Monday, June 28, 2010

Never say never about the future

Not so long ago, in a client strategy session, the management team expressed great concern about the lack of diversity in revenue sources. The CEO asked the management team why they were so worried. Their organization offers a highly specialized service and, in the past, faced little to no competition. In spite of market bumps during the past 25+ years, their revenue has remained consistent or with modest growth. "We have nothing to worry about," said the CEO.

The management team did not agree. Neither did I.  For the first time in its history, the organization faces newly-formed competitors and real threats to funding sources.

If we take away one lesson from recent history, it should be that none of us have 100% certainty regarding the outcomes of the new economy. Futurists like William Knoke can reveal growth and development patterns -- even predict behavioral and cultural shifts thanks to disruptive forces in our economy (see Knoke's eye-opening book, Bold New World: The Essential Road Map to the Twenty-First Century). But our world is changing at a rapid pace and many of the old models for every industry are either irrelevant or unraveling. The sub-prime mortgage industry collapsed in part because even the most informed financial institutions believed that American homeowner mortgage defaults would top, at most, approximately 6%. The number of subprime mortgages in default stood at 25% by end of 2008 (roughly 14% of all mortgages). With another wave of adjustable rate mortgages about to adjust to higher rates, losses will continue to rise (a few industry fast facts).

Old models, paradigms, and data are not as reliable as they used to be. So what is a growing organization to do? Where can you turn to develop long-term strategies for growth?

Growth-focused organizations never say never. They always expect the best but plan for the worst. Growth-focused organizations need leaders who can put ego and routine aside and expand their visions beyond industry norms and established best practices. Their employees must be ready to learn new things to keep pace with changes in how the company lives up to its vision and fulfills its mission. And the strategic plan doesn't rivet the organization to specific actions during the next five to ten years: it establishes foundations and guidelines that allow for flexible, rapid launches of new innovations, revised systems, and more effective processes.

Never say never. Always be ready with rapid response for oil rig explosions, exceptional loan default rates, changes in immigration policies, or shifts in consumer attitudes about genetically modified foods. As business leaders, your experience is valuable, but serves better as a launching pad rather than a definitive approach and strict path for the organizational roadmap. If you never say never, you can be prepared to take on anything that might shake up the way you do business.

For your consideration
Does your strategic plan allow you to never say never? Or does it contain maxims that could box you in if the economic realities break out of historical patterns? If you're unsure, call me to schedule an assessment: 206-782-4040

Monday, June 21, 2010

BP's and other CEOs should be compensated in the millions

The gulf coast oil rig explosion and BP's slow response to the spill has brought many conversations about CEO compensation in recent months. Suddenly, every major CEO of for public, private, and nonprofit organizations have found themselves under the microscope. People all over are asking: should CEOs be paid millions for running organizations?

I say yes. It's takes a talented, unique individual to meet the  core qualities of a top leader:
  • Top leaders make tough decisions. They know that authoritative does not mean authoritarian. They allow their teams to do their jobs, but know when to stop the wheel-spinning and make some final decisions to keep the ship (organization) moving forward.
  • Top leaders perform admirably under extreme pressure. This doesn't mean that they are flawless when times get tough. But they remain sensitive to the priorities and concerns of their stakeholders (employees, customers, investors, partners, and society) and keep their needs in mind while working diligently to confront threats and tough issues.
  • Top leaders are responsive and responsible. They don't spin their wheels or defer blame. They know that the buck stops with them.  They don't have to state it, because all of their stakeholders can see it in their actions. They take quick action and focus on the tasks needed to get results.
  • Top leaders imbue every action with integrity. Their actions align with their words. They are open and transparent when they can be. When being transparent could threaten the results they need, they state that loud and clear. They don't lie or tell half truths to appease their stakeholders. They act as if they are being watched at all times, because they are.
Not many people can do all four of these things at the same time. That's why CEOs and other top leaders should be make millions of dollars. Finding one person who can sensitively make tough decisions, perform admirably under pressure, be responsive and responsible, and act with integrity requires a strong character and high-performance mindset. These folks make the personal sacrifices necessary to keep the organization on course and out of danger in good times and bad.

The question everyone should be asking is, "Is this organization getting its money worth for what it's paying its CEO?"

In the case of Tony Hayward, CEO of BP, the answer is no.

I cannot claim that all of the media sources I have checked are without bias, but Tony's own words sum it up. On May 31, 2010, he stated in an interview, "I would like my life back." I hate to tell you Tony, but in times of crisis, the crisis is your life. That's why you were paid the big bucks when there were no global crises to face. Until the families who lost loved ones in the explosion have been consoled, until the flow of oil into the gulf is zero, and until the sheen on the water, the underwater oil plumes, and the goo in the marshes are non-existent, this is your life.

A CEO and other top leaders cannot foresee every crisis. But they should be prepared to make tough decisions, perform under pressure, be responsive and responsible, and act with integrity. If I were Tony Hayward, I would have locked my leadership team and top consultants in a room with a four-day deadline to evaluate and exhaust all the pros and cons every possible solution to containment and cleanup. We would eat ramen noodles and nap on cots in between strategy sessions until the decisions we made were bringing long term results with a solid positive outcome. No one would grumble, because all of the top leaders on my team would know that is what is expected of them when times get tough. They would know that we're in this together and none of us would rest until solutions were found. Why? That's what top leaders would do. And that's why my top leaders and I would expect to be making millions of dollars in compensation each year. If we could not do that, well, then, we should step down or be fired.


For Your Consideration:
Do you have the right people in the right positions? Do you have leaders working in other roles of your organizations, waiting for their chance to show your stuff? Would you like to find out? We can help you identify the right people for the right roles in your organization. Just ask me how: 206-782-4040.

Wednesday, June 16, 2010

Thirteen ways Washington State can help small businesses

To continue our conversation about how to grow small businesses and create jobs in the US, below are a list of topics that were important to the participants in our February 9th, 2010 Council for Small Business meeting. Many thanks to Karen Pemerl of the Washington State Department of Commerce for compiling these notes. I have edited them to elaborate on the content of the conversation.

Workforce development
Do more skills matching in jobs. Many states have resources for employees. In Washington, WorkSource uses keywords to help employers find candidates. The system uses a weighted approach and other creative methods will help employers link up with well qualified employees. Since WorkSource has a direct link to unemployed individuals in the state, it has one of the most comprehensive resources available to employees.

Recognition
Recognize new small businesses. Theresa Chambers of RecognitionWorks suggests that the state shows pride in small businesses by promoting them to increase name recognition. One option is a directory with new business name, the NAICS code plus a small amount of information that allows for self-directed search (more extensive than the current licensing database now available). 

Encourage match-making between small and large businesses. Enterprise businesses can be some of the best customers for small and emerging businesses. They often buy goods and services locally. Match-making would encourage more local purchases and help the small businesses stay afloat while helping large businesses find the sub-contractors they need to fill gaps left behind by downsizing, reorganizing, and rapid market changes.

Help small businesses tell their story. In addition to the directory, the state could highlight small businesses through existing communications channels so they get increased exposure to potential customers.


Regulation
Eliminate excessive regulations. Regulation is putting small businesses out of business. Reduce regulation at all levels of government (see my previous post.)

Streamline licensing and permitting process. I discussed this in my previous post. One of the attendees revealed that as a licensed home health care provider and business owner who recently relocated to Washington state, she was informed that it would take 3 to 6 months to obtain license. That's three to six months of not being able to generate income while waiting for a license for a small business owner.

Money Matters
Support economies of scale. Software costs can be crippling for small business owners. The state could help small businesses get lower costs on software, products and services through group purchasing programs. The Greater Seattle Chamber offers similar programs on services like health insurance and 401(k) programs.

SBA loan options are dwindling. Many SBA loans that were previously available are not available today.  Help small businesses by restoring loans similar to what was available in the past.

Be the bank. North Dakota has its own bank to increase lending to small businesses. Washington state is considering the option. It would allow for more fiscal flexibility in the long-run and provide a resource for small business lending programs.

Hold banks accountable. Many voiced that the state should make it easier to get funding through banks. Some even advocated that Washington should force banks to lend to qualified small business owners. We acknowledged that changing federal guidelines are making it difficult for some banks to loosen purse strings, though new federal funding will soon be available.

State Contracting
Make state contracts competitive. One recommendation is to create dollar limits on state contracts so small businesses can compete. It's easier for a small business to respond to a $5 million, five-year contract than it is to respond to a $50 million lump contract.

Respect the creative ideas of small businesses. In one state contracting example, a business owner had submitted innovative process for job skill matching. The state chose a different vendor, but used his idea to build a job skill matching process that wasn’t nearly as successful as it could have been with his additional knowledge and resources.

Establish a buy local priority. The state could create a model and incentives for state organizations and private enterprises to buy goods and services locally.

Tuesday, June 8, 2010

Ways to Help Build Small Business Viability in Our Communities

Last year at this time, we were discussing access to capital as the number one barrier to success for small businesses. Since then, it seems that small businesses have grown used to the lack of capital resources from traditional financial services institutions and have gotten creative in finding ways to finance growth and development.

Access to capital still leaves a gaping hole in success for many organizations large and small. But as I connect with more and more small businesses, the top barriers to adding staff members and growing market capacity include:
  • Patents. For many organizations, the process of getting a patent on their secret sauce can take years (the current average is 22 months), whereas the window of opportunity for their launch might not be as long. For companies whose main clients are beyond our national borders, the lack of international trademark and patent regulations can put a damper on success and introduce a reluctance to launch in countries where proprietary information might not be protected. Our government should work harder to streamline the patent approval process here at home. In addition, our global leaders should work together to put into place standards to recognize patent filings in home countries and to enforce laws against infringement.
  • Policies. Bureaucratic processes provide a slow and deliberate process for making changes in public policy and legislation. These processes are designed protect people from sudden changes in the opinions of new leadership and hotheaded activists. However, these processes were created in an era during which horses were more common than cars and the US Patent and Trademark Office claimed that nothing new could be invented. The pace of change has accelerated with the dawn of a new, information-based economy in our country. Our policies have to keep pace, or innovative new companies will face a lot of little hurdles that add up to big dollars when attempting to fill market demands. Economic and trade policy makers need mechanisms that will allow them to be responsive to worldwide market changes. The result will be policies that keep relative pace with the marketplace, instead of a five to ten year lag in policy updates.
  • Permits. See Patents and Policies above. Many of the same challenges that stall patent approvals and policy changes also hold up the permitting process. In the recent economic downturn, one property developer saw its previously approved financing completely disappear just as a few of its buildings were completing construction. Not long after they put the construction process on hold in an effort to secure new financing, their permits expired. To renew the permits required starting from scratch -- new master use permits, construction permits, project filing fees - the works. In light of the economic circumstances and developer outcry, local building authorities created a permit extension, giving developers more time to secure financing. We need more responsiveness like this from our permitting institutions to keep business moving forward.
  • Prospects. This is the same challenge that small businesses were having a year ago: where are the customers? Last year, customers were reluctant to buy. This year, however, that has changed: more customers are opening their purses, but hungry enterprise organizations are swooping in with extra-low-pricing and extras that small and medium businesses cannot afford due to smaller staffs and limited resources. The mantra of the 1990's that "there's plenty of business for everyone" has gone silent. To help our local small businesses, we have to realize that shopping local isn't just for grocery stores any more. The nation is picking up on supporting local small businesses by contracting and shopping for goods and services within their own regions. Big organizations should not be overlooked, but healthy local communities come from small and medium businesses in our local economies.


Addressing these four areas will help our small and medium businesses go to market more quickly with their offerings, create more jobs, and pump more tax dollars into our local communities.

How do you propose we increase demand and create more jobs for small and medium businesses?