Curb Your Enthusiasm

“The trust of the innocent is the liar’s most useful tool.”
– Stephen King

We all have people we trust. And they trust us in return. In some cases, that trust has been earned via confidences kept and commitments achieved. In others, it’s possible that the mutual trust is there because … well, just because.

Among my friends are two entrepreneurs who have been harmed by being too trusting, and perhaps too eager to offer others the opportunity to benefit from their businesses.

We all know people we describe as “the nicest people.” While this may well be an over-used phrase, in this case it’s true. These two folks – who by the way don’t know each other – are easily the most kind, gentle, nice and trusting people I’ve known.

For each of these two people, a positive characteristic – trust – turned into an Achille’s Heel.

What happened? In both cases – despite their very dissimilar businesses – there was a common thread: Each of these entrepreneurs sought outside help in advancing the business.

For one, it proved fatal for the business. The offending party offered to provide cash and a building in which to grow the operation. But after making those investments, the villain seized the business, leaving my friend out in the cold and wondering how this could have happened.

For the other, the culprit posed as a potential buyer of the company, only to copy the products and steal the customer list. The scenario is ongoing as this article is being written.

Both situations, I’m 100% convinced, were premeditated.

The impact on these people is predictable: Anger. Embarrassment. Financial loss. Uncertainty about the future.

What could these two overly-trusting entrepreneurs have done to prevent such skullduggery? Of course, the short answer is to get a lawyer involved. Hindsight, it is said, is always 20/20.

How does one know when to seek legal help? (A note to my attorney friends: The correct response is not “early and often.”) Certainly, there’s a time to bring in the lawyers, and having a competent – dare I say “trusted” – attorney at the ready is a must-have for any business owner.

Who wants to go through life thinking there’s a business-stealing boogieman around every corner, waiting to pounce?

But there’s a brutal reality: the boogieman is real. He sucked the blood from these two wonderful people.

Like it or not, a healthy amount of suspicion and skepticism goes with business ownership.

Each of us has to find a comfort zone. For some, it might mean cynicism and sliding a non-disclosure agreement across the table to every new acquaintance. For others, it may be a reluctant admission that some folks are scallywags.

So, be nice. Be generous. But be careful out there.

“Trust everybody, but cut the cards.“
– Writer & humorist Finley Peter Dunne

“Never trust anyone completely but God.”
– Lawrence Welk

“Trust, but verify.”
– President Ronald Reagan

Your Most Important Document

In a previous column titled Great Expectations, I urged business owners to have realistic expectations for their employees.

Now let’s build on that message: Define your expectations.

In my role as a business coach, most of the issues I hear about are related to employees. And more often than not, a lack of clear expectations is at the root of the problem.

We usually let our people know how to do a job. “Open the software. Click the blue icon. Use the menu to find the customer …”

But how often do we let them know what behavior we expect, or perhaps more importantly, why we expect it?

If the only clues to acceptable behavior are the inevitable corrections that come when straying off course, it may take a long time for your team to figure things out for themselves.

If you expect your team members to treat others with respect, just say so. Clearly. Directly. Early and often.

Some of you may know that I own a company called Arch Engraving in Kirkwood, Missouri. We make and sell awards, signs, nametags and personalized gifts. In 2010, I bought out my two partners and became sole owner. After that, we were busy moving the facility and creating a spin-off business. The dust has settled so I finally found time to create a “culture document.” It was rolled out in late 2012 and early 2013 for our 10 full-timers and various part-timers.

This document contains our Mission, Vision and 6 Guiding Principles. Under each Guiding Principle are 4 or 5 bullet points to explain the principle.

The contents were reviewed individually with each employee. The Guiding Principles and underlying bullet points were used as the performance review form. Since this is brand new for everyone, the review meetings were mostly about explaining our direction and our “why”, with suggested (and in some cases, required) improvements noted as appropriate. I tried to use these primarily as educational meetings, and as my opportunity to get feedback on the document. After all, they were seeing these expectations in writing for the first time so there was no justification to get all worked up about non-compliance.

Going forward, though, this document will be our guide. Everyone now knows we will hire, fire, reward and promote based on it. They know to filter all decisions through it. Our Mission tells them what we’re all about. Our Vision shows where we’re going.

I’m not kidding myself – there will be set-backs. But staying the course and using the document in our daily work will make it real. It’s not just a plaque on the wall.

Some experts advise to make this sort of work a team effort. In this case, I did it myself and tweaked it based on employee feedback. Right or wrong, I felt the business should reflect my own values and expectations.

There’s no doubt in my mind that this is now the company’s most important document.

Do you have a culture document? I’ll show you mine if you’ll show me yours. I intend to write more on this topic and would love to find great examples to highlight. Send me an email.

 

Work ON Your Business

Unless you’ve just been released from a long incarceration in a Turkish prison, you know that the concept of working on your business – rather than in it – was popularized by Michael Gerber in his mega-hit book, “The E-Myth Revisited.”

Gerber made many great points (which explains the “mega-hit” part), but the on/in distinction is the big take-away for most readers.

Here’s an excerpt:

“Go to work on your business rather than in it, and ask yourself the following questions:

  • How can I get my business to work, but without me?
  • How can I get my people to work, but without my constant interference?
  • How can I spend my time doing the work I love to do rather than the work I have to do?”

So, what does it mean to work ON your business?

Well, one of Gerber’s main themes is the idea of systems. Systemize everything. Manage systems, not people.

It’s terrific advice, of course, but many small business owners still struggle, even after reading E-Myth. What’s a system? What systems are needed? Where do you start?

My answer: Anything can be a system. A system is simply a way to avoid NOT making things up as you go along.

  • Instead of plucking interview questions out of thin air, create a hiring system.
  • Leaving the coffee pot on overnight, or forgetting to set the alarm? Create a “last person out the door” system.

Here’s a system I’ve used for years in my own businesses:  “Never, ever ask for computer help until you’ve restarted it. Period.”

Simple? Yep. Like I said, anything can be a system. Not all systems are this simple, but you get the idea.

Beyond creating and installing systems, how else can you work on your business?

Perhaps more to the point, how can you find the time to work on your business when you’re consumed by it all day, every day?

Here’s a way to let the ideas and time find you: Constantly be in “improvement opportunity mode.” Every time an error or crisis occurs, stop. Avoid the temptation to put out the fire and get back to work. Analyze what just happened. Was it human error, or could a system – even a simple one – prevent future recurrence? If so, create it right then and there. In many cases, you can do this sort of “post-mortem” work in a matter of minutes.

Planning is a great way to work on your business. As an early riser, my favorite planning time is early Sunday mornings, before my wife gets up. And business trips can turn into mini planning retreats … if you keep the TV turned off in your room.

I know a business owner who tells me he likes thinking about his business while on his riding mower. Some folks really embrace this concept by taking their teams on annual out-of-town planning retreats.

Exactly what you do is less important than developing the habit. Start working ON your business today.

“Do it. Do it now!”  – Arnold Schwarzenegger

Bonus Plan Best Practices

Well, it’s year-end bonus season again.

If you have a good year and want to share some of the fruits of your labor with your team, great. But to simply do so without a well planned and executed bonus plan is a wasted opportunity.

So, here’s a list of best bonus and incentive practices so you get the most bang for your bonus buck.

Plan Ahead

Get an early start on next year’s incentive program by creating it before the year starts. Then, share the numbers and generate excitement. Pick out the main numbers that drive your plan, and make them known. Create scoreboards. Encourage folks to pay attention to the progress. Talk about the plan at every opportunity. Start and finish strong.

Make the bonus “self-funding.”

This means it comes out of profits over and above your target. For instance, if you’d be tickled pink with $90,000 profit before tax, then make your bonus kick in for profit dollars above $90K. So, in this example you might consider putting 25-50% of all profits above $90k in the bonus pool.

Make the bonuses large enough to modify behavior.

The potential bonus needs to be significant enough to generate excitement, and actually get your people to help generate the profits that lead to bonuses.

Divvy up the bonuses in an equitable way.

Many companies divide the bonus pool according to base salary, so higher-paid people get a bigger percentage. You might use “shares”, just like the stock market. Make each $5,000 of base pay equal to one “share” in the pool. So, someone making $25K has 5 shares, and another making $30K has 6. If these are the only two employees in the bonus plan and the pool has $10,000 in it, there are now 11 shares total and each share is worth $909.09 ($10K/11 shares.) So employee #1 gets $4545.45 and #2 gets $5454.54. However you do this, keep it simple.

Make the first year an easy win.

Nothing will discourage your people more than starting a new bonus plan and then not earning a bonus. Set a fairly easy target in year one to show folks you are serious and to give them a taste of winning.

Consider paying the bonuses 30 days after the end of the quarter to help cash flow.

After all, your customers don’t pay you until after 30-45 days. Maybe more. So why not cut the bonus checks after that same amount of time? It’s a great real-life business lesson for your team.

Keep the bonus separate from regular pay.

I strongly recommend bonuses NOT be put on a regular paycheck (but of course you must take out payroll taxes.) Do a separate check run, so it isn’t perceived as pay. Make it clear that this is an additional reward for achieving a goal and is NOT an entitlement.

Your incentive plan can be a business drain or a business gain. Take the time to get it right.

Engage your Employees to Beat a Business Downturn

“I have recently had to let some people go. They were great people, but with our financial projections, we had to downsize. Some of my current staff has begun to get a bit discouraged about the company as a result of slowing sales and their friends no longer working here. What are some ways that I can make sure my remaining team stays excited and engaged during a tough time?”
– Worried Business Owner

Get your people involved in the come-back.

Have a meeting and show them the numbers – where revenue was the last few years, and how much it’s dropped off. Explain the relationship between sales, headcount, and profits. Take questions, give straight answers, and encourage discussion.

Share your vision for the future. It might be emerging from the recession stronger than ever, or simply surviving. Regardless, give them the unvarnished truth. And, be sure to set the tone as positive and optimistic.

Ask for their active participation and support. First, banish the rumor mill and negativity. If your people have concerns or complaints, they should voice them in company meetings, to a supervisor or to you. No grousing around the water cooler.

Put a mechanism in place to collect ideas for improving the situation: Customers. Marketing and sales activities. Cost of goods. Overhead expenses. Productivity. Receivables. Cash.

Of course, your team will want to know how things are going. Have regular follow-up meetings and post results on the wall. Show them that their ideas are being implemented. Share the results, and acknowledge those who submitted ideas. Learn from mistakes and celebrate even small wins.

That’s it. Transparency, engage your team, be smart and work hard.

 

Stop Pouring the Wrong Coffee

pour-coffee

Ever been to a restaurant with someone who drinks decaf coffee? You sit down and order drinks. Someone at your table asks for decaf coffee. Your server fills the order as requested. So far, so good.

Pretty soon, your food arrives and you dig in. The drinks are getting low, so either your server or someone assigned the mission-critical task of keeping drinks topped off swoops in. The coffee gets refilled, but not with decaf. Luckily, the decaf drinker notices that the server isn’t wielding the familiar orange color-coded pot and brings the mistake to the server’s attention. A mumbled apology is offered, and the server takes the cup to the kitchen to swap it out for the right stuff.

No harm done, right? Happens all the time.

Let’s take a look at the effects of this minor incident on the parties involved:

  • It wastes the restaurant’s time and money, literally pouring good product down the drain.
  • It wastes the server’s time, eating into time available to take good care of his or her customers.
  • To some small extent, it erodes the customers’ confidence in the restaurant.
  • Multiply these effects by dozens of locations in a restaurant chain times thousands of decaf customers times a boatload of wrong-coffee pourings, and you get scads of lost time, product, money, efficiency, productivity, and customer confidence.

All irretrievable. And all so easily avoidable.

Virtually all restaurants use orange color-coding to designate decaf coffee. Astonishingly, though, most still rely on memory or ESP to determine whether a customer gets regular or decaf.

A very few food service operators have eradicated this problem by placing a telltale coaster under each cup of decaf.

No more doubt. No asking the customer about the contents of the cup. No more mistakes, or wasted time, or wasted product, or eroded customer relationships.

What a simple, foolproof, and inexpensive solution to a widespread problem.

Two quick questions:

1 Why the heck doesn’t every restaurant do this?

2 What’s your version of this problem in your business?

Now, I know that not all problems in business are this simple or this cut-and-dried. So, regardless of the severity or complexity of your oft-repeated errors, how about using an old saying to give this phenomenon a name?

“We never have time to do it right, but we always have time to do it over.”

Here are two important take-aways from this discussion:

  • We’re talking about a system for fixing a recurring problem.
  • Every mistake is an opportunity to improve your company.

Let’s look at both of these ideas.

Use systems to avoid future mistakes.

If your approach to errors is people-centered, I recommend that you raise your sights a bit. While mistakes do happen and they can often be attributed to human error, a lack of systems and procedures is more likely in most cases.

Take the coffee example. If the manager happens to witness the decaf error, a brief conversation with the server might help avoid such mistakes for a while. The boss might even go so far as to convene a meeting of the wait staff, where they explore the importance of remembering which customer gets what coffee.

All well and good, but why not put a system in place (like the coaster) to remove as much human error as possible?

So I again ask, what’s your version of this problem in your business? Can you fix your nagging, recurring mistakes with color-coding, forms, templates, systems or procedures?

Every mistake is an opportunity to improve your company.

Mistakes are costly. They waste time, money, productivity and resources. They aggravate employees. They lose customers. Even so, each and every one is a golden opportunity for improvement.

Every time a mistake happens, ask: What can be done to prevent this same type of error from happening in the future? This is “root cause” thinking. You and all your people should get good at looking for the root causes of problems.

It’s not about blaming the individual employee. When errors occur, the person involved needs to admit it without fear of reprisal.

Drive individual blame and cover-ups out of your company. Replace them with willingness to admit mistakes, so you can find the root cause of errors and prevent them in the future. Learn from mistakes.

Make it the job of everyone in your company to identify and attack the root causes of errors.

Stop pouring the wrong coffee. Stop doing it over. Instead, start doing it right the first time.

 

It’s Free!

free

It’s a typical day at Bob’s Company, Inc. Bob notices that a recently-hired employee is now eligible for dental benefits. So, Bob hands her an application. As he walks away, she asks, “What’s the cost?”

Bob’s reply? “It’s free. The company pays for it.”

If this was a movie rather than an article, the startling shower music from “Psycho” would come on at this point.

Or maybe it would turn into a take-off from “Young Frankenstein.” Instead of “It’s alive!” the line could be “It’s Free!”

Shame, shame on Bob. He wasted a terrific opportunity for a “teachable moment” with a new employee.

Of course it’s not “free.” Every benefit provided by the company costs good money.

Free. What was Bob thinking? He should have responded something like this: “Our dental insurance costs about $25 per month. The company pays for it. It’s part of your compensation – just as our other benefits are.”

Too often employees think only about base wage or salary when the subject of compensation arises. This happens because we business owners and employers let it happen. You’re likely to hear something like “I make $35,000 per year.” You are very unlikely to hear an employee say, “Well, my base is $35,000, but on top of that my employer generously pays another $12,000 for my health insurance. Counting my paid time off, my other benefits and my payroll taxes, I cost my employer a whopping $58,000 per year.”

So, how do we get our “bang for the buck”? How do we get our employees to recognize and appreciate all aspects of the compensation package – so the company can enjoy a fine ROI in the form of increased employee satisfaction, improved productivity and reduced turnover? How do we drive the “entitlement culture” out of our companies?

Here are some approaches to use:

  • During hiring interviews, listen for signals. If the candidate is focused like a laser beam on your vacation plan or grimaces noticeably when you explain that you don’t pay 100% of the health insurance, these are not good signs. (Note: Yelling “Next!” is not a tactful way to end an interview.)
  • Your candidate job offer letter should outline the entire compensation package and focus on the total value – not just the salary.
  • Make ongoing education part of your company’s culture. Talk about the cost of doing business. Let your folks know how much insurance rates go up every year. Make sure the employees know that they have a vested interest in the company’s success … if they help the company succeed, you can continue to subsidize their insurance costs and provide excellent benefits.
  • Print a year-end statement for each employee, showing his or her total compensation and benefits costs.
  • Consider all aspects of compensation costs when budgeting and projecting pay increases. Example: Let’s say you like to provide an average 4% pay increase per year, and your total company compensation expense (including benefits) is $800,000. A 4% overall increase is $32,000. If you expect your health insurance to go up $5,000, you now have $27,000 left for salary increases. (Back to education: Explain your rationale and the math to your employees. Involve them in the decision. Maybe they want more salary increases and are willing to bear more of the insurance costs. If they help make these decisions, you’ll get better buy-in.)

You invest lots of money in your company in the form of salaries and benefits. Chances are, payroll and related expenses are the largest line items on your income statement. Spend the additional time and effort to maximize the investment. Done right, it can pay you back many times over.

PS: Bob’s story has a happy ending. He realized the error of his ways and corrected his statement to his employee.


Talking about Values is Good Business

What do “values” have to do with business? Everything!

This isn’t about “touchy-feely.” I see core values as a hard-nosed business practice, just like reducing costs. It’s simply a way to ensure that everyone on the team knows what is important.

As owner, you can – and should – shape your company’s culture. You can let it happen or you can make it happen.

So, what makes up a culture? All sorts of things. Fun versus serious. Honest versus dishonest. Friendly versus confrontational. Lunch with others or eat at your desk. All this and much more is the stuff of company culture.

A big part of a business’ culture centers on its values. You may not care whether your employees eat at the desk or go out, but you darn sure better care whether they are being honest with your customers.

My recommendation: Determine what principles are important to you, and then inject them into the workplace.

If you don’t spell out what’s important, then the implication is that either nothing is important or everything is important – trouble either way.

Here’s an example: Barry is the new guy in sales. He was put place with no orientation on what’s important to the company. He brought some bad habits, including breaking promises to customers. His manager doesn’t find out until a furious customer calls him.

But George works at a company where breaking promises to customers is unacceptable. The owners and managers “walk the talk”, setting the example for others. It’s discussed in meetings and in new employee orientations. It’s used in performance reviews and job descriptions. Do you think George shares Barry’s cavalier attitude toward commitments to customers?

This is the difference between ignoring what’s important and building a values-based culture on purpose.

Adopting a set of values is not about picking a litany of lofty goals that nobody can live up to. A company must identify those principles that the top people are passionate about and can adopt without hesitation.

What values to pick then? Each company must answer that question for itself. The answer may be found in things like the founder’s personal values and vision for the company.

Whatever values are chosen – and a handful is plenty – the company needs to really work at making them second nature for all employees. This doesn’t happen overnight. About the time you think your staff is getting tired of hearing a message, that’s about the time it’s just starting to soak in.

Here is perhaps the most powerful sign that it’s working: Your employees start enforcing the culture. When you hear one of them tell another, “That’s not how we do things around here”, you’ll know your work is paying off.

Adopting and living up to a set of guiding values can literally transform your business. Don’t assume your people know what’s important. Tell them. It’s hard work and a long process, but it will eventually have a positive impact on your bottom line.

Transparency and Leadership: Avoid Emily Litella Syndrome

Emily Litella, in one of her typical on-air rants: “What’s this I hear about computer parking lots? We’re in a recession, people are losing their jobs, and now we have parking lots for computers! It’s an outrageous waste of land and money!”

Jane Curtin, with her typical disdain for Emily: “It’s commuter parking lots.”

Emily: “Oh … Never mind.”

A note to those of you too young to have experienced Saturday Night Live’s original cast from the 1970s: Look up Emily Litella on Wikipedia. Better yet, see her on YouTube. Played by the late, great Gilda Radner, Emily was a commentator for the SNL Weekend Update news. Emily always jumped to rash and incorrect conclusions because she never had the right facts.

Do your employees do the same thing?

I constantly encounter business owners who are worried that their employees will find out either how well or how poorly the company is doing. Of course, lately it’s trending toward the “poorly” end of the spectrum – but either way, here’s my usual response:

“Your employees aren’t dumb. They’ll probably figure it out. But even if you can hide the truth, why would you? In the absence of facts and information, your employees will make assumptions and jump to conclusions. Their decisions and behaviors will be based on these false assumptions. How do you expect that to work out?”

A little transparency goes a long way.

That word – transparency – seems especially relevant today, given our current state of affairs. Think about the world of big-business, banking, and high finance. A string of crumbled companies, bankruptcies, lost pensions, mass firings, devastated families and broken dreams. Don’t even get me started on Congressional “leaders” who make deals behind closed doors and ram legislation through without even allowing their members to read bills before voting.

Many of America’s economic woes could have been avoided, but for a lack of transparency.

I’d argue that transparency gives rise to leadership.

In an open environment, leadership is a must. It requires you to carefully choose the “people on the bus” who are worthy of trust and who will act in the business’ best interests with the information given to them. It also means that you’ll have to explain the information – to mentor and train your team – so they’ll know what it all means.

Transparency allows full and effective delegation. “Here’s the goal. Go make it happen.” Knowing the organization’s goals, financial status, and available resources allow confident decision-making.

Integrity – a cornerstone of leadership – goes hand-in-and with openness. Shady business practices are like fungus and vampires. They don’t thrive in the bright light of day.

Business owners who worry that their employees will know the company’s status are withholding information and keeping their employees in the dark – and still expecting good results. It’s much like asking someone to play a sport without keeping score.

Delegation? A secrecy-cloaked environment throws a blanket over every potential solution. Aside from the top leaders, nobody has the big picture: “What should I do? What can I do? What resources are available? What methods make sense for our current financial situation?” The lack of information will result in questions, false assumptions, and faulty decisions … making micro-management necessary.

So often, the small business community looks to the captains of industry for answers. It sure seems to me that the example set lately by the big business community calls for a shift in thinking.

Why can’t the small and mid-sized business community set the tone for a change? Let’s start a revolution of our own. Let’s be the example-setters. Let’s be the poster-boys and poster-girls for transparency. For integrity. For solid business practices. And for leadership.

The Emily Litella act was funny on TV. It’s not funny in your organization. Open up and get Emily off your payroll.

It’s Not My Fault!

“It’s not my fault!”

How many times have you been a customer and heard that line?

It usually happens right after you bring a product or service defect to the attention of someone at an establishment where you’re spending your hard-earned money.

I was on the receiving end of this statement recently. It was tempting to give a customer service lecture to the person in front of me, faultless as he may have been.

This particular situation involved receiving the wrong fast food order. I had ordered the medium Unrecognizable Chicken McParts and instead received – and was charged for – the aptly named Super Sized version. For a moment, I thought perhaps they’d brought me the entire crate of McParts straight from the walk-in freezer but they assured me this was indeed packaged for individual sale and consumption. (Disclosure: While I may find it amusing to poke fun at the fast food industry, that’s where I had my first job. Accordingly, I’m somewhat sympathetic to fast food employees. Even so, until they start putting the right stuff in the bag, they will be the target of my “how-not-to-do-it” business lessons.)

As a small business owner, I pay special attention to the way service is delivered when I’m the customer. Most folks reading this are probably equally aware of nuances that might be missed by others: The words that are said and how they’re said, body language, the care with which transactions are handled, and so on.

It’s almost unfair to use fast food joints as examples of how to (or how not to) conduct business. After all, they make it awful easy to identify faults.

So, let’s raise the bar and discuss another industry. In fact, let’s discuss your own company.

Have you had the “it’s not my fault” talk with your people lately? Have you ever had it?

Chances are, if nobody has had a direct discussion with your employees they don’t intuitively know that the customer doesn’t care whose fault it is. Even if the customer does know who’s to blame, “blame” isn’t on the agenda. Getting the problem fixed quickly is.

Here’s a good discussion to have with your troops:

  • Every company makes mistakes – including ours. The difference between companies isn’t whether mistakes are made, it’s how they’re handled when they occur.
  • When the inevitable error does happen to one of our customers, apologize. You represent the company, and you’re doing this on behalf of the company. It’s not admission of personal guilt or fault, and it doesn’t invite repercussions.
  • Take steps to get the customer’s problem resolved. If you can’t do this yourself, be sure it gets handled.
  • When you make a mistake – whether it impacts a customer or not – admit it. Learn from your mistakes and share it with others so we can all avoid that mistake in the future.

As business leaders, it’s important for us to shift the focus from fault and blame to learning and improvement.

Banish “It’s not my fault!” from your workplace. Replace it with confident, competent service that keeps your customers coming back.