Friday, July 27, 2012

Are leaders truly committed to revenue growth in scarce supply?

Summit's Sales Coach
Mike Bingham
In a Summit coach's pow-wow yesterday, Mike Bingham (Summit's sales guru) said that he's been disappointed at the number of business owners and sales managers who say they are interested in revenue growth but don't choose to do anything new or different to achieve it.  Conversation ensued about the difference between wanting a desirable outcome - and DECIDING that it's the outcome you're going to achieve.

In today's market, like any other, some people are motivated because they have aspirations while others are motivated by looming consequences.  For the discussion on commitment to revenue growth, it doesn't really matter whether the commitment comes from an impending mortgage payment or a shot at the Inc. 500 (which Coach Mike led his company to achieve, by the way).  It doesn't matter whether the recent history of the company has been shiny or scary from a sales and customer retention standpoint.  It's the decision to be focused on, and to allocate resources toward growing the top line, and in a way that doesn't compromise sustainability or the bottom line.

What's the difference between a leader who is interested in revenue growth and a leader who is committed to revenue growth?

Attitudinal Differences
When you're interested you want it - with a small "w".  Or you might want it with some attached reservations, because you are thinking that you might have to work longer hours, improve your processes, or hire people in order to handle the influx of work.  If you grow your company you might reach the point where you have to change your personal habits and leadership methods so you can stay on top of an increasingly complex business.  When you're only interested you have an opportunistic mindset that says, "If it stops in my shop or drops into my lap, I'm all over it."

When you're committed, you want it with a capital "W."  There is no standing by and waiting for the revenue to appear.  You define what kind of business you are seeking, and how much of it you want to bring into your company.  You begin with the end in mind (thank you Stephen Covey!) and then make the resource allocations that create the infrastructure to attract clients and deliver the goods.  When you are committed to revenue growth you know that is not all about sales - it's truly about customer loyalty.  Loyalty brings repeat business and referrals, so you won't be reinventing your book of business every quarter, every year.

Behavioral Differences When You're Committed, Not Just Interested
Commitment means taking action, whereas interest doesn't do more than stand by.  In case you're not certain whether you're beyond interested, your actions will tell the story.  Leaders committed to revenue growth exhibit these behaviors:

  • Leaders committed to revenue growth truly believe that there is a greater future possible than has been manifested so far in the company.  These leaders also believe that the potential of the people working in the company has only been partly tapped, whether the company is already successful by conventional definitions or not.
  • They have a long term written plan (beyond 12 months) that establishes a vision for the company, incorporates input about the external environment and internal resources, and the leader uses the context of the vision and current situation to develop an operational mission.
  • They translate the vision and mission into a set of 12-18-month actions that pull the plan into daily operation in all of the functional areas of the business.
  • They develop the skills, attitudes, and goal-directed behavior of all of their staff in alignment with their company vision.  Their development effort includes the highly-educated, highly experienced senior staff, because they know that development transcends sales skills and goes beyond the sales department.  Revenue growth is not solely a function of the salesperson - every single employee contributes to (or detracts from) the company's ability to win and keep customers.
  • They define performance standards and then provide regular, actionable feedback.  This includes interim predictive sales dashboard information, and it also includes feedback on staff behavior that is either supporting or interfering with the revenue growth goal.
No list of behaviors could be completely encompassing.  Leaders come with individual talents and experiences that create multiple paths for success.  It would be safe to say that the be-all and end-all list for revenue growth has not yet been discovered.  The point here is the commitment.  The willingness to act to create something new and better in your business, your life, and the lives of your employees and customers.  Interested?

Thursday, July 26, 2012

Breaking the rule on private feedback

The Audience by drummajorinstitute
The Audience, a photo by drummajorinstitute on Flickr.
Today let's start from the assumption that you are the leader of a team - because you probably are. Think about how much time you spend hearing your team members confess their peers' sins to you.  They preface their comments by saying they know that the focus of your last management retreat was on developing accountability for results. So their goal in coming to you is to do what you said you wanted - to hold their peers accountable.

Does this sound a bit like the business version of tattling?  Is this the type of behavior that you want to reinforce in your staff?  If you're like a number of the leaders engaged in coaching with Summit over the past twenty-plus years, you'd be thinking right now that this behavior makes you feel like you're the teacher on playground duty.  You're the mom or dad in the house:  "Da-ad!  Trevor didn't brush his te-eth!"  And it's not the climate you want to reinforce in your workplace.

Tattling as a Symptom
When your team members are coming to you to report their peers' deficiencies, it's because they don't think that you know what's really going on.  They don't think that you know what's going on because they have never witnessed you holding someone accountable for the behavior that you said you wanted to see from them.

The "Easy" Accountability Feedback
If you are running a goal-driven organization, you are probably reviewing a dashboard on a regular basis, and talking about it in team meetings.  People are hitting their numbers or they aren't.  It's a factual, rational, unemotional process - at least when you're delivering the feedback and not the one squirming about your lack of performance.

Tougher, More Important Accountability
How are the results created?  By behavior.  If you want to prevent unsatisfactory results from being produced, you need to be holding people accountable for the upstream behaviors that create the results.  This sometimes requires you to engage your judgment and opinion, and many times will start a conversation that predictably creates defensiveness and self-justification on the part of the person receiving the accountability feedback.

Patrick Lencioni, author of The Advantage, says that leaders who wimp out on providing this upstream behavioral feedback - in a team setting - unwittingly create the "Da-ad!" tattling scenario.  So the way to prevent a tattle-tale culture is for the leader to call team members out during team meetings for behavioral adjustments. When the leader holds someone accountable in public, the rest of the team members realize that the manager is, indeed, in the loop on what's going on in the team, and so they don't feel the need to report on their peers.

The feedback needs to be specific - a "Straighten up your act!" sort of generality doesn't provide an adequate platform for improvement.  Some observation is necessary to be able to describe the behavior accurately.  And a specific recommendation for a better, replacement behavior is needed.  You can't only tell someone what not to do - that's like turning the TV set off.  You have to help them to select a different, better, channel.

Surprising (?) Outgrowth of Public Accountability Feedback
Lencioni says that the optimal accountability is one held among peers.  When team members know that the boss is on the ball, they are more likely to go directly to their colleagues and deal with any problems more immediately, and closer to the point of their occurrence.  Prompt handling at the lowest level possible prevents issues from stewing and even escalating, and creating bad downstream results.  Lencioni says that the more the boss holds people accountable, the less he or she winds up having to do it, because the peer-to-peer system takes care of it.

There are group exercises and other methods that can be used to pave the way for better peer feedback.  Summit can help you say goodbye to the playground climate and help your team lead itself more effectively, freeing you to focus on the strategic horizon.

Tuesday, July 24, 2012

Two cool techniques for unified execution

Huddle by donna_0622
Huddle, a photo by donna_0622 on Flickr.
In his book The Advantage:  Why Organizational Health Trumps Everything Else In Business, Patrick Lencioni describes a pair of methods a VP learned to use to increase the amount of productive conflict in his management meetings.  Increase the amount of conflict??

This VP discovered that fragmented and inconsistent execution often stems from unaired and unresolved disagreement while the game plan is being developed.  People were sitting in the meetings doing their best imitations of the bobblehead doll in the car (heads going up and down), but weren't totally bought in.  Either because of lack of trust, fear, apathy or expediency, they allowed ideas to move forward in meetings only to stall in their implementation of them once back out in their respective field roles.

It's difficult, if not impossible, to help people change by making a general pronouncement like, "You need to disagree more often!"  So the VP decided on a methodology of "disagree and commit," using two ground rules to flush the conflicts out during the discussion phase:

  1. Silence is assumed to indicate disagreement,  so every participant is expected to weigh in verbally on the idea at hand.  They can agree, support the idea - or they are expected to share their reservations and concerns out loud.  One or the other must be done by each person in the group session before the definitive direction or resolution is developed.
  2. Each member of the group is polled for formal commitment to the specific course of action before the group disbands to implement.

The VP determined that no decision would be made until every participant weighed in on the subject.  So the VP's staff learned that they might as well speak up right away, and air any conflicts sooner rather than later.

Lencioni talks in The Advantage about trust and vulnerability as being important foundations for productive conflict.  Although you cannot mandate the speed with which people truly embrace concepts or feel certain feelings, you can create methods like the ones in the case above that help them to learn new ways of behaving.  Sometimes the trust your team members need is developed through experience rather than given without question at the outset of the working relationship. 

One note to the senior person in the group:  If you want your employees to be vulnerable and to be candid in discussing their shortcomings, you have to go first to reduce their feelings of risk.  Vulnerability leads to trust, which leads to productive conflict, which leads to better commitment.  And that, friends, leads toward unified execution.

Monday, July 23, 2012

This may be your team's biggest obstacle

This delegation of officers of the National American Woman Suffrage Association received from President Wilson ... by The U.S. National Archives
This delegation of officers of the National American
Woman Suffrage Association received from President Wilson ...
a photo by 
The U.S. National Archives on Flickr.
The idea of team is right up there with Mom and apple pie in the workplace hall of fame.  Everyone aspires to it, or says they do.  Patrick Lencioni writes in his new book The Advantage that your team might not really be one.  Instead, they might be only a working group.  The two concepts are quite different, but inadvertently senior leadership creates one while intending to create the other.

Definitions of terms:
Working Group - The working group is a collection of individuals who operate independently and then report back to one another.
Team - On a team the members of a group interact with one another in the course of doing work and are interdependent.

You could probably say that a working group is a diluted version of a team.  You can tell whether you truly have a team or only a working group by observing it in action.  Here are some of the things you might find:

  • A large group.  Lencioni says that 12 members is the outside limit for a team, and that usually 3-8 members will be more effective than 12.  Sometimes the group has swollen unnecessarily because of political concerns, not because every member has responsibility, skills, or content knowledge that the group needs.  If you want a real team, don't add a person to the group for ceremonial or symbolic reasons.
  • Advocacy instead of inquiry.  How many times have you participated in meetings where the predominant mode was stating opinions and supporting points of view rather than asking questions?  Lencioni says that this happens when the group gets too large, because individuals are concerned that they won't have the floor often enough to be heard.  When the participants aren't interdependent they might not know the questions to ask that will lead to better outcomes - they are not in the loop.  In addition, large groups inhibit less extroverted participants. 
Lencioni says there are two other characteristics of a true team:
  1. They are collectively responsible for the results, and
  2. They share common objectives
Collective Responsibility
When a team is truly collectively responsible, they may choose to shift resources from one area to the other.  There is no personal or departmental turf to be protected because the overall good is the focus.  When there is collective responsibility, the need to advocate to "win" your point is reduced.  It's not the ownership of the point or the idea or the budget dollars, but rather the achievement of the group's goal that is the reason for decisions.

Common Objectives
A college wanted to increase its enrollment, so it provided sales training to all of its staff, including its groundskeepers.  Groundskeepers?  Why?  The school determined that of all of the staff, the grounds care crew was the most likely to have direct contact with lost or touring prospective students and their families.  Everyone in the college was engaged in the goal of growth in enrollment.  When the objectives of the organization are truly held in common, individuals contribute beyond their narrow areas of  functional expertise.

These teamwork concepts beg the question of whether there are processes and rewards in your company that are designed to support this operating approach, or whether leaders are being told one thing and paid according to a different set of criteria.  Structure - and the right people in the right seats - is going to impact the size and effectiveness of the group around the meeting table.  This form of teamwork is not a set of interpersonal skills, or motivation that can be sustained by regular rah-rah sessions.  You as the senior leadership need to build it into all aspects of the way in which you run your business.

Friday, July 13, 2012

The stuffed bunny and other training stunts

"Don't take the baby" by JMPoland
Sometimes it takes a little something extra to create a message that will overpower employee amnesia and have enough impact to change behavior.  And sometimes that little something works better when its impact is humorous (dare we say goofy?) enough to create buzz that reinforces the intended message.

Yesterday a medical practice manager I know decided to use a plush bunny in an umbrella stroller to drive home a point in a site meeting.  In this case, a persistent problem is people removing paper patient charts from the chart room without signing them out.  The practice is largely operating on electronic records now, but some of the staff still finds it easier to look at patient histories in their paper form.  As a result, documentation goes missing when a paper chart is needed by the next provider for the patient's next visit.

The practice manager wheeled the bunny into the meeting in its stroller, bunny wearing a medical mask that the nurse manager theorized would prevent "the baby" from getting sick, and holding a thick patient chart on its lap.  The practice manager then walked the stuffed bunny and stroller around the room, asking questions like, "Would you like it if somebody took your baby out of your house without telling you?" and "Would you leave your baby unattended on a counter top?"  "Wouldn't you worry about your baby?"  "Please don't take the baby!"  "Don't take the baby without telling us where it's going!"

Delivery is, of course, important here.  The desired tone is one of teasing and fun, not of reprimand.  But the message got through yesterday.  The staff had the opportunity to validate its theory that the practice manager is a little bit off his nut.  Frankly, he didn't care as long as the message got through.  He wheeled the bunny around all day yesterday, in melodramatic worry pleading with the staff,  "Don't take my baby without telling me - please!"  And at the nurse manager's request, the stuffed bunny in the stroller will be rolling around the practice again today.

How many different packages can there be for important information that you want your employees (or your kids) to remember?  Stunts like the stuffed bunny in the stroller can give you the impact that you want, instill a light-hearted work climate that builds employee engagement, and enhances productivity.

In case you are running short on ideas, here are some other stunts that paid dividends in message impact and retention:

  • The principal at an elementary school wore a "PSSA man" superhero suit to help relieve kids' nerves about their upcoming achievement tests.
  • The CEO of a transit authority placed inflatable palm trees around the office and creates "Hawaiian shirt day" to thank employees for their "beyond the call of duty" work during a blizzard.
  • A teacher shaved his head in front of his first grade class to reward them for reading 1000 books.
  • A manager demonstrated the goal of lean work processes by using a tornado tube to show how fast water can move from one bottle to another - if you can create a vortex.

Thursday, July 12, 2012

The value of a pen

Monteverde Invincia Deluxe by Snapshots by ©Nixy J Morales
Monteverde Invincia Deluxe,
a photo by 
Snapshots by ©Nixy J Morales on Flickr. 
What is the value of this fountain pen?  Why would you buy it for yourself or for a gift?

This pen represents anything that you - or your customers - might buy.  Until you know what the value is to the BUYER you won't know whether you are charging too much, too little, or whether you're focusing on the wrong things in your selling/buying conversation with them.  If you don't find out what is important to them about any pen, you won't be able to help them see the importance in buying one of your pens from you right now.

What are the characteristics of pens in general?
  • Permanent written record
  • Flow of ink
  • Held in one hand
  • Ability to vary color of ink (by choosing a particular pen or one with multiple ink cartridges)
  • Disposable when empty
  • Refillable when empty
  • _____________________

What are the features of this pen in particular?
  • Gold-plated grip
  • Prestige craftsmanship
  • Fountain pen with interchangeable nibs 
  • Even weight distribution
  • Refillable when empty
  • Color can be changed with cartridge change
  • Long life (durability, design, refillable)
People don't buy features, they buy benefits
Salespersons can get all wound up about the design features that they think are important.  Technological innovations, new fashion colors, etc. don't make a lick of difference in a company's ability to sell product unless the BUYER can perceive a benefit from the feature.

Here's an example from the pen illustration:  for one person the "disposable" feature might mean that a pen is convenient and inexpensive for them to purchase, use, and finish using.  They won't have to worry about losing it, and since they lose a lot of pens, that's important to them.  They really like the idea of cheap and temporary.  They can always buy another one just like it - and without mortgaging the house to afford it.

For another person the "disposable when empty" feature is not a benefit at all.  They don't like adding plastic to the landfill pile.  They aren't wild about plastic because the plastic pens all look cheap and the same as everybody else.  The handcrafted fountain pen buyer wants to send a different nonverbal message to the people who see them with their pen.  The message says, "This person is elegant and well-heeled.  Look at the handcrafted, gold pen they have been able to afford to buy.  And they must be smart, because their writing looks impeccable!"  It's not about the pen, rather about what the pen represents - culture, environmental awareness, and class.

Of course we're exaggerating a bit to make the point here.  (Point - hehe.  Pen pun slightly intended.)  Unless and until the salesperson identifies what the buyer wants and needs in the form of benefits from the product, the salesperson will be working harder than he or she needs to work to make a sale.  Or they might not make a sale at all because they didn't help the buyer see the connection between the product and the buyer's needs.  

There also relationship ramifications when you don't ask about needs and wants before you present solutions.  When you fail to ask questions to identify wants and needs before presenting solutions you waste everybody's time.  A reputation for wasting time makes it more difficult to obtain appointments with potential buyers.  When instead of asking questions you guess the relevant features, and then keep bringing more and more of them up as you get a "Nope, that doesn't do it for me" reaction from the buyer, you create pressure. Pressure creates resistance in your buyer, and resistant buyers don't buy.

A transaction over a higher end fountain pen pales in comparison to  purchases that might cost thousands, even millions of dollars for the buyer.  So the clear identification of benefits to the buyer (return on investment) becomes even more important as the size of (and therefore the perceived risk associated with) the expenditure grows.

Wednesday, July 11, 2012

The value of a mirror

Mirror Mirror by Matetex
Mirror Mirror,
a photo by 
Matetex on Flickr. 
We coaches often use the metaphor of a mirror to describe one of the major values of a coaching relationship.  Let's talk about what that might mean to you.

Why do you look in the mirror?  To see what you look like, of course!  Early in the morning it's nice to know that you're still fogging one (still breathing), and fog can be your ally in concealing the early morning bags, 5 o'clock shadows and bed head.

Once you have had the opportunity to spruce yourself up, the mirror affirms the value of your efforts.  You see yourself all duded up, shiny and ready to face the world.  You can magnify the image on some mirrors, to allow you to fine-tune your appearance.

It's said that the mirror doesn't lie.  That could be true unless you are looking into the funhouse variety, one that intentionally distorts the image to give you and your companions a good laugh.

The true value of the mirror is not the image itself, but the opportunity that the reflection opens to you.  The mirror shows you the places that you can improve, and later it shows you the progress that you have made.  The same goes with the coaching relationship.  Your coach can - and will - provide feedback to you and help you notice for yourself actions you have taken, habits in which you engage, and strengths and limitations.

Although the reflection is static, the purpose of the reflection is to inspire action. The important thing here is the connection between your current reflection and your goals.   It's not about who you are and how you look right now, but rather about who you can become and how you have the potential to look given some intention and attention.

Sometimes when you look in a mirror at yourself, your attitudes and preconceptions of yourself create fog around your image - you might not be seeing yourself as others see you.  If your prior experiences and mental baggage are significant enough, you might even see a funhouse image of yourself, and this time it's not for laughs.  You might be underestimating yourself and your potential and thereby unnecessarily limiting your success.

Being involved in a coaching relationship is embarking on a guided process of renewal, discovery, and development.  A coach can help you clear away the fog from your mirror.  A coaching relationship can help you identify the preconceived notions and habits of thought that are distorting your own mirror's image.  And a coach can hold you accountable to the actions that will create the reflection you want to show.

Tuesday, July 10, 2012

Opportunity now or goal achievement later?

Forced perspective confusion by Canon Camera
Forced perspective confusion,
a photo by 
Canon Camera on Flickr. 
Talking to a teenager in teaching mode sometimes yields as much teaching to the adult as to the teen.  Case in point:  yesterday I had a conversation with my favorite teenager about near term choices.  The specifics of the choices aren't necessarily important, but the discussion was about whether a person should go with the flow of what seems good now or whether it's better to keep a longer view in mind.

Many times if you're staying focused on the longer view of your life goals you are more likely to say no to a right-now opportunity for the sake of the later one.  For example, if you want to buy a vacation home in the next five years you might be less likely to splurge on a fancy car right now, choosing to save the extra money toward the future purchase of the vacation getaway.

But sometimes the immediate opportunities are pretty compelling.  They look good, smell good, or they might have pleasant associations with past indulgences.  Without the perspective of a bigger intention you can be pulled right into doing something that you regret later because it had consequences or investment attached to it for which you weren't fully prepared.

I suppose that you could simplify the battle into one between heart and head, between baser and higher natures, or some other set of evaluative terms.  But if you take the judgment out of it, the situation comes down to the criteria being used for making decisions about immediate actions.

If there IS no long term goal or intention, why not go with whatever feels good at the time?  The opportunity in the foreground looks bigger than anything in the background, just because it's in the foreground.

We try to teach our kids the things we do because we know that every action has an investment, and an outcome.  Adults know this because they have seen or personally experienced outcomes that are better avoided, and they don't want their children to have to learn lessons the hard way.  Adults also know this because they themselves are still reaching these decision crossroads, and sometimes aren't choosing the long view over the short-term opportunity.

What is the "right thing" to do right now?  That can only be evaluated in the context of the overall goal or intention.  The right action is the action that is in alignment with the long term.  It's not really a matter of willpower or virtue as much as it is a matter of one's attachment to one (the big goal) over the other (the lure of short term rewards) to the point that they forgo or postpone the "right now" for real thing that they want.

If you are going to help your teenager to make better choices, you need to help them determine and envision in detail what that long view is for them.  They ultimately will need to define what that goal is for themselves, and attach themselves to it.  The stronger that long term goal is for them, the greater influence it will have over short term decisions.

Monday, July 9, 2012

Blurry vision in your company

Nearsighted [82/365] by shinyscale
Nearsighted [82/365], a photo by shinyscale on Flickr.
Just like your eyes can go bad in several directions, your focus on your business can fail in more than one way.  Although this might sound a bit negative on a Monday morning, the good news is that business vision problems can be fixed readily - if you take the steps to fix them.

This vision problem is like placing your nose against a piece of paper and then trying to read what it says.  In many smaller businesses, or ones in which the owner is a player-coach, the operational demands of the business create an everyday close-up view as the owner is neck-deep in the details.  They hide the bigger picture behind the everyday tasks and crises.

The handling of crises focuses your eyesight on the issues near at hand, but crisis prevention requires a step back from the hubbub to get a longer view.  If you think you don't have time to do planning, capacity building and crisis prevention, evaluate which tasks are now consuming time that are not absolutely necessary - and borrow the time from them that you need to do your important, but not urgent, activities.

The more you exercise your distance vision, the easier it will be to decide to make it a regular part of the manner in which you lead.

Ever walked down the street gazing at a view, a store window, etc., and trip over a stone on the sidewalk?  Ever tripped over your own feet?  This is what happens to business owners who spend all of their time fantasizing about what could be, but who never look down often enough to identify the gap between that ideal condition and their current situation.  Sure they have ideas on how to make a million, but unless they can make payroll this week that million bucks is a moot point.  Unless they succeed in creating and maintaining happy customers (one detail at a time) the really big goal will be elusive.  And unless they lead in a manner that attracts and develops a loyal team they won't have the brain resources to be more than a flash in the pan.

We often sing the praises of the visionaries who had a big idea and then overcame innumerable obstacles to achieve it.  These people hit it big financially, and become part of the Horatio Alger rags-to-riches myth that we hold dear in the U.S.   But one thing that isn't talked about so much is that the idea guys and gals who succeed do so because they also see and implement the path they need to take to get there.

One other critical issue here is that you probably don't really know what's going on in the front lines of your business.  Only the people actually doing the jobs actually know all of the ins and outs.  So you might inadvertently make big decisions that cannot coexist with the reality of what has to happen to fulfill them.

Vision Correction
If you don't have a long term plan (2-4 years at minimum) you are risking nearsightedness in your business.  Some of the big ideas you have for five years from now require foundation-laying to be happening now, whether it's research and development, accumulation of financial resources, or improvement in the efficiency and effectiveness of work processes.  Sure, you might have a budget, but that's only for a year at a time in most companies.  And in many businesses, the budget process turns into the tail wagging the dog rather than vice versa.

If you have a strategic plan (vision and long-term mission) but you're missing the stones on the sidewalk you need to operationalize your plan more fully.  Start doing so by developing 3-8 critical goal categories to focus your energies (and that of your staff) and then SMART business goals for the next 12-18 months to make your desired accomplishments part of the monthly, weekly, and daily work.  Include your leadership team in your planning process so you have more buy-in, more knowledge of what's really going on with the operation, and more hands to help you implement.

Friday, July 6, 2012

Are you getting (or giving) a fair deal?

NEGOTIATOR. Producción y comercio de vino. by Luis Pérez Contreras
NEGOTIATOR. Producción y comercio de vino.,
a photo by 
Luis Pérez Contreras on Flickr. 
The deals are large and small.  A child negotiates for an extra cookie, and governments haggle over land borders and trade agreements.  The principles of successful negotiation apply in various sizes of transactions, but the mastery of them becomes more and more critical as the size of the potential gain or loss grows.

Effectiveness in negotiation relates to the immediate success of this transaction, but it also relates to your ability to create or sustain a relationship that will allow you to make a successful deal on another day.  If you want to be sure that you're getting (and giving) a good deal, consider these pointers from Stanford's Graduate School of Business:

Plan Ahead
Think ahead about your goal, your desired outcome for the negotiation.  You need to consider AHEAD OF TIME the point at which you are willing to walk away. Make a list of things that you are willing to budge on, and those components of the deal that are important enough that you will not be willing to surrender.  Remember that you are not the only one at the table.  If you anticipate the other party's concerns you may be able to enter the negotiation with some ideas already in place.  Test your assumptions once you are actually engaged with them. 

Remember that there isn't a "Fixed Pie"
Don't assume that both parties have to lose something in order for the issue to be resolved.  You may be able to satisfy a mutual interest if you are willing to suggest alternatives that have not yet been explored.

Frame the issue to influence the other party
You take on an unnecessary risk if you assume that the other party interprets the issue in the same way that you do.  Instead of holding onto your assumption, take some time at the beginning of your interaction with them to frame the issue verbally as you see it.  Then when you perceive that the other party has accepted your premise, negotiate from the framework that you have laid out.  (For an exercise in framing, check out the political ads that are showing up on TV now.  Analyze the words they are using to frame an issue in a manner that serves their party's purpose.  There likely is another way to frame it that would change its interpretation dramatically.)   Word choices are critical at this point in the negotiation; improvise at your own risk.

Consider cross-cultural issues
You take a risk of an unsuccessful outcome when you assume that the other party in the negotiation is just like you.  In cross-cultural negotiations there may be greater differences in values and priorities than you are used to handling.  This can be dealt with by doing some research during your planning phase, and then testing your information once you are in process in the negotiation to make sure you haven't simply replaced one incorrect assumption with another.  Cross-cultural differences are not limited to (and not necessarily factors of) race, ethnicity, religion, gender, etc.  There are cultural differences generated by urban vs. rural settings, more educated vs. less educated participants, predominant economic engines in a particular location, etc.  If you reveal yourself as uninformed or insensitive to differences that may exist, you place yourself at a strategic disadvantage.

Remember the parameters for the negotiation
The outer limits of the negotiation are called anchors.  When the other party proposes a solution that you think is completely unreasonable, be careful not to use the solution as the anchor for further negotiation.  Make sure that you and they start negotiating in earnest from two reasonable positions.  Who gets to determine what is reasonable?  Typically the party with the upper hand going into the negotiation.  For example, in the case of a real estate transaction, the seller has the upper hand unless they are in some circumstance like financial distress where they must sell now at whatever price.

Slow Down
Have you ever sold something to someone who took the asking price without any haggling?  Did you feel good about that transaction, or did you come away thinking that you should have asked more?  If you're like most people, you were kicking yourself afterward for asking too little.  If you're on the other end, always offer less, even when you know the price is an incredible deal.  It will help the other person come away from the negotiation feeling good.

Be a good sport
Nobody likes a gloating winner.  Be gracious, even when you know that your negotiation skills have enabled you to garner greater benefit than the other party.

Remember when you are engaged in negotiation that it is likely, perhaps even a given, that you will be encountering this person across the table again in the future.  The relationship points that you add or deduct in this transaction will have an impact on your future success.  Understand that you are laying the groundwork for the next negotiation, and the next, during this one.

Thursday, July 5, 2012

Projections leading you down the garden path?

Garden Path JN029245 by JaniceNolan_braud
Garden Path JN029245,
a photo by 
JaniceNolan_braud on Flickr. 
During a radio interview on behalf of SCORE the other day, I was asked why startup businesses fail.  Talk about a huge question with many potential answers!  In some instances it's a retail enterprise with a nonperforming location, sometimes it's a product that only a mother could love.

But if there were one major deal-breaker for new businesses, it would be financial.  In particular, many new businesses start with too little capital, and this problem is made worse by faulty projections - or no detailed projections at all.

Let's think through an example:  Small Business A wants to open a retail location.  They have some investments to make before they even open their doors:

  • Business entity setup - fictitious name, incorporation, etc.
  • Security deposit and rent for location
  • Fixtures, equipment
  • Inventory
  • Utilities
  • Insurance - physical site and liability
Let's assume for a minute that the new business has to invest $150,000 to open the doors on Day One.  How long will it take for the owner to start to generate revenue, and in what volume will the revenue start to come in?  The rent will come due again in 30 days, as will the utility bills.  If the business owner has chosen to hire employees, those salaries will be payable weekly or biweekly.

Depending upon the product, marketing (including promotion, pricing, location, etc.), owner reputation, economic conditions - and even the usual sales process - the business might take 3, 6, 9 months or even more to reach its sales production pace.  That means that the business needs not only the initial $150,000 of capital, but that 3,6, or 9 months of operating capital available as well.

Why projections go wrong
Here's how projections take business owners down the garden path:  prospective and new entrepreneurs feel tons of enthusiasm, passion, etc. when they are starting a new venture like this one.  The owner is sometimes (often?) reluctant to hear or think about information that might be a buzz kill right in the middle of this very significant creative act.  So the new owner, swept up in positive emotions, develops projections incorporating assumptions that the community will be banging down the doors to buy on Day One, that no unexpected expenses will kick in, and that the business will experience month over month meteoric growth.

Hopeium is not helpful when you are forecasting your business results.  Conservatism, even pessimism, is your friend.  Do the numbers work?  If they do, great.  If the winds have to be blowing in one exact direction and the stars have to be aligned in order for you to do the volume you're hoping to do - you need to look at the numbers again and figure out how to make them more realistic before you risk losing your business, and maybe some of your personal assets as well.

Some projections are missing key information.  The prospective owner doesn't know what he or she doesn't know, and so some numbers with significant impact aren't part of the equation.  Here's where an expert like an accountant or a SCORE volunteer can be helpful.  They can not only help to fill in the blanks - they can help a new owner know where the blanks need to be placed in the forecast.

The owner needs to grow too
One of the ingredients in business success is the speed of the owner's learning curve.  Your cash reserves need to be big enough to cover your sales cycle, but also enough to outlast your learning process.  What if you aren't going into business already effective at sales?  What if you guess wrong about the types and quantities of inventory you need to have on hand?  What if you underestimate the amount of waste, spoilage or shrinkage (theft) that you experience while you're learning how to run the business?  Will any of these factors be enough to shut your doors?  Even a small boo-boo might be enough to send the business toes-up if there is not sufficient funding.

The upside of tight cash
It's not always a bad thing to be bootstrapping your business.  Sure, you might be living a bit close to the edge.  But near term a "have to" working environment may help you to be willing to push yourself beyond your comfort zone to engage in the tasks that you might otherwise ignore or throw money at.  There's something about "have to make payroll" that lights a fire under the derriere.

When your budget is close to the bone you may be more likely to find creative solutions to your problems rather than simply throw money at them.  And ultimately the less cash you throw at things the more of your revenue will wind up staying in your pocket instead of blowing right back out again.

Monday, July 2, 2012

Do you see people as walking wallets?

Open your wallet by Rosiecat_LLF
Open your wallet, a photo by Rosiecat_LLF on Flickr.
There's a sales philosophy in town that has quite a few devotees.  You can see these folks at networking functions and listen to them operate in appointments, and they use a characteristic methodology - if you don't identify yourself as a prospect for their business they exit the conversation ASAP.  Or, if they don't walk away immediately they ask you what else you can do to help their business. 

Some of them would tell you (as one gentleman told a group recently) that the goal is not to waste someone's time.  Either they are going to do business or they are not, and if they are not, better to get on with opportunities that will be more suitable to both parties.

Hold on there for a minute.  This methodology has a few shortcomings.  If you are selling this way:

  • You create the impression that you see people as nothing more than walking wallets.  If they are not opening theirs for you they have no value to you and you don't engage any further.  Some people don't mind being seen as only a vehicle to your sales success, but a whole bunch do mind.  They dislike your instant brush-off so much that they are telling other people to steer clear of you.
  • You are squandering the opportunity for the person to buy sometime in the future when you shut them down in your first meeting just because they aren't buying right now.
  • Good business is based upon reciprocity.  This methodology smacks of "what can you do for me?"  Period.  By making a quick exit without stopping to find out whether you can help the other person's business you are missing the opportunity to build good will - and the foundation for future reciprocity.  
Perhaps it doesn't matter to you whether a good portion of the market won't buy from you - ever - because you treat them like nothing more than walking wallets.  You might be finding that the people who buy from you don't mind your self-centered approach.  They might not mind that you're only interested in one thing from them.  So you're believing that your approach has merit.

This becomes a core values discussion.  It then extends into a series of behavioral choices that demonstrate your assessment of the worth of the people around you.  Is this really what you believe - that people are only deserving of your time and attention if they have the potential to line your pockets in the very near future?  If it's not what you really believe, then you need to rethink your sales methodology.  Because regardless of your intention, the impact of your actions is sending that message.