Friday, January 16, 2009

Private Companies Can Be Better Served

Many private companies, including closely held, owner operated, family-owned, current or potential ESOPs, etc. often plateau in the mid-tier range of $5-100M, 50-500 employees. They have a bank, an accounting firm, an attorney, etc., but are typically not served as well by a business improvement adviser.

Edwin G. Booz determined that companies could benefit from the expert, impartial advice of someone outside their own organizations. This led to management consulting. Arthur D Little, Accenture, Booz Allen, McKinsey & Company, The Boston Consulting Group, and Bain & Company advise leading corporations (Fortune 1000 companies for the most part), but these consulting firms tend not to match the needs of the numerically larger tier of higher-growth potential smaller companies with employees of 50 to 500 or annual sales of $5-100M, whose owners tend to be more independent and distrustful of outside professionals who charge highly for their time, not necessarily for their value.

Michael Gerber/e-myth targets this tier with educational information. George S. May offers a service that has been characterized as too much of a “one-size fits all” approach. Other service offerings come from Vistage, IIB, and a variety of boutique consulting and coaching firms and individual specialists.

There is an opportunity to improve how to provide (for a modest retainer plus value-based incentive compensation) highly customized value improvement services especially for private companies in the high-growth-potential mid-tier.

Advances in best practices in some industries, e.g., Agile project management and Scrum in software development, can be adapted for much wider application in other industries.

In a time of increased government regulation, those dedicated to private enterprise have an opportunity and obligation to help our national and global economy by doing more to improve the value of private enterprise.

New roles that help management teams and their private companies improve might evolve out of improvements made in the traditional roles of members of boards of directors, advisers, consultants, educators, etc., leading to a more hands-on applied role with their corporate “clients.”

Increase Your Corporation’s Value

Even as a part-timer, I can help a private company CEO improve cash flow and corporate value. With an aptitude blending business, science, math, economics, psychology, coaching, etc., experience with business turnarounds, growth, and improvement, and alertness to advances in the world of business, I will share insights learned from years of playing this “greatest game,” to help a CEO do his best to reap the consequences of circumstances and timing. In “the fog of war,” generals make the best of what they’re facing, using a variety of past experiences, seeing more clearly in hind sight than in the maelstrom of the moment, providing valuable insight to do better under fire. Accumulated wisdom helps identify the few most important decisions made out of the many – improving leadership and culture, trusting, but verifying, questioning collaboratively, challenging supportively, experimenting and failing fast, focusing laser-like on what matters most.

I have worked closely with technologist geniuses, physicists, chemists, biologists, mathematicians, electrical and mechanical engineers, and a host of other professionals and all kinds of workers. Mindful of widespread prospects for software and Internet enabling, but not wedded to any industry, I offer fresh and creative thinking to almost any business. While preferring to work with the flexibility of private companies, the opportunity for improvement and resultant potential outweigh other considerations. I welcome association with private equity firms where I can help portfolio companies solve problems, produce better results, and generate more cash – where improvement can be substantial.

My role is to focus ON the business, to improve how the business works, to improve its value. People working at or in the business usually know where it hurts, but can use help with clarification, diagnosis, treatment options, and follow through to make things better. I will help the team get everyone more focused and motivated (incentives) to generate more cash and increase overall value – selling better, fulfilling better, improving quality, reducing costs – doing more to bring out the best in each person, improving capabilities and contribution. I will foster thoughtful problem-solving for improvements in the business model, strategy, marketing, sales, fulfillment, operations, products, services, quality, finance, and every other vital part of the business. I will help clarify and instill an updateable improvement vision in the minds and hearts of everyone needed to bring it about, for the benefit of all participants. Like in sports and medicine, vital core metrics will be selected to set goals, measure progress, and fulfill the vision.

The improvement vision may include one or more bold strokes, a series of vital drives, and/or many small advances. Effectively instilling the vision will stimulate actions to fulfill it. Focused persistence on what matters most brings it about. Leadership can always be improved, operations strengthened, organization developed and staff better trained, products improved and better ones developed, sales and profit increased, all to increase cash flow and corporate value. Putting combined insight and energy to productive and efficient use produces desired results.

As a facilitating, expediting leader adviser, I will help or get help to follow through to improve things, to achieve goals, and bring about the desired vision. In the process, our team will:

1. Review the business model, cash flow, P&L, balance sheet, etc. to pinpoint focus points, explore options, and follow through with positive action.

2. Clarify what is needed to improve confidence, credibility, communication, and innovation for mutually improved relationships with customers, employees, and suppliers to increase the financial value of the company.

3. Connect the dots on how each person affects results, using vital metrics to achieve goals; improve business through better information sharing, problem evaluation, research, planning, target setting, incentives, etc. – to fire better on all cylinders.

4. Clarify priorities and how better to organize and follow through to achieve them.

We will look for areas of frustration or vagueness, and other red flags, to clarify and prioritize improvement opportunities. We will spark initiative by asking: “What would you change or improve? What help do you need? What’s the next step?” Like a team of business doctors bent of getting the best results, we will start with careful observation, listening, questioning, and root-cause diagnostics, with an eye to prevention as well as cure, to achieve specific goals for greatest gain. Each situation is unique and the approach customized according to discernment of need and opportunity, based on combined experience and judgment, adapted to changing circumstances and priorities.

Thursday, January 15, 2009

My Turning Point in Business Leadership

After getting my Master of International Management degree and then MBA, I joined a fast-growing computer company in Texas and was initially given assignments that groomed me for general management. One particular learning experience changed my entire outlook. Two higher level bosses took me along with them to meet with a Japanese company to explore a proposed joint venture between our Texas-based company and their Japanese company. I was there mostly because my office was in the Bay Area where the first meeting was held, and my bosses had flown in from Texas, one originally from Boston, the other from Texas - both had strong accents.

Right at the start I became more of a focus than my bosses anticipated when the four Japanese men on the other side of the table seemed to look at and talk with me more than my bosses. This eventually frustrated one of my bosses enough that he asked why they talked only to me and not to the others, indicating I was obviously junior to either of them. The Japanese men expressed apologies for any offense, informing us that they were more familiar with California English than Texas English or Boston English.

I was given responsibility for maintaining the liaison from that meeting on. I tell this story for what happened next. After reaching a general agreement, we went back to our respective companies for more detailed planning. My boss’s boss assigned responsibility for this project to the general manager of our Fort Worth operation, who in just over a week produced a "well written" plan for our American end of things and sent it to me to follow up with the Japanese.

As weeks went by waiting for the Japanese to “get their act together” as my bosses would say, we grew increasingly frustrated. After over two months, I was told to tell them things like “fish or cut bait,” and “if you can’t make decisions, we’ll find someone who can,” etc. He later told me to call it off with them just as they finally submitted their plans. I was initially almost disgusted at how much “paperwork” they provided, feeling like it was so overdone, that they had made it all way too complicated, etc. We considered our plan succinct and to the point.

But the tables turned as planning was followed by implementation/execution. Virtually everything the Japanese had said they would do they did as promised or better, while our American end fell into disarray. The Fort Worth general manager had prepared his plan pretty much on his own. The fact that his bosses approved it was all that mattered to us. He had not involved the many others in his organization in the planning process, and I learned the great hazard of that style of planning when it came to execution. People were fired, and confusion reigned, and finally after six months, the Japanese told us they needed to replace us. I was in a position to see this episode up close and was embarrassed for us Americans and marveled at the Japanese.

In answer to my personal queries about why and how they did things, I was introduced to the work of Edwards Deming. This was 1979 and I had never heard of him. But I was captivated by his 14 points, and from that point on I made every effort to apply them in my business leadership roles. Deming’s points turned me into a longer-term value improvement version of a “turnaround specialist,” not the quick fix "slash & burn" type.

A Checklist to Really Increase Value

Overcoming any contributors to apathy, fear and cynicism will increase corporate value. Apathy and fear and cynicism can be caused by many things, not the least of which is inconsistency. Deming's good old 14 points were:

1. Create constancy of purpose for continual improvement of products and service to society, allocating resources to provide for long range needs rather than only short term profitability, with a plan to become competitive, to stay in business, and to provide jobs.

2. Adopt the new philosophy….We can no longer live with commonly accepted levels of delays, mistakes, defective materials, and defective workmanship. Transformation of Western management style is necessary to halt the continued decline of business and industry.

3. Eliminate the need for mass inspection as the way of life to achieve quality by building quality into the product in the first place. Require statistical evidence of built in quality in both manufacturing and purchasing functions.

4. End the practice of awarding business solely on the basis of price tag. Instead require meaningful measures of quality along with price. Reduce the number of suppliers for the same item by eliminating those that do not qualify with statistical and other evidence of quality. The aim is to minimize total cost, not merely initial cost, by minimizing variation. This may be achieved by moving toward a single supplier for any one item, on a long term relationship of loyalty and trust.

5. Improve constantly and forever every process for planning, production, and service. Search continually for problems in order to improve every activity in the company, to improve quality and productivity, and thus to constantly decrease costs. Institute innovation and constant improvement of product, service, and process. It is management's job to work continually on the system (design, incoming materials, maintenance, improvement of machines, supervision, training, retraining).

6. Institute modern methods of training on the job for all, including management, to make better use of every employee. New skills are required to keep up with changes in materials, methods, product and service design, machinery, techniques, and service.

7. Adopt and institute leadership aimed at helping people do a better job. The responsibility of managers and supervisors must be changed from sheer numbers to quality. Improvement of quality will automatically improve productivity. Management must ensure that immediate action is taken on reports of inherited defects, maintenance requirements, poor tools, fuzzy operational definitions, and all conditions detrimental to quality.

8. Encourage effective two way communication and other means to drive out fear throughout the organization so that everybody may work effectively and more productively for the company.

9. Break down barriers between departments and staff areas. People in different areas, such as Leasing, Maintenance, Administration, must work in teams to tackle problems that may be encountered with products or service.

10. Eliminate the use of slogans, posters and exhortations for the work force, demanding Zero Defects and new levels of productivity, without providing methods. Such exhortations only create adversarial relationships; the bulk of the causes of low quality and low productivity belong to the system, and thus lie beyond the power of the work force.

11. Eliminate work standards that prescribe quotas for the work force and numerical goals for people in management. Substitute aids and helpful leadership in order to achieve continual improvement of quality and productivity.

12. Remove the barriers that rob hourly workers, and people in management, of their right to pride of workmanship. This implies, among other things, abolition of the annual merit rating (appraisal of performance) and of Management by Objective. Again, the responsibility of managers, supervisors, foremen must be changed from sheer numbers to quality.

13. Institute a vigorous program of education, and encourage self improvement for everyone. What an organization needs is not just good people; it needs people that are improving with education. Advances in competitive position will have their roots in knowledge.

14. Clearly define top management's permanent commitment to ever improving quality and productivity, and their obligation to implement all of these principles. Indeed, it is not enough that top management commit themselves for life to quality and productivity. They must know what it is that they are committed to—that is, what they must do….Support is not enough: action is required!

Wednesday, January 14, 2009

Clarify & Cure Root Causes of Obfuscation

“What we have here is a failure to communicate.” (major understatement by the oppressive prison warden in "Cool Hand Luke")

Clarifying and overcoming root causes of obfuscation will increase cash flow and corporate value.

Poor communication is wasteful and counterproductive. To not be dealing with reality is a killer of time and resources. Total truth is more than just random facts of differing value; it requires the added clarity of insightful priorities.

"Talk" about how to improve company efficiency, productivity, or effectiveness, much less profitability, cash flow, and corporate value, must take into account the reality of the human communication factor within the company. And not just from management to employees, but from employees to management and the multitude of timely and truthful messages needed from any one person to another that can improve business value.

The human communication factor in the world of improvement can be either negative (obfuscation - fuzziness, muddiness, avoidance) or positive (clarification - truthfulness, completeness, priority valued). Obfuscation is more than conventional lies, denials, & deception. To obfuscate is to disguise, conceal, confuse or complicate, even by avoidance (passive resistance). The antonym is to clarify.

What exactly is confused, disguised, concealed, or complicated by obfuscation? We can call it the truth or reality. Synonyms for truth include fact, reality, certainty, accuracy, genuineness, exactness, legitimacy, veracity, honesty, candor, integrity, etc. Antonyms include fiction, falsehood, error, dishonesty.

Obfuscation may be due to any mix of: (1) seeking potential gain from promoting error, (2) fear of the consequences of communicating the truth, and (3) apathy, ineptness, mental impairment, and accident.

The more sensational category of seeking gain through fraud, demagoguery, and other forms of abuse gets the most press, and is the cause of highly costly attempts at regulation. The other categories are more hidden, but probably even more common and costly. Overall, the concealment of truth, deliberate or unintentional is a major barrier to improvement which can be reduced by improved leadership, management style, and resultant company culture and organizational design and development.

Truth is knowledge of things as they really are, as they really were, and as they really are to come. Knowledge that is filtered by fear, covered up, denied, or misrepresented for any reason is obviously less visible. Visibility is the first and most important level of clarity.

Improvement requires clarity about base line conditions. The truth must be clearly described and accurately revealed by those who know so that all affected can make needed improvements. Truth is more than appearances. Symptoms are appearances. Truth that matters most to improvement has to do with root causes, which are identified through increasingly deeper levels of clarity.

Common thread root cause clarification has immense potential to increase cash flow, corporate value, and everything else good in and about the company.

Because the barriers of fear, apathy, cynicism, ineptness, mental impairment, and accident are massively costly, clarifying and overcoming their root causes is enormously profitable.

Tuesday, January 6, 2009

Four Questions Spotlight Your Company's Needs

Jack Stack and the Great Game of Business spotlight four questions:

1. How well do your employees understand cash flow, profit, how your business makes money, and how they can help it make more?

2. How strongly do they personally work to achieve business objectives and the critical numbers?

3. How well do they know the rules of the game of business?

4. How well do they follow the action, keep score, and work together to win against the competition?

These questions get the ball rolling in a way everyone can appreciate.

Every company is unique and can best be described by the players themselves.

Don't over complicate it. Get started and learn. Identify needs, prioritize them, and keep improving things. As momentum increases, you'll figure out even better ways to improve your most important knowledge/skill base.

Improve Business Education on the Job

Improve the business of business education to further improve business.

How can people who make a living educating people on business improve their profession? What business model improvements are possible?

Look for ways to move from classroom theory to work place reality, get closer to the action, the real world providing the ultimate case studies, on the fly even, to be realistic, practical.

Hands-on workplace "teachers," whether called consultants or advisers or coaches or something else, are often outside professionals.

But there are others like senior managers, who may have the added benefit of already being much more familiar with the company, who, with appropriate tutoring where needed, could be even better, and certainly more permanent teachers than outside professionals.

There is always value in having an outsider's out-of-the-box point of view, but all the teachers certainly don't have to be outside professionals.

Any organization's master leader, even as servant leader, is ideally positioned to be master teacher.

There is something to the saying that "Teachers learn more than the students," so give everyone an opportunity to teach with the protection of teamwork and appropriate collaboration.

Teaching is a learn-able, cross-trainable skill, and worthy of being an ongoing part of overall company leadership, which is also learn-able.

Look for teaching and self-learning moments and seize them as improvement opportunities.