Category Archives: Management

Business Plans are Always Wrong, But Still Vital

September 10, 2012Back to Fundamentals, Managementplanasyougo.com, planning fundamentalsTim Berry

(Note: It feels like business planning season to me. Fall, or almost fall, time to think about next year. So I’m reviewing business planning fundamentals, this week and next, refreshing some of my older posts.)

Business plans are always wrong. That’s because we’re human. Business plans predict the future. We humans suck at predicting the future.

Paradox: nonetheless, planning is vital. Planning means starting with the plan and then tracking, reviewing progress, watching plan vs. actual results, correcting the course without losing sight of the long-term destination.

Planning is a process, like walking or steering, that involves constant corrections.

The plan sets a marker. Without it we can’t track how we were wrong, in what direction, and when, and with what assumptions.
Use this marker to manage the constant conflict between short-term problems and long-term goals. You don’t just implement a plan, no matter what. You work that plan. Use it to maintain your vision of progress towards the horizon, while dealing with the everyday problems, putting out fires.
So the plan may be wrong, but the planning process is vital.

The truth is that forecasting is hard. Nobody likes forecasting. But one thing harder than forecasting is trying to run a business without a forecast. Plan, connect dots, identify interdependencies, set numerical goals. Then track results, review, and revise.

A business plan is normally full of holes, but you fill them, after the fact, with the management that follows. That’s what turns planning into management.

Good planning is nine parts implementation for every one part strategy.

(Images: shutterstock.com)

Management And the Art of Saying No

August 27, 2012Management, WeblogsTim Berry

Do you recognize this tactic?

I was at the Apple Latin America headquarters in 1984 for an appointment with Hector Saldana, general manager. I arrived on time for a meeting, Hector came out of his office and welcomed me, walked me to the place to get coffee, and left me in a conference room, promising to be back shortly.

He came back in about 10 minutes, we talked for about 10 minutes, and he was gone. Back in another 10 minutes for maybe 15 minutes, then gone, back, gone, etc.

I recognized the tactic as what the overbooked pediatrician used to do when he had a room full of parents and babies. Hector was holding several meetings at once. I certainly couldn’t complain, I was a consultant and he was my client.

On the contrary, as I watched, I saw management in action. He came into the room, shaking his head. “Tough situation,” he said. “I’m always saying no to people.”

We talked about that, and Hector said: “Management is nothing more or less than knowing when and how to say no.” That may not be original, but that’s the only time I ever heard it.

Since then, I’ve watched. One of the hardest things business owners and operators do is deciding not to do something. It’s the art of saying no. Particularly for a growing business, the difference between strategy and chaos is knowing when and how to say no.

This is against the background of the fact that Strategy is Focus. Most growing companies want to do far more than they can effectively do. Bright managers want to seize every opportunity in sight, and all at the same time. In the real world, however, displacement is a fact of life. Everything you do in a business rules out something else that you can’t do as a result. To grow your business you must focus on well-defined target markets, well-defined products and services, building competitive advantage, capitalizing on your strengths and avoiding your weaknesses.

Yes, all of that seems obvious, and the best strategies are in fact obvious. They come straight from the SWOT Analysis (Strengths, Weaknessess, Opportunities, Threats). They are maintained over the long term, meaning several years. Successful strategies will be copied by competitors. Better a mediocre strategy consistently applied over several years than a series of brilliant strategies pushed one after the other.

All of which makes focus the key to effective growth strategies. And, furthermore, focus means exercising discipline in management, not trying to do everything. Saying No.

Displacement: A Critical Small Biz Factor We Never Acknowledge

July 26, 2012Back to Fundamentals, ManagementdisplacementTim Berry

Displacement: In the real world of small business, everything you do rules out something else you can’t do.

Understanding displacement is vital for business planning, vital for growing a business, vital for small and medium business in particular. Consider the picture here, marbles dropping into a full glass of water. The water comes splashing out of the glass and onto the table. That’s a good illustration of displacement and how it works in business.

I’ve seen it so many times: trying to plan their business, people start making lists of things that ought to be done and end up with huge unrealistic and impossible business plans because they haven’t come to terms with displacement.

Everything you do displaces something else that you can’t do. Learn to live with this and you’ll do better planning your business, and, particularly, growing your business.

(Note: this is a rewrite from a 2006 post)

(image: istockphoto.com)

Hooray the Late ’60s Are Finally Winning

July 19, 2012Back to Fundamentals, Leadership, ManagementAlexandra Levit, Amex OPEN, IBMTim Berry

No surprise to me: Alexandra Levit reports on Amex OPEN that big-company CEOs are “abandoning command and control.” IBM studied more than 1,700 chief executive officers from 64 countries and 18 industries.

Of course. Look around. You’ll see complaining sometimes about alleged millennials, but all they’re doing is wanting people to care what they think. That’s true of Gen-T too, and us aging hippy baby boomers as well. Nobody wants to mindlessly obey. Computers and software first, then the Internet, created a meritocracy of sorts. People share jobs and work from anywhere and it’s about results, actual work, not time warming seats.

Just a couple days ago I was sharing with a good friend that I thought I was bad as a manager building my own business because I wasn’t good at structure and command. I didn’t like authority that much. Now it turns out I was just ahead of my times. Hooray.

My favorite part of this report is the conclusion:

The IBM study has revealed a new type of CEO—one that lives on the ground rather than in the ivory tower and one that is able to adapt to a rapidly evolving business world. In many ways, small-business owners and entrepreneurs are accustomed to this form of leadership.

Hmmm … so in the smaller companies, the startups, the grass roots entrepreneurs are leading this change? Are you surprised? Big company leadership is taking longer to figure this out? Still surprised?

What I like is that what we started in the late 1960s is rolling along towards 2012. Power to the people, and all that.

It’s about time.

(Image: bigstockphoto.com)

5 Traits of A Great Startup CEO

July 18, 2012Leadership, ManagementJason Baptiste, OnStartups, onstartups.comTim Berry

I’ve been meaning to post about Jason Baptiste’s 14 Ways To Be A Great Startup CEO for a while now. With so much myth and misunderstanding slung around the web as advice on entrepreneurship, it’s unusual to see 14 good points in a row on this topic. I’m highlighting my five favorites here, but all 14 are valid. This is my selected best five. (And all the bullets here are direct quotes from Jason’s post.)

1. Be a keeper of the company vision

No explanation needed on this one.

2. Absorb the pain for the team.

Be a keeper of the company vision doesn’t need explanation. Jason explains absorb the pain for the team:

A startup CEO needs to be the personal voodoo doll for a startup. They need to be able to take on a strong burden of stress, pain, and torture all while making level headed decisions. You can’t have the troops stressing and worrying about the difficult challenges at hand. A good startup CEO will absorb the stress, so the rest of the team can carry on. He also needs to be able to mask this pain and stress. Not that he should hide or lie to the team- I’m not encouraging that. Most of the day to day nuances+stresses of a startup aren’t worth having the entire team worry about and the CEO needs to bear that pain.

I love the voodoo doll metaphor. And although Jason’s explanation winds around a bit, it’s a tough concept to deal with: The right mix of absorbing and sharing the problems is critical. No extremes here; somewhere in the middle.

I think my absolute favorite is…

3. Find the Smartest People and Defer on Domain Expertise

Jason lumps two things together under this point, both very important:

First:

The key is finding people that are smarter than you on specific topics. It might be technical team members/leaders or it might be a new VP of Biz Dev. A startup CEO has to have the ability to find these people and make relatively fast decisions to hire them. They also have to be able to show the fire and passion to convince them to leave what is most likely a better paying and more secure job to join the company.

And second:

The real key to hiring as a startup CEO comes after the hire. A great startup CEO will be able to trust the hires that they make and defer to them on areas of domain expertise. It’s hard to let go, but you have to learn to, especially when the company grows.

This seems obvious I think from the outside, but I can say from experience, it’s really hard to do. I found as I grew my company that, especially in the beginning, it was hard as hell to let go of me knowing everything best. As Palo Alto Software grew up, we had trouble dropping the flat organizational structure and going from decision by team vote to decision by functional expert in charge. That’s a hard change to make. But vital.

4. Have an uncanny ability to say no

It’s all about focus. Jason says a startup CEO gets a flood of suggestions, many of which sound wonderful, few of which can be implemented. One of my mentors once told me management is knowing when and how to say no. And there’s the important displacement principle that says everything you do rules out something else you don’t do.

5. Have the ability to call an audible

“Call an audible” is a American football reference to changing the pay at the very last second. I want to close this post quoting Jason on this one:

Nothing goes according to plan. Things fall through, people quit, shit happens, servers crash, and other random things go bump in the night. You’re going to have to deal with it and fast.

Amen to that one. And I totally believe in planning, but that’s planning process for me, the Plan-as-you-go method. which means planning is steering and steering is constant review and revision.

5 Hard Lessons Related to Firing Somebody

February 13, 2012Business Mistakes, Managementhiring and firing, letting an employee goTim Berry

So you start your business, and you get it going, and growing. If you have employees, it’s likely you’re going to have to deal with firing somebody. Here are my some of my thoughts (based on actual experience; not theoretical) on that subject.

Having to fire somebody who’s been trying hard and failing is the worst job a business owner has. I’d rather do collection calls. But it happens sometimes. If you can’t stand the heat …
Because of the recession in 2001 I had to let five people go on the same day. We had to cut costs and we had no choice. They weren’t let go for their own failure, but ours, and they knew it. For the record, that’s much easier than letting one person go because of work or performance reasons.
Firing somebody should never be a surprise. It should be because expectations weren’t met, and performance wasn’t as expected, and that person should always know it. If it’s a surprise, management has failed. (Well, if it is a surprise to the person let go, that is; as for co-workers, that’s none of their business.)
A good lawyer I worked with for years used to say that the time to let somebody go is the first time you ask yourself whether or not you should; the first moment you even think of it. He’s a smart guy, a good and honest lawyer, and basically compassionate. His underlying though was that it was best for both sides to do it as soon as you start wondering. And I’ve never known anybody to actually work that way. I didn’t. Still, the wisdom here is that it’s better sooner than later. Later does more damage.
I’ve had some successes with repositioning a person, rewriting their job description, having them do something entirely different, rather than firing them. However, to be honest, those successes were the exception, not the rule.
(Bonus) We live in a litigious world. Talk to your attorney before you do it. There are a lot of things you’d like to say but you shouldn’t. And some very unfair lawsuits happen.

What do you think?

(Image: bigstock photo)

3 Questions Business Owners Need to Ask About Employee Expenses

February 9, 2012Managementemployee expenses, employees, employer, small business managementTim Berry

Do you own a business? Do you run a business? Then I recommend you follow me through this simple math and some reasonable conclusions.

Assume you have a person making a $50,000 gross salary. Assume their true cost — including health insurance, overhead, work space, computers, Internet, electric power, payroll taxes, etc. — is $80,000. That person costs your company about $40 per hour.

For that calculation, I divide the $80,000 by 49 to calculate the weekly cost of $1,633 (I take off two of the 52 weeks in a year for vacation and another for national holidays). I divide that weekly cost by 40 to get $40.82 per hour. And then for convenience I round that to $40 per hour.

So, with that hourly cost in mind, I’d ask myself these questions:

Thinking about computers and Internet connections: Do I really cut costs by having employees working with old technology?
Books and magazines: I’m betting $15-20 per business book, or annual magazine subscription, on saving my people some time, generating good ideas, helping them work better. So the marketing books for the marketing team, programming magazines, business magazines, how expensive are they, really? How much do they have to help to pay for themselves?
Meeting expenses: how much does it cost me to start a meeting 10 or 15 minutes late? Is it worth it to bring lunch into a meeting to save my team members the time of going out to lunch?

My conclusion: spend the money. Keep your technology up to date, encourage employees to get whatever books and magazines or website subscriptions help them, and combine meetings with meals a lot.

What do you think?

A Potentially Creative Management Team Assessment Idea

December 15, 2011Management360-degree feedback, New York Giants, WSJ.comTim Berry

Whether you’re a football fan or not, I suggest you take a quick look at NFL: The Giants on the Giants on WSJ.com today. And that’s especially if you’re running a business, or working on a business team. And even more so if you’ve heard about the 360 methodology for polling teams – business teams — about each other.

Have you heard of the 360 (360 degree feedback), in which people in business organizations review each other anonymously? Each person reviews their supervisor, their subordinates, and their peers. The review includes questions about business, management, strengths and weaknesses, etc.

I can’t say I’m a big fan of the 360. It’s too easy to confuse popularity with management. Anonymous zingers can be painful, even when kept private. And negative feedback is hard to give directly, sure, but anonymous changes the chemistry. To be fair, the results of the 360 aren’t really "open," when it’s run correctly. Each individual gets individual results. But management also gets results.

However, I do think this variation on the 360 could be a great adaptation. They didn’t ask the football players about football; they asked fun questions, looking for fun answers. Read the source story and you’ll see … who would you sit next to, who is the coach’s favorite, etc. I could see this style working well in a company framework: best dresser, worse dresser, best presenter, most improved, etc. It could be a good discussion starter. (Illustration: by Scott Pollack, taken from WSJ.com)

A Great Case for Innovative Angel Loan Financing

September 28, 2011ManagementAngel investment, gust.com, startup loansTim Berry

I was reminded yesterday that sometimes the best financing for an emerging startup is innovative loan financing, from savvy investors, rather than straight investment or commercial borrowing.

The reminder came in an email from an entrepreneur named Terry (not the real name) who included two PowerPoint pitch decks: one for seeking venture capital, the other for a bridge loan. I’d met Terry in person three years ago, after we’d struck up a friendship in Twitter. I was impressed then with the commitment to the new business despite financial woes and family sacrifices of Terry and spouse, a young couple, with a new baby on the way, their first.

Three years later, Terry’s slides show 85 percent growth in revenues per year, cash flow break even, and a strong management team. Sales will roughly double in 2011. And the company has a convincing growth plan based on expanding into very closely related markets. I’m very impressed. The illustration here is taken from Terry’s deck. You probably can’t read the numbers and years, but it’s showing sales growing to about $1 million since 2007 and a more conservative growth line in the future, but that’s just to show what it would take to repay a proposed loan. My guess is that growth could be much higher than what’s shown here.

Which brings me to the reminder about the loan idea instead of investment. Here’s the situation:

Terry probably can’t just go to a bank and get a big pile of money to finance the expansion, simply because banks are governed by laws that protect depositors and discourage banks taking risks with startups.
On the other hand, Terry might not be able to show venture capitalists or angel investors quite enough growth, scalability, and defensibility to make this a great investment for outsiders.
Furthermore, Terry may not want to take on investors as partners. That’s like getting another marriage to deal with, great if it works, horrible if they are not compatible. And it means giving away substantial ownership, becoming a partner instead of just a plain owner.
So the innovative loan from savvy investors is a great compromise: if it works, it gets the funds for growth, but if the company repays the loan, the founders still own the significant majority of the company.

So what does Terry do? Find savvy local investors with a loan package. The loan offers the investors an interest rate several points higher than what they’d get with banks, CDs, or bonds, plus a small share of equity to give them a shot at a share of a big win if there is one, and a much bigger share of equity if the company fails to repay the loan.

This is a very real alternative, can be attractive to both sides, and it actually happens a lot more than what you’d think from reading startup blogs.

My advice to Terry: go to www.gust.com, register your company, post your loan proposal there, and contact the local angel groups you’ll find there among the 600 angel investment groups.