Archive for June, 2010

Teams vs Committees

Wednesday, June 30th, 2010

How often have you heard of a company that functions like a TEAM? Most people that say they are working with, or on, a TEAM are actually part of a COMMITTEE.

A number of years ago, prior to starting my first business, I was recruited by a corporation to turn around their largest division. After first declining the opportunity, the CEO and Chairman asked me to meet with them at the corporate offices in Kansas City. We met for six hours, visited two offices in Kansas and Missouri, they introduced me to the corporate officers and we dined at a great Kansas City steakhouse where I had one of the best steaks I’ve ever eaten. Throughout the day, the CEO emphasized teamwork within the organization and repeatedly stated that their team was like a big family.
After gaining a thorough understanding of the division that I would be leading, I bought into their promise of a family atmosphere and teamwork throughout the organization. After previously working in a family business with 500 employees, it appeared that this was a larger business of 5000 employees with a similar atmosphere of teamwork. I was wrong.

The initial sign appeared on my first day when the president flew from Kansas City to meet me at an off-site location in Philadelphia to provide some additional information that he and the CEO neglected to tell me during our previous discussions. It seemed that the person who I was replacing was still there. He was a 20 year employee of the company and was failing miserably. He was the reason that I was hired to restructure the troubled division. The company was in fear of losing several large government contracts and rather than reassigning my predecessor, the CEO advised him that they were sending in an experienced person to assist him in correcting the problems. Meanwhile, they told me that they were using this tactic as a way to help me get up to speed as quickly as possible and that it is up to me as to when my predecessor will be recalled to the corporate office. The transition window could range from one week two months. This was only the first sign that things were not as they were presented. I quickly learned that my predecessor lacked the knowledge and experience to perform the responsibilities of the position. Further, he had started two small businesses and was spending as much as 80% of his time on those businesses rather than in his position. After one week, I spoke with the CEO and my predecessor was quickly reassigned to his former position.

It was then when I realized that most people who speak of a business with a “family atmosphere” may actually be part of a dysfunctional family business and most people who feel that they are on a “team” are actually part of a “committee”. Allen Weiss describes the difference as follows: “in committees, various interests come together and share resources only if their own goals aren’t jeopardized. In true teams, resources are readily shared because goals can only be reached as a unit, not individually.” As an example, soccer is a team sport and during the World Cup soccer game between the US and UK, the UK goalkeeper made an error and the entire UK team suffered. Similarly, NASCAR is a team sport. If the crew chief makes an error in fuel calculations, if a crew member takes too long to replace a tire, or if the driver makes an error in judgment, the entire team will suffer. With committees, there are a variety of interests and the result of the posturing, positioning, pressuring and persuasion is rarely teamwork. Think of the politicians in Washington, DC and of recent spending bills that have passed. The cost of the final version of the bill is often inflated by as much as 50% due to the various interests of the politicians (committees) that were included in the bill in order to obtain a politicians vote in favor of the bill.

Dr. Weiss adds that “most teambuilding efforts fail because the effort is applied to a committee structure, which requires different interventions.”

Are you a facilitator of teamwork or of committees?

The Ethical Choice

Monday, June 21st, 2010

Both the U.S. Congress and most Americans were appalled when the CEO of BP recently testified before Congress. If you believe his responses, it is surprising how little CEO Tony Hayward knows about the corporation that he runs. The Deepwater Horizon oil well that is causing the disaster in the Gulf of Mexico was constructed using a cheaper, faster and less reliable method. At least 75% of the other wells in the Gulf of Mexico use a better design incorporating two pipes and an additional seal which provides an additional barrier to gas and helps to prevent an explosion like the one at the doomed Deepwater Horizon well. Many feel that the decision to use the cheaper well design was an unethical decision by BP.

Wikipedia defines ethics as “moral philosophy … that is, about concepts such as good and bad, right and wrong, justice, and virtue.” It is also “a standard of professional behavior” based on the idea of right and wrong; and it is a standard which exceeds the minimum standard set by the law.

Owners and executives of all businesses are faced with ethical decisions virtually every day. A reputable renewable energy company with whom I recently met was faced with an ethical decision that could impact their future. Many of their competitors are incorporating cheaper components into their systems that are not only substantially less expensive but that have a much higher defect rate and that produce only 80% of the of the power that is produced by the higher quality components manufactured by American, German and Japanese manufacturers. The solar industry has relatively low barriers to entry and the recent government incentives and resulting in flood of new competitors, many of which do not have the required technical expertise.

The energy company with which I met, has taken the high road and educates their customers about the different components available. In addition, several of their customers have learned of problems with systems that use the cheaper components. The ethical dilemma is exacerbated on projects in which the owner is not buying directly from the renewable energy company but is relying on architects, engineers, construction managers and real estate developers. This additional layer involves companies that are often price driven and that often do not have the technical knowledge to determine the effect of the various components on the efficiency of the system. The cost to the customer can be millions of dollars in additional operating costs, repairs and lost energy savings.

During a recent conversation with several attorneys and bankers who have been involved in renewable energy projects, they predict that within five years the industry will see a tremendous number of civil lawsuits as a result of renewable energy systems not operating as promised, primarily due to the use of cheaper components.

In the extreme there have always been individuals and businesses who knowingly sell products or services that do not provide the desired results; however, the majority of entrepreneurs, business owners and business executives strive to balance their goal of profitability while delivering a quality product to their customers.

Early in my career I led the negotiations on a large project in Pennsylvania. The owner was a large conglomerate based in Texas. After interviewing dozens of companies the list was narrowed to my company and a competitor. The decision-makers advised me that the contract would be awarded to my company if I would agree to the tight completion schedule. I advised that we could not meet the date and we provided a realistic date which we would guarantee. My competitor later told me that he knew he could not meet the date but decided to sign the contract anyway and he intended to negotiate an extended completion date. Our competitor ultimately completed the contract five months late which was three months after the date that we guaranteed. The delayed completion resulted in loss of sales for the customer. The customer sued my competitor and won. The conglomerate also fired the two vice presidents who were in charge of the contract. negotiations.

Ultimately, there were a number of ethical decisions that were made relative to the contract. The vice presidents knew that the contract could not be completed on time and rather than advising their CEO, they hired a company that signed a contract with a completion date that everyone knew was not achievable.

During a recent workshop several attendees argued that ethics can be cost prohibitive. Their position is not unique. The question of the cost of ethics has been around for some time. Some business men and women argue that ethics can be excessive and is ultimately more expensive, effecting the profitability of a business. The reality is that we have an ethical responsibility to our customers. We are expected to provide the product or service that they are buying and it is our responsibility to identify any known factors associated with a product or service that will result in the customer not receiving the quality that we promise to deliver.

The alternative results that could have resulted from a different decision in these three examples are:

1. Based on the initial reports from the Congressional investigators, it appears that the BP tragedy could have been avoided if the design that was used on the majority of other wells in the Gulf of Mexico was used on the Deepwater Horizon well.

2. Disputes and lost lawsuits can be avoided if the renewable energy companies provide an option to their customers to use cheaper components in their commercial solar systems and if they fully disclose the differences in components and the associated costs.

3. The two executives could still be employed and my competitor would have avoided a lawsuit and associated damages if all parties have been upfront about the completion date.

What are your thoughts?

Teambuilding 101

Wednesday, June 16th, 2010

My friend, Alan Weis, recently sent an email with his thoughts on team building and particpation:

Most people working with and on “teams” are actually involved with committees. In committees, various interests come together and share resources only if their own goals aren’t jeopardized. In true teams, resources are readily shared because goals can only be reached as a unit, not individually. (The UK goalkeeper in the World Cup game with the US made an error and the entire team suffered, because soccer is a team sport.) Most team building efforts fail because the effort is applied to a committee structure, which requires different interventions. For whom are you playing?”

Flag Day

Wednesday, June 16th, 2010

Like many Americans, during the average day, I don’t spend much time thinking about America or our flag. In other words, I take a lot for granted. I do, however, pause on national holidays and during international sporting events to consider how fortunate we are as a nation.

Upon returning to Philadelphia last year, I spent time reacquainting myself with the history of this city. Philadelphia is the place where Thomas Jefferson wrote the Declaration of Independence, it is where the Constitution was adopted, it was the Nations’ Capital and it is the place where both the Army and the Navy were established. It is also the city where Betsy Ross lived and made our flag, and where the consulates for other countries were located.

This week, I was invited by a Navy Admiral to join his family and friends at the annual Flag Day celebration at the Union League in Philadelphia. I learned that Flag Day is also the U.S. Army’s birthday. This year, the guest of honor was Vice Chief of Staff, General Chiarelli. The General was awarded the Abraham Lincoln Award. As you would expect, the General’s speech highlighted his experiences throughout his career and he ended by mentioning his personal commitment and his wife’s commitment to the men and women of the military who return home injured. Those soldiers’ lives are never the same and their personal sacrifice is often forgotten.

This blog is written about and for business owners, entrepreneurs and executives. So you may ask what this article has to do with business. During the evening, I made many new acquaintances, one of whom is the Romanian Consul, a truly fascinating man. The ball room was filled with business men and women as well as retired military officers ranging in age from 40 to well into retirement years. A surprising number of these men and women are successful business owners and business leaders.

My take away from the evening is three fold:
• When you see our flag, pause and consider how fortunate we/you are.
• If you are a business owner or hiring executive, consider hiring a veteran. They have
   remarkable training, discipline, loyalty and work ethic.
• Do your small part for the military men and women who make tremendous sacrifices for your
   freedom. Regardless of whether you chose to make a contribution, volunteer, or simply thank
   past & present military for their sacrifice, it will go a long way.

What’s On Your Dashboard?

Monday, June 7th, 2010

I’m an advocate of the time-tested concept that in order to manage effectively, you must measure. Many business leaders use a daily report, often referred to as a dashboard. The components of that report, as well as the use of the data can directly impact the ultimate success or failure of a business. The results that we encountered with the following three client companies illustrate the benefit of a dashboard report.

Company one is a third-generation 90-year-old family business with revenues of $200 million, but it was not always that way. They spent the past decade undergoing significant internal change which has resulted in their recent revenue climb to triple the revenue level at any other time in their history. I began working with that company when annual sales were about 18% of their current level. I convinced the CEO to identify his vision for the company. We worked together to develop and implement a new business strategy, aligned operations to meet challenges, and accelerated their organizational performance. Early in the process we developed a dashboard for the CEO with key data that allowed the CEO and key managers to keep their finger on the pulse of the organization. The company’s success and phenomenal growth is directly attributable to their focus on the vision and commitment to the strategy. The dashboard enables them to monitor daily performance and to make adjustments in response to unanticipated variations.

Company two is a $10 million service company that has been consistent in terms of revenue and in profit margin, with no growth for the past 5 years. After returning from a CEO focus group to which he belongs, the company owner directed the controller to begin providing a three page report each week. Initially, the report was beneficial; however, after four months the reports began to pile in the corner of the owners’ desk and were seldom reviewed. The company immediately benefited from improved profit margin after first using the report but the profit margin decreased within one month after the owner and management stopped using the dashboard. We revised and condensed the dashboard to include one page with eight key indicators. We worked with the owner and managers to understand the report and to use it daily. Within one month, profit margin began increasing and after three months, profit margin increased by more than 50%. The management team continues ot use the daily dashboard and profit margin remains strong.

The third organization is a bank with about 15 branches. We help them to develop a system to report eight data points. During a recent executive meeting, the bank president questioned an executive about the actions taken after he noticed a data variance on the daily dashboard report. The manger was aware of the sales decrease but she did nothing about it. Subsequently, criteria were developed so the respective managers knew what actions to take in response to fluctuations in the dashboard.

Dashboards can be very effective and I recommend them to virtually all clients. There are generally eight measurements that should be on every dashboard, although additional data can be included in a report. The purpose is to provide clear data that can indicate key movement of financial or operational performance at a quick glance. The data may indicate sales fluctuations, production results, expense fluctuations, profit margins, or other relevant data.

The dashboard report is only effective if it is reviewed each day or week. Additionally, there must be a set of “ if, then” criteria in the event of a variance from a predetermined range. For example, the bank that I mentioned above realized that daily sales were usually within +/- 1.3%. The bank established a procedure if daily sales fluctuated by 1.5%, or more. The variance was investigated by the sales director and a note was added to the CEO’s copy of the dashboard advising the cause of the variance and the actions taken to return the sales to the projected level. This procedure assured the CEO that the manager was aware of the fluctuation and that corrective steps were taken.