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Friday, March 14, 2008

Stuff happens: What to do when you bear bad business news

The business world is definitely not for cowards. There are good days and, well, not so good days. Plans fail. Market conditions change. Projections miss the mark. As a manager, sooner or later, you will have to carry unpleasant news to your senior management team, or to your stockholders.

When that day comes, especially in today's competitive environment, you'll be tempted to push the panic button. Here's my advice: Don't.

As you stand on the cliff ready to jump, here are a few things to think about:

1. The sky (almost) never Chicken Little usually winds up looking foolish. Everyone who has been in business longer than five minutes knows that it's risky and bad things can happen. Inexperienced managers sometimes remind everyone of potential disaster every time a decision is made. Usually, their motive is to cover their own behinds, in case something goes wrong. It's unnecessary - and annoying.

Before you pull the fire alarm, make sure you are dealing with a real crisis, not just what could happen if things go wrong.

2. Size matters. Okay, so you've got a real issue that needs attention. But how serious is it? Are we talking a four-alarm blaze, or can you handle it with the extinguisher under the sink in the break room? Take a minute and rate your problem on a scale from one to ten. One means someone might be inconvenienced in a year or two. Ten: evacuate the building immediately. This will help you take appropriate action, without over - or under - reacting.

3. Timing is everything. You don't want to rush to the board room without all the information you need, but don't wait too long, either. Problems you ignore - even small ones - usually just get bigger. If the issue is pressing enough, people find out about it anyway. No one will love you for letting a nasty surprise grow to twice its size while you get your ducks in a row. Better let them hear from you in a timely fashion.

4. Two heads (or twenty) are better than one. Don't forget, when you share a problem with other managers, you tap into a rich pool of experience and possible solutions. Chances are, somebody has seen it before and has an answer it might have taken you weeks to figure out on your own. Business is always a joint venture that takes a whole team of smart people. Don't be afraid to pass the ball and let someone else run with it.

5. Take responsibility - but not too much. Many people fear delivering bad news because they think it is all their fault. Sure, people make mistakes, but more often than not, when things aren't turning out as senior management planned, it is due to elements outside anyone's control.

The current trouble in the sub-prime mortgage market is an excellent example. Suppose you've had a condominium development project in the works for a couple of years. You've done the work, and everything looks good. Then, suddenly, market conditions change, due to unforeseen events in an another sector of the real estate business. Money gets tighter. Consumer confidence falls. Through no fault of yours, you now have to report to shareholders that projections must be significantly revised.

Own up to your contribution to negative issues, but only yours. Keeping your perspective will make your job as an unwanted messenger much easier.

6. A steady flow is better than a flash flood. Create an environment in which you routinely discuss all issues - positive and negative - that affect your company. When information circulates freely, there is less need for dramatic "announcements" that catch everyone by surprise.

Bad news happens. But, if you keep your head when bringing to the attention of managers and shareholders, it doesn't have to be the end of life as we know it.

Sunday, March 2, 2008

Thinking of being on a board of directors? Four things to consider

Being a member of a board of directors can be a prestigious and rewarding activity. It allows business and community leaders to work to improve companies in which they have an interest, or to support non-profit organizations they care about. Board membership provides a valuable platform for social and business networking.

But, it's also a significant responsibility. Many candidates for the position don't fully understand what's involved. For instance, board members assume personal liability for the consequences of their management decisions. Or, in some cases they are expected to invest a significant amount of time in work on committees, or fundraising activities.

Here are a few of the important things to consider before accepting a seat on a board of directors:

Know when you're a good fit - and when you're not.
As flattering as it is to receive an invitation to serve on a board, take time before you accept, to be sure you're right for the job. Companies and organizations have a variety of reasons for offering you the position. You may have skills they need, or provide access to resources they otherwise lack.
Make a point to know what they see in you, and decide for yourself whether you are comfortable playing the role they have in mind. Also, be honest about whether you can deliver all they think you can.

In some cases, your decision may be based on what's best for the organization in question. I once turned down a position on the board of a regional university after considering who was on the board already. All the other members were qualified community leaders and business people. But none had influence beyond the local environment. The problem was, neither did I. I felt strongly that the board would benefit more by inviting someone with national, or even international appeal. Since then, the school's reputation has developed dramatically - and justified my decision.

Know the organization's financial liability and insurance coverage.
As a board member, you can be personally sued for decisions and actions that result in harm to the public, or to stockholders. It is important to understand what your exposure could be in such a case. Companies and organizations typically carry insurance to deal with lawsuits, but the policy may be inadequate to cover the full liability. A $1,000,000 policy won't even pay the legal fees on a $30,000,000 suit.
Make sure you do the math before you take the job. If you have a substantial financial stake in the company, the risk may be worth it. If not, be careful.

Know the management team.
One of the duties of a board of directors is to oversee the organization's management practices. In other words, you are legally liable for the actions of your management team, as well as your own. Get to know the people who run the company before you agree to vouch for their competence and integrity.

Know what's expected of you.
There are two kinds of boards: "advisory" and "working."
As a member of an advisory board you may simply be expected to offer wisdom in important decisions. Or, you might be called on to cultivate donor relationships, as a member of a non-profit board. The time commitment involved is usually not significant.

A working board, on the other hand, is expected to take responsibility for hands-on management activities. For instance, if the company decides it is time to revamp its human resources policies, you might be asked to chair the committee of employees tasked with the job. A friend, who was a member of a local non-profit arts center board, told me his first official act was to spend a whole Saturday cleaning and painting the basement.

Serving on a board can be an exciting opportunity to be on the cutting edge of an organization's growth and advancement. Just look before you leap. Know what you're getting yourself into and avoid any unpleasant surprises.

Yes! The magic word for better business

This scenario has happened to all of us:

You walk into a company's customer service center with an issue you feel needs to be resolved. Something has happened to make you less than satisfied with their product or service, but there is still a chance for them to make things right.

But, you know from the moment you lay eyes on the person across the counter that the answer to your question is probably "no." Right away his demeanor is confrontational, daring you to get past his defenses. Or, at the other end of the spectrum, he is too timid to make even the smallest decision on his own.

It reminds me of the saying a friend of mine shared with me from his days in the army. He was a clerk in a military supply depot. His boss put a sign over the front desk that read: "Your request is disapproved. Resubmit in 90 days for further disapproval."

That about sums up the attitude of many people in business. How does this happen?

It's true that many employees bring a natural pessimism and grumpiness to work with them every day. They seem to actually take pleasure in saying "no," when "yes" would cost them nothing at all. As managers, the best you can do is try and keep such people away from the general population of your clients and customers.

But I think the culture of "no" in business goes deeper than a few gloomy employees. In fact, it is often created by thoughtless - and usually inadvertent - management practices. Employees learn when to say "yes" from their managers.

I run a couple of Ben and Jerry's Ice Cream stores. Everyone loves ice cream, and our product towers above the competition (take it from me!). It's hard to create dissatisfaction with so much going for us. So why did a customer named Barbara call me recently to complain about her experience at my store? The answer is, I had unknowingly taught one of my employees to say "no" instead of "yes."

Here's what happened: Barbara had a coupon for a discount on her next purchase. She had saved it until she had time to bring her kids down to our store for a treat. So far, so good. The problem started when she presented the coupon to Dan, the cashier - who noticed it had expired the previous week. Following the letter of the law, Dan would not accept the coupon.

How was this my fault? I had not done a proper job of empowering Dan to think for himself, to see the bigger picture. Sure, I would not have wanted him to honor the expired coupon if someone walked in the door with two hundred of them. That customer is simply running a scam. Rules like expiration dates are not there to keep us from making our ordinary customers happy. It was my job, as manager, to make sure everyone knew that.

Here's a success story that illustrates my point:

A friend of mine has a relatively new car that broke down recently. He wasn't worried, because it was still under warranty - or so he thought. It turned out the odometer stood 204 miles over the 36,000 mark specified in his warranty. Technically, the woman checking him in could have said "no."

But she didn't. She fudged the numbers and, in doing so, created a satisfied customer who has told the story to dozens of people. Did her action cost the company a little money? Yes - in the short term. Did she strengthen the company in the process? Absolutely.

Here are a few things to keep in mind as managers, if you'd like to replace the culture of "no" with a climate of "yes:"

1. Every job is a customer service job. What are you and your employees at work to make? Customer satisfaction. Profit will follow that commitment.

2. Safety first. If your employees feel that a "mistake" will earn them a reprimand, or even cost them their job, they will always choose "no" over "yes." Make them feel safe, and that you will back them up.

3. Practice what you preach. When your employees come to you with ideas for how to improve your operation, be careful you don't automatically shut them down with "no," when "yes" would go a long way toward making them feel like a valuable part of the team.

Your business will be better off if everyone treats "no" as a word of last resort.