2nd in A Series – WHAT YOUR BUSINESS CAN LEARN FROM GOVT BUDGET SHORTFALLS – Avoiding Conflict and Hoping to Be Rescued During Bad Times

As an employer, I’ve been paying into New Jersey’s unemployment insurance trust fund for over 30 years. Plus, my employees have been doing their part. That way, if we hit hard times and I had to do layoffs, my employees would be able to receive unemployment checks until I could bring them back or while they looked for employment elsewhere.  Right?

In the 1990s, when economic conditions were far more favorable than they are today, apparently it was just too easy for the governors and legislators to borrow against the future to pay for budget shortfalls.  As a citizen, I simply do not understand how it was legal for them to dip into the unemployment insurance funds.  But that’s what they did.  They depleted the $4 Billion dollar unemployment fund. The State of New Jersey has been forced to borrow money from the federal government to pay its unemployment claims. In an attempt to help people, Congress has recently extended eligibility for unemployment benefits.  An individual can collect unemployment checks for up to 99 weeks! New Jersey couldn’t afford the previous mandated levels, so…

New Jersey’s “solution” is to create a new tax so employers like me will be required to keep contributing at previous levels PLUS replenish the unemployment insurance fund. That’s the same fund we financed in the first place, and no changes have been instituted to prevent the legislators from dipping into the unemployment fund again!

The same thing happened to New Jersey’s pension fund…only more so.  Year after year, New Jersey’s governors and legislators stole money from “protected” trust funds and chose getting re-elected over restructuring or negotiating with the powerful unions. The total unfunded liability for New Jersey pensions and benefits is now $130 Billion! ($80 Billion pension shortfall and $50 Billion in unfunded postretirement medical and prescription drug benefits.)

New Jersey’s response? The most recent Administration passed more mandates. Who will be expected to pay for it?  Proponents quickly point out that the mandated 6 weeks of paid family leave is funded by the temporary disability fund.  Based on the long term pattern, that fund will also soon be depleted and employers like me will be expected to pay the costs associated with paid family leave and mandated health insurance.  New Jersey employers already pay an average of $10,522 for health insurance per employee, but that isn’t considered when more mandates are being considered.

New Jersey’s employers now also face increased corporate and income taxes … all while the WHITE ELEPHANT IN THE ROOM continues to go unaddressed.

To be continued…

 

1st in a Series – WHAT YOUR BUSINESS CAN LEARN FROM GOVERNMENT BUDGET SHORTFALLS – Ignoring the Numbers and Borrowing Against the Future During Good Times

Since the time I relocated to New Jersey in 1970, the population of the state has increased 20%.  If you guessed that the number of State employees has increased a comparable 20% across those same 40 years, you would be wrong because it has increased a full 50%. Do the math. That’s 150% more than the rate of population growth.  Even without considering the relative productivity of individual civil servants, that is a HUGE staffing buildup.  And it happened during “the computer age” when we were all promised increased efficiencies from automation.  

Reading that comparison, how much would you guess the expenditures grew across that same 40 year period?

This is NOT a trick question.  Think about it.  A 50% increase could be explained by the increased number of people on the State payroll.  Plus, there is inflation to consider.  Even rounding to an average of 5% cost of living/year compounded over 40 years, your guess would be well over 100%. Right?  If you have been reading the newspapers, watching television, hearing the political campaign speeches, or noticing things like new commuter trains, you might guess as much as 200 or 250%!  Right?  That would be a HUGE increase in spending!!!

The reality is…New Jersey’s expenditures have grown an unbelievable 2,350% across that same time frame.

What on earth did all of that money buy?

Maybe New Jersey’s citizens could point to things like the roads. After all, New Jersey is the center of the Northeast Corridor, but much of the transportation money comes from the federal transportation trust fund…and that is underfunded! There are WAY too many NJ bridges in desperate need of repair or replacement!  Without reviewing all of the issues, suffice it to say, commitments have been made for years for money that simply isn’t there.  And the money hasn’t been there for a long, long time.

State employees, legislators, and every teacher in NJ’s public schools and their surviving spouses have been promised lifetime pensions and gold standard health insurance. That sounds nice. And in many cases, the promise of security during their retirement years has been the only lifeline keeping public sector employees working at all. How else can you tolerate the bureaucracy, the inconsistent decisions, and the corruption?

Democrat and Republican Governors and legislators have not been able to (have refused to?) face the HUGE WHITE ELEPHANT in the room and just keep promising lifetime pensions and health insurance when the money simply isn’t there!  $11 billion of the $30 billion budget for 2010 will go toward pension and healthcare contributions.

To be continued…

 

Facing that it is Time to Let That One Key Person Go

It seems like we have all been there. There is a long term employee who helped your young business get off the ground.  JANE represents where you have been, the history, and how things used to work.  She seems more focused on the past than on embracing the future.  Welcoming new systems and technology is just “not her thing.” More time is spent complaining about how much work there is to be done than on accomplishing tasks. JANE’s tendency to gossip, create cliques, and stir up dissent is distracting other employees.  She’s become so adept at passing the buck that no one can really figure out what she is doing all day, even though she always seems “busy.”

Deep down, you know it. She’s no longer happy.  You are no longer happy, and your credibility as a leader is being compromised on a daily basis the longer she remains.

Why do so many of us hang on and leave the JANEs of the world in place? Sometimes, it’s because we want to demonstrate appreciation and loyalty. Maybe you couldn’t afford to pay JANE for everything she did in the early years. Sometimes, we invest too much effort in finding a new role for JANE.  Sometimes, we are waiting for “the right time” to initiate the change, but there never really is a great time to act on a long overdue decision. Sometimes, we delay because we can imagine ugly backlash, accusatory comments, and even wrongful firing lawsuits. Sometimes, we see a few days of “the old JANE” and wonder if we have become too harsh.

A few of my clients faced this situation in 2009.  I was very impressed that each tailored their actions to the specific circumstance and didn’t act out of anger. One provided a severance package.  Another helped the long term employee open a small retail business she had been talking about for years. Another extended healthcare coverage and paid for a career counselor. In all three cases, it was as though something just “clicked” in the minds of the executives.  In all three cases, there was what I call the “we both know…” discussion. And in all three cases, the peace of mind and readiness to face the tough decision started with a renewed sense of optimism and vision about where their businesses are now headed.  Their commitment to their companies trumped their loyalty to JANE(s). Each knew that leaving JANE in place would simply send the wrong message to everyone.

 

Pegging

Have you concluded that you really should expand the definition of (what you call) “your market”?

Instead of diving in to try to reach millions of people you don’t know, try a technique called PEGGING to expand your reach based on your customers’ preferences.

1. Identify the primary trait(s) your customers have in common.  To help you see how this works, let’s follow an example. Imagine that your customers are all Catholic.
2. Look for secondary demographic traits of subgroups within your market.  Are some single mothers? Are some grandparents? Are some high school students?
3. Choose one subgroup with 2 shared traits. (e.g. Catholic single moms). Survey. Listen. Observe.  What do they read? Which websites do they visit? Which blogs do they read? Who do they listen to? What do they buy? Where do they shop? Which associations do they join?
4. Then obtain access to those websites, subscriptions to those magazines, membership in those associations, use of related lists, etc.
5. Send outbound marketing messages through those websites, magazines, associations, stores, lists, etc. to reach out to a broader group of single moms beyond those you have had as customers in the past. Include a secondary message that would particularly appeal to the Catholics among them.  You’ll attract even more Catholic single moms and have expanded your marketing methodologies.
6. Now select a second subgroup from within your existing market (customers) that differs from the first subgroup.  Catholic grandfathers perhaps.  Again, reach out to that subgroup of existing customers.  Don’t just sell them more products.  Learn who they listen to. Find out what they read. See which memberships they value. Observe which websites they visit. 
7. Now repeat the process. Do a marketing outreach through those websites, magazines, associations, lists, etc. (with a Catholic sub message) to sell products to a broader group of grandfathers, including those who are Catholic.  Make sure to choose a range of characteristics (age, career, geographic location, income level).
8. For many companies, 3 or 4 subgroups capture the range of people within their customer base.  You will undoubtedly end up with dramatically different websites, blogs, stores, publications, associations, and list…AND that’s the idea.  After a few rounds of research and marketing outreach, you will have an expanded data base of prospects and some new effective marketing mediums.
9. This technique can help community banks attract more small business customers away from the large impersonal financial institutions that precipitated the recession of 2008/2009.

 

Is Choosing Not to Learn an Option?

My father is now in his late 80s and has been fully retired for several years now, but he is physically active and mentally alert. He’s an avid fan of the Washington Redskins so the “mentally alert” part might be questionable (just kidding).

So one question is should he try to learn how to surf the Internet, send/receive email, have a texting function on his cell phone, and/or be part of Skype video phone calls?  Most of the time, he feels like the window of opportunity for him to learn how to use a computer “has passed him by, it’s too late for him to take all of that on, and it’s just not worth the effort.”  Is he right?  His grandchildren (and children) would LOVE to be able to interact with him more often without having to spend so much time and money traveling long distances to visit him.  He’s convinced that if people really want to be with him, they will recognize that, at this point in his life, everyone should come to him. I know some home based solo practitioners who sound like my father when it comes to social media (Twitter, Facebook, LinkedIn).

Your long term employees may feel the same way when asked to participate in strategic planning, help change the business model, relocate, or learn new skills. Even during a recession, there needs to be enough incentive (a really good reason) for people to face the unknown, learn new skills, and pick up speed. There’s a great deal of comfort involved with knowing what you are doing. Who likes to feel stupid or embarrassed?

When your business is engaged in a significant change, we all need to try to spell out the “what is in it for me? (WIIFM).” No news there, right? But then watch peoples’ reactions. If you think you have provided good opportunities and reward for folks to learn, grow, try, stretch….and some clearly choose to opt out…it’s time for career development discussions. No one has to be miserable. Leaving non- learners in place is a disincentive to the people who are stepping up.

 

Collateral Damage

As a year winds to an end, many of us become reflective.  How did we do this year? Did we accomplish enough?  Why didn’t we even start that project we have been talking about for months? How come we aren’t doing a little better by now?  We have great products.  We invested in technology. Our marketing campaigns seem creative.  The economy still isn’t strong, but customers in our sector are still buying. Why aren’t we getting more?  Are we having fun yet?

The past 18 months may have set your company back in more ways than just reduced access to capital.

Most businesses have symptoms of at least mild post traumatic stress disorder at this point.  Think about how people act and feel following a disaster like a hurricane or fire. How about when a family member has had a serious illness or an accident takes the life of a loved one. Post traumatic stress disorder impacts health, creativity, productivity, outlook, attitude …. everything. 

Think for a minute about the behavior of your employees. Are they focused more on themselves than customers? Are they still worried about their job security, pay, and benefits?  Do your team members feel free to laugh or has everything become too serious for that? Are you hearing wild, ambitious, creative ideas or are folks playing it safe? When things go wrong, is the inclination to look for whom to blame?

You would know to reassure, build confidence, celebrate one another, and be helpful if a friend of yours just experienced a traumatic event like fire or illness. Do you need to bring a bit of that attitude to your company now?

When you are able to effectively help team members move past post traumatic stress disorder, don’t be surprised if more optimistic goals are considered when you do your strategic planning together.

 

Replace inertia with momentum

If your business has been essentially the same size for several years, inertia has probably become a much stronger deterrent to the growth of your company than any economic downturn.

Where’s the incentive for bright, ambitious younger people to want to work for your company? 

What’s the impetus for investing in new technology, systems, and approaches?

Why would a prospective customer realistically expect that you would be able to handle a big account/project? (trust you?) (believe you could?)

What will prevent you from becoming bored someday after doing essentially the same job (tasks) year after year after year?

If these questions resonate for you, ask yourself what size your company would need to be to

• be more exciting, less routine?
• require that new skills be acquired and new ideas learned?
• generate markedly increased net profit (income) for you and others?
• attract interesting well paying customers/projects?
• provide career opportunities for hard working dependable employees?
• increase your options for succession when the time comes?
• help momentum replace inertia? 

The transformation from inertia to momentum often involves expansion of the leadership team for an infusion of energy. Start there. Imagine the leadership team that you would need to truly break inertia. Do the math. What would their compensation packages add up to? What percentage of the company’s budget should be invested in executive/management compensation? OK. What size will your company need to be to have replaced inertia with momentum?

I’ll bet it isn’t incremental change like the +2-5% goals in many annual business plans.

 

Is Participative Strategic Planning Like a Rubik’s Cube®?

The President of one of our client companies recently opened a meeting with the observation that strategic planning feels a lot like playing with a Rubik’s Cube®. Remember that toy?  His hands turned in multiple directions as he reassured his team members:

“We’ll all be messing with just about everything in the strategic planning process from product development to marketing to production to accounting. But the good news is that we all know what the Rubik’s Cube® will look like in the end, and it won’t all come apart in the process.”

That was an impressive analogy. This particular team needed the reassurance. The company enjoyed a large market share for some time and hadn’t felt the need for repositioning strategy until now.

In many ways, a well-managed participative strategic planning process is a great deal like a Rubik’s Cube® because things won’t come apart while “everything is being messed with.”

However, the discovery and creative elements of participative strategic planning are NOT like the Rubik’s Cube®. Developing a positioning strategy early in the process can be equivalent to knowing the “secret” to the middle square on each side of the Rubik’s Cube®.  It provides a sense of direction, but you really are not completely certain about how everything will turn out when the plan is completed.

For this client, we know that they will be adding new products to their mix. Do we know exactly which ones before research and decisions are made? No. We know that they will be moving into a new organizational structure. Do we know the exact job description for each new role and the names of the people filling new positions? No. 

If your team members are the type of people who want to be provided detailed maps for their trip to __(place)__ and would preview the video tour of the city before committing to travel anywhere, increase the emphasis on exploration, discovery, and creativity so they can enjoy the journey. 

Why go through a participative process for strategic planning if all you want to do is copy what someone else has already done?  In this day and age, you would just be setting yourselves up to be BEHIND!

 

How Do You React When a New Competitor Comes Into Your Niche?

You just launched a new product aimed at your niche market. You thought you had a great head start, but today you learned about a very similar product being promoted to the same niche by a new competitor.

So what is your reaction?

It’s amazing how many companies overreact and immediately shift their marketing and pricing. If your marketing campaign featured the language of a market leader a few days ago, wouldn’t you look a bit paranoid if you suddenly shifted to “challenger” language?  Why point out the limitations of the competitor’s product? If they are relatively new, they may not recognize their limitations, and you will just be teaching them how to compete against you. Why automatically lower your price?  If you are really tempted to do that, perhaps you need to improve your product instead.

Maybe the “new competitor” could actually become a resource for you.  Having a new competitor in your niche market may be an indication that you should speed up your product development cycle.  If the competitor has demonstrated an interest in your niche and a capacity to produce a high quality product, maybe it’s time to learn about their capabilities.  Who knows? They could become a subcontractor, a joint venture partner, or a candidate for acquisition…with you still in the leader position within your niche.

 

PAUSE before Rolling Out the Results of Your Strategic Planning Effort

Congratulations! Your executive team has invested several weeks (perhaps months?)

analyzing  trends                                              generating scenarios

establishing significant ratios                      clarifying competitive position

adjusting pricing logic                                     selecting products to launch

creating targeted campaigns                       determining the best financing

modifying the organizational structure   updating compensation formulas

identifying new distribution channels     comparing CRM systems

declaring goals                                                  setting budget guidelines

How impressive!  How executive of you!

How boring!

PAUSE before you convey all of this to supervisors and line staff. You don’t have to impress them with your acumen.  You need to convey the direction, the priorities, and the themes in a memorable way.  It’s okay… no, it’s preferable if your strategic plan is conveyed in simple, direct language!

Think about the wording used in television advertising.  Getting your entire team on board quickly is “internal marketing”.  What is the slogan that captures the essence of where you are headed?  For what will your company be known when your strategy works well?