Avoid All Eggs in One Basket

Tuesday, May 21, 2013 by:David Zahn
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Most of us grew up with our Mothers sharing their wisdom through quick one or two sentence statements. Some of those statements later proved to be untrue – if you cross your eyes they don’t stay that way forever and if you swallow gum it does not stay in your stomach for decades. However, there are some truisms that Moms around the world know that should be paid attention to when becoming more educated about investing our business resources (human capital, equipment, marketing approaches, sales techniques, etc.):
     1. Too much of a good thing can be bad
     2. Don’t put all your eggs in one basket

 

Be careful with business investments, look to diversify.

Be careful with business investments, look to diversify.

When choosing where to invest one’stime, energy, and money, it might seem appropriate to pick a single approach to business (product line, service offering, strategy, etc.) that is outperforming all of the other options or competing initiatives in that market and put all of one’s funds into that one “winner.” However, while it may be a good thing today, there is no guarantee that it will remain as such and what appears to be a good thing now may quickly turn bad in the face of unforeseen occurrences.

Underlying this conundrum is that we all make decisions today based on that which is known. However, none of us have an ability to foresee tomorrow’s realities. We are therefore forced to make decisions based on imperfect data. Because of that, according to investment theory, it is recommended that no more than five percent of one’s investable assets be in any one holding. The same approach should be used in thinking about business operations (though the percentages may change, the concept of diversity across products, services, etc. should be adhered to in thinking about business offerings).

Few people saw the likely demise of Blockbuster before it began to fail. Up to that point, the ability to rent a movie at a local store for that night’s entertainment seemed like a winning approach. Investing in a company like that seemed like a very safe decision. Of course, that was before companies like Redbox and their kiosks in local stores became prevalent and Netflix became the supplier of choice for many. The strength of the cable tv programming providers and the capability of computers to stream video from online have all contributed to the weakening of Blockbuster. Because Blockbuster did not see the downside of being “all in” on their business model without regard to other options, they reacted far too slowly (if at all).  It is incumbent upon the business leader or company to perform competitive analysis to identify potential threats and opportunities, due to competitive incursions, technological changes, and marketplace dynamics.

Because we do not have an accurate way of telling the future it is best to spread one’s “investment” across multiple vehicle or opportunities s to ensure that if any one of them should not perform as expected, there is a reduction in the impact that portion of the investment will have on the total business. Now, of course, that also means that should that singular business investment suddenly take off and sky rocket, there will be a smaller gain than if the total invested amount had been consolidated in that one investment. Yet, the opportunity to switch the percentages always exists to leverage potential upside gains and reallocate resources.  However, given that none of us can “win” by trying to outguess that which is unknown, it is not only prudent, it is also strategically sound to diversify or allocate portions of one’s business investment dollars across multiple investment opportunities.

Just like too much of a good thing could turn bad, so too can putting all of your eggs in one basket become a negative. While the potential upside of getting a huge return is attractive, the reality is that Mom was right and more times than not, putting all of your eggs in one basket will create an unnecessary risk that will leave the investor’s financial portfolio scrambled.

Categories: General

What was Old is New Again

Thursday, May 16, 2013 by:David Zahn
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Without giving out too much information about my age and how long I have been in business, I can tell you that when I was first starting out I received a lot of advice from mentors about the importance of:

  • Determining the skills,services,  products, benefits, etc. I could provide or what is now referred to as the “offer.”
  • Selecting the customer target or what is now called “marketing niche” I wished to meet.
  • Identifying the approaches I would use to connect me and my services to prospects and customers or what is now discussed as “networking.”

The fundamentals of business have not changed.  The methods may have evolved, the technology to accomplish tasks has; but the outcomes have not.

I bring this up because of late there have been a rash of emails, direct mail pieces, and even a few telephone calls trying to convince me that my website needs upgrading, I need to migrate to new platforms, I am late to the party to leverage social media opportunities, etc.  I have even been curious enough to participate and listen to some of the sales pitches, demonstrations, case studies, testimonials, etc.  What has come through loud and clear is that there is an awful lot of shamans and snake oil sales people preying on the uninitiated.

Social Media

Social Media sites (I am lumping Facebook, LinkedIn and Twitter into this categorization) are primarily designed for socialization.  While there are attempts made by businesses to “monetize” their efforts on these sites, it still boils down the same business principles:

  • Giving prospects and customers something of value (in the digital world, that means links to content, discounts, early notification of new products, etc.)
  • Providing customer service at expected or above expected levels (in the digital world, that means offering responsiveness, having all links functional, follow-up on requests, etc.).

What is far less certain is how to translate the race for “likes” or “friends” into actual revenue.  The misguided view that “clicks” count, or that accumulating “fans” is equivalent to money pervades many attempts to maximize social media presence.  Only money counts as money.  The escalation of people connecting with the company or the brand may be a start – but only if it translates to actual business.  Watching the counter reach six figures is ego gratifying, but does nothing to add dollars to the till.

This is similar to the discussion that NEEDS to be had in executive offices around the difference between “KPI’s” (Key Performance Indicators) and Objectives.  KPI’s are not the same as performance as tracked and measured by the business.  It is an indicator only.  Something that may be correlational or perhaps causal, but is NOT the performance.  Saying you will collect forty names a day from your email newsletter is not the same as picking up forty new customers (or even one!).  Growing a mailing list is non-revenue generating if those new subscribers to webinars, free incentive downloads, blog readers, etc. do not purchase from you.

Keyboard depression is NOT purchasing.

Keyboard depression is NOT purchasing.

While being active in social media provides an avenue and an opportunity to reach more prospects and remain in touch with existing customers inexpensively, and permits tailored messaging or offers, it is not the same as selling new business to them.  The basics of business have not changed.  Depressing a keyboard character is not writing a check.  While we have entered into a new business world in many ways – that has not changed.

 

 

Categories: General

We Love the Home Runs

Tuesday, May 7, 2013 by:David Zahn
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Culturally, our society loves the big outlandish efforts. We love the Baseball sluggers who hit massive home runs that pull us out of our seats (though we forgive them when they far more often strike out in their attempts to “swing for the fences”). We celebrate the Football defensive players who can “sack the Quarterback” (even though; at best, it happens a couple of times a game out of more than 60 plays). And, at times, we apply the same respect and affection for our prognosticators who forecast outcomes that have “game-changing” results.

Our culture celebrates the home run or big action.

Our culture celebrates the home run or big action.

However, while our athletes provide us with entertainment, amusement, and a distraction from our daily lives and can be afforded the liberty to try for the “big play;” following the projections of the so-called pundits who are willing to pursue the contrarian point of view time and time again rarely leads to financial success. The reality is that it is far more common that they are “one-shot wonders” more than repeat champions.

A recent article on www.dailyfinance.com written by Vishesh Kumar (January 18, 2011), pointed out the fallacy in following the pundit who either guessed correctly or made a bold projection of the recession before it happened in 2007. He spotlighted three of the more prominent pundits, each of whom correctly identified the likelihood of a recession well before others recognized it (Meredith Whitney, Nouriel Roubini, and David Rosenberg).

A follow up on their success since then has shown very lackluster results. According to Kumar, Whitney has been right on only 37% of her decisions regarding the S&P 500 Financials Index. Furthermore, Whitney is calling for a meltdown of the municipal bond market now (a forecast few others agree with). Nouriel has made numerous guesses that have not come to pass (hedge fund meltdown, forecasting oil prices would remain at $$0 a barrel, only to see the price top $80 a barrel, and his prognostication that the S&P 500 would fall lower than 600 by the end of 2009. The actual close at the end of the year was 1,115. Lastly, Rosenberg continues to bang the drum for doom and gloom, even as others recognize the recovery and have become more optimistic.

While it is memorable when someone seems to have an inner sense of the future and provides a glimpse of the future, it often is no different than the carnival fortune tellers who occasionally make a projection that comes true days, weeks, or years after providing a “reading.” If one constantly swings for the home runs and is willing to accept a lot of strikeouts, it stands to reason that every now and again, the ball will clear the fence. However, the batting average or number of times that the player actually gets a base hit is usually much lower than the players who do not try to hit homeruns with every swing, but rather, attempt to get base hits based on the situation of the game, where the pitch is placed, and the player’s natural swinging motion.

Categories: General

Working with Sub-Contractors

Tuesday, April 30, 2013 by:David Zahn
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In today’s economy and business environment it is often necessary for service providers to cobble together a solution for their clients or customers by employing experts and niche providers as sub-contractors.  The approach used to hiring sub-contractors, management of sub-contractors, and compensation of sub-contractors is often in misalignment with the goals of the project and/or relationship between the two companies.

Hiring Sub-Contractors

Given that projects often require expertise that exceeds the subject matter insight or experience of any one service provider, it is becoming more common for sub-contractors to be hired in support of a project.  While having that resource assigned to the project can often ensure a better outcome; it can only happen if there are certain considerations employed:

  1. Knowledge, experience, and expertise – it almost goes without saying that a good outcome will hinge on the ability of the sub-contractor to meet the requirements of the job.  A first requirement for choosing a sub-contractor is ensuring that they have the “goods” to perform.
  2. Cultural – determining if the sub-contractor’s approach to business mirrors the needs of the primary contractor and the end-user customer.  In addition to the content expertise, there also needs to be a similar alignment culturally to how the project will be conducted.  Formal vs. informal, communication methods, frequency and duration of contacts, demonstrations of passion and emotion, etc. can all impact the success of a project if not consistent across all members of the combined team.

Management of Sub-Contractors

The roles and requirements of the project should be very clearly elucidated to avoid conflict or misunderstanding.  Given that the sub-contractor and contractor at times may collaborate on some projects and at other times may actually compete for business, it is necessary to consider how the project will be managed and what the tolerances are for sub-contractors to assume more responsibility, have “face-time” with the client, how they are introduced to the client (as members of the team or as sub-contractors, or other ways), etc.

Contractors that lie to sub-contractors harm the project and relationship.

Contractors that lie to sub-contractors harm the project and relationship.

Compensation of Sub-Contractors

A huge issue for contractors to wrestle with is how to compensate the sub-contractors.  A huge issue for the sub-contractor is compensation, too.  However, they do not share the same issues around compensation.  For the contractor, the issue is often one of how much to compensate or how to determine what is “fair value.”

For the sub-contractor, the issue is more often, when will the fee be paid and how reliable is the contractor in living up to commitments.  I have personally been on both sides of this relationship and can attest to the inportance of being able to trust that I would receive payment on time.  Once that promise is broken, the relationship is fractured and very hard to repair.

The outcome can often be in jeopardy then – the sub-contractor may choose not to perform on the project (can be harmful if the project is not completed), the sub-contractor may do sub-optimal work by assigning it to lower skilled and lower compensated employees as a way to reduce the exposure and costs incurred, and the relationship between contractor and sub-contractor will also suffer.

Categories: General

Ethics, Business, and Sales

Tuesday, April 23, 2013 by:David Zahn
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I teach a course in Consulting Skills in a “small New Haven, CT” Graduate School. The students are comprised of academically bright students and business professionals pursuing their Masters Degree for their personal career development purposes. One of the topics that came up recently in class was the concept of ethics.

A student wanted to know about the propriety of disclosing information to management she had come across about a colleague of hers that contradicted what the colleague claimed on a resume and professional biography. The conversation in class became rather animated with people taking polarized positions. We did not reach a consensus, though the conversation was illuminating. Among the points made:

  1. A variation of the Mother’s admonition, “if you have nothing nice to say, don’t say anything at all.”
  2. Tattling is umbecoming and says more about the tattler than the person being tattled on.
  3. Whistleblowers should be celebrated and acknowledged, not shamed or silenced.
  4. Just do your job and let the chips fall where they may/mind your own business.
  5. What is the benefit to the organization? What is the benefit to the individual doing the sharing of information?
  6. The organization has a right to know and the consequences are outside the control of the person sharing the information and should not factor into the decision to share.

    Perceiving outcomes is often difficult when choosing between ethical options.

    Perceiving outcomes is often difficult when choosing between ethical options.

The student who brought the issue up in class further wanted to know if the answer or response changes if the discussion changes based on whether it is a discussion about an internal employee or if a vendor were to share the information about a competitor. That is an area that I felt more comfortable addressing.

Sales people and consultant/vendors will occasionally try to bolster their own standing wih a prospect or customer by sharing secrets or insights about a competitor that degrades that competitor or minimizes their background, experiences, or marketing claims. To that point, I shared with the class:

It is a bad idea. It rarely serves the goal of improving that company’s standing.

There is the ethics issue to be discussed, but what occurs to me is that there is also a business issue that also needs to be considered. Stating what the company I represent stands for, sharing my own experiences, connecting my own background to the needs of the situation or prospect/client/customer, etc. are all worthwile pursuits. However, taking steps to knock a competitor causes the customer to wonder why, whether what is being shared is objective or an ad hominem attack, and creates ill will and distrust. It is always better to sell on the basis of YOUR strengths and not on the weaknesses of the competition. The prospect/customer can make the comparison on their own when presented with the facts and reach their own conclusion.

As a salesperson, it is appropriate to suggest that references or testimonials be checked in the same way that it is done before hiring a job applicant. It is not necessary to besmirch a competitor and accuse them of lying or of being untruthful.

Categories: General

Why am I being Recorded?

Friday, April 19, 2013 by:David Zahn
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In speaking with business professionals still struggling with the slow return of the economy, one of the frustrations is in dealing with credit card companies, mortgage companies, or other lending institutions after the busines person has missed a payment. One of the more frequent annoyances they confront when dealing with certain organizations over the phone is the necessity to hear a scripted announcement from the customer service representative about how the call is being recorded, that if this is an attempt to collect a debt…, that if you have filed bankruptcy, the information is for informational purposes alone, etc.

The assumption has always been that the recording is for the protection of the agency so that any agreements can be confirmed, that there is proof of contact, acknowledgement of the deal struck, or in some other way provide relief should the debtor claim to not have spoken with or discussed the payment plan.     However, when there is a dispute between the organization and the debtor, the recording is not to be shared with the caller.  The organization (bank, lender, credit card, collector) has access to it, but they do not allow the caller to hear it or review it with them.  When questioned about why that is, the answer that is provided is “that is our policy.”  So, while there is a recording, it is for THEIR protection and not in the interest of pursuing the “truth.”  If there is a dispute about what was said or agreed upon – the caller cannot check the recording.  The organization does the “research” and then determines what (if any) actions need to be taken.  So, it is a case of the wolf guarding the hen house.  They are unwilling to allow the customer to have access to the recording.  Therefore, it is left to the customer to “trust” the company to correctly represent what was contained in the telephone call.

Why am I being recorded?

Why am I being recorded?

 Not at all a customer-oriented organizational approach to be sure!  The bureaucracy trumps performance in this instance as it is far more concerned with “covering their own hindend” than in properly serving customers. 

 

 

 

 

 

 

Categories: General

The Trust Tax

Friday, April 5, 2013 by:David Zahn
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The calendar indicates that this is the time of year when we are all expected to submit our personal income tax forms to the IRS (and by the way, if you have not done so yet, there is still time to go to http://www.irs.gov and download the appropriate forms).  And while many of us are not caught unaware by this annual practice, there is another tax that most of us are paying that we are not even aware is costing us in our professional lives.

Trust Economics

In the most simplistic form, we tend to think of our business performance in terms of the following equation:

S  x  E  =  R

S – strategy employed to accomplish the goals and objectives of the company.

E – execution and tactics employed to achieve or implement the strategy

R – results or levels of performance/achievement

However, the reality is that the equation is missing a core component:

(S  x  E)  T  =  R

The “T” represents Trust.  The level of trust directly impacts the performance level achieved.  When it is at an apex, performance will be positively affected.  However, when it is on the wane, performance will suffer and be sub-optimized.

Trust Tax

As this graphic shows, trust has a rolling effect on the other components leading to success:

Trust has a major role in establishing business results

 

When trust ebbs, the speed to making decisions also decreases as hesitancy creeps in, more steps are required to be convinced to move forward, and greater proof is needed in order to move forward.  Further, owing to the additional requirements, incremenetal time to make decisions, and demands for more examples and proofs – the business suffers.

Compare that to what happens when trust is at a high point.  The speed to make decisions increases as there is less doubt, greater belief without the need for constant proving, and costs decrease.

At first blush, this may seem like a fertile ground for abuse and for poor decisions to be permitted.  After all, most of us have had it ingrained in our professional thinking that we must base our decisions on facts, proofs, being cautious, etc.  However, the recognition of one’s trustworthiness often requires a rather comprehensive process that ensures that both parties are aligned and view the business opportunity similarly.  Rather than asssume that trust is offered indiscriminantly, trust must be developed and proved through experiences with each other.  Once established though, it allows for greater speed, lower costs, and improved business performance outcomes.

For more insight into the process and how trust hinders or contributes to the success of business relationships, consult the book, The Speed of Trust by Stephen M.R. Covey.

Categories: General

Getting Oriented About Interviewing

Thursday, March 21, 2013 by:David Zahn
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As a senior executive or even the owner of a business it may not occur to you to look at your company from the perspective of a prospective new job applicant.  You might perceive that you are far too busy for that, or that it is not you or the company that needs to impress the applicant – but the applicant that has to impress you!  However, the dynamic is one where both parties need to put their best food forward.

The beginning of the wooing

The first contact betweeen the company and the potential new employee is the job listing.  The job applicant will identify jobs, tasks, responsibilities, etc. listed in the job listing that align with his/her own experience or capabilities.  Both are well served to be honest in their portrayal.  The company should be honest about the role and the applicant should not claim experiences or responsibilities that are not their own.  In years gone by, it might have been possible for companies to get away with stretching the truth about a position’s true nature.  However, now applicants can rely on sites like glassdoor to provide them with an insider’s view of the company (comments written by previous or current employees about the company’s culture, pay rates, and job tasks).

First Contacts

It is advisable for the company to create an interview schedule if more than one interview will be conducted and share that with both the applicant and those conducting the interviews.  This allows the applicant to understand who they will be speaking with (by name and job title), the schedule of interviews, and can better prepare their interview answers based on the functions, responsibilities, and perspectives of the interviewer.  The interviewers can then tailor their questions so that the applicant is not asked the same questions numerous times, but rather each interviewer is tasked with collecting different information.

Transitions

In the event that the interviewers are detained or unable to meet with the applicant at the assigned time, it is especially important to have someone tasked with acting as “host” or “hostess.”  This person will shepherd the applicant from interview to interview, or check in periodically to ensure that the applicant is being tended to, answer any questions that may arise, or allow the applicant to make requests to ensure their own comfort during the process (water, access to a bathroom, chance to make a phone call, etc. – as appropriate).

Engagement on Interviews

While there are different approaches to interviews:

  1. Behavioral interviews are popular where the interviewee is asked for examples of how they have performed in different conditions or scenarios, or how they might behave in simulated situations.
  2. Another less popular form of interviewing, but still occasionally conducted are “stress interviews” where the applicant is seen in a situation that is uncomfortable and then judged on how they handle stress.  An example of this is stress interview .
  3. The traditional approach is the review of one’s career highlights and sharing the position’s key responsibilities.

Treat interviews as important exchanges.

The purpose of the interview should not be forgotten in the pursuit of the techniques.  The interview is designed to give a realistic insight into both the applicant and the job to ensure that there is an alignment between the two.  If either the company or the applicant are not better informed about each other after the interviews have been completed, it was not as successful as it could have been.

Next Steps

Share the expectations after the applicant has completed the interviews.  Will there be follow-ups?  Additional interviews?  Is there any administrative transactions that are to be completed (paying for travel, lodging, meals, parking, or other expenses incurred – and agreed to beforehand)?  What is the timing that decisions be made?

Failure to consider these aspects of the interview process may lead to a less than optimal interview/hiring experience for both the company and the interviewee.

Categories: General
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