Big Book on Small Business


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OF SMALL BUSINESS
YOU DONT HAVE TO RUN YOUR BUSINESS
BY THE SEAT OF YOUR PANTS
TOM GEGAX
with Phil Bolsta
Previously published as
By the Seat of Your Pants
This book is dedicated to my father, Bill, an old sol
dier who battles every day to overcome a horrendous
stroke. He was a model enlightened entrepreneur, a
fact that took me years to appreciate. His compassion
with his employees and dedication to service inspired
pathy. Ž When I told him I was starting a business,
his “
rst words were, Always treat your employees
right.Ž He learned that appreciation the hard way,
losing his father at a young age and countless war
buddies in the trenches. But his love for God, coun
try, and his fellow citizens never wavered. This ones
for you, Dad.
Foreword by Richard Schulze,
Found er and Chairman, Best Buy
Introduction
: Living by the Seat of My Pants:
A Journey from Clueless to Cashing In
PART
What Every Budding Entrepreneur Needs to Know
Make Up Your Mind: Uncommon Factors to Consider
Before Quitting Your Day Job
Write the Business Plan: Building Your Blueprint for Success
Find Funding: Raising Capital Without Relinquishing Control
Position Yourself: Nailing Your Name, Location, and Differentiation
Line Up Your Legal Ducks: Protecting Your Business Interests
PART
Laying In Your Mission, Vision, and Values
Mission Critical: Embodying Your Mission Statement
Vision Check: Composing Your Vision Statement
Accountable Ethics: The Four Pillars of Ethical Leadership
PART
Snatching Up Stars:
Embracing Your Hire Power
Talent Scouting: Finding the Best People
Interview Essentials: Stripping the Guesswork Out of Hiring
Labor Legalities: The Dos and Donts of Employment Law
Hit the Ground Running: Welcoming New Hires
PART
Growing the Culture:
The Camaraderie Credo: Developing Team Spirit
Lead the Charge: The Twenty- one Laws of Cultural Leadership
Honor Thy Employee: Putting People First Produces Higher Pro“
HR Solutions: Shifting Focus from Paperwork to Partnership
Fun, Friendly, and Flexible: Loosening Up Keeps Grumbling Down
Workplace Wellness: Nurturing Healthy and Productive Employees
PART
Building a Systems- Disciplined Or ga ni za tion:
Crafting Pitch- Perfect Pro cesses
Strategic Planning: Drawing Up Tomorrows Road Map
Execution Is Everything: Ensuring Its Done Right
Resolve Roadblocks: Helping Individuals and Groups
Solve Problems
The Best Never Rest: Continuous Systems Improvement
PART
Sending Static- Free Signals
Listen Up: Practicing Active Listening
Express Yourself: Writing and Speaking Effectively
Communicate Expectations: Achieving Airtight Accountability
31.
Ask for Advice: Soliciting Employee Ideas
Face- to- Face Feedback: Delivering One- on- One Critiques
Face Your Flaws: Soliciting Frank Feedback
About Your Per for mance
PART
Coaching Others:
Cheering and Steering, Not Domineering
Dare to Care: Kindness and Empathy Wins Hearts and Minds
The Annual Review: Turning the Review into a Coaching Session
Reward Results: Matching Incentives to Outcomes
Good- bye and Good Luck: Freeing
Up the Future of Underachievers
PART
Educating Employees:
Riding Employee Development to the Top
On- the- Job Learning: Building Your Educational Infrastructure
Delegate or Die: Deputizing Your Staff Multiplies Your Impact
41.
Teach, Dont Preach: Making Lessons Stick
Succession Strategies: Putting the SuccessŽ in Succession
PART
Coaching Yourself:
Guiding Yourself to Peak Personal Per formance
Got Mission?: Crafting Your Personal Mission Statement
Work the Plan: Linking Goals to Action Steps and Schedules
Time Wise and Orga nized: Embracing Enlightened Ef“
Mind- Body Balance: Bringing Your Inner Team into Alignment
PART
Key Concepts and Killer Tips
Supply Management: Strengthening Every Link
51.
Customer Service: Making Your Guests Feel at Home
Finance, Accounting, and IT: Beyond Bean Counting
PART
Weathering Worst- Case Scenarios:
When Bad Things Happen to Good Companies
Relationships on the Rocks: Rescuing Key People Who Jump Ship
Natural Disasters: Coping with Catastrophes
Its Strictly Business: Dealing with Brutal Bankers
know ledgments
About the Publisher
Index
About the Authors
: Growing Pains: Stepping It Up from Small
Business to Midsize Company
By Richard Schulze
Founder and Chairman, Best Buy
met Tom Gegax at an Entrepreneur of the Year awards ceremony in 1994.
I had been aware of Tom and of Tires Pluss success. Before leaving that
eve
ning, Tom invited me to lunch. A couple of weeks later, we met at one of
my favorite restaurants. During the meal, he asked if I would mentor him. It
ing about it for a few days, I agreed.
Sure enough, Tom was thoroughly prepared for each lunch. He squeezed
oughly understand every issue. He would keep asking questions until every
thing was clear. Here was a man who was not going to rest on his laurels. He
was tireless in his pursuit of knowledge, and genuine in his attempt to learn
from all who had achieved business success. Toms hunger for insight into
business management was insatiable. He frequently brought me members of
his management team to engage in our dialogue, to share their discoveries
and double-check the facts.
Tom is a consummate team player, dedicated to what I value most in a
leader„respect and consideration for everyone in the or
tion. He knows
you win with motivated people supported by ef“
cient business practices.
That creates a culture of caring, accountability, and continuous pro cess im
provement.
Toms
Big Book
has all the good stuff and none of the ”
uff. Let it guide
your every step and the decisions of those throughout your or
tion.
Then you, too, can “
nd yourself on the road to undreamed-
of business suc
cess.
LIVING BY THE SEAT
OF MY PANTS
A Journey from Clueless to Cashing In
had sold my company and the papers were signed. But the payment was
two weeks overdue. I stared at the ceiling much of the night wondering
how a guaranteeŽ to buy Tires Plus, my midwestern chain of 150 retail
stores, had eroded into a maybe.Ž Tomorrow„tomorrow!„Bridgestone/
Firestone had promised, it would wire the cash by 10:00
to seal the deal.
Tension in the of“
ce the next morning was thick enough to clobber with
a tire iron. My CFO, Jim Bemis, called the bank at a few minutes past ten.
No wire. He checked again after lunch. Nope. Finally, at three in the after
noon, Jim stepped into my of“
ce with a crooked grin. My cofound
er, Don
Bridgestone/Firestones sputtering had sent me hurtling down the high-
stress highway. I didnt understand the holdup„until a week after the sale.
Thats when the big multinational issued a tire recall that made banner head
lines around the globe; it threatened to implode the entire corporation and
strip the luster off its trusted name. I “
gure our deal had been on life support.
Im sure the only thing that saved it from ”
atlining was the hefty down pay
ment and signed purchase agreement.
Don and I enjoyed divvying up the spoils. Tires Plus teammates pock
eled, college plans were made. One teammate and his wife used their windfall
to bounce back from a disastrous side enterprise that had plunged them into
debt.
After cashing out, I dove head“
rst into consulting, writing, and speak
ing. Of course, “scal “
tness is a hollow victory without the physical “
tness to
enjoy it. Today, at sixty, according to my doctors at Minnesotas Mayo Clinic,
I have the heart of a
thirty-
year-
old. Im also blessed with the love of my fam
ily, friends, and life partner, Mary Wescott, an indispensable source of inspi
ration and strength.
THE REARVIEW MIRROR
ance to fellow students; working in the HR department at Shell Oil in Chi
cago; transferring to sales “
eldwork, at
twenty-
nine„after all that, I dreamed
big and shared my idea for a new business with Don, a sales guy working for
me. Thumbs-down at nine banks, thumbs-up at number ten. Tires Plus was
born.
By 1989, Tires Plus had become a regional powerhouse with thirty loca
tions. Life was good. Then, virtually overnight, life as I knew it ceased. In the
course of six months, my doctor diagnosed me with cancer, my
twenty-
three-
year marriage disintegrated, and my CFO told me the company till was a
million bucks short and our credit line was dry.
Boom. Overnight, three critical pillars„health, family, career„turned
to dust. And damned if that entire time I hadnt thought I was Mr. Got-
It-
Covered. Now zombielike, I came in to work, locked my of“
ity for righting everything that had gone so disastrously wrong.
Inner Yearnings, Higher Earnings
Looking back, I see with equal parts amusement and horror that I had been
running my company by the seat of my pants. I was sprinting as fast as I
could yet always felt a step behind. It was still some time before I learned
high-caliber communication and relationship-building skills. I hadnt im
plemented essential business management disciplines like strategic planning
and bud
aware of a basic law of the universe: Life is a card table. A well-balanced life
relies on the four legs of healthy intellect, psyche, body, and spirit. Ignore one
leg and the table wobbles. Disregard two or three, like I did, and its going to
collapse.
It was time to work and live with balance and discipline. I morphed into
a knowledge junkie, devouring books, tapes, and seminars on business man
agement and personal growth. For a know-it- all, I was amazed at how little I
knew. I sought out the best and the brightest business mentors (Curt Carlson
of Radisson/TGI Fridays, Carl Pohlad of the Minnesota Twins, Dick Schulze
of Best Buy). Funny, but I had always prided myself on my knack for recog
nizing ”
aws in others. Now I turned the interrogation kliegs on myself and
unblinkingly confessed years of denial, defensiveness, and doubt. It was pain
ful but exhilarating work.
One by one, I started connecting the dots. Improving mental clarity and
emotional health helped me spot and deal with unhealthy behavior. I was
more caring, which inspired more commitment from employees and family.
My new
systems-
sions, and peace of mind. Then something odd happened. The more I prof
ited on a personal level, the more my company pro“
ted. Revenues began
doubling every three years, reaching $200 million by 1999. Pro“
ts performed
being of your employees and customers„as well as your
own„success
naturally follows.
MY BOSS JUST DOESNT GET IT!
Entrepreneurs and managers, youd be frightened how often I explain this
Back in the early days of ”
ying, the phrase seat of the pantsŽ was used to
describe how pilots could guide their planes without complex navigation and
control systems. They felt the plane react to every nudge of the stick via the
A big part of running a business comes down to gut feelings and reac
tions. Relying on your intuition is smart„you wouldnt have gotten this far
without it. But overreliance on instinct can lead to cutting corners: Why
waste time planning and analyzing when you can shoot from the hip? Well,
because one hiccup and you can shoot yourself in the foot. Sure, a seat-
of- the-
Chances are you think you already know some of the stuff in this book. I
was cocksure I did. But sometimes its the lessons weve already mastered that
trip us up. Im reminded of mountain climber Cameron Tague. In 2000, Tague
attempted to scale the sheer, one-thousand-foot Diamond Face on Longs Peak
in Colorado. The expert climber didnt bother roping up on an easy traverse
along the Big Walls wide, sloping ledge, where “
ve- year- olds and a six- piece
band had safely climbed. You can guess what happened. Tagues mind appar
Not only was I clueless that I was unenlightened, I didnt have a clue that
I didnt have a clue. Even if youre smarter than I was, youre way too time
crunched to hunt through hundreds of books, tapes, and seminars for the
What does enlightenedŽ mean? Clarity of mind and clarity of vision.
Scarce commodities that will make you in“
nitely more valuable and trans
form you into a chief
enlightenment
of“
cer or an enlightened entrepreneur:
tough- minded, warm- hearted, systems-disciplined leader who inspires people to
embody the organi zations mission, vision, and values.
Whats the Difference?
Your shoes are charred from stomping out brush “
res. You have nightmares
about UFOs (unreachable “
nancial objectives). All-star interviewees turn into
SEAT-OF-THE-PANTSER
ENTREPRENEUR
His self-centered agenda drives every
He must take care of himself
encounter.
(intellectually, physically, emotionally,
spiritually) before he can take care of
employees.
She operates without a strategic plan, or
She recognizes that the high-speed
with one that overshoots the future. Either
way shes constantly putting out 
res.
how to break a strategic plan into
operational steps and parcel assignments
to the right people.
He cuts corners whenever possible, in
The high road is the only road. He
knows that shortcuts become longcutsŽ
because theyre often undone or redone.
Shes a micromanager, oblivious to the toll
She knows how much supervision
on employees creativity and motivation.
each team member needs and when
to untether talented, motivated
employees.
Hes ready to unload on anyone who
He solicits ideas for improvement„for
offers constructive criticism.
his performance
and
the companys„
through formal and informal channels.
She assumes that the only reason
Her attitude toward employees is,
How can I help them grow and succeed?
to do her bidding.
He passes on the best and brightest hires
He hires the best candidate for every
in favor of mediocrity for fear that somebody
position to elevate everyones performance.
toiling under his command will outshine him.
Shes a daydreamer whos oblivious to
Her catlike situational awareness leads to
whats going on around her and views
details as distractions.
upgrades, and competitive advantages.
Wonder if you qualify for enlightened entrepreneur status? To bench
mark where youre at before reading
The Big Book,
go to the Business Man
agement Assessment & Prescription’ tool at www.gegax.com. I consider it
the Myers-Briggs of management assessments.
SYSTEMS AND ATTITUDE MAKE THE DIFFERENCE
countable culture, one supported by ef“
cient pro cesses and clear communi
cation. We added the right mix of inspiration, incentives, and educational
enrichment to grow through self-coaching. We also mixed in strategies for
seven key business functions. This
no-
nonsense management system pro
duced EBITDA (earnings before interest, taxes, depreciation, and amortiza
tion) so robust that we never had to sell shares to outsiders to fund growth.
THE BIG BOOK
DELIVERS A RICH ROI (RETURN
ON INVESTMENT)
Its packed with proven, practical tips.
Im not proposing drawing-board theo
ries that
work. The practices I outline in this book
work. I had the
freedom to experiment in my workplace laboratory, studying the science„
and art„of business management. Reading
The Big Book of Small Business
decision. The proof is in the puddin: I led a team that turned a $60,000 loan
cosigned by my parents into a $200 million business that a multinational
corporation paid a lot money for.
lightened entrepreneur combines hard-nosed accountability and ef“
ciency (putting pro“
ts “
rst) with treating people fairly and with care
(putting people “
rst). Some leaders can squeeze out good
short-term
perfor
mance with the
gruff-
and-
tough management style. But that
doesnt work with businesses that bene“
t from low turnover; people
will lose heart and quit after too long under a heartless leader. Like
wise, employees respect and appreciate “
rm yet caring oversight that
Its a
step- by-
step desk reference.
Keep
The Big Book
on your
desk. No matter what the challenge is, a quick scan of the table of
contents will take you where you need to go. Job candidate coming
in? Flip to the hiring section. Ideas slipping through the cracks? You
want the section on ef“
cient systems. Sales slacking? Grab a yellow
highlighter and make a beeline for the sales chapter. No matter what
page you land on, youll “
increase your brand equity (chapter 51)
establish the foundation for value creation (chapter 10)
protect your business interests (chapter 6)
strengthen your supply chain (chapter 50)
ensure that ideas are well executed (chapter 24)
receive and deliver clear information (chapters 28…33)
harvest outside advice (chapter 7)
raise your game„and everyone elses (chapters 43…49)
nd, hire, and keep the best people (chapters 12…15)
inspire employees to delight customers (chapter 53)
deal with dysfunctional behavior (chapter 22)
cut costs and improve your bottom line (chapter 54)
design and execute strategic and operational plans (chapter 23)
build good teams (chapter 16)
manage airtight pro cesses (chapter 27)
enhance employee perfor mance (chapters 39…42)
manage the “
nance function and lender relationships
(chapter 54)
HOW TO NAVIGATE
THE BIG BOOK
People often ask, Whats the “
rst step I should take?Ž Once youve crafted a
top-
shelf business plan, and once you trust that your model will produce
cash, youd pour the philosophical foundation„your mission, vision, and
values. Then youd snatch up stars, grow your culture, implement pitch-
perfect pro cesses, and communicate via static-
free signals. Youd also coach
your people to be hungry, teach them that schools always in session, and help
them reach their peak personal perfor mance.
Theres only one problem: You live in the real world. Business, like life, is
messy. So, where to begin? Start by identifying the source of your most acute
pain„whats keeping you up at night?„and jump in. Morale tanking? In
effec
tive communication may be the culprit. When your people emotionally
check out, that also undermines your best practices and sabotages your mis
sion, vision, and values. Or, start with a
department„supply managements
mote competitive offerings. That depresses sales, which leaves your best sales
people vulnerable to poachers at more pro“
table companies. Click. Heres
your lightbulb moment: Your entire operation is interrelated, and thats re-
ected in
The Big Book
. Every element is linked to every other element. If any
Reach “
rst for low-hanging fruit„its important to chalk up early wins.
Some shifts require only simple tweaks in thinking. Others take more dedica
The business world has two
constants„change and accelerating speed. It
has one variable„your ability to keep up. Enlightened entrepreneurs do
more than keep up; they lead the way.
What Every Budding Entrepreneur Needs to Know
t was my job as a Shell Oil Company sales manager to or
nize 1975s gala
trade show for our Minnesota ser
vice station dealers. Instead of a
run-
of-
the-mill hall, I booked a high-end Minneapolis hotel. What do you know,
the upgrade worked: We doubled our sales goal. But my district manager,
this garbage, Ive gotta think about starting my own company.
Shell had planted the seed earlier in the year when execs poured cold water
on my entrepreneurial impulse. I had seen a new era dawning for the oil indus
try when the Minnesota State Legislature legalized
self-ser
vice gas stations.
think that self-serve would catch on in the Minnesota tundra. End of discus
sion. Turns out it wasnt such of a leap to think that Minnesotans, who sit for
hours on a frozen lake staring into a “
shing hole in the ice, would happily don
a parka for cheaper gas.
Two months after the trade show “
asco, my entrepreneurial engine was
porate austerity program. It included a crackdown on expense accounts. After
A few months later, I resigned to start Tires Plus. To be sure, my eight-
year apprenticeship at Shell Oil was invaluable. Met a lot of good people,
learned a lot of skills. But the plodding bureaucracy, risk phobia, and of“
politics were warping my idealism and enthusiasm. I was working in a Dil
bert cartoon.
If youre running your own show, you can relate to the urge to ditch the
out-of-touch boss, the tone-deaf bureaucracy, corporate Americas myopic
obsession on quarterly numbers. You and I, we wonder: How do so many
people endure soul-draining of“
ces? Were not cut out to work for somebody
else. We want more control of our destiny. Were not afraid of hard work. We
Nodding your head? The next seven chapters describe what the early days
need to look like if you want to succeed. Theres a swarm of things to antici
pate. Ill take you from wannabe entrepreneur to con“
dent, informed start-up
chief. Even if youre well underway, think of these chapters like a computer
ized scope hooked up to your car engine, detecting problems that you can “x
now in order to avoid costly breakdowns later.
MAKE UP YOUR MIND
Uncommon Factors to Consider Before
Quitting Your Day Job
all me naïve. It never occurred to me that my new business might fail.
Hey, this was
were talking about. Tom Gegax. Four- sport high-
school hotshot. Rising star at Shell Oil„earning promotions like compli
ments at the prom, tooling around town in a company car, illuminating for
ser vice- station managers the “
ner points of running their businesses. I knew
it all.
In reality, I had no idea what I was about to do to myself„and to my
family. Oh sure, my wife, Jan, and I had talked it through: Should I stay or
Entrepreneurial types are apt to jump the starting gun. That pedal-to-
the-
Achilles heel. In our zeal to conquer the business world, we may disregard or
overlook these critical start-up issues.
Consider the impact on your family.
In my acceptance speech for
Inc.
magazines 1995 Midwest Entrepreneur of the Year Award, I
Was it all worth it? Would I do it all over again? Yes„under two
conditions. First, Id need to know everything in
The Big Book
ness. That calmer state of mind would ful“
ll the second condition: a
Face the fear.
I was twenty-nine years old, my “
rst day off Shells
payroll, and my wife and two sons were at a Dairy Queen in suburban
Minneapolis. We ordered Peanut Buster Parfaits and Dilly Bars. As I
handed over a “
ve-dollar bill and took the ice cream, ten words am
bushed my mind:
Where will the money come from to pay for these?
That
thought was more chilling than an Arctic Rush brain freeze. No more
checks on the “
rst and “
fteenth. No pro“
t sharing, no company car,
no expense account. Really, I had no idea if my new business could
generate enough revenue to support the four of us. That undercurrent
of quiet terror was my constant companion for a long, long time.
Tell me I cant do something that I want
to do, and Ill work my butt off to prove I can. My junior year of high
MAKE UP YOUR MIND
school that my small town hadnt beaten in twenty years. I had the
ball. Dribbling down court, I saw an open teammate streak down the
sideline. Misjudging how far to lead him with the ball, I passed it
behind him and out of bounds„and threw away our chance to take
the “
nal, potentially game-winning shot. I was so embarrassed and
guilt-ridden that I didnt show my face in school for two days. The
only thing my coach ever said about it was, Dont bother going out
That unshakable„and, in hindsight, borderline delusional„belief
in myself saved my business bacon countless times. At Shell, my
manager said I wasnt tough enough to transfer from HR to the “
eld.
After a year, he relented and assigned me to the toughest part of Chi
cago, the near South Side, Bad Bad Leroy Browns neighborhood. I
helped take South Side dealers from worst to “rst in tire sales. As
soon as I started my own business, before the paint had even dried on
My post-Shell cluelessness did have a few advantages. Had I known
Remember the buddy system; it works in
business, too. Even a motivated overachiever cant always go it alone.
The right partner is a godsend if hes rational, caring, and willing to
compromise„on issues, not values. Its hard to come by a partner
with integrity, multiple specialties, and the ”
exibility to deal with
Know your would-be partner inside and out (see the interview
checklist in chapter 13) before signing anything. If hes a social ac
quaintance, drill down. How would he handle a “
nancial crisis or a
delicate employee matter? Don was a good “
t because he had spent
One more reason to team up: Its lonely at the top. Your partner is
the only one who can relate to whatever youre going through. It may
sound like a negligible bene“
t, but having a trustworthy peer to com
miserate and brainstorm with is like having a close family to endure
personal crises with.
New businesses gobble up cash, so I looked for every op
portunity to save a buck here and make a buck there. Our “
rst real
headquarters was a
second- rate of“
ce park in a third-rate neighbor
hood and cost $250 for rent. Noticing it lacked vending machines, I
asked the buildings owner if I could install one myself. That netted
$250 a month. Now rent was free.
Labor will likely be your biggest cost. Keep base salaries low by
hiring top-notch talent wholl work their tails off for incentive-based
payoffs like commissions, bonuses, and stock options. The more hats
you wear yourself, the fewer people youll have to hire. In our “rst
year, Don was a one-man wholesale company„he ordered the prod
ucts, unloaded them, stocked them, sold them, delivered them, and
collected for them.
MAKE UP YOUR MIND
Initially, anyway, youll have to pinch pennies more than youd
like. Our family car was a used, eight-year-old Plymouth station
wagon with a hatchet hole in the rear, bought at an auction (we imag
ined that it had been used in some kind of grisly crime). But it got us
where we needed to go. I paid myself enough to cover monthly ex
penses and plowed the rest back into the company.
Why do young companies hoover up so much cash? Other than
labor costs, the four main sources of suction are:
taxes
start-up loans (with after-tax money)
inventory (as stock levels increase)
accounts receivable (even if every customer pays on time,
youre still thirty to ninety days behind, depending on the
terms you offer)
These greenback gluttons can drain morale along with cash. Lets
say you net an annual pro“
t of $400,000. Taxes take $150,000 off
gations that take $100,000. For you? That leaves exactly zilch. Now
that Im consulting, I hear it all the time: Im working 24/7, sales
and pro“
ts are increasing, but theres nothing left for me!Ž Thats why
entrepreneurs need to keep costs low (chapter 54), ride herd on re
search. I was somewhat familiar with the industry after working for Shell, but
I got lucky. If I tried that nonchalance in todays
hyper-
place, youd “
nd me scampering back to Corporate America faster than you
same„unless she was offering something dog owners wanted and
talize on that? Rack up some frequent ”
ier miles visiting successful
Probe the pros.
Draw up a list of questions; then interview ten to
fteen professionals in your industry. Even if you dont personally
know them, explain what youre doing and that youd appreciate their
candid comments. Some will blow you off. Most will be happy to
give you ten to “
fteen minutes. Ask them to poke holes in your plan.
The point is to “
nd and plug holes now so pressure down the road
doesnt cause a blowout.
Trek to trade shows.
Turning up at trade shows is the fastest way to
learn industry logistics and build relationships with the movers and
shakers you need to be moving and shaking with. Dress smart, “
nd that
easy smile. You cant help but literally bump into vendors, manufactur
ers, and distributors. Nows your chance. Be con“
dent and cordial.
Shake hands, build rapport, ask questions, explain your business (in “
connect with your contacts via phone calls and e-mails as questions
arise. Caveat: Treat each contact with care. Theyre busy people. Under-
11 11
Retailer? Tap into your shoppers heads. Ask
friends and family about their experiences and expectations when
they shop for whatever you plan to sell. To go deeper, bust out the
chocolates, or beer, and gather a series of focus groups with “
ve or six
people (weight for race, age, and gender). Thatll net you qualitative
research„info thats deep and narrow. For quantitative research„
data thats wide and shallow„hire a survey “
rm and develop some
good questions.
Trust the experts.
come, education). You need data points like buyers occupations, in
terests, opinions, and habits. Fact-“
nding missions like this may dent
your bank account some, but your data- directed course correction
will pay for itself, and then some.
BUSINESS PLAN
Building Your Blueprint for Success
verybody and their brother, sister, and long-lost cousin has a million-
dollar
idea„and a
ten-
cent scheme for making it work. What sepa
rates the entrepreneurs from the entrepre-never-wills is the business plan.
tors.
Writing a business plan is only slightly less demanding than writing a
stincts will help you pull untold riches out of undersold niches.
When writing your business plan you should:
enforce ruthless realism
anticipate roadblocks
engage in rigorous risk assessment
map out contingency plans
consider resource allocation
scrub “
nancial assumptions
calculate start- up costs
analyze ongoing cash- ”
ow demands
educate partners on operations and goals
reassess your management team
These are a few standard features of a business plan:
Executive summary.
In three pages, summarize your companys mis
view leaves lenders and investors cold„thwack! Your plan hits the
recycling bin.
Business breakdown.
Begin with your elevator speech,Ž a one-
sentence description of what your business does. Next, detail your
ers needs, and explain how you intend to neutralize their strengths
and exploit their vulnerabilities. Spell out why your offering gives you
Flying into the fray with an untested squad of
tors that your shoulders are broad enough to carry your team to the
Promised Land.
try handles the whipsaw of the business cycle. (Trade associations and
local industry insiders are excellent sources.) Next, specify the demo
graphics of your target customers, and whether theyre local, regional,
national, or international. If youre going B2B (business-to-business),
identify your potential corporate customers. Who are the decision
makers, how will you breach their defenses, why will your product or
service be irresistible? If youve already landed some contracts, say so.
dle advertising and PR yourself? Follow that with your pricing strat
Offer a glimpse into your day-to-day business,
starting with the workforce. How will you “
nd, train, and compensate
employees and convince them to buy into your vision? Then name the
vendor relationships youll cultivate, and which functions, if any, youll
outsource, and why. Last, describe your accounting plan. Wholl wear
the green eyeshades, and what resources will she have?
Time to remove your rose-colored glasses and as
sume the role of devils advocate. Really, quit drinking your own
Kool-Aid for a minute and try to prove your assumptions wrong.
Every business has vulnerabilities. What are yours, and how could
Sales forecast.
Lay out conservative and best-case sales scenarios.
When in doubt, err on the side of caution. Estimate monthly revenue
and units sold for the “
rst year. Do the same, but on an annual basis,
haps focus groups. Pit the numbers against your sales objectives, and
account for any discrepancies. Perhaps most important for lenders
and investors, spell out your margins and breakeven point, as well as
cial statements need room here. Start with the pro forma pro“
t-and-
loss (P&L) statement, projecting monthly income and expenses for
the “rst year. Do the same for the next couple of years, but on a quar
terly basis. (Develop both conservative-case and best-case scenarios.)
projections for the “
rst year, and quarterly projections for the next
two years. Follow the same formula for cash-”
ow projections. Now
Attach documentation for your assumptions, analyses,
and projections. Include a list of business and personal references, as
well as contact info for your bank, lawyer, and accountant. If youre a
B2B play, add any letters of intent from future customers. Dont for
Okay, thats it. Youre done„for now. Later, youll tighten the nuts-and-
bolts portions of your business plan at strategic-planning time (chapter 23).
Now thank yourself for that hard work. Youre already avoiding the seat-of-
the-pants trap and looking more and more like an enlightened entrepreneur.
(Helpful hint: For more details and actual business-plan templates, visit
www.score.org or www.sba.gov.)
Raising Capital Without Relinquishing Control
his part drove me batty. After eight banks had turned us down, a loan
of“
cer at the ninth rejected us because we had no experience running
a business. Thats when I lost it. Why do they even need people like you?Ž I
asked. I thought things like character and credit history meant something. If
its just a matter of not having done it before, why dont you just pop that into
your computer and have it spit out,
No experience, no loan
.Ž It wasnt one of
my prouder moments, but I was fed up (and it felt good at the time). Luckily,
the tenth bank saw what the “
rst nine didnt. They approved our $60,000
loan and we launched.
Scaring up seed capital can be a
full-
time job. First, of course, calculate
how much cash you need (Hint: Check your business plan). Funders expect
your “
nancial projections to be detailed and reasonable. Later, if ”
awed pro
jections cause you to slink back with your hand out, your credibility and
Start-up funding should cover all the initial one-time costs (corporate I.D.,
furnishings, equipment, initial inventory, legal fees), working capital (rent, pay
roll, inventory replacement, accounts receivable, debt service), and reserves.
Rare is the business that doesnt burn through 50 percent or more cash than
projected.
Why go to a bank for a loan rather than “nd an investor? Excellent
question. A bank is simply a creditor, while an angel investorŽ or venture
capitalist demands a stake in the company, if not a say in its operation.
(Im proud to say that Tires Plus grew without taking a dollar from inves
tors.)
Bootstrapping.
You can also self-fund operations with some creativity. Say you
cover your
start-up costs, and your business is
product-based„you
tions by tapping into your cash ”
ow. How? Do the legwork to “
nd a
vendor who has a great product line and inadequate distribution sys
tem. Suggest a consignment arrangement, payment via promissory
note, or generous terms. If you “
nagle 120-day terms and turn your
inventory every sixty or ninety days, youre operating on the vendors
money, and your pumped-up cash ”
ow can help you stay on top of
operating expenses.
In our early years, we approached Bridgestone, not a big name in the
United States at the time, though they owned 60 percent of the Japa
19 19
merged with Firestone, told me, You guys were pretty small, but you
were young, full of “
re and brimstone, and we believed in you.Ž
Family and Friends.
The initial funding for start-ups is com
monly called the friends and familyŽ round. Tapping loved ones for
funding is as common as it is dicey. If it turns out well, life is good.
If it doesnt, lifelong relationships can turn sour. Treat these loans
like the serious business agreements they are. Present your case as if
up bank loan.
In addition to family, gather a mix of friends and business folks
with vicarious entrepreneurial streaks. In exchange for their money,
Banks.
Its all about collateral. Dont expect a bank to hand you
tory. It still took ten banks to “
nd one willing to cut us a check.
The Small Business Administration.
Turned down by a bank?
The U.S. Small Business Administration (SBA), an indepen dent
agency of the federal government, also administers loans. Its partners„
lenders, community development organizations„make the loans that
the SBA guarantees. The agencys loans typically require lower down
is just as demanding. Applicants must pony up personal assets (around
30 percent of the capital loan) and have a healthy debt-to-net-worth
ratio and a sparkling credit history. The owner must also be active in
day-to-day affairs, put up the same collateral a bank would demand,
and prove that cash ”
ow is strong enough to meet his obligations.
That said, the SBA is likely to green-light a loan if the only red ”
ag is
insuf“
cient collateral, whereas a bank would ding you for it. While
SBA loans typically go to existing businesses, well-planned start-ups
Angel Investors.
Yes, there are angels among us, and they usu
ally ”
utter up after youve gone through your family and friendsŽ
round of “
nancing. But their heavenly cash often comes with a
helluva price„and I speak as an angel investor. Its a classic supply-
and-demand scenario. In most industries, at most points in the busi
ness cycle, there are fewer angel investors than entrepreneurs in need
of them (Big exception: the Internet and wireless spaces in the early
twenty-
rst century). Some angels motives lean more toward men
toring and the joy of business building than simply in”
ating their
net worth. Other angels exploit their leverage by imposing turnip-
bleeding terms and draconian exit strategies. An angel may say, My
$100,000 investment would bring the value of your company up to
$200,000, so I would own 50 percent of the business. Oh, and by
the way, Ill take “fty-
one.Ž Just like that, youre answering to some
body else, your dream of working for yourself dashed. (Beware of
the dark angel.) Angels will have their attorneys draw up the invest
Venture Capitalists.
After the angels, who often ”
y solo with
smaller bundles of cash under their wings, venture capitalists swoop
in with institutionalŽ money ($1 million and up). Their ranks in
clude former entrepreneurs who offer contacts and expertise ranging
from operations to “
nance to the particulars of the space in which
youre planting your ”
ag. VCs, as theyre called, try to squeeze even
more favorable terms out of new companies than most angels. (Thats
why you may hear that VC also stands for vulture capitalists.Ž) Like
angels, VCs expect a return on their money in roughly “
ve years.
Many start-ups dont interest venture capitalists because they dont
POSITION YOURSELF
Nailing Your Name, Location, and Differentiation
Differentiate Your Offering.
Remember Charles Lindberghs
solo transatlantic ”
ight? Roger Bannisters four-minute mile? Creative
Cartons perfect record for
same-
day orders? Missed that last one? It
may be the most impressive . . . to manufacturers of corrugated pack
aging and displays. Minneapolis-based Creative Carton had already
After lots of hits and a few misses, CEO Mike Sime possessed the
people and procedures to go for same-day gold. Seven years later,
Creative Cartons perfect-delivery winning streak is still unbroken.
Same-day service became their marquee differentiator, even though it
accounts for just a fraction of orders. Is it a big deal?Ž Mike asked.
Well, it is to a customer sitting at his desk with white knuckles and a
supervisor breathing down his neck. Its like the old Federal Express
commercial„when you absolutely, positively have to have it delivered
the same day, whats it worth?Ž Plenty. Especially in an industry no
torious for time-pressured customers. When you offer them some
Most differentiation decisions hinge on where you want to land on
Beyond price, quality, and service? Look at subcategories. Creative
Carton was already known for speed; same-day delivery added one
more point of separation from the pack. It helped the company create
a nested nicheŽ„a niche within a niche. Likewise, FedEx is synony
mous with overnight shipping.Ž But the company knew the only way
POSITION YOURSELF
pricing and delivery options, extended hours, and convenient drop-
off locations. Privately owned Enterprise Rent-A-Car has become
the largest car rental company in North America, thanks to its
differentiator„Well pick you up.Ž Geek Squad, a Best Buy…owned
computer support task force,Ž “lled a neglected niche by offering
personalized security, repair, and technical support to both business
types and civilians.Ž Further distinguishing themselves, Geek Squad
agentsŽ in white dress shirts and skinny black ties make house
calls„theyll race to your home in squad-car black- and-white Volks
wagen bugs as fast as a pizza delivery man.
Know who you are before you introduce yourself to your custom
ers. Otherwise youll always be a little hazy to them. Once your doors
open, keep asking yourself whether your offering is in tune with what
makes your operation unique. To the extent you can, shed your pas
sion for your industry and look at your products and services through
your future customers eyes. Ask yourself,
If I were happy doing busi
ness with one of my competitors, what would it take to get me to switch?
Price? Speed? Service? Warranty? All of the above?
Once we were un
derway, I got a kick out of customers (guestsŽ) who came to our
The best feedback for honing your offering arrives once customers
start calling. Software manufacturers have done this for years with
change for their efforts. Whether youre retail or B2B, this sneak-peek
strategy also generates advance buzz and stimulates demand.
Nail Your Name.
Back in 1982, when I decided to shift our
focus from wholesale to retail, our three stores were called (City
ter. At a party one eve ning, I leaned over to my neighbor and said,
Hey, Bob, Im starting a chain of tire stores. Gotta tell you the
name„Guarantee Tire.Ž Bob scowled as soon as it left my lips. He
pany. Bob noticed how de”
ated I was and offered to brainstorm
names with me. The next day, I was telling Bob, My stores will of
fer tires plus other services.Ž He cut in: Tires Plus. I like that. Add
it to the list.Ž I liked it, too. It conveyed optimism, promised that we
Convinced youve already got a great name? Dont be afraid to put
your identity on the couch. Charles Lukens, cofounder of Planet Sal
vage, a nationwide, Web-based auction for auto parts, resisted when I
challenged him to rename his company. The name Planet Salvage
was like my kids name to me,Ž Charles said. Plus, I was hung up on
ance companies like State Farm, Safeco, and Nationwide). To his
credit, Charles cut his emotional ties. During a staff brainstorming
session at the companys Kansas City headquarters, I suggested zero
ing in on what they did. We boiled it down to:
insurance and body-shop industry jargon). Given that the acronym
APU was constantly on the lips of industry execs throughout the busi
ness day, the perfect name was a no-brainer„APU Solutions.
With your name in the bank, turn to your slogan. Does it holler
ers Insurance. He wanted a guarantee that the parts he purchased via
POSITION YOURSELF
APUs Web site would actually be in stock and shipped the same day
at locked-in prices. Look,Ž he said, I need real steel, real time.Ž The
minute we left the building, I said to Charles, Did you hear that?
ways Low Prices. Always.Ž).
Lock in the Right Location.
dard locations to save rent. Thats shortsighted, and often has costly
enue per store spiked. Our customer surveys showed that despite tons
of advertising, the number one reason why they shopped us was We
saw your store and sign.Ž
I shared my story with Natalie,Ž a consulting client whose annual
sales had plateaued at $250,000. The “
rst thing I pointed out was
that her womens apparel store was marooned in a D location, a fact
she was already painfully aware of. After researching the rental mar
drupled to a cool million. Customer traf“
c boomed and her aver
age sale nearly doubled. Not sure how many additional customers
youd see at a premium site? Calculate how many more customers
youd need just to break even, and imagine your business at an A site
versus a C site. The number is probably fewer than you think to sup
port an A site.
For of“
ce locations, the bene“
ts are less tangible but no less impor
tant. Even if your clients never visit, potential clients will see your
sign more often and have a better impression of you. In business, as
in most of life, perception is reality. Its virtually impossible to run a
rst-class operation at a low-class location. Bottom line: Dont let
higher rent scare you. What Goliaths understand, and most Davids
do not, is that its not what you pay; its how much you net for what
you pay.
Negotiating a low-risk lease is crucial. Locking in a long-term lease
can be perilous. You could “
nd yourself in a pickle if business takes
off and you outgrow your space, or if you sputter and need to hit
eject.Ž Yet a short-term lease might force you to vacate sooner than
Enthusiasm alert: Think twice before making enhancements to
rented property (aka, leasehold improvements) that are made and
paid for by you, the lessee. Legally, its the property of the lessor once
the lease expires. I heard the founder of a retail food business confess
that she had sunk $150,000 into building a full kitchen in her rented
POSITION YOURSELF
space. From the very beginning she knew that her landlord could
boot her when her “
ve-year lease (without options) expired. She also
knew there was talk of condemning her building for road construc
tion. Yet she plowed in the money anyway. You know how this one
ends: She lost her lease and the “
nancial hit knocked her so hard that
she couldnt recover in time to start over in a new location.
One more location consideration: Countless non- retail start-ups
thrive by hitching their wagons to business incubators. An incubator is
nothing more than a building divided into of“
ces that are
leased„
often subsidized„to early- stage out“
ts. Economic development or
ganizations, government entities, academic institutions, or other
nonpro“
ts manage most of North Americas one thousand incubators.
Most are closely associated with high-tech start-ups, but the concept
has expanded into virtually every industry.
The lucky start-ups that are accepted into an incubator typically
up is “
nancially healthy enough to leave the nest and ”
y on its own.
(For more information, visit the National Business Incubation Asso
ciation at www.nbia.org.)
LINE UP YOUR
Protecting Your Business Interests
pate. You and your future business partner can epitomize integrity, then
along comes miscommunication or poor planning. Suddenly things spiral out
of control. Thats when you want a legal safety net. I dont care if youre start
ing a business with your grandmother, these four words are nonnegotiable:
Get it in writing.
terest. I had asked myself,
Whats the worst thing that could happen? And what
can I do now to prevent it from happening?
My take was that a partnership
disagreement could prove fatal, and that the solution was for me to own a
majority interest.
The business idea had been mine, and Don had reported to me at Shell, so
it only followed that majority interest should rest with me. It was incumbent
upon me, of course, not to misuse that control. A few years later, when the com
pany was gaining in value and Don had a rare mis“
re on a key assignment,
LINE UP YOUR LEGAL DUCKS
he asked if he should resign. Are you kidding? Absolutely not,Ž I told him.
You dont mess up any more than I do, and youre too critical to the company.Ž
I could have stockpiled more shares had Don left, but it wouldve felt wrong
and it wouldve been wrong. Besides, Don really was too valuable to lose and
An employee stock-ownership plan later diluted our “
fty-“
ve/forty- “ ve
split, but I always retained 51 percent of the voting stock. My unequivocal
advice: Do not divide the ownership pie even-Steven. I once served on the
board of a “
fty-“
fty company where the co-owners, after a brief honeymoon,
These are steps to ward off legal woes:
Hire the best lawyers.
Take the time, do the research. Solicit refer
rals from your network, and ask prospective attorneys for references.
Do what it takes to retain the best legal eagle you can afford, a skilled
business analyst who delivers practical solutions, as opposed to the
ory. Experience, ef“
ciency, and quality count more than hourly rate.
If Lawyer A takes three hours to prepare a contract, and Lawyer B
takes one hour at twice As hourly rate„and does it better„well, do
the math. Our plan to start our company depended on purchasing the
franchise rights to three Shell Oil service stations that we would turn
into tire stores that sold gasoline. Well, Shell tried to block approval
of our franchise rights in order to keep Don and me in the fold. We
looked around for an attorney and found Minnesotas former securi
ties commissioner, who had authored the very laws governing fran
chises and dealerships that were in play. Case closed.
Decision makers sign countless contracts. From
equipment leases and supplier agreements to strategic alliances and
employment pacts, dont just ”ip to the last page and sign. Its your
job to spot the fox in the henhouse. Certainly, legalese induces sleep,
kinda like ”
ipping through a medical journal. Power through and
read it anyway. Highlight what you dont understand. Ask your
attorney to explain (brie”
y) the mumbo jumbo, but only after you
explain to him the business issues involved.
Be thorough.
My longtime corporate attorney once reviewed an of
ce lease for another client that allocated $4,500 for tenant improve
ments. That was one crucial zero less than the $45,000 the client
had been promised. Fortunately, the client had thoroughly briefed
the attorney on every detail before feeding him the contract. An
ounce of prevention saved the guy forty grand in pain. Also, make
sure that important contracts address your worst-case scenarios„
and comfortable solutions for when (not if ) one of them occurs.
What happens, for instance, to your volume discount if a supplier
runs out of merchandise during your busiest month? What happens
if your strategic- alliance partner “les to break up with you and
claims your technology that theyve shared is now theirs? So many
Most small
businesses bene“
t from selecting Subchapter S Corporation or Lim
ited Liability Company (LLC) status. They offer the owner the liabil
ity protection of a C Corporation and the pass-through tax advantages
its typically favored by lone wolfs.
ADVANTAGES:
Its the simplest, most inexpensive business entity
to form and operate. Pro“
ts are not
double-taxed. Closing the
business is easy. No separate tax return is required; simply attach
a Schedule C form to your personal tax return.
LINE UP YOUR LEGAL DUCKS
DISADVANTAGES:
The owner is personally responsible for business
losses. The business is liable for the owners personal liabilities. Each
members proportionate share of pro“
ts represents taxable income,
C Corporation
A business entity that pays corporate taxes on its net
pro“
ADVANTAGES:
Owners are not personally liable for business losses.
Its easy to add owners or investors. Transferring ownership is also
easy, subject to complying with security laws. Stock sales can raise
capital. Takes advantage of employee-bene“
t tax breaks.
DISADVANTAGES:
Double taxation: Net pro“
t is taxed at corporate
rates; and if net pro“
t is distributed to shareholders, its also taxed as
a dividend. (The only exception is the payment of salary, bonuses, or
other compensation to owner-employees to the extent its accepted
by the IRS as reasonable compensation.Ž) A separate corporate tax
return must be “
led. The company is subject to formal requirements
Subchapter S Corporation
A domestic corporation with only one class of stock
and no more than one hundred shareholders. (Subchapter SŽ
refers to a par
ticular tax status, rather than a type of company.)
Ask your tax adviser how to time the “
ling of the Subchapter S
election form.
ADVANTAGES:
Owners report corporate pro“
ts and losses on
their personal tax returns. Early losses can be passed through to
the shareholders, giving investors a tax write-off against ordi
nary income, up to the amount of the investment. Once the
corporation turns a pro“
t, the tax liability is passed on to the
shareholders„theyre insulated from personal liability for
business debt„and taxation is eliminated at the corporate level.
Avoids double taxation. Withdrawal from Subchapter S status is
easy.
DISADVANTAGES:
Each members proportionate share of pro“
tions. Stockholders and employees must declare employee ben
ts such as health insurance as taxable income if they own more
than 2 percent of the stock. The company must use the calendar
year as its “
scal year. The number of shareholders cannot exceed
one hundred. Its relatively expensive to create and maintain. It
can be a headache dealing with federal and state agencies that
oversee corporations.
Limited Liability Company (LLC)
Similar to a Subchapter S, with the exception that the
LLC may offer several classes of ownership (or membershipŽ)
interests; does not limit the number of members; permits corpora
tions, partnerships, and trusts, as well as individuals, to become
members; and typically imposes fewer formal “ling and reporting
requirements. For tax purposes, the IRS treats an LLC as though
it were a partnership.
ADVANTAGES:
Without incorporating, owners are still generally
protected from present and future liabilities or judgments against
their business. Offers many of the tax bene“
ships and partnerships, including pass-through taxation. In
general, subject to IRS regulations, LLC entity documents may
provide for disproportionately splitting member pro“
ts and
losses„i.e., in percentages different from ownership percentages.
LINE UP YOUR LEGAL DUCKS
DISADVANTAGES:
Each members proportionate share of pro“
Partnerships
Two types„general partnership and limited partner
ship. In the “
rst, two or more people agree to start a business
tion of one or more general partners (personally exposed to the
partnerships liabilities) and one or more limited partners (liable
only in proportion to their ownership in the enterprise). In
limited partnerships, the general partners control business
decisions, while the limited, or passive,Ž investors have no votes
or say in operational matters. If state statutory requirements are
not followed, the law views a limited partnership as a general
partnership.
ADVANTAGES:
Partnerships can accommodate multiple owners.
Avoids double taxation. Structure is easily created, ”
exible, and
maintained with relatively few legal formalities.
DISADVANTAGES:
General partners are personally responsible for
all of the partnerships liabilities. Each members proportionate
share of pro“
Clarify own ership issues.
Great partnerships can run smoothly for
decades. Others sputter after a few weeks. A corporate lawyers job is
to assume the latter and think,
What agreements can we write to keep
the business going when the starry-eyed shareholders are no longer on
speaking terms?
It doesnt matter how long youve been up and run
ning. If you havent clari“
ed these important issues, complications
can crop up if shareholders grow apart. Before it gets nasty, consult
an attorney about:
Liability.
Most lenders require personal guarantees to secure
nancing. A contribution agreement among guarantors ensures
that responsibility is divided along the same lines as shareholder
ownership. This prevents the bank from forcing the guarantor
Role of Equity.
How many classes of stock, or membership
interests, should you have? Do voting rights differ for each?
Which is best for you? Its an oversimpli“
cation, but lets say one
class of stock provides for only equity and “
nancial rights, while
another class receives those rights
plus
voting privileges. The
former may be “
ne for passive investors; the latter is the province
of players who want a say on strategic decisions.
Value of Contributions.
Make sure the executive-compensation
exchange for sweat equity or for stock options granted to key
employees. For stock options, calculate the tax implications and
make sure theyre properly recorded on the companys ledger.
Shareholders Buy-Sell Agreement.
This document addresses the
closely held companys valuation, how shareholders must “rst
LINE UP YOUR LEGAL DUCKS
offer their stock to the company or insiders, and what happens
upon the death of a shareholder. In fact, include a life insurance
plan here so in the event of a principal shareholders death, a
buyout doesnt break the company bank. Each shareholder should
Exit Strategy.
Strategic Financial Planning.
Long-range objectives may be
undermined if the buy-sell agreement, exit strategy, and other
aspects of ownership are not seamlessly coordinated with estate
and succession planning. Once or twice a year, gather your team
(attorney, accountant, estate planner, insurance planner, and
others) to make sure all angles are covered. Dont rely on just one
experts opinion. Your attorney may have a brilliant legal mind,
but unless hes also tax savvy, he may overlook important IRS
rami“
cations.
Protect your intellectual capital.
In our early days, tire dealers in
other parts of the country used our brand name and plagiarized our
Yellow Pages ads. Sure, imitation is ”attering and all that, and the
tary products and processes to preserve your competitive advantage
(chapter 14). Protection moneyŽ pays for itself by increasing your
brand equity. When we sold our 150 retail stores to Bridgestone/
Firestone in 2000, the big ol Fortune 500 corporation actually
changed the name of its four hundred existing stores to Tires
Plus.
Prevent unwarranted employee claims.
You should know this doc
ployees sue you.Ž Plop. This is in case someone steals from you. This
stroys your building.Ž It went on and on, and so did the pile of paper.
Don and I looked at each other with wide eyes that said,
Gods name did we get ourselves into?
Entrepreneurs are risk takers by nature. Still, take the time to
weigh the costs and bene“
ts of various insurance coverage. Not
every one applies, but rolling the dice on the whole stack is a
gamble you cant afford. Its not just your business thats at risk„
your familys “nancial future may also be on the line. Some cover
age may be required by lenders, landlords, licensing entities, or the
law.
LINE UP YOUR LEGAL DUCKS
Property Coverage.
Insure the businesss real (buildings) and
personal (contents, including inventory) property for their
replacement costs,
not depreciated value.
General Liability Coverage.
If the owner is found legally liable for
injuries occurring on company property (including job sites), this
policy pays damages. The business is also protected from claims
Business Auto Coverage.
The liability portion protects owners
from injuries or property damage caused by company vehicles.
Make sure anything with an engine and wheels is titled or leased
in the name of the business to maintain insurable interest.Ž Its
also a good idea to include comprehensive and collision coverage
for damage to the vehicle itself. Employees use their personal
vehicles for business? Add
Hired and Non-Owned
coverage to
protect the business against damages above and beyond the
drivers personal insurance limit. Sure, employees personal auto
insurance policies offer primary coverage. But if it isnt suf“
cient
for, say, a serious accident, the claim could drag you in, since the
employee was operating the vehicle on behalf of your business.
Coverage caveat: Make sure your uninsured and underinsured
coverage matches your liability limits. Why? More than 10 percent
of drivers are uninsured, and many others hold only minimal
coverage. One bad accident could push you to the brink of
collapse. Besides, if youre willing to provide coverage for others
Workers Compensation.
Every state enforces workers compensation
laws to protect employees against loss of income and to pay medical
expenses caused by work-
related injuries or health problems.
Premiums are based on payroll costs, and coverage isnt mandatory.
But you cant afford to be without it, even if you exempt yourself
and have just one other employee. Nor should you try to skirt the
rules by declaring employees independent contractors.Ž States have
wised up to that trick and instituted qualifying conditions that few
Umbrella Coverage.
General Liability policy limits may not fully
protect owners from serious property damage or personal injury
claims. An Umbrella excess-liability policy offers additional
coverage over and above General Liability, Auto Liability, and the
Employers Liability section of the Workers Compensation policy.
Umbrellas are available in $1 million layers. Smart owners add
Employers Liability Coverage.
Protects the business owner from
employment-related suits like sexual harassment, wrongful
termination, and age discrimination. General Liability covers none
of these claims, which grow more expensive to defend by the day.
Without coverage, you have to pop for defense costs and any
judgments against you, and pick up the plaintiff s attorney fees.
The sad fact is, its often a matter of when, not if, claims like this
hit a business.
Key ManŽ Life Insurance.
This is simply a life insurance policy
written on the life of the owner. The policy pays for costs
associated with running the business temporarily should the key
manŽ die. Tailor it to direct proceeds to another bene“
ciary (the
owners spouse) should the surviving decision makers choose to
dissolve the business.
LINE UP YOUR LEGAL DUCKS
Disability Insurance.
Pays the owner up to 66 percent of his pay
(tax free) if hes unable to work. Disability coverage is especially
helpful for all those small-business owners who exempt
themselves from workers comp coverage. If the owner is disabled,
his salary goes to paying somebody else to take the wheel while he
recuperates.
Coverage caveat: Make sure your policy is tied to your
Sit down annually with your commercial insurance agent to con
rm that your coverage in key areas is keeping pace with your growth.
Its especially important for small businesses susceptible to swamping
by the tiniest of waves.
Avoid litigation at (almost) all costs.
Lawsuits are like accidents„
theyre impossible to predict. Fifteen years after Jeff Ž purchased a
tives on an issue and were letting the judicial system determine the
outcome.Ž I put my arm around him. I still care a lot about Jeff,Ž I
said. He believes hes right, we believe were right. Regardless of how
its decided, were going to remain friends.Ž A few weeks later, Jeff
Legal hot zones must be top-of-mind for new business owners. The
justice system wasnt designed by the Founders to resolve business is
sues. As Jeff s story illustrates, winning a case on the merits is beside
the point. Legal fees run far beyond what you pay your attorney.
Consider the time spent by the executive team on pre trial discovery,
document review, general trial preparation, and the trial itself. Even
when you win, you lose.
Still, litigation happens. When it does, show respect for the people
on the other side of the courtroom. More often than not, an aggressive
BUILD A STRONG BOARD
Getting Help, Not Headaches, from Outside Advisers
These guys saved our hides. Theyd been in the trenches with hundreds
of companies in dozens of industries. Their been there, done thatŽ insight
minds or big egos is a waste of time. In addition to the three outsiders, our
Landing the ideal board member can provide that mystery check-and-
balance. In early 2000, the countrys runaway-stagecoach economy was
lurching but still rolling along. A packaging company purchased “
ve months
earlier by National City Equity Partners, a Cleveland private equity “
rm,
was planning to build a fourth manufacturing plant. That made Carl Bal
dassarre nervous. A new board member (and National Citys general part
ner), Carl looked down the road and saw potholes. I didnt know if the
wheels were going to fall off,Ž Carl recalled. But knowing that the packag
ing industry closely follows the economy, clearly it was time to pull back the
reins.Ž
But how hard? A new board member cant just
ride into town on a
white horse, grab the longtime sheriff by his vest, and lay down the law.
Carl had to persuade the packaging “rms successful CEO to abort his ex
pansion plan without alienating him. (Taming hyenas is easier than advis
ingŽ a successful CEO.) The CEO acknowledged it could take two years to
build enough volume for the new plant to become pro“
table. He reasoned
that the other plants were humming along at full capacity and could of”
oad
business to the new facility. On behalf of the board, Carl asked the entre
preneurial CEOs team to war-game how various revenue- softening scenar
ios would impact the existing plants. At the same time, Carl requested, lay
over the cash output for the new facilitys lease, capital equipment, labor,
and other
one- time expenses.
Snapping the CEO out of his passion and into objective analysis had a
sobering effect. He recognized that even a 10 percent drop in top-line reve
nues, combined with the new facilitys start-up costs, would jeopardize the
companys liquidity and bank covenants. If that happened, abandoning con
sion that followed the dot-com bust that March, canceling the expansion
proved a wise choice.
BUILD A STRONG BOARD
Fill your board seats with Carl Baldassarres. His “
rm manages a
billion-
dollar investment portfolio with stakes in over sixty companies, three-quarters
of which generate $25 million to $150 million in revenue. Carl, who serves
on seven boards (Ive been fortunate to join him on one), is the perfect blend
of caring and fairness. Hes tough, but not rough, smart, and understands the
value of relationships.
Follow these board benchmarks to pull the most value out of your wise
men and women. While it may take awhile to work your way toward formal
THE DYNAMICS
Compensate fairly.
Board members command increasingly higher sti
pends. Theyre also taking on greater risk. The 2002 Sarbanes-Oxley
Act„the congressional response to scandals at Tyco, Enron, and
Adelphia Communications„cuffed all public companies with tough
new requirements. Now of“
cers and directors are held even more ac
countable. That raised the bar for privately held companies, too.
Higher expectations, heavier workloads, and a greater threat of litiga
tion have turned board members into cold-eyed realists„
My time is
valuable. Im assuming more risk. Pay me what Im worth.
Still interested in tapping their wisdom? Heres what you do. First,
write a check for directors and of“
cers liability insurance„D and
O insurance.Ž (Board candidates may still beg off, citing potential
coverage holes.) Second, small-to-midsize companies can expect to
shell out anywhere from $12,000 to $30,000 annually to each direc
tor. Granted, thats too rich for most start-ups„start if you must by
inviting some trusted graybeards out to dinner every few months
with the promise of a more lucrative and formal arrangement as your
business grows. Third, consider throwing equity into the mix in the
form of stock options and purchase programs. Give everybody their
own oar and a part of whats on shore, and theyll row like mad re
gardless of the tide. (Caveat: The Financial Accounting Standards
Board ruled that stock options must be expensed in a companys
P&L, somewhat dulling the allure of stock options.)
tory board of directors,Ž theres no legal exposure for members who
serve on a board of advisers.Ž Its not just semantics. In the former,
executive management must implement the boards decisions; the latter
is a less formal advisory relationship in which the CEO calls the shots.
Private companies tend toward boards of advisers, especially if the
CEO has a controlling interest. The advantages: avoiding D&O insur
ance expense, less dif“
culty “
nding board members, and no obligation
to accept the boards advice. A board of directors, on the other hand,
typically sprouts when a company has multiple investors, none of whom
has controlling ownership. Its the best way to maintain checks and bal
ances on entrepreneurs like us and our management teams.
Diversify.
A board typically has “
ve to nine members. Pick people from
both inside and outside your industry whose talent doesnt duplicate
your own. Complementary skills„“nance, marketing, operations„
among members is good. A lot of boards reserve a chair for the retired
sage. Certainly, theres a role for wisdom, but depending on the indus
try, contemporary knowledge can be even more valuable. The best di
rectors have been through the wars of growing, building value, and
exiting a company. Theyve already done what you want to do, on a
larger scale. Yet theyre still in touch with day-to-day operations.
The board is your last line of defense
(other than your spouse and kids) against fooling yourself. That means
that members must say exactly whats on their minds. Avoid the types
who play politics and try to curry favor with management. They can
cripple you. When I joined the board of a manufacturing company, I
was shocked to discover that a lot of critical operational disciplines„
specting management. Once his rant sputtered, the companys chair
man chimed in. Tom is 100 percent right,Ž he said. These are not
radical ideas. They need to be implemented and were going to do
BUILD A STRONG BOARD
them. Period.Ž Leaders who hire yes-people do little more than bore
holes in their own hull.
Prescribe protocols.
Boards of privately held companies need to
spell out how they do their work, lest con”
icts creep in. Then every
body should stay out of each others way. An audit committee com
posed of outside board members should review “
nancial statements
holder. Each committee elects a chair, who reports to the board of
directors„not the CEO. Make sure each committees protocol and
responsibilities are clearly de“
ned. Also, translate the boards princi
ples into simple procedures that dictate things like implementing
strategy, evaluating executive of“
cers, and keeping tabs on company
perfor mance. Best-practice boards evaluate not only their own perfor
mance but also that of their committees and individual directors.
In the interest of transparency, good boards post
their principles on corporate Web sites (standards vary for publicly
held and private companies). They may include how a board relates
to management, how stakeholders access the board, and why the
board does or does not separate the roles of chairman and CEO.
Make the board a planning partner.
We expect them to think stra
tegically, yet some companies strand board members on the sidelines
during strategic-planning marathons. Strategy isnt a spectator sport.
Pull members into the game. Ask them to help identify the companys
SWOTs (strengths, weaknesses, opportunities, threats). Or, go all the
way and invite them to every single planning session. At the very
least, tap them during the “
nal review phase„and deputize them to
help track and analyze results.
cerned only with strategic planning, “
nancial health, and picking
executive of“cers. That is
Manage the board.
Like every collection of people, a board has its
own agendas, egos, frailties, and con”icts. Be mindful of a boards
needs and personalities. A good entrepreneur works his board, which
isnt manipulation. Build the board into your consciousness. Occa
sionally do quick one-on-ones over coffee. Besides rapport building,
youll learn a ton. Share information„e-brief members regularly.
Solicit input, not for consent or assent, but to stay connected and
keep everyone in sync.
Start spreadin the news.
Distribute the board bookŽ (agenda, “
ships) digitally or via hard copy three days before the big board
bers lose precious pro cessing time. Everyone should be up to speed by
the opening bell.
agement (typically the CEO, CFO, and VP of operations) presents
information about various agenda items; then the board members
earn their fee by providing feedback and counsel. Ive watched too
many executives spend more than two-thirds of the meeting present
ing and less than a third soliciting feedback. Flip that ratio. Some
people mistakenly consider it a sign of weakness to ask for help. They
Companies on the move like to crow about
the numbers early and often. In down times, the “nancials magically
BUILD A STRONG BOARD
sents the interests of the workers). A good board advises your
management team on strategic plans and grills your execs on the
spot to make sure strategies are credible, in everyones best interests,
and well executed.
The board
doesnt run the company, management does.
Seasoned
est or in deep denial„then a direct challenge is in everyones best
interest. Good board members can and should look over manage-
ments shoulder by asking simple questions like,
ing its goals and performing well compared to industry benchmarks and
committed timelines?
If yes, the board should stick to strategy. A no is
your invitation to venture into operations.
After digesting the “
nancials, review
the status of actionable, management-level items generated at the last
ner, growing restless. Do not waste the boards time. Keep things
moving with good preparation and agenda restrictions that limit the
number of critical issues. Appoint a watchdog to (judiciously) keep an
eye on the clock.
Think things through.
Before quitting your day job, consider the
impact that starting a business will have on your family and “
nances. Expect to make constant companions of fear and rejection.
Do your due diligence.
Write a knockout business plan.
Its your road map to success and
your entrée to lenders and investors. Writing your plan is a valuable
exercise. It forces you to anticipate roadblocks, assess risks, sharpen
Scare up seed capital.
Cant self-fund your company? Start with
family, friends, and business contacts. Need more cash? Banks and
Create visibility.
Position your new company so customers cant
avoid you. Differentiation is the key. Find the perfect niche along
the price-quality-service continuum. Make sure youve nailed your
name and slogan. Before signing a lease, remember: Its not what
you pay, its how much you net for what you pay.
Protect yourself legally.
Choose the right type of operating entity.
Hire a top-notch attorney. Dont sign contracts unless every word
makes sense. Take steps now to protect your intellectual capital.
BUILD A STRONG BOARD
Head off employee defections and bogus claims. And for Petes
Build a great board.
Hold hands with savvy, sophisticated outsid
ers who will share their expertise (for a reasonable fee). Look for
complementary skills, encourage frank feedback, and keep every
one on the board current and connected.
FOUNDATION
Laying In Your Mission, Vision, and Values
icture a general addressing his nervous troops on the eve of a decisive
battle. He implores them to “
ght “
ercely for the honor of everything
and everyone they hold dear. He stresses that the safety of their loved
ones rests on how courageously they perform on the midnight battle“
eld.
Then the general strides over to a second company of troops and orders
them to conquer the enemy or die trying. The objective, he thunders, is to
The
do-
or-
die spirit of an army or marine unit is the essence of what an
enlightened entrepreneur must instill in the men and women under his com
mand. That lofty goal is within reach, but only if the answers to three funda
mental questions are clearly articulated, strategically spread, and consistently
reinforced:
Why does the or ga ni za tion exist?
Where is it going?
The answers must be precisely expressed„in a mission statement, vision
statement, and statement of operating values„and held with conviction
throughout the culture. ConvictionŽ is the operative word. If a companys
mission, vision, and values arent genuinely believed and championed by you
and your management team, theyre just words on paper. Ah, but when con
viction is convincing, the organization rises above the sum of its parts and
produces an inspired team. The change is palpable. Its also contagious. Writ
ing your mission statement, vision statement, and statement of operating val
ues amounts to nothing short of pouring the foundation of your business.
The Mission Statement. Sure, its Business 101„something most com
panies have (gathering dust next to some plaques in a forgotten storeroom).
But is it working? In seat-of-the-pants out“
A mission statement is fundamentally immutable. Carve it in granite
less. Through boom and bust, 3Ms mission will always be
To solve unsolved
problems innovatively.Ž
ence pro“
ence in the world.
Now imagine youve just received an advance copy of
BusinessWeek
Emphasis here is on the word advanceŽ„the publication date is ten years in
the future. The cover story features your very own business. Before you rif”
POURING THE FOUNDATION
through the pages, pause for a moment. What would you like that article to
say about your company„its image, its culture, its values, its accomplish
ments?
What can you do right now to turn those dream headlines into scrap
book clippings? Now that everyones on board the mission train, how do you
keep from derailing into complacency or chaos? How can they pick up a head
of steam while theyre at it? Hitch up to the ol Double-V„vision and values.
Unlike your mission, which states your purpose, a vision statement asserts
where your company is headed. A statement of operating values spells out the
traits you and your employees must possess in order to live up to the compa-
MISSION CRITICAL
Embodying Your Mission Statement
o help restore people to full life.Ž
Thats the essence of
Minneapolis-
based Medtronics
six-
part, 171
word mission. Its also the mantra Ann Krzmarzick heard in each of the eight
interviews she endured to become a communications specialist at the re
nowned medical technology company. It was a test of sorts. If Medtronics
mission didnt resonate, the human resources manager told her, she should
look for employment elsewhere. Ann smiled and nodded. It was a catchy
sound bite, but she “
gured it would have about as much impact as a bumper
sticker on her day-to-day duties.
She “
gured wrong. Ann quickly discovered that those seven words were
the beating heart of Medtronics corporate body. I didnt realize,Ž she said,
that the light of that mission would shine so brightly on the everyday work
in communications, given that were fairly removed from direct patient care.Ž
The mission was
consistently„almost reverently„referenced in every meet
ing and memo. It informed every decision at every level. It even reached all
the way to the annual holiday party, where six bona “
de patients share their
stories of heartache, hope, and renewal. Theres never a dry eye in the
house.
57 57
Surveys reveal that nearly every one of Medtronics twenty-six thousand em
ployees knows the companys mission statement and how it applies to their
job. Theyre inspired because they know their work makes a big difference in
peoples lives. Is it any wonder that Medtronic always appears on
Fortune
magazines list of 100 Best Companies to Work ForŽ?
At Tires Plus, we expressed our companys guiding principle through
our thirteen- word mission:
Deliver caring, world-class service to our guests, our
community, and to each other.Ž
A noble sense of purpose was essential for at
tracting quality employees. Most people consider working in the tire business
I was a human billboard for our mission statement. Take the time my
I had spotted the couple coming out of the store and sensed by their ex
pressions that they werent happy. I asked if there was a problem. There
shouldnt have been, because a big part of our mission was empowering store
Our corporate commandment„
Thou shalt be caring
„was like a global-
positioning satellite that helped our people navigate the choppy waters of day-
to-day decision making. More important, it helped managers identify and
capitalize on coachable momentsŽ„instances when an employees actions
MISSION CRITICAL
con”
icted with our mission. For instance, our follow-up system required us
to contact customers not more than forty-eight hours after providing a price
quote. On a regular
systems-review visit to a suburban Minneapolis store, I
checked the phone log and saw that a teammate was skipping the follow-up
call. Turns out he hadnt been properly trained and wasnt sure how to do it.
So I spent some time teaching him the ropes via the Confucius Checklist
(chapter 41).
I listened in when it was time for him to make an actual call. The
woman he called told him she had opted to buy new tires from Firestone.
Oh, thats too bad,Ž he said, you really missed out.Ž After he hung up, I
said, Wow, you basically told her she made a bad decision. How do you
think that made her feel? Do you remember what our mission is?Ž He
stammered, To give caring,
world-class service to our guests?Ž I asked if
that phone call was consistent with the mission. He acknowledged it wasnt.
If somebody tells us their needs were taken care of,Ž I said, our reply
should be, Im glad you got what you needed. Your car is safer and will
handle better now, and thats whats most important. Next time youre in
will bene“
ts everyone.
We upheld our missions integrity just as vigilantly for internal custom
ers.Ž If an employee treated a colleague rudely, I challenged him. I wanted
amends made and behavior corrected immediately. How would you feel if
somebody treated you that way?Ž Id ask. How would you react?Ž Id re
mind the offender in no uncertain terms that our mission called for every
one in the company to deliver caring service, and that also applied to one
another.
Emphasizing worker civility isnt just the right thing to do. Its also practi
cal. The average Fortune 1000 boss spends 13 percent of his time refereeing
his staff, according to a study by the Marshall School of Business at the Uni
versity of Southern California. Do the math. Thats seven squandered weeks
every year, a crippling price for neglecting to put your manners where your
mission is.
Is your companys mission in mothballs? Two words: huge opportunity. Re
Thats time for an update. First, convene a brainstorming session with top
brass. The leaders should have an innate sense of the companys purpose.
(Hint: A management consultant can smooth the pro cess if her focus is “xed
on facilitating; however, the question of purpose requires an insiders insight.)
How to begin? Start by describing your offering. Ask, Why is that impor
tant?Ž Challenge what the group comes up with, asking again and again,
How does that help our customer?Ž Go deeper until you “
nally punch
through the brick wall of logic and tap into peoples hearts. After “
ve or six
iterations„the whole thing could take two or three sessions„odds are youll
nail the essence of why youre in business.
Now its tweak time. Create opportunities for every employee to pitch in.
Reach out to resident wordsmiths and deep thinkers by posting drafts of the
mission wherever people will see it„elevators, bathrooms, paycheck enve
ce and cubicle.
Your responsibility as CEO (chief enlightenment of“
cer) is to champion the
companys mission until it guides every member of your team like the North
Star. A leader breathes life into a mission statement by consistently modeling
it. Then it evolves into a force that shapes employee behavior. Its like Johnny
Appleseed, only with words, sowing seeds that take root in minds, hearts, and
MISSION CRITICAL
souls. Feature your mission everywhere„in orientation seminars, employee
manuals, visual reminders, promotional materials, staff meetings, perfor
mance reviews, one-on-one coaching sessions, special functions, ceremonies.
To promote awareness of your mission:
Use it as a
litmus test
Ask people to
commit it to memory
Hold an annual
Try an
essay contest
with a topic like,
How our mission helped me
make an important decision
. Or,
How our mission inspires me to give
my best
. Or, simply,
What our mission means to me
. Post the entries
Start a Mission MentionsŽ section in the
company newsletter
of“
cially recognize employees for embodying the mission through
Post a
suggestion box
for comments about how the company can
follow through on its mission.
Encourage employees to speak up
if they see circumstances that
clash with the mission. Make various reporting channels available.
The energy spent on this will pay huge dividends directly and
indirectly throughout your business.
Composing Your Vision Statement
hink of your vision statement as a list of dreams committed to paper. Its
a collection of shooting stars that inspire people to reach for the heavens.
Not only did I share our vision with new hires, I reinforced it every quarter at
I saw the “
re in their eyes when Id single one of them out and say, Joe,
how old are you going to be in ten years? Forty, huh? Well, if we grow 15
percent every year for ten years and turn our vision into reality, how will our
perfor
mance incentives affect your salary? What kind of opportunities do
you see for yourself in a $1.7 billion company? With your help, and the help
of everyone in this room, we can make it happen.Ž
People crave a clear sense of purpose (mission) but they also love to be on
a winning team (vision). Show them the way by painting idealistic, yet reach
Become a national player with $1.7 billion in revenues and eleven
hundred stores by 2010.
Become the marquee tire company in the U.S.
Serve guests so well that 99 percent recommend us to family and
friends.
Develop the strengths of a big company while maintaining the
agility of a small one.
Provide a nurturing and healthy environment that establishes us
among Americas most desirable companies to work for.
Unlike a mission statement, you can tinker with a vision statement. At
Need to update your vision statement? Follow the steps you took to retool
your mission (chapter 8), keeping in mind two distinctions:
BoldŽ and FearlessŽ are the Operative Words.
Shoot for the moon,
like JFK in a 1961 speech to Congress: I believe that this nation
should commit itself to achieving the goal, before this decade is out, of
landing a man on the moon and returning him safely to the earth.Ž
Telescope Out Seven to Ten Years.
Peering that far requires visionary
thinking and a willingness to look beyond current capabilities and
CHAMPION CORE VALUES
f a scientist extracted your companys DNA and placed it under a micro
scope, the image she would see is your operating values. Its the cultural
backbone of your organization, alistofvaluedtraitsand deedsexpectedfrom
all employees. Your vision statement shows employees where you want to go;
These core values should run so deep through your culture that the hur
ricane winds of markets, disruptive technologies, and economic conditions
cant uproot them. If you can imagine any circumstances that would force
one of these values off the list, then its not a core value and should never
have been identi“edasone.Likeyourmission statement, thesevaluesmust
be championed and modeled by management. Otherwise, employees will
shrug off a Values We ValueŽ campaign as just another sleepwalking initia
tive.
Promotingits values helpsanorganization avoid hiring andharboring
people who dont measure up. For instance, if your talent scouts look for
new hires based on attention to detail, world-class service skills, and in
novative thinking,itsunlikelythatalazyconformistwillsneak past the
CHAMPION CORE VALUES
front gate. Those who do will soon either run for the door or have it shown
to them.
The ideal Tires Plus employee possessed six qualities. Scott McPhee, our
retail operations veep, coined the acronym COPPSS to make these attributes
easy to remember: Caring, Optimistic, Passionate, Persis tent, Systems-
disciplined, and Spirit-“lled. We snapped up everyone we could who embod
ied these six qualities:
Caring.
Twenty-four years in my workplace laboratory con
vinced me there are two kinds of employees„those who are de”
ated
by mixing with the public and those who are energized by it. The
distinction may initially be dif“
cult to discern. Nineteen out of
twenty applicants for client- service jobs will assure you, I love work
ing with people!Ž Yet six months into the job, the self-proclaimed
people personŽ is bellowing, These people are driving me nuts!Ž We
sought out employees who loved to make someones day. Every busi
ness, regardless of its offering, is in the business of helping people.
Every employee, no matter how removed from customers and col
leagues, contributes to the organizations CQ (caring quotient). The
higher the CQ, the more harmony in the workplace. That means a
happier, more productive hive.
Stress and losing ourselves in our work are just two of the factors
neapolis to San Diego. I was trying to nail a deadline under less than
ideal conditions, made worse by the oaf in front of me who fully
cranked his seat into my lap. Agitated over this guys boxing in my
six-foot two-inch frame, I sank my knees, already pressed into his
seat, a little deeper to send a message. Forty-“
ve minutes later, a
woman in her eighties rose in front of me and used a walker to reach
the restroom. I was horri“
ed. I had zinged an elderly lady, of all peo
ple, with my knee-jerk reaction.
To this day I draw upon that woman when Im in a rush. It re
minds me to always recognize the humanity of other people. The
Sanskrit greeting Namaste expresses this intent: The divine in me
bows to the divine in you.Ž
Optimistic.
In the Optimism Olympics, Eddie Haskell would
be barred from the stadium. At best, Eddies oily brand of optimism
Leave It to Beaver
was annoying (Mrs. Cleaver, I know your din
ner party is going to be a big success!Ž). So is the modern corporate
yes-man equivalent (Thats an awesome report, Boss; its going to
On the opposite end, overt negativism kills initiative and deadens
spirits. Its also contagious. Ive seen one employee with a rotten atti
tude seductively infect his colleagues until a black cloud hovered over
an entire department. Grousing about coworkers is especially toxic. It
sows dissention and doubt throughout your shop. Pessimism becomes
self- ful“
lling. Once your people lock themselves into it, they wind up
spending more energy justifying their negativity than in searching for
solutions.
Once I got steamed during a biannual operating-plan review. Dan,
one of our regional managers, had unilaterally reversed our formula
of devoting 10 percent of a plan analysis to identifying obstacles
and 90 percent on how to hurdle them. His presentation turned
into one long excuse for why he hadnt met his pro“
t goals. Typi
cally, Im gentle with underperformers, especially in front of their
peers. But Dan had worn my patience thin. I asked him point-blank
why he hadnt told us about his problems earlier so they
couldve
been solved by now. He mumbled something about not being able
ing to our team.
Does this attitude sound familiar?
The glass isnt just half empty, its
cracked down the middle and smudged with ChapStick
. Yeah? Heres
hoping you can convince your people theres a more pleasant„and
productive„way to look at the world. It aint easy, thats for sure, es
pecially if theyve been counterprogrammed since childhood. But
CHAMPION CORE VALUES
thoughtful dissent, inspires the con“
dence to hurdle any obstacle,
and reframes roadblocks as opportunities. For instance: Yeah, land
ing that account is a challenge. But if we study the offering our com
fectly:
Things turn out best for the people who
make the best of the way things turn out.
Optimism poured out of our phones daily: Its a great day at Tires
Plus. This is Tom. How can I help you?Ž You should have heard the
reaction when I “
Passionate.
Selling a new idea to colleagues is like a district at
torney trying to persuade a jury to lock up the bad guy: Conviction
equals success. More precisely, success hinges on the
passion
of your
convictions. In its purest form, passion is the combustible mixture
trolled passion also packs in”
uence. Besides, erupting too often raises
eyebrows. People are more apt to help someone who maintains an even
keel and hollers, Man overboard!Ž only after a really loud splash.
A passion de“
sistency, or if an authority vouches for you. Dave Wilhelmi, our vice
ning U.S. Tire Dealer of the Year. Tom gave one of his heartfelt ad
dresses, thanking all the people who were such a big part of our
success,Ž Dave said. In the hallway afterward, Dave ran into a new
vendor- partner who as
Per
sis
tent.
Our “
rst three tire stores were small converted ser
vice stations that also sold gasoline. With the late-70s energy crisis in
full swing, my gasoline allocation was grossly inadequate and I strug
ment for more gas. Denied. I called the Department of Energys
Midwest of“
pany survived its earliest, darkest days.
A per sis tence de“
cit will derail even the most talented professional.
Murphys Law„
Whatever can go wrong will go
wrong
„will never be
repealed. But that doesnt mean you cant hurdle or dodge Murphy
through dogged persis tence. When employees bounce off obstacles,
educate and inspire them to “
nd another route. Remind them that a
corollary of Murphys Law is
What evers worth doing will be more dif
“cult and time-consuming than you expected
. Yet if the juice is worth
the squeeze, keep the pressure on.
CHAMPION CORE VALUES
Calvin Coolidges Law of Persis tence,Ž dated though it may be,
has been on my wall ever since I started my business:
Nothing in the world can take the place of persis tence.
Talent will not; nothing is more common than unsuccessful men with talent.
Genius will not; unrewarded genius is almost a proverb.
Education will not; the world is full of educated derelicts.
Persis tence and determination alone are omnipotent.
Its unbelievable the number of people Ive seen limp away after stum
bling over a roadblock or two. Little did they know that success was
just around the bend.
Systems-
disciplined.
In my younger, ego-drenched days, I of
ten challenged authority„professionally and privately„and relished
every opportunity to beat the system. Hindsight is humbling. Its
now clear that playing by the rules produces less chaos and honors
others more.
Choosing to ignore even a minor procedure can be costly, a point
Does this mean every rule should be slavishly obeyed? Of course
not. Veering onto the dirt shoulder and roaring past law-abiding
traf“
c may be necessary in emergencies. Just keep an eye on your
rearview mirror to make sure the dust youre kicking up doesnt
cause a fender bender or pileup. (For more on systems, see chapters
23…27.)
Spirit-
lled.
On a Paris business trip in 1998, I had the honor
ing me a big hug.
Wow,
I thought,
I hadnt realized I was in such a
spirit- “lled business
Spirit-“lledŽ evokes the image of pumping your tank full of air
at a metaphysical service station. I believe spirit is an inherent part of
who we are„something to be released rather than created. Spirit
ows from seeking meaning and purpose in life. It does not mean
espousing religious beliefs around the watercooler. It means having
the courage to hold fast to your cherished values and be authentic.
When youre connected to spirit, youre unconsciously modeling a
This wisdom is implicit in May the Force be with you,Ž Obi-Wan
Kenobis benediction to Luke Skywalker in
Star Wars
. Call it what you
will„spirit, God, the Force. Its the omnipresent intelligence that gov
erns everything. Align yourself with it, with the pure intention of ben
ting the world, and youll emerge from the shadows of self-absorption
into the sunshine of sel”
ess service and synchronicity. Doors will open,
obstacles will vanish, people will appear„meaningful coincidences
that nudge you closer to your goals.
Connecting with spirit is a primal need. Mythologist Joseph
Campbell spoke of our innate desire to feel the rapture of being
alive.Ž I felt this euphoria of living more intensely the more I avoided
spiritual tranquilizers„unhealthy food, booze, no exercise, denial,
guilt, inappropriate anger. Russian philosopher P. D. Ouspensky ex
plained that most of us move through life in a waking sleep that
prevents us from tapping into our spirit. If that sounds familiar, stop
hitting the snooze button. Its time to wake up.
ood leaders watch like a hawk for decisions that fail to uphold the com-
panys mission, advance its vision, and express its core values. This may
sound like some utopian B-school dogma, but compelling evidence points to
Balanced Stakeholder Interests.
Look around. You arent oper
ating in a vacuum. Your company “
ts into a larger community. Its
relationships„with employees, customers, business partners„are
intertwined. Tending the till in an enlightened social context drives
superior “
nancial per
for
mance. A “
rm generates this virtuous circle
when it honors employees, who then turn around and produce a
high-
quality product on service. Ultimately, customers are so pleased
that they become pied pipers leading everyone else in town to your
door.
Whenever our executive team voted on a big issue, we “
rst mulled
over its effect on all our constituencies. Our three-word litmus test„
Is it fair?
„exposed ”
Leadership Integrity.
From the start, Tires Plus stores were
upscale, with cappuccino machines, prints on the walls, TV and
movies, toys for kids, and shiny, clean ”
oors for them to play on (did
I mention these were tire stores?). The industry was tagged as unpro
ing white shirts and ties. The issue came to a vote at an executive-
Con”
ict like this will certainly produce blowback. But enlightened
entrepreneurs tune out the grumbling. Theyre purpose pleasers, not
people pleasers. Theyre less concerned about who is right than what is
right. Base your decisions on whats best for all stakeholders, in the
broadest sense of the word. Long-
term bene“
ts are worth the
short-term
Make us to choose the harder right instead of
the easier wrong, and never to be content with
a half truth when the whole can be won.
Pro
cess Integrity.
Otherwise known as institutional integrity,
pro cess integrity is a re”
duct. They follow their scruples, even at the cost of pro“
ts.
Its a principle that guides Reell Precision Manufacturing Corpo
ration, a thirty- seven-year-old manufacturer of electromechanical
components such as clutches and hinges. When fears of a recession
plunged orders and revenue in 2001, Reell executives asked employ
ees to take a temporary pay cut to avoid layoffs. Employees readily
accepted the proposal because the dozen se nior execs had already
stepped up and slashed 16 percent off their own pay. Reell saved half
a million dollars„and dozens of jobs.
Thats business as usual for this Vadnais Heights, Minnesota, com
ing and assembly to quality checks and failure analysis. Product is
shipped only after the line worker signs off„without backup inspec
tion (other than periodic audits).
ing the production jobs is to bene“
t the workers„theyre happier
and more ful“lled. But from the companys standpoint, encouraging
and educating employees to develop mastery in their work, and to
ments. Of the roughly half a million units Reell shipped annually to
Xerox, not one was rejected during a
four- year span.
Ironically, times of crisis magnify a “
Environmental Stewardship.
ment when he said, Do no harm.Ž But who knows? The fact is,
protecting our natural resources is a businesss moral responsibility.
Every Tires Plus store recycled paper and plastic. In our hydraulic
ties. We even teamed up with the U.S. Department of Transportation
to produce guidelines that showed drivers how to tread easier on the
environment.
Why all the fuss? Because a healthy earth is good business. Its a
lesson that smog-clogged China is quickly learning as its popula
tion falls in love with the automobile. My friend Terry Tamminen,
a fellow board member for the International Waterkeeper Alliance,
which he cofounded, was so persuasive with this argument that
California governor Arnold Schwarzenegger tapped him for a cabi
ing and electrical equipment pays for itself in as little as eighteen
months and reduces the need to burn fossil fuels. How many busi
ness decisions do you make that are good for both the soul and the
cash register?Ž
For guidance on environmental sustainability, check out:
Alliance for Sustainability (www.allianceforsustainability.net)
Rocky Mountain Institute (www.rmi.org)
Business for Social Responsibility (www.bsr.org)
Business Alliance for Local Living Economies (www
.ballenetwork .org)
Sustainable Business.com (www.sustainablebusiness.com)
tures and Gantz Wiley Research. It provides credible, unbiased
feedback and helps you develop principled practices. For more infor
mation, visit www.cebcglobal.org.
NO SHORTCUTS
But a tiny crack in the glass gradually expands until you cant see out the
windshield. That is, one dishonest action, no matter how slight, can compro
mise our sense of right and wrong and leave us vulnerable to the allure of
more dangerous temptations. Especially when people are under pressure to
We never intended to cross the line. But thats what we do when we cut
corners on quality to save a few cents per unit. Or when we dodge environ
mental regulations. Or cook the books. Smart business decisions, we tell
ourselves. Before we know it, security is escorting us out of the building. Or,
worse, we trade in pinstripes for prison orange. Feel yourself edging up to a
slippery slope? Take an ethics check. Ask yourself how youd feel if your be
havior were broadcast on the local news. Would you make the same decision
if your family were standing at your side? Some may consider this litmus test
plex to be boiled down to shirtsleeves decision making. I disagree.
Corporate responsibility demands that leaders recognize a common in
terest beyond their own self-interest. In 1776, the American Revolution
coincided with the publication of Adam Smiths
Wealth of Nations,
which
revolutionized economic thinking. The Scottish philosopher and econo
mist theorized that the invisible handŽ of the market transmutes the indi
vidual pursuit of self-interest into a public bene“
t. Two hundred eighteen
years later in Switzerland, the Caux Round Table took a more practical
view. In recognition of the complexities of the modern world, this annual
cally, responsibly, and with the common good in mind. A heroic effort is
required to earn back the respect of employees, the con“
dence of sharehold
ers, and the trust of the public. Im con“dent we can answer the call.
POURING THE FOUNDATION
A well-
crafted mission statement is the foundation of an enlight
ened or
ganiza
tion.
Revisit your companys purpose for being and,
if necessary, revitalize it with inspiration. A mission is the polestar
that corrects and directs employees. But if team leaders dont em
body it, its just one more empty piece of paper pushed by a wan
nabe titan.
craft your vision statement with boldness and idealism.
Look
at least seven to ten years out, well beyond organizational capabili
ties. Declare a destination, rally the troops, and the road map will
begin to take shape.
Spell out your core operating values.
De“
ning success behaviorŽ
for employees weeds out the wrong people and keeps the right ones
on track. Through the collective power of employees deeds, these
fundamental principles de“
ne your “
rms character.
Revisit your vision statement occasionally, but preserve your
mission and core values.
Update your vision statement when mar
ing.
Enlightened entrepreneurs base decisions on more than self-
interest.
Healthy pursuit of self-interest often leads to parallel
public bene“
t. But as the Enron and WorldCom scandals demon
rate giants, ruin lives, and cause enormous economic damage.
petitive advantage, when it demands integrity from its leaders, pro
cesses, stakeholder relationships, and environmental stewardship.
SNATCHING UP
STARS
Embracing Your Hire Power
he hiring pro cess, a romantic dinner, walking a tightrope„what do
they all have in common? A rush job can produce disastrous results.
Hiring after one interview„no probing, no references, no work-history
review„is like hopping a red-eye to Vegas to
ting bitten on the back end. Shortcuts are tempting, especially when a candi-
dates personality, résumé, and references are intoxicating. The swoon is like
puppy love, as if the person has been delivered by divine decree.
Seat-
of-
the-
pantsers typically put mediocre employees in charge of hiring.
Big mistake. It takes a sharp person to recognize a fellow thoroughbred„and
Beware of the fear factor. Some managers dont
their socks knocked
off. Sure, its only human nature to feel threatened by someone who could do
TALENT SCOUTING
Finding the Best People
om Greenwades Oldsmobile must have been caked with dust by the
time he pulled up to the bleachers in Baxter Springs, Oklahoma. The
baseball scout was there to bird-dog the third baseman for the Whiz Kids, a
local semipro team. But it was the young shortstop that caught Greenwades
eye by belting two monstrous home runs into the river well past the fences.
Since the phenom was only a high school sophomore, Greenwade vowed to
return bearing a contract on the young sluggers graduation day. True to his
word, two years later, Greenwade attended commencement ceremonies for
the Commerce High School Class of 49. Thats how Mickey Mantle signed
his “
rst New York Yankees contract.
To attract and “
nd top- notch talent:
Turn your workforce into an army of bounty hunters.
Dangling a
Pluck prospects from your web of business partners.
When we
needed a new CFO, the “
rst thing I did was contact our accounting
rm. I asked the partner in charge of our account if he knew anyone
who might “t. He recommended a “
nancial wizard named Jim Be-
mis who had just resigned from a troubled company. Snapping up
Jim was critical to taking our company to the next level. Word travels
fast in professional circles, so dont be shy about mining business con
tacts for referrals.
Crank up your visibility.
The real estate mantra Location, location,
locationŽ doesnt apply just to land valuation. It also helps land valu
able employees. Ask yourself,
Where are the people we want to hire?
there, and start schmoozing. Join the chamber of commerce. Attend
all the business, community, and charitable events you can. The hand
you shake may be your next superstar.
Wayne Shimer, who headed up our
recruiting and retention, was in Omaha in 1998 to guide some store
openings. Standing at an ATM machine, of all places, he met a guy
who was wearing a shirt, tie, and name tag. I asked him, How are
you doing?Ž Wayne recalled. Im doing
great
! he said.Ž Impressed,
Wayne struck up a conversation and discovered that the guy was
bored with his sales job at a hat shop in the mall. They exchanged
cards and Wayne returned later to scout him out. The guy was fan
tastic,Ž Wayne said. I hired him on the spot and hes still with the
company today. And doing very well, thank you.Ž
Radar is important because you bump into tomorrows stars all
TALENT SCOUTING
day long„the cheerful, ef“
cient waitress who clearly enjoys working
with people; the friendly clerk who makes you feel like youre his fa
vorite customer. When I saw a smile on someones face and a sparkle
in his eyes, I told him he gave great service. How long have you
worked here?Ž Id ask, and follow up with a couple more: Do you like
what youre doing?Ž and Is there a good career path for you here?Ž
If the answer to the last two were yes, Id thank him and be on my
way. But nine times out of ten hed say it was only a temporary job.
Id tell him I was always looking for good people like him. If he
showed interest, I handed him my card. Ive hired dozens of people
like that.
tions with exceptional standards and sparkling reputations. To para
Dont take no for an answer.
We didnt mess around when some
body was right for us. We took him to dinner, introduced him to the
team, and did whatever it took to persuade him to sign. One of my
recruiting execs once said we should ding a candidate because he
wasnt pursuing us vigorously enough. Heck no!Ž I said. The stars
dont have to go hard after companies. Were the ones who need to
pursue
.Ž Some twenty years ago, we were searching for a special
ized sales rep. I knew Tom DuPont was the guy for the job by the end
of our “
Over two weeks, I bought him lunch, brought him back to the of
ce, and called him three or four times. Tom just kept coming at me
and coming at me until I “
nally relented,Ž DuPont recalled. He kept
telling me, Youve got to join the team! He was very persis tent. That
really made me feel great because its always nice to feel wanted.Ž Du-
Pont took the job and stayed with us for ten years until he left to start
Explore the jungles of guerrilla recruiting.
Recall bank robber Wil
lie Suttons famous line? Asked why he robbed banks, he quipped,
Because thats where the money is.Ž Apply Willies logic to the
of“
sponses: (1) Dont let the door hit you on the way out,Ž (2) Five
hundred bucks? Sure, Ill keep my eyes open,Ž or (3) Im not happy
here, can I schedule an interview?Ž Of course, we never tried to
stealŽ employees who were content. But we felt good about provid
ing opportunities to anyone who felt underappreciated.
The lowest person on the totem pole often
carries the tribe on his shoulders. I always put that theory to test in
the “
eld. When I walked in the front door of one of our stores, I
reled away. In Cedar Rapids, Iowa, I hit the jackpot in a technician so
gregarious and sharp that I ran to the sales ”
oor and told our person
Fall in love with internal promotion„itll return the favor in spades.
Career Awareness Day was the linchpin of our retention success. Once
a year in our support center, employees who were considering career
changes walked among booths representing every department. Youve
got to “
nd that diamond in the rough whos already drawing a pay
check,Ž Wayne said, and help him further his career.Ž Tire techs, for
instance, discovered opportunities in the warehouse. Sales staff
TALENT SCOUTING
combing the want ads found openings in, say, customer service. Every
department had somebody who was working toward a business de
gree,Ž Wayne recalled. We discovered peoples hopes and dreams, but
just as important was what their hopes and dreams were not.Ž Its like
the guy who sold his home to travel the world in search of fortune only
to hear later that one of the worlds largest diamond mines was discov
ered on his old property. We cultivated our “
eld all the time,Ž Wayne
said. We knew if we didnt, wed lose em. Wed just be a stopover
point instead of a career destination.Ž
ied treasure. Network at universities and vocational schools, consis
tent sources of leads. Search “
rms and employment agencies produced
some three hires for us at every job fair we attended. Trade shows and
Stripping the Guesswork Out of Hiring
nterviewing a job candidate is like asking your kid what he did at school.
You wont “
nd out whats worth knowing until you ask just the right ques
tions in just the right way. In the Hiring Game, its crucial to arm yourself
with probing, open-
ended questions. Most job seekers know the drill inside
and out. Theyre skilled at telling you what they think you want to hear and,
more important, suppressing details they
dont
want you to hear. But that, my
friend, is exactly the information you need to know.
Who should be there? The candidates quality and the importance of the
job determine who sits in on the initial interview and how many cycles it will
take. Lots of companies pinball a candidate from one managers of“
ce to the
next to face the same predictable litany in an endless circuit. That wastes the
applicants time and nets canned responses. I typically arranged a panel of three
to “
ve teammates for key positions. Granted, six against oneŽ can be intimi
dating, but it also provides insight into how an applicant performs under gentle
pressure. No matter how many suitsŽ are in the room, create a relaxed, wel
coming environment.
Before launching into a friendly grilling, level the playing “
eld a bit and
ease into the conversation. Id thank a prospect for considering us and ac
knowledge that she was interviewing us as much as we were interviewing her.
Id emphasize that wed each bene“
t from total candor, noting that impor
tant details that didnt surface could come back to haunt us. Id promise not
to oversell my offer and ask her to return the favor.
After going over our mission, vision, and values, Id pepper her with
thought-provoking questions arranged under nine themes. Id do my best to
come across as both caring and curious, probing but not prosecutorial. Through
tone and body language, Id lob up even the most challenging questions like
softballs. Id encourage her to go with the “
rst response that came to mind and
let her do 70 percent of the talking.
The interview checklist:
If you cant establish congruence with
the Big Three, theres no point continuing the interview.
How does our mission statement sound to you? What do you like
about it? How do you feel when you think about it?
How could you help us reach our vision- statement goals?
Which of our values resonate with you and why? Which of our
values are you uncomfortable with?
Can you give me two examples of the role these values play in
your life?
Job history.
Start with the basics and add a twist. To understand a
prospects experience, ask about her last three jobs.
What was your job description, and what did you actually do?
What did you love about the job, and what did you hate?
How would you rate your boss, and why?
Did you leave the job or did the job leave you? What exactly
happened?
The kicker? Dont ask what her last supervisor thought about
the quality of her work. Instead, ask,
What will your supervisor say
about you when I call?
answer because shes probably thinking,
Rethinking references: If the applicant worked at a smaller busi
ness, you might squeeze some candid impressions out of her supervi
sor. It cant hurt to try. Larger companies refer questions like that to
a tight-lipped HR rep who will only con“
rm dates of employment
and positions held. For serious intel, ask the applicant for names of
former colleagues. Later, follow through: Bill? Hi, this is Tom over
at Tires Plus. Your name came up during an interview with Jane
Doe and I wanted to know if you could tell me anything about her.
What? Terminated for tardiness?Ž
Drive and ingenuity.
These questions determine a job seekers capac
ity to work hard
and
smart.
Walk me through a typical day at your most recent job (or the
one most relevant to the position under discussion). How did you
feel about each part?
What were your biggest contributions to your last employer?
What are some on- the-job examples of your going beyond the
call of duty?
Tell me about the times you underperformed. What did you do
about it?
What is your understanding of what this job requires?
How many hours did you work at your last job, and how many
do you expect to work at this job?
Integrity.
Dont pass up the opportunity to stress zero tolerance for
tions:
Everyone has bent or broken a rule at one time or another. What
was one of your recent transgressions, and what did you learn
from it?
Are all rules valid?
If you felt a rule was unfair, what would you do about it?
Have you ever broken a rule to satisfy a customer? If so, how?
Which is more important, customer service or making
a pro“ t? Why?
These four questions help judge the candidates maturity
and the quality of her decision making.
Tell me about a few good decisions you made recently
What was the toughest work- related decision youve made?
Describe the result of the biggest calculated risk youve ever
Why would this be a good place for you to work?
My eyebrows rise when a prospect makes even a modest
attempt to de“
ne her career dreams. It makes me more con“
dent that
shes selective about the job she wants. Suddenly, an image of a hard
working, productive employee snaps into focus. These questions help
you glimpse a candidates career vision.
What are your short- term and long- term career goals, and why?
How are you going to accomplish them?
What alternative careers are you pondering, and why?
Why did you apply for this position?
Personality.
My hiring philosophy is simple„avoid surprises. With
the interview now more than halfway through, remind her that the
Whats the happiest youve ever been, and why?
What makes you sad?
What scares you?
What makes you laugh?
What really made you mad at your last job? What did you do
about it?
Describe a poorly handled encounter with a colleague. What
would you do differently?
How would you react if a colleague or customer yelled at you?
How well do you work under pressure and deadlines?
When do you “ nd you are not a team player?
What is your greatest accomplishment?
Tell me about your most spectacular failure
Tell me about three big changes youve made in your life and
what you learned from each
A touchy issue to keep in mind: Im a big proponent of standardized
psychological testing for
high-level managerial positions. Even though
there are legal risks to consider, its a good way to make sure a candi-
dates personality, worldview, temperament, and work ethic match the
rest of the teams. If a prospect was a square peg that would “
t snugly
into our square hole, I knew we could train and integrate her.
Self- analysis.
You need clarity about a candidates strengths and
vulnerabilities to know if shes a magical match. Generic, open-ended
questions like
What are your greatest strengths?
yield only marginally
useful information. Instead, list a dozen or so topics„organizational
skills, software and web pro“
ciency, time management, customer ser
With two questions, youll zero in on a salary youll
both be comfortable with. First, ask,
What would you like to make?
ter she gives a “
gure, ask,
Whats the minimum you d feel good about?
Its
a question rarely asked. Shell hesitate. Be patient while she does some
quick math in her head:
If the numbers too low, I ll cheat myself. If its
too high, hell lose interest in me
. I call it the Goldilocks StrategyŽ„
people feel compelled to shoot you a number thats
juuust
right.
Its worth noting that we never hemmed in people with strict sal
ing an average salary?
ers. Thats great, because its an important part of our mission.Ž
Finally, if the candidate has potential, say so, and invite her back for a
second interview. More questions will arise from the post-interview panel
discussion, reference checks, and personal re”
ection. Welcoming somebody
into your workplace family is a life-changing commitment. I often conducted
a third interview to ward off the old college sin of wishing em beautiful and
willing em brilliant.Ž
ADVANCED INTERVIEW STRATEGIES
Inquiring about past jobs and money, let alone poking around under the psy
chic hood, are not enough. Sometimes, candidates hide behind pat answers
and the impulse is to move on to a new question. Instead, soldier on. The
greater the resis tance to answering a question, the more important it is to
question the answer. Keep going deeper. Here are two techniques to squeeze
even more information out of an interview:
Funnel Down Technique:
the question or not wanting to share the answer, it might be tempting
to “
ll in the silence. Dont. An awkward pause (Ive seen them go on
me:
How did you like your last position, Janet?
janet:
Oh, it was okay.
me:
Was there anything about it you didnt like?
janet:
did he want you to work?
janet:
Forty!
me:
Forty, huh?
(Red light. After a few more questions, its a wrap.)
Well, its been good talking to you, Janet. I wish you luck in your
job search.
sumed the role of an angry customer. Trying to crack management?
We thrust him into an employee con”
Some applicants I interviewed were tentative: Well, in that situa
tion, I guess Id say . . .Ž Id stop him and say, No, Im the customer
me how youd handle it.Ž Nobody ever walked out on me, but
some found it dif“
Closing the Deal
Offers and counteroffers.
Convinced its a magical match? Be ready
to pop the question as the second or third interview winds down.
First, gauge his interest. Ask, Do you think this position is a good “
for you?Ž Follow up with, Are you interested in pursuing it?Ž If yes,
say, Great. We think its a good match, too.Ž
Next, con“
rm his compensation expectations. What I heard ear
lier is that youd be comfortable with a salary range of $X to $X. Is
that right?Ž Now that youre both on the same page, close the sale.
So, if we offered you this position for $X with a start date of month/
day, would you accept it?Ž If so, say, Then thats what wed like to
do. Youll start on month/day with a salary of $X.Ž
Theres one more crucial piece of business to take care of before
shaking hands and directing your new teammate to HR for orienta
tion. If your new hire is as good as you think he is, you may have to
ght a counteroffer from a jealous employer in the throes of re-falling
ger seal on the deal.
you:
John, just curious, how would you react if your company
promised you the moon to keep you?
john:
Oh, I dont think anything could change my mind.
you:
John, I have to advise other candidates for this position that
weve “
lled it. So, I have to ask: Is there any possibility you could
be in”
uenced by new promises? Because if you tell me later
youve reconsidered, that puts me in a very tough position. I
would have to call back my second choice„and nobody wants
to be second choice.
john:
No, Tom, this is “
rm.
you:
(Extend your hand)
Great, Im really glad to have you on the
team.
It takes only a minute. Dont pass up the opportunity to cement the
commitment with a verbal agreement. Finish up by giving him a tour
and introducing him to people he might call teammates someday.
Helping him feel at home will reduce the stress of a career move.
ne your hiring pro cess by gleaning info from:
The Candidate
After the interview, ask him what he liked and
disliked about the pro cess at other companies hes interviewed
with. Simply posing the question is ”
attering. Most people will be
happy to share their experiences.
Your Employees.
Ask them to grade your hiring pro
cess. Now that
theyre in the fold, theyll “
ll you in on what surprised them and
what made them sweat.
The Ones That Got Away.
Respectfully ask decliners for their
The Dos and Donts of Employment Law
ou shake hands with an applicant and ease into the interview. So, mar
ried? Kids? Great. My sons ten. How olds yours?Ž Just small talk,
right? Not if you ask the federal government. Its up to you to know where
they draw that legal line in the sand. Knowing what you can and cant ask in
a job interview is in many ways the epicenter of employment law.
ment, and you may wind up forced into writing a check with lots of zeroes.
Before interviewing candidates, create job descriptions that lay out duties,
responsibilities, hours, and reporting relationships. Decide in advance how
much schooling and experience is required for each position. Its also crucial
to maintain detailed rec
ords after the interview to explain why each applicant
was rejected or selected.
Steer clear of any question thats unrelated to job quali“
cations or could
be viewed as discriminatory. That goes for quali“
cations you list on job no
tices, advertisements, and other recruitment efforts. Its easier to avoid the
mine“
eld completely than to tiptoe your way through it. Remember, what
you write during a job interview can be just as self-incriminating as what you
say. Dont take any notes about the job-seekers age, race, appearance, health
issues, or other such observations. If he or she offers such information, dont
jot it down or even respond to it. Sure, it all sounds a bit paranoid. But this is
exactly the kind of stuff that subpoenas root out and use against you.
Ask:
What is your educational background?
Do you speak any foreign languages [only if the job requires it]?
What is your address?
What is your contact information?
How long have you lived in this city?
Are you a citizen of this country?
Have you ever been convicted of a felony [if duties include
handling money or con“
dential info, you may ask related
questions]?
Dont Ask:
Are you a native-born or naturalized citizen?
When were you (or any family members) granted citizenship?
Where did you grow up?
What country do you come from?
What is your ancestry?
What is your native language?
How long have you lived in this country?
Have you ever legally or otherwise changed your name?
Whats your maiden name? [Exception: if applicants name is
different on education or employment records.]
What clubs, associations, or organizations do you belong to?
Do you consider yourself a feminist?
What religion do you practice?
What church do you attend?
What religious holidays do you observe?
What is your sexual orientation?
Do you have any friends or family members working here?
Do you rent or own your home?
Have you ever been arrested?
Have you ever pleaded guilty to a crime?
Age
Ask:
Do you have a drivers license [only for driving-related jobs]?
Are you of legal age [only for jobs handling tobacco, alcohol, or
other restricted substances]?
If youre younger than eighteen or older than sixty-“
ve, what is
your age?
Dont Ask:
How old are you?
Whens your birthday?
When did you graduate from high school?
Family
Ask:
Is there any reason you cannot work the hours of the position as
explained to you [only if asked of all applicants]?
Is there any reason that you couldnt travel for work?
Dont Ask:
Are you married?
Are you divorced, separated, widowed?
Should I call you Miss, Mrs., or Ms.?
Do you have a live-in romantic relationship?
Do you have children?
How old are your children?
Do you plan to start a family?
Do you have a child-care provider?
If you have any children in the future, who will provide for them
while you work?
Whats your spouses name?
Is your spouse covered by health insurance?
What kind of work does your husband/wife/son/daughter do?
Are you the chief wage earner?
Where are your family members employed?
How does your spouse feel about your out-of-town travel?
Work History and Requirements
Ask:
What experiences qualify you for this job?
Do you have the required certi“
cation (or licensure) for this job?
Can you provide documents proving that you can legally work in
this country?
Is any of your employment history under a different name?
Do you belong to any organizations related to this “
eld?
Are you willing to travel?
Are you available for overtime?
Dont Ask:
Have you ever “
led a workers compensation claim?
Have you ever had a work-
related in
jury?
Disability and Health
Ask:
Is there any reason why you could not carry out the responsibilities
of this job?
A company physical is required for this position„is there any
reason why you wouldnt agree to that?
Dont Ask:
Do you have (a speci“
c disease)?
Have you ever been treated for (a speci“
c disease)?
Do you have any physical limitations that will prevent you from
handling this position?
Will your disability compromise your ability to do this job?
How many days were you sick last year?
Are you taking any prescription drugs?
What conditions, if any, have you been hospitalized for?
Have you ever been treated for alcoholism or drug addiction?
Do any of your family members have disabilities?
What conditions, if any, have required treatment by a psychiatrist
or psychologist?
PREVENTION AND PROTECTION
Dont fear employment law. Keep the compliance cops at bay by leading the
tion:
Make sure your
law attorney knows her stuff.
labor-law expert is an extension of management. She irons out wrin
kles when your corporate culture clashes with state or federal re
quirements.
The U.S. Department of Labor Occupational
Safety and Health Administration (OSHA) requires employers to
loadable at www.osha.gov). OSHAs Web site also helps you deter
mine which additional posters (minimum wage, equal employment
opportunity, and the Family and Medical Leave Act) should be dis
played.
full- ser
vice insurance broker.
Dont let paperwork
and protocols distract you from your core business. Large insurance
rms often have HR specialists to manage claims, update policy man
uals, and provide bene“
ts resources (on-site seminars, administration
of 401(k)s, disability). They also administer risk-
management services,
Guard against defecting employees.
We insisted that all our man
grations.
Inform the employee during the interview pro cess that a non
eration,Ž such as a bonus or a right to buy stock. Check with an
employment-law attorney to con“
rm the adequacy of considerationŽ
and to ensure that the agreement is worded precisely. The law re
garding enforceability of non- competes„addressing geo graph i cal
coverage, duration, the de“
and the timing and adequacy of consideration„varies from state to
state.
tive edge from corporate espionage with nondisclosure agreements
(aka, NDA, con“
tures, too. Even if the horse is already out of the barn, a court order
can zip loose lips to prevent further leaks. You can also sue for dam
ages or press criminal charges.
up- to- date.
Business and Legal Reports (www.blr.com) offers
HR news, white papers, and federal and state info on employment
law. For online training, check out www.skillsoft.com and www
.hrclassroom.com. The U.S. Equal Employment Opportunity Com
mission (www.eeoc.gov) provides the scoop on legal issues, from age,
sex, and religious discrimination to litigation stats and education pro
grams. The U.S. Department of Labor (www.dol.gov) lists state
speci“
c information.
GROUND RUNNING
Welcoming New Hires
ike proud parents welcoming a new
daughter-
in-
law, we warmly, if me
thodically, welcomed new employees into the fold. New hires acquired a
buddyŽ who gave them a tour of their new home along with the lowdown on
the people and culture. We introduced new associates with a group e-mail
We assimilated new hires into our coaching culture as quickly as possible.
Their department head asked
open-
ended questions to draw them out, build
rapport, and establish healthy communication: What do you see as the big
gest challenges in your new position?Ž What new skills would you like to
develop?Ž What can I do now to help?Ž Orientation sessions briefed new
hires on what was expected of them„and what they could expect from
us„regarding attitude, ethics, and behavior.
Making new teammates feel valued from day one produced a big
HIT THE GROUND RUNNING
ing great personalities. We understood that the “rst week is crucial„thats
place those who were unhappy and unproductive.
THE LAW OF DIMINISHING DEDICATION
Ever been so “red up at a leadership seminar that you were champing at the
bit to race back to the of“
ce to test things out? You were still pumped up
when you got back to your desk. Then the regular stuff began crowding out
your time. The days rolled by. Enthusiasm for what you learned began to
wane, and “
nally, what was once so fresh in your mind had faded into a
dusty memory.
So it goes with a new job. Most people show up for their “rst day all gung
ho and eager to contribute. With luck, a wise team leader and a healthy cul
ture will greet them. Otherwise, bureaucratic roadblocks, turf wars, inef“
cient systems, and the hypnotic comfort of daily routines will blunt their
passion and lull them into mediocrity. Its as quiet and insidious as radon
poisoning.
To avoid the Big Sleep, I personally talked to new recruits during week-
long orientation courses at the company school. New employees are open. I
ture, I occasionally saw a new hire sabotaged by a negative colleague.
How do you combat that? I stressed there are best practices for every
thing, from heart surgery to piloting a plane, and that sticking to our system
lowing procedures so closely: Aw, look at the rookie. Here, kid, lemme show
you how we do it around here.Ž Call me obsessive, but we also role-played a
way to handle those encounters. I suggested something like, Thanks. Sounds
like that works for you, but Im going to go by the book so I can catch up to
your level someday.Ž Reaching new heights„and staying excited about the
journey„is what the rest of
The Big Book
is about.
SNATCHING UP STARS
Think of yourself as a top talent scout.
Landing the hot hire re
quires diligence and resourcefulness. Keep a lot of balls in the
air„work your business contacts, offer referral bonuses, hit schools
and hiring fairs, consider search “
rms. Make sure your culture at
tracts and retains good people.
Dont let stars in your eyes cloud your vision.
Dont assume that
heavy hitters on other teams have more expertise or will “
t seam
lessly into your culture. Do your homework„and dont make ex
ceptions to your standard hiring pro cess.
Develop a good game plan.
Job interviews are like hide- and-seek.
Candidates try to hide their faults„you seek to discover them.
Ask probing questions that reveal a candidates personality, matu
rity, strengths, and vulnerabilities. The greater the resis tance to
answering a question, the more important it is to question the an
swer. Established drills like role-playing help avoid the irritation of
watching new hires turn into mis“
res.
Make it mutual.
Its just as important to impress applicants as it is
for them to impress you. If she knocks your socks off, chances are
shes wowed other employers, too. A perfect “
Follow the law.
Know what you can and cant ask in a job inter
view. Guard against ill-advised comments that a candidate could
HIT THE GROUND RUNNING
Welcome new hires.
Make employees feel comfortable from day
one. Assign them a buddy,Ž introduce them to colleagues, build
rapport with management, and brief them on whats expected
from all sides. A healthy, team-oriented, systems-disciplined cul
ture prevents newbies from drifting into mediocrity.
GROWING THE CULTURE
Seeding an Enlightened Environment
mployees are like plants. To thrive and bloom, they need to be rooted in
the rich soil of a nurturing environment. They need to be watered with
care, and warmed by the sunlight of appreciation. Yet too many leaders,
all thumbs in the art of human horticulture, treat their people like cactus.
They expect them to ”
ourish in an arid, remote atmosphere.
By design or default, every business has a corporate culture. But I suspect
most business folks would be hard-pressed to describe theirs in any detail. By
my lights, cultureŽ (some prefer climateŽ) is an umbrella term encompassing
the conditions and standards that de“
ne the of“
ce environment
employees shared understanding of team dynamics and how they
t in
the tribesŽ behavior, dress, appearance, and rituals
the teams collective personality and identity
look forward to coming to work
feel pride in being on the team
consider their coworkers friends
gladly go beyond the call of duty when required
enjoy personal satisfaction when the team does well
feel in sync with the organizations operating values
believe their work contributes to the teams success
The leader who neglects to grow his or
ganizations culture does so at his
peril. Sure, changing an existing culture is dif“
cult. But its doable. The pres
sure of running a company can siphon your attention away from employees.
That its dif“
cult to stay focused on their satisfaction, however, makes it no
less necessary. The less attention paid to peoples basic desire to offer value
and feel valued, the faster spins the revolving door of turnover. (Of course, to
an enlightened entrepreneur without a healthy bottom line, morale is a moot
point.) While good morale helps grow a healthy bottom line, beware justify
ing most anything for employees in the name of morale. That can hurt the
bottom line.
The best people„productive, creative, passionate„wont settle for less
der his direction, the studios animated blockbusters (
Monsters, Inc.; A Bugs
Life;
the
Toy Story
Finding Nemo; The Incredibles
) have generated
worldwide grosses of more than $3.2 billion. As
Newsweek
noted:
With such success, you might think all the competing studios would have plundered
Pixar like an unguarded vault„which, technically, it is, since unlike at every other
studio nobody besides Lasseter works under contract. So far everyone is staying put.
A piece of paper wont keep them here,Ž Lasseter says. You want their heart here. So
you make them creatively satis“ed.Ž
THE CAMARADERIE
Developing Team Spirit
he esprit de corps at Tires Plus was impossible for visitors to ignore. Dur
ing one of my talks at a company gathering, a tire vendor whispered to
Brad Burley, a regional manager, Does Tom make you all drink the same
punch, or what?Ž Brad laughed as the vendor went on. You guys all talk the
same. You dont have problems, you have opportunities. Ž Brad took it as a
Saturate the Environment.
Our of“
ces pulsated with teamwork.
Anyone in a position to coach preached that our success depended on
the sum of our parts. Egomaniacs stuck out like cutoffs at a cocktail
party. Now, that
doesnt mean we wanted everyone to think alike. In
fact, its important they dont. As General George S. Patton said, If
everybodys thinking alike, somebody isnt thinking.Ž
Talk the Walk.
Talk isnt
cheap. We asked our people to
bility if “xes were in order. A company isnt a corporate seal on a piece
of paper, its a team of people. All those people have a common
Hire Team Players.
We asked job candidates questions like,
Where do you rank as a team player on a scale of one to ten?Ž and
When do you “
nd you are
not
a team player?Ž Invariably, they
would leave the interview with our mission statement plastered on
the billboard of their mind„
Deliver caring, world-class service to our
guests, our community, and to each other.
We drew special attention to
the last four words. The message was plain„lone wolves need not
apply.
Recognize and Reward It.
If you dont actively promote team
work, you may as well endorse sel“
shness. Toss out a Way to go

whenever you catch someone team-building. Good moves won
THE CAMARADERIE CREDO
Embody It.
You can hold a pep rally seven days a week, but its
merely platitudes and pom-poms unless biz owners themselves ex
hibit the highest standards of teamwork. Early on, Im embarrassed
to admit, it was always about me, me, me instead of we, we, we. As I
shed my seat-of-the-
pants ways, I came to my senses, and John Hy-
duke, a vice president, noticed. Our executive committee had been
deliberating about strategic timing for planting our ”
ag in an array of
jority interest,Ž John recalled. He had every right to make decisions
while shaving in front of the mirror.Ž John appreciated that I weighed
my opinions against those of the rest of the committee, and rarely
exercised a veto. We all shared a sense of ownership in the decisions,Ž
Celebrate Achievement.
We celebrated all the time. Tom was
a stern taskmaster,Ž Brad Burley recalled. But he wanted us to feel
good about what we accomplished.Ž Establish traditions to mark
hard-earned victories and bolts from the blue„hand out cigars, pop
the cork on some Dom, give the team the afternoon off. Announce
triumphs„a successful product launch, blowing past projections,
landing the huge account„while blasting Queens We Are the
Champions.Ž
The Twenty-one Laws of Cultural Leadership
reak
these laws and your culture surveys will be graded D for
dreadful
Imagine youre a kid again. Somebody
treats you like dirt, yet your parents wont listen to your grievance.
Now youre frustrated and resentful. Well, as a boss, youve got to rec
ognize that youre a surrogate parent for a lot of the people around you.
Make yourself available
when they need you
. Give them your full atten
tion, and their appreciation will show up in the simple metrics of pro
ductivity and turnover. Anybody in the company, from a store manager
Project a positive image.
An egomaniac inspires a lot of feelings, but
loyalty and passion arent among them. If hes followed, its only reluc
tantly. Ditto negative, insecure leaders. An enlightened entrepreneur
projects the right mix of con“
dence and humility. Shes serious about
life and work but doesnt take herself too seriously. Tom carries a
ing that it doesnt put people off in any way. Tom leads with his mind
and
his heart.Ž
Beware your impact.
I still remember the huge crush I had on Linda
Harness in high school. No clue was too minor to crack the case on
Enlightened entrepreneurs root out the truth
like a gumshoe. If key details are missing, you cant make the right
choice, solve the big problem, launch the stinger strategy. When em
ployees told me things were “
ne, I dug deeper: Anything I can help
you with?Ž If
you
ran things, what would you do differently?Ž Sooner
or later, the answers spilled out. When Tom hit the “
eld, wed do
everything in our power to make sure the stores were “
ring on all
cylinders,Ž said Jim Pascale, a regional manager in Iowa. Before one
of my visits, Jim asked all his store personnel„over and over„the
questions I typically asked. Sure enough,Ž Jim recalled, Tom ended
up asking many of the same questions I had. But he got twenty new
answers!Ž
Be relentless. Its instinctive to withhold bad news from the boss.
Some try to protect underperforming colleagues, or hide embarrass
ing details. Other times, the truth remains elusive because no ones
Practice the accordion.
The best decisions emerge from a pro cess
thats neither exclusively top-down (leader calling the shots) nor
bottom- up (rank- and- “
le referendum). Its gotta be a collaborative
effort I call the accordion.Ž You can argue that top-down decisions
are smarter because upper management commands a broader view of
economic, cultural, and mission-related facts. Yet management is too
often out to lunch on the down and dirty details, if only because em
ployees hate delivering bad news. The remedy: raw intel, gathered
from as many sources as possible. Id tell people, If something needs
to be said, dont minimize it or dramatize it. Just ”
at-out say it.Ž
In too many shops, input from the ”
oor is either ignored or dis
counted. The rationale is predictable„
Hey, if my employees were
smarter than me, Id be reporting to them.
Perhaps a common military
axiom will shed some light: Battle plans never survive contact with
the enemy.Ž Without a constant feedback loop from the front, plans
hatched by the commanders can be comically naïve or fatally ”
awed.
Thats why Wayne Shimers store inspections started in the service
bays. Why did he talk to the guys with grease under their “
ngernails
rst? In high school, Wayne had worked construction for a family
friend named Mel. Every morning, Mel pulled up in his station wagon
and headed straight for the welders. One day Wayne asked him why
he spoke to the foreman last. Wayne,Ž Mel said, after talking to the
guys, I knew if the walls were going up at the right pace, I knew if the
sand was being delivered, and I knew if the cement guy had been by.
So by the time I got to the foreman, he couldnt snow me.Ž
My “
rst day at Shell Oil in Chicago was elec
trifying. I was twenty-
one and ready to take on the world. I wanted
just one word to come to mind when my boss thought of my perfor
mance:
spectacular
. I never lost the desire to do great work, but, bit by
bit, a bloated bureaucracy and sti”
ing daily routines blunted my
gung-ho edge. Naïve as I was, it was obvious to me that a companys
procedures and systems have gotta be user-friendly. I also learned not
to jerk people from one cant-wait- another-minute project to the next,
One reason I left Shell Oil was I didnt know
manager,Ž Al said. We may not have been able to step in seamlessly
to run their division, but it wouldnt have ”
oundered either.Ž
All employees should be briefed on the enterprises perfor mance
spires loyalty. As Sam Walton pointed out:
Communicate everything you possibly can
to your [employees]. The more they know,
the more theyll understand. The more
they understand, the more they ll care.
Once they care, theres no stopping them.
My passion for a project has been known to derail
my common sense. Id just want the darn thing done, the heck with
the details. As
New York Times
lm critic A. H. Weiler quipped,
Nothing is impossible for the man who doesnt have to do it him
self.Ž Sometimes it took me months to realize a project was doomed.
nity to tell me that popcorn wouldnt lure customers, never mind that
managers had better things to do. Tom kept hounding me for six
months to “
nish the popcorn project,Ž Wayne remembered. One
Talk it through.
Larry, a consulting client, wanted to thaw the ten
sion at his small Minneapolis packaging “rm. I just dont under
After talking to his employees, I broke it to Larry that
was the one
Look with fresh eyes.
The status quo is a work in progress. One
question always on the tip of my tongue was,
What did you learn?
If
you didnt have a good answer,Ž recalled regional manager Brad Bur-
Its up to you to lead the fresh-eyes charge. Unfortunately, leaders
are conditioned to project a know-it- all facade. Escape that trap. Ad
mit when youre stumped. Listen
new ideas, not
against
them. Itll
in”
uence your people more than any lecture. Remember, the more
In the heat of frustration, it may
be tempting to rub employees noses in their mistakes. I used to do
that. It should be obvious, but theres a whiff of sadism in shaming
somebody who is already beating herself up. Besides, morale and con
dence spiral when the boss chews you out, especially if its mean-
spirited. Enlightened entrepreneurs pose thoughtful questions until
the light of understanding ”icks on.
Heres how to use
question-
based
coaching to convert a miscue into a teachable moment:
you:
So, John, howd you feel when you heard we lost that order
because the form was “lled out wrong?
employee:
Pretty lousy.
you:
Yeah, its tough. This has happened before, hasnt it?
employee:
Yeah, a few weeks ago.
you:
What happened then?
employee:
I dunno. I guess I was just rushing and got a little
careless.
you:
Same thing this time?
employee:
I guess so.
you:
Well, lets look at this a minute. If you “
nd yourself rushing
again, what will you do differently?
employee:
right because one wrong digit can really screw things up.
you:
Yeah, your job demands dotting all the
s and crossing all the
s,
doesnt it? Do me a favor and grade yourself on attention to detail.
employee:
Probably C-minus.
you:
Okay, thats honest. And where would you put your desire to
make it happen.
Partnering with an employee creates solutions both parties own,
tions, theyre more likely to execute them with gusto. Its human
nature. People
to expand their capacities. They
those
Ah- ha!Ž moments.
Of course, sometimes action speaks for itself. The story goes that
Thomas Edison and his crew worked twenty-four hours straight to
build the “
rst commercial lightbulb. Exhausted, Edison placed the
precious orb in the hands of his young assistant to carry upstairs. Due
to the gravity of the moment, the nervous boy was shaking so badly
that he dropped the bulb on the way up. The team spent another
twenty-four hours making a second bulb. Come time to carry it up
stairs, Edison smiled and again handed it to the boy. Con“
dence re
stored, the kid ferried the bulb upstairs without incident. The simple
Be tough, not rough.
One day, a shipment of high-perfor mance tires
arrived at one of our stores instead of its true destination„our chief
I broke in with a challenge: I want the person whos never accepted
too much change at the bank or grocery store to speak up, please.Ž
Silence. Is what they did wrong?Ž I asked. Absolutely. Should there
be consequences? Of course. But it
isnt
just like breaking into another
companys store. And dont tell me this is worth trashing the careers of
two decent men. Thats overreacting. Who among us has never needed
a second chance?Ž We returned the tires to UPS and slapped Dave
and Jerry with two-week suspensions. Both men literally broke down
when they learned we had spared their jobs. My management team
also learned a lesson„big decisions that impact the lives of our people
shouldnt be made in the heat of the moment.
A few months after launching the com
pany, we moved our headquartersŽ out of the back room of a gas
station and into a small suburban of“
ce building. As I mentioned in
chapter 1, cash was tight, so I persuaded the building owner to let me
install a vending machine in the community break room to help de
fray rent. I “
lled the machine with granola bars, nuts, and fruit, ex
thing decent like Snickers, Hershey bars, or chips. Click went the
lightbulb. Wasnt there a touch of arrogance to my assumption that if
I wanted healthy snacks, everybody else did, too? Gee, what a con
cept:
Not everybody likes what I like
. Suddenly, my me-ismŽ and lack
of empathy were grimly comical.
Lesson: Seize opportunities for spontaneous brainstorming. When
I was talking to a store sales team about a big issue, Id often call a
time-out and pull in the mechanics. Everyone stopped work for “
fteen
minutes to hash things out, then returned to work energized because
they had a chance to weigh in on a big decision. Huddle up on every
Respond rapidly.
Back in the day, whenever a subordinate asked me
to do
something„review a draft, powwow over a big
issue„my re”
was the same:
Hey, Ill get back to you when I feel like it, pal. Im the one
who calls the shots around here.
Inevitably, deadlines came and went
and I got mad. Id ask people where their reports were, and theyd
explain that they were still waiting on me for info. It took awhile, but
the message “
nally sank in. First, these were things I had asked them
to do. Second, its intimidating to ask the boss for something more
than once. Last, the faster I got things back to people, the faster things
got done.
Man
, I thought,
nately, Neil accepted my apology.
For some reason, the words Im sorryŽ are kryptonite to entrepre
neurs. But theyre also two of the most powerful words in the leader
ship lexicon. Theyre a tonic for employees who feel wronged and
cling “
ercely to resentment. Only a heartfelt apology can ease the
pain and repair the relationship. We all make mistakes, but not own
ing up to them ranks among the biggest mistakes of all.
The Denver expansion was cruising along. My
ready entered into a number of development agreements. It was a
done deal„until Jim Pascale, our VP of franchise operations, piped
said. Stunned silence. Weve just gone into Kansas City, Omaha,
and Oklahoma City,Ž he continued. Look at the cash ”
ow and the
ward with Denver would stretch us too thin.Ž
Nearly everyone around the table disagreed, strongly. I sat back
and weighed Jims argument. No, I said “
nally, Jims right. We need
to take a harder look at the numbers. I turned to Jim Bemis, our
CFO. Was Jims assessment accurate? Bemis nodded. We slept on it,
then decided to press
Pause
ened. A year later, we took Denver. There was a time when I crushed
opposing views. But that only pours cold water on a hot company.
Tom began encouraging us to be assertive and to share opinions,Ž
Jim said, especially if they differed from his.Ž
Dont play favorites.
Signing John Leach to a consulting contract
was like the New York Yankees signing A-Rod. John was an all-star
with great instincts in the “eld and a sharp mind for the game. He had
been head of Western Auto Supply Company, a division of Sears that
owned Tire America and NTW, two of the countrys largest tire
ings, however, two members approached me independently and ac
cused me of knighting John The Golden Boy.Ž They claimed I valued
Humbled, I pleaded guilty to the charge of poor leadership. Few
things are more deadly for morale than a star system. Sure, cashing in
on the fresh eyes of new teammates is smart. But I overdid it. Listen
ing to one person at the expense of others pains the entire room.
Certainly, you cant treat every idea equally. Nor should you suppress
enthusiasm for a great one. But “
nd the healthy middle ground.
Avoid consistently valuing one teammates opinion, or one outside
consultants at the expense of everybody elses.
Express gratitude.
Few things are appreciated„or inspire deeper
loyalty„like the balm of a heartfelt thank-you for a job well done.
Among the ways I thanked my execs was writing annual birthday
notes„like this one to our treasurer, Jim Wolf:
Jim, happy birthday. Thanks again for your dedication
to our team. Your contribution is very important:
lowering interest rates, critical budgets and projections,
handling cash, and pro“t improvement team, among a
few biggies. You do all this with a sense of fun as well
as discipline and focus„a great combination. Great
attitude. Thanks and take care, Tom.
Little did I know that Jim saved every letter. A handwritten note
like that,Ž Jim recalled, with speci“
cs about my perfor mance, told
me Tom really took the time to think about what he was writing.Ž
Eric Randa, our loss-prevention czar, had never worked at a company
where the owner handwrote letters of appreciation. It was one of the
best pats on the back I ever had in my life,Ž Eric said. I now do the
same thing at my new company. One of my managers just told me it
meant the world to him to read the kind words I had written.Ž The
Congratulate publicly.
Wayne Shimer, a sixteen-year colleague, never
complained, never got defensive„he just rolled up his sleeves and
blasted away. To Wayne, a job well done was its own reward. In 1992,
a grueling but rewarding year, I started handing out a Most Valuable
Player Award at our annual convention. It gained instant Oscar-like
stature in our little tire universe. I had been riding Wayne hard all
year, but we had made a good pro“
t, and I presented him with the
inaugural award. Out of the blue,Ž Wayne recalled, in front of “
hundred people, Tom calls me up and gives me this award. I couldnt
even talk afterwards I was so emotional.Ž
People crave recognition, not only for results but also for their
HONOR THY EMPLOYEE
Putting People First Produces Higher Profits
tween work and home has crumbled in the wake of the
baby- boomer-
fueled
personal-
growth movement. In the span of a generation, a hunger for
meaning that grew even more ravenous after 9/11 has spurred an unpre
ce-
dented demand for integration (within an employees own life) and intercon
nectedness (with the lives of others).
High-
tech wizardry also contributes to blurred boundaries. Its now
commonplace to e-mail extra work home„or remotely tap into the of“
network„for relaxed, after-dinner analysis. We sit in our of“
ces and moni
tor our stock portfolios, place bids on eBay, and e-mail our kids instructions
for dinner. We take partial tele-vacationsŽ to sandy beaches in the tropics,
and we placate customers on a cell phone in our pajamas (I can hear Groucho:
How a cell phone got in your pajamas, I ll never know
Cultural aftershocks ripple from these psychological and technological
tremors. Employees are clamoring for ful“llment
and
exibility, and won
dering if theyll ever have an undivided moment thats protected from cell
preneurs:
During a routine visit to a Minneapolis Tires Plus
store, I asked a young salesman named Gabe Lopez how things were
going. To be honest with you,Ž he said, not too well.Ž Gabe said he
had recently clocked a seventy-hour week only to be told after the fact
that he had been promotedŽ from an hourly to a salaried position.
He felt chumped, that he was owed the overtime money. He had me
thodically climbed his grievance up the corporate ladder, but felt his
protest had fallen on deaf ears.
On the spot, I called our head of HR for an explanation. Gabes situ
ation was a gray area,Ž I was told, and we had a good case for not pay
ing him the overtime cash. If theres a gray area, I told her, the employee
should be given the bene“
t of the doubt; after all, thats what we do for
our customers when theres a dispute. I hung up and apologized to
Gabe. He got his check the next day. I was just a nineteen-year-old kid
out of high school working in an entry-level position,Ž recalled Gabe,
now a Tires Plus assistant district manager. The fact that Tom took
the time to listen to me and resolve the situation without hesitation re
ally wowed me. Its something that will always stay with me.Ž
Gabes story illustrates why you cant leapfrog your employees„
your internal customers„and focus solely on pleasing your external
customers. Its a simple matter of connecting the dots. Honor your
people and care about their well-being and theyll reward you with
Expect greatness.
yond the moon. It will pull the best out of them. Jim Pascale, our vice
president of franchise operations, saw this a lot. Working for Tom
was like playing for a coach who says, We expect to win champion
ships here, Ž Jim said. You “
nd out what youre made of. You rise up
to that level, you practice harder, and you have higher expectations.Ž
ductivity and morale unless individual expectations are clearly de“
ned
in relation to team goals
and the players appreciate how the two are
HONOR THY EMPLOYEE
related. Thats why the strategic-planning pro cess (chapter 23) is criti
tional objectives and individual goals.
Contrary to business mythology,
putting family “
rst in a disciplined, achievement-oriented culture
will actually
enhance
productivity, not diminish it. Countless times
Ive seen grateful employees tackle their work with renewed vigor af
ter returning from a family-related absence. Maybe parents dont
need to take in every single soccer game, dance line perfor mance, or
spelling bee, but a high attendance rate is important to them and to
their child. Keep their bodies at work during these events and youll
lose their hearts and minds.
One afternoon each week, for seven summers, Larry Brandt left
work early to cheer at his son Andrews baseball game. A key Tires
Plus exec and our third-largest shareholder, Larry also ducked out oc
casionally to root for his other son, Barett, as he worked his way up to
a black belt in karate. To compensate for his absences during the
workday, Larry worked at night and on weekends.
Remember, output equals quantity of hours worked multiplied by
the quality of those hours.
sence would overshadow the event„is a goodwill gesture sure to boost
Trust employees to deliver.
We had a caring, family-oriented cul
ture, but also a hardworking culture. The two naturally go hand in
hand. Of course, we also had systems in place, like weekly reports
and one-on-one coaching, to ensure that employees stayed on track.
If people didnt live up to their end of the bargain, their privilege pa
rame ters were tightened a bit. Honoring and valuing your people and
going out of your way to accommodate their personal needs„not to
advance your own agenda, but because its the right thing to do„
produces dedicated employees.
Remember, quality employees want to be trusted, and they want
balanced lives. Thats why Best Buy designed ROWE (results-oriented
work environment)„to attract top-notch candidates. The program
goes light-years beyond typical ”
exibility bene“
ts like
condensed
work weeks and telecommuting. People are free to work when and
In stark contrast, a seat-of-the-pants of“
ce is like a prison. It drains
and frustrates its denizens. The only thing they look forward to is
giving their two-week notice. Moving from that kind of fear-based,
spirit-
deadening atmosphere to our company gave Doug, one of our
top execs, a severe case of culture shock. Doug had spent nineteen
years at a well-known national “
rm. The executive vice president of
operations was confrontational with his staff and pitted his managers
against each other,Ž Doug said. Because he was unwilling to make a
decision he could be held accountable for, we were left to “
gure out
for ourselves what direction our divisions should go.Ž The inevitable
turf wars that followed caused some capable managers to bolt. Even
though these were smart, sought- after pros, Dougs boss spun every
loss as a victory. He would boast to the board that he had weeded
out another malcontent,Ž Doug recalled. That created a culture of
managers who were afraid to make decisions, take risks, or offer cre
ative suggestions. It just became a very stressful place to work.Ž
Shifting Focus from Paperwork to Partnership
R is like Ellis Island. Everyone„your newly hired huddled masses,
yearning for a
paycheck„passes through the human resources depart
ment to enter a new world of opportunity. To some
seat-
of-
the-
pantsers, HR
is nothing more than a pro“
t-suction that should only distribute paychecks,
manuals, and bene“
ts answers. To those guys I say, wake up and smell the
new century.
Progressive companies regard HR as a strategic partner that pumps up
the people side of the business with policies and programs that jibe with their
mission, vision, and values. HR delivers a consistent brand message to em
ployees. It also works with management to shape cultural values, to develop
house HR presence that coordinates programs and maintains standards. Con
sultants and outside agencies also help with everything from bene“
ts, payroll,
and workers comp to recruiting, hiring, even employee leasing.Ž Based on
your circumstances, mix and match these tips to enrich your people.
HR is your culture keeper.
The best HR reps advocate for both em
ing statistic that points to this importance: On average, only 50 per
cent of new hires stick around longer than six months. HRs capacity
to elevate the culture and provide outstanding internal customer ser
viceŽ can keep turnover low and training costs lower.
Pull HR into the inner circle.
cols and legalities that pop up is also valuable. Consider HR the go-to
leader for big-picture thinking that balances human, “
nancial, tech
A comprehensive employee manual proves that
everyone receives fair and consistent treatment, and that your com
lines, work rules, employment conditions, and leaves of absence.
Committing policies to print improves the odds that supervisors will
correctly administer them. The manual might also protect you from
spurious legal claims (chapter 6).
ries were fair but unexceptional, although go- getters fattened their
paychecks through individual and team per
for mance bonuses. What
put us at the top of the Best Places to WorkŽ list was the caring cul
ture. Dont scoff. Study after study reveals that employees value cul
ture more than compensation (chapter 37). Youre on track when the
of“
ce is full of joking and laughing on Monday morning.
Provide healthy health benefits.
Offering competitive health bene
ts (medical, dental, disability, vision, chiropractic coverage) helps
recruit and retain top”
ight employees. That boosts morale, produc
tivity, and commitment to the company and its goals. Roughly 60
percent of employees value health insurance more than any other
bene“
Remarkably, small employers tend to think they can withhold
health bene“
ts without suffering blowback. According to a recent
Employee Bene“
t Research Institute Small Employer Health Bene“
Survey, companies that provide health bene“
ts have overwhelmingly
stronger cultures than those that dont. Moreover, businesses without
bene“
ts tend to pay considerably lower salaries and have a smaller
proportion of
full- time employees. Those same “
rms report that most
of their employees quit after a few months. Shocker.
Offer an Employee Assistance Program (EAP).
EAP providers offer
phone banks staffed by trained counselors. Your people can call for
help with nearly any issue„including emotional health, family crisis,
nancial stress, and chemical dependency. Any one of these issues can
in”
ict enormous emotional suffering, torpedo job perfor mance, and
damage your culture. Many EAPs, typically offered in conjunction
with a health insurance plan, can also guide you through legal land
mines, and most are surprisingly affordable on a
per-
employee basis.
FUN, FRIENDLY,
Loosening Up Keeps Grumbling Down
our employees are on board with the mission, theyre stoked about the
vision and they feel honored and valued. With a little more effort, you
can crank up the culture and make the place so enjoyable that people wouldnt
dream of working anywhere else. As Herb Kelleher, the pioneering former
CEO of Southwest Airlines, says:
If people come to a place that they regard
as fun, entertaining, and stimulating, their
minds are turned on. Theyre looking for
solutions and theyll “ nd them.
Start with yourself. Fair or not, your relationships with people under your
dies told me they saw the same thing. There were some leaders wed gladly
follow out of a foxhole into battle,Ž they said. But there were others we wanted
to shoot in the back.Ž Its no different in the corporate foxholes. As commander
in chief you can make every day feel like a slice of heaven or a glimpse of hell.
FUN, FRIENDLY, AND FLEXIBLE
ing by asking everyone to share something interesting going on in his or her
personal life. Or, start with a humorous, self-deprecating story. Ever spill food
on yourself at an important business dinner? Make a bonehead play in a bas
Your gentle humor and humility encourage others to follow suit. Build on
that. Every so often, organize a potluck lunch or have take-out food deliv
ered. If weather permits, make it a picnic lunch. Breaking bread is a wonder
ing huge snowstorms, we tried to keep our crews fueled with pizza while they
worked sixteen-hour days to serve panicked drivers.
Dont stop there. Sponsor a softball, golf, or bowling team. Maybe a vol
leyball or archery league. Gardening or chess club, anyone? Welcome the
spouses of employees and former employees„whoever wants in on the fun.
Some of these things might spill into company time, but thats okay. Its not
That camaraderie is priceless, especially when leaders participate. I was a
nual golf outing, and took on countless Ping-Pong challengers determined to
beat the boss. By keeping rank-and-“leŽ diversions like this at arms length,
management promotes an us-versus-them mentality. If nothing else, show up
on the sidelines once in a while. I had a blast cheering on our softball team.
Enlightened entrepreneurs also recognize that most employees have busy,
complicated lives. Do what you can to reduce their stress. If circumstances
allow (and often they dont), provide ”
exible start and “
nish times. Let people
sible adults.
Want to be a hero to your employees and help them consistently hit their
Rehabilitation at Boston University, and his wife, Camille, argues that losing
just one hour of sleep a night for a week slashes work productivity. When
American workers feel sleep deprived, 51 percent say they do less work and 40
percent admit the quality of their work suffers, according to the International
Labour Organization (ILO). I know many executives will think on-the-job
napping is goofy, but the concept is catching on; 16 percent of workers sur
veyed by ILO were allowed to take naps at work. I expect that number to
grow. Employees who take catnaps make fewer mistakes, are more produc
tive, and„heres the best part„are eternally grateful they work at such an
employee- friendly company.
tain people, it can even lure them back once theyve left. Before a departing
employee slipped out the exit door, I made sure he saw the WELCOME BACK
sign taped to the other side. Many employers dub them persona non grata. Big
Once, a larger company offered our director of loss prevention, Eric
Randa, a major boost in salary and responsibility. After reviewing the facts,
I shook his hand. I hate to lose you, Eric,Ž I said, but youre obviously
making the right decision.Ž Almost “
ve years later, we had grown from 40
stores to 150. I got a wild hair, called Eric, and asked if hed like to come
back, as a vice president, with stock options. I was fairly content where I
was,Ž Eric recalled, but the new job hadnt been nearly as enjoyable. At
Tires Plus, I had put in long hours, but I learned a lot and it had been a lot
of fun. It didnt take long to accept Toms offer. It was a breath of fresh air to
come back.Ž
Maintaining cordial relations with
ex-
employees was an important part of
our culture. It wasnt just because we hoped theyd return; it was also one of
our values. If I heard an employee bad-mouth a former teammate, I slammed
on the brakes. Youre glad hes gone?Ž Id say. Yes, he made some mistakes.
But dont we all? Overall, hes a good person, he contributed, and I hope hes
happy at his new company.Ž Speaking well of former colleagues shows your
FUN, FRIENDLY, AND FLEXIBLE
people your concern is authentic, and that you wont treat them like stale toast
should they leave. That authenticity is the glue that binds a healthy culture
Okay, reality check: No matter how much effort you put into making
your of“
ing to grouse. Its always left me scratching my head about some folks„the
Changing your culture is hard, but rewarding, work. There are no quick
xes. But take heart. Once you begin engaging hearts and minds with the idea
that work can be exciting and enjoyable, the pro cess crosses a tipping point. As
Nurturing Healthy and Productive Employees
healthy culture requires healthy employees. My executive committee
objected when I proposed building a “
tness center, massage area, and
meditation room in our new suburban Minneapolis headquarters. Why
waste valuable square footage on luxuries?Ž some argued. Theyre not luxu
ries, theyre necessities,Ž I said. When we take care of our people, we take
care of ourselves.Ž They werent the only skeptics. Dave Wilhelmi, our vice
president of marketing, was dumbfounded. Our home of“
ce was going to
It didnt take long to win Dave over. When I think back,Ž he said, I
remember the swelling pride I felt in showing off all those features to a group
of out-of-town guests and watching their eyes pop as I toured them around.Ž
Dave explained why we offered those amenities, along with an
in-
house uni
versity with mock showroom and service bays, and a
hundred-
seat break
room furnished with a state-of-the- art kitchen and a woodsy view. Visitors
were especially impressed with the grand staircase that cascaded down to the
two-story glass windows overlooking a pond.
Pride and productivity arent easy to sustain when you feel ill, physically
or emotionally. Common sense tells you productivity suffers if employees
dont exercise; if they eat too much junk food; if theyre stressed out and
sleep-deprived; if they dont feel good about themselves. Now, Im not sug
gesting that you pry into personal lives. Even casually telling people what
they
should
be doing crosses the line. With that caveat in mind, I came up
with a three-step process that, over the years, inspired hundreds of employees
to make healthier lifestyle choices.
Model Healthy Behavior and Habits.
An overweight, cantan
kerous boss who chain-smokes and guzzles sugar-water all day long
broadcasts a very different message than a “
ally grounded leader with a ready smile and encouraging word. But
dont wait till youre a paragon of healthy habits before you send out
Encourage Others (Gently) to Take Better Care of Them
selves.
When an employee was noticeably sleep-deprived or lethargic,
Id say, Gosh, Ken, are you doing okay? You dont seem to be your
ken message: Whats this nonsense about going to the gym and eat
derstand that when employees devote a few hours a week to self-care,
the hours they do spend at work will be more productive
Seat-of-the-pants cultures are notorious for discouraging people
from taking sick days. Hello? Coming to work sick often extends the
illness and may put other employees at risk. If someone is snif”
ing,
shivering, and sneezing, thank her for her dedication and tell her to
Create Opportunities for Employees to Make Healthier
Choices.
Our corporate wellness program, led by an in-house wellness
coach, wasnt limited to nutrition and exercise. It covered everything
from stress reduction, weight management, and smoking cessation to
back care, emotional health, and substance abuse. Info and program
ming were accessible through on- site workshops, brown-bag classes,
Sure, not everyone took advantage. But the bene“
ts were dramatic
for many who did. People dragging by lunchtime returned from a
workout invigorated. Employees struggling with emotional chal
This is one of the most misunderstood bene“
ts a business own er can
provide, maybe because results of wellness initiatives are hard to mea
sure. But conservative data Ive seen estimates a three-to-one return on
investment. It makes sense. The bene“
ts are obvious„health- care costs
and absenteeism go down; creativity, ef“ciency, and perfor mance go
up. Theyre programs people enjoy and appreciate, which translates
The Rules of Engagement
ers arrived, however, he had let his guard down and confessed he was in the
midst of a messy divorce. No wonder he could barely function; he was dis
tracted, disoriented, depressed.
No stranger to a painful divorce, I asked him what he was doing to take
care of himself. Nothing, he said, he was just trying to tough it out. Joe was a
mans man, a real blue-collar guy who thought asking for help was a sign of
weakness. I asked if he cared to hear how I got through a similar rough patch.
He nodded, so I told him how counseling had helped. I recommended he
consider it. He was skeptical, but recognized what was at stake. Joes next two
139 139
monthly store reports showed him moving in the right direction. The month
Why is a chapter thats basically about psychological health in a business
book? Because the most troubling and potentially dangerous challenges in the
workplace arent caused by knowledge gaps. Theyre caused by behavior gaps.
Dysfunctional behavior is a deadly serious business issue, yet business
owners rarely deal with it. The consequences are staggering, both in terms of
the emotional toll on brittle employees and in cold, hard cash. Mind-body
research performed in the past decade has proven conclusively that, without
intervention, emotional or psychological turmoil can weaken the bodys im
mune system and lead to physical illness. The upshot? More absenteeism, a
productivity plunge, rising health insurance costs, and high turnover. One
gage spills out in the of“
ce. Does that mean you have to be an amateur psy
chologist? Maybe. Lets revisit the de“
nition of enlightened entrepreneur:
tough-minded, warm- hearted, systems-disciplined leader who inspires people to
actively embody the organi zations mission, vision, and values.
By my lights, its impossible to be a master motivator without under
standing what makes people tick. All leaders would do well to learn the basic
tools psychologists use to help clients work through problems. I wasnt blessed
from birth with the skills to recognize warning signs in the next guy, or to
follow up with open-ended questions, or to coach him toward a healthier at
titude and lifestyle. What I know I gained through a lot of couch time.
There isnt an honest person alive who hasnt unconsciously indulged in
mind games at one time or another„control freaking, defensiveness, in
timidation, workaholism, sabotaging, perfectionism, procrastination, dis
placed anger, victimology. Study that list for a second. Theyre games your
employees are playing
right now,
and many feel perfectly justi“
ed to play
hardball.
Suggestion: Consider asking key employees to take a standardized psy
chological test (“
rst consult with a corporate attorney). Tests like the
Myers-
Briggs Type Indicator or Riso-Hudson Enneagram Type Indicator can help
sonal dynamics grows, these tests become less important.
Leaders must compassionately confront workers who are underperform
ing or over- annoying. Youll “
nd that employees are often relieved to tell you
why theyve been acting up. More often than not, as in Joes case, it doesnt
demand heavy lifting„just a question or two here, a suggestion or insight
there. When you “
rance about an important detail, I quizzed him, gently but persis tent
ly, until
he boxed himself into a corner. With tears running down his cheeks, he con
fessed he had been lying. Im sorry to break down,Ž he said. Mike,Ž I said,
this isnt a breakdown, its a breakthrough. Congratulations.Ž
After composing himself, Mike explained that he was raised by a cold
hearted father. Whenever Mike did something wrong, his father relentlessly
interrogated him until he extracted every last humiliating detail. Then Mike
was punished mercilessly. His survival instinct quickly taught him that aloof
ness or, when necessary lying, was a good form of protection. I assured Mike
that this was a safe place, and he could feel free to talk about anything with
out fear of reprisal. The look of relief and gratitude on his face was a joy to
behold.
In extreme cases, Ive used something called the Two-Chair Technique.Ž
tioning his value as an employee and human being. Mark,Ž I said, youre such
a hard worker and you do so many things right. This may sound strange, but
if youre willing to have a conversation with yourself and also look at things
from a positive perspective, we can try something I learned from my thera
pist. It helped me bounce back when I was in the frame of mind youre in.Ž
With a ”
ash of alarm and amusement, Mark shrugged. Sure,Ž he said,
what the heck.Ž I arranged two chairs facing each other„a negativeŽ
chair and a positiveŽ chair. He chose the negative chair, naturally. Now I
said, imagine youre also seated in the positive chair. I told him to make the
case to his other, positive self, that he was a failure. Given his mood, that
wasnt dif“
cult. He said, Youre bad news, Mark. You keep on screwing up.
Whats the point of even trying anymore?Ž Then I asked him to change
chairs and respond to what Mark in the negative chair had just said. Ad
dressing the negative chair, Mark defended himself with his positive quali
ties and all the great things hed done. It wasnt exactly trial-lawyer stuff,
but it was a convincing argument. Fifteen minutes later, Mark felt ener
gized after realizing he was a good guy after all. Over the following months,
Mark con“ded that the Two-Chair Technique had also helped him resolve
some personal problems.
Some people simply wont budge the door on their inner lives. Thats
okay. Dont force it. A lot more people
will
tell you whats on their mind if
you follow these tips.
People open up if they sense they can trust you. They
need to know you care, and that the personal information theyre
sharing wont come back to them from another source. Establishing
that trust begins today„right now„through respectful interaction.
That way, when an issue does bubble up, an employee will trust that
The day people stop bringing you their problems
is the day you stopped leading them.
Stop, drop, and listen.
When an employee needs to talk, stop think
ing about business, drop what youre doing, and give him your full
attention. The words of Brad Burley, one of our regional managers,
demonstrate why. Brads three-year-old daughter had been having ear
aches and developmental problems that stumped her doctors. Touring
the stores one day, I asked Brad how she was doing. Normally, Tom
was very focused on business while we were driving around,Ž Brad
ing me the names of doctors who may be able to help. He even told
Joes struggle with his divorce showed that employees
Step out from behind your big, imposing, all-
hail-the-chief desk and sit toe-to-toe with employees as equals. If you
have two extra chairs in your of“ce, thatll do. Or stake out neutral
ing if you dont ask how you can help.
If youve struggled with a similar issue, dont assume
your “ x is universal or that your recovery timetable is relevant. Sure,
your experiences are good points of reference. But recognize that the
circumstances and rhythms of your employees life created a very
different scenario. Proceed with caution. Be patient, and open your
self to her point of view.
Walk the talk.
Its one thing to assure people they can tell you any
thing; to tell them youll respond with understanding; to say youll
help them work things out and regain their footing. But you cripple
your credibility if you respond in a way that puts the lie to your as
surances. You cant be judgmental, you cant condescend, you cant
trivialize. Breach that trust
even once
and the gossip gourmets and
gourmands in the of“
Your goal as coach is to maximize each
employees value. To do that, never lose sight of the fact that her well
being takes pre cedence over her work responsibilities. Heresy? Only
to a boss running the shop by the seat of his pants. Putting the health
and happiness of employees “
rst unquestionably bene“
ts an or ga ni za
tion in ways both measur able and intangible.
Be ready with outside resources.
Sometimes you have to call in
the professional„chemical dependency, anger management, clini
cal depression, marital strife, physical abuse. The “rst step is to
subscribe to an EAP (employee assistance program), a phone bank
staffed by trained counselors. Dont stop there. Compile a list of
programs, support groups, and organizations whose mission is to
help people who are severely stressed out or consumed by a full-
blown crisis. Post the list in the of“
ce (on your intranet or bulletin
board) and remind people its there. Encouraging your staff to con
sider outside help adds credibility to those options and may blunt
their shame. Remember, troubled employees dont always know
which way to turn. Pointing them in the right direction might be a
lifesaver.
GROWING THE CULTURE
Culture requires constant nurturing.
Sustaining an energized,
team-oriented atmosphere is an ongoing process. It begins with
cal, emotional, and motivational needs.
Mold individual egos into a team ego.
Theres nothing so heady
as being on a winning team. Use formal and informal channels to
communicate that long-term success depends on harmony with
coworkers. More important, lead by example.
Apply the laws of cultural leadership.
Great leaders are born„
and made. Seat-of-the-pants bosses can begin improving their
leadership skills today by putting these essential laws„huddle up,
respond rapidly, invite dissent„into practice.
Honor your people and accommodate their priorities.
Great em
ployees seek ful“llment and ”
exibility. They expect to be held ac
countable. They welcome challenging and meaningful work. They
put family “
rst. They hate micromanagement.
Leverage your HR assets.
Consider HR a strategic partner that
pumps up the people side of your business with policies and pro
grams that jibe with your mission, vision, and values. Work with
HR to shape cultural values, provide “
scally responsible compen
Give employees opportunities to be healthier and happier.
Estab
lish a wellness program and encourage camaraderie through hu
Realize that personal issues spill into the workplace.
People are
human beings “
rst and employees second. That means nobody
sails through life without some behavioral issues or the occasional
crisis. Both impair perfor mance. Recognize warning signs so that
you can either help them deal with it or direct people to appropri
ate resources.
Dont hesitate to ask if everything is all right.
Keep in mind that
people who act dysfunctionally believe theyre justi“
ed in doing so.
Consequently, many are receptive to probing. Others, however,
force a smile and deny that anythings amiss. Youre not a miracle
worker. All you can do is coach people who are open to it and keep
a compassionate eye on those who arent.
SYSTEMS- DISCIPLINED
OR GA NI ZATION
Crafting Pitch- Perfect Pro cesses
magine youre at the Kentucky Derby, the Run for the Roses, the Super
Bowl of
horse racing. Betting is brisk. The horses are champing at the bit
for the electronic gates to ”
ing open. The jockeys position their steeds.
The ”
ag goes up, the bell sounds, and the
gates„stay closed. The jockeys
curse, the horses bray, track of“
You can be a walking billboard for your companys mission, vision, and
values. You can have a stable stocked with talented, motivated thoroughbreds.
You can take pride in your enlightened, healthy culture. But if you dont have
the right systems in place, nobodys going anywhere.
Quality guru W. Edwards Deming declared that 80 percent of all errors
are systems errors. While Deming was referring chie”
y to manufacturing, the
essence of his observation applies to any of your systems and procedures.
Even if that percentage were halved, its clear that developing sophisticated,
user-
friendly
procedures„for everything from strategic planning to conduct
de“
ne roles, responsibilities, and relationships
coordinate, communicate, and make decisions
allocate and deploy resources
convert strategy into reality
respond to change
develop employees
provide stability
The structural linchpin is the org chart.Ž Keep it current and visible so
everyone knows who does what and who reports to whom. Even if everybody
in a small “
rm wears three hats, the org chart still lets everyone know how
they “
t into the big picture. The ”
atter the org chart„meaning more people
nication snafus you can expect in both directions. For instance, CEOs often
have IT (information technology) and human resources, functions critical to
overall success, report to the CFO. Without direct contact, its more dif“
cult
to keep your “
ngers on front-page issues. Dont worry, having more people
report to you wont drain your time„if youre hiring the right people, em
cial power grid, but its just as important to know who wields the unof“
cial
clout. A CEOs executive assistant, for instance, often has more in”
uence
than some high-level execs.
Without a framework, any organization„corporation, government,
nonpro“
t„is doomed to mediocrity and chaos. A taut system is like a
trampoline„it keeps you bounding higher. Slip and it bounces you right back
up. Yet relying heavily on structure is a tough leap of faith for creative, right-
brained leaders who view well-de“
ned systems as blood- sucking bureaucracies.
The challenge is to “
reaucracy. Large corporations tend to be top-heavy with regulations, while
small businesses too often ad-lib it. Its easy to see why. Most entrepreneurs
run their own show because they feel suffocated by bulky bureaucracies. But
they tend to overcompensate by going from too many rules to too few. Thats
why inef“
ciency and waste are common causes of death for small businesses.
Make sure employees focus on all the options and freedom within your
structure rather than on its limitations. A long list of dont dos„accompanied
BULDING A SYSTEMS-DISCIPLINED ORGANIZATION
by incessant harping„sti”
es creativity. Worse, “xing attention on what not to
do can bring about the very result youre trying to avoid. Karl Wallenda,
found er of the Great Wallendas, a daredevil circus troupe famous for perform
tels in San Juan, Puerto Rico. His widow said afterward that, for the “
rst time
in his life, her husband had put all his energies into not falling rather than
walking the tightrope.Ž
STRATEGIC PLANNING
Drawing Up Tomorrows Road Map
e went from contender to champ the day we implemented a strategic
planning pro cess. The strategic plan is the sun in your solar system.
It illuminates the purpose of every proposal, every pro cess, every project.
Everything revolves around it. Everything radiates from it. It ”
ows from
team objectives into operating plans into individual goals into action plans
and, “
nally, into bottom-line results. Our strategic plan put us all on the
same page,Ž said Jim Bemis, our CFO. It made everyone accountable and
tegic plan.
Seat-of-the-pantsers, particularly in smaller organizations, pooh-pooh
tegic planning is totally conceptual, looking out “
ve to seven years. But
short-
term and
mid-
range planning is absolutely necessary. Certainly you
cant prepare for every possibility, but failing to methodically look out a year
or two can be fatal.
PLANNING CHANGE, CHANGING PLANS
Show me a leader who avoids planning and Ill show you a leader afraid of
change. Its human nature. Grooves are safe and comfortable. Too much
comfort, however, dulls the senses. You may think youre at the top of your
game when youre actually skating on thin ice. A hockey player who rushes
to the puck instead of to where its going to be next doesnt score many
goals.
The best leaders expect change, embrace it, and inspire others with its
promise of new opportunities. They do it without losing sight of day-to-day
operations and challenging their people to raise their game through devel
opmental education. Managers who stubbornly cling to the status quo„
out of fear, denial„only hasten a change in their own status. Im reminded
of a woman who attended a Change Management seminar only to walk
away disappointed that the subject was managing change, not changing
managers.
Managing change doesnt work on the run. Nor can you grapple with it
in a vacuum. Every action causes a series of reactions in every corner of the
company. Plumbing the depths of change requires focused, structured, and
strategic input from throughout the company. Thats why its woven tightly
into your strategic-planning pro
cess. Also, twice a month, at executive-
STRATEGIC PLANNING
($24.4 million) since going public four years prior. The culprit? The low-carb
self in our cultural consciousness and leaving a trail of corporate carcasses in
its wake. Misjudge cultural cues and its your company that will fade.
Janet Dolan knows how to stay sharply in focus. In March 2000, the
CEO of Tennant Company, the U.S. leader in power-cleaning equipment,
summoned her top “
fty people to a two-day strategy marathon. The objec
tive, she told them, was nothing less than total transformation. The response
lion. The publicly traded companys earnings-per-share were hitting historic
highs. Cash ”
ow was healthy, debt inconsequential.
But Janet looked beyond the numbers. It was a month before the dot-com
bubble burst, and she felt the winds of change kicking up. She and her execu
tive team believed that an imminent recession and industry trends were about
facturing operations overseas. Technology was on the verge of rendering
many cleaning solutions obsolete.
Convinced that innovation paves the road to salvation, Janets team tore
up and rebuilt every premise and pro cess. Surveys revealed that customers
tegic planning is straightforward. Frame it with a searching question:
How
can we take advantage of our strengths and opportunities and neutralize our
weaknesses and threats?
Fix your eye on your SWOTs (strengths, weaknesses,
opportunities, threats), and the right plan unfolds.
Strategic plannings eight steps are:
Identify SWOTs.
Set Priorities.
Come September, gather the executive commit
plify both lists by grouping similar issues under the same macro
heading (approve no more than eight macro issues per time period).
ate leader.
Task-force It, and Plan, Plan, Plan.
Each priority earns its own
task force, composed of the companys
subject-
matter experts. For the
next two months, they research the priority and design an action plan
cates resources, and establishes controls.
Present Action Plans.
STRATEGIC PLANNING
to thoroughly prepare benchmarking protocols, ROI (return on invest
ment) projections, and other necessities.
With the task-force plans presented, start green-lighting. Some
plans will be good to go; others will need modifying based on avail
able resources. (Plans requiring revision should be redistributed
within two weeks.) Of course, each strategic objective is generally
multidepartmental„hence the team approach. If the goal, for in
stance, is to open a dozen new stores, the exec in charge of real estate
secures locations and oversees construction. Meanwhile, the CFO
arranges “
nancing; the retail operations people groom new store man
Now that action plans are established, incorporate them into the
annual grand (ours ran ten pages) strategic plan. This plan has two
major sections. It kicks off, of course, with your mission, vision, and
operating values. Fundamental business-plan issues follow„product
Present Departmental Operating Plans.
Now break each ac
tion plan into pieces and parcel them out to the right people. Those
employees who have others reporting to them create individual oper
ating plans to execute the pieces assigned to them. Department heads
collect these operating plans, approve them, and roll them into de
partmental operating plans. In December (or the “nal month of your
scal year), round up the same group as in November to review and
approve these departmental plans. Example:
The accounting plan looks
good except we need the “
nancials two days earlier.
Then update de
partmental and individual operating plans.
projected monthly cash ”
diture plan„should be built off last years perfor mance and this
years SWOT-powered operating plan.
Follow-
up.
A poorly executed plan isnt worth the paper its
printed on. Follow-up is critical. Enthusiasm can wane. Attention
Six months after approval (and again six months later), con
vene the executive committee for an operating-plan review.
Each department head introduces her key reps (from the ac
counting department, it may be the controller, treasurer, and
accounts payable manager) to present progress reports com
paring accomplishments to operating-plan goals. The present
ers, and the department chief, grade their own perfor mance.
The groups accomplishments and grades (later factored into
employee annual bonus calculations) are open to compliments
and challenges. The department head wraps things up with a
summary of successes and shortfalls over the last six months
as well as expectations for the next six months. Once com
ports to her (chapter 32).
Regular, one- to- three- hour executive- committee meetings
throughout the year also keep the strategic plan on track.
Aim for weekly or monthly, depending on team experience
and the pace of change (we met every two weeks). The
agenda includes
mid-month review of the P&L, including department
by- department response
monthly review of key departmental metrics
brainstorming on inter- and intra-departmental
challenges
STRATEGIC PLANNING
round-robin sharing of new ideas or recent successes
introduction of new enterprise-wide policies and
programs
Team Update.
Gather the entire company for a few hours each
month or quarter to motivate, inform, celebrate, and educate. Have
department heads update people on wins and losses, what needs to be
done over the next period, and how everyone can make it happen.
Solicit ideas and questions. Its also a good time to salute birthdays,
births, and employment anniversaries.
Of course, six days of strategic planning can choke a small company. Rather
quency (in parentheses) with which theyre mentioned, replaces an entire day
of roundtable debate and chatter.
tor moves, last years performance, and this years “
nancial forecasts. Allocate
the remainder of the two days to brainstorming and coming up with action
plans for the top seven to eight issues on the SWOT survey.
Give more time to issues higher on the list. Chances are these issues burn
A note taker records the action plans by issue and sends them to all the play
On “
rst blush, the creation and execution of a strategic plan may seem
like learning a foreign language. It may also seem like death by a thousand
grading our strategic planning, our pro“
ts increased tenfold and revenue
soared from $40 million to $200 million in just eight years. Coincidence?
EVERYTHING
Ensuring Its Done Right
he best operating plans arent worth a plugged quarter (even clichés need
to keep pace with in”
ation) without thorough execution. My four-
execution solution helps employees hurdle obstacles
and
pick themselves up
when they stumble: De“
ne expectations, inspire, teach, follow up.
The simplicity is deceptive. Lets say an employee poorly executes a piece
of her operating plan and blames it on colleagues who failed to “
ll out a form
correctly and on time.
First, did she
de“
ne the expectation
? Ask if she spelled out what
needed to be done and by when. Did she write a clear memo
(bullet-point format with key points bolded)? Did the subject line
or “
rst sentence clearly convey her key message?
Second, did she
inspire
? Ask if she explained why it was important
to completely and accurately “
ll out the form, and why speed was
essential.
Next, did she
teach
? Ask if she demonstrated how to “ll out the
form. For more complex issues, did she resort to the Confucius
Checklist (chapter 41)?
Last, did she
follow up
? Ask if a system was in place to ensure
accuracy and timeliness. If so, does it call for instant feedback for
noncompliance?
Did she answer yes to each question? If not, tell her youre happy to listen
to what somebody else needs to do
after
shes done what she needs to
do„execute all four steps. Until then, the ball stays in her court.
RESOLVE ROADBLOCKS
Helping Individuals and Groups Solve Problems
lame, shame, panic,
pander„enlightened entrepreneurs dont do any of
these to employees that miss their marks. Sure, these execs may feel
frustrated. But theyre cooperative and exploratory, not combative and accu
satory. They know that a disciplined attitude, tight procedures, and plenty of
intellectual elbow grease can make problem solving more like piecing to
Say your departments sales report reveals that Bills in free fall. When
you ask Bill whats up, he points to a deskful of factors beyond his control.
Im doing everything I can,Ž he insists. But the decks been stacked against
me for weeks. Business is down all over, man. Those new guys are really un
derpricing us. And the weather!Ž
descension, or you may plant seeds of anger and resentment. Really?Ž you
might reply. According to this report, Debbie and Max hit their numbers in
the same environment. Lets take a look at how well youre following the sys
tem. The plan calls for you to make twelve to “
fteen cold calls daily, and I see
I should say in passing, a streamlined system works for
procedure problem
solving,
but its useless for
people problem solving
(chapter 22). Emotions and
feelings need more than precision-guided procedures.
Not all problems can be solved one-on-one. Thats why its important to
learn my group problem-solving technique. When I hit the road for store vis
its, it was fun to identify and resolve roadblocks as a group. The pro cess can
yield a big harvest wherever you go.
The seven steps for group problem solving are:
Build Rapport.
Learn or con“
rm everybodys name: Nice to
inely making the effort to connect, one human being to another,
builds the bonds of an effective working relationship. The goal
here is
mosphere teases out the creativity essential for solving problems.
Offer Assistance.
Con“
port they need. Somebodys almost always thinking,
How can we take
onstrate a willingness to unplug blocked channels. Later, when you
RESOLVE ROADBLOCKS
do discuss concerns with the appropriate managers,
do not
name
names. Prefacing your comments with Jill said this about youŽ plants
seeds of resentment and leads to unhealthy triangulation and a cor
rosive culture. If you absolutely must reveal a source, positively frame
her suggestion: Jill had a terri“
c idea for how we can make this pro
Review the Numbers.
Ask for stats„revenue, customer satis
faction surveys, ad-response rates„that re”
ect the groups perfor mance.
For instance, Id ask the store manager for last months pro“
t- and- loss
statement and up- to- the-second leading indicators. That info provided
valuable context. Its also a reality check to the
Everything is great!
drome (phony optimism is a huge red ”
ag).
Compliment and Congratulate.
Recognize and praise indi
tional cases, promise to pick up the tab for a team outing. Praising
people in front of their peers pumps up the team and sends the mes
sage that excellence is expected, appreciated, and rewarded.
Identify Roadblocks.
Ask everyone where improvement is most
needed and where they see obstacles. In an atmosphere of trust and
security, its amazing how a simple question like Whats going on?Ž
produces all sorts of valuable info. At the “rst hint of a problem, drill
down with Columbo-like questions until you hit a gusher. If revenues
are lackluster, “
nd out if basic protocols were followed. In our stores
that meant pulling work orders and asking questions: Were the
Cast the Net Again.
To ensure real candor, hand out blank
the positive ones and digging into the challenges. For large groups,
sue involves singling out a colleague. So wrap up with a reminder that
youre always available to discuss sensitive issues one-on-one.
Get Commitments.
Its natural for somebody to be embarrassed
when theyre identi“
ed as a roadblock in front of their teammates.
Disarm the situation by warmly pointing out what the person is doing
right and framing the matter as a teachable moment: Im really glad
this came up, because its a great reminder that every single step in our
pro cess impacts customer service, store earnings, and, ultimately, your
bonuses.Ž Gently ask the employee how he can make things right. If
youre satis“
ed with his answer, agree on a course of action.
Then„
The magic of candid group sessions can illuminate every angle of a problem.
No problem can withstand the assault of
sustained thinking.
ings tamp down turf wars„when a group solves each others problems, people
magically become less turf-conscious. Yet youll waste a year of your life in
Ready
Still gotta do it? Okay, but invite only the A-listers, and make sure
you have a quorum.
Con“
If its a teleconference or videoconference, con“
rm timing with the
vendor. Do not screw around with cheap speakerphones; state-of-
the- art phones wont waste the time of long-distance participants.
E-mail the agenda, handouts, and step-by- step access instructions
to all participants (noting start time in both your time zone and
theirs). Add a note to remind teleconference participants to
identify themselves before speaking.
Set
Prep an agenda that includes time limits for pre sentations and
Remind presenters to come armed with handouts that minimize
questions and note taking.
Appoint a time sheriff to signal you whenever people run long.
Designate a note taker to record the action steps produced by
agenda items.
Start on time, to the minute. It enforces promptness. George W.
Starting ten minutes late sends people a bad message„that its
okay to mosey on in whenever they feel like it.
Wed sometimes start with sixty seconds of quiet time to just
breathe and relax (some people needed to catch their breath after
If it feels natural, go around the table for (very) brief updates on
everyones personal lives. It lifts spirits and bonds the group.
Quickly review the agenda, then ask for late-breaking additions or
deletions.
Pick Up the Pace
Urge ramblers, even when theyre on message, to keep it moving:
Hey, Tony, FYI, weve got “
ve more minutes for this segment.
Beware piling on,Ž the tendency we have to toss in our two cents.
Rather than allow everyone to say the same thing in slightly
different ways, ask people to call out ditto to signal agreement.
Deep- six side conversations by looking directly at the talker and
injecting his name into what youre saying: So this solution, Jim,
should solve that problem.Ž
Drawn-out discussions make it hard to wrap up an issue. Bring it to
a head by saying, Weve got two minutes. What are the action
steps?Ž If thats not practical, either defer the topic to the next
terbacked with discipline, committees save time and produce results.
ing with your facial expressions. Why? Play your cards too soon
and the pot wont have time to grow. In other words, a leaders
opinion in”
uences others opinions, the mental equivalent of a pile
of chips. Keep a poker face and youre more likely to draw out the
quiet types and make it hard for the sycophants to parrot your
ideas. (Ask a trusted team member to cue you if youre too quick
to seize the reins.)
Ask open-
ended questions. Youll hear thoughtful and often
revealing answers.
Indulge wisecracks. Youre keeper of the tone, and laughing and
kibitzing with everyone else keeps it light and fosters strong
relationships.
Stand and stretch every hour or so to keep people invigorated and
focused. Let people stand if they begin to feel uncomfortable or
fatigued.
Finish Line
Close out every issue by de“
ning action steps: Okay, exactly what
are we going to do, whos going to do it, and when are they going
to do it?Ž Skip this critical step and you waste everyones time.
Cooling Down
As people leave, strike up a conversation with anyone who was
Continuous Systems Improvement
uccess has many fathers, as the saying goes. One sire to my companys
exponential growth was our obsession with improving the way we did
things. We
were fanatical about identifying roadblocks, unearthing errors,
and
ne-
tuning our system. Part of our campaign included benchmarking
the high”
iers; one way we did that was an occasional intel- gathering “
eld
trip. Once, we chartered a twin-prop plane for our regional managers, Wayne
Shimer, and me to investigate a top national chains Omaha locations. The
company had a great reputation and did a lot of things right„and they were
We split into three teams, rented cars, and went shopping. We got oil
changes at every store and watched their MO. While we waited,Ž Wayne re
called, Id say to the manager, That looks like a great computer system. How
does it work? And hed explain the whole thing in detail.Ž We ”
ew home fat
with improvements that we immediately clicked into place, like installing win
onto a charter and ”
y us back and forth to Omaha, I mean, thats crazy. Or is
it? It takes a lot of passion and drive to be the best.Ž
The big boys tend to pursue structural precision through a process called
Lean Enterprise, a hybrid of TQM (Total Quality Management) and JIT
(Just In Time). Essentially, Lean Enterprise integrates quality commitment,
waste elimination, and employee involvement within a structured manage
ment system. Its primary purpose is to perform all functions„from product
development and production to sales and customer service„so that steps that
dont create value for the end user are eliminated. This allows steps that do
create value to ”
ow unimpeded in the value stream. Clearly, Lean Enterprise
demands a thorough understanding of customer needs, as does Six Sigma, a
rigorous, empirical method of eliminating defects in all systems. Six Sigma,
conceived by the late Bill Smith, a reliability engineer at Motorola, de“
nes a
defect as anything outside of customer speci“
cations. General Electric claims
that Six Sigma produced $10 billion in bene“
ts in just “
ve years.
There arent many companies
$2 billion annually. And small busi
employee input.
Theyre in the thick of the action, so every
month ask each person, Whats working and what isnt?Ž
Implore employees to
report all errors
as soon as they happen.
Welcome mistakes with open arms. Finding and “xing errors
prevents major headaches down the road.
Abandon any part of the system
ing even the smallest wave. Partner with a loss-prevention com
pany to provide a hotline for employees to con“
dentially offer
suggestions and point out problems.
Establish
system-
improvement committees
to hunt bottlenecks in
your systems, from machines and materials to communication and
training. Do whatever it takes to repair broken links.
Partner with a con
sul
tant
specializing in Lean Enterprise, Six
Sigma, or some other highly regarded system-improvement spe
cialist, if the expected bene“
ts exceed the cost in time and money.
BUILDING A SYSTEMS- DISCIPLINED OR GA NI ZATION
Focus on strategic planning.
Its the cornerstone of a proactive,
healthy organization. Dont let the pro cess intimidate you. Strate
gic planning exploits your strengths and opportunities and dimin
ishes your weaknesses and threats.
Execute in four steps.
De“
ne expectations, then inspire, teach,
and follow up. The execution solution helps employees avoid ob
Methodically solve problems.
When an individual or department
underperforms, dont blame, shame, panic, or pander. Cooperate
and explore, dont “
ght and accuse. The right attitude and the
right systems turn problem solving into no problem at all.
ration and strict protocol.
Troubleshooting is a
year-
round sport.
Beyond high- concept the
ories like Total Quality Management, tell your people that their
company is a work in progress. Dedicate yourself to continuous
COMMUNICATING
CLEARLY
Sending Static- Free Signals
ack in 1968, I graduated from Indiana University into the HR depart
ment of Shell Oil Companys Midwest regional headquarters in Chi
cago. At twenty-one years old, it was my job to ensure that proposed
salary increases were commensurate with corporate policy. I threw myself
into the fray with all the youthful, bullheaded passion of an idealistic college
grad. I kicked up a storm, to put it mildly. After I had butted heads with de
partment leaders for a week, my manager, Neal Pettit, was deluged with com
plaints about me.
Thank God Neal saw the uproar as a teachable moment. He asked me to
tag along as he visited a few poodles I had turned into South Side pit bulls.
Neal put on a diplomacy clinic. He started with a smile and some small talk,
then eased into inquiring about the logic of the raises I had rejected. He lis
tened intently and praised each supervisors approach. But he didnt hesitate to
scratch his head over a few things that didnt track for him. It was a humble,
lumbo
). Neal patiently worked with each manager to explore options and “
solutions. I was amazed at how effortlessly he patched up the relationships.
Neal taught me two simple but important lessons. First, it takes great
communication skills to build and manage relationships. Second, every single
thing you do requires building and managing relationships. Its the quality of
your bonds that ultimately determine how well you communicate, and vice
versa. Remember this four-word mantra:
Less ego, more empathy
Egotism and empathy are opposites. They repel each other like poles of
Neal taught me that people care not only about
what
is said but about
its said. Years later, Scott McPhee, one of our top execs, learned the same
lesson. One afternoon, Scotts colleague teared up as she con“
ded to me that
Scotts body language proved his disdain for her. She feared for her job. I
called Scott in for a brie“
ng. When Tom explained it to me,Ž Scott said, I
thought,
Wow, Ive heard the same thing from my wife
.Ž That insight helped
Scott understand the impression he left on people. He apologized to his col
league and repaired the damage.
If youre quarreling with colleagues, step back. Think of yourself as a
complex communications network that pro cesses the messages you receive
and assembles the messages you send out. Are your lines open and clear, or is
Practicing Active Listening
i, my name is Tom and Im a talkaholic.Ž Thats right, if there were a
support group for dialogue hogs, I
wouldve been a charter member. I
used to see every conversation as a
race„“
wins. But cutting off a conversation without considering what the other per
announced.
It never occurred to me that I was a lousy listener. Heck, listening was
like breathing„I never thought about it, I just did it. My Aha! moment came
at C. J. Hegartys Active ListeningŽ seminar in the
mid-
eighties. His theme:
Hearing is involuntary, but listening is an acquired skill.
When it dawned on
me that listening involved more than noticing noise emitting from a mouth,
my transition to enlightened entrepreneur picked up steam.
Lousy listening wastes precious resources and damages relationships.
How can we discipline an employee if we dont
listen„really listen„to her
side of the story? How can we expect employees to nail deadlines if we dont
listen to their questions and concerns?
175 175
In small businesses„where people wear multiple hats, chase deadlines,
and move fast and talk even faster„listening better be a core competency.
Imagine what can be lost or misinterpreted in a simple exchange between
two people of different genders, ages, and socioeconomic and cultural back
grounds.
Five listening lessons:
Seek First to Understand Before Seeking to be Understood.
These nine simple words, from the timeless prayer of St. Francis of
Assisi, are powerful. Challenging myself to view things through an
other persons eyes expanded my powers of perception and deepened
my connection to„and appreciation of„others. It was further proof
that empathy trumps ego. Another bene“
t: The more you listen, the
Be a Human Mirror.
We expect colleagues to hang on our
every word. Yet if we dont “rst listen to
„so we can lock onto
their communication style and mirror it back to them„we might
as well be speaking different languages. For instance, if youre brain
storming with a coworker who thoughtfully chooses every word,
your brilliant idea might zip by her if you spew sentences at the
speed of light. The same goes for decibel level; your pithy points
may not register if you overwhelm her soft- spoken sensibilities with
bluster.
Value the Speaker as Well as the Speech.
Its easy for people to
tell when their boss is listening
against
them instead of
them. A
dead giveaway is the wall he throws up„leaning back in a chair and
folding his arms across his chest. No matter what comes out of his
mouth, all theyre going to hear is,
I have nothing but contempt for
you and your ideas. Stop wasting my time.
If this sounds like you, you
wont be crowned Mr. Motivation anytime soon„people are cer
tainly not going to share all their great ideas just to see them shot
down. Conversely, a caring approach„a smile, leaning into the con
versation, eye contact„lets employees know theyre taken seriously.
The mind-set is
Whats right with what shes saying and how can I
learn from it?
rather than
Whats wrong and how can I object to it?
Hear the Unspoken.
Subtle messages ”
ow through facial ex
pressions, body language, and tone of voice. That awareness came in
handy during store visits when I queried customers about our service.
I recall one typically over-polite Minnesotan who called the service
ne.Ž But her steady foot-tapping and the restless way she ”
ipped
through her magazine told a different story. I pressed her. Are you
sure?Ž I asked. Anything I can help you with?Ž She paused, then
confessed her car was twenty minutes overdue. Information in hand,
we addressed the problem.
Repeat What You Hear.
Try not to ape the speaker, of course,
but play back your interpretation of what you heard. Paraphrasing
her message shows you listened carefully and gives you both a chance
to clear up miscommunication. (Remember that one of our deepest
Active listening is grounded in courtesy, empathy, and a desire for clar
ity at all costs. You dont have to agree with what you hear. But your atten
tiveness and attitude speak the unspoken:
I want to understand where youre
coming from. Tell me how you see this.
Practiced conscientiously, active lis
tening engenders trust, reduces errors, and encourages people to speak their
mind.
The same dynamics apply to groups. Eric Randa left the company and
returned four years later only to notice a distinct change around the confer
ence table. There had been a tendency for some executive-committee mem
bers, including Tom, to go for the jugular,Ž recalled Eric. It made people feel
I wised up. I told the team that corrosive, vindictive behavior was no longer
acceptable. I reminded them that our mission statement and operating values
called for caring, respectful interactions. Once Tom put a stop to that kind
ings anymore. We all realized that challenging each other in a professional
way would help us all grow.Ž
EXPRESS YOURSELF
Writing and Speaking Effectively
ne day, Eric, our vice president of loss prevention, dropped off a three-page
memo. I scanned it and called him back into my of“
ce. Eric,Ž I said, this
is a great memo, but I need you to condense it and make it simpler.Ž In fact, I
said, write every memo like its for the president of a company, someone who
has to read a hundred memos a day and doesnt have time to read two pages, let
For all the effort to keep it plain and simple, the near universal use of
e-mail, instant messaging, and phone-
texting tempts us to backslide into
vagueness. Digital communication lends itself to shorthand and slang, with
new abbreviations invented daily. To avoid confusion, write full sentences
that err on the side of polite formality. Also, treat e-mail the way a driver ap
proaches her car„dont use it if youre tired or tipsy, or you may steer your
business into a ditch.
I have a low tolerance for sloppy verbal communication, too. The
tion. Sure enough, she had erred. Bad information creates chaos and sabo
tages team goals. Recognizing, however, that this exec was already embarrassed
by her mistake, I reined in my frustration and stressed to the team that suc
cess hinged on airtight info. Effective immediately, I said, we need to be
precise with our language and extraordinarily careful not to confuse proba
blyŽ or pretty sureŽ with absolutely.Ž My executives red face and my own
exasperation were a small price to pay for purifying the pro cess.
Stepping up a level of communication, the bully pulpit can spread the
word fast. Seize every opportunity to address your troops. One well-crafted
speech saves time and magni“
es impact. For that matter, dont pass up out
side engagements„speaking to community groups extends your companys
goodwill (and brand). How to perform like a pro?
Chat up the organizer (or, for in-house talks,
the employee closest to the action). First, nail the facts: number of
attendees, average age, gender breakdown. Next, ask three ques
tions to gauge the attendees state of mind:
Do they know who I am?
Is attendance voluntary? How much do they know about the topic?
nally, ask whats dominating watercooler chatter so you can slide
into their rhythm.
Ask yourself three questions:
Whats the goal
of this talk? How can I take the audience from here to there? What
could block their understanding or acceptance?
The answers will pro
Put your “ngerprints on the content, especially
if youre covering familiar territory. Spring off audience concerns to
EXPRESS YOURSELF
Jot down key words on recipe cards to keep
your train of thought on track. If you must write out the whole
thing, say it out loud as you write, like youre telling a friend whats
on your mind.
Put away your notes for a day or two, then review
them with fresh eyes. Look for ways to clarify points and trim fat.
Does your opening clearly state your message? Does your kicker
summarize your big points and link them to action steps?
Do a run-through with a colleague. Or,
speak in front of an empty chair, a stand-in for the audience. Speak
conversationally. Slow. When youre “
nished, do it again„and again
and again and again, until its second nature. (Cures for stage fright:
Dale Carnegie courses and Toastmasters.)
Proof your intro.
Find out whos introducing you and ask if you can
see her remarks in advance. Check that the title of your talk is cor
rect. Fix any errors and offer updated info.
Create a checklist.
WAITING IN THE WINGS
Walk the room.
tice your entrance and exit. Test the microphone. Ask someone to
stand at the back of the room to con“
rm that your voice will carry.
Keep a bottle of water nearby. Periodic sips keep your
voice strong. But dont overdo it„unless the talk is long enough for
you to take a bathroom break.
Before stepping into the spotlight, breathe slowly and deeply
for thirty seconds, preferably with your eyes closed. Slow, deliberate
breathing calms your nerves and opens your mind.
Silently ask for guidance to “
nd the best words to
bene“
t your audience.
REAL- TIME REMINDERS
Dont hide behind the podium.
Its a home base, not a planting pot.
A wireless lavalier mic lets you roam among the audience.
Novices can jabber at warp speed, making it hard for
audiences to digest the message. Dont underestimate the value of a
pause; few things grab an audiences attention quicker.
Talk with the audience, not at them. It may help to pre
tend youre chatting with close friends. Keep your head up. Establish
eye contact. If you know your material well, believe that the words
will come. Better to stumble occasionally„and come off as genuine„
than robotically recite every point from a canned script. Key words
on note cards or a PowerPoint presentation can help avoid losing a lot
of eye contact.
For some reason, audiences arent always
breathlessly anticipating your pearls of wisdom. Stomachs will growl.
Dozers will daydream. Somebody will come fresh from a “
ght with
her boss (or husband). Grab the rooms attention, or its funny bone.
EXPRESS YOURSELF
That “
nity by droning on about how happy you are to be there, in Kansas
City„I mean, Cleveland. And for the love of God, do not try to
lower expectations by claiming to be a poor speaker, or that youre
unprepared, or not feeling well. If you do, that splashing sound youll
Infect your audience with your passion
Pepper your talk with questions to the group as a whole and
to individual audience members by name:
What would you do if that
happened, Sharon?
When appropriate, role-play with a volunteer„
showingŽ always trumps telling.Ž
Facts and “
Firing them up is pointless unless you demonstrate
how to stoke the coals. Show how to translate your lessons into every
day actions that yield results.
Finish strong and on time.
Save your best for last and leave em
wanting more. I like to close with a favorite story that never fails to
COMMUNICATE
EXPECTATIONS
Achieving Airtight Accountability
This is how it works:
Ask: What are your expectations?Ž
Know your team members
needs, desires, and
expectations„for their job and their career. Do
you know what your people value most? Is it making more money?
A promotion? Meaningful work? Time off for family?
Relationships, personal and professional, break down if theyre taken
for granted, if we focus exclusively on our own needs. In business, this
is called turnover.Ž Dont kid yourself, turnover is always about em
ployees unmet needs. Ask them what they need from you and from
the organization, and then do what you can to give it to them.
COMMUNICATE EXPECTATIONS
Tell: Here are my expectations.Ž
Do your people know exactly
whats expected of them? If theres a chance youre not on the same
Think that formally de“
ning expectations is overkill? Just the op
posite is true„its liberating for people to know whats expected of
them. Done with care, clarifying mutual expectations stokes initia
tinual exchange of constructive feedback.
Were imperfect creatures. Daily brush “res
can divert our attention and scorch our commitments. Checking in
with colleagues who report to you brings us back. But be realistic.
Dont expect employees to rattle off opinions when you ask how
youve been doing as a leader. Some may respond without reservation.
Others will hesitate even if they have a laundry list of gripes„unless
theyve noticed youre open to hearing honest feedback. Even then,
you may have to resort to the Rule of Three Technique (ask three
request one:
Is there anything I could do differently to improve
how things work around here?
response:
Uh, no, not really.
request two:
I really value your opinion, Scott. Youre telling me
theres
nothing
I need to change?
response:
Pause
) No, everythings “
ne.
request three:
Now get speci“c.
response:
Well, yeah, I guess I could think of something. Its no
big deal, but you always seem to have broccoli stuck in your
teeth.
Tell: Heres how youre doing.Ž
Use the cardinal rules of coaching:
Mold, dont scold.
A spoonful of sugar helps the criticism go down.
Leave people feeling empowered, not embittered.
People are more likely to take corrective feedback to heart if its
imparted with care and„this is critical„accompanied by kudos.
Thats to say, shy away from striding up to an employee, brusquely
sand, its the dead weight of all your damaged relationships that will
drag you, and your company, down.
The Ask/Tell Technique also helped me monitor how the people who re
ported to me were dealing with the people who reported to them. Every so often
I asked my executive committee to list the names of everyone on their team.
Then I asked them to grade each relationship based on four Ask/Tell questions.
How well do you understand her needs, desires, and
expectations?
Do you think she perfectly understands what you expect of her?
Is she comfortable letting you know her likes and dislikes?
Are you giving her regular feedback?
For grades lower than A, I didnt even bother to ask why. My execs knew
COMMUNICATE EXPECTATIONS
people they needed to get to know better. Nobody knew his people better
than Wayne Shimer. He was master of what I called the inner-view,Ž chat
ting up employees in the hall, during lunch, or before getting down to busi
ness around the conference table. Its nothing more complex than a series of
simple inquiries: Whats up with your kids?Ž Hows your dad feeling?Ž Af
ter that, the four questions above go down a lot easier.
Wayne read his people like sports fans read box scores. Full-time or part-
inely cared about them. Tom always looked you straight in the eye and you
could tell he was listening,Ž said Brad Burley, a regional manager, that he re
ally did want to know. That was the key to Toms success: caring.Ž Point the
Ask/Tell Technique at your subordinates or at external business partners. Its a
key to motivating and keeping everyones expectations clear and aboveboard.
Soliciting Employee Ideas
oping to grab a
pre
”ight bite one night, I scanned the slim choices at an
airport concession stand„chili- cheese dogs, chocolate muf“ns, ice
cream sandwiches. Nothing remotely quali“
ed as healthy. I suggested to the
kid behind the counter that he urge the own
er to add veggie burgers to
the menu. His blank look morphed into a laugh. Are you kidding?Ž he
said. The boss would never listen to me.Ž Thats a portrait of a boss taking
a pass on success. Employees in constant contact with customers are like
the waitstaff at a
small-
town diner. They know the inside scoop on just
about everything.
Fresh ideas are the lifeblood of any organization, and its often the non
managerial players on the front lines that come up with the biggest corkers.
But woe to the employee who tells a seat-
of-the-pants entrepreneur how to do
tions pumping with clear, con
nient channels of employee communication.
Bring ideas in and entertain them royally,
for one of them may be the king.
ger you wait to root out the problem the more entrenched„and costlier„it
becomes. The challenge is breaking the code of silence among employees,
without wreaking havoc on morale and solidarity.
To excavate the gold of employee intelligence:
ble wed go. One person might propose a new policy or procedure.
Another passed along an idea from a customer or vendor. Somebody
else described a team members innovation. The brainstorms were
torrential, and livened up the place. If you try it, vary the format and
occasionally provide incentives to keep the creative juices ”
owing.
For the best RBI of the day, we often awarded a dinner certi“
cate or
small cash bonus.
Our annual culture/climate survey asked employees
what they liked about our operation, what they thought we could do
nual strategic planning pro cess (chapter 23).
Query new recruits.
New hires have the fresh eyes of a consultant,
minus the enormous price tag. But get them before theyve slid too
deeply into the status quo. Tapping newbies for advice also makes
them feel valued, which engages and motivates them. Even if their
suggestion is a stinker, react positively so the feedback channel stays
open.
One morning a new salesman in one of our suburban Minneapolis
edged some brewing tension. Oh, really,Ž I said. How do you think
we can “x that?Ž He and I brainstormed a few minutes and decided
to call a huddle to “
nd out what people were thinking. It was like a
group therapy session. Grievances were aired and addressed and,
what do you know, cooperation improved.
Heres an overlooked resource. Denial
and rationalization tell us we arent losing much so we dont need to
listen to deserters. These people have the dirt you want. Simply ask,
What do you think we need to change around here?Ž Take notes. A
person packing up his of“
ce has little to lose and, typically, is only
too happy to tell you what he thinks. Sometimes the grapes are sour
Be prepared to hear things you dont want to hear, but need to.
Employees who had given their notice occasionally said their man
ager had paid little attention to them, that they hadnt been given
enough responsibility. Id immediately remind my executive team
that staying connected to our people was priority one. Tom often
said a little bit of attention, a little bit of love, goes a long way,Ž said
Wayne Shimer, a key VP. But Tom wasnt realistic. When you have
sixteen hundred employees scattered throughout ten states, all with
different personalities and supervisors, some are going to slip through
the cracks.Ž Wayne may be right, but that didnt stop me from trying
to caulk every last crack. Good employees are hard to “
nd and costly
to train.
Ask how the person would resolve the situation. People are more
likely to back a solution they helped create.
Keep it con“
dential. If its impossible to conceal your source, make
it clear to everyone that you sought out„and will continue to seek
out„information to improve the organization and everyone in it.
Break these rules even once„by going ballistic, imposing unilateral solu
tions, or identifying your source of information„and your intel pipeline will
run dry. Worse, resentful employees may retaliate against the whistle-
blower
or idea person.
FACE- TO- FACE
Delivering One- on- One Critiques
good boss helps his people correct course and work through roadblocks.
This is obvious, perhaps. But tricky in practice. Be careful to avoid
coming off like Judge Judy, CEO. In other words, give feedback thats wel
comed rather than dreaded. Take the time Brad Burley and I drove north a
few hours to Duluth, Minnesota, to inspect a store. It took all of ten minutes
to understand that the store manager was just skating by. I was more than a
little disappointed, in both Brad and the manager.
ered what I needed to do, he talked through everything I was doing right.Ž
Before leaving, I made sure Brad was in the right frame of mind. Hey,Ž I
said, you
can
Hammering away at how Brad had screwed up would have left him wal
lowing in negativity, unable to think clearly and creatively. Today, Brad uses
FACE-TO-FACE FEEDBACK
kids,Ž Brad said, the “
rst thing I tell them is how great they are and how
much I love them. Then I single out the speci“
c behavior that isnt acceptable.
I look them straight in the eye when Im doing it. I learned that from Tom.Ž
Delivering timely feedback to everyone who reports to you may sound
overwhelming. Thats why I broke it down into four manageable pieces. They
help transform the pro cess from grating and stressful to gratifying and suc
cessful.
Level One:
Level Two:
Quarterly twenty-minute reviews (chapter 32).
Level Three:
Biannual operating-plan reviews (chapter 23).
Level Four:
Annual perfor mance review (chapter 36).
Each level reminds people whats expected of them and redirects them when
they stray off course. Mind you, this sort of structured feedback doesnt re
place your obligation to give quick, ”
oor-coaching critiques whenever oppor
tunity knocks„both on what an employee is doing well and on what I call
NTIs (need-
to-improve areas). Dont worry about overkill. Artfully delivered
THE SANDWICH TECHNIQUE
A lot of leaders are wildly inconsistent with reprimands. They manage to
restrain themselves when someone makes a huge mistake, only to erupt later
over a penny- ante infraction. Thats when you see employees shaking their
heads (or muttering, What a psychoŽ). Well, that was me back in the old
days. I didnt hesitate to light into employees who had messed up and hurt
the company. But Im embarrassed to say, I blew my fuse over lesser offenses
How do people feel after youve reprimanded or corrected them? Ready
to take on the world? Or are they cursing you on a coffee break? In time,
thankfully, I got a grip. Instead of breaking peoples spirits, I learned to
make them soar. How? By serving up the Sandwich Technique, which slides
Ask if shes open to hearing a concern. Look her in
the eye; establish trust. Smile, pay her a bona “
de compliment: Sally,
I cant tell you how much I appreciate the care you put into your
work.Ž
The meat of the matter.
Ask a question or two about the issue at
Sprinkle in a compliment: Overall, Sally, youre
doing a super job. Thanks for your efforts.Ž This “nal step can
Taste tip: Take a bite out of the Sandwich from time to time. If you habitu
ally follow up praise with a helping of corrective criticism, people will develop
a Pavlovian response, and wince whenever a compliment escapes your lips.
Uh-oh, here comes the high heat!
) Thats counterproductive any way you slice
it. I can vouch that the praise-criticism-praise habit is hard to break; it was on
my NTI list for years. Avoid that syndrome by throwing out plenty of stand
alone high “
ves and
way- to- go
s.
FACE-TO-FACE FEEDBACK
No excuses,Ž I told Ron, a client who owns a midwestern manufacturing
ens of times a day.Ž One of the most common blunders leaders make, I told
him, is believing that of“
ce drop-ins and hallway encounters are the same as
regular one-on-ones. To cement my point, I rattled off some bene“
ing face- to- face:
Clears fog from mission-critical projects and speeds problem
solving
Straightens the paths of misguided workers
Deepens loyalty by opening up your schedule
Prevents brush “
res and saves time and money by nipping
mistakes in the bud
Produces prepared employees geared toward weekly project
check- ins
Speeds the idea- to- implementation cycle
Reduces interruptions by delaying minor questions until the next
meeting
Unearths deeper issues through open-ended questions and
big- picture thinking
Kick things off by asking how things are in general. Every
month, also ask how he
feels
about his job. Keeping tabs on an em-
Look over his Goals Activity Report (opposite page). It
tracks projects related to the operating plan, plus other tasks added
throughout the year. Each goal is listed along with its status and three
due dates„rough draft, “
nal draft, implementation. Career and be
havioral goals are also listed (often without due dates) to heighten their
awareness. The Goals Activity Report is a reminder of the expectations
The Goals Activity Report tracks all the moving pieces that propel
your business. Wayne Shimer, who headed up a few divisions for us,
swore by it. He also at times swore at it. Everybody was plowing full
speed ahead,Ž Wayne said. We all had 135 things on our plate. Then
Tom would go on what we called a ride„visiting some stores. I
After I sold Tires Plus, Wayne brought the report to his new com
pany. It absolutely works,Ž Wayne said. It shows me very quickly
what each person needs from me and how they respond to priorities
Keep hot projects moving.
For each high-priority project, ask six
questions (vary the phrasing to keep it fresh):
How do you see yourself proceeding?
What roadblocks do you anticipate?
How do you plan to skirt the roadblocks?
What do you need from others to be successful?
What do you need from me?
When do you expect to complete this? (Verify„and, if
necessary, adjust„the three due dates listed.)
Tackle any
project-
improve areas).
other deadline has come and gone? Zero in: Weve talked about the
missed the last three. Whats happening, Joe? Youre generally on
time.Ž The gravity of your reaction depends on
the projects importance
the projects time frame
how close the project is to completion
the number of warnings youve given
the employees record for hitting deadlines
the employees level of denial
For each project, generously compliment any progress. If hes en
thusiastic about a particular assignment, encourage his passion. Wrap
up this section with a scoop of praise: Its nice to have someone on
the team whos so diligent, Joe. Im impressed with how you collected
and summarized everyones input on the new campaign.Ž
Throughout the pro cess, avoid yes-no questions. Open-ended
questions like What do you suggest?Ž give his mind room to roam
and nudge him along until he arrives at his own solutions. Answer
any monosyllabic responses by digging deeper. If your question How
do you feel about this project?Ž is met with, Good,Ž ask, Good in
what way?Ž
Ask for concerns. If he says nothing comes to mind,
prompt him: What would you do differently if you were in charge?Ž
You may have to resort to prying him open with the Rule of Three
Technique (chapter 30): Cmon, I
know
you can give me three things
youd like to see different around here.Ž Its the rare employee who
wouldnt enjoy tweaking the status quo.
QUARTERLY REVIEWS
Most people are dying to know what the boss thinks of them. I certainly was
when I worked for Shell Oil Company. So I started doing my people a favor.
Every few months, as a weekly one-on-one wound down, Id ask, Are you
FACE-TO-FACE FEEDBACK
open to a quick review of what I think is going well, and hearing a few ideas
on how you can do even better?Ž Granted, not many people will say, No,
thanks,Ž to the boss. But I rarely sensed resis tance. In fact, eyes lit up virtu
ally every time I offered a
twenty-minute miniperfor mance review. The bosss
Next, I addressed NTIs in quick-hit summaries only, since they were on
going coaching issues. Remember, putting NTIs squarely on the table wont
be seen as going negative as long as theyre presented fairly and offset by
things the employee is doing right. But again, choose your words carefully. If
she feels under attack, the tips youre trying to embed in her consciousness
wont pierce her barriers of shame, guilt, and fear. Theres a world of differ
FACE YOUR FLAWS
Soliciting Frank Feedback About Your Perfor mance
t was 1994, but I can still see the shell-shocked faces of the other CEOs. In
Quebec City for an American Management Association conference, I had just
shared the results of my annual Roundtable Review (chapter 36), in which the
six vice presidents (departmental head coaches) who reported to me anony
mously listed their view of my strengths and NTIs. The NTIs were things like:
Youre very careful of your own time, but not always with others
ings to run late.
In quizzing deeply for problems, you come up with small, insig
ni“
cant things that waste peoples time on follow-up.
You try to come across as caring, but youre not always genuine.
Example: You asked an employee in the presence of his spouse the
name of another employees spouse. The “
rst spouse then heard
you go up and say, Hows it going, Mary?Ž The two spouses got
FACE YOUR FLAWS
The CEOs were aghast. I cant believe you let your people talk to you
like that,Ž one said. Hey,Ž I said, if theyre thinking it, I wanna know. At
least then I can deal with it.Ž Was it painful to read the negative stuff? Abso
lutely. You always like to think that your employees admire you. Dont kid
yourself. If youre committed to being the best leader you can be, youve gotta
let Toto pull back the curtain and expose the ”
aws of the great and powerful
Oz (that would be you).
Yes, the Tell me how Im doingŽ step in the Ask/Tell Technique (chap
ter 30) extracts some useful information, but there are some things employ
ees just wont say to your face. Digging up the really good dirt requires
three conditions:
Confidentiality.
For my annual Roundtable Review, the people who
reported directly to me wrote their critiques and submitted them to
HR, who merged and purged the comments and presented them to me
anonymously.
Receptivity.
Solicited brutally frank feedback must be accepted with
grace. Early on, I often heard comments like, You say youre open to
us giving you feedback, but you should see your facial contortions
when we do; its a kill-the-messenger look.Ž They were right. My
spoken gratitude was belied by body language that said Id rather be
walking barefoot over hot coals. I had to train myself to listen re”
tively, rather than defensively. Your organization will be unhealthy
unless your people can speak their minds (respectfully) without fear
of reprisal.
Con“
dential feedback has to be acted upon„quickly„lest
your people quit bothering to drop comments into the pipeline. I
For the record, heres how I responded to the three NTIs listed at the be
ginning of this chapter:
Youre very careful of your own time, but not always with others time.
respect your time and schedules.
In quizzing deeply for problems, you come up with small, insigni“cant
things that waste peoples time on follow-up.
Some nitpicking prob
You try to come across as caring, but youre not always genuine.
With
the number of employees and spouses we have, Im not able to
remember every name. I have asked, and will continue to ask,
somebodys name when I dont know it. I will, however, make sure
no one else hears me doing so. I would hope, though, that if
someone does overhear me they would think, Whats wrong with
ber his or her name.)
Occasionally I was hurt and frequently humbled by the criticisms. But I
tried hard to take them to heart and change what needed changing in order
Criticism may not be agreeable, but it is
necessary. It ful“lls the same function as
pain in the human body. It calls attention
to an unhealthy state of things.
FACE YOUR FLAWS
COMMUNICATING CLEARLY
Less egotism, more empathy.
These four words enhance work rela
tionships because they scrub the vagueness out of communication.
Ultimately, success depends on how well you communicate your
ideas and how well you receive feedback.
Acquire listening skills.
vided attention.
Be concise.
Sharpen your
public-
speaking skills.
Speaking to groups inter
nally and externally leverages the power of your words and spreads
your companys goodwill. For best results, prepare a killer outline,
maintain eye contact, use stories, and interact with your audience.
Ask and tell.
Cast a wide idea net.
Fresh ideas fuel organizations. Tap your
people, especially if they have direct contact with customers. Make
Structure feedback.
Breaking operational reviews into varying
formats and frequency (weekly, quarterly, biannual, annual) makes
them manageable. Capitalize on opportunities to offer spontane
ous praise and corrective critiques.
Schedule regular
one-
ones with employees.
Request brutally honest feedback.
Painful as it may be, youre best
off knowing what employees think of you. Keep it anonymous, ac
cept it graciously, and offer a detailed response to show you take
their input seriously.
COACHING OTHERS
Cheering and Steering, Not Domineering
eople make decisions emotionally and justify them intellectually.
Thats
the “rst thing I share with business owners who tell me theyre baf
ed by their employees. Man,Ž they say, I just dont know how to
deal with these attitude problems.Ž Its dif“
cult for seat- of- the- pantsers to re
alize that it takes more than raw wits or charisma to inspire employees. People
will not run through walls for you unless you forge some sort of emotional
connection.
My dad preached the virtues of humility and empathy for as long as I can
recall. Louis Schmidt, my dads platoon of“cer in World War II, poignantly
recalled his example. When Bill came in as “
rst lieutenant, he was a breath
of fresh air because we got somebody who really cared about the guys,Ž
Louis said, pausing to compose himself, more than he cared about himself.Ž
The late A. Bartlett Giamatti, former president of Yale University, called
leadership the assertion of a vision, not simply the exercise of a style.Ž Allow
me to build on that. Enlightened leadership demands the
that inspires
followers, the
values
that earn their trust, and the
vitality
to march them to
the Promised Land. With all three in place, a leader is like a lantern that
lights the road, beckoning,
Come, follow me.
Burn four words into your consciousness:
Manage things, coach people.
Manage people impersonally and theyll resent being treated like cogs in a
machine. Coach them individually and theyll ”
ourish. Its your choice„
ployees need„then the shift will be a grind. Youll only make things worse
if you apply these principles without buying into them. People can smell
insincerity.
Seat-of-the-pantsers typically come in two types: Type A, dictator, hard-
tional, and spiritual well-being to deepen connections and inspire achieve
ment.
The good news is, Type E leadership is contagious. The more you act
like an enlightened entrepreneur, the more likely you are to infect employ
ees with the Type E bug. Symptoms include decisive movements, a sparkle
in the eye, and a spring in the step. Enlightened entrepreneurs realize
theyre at the service of their employees. That means that personnel devel
opment ranks up there with locking up the store at night. When people
sense youve got their best interests at heart, theyll rise to the occasion, if
only to justify your con“
dence in them. Novelist Hermann Hesse illus
trated the service-leadership connection in
Journey to the East,
in which a
humble servant in a mystical organization is revealed to be the groups wise
and exalted leader.
What kind of coaching are we talking about? A Lamaze childbirth
coach comes to mind. Or a golf or tennis coach. Someone who stays close to
the action, offers tips, and patiently corrects technique. Good coaches are
incurable optimists. They view people as unique human beings, each capable
COACHING OTHERS
of greatness. They ask insightful questions and nudge people to craft their
own solutions.
With the right attitude, anyone can become a good coach. Soon after
Scott McPhee joined us as regional manager, we relocated him to Iowa, our
ing on tires they purchased somewhere else. Scott struggled. He had been a
hard- driving regional manager elsewhere, but his my- way- or- the- highway
style wasnt in sync with our culture.
Scott was a systematic guy, but a poor listener. I didnt pay much atten
tion to what others thought,Ž he admitted. I always got results by ordering
employees around, but that starts to wear on people.Ž He started noticing
that the Iowa store managers were working against him. Moribund sales
and high turnover signaled that it was time to pay a call on Scott. A stand-
up guy, he admitted he was in over his head. Again, I urged him to coach
rather than manage, to get to know his team and learn what made them
tick. Ask more questions, I said. Partner with people instead of laying down
the law. I “nally got it,Ž Scott said. I realized I had to transition from
preaching to teaching. Instead of
telling
people what to do I had to
inspire
them to do it.Ž
Good coaches also know that leading is more important than doing. De
vote more of your time to inspiring and educating the people who report to
you. Otherwise, theyll feel youre oblivious of their hard work. Theyll think,
Why should I knock myself out? Ill just do enough to get by. Nobody will notice
anyway.
That leads to„you guessed it„lots more work for you. I learned
this lesson “
rsthand from observing one of my Shell Oil dealers in Chicago.
Roger was one of the smartest guys I knew. He was also the most frenzied.
Every time I stopped by, he was working his tail off while his employees
agement lesson if ever I saw one.
I wasnt surprised a few years later when I
heard Roger had gone out of business.
Sometime in the early 1990s, I started feeling uneasy about the titles we
were using„CEO,Ž vice president,Ž supervisor.Ž Traditional titles just
mote the ideals of employee development and teamwork. As I watched an
Convinced I had discovered the Holy Grail of workplace harmony, I
pitched a title overhaul to my executive committee. Instead of CEO, I would
be Head Coach. Our CFO would become Chief Financial Coach. Store
managers would be converted to Store Coaches. Employees would transform
into teammates and customers into guests (fansŽ seemed a bit presumptu
ous). I explained to the committee that the effects would be electrifying„
our people would stride with purpose, relationships would blossom, morale
would soar.
The executive-committee vote was unanimous. They hated it. Down to
my last option, I turned benevolent dictator and overruled them (a rare
move). The grumbling didnt last long. Within months, the new titles started
to feel like cozy old sweaters. A year later, nearly everyone was on board and
extolling the new names to visitors and recruits. (It was just more validation
that most new ideas go through four stages: rejection, ridicule, acceptance,
and I knew it all along.Ž)
As far as I know, we were the “
rst company to adopt coaching titles; Im
still waiting to hear about the second. Im not surprised no one has followed
suit. It is a radical change. For the sake of clarity, some teammates carried
Coaching titles havent caught on, but the coach approach has swept
through Corporate America. Twelve years ago, when I met Lee Iacocca at
Executive Focus Internationals annual forum in Orlando, Florida, I asked
him if hed consider consulting for Tires Plus. Sure, he said, and asked for my
COACHING OTHERS
business card. He looked at it and saw Head CoachŽ under my name.
Whats wrong with you, boy,Ž Lee said, dont you want to be a CEO?Ž I
said no, I liked being a Head Coach. He looked at me like I was crazy. I told
the Iacocca story to Nike CEO Phil Knight when I ran into him in India
napolis at a NCAA Final Four game. Youre right on and Lee was dead
wrong,Ž Phil said. Its all about coaching.Ž Titles can be powerful instru
ments of change. But whats more important is switching from a managerial
DARE TO CARE
Kindness and Empathy Wins Hearts and Minds
ee Hock, chairman emeritus of Visa International, penned some of the
wisest words ever written about coaching. Essentially, he supersized the
Golden Rule:
ake a careful list of all things done to you that
you abhorred. Dont do them to others, ever.
Make another list of things done for you that
you loved. Do them for others, always.
tered the hardŽ skills of
leadership„from strategic planning to managing
Still not buying the kindness quotient? An undercurrent of mean-
spiritedness, or even benign neglect, produces a culture of fear and loathing.
All my life, till I was forty-two, I had scoffed at the notion that kindness
and empathy were the bedrock on which leadership was built. My faith was
in ruthless ef“
ployees would lead to greater stability and higher pro“
ts.
When I started my own company, I vowed to take only the best elements
of Shell Oil with me. But some of the bad ones tagged along, too. I was like
the product of a dysfunctional home who rebels against his familys unhealthy
cerned about proving how great I was than about being a good leader. I didnt
understand that I was managing too much with my head and not enough
with my heart.
It wasnt until I shook off the trauma of personal and professional ca
lamities that I realized that learning how to be a better leader begins with
come an enlightened entrepreneur. The “
rst step is a commitment to contin
ual improvement. As French critic Charles DuBois wrote:
The important thing is this: to be able
at any moment to sacri“ce what we
are for what we could become.
Dont pay attention just when people are screwing up. Add some drive-by
praising into the mix. When you notice what theyre doing well, theyll listen
to your constructive criticism in the right spirit. Theyll think,
My boss is a
sistant at Tires Plus. She was smart, quick, and dogged. She knew when I
DARE TO CARE
needed help before I even knew I needed help. One morning I called her into
my of“
ce. Dorie,Ž I said, I just wanted to tell you I think youre doing a
super job.Ž For ten minutes I rambled on about her skills, dedication, and
cheerfulness. Her efforts meant a great deal to me personally and profession
ally, and I told her so. The odd thing was that Dorie, a perfectly stoic Min
nesotan, just sat there stone-faced, occasionally nodding her head. All in all
she looked rather blasé, like I was giving a dish-by-dish of every meal Id
eaten for a week.
Thats okay,
I remember thinking,
I just want to make sure
she knows how much I appreciate her contributions
. Later, Dories teammates
told a different story. One stopped me in the hallway. What did you say to
Dorie?Ž he said. Shes beaming from ear to ear and telling everyone about all
the compliments you paid her.Ž
Praise sticks when its personal. Extend the life of your compliment by
naming who the smooth moves helped, and why you appreciate it so much.
Everyone likes to hear Hey, nice work.Ž But to leave a tattoolike impression,
try, Wow, heck of a job. That really helped the team and our customers.
Thanks for caring enough to make it happen.Ž
If nothing revs an employees motivational motor like positive strokes,
why are bosses so miserly about handing them out? A recent Gallup Poll
showed that 65 percent of workers received zero recognition for good work
the preceding year
. Ive rounded up seven of the usual suspects:
Not Enough Time.
Baloney. It takes ten seconds to light some-
ones afterburners. All you have to do is pay attention to what, and
who, is right in front of you.
What, Im supposed to congratulate people for doing what I pay them to
do?
Yes, if you want those results to be repeated, if not eclipsed, and
you dont want employees jumping ship. Dont wait till they climb
over the rail. If someone goes from 70 percent of goal to 78 percent of
goal, hey, thats reason to celebrate. One of my mottos is,
youre not performing, you get kudos for trending!
Too
Touchy-
Feely.
The sad truth is that relating to an employee
on anything resembling a personal level is foreign to a lot of leaders.
To give someone a genuine compliment, youve got to connect, one
human being to another. No disrespect, but if somethings preventing
you from doing that, deal with it.
I Get No Reaction.
As I discovered with Dorie, raving about
an employee to her face can produce deadpan looks. But the praise
still makes a huge impact. Tell a child how wonderful he is and he
beams. That joy doesnt fade as we get older; many of us are just too
reserved to express it in front of an authority “
gure.
Dont Wanna Overdo It.
Ever hear of somebody overdosing on
genuine compliments? Have
you
ever been fed up with too many?
ees will see through it.
Gotta Hold On to Power.
It takes a strong ego to lift up some
body elses. Too many seat- of- the- pantsers play one- upmanship with
rules that assume
If I acknowledge how good you are, I mustnt be as
Ill Pay for It.
Wise and all-knowing leader that I was, I used to
unilaterally assign goals to people. When no one was as excited as I
was about reaching them, as was often the case, I was mysti“
ed. It
there among the stars.Ž What I was oblivious of was that this actually
created a locomotive streaking toward a
head-on collision with hu
man nature. I assumed that people would just barrel along until they
ran out of steam. But people dont work that way. A goal thats too far
out of reach is a
demotivator
. Discouraged employees think,
Whats
the point of even trying? I could work 24/7 and still come up light-years
short.
That hopelessness is contagious, and team morale inevitably
nose- dives.
The solution? Either scale back the goal or help your employee put
it into perspective. Stretch goals dont necessarily need to be hit to
When it comes to motivating employees, its not always your job to do the
heavy lifting. Ask team members to name three ways they could improve
Turning the Review into a Coaching Session
ne day two decades ago, I was sitting at my desk, ”
ipping through an
employees annual review and growing more frustrated by the minute. I
remember thinking,
tions,Ž drop in the employees “le.
I recalled the words of W. Edwards Deming, the father of Total Quality
Management. He said the standard review nourishes short-
term per
for
mance, annihilates long-term planning, builds fear, demolishes teamwork,
nourishes rivalry, and leaves people bitter.Ž No wonder so many entrepreneurs
feel like going on vacation come review time. Sitting at my desk, I thought,
multiple-
choice questions are pointless. What should I really discover about
employees at review time?
I jotted down four questions:
Whats he done in the past year versus what he said he would do?
Whats he doing well that I can reinforce?
Where does he want his career to go, and how can we help?
The best snapshot of this, I “
gured, would require observations from four
angles: the employees, his subordinates (if applicable), his peers, and mine.
Armed with this no-holds-barred critique, Id sit down with the employee
and go over his Goals Activity Report and his individual operating plan (an
Review results.
Wed brie”
y check the status of his
operating-plan
goals and other high-priority objectives that he was assigned during
the year. This was largely an overview, since Id been monitoring his
progress during our weekly one-on-ones (chapter 32).
Assess strengths and developmental needs.
First, Id ask the em
ployee to read me the positive attributes he listed in his self-appraisal.
Id endorse his assessment, then share his subordinates laudatory
observations: Okay, Joe, heres what your team members had to say.
Four of them said youre really caring; three say youre running tighter
Next, it was time to move on to NTIs (need-to-improve areas). Id
say, Now, lets review everyones tips, including your own, for how
nual Review.Ž (I always prepped by studying the employees previous
annual reviews.)
The best employees were realistic about the review and used it to
their advantage. All that honest feedback taught me a lot about my
self,Ž said Hank, a key exec. But if I had ten or twelve things that
needed improving, I was never crazy enough to think I could “x all of
them. Id pick out the top “
ve and work on those for the year.Ž Hank
paid par
ticular attention to the multiple complaints and ignored the
one-offs. Maybe you ticked somebody off and it was payback time,Ž
he said. Welcome to the world of management.Ž
After wrapping up the NTIs, Id recap and af“rm what was going
well: Overall, Joe, youre doing a super job. Youve got a great out
lenges we discussed, like keeping your temper in check, clamping
Look to the future.
Id ask him to read me his self-appraisals career
goals, both two and “
ve years out. If his abilities matched his ambi
tions, Id help him determine the action steps that would take him
from daydreaming to day-doing. If he wanted to nab a promotion,
Id suggest a seminar or mentor, which hed duly record in his Goals
Activity Report. Finally, Id congratulate him and thank him for his
efforts.
Brad Burley credits the Roundtable Review for his promotions. I
was very comfortable expressing my career goals to my supervisor,Ž
Brad said. Out of those discussions, I went from being a store man
ager to being a wholesale sales manager to being a regional manager.
That kind of upward mobility was built into our system.Ž
The Roundtable Review is a potent developmental tool. So I got
REWARD RESULTS
Matching Incentives to Outcomes
ike all entrepreneurs who pour every last dime into their company, my
cofounder, Don, and I got nervous whenever business hit the skids. What
made me really nervous early on, though, was when nobody else was nervous.
No wonder theres no urgency,
I remember thinking.
Everybody else is on straight
salary. They dont have an incentive to make us more pro“table. Yet if revenues
dry up, Don and I dont get paid.
What was wrong with this picture? Seeing the ”
aw changed everything.
A couple months later, we installed an
incentive-
based compensation plan. It
took awhile to coach everybody through it, but we tied a portion of most ev
ery employees salary to individual, team, and or
gan i za tion al per for mance.
Suddenly, a gust of wind hit our sails. Slackers
were exposed and cut loose.
Stars netted big bonuses. Productivity soared.
Yet it wasnt all about money. Fat paycheckŽ barely cracks the top ten in
employee motivation surveys. Consistently topping the list are intangibles
like challenging and interesting work,Ž involvement in decision making,Ž
feeling respected and valued,Ž the ability to make a contribution.Ž Salary
REWARD RESULTS
and vacation time are closer to the bottom, believe it or not. Wanna know
what seat-of-the-pantsers call motivators? Turn that list upside down.
By my lights, compensation lures employees more than surveys suggest
and less than employers would like to think. Sacks full of cash might make
people stick around, but they arent necessarily going to make happy camp
ment where extra effort equals extra pay.
The X-factor here is human nature. Motivational motors sputter and
sider the possibility that the reward systems they have installed are paying off
for behavior other than what they are seeking.Ž A few institutional follies:
We hope for teamwork and collaboration, yet reward only
individual effort.
We hope for innovation and risk taking, yet reward the errorless
status quo.
We hope for long-term strategic thinking, yet reward quarterly
earnings.
They sound like obvious and curable maladies until you realize how deeply
theyre ingrained in the business world. After reading Kerr, whenever I saw
something that just didnt seem right, I asked myself,
What behavior are we
really rewarding?
This led me to create the farm systemŽ to reward store
managers for developing assistant managers (chapter 16). Without the farm
be backed up by reward. Its folly to tie a store managers bonus to his teams
perfor mance, and then expect him to tell us when his assistant manager was
ready for promotion. The “
rst time he sees one of his protégés whisked off to
Human nature is a powerful force that must be reckoned with. Before
launching a new initiative, shut your of“
ce door and take a few minutes to
consider its real-world consequences. Close your eyes. Slip on the shoes of an
One last thought on incentive. Ask yourself,
Would I work as hard if I
didnt have a piece of the action?
Where appropriate, we let key execs invest in
the company. The payback was phenomenal. My commitment and loyalty
were heightened when I became a shareholder,Ž said Jim Pascale, who headed
up our franchise operations. Jims equity spurred a
no-limits attitude. It
made me care about every aspect, not just the division I was running,Ž Jim
said. I was willing to help everybody and work more cooperatively to do
whatever had to be done.Ž
GOOD LUCK
Freeing Up the Future of Underachievers
n the early days, I was so doggedly loyal that I terminated people only for
serious underperfor mance or egregious offenses. It was a major shift to re
alize that welfare management„failing to hold people accountable and al
lowing the wrong people to stay in key positions„hurts everyone. It took
years to learn to be both compassionate and tough. Once I balanced my
personal resolutions with my professional duty, the termination process took
on a life of its own. In fact, it often culminated with an underachieving em
ployee offering to terminate himself, and there was almost always a sense of
relief.
Take one of my former top execs. A nice guy, he had been with us for years
but repeatedly failed to provide accurate, timely reporting on critical issues.
After one too many broken promises, I called him into my of“
ce. I asked how
important he thought it was to consistently produce these reports. He agreed
it was essential. He also acknowledged that we had established mutually de
ned objectives and that he had consistently fallen short of the mark. I then
asked, What do you think should happen here?Ž Crestfallen but with honor
intact, he replied, I think I should probably leave.Ž I hesitated for a moment,
to acknowledge how dif“
cult this was for him. Yes,Ž I said, I think youre
right. Congratulations for that awareness. I really appreciate everything youve
done for this company, and well do everything we can to make this a smooth
transition.Ž Visibly relieved, he left to type his resignation letter. We supported
him until he found another job.
tion. Personnel pioneer Robert Half had a nice way of putting it:
Theres something more scarce than ability;
its the ability to recognize ability.
COACHING OTHERS
Aspire to Type E (Enlightened) leadership.
People make decisions
emotionally and justify them intellectually. People will run through
walls for you once youve forged bonds. Type E leaders achieve
sustainable results through “
rm, but caring, leadership.
Manage things, coach people.
See each person as a unique human
being capable of greatness. Become a steady stream of constructive
feedback. Ask insightful questions and nudge people to craft their
own solutions. Coaching is the best way to maximize the potential
of everyone in your organization.
Care about your people.
Yes, business leaders need to master
ees has a big impact on pro“
ts.
Pour on the praise.
Sincere words of praise are necessities, not lux
uries. They inspire con“
dence, shore up self-esteem, and reinforce
good habits. People will go the extra mile when you start tossing
out drive- by praising.
Cocreate challenging (not impossible) goals.
motivate. Avoid either extreme by involving people in the pro cess.
Exploit per
for
mance reviews.
Transform this annual rite into a
real-world educational tool. Toss the generic forms in favor of an
interactive process that reinforces success, corrects stumbles, and
advances career and personal goals.
Match incentives to outcomes.
Examine your reward system when
you “
nd yourself wondering why you have listless employees. Ask
yourself,
What behaviors are we really encouraging?
You may be un
wittingly rewarding the wrong kind of conduct.
Avoid welfare management.
The drawbacks to loyalty reveal them
selves when you hold on to underperformers whore pulling every
one else down. Be compassionate and tough, ask good questions,
and people will often terminate themselves. Unless “red for cause,
support departing employees and help them in their transition.
EDUCATING
EMPLOYEES
Riding Employee Development to the Top
ome years ago, a junior IBM executive lost the company $10 million
when a deal blew up. Shortly afterward, CEO Tom Watson Sr. called
the young man into his of“
ce. When the contrite exec said, I guess you
want my resignation,Ž Watson replied, You cant be serious, son. Weve just
Hard- line “
scal hawks may squawk, but the yields on
human-
capital up
IDENTIFYING ROOKIES, PROS, AND FALLEN STARS
Enlightened entrepreneurs take into account the natural four- stage pro cess of
learning and unlearning that governs most peoples career arc. As Alvin Tof”
wrote, The illiterate of the 21st century will not be those who cannot read
and write, but those who cannot learn, unlearn, and relearn.Ž Heres my spin:
ened his skills and is starting to shine. Yet hes still humble, and eager
to master every challenge that comes along. He sees with the begin-
ners mind,Ž as Japanese Zen priest Shunryu Suzuki- roshi calls it, a
mind fertile for limitless learning and growth.
gance. Now, corners are tempting to cut.
Sure, I ll try that
morphs
into
Been there, done that
. A good coach recognizes the signs and is
sues a wake-up call. Some of your employees will respond; the others
will hit the snooze button and drift into the next stage.
careful. He no longer knows what he needs to know in order to keep
pace. The golden boys glitter has faded, but hes too busy taking long
EDUCATING EMPLOYEES
lunches and admiring old press clips to notice. Hes ”
ying by the seat
of his pants straight into turbulence„shifting trends, technological
Sometimes an involuntary plunge is precisely what a former star
performer needs to break his sense of entitlement. After years as one
of our top store managers, Warren was neglecting the basics. His
stores revenue and morale were tanking. Motivation didnt work.
Probation didnt work. After eighteen months, concerned about the
message we were sending to other employees, we were forced to let
him go. A few years later, Warren called and offered a heartfelt mea
culpa. He said he had matured and asked for another shot. After two
months of retraining, he roared back and reclaimed his star status.
Warrens comeback illustrates the value of customized coaching. A
seat-of-the-pants leader acts impulsively without seeing employees as
individuals. He sometimes reaches for motivation when he should
grab education. Sure, an inspired employee will try to leap over a
moat of alligators„but its safer for everyone if you teach him how to
lower the drawbridge. The following rules may have a whiff of Man
agement 101, but seat-
of-the-pantsers violate them like speed limits.
ON- THE- JOB LEARNING
Building Your Educational Infrastructure
employee-
education equation is Zen simple:
more input
more output
Input education and your people will output more productivity. Youre the
conduit: Share what you know about building a business. If you keep it to your
Employee education stretches beyond
work-
related subjects. The best edu
cation is multidisciplinary, reaching across all of lifes arti“
cial boundaries.
Well-rounded employees with mature, sophisticated viewpoints are more likely
to become happy masters of their craft. Focus on education had a lot to do
with our low turnover,Ž noted Jim Pascale, our franchise operations veep. The
more educated you are, the more productive and ful“
lled you are.
The building blocks of employee education are:
Training.
Minneapolis headquarters, Tires Plus University included classrooms,
an auditorium, and a virtual store complete with showroom and
service bays. (In-house universities are expensive, but ours paid for
itself in no time.) We enrolled new employees in weeklong courses
with three primary objectives. First, TPU, as we called it, taught
standardization„indispensable to an explosive out“
t with employees
from Milwaukee to Denver. Second, TPU made store responsibilities
second nature for new hires, so they hit the ground running at their
rst store. Third, TPU taught product knowledge. Nobody in the
tire industry knew their black goldŽ like our staff. With reassurance
and a smile, they provided customers with manufacturer specs„as
TPUs Accelerated Management program put select employees on
the fast track, a must for a growing company. Eventually,Ž said Chris
Koepsell, TPUs dean, we reduced the training timeline from six to
twelve months down to three months.Ž The approach was simple„
identify the skills necessary for the position, identify an employees
skills, train to the gap.
The formula also applies to bosses, especially the entrepreneurial
variety. Most people start a business because it allows them to make a
living doing something they love. Unlike me, some of my car-loving
competitors paid more attention to brakes and oil pans than bud gets
and operating plans. Every minute under the hood was another min
ute they werent sharpening their leadership skills. (By all means,
tinker away if staying comfortably small is your game plan.) The sad
truth is, if a restaurateur is more passionate about her dishes than
improving her business skills, shell gradually become overwhelmed
by the daily demands of a growing business. The inevitable frustra
tion that follows may crush the food passion that led her into busi
ness in the “
rst place.
Familiarity breeds boredom. A new face in
the of“
ce complements your in-house experts. Mike Norman, a fran
chisee for Dale Carnegie Training, lit a “
re under a hundred of our
regional and store managers during a half-day leadership workshop.
At the time, we needed to reinvent ourselves and quit relying so
much on internal leaders to educate and motivate employees,Ž said
Chris Koepsell. I always looked to the horizon for fascinating special
ists who could speak on anything from business trends to psychology.
Send employees to workshops that “
t their positions„and
dont neglect yourself. I took notes and collected handouts at numer
ous classes, conventions, and seminars so I could re-present the con
tent to our management team.
I periodically asked my executive team to read a business or
personal- growth book. Id assign everyone a chapter or two to sum
marize at an upcoming meeting. The reaction was predictable„
nobody liked homework, but everybody liked having done it. I have
a belated appreciation for Toms emphasis on downloading informa
tion about successful people and companies,Ž said Dave Wilhelmi,
Mentoring is a terri“
c way a business owner can leverage
one employees strengths to educate another. Mentors and mentees
Tuition assistance.
In the early days, Steve Varner was a wholesale
rep eager for a fresh challenge. We obliged with an assignment to the
collections department, followed by a bump up to credit manager
that required him to squeeze people for money. Figuring there was
more to the job, Steve signed up for a credit- and-“
nancial-management
course at the University of Minnesota. We were thrilled, and paid
ally replaced me with somebody from the outside.Ž Hes right. Our
rapid growth demanded that Steve know everything from calculating
a customers credit risk to interpreting antitrust and collection laws. It
was a classic win-win. Steves bad-debt ratio was well below industry
benchmarks, and his stewardship played a key role in the growth of
our wholesale division.
Encourage your people to advance their education however it “
into their busy lives. Its dangerous to assume they already have what
it takes to play in the big leagues. Night and weekend courses make
an immediate impact. Web-based distance learning makes formal
education more convenient than ever.
DELEGATE OR DIE
Deputizing Your Staff Multiplies Your Impact
ver-delegation is in the eye of the delegator. One of my key execs listed
delegates too muchŽ as a weakness on his annual review. His staff
disagreed„70 percent said he didnt delegate enough. My advice on delegat
ing can be summed up in three words: Let er rip! It develops employees like
nothing else can. Hand over anything your people can do
quicker than you
at less cost than you
that will add to their development
that will free you for more important pursuits
Under-delegation is rampant. Micromanagers, take note. Many seat-of-
the-
pantsers wear their re
sis
tance to parceling out tasks like a badge of honor.
Others conceal it behind a wall of bravado. There are myriad excuses for
under- delegating. Theres the
elsewhere. Theres the classic
I-can- save- time- doing- it- myself syndrome
ditional assignment each week to seven people who report to you crosses
thirty assignments off your to-do list every month. Another malady is the
Somebody- else- might- make- a-mistake syndrome.
Mistakes
will
be made, but
thats exactly how people develop the experience needed to free you up for
more meaningful activities.
Other conditions that cause under-delegation include the
Fear- of- giving
the- wrong- impression syndrome,
marked by concern that youll appear to be
carrying less than your own weight. In fact, respect deepens when you place
your trust in others and focus on the big picture. Theres also the
I-feel-
threatened syndrome
„fear of being shown up by a subordinate. That leads to
ects poorly on you. Last, theres the
I-might- lose- control syndrome
. Hey, no
problem, people love working for a control freak in an of“
ce gulag.
Good leaders occasionally use overt nondelegation to emphasize a point.
Take the Monday morning Eric Randa, our loss-prevention czar, and Wayne
Shimer, head of recruiting and retention, our retail operations V.P. at the
time, stopped by a Wisconsin Tires Plus store. They walked past soda cans
and other weekend detritus spotting the lawn on their way inside only to dis
cover the store manager and two associates standing around. Now, under
Nobody ever accused me of under-delegating. Tom was a dedicated del
egator,Ž Wayne recalled. He forced me to be better by getting me to do
things I didnt think I could do. The downside was that Tom was so strong at
it he would sometimes over-delegate. His logic was that he never knew how
far he could challenge you to “
nd your end point, and Tom wanted to “
that end point. If your optimum capacity was 98, he wanted you at 97.9.Ž
I do tend to overload people. But thats so they learn to unload lesser pri
orities. But theres a “
ne line. You have to trust that people will yell Uncle

Back in chapter 32, Wayne mentioned the time he had 135 items on his
Goals Activity Report. I just became adept at “
guring out what Tom really
DELEGATE OR DIE
wanted done,Ž Wayne said. What were the $10 items, what were the $5
items, what were the $1 items? I took the $10 items and worked the heck out
of em. If he hit me on an uncompleted $5 item, hed grill me some, but he
never brought up the $1 items. His motto is, Be tough, not rough. Im con
vinced he walked out of the building at night smiling and thinking,
Experience has taught me that tough-not-rough delegation bene“
ts every
one. Still, Im not surprised that many seat-of-the-pantsers refuse to hand off
enough work: willy-nilly delegation creates more problems than it solves. Be
fore plopping assignments on desks, do your delegation due diligence.
Here are ten delegation directives:
Transfer Own
ership.
Be clear: Here you go, this babys all
yours now.Ž
Tell Why.
An employee who understands why shes being asked
to handle a task is more likely to execute it thoroughly.
Get the Wheels Turning.
For complex projects, help the delega
tee develop an action plan by asking
open-ended questions like How
do you see this unfolding?Ž and What roadblocks do you anticipate,
and how will you overcome them?Ž
Set Deadlines.
Mutually agree on a completion date and time.
Otherwise, the task may sink to the bottom of the delegatees priority
list.
Ask for a Recap.
Dont assume the delegatee perfectly under
stands the assignment. Always double-check: To make sure I com
municated clearly, please explain what youre planning to do and
why.Ž The answer may surprise you.
Monitor (but dont smother).
The point is liberation, so dont
micromanage unless the delegatee is untested or timing is critical. If
she starts down the wrong path, say something like, That might
work, but have you considered going in this direction? What do you
think that could yield?Ž Remember, the weekly one-on-
one employee
Take-
Backs.
Dont retract an assignment at the “
rst sign of
trouble. That hurts con“
dence. Setbacks are learning opportunities,
so coach the delegatee back on track.
Play to a Delegatees Strong Suit.
Tailor assignments to peo-
ples strengths. Dont saddle a big-picture thinker with a pointillism
project.
Dont Duplicate.
Assign speci“
c duties to speci“
c people, with
zero overlap. If there are two people involved, make it clear whos in
charge.
10.
Distribute Evenly.
Up-and-comers need challenges, too. Avoid
the temptation to overload your stars.
TEACH, DONT PREACH
Making Lessons Stick
told him what to do and how to do it„and he still screwed it up!Ž When
ever I hear this complaint, I agree that someone indeed screwed up. The
culprit, however, was usually the guy doing the venting. You cant just throw
information at people and expect them to pro
cess it the same way you do.
Nobody shares your precise experiences and frame of reference, so a few links
understand? Stated gastronomically: Digesting and assimilating raw infor
mation requires a committed chef to chop it into bite-size chunks and sauté it
in encouragement.
Teaching is as simple as the Confucius Checklist. But seat-of-the-pantsers
usually abandon it after the “
rst step, oblivious that barking orders on the
run wastes more time than it saves. Each step takes them a quarter of the way
toward learning what you know.
Tell him.
Show him.
Watch him do it and offer feedback.
Watch him do it again.
Say youre coaching an employee to “
eld calls. Start by reviewing the pro
tocols point by point. Next, take a call yourself and handle it with your usual
aplomb. After hanging up, smile and ask him to take a stab. Watch closely.
When he “
nishes his call, critique his perfor mance: Nice job, Larry. You
were polite and friendly, the qualities we look for. A couple minor things.
Remember to offer your name before, How can I help you? Try not to hem
and haw so much. Project con“
dence. All right, lets try it again.Ž Watch and
listen once more. If he nails it, give him the thumbs-up and move on to the
next student.
The Confucius Checklist is grounded in a basic truth„information turns
into knowledge when we understand how it applies to us, and knowledge
turns into wisdom when we absorb it and act on it. This pro cess has inspired
leaders for twenty-“
ve hundred years, ever since Confucius (one of the earli
est enlightened entrepreneurs) said:
Tell me and I will forget.
Show me and I might remember.
Involve me and I will understand.
STRATEGIES
Putting the SuccessŽ in Succession
usiness abhors a vacuum. I tossed and turned many a night worrying
ture potential turns your staff into a major-league team while also producing
resource-
ing the next surprise departure or summoning the courage to act when an
employees poor perfor mance forces your hand.
Here are ten succession strategies:
Dont Procrastinate.
Begin today planning developmental ex
periences for tomorrows leaders. People need a chance to test their
wings before you push them out of the nest. Focusing solely on the
here and now carries a high cost„frequent turnover, operational
interruptions, squandered human capital. To paraphrase Professor
Harold Hill from Broadways
The Music Man,
Planning Purely for
the PresentŽ starts with
which rhymes with
and that stands for
Trouble.Ž
Develop a Deep Bench.
Routinely prepping people to take on
more responsibility minimizes the chaos created by a surprise resig
nation. I never knew when I was going to need a new store man
ager,Ž said regional manager Brad Burley, so I always had two or
three candidates lined up. It was great for morale because people
knew there was a plan to help them advance.Ž Employees can sense
when their departure will hurt you, and sometimes they subtly ex
ploit it.
Ask, Dont Assume.
Its easy to think,
Jakes a sales guy; I
cant see
him as a customer service rep.
Well, maybe Jake can. Dont wait for an
annual review to discuss career goals. Its a natural thing to chat
about in the parking lot. Ask about employees interests and where
they see themselves two years and “
ve years down the road.
Cross-
Train.
Challenge people to learn new skills, especially in
unfamiliar areas of the company. Start by asking them to back up
colleagues during vacations, illnesses, and so-busy-I-cant-think peri
ods. If they resist, nudge them out of their comfort zone and encour
age them to stretch. You wont produce any butter”ies if you allow
Prevent Paranoia.
Its a safe bet people will feel threatened if
theyre asked to train somebody else to do their job. Assure them
their job isnt at risk. Explain that its critical for the company to
Move People Around.
Dont nail peoples feet to the ”
oor. Some
companies transfer managers to other departments every few years to
keep them fresh and ”
exible. (Newspapers routinely move reporters
SUCCESSION STRATEGIES
disparate parts of the company “
Use em or Lose em.
Theres a tendency to keep a potential all-
star right where he is because you dont want to risk replacing him
with someone less capable. Who knows how many Chris Speakes
there are out there. In the course of eight years, Chris climbed from
part-time tire tech to full-time sales to service manager to store man
ager to, “
nally, franchise store owner. If you dont allow people to
explore and express the full range of their God- given abilities, theyll
nd somebody who will.
Promote from Within.
When a job opens, the “
rst impulse
should be to pass the baton to one of your own. Choking off advance
ment by regularly hiring outsiders for key positions dashes employees
hopes and creates a culture of complacency. On the other hand, in
vesting in your peoples professional development, and then reward
ing them with plum promotions, delivers a powerful message: If you
apply yourself, anything is possible. It took years„and plenty of
Avoid Ruf”
ed Feathers.
Sure, sometimes its necessary to recruit
a heavy hitter with years of specialized training. In that case, let in
siders know that you took them and their feelings into account. Like
the time our less-
than-effective CFO resigned. Daily cash crises
were
poking holes in our suddenly porous “
nancial foundation. Somebody
had to step up„fast„and plug the leaks. Luckily, we countered the
wolf at our door with a Wolf of our
own„Jim Wolf, our treasurer.
Jim had brie”
y served as the CFO of a start-up, but a company our
size was a different ball game. I basically operated in survival mode,Ž
Jim recalled, and managed the cash on a daily basis to help us limp
through the “
rst half of the year. It was a stressful time, but it was
also a great opportunity to learn and perform under “
re.Ž Six months
later we hired Jim Bemis as permanent CFO, but Jim Wolf was
strongly considered. Tom was sensitive about my feelings, but I ac
tually felt good about the decision,Ž Jim said. Jim Bemis came in
sury and planning.
10.
Collect Names.
Keep a short list of all-star outsiders in case a
high-level position opens up that no staffer is quali“
ed for (or inter
ested in). When I ran across, say, an impressive CFO, I jotted down
his contact info. Ditto for quality referrals and great candidates we
didnt hire.
EDUCATING EMPLOYEES
Invest in education.
Make a healthy PR&D (people research and
Learn how people learn and unlearn.
There are four stages of
cordingly.
More input
more output.
creased employee education and increased productivity. Improve
their skills through every means, from books and seminars to
mentors and tuition assistance.
Develop via delegation.
Tough- not- rough delegation bene“
ts ev
eryone. Increasing employees responsibilities develops their con
dence and expertise. That frees you up for more important
pursuits.
SUCCESSION STRATEGIES
Follow the Confucius Checklist.
Tell an employee how to do
Plan for succession.
Development programs put the successŽ in
ductivity in their current job and grooming them for their next
move.
COACHING YOURSELF
Guiding Yourself to Peak Personal Per formance
y this section, youve learned a strong management methodology. But
setting it in motion, day after day, requires discipline, and that requires
self-coaching. Huh? Self-coaching?Ž What does that have to do with
ness psychology. Lets start with a de“
nition„self-
coaching is a systematic
way to inspire, educate, and lead yourself so you can be an effective, enlight
ened leader. Are you thinking,
Theres nothing wrong with me that doubling my
pro“
ts wont cure
? I used to think that, too. But I can assure you that self-
coaching„coupled with enlightened business
methods„will double your
pro“
ts.
Self-
coaching strengthens your organ
i zation
al skills as well as your
intellect, body, psyche, and spirit. That expands your capacity to lead.
Simply holding
The Big Book
means youre ahead of where I was at forty-
one, a year before life went all
Humpty-
Dumpty on me, before I was inter
ested in self-coaching. Had you met me back in 1988, you
wouldve seen the
facade of the Classic American Dream. I had the handsome family, the beau
tiful home. Every week I had time for church and shooting hoops with pals.
I had the growing company and prominence in the community. I wouldve
told you with an ear-to-ear grin and a “
rm handshake that life was good.
Real good.
Next thing I knew, divorce, cancer, and a business crisis laid me ”
at. My
twitchy nerves forced people to tread lightly around me as I tried to glue
ing where it says its healthy to feel my feelings.Ž A wicked internal storm
started splintering my defenses. I pummeled myself for six months:
You really
screwed up. You hurt your family. You ruined your business. Theres no way out
of this one.
tional breakthroughsŽ and spiritual connections.Ž
Maybe a shrink can tell me
whats wrong with everyone else,
I remember thinking.
This mess sure cant be
my fault.
Enter psychologist Brenda Schaeffer„contacting her was one of the smart
est calls I ever made. She helped me see that my choices and behavior were the
shovels that had dug the cesspool I was ”
oating in. It dawned on me that maybe
there was a higher purpose for the sledgehammer that had walloped me. The
words of philosopher Soren Kierkegaard started speaking to me:
A man may perform astonishing feats and
comprehend a vast amount of knowledge,
and yet have no understanding of himself.
But suffering directs a man to look within.
If it succeeds, then there, within him, is
the beginning of his learning.
Humbled, I began exploring healthier lifestyles. I read books and at
tended seminars on psychological and spiritual wellness. I overhauled my
ments), and individual and group therapy sessions “
lled my calendar. I solic
ited blunt, objective feedback from friends and colleagues. Without naming
it, or knowing where it would lead, I had begun the pro cess of self-coaching.
COACHING YOURSELF
clarity and self-awareness enhanced my ef“
ciency and management skills.
My strategic and operational thinking grew sharper. To my delight, I was
connecting deeply with teammates. Better still, my healthier frame of mind
inspired healthier behavior in employees, who in turn produced a healthier
bottom line. Now Im actually grateful for that humbling trauma. It shook
up my priorities and steered me down the road toward enlightenment. Maybe
you can turn my screwups into signposts that keep you out of the ditch.
Self-coaching will help you:
Fulfill your promise.
There isnt much wiggle room in professional
sports contracts. Athletes must take care of themselves so that they
play at the top of their game. Likewise, youre agreeing to give your
best to your employees and customers when you start your own busi
ness. If you dont take care of yourself physically, emotionally, intel
lectually, and spiritually, you wont “
nd the stamina or know-how to
lead your team.
Leadership demands a passionate sense of pur
pose, clarity of mind, and stratospheric levels of integrity, energy, and
age to manage yourself, youre doomed to inspire your troops about as
well as Dilberts pointy-haired boss.
Improve relationships.
Its an aphorism that bears repeating:
People
dont care how much you know until they know how much you care.
you have more issuesŽ than
National Geographic,
youre too mired in
your own muck to care for the people under your watch. Youll also
remain mysti“
ed why people dont pay you the respect you think you
deserve.
Time management improves because youre focused, orga
nized, and alert. Better interpersonal and decision-making skills also
help dispatch more issues as they arise, preventing future course-
correction headaches. Sure, its tough to “
nd time to do everything
that coaching yourself entails, but avoiding it altogether will make
life harder than it should be.
proaching and comforting a struggling employee is an underrated
skill„and dif“
cult to pull off without going to school on it.
Think like a parent, even at work.
tic, your teammates are more likely to be upbeat and positive. If
youre moody and negative, youll have an of“ce full of grouches.
Make work more enjoyable.
Of“
ce life gets easier the harder you
work at self-improvement. You start going with the ”
ow instead of
posed to.
Among the more valuable currencies in
a team environment are superior organizational, management, and
people skills. Master them, and youll respond to crises with the
calmness and clarity of Sherlock Holmes.
All coaches need a playbook that spells out their championship strategy,
even for coaching yourself. Yours is the next seven chapters. It starts by clari
fying the life you were born to lead, then shows you how to realize that vision
GOT MISSION?
Crafting Your Personal Mission Statement
ne way to sharpen your focus is to put pen to paper„or “
ngers to
keyboard„and craft a personal mission statement. It helps zero in on
why youre here (surely theres more to life than worrying your mother).
The act of writing out a vision crystallizes conviction and trues up your
internal compass. It also unpacks the wisdom of the adage, The purpose of
life is a life of purpose.Ž When I act in concert with my mission, opportuni
ties are more obvious, big decisions come easier.
Youll avoid bolting up in bed some night with the horrible realization
that your dreams have gone unful“
lled, scattered to the wind like wisps of
smoke. Do the work you need to do, right now. Dont wait until you “
mission statement reconnected my head to my soul. Yet I dont expect it to
shield me from lifes vicissitudes. Chaos and calamity may pay me another
visit, especially when I lose focus and drift. The difference now is that its
easier to regain my footing. Thanks to the stability and perspective of my
mission statement.
FIRST THINGS FIRST
In the time it takes to see a movie, you can “ nish the “
rst draft of your mis
sion statement. Its a small price to pay„skipping the latest action ”ick„for
Find a quiet place and turn off the phones. You
may even want to tape a DO NOT DISTURB sign on the door.
tally go to a calm, peaceful place„a river valley, a mountain glade.
Experience it with all your senses and let the tension melt away.
Give your inner critic the day off and let ideas
ow.
This isnt
Jeopardy!
Take your hand off the buzzer and
your eyes off the clock. Take as much time as you need to tap your
longings.
To the extent you can, temporarily suspend your analyti
cal mind and material desires. Open yourself to a deeper source of
wisdom. Sure, lofty pro“
ts and business awards are worthy goals. But
you dont stand a chance of ful“
lling your destiny if your mission is
grounded purely in egotism and material desires. As Carl Jung wrote:
Your vision will become clear only when you
can look into your own heart. Who looks
outside, dreams; who looks inside, awakens.
GOT MISSION?
ASK THE RIGHT QUESTIONS
Take a deep breath, Clark Kent. Youre about to duck into a phone booth.
First, ask,
What was I sent here to do?
Yep, a broad question, one so often ob
scured by daily stressors. Narrow your focus by applying the question to lifes
most important quarters:
What was I sent here to do for
my spouse?
my parents?
my friends?
my career?
my community?
the earth?
my children?
my extended family?
the world?
my colleagues?
my country?
my spirit?
The only mission you can trust springs from your heart, mind, and soul.
Strip away everything that has limited you„money, age, health, family, geog
Nourish myself with more spirituality.
Build my communication skills.
Ignore distractions that impede growth.
Care and love more.
Guide people one-on-one and in groups.
Model healthy living and well-being.
Tap my Higher Source for wisdom and discipline.
Now imagine that one of the cool things you discover when you die is
answers to those two questions different? What parts of your personality
would you like to stand out? What deeds would you like to de“
ne you? Heres
what I jotted down after pondering,
How would I like to be remembered?
He was a loving son, brother, and mate.
He was the best father he knew how to be„a friend and mentor
to his sons.
He tried to “
nd the goodness in everyone and to bring people
together.
He shared his blessings.
He had a sense of humor, lightened the load of people around him,
and had fun.
He was caring, loving, and gentle with himself.
He stood up for his beliefs and challenged power in the name of
community.
He supported organizations that shared his values.
After harvesting all these ideas, I sifted them around and mixed in a few
more I plucked from my suddenly fertile imagination. Voila! My mission
practically wrote itself. Its a living document, but heres my latest:
To evolve toward an enlightened and loving state.
To strengthen connections to my Higher Power, family, and
friends.
To grow via education that integrates body, intellect, psyche,
and spirit.
To develop my knowledge and communication skills.
To build nurturing environments that contribute to the growth
of family and friends.
To contribute to colleagues by helping them develop their talents
and productivity.
GOT MISSION?
To teach leadership skills to organizations that improve
the world.
To tread lightly on the earth so future generations inherit a
To help people achieve their missions.
When you think youve got it, repeat your mission statement out loud a few
times to burn it into your consciousness. But dont just say it. Display it. Frame
it and hang it on your of“ce wall, or put it on your desk next to family snap
TRUTH OR
ure, your mission statement is a thing to behold, with the potential to
light up the world. But it isnt the Mona Lisa. You can print it out in
fancy fonts, frame it up, and hang it. Its still not a work of art unless it in
quences.
Youre being watched.
Put aside for a moment the nanotechnology
that makes cameras the size of pushpins. Look around. The people
who report to you are watching your every move. Our natural com
petitive impulse “
nds us keeping an eye on one another. So often we
TRUTH OR CONSEQUENCES
raise the bar higher for others than we do for ourselves. One slip and
were instant grist for the gossip mill. But its worse for the boss. Em
ployees model their leaders like children model their parents. Swipe a
few pads of Post-it notes and people will think that its open season
on the supply cabinet. Thats why I gave my assistant, Dorie, an on
going kitty of $100 to pay for personal expenses like snacks and post
age. I obeyed every rule and received the same discount on tires and
car repairs as everyone else.
Youll know it.
Some people fold themselves into logic pretzels to
justify dubious decisions. But deep down, where the best part of them
lives, they know better.
New York Times
columnist William Sa“
explained it well:
The right to do something does not mean
that doing it is right.
Take the time my company cars lease expired. I upgraded to a more
expensive model; however, pro“
ts were below expectations and the
entire company was in belt-tightening mode. Even if nobody so much
as raised an eyebrow, it didnt feel right to force the company to take
the hit for my higher car payment. So I asked human resources to
take an extra $300 a month out of my paycheck. Each year I also
asked HR to compare my compensation against our CPA “
rms na
Those rare occasions when I did compromise, my conscience
wound up costing me, often in subtle ways„I wasnt fully present
around others, or the lump in my stomach wouldnt go away. That
Do you sense you have an employee feeling guilty about a past
decision? Tell them theyre not alone. To the extent that you can,
speak broadly about forgiving yourself for past errors. Tell them they
orably. We already know that its deeply rewarding to do whats right
for the sake of doing whats right. So take the high road„theres less
traf“
Youre gambling with your good name.
When news broke that Ar
thur Andersen had shredded Enron documents and committed other
crimes and misdemeanors, the Big Six accounting “
rms reputation
was tarnished for good. It wasnt long ago that the overnight collapse
of a global Goliath was unimaginable. Now there are days when the
We live in a transparent age. Corporations have glass walls. Dis
gruntled employees can e-mail incriminating documents faster than
you can say, Not guilty, Your Honor.Ž If you bend the rules even
once, youre asking for trouble. Same goes for your personal life. After
the sale of Tires Plus to Bridgestone/Firestone was made public, I re
ceived an unsolicited call from a well-known accounting “
rm that I
had never engaged. They told me I could save several million dollars
tion. Its not a question of faint-heartedness; its a matter of right
heartedness. The dollar amount was irrelevant. You cant put a price
tag on a good nights sleep, or a good family name.
Turning Dreams into Destiny
Why the disconnect? Lots of reasons. Chronically impatient people think
ing it. These are the same people who prefer driving around lost for an hour
before stopping for directions. Others are wary of introspection, a prerequisite
to pinpointing what they want from life.
Some folks actually fear success because living the dream might cause
them to sacri“
ce their suffering. Personal demons trap certain folks into
thinking they dont deserve happiness and “
nancial security. Then theres
fear of failure, a particularly acute malady for fragile egos that just cant take
the blow of another disappointment. Any of this sound familiar? If so, read
and reread the self-coaching section. Itll help lift these obstacles.
Herding your goals into one place„a digital “
le, a legal pad, a
planner„
is deeply satisfying, clarifying, and deceptively powerful. In his 1951 book,
The Scottish Himalayan Expedition,
W. H. Murray explained:
There is one elementary truth, the ignorance
of which kills countless ideas and splendid plans:
that the moment one de“nitely commits oneself,
then Providence moves, too. All sorts of things
occur to help one that would never otherwise
have occurred. A whole stream of events issues
from the decision, raising in ones favor all
manner of unforeseen incidents and meetings
and material assistance, which no man could
have dreamed would have come his way.
With your personal mission statement in one hand, writing down your goals
with the other is as easy as “
lling out a job application. The “
ve steps for
crafting your mission statement also apply here„“
nd a quiet place, relax,
dont judge, be patient, open up to a deeper wisdom. Once grounded, take a
minute to review your mission. Let it sink in. Now jot down what youd like
Family
Romance
Business
Finances
Friends
Physical
tness
Social life
Spiritual “
tness
Intellectual “
tness
Recreation
Emotional “
tness
Community service
Looking to boost sales by 20 percent? File under
business
Wednesday eve nings at the soup kitchen? File under
community service
. Before
starting, consult these guidelines:
Choosing what you want from life shouldnt feel like
ing through holiday catalogs and making out a wish list.
You
decide
user- friendly.
Arrange your goals in an easy-to-read, easy-
outline.
Clarity and precision make goals measur able, whereas
duce action: Lose weightŽ? Lose ten poundsŽ? or Lose ten pounds
by May 15Ž?
ing ten million bucks, date a supermodel, play polo in the Hamptons„
knowing hell fall short but looking forward to the adventure. The
pragmatist, on the other hand, motivates herself with challenging,
accessible objectives. Shes disappointed if she cant put a line through
everything on her to-do list. Which camp are you in?
Dont just identify
what
you want but
Walk the tightrope.
Life is a daily balancing act. A lot of people
zero in on their career and tune out everything else. I can relate. All
the late nights and weekends I worked exacted a toll (cancer, di
vorce). The world is full of hardworking moms and dads who
would gladly return the extra money they earned if they could turn
back the clock and cheer at a couple more Little League games or
boost their kids up a few more jungle gyms. The ultimate gift of
time is the moments when youre fully present, without the faintest
thought of anything but whats in front of you. Yet, success is im
possible without hard work. Nothing is easy. Indeed, sometimes
circumstances legitimately demand an obsessive focus on work dur
ing an extended stretch. Operating out of balance occasionally can
ing too long in the red zone can lead to burnout, health problems,
bad relationships, and ill-advised decisions. Or, at the very least, a
vague feeling of emptiness and a life that just doesnt work very
well.
duces a sense of ongoing accomplishment and keeps you motivated.
Its also not a bad idea to “
nd a mix of long shots and chip shots.
Envelope-pushing projects test your abilities, but an agenda full of
Some goals will “
nd their way onto your list out
of your sense of obligation. Just make sure the majority spring from
you rather than somebody else.
No matter how bold your effort, uncontrol
lable circumstances may intervene. Thats okay. Look at what you
did accomplish„knowledge, relationships, con“
dence„in the
pursuit. If at least part of the goal is still doable, recycle it for next
years list.
FINISHING TOUCHES
Once youre satis“
ed with your list, sign and date it. Treat it like the impor
tant document it is, a compact with yourself. But theres always room for
amendments (and they shouldnt require an act of Congress). Review and
revise your goals every few months so theyre up to speed with lifes twists and
turns. You may need to adjust your exercise routine in the wake of a promo
tion that demands more time or travel„a development that could also im
pact “
nancial, social, and relationship goals. If you happen to slow down to a
trot, tweaking your goals sparks a renewed dedication to dig in your spurs
and start galloping again. Caveat: Dont overuse revision. It can become an
excuse for giving up on what you wanted.
Your list of goals is a companion to your mission statement. Keep them
Linking Goals to Action Steps and Schedules
im Pascale was just twenty-seven when we hopped into my car and took
off for Iowa. It was our “
moted Jim to Iowa regional manager. Speeding out of Minneapolis and down
I-35, I asked to see his schedule. Gripping the wheel with one hand, Jim
grabbed his planner from the backseat and handed it over. I was a little
shocked by what I saw. Do you have a copy of your goals with you?Ž I asked.
Jim froze and shot me a
deer-
in-
the-
headlights look. Pull over,Ž I said. Im
driving.Ž Back on the interstate, I told Jim to write down everything he
wanted to accomplish for the year, from career and “nancial goals to travel,
health, and relationships. He listed the categories and wrote things like, Hit
When Jim “
nished, I congratulated him, but cautioned that it was only
the “
rst step. I told him to rewrite his monthly schedule by “nding homes on
his calendar for what was personally important. Next, he added mandatory
As I entered each item,Ž Jim recalled, I began connecting the dots be
tween my goals and my daily activities. To hit my personal “ nancial goals,
Do what youve always done and youll get what youve always gotten.
FIRST CREATE, THEN INTEGRATE
An action plan is just what it sounds like„a list of what must be done to
change a goals status from To doŽ to Ta-daaa!Ž In 1998, I renewed my
commitment to deepen my relationship with my parents, who are divorced
Personal Mission Statement (relevant portion):
To build nurturing
environments that contribute to the growth of family and friends.
Goal Category:
Family.
Goal:
To enhance my relationship with my mother (I created a sepa
rate plan for my relationship with my father).
Action plan:
Call Mom three times a week.
Take a weeklong vacation with her wherever she wants to go.
Spend six long weekends at her Indiana home.
Host her in Minneapolis from Christmas to New Years Day.
Send cards on her birthday, Mothers Day, and other holidays.
Financially assist her so she lives a comfortable, active life.
Consistently check in on her feelings and her life, and leave
nothing unsaid. Regularly express that I love her and appreciate
all the love shes given me.
Writing action plans is invigorating but, like your mission and goals,
theyre still just words on paper. Transferring your action plans over to your
schedule and to-do list is the critical link. Just be sure to mind your priorities„
schedule your personal life “
sonal goals paves the way to success at work. Lay important family dates on
your calendar like primary coats of paint„birthdays, Little League, family
outings, vacations. Sure, something will come up at work, you may have to
miss a game or two. The point is, if you dont schedule them, youll miss a
whole lot more.
Its actually easy to integrate action plans into daily life. After calling my
mother to discuss what dates worked for her, I typed everything„the week-
long vacation, long weekends, holidays, annual “
nancial review„into my
Microsoft Outlook calendar. I also added send-
a-card reminders three days
ahead of each birthday and holiday. As always, Call MomŽ anchors the top
of my Task List. Its a joy to lace my action plans„business objectives, “
nancial planning, physical exercise, spiritual growth„into my daily life. I
know it improves the chances that Ill do what it takes to hit my goals.
SCHEDULING BREEDS SPONTANEITY
I can hear the snickering:
Whoa, does this guys calendar tell him when to
ties simply because youve got an appointment, especially one you could eas
ily reschedule. Enjoy the freedom to improvise; just dont put off things
you
made high priority.
sion, goals, action plans, and schedule. Youll “
nd youre more relaxed and
spontaneous because the parts of your life that really matter are (generally) on
track and accounted for. For me, that means Im free to live fully in the mo
ment. With everything in sync, my mind isnt cluttered with the debris of a
million to- dos:
ity I can do without.
Think of action plans as suggestions and reminders. Careful not to pack
em in too tight. Time was when my days were wound so tightly I made every
pointments. That gave me time for a few deep breaths and let me catch up on
minor tasks. I still “
nd myself in an occasional tight spot, but now its an ex
ception rather than the rule. Bottom line: Schedule your time or it will sched
ule you.
Keep in mind Professor Cyril Northcote Parkinsons tried-and-truism:
Work expands (or contracts) so as to “
ll the time available for its comple
tion.Ž That is, the more air you build into your schedule, and the more time
you allocate for doing something, the longer it will take. That limits the
number of goals you hit. Eventually, if youre discipline-challenged, youll feel
like a helpless bystander watching your life pass by with nothing to show for
TAKE YOUR EYES OFF THE PRIZE
As I work toward a goal, I often visualize what achieving it will feel like. But
to actually get there, I need to focus on a series of short, easy steps. As poet
C. Richards wrote:
A knowledge of the path cannot be substituted
for putting one foot in front of the other.
Lets say you want to land the big Acme account. Sure, its fun and in
spirational to visualize the handshake in Technicolor detail„whooping it
up at signing, pumping up the team, adding it to your portfolio, and watch
ing things snowball. But the lions share of your focus must shift to what it
takes to accomplish the goal. That calls for an action plan. Ask yourself,
Whats the smallest step I can take right now toward my goal?
Then ask,
Whats
the next smallest step?
Then look for the one after that. Keep going till youve
written down every step you can imagine. Perhaps your list will look like
this:
Goal:
Land the Acme account.
Action Plan:
Research the company.
Hone sales skills by reviewing my last refresher course and
scanning sales books.
Ask colleagues why previous shots at Acme had “zzled.
Prepare for upcoming sales call by analyzing the “
zzles
cause and spelling out our companys enhanced pricing
package and service commitment.
Introduce myself via a letter to the decision maker at the
parent company.
Now weave the steps through your schedule and to-do list, and start
crossing them off. Take “
ve minutes each morning and “
fteen minutes at
weeks end to review progress and priorities„with market conditions in ”
ux,
a goal that seemed essential six weeks ago might be meaningless today. If you
think of other steps, update your action plan, schedule, and to-do list accord
ingly. Then dig in again, and keep shoveling until you hit pay dirt.
AND ORGANIZED
Embracing Enlightened Efficiency
o many leaders have the ef“
ciency equation only half right. Take the
business owner whos enlightened but inef“
cient. Hes like the absent
minded preacher, late to the pulpit with lines of a great sermon running
A leader whos both enlightened
and
ef“
cient is like a trusted family
friend. She deeply cares about the personal education and well-being of peo
ple under her watch, while tirelessly challenging them to be productive and
disciplined. To her fans, shes like a double shot of espresso.
Enlightened ef“
ciency isnt an end in itself. Without it, however, you
handling future challenges. Its the tipping point that can take you from
frustration to ful“llment. As one of my favorite sayings goes:
The will to prepare to succeed is more
important than the will to succeed.
I CANT BELIEVE ITS NOT CLUTTER
Shooting for ef“
ciency without “
Organization paves the way to enlightened ef“
ciency and reaching your
goals. Can you be productive with a messy desk and chaotic “ les? Sure, any-
Id be lost without my BlackBerry. Before I leave the of“ce, I sync it with
my PCs address book and to-do list. On the road, I update and revise on the
y; I stay connected in an airport or doctors of“
ce through phone, Web ac
cess, and wireless e-mail. Then I upload everything back into my PC once
home. (Caveat: Prioritize people over PDAs when out with friends and fam
I prefer a PDA to paper planners because its compact and reduces redun
dancy (plus, its a wireless wonder„when I update my calendar on my Black-
Berry or PC, the other device automatically updates). But there are as many
planning systems„digital and manual„as there are personalities. PDAs
also help capture those “
re”
Cleaning up the clutter begins from the inside out. Internal clarity
naturally stirs desire for external clarity, and makes your personal and busi
ness life ”
ow smoothly. Changes unfold subtly, but the day will come when
you stop in your tracks and marvel at how a heady concept like enlightened
ef“
ciency has become as natural as breathing.
ALL THE TIME IN THE WORLD
It hurts to see people whove yet to balance ef“ciency with perspective. A few
years ago, after a keynote address to Students in Free Enterprise, I judged a
plier manning a convention booth. By coincidence, his daughter had given
one of the forty-“
ve-minute presentations I had judged. I asked how hed en
ve minutes? Imagine the message that sent her. What clouded his judgment
and twisted his priorities?
Sorry to say it, but I know the answer„fear. In my lean early years, I was
tion, every sales dip„everything was a white-hot priority. Even when busi
If twenty-four hours in a day seems to shortchange you, youre not
alone. A recent
Wall Street Journal
/NBC News poll showed that 80 percent
of us describe our lives as busy or busy to the point of discomfort. More
telling: Surveyors had to call 31,407 phone numbers to “nd 2,001 Ameri
cans with enough time to answer their questions. The I-dont-have- enough-
time mantra becomes a self- ful“lling prophecy„you dont have enough
time because you never believed you would. Enlightened ef“
ciency de
mands that you consciously choose to experience time differently. You replace
the old mantra with a new one:
I have all the time I need to do everything I
need to do.
Something magical happens when you add purpose to your life by iden
tifying your goals, breaking them into action plans, and building your
schedule and to-do list around them. Time. Slows. Down. Its easy to ex
plain. The smarter you are with your time, the more of it you have. Still, no
matter how sharp your focus, time-wasting traps lurk in every of“
ce. We
Trim the talk.
Imagine. If you have thirty conversations daily, each
running four minutes longer than necessary, you lose two hours a
day. Zeroing in on the matter at hand and cutting just a little fat goes
a long way toward reclaiming your schedule. Saving ten minutes here
and “fteen minutes there ultimately frees you up for those times
when people need you most. Three talk trimming tips:
Push your purpose.
Be cordial, of course, but clip the small
talk. Prior to longer conversations, I list the questions I want
to ask and the points I need to make. Just one minute of prep
makes for a productive and punctual exchange.
Bottom-
line it.
Our people had a gentle way of cutting off
ramblers. Wed respectfully interject a phrase I learned from
ef“
ciency guru Edwin Bliss: Bottom line?Ž Without fail, the
rambler cut to the quick (if a little sheepishly) and made his
point. A softer variation sounds like this: Sorry, Id love to
hear more, but Ive got an appointment. Can you bottom-line
it? Or we can talk later.Ž Remember that bottom-lining is a
business move that works only if its caring rather than de
manding. Also it is not a shortcut for personal matters.
Do it digitally.
Whenever possible, handle the matter via e-mail
or text message. I send and receive dozens of messages a day to
inquire, inform, and build consensus at lightning speed.
native to writing letters and memos) or your worst enemy (a font
of interruptions). Making cell-phone calls during out-of-of“
downtime„with a
time„is a good “
Appoint an auxiliary gatekeeper.
My outgoing voice-mail
message was a trusted sentry at Tires Plus, unfailingly repeat
ing: Hi, this is Tom Gegax. Please leave a message detailing
your needs and desires so either the appropriate person or I
utive assistant, Dorie, a ton of time.
Leave precise instructions.
When you cant reach your con
tact, leave a thorough message and ask him to respond on
your
voice mail. Voíla! Youve eliminated phone tag and done
some business. Its the same asymmetrical communication
that made e-mail a business revolution. We dont always
need a two-way. When you do, say as much in your voice
mail, detailing when and where you can be reached. Caveat:
There are many times when reaching out to an employee or
customer demands more high- touch than high- tech.
Be upfront, not uptight.
For longer conversations, presentations, and
utes and suggested she pack her points into three “
ve-minute stages:
sales pitch, questions, decision discussion. Recognizing that “
fteen
be mindful of whom youre with, why youre with them, and how the
encounter “
ts into the larger picture of your day, your career, and
your life.
BATTLING BRUSH FIRES: THE SIX
Whens the last day you
didnt
have a high-priority phone call, an urgent e-mail,
Dont Do It.
Seriously, some things will simply go away if you
ignore them. As you grow more focused, youll also grow more resil
ient to the tug of minor things that try to pull you off your path.
Delay It.
Some interruptions disappear if you simply delay
them. Think of all those urgent voice mails, e-mails, and memos you
returned to after vacation. You never knew about them, yet they in
variably cooled.
De”
ect It.
Some ”
Delegate It.
Enlightened entrepreneurs dont do things other
people are paid to do. Youre not hiring the right people if youre
thinking,
If I want it done right, I have to do it myself
. Delegate what
ever you can. Otherwise, mindless minutiae will slam the brakes on
your businesss development. (Delegation is so crucial that chapter 40
is devoted to it.)
Do It Imperfectly.
Dont automatically shift into perfectionist
mode when you realize a task is something only you can do. Youll
burn huge chunks of your schedule and brainpower that belong to
worthier enterprises.
Do It Really Well.
Some brush “
res demand your full, imme
diate attention and need all your effort. But its a lot easier to “
nd the
time and energy for big challenges when youve doused other ”
are-
ups with the “
rst “
s.
MIND- BODY BALANCE
Bringing Your Inner Team into Alignment
ness, some of us are laudably proactive. When it comes to personal issues,
however, too many of us have
upside-
down priorities. We wait until a crisis
Case in point: The triple trauma that struck me at
forty-
two also ”
tened my assumptions about health and wellness. Divorce and a business
cash- ”
ow crisis crumbled my psychological and spiritual foundations. Then
cancer forced me to rethink physical “
tness. Those ordeals poked gaping
holes in my theory that a shrewd mind was the only arrow I needed in my
workplace quiver. Six painful months of self-analysis revealed the barriers Id
Not only were the four players on my inner teamŽ incommunicado, they
had never been formally introduced. My intellect was calling all the shots, my
body never looked beyond its next run, and my psyche and spirit were
Figure 48.1
neglected stepchildren. For years, I had been in constant motion and felt
healthy. But a lack of inner harmony had blocked my path toward true wellness
and peace of mind. When that realization washed over me, I was embarrassed
to realize that Id sidelined much of my inner team. In business, I would never
have wasted half my workforce. My life looked like Figure 48.2 when trauma
struck.
MIND-BODY BALANCE
Figure 48.2
Figure 48.3
Figure 48.4
Integration produced clearer thinking, sharper instincts, and more en
ergy. I started feeling the quantum leap in wellness that occurs when our in
ner elements align. Ideally, it looks like Figure 48.4.
Not a minute passes when every part of our being isnt enhancing or
sabotaging our decisions and actions. For instance, I discovered that when
coaching a team member on a sensitive issue, my reasoning was in”
uenced by
my state of physical, emotional, and spiritual well-being. That new business
plan that needs analyzing tests more than our intellect„our body, psyche,
and spirit are in on the action, too. Theyre all affected by how we slept the
MIND-BODY BALANCE
FROM EXHAUSTING TO EXHILARATING
The more I balanced the scales of my inner life, the more my thinking
shifted. Like a gosling trailing its mother, my behavior followed suit. I started
Wellness became my holistic bank account, a metaphor established by
stress-research trailblazer Hans Selye. Withdrawals are poor food choices;
sleep deprivation, emotional tension, and other life stressors. You make de
posits with exercise, healthy meals, meditation, and supportive relationships.
When withdrawals exceed deposits, youre grouchy, stressed-out, foggy, and
weak-willed. When deposits exceed withdrawals, youre blessed with super
charged energy, crystal clear thinking, and deep serenity. Not only that,
youll have enough fuel in the tank to shift into “
fth gear when crises
strike.
The wellness track does require time and attention, but it doesnt always
demand huge chunks of time. You can immediately reduce stress, for instance,
simply by reminding yourself to breathe deeply whenever youre nervous or
rushed. Take the time I brought my friend Deepak Chopra, the best- selling
mind-body-connection author, to dinner at the home of a high-pro“
le con
sulting client of mine. As we were waiting in the entryway, Deepak began
breathing very slowly and deeply. The next day, our host asked me if Deepak
had asthma. No,Ž I laughed. He was just doing his breath work. He calls it
his Vader [as in Darth] breath. It clears his mind and helps him stay calm
and centered.Ž Deepak taught me the Vader breath,Ž and I can vouch that
it works.
af“
rming consequences of making healthier choices are often so immediate
and profound that theyre all the motivation you need to continue making
them. I was thrilled to discover a newfound vibrancy. It was like Id tapped
into an extra fuel tank.
Be prepared for unsupportive responses. Over the years, most of my ex
ecutive team poked fun at me for the way I ate, exercised, meditated, and fo
cused on psychological growth. Yet one by one the teasers inevitably knocked
on my door. Theyd blurt out a frightening diagnosis or test result and beg
me to spill everything I knew about nutrition and wellness. Something inevi
tably throws the switch of understanding for most people.
Why wait? Find that switch, now, on your own terms. The body is an
amazing work of art; its hardwired intelligence is constantly striving toward
optimal health. Your odds of reclaiming vibrant physical health are excel
lent. If your body is already under siege, slamming on the brakes and hang
IT ALL ADDS UP
Bottom line: High-level wellness will help you run your business better and
longer. My cancer was a blessing in disguise. Cliché? Maybe. But it jolted me
nis match because your opponent never showed up. Not losing isnt the same
as winning„its not even close. Just as your opponent forfeited the match, if
you dont show up as your own wellness advocate, you may be forfeiting your
health. Distill wellness down to two words: cumulative effect. As nutrition
author Adele Davis cautioned, Every day you do one of two things„build
health or produce disease in yourself.Ž
Health problems„whether physical, emotional, psychological, or even
spiritual„dont breakŽ overnight. The seeds are often planted early in life in
the form of poor nutrition, lack of exercise, and a negative attitude. Watered
by steady neglect, they can germinate undetected for years, even decades.
Then, boom, they sprout, take over, and overwhelm everything in their path.
Its like driving a car for months or years without an oil change and then
suddenlyŽ it burns up and shuts down. Until that day of reckoning, the mys
MIND-BODY BALANCE
terious repercussions of our lifestyle choices are bubbling away inside us,
growing more toxic by the day.
Until my early forties, I often felt sluggish and foggy. In those bleary-
eyed days, I knew I wasnt operating at peak ef“
ciency. I sensed I was miss
ing something but didnt bother giving it much thought. I certainly had no
intention of changing my behavior„not until a malignant tumor grabbed
me by the throat and nearly squeezed the life out of me. Lemme tell ya,
when the Grim Reaper pulls over and offers you a ride, hitchhiking your
way to Introspection City is a little more appealing.
Bottom line: The choices you make today determine the quality of your
relationships, health, and effectiveness at work in all your tomorrows. It isnt
SPOTLIGHT ON
SELF-CARE
rowsing a bookstore years ago, a title caught my eye„
Please, Doctor, Do
Something!
I read it in two sittings. Dr. Joe Nichols, then president of
the Natural Food Associates, argued that the high-fat, arti“
cial-everything
Your body isnt the only inner zone that needs constant tending, as I
learned one day in 1989. Reporting my progress to my tai chi instructor, I
was a little defensive when I told him I hadnt been practicing. But I have
been working out,Ž I said. He looked deep into my eyes and in a deadpan
tone slowly responded: Working out . . . as opposed to working in.Ž Busted.
As much as I value working out, introspection„working
inŽ„is even more
SPOTLIGHT ON SELF-CARE
valuable. As Oliver Wendell Holmes said, What lies behind us and what lies
before us are tiny matters compared to what lies within us.Ž The subject of
nurturing your body intellect, spirit, and psyche (the vessel of psychological
wellness) is impossible to cover in one short chapter. But Id like to think
these executive summaries will move you to explore your inner and outer
landscape.
BODY
ger than I thought. If a single pill can alter our physical and mental states,
imagine how our bodies react to the hundreds of pounds of food we consume
minish. If youre determined to make changes, be kind to yourself when you
slip off course. Keep telling yourself,
If there is no change, then there is no
change
. (Disclaimer time: Consult a health professional before changing your
Pumping up the heart rate regularly helps in other ways, too. As Mr. Sci
ence might explain it, vigorous exercise increases blood ”
ow and ”
oods the
body with endorphins, those fantastic little brain chemicals whose pleasure-
inducing properties are similar to opiums. In other words, exercise sparks a
natural high that can keep you pumped up for a day or so. An active lifestyle
helps you stay limber, increases and maintains bone mass, and extends heart
and lung capacity. It also keeps you chemically balanced and shores up your
immune system.
Entrepreneurs cannot let terminal time-crunch syndrome bury exercise
at the bottom of their priority list. Believe me, its worth reworking your
list. Spending just four hours a week sweating„3 percent of waking
lems that seem monumental before a workout can look minuscule after
ward.
Dont wait to start until you have the energy; the energy doesnt come
until you start exercising. Start by choosing an activity you enjoy and that, if
need be, you can do alone. Simply walking twenty minutes, three times a
week, is one of the best ways to ease into shape. Next step, sign up for a health
club membership (many offer at least one free session with a personal trainer)
or lug a few dumbbells home from a “
tness store. But dont wait till youre
home or at the club to exercise. Youre surrounded with opportunities to
power up, even at the of“
ce: Take a brisk ten-minute walk during your lunch
break or take the stairs instead of the elevator.
Think of it as a new productivity push. A nutrition and “
tness upgrade
SPOTLIGHT ON SELF-CARE
Valued highest in our meritocratic, information- saturated times, intellectual
passion is the urge to manifest internal vision through external invention.
Expanding your intellectual capacity is important, but you can shortchange
tency. All indispensable. But success requires the alchemy of creative thinking
to alter information from knowledge into wisdom.
Like many businesspeople, I felt long on straight- ahead thinking and
short on creativity. Heck, that was the province of paint ers, musicians, and
designers, not pinstriped, results-oriented executives. Then one day I was tell
ing a friend about an org chart Id drawn up. Instead of the hierarchical ”
ow-
chart of rectangles that represents traditional top-down thinking, I drew a
series of concentric circles. Floating out from a central source like ripples in a
pond, it suggested an inside-out approach to communication and customer
service. Wow, what a creative idea,Ž he said. How did you think of that?Ž
Right-brain thinking allowed me to transcend the eminently logical prac
tice of combining two known quantities in order to produce a third. Anyone
can access logic (which too often narrows our options) and creative thinking
(which in“
nitely expands our possibilities). Trouble is, these complementary
sides of our intellect often fall out of balance. Finding parity revitalizes your
intellectual passion and launches you into a limitless realm. Or, as artist Ma
son Cooley said, Intelligence complicates; wisdom simpli“
es.Ž
On the other hand, the daily grind of familiar habits can deepen our
mental ruts and make us stale. Refresh your mind by exposing yourself to
new subjects and ways of thinking. Take courses on subjects youve always
wanted to learn about; try mental aerobics like crossword puzzles and board
games; change your surroundings„hang a new picture, rearrange the
furniture„to shift your perspective; break out of your comfort zone and
do something youre not good at.
Psychology is routinely brushed aside at the of“
ce. Thats dangerous for you
and your business. Your psyche is an air-traf“
c controller overseeing all your
psychological and emotional ”
ights:
Thought #364, youre cleared for landing
on runway three. Emotion #42, prepare for takeoff.
Scant attention to your
psyche risks crash landings.
SPOTLIGHT ON SELF-CARE
Psychological wellness is a “
ity of your business decisions will suffer. Even bearing down and logging
seventy-hour weeks wont “x things. You cant outrun your self-image.
I used to be a brawling, take-no-prisoners entrepreneur. My intellect
powered me through the emotional pain of unhealthy relationships, ruthless
self-
tions were, unexplored caves. The “
rst time I ventured into a psychologists
of“
ment. By adulthood, however, our childhood defenses usually lose relevance.
As a kid I developed the smiling defense„everythings peachyŽ„to shield
myself from issues too large to comprehend. As I grew older and more re
sourceful, I still met con”
ict with that same stupid grin.
I learned that if a behavior no longer served me, regardless of its origin, it
ting scraped off the highway like I was. Or, you can start taking steps toward
living an introspective life. The more consciously you live, the less youre
weighted down by guilt from the past, fear of the future, and anger in the
present. Resolving issues that have hampered your growth frees you to be
iors; ask a loved one to regularly give you gentle, but candid, feedback; deepen
emotional intimacy with friends by sharing more of your thoughts and feel
ings; engage in individual and group therapy.
other angel said. Theyd “
nd it up there someday.Ž A third angel suggested
burying it in a deep valley. Nope,Ž another angel replied. Humans are al
ways digging for answers. Theyd “nd it there, too.Ž Yet another angel sug
In our search for God, we typically look outside ourselves. By far, the
most profound and rewarding gift I received during my quest to become an
enlightened entrepreneur was a feeling of reconnection to the divine source.
Part of the mystery and majesty of deepening this relationship is that not ev
ery question you ask can be unequivocally answered. Its a point of frustration
for logic-oriented execs, one that author Kent Nerburn described when he
wrote, When we try to understand God, we are like children trying to hold
sunlight in our hands.Ž
For me, being spirit-“
lled is all about feeling connected„with myself, my
Higher Power, my mission, and other people. Obi-Wan Kenobis famous
refrain, May the Force be with you,Ž from
Star Wars,
comes to mind when
I feel spirit-“lled. My step is lighter, a warm energy buzzes through me, and I
feel surrounded by a protective glow. Thats when Im more considerate and
SPOTLIGHT ON SELF-CARE
reach out to others. One eve ning in a restaurant, for instance, my partner,
Mary, and I were waiting for a table. The couple in front of us reluctantly
agreed to a small table inches from a crying baby rather than wait “
fteen
minutes for the booth they had requested. A minute later, a booth opened up
and the hostess guided us past the “
nection we all felt was, as the ad goes, priceless.
When I feel spirit- “lled, I trust that everything is unfolding as it should„
and Im more inclined to look for and recognize the blessing in whatever oc
curs. Unfortunately, feeling calm, centered, and connected can be ”
Thats why its important for me to start each day with a spiritual practice
that delivers a measure of peace. Perhaps a few minutes of quiet re”
ection and
deep breathing. A few pages from an inspirational book. Yoga. There are
hundreds of ways to touch a calming chord. The of“
ce may not know you
spent thirty minutes practicing tai chi before you came in. But it shows up in
caf ) coffee whenever you pour the last cup.
My stress builds„and connectedness wanes„when I skip meditation,
yoga, or daily prayer. Wobbly days are a reminder that the cornerstone of any
spiritual-wellness program is daily ritual. Dont expect the sublime without
putting in the time.
COACHING YOURSELF
Commit to
self-
coaching.
It may seem like life is humming along.
Take a closer look. Are you and your employees enjoying ful“lling
work? Are you and your family happy at home? Are you happy
with your behavior and state of mind? If any of the answers are no,
take responsibility and start making changes. If nothing changes,
well, nothing changes.
A mission statement deepens your sense of purpose.
Recording
ment visible in your daily life to remind yourself why youre taking
Honesty is an
all-
nothing proposition.
No matter how its jus
reer, romance, and friendships to “
nances, recreation, and emo
tional “
tness.
Take your eyes off the prize.
Visualizing the completion of a goal
can be a big motivator in and of itself. That said, shift your focus
from the goal itself to the steps required to reach it. Integrate ac
tion steps into your schedule and to-do list, then methodically ex
ecute them.
Get time on your side.
Everything magically slows down when
Clean the clutter.
Organization lays the groundwork for enlight
ened ef“
ciency„and for achieving your goals. Stop rationalizing
that a messy desk and sloppy “
les (digital and physical) arent hold
ing you back. A clean environment, leveraged with organizational
technologies, delivers calm and focus to your day.
Hit the books on healthier lifestyles.
Go back to school for smart
SPOTLIGHT ON SELF-CARE
aside time for quiet re”
ection. Methodically improving yourself in
tellectually, physically, emotionally, and spiritually leads to greater
happiness and ful“
llment.
Manage your wellness bank account.
Poor food choices, sleep
deprivation, tension, and other stressors are withdrawals. Exercise,
healthy meals, and supportive relationships are deposits. When de
posits exceed withdrawals, you have more energy, crystal clear
thinking, and greater serenity.
Start with small steps.
havior are self-
perpetuating. Their consequences„vitality, clarity,
renewed zest for life„are all the motivation you need to continue
pursuing healthier habits.
Prioritize exercise.
Dont put off exercising until you “
nd the en
ergy; the energy doesnt come until you start exercising. Make regu
lar time in your schedule to lift weights or hit the treadmill. Just a
few hours a week of vigorous activity sharpens your mind and im
proves productivity. Regular exercise saves time, it doesnt spend it.
Monitor your psychological and emotional
well-
being.
How you
think and feel about yourself impacts your decisions and actions.
You cant outrun your self-image. Take responsibility for changing
the thoughts and behaviors that no longer serve you. Read books;
self-police your bad habits; ask people close to you to give you can
did feedback; share more of who you are with friends and loved
ones.
Get into the spirit.
Connections„with yourself, your Higher
Power, your mission, other people„start with being spirit- “
lled.
Begin each day with a ritual„an inspirational passage from a
book, a guided meditation, a daily prayer, yoga. A regular spiritual
practice helps us stay calm and grounded when crises arise.
DOS AND DONTS
Key Concepts and Killer Tips
eep in the bowels of my workplace laboratory, I was always tinkering
or not, every business creates its own unique corporate recipe by virtue of its
culture, people, and pro cesses.
ened entrepreneur, contends with supply management, marketing, sales, cus
tomer service, “
nance and accounting, and information technology. You
If youve got the time, bushels of books have been written about each of
these subjects. If, however, youre a bottom-liner, permit me to pull back the
curtain and reveal the
department- speci“
SUPPLY MANAGEMENT
Strengthening Every Link
upply management has evolved into an unimaginably complex discipline.
The ultimate goal used to be the lowest price. Now every link in the sup
ply chain is ferociously scrutinized for economy and ef“
ciency. Its what the big
MANAGING THE SUPPLIER RELATIONSHIP
Make sure your supply chief is skilled at complexity management. She has to
grasp how all the internal and external links in the chain impact each other„
and how to coordinate them all to land the best deals. For starters, that
means forging strong supplier alliances. Its vital to:
On day one, establish expectations, re
sponsibilities, accountabilities, and an objective measur ing stick to
track results. To minimize back orders, stipulate penalties for incom
Your suppliers are trusted teammates
who want to help you achieve your goals. That, at least, is how the rela
tionship should work. Smart companies practice strategic sourcingŽ„
factoring in a vendors ability to identify new business opportunities,
storming sessions„at the strategic level and when product-related
problems ”
are up„deepens mutual understanding, strengthens bonds,
and creates win-win outcomes. Look for suppliers who are positioned
to grow with you, who have more capacity today than you think youll
ever need. (Collaboration works both ways. I visited Michelin, Pirelli,
and other big vendors to deliver management seminars. When your
suppliers operations improve, guess who bene“
ts.)
Widen the loop.
Broaden contact with your suppliers throughout
your organization. Regularly put your top execs in the same room
as your valued suppliers senior management. Consistent contact„be-
yond purely transactional moments„builds rapport and trust, key
ingredients in any valued relationship.
Share your vision.
If your volume doesnt justify preferred rates,
bust out the PowerPoint and show your plan to vendors and suppli
SUPPLY MANAGEMENT
sionally initiated a conference call for a quick point-counterpoint.
ers. One refuted the claims of the other, who stuck by his story. So,
right then and there, I got them both on the line and listened while
each made claims and counterclaims. It was a mini-debate. Tone of
voice, con“
dence, and quality of argument told me who had his facts
straight, and whom I wanted to do business with.
Track price increases.
tailing the date, amount, and reason for each price increase. A pattern
may emerge once youve culled enough data. For instance, if a suppli-
ers been upping prices every July for the last “
ve years, you may be
able to fend her off this time around: Youve asked for a price in
crease every July, and each time youve had a different reason. Whats
going on?Ž When suppliers know theyre under a microscope, they
tend to be more upfront. Cluelessness will cost you.
Watch out for the friendship trap.
Vendors are great schmoozers.
They know ”
ment a no giftsŽ policy. Make no mistake„gifts, while given par
tially in appreciation for past business, are primarily a subtle bribe to
in”
uence ongoing purchasing decisions.
for mance.
Dont mea
sure buyer performance on cost savings alone. End-user satisfaction is
I value loyal, long-term partnerships. Yet habitu
ally doing business with one vendor can cost you. Suppliers are more
likely to jack up prices when they think youre in their hip pocket.
vice packages. Just dont overlook the soft costs of changing suppliers.
Acclimating to one another (culturally and technically) takes time.
Of course, your leverage options dwindle with suppliers who domi
nate an industry or who provide new technology.
Be careful, especially when comparing strategic vendors, that you
dont throw the bidder out with the bathwater. You can weaken the
supply chain by swapping out links all the time. That lesson isnt lost
on the director of a large purchasing “
rm near my home turf. One of
his suppliers provides engineers who design new products for his com
pany. He wont be bidding out that business any time soon. What
incentive does a supplier have to invest time, effort, and capital in
serving my needs,Ž he said, if he knows Ill hand over the account to
the lowest bidder at the end of the contract period?Ž Yes, keep all sup
pliers on their toes and never stop negotiating. But the more strategic
the relationship, the more non-price factors you need to consider.
PURCHASING POINTERS AND
NEGOTIATION NECESSITIES
Handshakes and small talk done, I took a deep breath and headed to the
whiteboard. Arrayed around the conference table were top execs from one of
the worlds best-known companies who had canceled their eve ning plans to
hear me out. The president had asked me to ”
y out after I informed him we
were putting our account in play. I was frank. Their pricing was a drag on
SUPPLY MANAGEMENT
why. We wanted to do business. But at the end of the day (literally, in this
case), we would do what was right for our company, understanding that they
would do the same.
Their response was immediate. If we agree to your terms,Ž the president
said, will you commit to a “
ve-year contract?Ž Inside, I was jumping up and
down:
Enlightened entrepreneurs cant negotiate by the seat of their pants. They
prepare a list of what theyre willing to give up and whats nonnegotiable.
Then, they stick to it. Dont take a seat at the table until youve studied these
ted from knowing that a major client had just bailed on our sup
Find common ground.
One- sided arguments lead to lopsided results.
Turn win-lose into win-win by telling the other party exactly what
you need and seeking to understand what they need. For instance, in
hopes of lowering costs, we asked a major tire manufacturer how we
could help lower
their
costs. They suggested we improve our forecast
ing accuracy by digitally linking our inventory to their HQ, triggering
automated ordering. They also recommended shipping some orders
directly from their factory to our retail stores, bypassing warehouse
expenses on both sides. Caveat: If netting a win-win is a priority,
youre working for both your company and the supplier. Thats noble.
When it works, its a beautiful thing. Trouble is, the supplier may not
hold your best interests in the same high regard. By all means, give it a
shot, but dont assume responsibility for your suppliers wins. If hes
not happy, trust me, hell let you know.
Wear good walking shoes.
Pinpoint the number that nets you the
best possible package, yet provides the other side enough incentive to
do business with you. Youll know youve overshot their number
when they start to walk. If theyre still at the table, but refuse to come
within spitting distance of your number, its your turn to walk. If
they call you back to the table, youve got em. If they dont, and you
cant afford to lose the relationship, dont panic. Call them a day or
two later and say youve re-crunched the numbers and would like to
reopen negotiations.
Turn all the cards faceup.
Take nothing for granted. Before signing
off, reach accord on every microissue, not just price, terms, and freight.
Be friendly.
Smile. Make small talk. Share a laugh or two. In other
words, lighten up. Suppliers are more willing to cut deals with people
they like and enjoy working with.
SUPPLY MANAGEMENT
to your advantage. Arrange your contract to expire in July; the slow
seasons sting will loosen the suppliers hand. In general, youll improve
your horse-trading odds by hitting up vendors for deals at the end of
The morning of our
two- million-
dollar meeting, we told our big-time supplier we had an
cially when we told them„truthfully„that an agreement had to be
noon. (We were literally racing against the clock. After poor weather
scrubbed our afternoon ”
ight, Larry and I dashed to the only other
fers that would expire by days end (the old standing room onlyŽ
uniforms. Once we realized what was going on, our purchasing point
man, Mel Donnelly, sat down with the uniform contractor. Look,Ž
Mel said, if a guy changes oil for a living, chances are hes going to
spill oil on himself. Showroom salespeople need unstained shirts;
mechanics dont. Second, when an employee quits after a few weeks,
his uniforms in great shape. We want to reuse those shirts and pants
for new hires with the same measurements.Ž Sorry,Ž the uniform rep
said, thats not the way we do things.Ž Well,Ž Mel shot back, you
ness.Ž They saw the light and we saved the green.
Lets say youre an industrial launderer
shopping for a washroom chemical. Supplier As solution will cost
you ten cents per hundredweight of white shirts. Supplier B breezes
in at eight cents. Ah, but what Supplier B didnt mention is that his
chemical requires a higher water temperature, which drives up en
ergy costs. Further, water that hot demands another chemical to
balance acidity. Plus, Supplier Bs chemical also extends the rinse
ing some old-
ple spend per diem on breakfast and the Net before inking the con
tract.
dard terms are two months, ask for three. Request geo graphical or
dor to pitch in. Incentive trips are a fun add-on (and, unlike indi
vidual employee gifts, are earned). A vendor once offered a Caribbean
vacation to our se nior execs. We asked for, and got, more seats on the
SUPPLY MANAGEMENT
plane. It was a cost-free, and greatly appreciated, way to reward de
serving employees.
Careful about blurting YES too soon. Zeal
to seal the deal is good. But overeagerness makes the other party
Locked into a contract for another eight
ness after it expires.
Team up.
To increase our purchasing clout, I cofounded a consor
tium of the countrys six strongest regional tire dealers (none were
veat: Successful purchasing cooperatives can become mini-empires,
complete with deluxe of“
ces and big salaries, which gobble up cost
savings.
If youre a service provider (sans products), skip this section. If youre a
product-oriented company, do you want to have distribution in-house? Be
ready to invest in space, equipment, software, and people as you grow. Keep
these factors in mind:
How many do you need now, and
how many will you need down the road? The low number always
wins. Sure, youll have to travel a greater distance to reach the average
customer. But youll more than offset your higher outbound trans
portation costs with lower facility, equipment, inventory, and man
agement expenses. Do the math.
Generally, the closer to the East
Coast, the lower the cost of transportation. Thats because the East is
considered the consumer coast, while the West is the producer coast.
Shipping to consumer cities is usually a dead-end shot for transporta
Energy costs.
Many companies with in-house distribution take it on
the chin. When employees go home at four oclock they plug their elec
Deployment of product.
Got ten thousand SKUs (stock-keeping
units) and three distribution centers? Stock all three with the top
ve thousand sellers and house the slow-moving stuff in just one
center. Delivery time on the “
ve thousand slow sellers will indeed
suffer. But youll require substantially less inventory and have more
space for high-demand items. Productivity goes up because most
warehouse employees are dealing with half as many products. Costs
SUPPLY MANAGEMENT
Labor management software establishes
quantity and speed goals for each warehouse staffer, and monitors
their perfor mance in real time. Too Big BrotherŽ? Think again. Re
search shows morale improves when employees are monitored, given
“xed expectations (aka, engineered standards), and provided with
ongoing on-the-spot training. Contrast that with the traditional
shepherdŽ method of management„walking through the ware
house, making sure everyones working, leaping on em when theyre
Back in the day, warehouses closed down
once or twice a year for physical inventory. The advent of cycle
countingŽ„sampling a number of items each day„improved inven
tory accuracy. Now weve got real-time checkpointŽ systems. The
technology senses„and asks for veri“
cation„when an order- “
ller
picks the last item from a bin. Boom, your cycle counting is done,
minus the manpower hours.
Order taking.
Thanks to RF technology, when inventory is removed
from a bin, the system knows how many items are left, how many
orders are queued for those items, and how to prioritize customers
accordingly. That means customers can see your entire inventory
when placing an online order„if you want them to. The downside of
inventory transparency is that customers may go elsewhere if their
item is temporarily out of stock.
Traffic coordination.
Used to be, when a forklift operator pulled a
more. Todays software guides him to pick up an outgoing product
on his way back to the dock. Theres no easier way to nearly double
productivity.
UPGRADE YOUR OUTSOURCING
To outsource or not to outsource, that is the question. (William Shakespeare„
who, according to some academics, had no discernible talent as a playwright„
may have been an early outsourcer.) Smart companies undertake the discipline
ply functions they should keep in-house and which should go to outside ex
Keep current.
New pro cesses and technologies may in”
uence your
outsourcing decisions. Supply management specialists can keep pace
with industry advances by enrolling in local and national professional
organizations. The Institute for Supply Management (www.ism.ws)
is the worlds largest association of its kind. Its Web site details how
to obtain a CPM (certi“
ed purchasing manager) designation. Also
check out the Association of Purchasing and Inventory Control Spe
cialists (www.apics.org). This international or ga ni za tion offers edu
cational and professional certi“
cation programs. Your people can sign
up online for APICS webinars (Web-based seminars).
SUPPLY MANAGEMENT
your orders stream in during the “
nal week. If the contractors people
sit on their hands for three weeks only to work overtime the fourth,
Include a contractual exit strategy.
If a contractors bid works out
to 1.8 percent of sales and youve determined your costs cant exceed
2 percent, structure the contract to leave you with ironclad options.
For instance, when the 2 percent threshold is crossed, the contract is
automatically voided.
Make sure its love at first site.
If you decide to outsource distribu
tion, invest the time up front to do a thorough contractor search.
house. Its hard to reconstitute a department once its lost its space
and personnel.
Technology has ”
tered with hurdles that can trip up even the most experienced pros. When
dealing with overseas customers:
Know the hard costs.
rangements at the other end„from port to warehouse. Tap the Inter
net for info on foreign freight forwarders.Ž Duty rates vary by
country„a 10 percent duty hikes the customers price by the same
amount at the other end. A hefty value- added tax (what Americans
Countries have their own commercial regula
tions. Maybe disposable diapers require a higher absorbency rate.
Maybe a speedometer must display kilometers more prominently than
miles. Perhaps of“
cials stop dated products at the border. You may
have to tussle with a countrys equivalent of the Food and Drug Ad
ministration. Bottom line: The product„diapers, cars, pajamas„is
antee against tampering, theft, or destruction in transit. Ask your
commercial insurance agent how to protect your investment. Or,
check out www.exim.gov for insurance coverage through the Export-
Import Bank of the United States, the of“
cial export credit agency of
the U.S. government. Ex-Im programs insure the receivable from
90 to 100 percent of the total invoice. Without insurance, special
circumstances can create major heartburn. One fellow I know of im
ported a shipment of cheese to his McDonalds franchise in Sweden.
The gauge in the refrigerated container indicated that for “
fteen min
utes, the temperature was two degrees too high. The shipment was
rejected, and the franchisees cheeseburger-loving customers had to
Increasing Brand Equity
arketing is like parenting. Everyone thinks theyre an expert„and
takes offense when told otherwise. We all form opinions on what
works and what doesnt based on our tastes and experiences. Most of us think
our own sensibilities ”
oat right in the middle of the mainstream. Everyone
thinks they can write a clever radio spot or design the perfect showroom. To
paraphrase a truism from the legal profession, businesspeople that do their
lapse if you ignore the “
mately familiar with the psycho-demographics of your target market. Then
calculate the most ef“
cient ways to reach their eyes and ears. (Be sure to keep
in touch with your customers through regular surveys and focus groups so
you grow with them.)
This chapter tells you how to beef up your promotional efforts, deepen
your understanding of evolving tastes and trends, and strengthen your mer
chandising. Theyre all linked, to each other, to your identity, differentiators,
and location logistics (chapter 5), and to every customer touch point. This
PROMOTE, PROMOTE, PROMOTE
One thought bounced around my brain as I walked into our brand-new
Burnsville, Minnesota, store:
Where the heck are all the people?
It was years
ago, when we
were still the new kid on the block. But we had great people,
Not long afterward, we had an opportunity to plaster our logo on the
largest sign at the Hubert H. Humphrey Metrodome, home to the Minnesota
Twins and Vikings. The package also included sixty seconds of big-screen ad
time for our tire mascot races at all home Twins and Vikings games. My
executive team thought I was crazy to commit $1 million over ten years, par
ticularly since the cost equaled our annual pro“
ts. They said we couldnt
afford it. Guys,Ž I said, we cant afford not to.Ž I pointed out that the con
tract would give us the exposure and credibility our young company needed.
I swung the bat and didnt look back. It was a grand slam.
More than great advertising, the Metrodome contract was PR gold. Whats
the difference? As Dave Mona, founder of Weber Shandwick Minneapolis, the
Midwests largest PR “
rm, explains it, If I tell you Im a great lover, thats ad
vertising. If someone else tells you Im a great lover, thats public relations.Ž
The operative words are someone else.Ž A positive magazine article or news
feature is more credible than an ad because its essentially a third-party en
dorsement. Sure, advertising has its advantages„an ad appears exactly where
you want it and says exactly what you want it to say. But there are times when
a creative PR campaign trumps anything the ad wizards offer.
Take the time Dave sat down with reps for the annual Minneapolis
Home and Garden Show. The lengthy list of feature stories for the new show
was sleepy. There was no gee-whiz hook to build a campaign around. A show
rep ticked off the last item and turned to Dave. Well,Ž he said, what do you
think?Ž Dave scanned the list again, stopped at number eighteen, and smiled.
Tell me about the carnivorous plant display,Ž he said. Not much to tell, the
client said. It was just a bunch of Venus ”
ytraps and other plants some guy
kept in his van while traveling from show to show. What are they going to
eat?Ž Dave said to the puzzled client. Thats not our problem,Ž said the cli
ent. What if it were our problem?Ž countered Dave. What if these plants
need insects to live on? We dont have a whole lot of insects around here in
February. What if we had a crisis and we had to import some insects„for
instance, mosquitoes„to feed to these plants?Ž Everyone grinned.
Thus was born the infamous carnivorous plant display crisis of 1984.
There was just one catch„hard as it is to believe, there arent many mosquito
retailers. Daves team “
nally tracked down a Florida medical lab that experi
mented on mosquitoes. The lab manager laughed when Daves people asked
if theyd be willing to sell a few hundred mosquitoes. If you come down
here,Ž said the lab guy, well
give
you the mosquitoes.Ž A staff member was
dispatched to Florida„but not until Dave alerted the local media. Everyone
recognized it for what it was, a blatant publicity ploy,Ž Dave said. But it was
a slow news day, and when the plane landed we had two newspapers, two
Here are some advertising and PR promotion pointers:
Imagine sitting down with all your custom
ers at once. What would you tell them? Something about your com
pany (an image ad)? Something about a speci“
c offer (a direct
response ad)? The former is good when you arent well known; the
Preach to the choir.
TV and radio ads are:
ferred to as effective reachŽ„refers to the percentage of your
audience that will see or hear your spot at least three times.
Generally, it takes three or more exposures to a message to
prompt an individual to act on it.
Television is the most obvious medium for max reach (larger audi
ence, broader demographics, fewer and more expensive spots). Radio
is effective for building frequency (narrowed demographics, more
spots). Online ad spending is gaining fast on both. Reach and fre
quency numbers will vary according to your offer and objectives. Are
you trying to drive traf“
c to your stores, or focusing on branding?
Are you launching a new product, or advancing a long-term cam
paign? Is your message time sensitive? How are you divvying up your
Promote early and often.
Breaking into a new area? Launching a
new service? Open up the ”
Match the new kids noise level.
Brand loyalty aint what it used to
Dare to be different.
Global insurance giants and talking ducks go
ers, magazine publishers, and newspaper editors are always scouting
for story ideas. Make your news release stand out by keeping these
tips in mind:
Create a wish list.
These are the publications and shows your
customers read, watch, and listen to.
Do your homework.
Check out a publications editorial calen
dar to “
nd out if your product or service dovetails with up
coming themes.
Cultivate a relationship.
Call the producer or editor (Google
for names and contact info) and introduce yourself. Tell her
why your business is a good “
t for her show or publication and
ask if shes open to story ideas.
Put on your editors hat.
Brainstorm with your staff to come
up with a hook that readers or viewers would “
nd interesting.
You may love your plants new jumbo press„but an editor
will just yawn and delete your e-release from her in-box or
toss your paper release in the trash. She may, however, “nd it
unique that you deliver ”
owers and candy with every order.
How to begin? Ask yourself,
What separates us from everyone
else?
Then build on it.
Write a straightforward headline.
Convey the thrust of your
release in a handful of words„
Customers get ”owers and candy
with every print order.
Write in inverted pyramidŽ style.
In other words, lead with
the most important information (the broad base of the pyra
mid). The “
rst paragraph should tell the whole story„who
you are, what youre doing, and when, where, and why youre
doing it. Each successive paragraph provides additional info
in order of descending importance. Limit it to less than one
page.
Stick to the facts.
A news release is just that„news. If you
even start going down the
Heres why our company is so won
derful
road, you blow your credibility out of the water.
Focus on people, not things.
If possible, add a human face to
your story. If your news is product-related, what will your cus
tomers perspectives be? Attractive photos are a great lure.
Dont go it alone.
Sprinkling in quotes and facts from indus
try authorities adds credibility.
Customize it.
Tailor your news release to each publication or
show. If your story isnt in sync with a magazines or newscasts
personality, youre wasting everyones time.
Anticipate the “
nal product.
When you release information,
you lose control over placement and perspective. Have your
team comb over the release in search of positive and negative
erage you want.
Build news releases into your strategic efforts.
Leverage an
article or news segment relating to your business in multiple
ways. Send reprints to customers and prospects, and reference
or excerpt it in your advertising.
A founder or chief exec is sometimes the best person
to sell the companys story. Lee Iacocca pioneered it at Chrysler. He
paved the way for Victor Kiam of Remington (I liked the shaver so
much, I bought the companyŽ), Steve Jobs of Apple, and Richard
Branson of Virgin Group. I took the publicity plunge at my company
and did our TV and radio ads for “
ve years. I “
gured if I could talk
to prospects on air as well as I did one-on-one, I could persuade them
to give us a chance. It worked„our same- store sales trended due
north. Caveat: For every leader who makes a successful spokesperson,
there are ten who are god- awful. Dont try it unless you have some
natural charisma and can express yourself powerfully before a camera
or microphone.
Communicate internally.
You have to create internal excitement be
others to kick in ideas for promotion design (management and sales
may have completely different ideas about your product). When a
Tele
sion.
More and more evidence suggests that TiVo and
other digital video recorders are blunting the power of commer
cials. Plus, younger generations are spending more time with a
computer than a TV, and baby boomers are diversifying their
entertainment options. Still, for now, nothing beats TV for
mentation may have lowered ad rates, for instance, but are they
cheaper from an ef“
ciency standpoint? Does a thirty- second
spot on the Dry Cleaning Channel really garner an ef“
cient
cost per point? Find a freelance media buyer who can navigate
the numbers, “
nd deals, and negotiate for you.
ers who click on their ads. In other words, you only pay for
quali“
ed buyers who sought out your product or service, and
its entirely quanti“
able. At least, thats the way it works in
theory. Keep an eye out for the latest news on click fraud, per
Radio.
An economical sixty-second radio spot offers more ear
time„compared to a pricey thirty- second TV ad„to sell your
brand
and
your offering. Radio offers more ”
exibility than TV.
You can swap out creative content in minutes and digitally
send spots to a station at the eleventh hour. Radio also delivers
a captive audience„listeners are typically sitting in their vehi
cle or of“
ce, and they channel surf less than TV couch pota
toes. We took advantage of catching consumers in their cars,
where they were particularly sensitive to a tire pitch.
Newspaper.
Papers work best for direct response, as opposed
Yellow Pages.
Still a must, even with online search engines
and multiple books to choose from. Make sure your ad is larger
Direct mail.
sults and keep re“
ning. The newspaper-headline rule (80 per
cent of words are “
Trade publications.
Decision makers count on industry rags
Consumer magazines.
Sports marketing.
Our ads and promotions with the Twins,
Vikings, Green Bay Packers, and Kansas City Chiefs were big
winners. We also generated word of mouth with JumboTron
tire mascot races at NBA games. (Our mascots„Sporty,
Tuffy, and Classy„were also hits at parades and other com
munity events.) Fans cant help but associate your name with
warm feelings for the home team.
Out-
of-
home marketing.
Brand loyalty has been waning for
each successive generation since World War II. People, espe
ful of words that are large enough to read in a quick glance.
Spread the virus.
My son Trent was in a trendy Greenwich Village
cigar bar in the mid-1990s when the woman next to him started talk
ing up her Hennessy martini. Hey, Paul,Ž she “
nally yelled to the
bartender, would you please bring us another Hennessy martini?Ž She
lingered on every one of the brands syllables, and patrons took notice
of the mysterious call. Before long, the drink was on everyones lips.
gives your grassroots branding effort a heaping dose of fertilizer. It
takes other forms, too, from new restaurants that tell callers theres a
month-long wait for a table, to lounge owners who pay models to drink
sumers to gather around to gossip about your product.
Wow them on the Web.
Your digital presence has to be more than
brochureware.Ž So often its your Web site that introduces you to
prospects. Every aspect should re”
ect your brand„the look, the feel,
ing experts in the same room to ensure your promotional ef
forts are consistent and interdependent.
Get sticky.Ž
Regularly update resources, offers, news, or data
to give users a reason to stick around and come back. That
holds regardless of your sites purpose„retail, lead generation,
info hub.
Drive traf“
c via all channels.
Feature your Web site address
Maximize e-visibility.
This isnt a do-it-yourself job. Partner
with a specialist in search-engine optimization. You can have
the greatest site in the world, but its chattering in a vacuum if
your target audience never sees it.
Be brief.
Users will read chatty paragraphs and concise bullets,
but arent likely to scroll through pages of boilerplate text. Enlist
a professional Web copywriter to shape and spice the content.
Get speci“
Design your site with your target audience in
mind. You have multiple audiences„consumers, wholesalers,
investors. Either develop separate URLs (uniform resource
locators„geek- speak for Web site addresses) or cleanly split
your site into sub-sites.
Sync with sales.
If your site is sales-focused, link a primary
offer from your home page to an opportunity to buy. You also
need an
easy-to-use shopping section that takes advantage of
opportunities to value- sell (aka, up- sell) and cross- sell, partic
ularly at the shopping cartŽ step.
Highlight the fresh stuff.
The Whats NewŽ section on any
home page is like catnip (especially if you add video). It keeps
visitors up-to- speed on the latest products, sales, news releases,
and events.
Lights, camera, action.
traneous clips can back“
re.
Harvest quali“
ed e-mail addresses.
Direct visitors to sign up
for periodic newsletters, updates, and offers, and soon youll
assemble a golden address book. Install a sign-
up button on
your home page, at checkout, or both. For best results, consult
with programming and list-management experts. Lists need
regular pruning and sorting into appropriate categories based
on customer preference.
Leverage e-mail.
Make a habit of mailing offers and updates
to customers and prospects (auto-responders triggered by
quire opt-out links on e-mail blasts.)
Secure af“
liate
programs.
Give af“
liate partners unique
URLs that link back to your site. Featuring these URLs on
their sites and e-mails generates quali“
ed Web traf“
c, im
proves your conversion rates, and improves your position on
search-page results. If youre offering commissions, its easy to
chart the traf“
c and sales each af“
liate generates.
Get in the feedback loop.
Web reporting, from your site host
or subcontractors, produces all kinds of valuable metrics. Stay
on top of traf“
c, visitors origin (sites, af“
liates), purchase pat
terns (conversion rates, frequencies), and other usage indica
tors. Another option: Use discounts or freebies to entice visitors
to “
ll out surveys.
MAKE TRENDS YOUR FRIENDS
Volvos plan to design a car for Gen X was stuck in neutral. The Scandinavian
nect with the innate core values of the Gen-X consumer,Ž Vickie Abraham-
son, Iconocultures cofound er and executive vice president of consumer
analysis, told Volvo. Vickies team put Gen Xs cultural DNA under their
MacrotrendŽ microscope. They read their books, listened to their music, ate
where they ate, shopped where they shopped. Iconocultures observations led
them to identify “
ve key Gen-X Macrotrends„Artisan (one of a kind, per
sonal style), Carpe Diem (passion, adventure), Torquing (style
high per for-
mance), Neo-Puritanism (traditional family values), and Great Expectations
(luxury). The Volvo team translated those trends into concepts and designs
relevant to
Gen-
X lifestyle values. The upshot? Five new interior prototypes
and a stockpile of fresh promotional angles.
tion tick, from Boomers and Gen Xers to Matures (older than Boomers) and
Millennials (or Gen Yers). Use that knowledge to create opportunities all
across your business, from product development, brand equity, and position
ing to sales, promotions, package design, and customer care.
Trend trackers think of themselves as immigrants trying to dial into the
language and lifestyle of a new land. After all, trends are signposts for under
books. Iconocultures Lifestyle Trend Tracker Checklist translates your cus
tomers needs, desires, and values into a healthier bottom line:
Open your media maw.
Read every magazine and newsletter that
Customers in every economic class dream of reaching
higher. Take it from a tire biz vet, you dont always have to reinvent
the wheel. Consider carrying luxury products and services to the
mainstream by recon“
guring and repositioning them to make them
more affordable.
Befriend your customers. Move beyond statistics and
munities, and sporting events. Youve gotta understand them where
they live. Also, track trends outside your industry and expertise.
Youll be surprised at how quickly you connect the dots.
Ask
customers„in one-on-ones, focus groups,
surveys„about their passions. Are they newshounds or sports buffs?
Do their hobbies land them in the kitchen, the music room, the green
Todays kids arent shy about speak
Doesnt matter if its a frozen pizza, a backyard playhouse, or the lat
est iPod„youre fooling yourself if you dont think kids are a major
in”
uencer in purchasing decisions. What Junior wants, Junior usu
ally gets.
A WORD TO THE WISE: MERCHANDISE
The “rst Brunswick billiard table was built in a small Cincinnati wood
shop in 1845. One hundred “fty-“
ve years later, the companys selling
channel seemed just as old. Most Brunswick tables were sold in mom-and-
pop dealerships that cared little about the prestige of the brand. Many
stores commingled brands and stacked tables on top of one another like
cheap chairs. No surprise then that merchandising master Sandy Stein was
summoned to Brunswicks headquarters in Bristol, Wisconsin. His assign
ment? Create a customer experience that would yield higher perceived brand
value, create excitement, and separate Brunswick from the commoditized,
low- end tables.
The solution? Sandy, found er of Minneapolis-based Stein Trending
Branding Design, came up with the Brunswick Pavilion, a store-within-
a-store concept that the company rolled out nationally. In a typical store, a
dozen or more tables are positioned for optimal viewing, a pro cessional-like
entrance features history panels extolling the companys heritage, and backlit
oor-to-ceiling fabric scrims display photos of additional table styles in vari
ous home environments. The result? A brand appreciation that transcends
price and, more important, appeals to the female factor.Ž The Brunswick
Pavilion concept,Ž Sandy said, makes an emotional connection to women,
typically the gatekeepers on large purchases. The showroom spurs the reac
tion, Thats the way I want our room to look. Ž
Sandy had racked up a big success, but now he wanted to run the table.
Brunswick, however, passed on his idea to develop its own national prototype
retail store. Convinced that the concept would change the face of billiard re
tailing, Sandy joined forces with a retailing colleague and invested twelve
months worth of spare time in writing up a business plan. Impressed, the
company gave Sandy the green light, and the “rst Brunswick Home and Bil
Here are more entrepreneurial merchandising tips:
Provide a
fort is important. Emotions and feelings often drive purchases. Our
store personnel were trained to treat guests like gold. Our interiors
appealed to all of our customers senses„beautiful showrooms, view
ing windows into the auto bays, upbeat music, pleasing scents to off
Brunswicks lean, clean, in- store graphic im
agery answers top- of-mind questions„How big does my game room
Edit offerings.
Too many choices can overwhelm the buyer. Some
independent bar stool retailers, for instance, offer up to two hundred
styles. Thats confusing enough, but theyre poorly displayed, too. By
Leverage the Web.
Smart retailers offer intuitive online shopping experiences that seam
lessly sync with in- store visits. But thats not the half of it. The Web
is an avenue for building and reinforcing customer connections. Re
member, relationships, not transactions, are the building blocks for
long-term wallet share. Link your customers core values (youve al
ready done your trend research) to value- added propositions that ap
peal to a virtual community. This online community is a home where
customers can exchange thoughts and information about your
offering„and exchange instantaneous feedback with you. That puts
you in touch with customers thoughts about your products and ser
vices, and tells you how effective you are at solving their problems.
Pricing is a key element of any offer. We were able to occupy the low prices
with nicetiesŽ niche by offering how-low-can-you-go pricing on commodity-
like products and making a bit more on out-of-
the-mainstream items, exclu
sive product lines, and premium products and services. Positioning aside,
These are some pricing factors to consider:
tors pricing and your sales volume.
body shares the pain. Still, you need to “nesse it by balancing two
factors„how much to raise prices and how often. Lets say youre a
supplier whose input costs have gone up 3 percent. Youve got to
Raising consumer prices is sometimes touchier. Most retail cus
Lowering prices, on the other hand, is generally a matter of
lessly drive down prices. If you dont play by their rules, theyll
“nd someone who will.
New products keep the sun from going down. Back to our
haps youre already exchanging virtual handshakes with overseas partners. No?
Just wait. Chances are youll eventually sell and ship products overseas, pur
Stay current.
Even seasoned vets need to keep abreast of shifting
geopo liti cal and global- “
nancial dynamics. Start with your state trade
promotion agency„most states have a small of“
ce within their com
merce or economic development departments. Its a clearinghouse for
federal, state, and local initiatives. Many offer export promotion as
sistance through workshops, seminars, and one-on-one counseling.
Subscribe to
The Economist
. Or, see these Web sites for the latest hoops
and how to jump through them:
Federation of International Trade Associations (www.“
.org).
FITA lists more than 450 independent national associa
tions and provides links to seven thousand international trade
Web sites. Sign up for
Really Useful Sites for International
Trade Professionals,Ž
a free e-letter.
The U.S. Government Export Portal (www.export.gov).
This site gives you the skinny on international-trade logistics
and requirements. More important, it provides access to the
U.S.
Commercial Service, the global business solutions unit of
the Department of Commerce. Through its 108 domestic of
ces and nearly 150 posts in 76 countries, the U.S. Commer
cial Service offers customized solutions to help small and
International Chamber of Commerce (www.iccwbo.org).
ICC, the voice of world business, champions the global econ
omy as a force for economic growth. Here, youll “nd the
home page for Incoterms 2000, thirteen international rules
accepted by governments, legal authorities, and practitioners
worldwide. Incoterms 2000 rules bridge communication gaps
by spelling out buyer and seller responsibilities.
tion in-house could overtax people and pro cesses dedicated to domes
tic sales„you may have to reallocate and add resources. Plan for
complex travel arrangements, warranty repairs, and after-sales sup
port. If you go with distributors to represent your product and man
age post- sale issues, will you train them on their turf, ”
y them to your
of“
ce for annual sessions, or do it all via webinars? Other options:
Open an of“
agement company that will develop business in exchange for a cut.
(What ever the strategy, make sure you integrate step-by- step pro
cesses for overseas trading into your order-taking infrastructure.)
Next, establish pro“
les of your ideal business partners. Perhaps you
need someone who stocks warranty replacement parts and does on-
site repairs. Another “
rm may offer twenty-four-hour tech support.
Or, is it more important to have engineers on staff to do installs?
Appreciate cultural differences.
Theres always more to learn about
countries you do business with. Go to school on their cultures, from
business protocol to entertaining etiquette. Americans and Europe
ans, for instance, rely on meticulously detailed contracts, while the
Japanese favor oral agreements or brief written summaries. In Japan,
take a small gift if youre invited to someones home. But dont wrap
it in white paper„its a symbol of death. Elsewhere, if you dive into
a French or Saudi companys customer data before building the
are interpreted negatively. Germans and Japanese tend to be punc
tual, while time is more ”
exible in Latin American countries.
It certainly helps to have employees who are ”
uent in
foreign languages. But many growing “
rms cant afford the luxury.
English, of course, is the lingua franca of business in most industrial
ized, non-Spanish-speaking countries. If you plan to do business in
Latin America, learn Spanish. Or, hire someone whos ”
uent. South
ers cant decipher labels and packaging, you may be forced to give
steep discounts. Then there are advertisings linguistic land mines.
Increasing Market Share
savvy sales pro knows how to turn yelling into selling. Before embark
ing on a family vacation, Tim, a sales rep for a Boston-based air com
pressor supplier, told his hot prospect that hed drive back from Cape Cod on
a moments notice if thats what it took to close the deal. The customer prom
ised he wouldnt nose around elsewhere in the meantime, easing Tims anxi
ety. There was a lot more at stake than an order for a $30,000 air compressor.
The prospect, a decision maker for one of the largest automotive companies
vice the compressor. He also offered a modest discount as a peace offering. In
the end, cooler heads prevailed. The customer reversed his order and went
with Craig and Tims company.
Driving back to the of“
ce, Craig tutored Tim on all the Sandler Selling
trial equipment, its tenacity, passion, and resolving to do right by the cus
tomer that opens accounts and closes sales.
Its worth mentioning that the word salesŽ needs a good slander lawyer.
If Sales were a person, the image many would conjure is a chatty, slick sales
man preying on helpless naïfs. My perspective was shaped by the wisdom of
MANAGING THE SALES FUNCTION
Theres a lot riding on how well you coach a sales team. Its perfor mance de
Spend a bundle on a sales manager.
Many a business own er stud
ies subpar sales “gures, scratches his head, and wonders,
I missing?
eld general, thats what. A creative sales manager sniffs
ans, and herds volatile personalities. Volatile? Salespeople tend to
be mavericks. Theyre more impulsive than cube dwellers. On top of
that, physically and digitally pounding the pavement armed only
with traditional, unenlightened sales techniques can exact one heck
of an emotional toll. Unfortunately, the way many sales departments
operate is negatively self-reinforcing„a lot of leaders simply promote
their best salesperson to sales manager. Good luck with that. There
may be some overlap in
expertise„people skills, for instance, and
tricks of the trade. But management is a different animal. If your
sales wiz doesnt have noteworthy leadership experience, his supervis
ing stint may be a short one.
Track down the best salespeople.
Your company team wont make
the big leagues without an all-star sales force. The best are probably
already employed„but dont let that stop you. Many are treading
water, plying under adverse conditions„a mediocre product, poor
merchandising, scant inventory, shoddy support. Those roadblocks
are curbing their earnings and steering them toward greener pastures.
Fling that window of opportunity wide open. Besides checking out
the star-catcher methods in chapter 12, ask yourself, your people, and
everyone in your Rolodex:
Has anyone knocked your socks off lately?
Its
shing expedition that often nets great leads.
Be your own search “
rm. Ask yourself,
If I was a great salesperson,
where would I work?
Then start dialing. Express interest in the compa-
nys offerings: I want the complete picture, so have your best salesper
nd somebody like you?Ž If he expresses interest, take the high road
(Thanks, but I cant do thatŽ) and be satis“
ed with a good referral.
Salespeople are a unique breed. They
need thick skin and a Kevlar ego to survive the battering ram of rejec
tion. During the hiring pro cess, ramp up your personality probing
and role-playing exercises (chapter 13). Make sales aptitude and psy
chological testing mandatory (assuming legal issues dont pose a
problem). Look beyond numbers when reviewing applicants accom
plishments. Did they build a territory from scratch or inherit it? Re
member, youve gotta sell them, too„on your mission and vision for
the company and the rewards that follow.
Offer seductive incentives.
Dangle a fat carrot and youll “
nd sales
people racing around the track long after the nine-to-“
vers have gone
home. Big hitters prefer a generous commission arrangement with
ment (If you fail to reach 70 percent of goal after four months, well
shake hands and go our separate waysŽ). That helps cut your losses
early and prevents uncomfortable terminations.
Train your force.
Dont give up on your current players quite yet.
With the right system (the Sandler Selling System is my favorite),
even chumps can ”
ower into champs. Invest in your salespeople by
enrolling them in a great sales course. The cost is a pittance com
pared to the extra revenue its sure to produce.
Build authority.
Turn your sales team into doctoral candidates in
erature until they could write the textbooks themselves, reciting nu
ances, features, and bene“
ts for every brand. They knew how each
product could cure customer pain. Thats how you add value to every
customer contact. The higher you rise above the pack, the more valu
able you, and your brand, become.
sure results.
Where theres measure ment, theres motivation.
Our weekly e-mail reports ranked the entire sales force by various
metrics. Sales folks are “
Demand input from salespeople.
As my dad used to tell me, Ap
preciate and listen to your salespeople„they bring in the bucks that
pay everybody else.Ž Think about it. Your sales force is a direct pipe
line to customers. Theyre the “
rst to know when your customers
needs and desires morph„and theyre an early warning system for
adjustments on the ”
y. For example, I own a stake in a technology
concern that hired two battle-tested salespeople with broad industry
experience. Their former employer had completely tuned them out.
So they were shocked when we treated their recommendations like
sage advice and adjusted our product offering, training, and customer
ser vice accordingly.
Embrace Big Brother.Ž
Weekly one-on-ones have limitations. The
only way to ensure a salesperson is following protocol is to monitor
her on a prospect call. Compliment her on what shes doing right and
address her NTIs (need-to-improve areas) with the four- step Confu
cius Checklist (chapter 41)„tell her, show her, watch her do it and
offer feedback, watch her do it again.
Drum up support for your sales staff
via employee communication channels„e-mail blasts, executive
Create material support.
To present a “
rst-class image, youve gotta
have “
rst-class business collateral. Thats everything from business
cards, stationery, and brochures to Web sites, newsletters, and trade
show booths. Make sure they all deliver a consistent brand message.
Theyre your silent sales force, at it 24/7.
MANAGING THE FUNNEL
Think of your sales funnel as a place to pour all your prospects, everyone
from current customers to people unfamiliar with your offering. Our sales
funnel (others call it a pipeline) report listed current and prospective accounts
along with current or potential sales levels, goals, follow-ups, roadblocks, and
solutions. Perfor mance reports, “lled with individual stats like the back of
a baseball card, were e-mailed to everyone on the team daily, weekly, and
monthly. The sales manager stayed on top of things through weekly one-on-
ones with all his salespeople.
Constantly sift your sales funnel to separate hot leads from dead-enders.
A good way to keep costs„and your sales teams frustration„down is to
bring in savvy assistants to qualify the leads. Ef“
cient above- the- funnel man
agement keeps your rock- star sales reps happy and productive. Expecting
sales pros to do their own cold-calling and lead qualifying is like asking Sha
quille ONeal to launder team uniforms. (Cold-call caveat: Mine isnt a one
size- “
ts- all strategy. It may indeed be worth sales reps time to cold-call.
Much depends on things like the size and maturity of the company and terri
tory, the universe of available leads, the average account value, and the dif“
culty of reaching decision in”
uencers.)
ing?Ž How are you personally affected?Ž How much is that costing you?Ž
What are you doing to “x the problem?Ž How well is that solution work
ing?Ž Youd be surprised at how prospects open up. Still, most leads wont
pan out. Thats okay. Its quality, not quantity, that counts„80 percent of
your business comes from 20 percent of your prospects. Theyre the ones that
The nature of the work demands that salespeople embody certain character
istics. Fine-tune your hiring and training pro cesses to spot and develop these
eight qualities:
Goal-
oriented.
Show me a “
ve- star salesperson and Ill show
you a
go-
them. Real-world experience is the number-one predictor of sales suc
cess. Look for take-charge people who can rattle off case histories of
Self-
cep
tance.
Self-esteem is the best form of rejection pro
tection. The greats dont take losses personally. They stay con“
dent in
their abilities and recognize that circumstances beyond their control
sometimes in”
uence outcomes. Take every opportunity to remind
your reps theyre great people, regardless of what the weeks numbers
look like.
Empathy.
Great salespeople are great listeners. Customers sense
the difference when a rep shifts from huckster to caring consultant.
You cant fake it„the greater the suspicion, the lower the commis
sion. Come to think of it, the term sales forceŽ is something of an
oxymoron because a sale will fail if you force it. Bottom line: If your
salesperson does right by his customer, hell do right by himself (and
your company).
Zeal.
If your sales reps dont believe your offering is the greatest
tween what hes providing and how hes helping people. If he cant
access his passion„and express it genuinely through verbal and non
verbal cues„hes dead in the water. Counterfeit enthusiasm kills off
more sales careers than tacky menswear ever will.
Education-
obsessed.
Friendliness.
Its human nature. People do business with people
they like. Never underestimate the likability factor.
Doggedness.
The yes a salesperson yearns to hear may be wait
ing patiently in line behind thirty- six door- slamming noes. Slogging
through that cold- shoulder quagmire has broken the spirit of count
less Willy Lomans. Top salespeople apply their batting average„for
both number of sales and dollars per sale„to their goals. Its how they
calculate how many at-bats they need to hit a home run.
Hunger.
The best salespeople thrive on the thrill of the hunt.
Theyre never complacent or satis“
ed. Oh, they celebrate when they
score big, but only brie”
y. Then its on to the next quest. There are
always more prospects to “
nd, more appointments to make, more
people to help. Great hunters require only cursory coaching„just
throw plenty of red meat their way and watch em run.
THE SANDLER SELLING SYSTEM
egy is locked and loaded. Youve built a principled, outgoing sales force. But
the cash registers wont start singing until youve plugged in the right sales
pro cess. Ive seen and experimented with countless techniques. Hands down,
the best is the Sandler Selling System (www.sandler.com), which has notched
countless win-wins for me the past twenty-“
ve years. No-nonsense and digni
Sales reps wont blossom until they catch on to the prospects system.
Over the years, through exposure to countless sales pitches, prospects have
learned enough about the traditional selling pro cess to thoroughly undermine
it. Why? Because they feel they have something to lose„their money.
The four pillars of the prospects system are:
Prospects Dont Always Tell You the Truth.
Otherwise honest
folks have no problem withholding information from, and even mis
leading, salespeople. They fudge the facts and hold their cards close,
all out of self-preservation. Why? Prospects believe that while theyre
busy managing their daily affairs, salespeople are sharpening their
talons. So they stay on their toes lest you “
nesse them into, heaven
forbid, buying something. Precious little indication is forthcoming
on how much they actually need your product or service because,
well, that would play right into your hands.
The Prospect Wants to Know What You
Know„for Free.
ductivity, or lowering costs. Why else would your “
rm invest in the
The Prospect Commits To Nothing.
Information in hand, she
may imply shes close to committing. Shell dangle just enough hope
to string you along as an unpaid consultant. You hang on, con“
dent
youve notched another win, when in reality youve got nothing. You
The Prospect Disappears.
Overnight, it seems like shes skipped
town. Voice mail and e-mail barriers spring up„salesman kryptonite.
The relationship was terminated without your knowledge. Yet you
continue following through because youve invested too much in chas
ing a phantom sale to admit youve been had. When reality sinks in,
well, lets just say its a bad day.
Now lets look at why the traditional selling system doesnt work. What
ever brand it goes by, its underlying structure is predictable. The salesper
son must
sell features and bene“
withhold price and terms until value is established
rely on presentation skills to gain agreement
anticipate and handle objections
employ an array of manipulative closing techniques
Sure, this system has survived longer than snake oil. But its so widely
used that savvy buyers see it coming. Worse, the manipulation it advocates
contributes to todays adversarial sales environment that only hardens the
prospects system of defense. To top it off, each step is ”
awed.
People dont want features and bene“
ts; they want solutions.
Delaying vital information wastes valuable time on dead-end
pursuits.
Presenting to blasé prospects wastes everyones time.
Your best pitches work about as well as one-liners at a singles bar.
ing among equals. The salesperson assumes the role of a high-end consultant,
offering an honest exchange of information.
Here is the seven-step Sandler Selling System:
Establish Rapport.
Stop acting like a salesperson. Shift your
mind-set from
What can I get?
How can I help?
Be warm and
genuine. That is, smile, maintain eye contact, use “
rst names. Men
lationship.
Establish an Upfront Contract.
Be clear on a few important
ground rules. Establish the purpose of the visit, the prospects agenda,
your agenda, the length of the visit, and the options going forward.
For instance, cover all “
Uncover and Probe the Prospects Pain.Ž
People buy emo
tionally and justify intellectually. A prospect who doesnt have the
tools she needs to do her job experiences emotional pain. Ask ques
tions until you discover the issues causing that
pain„and just how
excruciating each one is. To move closer to a sale, the old adage is
true„no pain, no gain. If the prospect is pain-
free in your area of
expertise, congratulate her and tell her shes good to go with her cur
rent vendor and not you.
Put Money Issues on the Table.
Clearly deliver this message:
The most important cost is not the price of the goods but what the
prospect stands to lose if she does nothing. That said, determine the
nancial impact of the issues (the pain) youve uncovered. Then
Learn the Prospects
Decision-
Making Pro
cess.
Can the pros
pect make the “
nal call? If not, ask for an appointment with the
decision maker. If you “
rst need to sell the gatekeeper, do it with the
Present a Solution that Cures the Prospects Pain.
Again, people
dont buy features and bene“
ts. They buy ways to avoid and overcome
pain. Describe how you can “x her problem and heal the pain. Then
are you on a scale of one to ten, with zero being no interest and ten
being sold?Ž If the answer is “
ve or less, youve got a problem. Re
sure and places responsibility for the decision where it belongs„
squarely on the prospect. Let her close the sale.
Reinforce the Sale with a
Post-
Sell Strategy.
When a competi
tor realizes hes been cast aside, he may “
ght back with a lowball price
or some trash talk. Shore up your sale before you leave by anticipating
buyers remorse and unearthing hidden objections. Thank her for
Remember, business is won or lost on the sales dance ”
oor as rapport is
established. Its the moment of truth, when you determine whose selling sys
tem will prevail, yours or your prospects. Without a strong system, you de
fault to a passive role. Dont let that happen. The best dancers lead gracefully,
always staying a step ahead of their partner.
Making Your Guests Feel at Home
walked into a suburban Minneapolis Tires Plus store one day to “nd one of
our young salesmen in a heated argument with a
middle-
aged customer. I
stepped in and offered the older guy a cup of coffee. We sat down and I asked
what I could do to make things right. He told me his car was late, and then
con“
ded that his doctor had just diagnosed him with terminal cancer. I told
Too many times theres a good reason for patrons to be on edge. Regard
less of customer behavior, we banned our people from acting disrespectfully.
exceptions„that young salesman never battled another Tires Plus guest.
If I found an employee fuming over a testy customer, Id ask, Ever have a day
Tires Plus customer service was legendary. I asked our people to add a
touch of volunteerism to the job, to try to make each customers day a little
brighter. If we concentrated “
rst on kindness and empathy, I said, healthy
pro“
ts would naturally follow (as long as our prices and costs were in line).
Just a few words can forge customer connections. Some of my proudest
moments came while reading comment cards. My favorite: A woman who
said she had visited Tires Plus believing she needed new tires only to be told
her old ones still had tread to spare. Our teammates reached across the cor
porate divide all the time. Our entire Coon Rapids, Minnesota, store signed
a sympathy card upon news that a car had hit the dog of a longtime cus
tomer, George May. George was touched„and never bought tires anywhere
else.
Why shoot for legendaryŽ customer service? As busy chief entrepreneur
ial of“
cer, its easy to lose interest and see customers as pieces on an assembly
line rather than as human beings.
Business own ers spare no expense to get
new customers in the door, yet often fail to provide a why-go- anywhere-
else experience. Huge mistake. Customers are like spouses„take them
vicious circle„businesses pour more and more resources into un
earthing new customers to replace the ones lost to neglect. This isnt
placements.
Take the time Pete Selleck, COO of Michelin Americas Small Tires,
ew in to hammer out our partnership agreement. He asked for a store
tour, so I showed him a few locations. In Woodbury, we introduced
prised, I asked why. My goodness,Ž she said. Im sitting here watching
a movie, sipping your cappuccino, and my kids are playing with toys on
a clean ”
oor.Ž Pete was blown away. Later, I learned he shared the story
with every tire dealer he worked with.
Thats why smart companies focus less on trying to make unhappy
customers happy and more on converting satis“
ed customers into
top boxŽ apostles. What does that mean? Enterprise Rent-A-Car,
vice questionnaire. Industry standards back up Enterprises belief that
satis“
edŽ just doesnt cut it. About 35 percent of satis“
edŽ custom
ers will come back. Not bad. But a full 80 percent of customers who
Dont just satisfy customers. Astound
ily. That sends new customers to your doors and Web site„at no ad
ditional cost. Expect a dazzled customer to recommend you to two to
three others. On the other hand, one rude encounter with an employee
can torpedo every future purchase from that customer, his family and
friends„and
their
family and friends. Expect a peeved customer to
complain to three to eight others. Precious word-of-mouth buzz„free
Its the right thing to do.
Back in 1986, David Wagner, owner of
Twin Cities…based Juut Salonspa, was surprised when a regular
showed up without an appointment just two weeks after her previ
ous visit. She wanted her hair styled, not cut, so David assumed she
had an important social engagement. Luckily, he had an opening.
I was in a great mood and I was really on,Ž he recalled. I gave her
a great scalp massage and shampoo, and then styled her hair. We
laughed and joked and had a lot of fun. When she left, she gave me
a big hug that lasted just a little longer than usual.Ž Two days later,
David got a letter from her. He started reading, and froze. She ex
plained that she had planned to commit suicide that day, and had
cause David had helped her realize life was worth living. She went
home, confessed her plans to her sister, and agreed to check into a
hospital.
David was stunned. If you had lined up a hundred of my clients
and asked me to choose the one who was considering taking her own
life, she would have been last,Ž he said. She was gregarious, outgo
ing, and successful. I had no idea she was in such a dark place.Ž David
was grateful he had made a difference, and humbled by the experi
ery customer like I had treated my suicidal client,Ž he said. David
kept his promise, and wrote a best- selling book,
Life as a Daymaker:
How to Change the World Simply by Making Someones Day.
He de
nes daymaking this way:
To go about your life in a
heart-centered,
caring, and compassionate manner with a genuine intent to uplift others.
He also decreed daymaking as the of“
cial noble purposeŽ of Juut
Salonspas four hundred employees.
Here are six ways to win legendary customer loyalty:
Hire the Right People and Train Them Well.
We showed every
one involved in hiring how to spot applicants who loved helping
people and making their day. But that was only the beginning. Good
employees also need training and inspiration. We enrolled new hires
in a weeklong orientation where, among other things, I spelled out
our mission„
Deliver caring, world-class service to our guests, our com
munity, and to each other.Ž
Treat Employees Right.
If you leapfrog your people and focus
chie”
y on pleasing customers, youll wind up with unhappy custom
ers. Connect the dots, folks. Do you really expect employees who feel
unappreciated to welcome customers with a big smile and a genuine
desire to give them a positive impression of the company? Honor your
people, concern yourself with their well-being, and respond to their
grievances as if they were customers. Theyll reward you with invigo
rated loyalty and new standards of perfor mance and customer care.
Establish Clear Policies.
No matter how attentive, bright, and
spontaneous your people are, customer service should be as scripted
as a political stump speech. Improvisation leaves too much to
lines were essential at three customer-care stages.
Initial contact.
Guests were greeted with WHENS„Welcome,
Handshake, Eye contact, Name, Smile. We asked a series of
questions to identify their needs. If appropriate, the salesperson
walked outside with the customer to examine tire tread. Hed of
fer a solution, write up a work order, and invite the customer to
relax in our lounge until her car was ready. Staffers also “
elded
phone calls according to a fun protocol I established in the
early eighties: Its a great day at Tires Plus. This is Jim. How
can I help you?Ž
Warranty ser
vice.
Salespeople were trained to welcome return
ing, non-revenue- producing guests like they were new custom
ers. The reason should be obvious„customers prefer to go
steady rather than have a one-night stand. That means cod
dling. We had scripts prepared for every eventuality„“
xing
faulty repairs, replacing defective warrantied parts, servicing
prepaid maintenance programs.
Customer complaints.
We welcomed them. No, seriously.
They were opportunities to demonstrate we cared about our
customers. We even deep- sixed the word complaintŽ and re
placed it with guest opportunity.Ž Its said that the value of a
persons character is measured by how one deals with adversity.
Thats also true of the value of a companys character. Employ
ees at every level need the authority to do whatever it takes to
satisfy unhappy customers. Give guests the bene“
t of the doubt
How do seat- of- the- pantsers handle complaints? My sister- in- law,
Pam, had patronized a dry cleaner in Lexington, Kentucky, for “
teen years. One day I tagged along as Pam returned a pair of pants
the cleaners had shrunk. The owner protested that it wasnt her fault,
and implied that another cleaner had done the damage. She refused
to make it right. Insulted, Pam never returned. Rather than spend
thirty bucks to “ x the problem, the dry cleaner lost a hundred times
that in lifetime sales.
Enlightened entrepreneurs go from zero to hero by easing the ten
sion in these “
ve elements of customer complaints:
The Layers.
When a customer calls to lodge a complaint, will
she reach a real person or a machine? Automated reception
ists are convenient and save money, but they also elevate cus
tomers blood pressure. When she is connected to a human
being, will that person help her? Or, will she fall into a mad
dening maze? If they complain in person, is someone with
authority on duty?
The Apology.
Two words solve most customer con”icts:
Im
sorry.
However, a forced apology only makes things worse.
If it isnt heartfelt, shell never come back„and bad-mouth
ner felt it was genuine. (Bonus: Employees told me this ex
ercise also helped when they owed an apology to an angry
spouse.)
The Duration.
The longer it takes to “x a problem, the more
frustrated the customer.
The Action.
After gaining clarity, recapping the issue, and
apologizing, we offered a tailor-made solution. If that was still
unacceptable, we asked the customer what was fair. We
granted all but the wildest requests. Its just smart business
serving guest than miss satisfying a deserving one. The num
Solicit and Act on Feedback.
Create as many comment channels
ers think. For one “rm, that may mean comment cards and follow-up
phone calls. For another, it may be a Web blog. Dedicated complaint
hotlines appeal to certain demographics. Some companies retain an
outside service to conduct customer surveys, something Tires Plus
did regularly. We also contracted a mystery shopperŽ service„for
Gathering information is pointless, of course, unless you act on
it. We tweaked our store protocols all the time based on customer
feedback. Every negative comment about an employee was routed
to his managers in-box (and ccd to his district manager) so he
could coach the offender back on track. When possible, we told
customers about the “xes they inspired„and asked what we could
do to win them back. If they said there was nothing we could do,
we told them we understood because we had broken our promise.
We also told them we hoped they were treated well by their new
merchant because thats what they deserved. Our goodwill shocked
some people and often turned them around. But thats not why we
did it. It was a simple matter of decency.
Mea
sure and Reward Per
for
mance.
We had a customer-
satisfaction metric called GEI (guest enthusiasm index). Applied to
individual stores and the company as a
whole, it measured the per
centage of customers who would recommend us to friends. Below-
prominently displayed the letters. During the party, these customer
service all-stars basked in a well-deserved round of applause.
Walk Your Talk.
Entrepreneurs give a lot of lip service to their
commitment to customer service. Are you among the ones who fol
low through? When you hear of a complaint, do you shake your head
and joke about the
odd-
duck customer? Or, do you urge your people
to look at the situation through the customers eyes and do what it
takes to make her happy? Do you shout, You gave away WHAT?Ž
Or, do you say, Good for you, you remembered our values and did
the right thing.Ž Great customer service will wither on the vine with
tional if we broke our promise. Our customers and employees knew it
wasnt just an empty slogan.
FINANCE, ACCOUNTING,
Beyond Bean Counting
e were sitting on hundreds of thousands of dollars worth of unpaid
bills when Jim Bemis joined us as chief “
nancial of“
cer in 1993. We
couldnt mail checks because we didnt have the cash to clear them. In the
previous twelve months we had added two locations in the Twin Cities and
glers and regrouped. In the short term, we decided to open stores only in the
Twin Cities, where our brand was “
rmly established. Sure enough, every new
homegrown store quickly turned pro“
table. Eight months after Jim joined us,
the checks were truly in the mail.
Jims “
nancial leadership was pivotal. I was elated when he cleaned up
ter, our auditors gave us high marks for the “
ness leaders view bean countersŽ as math geeks whore around only to clean
up their messes. Its not a surprise, given that most entrepreneurs come from
FINANCE, ACCOUNTING, AND IT
Had I read this chapter at the start of my career, my seat-of-the-pants days
wouldve been a little less rocky.
AND THE FINANCE FUNCTION
sent these controls, you open yourself to ”
awed decisions, theft, and em
bezzlement. That said, hire more than a checkbook holder or recorder of
history. The CFO belongs on the executive team. The best ones are infor
mation hubs, providing the rest of the team with “nancial tools for running
their departments.
Good CFOs provide monthly analyses and presentations to the executive
team„that includes pro“
t-and-loss statements within “
ve to ten days after
vinced of the CFOs value? I yield to Dave Cleveland, a forty-year banking
vet and found er of entrepreneur-friendly Riverside Bank in Minneapolis: If I
could ever “
nd a company where the owner paid the CFO more than he paid
himself, Id make that loan automatically.Ž
No matter your take on the “
nance function, be careful not to hand over
responsibility and power. After an early CFO repeatedly failed to produce ac
curate, timely reports„and resigned as a result„I challenged our CPA “
for not alerting me to his shortcomings. Thats when I realized that the CPA
rms loyalty to the CFO may have colored its objectivity (he had selected
them, after all). That was the end of that relationship; I helped choose a new
CPA “
bility was to me as chairman and CEO. I also scheduled periodic one-on-ones
with the “
Every CFOs raison dêtre is cost containment. No matter what pricing
position your company stakes out, cost-cutting is an ongoing exercise. Ryanair,
the Ireland-based no-frills airline thats revolutionized European travel, is an
extreme„and extremely successful„example of how driving down costs
drives up pro“
ts. Michael OLeary, who heads up Ryanair, got religion on cost
containment after visiting Southwest Airlines Dallas headquarters in 1991.
His motto now: A penny shaved is a penny earned. Like Southwest, Ryanair
ies point-to-point to smaller airports and limits maintenance costs by using
just one airplane model.
OLeary also did away with preassigned seats, travel agent commissions, and
frequent- ”
ier miles. He even eliminated seat-back pockets to speed up cleaning.
You can always “
nd more fat to trim, no matter how lean you are. Sit
down with your management team and slog through the expense portion of
your pro“
t-and-loss statement. Line by line, ask two questions:
Does this add
value to the customer experience? If so, can it be recovered through product or ser
vice pricing?
If the answers are no, eighty-six it.
These are some more waist-slimmers:
Assume youre paying too much for absolutely everything, from
your CPA “
rm to advertising to ballpoint pens (see chapter 50 for
purchasing tips).
Turn to your people for ideas to eliminate wasteful spending. (Our
Pro“
t Improvement Team included employees at all levels across
all departments.)
Weed out underperformers.
Measure costs by department.
Boost inventory and manufacturing ef“
ciencies.
Recalibrate compensation levels to re”
A consultant once told me about an anonymous client whose monthly reports
cause the company was stuck in no- growth gear. He “
nally “
gured out his
FINANCE, ACCOUNTING, AND IT
tablished at the beginning of the year. (Forecasts, on the other hand, should
be updated
regularly„and spending adjusted accordingly„to re”
ect actual
lines?
In 1519, Cortez, the Spanish explorer, arrived to conquer Mexico. Once
ashore, he ordered his men to burn the ships that had carried them to the new
land. It was a bold message„win or die. Cortez would have made a lousy
businessman. Sometimes, retreat is the wisest call.
Lay the groundwork for buy-in by involving all levels of manage
ment in the strategic planning pro cess (chapter 23).
nancial models and loading up last years numbers.
Start fresh with a zero-basedŽ approach. Begin with last years
numbers„but dont assume theyll remain constant. Analyze the
origin of last years business and what might change. Then build
this years numbers from the bottom up. Result? More accurate
revenue forecasts and tighter expense control.
Exercise caution. Estimate revenues on the low side and expenses
on the high side (but not too high because people generally spend
Its okay to submit a more conservative plan with lower expecta
ing the covenants that the bank created based on the plan you
gave it. No matter who your constituencies are (bank, analysts,
board of directors), you cant go wrong with a strategy of
UPOD„under- promise, over- deliver.
Youre in the drivers seat, so keep an eye on the dashboard. Every business
should track daily, weekly, and monthly metrics„receivables, payables, gross
and net pro“
t margins, sales, average sale, inventory. Enlightened entrepre
neurs also insist on real-time measurements unique to their industry. For in
stance, three key manufacturing metrics may be:
Scrap rate.
Lets say you make die-cut labels. On any given day,
FINANCE, ACCOUNTING, AND IT
order is going to be late. See that someone hits the ”oor to “
nd out
why. Maybe a machine broke down. Maybe somebody ran the job
on the wrong paper. Whatever the case, if you ignore the scrap
call from an unhappy customer.
Backlog.
Keeping orders ”
owing through the pipeline is vital. Too
much downtime is murder on margins. (Have your CFO deter
mine how to measure this metric.) Sales and manufacturing need
to sync up to stagger orders and keep production rolling along„if
Equipment utilization percentage.
No metric screams red ”
agŽ
louder than this one. Too many entrepreneurs fall in love with
equipment. One business owner I know had to have the latest toy
but ran it only 20 percent a day. Idle employees passed the time
watching wasted dollars„capital expense, depreciation, insurance,
labor„swirl down the drain.
Numbers tell the story, but dont obsess too much about them. Entre
preneurs often succumb to analysis paralysis by studying too much„or the
Seat-of-the-pantsers often overlook the most obvious and important
metric„cash. I found out how a cash crisis can sneak up on you when, one
day in 1989, my CFO told me that we were $1 million in the hole and tapped
out on credit. Financial statements may lead you to believe that youre raking
prits are overdue receivables, slow-turning inventory, and growing too fast.
All companies, particularly young ones, should keep close tabs on cash by
forecasting their balances daily, weekly, and monthly„and then act quickly
when projections fall short.
MANAGING RECEIVABLES
In the mid-nineties, an Arizona
wholesale customer played us like chumps.
They steadily grew into one of our largest customers, paying like clock
work. Then they placed a succession of huge orders that pushed them be
yond their credit limit. Red ”ags ”
ew, and they pleaded for our help. We
made an exception because of their sales volume and sterling payment
record. You know where Im going with this. We got stung to the tune of
ve hundred grand. Lesson learned. My philosophy is simple. Not only do
ment of your receivables:
able payment terms„date due, “
nance charges. Dot the
s and cross
the
s„so you dont have to cross your “
ngers come collection time.
Know your customer.
Dont rely solely on credit reports for informa
tion on commercial accounts„that info is often two years old. Call
Establish a personal relationship.
Its not always practical, of
course, but it can tilt the payment odds in your favor.
Walk away from large, suspect sales.
If youre not completely con
dent an account can or will pay you on time„and the sale is large
enough that not collecting the cash can hurt you„dont take the
sale.
Use liens when appropriate.
If youre selling certain property or ser
vices, be sure to document your lien rights. If youre selling inventory,
for instance, your bank can help you “
le a lien on the property sold.
FINANCE, ACCOUNTING, AND IT
nies in trouble.
Establish phone protocol.
The “
rst call to a past-due account is al
ways a relationship-building call: Im just calling to make sure you
received the invoice.Ž The second is a problem-solving call: Im just
checking in to see if theres a reason why we havent received your
payment.Ž If theres a pause, dont “ll it; wait for the customers
response. Subsequent calls should always be “
rm, fair, and profes
sional.
Tutor
customer-
relationship own
School them (typically your
salespeople) in accounts-receivable policies and procedures. Feed
them clear, easy- to- interpret aging reports. Account- relationship de
cisions should be led by those who own the customer relationship.
After all, they have a vested interest in the outcome. That said, “
nal
decisions regarding ongoing credit are the credit managers call.
Dealing with overseas customers? Be prepared to be resourceful, espe
cially if youve never met the customer and credit references are impossible to
come by. Skip Thaler, an old friend and importer-exporter, once sent a ship
ment of tires to Italy. The customer never picked up the order. As far as Skip
knew, a UFO had scooped her up. Because freight and duty fees were too
high to retrieve the shipment, Skip got on the horn, dropped his price, and
eign customers, factor in these three primary risks:
Country Risk.
Before you pursue an overseas deal, consult coun
rency, so governments often restrict hard currency from leaving their
borders, which would raise in”
ation, interest rates, and exchange rates
vis-à-vis the U.S. dollar. Thats not to say you cant pry dollars out.
Youll just need a really big lever.
Currency Risk.
If, on the other hand, you agree to take payment
in foreign currency, protect yourself against ”
uctuations by contractu
Payment Risk.
Whats the cardinal rule of international trade?
Know your buyer. Begin every business relationship by pricing your
product in U.S. dollars and asking for advance payment. (Make sure
your bank pro cesses international wires.) Sure, its a stern approach,
time buyers than it is to expose yourself to ruinous risk. Up front, tell
your trading partner that as your relationship matures, you can ex
plore more equitable ways to share risk. In time, move from advance
payment to letters of credit to documentary collections (theyre less
BOND WITH YOUR BANKER
Your bank is a partner, not an adversary. Get your banker on board by com
municating early and often. Habitually review your monthly “nancials
together„bankers love it when you consider them an extension of your
FINANCE, ACCOUNTING, AND IT
management team. Be especially forthcoming with bad news. Its human
nature„nobody likes to tell the banker when theres a signi“
cant negative
vance notice. We just calculated that, due to weather, were not going to hit
our November numbers.Ž Chances are hell waive the companys covenant
before D-day. Hes human, too„the last thing he wants to do is go to the
loan committee with bad news after the fact. Avoid that scenario by com
mitting only to loan covenants„current ratio, leverage ratio, debt-equity
ating those covenants earns bankers respect.)
One of the smartest things you can do is take a lender to lunch. Lay the
tionship manager (typically an up- and-comer), her boss or her bosss boss
(the closest thing nowadays to the traditional gray-haired banker), and, most
important, the person who chairs the credit committee. It works like this.
tend your credit or amend your covenant. After a credit analyst reviews the
request and writes up a report, its taken to the credit committee, where your
fate is decided. The credit chairs job is often drudgery„hes chained to his
desk analyzing “
quests. So, when your relationship manager introduces you to her boss, invite
the boss„and the credit chief„to tour your company and have lunch. The
credit guy will love taking a break from the dungeon. Its also a coup for you.
MANAGING AND FUNDING GROWTH
Businesses are like sharks„their survival hinges on forward progress. Some
times that means adding new stores, plants, or regional of“
ces. In other busi
Entrepreneurs are typically more growth aggressive.Ž Founders of com
panies tend to be builders all the way down to their DNA. They love to create
products and expand capacity, and theyre con“
dent the business will justify
the expenditures. Each new success emboldens an entrepreneur to take on
ties arise and its risk pro“
le changes, dramatically. Enlightened entrepreneurs
In lieu of a board, “
nd an outsider to ask you some tough, basic ques
tions. Take the expansion-happy retailer whom Ive consulted. I asked him
ve questions about his plans to branch from one location into three. Are
you a well-
oiled machine?Ž I asked. Until you have airtight procedures, I said,
running three locations will produce ten times the headaches. Second, I
asked, Is your offering unique, or are you just lucky?Ž If its the latter, I said,
dont count on duplicating your “rst locations success. Third, Do you have
a well-documented, cookie-cutter plan that lieutenants can execute?Ž You
simply cant be in two or three places at once. Fourth, How are you going to
expand?Ž Essentially, it boils down to two options: company-owned stores or
FINANCE, ACCOUNTING, AND IT
He didnt resist when I suggested he shelve his growth plans until he had “
good answers.
Avoid the oxymoronic death-by- growth nightmare by doing sound due
diligence. Before adding all the ingredients„people, equipment, inventory,
How soon will the investment break even, so you can pay
shareholders?
What will be the return on investment?
Nailing down these numbers takes a lot of the risk (but not all) out of the
investments go/no goŽ call. To ignore crunching numbers in favor of going
with your gut is to court disaster. The gut doesnt appreciate that unitsŽ„
equipment, storefront, salespeople„have to quickly support themselves (pay
back) and contribute pro“
The best acid test for pro“
tability is a cap- ex,Ž or capital expenditures,
calculation. Scholars may laugh at my simpli“
cation, but all I care about is
ment, for instance, increase the denominator accordingly.
For example, say the cost to open a store is $100,000, and its “
rst-year
EBITDA (earnings before interest, taxes, depreciation, and amortization) is
$10,000 in the hole. Your cap-ex calculation is:
$10,000/$100,000
.10/1 year
.10 (ROI is underwater by 10 percent)
Now, assume the second-year EBITDA is $60,000. The cumulative EBITDA
becomes $50,000 (
$10,000
$60,000). The new cap-ex calculation is:
$50,000/$100,000
.50/2 years
.25 (ROI is 25 percent)
The Really Big Question: When do you reconsider the investment? The
Simple Answer: If you
ery seven years, the owners had to double down their capital expenses before
they could turn a pro“
t. Its like Sisyphus and his rock. Each time he pushed
it up the mountain, it rolled back down again.
Leveraging your offering may be the gateway to growth. Small businesses
dustries, approached APU Solutions, a small midwestern company offering a
Web-based, real-time way to buy and sell auto parts. APU (disclosure: Im a
part owner) swapped the use of its real-time estimating software for access to
Mitchells sophisticated infrastructure and customer reach. David-and-
FINANCE, ACCOUNTING, AND IT
transition was seamless because customers viewed the old locations as
brand-new stores. Later that year, we acquired a dozen stores in Omaha.
Im still scratching my head over why we didnt follow the Kansas City
script. Instead, we kept the stores open under the old name. We waited
months to re-brand them, and remodeling took an entire year. We also took
our time replacing employees who didnt “
t our culture. It wasnt exactly a
shocker when we fell a country mile short of our sales goals.
If you plan to acquire other companies:
Expect culture clashes.
Buyouts push employees out of their
comfort zone, triggering an avalanche of emotions. They fear their
jobs are in danger and the new owners could ruin everything.
Remedy: Communicate early, often, and with empathy.
Weigh the pros and cons of organic growth.
Taking over an
existing out“
You could practically hear a TV announcer booming, Smile, youre on
Cor
porate Camera!
Ž Shortly before we hired Eric Randa as head of loss preven
tion, he was handed The Case of the Vanishing Laptop. A digital camera and
other pricey items had also disappeared from corporate of“
ces. They were
after-hours thefts, so Eric looked to the buildings entrance camera for clues.
Sure enough, an unfamiliar maintenance worker had been on duty. Eric di
rected his right-hand guy to stake out the parking lot. When the suspect
emerged at the end of her shift, he nabbed her red-handed.
If only catching the bad guys (and gals)
were always so easy. Employee
theft is the culprit behind 30 percent of all business failures. Yep, you read
that right, and the percentage is even higher for small businesses with scant
margin for error. The U.S. Department of Commerce estimates that sticky
ngered employees steal upward of $40 billion annually from American
companies. Collaring dishonest employees makes a dent, but the real cost
savings is in prevention. Protect your business with these measures:
Scrub rather than screen job candidates.
You wouldnt hand your
house keys to someone you dont know and trust. The keys to your
business are no different.
Question areas left blank on the application.
It may be intentional.
Gaps in employment history, while often innocuous, may indicate
time spent in the slammer.
Conduct background investigations.
The cost is negligible„
especially with volume discounts„compared to the messes made by
bad eggs. Verifying an applicants Social Security number costs about
ten bucks. County, statewide, and federal
criminal-
record checks
cost about $20 each. Drug tests run about $40 apiece. At the very
least, go deep into applicants whod have access to assets, from a
dockworker handling manufactured goods to an accountant with
signature authority on bank accounts. Avert lawsuits by choosing a
reputable sleuth.
Its easy to rationalize that
lifting a few reams of paper wont hurt anyone. Your people may even
feel theyre just collecting the bonusŽ you overlooked. Use memos,
FINANCE, ACCOUNTING, AND IT
Scan for red flags.
ventory shrinkage like its a four- alarm “
re. The sooner you investi
gate, the more likely youll catch the perp and minimize losses.
As Ive mentioned, Oscar Wilde used to quip
that he could resist anything but temptation. Take note, and build in
checks and balances. Require a countersignature on company checks,
and dont allow the same employee to both approve and pay invoices.
Desperate circumstances can warp decent peoples scruples and lead
them to borrowŽ what they can never realistically repay. Regularly
review accounts payable, and conduct annual, independent audits to
police for irregularities. Dont allow “
nancial records to leave the of
ce. Buy a shredder. The more hurdles thieves face, the less likely
theyll take that “
rst leap.
Invest in physical security.
An alarm system not only scares off bad
guys, its electronic access codes record who enters the building around
the clock. Review system- generated reports occasionally and follow
up on comings and goings: Hey, Sandy, are you really working so
hard that you need to enter the building at 2:26
?Ž Alarms should
sound when back doors are opened without keys, and building keys
should be impossible to duplicate by anyone other than authorized
locksmiths. Also, use clear trash bags„a favorite trick of the dark
trade is to conceal company property in the trash only to double back
later and retrieve it.
shrinkage broke down this way: 47 percent was due to employee
theft, 32 percent to shoplifting, 15 percent to administrative error,
and 6 percent to vendor theft. (Inform vendors up front about your
inspection pro cess.) Ready for another jaw-dropper? The average hit
caused by a dishonest employee was $1,023, while the average shop
lifter made off with $128. It makes sense. Employees have the oppor
tunity to commit theft daily while shoplifters zip in and out.
How to minimize risk?
JOIN A NATIONAL THEFT DATABASE.
ChoicePoint, General Informa
tion Services, and U.S. Investigations Services offer three of the
best. Built by retailers for retailers, these databases share informa
tion on shoplifters and employees terminated for theft and fraud.
When a Montana lumber
items„over a “
fteen-month period, Gary Kasper suspected foul
play. The companys loss prevention chief, Gary, went undercover
after installing a hidden camera to monitor the cashiers register
lane. He posed as a customer and bought a $500 tool, then
forgotŽ the receipt on the counter. Sure enough, the cashier
living color. The cashier was prosecuted for $25,000 worth of
fraudulent refunds.
PROVIDE EXCELLENT CUSTOMER SERVICE.
enter and repeatedly acknowledge them during their visit. Ask if
theyre “
to a product. Shoplifters are edgy people who prefer to blend into
the woodwork. If they cant, theyll likely go elsewhere.
CIRCUIT TV CAMERAS IN PLAIN SIGHT.
Surveillance
deters shoplifters and dishonest employees alike.
CLIP ELECTRONIC ARTICLE SURVEILLANCE (EAS) TAGS ONTO
Beeping tags have thwarted countless shoplifters, and
FINANCE, ACCOUNTING, AND IT
they pay for themselves. Thanks to the microchip revolution,
month.
WAIT AND WATCH.
points, your employees over the course of a day. Look for suspi
cious activity during opening and closing observationsŽ„and
during lunch hour, when lower-level employees relieve managers.
Bird-dog an employee on a bank-deposit run. Even more impor
tant, use stakeouts to catch employees doing something right.
Congratulate them for opening on time or for a by-the-
book bank
run. Youll boost morale and also send this subtle message:
Theyll never know when youre out there watching them.
MANAGING IT (INFORMATION TECHNOLOGY)
Purchasing, “
nance, and IT people rarely speak the same language. Techies
dors. That skills gap is dif“cult to bridge, leaving a big hole for IT invest
ments to plunge through. Building that bridge requires three main pillars:
The integration of IT into the strategic-planning pro cess.
The unquali“
ed support and leadership of upper management
(which should include the IT director).
The acceptance that IT investment is ongoing.
Building IT into strategic planning is the best way to align IT strategy
nical, breakdowns. It comes down to change management. Implementing an
IT initiative starts a domino effect„every business process also changes.
Thats why upper management must own and manage an IT project.Ž Most
people resist change„especially technological ones. Your IT staff can man
age the technical side, but they cant mandate that users accept the change. If
key users havent had a seat at the designing-testing-training table, and dont
justs the way they operate.
A big IT fallacy is that ROI will magically start growing like a weed. Dont
count on it. Maximizing ROI demands that you keep investing in the solution.
That means training both IT and users on technology, applications, and en
sign, and upgrades. (The upgrade cycle of enterprise software is generally one to
three years; each event can require up to four months.) Failing to fully invest in
IT solutions is why many companies are using only 20 percent of the function
ality they buy. How can that happen? Easily. A hot project plops in the lap of
top management. They dutifully approve an IT purchase in line with the
companys capabilities and projections. The
bare-bones functionality of the IT
That waste can be minimized„at least for nonstrategic IT solutions„by
partnering with an MSP (managed service provider, aka, outsourced service
provider or utility computing service provider). Thanks to MSPs, which de
tricity, management can now focus on ITs use and not its generation. Like
other commodities, users are billed only for services they use. Bottom line:
ployment and management. Todays IT focus is on Web-based access, not
reduces your IT infrastructure and deployment risks
allows you to quickly scale your IT infrastructure up or down
lowers up-front costs as well as costs associated with excess IT
capacity
eliminates the need to staff up for peak demand periods
FINANCE, ACCOUNTING, AND IT
allows your IT group to concentrate fully on strategic issues
starts with well- de“
ned and fairly generic applications„e-mail,
messaging, connectivity, hosting, security, redundancy, storage,
disaster recovery, stand-alone applications (like sales automation)
Here are more IT success strategies:
Cycle IT leaders throughout the company.
Dont con“
ne your se
nior IT people. Give them operational experience in other depart
Its every entrepreneurs nightmare„
the break- the-
bank software purchased two short years ago is obso
lete. Make sure your IT head invests in ”
exible open architectures
tial also needs to be taken into account„big investments should in
clude volume price breaks for future users, computers, or servers. (An
Embrace industry standards.
Dont create more problems than you solve.
In the late 1990s,
CRM (customer relationship management) solutions were all the
rage. A lot of organizations coughed up big bucks for CRM software
without speci“
c plans for how to use it. The result? ROI was DOA.
Software is a tactic, not a strategy. Develop a strategy “
rst, then se
cure the tactics to support it.
Demand ROI from most IT investments.
When a business unit pro
poses an IT solution, challenge your people to prove that it will di
rectly bene“
t the company in measurable ways. Require the business
ogy and the business unit responsible for results. Make sure your “
nancial reporting is clear and transparent so results can be traced to
speci“
c investments. Caveat: There are exceptions. Up to 20 percent
of your IT spending should be R&D related. Your IT staff needs to
Be wary of big promises.
Benchmark industry IT investment as a
percent to revenue. Youll need it as a shield against slick-talking sales
folks. Skilled IT vendors can construct an ROI model showing you
Manage your supplier relationships.
Expect more than supplies
from suppliers. Require them to add value by identifying busi
ness opportunities, developing markets, providing technological
FINANCE, ACCOUNTING, AND IT
improvements, or contributing to strategic decision making. Find
suppliers who are positioned to grow along with you.
Negotiate shrewdly.
Make a list of what youre willing to give up
Polish your pricing protocols.
Stake out your position on the pric
ing continuum. Then adjust when necessary by continually moni
Manage the sales function.
A top-notch sales manager is a must.
tomers.
Study the Sandler Selling System.
Build rapport, establish an up
front contract, pinpoint the prospects pain, determine that pains
nancial impact, identify the decision maker, offer a solution, and
follow up with a winning post- sell strategy.
Deliver legendary customer ser
vice.
Keeps em coming back for
more. Customer replacement is wasteful and expensive. Good cus
tomer experiences lead to free advertisingŽ„dazzled customers
spread the word to family and friends. Treating people well is also
the right thing to do; a little kindness goes a long, long way.
Win customer loyalty.
Happy, well-trained employees are more
isfaction and reward results, and support solid service every way
you can.
Land a great CFO.
Expect your CFO to provide monthly analyses
and presentations to the executive team. He should consistently
challenge other departments to raise their game, and lead the
never-ending war on costs. The best CFOs are data hubs, provid
ing the rest of the team with “
nancial tools and metrics.
IT and loss prevention are key parts of the “
nancial team.
Invest
time, energy, and money„their impact will echo throughout the
company.
Bond with your banker.
Your banker is a partner, not an adver
sary. Keep communication strong. Make her an extension of your
management team by regularly reviewing monthly “
nancials to
mittee.
WEATHERING
WORST-CASE
When Bad Things Happen to Good Companies
DR waswrong.Businessownershaveplentytofearbesides fear itself.
At anymoment, theunexpectedcan splinter your operations,rupture
your strategic plans, and jeopardize your survival. Ive spent many anx
ious days and sleepless nights worrying about nightmare scenarios. After
fumbling a few pressure-packed incidents, I developed a crisis drill:
Jerked into panic mode, your muscles tighten
and breathing grows shallow and fast. Take slow, deep breaths for a
few minutes. Continue to breathe deeply while massaging your neck
and shoulders.
rious illness or a death in the family. Pull yourself into positive terri
tory by looking for hidden opportunities and appreciating what youve
got„family and friends, dedicated employees, a great product, loyal
customers. Keep reminding yourself of whats truly important in life,
especially when your mind races and queasiness bubbles in the pit of
your stomach.
Create and execute action steps.
Pick yourself up, dust yourself
Place an ad in the paper.
Network with professional contacts.
Consult list of potential candidates.
Interview and consider promoting Cathy and compressing her
development schedule.
Worst-case scenarios drop from the sky, sometimes right into your lap. Take
the April day I opened a letter from my executive committee. Dear Tom,Ž it
began, we want to inform you that we, your entire management team, are
Worst-case scenarios dont have to end up with worst-case results. Han
dled correctly, they can turn out to be blessings in disguise. When your feet
are to the “
re and you come out on top, youre stronger and more con“
dent
for the experience. One things for sure„you “
nd out what youre made of.
narios into catalysts for growth.
RELATIONSHIPS
Rescuing Key People Who Jump Ship
SCENARIO #1: BOLTING KEY EMPLOYEE
ing the offer would throw our salary structure out of whack. We
named an interim head from within the department and, six weeks
later, found a knock- your- socks- off replacement.
Option #2: Try to keep em.
I was never resigned to losing a valuable
employee. As long as she hadnt turned in her ID badge, I “gured I
serve the best. Im not going to try to talk you out of it. I just wanted
to thank you for your contributions. If youre open to it, we could
brainstorm a bit to make sure youre making the right decision.Ž
casionally use a more sophisticated decision-making model called the
Weight & Rate.Ž Its beauty is that it considers both the relative value of
each decision point and the likelihood that either job will deliver it.
These exercises shed light, yet logic takes a person only so far. After
reviewing the pros and cons and adding up the numbers, the wild
card is the employees gut feeling„and if your caring attitude hasnt
turned the tide, all you can do is respect where shes coming from.
My impromptu brainstorming sessions worked about half the time.
The other half, I usually ended up agreeing that, yes, our analysis
nancial service companies, sales-driven out“
ts, law “
rms, and other
organizations where clients value account-manager relationships over
the business itself. The best strategy is to wake up before this night
mare begins. Odds are low that employees will skip out with clients
(or colleagues) if youve won them over with a healthy culture that
makes them feel trusted and valued.
Additional proactive strategy:
Succession planning (chapter 42).
SCENARIO #2: BOLTING MAJOR CLIENT
The phone call couldnt have come at a worse time for Alexis Bloomstrand.
The sole owner of New Morning Windows, she had just had surgery to fuse
four vertebrae, and faced months of recuperation. She was in the midst of
building a new house on the heels of divorce. She was also negotiating with
her ex to buy the Minneapolis building that housed the business they had
launched twenty-two years earlier. On top of all that, it was just a month
after the 9/11 terror attacks. She had an inkling bad business news was
brewing. Two weeks before going under the knife, she asked her ”
agship cli
RELATIONSHIPS ON THE ROCKS
Four days after her surgery, the phone rang. The client had indeed pur
gic alliance with New Morning would be terminated. Overnight, revenues
plunged from $8 million to under $3 million. Alexis managed to keep all
seventy- “
ve employees on through the winter holidays, but eventually cut the
staff to thirty. The new year brought more bad news. A major lender acquired
Alexiss bank and issued her a default notice. A few months later, referred by
both her attorney and a trusted consultant, she looked to the Platinum Group,
a Twin Cities…based turnaround “
rm. I couldnt have gotten “
nancing with
out them,Ž Alexis said. Platinum tutored her in cash-”
ow models, inventory
management, new production ef“
ciencies, and cost-cutting strategies. Eigh
teen months later, New Mornings revenues rebounded, and then some. In
three years of hell,Ž Alexis said, I learned more about running a business than
I had in the last twenty.Ž
Losing your biggest client is traumatic. When revenues nose- dive, these
proactive strategies can help soften the landing.
Panicked business leaders dont make
good decisions. When one of New Mornings suppliers later hit a
rough patch, Alexis suggested he pony up for expert advice like she
had. It was an expense he said he couldnt afford. I told him he
couldnt afford not to,Ž Alexis said. Our legal and consulting fees
were $200,000 one year. That makes me sick. But if we hadnt spent
it, we wouldnt be here today.Ž
Upgrade financial fluency.
Working with consultants helped Alexis
learn the nuts and bolts of cash ”
ow and cash management. I knew the
basics,Ž she said. But they showed me the importance of mastering the
nancial end.Ž She now knows how to build a “
nancial planning model
to prove the companys long-term viability and attract new “
nancing.
mance bar.
Forced to scour her labor costs, Alexis
didnt like what she saw. Some veteran employees were coasting on
in”
ated salaries built by automatic annual raises. She tackled produc
tivity issues head-on by implementing education and training pro
grams. She upped the ante on task-heavy job descriptions by spelling
out challenging, but reachable, goals. Most important, she tied a
large portion of salary to perfor mance. For icing, she pledged to the
staff an equal distribution of 15 percent of after-tax pro“
ts. Three
years and three rounds of layoffs later, and with thirty-nine employ
ees instead of seventy-“
ve, morale reached an all-time high.
Getting lean and mean is an ongoing
discipline. Its what the big boys do best. Check out the cost-containment
strategies in chapters 54 and 56.
Alexis recruited new sales reps to pur
The more your business is fueled by synergy, the quicker
the pieces will click into place. Alexis stepped up training and men
toring for employees at every level. She cleared communication chan
nels and established a bonus plan to invigorate the culture and drive
innovation. She streamlined operations and reorganized work ”
ow to
do more with less. Bottom line: Think macro, act micro.
Have a plan in place to change the clients mind.
Id pull out all
the stops to win a customer back. Id appeal to decision makers to„
please, please„in recognition of our longstanding relationship, at
least sit down and talk things through. (In a case like Alexiss, obvi
fered versus what we had. If we were outgunned, Id be the “
rst to
admit it. More often than not, a few tweaks here and a few conces
sions there were enough to save the relationship.
Additional proactive strategy:
Customer service (chapter 53).
NATURAL DISASTERS
Coping with Catastrophes
SCENARIO #1: NATURAL DISASTER
When a 1981 tornado took out his biggest cash cow„the most pro“
table of
his nine Sound of Music stores„Dick Schulze focused on possibilities, not
pain. The storeroom, remarkably, was spared. So Dick held a Tornado Sale in
the parking lot. Lured by steeply discounted stereo gear, thousands of Min
nesotans swarmed the place. Police had to shut down traf“c, so great was the
frenzy stirred by the overnight best buy in town. Realizing he had stumbled
onto something, Dick phoned his other eight stores:
Bring over more
components and car stereos!Ž
Within two years, he had completely transitioned
from average prices/average volume to deep discounts/high volume. It worked.
Oh, he also slapped on a new name„Best Buy.
Message: When disaster strikes, force yourself to ask quality questions.
Dont moan, Why me?Ž Instead, think,
What can I do right now that will
During 1997s Flood of the Century in Grand Forks, North Dakota, our em
ployees asked themselves,
How can I help?
Flooding had begun seventy-“
miles south in the Fargo-Moorhead area. Regional manager Mark Lessin
By the time the Red Rivers surge reached Grand Forks, it had risen out of
control, threatening dikes and levees. More than “
fteen Tires Plus employees„
and their families„from Fargo, Moorhead, and Grand Forks reported for
duty. They worked a shift at the store, then rushed to the dike to “
ll sandbags
for another six hours. It was a lot of long days and late nights, but we saved
several communities,Ž Mark said. We also stationed water trucks at our stores
to supply residents with fresh drinking water. The overtime pay„everyone
was on the clock throughout the ordeal„took a bite out of monthly pro“
ts.
But our roots in the communities grew deeper, our bonds with employees
grew stronger, and sales quickly trended upward. In the long run, we came
out ahead. Bottom line: We did the right thing.
Proactive strategy:
Pray a lot.
SCENARIO #2: PERSONAL CRISIS
It was an ordinary Monday night for Larry Dennison„except for the killer
headache. Everyone else in his Farmers Insurance Group of“
ce had gone
home, so Larry dialed 911. The one-time district manager of the year was
lucky. Most aneurysm victims dont make it to the phone. One month in an
intensive care unit and two surgeries later, Larry was left with unintelligible
speech and double vision, and con“
ned to a wheelchair. A doctor told Larrys
wife, Gay, that her husband was months away from rehab. A nursing home,
the doc said, was the best option. She shot back four words: Over my dead
body.Ž Gay saw to it that Larry stayed put.
Larry “
lled the Farmers leadership void by handing over temporary con
trol to his daughter, Hayley, the agencys head of recruiting and training. Like
an air- traf“
c controller guiding in an accidental pilot, Larry advised his
daughter from his hospital bed (Hayley was one of the few who could deci
pher Larrys speech). Hayley wasnt about to let her dad down; she worked
NATURAL DISASTERS
Larry beat the odds. In October 2001, nine months after his aneurysm, he
returned to work. His balance, speech, and vision were still severely impaired.
His patient staff helped him operate his keyboard, and they werent shy about
asking Larry to repeat himself. He used a walker to navigate corridors. Month
by month, Larry grew stronger. Today, I can understand almost everything
my friend says. His handshake is “
rm and he walks without a cane. Once
again, his district is one of the countrys top producers. He even went on to
win two more prestigious awards. Larrys recipe for recovery? He surrounded
himself with good people. He expected the best and prepared for the worst.
He picked himself up every time he fell, and never lost his sense of humor.
I faced my own personal challenge when, at age forty-two, a triple trauma
of divorce, cancer, and cash-”
ow crises left me in no condition to run a com
pany. I needed a few months to recover. But before I dropped out of circula
tion, I had to take care of business. I shelved the want-tos, divvied up the
have-tos, and communicated, communicated, communicated. I drafted a let
ter to employees that offered some explanation. I asked for their patience and
thanked them for keeping us a”
oat during my leave. Then, one by one, I told
my key people exactly what I needed. Finally, I briefed our bank and vendors
that I was temporarily releasing the reins. Over the next six months, I com
municated sporadically with the of“
ce. If I did drag myself into work, I just
lay on the couch in my of“
ce. After three months of vegging out and another
three months of healing strategies„therapy, yoga, meditation, nutrition, self-
help books, retreats„I returned to work rejuvenated.
Fortunately, Mark Sathes 2000 odyssey also looks promising. Given a
sentence of a year to live following diagnosis of malignant melanoma, Mark,
at “
fty-two, turned over control of his Minneapolis headhunter “
rm to a
young exec. He crafted a stock plan that gave each of his six employees 1 per
tory,Ž he told me in 2006. We still have no turnover this decade, and em
ployees now own more than 20 percent of the stock. Im now a granddaddy,
I work out regularly, and Im looking good„or so everyone tells me!Ž
growth of key man insuranceŽ„a life insurance policy that names the com
pany as bene“
ciary (chapter 6). The payout helps it survive the blow of losing
the person who made it work. These stories also underscore the importance of
periodically consulting experienced tax and estate-planning attorneys.
Proactive strategies:
Minimize potential health crises (chapter 49). Succes
sion planning (chapter 42). Estate planning (chapter 6).
SCENARIO #3: PUBLIC RELATIONS CRISIS
A salmonella outbreak had sickened tens of thousands of Minnesotans. The
culprit? Schwans ice cream, state of“
cials told the manufacturers se nior
management during a conference call. Before hanging up, Alfred Schwan
ordered his people to stop making and selling the companys ”
agship prod
uct. He cut his business trip short and caught the “
rst ”
ight home. The next
morning, the media descended on Schwans rural headquarters. Alfred was
ready. When a reporter asked what he was going to tell customers, Alfreds
reply revealed the depth of his character: Dont eat Schwans ice cream.Ž The
outbreak, he said, was unacceptable. He apologized to his customers and an
nounced a recall of every last scoop. A week later, authorities nabbed the
It was a ”
ashback to the 1982 Tylenol scare twelve years before. Once
again, aggressive crisis management prevented a sterling brand from being
tarnished. Schwans actually walked away with its reputation enhanced.
With the trust Schwans had built through the years,Ž recalled former
Schwans president Ken Noyes, our customers forgave us a lot quicker than
we forgave ourselves.Ž He wasnt exaggerating. Some customers even refused
to hand over half-empty cartons of ice cream when Schwans trademark
home-delivery trucks rolled up. We said we had to ask for their ice cream as
a precautionary measure and promised to give them free replacements when
we got things resolved,Ž Ken said. They said, No, I like my Schwans ice
cream. Im not giving it up. Ž
Schwans handling of its salmonella crisis should grace the pages of every
public relations textbook. Every PR predicament, of course, has its own chal
NATURAL DISASTERS
lenges. Perhaps youre closing a plant and offshoring production. Or, maybe
one of your executives was arrested under embarrassing circumstances. When
the media show up and thrust a microphone in your face, the experience will
hurt less if:
Youre prepared.
Start now by identifying which employees would
serve as front-line contacts should the worstŽ happen. Crises rarely
strike during working hours, so ensure that everyone has a contact
list. Agree up front on the values and commitments that will drive
the message of any crisis response„responsibility to the community
trumps pro“
t concerns, for instance. Planning beyond that may not
be helpful. Most execs overestimate the value of a crisis plan.Ž They
ation that actually unfolds. When an incident does occur, its unique
nature will shape the response. That said, your team should always
include an attorney and a PR professional who can school your spokes
people in media relations. Also, identify your publicsŽ (employees,
employees emergency contacts, customers, investors, suppliers, bank
ers, retirees, neighbors), and know how to reach them. Quickly. News
that used to take days to travel now ricochets through cyberspace in
nanoseconds.
Youve got the facts.
Gather every shred of information from as
many sources as possible. Then determine how much to release.
You apologize.
First, be contrite. Second, be contrite. Third, be con
trite. This is more dif“
cult than it might appear. Look at the rogues
gallery of disgraced politicians, sports stars, and domestic divas who
ing responsibility where you should, and patiently explaining what
steps are being taken to ensure the incident wont happen again.
Youre sincere.
Step out of your insular universe and imagine what
the situation looks like to the public. Empathize with their concerns.
Youll come off as a stooge if you or your people simply parrot a du
plicitous party line.
Youre honest.
Never, under any circumstances, lie. Lying to the
public will permanently damage your companys image, to say noth
ing of your personal credibility. It takes only one solid hit to knock
off the crown of a good name. If you dont know an answer, say that
mation. If a question is best left unanswered, pledge to address it
when the full picture comes into focus.
Proactive strategies:
ITS STRICTLY BUSINESS
SCENARIO #1: CALLING THE LOAN
I had the seven-
year itch. After six years in business, it was time to expand our
retail operation. Research had convinced me the future of the tire business
was in retailing. Before long, tight margins would strangle
wholesalers like
me. So, I went for broke. In one year we doubled our store count, from three
ally pro“
table
wholesale division couldnt support us, we
were quickly up to
our wheelwells in retail red ink.
One day over lunch, my banker and friend, Jeff Mack, dropped the ham
mer. Im sorry, Tom,Ž he said. Our auditors reviewed your “nancial state
ments, and theyre telling me we should call your loan. You had a successful
wholesale business and you blew it by expanding into retail.Ž If I couldnt pay
off the note, he added, the bank was prepared to collect its
collateral„our
company. Panic Time.
Clearing my heart from my throat, I said, Jeff, hold on a minute. Let me
show you what were doing.Ž I pulled out our projections and explained how
pro“
table the new stores would be once they matured. I showed him our new
business plan. Please,Ž I said, give us two months and I promise youll see a
turnaround.Ž Jeff took our plans back to the bank, met with the audit commit
tee, and called the next day. Okay,Ž he said. Youve got sixty days. Thats it.Ž
Flush with adrenaline, I challenged my team to execute our plan and do what
ever it took (while still observing the law!) to maximize pro“
ts for two months.
It worked. We got back in the black just in time to hold off the liquidators.
Consider bank skirmishes the cost of doing business. Eight years later, in
1991, I was “
ghting off yet another bank. Our local lender had been acquired
by a faceless national bank. Soon after, one of the mega-banks low-level
henchmen called to inform us our business model didnt mesh with the
banks philosophy. Were giving you sixty days notice that your line of credit
is being eliminated,Ž he said. We had two months to come up with $2 mil
lion. Panic Time, the sequel. We approached every bank in town, including
Riverside Bank in Minneapolis, the reputed last stop for desperate entrepre
neurs. If I had to pick a low point in my professional career, being turned
down by Dave Cleveland, Riversides president, would be it. Word was if
Dave wouldnt loan you money, nobody would. It was true„he didnt, and
they didnt.
Once again, we scrambled to free up every dollar that wasnt nailed down.
We met with suppliers and reminded them of their vested interest in our suc
cess. We told them if they wanted our business they had to help us out by
taking temporary promissory notes instead of payment on inventory. Two
suppliers agreed. Boom„theres $1 million. We cobbled together another
million by extending other payables, reducing inventory, and offering dis
counts to wholesale clients for paying us ahead of schedule. By day sixty, the
Now we were in the clear, or so I thought. Six months after that 91 bank
ITS STRICTLY BUSINESS
backed us into a highly leveraged corner. We were pouring money into new
stores faster than we were draining it from existing ones. John said approving
our audited statement would, under auditing standards, be stating that we
could continue as a “
nancially viable entity. That, however, was turning into
a dif“cult conclusion to draw.
For the next hour, I tried to persuade John to sign that statement. I pa
ing practices, and our heavy„and wise„investments in systems and people.
Finally, he saw the light and signed off. A bit wobbly, I hung up and collapsed
backward on the bed. I asked my boys to give me a minute. Then I put on a
fresh shirt and we went to dinner.
When faced with a cash crunch:
Where appropriate, hire part-timers or try out
sourcing. For sales, offer new hires straight commission or, if neces
sary, a modest draw. A differentiating product or service and sizable
Ask suppliers for promissory notes.
You sign a note for, say, $1 mil
lion. The supplier credits your account for that amount and sellsŽ you
$1 million in inventory. If you hit your numbers and continue to
grow, you never accrue interest. The notes just deferred year after year,
like a self-renewing, interest-free loan. As long as everything follows
plan, the extra inventory “
nances the growth necessary to generate the
income to pay off the note. This strategy can save your bacon. But
use it cautiously. It comes with two downsides: One, it uses up a
chit„theres a limit to a suppliers goodwill. Two, you may be facing
an uphill struggle in future negotiations. In other words, if the sup
plier is unhappy, it can call the loan.Ž
Speed up receivables.
Do the math. If your credit line is maxed out,
offer customers a 1-percent-per-month anticipation discountŽ for
paying cash immediately instead of waiting thirty days. In effect,
youre borrowing at 12 percent annually (sky-high, but remember,
were in the crisis section) while bene“
ting in three ways. One, you
avert a cash-”
ow crisis. Two, you fund growth without giving up
In accounting- speak, a factor is a third party
who buys invoices, or accounts receivables. This is a good way for a
edgling business to generate immediate working capital. Factors
commonly pay clients advances of around 80 percent of the invoice
value. Once the factor collects on the invoice, he pays the balance, or
Ask suppliers if you can pay in sixty days instead
of thirty (or ninety instead of sixty). Then pay on the very last day.
Its interest-free money. The bigger you get, the more likely youll get
favorable terms.
Manage inventory.
Thanks to technology, inventory management
has never been easier. Good news, because just-in-time inventory is a
ery sixty days frees up boatloads of cash. Better still, with thirty-day
turns and
thirty-day terms, your cost of inventory is zero. Sixty-day
ITS STRICTLY BUSINESS
Additional proactive strategies:
Supply management (chapter 50). Finance
and accounting (chapter 54).
The day that an arm of one of the countrys largest companies announced its
intent to crush us was like my own professional Pearl Harbor. They had
boasted in a video at a national media fest that they were going to enter cer
ers, suppliers, and shareholders. Like a football coach who posts an opponents
insults in the locker room, we used their braggadocio to whip our people into
We had eighteen months to plan our counterassault. First, we chartered
Next, our top people hopped a bus for a fourteen-hour tour of the “
sentation from every department, we recorded what each store felt like and
what was needed to stave off the big boys.
Finally, we brainstormed around the clock. Within weeks, we had a
fteen-page action plan. A full six months before the invasion, we were on
war footing. We remodeled stores at each front, staffed them with our best
people, lowered prices, and bumped up stocking levels. On the wholesale
side, we blitzed commercial and ”
til we had secured a level playing “
eld.
For months after opening, they slashed many prices to well below cost,
telling the V.P. of pricing, I later learned, to bring them to their knees.Ž We
matched em dollar for dollar„one tire free-fell from twenty dollars down to
ve bucks. I remember one teammate asking, How can we keep doing this?
Its brutal.Ž Hey,Ž I told him, weve worked our tails off for too long to let
ter touring our stores and taking in our locations and friendly personnel, I
drove them back to the air“
eld. As my friend showed me his jet, he said, You
should be very proud of what youve built, Tom. We wont be coming in here
any time soon.Ž
Additional proactive strategies:
Strategic planning (chapter 23). Marketing
(chapter 51). Continuous systems improvement (chapter 27). Action plans
(chapter 46).
ITS STRICTLY BUSINESS
WEATHERING WORST- CASE SCENARIOS
Dont lose your cool.
When a crisis shreds your plans, dont panic.
Take slow, deep breaths to stay calm. Keep perspective; its not the
end of the world. Most important, start composing a survival strat
egy ASAP„solution-oriented thinking and positive action steps
keep fear at bay.
A crisis may be a good thing.
Crises reveal character, and theyre
often growth catalysts. Handled right, a worst-case scenario can
leave you stronger and more con“
dent, deepen your business wis
Dont let key people leave.
Avoid just shaking a valuable employees
hand and wishing her luck at her new job. Ask if shes willing to
brainstorm some to make sure shes making the right decision. List
Prepare for bolting clients.
Losing a big client is traumatic. Dont
Face a personal crisis
head-
on.
Need a leave of absence? If possi
ble, take care of business “
rst. Divvy up your duties and spell out
the situation to employees, vendors, and business partners. Your
attitude can make or break you. Stay positive and take good care
of yourself in every way possible.
Prepare for PR predicaments.
Avoid a public relations nightmare
by identifying internal front-line contacts, agreeing on the values
that will drive the simple message of a crisis response, and partner
ing with a PR pro who can school your people in media relations.
Anticipate “
nancial dilemmas.
Faced with a cash crunch? Free up
every dollar that isnt nailed down. Ask suppliers to accept tempo
rary promissory notes instead of payments. Extend payables, speed
up receivables, reduce inventory, factor invoices, and offer wholesale
clients discounts for paying ahead of time.
GROWING PAINS
Stepping It Up from Small Business to Midsize Company
ward, two steps back, living the dream. That works for a while. But inevita
bly, growth stalls. The dreamer who built a $5 million business from scratch
is almost always ill-equipped to take it to $100…200 million. Reaching that
rari“
ed revenue range demands three big upgrades:
Upgrade Yourself.
If your company steps up to the next level of
growth, itll happen either thanks to you or in spite of you. My career
crossroads came nine years in. Our revenues
were $12 million, but ex
pansionitis had us gushing red ink. We
couldnt “
nd good talent fast
enough, and our lightweight systems
were imploding. Desperate, I
hired Dean Bachelor, a turnaround con
sultant, to stop the bleeding.
After exhaustive due diligence, he sat me down and looked me dead in
the eye. Tom,Ž he said, the biggest problem in your company is you.Ž
My jaw dropped as Dean rattled off a laundry list of my transgres
sions and shortcomings. Our
debt-
to-
equity ratio was four to “
times higher than our banks comfort range; I was Ivan the Insensi
tive with employees; our lame budgeting process was steering us
toward a “
nancial cliff; the absence of a strategic plan caused us to
operate in continual crisis mode.
My head was spinning. I was the problem? How could I be the
problem? I had to collect myself, swallow hard, and acknowledge that
my company was growing faster than I was. I had been trying to do
it all myself, which of course made me more frantic, less caring, and
a lousy leader. Sure enough, I was a baby CEO at all of thirty-eight
years old. But that mattered squat. I had to toss my ego out the win
I committed to a regimen of continuous improvement„as a leader,
coach, and manager of business functions. I had a feeling that if I
didnt lead the way up, Id turn into a lead weight carrying my people
to the bottom. I told my executive committee that if my own skills
couldnt keep pace, Id do the honorable thing and bow out. As major
ity shareholder and chairman, I had the power to replace myself as
CEO and president and was fully prepared to do so. In fact, many
entrepreneurs choose to hand the reins to a new CEO and step aside,
or hire a COO (chief operating of“
cer) to clean up after them. I chose
upgrade
myself rather than
replace
myself, and for the next “
fteen
years, persistence and stubbornness pushed me to keep up with the
demands of leadership.
Upgrade Your People.
tioned that I was working harder than I ever expected. He asked how
I was stunned. Dick was right. We were reaching a lot of our goals,
but our jackrabbit growth was noticeably outpacing the skills of some
key execs. Back in my seat-of-the-pants days, I had masked my fears
and insecurities by wielding an iron personality. Basically, I hired
GROWING PAINS
submissive people in constant need of my unerring guidance. My
micromanaging had created a play-it- safe culture where people did
One by one, over the coming weeks, I challenged the dozen mem
bers of my executive team. Half responded and tirelessly upgraded their
skills. Wayne Shimer remembered it as a sort of near-death experience.
Tom sat me down,Ž Wayne recalled, and said, Wayne, youre just not
giving the team what it needs. If you cant make it work in the next
ninety days, well have to make a change. I said, Fine, I understand.
Ill either make it happen or Im gone. And I made it happen. Thats
the way Tom operated„tough, but not rough. I respected that.Ž
Six other execs couldnt or wouldnt pick up their game (three were
reassigned and three left). My corporate Darwinism was working,
but our executive-team ”
owchart looked like a slice of Swiss cheese.
So many open key positions stressed me out, but I knew that “
lling
each slot with exactly the right person called for patience.
Patience wasnt my problem. Where I messed up was assuming that
seasoned vets from Corporate America would have more knowledge
and skills than people already on my team. Sure, sometimes its neces
sary to recruit heavy hitters for a specialized slot like CFO. But big-
company outsiders, particularly those prone to bloated, bureaucratic
thinking„numbers over names, politics over per formance, formality
over urgency„often clashed with our caring, service-oriented, entre
preneurial culture.
Take the vice president we lured from a Fortune 500 “
rm. He
oored me one day with a passing remark. Oh, I forgot to tell you,Ž
he said, Darren, the manager of our Rich“
eld store, told me he
wasnt happy about some things. I told him if he wasnt happy, he
could “
nd another place to work.Ž Youve gotta be kidding,Ž I said,
barely controlling my anger.  Like it or lump it is not the way we do
things around here. Thats a clear violation of our mission, vision,
and values. Darrens a big-time performer and hes the last guy we
want to lose. If hes got complaints, we need to hear him out.Ž I called
Darren as soon as I could. It was too late. He had just accepted an
offer from another company.
Serves me right. I never should have hired that veep in the “
place. I fell for big cred, charisma, and championship schmoozing. I
ing hole youre trying to “
ll grows wider by the day, dont panic. Be
prudent. Plugging the wrong person into a key position is like apply
ing a Band-Aid to an infected wound. By the time you realize youre
in trouble, you may have to amputate.
Upgrade Your Business Partners.
In the midst of our executive
team make over, I began applying the same high standards to vendors,
suppliers, and professional services. Our longtime CPA “
rm was a
midsize regional shop. I learned we were their largest consumer-based
business client, so I interviewed more sophisticated “
rms that could
jump us to the next level. I was astonished to see what wed been
missing. We treated each candidate like a potential hire and made
sure they shared our vision. We ended up switching to a larger “
with invaluable retail-
chain experience.
Our constant quest to upgrade our vendors and strategic partners
propelled our growth, but cost a friendship. Almost from day one, we
called on Jack McClard for our equipment„wheel balancers, align
ment machines, hydraulic lifts. I loved Jack like a brother. But after
ten years, big national vendors started taking notice. One of Jacks ri
vals offered us a package of product lines that would save us $100,000
annually, without sacri“
cing service or quality. I asked Jack if he could
match the offer. He tried but came up well short. I hate to do this,
Jack,Ž I said, but one of our principles is to give the best value to cus
tomers and shareholders. Ive gotta go with the other guys offer.Ž
GROWING PAINS
It was painful for both of us. But there was more at stake than dol
lars. I felt the eyes of my people on me, watching to see if I would
walk my talk. Afterward, Jack and I maintained a friendship, but it
With
The Big Book
as your guide, growing your company can be just as
exhilarating as those heady upstart days. I hope it provided the knowledge
and wisdom thatll help you shed any remaining seat-of-the-pants ways. May
it navigate your path to enlightened entrepreneurial leadership, and may the
journey be ful“lling and pro“
table.
GROWING PAINS
Upgrade yourself.
Your business will jump to the next level be
cause of you, or itll leave you behind. Find a trusted outsider to
help face your limitations, then go to school on them. If you cant
make the jump, do the honorable thing and hire a CEO and move
yourself to the president role.
Upgrade your people.
cially if you hire people who play it safe and cling to your leader
ship. Be kind, caring, and demand outstanding perfor
mance.
Better to have empty key positions than keep them “
lled with un
derachievers, and resist the lure of charming all-stars from the
outside.
Upgrade your business partners.
Apply the same high standards
to vendors that you do to your employees. Do not hesitate to com
parison shop, even if it means alienating a good friend. Doing
otherwise violates company principles; and your people will notice
and follow suit.
m indebted to the thousands of teammates who taught me a lot and helped me
develop a company that made us all proud. Their willingness to listen, learn, and
share their insights contributed to this book. Special thanks to Don Gullett and
Larry Brandt, fellow principals in arms.
Special thanks to my life partner, Mary Wescott, for her steadfast support and
encouragement in what ever I do.
Thanks to my assistant, Edie Sandmeier, whose dedication and multitasking
are the stuff of legend, and to Jason Goldberg, who helped shape
The Big Book
Many thanks also go to T. Trent Gegax, an
eleven-
year
Newsweek
magazine
vet, who provided chapter- by-chapter editing. His active, edgy style grabs me like
that of no other business book Ive read.
To my mother, Lib, thanks for a lifetime of unconditional love and modeling a
meaningful, active life at the age of eighty-nine. Thanks to my son Chris, who, like
his brother, Trent, continues to enlighten my personal and professional lives. Thanks
to my two
daughters-in-law, Samara Minkin and Heidi Gegax, who heighten my
awareness in so many important areas of life. And thanks to my brothers, Gary and
Tim, and their wives, Pam and Allison, for their love and support.
Ill always be indebted to my business mentors: Dick Schulze, Curt Carlson,
Carl Pohlad, Dean Bachelor, Tom Macintosh, and John Berg.
Numerous friends, colleagues, and industry experts sacri“
ced
substantial
chunks of time to re“ne
The Big Book
or to help in other meaningful ways. My
thanks to Matthew Abbott, Scott Bakken, Doug Barber, Romaine Bechir, Anil
Bhatnager, Bruce Birkeland, Alexis Bloomstrand, Rinaldo Brutoco, Jim Bundick,
Terry Childers, Larry Dennison, Roger Elias, Sherri Engstrand, Mari Fellrath,
Kirsten Finstad, Brian Freeman, Mark Gassedelen, Pam Gegax, Terry Gips, Vivian
Glyck, Joe Goldberg, Bob Hauer, Don Hays, Bill Hibbs, Marcia Hines, Andrew
Humphrey, Ron James, Ryan Kanne, Gary Kasper, Elizabeth Kautz, Tom Kieffer,
Ed Klemz, Gregg Kloke, Mike Koenigs, Ann Krzmarzick, Tom Kuhn, Bea La-
Monica, Charles Lukens, Jim Lynum, Dave Mona, Patricia and Craig Neal, Greg
Nemec, Gregg Newmark, Ken Noyes, Donald OConnor, Richard Perkins Sr.,
Tom Porter, Craig Primiani, Gayle S. Rose, Barry Rubin, Gigi Bechir Rudd,
Nancy Sabin, Larry Sandman, Mark Sathe, Alfred Schwan, Jay Scruton, Mike
Sime, Darrell Skramstad, Sandy Stein, Terry Tamminen, Skip Thaler, Jeff Thull,
Kathy Tunheim, Bill Velin, Ken Volker, David Wagner, Bob Wahlstedt, and Tom
Zosel.
Special thanks to our all-star reviewers, who answered beyond the call of duty:
Vickie Abrahamson, Carl Baldassarre, Dave Cleveland, Allen Fahden, Shelly Fling,
Andrea Luhtanen, Tom Macintosh, Jay Novak, Bink Semmer, and Sven Wehr
wein.
A big thank-you to former colleagues who contributed their stories: George
Argodale, Jim Bemis, Darrel Blomberg, Brad Burley, Mel Donnelly, Tom DuPont,
Don Gullett, Gwen and Eric Heimer, John Hyduke, Chris Koepsell, John R. Leach,
Mark Lessin, Gabe Lopez, Scott McPhee, Jim Pascale, Eric Randa, Wayne Shimer,
Chris Speake, Trent Stoner, Dorie Thrall, Joe Thul, Dave Urspringer, Steve Varner,
Dave Wilhelmi, and Jim Wolf.
Thanks to Genoveva Llosa, our editor at HarperCollins, whos as kind and pa
tient as she is expert at the jigsaw work of assembling a book. Thanks to Arielle Ford
and Brian Hilliard for always pointing me in the right direction; to Jack Caravela, Jay
Monroe, and Sharron and Harry Stockhausen for their creative contributions; to
Tita Gillespie, Joe Applegate, Denise Logeland, Mel Vork, and Mary McCarty for
their editing prowess; and to Earnie Larsen, Brenda Schaeffer, and Barbara J. Winter
for their inspiration.
Finally, immense gratitude goes to my Higher Power, the constant companion
whos gifted me with an abundance of ideas and the drive to keep moving them
forward.
Abrahamson, Vickie, 325
access to leadership, 112…13
accordion, the, 114…15
accountability, 184…87
accounting, 356…58.
See also
“ nances
acquisitions, 368…69
action item lists, at board meetings,
action plans, 266…71
crisis management and, 380
eyes off the prize, 270…71
mission statements and, 267…68
review meetings for, 154…55,
157…58
scheduling breeds spontaneity,
268…69
active listening, 142…43, 175…78,
203
advertising, 314…25
in business plans, 14, 15
general pointers for, 316…25
name and slogan, 25…27
advice.
employee feedback;
feedback
advisers.
board of advisers
af“liate programs, 324
AFLAC, 317
age, discussing in job interviews, 97
alarm systems, 371
all-access passes, 112…13
Alliance for Sustainability, 74
ambition, of job seekers, 89
angel investors, 21
annual reviews, 217…21, 227
Anthony, William, 133…34
apologies
for customer con”icts, 353
from leaders to employees, 121
during public relations crisis, 391
appendix, in business plans, 17
Apple, 319
Appleseed, Johnny, 60…61
APU Solutions, 26…27, 368
Arthur Andersen, 260
Art of Napping at Work, The
(Anthony), 133…34
Ask/Tell Technique, 184…87, 196,
201
Association of Purchasing and
Inventory Control Specialists,
310
ASU (ask and shut up), 185…86
attitude, for coaches, 207
attorneys, 31, 37, 99
audience, for speeches, 180
authenticity, of leaders, 112
authentic optimism, 66…67
automated ordering, 303…4
Bachelor, Dean, 43, 401…2
background checks, 370
backlogs, 361
back orders, 300
bad behavior and habits, 258…60
nurturing healthy and productive
employees, 136…38
rules of personal engagement,
139…44
balance sheets, in business plan,
16…17
Baldassarre, Carl, 44…45
balloting, 168
banks (bankers)
bonding with, 364…65, 378
calling loans, 393…97
start-up funding from, 20
bargaining, with suppliers, 302…7
Bechir, Bob, 26
Bemis, Jim, xv, 82, 122, 151,
245…46, 356…57
Berg, John, 43, 394…95
Best Buy, 27, 128, 337, 387, 402
best-practice boards, 47
betaŽ releases, 25
bids (bidding), 302
BlackBerry, 273…74
blogs, 323
Blomberg, Darrel, 354
Bloomstrand, Alexis, 384…85
board books, 48
board of advisers, 43…50
vs.
board of directors, 46
dynamics of, 45…48
meetings, 48…50
board of directors,
vs.
board of
advisers, 46
body, care of, 287…88
body language, 177
body-mind balance, 279…85
bolting key employees, 100…101,
381…84
non-compete agreements and,
100…101, 384
Weight & Rate Decision-Making
Model for, 382, 383
bolting major clients, 384…86
bonuses, 110, 223…24
books, recommended, 235
bootstrapping, 19…20
bounty hunters, employees as, for
scouting talent, 82
brainstorming
identifying SWOTs, 154
mission statements, 60
promotions, 318
seizing opportunities for, 120
soliciting ideas from employees,
189
brand name, 25…27, 37…38.
See also
strategic plans and, 155…56
bullet points, 179
Burley, Brad, 109, 111, 117, 142…43,
187, 192…93, 221, 244
burned bridges, 382, 384
Bush, George W., 166
Business Alliance for Local Living
Economies, 74
Business and Legal Reports, 101
business auto insurance, 39
business culture.
corporate
culture
business entity status, 32…35
business ethics, 71…76
Business for Social Responsibility, 74
business function dos and donts,
297…378
business growth.
growth
business incubators, 29
business locations, 27…29
Business Management Assessment &
Prescription, xxi
business name, 25…27, 37…38
business partners (partnerships),
7…8, 35…37, 404…5
business plans, 13…17, 50
sharing with suppliers, 300
standard features of, 14…17
business reputation, 260, 319
business slogan, 25…27, 37…38
But my boss doesnt get it,Ž xviii…xix
Cadet Prayer,Ž 72
camaraderie credo, 109…11, 145
Campbell, Joseph, 70
cap-ex (capital expenditures),
367…68
Career Awareness Day, 84…85
career goals, 218, 220
caring, 58…59, 211…15, 226
caring quotient (CQ), 65
Caux Round Table, 75…76
C corporations, 33…34
CEBC Integrity Measurement
Program, 74
celebrations (celebrating
achievements), 111
cell phone calls, 275…76
Center for Ethical Business Cultures,
71, 74, 83
CFCs (chief “nancial coaches), 208
CFOs (chief “nancial of“
cers),
357…58, 378
ChoicePoint, 372
Chopra, Deepak, 235, 283
Chrysler, 319
Churchill, Winston, 202
Cleveland, Dave, 357, 394
clients, bolting major, 384…86
closed-circuit TV, 372
closings, for speeches, 183
clutter, 273…74, 294
coaching, 205…27.
See also
self-
coaching
annual reviews, 217…21
daring to care, 211…15
“ rings, 225…26
helping employees through goal
coaching titles, 208…9
management style, 73
comment cards, 354
Commercial Service, U.S., 331
commissions, 337
communication issues, 173…204
achieving accountability, 184…87
active listening, 175…78
delivering critiques, 192…99
expressing yourself effectively,
179…83
key points to remember, 203…4
soliciting employee ideas, 188…91
soliciting feedback about your
performance, 200…202
compensation.
See also
employee
compensation
board members, 45…46, 47
bonuses, 110, 223…24
executive, 36, 47
incentive-based, 222…24
competitors
attacks by, 397…98
market research, 11, 14…15
con“
dential feedback, about leaders
performance, 200…202
con“
dentiality agreements, 101
Confucius Checklist, 241…42, 247
congratulations, 123…24, 163,
212…14
conscious competence, 230
conscious incompetence, 230
consideration,Ž in non-compete
agreements, 100…101
consignment, 19
consumer magazines, 322
continuous systems improvement,
170…72
contracts, 31…32
controlling interests, 30…31
conversational tone, in speeches,
181
Cooley, Mason, 289
Coolidge, Calvin, 69
COPPSS (caring, optimistic,
passionate, persistent, systems-
disciplined, spirit-“lled), 65…70
copyright, 37…38
core values, 54, 64…70, 77.
See also
speci“c core values
discussing in job interviews, 87
corporate culture, 107…46
developing team spirit, 109…11
honoring employees, 125…28
HR solutions, 129…31
key points to remember, 145…46
leading the charge, 112…24
loosening up environment,
132…35
nurturing healthy and productive
employees, 136…38
rules of personal engagement,
139…44
corporate espionage, 101
corporate responsibility, xxii, 71…76
corporate wellness programs, 136…38
counseling, 139…40, 144, 250, 291
counteroffers, in job interviews,
93…94
country risk, 364
CQ (caring quotient), 65
Creative Carton, 23…24
credit references, 362, 363
crisis drill, 379…80
crisis management, 379…400
bolting key employees, 381…84
bolting major clients, 384…86
calling the loan, 393…97
competition attacks, 397…98
key points to remember, 399…400
natural disasters, 387…88
personal crisis, 388…90
public relations crisis, 390…92
critiques, 192…99
quarterly reviews, 198…99
sandwich technique, 193…94
tête-à-têtes, 195…98
cross-training, 244
cultural differences, 332…33
cultural leadership, 112…24, 145
culture.
corporate culture
currency risk, 364
customer complaints, 352…55
customer feedback, 25, 353…54
customer loyalty, 348…49, 351…52,
378
customer relationship management
(CRM), 376
customer research, 12, 354
customer service, 347…55, 377
bene“
ts of, 348…51
loss prevention and, 372
ways to win, 351…52
customer traf“
c, and location, 27…29
cycle counting, 309
daily interruptions, handling,
277…78
daily operations, in business plan, 16
D and O insurance, 45
Davis, Adele, 284
Davis, Art, 127
defecting employees, 100…101,
381…84
non-compete agreements and,
100…101, 384
Weight & Rate Decision-Making
Model for, 382, 383
delegation, 237…40, 246, 277
Deming, W. Edwards, 147, 217
demographics, 10…12
in business plan, 14, 15
Dennison, Hayley, 388…89
Dennison, Larry, 388…89
departing employees, 381…84
asking for advice from, 190…91
maintaining cordial relations with,
134…35
non-compete agreements and,
100…101, 384
Weight & Rate Decision-Making
Model for, 382, 383
differentiation, 15, 23…25
digital communication, 179…80.
also
e-mail
diminishing dedication, law of,
103…4, 184
direct mail, 321
disabilities, discussing in job
interviews, 98…99
disability insurance, 41
discounted cash ”
ow (DCF), 367
discrimination, and labor law, 95…99
dissent, encouraging, 121…22
distribution, 307…10
outsourcing, 310…11
distribution centers, 308…9
diversity, of board members, 46
r. Dean Ornishs Program for
Reversing Heart Disease
, 287
nurturing healthy and productive
employees, 136…38
rules of personal engagement,
139…44
eating, and wellness, 287…88
Edison, Thomas, 119
educational infrastructure, 233…36
EEOC (Equal Employment
Opportunity Commission), 101
egotism, 113, 145, 174, 203, 212
electronic article surveillance (EAS)
tags, 372…73
e-mail, 179…80, 260, 275…76, 324
emotional wellness, 290…92, 295
nurturing healthy and productive
employees, 136…38
rules of personal engagement,
139…44
empathy, 174, 203, 211…15, 341
employees
bolting key, 100…101, 381…84
“ ring, 225…26
fun, friendly, and ”
exible work
environment, 132…35
136…38
rules of personal engagement
with, 139…44
team-building measures, 109…11
employee assistance programs
(EAPs), 131, 144, 235…36
employee claims, 38
employee compensation, 130…31
discussing in job interviews,
90…91, 93…94
employee development (education),
229…47
building educational
infrastructure, 233…36
delegation, 237…40
identifying rookies, pros, and
fallen stars, 230…32
key points to remember, 246…47
making lessons stick, 241…42
succession strategies, 243…46
employee feedback, 188…91.
See also
employee reviews
about leaders performance,
200…202
accordion method for, 114…15
active listening and, 175…78
ask/tell technique, 184…87
face-to-face critiques, 192…99
employee management software, 309
employee manuals, 130
employee reviews
annual, 217…21
quarterly, 198…99
Teammate Review Form, 218,
219
weekly, 195…98
employee stock-ownership plans
(ESOPs), 30…31
employee theft, 369…73
employee turnover, 73
employers liability insurance, 40
employment law, 95…101, 104
interviewing (interviews), 95…99
prevention and protection,
99…101
employment-law attorneys, 99
energy costs, in distribution, 308
energy ef“
ciency, 74
enlightened entrepreneur,
vs.
seat-of-
the-pantser, xix, xx
enlightened environment.
corporate culture
enlightenment quotient (EQ), xix
Enron, 76
Enterprise Rent-A-Car, 25, 349
environmental stewardship, 73…74
EQ (enlightenment quotient), xix
Equal Employment Opportunity
Commission (EEOC), 101
equipment utilization percentage, 361
equity, role of, 36
esprit de corps, 109…11
essay contests, 61
Ethical Advantage, The
(study), 71
ethical leadership, xxii, 71…76
ethical living, 258…60, 294
ethnicity, discussing in job
interviews, 96…97
e-visibility, 323
execution, 159…60, 172
executive compensation, 36, 47
executive summary, in business plan,
exercise, 137, 138, 286, 288, 295
exit strategy, in partnerships, 37
expectations.
See also
goal setting
communicating your, 184…87
setting high, 126…27, 159
expenses.
“ nances
Export-Import Bank of the United
States, 312
exports, 311…12, 331…33, 363…64
external comparison, 161…62
eyes, looking with fresh, 117
eyes off the prize, 270…71, 294
face-to-face feedback, 192…99
family
accommodating as a priority, 6,
126, 127
discussing in job interviews,
97…98
soliciting funds from, 20
start-ups impact on, 6
Farmers Insurance Group, 388…89
farm system, 110, 223…24, 243…46
favoritism, 122
fear, 6, 212, 238, 261…62, 274,
291…92
Federation of International
Associations, 331
FedEx, 24…25
feedback.
See also
employee feedback
about your performance,
200…202
active listening and, 175…78
annual reviews, 217…21
customer, 25, 353…54
face-to-face, 192…99
quarterly reviews, 198…99
sales force, 338…39
feel-good shopping experience, 328
Fiene, Ray, 68
“ nances, 356…76
analysis in business plan, 16…17
bankers, 364…65
budgets, 358…60
calling in loans, 393…97
CFOs and function, 357…58
discussing at board meetings,
48…49
hidden expenses, with suppliers,
306
information technology, 373…76
living lean, 8…9
loss prevention, 369…73
managing and funding growth,
366…69
metrics, 360…61
ownership issues and, 35…37
receivables, 362…64
“nancial planning, 37, 366…69
“nders fees, for employees, 82
“ rings, 225…26
tness.
exercise
exible work environment, 132…35
family time and, 6, 127, 128
follow-up, of strategic plans, 156…57,
160
food, mood, and health, 287…88
force be with you,Ž 70, 292…93
foreign languages, 333
foreign trade.
global issues
forwarders, 311
fossil fuels, 74
Four Pillars of Ethical Leadership,
71…76
Francis of Assisi, Saint, 176
friendliness, of sales force, 341
friendly work environment, 132…35
friends (friendships)
soliciting funds from, 20
with suppliers, 301, 304
funding, 18…22, 50, 366…69
funnel down interview technique,
91…92
future growth.
growth
Geek Squad, 25
GEI (guest enthusiasm index), 354
General Electric, 171, 265
General Information Services, 372
general liability insurance, 39, 45
general partnerships, 35
Gen-X Macrotrends, 325
Giamatti, A. Bartlett, 205
global issues, 311…12
managing receivables, 363…64
marketing, 331…33
outsourcing, 310…11
Goals Activity Report, 196, 197, 218,
goal setting, 261…65, 294
helping employees, 215…16, 227
linking to action steps and
schedules, 266…71
for sales force, 340…41
spirit-“ lled
Golden Boys, 122
Golden Rule, 211
Government Export Portal, U.S.,
331
graciousness in defeat, 264
Graduate, The
(movie), xxi
Grantz Wiley Research, 74
gratitude, 122…24
Greenwade, Tom, 81
group problem solving, seven steps
for, 162…64
growth, 401…5
funding, 366…69
upgrading employees, 402…4
upgrading partners, 404…5
upgrading yourself, 401…2
guerrilla recruiting, 84
guest enthusiasm index (GEI),
354
Gullett, Don, xv…xvi, 8, 30…31, 38,
58, 121…22
gut instincts, xviii, 6…7
Half, Robert, 226
handwritten notes, 123
Harness, Linda, 113
health and disability, discussing in
job interviews, 98…99
health bene“
ts, 131
healthy behavior and habits
nurturing healthy and productive
employees, 136…38
pitfalls of unethical behavior,
258…60
self-care, 286…93
heart, leading with your, 211…12
heart rate, 288
Hegarty, C. J., 175
Hennessy, 322…23
Hesse, Hermann, 206
Higher Power.
spirit-“ lled
hiring, 79…105
interviews, 86…94
key points to remember, 104…5
labor legalities, 95…101
loss prevention and, 370
salespeople, 337
scouting talent, 81…85
team players, 110
welcoming new hires, 102…4
Hock, Dee, 211, 251
Holmes, Oliver Wendell, 287
Home Depot, 398
honesty, 258…60, 294
public relations and, 392
with suppliers, 302
honoring employees, 125…28
hotline numbers, 171
Hubert H. Humphrey Metrodome,
314…16
human resources (HR), 129…31, 145
humbleness, 143
hybrid positions, 24
Hyduke, John, 111
Iacocca, Lee, 208…9, 319
IBM, 229
237…38
I-can-save-time-doing-it-myself
syndrome, 238
Iconoculture, 325…26
I-might-lose-control syndrome, 238
imports, 311…12, 331…33, 363…64
Inc.
(magazine), 6
incentives.
rewards
independent contractors, 40
industry standards, 375
information sharing, 115…16
information technology (IT),
373…76
ingenuity, of job seekers, 88
inner-views, 187
Institute for Supply Management, 310
institutional integrity, 72…73
insurance, 38…41, 131, 312, 371
insurance brokers, 100
integrity
of job seekers, 88…89
of leadership, 72…73
intellectual capital, protection of,
37…38
intellectual passion, 289…90
internal analysis, 161…62
internal promotions, 84…85,
244…46, 319…20
internal rates of return (IRR), 367
International Chamber of Commerce
(ICC), 332
International Waterkeeper Alliance,
Internet advertising, 320, 323…25,
328…29
interruptions, handling daily,
277…78
interviews (interviewing), 86…94,
104
advanced strategies for, 91…94
checklist for, 87…91
labor laws and, 95…99
introductions, in speeches, 181,
182…83
inventory management, 304, 309,
396
inventory shrinkage, 371…72
inverted pyramidŽ writing style, 318
IRR (internal rates of return), 367
JIT (just in time), 171
job discrimination, 95…99
job history, discussing in job
interviews, 87…88, 98
job interviews.
interviews
Jobs, Steve, 319
job safety, 99, 100
job titles, overhauling, 208…9
judgment, of job seekers, 89
Jung, Carl, 254
just in time (JIT), 171
Juut Salonspa, 350…51
Kasper, Gary, 235, 372
Kelleher, Herb, 132
Kerr, Steven, 223
key man insurance, 40, 390
Kiam, Victor, 319
Kierkegaard, Sören, 250
kindness, 65, 211…15
Knight, Bobby, 235
Knight, Phil, 209
Koepsell, Chris, 234…35
Krispy Kreme Doughnuts, 152…53
Krzmarzick, Ann, 57…58
Labor, U.S. Department of, 99,
labor costs, 8…9, 395
labor law, 95…101, 104
interviews, 95…99
prevention and protection,
99…101
labor management software, 309
Larsen, Earnie, 291
Lasseter, John, 108
law of diminishing dedication,
103…4, 184
laws of cultural leadership, 112…24
lawsuits, 41…42
lawyers, 31, 37, 99
Leach, John, 122
leadership.
See also
coaching
4 Pillars of Ethical Leadership,
71…76
21 Laws of Cultural Leadership,
112…24
enlightened entrepreneur
vs.
seat-
of-the-pantser, xix, xx
growth management and, 401…2
honest feedback about, 200…202
leading,
vs.
doing, 207…8
Lean Enterprise, 171
leases (leasing), 28…29
Leave It to Beaver
(TV show), 66
left-brain thinking, 289…90
legalese, 31…32
legal issues, 30…42, 50…51.
See also
labor law
business entity status, 32…35
insurance, 38…41
ownership, 35…37
steps to ward off legal woes,
31…32, 41…42
Lessin, Mark, 388
liability, 36
liability insurance, 39, 45
liens, 362
Life as a Daymaker
(Wagner),
350…51
Lifestyle Trend Tracker Checklist,
326…27
limited liability companies (LLCs),
34…35
limited partnerships, 35
listening, 142…43, 175…78, 203
LLCs (limited liability companies),
34…35
loan covenants, 365
loans, 393…97
location, 27…29
logo, 27, 37…38
long-term leases, 28
Lopez, Gabe, 126
loss prevention, 369…73, 378
loyal customers, 348…49, 351…52,
378
Lukens, Charles, 26…27
McClard, Jack, 404…5
Macintosh, Tom, 43
Mack, Jack, 393…94
McPhee, Scott, 65, 123…24, 174,
207
magazines, 322
managed service providers (MSPs),
374…75
management team, in business plan,
Mantle, Mickey, 81
manufacturing metrics, 360…61
marketing, 313…33, 377
in business plan, 15
global issues, 331…33
merchandising, 327…29
pricing, 329…30
promotions, 314…25
trends, 325…27
market position (positioning), 15,
23…29
location, 27…29
name, 25…27
market research, 10…12, 50
market-research “rms, 12
339
May, George, 348
May the force be with you,Ž 70,
292…93
media mix, and promotions, 320…22
meditation, 293
Medtronic, 57…58
meetings, 165…69, 172
annual reviews, 218, 219
board, 48…50
employee weekly, 195…98
strategic planning at, 154,
156…58
tips for running tight and
productive, 165…69
mentors (mentoring), xvii, 235
merchandising, 327…29
metrics, 316…17, 338, 360…61
Michelin, François, 70
micro management, 402…3
mind-body balance, 279…85
Minnesota State Legislature, 1…2
mirroring, 176
mission statements, 54, 57…61, 76.
also
personal mission statements
in business plan, 14
discussing in job interviews, 87
retooling, 60
sowing seeds, 60…61
mistakes as opportunities, 117…19
Mitchell International, Inc., 368
Mona, Dave, 315…16
money.
“ nances; funding
Most Valuable Player Awards, 123
motivational speakers, 234…35
MSPs (managed service providers),
374…75
Murphys Law, 68
Murray, W. H., 262
Myers-Briggs Type Indicator, 141
name, 25…27, 37…38
naps (napping), 133…34
National City Equity Partners,
44…45
national theft database, 372
natural disasters, 387…88
need-to-improve areas (NTIs), 193,
196, 198…99, 218, 220
negativism, 66…67
negotiations, with suppliers, 302…7,
377
Nerburn, Kent, 292
networking, 29, 82, 85
new hires
soliciting ideas from, 189…90
welcoming, 102…4
New Morning Windows, 384…85
newsletters, 61, 85
newspapers, 318…19, 321
news releases, 318…19
Newsweek
, 108
New World Pasta, 152…53
New York Times
, 259
niche differentiation, 15, 23…25, 50
Nichols, Joe D., 286
nightmare scenarios, 379…400
bolting key employees, 381…84
bolting major clients, 384…86
calling the loan, 393…97
competition attacks, 397…98
key points to remember, 399…400
natural disasters, 387…88
personal crisis, 388…90
public relations crisis, 390…92
no giftsŽ policy, 301
non-compete agreements, 100…101,
384
nondisclosure agreements (NDAs),
Norman, Mike, 234…35
note taking, at meetings, 166, 169
Noyes, Ken, 390
NTIs (need-to-improve areas), 193,
196, 198…99, 218, 220
Obi-Wan Kenobi, 70, 292…93
Occupational Safety and Health
Administration (OSHA), 99,
100
offers, in job interviews, 93…94
of“
ce locations, 28
OLeary, Michael, 357…58
On the Folly of Rewarding A While
Hoping for BŽ (Kerr), 223
on-the-job learning, 233…36
open-ended questions, 168, 198
operating plans, 151, 155, 156
execution of, 159…60
operating values, 54, 64…70
COPPSS, 65…70
discussing in job interviews, 87
optimism, as core value, 66…67
order taking, 309
organization, 273…74, 294
organizational (org) charts, 148
organizational culture.
corporate
culture; systems-disciplined
organization
orientation sessions, 102…4
Ornish, Dean, 287
Ouspensky, P. D., 70
out-of-home marketing, 322
outsourcing, 310…11
over-delegation, 237, 238…39
ownership issues, 35…37
pace of meetings, 167
paranoia, about succession, 244
paraphrasing, 177
Parker Pen, 333
Parkinson, Cyril Northcote, 269
partners (partnerships), 7…8, 35…37,
404…5
Pascale, Jim, 114, 121…22, 126, 224,
233, 266…67
passes, all-access, 112…13
passion, 67…68
past-due accounts, 363
Patton, George S., 110
payment risk, 364
PDAs (personal digital assistants),
273…74
people research and development
(PR&D).
employee
development
performance goals, for salespeople,
337
performance reviews.
annual
reviews
persistence, 68…69, 83…84, 342
personal assistance, to employees,
139…44, 162…63
personal conviction, 54, 67…68
personal crisis, 388…90
personal engagement, rules of,
139…44
personal history, discussing in job
interviews, 96…97
personality, of job seekers, 89…90
personal mission statements, 253…57,
294
asking right questions, 255…56
putting it all together, 256…57
retooling, 60
setting goals, 262…64
setting the stage, 254
personal reputation, 260, 319
personifying your speech, 180…81
pessimism, 66…67
Pettit, Neal, 173…74
phone banks, 144
phone calls, 275…77
Pixar Animation Studios, 108
Planet Salvage, 26…27
planning partner, board as, 47
plans (business plans), 13…17, 50
sharing with suppliers, 300
standard features of, 14…17
Platinum Group, 385
Please, Doctor Do Something!
(Nichols), 286
podium, hiding behind, 182
polling employees, 189
position.
development).
employee
development
preaching,
vs.
teaching, 241…42
presentations, at meetings, 166…67
pricing, 329…30, 377
with suppliers, 301, 302…7
priorities, setting, 154, 255…56, 261,
271
problem solving, 161…64, 172
personal issues of employees,
138…44
procedures.
systems-disciplined
organization
process integrity, 72…73
procrastination, on succession plans,
243
productive employees, 136…38
productive meetings, 165…69
productive work environment,
132…35
professional liability coverage, 39
promissory notes, 395…96
promotions, 84…85, 244…46,
314…25
property coverage insurance, 39
protection money, 37…38
protocols, for board members, 47
psychological testing, 90, 141
psychological wellness, 290…92,
nurturing healthy and productive
employees, 136…38
rules of personal engagement,
139…44
public relations, 315…25
in business plans, 14, 15
crisis management, 390…92
public speaking, 179…83, 203
punctuality, for meetings, 166…67
purchasing, 302…7
quarterly reviews, 198…99
quitting your day job, 5…9
radar, for locating talent, 82…83
radio, 316…21
ramblers, at meetings, 167
Rand, Ayn, 76
Randa, Eric, 123, 134, 177…78, 179,
235, 238, 369
rapid responses, 120…21
rapport, with employees, 139…43,
162
RBIs (really big ideas), 189
real-time checkpoint systems, 309
recaps, 239
receivables, 362…64, 396
recognition, 123…24, 163, 212…14
recruitment, 81…85
recycling, 73…74
Reell Precision Manufacturing
Corporation, 72…73
references, 88, 362, 363
referral fees, 82, 84
referrals, 246
refunds, 372
relaxing before speaking, 182
religion (spirit-“lled), 70, 292…93,
Remington, 319
rental property, 28…29
reputation, 260, 319
results-oriented work environment
(ROWE), 128
retention campaigns, 316
return on investment (ROI), xxi…xxii
reviews.
See also
employee reviews
Roundtable Reviews, 200…202,
221
strategic planning and, 154…55,
157…58
rewards, 222…24.
See also
compensation
camaraderie credo and, 109…10
salespeople, 337
suppliers and, 306…7
Richards, M. C., 270
right-brain thinking, 289…90
risk assessment, in business plan, 16
Riso-Hudson Enneagram Type
Indicator, 141
Riverside Bank (Minneapolis), 357,
394
roadblocks, resolving, 161…64
Robbins, John, 287
Rocky Mountain Institute, 74
Rogers, Will, 267
ROI (return on investment), xxi…xxii
role-playing, in job interviews,
92…93
round-robin technique, 168
Roundtable Reviews, 200…202, 221
ROWE (results-oriented work
environment), 128
Rule of Three Technique, 185…86
rules, for board members, 47
Ryanair, 357…58
S corporations, 33…34
Sa“re, William, 259
sales, 334…46, 377
forecast in business plan, 16
managing, 335…40
Sandler Selling System, 335,
342…46
snif“ng out successful sellers,
340…42
sales assistants, 340
sales force (sellers), 336…42
characteristics of, 340…42
Salesforce.com, 374
sales funnel (pipeline), 339…40
sales managers, 335…36, 340
Sandler Selling System, 335,
342…46, 377
Sandwich Technique, 193…94
Sarbanes-Oxley Act of 2002, 45
Sathe, Mark, 389
SBA (Small Business
Administration), 20…21
Schaeffer, Brenda, 250
schedules (scheduling), 268…69
Schmidt, Louis, 205
Schulze, Dick, 387, 402…3
Schwan, Alfred, 390…91
Schwans, 390…91
Schwarzenegger, Arnold, 74
Scottish Himalayan Expedition
(Murray), 262
scouting talent, 81…85
scrap rate, 360…61
seat-of-the-pantser, xviii…xix
vs.
enlightened entrepreneur, xix,
secret balloting, 168
seed capital, 18…22, 50
self-analysis, 263, 291…92.
See also
therapy
of job-seekers, 90
self-care, 286…93
self-coaching, 249…95
bene“
ts of, 251…52
crafting personal mission
statement, 253…57
embracing enlightened ef“
ciency,
272…78
key points to remember, 293…95
linking goals to action steps and
schedules, 266…71
mind-body balance, 279…85
setting goals, 261…65
unethical behavior, 258…60
self-interest, 6…7, 75…76, 77
self-optimism, 66…67
Selleck, Pete, 349
Selye, Hans, 283
seminars, 235
setting goals.
36…37
Shell Oil Company, 1…2, 115, 173,
207…8
shepherd management style, 309
Shimer, Wayne, 82, 84…85, 114, 115,
116, 123, 170…71, 187, 190,
196, 238…39, 403
shoplifting, 372…73
short-term leases, 28
Shunryu Suzuki-roshi, 230
sick days, 137…38
Sime, Mike, 23…24
Six Sigma, 171
SKUs (stock-keeping units), 308…9
sleep deprivation, 133…34
slogan, 25…27, 37…38
Small Business Administration
(SBA), 20…21
Smith, Adam, 75
Smith, Bill, 171
sole proprietorships, 32…33
Somebody-else-might-make-a-
mistake syndrome, 238
Sony, 54
Sound of Music, 387
Southwest Airlines, 132, 358
speaker,
vs.
speech, 176…77
Speakes, Chris, 245
speeches, 179…83, 203
spirit-“lled, 70, 292…93, 295
sports marketing, 322
standing room onlyŽ closes, 305
star system, 122
start-ups, 5…9
business incubators and, 29
funding sources, 18…22
Star Wars
(movie), 70, 292…93
state trade promotion agencies, 331
Stein, Sandy, 327…28
Stein Trending Branding Design,
327…28
stock, 33…37, 45
stock-keeping units (SKUs), 308…9
Stoner, Trent, 113
Store Coaches, 208
storytelling, in speeches, 183
straight shooters, as board members,
46…47
strategic planning (plans), 151…58,
172
compressing for success, 157…58
eight steps of, 153…57
HRs role in, 130
managing change, 152…53
strengths, weaknesses, opportunities,
threats (SWOTs), 47, 153, 154,
157
stress, 65, 293
stretch goals, 215…16
structural integrity.
systems-
disciplined organization
Students in Free Enterprise, 274
subchapter S corporations, 33…34
succession strategies, 243…46, 247
suggestion boxes, 61
suppliers
managing alliance with, 299…302,
376…77
negotiations with, 302…7
supply management, 299…312
distribution, 307…10
funding crisis and, 395
global issues, 310…12
managing supplier relationship,
299…302, 376…77
outsourcing, 310…11
purchasing and negotiations,
302…7
Sutton, Willie, 84
SWOTs (strengths, weaknesses,
opportunities, threats), 47, 153,
154, 157
synergy, xxi
systems-discipline, as core value, 69
systems-disciplined organization,
xxi, 147…72
adding muscle to meetings,
165…69
continuous improvement, 170…72
execution issues, 159…60
key points to remember, 172
resolving roadblocks, 161…64
strategic planning, 151…58
systems-improvement committees,
171
tag alongŽ provisions, 37
Tague, Cameron, xviii…xix
talent scouting, 81…85
talk trimming tips, 275…77
Tamminen, Terry, 74
Target, 27, 328
target markets, 10…12
in business plans, 14, 15
tariffs, 311
task forces, 154…55
taxes (taxation), by business entity
status, 32…35
teach/equip/trust management style,
teaching,
vs.
preaching, 241…42.
also
coaching
Teammate Review Form, 218, 219
team spirit, 109…11, 145
telecommuting, 128
teleconferences, 166
telephone calls, 275…77
television, 316…20
Tennant Company, 153
termination, 225…26
tête-à-têtes, 195…98
Thaler, Skip, 363…64
thank-yous, 122…24
therapy, 139…40, 144, 250, 291
thoroughness, in contracts, 32
Thrall, Dorie, 212…13
threats, 47, 153, 154, 157
3M, 54
time limits, in meetings, 166
time management, 251…52, 272…78,
294
organization, 273…74
time traps, 275…77
time traps, 275…77
Tires Plus University, 233…34
to-do lists, 267, 268, 271, 273
Tof”
er, Alvin, 230
top-down decisions, 114…15
TQM (total quality management),
171, 172, 217
trademarks, 37…38
trade publications, 322
traf“
c coordination, 309…10
training, 233…34
customer service, 351…52
sales force, 338, 342…46
transfers, 244…45
transparency, 115…16
trends, 325…27
trust, in employees, 142
tuition assistance, 131, 144, 235…36
TV (television), 316…20
Two-Chair Technique, 141…42
Tyco, 76
type A leadership, 206
type E leadership, 206, 226
umbrella coverage insurance, 40
unconscious competence, 230
unconscious incompetence, 230…31
underachievers, letting go, 225…26
under-delegation, 237…39
unethical behavior, 258…60
unspoken messages, 177
Urspringer, Dave, 69, 113
U.S.
Investigations Services, 372
Vader breath, 283
value-added extras, from suppliers,
306…7
value-added taxes, 311
valuing employees, 125…28
Van Doren, Mark, 188…89
Varner, Steve, 235…36
vegetarianism, 287…88
vendors.
suppliers
venture capitalists (VCs), 21…22
verbal communication, 179…83
video conferences, 166
viral marketing, 322…23
Virgin Group, 319
Visa International, 211, 251
visibility, for scouting talent, 82
vision statements, 54, 62…63, 76, 77
discussing in job interviews, 87
visualization, 270…71, 294
voice mail, 275…76
Voltaire, 164
volunteerism, 347…48
Volvo, 325
Wagner, David, 350…51
Wahlsted, Bob, 73
Wallenda, Karl, 149
Wal-Mart, 27
Walton, Sam, 116
warranties, 352
Watson, Tom, Sr., 229
weaknesses, 47, 153, 154, 157
Wealth of Nations
(Smith), 75
Web sites, 11, 323…25, 328…29, 331
weekly meetings, 195…98
Weight & Rate Decision-Making
Model, 382, 383
Weiler, A. H., 116
Welch, Jack, 265
welcoming new hires, 102…4
wellness bank account, 283, 286…93,
wellness programs, 136…38, 145
WHENS (Welcome, Handshake,
Eye contact, Name, Smile),
351…52
Whiz Kids, 81
Wilde, Oscar, 371
Wilhelmi, Dave, 67…68, 136…37, 235
Wolf, Jim, 123, 245…46
work environment, 132…35
workers compensation, 39…40
work history and requirements,
discussing in job interviews,
87…88, 98
workshops, 235
WorldCom, 76
worst-case scenarios, 379…400
bolting key employees, 381…84
bolting major clients, 384…86
calling the loan, 393…97
competition attacks, 397…98
key points to remember, 399…400
natural disasters, 387…88
personal crisis, 388…90
public relations crisis, 390…92
writing effectively, 179…83
Yellow Pages, 321
yoga, 293
zeal, of sales force, 341
Tom Gegax,
cofound
er and chairman emeritus of the 500-store upscale Tires Plus
store chain, served as chairman and CEO (head coach) for twenty-four years. By the
time Tom sold the company to Bridgestone/Firestone in 2000, it had mushroomed
from a napkin sketch to a market leader with 150 locations in ten states and $200
million in revenue. A pioneer of the tough-minded, warmhearted coaching style of
management, Tom founded Gegax Management Systems in 2000 to coach growing
companies. His ideas were featured in
The New York Times
and
Fast Company
magazine, and on CNN, CNBC, and PBS, and he has won numerous national and
regional awards for his entrepreneurial leadership. Tom has served numerous corpo
rate and nonpro“
Phil Bolsta
contributes to numerous business and general interest magazines. He
cationsand marketingmaterials.Helives with hisfamilyinMinneapolis.Philcan
be reached at [email protected]
Visit www.AuthorTracker.com for exclusive information on your
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