Are You Challenging the Process?

As leaders we seek challenges and accept opportunities to test our abilities, to exceed our limits. At least we should. Challenge is the opportunity for greatness. Many people are at their best when there is a chance to change the way things are done. Maintaining the status quo breeds boredom and mediocrity for individuals and organizations.

We need to encourage innovation. We should be looking for ways to improve our work and our organization. We must be open to listening to the ideas of others.

Challenging the process means experimenting and taking risks. Mistakes will happen and that is okay, as long as we learn from them. When we try something new, there will be added stress and uncertainty. Help yourself and others through these challenging times. Reward people for taking on stressful and important tasks. Stay upbeat and acknowledge your successes--not just the liabilities. And ensure your people are empowered to make change by demonstrating you’ll work with them rather than going around them or over their heads.

“There ain’t no rules around here! We’re trying to accomplish something!” Thomas Edison

Where Do New Ideas Come From?
Most of us can identify when things are working well, however, figuring out how to change something isn’t always simple. Or is it? Most of us are convinced that our problems are unique to our business, our industry, etc. Truth be told, the probability that someone else has experienced the same or similar problem in your industry, or in an entirely different industry, is extremely high. So where can you find those new ideas and solutions?

• Look beyond your office. Get out and talk to customers, employees, and suppliers, attend networking events that are industry specific, or speak to a group of your peers.

• Step outside of the boundaries. It is easy to let the daily routines get in the way of seeing a great idea. A fresh perspective from a different view can often turn on the light bulb.

What Can You Do To Challenge the Process?
Here are a few ideas to help you get started.

• Choose one routine task, and do it as if for the first time. Ask yourself: Why am I doing this? Does it have to be done this way?

• Find something that is broken and fix it.

• Encourage everyone to set up little experiments in improving their work. Start a “wacky idea of the week” award and give it to someone who made an interesting experiment (even if it failed) and who learned something.

• Collect new ideas from everyone. Start an idea club. Ask everyone on the team to come with one new idea to improve the teams’ performance.

• Reward risk takers. Praise them. Give them silly prizes. Have them share their experiences and lessons.

• If you don’t understand a policy or process, ask why. “Just because …” is not an acceptable answer. If there isn’t a good explanation, change it!

• Tell everyone about the worst mistake you ever made and what you learned.

It Can’t Be Done!
Challenging the process means initiating change and often means taking on some things that others believe are not worth the time or energy. A few examples include

• This “telephone” has too many shortcomings to be seriously considered as a means of communication. Western Union internal memo, 1876.

• A cookie store is a bad idea. Besides, the market research reports say America likes crispy cookies, not soft and chewy cookies like you make. Response to Debbi Fields’ idea of starting Mrs. Fields’ Cookies.

• The wireless music box has no imaginable value. David Sarnoff’s associates in response to his urging them for investments in the radio.

Now this may sound difficult but the rewards are significant. Clients of mine that have "challenged the process" have found great rewards, particularly during the current economic climate. They have found new and complimentary markets, found ways to improve productivity, find cost savings, and get the right people in the right roles within the organization. I'm not saying that this is easy, most change isn't, but challenge yourself and your company. You'll be glad you did. Let me know about your changes!

Job Losses Demystified

The following post is written by Peter Schiff of Euro Pacific Capital.

Every business owner and executive should understand why our job losses are continuing to increase and Peter's article does an excellent job explaining our country's current job situation.
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As the unemployment rate crossed the double digit barrier for the first time since Michael Jackson learned to moonwalk, President Obama announced that he will convene a “jobs summit” to finally bring the problem under control. Using all the analytic skill that his administration can muster, the President is determined to figure out why so many people are losing their jobs and then formulate a solution. That's a relief; for a while there, I thought we were in real trouble! In fact, the absolute last thing our economy needs is more federal government interference. If Obama really wants to know what's behind entrenched joblessness, he should start by looking at the man in the mirror.

Obama is pursuing, with unprecedented vigor, the same policies that have for decades undermined our industrial base and yoked us to an unsustainable consumer/credit driven economy. This doubling down on Washington's past failures is destroying jobs at an alarming rate. Today we learned that the September trade deficit surged by 18.2%, the largest gain in ten years. Much of the deficit resulted from Americans spending Cash-for-Clunkers stimulus money on imported cars – or “American” cars loaded to the sunroof with imported parts. In exchange for more domestic debt, we have succeeded only in creating foreign jobs.

An article in this week's New York Times by veteran writer Louis Uchitelle confirmed a fact that I have been alleging for years. Uchitelle pointed out that foreign outsourcing of component manufacturing has led to consistent overstatement of U.S. GDP and productivity. The connection goes a long way to explain why we keep losing jobs even as GDP is apparently expanding.

As our economy becomes less competitive due to higher taxes, burdensome and uncertain regulations, and capital flight, more manufacturing and services will be outsourced to foreign firms. However, the flaw in GDP calculation allows the output of those foreign workers to be included in our domestic tally. Since we count the output but not the worker responsible for it, government statisticians attribute the gains to rising labor productivity. To them, it looks like companies are producing more goods with fewer workers.

The reality is that we are producing less with fewer workers. The added “productivity” comes from higher unemployment and larger trade deficits. This is a toxic formula that will have lethal economic consequences.

Don't expect the brain trust at the President's job summit to fret much about these details. That public relations stunt will likely ignore the root cause of the economic imbalances and instead stress the need for government spending on training and education, i.e. more public debt. The unemployed do not need government theatrics, they need actual jobs. But as long as the government props up failed companies, soaks up all available investment capital, discourages savings, punishes employers, and chases capital out of the country, jobs will continue to be lost.

To really fix the unemployment problem, the President must look past his peers in government and academia to understand how jobs are actually created. In the private sector, all individuals have a choice to either work for themselves or someone else. Since labor is far more productive when combined with capital (office equipment, machinery, business models, and intellectual capital), those who lack these assets themselves often choose to work for others who have sacrificed to accumulate them. This increased productivity is shared between the worker and the owner of capital, and both are better off.

However, for one person or company to choose to offer a job to another, there must be an incentive to do so, and they must have the necessary capital. In the first place, employers must commit to paying wages and benefits, comply with government mandates and regulations, and subject themselves to potential lawsuits from disgruntled employees. All of these costs must be measured against the extra profits an employer hopes to earn by hiring an additional worker.

If profit opportunities exist, jobs will be created. Otherwise, they will not. Of course, anything the government does to raise the cost of employment, such as a higher minimum wage, mandated health care, or greater regulatory burdens, not only prevents new jobs from being created but also causes many that already exist to be destroyed. Anything that diminishes the profit potential of extra hiring will diminish the number of job opportunities that are created. Also, since it is after-tax profits against which employers measure risk, the higher the marginal rate of income tax, the less likely employers will be able to hire.

Finally, in order to hire workers, employers must have access to capital to expand operations. Anything the government does to discourage capital formation automatically diminishes job creation. By running the largest federal deficits in history, Barack Obama is diverting all available capital to the Treasury, and is in effect waging a war against private capital formation.

If the President's summit truly intends to find the root cause of unemployment, his advisers don't need Bureau of Labor statistics or complex modeling software, just the courage to drop their dogmatic belief in central planning and embrace the laws of economics.

Wanted: Overqualified Professionals

How to manage expectations and integrate advantageous hires.

By: David Lewis

Is it over yet? Are we finally on the road to recovery? When will business be back to normal? In today’s business world we’re all asking these questions. The harsh reality is that what we considered “normal” is probably a long way from returning, if it ever returns completely. However, there are many opportunities for business owners, especially in the area of staffing. What makes hiring different today is the deep pool of talent that exists due to the recession. What is even more remarkable is the fact that these potential new employees come to the table with skills that far exceed what would fall into the salary range for the position they are interviewing for. So what’s the problem? There are several. The recession has delivered a huge challenge in the area of workforce management: how to hire top available talent who will work for less than your current staff without creating total havoc among your employees. How, for example, do you bring in Bob, a 15-year marketing veteran who happily will take the marketing coordinator position, yet has more experience than the person to whom he reports? On the one hand, you may want to avoid creating such a conflict; but on the other hand, you want to hire the best available talent in order to best benefit your business. If you handle this correctly, it can be one of those “good problems.” If you don’t, you are going to regret the decision. There are ways to ease into this type of situation tactfully and strategically. Ask the Right Questions Before you conduct the interview, determine how satisfied the candidates will be in a lesser role. You can do so by looking through their resume for signs they have successfully transitioned into roles with lower stature or lesser levels of responsibility. In the interview itself, your line of questioning needs to focus on their past behavior when it has come to handling the work of those below them. For example, have they stepped in regularly to assist their staff when the workload required? Can they show they have remained very much a “player/coach,” serving as a leader and a doer? Many candidates will tell you—as tactfully as they can—that they really have no other choice, and therefore are willing to accept what the market will bear. In the past, we may have eliminated candidates who were “overqualified” in part because we thought that they would leave the company as soon as they found a more suitable position. However, because so many companies have consolidated or disappeared, professionals in all areas of business are oversupplied and under-demanded. That means that bringing on board overqualified new hires does not present anywhere close to the flight risk we have reasonably been concerned about in the past. If you are still concerned that they might not be around for the long term – consider asking them about the other positions they have interviewed for, paying close attention to the level of those roles. If they are similar to the position you are hiring for, that could validate their claim. Integrating New Staff Once the new staff member is on board, it’s important to pay close attention to the dynamic between old and new. Your current staff could easily see the new hire as a threat. It’s therefore critical that you take a proactive approach with all parties. For the new hire, be sure they have a realistic set of expectations when it comes to their role, as well as current and future compensation. Tell them what you expect in terms of their performance and interactions with coworkers, providing direction and guidance on how you want them to “manage up” to those that hold more senior roles, yet have less experience. You want to tell your tenured staff that you continue to value them and their contributions. That being said, you also want to encourage them to solicit ideas and input from the new staff member, and to not view what they offer as threatening, but rather hugely valuable. By taking these steps, you can create a level of constructive competition that raises the level of performance of junior employees who have more tenure than the more experienced new hire. Look for ways to tap ideas and contributions in group settings, while reinforcing the hierarchy that exists in your organization. Future with Your Company Over time, these new hires will most likely expect growth within your company. Just because they are willing to get started at a lower level doesn’t mean they will be satisfied to stay there. Before taking on experienced people, you should decide if you can handle feeding the success of your business at the expense of losing the resources that got you to this point, or if you see enough growth on the horizon to allow parallel career trajectories. If your loyalties are to those that have been with you the longest, then it may mean that your future success could suffer. When the environment you create by hiring today’s available talent is not managed and monitored carefully, morale and loyalty across the board can decline. Keeping a close watch and injecting yourself as needed should allow for growing your capabilities to new unexpected levels, while getting even more out of those that have been with you to this point.

Anticipate the Best, Prepare for the Worst

Editor-in-Chief Robert Levin discusses business planning during uncertain times.

By: Robert S. Levin

Fall is an interesting time of the year. We’ve got one eye on finishing the current year strong, and the other on planning for the next year. When it comes to planning for next year, there is good reason to start early, but the reality is that most of us will want to procrastinate planning more than we have in years past.

This is totally understandable, because while the marketplace has settled down a bit, the state of the economy has caused us to say, “I have no idea what is going to happen next year.” But that doesn’t mean that we should not plan. In fact, it means that a plan for 2010 is even more important than it has been over the past few years.

Without a well-thought-out plan, we will not be in a position to react if business picks up or slows down considerably. So, how do you plan in time of uncertainty? Here are a few of the things that we are doing at NY Report, as well as what other business owners have told me they are trying:

Create projections for the worst-case, expected, and best-case scenarios. In the past, I just created one set of projections; however, this year I will create three, because the degree of uncertainty is much higher. The projections include plans for cutting back on certain expenses if we get into the worst case, and increasing investment in the best case.

Plan to utilize freelancers for new projects. You pay a premium for freelancers, but if things aren’t going well, freelancers are easier to cut than employees.

Examine cash flow (not just profits) when considering new products and services. Two reasons for this: 1) customers are paying slower, and 2) access to credit might not be there when you need it.

Remember that in every market there is opportunity. So this year, I am paying even more attention to how my industry is changing and how we need to evolve in order to capitalize on these changes.

If, after reading this, you are still thinking “Everything is really up in the air and planning is just a crapshoot,” you might have a point. But by giving careful consideration to these ideas, you will increase your odds of success significantly. We cannot let uncertainty prevent us from taking advantage of opportunities, nor can we be oblivious to threats.

Why Money Isn't Flowing From the Banks

Depending on who you are talking to the recession is over, will soon be over or isn’t going to be over anytime soon. Many small business owners are looking for financing. Many for growth and some because they just need a bridge to help get them through the current economic times. Funny though, regardless of how strong your financials are very few seem to be getting financing.

The SBA ARC Loan Program, a guaranteed $35,000 short-term relief loan for small businesses facing immediate financial hardship to help them ride out the current uncertain economic times and return to profitability, is rarely being received. Very few companies in Colorado, and throughout the country for that matter, have been granted the loan. Why, well amongst other things there is so much paperwork required that the banks don’t make any money. In fact, in many cases, they actually lose money.

Yes, banks should be helping us get out of this bad economy. But they aren’t. They don’t have to lend out money to be profitable. Here are just a few reasons:

• Banks have received TARP (Troubled Asset Relief Program) money to clean up their books.

• They are still making money on their credit cards.

• They borrow money from the Fed for nearly nothing and buy 30-year Treasuries at 5 percent. A nice profit for the banks considering they are using our (taxpayers) money.

• They still have their “toxic” assets that have been written down, and they will eventually provide a profit.

So where else can you find money? Well, that leaves private financing - anything from family and friends to Angels and Venture Capitalists and everything in between. There is private money out there but it is harder to get, more expensive and there is less of it. Since there are a lot of people looking for money our friends with money are pickier than ever in terms of whom they give their money too. And of course, generally speaking, deals take longer to put together.

So what can you do? Well, for education you can go to the Angel Capital Summit Nov. 17^th. You can also work on your business – make sure you have a solid business plan and supporting financial model. To learn more about how to do that attend Planning, Focus & Discipline… 3 Keys to Leading Your Company Out of the Recession on Oct. 21^st or 27^th. Investors want to know where you want to go and how you plan to get there. Having a compelling story with a solid plan to back it up will only help you. And last, but not least, talk to your local politicians. Until the Feds change the rules for the banks money will be slow in coming, which means jobs will be slow to come which will prolong the economic recovery.

A Recovery - Statistics Aren't Everything

The government is releasing statistics and starting to talk of the recession ending. It won’t be feeling like a recovery for many people. These sentiments were echoed in an editorial in the Washington Post. 2010 will still be difficult but there are opportunities too!

As business leaders this is a critical time for you. Regardless of whether you are making a profit now or if you are bleeding red ink you need to do some planning. This is the time to put plans in place for operating your business in an “unstable” environment.

Sit down and put together scenarios that show what happens if your revenues drop significantly. Look at revenue decreases that range from 35%-75%. Based on these scenarios you can then put plans/options in place to help you and your team manage through these uncertain times. You need cash to operate your business. Know how much you need. Getting any kind of financing now is extraordinarily difficult. Money just isn’t flowing from banks, etc. You have to find private funding but that comes with its own set of pitfalls. So do what you can with what you have. Look where else you can cut – people, products, benefits, etc. What else can you do to bring in additional revenues? Ask yourself all of the hard questions!

If you aren’t in the black now, do everything you possibly can to get back to positive. It’s ironic; companies that have seen decreases in revenues are now operating where they were a few years back. One clients business has dropped from over $4M to $2M. Of course, when they were at $2M they were thrilled. Now they have to go back to being able to operate successfully back at the $2M level.

I had one of my clients go through the process of identifying the various options available to them should sales drop significantly. They put “triggers” in place that set in motion certain activities should sales drop below pre-defined levels. The questions you have to answer include - what does it take to run your business, how much do you have to make in order to operate your business, and at what point do you shut the doors?

The environment will remain challenging for some time. Figure out what you need to do to operate successfully in unstable conditions.

Sometimes We Just Need an Escape

Today, I spent the day at a baseball game – the Colorado Rockies and the San Francisco Giants. I am a big baseball fan. There is just something very calming yet exciting and energizing about it. But I digress.

We all know that the world we live in is challenging right now, there is a lot of negative energy out there. Every day there is bad news that the press magnifies. The economy is struggling and will continue to do so for some time. As business owners (and individuals) there is pending legislation that threatens to have major impacts on our business and in our lives. Conflicts overseas have the potential to impact our national security and how we do business.

With all that said, as a business leader it is important to take care of yourself! As I was taking in the ballgame, and the environment as a whole, I realized that for a few hours people from all walks of life (regardless of who they were rooting for at the game) were letting go of their stress, participating in the various game activities and of course standing, cheering and chanting for their ball club. There was not talk of politics, the economy, health care, etc. Okay, there were those who could be seen tweeting, texting, sending pictures and probably posting to their MySpace and Facebook accounts. But it was all in good fun!

If you think about it, for thousands of years, people have gathered to watch sporting events. There is something about the gathering of a fun and friendly crowd that has a certain energizing effect on us, especially when “our team” wins. It is the simple things in life that can give us the biggest boost.

During these stressful times, take time for you (and your family). Clearing your head and just having some good clean fun even for a few hours can give you new insights into some of your greatest challenges. Take your new found energy back into the office the next day – you will be a better leader for it. Worse case is that you get some fresh air and cheer on your favorite team!