The title of this post is a play on the title of one of the best business books I know: Up The Organization by Robert Townsend. Townsend was president of Avis Car Rental in its prime and has some witty and insightful things about how companies (mostly big ones) should operate. The book has been revised and reprinted, but if you can find an out of print copy of  his sequel Further Up the Organization, I recommend that one.

What Do You Mean Organization?

That’s reaction some entrepreneurs have. They don’t need no stinkin’ organization. They just tell people what to do. Then they scream and curse when it doesn’t get done right. But whenever you have two or more people working toward a common goal, you have an actual organization, whether you like it or not.

The trick to developing a growing, thriving organization is to push as much responsibility as possible down the organization.

Yes, Down The Organization.

The more things that are handled as close as possible to where the work is done, the more people at the top have time and resources to do more strategic things. But this is hard to do.

Why? Because the people at the top often have more experience and ability. At least we say that’s the reason. Yes, they often are more competent. But the reason it’s hard to push that competence down the organization is that people who are good at what they do have what’s called “unconscious competence”. Remember when you learned to drive a car? Remember the focus it took? You were developing competence – consciously. At some point you got so good you could drive and talk and listen to the radio, AND think about something else. You became unconscious of the movements needed to maintain speed, steer, put on the blinker etc. That’s unconscious competence.

People Don’t “Get It” When They’re Not Unconscious

Probably the person down in your organization, the one who should be given some responsibility, is not unconsciously competent. And if you just told them to do something they wouldn’t do it right. They wouldn’t get what you wanted done. It may not be that they can’t do the job, just that they need training, mentoring, oversight (aka management) to be able to execute that responsibility as well as it needs to be done.  And that takes time and effort.

But more than time and effort it takes you being able to explain what you do well, and how you do it. That’s what trips most of us up. When we are so good that we are unconsciously competent, we can’t always explain to another person how it should be done. And so, we can’t figure out how to push some responsibility down to someone else. And we have to keep it ourselves. But that limits the growth of the company.

The Solution?

There are many: Checklists, Work Flows, Management Training, Mentoring, etc. “The Exercise of the Elves” is one of my favorites. They all take a skill set that is often quite different from the skill of actually doing the work. This is one reason many small companies stay small. They aren’t willing to invest in that skill. Big companies are. They hire people to do these things, or they bring in consultants [shameless plug] or both. Companies that aren’t willing to do this are forced to keep responsibility at the top and keep their organizations small.

But if you want to get out of the engine room and into the wheelhouse; if you want to take your company to new places; in short, if you want to function more like the CEO and less like the General Manager, it’s a skill you need to bring on board.

image from http://www.flickr.com/photos/debaird/325700

Then click on Lucky Day for a two and a half minute video of some of the luckiest people on earth – pedestrians, drivers, even bank robbers.

Stay for the last one – I laughed out loud.

On a serious note, don’t disregard luck as a source of your business success. Not the only source. You have to be smart enough to recognize the luck and take advantage of it. But I doubt Bill Gates would be as successful as he is if he’d been born 30 years earlier. Would Sam Walton have done as well in the 1800′s as he did in the 1900′s? Would George W. Bush have been President if he’d been born in Texas to an oil family instead of Connecticut, to a political family? (look it up) Or Obama if he’d really been born in Kenya?

There’s been some interesting research on luck. Turns out people who feel lucky are more open to seeing possibilities that others miss. But those who think their success is all of their own doing, miss a lot of opportunities.

I read of one person who asks everyone she’s interviewing for a job if they are a lucky person.

Are you a luck person?

UPDATE: Turns out that last bit of the video is fake. Thank you SNOPES – but still funny.

My Drug of Choice

Wow. That title ought to get me some hits on the Google -  doncha think? But really this post is about …

How to Treat Your Customers Right

And about how I got get free drugs from people who are doing it wrong. I have rosacea, a disease that makes my face  break out like a teenager with acne. One of the treatments is a low dose of antibiotic. So they make one that’s time released so I only have to take it once a day. (It doesn’t help much but my doctor says we have to give it a year.)

The drug is basically tetracycline. You can buy 300 capsules (250 mg) of tetracycline for $30. Mine is time released (a common process that I can’t believe adds that much cost) but which cost $311 for 30 capsules of 40 mg each. You do the math. Never mind. I did the math. Mine cost 25.9 cents a mg. The other cost 0.04 cents per mg. Mine cost 648 times as much. Six hundred and forty eight times! Just for making it time released.

But that’s not the story of treating your customer’s wrong. That’s the story about the health care in the US and I already wrote about it. I don’t actually pay $311.00 each month for my drugs. Yes I have health insurance, but the deductible is so high ($10,000 per year) because it’s an individual plan that unless something catastrophic happens I’m paying for my health care myself.

No, the reason I don’t pay $311.00 is that the doctor gives me a card which allows me to get 30 pills for $25. So maybe if every one pays that much the real cost is 2.08 cents per mg – only 52 times  as much as non-time released. Go figure.

It turns out the pharmacies in my area all want new customers. So it’s easy to find a coupon that gives you $25 in savings, gift cards or whatever if you bring a new prescription  to them. And many places in my area do this. So guess what I do? Each time I get a refill, I bring it to a new place and get $25 off of a $25 prescription  so I get my drugs for free.

So what are these pharmacies doing wrong?

Mistake #1 – They are treating prospects better than customers.

That’s a very stupid thing to do. Your existing customers are the cheapest ones to market to. Not the ones you should be forgetting about. It’s not as easy to measure your results with existing customers. You don’t know if they would have bought anyway. And this leads me to suspect the reason these pharmacies are doing is wrong.

Mistake #2 – Measure the right things.

Somebody at corporate probably figured every new prescription  customer was worth $XXX because they would keep their business for a while, they would buy other things while they are in the store etc. So they figured it was worth $25 to get them in.

And you know what? They might be right. I’m not like most shoppers.  So maybe the $25 they didn’t make on me is just the cost of doing business. Maybe the whole promotion does pay off. Maybe. I doubt it. But even if it does make money for them it’s probably not the right thing for you. Why?

A Small Company is not a mini-Big one.

You can’t take what works at a $500 million dollar company, scale it back 100 fold and expect it to work at a $5 million dollar company. The scale doesn’t work like that. These big pharmacy chains are faceless companies to me and probably most of their customers (and employees). You aren’t – or you shouldn’t be.

Takeaways:

• Measure the right things
• Treat your existing customers better
• Be a face people can have a relationship with

This video of Dan Ariely from TED  has several enlightening and surprising ideas you can use. It’s 18 min long but the last 2 minutes are an ad.

Why people cheat and steal and how this can be encouraged or discouraged. The reasons are not at all what you’d expect.

How these conditions were exacerbated by the stock market and financial systems to cause the mess we’re in.

Why our intuitions can lead us wrong and what to do about it. This doesn’t come up till about the 14th minute but it’s the most important takeaway. It broadens the appeal beyond cheating and beyond the financial mess. How many of your intutions do you rely on to run your business and how many have you really tested?

Takeaways:

1. Buy Dan’s book here  http://www.predictablyirrational.com/
2. Test your intuitions. This is a hard and painful process for most people. Hard because our intuitions are often invisible – we just think of them as “how things work.” And painful because self inspection often is. Hire a coach to help if you want to break out of the limits your intuitions are imposing on your growth.

[tags] CEO skills, entrepreneurs, intuition, small business, management [/tags]

Most of us aren’t in a position to turn the entire economy around. But don’t think you are powerless. Some people look at this situation and see all the negatives. Some people see opportunity. It’s easier to feel the fear and do the cut back thing and blame the economy.

In fact, it’s both the worst of times and the best of times (haven’t I heard that before?) And you’ve got to deal with both. I’m launching a new program to help companies do this called “Tighten Up and Come out Swinging”

Tighten Up to deal with the problems. Come out Swinging to take advantage of the opportunities.

In fact I’ve re-done the opening page of my web site to explain the details. Check it out.

Takeaway:

• Call or email to see if I can help you

[tags]CEO Skill, economy, small business, entrepreneur, turn around [/tags]

Here are two followups to two (unrelated) posts.

Update to What Really Happened To The Economy?

Michale Lewis, who wrote Liar’s Poker has an article on Conde Nast Portfolio.com with an inside story about what went wrong and why. You’ll be shocked, SHOCKED, to know that there was greed, short term thinking and stupidity on Wall Street. It’s not nearly as positive as Warren Buffet’s take, but I’m not sure how much difference that makes to the ultimate question of what do you do now.

Update to What to do When the Excrement Hits the Air Velocity Accelerator.

Here’s an article by Ram Charan about the opportunities that arise in bad economic times. It was written about different bad economic times but the lessons till apply.

Ram Charan is a pretty smart guy. Every book of his that I’ve read I’ve found to be useful. However, he works mostly with large companies. They have more reserves than small companies so can do more things in a recession. Still, you can can do more than you think if you try hard. And one lesson is build up reserves in the good times.

Takeaway: (same as last time)

• Plan for the world not to end. If it doesn’t you’ll be in better shape for planning and if it does, your planning won’t matter anyway.

[tags] economy, small business, ceo, entrepreneur [/tags]

1. Talk to people – Don’t assume
Talk to your customers

• Ask how the current situation will impact them.
• Ask how you can make it easier to keep their business

Talk to your vendors and suppliers (Look at point #2 before you do this so you can combine discussions as you see fit).

• Will they need to change terms?
• Tell them what you’re going through so they aren’t suprised

Talk to investors
Talk to your bankers
Talk to Employees
Talk to your spouse and family

2. Cut back – conserve cash. Think of cash flow before profit.
Do a line item inventory. Go through your P&L statement and stop spending on anything you don’t absolutely need. For everything else, call up your vendor’s and renegotiate.
Cut back on employees last (unless there are some you should have let go anyway – and this is true for many companies)

• Be sure to explain to employees what they can expect. They’ll expect the worst if you don’t and you may end up losing people you want to keep
• Maybe we call all cut back on hours so as not to lay anyone off
• Maybe we can cut back on some pay or benefits – start with yourself (and since you’re talking to them – see #1 they’ll understand.
• Maybe become like Toyota – Invest in your employees.
• UPDATE: If you can’t be like Toyota and find you do have to lay people off read this by Guy Kawasaki about how to do it well.

Cut back on Marketing second to last. The stronger you market in the down times the better position you are in

• A) you’ll be more likely to get a bigger share of the business that is still out there
• B) you’ll do better faster when things turn around as your weaker competition is gone
• C) perhaps you’ll find ways to get into markets you haven’t had before

Cut back on prices as necessary. Understand where your break even is and what your marginal costs are. It may be smart to take some jobs or sell some product just to keep your staff employed. Be flexible.

3. Look for more ways to get more bang for your time (you thought I was going to say buck didn’t you? – you did that in #2 if you were paying attention).

Takeaway:

• Plan for the world not to end. If it doesn’t you’ll be in better shape for planning and if it does, your planning won’t matter anyway.

[tags] CEO, entrepreneur, recession, small business, economic melt down [/tags]

What a dumb question. If you’re a parent, I doubt you’ve ever gotten an answer that comes anywhere near what you’d call satisfactory. And if you’ve ever had a parent, I doubt you’ve given such an answer.

Because it’s the wrong question.
I was reminded of this watching the Republican political convention. For some reason we had on the PBS channel (we usually watch on C-span so we don’t have to listen to pundits) and one of the “reporters” was asking someone in McCain’s campaign about the choice for VP. In case you’ve been under a rock for a week, you know that the pick and how it was handled is pretty big news.

The question was “Did you vet her well enough?”

Why waste prime time asking a question when I know what they’re going to say? I don’t mean I know the answer – that’s a judgement call. But when you’re a reporter talking to someone in the campaign, it’s the wrong question. She should have asked “When did the campaign first learn about xxxx?” or “How many people were interviewed in the vetting process?” or any number of factual questions which would give more of a hint at the vetting process, especially when you can see if the person avoids the facts.

So what does this have to do with running your business?  Simple. Asking the wrong question will make you think you have an answer when you don’t. If your kid says “School was fine” does that mean it was? Maybe, maybe not. It probably means they don’t want to talk about it anymore.

There are lots of questions you want to ask of prospects, of customers, of employees, of suppliers. But if you don’t ask the right ones, you’ll think that school really was fine. And the risk is you’ll be wrong and not know it.

Takeaway:

• If you have younger kids, ask them who they sat next to at lunch or what games they played at recess. If you have older kids, ask for a similar level of detailed facts. And remember the names of classmates and teachers so you can ask about them in detail next time. That will tell you more about how school really was and you’ll get a much better conversation going – which is probably what you wanted anyway.

[tags]business, entrepreneur, parenting, school, CEO skills [/tags]

“Never Give Up” I’m always a big fan of Inc Magazine, but when they had this advice on the cover I had to say something.

It’s not that you should give up – it’s that saying “Never Give Up” makes it sound like success in business is entirely under your control. It’s not. Success is based on what you do plus how people respond to what you do then how you adapt to how people respond and what they do about that and so on. Of course, if you give up too soon you’ll miss all the shots you never take as Gretzky said. But what if you give up too late? They don’t run stories or write books about people like that. Except maybe Seth Godin and The Dip.

Take my favorite business analogy: Courtship. There are people who are in a wonderful relationship today because one of them refused to take no for an answer. But there are also people in jail for stalking (or worse) because they refused to take no for an answer. Persistence has its place but it’s only part of the equation. All too often persistence (like love) is blind.

Best Business Advice?
Understand. Learn what motivates your customers. Learn the ins and outs of your business model. Learn what gems of knowledge are hidden in your finances. Learn what makes your employees tick. Learn the difference between being lucky and being smart – then be both. Now put all that understanding into the right action at the right time. But that’s a bit more subtle and it sounds like a lot of work. Because it is. That’s why business success is worth celebrating. If it were easy, everyone would do it. And no one would be left to work for you.

Takeaways:

• Free advice is worth what you pay for it.
• Sometimes advice you pay for is worth even less.
• Sometimes advice is worth more than you could ever pay.
• It takes sensitivity and work to learn the difference.

[tags] Entrepreneur, small business, CEO Skills, management, Persistence [/tags]

Seth says: If you are willing to satisfy people with good enough, you can make just about everybody happy.

I’d say If you want to make everyone happy you’ll HAVE to be satisfied with good enough. [read the whole story - it's kind of funny in a sad sort of way - and you'll see what the picture is about]

The problem is that good enough usually isn’t. And it virtually NEVER is for a small company. It can work for a big company like General Motors (oops – they’re getting their clock cleaned by Toyota) so I mean good enough is OK for a big company like Microsoft (oops Google’s eating their lunch) how about McDonalds? (then why did they buy Chipotle?) OK I guess it isn’t good enough for the big guys either.

Takeaway:

• To make a difference you’re going to piss some people off.
• By “Make a Difference” I don’t mean change the world, though that’s fine if you want to try. Making a difference in your own life or even just your bank account is plenty of motivation for running your own company well.
• If you don’t want to make a difference, go get a job.
• Don’t use it as an excuse to piss off the wrong people – rather just make the right people happy (and ignore the others).

[tags] small business, entrepreneur, ceo, being remarkable [/tags]

– image credit:
http://www.folsom.ca.us/news/displaynews.asp?NewsID=275&targetid=1