Business In Washington - Business Operations & Management Consulting

As I have watched the economy tank and our government react and overreact, I keep having flashbacks to the 1970’s. There was a lot more to the 70’s than bell-bottom jeans, leisure suits, sideburns, double-knits and green shag carpet. It was a terrible economic time.

I finished college in 1975 and took my two degrees into an abysmal job market. I found something, but struggled for several years before finding a good job, one that I stayed with for 15+ years. During the early years of my career, I did what all young professionals do. I tried to succeed at my job, build up some savings, find a life partner, and establish myself personally and professionally.

However, it was a tough time to do this. Inflation ate up every salary increase and limited my savings. I wanted to buy my first house, but the market stayed one step ahead of me in spite of my efforts as housing prices and mortgage rates soared. It took me until the 1980’s to make the leap into the housing market. I managed to obtain a mortgage at the eye-popping rate of 13.5%, and for the time this was a good deal! The resulting PITI house payment took more than half my monthly income.

For some time now, as I have observed our current economic crisis, I see a 1970s redux in the near future. And it isn’t pretty! There is an excellent opinion piece in today’s Wall Street Journal written by Arthur Laffer of “Laffer Curve” fame. He is also one of the authors of the recent book, “The End of Prosperity”. I have read part of it. It is excellent and scary.

I urge my readers to take a look at Mr. Laffer’s article. Press here to read it.

I look forward to hearing your comments!

It was probably inevitable. The AIG bonuses, followed by Congress’ knee jerk response. The final straw. The tipping point that would convert economically frightened and somewhat paralyzed Americans into a raging group of Howard Beales. Remember him?

Howard Beale was the character in the 1976 movie “Network” who encouraged people to “get up right now, sit up, go to your windows, open them and stick your head out and yell - ‘I’m as mad as hell and I’m not going to take this anymore!’ Things have got to change. But first, you’ve gotta get mad!. You’ve got to say, ‘I’m as mad as hell, and I’m not going to take this anymore!’ Then we’ll figure out what to do about the depression and the inflation and the oil crisis. But first get up out of your chairs, open the window, stick your head out, and yell, and say it: I’M AS MAD AS HELL, AND I’M NOT GOING TO TAKE THIS ANYMORE!”

I am struck by the parallels here, both the economic conditions of the time (I was there. The economy at the time was worse than now.) and the helpless outrage of the people. We need to be angry now. There are very good reasons for our current outrage. My concern is that we direct it at the proper targets. Although many want to aim at the AIG execs themselves and castigate them as greedy SOBs, beware the mob mentality that sends death threats to their family members. As Americans, we can and must be better than that.

Instead, let’s channel our anger into positive action. First, understand the causes and players here. Learn the facts. Then, consider actions that are more likely to make a difference. As business people, there are some real dangers looming as well as some real lessons to learn. Here are points I am focused on at the moment and I offer them for your consideration.

• The bonuses were huge and completely inappropriate, but they were contractual and legal.
• Key members of Congress and the administration were fully aware of the bonuses ahead of time. In fact, language they deliberately placed in recent legislation allowed the dollars to flow.
• The move in Congress to tax them at 90% is most likely NOT legal, or constitutional. (And this from our supposed lawmakers! Have they read the Constitution? I have. Haven’t you?) It is also a dangerous precedent that business people need to watch very carefully.
• Not all corporate execs are greedy bad guys. In fact, most are not. As a business owner, I am a business exec, and I assure you that I place ethics and integrity at the top of my corporate principles. Corporations are not evil entities, but people like you and me, making a product or offering a service as a fair exchange for a customer’s dollars.
• Actions have consequences, some of them unintended but still very real. Congress needs to study this principle, especially now that our Treasury Secretary is proposing a public/private partnership to address the toxic asset problem strangling our banks and lenders. Will private companies and their executives (some greedy, most not – don’t forget that!) feel comfortable participating if they fear punitive taxation, especially when it comes after the fact, essentially altering the rules of a game in progress?

I think our government should abandon their punitive mentality and go after these guys with simple, old-fashioned shame. Take the higher, principled road and use the bully pulpit to encourage greater integrity. For example, try returning all those campaign dollars they received from AIG. Perhaps then Congressional actions will be viewed as examples of the best in America, rather than political pandering.

Finally, remember that the profit motive is really a positive thing. It only becomes greed when it goes too far. A healthy profit motive, the hope of reasonable reward for effort, is what encourages Americans to innovate, build, become entrepreneurs, and ultimately drive our capitalist economy. It will not help our economy recover if our government keeps punishing success!

Greetings to all of our faithful readers!  You may have wondered exactly where we have been hiding for the last couple of weeks.  Well, Murphy’s Law is in full force for all of us.  Remember that one?  It goes something like this:

“If anything can go wrong, it will.”

Then there is MacGillicuddy’s Corollary - “at the most inopportune time.”

And another extension - “It will be all your fault and everyone will know about it.”

And, finally, my extension - “Murphy was an optimist.”  Okay, that one’s not really mine, but I am unable to attribute it at this moment.

Murphy has certainly been in charge of our blog, but we have finally triumphed and are back on the “air”, on a great new server, and with the same great content.  A better look and feel will be coming soon. 

In the meantime, let me close with these Words of Wisdom - “To err is human, but to really foul things up requires a computer.”  If you prefer, plug your own word into the saying instead of “foul”.  We are a family-friendly business.

We thank you for your patience!  Let’s blog on!

In case you would like to read more about Murhpy’s Law, surf over to www.murphys-laws.com.  Enjoy!

We’ve had a lot to say recently about the lousy service one gets whenever one is compelled (or just crazy enough) to board a plane and fly somewhere.  The latest symbol of the demise of the “friendly skies” was the announcement by one airline that they would no longer offer peanuts to the passengers.

No peanuts.  How low can you go?

There was a fabulous article in The Seattle Times this past Sunday, entitled, “Once upon a time, the skies really were friendly.”  Did you read it?  Do take a look if you can.  Those of our readers who will admit to a certain maturity (note, I didn’t say old!) will relate to some of the stories.  To you young whippersnappers, it will seem like a fairy tale.

Like all good fairy tales, this one begins:  “Once upon a time, air travel was exciting and fun.”  Hard to believe?  Check out the examples offered by Times readers.

Yes, I am mature, and I do relate.  My very first plane flight was taken as a young child.  My brave mother, single, with two elementary-school-aged children, decided to visit relatives in Illinois.  Thinking of the trip as a potential experience and “teachable moment”, she eschewed the car and decided to use a combination of train and plane travel. 

We embarked on a flight from Detroit to Chicago.  My brother and I were beside ourselves with excitement!  We got to peek in the cockpit and meet the pilot.  The stewardesses (all women in those days and all slender and pretty) were incredibly nice to us.  Mother, less sanguine, was armed with toys to entertain us and Dramamine to ensure health, since I was prone to motion sickness.

We were buckled into a window and middle seat, with Mother on the aisle.  Probably wanted to make sure we couldn’t escape.  Excitement reigned.  We took off and competed for the view from the window.  How amazing to two little kids!  People below looked like ants.  Once fully airborne, we were surrounded by fluffy white clouds, marshmellows to us.  Was God out there?

After a while, things got more interesting, for the adults.  We hit some wind.  Instead of a smooth flight (”Feels like you are sitting in your living room!”), we were suddenly on a roller coaster.  We would go up, hover a moment, then plunge down, leaving our stomachs behind.  My brother and I loved it!  We squealed with delight.  Mother took the Dramamine.

We landed in Chicago on time, 5 mintes earlier than we took off due to the change in time zone.  This was yet another wonder to me and my brother.  We talked about it for weeks.  We were ushered off the plane, with apologies from the flight crew about the roller coaster.  (What was to apologize for?  We’d had a ball!)

By contrast, our train ride from Chicago to Peoria was a drag.  It was slow, noisy, and dirty.  We hated it.  This was the start of a love affair with flying.

In the late 1950’s when I started flying (yes, I am that old), it was still new enough to be special.  We still ran out of the house to look when someone hollered about an airplane overhead.  (This stopped when the flight paths for Detroit Metro were rerouted over our house.)  Parents took their kids to airports just to watch the planes take off and land.  We dressed up for this.  People dressed up to travel, especially when they flew.  There was a glamour and an excitement to air travel in those days.  And the service fit the mood perfectly.

Given the fact that airline travel is now SOP for a large percentage of Americans, it is natural that the romance of it would be gone.  But is it really necessary for the pleasant service to follow suit?  I think air travel can be spartan without being so de-humanizing.  And good service can go a long way toward accomplishing that.

Next time I decide to reminisce, perhaps I’ll tell you about my very first business trip.  What flying stories do you have?  Please share them!

I confess.  I watch too much TV.  My excuses?  Well, I guess I could blame it on my generation.  As a baby boomer, I was raised with TV, the first generation in the United States that was.  Probably a bigger reason is that by late evening I am too tired to do anything else and an absorbing story takes me out of the stresses of the day and helps me unwind.

So, this has been a good TV week.  Most shows have their season finales, with great stories and cliff-hanger endings.  One of my favorites is NCIS.  The usual draw for fans in a police drama’s finale is leaking the fact that a series regular will die.  We all tune in to find out who.

The NCIS finale was a great action story, with plenty of suspense, rule breaking, insights into various characters, and an exciting gun battle.  For those of you awaiting a rerun, I will skip the “who died” part and move on to why I am talking about TV on a business blog.

At the tail end of the show, there is a new director of NCIS.  He hands out envelopes to each of the main characters, and tells them their new assignments, all in different places.  In short, he is breaking up the team.  There the episode ends.  The cliff-hanger, right?  We have to wait for fall to find out the outcomes.  Which of our favorite characters is returning?  (In addition to who died, of course.)

I was struck by the management lesson.  If a new manager is stepping into the lead, what should be done with the team reporting to him/her?  My take is, barring unusual circumstances, not what this guy did.  I would spend some time with that team to assess their strengths, both individually and as a group.  An effective team will equal more than the sum of its parts.  It will accomplish greater things because of the synergies resulting from a team familiar with its members and all of their strengths. 

Even more telling, to me, is that an effective team has enough of a track record to establish high levels of trust.  This is particularly important in a dangerous profession, such as law enforcement.  You just don’t break up an effective team without a better reason than I saw here.  It’s a criminal waste.

Why did the new director do this?  I think it was a power play, pure and simple.  And I think it may blow up in the guy’s face.  But I will have to wait until fall to find out.

Darn!

Today I am daring to mention that tender subject that makes every woman wince - the annual mammogram.  This is never fun, for any of us, but we do it.  The importance of this exam has been drilled into our heads.  We make jokes (To prepare for your mammogram, lie comfortably on the cold garage floor and have your husband run the car over your breast a few times…), but we still approach the appointment with trepidation.  What if they find something this time?

I took my mother to her appointment recently.  For her, it’s a bigger deal, since she has had breast cancer.  She has beat it and remains cancer free, but you can imagine her level of trepidation and the especially tender state of her breasts after surgery, radiation, etc.  We went to a local breast center, attached to a reputable hospital where her surgeon (a truly wonderful man and skilled surgeon) practices.  If only their attitudes matched his!

Speed and efficiency seemed the primary goals at this location.  Mother is handicapped and walks very slowly with a walker and we could sense the impatience all around.  Ushered to a thinly curtained booth, she was instructed - quickly - to strip from the waist up and put on the gown with the opening in the front.  Then, the woman split.  Mother didn’t hear a word (she’s partially deaf), so I repeated.  I also told her to wash off her deoderant (SOP since it distorts the image), which the woman had forgotten.  Mother changed, then took a seat in the tiny waiting area and I joined her.

The same woman eventually returned, and led Mother into the exam room.  Afterwards, I helped her dress, retrieved her walker and we left.  Once in the car, Mother commented on the technician’s manner during the exam.  For my male readers who have not experienced the joy of a mammogram, you need to understand that you have to assume a very awkward position for this xray, with your breast smashed painfully between a couple of plates.  My handicapped mother was having great difficulty getting into the position and the woman got impatient and angry with her!  Mother defended herself, explaining that she was physically unable to move quickly or into the position quite the way she was being directed, and the woman finally calmed down.  Mother was understandably disturbed by this.  I was outraged.

Now, let us recap.  You have an elderly, handicapped woman who has difficulty moving and hearing, and who had bilateral partial mastectomies and radiation just last year.  She remembers the pain and she is frightened.  If this were your customer, and a very typical one given your trade, how would you treat her?  If you were a manager, how would you direct your employees?  What would be the primary goal for your customer service?

Contrast this with my last mammogram experience, just a few months ago, but at a different breast center.  I was greeted with a smile, handed paperwork with discretion, and asked to take a seat.  Another woman came to get me, ushered me into another room and to a booth with a door, not a thin curtain.  I was given a short gown and directed to place my valuables in a locker, which was supplied with a key on an elastic bracelet.  The very pleasant woman asked if I was wearing deoderant, showed me where the wipes were in case I was, and left me to change my clothes.  While seated in the quiet waiting area adjacent to the dressing booths, another woman came, gave me pamphlets about breast exams and cancer and offered to answer any questions.

During my actual exam, I was handled with kindness.  The technician was efficient, but not rushed.  She was focused on me and making an unpleasant moment pass as easily as possible.  Her manner was professional, unhurried, friendly and reassuring.

What a contrast.  My only concern about all of this is what I will do if my test is positive and I have to choose between my breast center/hospital and Mother’s breast surgeon.  It will be a tough choice.

By the way, our test results were good.  We are both free of cancer.

Sometimes I think we speak more to voicemail systems than people.  In fact, I have been stunned to silence when the person I am calling actually picks up the phone!  I usually cover my confusion with humor, my normal coping mechanism.  The person I called laughs and we move over my verbal stumble to the purpose of the call.

If we are going to converse well with all the digital receptionists out there, we need to give the process a little more thought so we can convey an image of professionalism.  We may be sitting in a home office wearing a robe and bunny slippers, but our client/prospect/colleague will never know it unless we tell them, right?

So, how does one leave a good voicemail message?  Here are my thoughts.

1. Start by identifying yourself and your company or organization.  (It’s amazing to me how often this critical first step is left out.)
2. Speak clearly.  Enunciate.  Don’t speak too quickly.  (Have you ever noticed, with frustration, that many people speak at an excellent, easy to understand pace until they get to their phone numbers?  Then they rattle the number off so fast you can’t get it written down.  Aarrrgghh!)
3. Leave a complete, but concise message.  Don’t keep rambling on.  The fine details are best left to the actual conversation.
4. Don’t leave numeric or financial details on a voicemail message!  (My partner often comments about getting detailed financial data on a voicemail message as he drives down the freeway.  Save it!)
5. Prepare yourself before you dial the phone.  If you know in advance what you want and need to say if you miss the person and get the voicemail, you are far more likely to be able to leave a brief, professional message without stumbling and feeling foolish.

Dennis got a call today from a woman probably intending to follow up on arrangements for a conference he is planning to attend, but he can’t be sure.  She identified herself only by her first name, never mentioned the organization, and simply asked if his registration was complete and his hotel arrangements made.  Then she left her phone number, speeding up to a tempo approaching the speed of light.  He had to listen to the message multiple times to catch the number.  Then he had to guess where she was from and why she was calling.  Not very professional, or even useful. 

The phone is frequently your first contact with a customer or prospect.  How you and your employees answer the phone and leave voicemail messages will leave an impression, maybe an indelible one.  How do you want to be perceived?  Think it through.  Then, once you work out how you leave messages, don’t forget to train employees so they can do the same.  Consistency, across your organization, will give a great impression!

There is a great cartoon, currently posted on our web site, that reminds us of the principle behind my comments here.  It’s from the New Yorker collection and says, “On the Internet, no one knows you’re a dog.” 

Woof!

According to an item in today’s online Puget Sound Business Journal, Washington’s unemployment “jumped” from 4.5% to 4.9%.  Granted, any time a job is lost, it hurts.  Particularly if it’s your job!  I’ve been there and truly empathize.

However, we need to hang on to some perspective here.  According to Employment Security Commissioner Karen Lee,  ”March was the 18th month in a row that Washington’s unemployment was under 5 percent. It is a phenomenal record, despite the rise in unemployment.”  

Even more telling, if we trouble to remember it, is that an unemployment rate below 5% has long been considered full employment.  The current angst seems a little extreme given these numbers and these facts. 

 In Washington, we are better off than the nation as a whole.  Nationally, the rate jumped to 5.1% in February, from 4.8%.  Even that higher rate is close to that full employment level, although there are areas of real job challenge in the country.  I was born and raised in Michigan where the state’s economic health goes hand in hand with the auto industry.  So they are far closer to a real recession than we are in Washington.  During my last visit to Michigan, seeing so many lakefront mansions in Grosse Pointe for sale, and languishing on the market, was something of a shock. 

Yes, we are facing some real economic challenges in this country, but let’s remember history and count our blessings.  I finished my college education in 1975 and hit the job market with an unemployement rate fluctuating between 8 and 9%!  I am not relying solely on my memory here.  I got those numbers from The Federal Reserve Board - a chart showing civilian unemployment rates from 1974 - 2007.  (Ya gotta love the internet!) 

About 8 years later, when I had saved enough to by my first house, I managed to get an FHA mortgage at 13.5% and thought it was a great deal.  (It was, at the time.  By the mid 1980’s, many of my friends and colleagues had mortgages of 17% and higher!) 

We may have something of a bumpy economic road ahead of us, but let’s not lose sight of the actual numbers.  We can hang onto perspective, and a great deal more calm, if we use real information and logic, not just emotion.

I’ve helped a lot of clients buy businesses over the years.  I’ve also been brought in after the fact to help fix problems in the businesses.  Suffice it to say that I have observed many buy/sell transactions during my career.  Buying a business and becoming a business owner for the first time is a big deal, the culmination of a dream for many.  Since it matters so much, and entails so much investment of time and dollars, it’s important to make the best purchase decision possible and be well positioned for business success.

The flip side of success is failure.  So why do some of these purchases and dreams of business ownership head south?  I typically see 3 big mistakes new business purchasers make.  Avoid these and you will have a better chance of ultimate success.

1. Paying too much.  Every business owner thinks his/her company is worth more than it really is.  This is completely understandable, particularly if the seller is the company founder.  It is his/her baby, something created from scratch and built up with passion and extremely hard work.  So, as obvious as this concept is, it constantly amazes me that many business buyers take the initial offering price and go with it.  Do your due diligence!  Research and negotiate.  Delve deeper into the financial information offered by the seller.  Maintain a healthy level of skepticism.  In the immortal words of Ronald Reagan, “Trust, but verify.”  You want to offer a fair price for the company, but if you pay way too much you risk burdening your new business with a debt load that could sink it.
2. Buying a job, not a business.  This mistake is most common when employees buy the business from their former boss.  Running a business is not the same as working within that business.  From the time you begin considering the purchase of any business, you need to shift your mindset.  Think like a CEO and look at the business from that perspective or you will not be successful leading the company.
3. Going it alone.  Sellers usually use a business broker, an attorney, or a business consultant to help them market their companies.  The buyer should also have appropriate assistance.  You are talking about spending a lot of money here, so don’t balk at spending some up front for expert help!  Viewed within the overall context of a business purchase, it’s a relatively small investment.  Don’t rely only on the seller’s attorney.  Have your own counsel.  Work with an experienced consultant to help you value the business, set a price, and negotiate the sale.  Remember Big Mistake #1.

Plan ahead, avoid these three mistakes, and your business purchase will set you up for success as an owner and CEO!

The title of today’s post is a question I have been asked many times over the years.  It generally comes from a client who already owns at least one business.  (Issues pertaining to buying one’s first business are quite different and will be addressed in another post.) 

I begin by asking a couple of critical questions.  First, does the company fit with your current business?  Consider the following:

• Does the business produce a similar product or service?  In this case, it may make sense because you are essentially buying out part of your competition.
• Is the customer base the same as yours?  This may indicate a good fit.
• Does the company bring solid repeat customers with it, thus expanding your customer base?
• Does the company make a complementary product?  One that fits logically with your offerings and expands your product set?

An acquisition will make more sense and have less risk if it fits with or complements your current business. 

The second big question is this.  What do you bring to the table that will make the company better and more profitable?  Additional profit is absolutely necessary to justify and recoup the purchase price, as well as support the debt usually incurred to make the purchase.

• Do you have ideas to enhance the business that the current owner is not attempting at present?
• Are there synergies with your business that will ultimately enhance results?  Economies of scale?
• Can you bring a needed cash infusion to an otherwise good, but financially strapped company?
• Do you bring additional industry knowledge, contacts, or management skill to the table?

Unless you can clearly articulate how you will make the company better and more profitable, don’t buy it.

Until you can answer these big, strategic questions, delving into the due diligence of analyzing the company doesn’t make much sense.  Once you have your strategic answers, however, you can proceed to look at the specifics of the business - its finances, market share, growth trends, management, etc.

Expanding your business through acquisitions is a great idea, as long as it makes sense strategically.