I thought about this and have come to the conclusion that there may be a level of misunderstanding about the perception of hiring a consultant.

Some owners or business leaders may see an outsider coming into the organization and making suggestions for change as a threat.  They may feel, if they agree to make changes then they’re admitting what they were doing was wrong. Some may feel that they know more about their business than someone from the outside and they don’t need any help.

As to the first concern, change is inevitable, and those that get ahead of it and meet it on their own terms are usually well ahead of their competition. One of the things I enjoy most about consulting is learning about new businesses and markets. I get a chance to learn what works and what doesn’t and am able to bring best practices from other organizations for my clients to evaluate. A consultant is a fresh pair of eyes and looks at the business without the emotion that comes with ownership.

As to the second concern the owner or CEO knows more about the business than an outsider, I agree wholeheartedly. The advantage a seasoned consultant brings to the table is the ability to ask probing and sometimes uncomfortable questions that challenge the status quo. In my experience the knowledge of what needs to be done is often there, it just has to be analyzed and validated. I would be very wary of someone promising to provide all of the answers in a few hour visit.

A consultant or coach should be a confidential and honest resource that you can “bounce things off of”, while serving as a source of new information and ideas. It doesn’t mean that he or she has all the answers, but they should have the experience and knowledge to facilitate a process to find those answers either internally or externally.

Think of a consultant as being a staff member that always provides honest input, that isn’t swayed by internal politics, Remember all they can do is provide advice and guidance, the final decision is till yours.

Looking back on my days as a CEO I wish I had access to a confidential individual that I could discuss things with before I took them to the Board of Directors, or approached an important customer. You can always talk with your staff members but getting true critical review and input is tough.

As long as you and the consultant understand and agree on expectation, deliverables and discretion there is nothing to fear and perhaps a lot to gain.

A poll by the National Federation of Independent Business (NFIB) listing the issues showed that sales concerns have grown from less than 10% in 2000 to nearly 20% in 2010.

As you can see from the table above sales and taxes followed by regulation are the top concerns.

As the saying goes “the only things certain are death and taxes,” so spending excessive time and energy on things out of your direct control aren’t really productive.

So how can you gain market share and increase sales? First you have to come to grips with understanding the problem.

Sales in most every market is a zero sum game. There is a limited amount of revenue to be had in the market. When the economy is poor the amount of money available shrinks making it even more competitive. Increased sales in one company usually means loss of revenue somewhere else.

So how then do you increase sales? Give your customer a clear and compelling reason to buy. I ask my clients to answer a simple question, “with all of the goods and services available to your customers in your market why should I buy from you?”

 The answer to that question is your value proposition. In absence of a great answer to that question you are seen in the market as the same as everyone else. If you’re the same as everyone else you’re a commodity, and that means you eventually get forced to compete on price.

There are really only a few ways to increase sales in any economy, and they all center around giving your customers a reason to buy.

• Lowest price
• Best selection / inventory
• Fastest delivery
• Best perceived value for the money

Of these lowest price is usually a short-term advantage. Unless you are a major player in a market with high volumes, volume based buying power, and high efficiency this isn’t usually a good business model.

High inventory and selection are again tied to volume; inventory sitting in your distribution chain is cash tied up that could be used for something else.

That leaves best-perceived value. The fact is most businesses don’t sell on perceived value because they haven’t taken the time to define it, they don’t understand it, and their sales people don’t understand it, so how can their customers get it?

In absence of educating your customer base why buying from you is the best decision the discussion always gets back to price.

When demand is high companies can get by with a poor value proposition, but when the market demand falls off the weaker companies lose market share, and the companies perceived by their customer base as offering high value for the investment retain a larger piece of a smaller pie.

I have since revised my thinking somewhat. The biggest problem most business leaders face isn’t what they think it is.

I listed the top issues at that time as:

• Lack of a clear plan– the SBA says that over 50% of businesses that fail don’t have a plan. I can say from my 30 plus years of experience not only is that number conservative, but worst many businesses don’t know how to plan.
• Ineffective leadership – this issue takes many forms. In my experience it is frequently in the form of depth of leadership. The founder of the company is hands- on and effective but has little or no management depth behind him or her.
• Sales / marketing effectiveness- this leads back to planning and leadership. Part of the planning process should include a very clear answer to one simple question, “with all of the products and service available to my customers why should they buy from me?”

• Lack of execution- this may be the biggest of all. Research has shown and my own experience backs up the following facts:

• Over 90% of strategies that are developed are never executed. % of improvement initiatives fail.   85% of leaders spend less that 1-hour per month on strategy.
•  Over 90% of employees don’t know the company’s strategy. (This is a direct result of top management not documenting and communicating it)
• Well over 90% of organizations don’t have meaningful performance measurements in place.

I said at that time execution may be the biggest issue of all. I was right.

The biggest problem facing business of all sizes today is the inability to execute. The issues I listed can all be solved through planning and execution.

Numerous studies have noted the very weak relationship of strategy formulation to strategy execution. Fortune Magazine stated “Less than 10% of strategies effectively formulated are effectively executed.” Companies large and small worldwide spend billions of dollars each year on strategy formulation. A search of the World Wide Web using Google took less than 1/3 of a second to return more than 1.3 million hits on strategy consulting, ranging from the “Big 6” firms to boutique firms specializing in strategy. Interestingly, a similar search for strategy implementation consulting returned less than 500,000 hits. Even allowing for overlap this is a significant disconnect.

I did some research on execution independently, looking for tools and methodology that I could offer my clients to help them.

I have since expanded my practice to include a proven execution process and methodology. Success of any methodology begins with how leadership thinks about their business.

I have refined my focus to and philosophy to: Everything I do is to get business leaders to think differently so that they can create more and better options for their organizations and stakeholders.

Change management starts with changing how you think about and see your organization.

change management, effective leadership, effective strategy execution

The biggest problem facing your business may not be what you think it is.

First and foremost government doesn’t create anything. The simply fund projects paid for by taxpayers to ceate the illusion of employment. Most of these are short term and add little or no value to the economy.

So where are jobs created? In 2009, large corporations shed 700,000 jobs, small business employment was down 20% and startups because of their 50% failure rate inside of five years are a net zero.

According to studies done by the Small Buisiness Administration office of Advocacy, and a recent study by the Blueprint Growth Institue virtually all job creation in the past twenty years has come from “high Impact” firms.

High Imact firms are defined as:

• Those that double sales and employment in the most recent 4 year period.
• Are 25 years old on average, not startups in most cases.
• Represent less than 4% of all firms.
• Exist in all regions of the U.S. and in all indistries.
• Take about 20 years to reach high impact.
• In the 4 years after reaching high impact only about 4% “die.”

A ranking of all 50 states on the percentage of high impact firms as compared to all firms in the state has Tennessee ranked 25^th and Mississippi 47^th. South Carolina leads the southeast at 4^th overall.

Clearly the answer is find a way to create more of this level of growth from existing companies in the region. The term being used today is “economic gardening.”

Economic Development groups and business incubators focus on startups and attraction of companies from other locations. Toyota’s plant near Tupleo was a great boost for Northeast Mississippi, but net job creation for the country was zero because of the corresponding plant closure in Fresno, CA. The same can be said for Winchester in Lafayyette County, these jobs were relocated from Illinois.

There is no focused effort to grow existing companies with potential in this or any other region.

I’ve been fortunate to be able to receive the benefit of the study results from the Blueprint Growth Institute where they have identified 7 critical factors that growth companies employ. In fact they studied all companies that went public since 1980 and found that 100% of the companies that reached $1B in sales employed at least 5 of the 7 essentials.

They also found that the companies reached $1B in sales on 3 trajectory paths, 4, 6 or 12 years and 100% of the time these companies launched their growth trajectory from the level of $50M in sales.

Of all of the companies that went public since 1980 only 387 (4%) reached $1B in sales, and those 387 companies accounted for:

• 63% of employment
• 64% of total market value
• 72% of revenue and taxes paid

Our challenge is to grow more companies to the $50M level with the essentials built in to faciliate growth beyond that level.

There isn’t any secret forumla but there is a process that can be dulpicated.

Of course none of us know for certain but we may have more control that we think as it pertains to our business.  Maybe a better way to ask the question is where do you want to be in five years? While this question may sound easier, most organizations struggle with documenting a clear vision. Sadly too many businesses wait until the market dictates the direction their company will take, and very few set the pace. Those that do are well known, Apple, Toyota, Wal-Mart, all have a clearly defined vision and execute effectively to attain that vision.
If you read the list of companies that are expected to disappear during 2012 they include several major brands that were doing very well just a few years ago.
The list includes several well-known brands such as Borders. Sears, and Office Depot.
What did these companies do wrong that caused such a rapid decline? In a word, nothing, and therein lies the problem.
Doing nothing is a kiss of death in the rapidly changing marketplace that exists today.
In my practice I see a huge number of leadership teams caught in this predicament, they are unsure what to do, so they do nothing. They are waiting for “more information”, a better time, whatever the reason, they put off making a decision or making a change hoping something happens that will eliminate the need to do something. And often it does!
What they fail to realize is not making a decision is in fact making a conscious decision to do nothing.
If the companies mentioned above had made the effort to develop a strategy to compete with new technologies and markets they may be in a better position today. Doing nothing isn’t a strategy.
Successful business leaders have a clear vision. They document and preach that vision to anyone and everyone. Every decision is based on the simple question; will this take me closer or further from my vision?  Unsuccessful business leaders react to market and competitive challenges, putting them in a constant catch up position.
Having a vision is key to growth and positioning in the marketplace but vision without execution is a daydream.
That is the subject of my next post.

It appears none of them are looking for the root causes and drafting solutions to make a meaningful impact.

The root causes that would have the largest impact on reducing the budget deficit are conveniently interrelated. They are the trade deficit and job creation.

In a presentation to a congressional committee given in 2002, Robert Scott of the Economic Policy Institute used this illustration to show that in the period from 1947 to 1998 as the trade deficit declined jobs went up. 

In a more recent article dated April 8, 2004 Robert Bivens of the same institute that domestic manufacturing output was just 76.5% of domestic demand. That average had fallen 14% from the 1987 to 1997 average of near 90%.

The United States hasn’t stopped buying manufactured goods, we just stopped making them. We really don’t manufacture much of anything. Even foreign automotive manufacturing plants are really just assembly plants. We just put things together that were manufactured elsewhere.

 There are many academic positions on this issue. If you research the subject you can find compelling arguments on both sides.

 Since I’m not an academic nor an economist I’m not burdened by the need to justify a position. I’m just a business coach that supports manufacturing and distribution companies.

 And as such I can tell you that there is far more distribution of goods made offshore that of those made in the USA. The decline of good paying manufacturing jobs that created and supported a strong middle class in the 60’ and 70’s has made a huge impact on tax revenues and the overall budget.

 I read recently that McDonalds had a nationwide job fair looking to hire an additional 50,000 workers. This was slanted as good news by the local paper. These are part time, low wage jobs with largely no health benefits and used to be reserved for school kids, Now I fear they are looked at as legitimate 2^nd jobs to support household income.

 There is a lot of talk about heavy manufacturing being dead in America and that the job force has to be retrained to “take advantage” of new opportunities. 

The simple fact of the matter is everyone doesn’t go to college, and if they did we can only absorb so many new lawyers and MBA’s. A large percentage of the population is not cut out for professional careers. There isn’t anything wrong with that it’s just a fact. 20 or 30 years ago they could go into manufacturing, steel making or other industry positions make a solid wage with benefits and enjoy a good lifestyle. In our present situation these folks have gone from contributors to a drain on the unemployment and Social Security Systems. There simply isn’t anywhere for them to go.

 In my past life I ran a subsidiary of my logistics company in Germany, There isn’t a higher cost, more unionized workforce than Germany. Yet they have a solid domestic manufacturing sector. Clearly the U.S. is missing the point.

 The government addresses this problem by creating short-term projects to pass as jobs, they aren’t seeing looking at a long-term solution. U.S. manufacturers are also looking sort-term, and quick ways to boost quarterly profits and keep the stock price up. However they can only downsize and outsource for a finite period of time.

 The two entities have got to work together to bring manufacturing jobs back to the U.S. to solve the problem at the root cause.

 The government is dependent on large companies for campaign contributions to stay in their jobs and aren’t likely to bite the hand that is feeding them by penalizing them for pushing manufacturing offshore. If they take some of the “stimulus money” and use it as incentives to business to create manufacturing jobs in the U.S. it might be better spent than creating short-term infrastrucute rebuilding projects.

Simply put, marketing provides useful information that lets your customers know you understand their needs and provides them potential solutions.

 But you can’t help them understand your products or services unless you first understand their needs.  In other words, you can’t start building your pitch about why your new “widget” is the best thing on the market until you understand the reasons why people buy widgets.

 Here are some questions to ponder about your potential future customers:

• What are they trying to achieve by purchasing this item or service?
• How would they prefer this item or service delivered?
• How will this item or service be utilized to help them achieve their goals?
• How can your item or service provide better value than the competition?

 The tough part is convincing your prospects to agree with you that your widgets are the best.  This can be difficult because in this age of the Internet, traditional marketing mediums such as radio, TV, print advertisements and celebrity statements are becoming less effective. 

 That can, however, be good news for small and mid-size companies as the web has somewhat leveled the playing field.  Formerly, only big companies could afford to buy influential testimonials and frequent advertising. Today, however, blogs, online forums and other web-based marketing are the great equalizers. Take any product and search it online. You will find several comments indicating the marketplace perception of that brand.  The customer is now the marketer instead of (or in addition to being) the one being marketed to!

 By employing online marketing techniques strategically, you can make a big splash on a limited budget. With the rise of social media, ingenuity is becoming more important than dollars. And it’s been proven that consumers respond better to engaging dialogue than to expensive broadcasting.  This type of marketing has come to be known as “inbound marketing.”

 Effective inbound marketing provides enough useful information to your prospective customer base that they seek you out. Your company becomes the recognized expert in your field. Inbound marketing is welcome marketing, providing free, useful information about a potential customer’s issue and then offering great solutions. Traditional marketing is often viewed as invasive, focused on price or product features, distributed to a mass audience, hoping some of the noise finds its mark.

 Now with the never-ending array of TV commercials, emails and print ads, you need to find a way of reaching your customer that isn’t “lost in the noise.”  Having them seek you out is by far the best return on your investment. You may have less traffic to your website or office, but the traffic you do receive will be much better qualified and knowledgeable about your product or service.

 So, what are the most common causes of potential litigation – and what steps can you can take to prevent (or at least minimize) their impact?

The most common legal problems stem from the areas you deal with most frequently, including:

• Employee-related lawsuits
• Business-to-business litigation
• Breach of contract disputes
• Intellectual property disputes

Of the above, employee-related lawsuits are most common. According to the EEOC, employee-related lawsuits comprise almost 75% of all suits filed against businesses today, with 40% of all employment practice claims filed against private employers with between 15 and 100 employees.

What can you do to minimize your risk in these specific areas?

Employee-related litigation

1. Have a documented employee handbook detailing expectations and policies including:
   1. Compensation
   2. Time off
   3. Disciplinary processes
   4. Grievance procedures
   5. Employee performance review policies and schedules
   6. Be consistent with employee treatment.  Trying to be compassionate or help a deserving employee that has made a mistake is setting a precedent that can come back to haunt you.
   7. Train your managers and supervisors in all areas of employee interface including:
      1. What you can/can’t ask in an interview
      2. EEOC policies
      3. Sexual harassment laws
      4. Privacy standards and practices
      5. Create and manage personnel files containing all pertinent data including performance appraisals and any warnings or notifications of poor performance.
      6. Evaluate honestly and consistently. One of the more difficult things for managers is to discuss substandard performance with an employee. Documenting clearly where an employee is not meeting expectations, and documenting a performance improvement plan with clear goals and milestones can go a long way in preventing unlawful discharge lawsuits. Having poor documentation of poor performance and terminating an employee is one of the most common (and costly) mistakes.
      7. Communicate regularly with all levels of employees.  Encourage an “open door” policy.
      8. Make sure your management team understands why you have an open door policy so that they don’t view it as a threat or feel undermined.

Business-to-business litigation

Joint ventures, outsourcing, or other kinds of partnership arrangements are a good way to keep costs to a minimum while sharing expertise. Again, planning and documentation on the front end can minimize problems down the road. These agreements have to be a win/win for both parties or they invariably come unraveled.  Here are some steps to achieve success in this area:

1. Start with a clearly documented statement of work detailing expectations of both parties. Lack of upfront preparation is a common pitfall. Often a company doesn’t know all of the expectations when they enter an agreement, so they purposely leave it vague.  The statement of work should outline clear goals, timed milestones and deliverables, and outline regular review meetings scheduled to discuss progress.
2. The master agreement should contain, as a minimum:

• A process to update the statement of work for those items that are missed in the original document, along with a process for schedule and cost adjustment.
• A documented process for addressing substandard performance with a pre-agreed upon cure period.
• A breakup clause whereby, if all else fails, either party has the option to terminate the agreement with proper documentation and notice, with termination costs clearly spelled out.
• Confidentiality and a non-compete agreement that prevents unauthorized use of confidential material gained from a partnership.

1. Be fair and open with the partner. A business partnership is like a marriage and should be approached with the same openness and communication for it to work well for both parties.

Breach of Contract Litigation

Some of the areas that can protect you with breach of contract litigation are covered in the sections above.  Be clear and honest regarding your expectations.  Document deliverables and milestones.  Communicate and review progress regularly.  Make sure you have competent legal council review all documentation and take the time to understand it.  Don’t assume because your lawyer looked at it, so it’s fine.  You know your business and expectations better than anyone.  Don’t rely on your attorney alone to fully understand your needs or concerns.

Intellectual Property Litigation

There are two areas that result in most intellectual property issues:

1. Shared IP:  In joint ventures or outsourcing agreements where existing IP is shared, make sure ownership is clearly defined as well as what the non-owning party is entitled to do with the IP. Even property protected by patent or trademark is open to risk by a party “reverse engineering” another companies work. Protect yourself with a strong non-compete agreement for a period of time after the termination of the partnership.
2. Ownership:  Make sure it’s clearly understood who owns any IP developed during a partnership.  If you’re an employer, make sure your employment agreement clearly defines who owns any IP developed by a company employee during their employment period.

Most litigation can be prevented by good due diligence and documentation on the front end, consistent application of policy, and open communication. Having a good working relationship with an attorney that understands your business can also be invaluable.

In my book there is a chapter entitled “Control your air supply”, because cash truly is the lifeblood of your business. It goes on to suggest internal sources of cash that you may overlook in the everyday course of business. Good cash management is critical.

I just had an article published in the Memphis Daily News on this subject because the editors felt that the subject had wide interest. (Click on this link to read the article).

The main points highlighted in the article is exhaust all of your “internal” sources of cash before looking outside the organization.

Internal sources include:

• Slow moving or excess inventory
• Rework
• Slow Accounts receivable collection
• Customer returns
• Overtime due to productivity or production issues
• Expediting freight both inbound and outbound due to poor planning or late delivery

All of these can add up to significant cash expenditures with no return in either profit or customer goodwill.

This is a cell phone photo someone took of the tornado as it approached the town.

Just think about that for a second, everything you’ve worked for and developed gone in 10 seconds. Of course that loss pales in comparison to the loss of life that storm caused, 14 at last count with a like number still missing.

We can’t control what happens to us, but we do have some control about how we deal with it. Including disaster recovery in your strategic planning process just makes good business sense. The time to plan is before a terrible thing like this happens.

Human nature causes us to shelf thoughts of things like this happening, but we need to plan for the worst and hope for the best. Unfortunatly sometimes the worst happens.

Leadership requires thought of how to put the pieces back together.