Donald J. Patti

Archive for the ‘Business’ Category

From Chaos to Crisis to Calm – 9 Tips to Recover Troubled Projects

In Business, Entrepreneurship, leadership, management, project management, Small Business on 8 February 2010 at 9:00 am

Dan Moore, a fellow Principal at Cedar Point Consulting, recently reminded me that, “You can’t manage chaos, but you can manage a crisis.” These are very wise words, but they reminded me of the early stages of a trouble project — one which is far behind schedule, well over budget, not delivering results, or all of the above.  If anything, a troubled project is chaos waiting for a strong leader to transition it to crisis, and then ultimately to calm.

Whether you’re a C-level executive, an entrepreneur or a project manager, you may not have encountered very many troubled projects in your career, so you may not be familiar with how to transition from chaos, to crisis, and finally to calm. We consultants are often brought in to deal with just such problems, so I have a few tips that should help:

  1. Don’t Panic! Douglas Adams references aside, you may have just learned that a key project is in trouble, but it’s important that you not panic. First of all, panic spreads, so you create chaos from crisis, and it won’t be long before your co-workers and your subordinates are panicked, too.Second, panicked people don’t reason effectively – they make “fight-or-flight” decisions instead of rational ones, so you’re far more likely to make a bad decision or push others to do so.
  2. Be Methodical. At Cedar Point Consulting, we have a 5-step process that we follow to recover projects – Review, Recommend, Respond, Transition, Close. While this is not the only way to recover a project, it does consistently work – by step three, the project is making progress once again. Regardless of the technique or methodology that you choose, don’t attempt to solve the project’s problems until you have an understanding of their causes. Do take measures to stop the bleeding, until you’ve effectively identified root causes.
  3. Read the Tea Leaves. Whether well run or not, nearly all projects have documents that tell you where the weaknesses are and whether they are being managed well. At minimum, even the smallest project should follow a standardized process ( project methodology); a charter (with a project goal); a project plan that includes a schedule, a budget, and assigned staff; regular meeting minutes and regular status reports. If these exist, review them to assess where problems are occurring. If they don’t, find out why.
  4. Be From Missouri (“Show Me”). Reading current project documents is a good start, but what if someone is fudging the numbers or painting a rosier picture than reality? For select documents, like staff hours, project schedule and project budget, confirm that they are reasonably accurate independently. Which brings us to the next tip…
  5. Use an Independent Third Party. Whether you hire a consultant or have someone in another part of your business lead your project recovery effort, they should be an independent third party. Having a friend of the Project Manager, the Project Manager’s immediate superior or one of their subordinates jump in to help is unlikely to be successful.
  6. Change Leadership or Change Process. At the most basic level, projects most often fail because either the project manager is not up to the task or the project management process is preventing them from succeeding. A good project manager controls time, scope, cost and quality on a project. If they don’t control at least two of these and influence all four, then they are likely to fail. Conversely, if they control all of these but the projects headed off a cliff, you probably need to switch project leadership.
  7. Increase Communication. When you’re trying to identify problems with a project, it helps to increase communication within the team. Schedule and require participation in regular meetings – daily, if necessary, like Stand-ups or Daily Scrums. Finally, increase the frequency of status reports to key parties, such as the client, the sponsor and key stakeholders, even if the reporting is informal.
  8. To Thine Own Self be True. There’s always a need for optimism in every situation, but good leaders are also honest to themselves and to others about the current state of a project. Depending upon how far behind the project truly is, consider reducing scope or resetting the schedule. Failing to do so may doom the project and the project team to yet another failure – one from which they may not recover.
  9. Start Small, Review Frequently.  After you’ve planned your recovery, be sure to start with small deliverables and shorter milestones, reviewing the project’s progress frequently to make sure the conservative short term goals are being met. While this is not normally the best approach with a project, starting small enables the team members to practice working together as a team before they have to tackle the larger, more challenging deliverables of the project.

The list above isn’t a comprehensive recipe for solving all the problems of a troubled project or for complete recovery, but it is a good start.  In a subsequent post, I’ll provide a list of ways to minimize the possibility of troubled projects altogether.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy.  Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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Failed Pilot? Chalk it up as a Win!

In Business, E-Business, management, project management, Software Development, Technology on 14 December 2009 at 8:30 am

You’ve just had a failed pilot, followed by a quick meeting with the Project Management Office (PMO).  Your project was killed and you feel like a failure.

What should you do next?  “Celebrate,” I say, “then chalk it up as a win.”

What? Not the answer you were expecting?  Let me explain…

I spend quite a bit of time in a classroom, whether its to teach a subject or to learn myself.  During one class, the oft-cited Standish Group statistic that measures projects successes reared its ugly head once again, this time citing a roughly 30% project success rate with roughly 45% qualifying as challenged (Standish Group 2009).  Per Standish, roughly 70% of projects fail to meet expectations – a sobering statistic.

A project manager sitting behind me who specialized in pharmaceuticals shocked me when she said, “Gee, I wish our numbers were that good [in our industry].  The odds of a clinical trial resulting in the drug reaching market is 1 in 20, and this is after its cleared a number of internal hurdles to justify a stage I/II trial.”  (A stage I/II trial is early in the process and serves as a pilot).  While I laughed at her comment, I also considered how it related to the Standish statistics and definitions of project success.

By her definition, success meant bringing her product all the way to market, an unlikely outcome by her own estimation and by those of my fellow health sciences colleagues.  But, what if success was defined as, “Accurately determining whether a product should be brought to market,” or “Successfully determining whether a project should continue past the pilot stage”?  Suddenly, many of her projects would be considered successes.  After all, how many drugs don’t work, have ugly side effects, or have the potential to kill their patients?  Isn’t she and her team successful if they keep bad drugs off the market and aren’t we better off for it?

In the software industry, good software methodologies use pilots, proof-of-concepts or prototypes to determine whether a software product is worth fully developing and fully budgeting.  In the Rational Unified Process, the rough equivalent of a pilot is called the Lifecycle Architecture Milestone and its purpose is to confirm that the greatest technical and design hurdles can be overcome before additional funding is provided to the project.  In Rapid Application Development prototyping is embedded in each and every iteration (cycle), while paper prototyping is a part of Agile development.  Regardless of the methodology, these steps are designed to provide results early, but they are also designed to confirm that a project is worth completing, providing an opportunity to change course or shut down the effort when it’s not.

So, maybe it’s time for those of us in the PMO and portfolio management to change they way we measure project success.  Right along side the “projects successfully completed on time/on budget” statistic, there should be two others — “projects successfully killed because their pilots proved they simple weren’t viable,” and “dollars saved by ending unfeasible projects early.”  Because in the end, a pilot’s failure is just as good as a pilot’s success, as long as you listen to its message.

When Taking Over Means “Steady as She Goes”

In Business, leadership, management, project management, Small Business on 15 November 2009 at 8:00 pm

You’ve taken a new leadership position, so you’re ready to take charge and make your mark. There’s just one problem – all’s well. The division you’ve inherited is running smoothly, or the project you’ve taken over is on target. What do you do? Here’s how to tell you’re in this leadership situation, and what to do if you are.

Confirming All’s Well

Because leadership changes usually occur when change is needed, it may be difficult to tell that nothing is wrong. But there are a number of indicators that appear when everything is just fine. If you answer “yes” to most of these questions, you’ve probably inherited a steady ship:

  1. Your predecessor retired. While some people are forced in to retirement and not all recent retirees were good leaders, it’s a good sign that all was managed well if your predecessor retired in the position.
  2. Your predecessor held the position for more than 10 years. Particularly in disciplines like information technology and marketing, ten years is a mark of seasoned leadership. While times may have changed and forced a change in leadership, it’s a good sign that your predecessor enjoyed the position enough to stay in it for a decade or more.
  3. Turnover was low. You’ve talked to the staff below the prior leader and they average five years or more with the company. This means the prior leader knew how to hire and retain the right people for their positions.
  4. The numbers are good. Whether the key performance measures for the division are customer satisfaction, profit-per-unit-sold or days-ahead-of-schedule, the key measures all look good, especially after some independent validation confirms they’re accurate.
  5. You’re allowed to phone your predecessor. When both sides haven’t parted on good terms, it’s rare that you’re allowed to pick up the phone and call your predecessor. When you ask, “Do you mind if I give the prior manager a call?” an answer of “yes” with no cautions or caveats is a good sign.
  6. The echo of kind words. In initial conversations about your predecessor and their work, co-workers and subordinates speak fondly of them and readily point to past successes.

If you’ve responded, “yes” to 4 of 6 of the indicators above or more, there’s a very good chance you’re inheriting a well run division or team that needs few short-term changes. The next section describes how to lead in this situation.

An Even Keel

Once you’ve confirmed that all is well, you have quite a management challenge ahead of you. (Yes, that’s correct – a challenge). Your predecessor was well liked, the team performed well, and you have to do at least as well for the transition to be considered successful. Here’s what you should and should not do:

  1. Give credit. Once you’ve confirmed prior success, give credit to your predecessor and the team, noting that you respect what they’ve already accomplished. This is more than phony ego-stroking, it’s confirmation for your staff that you knew can properly assess a business situation and take the correct actions moving forward. They’ll appreciate that you’re recognizing them, but they’ll respect your business intuition even more.
  2. Avoid radical change. While it’s very tempting, do not try to transform the organization to suit your own management style and don’t attempt a major reorganization. It’s likely to cause resentment by your co-workers and subordinates who were very happy with the way things were. Even worse, it may turn a productive team into an unproductive one.
  3. Make change slowly. An obvious converse of the prior point, if some changes are necessary, make them slowly. This will give people an opportunity to know and trust you, but it will also give you time to understand why the team was so successful in the past. After a little wait, you may find that some of the changes you’ve planned aren’t needed and it will definitely put the distance of time between you and your predecessor.
  4. Learn from the management style of your predecessor. They were successful sitting in the same chair you now hold – who better to study than them? Review old reports and deliverables, review performance results going a few years back, and see how the division ran in the past.
  5. Give them a call. Invite your predecessor to lunch and ask them what worked so well. What management style did they use, what methodologies or techniques. Also, if possible, ask them about your staff – what are their likes and dislikes, what makes team members tick, who doesn’t get along with whom? In a couple of hours, you’ll be a lot closer to making a smooth transition.
  6. Review goals, then consider more ambitious ones. It’s possible your predecessor already set some pretty solid target for the team, but there’s also a very good chance that the bar has been a little too low most recently. If this is the case, raise expectations a bit, work with the team to identify new opportunities to excel, then add them to your strategic plan. By doing so, you’re most likely to add value to an already good situation.
  7. Adjust. While it may not be YOUR management style, your predecessor’s approach worked well. Consider adopting all or part of it, even if it’s a stretch for you. You may find that you grow as a leader by adding arrows to your quiver in this way.

Same Crew, More Knots

As a manager and leader, taking on a successful team may be the most challenging experience you ever face. It’s likely you’re a leader because you can take charge in difficult times to steer a new course, but the winds of change simply aren’t blowing. In this case, the most prudent course is to learn from the successes of the past and adapt to the new team. It will take longer, but eventually your team will improve upon past successes. If nothing else, resist the temptation to immediately set a new course – ironically, you’re far more likely to fail.

When Quality is Too Costly

In Business, management, project management, Quality, Software Development, Technology on 2 November 2009 at 8:15 am

Throughout his career, my father served as an engineering manager in the aerospace industry, where the parts he and his teams developed were used for missiles and spacecraft. Sometimes, these parts were required to meet specifications within one ten-thousandth (0.0001) of an inch, a level of quality rarely seen in any industry. I remember discussing the day his company announced they would enter the automotive parts market, which used similar components.

“You should be quite successful,” I told my father, “if you’re able to deliver products that are of such high quality to the automotive industry. Who wouldn’t buy a product that meets specifications so precisely?”

“That’s actually the problem,” my father responded. “We can build parts to one ten-thousandth of an inch, but the automotive market doesn’t need anything that precise and isn’t willing to pay for it. It costs an awful lot of money to build something that precise and to verify that it meets that standard.” He continued, “It will take us a while to figure out how to mass-produce products with much lower tolerances that are also competitively priced.”

Many years later, I encountered the same issue in my own career. Educated like many others in the principles of total quality management (TQM) and the concept of “zero defects”, I believed that the key to building excellent software was a clean defect log.  Budgeting time for multiple rounds and types of testing, my team and I dutifully worked to test 100% of all functionality in our systems and didn’t release our software until every known defect was repaired.

The day came to release our software and I was met with an unexpected surprise. Sure enough, not many defects were reported back, but there were defects reported. Why?

It turned out that our large user base was exposing problems that neither our QA team nor our beta testers encountered or anticipated. Only through the rigors of production use did these defects come to the surface. This was my first lesson about the limitations of preaching a “zero-defect” mantra – nothing replaces the “test” of production.

During our project retrospective, an even more important downside to the blind pursuit of “zero defects” surfaced. Over the two extra months our team spent addressing low-severity defects, our client lost roughly $400,000 in new sales because the new system was not available to collect them. (I had done the ROI calculations at the beginning of the project showing a $200K per month of new income, but had completely forgotten that holding on to the system for a couple of months meant the client would be deprived of this money entirely-they were not merely delayed). For the sake of perfection, zero-defects meant withholding key benefits – this was a far more important lesson than the first.

Certainly, few users want to deal with defects in software, particularly software that’s not ready to deliver. And, of course there are software products where a near-zero defect rate is extremely important. For example, I’d be quite upset if a zero-defect standard weren’t set for the key functionality in an air traffic control system or in certain military, aerospace, medical and financial systems.

But now, before I recommend a zero-defect quality target for any project, I make certain that the costs of such a high level of quality are not only beneficial to the client, I make certain I include in my calculations the lost benefits the product will bring to the users by holding it back until this level of quality is achieved. After all, none of us like defects, but would we really want to wait the months or years it might take before we reap the benefits from a new version of our favorite software?

Challenges Managing in the Knowledge Economy? The Answer is Beneath You

In Business, management, Technology on 10 August 2009 at 8:45 am

As children, many of us grew up with a vision of the manager as “the boss” – a key source of authority in the business who knew the answers, told others what to do and led with a firm hand.  As adults, many of us move into management and try to live that childhood vision – with disastrous consequences.  Why hasn’t the “boss as manager” model work for us today? What’s changed?  Surprisingly, the answer is beneath you.

To understand what this means, consider, first, the era when management as profession came into vogue – the industrial age.  The emphasis had shifted away from the craftsman-apprentice model before mass production, where individuals passed on knowledge one-on-one.  Instead, the secret to success in the industrial age was mass production, which required the standardization of business processes and simplification of tasks so that unskilled workers could more easily complete the work.

A manager’s primary responsibilities were to coordinate the efforts of large groups of people, so a highly regimented top-down management style fit best. The 24-hour day was broken down in to two or three shifts, people were assigned to shifts and they generally completed their assigned work. During this age, a manager’s biggest challenges were employees who didn’t show up on time, who left early or who didn’t complete their fair share of work.  A firm hand was required to prevent abuse and keep productivity up; the “manager as boss” excelled in this world and this management approach flourished.

On to the knowledge age, where knowledge is the key tool used to create products as well as the product itself.   For the first time, many products — semi-conductors, computer hardware, software, even modern phones — rely heavily on knowledge as the key inputs to their creation.  In the knowledge economy, the highest single cost in creating the product is the labor of experts – not manufacturing labor or raw materials.  In turn, making the most of the knowledge of these experts is the key to success – not necessarily making the most of their time.

With the shift from industrial economy to the knowledge economy, the storehouse of knowledge and authority are no longer in the same hands.  In the industrial age, the boss knew best; in the knowledge age, you, as a manager, still have the authority, but the knowledge is beneath you, in the hands of the experts.  To adjust for this, a change in management style is needed.

Based on my conversations with respected managers in the age of knowledge and my own experience, here’s how to succeed as a manager in the knowledge economy:

  1. Ask the experts.  This sounds simple and straightforward, but it’s rarely followed.  Because many of us are former experts who moved in to management, we consider ourselves experts still.  Yet, how long does it take before our expertise becomes out-dated when we don’t use it?  As little as six months? As much as a couple of years?  Consider this: If your subordinate knows all of the features of the latest version of your software, but you know all the features of the last one, whose knowledge is more valuable?
  2. Facilitate – don’t order.  As managers, we all know that the experts around us are extremely bright – in many cases brighter than we are.  How condescending it must seem, then, when we managers order our team members to execute our instructions.  Instead, help them to identify the problems together, then assist in developing a methodical approach for solving it.  In the process, it will become clear which team members should tackle each step in solving the problem.  No orders necessary.
  3. Coordinate – don’t control.  As former experts, we’re acutely aware of the challenge of being “stuck in the weeds” – that desire to keep your head down and focused on solving the problem in front of you.  As much as that tendency toward isolation grips our fellow experts, we should coordinate their efforts and encourage them to work together as a team.  Coordinating the team means bringing them together, discussing key challenges and asking one expert to help another to achieve breakthroughs when addressing a challenging problem.
  4. Serve as a knowledge bridge.  In many cases, the specialized knowledge of one expert on your team is very different from the specialized knowledge of another.  For example, one person may specialize in database design, while another specialized in user interface (screen) development.  Because of this, they are often working on very different tasks, even though one person’s knowledge may be needed to solve another person’s problems. As the manager of this team, we know what each team member is tackling and we should know whether they have solved past problems.  It’s our job to connect the dots across the work of our teams, to point out patterns in problems that we see, and to bring together the experts to share their relevant knowledge, solving each other’s problems more quickly and efficiently.
  5. Set challenging (but realistic) goals.  Knowledge experts like challenges, so work with them to set short term and long term goals that are SMART – Specific, Measurable, Attainable, Relevant and Time-specific.  As part of the process, be certain to set goals to be a little more challenging than the person believes is possible – but not so difficult that the person ignores the goal because he or she thinks it’s impossible.
  6. Value the individual.  In the industrial age, the loss of an individual team member was disappointing, but it wasn’t likely to cripple your business, your division or your projects.  In the knowledge age, there are people who are so essential that their departure could force the business to crumble.  While I would argue that it has always been important to treat people well, in the knowledge age, it’s even more important to treat each individual with respect and consideration.

——-

In many respects, the knowledge economy has made managing more challenging.  In many management positions, “people” skills are more important than analytical abilities.  Even more challenging, your position as manager often makes you more expendable than your subordinates.  Combined, it’s critical to your success as a manager to look beneath you for the knowledge and expertise for you and your organization succeed.

“But They Said They Understood…”: A Common Mistake with Indian Off-shore Teams

In Business, Culture, E-Business, Ethics and ideology, management, off-shore, Technology on 6 February 2009 at 1:23 pm

If you’re a long-time U.S. IT Manager, you’ve probably already led international teams composed of individuals from all over the globe.  I was fortunate, for example, to have one project with team members from England, Germany, Australia, Singapore, India and all four continental U.S. time zones.  While the mix of cultures and talents can cause conflicts, once the team gels, the results can be overwhelmingly positive.  It’s amazing to see what a team working nearly 24X7 can do when you lead it properly.

One mistake I’ve seen made by U.S. IT managers involves managing Indian off-shore teams, in particular, and has been repeated at three different client sites in the last five years, so it’s worth a good blog entry.  First I’ll explain the scenario and then I’ll explain why it is legitimate – NOT bigoted – to point out this common mistake so it can be avoided.

The Mistake

To explain the situation, you’re running a newly formed off-shore team and you’ve just assigned them a particular set of tasks that make up a deliverable. You ask, in front of the group or over a conference call, “Do you have any questions?”  When no questions are heard, you move merrily on and end the meeting, continuing on with your week’s work until you have your next meeting with your team.

“Is the work done?” you ask.  No.

“How much progress did you make?” None.

“Is it not explained clearly?” Yes, comes a response. Then, silence.

It’s at this point that we leaders usually begin our rant that it is not acceptable to complete nothing during a given week.  We consider terminating people, canceling our contract with the entire team, or trying to recoup costs now that the team is one week late.  As much as all of these actions would be acceptable in our culture given the outcome, this neither the way to deal with the problem, nor is it in the long-term best interest of your company.

The Cause

If you thought the problem was with literal understanding of your words, it’s possible, but unlikely.  Most Indians receive a healthy dose of English throughout their education and can understand it even if their pronunciation doesn’t sound like a Hollywood movie. But if you’ve figured out that the situation above occurred because of cultural differences, you’ve come to a more likely conclusion, though it will help to understand it in more detail than to merely say, “it’s cultural”.   Enter Geert Hofstede, a Dutch researcher and author of “Culture’s Consequences and Cultures and Organizations, Software of the Mind”, which can be found by googling the ISBN 9780071439596 or visiting this page on Amazon.com.  

Mr. Hofstede and his son Gert studied different cultures throughout the World but within the same company, IBM, and determined that there are five key differences in World cultures that can be scored across a continuum.

Individualism v. Collectivism: The extent to which a culture emphasizes speaking up for oneself and taking a unique path in life versus belonging to a group and benefiting from group affiliation.

Masculinity v. Femininity: The degree of emphasis on traditional Western male or female roles, such as assertiveness in males and subservience in females.  (If you don’t like the way I’ve phrased this ladies, I’m sorry. I’ve done my best to make it accurate and fair without losing the message. Alternate ideas on how to phrase this are appreciated).

Power Distance: Power distance refers to the social distance placed between people in authority compared to those who are not.  Because authority is relative (I have a supervisor, but I also supervise others), you can expect a middle-manager to behave just as their subordinates to them, but with their own manager.  As one would assume, the greater the power distance in a culture, the more deference and subservience subordinates display to their superiors; the lesser the power distance, the less deference displayed.

Uncertainty Avoidance: The desire or need to avoid uncertainty in relationships or dealings with others.  Cultures that try to avoid uncertainty have lots of rules.

Time Horizon: Some cultures have a short-term time orientation, while others have a long-term time horizon.  As an example, business leaders in the U.S. tend to manage to maximize short term, quarterly profits, while those in Japan and China manage across lifetimes and generations.

If we compare scores between the U.S. and India, we can better understand (or at least speculate) about why our mistake occurred.  While there are similarities in masculinity and uncertainty avoidance scores between the U.S. and Indian cultures, there are dramatic differences in power distance, individualism and time horizon between us.  The specific scores are here, but it’s important in our situation to note that Indian subordinates are far less likely to speak up when talking to a person with more authority and are far less likely to contradict or challenge someone in front of a group.   So, when you asked, “Are there any questions?” it was pretty unlikely you’d hear any from your team – even if they had them.

It’s probably good for me to note, as well, that these are generalizations. Just as all Americans are different, this is equally true with Indians, so you may well see different behavior from your team members.  The Hofstede’s describe the norm within a culture, not the exception.

A Better Response

Having managed over a dozen projects composed of Indian development and quality assurance teams, I have found that there are better ways to avoid the “Understanding Gap” and prevent it from occurring.

  1. The confirmation question. In our situation, we asked, “Does any one have any questions?” to the group as a whole.  Instead, ask each individual slightly different questions, phrased in a way that confirms they understand specific elements of the task.  As an example, one might ask, “<Name here>, I’m a little uncertain how I’d complete your portion of the work, so maybe you can help me understand. How were you thinking you’d test the <insert name> functionality?”  Or, “You’re most likely to find building the <insert name> component challenging.  Have you thought about the steps involved?”  This approach not only confirms the person’s understanding, it results in better design because the person asked may have a better approach than you do (unless you have a monopoly on brilliance?).
  2. The one-on-one. After asking confirmation questions, if you find one or two individuals struggling, schedule a one-on-one to go through their work and answer their questions.  In a one-on-one, they are more likely to feel comfortable asking pointed questions, and may even propose a better way to complete the work.
  3. The follow-up call. This one is simple.  If you’ve assigned a task, don’t wait one week to check on progress.  Check back with the team at least every other day to make sure they’re making progress and understand what you’ve asked.  Over time, this will be needed less and less, but initially, the follow-up call is a true time-saved
  4. The “you’re among family” reminder. Regardless, of culture, everyone has the fear that a “stupid” question or a mistake will threaten their jobs.  In some cases, the fear is warranted.  Particularly with teams that have just formed, remind the team members that “they are among family” when speaking to team members and that team members are here to help each other.  Even more important than saying, “you’re among family” is to live up to that statement. Do not brow-beat subordinates for small mistakes and do not cavalierly fire people because of a single error.  If you do, you’ll find the two-way channel you need to effectively lead a team is suddenly closed.

Possibly, you’re reading this article before you’ve managed your first global, off-shore or Indian team, so it’s been a good primer.  But there’s far more to know about the subject than can be posted in a single blog entry.  Though it’s very academic in the way it’s written, I encourage you to buy and read Hofstede’s book, referring back to the cultural dimensions the book provides on graphs so that you better understand each team member’s cultural before you try to relate to them using a purely American mindset.  I’d also use the following links for quick reference once you’ve read the book through:

http://www.geert-hofstede.com/

http://www.geert-hofstede.com/hofstede_dimensions.php

Doing so could save your company thousands, if not millions of dollars, keep your projects running smoothly and – most importantly – help you to build a harmonious work environment where people look forward to each and every day.  After all, isn’t that what keeps us from burying our heads in the pillow and hitting the snooze button twelve times?

With Goliath Incentives for Others, Seven David’s Need Stimulus, Too

In Business, Finance, Politics, Small Business, Uncategorized, United States on 29 January 2009 at 12:05 pm

Last Saturday, I received call #7 from a friend or associate starting a business in one of the gloomiest climates since the Great Depression.  Never mind that these seven individuals are figuratively “spitting into the wind” (Jim Croce) by spending time and money in such difficult economic times, their efforts are a telling example of how the U.S. economy recovers time-and-again from recessions.  Despite big businesses shedding jobs and shuddering their windows until the economic climate improves, individuals like you and I come to the rescue with innovative ideas, hard work and untiring faith to renew growth in the most impressive economy the World has ever seen.

Given the repeated successes of America’s Davids (and Davidettes, ladies), I’m surprised and disappointed to see that President Obama has left sizable incentives for small businesses out of the economic stimulus package before Congress.  With mass transit and benefits extensions for the unemployed on the list, there’s definitely been some careful thought put into the plan about who needs help and where future growth should occur.  However, there’s little to nurture the efforts of the seven fledgling businesses contained in President Obama’s package.

Knowing the business models the seven David’s will use to grow, I’ve thought of 5 ways the 2009 stimulus package could be modified to help small businesses get America back on its feet.  These should be targeted at businesses under $5 million in annual revenue and owned entirely by individuals (sole proprietorship, partnerships, S corps, small LLC’s) to prevent larger businesses from launching subsidiaries just to take advantage of the situation:

1. Give a Three-year Tax Holiday on Income Increases to Small Businesses.

Description: Give a three year tax holiday at the Federal and State level for income growth when compared to 2008.  If you made $100,000 net income in 2008 and $250,000 in 2009, the additional $150,000 in income would NOT be taxable.  If you lost money in 2008, then any earnings in the next three years would be untaxed.  The same should apply to 2010 and 2011 when compared to 2008 earnings.

Reason:  This rewards small businesses for taking risks in 2009, 2010 and 2011 to invest in activities that increase growth, which will increase spending and employment throughout the economy.  The alternative is to NOT do this, not see the growth and not collect the tax revenue, anyway.

2. Reward Small Business for Going Green.

Description:  From buying energy-efficient equipment to purchasing fuel-efficient cars to reducing energy consumption to installing solar power, small businesses should be rewarded for finding ways to run lean.

Reason:  An immediate capital investment will boost the economy short term and reduce our dependence upon unstable energy sources long term.  Even better, getting small businesses to think green will encourage them to build this mindset into every avenue of future business, yielding gains decades ahead.

3. Give Incentives To Hire.  Big business is cutting back big time on head count and small businesses will likely follow suit.  Give small businesses 10% of each employee’s salary – up to $10,000 –  as incentive for bringing on new people. Decrease the incentive to 5% in 2010 and 2011.

Reason:  Small companies hiring in 2009 should be rewarded for bucking the trend.  While big businesses could potentially receive the same incentives, small businesses are far less likely to find loop holes in the law to exploit the tax benefits without truly bringing on a live body.

4. Encourage Small Business to Advertise.

Description: For every small business in America, give a 50% tax credit for $ spent on marketing and advertising in 2009 up to $25,000 in total benefits.  The money must be spent outside the business to either market or advertise the company’s products and services and must result in a bulk e-mail, a website banner ad, a radio ad, a newspaper listing, a cable TV ad or something similar that was not done in 2007 or 2008.

Reason:  If there’s one place I believe small businesses chronically under-spend, it’s on marketing and advertising.  Even worse, advertising is often a hit-or-miss endeavor and it takes a few tries to be successful before the appropriate channel is identified.  This type of advertising incentive encourages small businesses to consider how they can grow and the $50,000 investment required to gain the $25K in tax credits will have an enormous impact on the sales of a small business.  That same $50,000 would do little for a big one, which is already advertising at a level well-above $50 grand.

5. Provide Easy Access to Working Capital Loans for Small Businesses.

Description: Through the SBA, triple the number of $25,000-$50,000 loans to small businesses and ease up on the credit restrictions.  Advertise the avalable loans; guarantee the loans issued by banks; and, issue the loan directly if the banks won’t.

Reason:  Many small businesses aren’t expanding because they simply can’t get a hold of the capital necessary to run their current operations on a day-to-day basis.  Working capital enables small businesses to pay employees, cover rent and buy raw materials up front until their clients pay them for services or consumers buy their goods. Yet, banks have shut off the tap to their lines of credit and many aren’t issuing any new credit at all, even if the borrowing business has historically been successful.  Increasing the number of Working Capital Loans will prevent contraction among small businesses and can enable them to grow, once again.

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I’m not a professional economist (though I have an Econ degree and an MBA), so I honestly can’t tell you how much money, in billions of dollars, these incentives would cost.  I don’t have access to the modeling tools economists use and my pencil isn’t that sharp.  But I can tell you that small businesses have historically led economic recoveries, that a little money goes a long way in a small business, and the seven David’s have some good ideas that will need a break if they are to succeed in 2009.

Does “Process Improvement” Kill Creativity?

In Auto Industry, Business, Ethics and ideology, Manufacturing, Quality, Technology on 23 January 2009 at 1:58 pm

Early in my career, ISO-9000 was just coming into vogue and my employer, Manpower had earned the honor of being called ISO-9000 certified.  To say the least, the ISO-9000 concept was a little irritating to a young, creative-type:  Processes are documented, standardized, and followed without deviation because deviation yields an inconsistent outcome and inconsistent quality.  Even worse, ISO-9000 principles were being applied by Manpower not to manufacturing but to services, where the human factor was so important.  While people certainly admire the fact that a Hershey bar has the same consistently delicious taste, would the feel the same if the Service Rep at a Manpower office answered the phone in an identical manner every time, smiled at visitors in the identical manner and greeting them with the same Mr. or Ms. in the same robotic way?  Somehow, ISO-9000 seemed to be forcing the soul out of services and driving creativity out of the American worker.  This would not stand.

Fast forward nearly twenty years and I am now the devil I once cursed.  A leader of IT endeavors of all kinds, I regularly propose improvements to and then standardize processes for the company and clients I serve. To-be diagrams evolve into Standard Operating Procedures (SOPs), guidelines or end-user documentation. Similarly, systems are built with virtual guard rails that keep users from driving off the side of a digital cliff, enforcing the business rules and guidelines that are at times irritating and often restrictive, forcing workers to not only perform the same task repeatedly, but forcing them to do it in exactly the same way for sake of consistency.

Staring the enemy in the eye every time I pass a mirror, I think about what I’ve done. With such limits and constraints, how can creativity establish a foothold, much less flourish?  Have I not killed the entrepreneurial spirit of co-workers and end-users, alike?  With all these constraints, how many good ideas have been stifled, delayed or killed? Has the work I’ve done under the banner “Process Improvement” standardized our work to the point that we’re all nothing more than automatons?

A big believer in creativity and diverse thinking, I know that the World’s greatest innovations come from ignoring conventional wisdom and trying something a different way, so these questions are not trivial.  I think my answer, however, comes from two disparate figures:  Geoffrey A. Moore and Kiichiro Toyoda.

For those of you who don’t know Moore, he’s a business geek’s ultimate hero — the man behind the technology adoption lifecycle, Crossing the Chasm, and Dealing with Darwin.  It is in Dealing with Darwin that Moore introduces the concept of reallocating business resources from context to core.  Context is all that work done by employees that does NOT separate your business from its competitors.  Cores represents all work that is critical to delivering your products or services uniquely; core helps to separate you from your competitors and is the leading driver of innovation.  According to Moore, businesses spend far too much of their time (80%) in context activities and far too little in core (20%) involved in the core.

Let’s apply this to process improvement and process standardization.  These exercises provide a window for innovation, then they lock down a process so that it yields consistent results.  They also reduce a business’ emphasis on context activities by removing unnecessary steps and automating once-manual processes.  So, more time can be spent on the core, where a business can differentiate itself, developing new products or services with the creative mind.

Kiichiro Toyoda had a similar mindset nearly fifty years earlier when he developed the Kaizen philosophy of continuous improvement and the lean manufacturing concept targeting the elimination of waste.   Founder of Toyota Motor Corp, Toyoda had a keen eye that focused human efforts on eliminating waste and improving processes rather than perpetually repeating them without question.  Combined, Kaizen and lean are key reasons why Toyota leads in sales and product quality and why Toyota employees are among the happiest in the industry.

So, considering Toyoda and Moore when reflecting upon my past sins in the areas of process improvement and standardization, I’ve developed a few principles to keep in mind as we standardize:

(1) Wherever possible and cost-effective, automate.  There’s no sense in having people do work that a machine or computer can do faster and more consistently, especially when this is sure to dull the human capacity for innovation.  Instead, people should monitor repetitive processes, not do them.

(2) Involve workers and end-users in innovation.  Your best ideas often come from the line-worker, the front desk staff or a computer system’s end-users.  This also gives them an opportunity to flex their mental muscles.

(3) Focus your employees on creative efforts inside the core.  If you have people who are spending their time trying to marginally improve legacy products or services, redirect them to activities that create new products or radically transform current ones — efforts that will benefit most from the human capacity toward innovation.

(4) Leave room for creativity and individuality.  Where product quality won’t suffer and humans are involved in production, leave room for creativity and individuality.   This one is the hardest to follow, because we know that a consistent product is best created by a consistent process.  But, avoiding excessive detail in a process leaves room for grass-roots innovation and keeps the human mind engaged.

(5) Build a World that is Human-Centric.  Human beings are inherently creative and intuitive:  We move beyond patterns to think of completely different ways to solve a problem, create art or experience life.  All of the products, services and processes that we create need to remain human-centric, recognizing that they exist for the benefit of humans and to add value to the human experience.

Looking back at my list, I’m not fully satisfied that I’ve slayed the demon who kills creativity in the name of process and quality. Nor am I certain that there’s an easy way to balance the need for high quality with the need for innovation and human creativity.  But, at least I have a set of principles to follow to measure my progress.

Chrysler & Fiat — The World’s First Happy Shotgun Marriage?

In Auto Industry, Business, Trends, Uncategorized on 23 January 2009 at 10:49 am

It was not long after I posted my “10 Steps to Save Chrysler” blog that I began hearing rumors about a Fiat/Chrysler merger, which intrigued me.  Autosavant, one of the best auto-industry blogs on the ‘Net these days, scooped many of the traditional media outlets by reporting talks on the 19th in this blog entry by JS Smith that’s well worth reading:  http://www.autosavant.com/2009/01/19/chrysler-may-survive-by-fiat/.

Forced together by anemic – no, paralytic –  auto sales, the global credit crisis and some key strategic mis-steps, this engagement between two auto giants may well turn out to be one of the industry’s happiest marriages.  I decided to look back at my article from last week and see which of my “10 Steps” the Chrysler-Fiat partnership helps to address to see whether this isn’t one of the wisest merger opportunities we’ve seen this decade.

Based on a quick tally, a Chrysler-Fiat merger could effectively address these steps:

1. Original Recommendation: Stop building engines.  Analysis: Initially, I recommended that Chrysler stop building engines because of the enormous development costs associated with engine development, the uncertainty around which powerplant would drive growth in the next decade and my past experience seeing how well engine vendor relationships can work.  While a Chrysler-Fiat merger would by no means outsource engine development and production, it does enable Chrysler to share the economic burden of engine design and development, while giving Chrysler access to some of the smaller, more efficient engines that Fiat has dropped in to their European and South American products so effectively (See JS Smith Article).

2. Original Recommendation: Share platforms.  Analysis: This is also a big win for Chrysler and Fiat because the two can share platforms during design and lower overall product development costs.  Suddenly, Chrysler has access to smaller-framed vehicles at a low cost, while Fiat can eliminate some of their larger platforms and adopt similarly-sized Chrysler platforms.

4. Original Recommendation: Focus on the brand(s).  Analysis: Here’s another big success.  I mentioned in my previous blog that Chrysler lost its brand ladder when it dropped Plymouth, then diluted Dodge and weakened Chrysler.  Consider the brand ladder potentially created by a Chrysler – Fiat merger:  Fiat (small, fuel efficient cars), Dodge (mid-range, family-oriented vehicles), Jeep (off-road, rugged), Alfa Romeo (sporty, high-end, high-performance) and either Lancia or a resurrected Chrysler (luxurious, well-appointed, full-featured).  Positioned effectively, the brand ladder would be complete in a matter of 3-5 years instead of decades.

5. Original Recommendation: Dump the Dealerships, not the Dealers. Analysis:  Another big win, because it addresses the fact that Chrsyler’s dealer network is far too large given it’s product lines and likely future sales. Remember, I said that declining product sales continue to put strain on Chrysler dealerships and it’s time for Chrysler to reduce ranks so some dealers can survive the downturn.  If some Chrysler dealerships are transitioned over to the Fiat brands, this effectively reduces the number of Chrysler dealers and gives Fiat products access to an enormous U.S. Market.  I still believe it’s important for Chrysler to look at other sales channels, including shopping malls (read my original blog) and the Internet, but a merger addresses half of the problem.

Of note, I would caution Chrysler against creating “Fiat/Dodge” or “Fiat/Chrysler” dealerships.  This merely increases brand confusion and makes it difficult for the dealers to cater effectively to their customer niche.  Better to offer Dodge dealerships the opportunity to convert over to Fiat.

For the remaining six recommendations in my previous blog, a Chrysler/Fiat merger does not prevent a merged organization from addressing these issues, but does little to help them.  Chrysler would still have to address quality perceptions, needs to change the underlying philosophy of leadership and explore new channels for delivering its products to customers.  Given this, a Chrysler/Fiat merger has the potential to be a very happy marriage, but it would be unwise for  Chrysler/Fiat leadership to stop there.

As Gun-Shy Investors Turn Away from Traditional Markets, Banks Face Newest Threat

In Banking, Business, Current Events, E-Business, Finance, Peer-to-Peer Lending, Technology, Trends, United States on 16 January 2009 at 4:55 pm

Earlier today, Bank of America and Citi Group posted huge losses, then stood in line with a tin cup held out for more government loans via TARP (16 January 2009, Washington Post, “Bank of America, Citigroup Post Major Losses”).   It’s clear that, despite an injection of $350 billion, the U.S. banking industry is still reeling nearly four months into the credit crisis that has brought down some of the World’s largest banks and investment houses, leaving carnage in its wake.

Yet, at the same time these titans deal with “toxic” loans and absorbing the remains of their recently departed siblings, another threat grows beneath their giant footsteps and between their toes – Peer-to-Peer Lending.  Fueled by the sour credit market, distrust in traditional banks and fear of continued losses in the stock or bond market, once-wary investors are taking their dollars to upstarts prosper.com, lendingclub.com and even virginmoney.com where they can earn superior returns, diversify their investments and know specifically where their money is going.  Though resources in traditional banks are best directed toward immediate financial crises and folding in the business of recently acquired competitors, it’s time for traditional banks to start planning for the coming onslaught from peer-to-peer.

In only a few years, peer-to-peer lending has sprouted from the more-proven micro-lending practiced in developing countries and pioneered by Dr. Muhammed Yunus and Grameen Bank in 1983 (16 January 2009, http://en.wikipedia.org/wiki/Muhammed_Yunus).  Realizing that the loans needed by low-income individuals were far too small, uncollateralized and therefore “too risky” for traditional banks, he began making many small loans via Grameen to under-privileged entrepreneurs, who took the meager sums and made sizable profits, yielding healthy returns for Grameen.  Not specifically interested in making money, Yunus saw how the concept of pooling small sums of money from borrowers to make larger loans or taking larger sums to make many smaller loans had an enormous positive impact on the poor.  This became his business model for Grameen and other micro-lenders like it.

Operated much like the micro-lending Grameen, peer-to-peer lenders match lenders with borrowers on a relatively small scale – often no more than $25,000 for an entire loan and typically in the $5,000-$15,000 range.  Borrowers meet minimum standards for credit-worthiness and credibility, then they post information about their requested loan on line, stating how the money will be used and how much they need.  For most peer-to-peer sites, borrowers approve each lender’s loan offer and terms until the target loan amount is met.

For their part, lenders can lend out as little as $25 to a specific borrower and spread their money around as they deem fit, minimizing the risk that a single lender’s default will cause a huge personal financial loss.  Most often, payments are received on a monthly basis and doled our proportionately to each of the lenders until the fund are repaid.

Peer-to-peer lending sites like LendingClub.com and Prosper.com make their money in a few ways, though the process isn’t entirely consistent between them:  Peer-to-peer lending sites collect a 1-to-3 point service fee on the loan, much like the spread between the amount banks charge their borrowers and the Federal Funds rate at which they borrow.  They may also collect an on-going loan maintenance fee, late payment fees and collection fees if the borrower defaults.  In return, the peer-to-peer brokers screen the borrowers, process the loan, capture legal signatures and may even assist with collections if the borrowers default.

None of this sounds very threatening to traditional banks as of 2009.  The current market for peer-to-peer lending is about $100 billion (www.business-standard.com) and is dwarfed by the total U.S. market of $2.56 trillion (Federal Reserve, http://www.federalreserve.gov/releases/g19/Current/).  But, consider how the credit crisis has created a fertile environment for peer-to-peer lending:

(1)    The spread on a secured consumer loan for a car is 6.88% (7.13% as listed on Bankrate.com – 0.25% Federal Funds rate), far more than the 1 to 3% charged at peer-to-peer lenders. Though rates a higher of unsecured loans in both environments, the difference in spreads is even more dramatic.  (www.bankrate.com and http://www.federalreserve.gov.)
(2)    The yield on a 5-year government bond is 1.47% while the yield on a loan with a similar commitment, an auto loan, can yield 6-9% for the lender – a 4-to-7 point difference (http://www.bloomberg.com/markets/rates/index.html).  Certainly, risk is a partial factor in the large spread, but the other factor is likely the profit margins of banks.
(3)    Traditional lenders are turning away borrowers on all types of loans at record rates in efforts to shore up their portfolios and reduce risk.  Consumer credit dropped in December 2008 for a third straight month and automakers are citing the credit crunch as a reason car sales were off  by one-third between ’07 and ’08 (http://online.wsj.com/mdc/public/page/2_3022-autosales.html).

Traditional banks have some time to respond to the threat posed by peer-to-peer lending sites, but it can be measured in months and not decades.  They are unlikely to be able to compete with them via traditional methods, because the cost of staff, buildings and infrastructure in the brick-and-mortar is simply too high.  But it is viable

(1)    Ignore peer-to-peer lending and hope it fades away – a dangerous way to deal with a tech-savvy threat.
(2)    Acquire a peer-to-peer lending site once the process is refined and market penetration still low, reaping the largest gains by increasing market penetration.  This can be dicey, especially if the market potential is recognized early, driving up the price.
(3)    Develop their own peer-to-per lending capabilities to compete with the upstarts, keeping one of the smaller players from becoming the next “MySpace” or “YouTube” that fetches an exorbitant price on the open market.

Regardless of the path chosen by traditional banks, their spreads are likely to drop, forcing their business practices to change, as well.  A few will under-assess the threat and act too late, bringing them down in the process.  This does not bode well for the people who work for the titans of banking’ they are likely to see another assault on their jobs, just after the “credit crisis” has already dramatically cut their ranks.