The Chicken and Pig Fable

I was recently reminded of the business fable of the Chicken and the Pig and their commitment to a bacon and eggs breakfast.

The chicken has a passing interest while the pig is totally committed. Of course, neither the chicken or pig really know what they are getting into, but the self-awareness of these animals is not the point of the fable. The point is, which is fully committed to the project or job, or put another way … do they have skin in the game? Or are they dispassionate participant in the process?

Which is better?

Some will say the chicken. The chicken has a passion for laying eggs. Was born to lay eggs. And will lay eggs faithfully for a long time. And what’s wrong with that? Nothing if you want predictability over a long period of time. But usually predictable outcomes are at best average.

The pig on the other hand is totally committed with major skin in the game! The pig will not be around long-term but its contribution is big and significant.

Managers need a mix of employees on their team. While there is a role for the long tenured employee who faithfully executes every day, I also want the employee who is totally committed, works hard every day to exceed goals, and may outgrow the organization in a few years if I can’t provide new challenges or resources. Without significant commitment, the organizational will not be extraordinary.

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So, I’ll take the pig’s extraordinary commitment over the chicken’s predictable passing interest.

Darrell Pardy

p.s. No chickens or pigs were harmed in the production of this blog entry.

Rightsizing A Company

Simple rule - it’s always easier to add overhead as a company grows, than to shed it, as it contracts.

Let’s be honest. Who doesn’t like the idea of standing in front of a group of colleagues and announcing the addition of new jobs and a new piece of technology? But is there anyone who really enjoys being in front of the same group and telling them that you are cutting jobs and the technology investment will have to wait another year?

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The fact is, rightsizing a business to a smaller level is psychologically tough. It’s always easier to go from coach to first class, then from first class to coach.

Here are some lessons that may be helpful if you are faced with this challenge in your business.

Lesson 1 – It Will Be Emotional

Rightsizing a business to a smaller level will be emotionally challenging. There will be conflict over what to cut and what to keep. If employees are involved it will be what is best for the company and how best to treat employees. This balancing act is further complicated with personal relationships, favorites, and the “sacred cows”.

Second guessing, teeth gnashing, and sleepless nights during this process in normal.

Lesson 2 – Swallow the Worm Whole

What is the best way to eat a worm? - In one bite. Get it over with.

Depending on how the business is performing will determine if you use a scalpel or an axe. Too many executives believe they can make surgical cuts to minimize the downsizing and pain. Then they find themselves having to surgically cut again six months later. The fact is, we are business leaders and not surgeons and most of us just aren’t that good.

Sometimes you just need to take an axe and chop deep. The idea is to cut deep, deeper than the revenue reduction may require. This may seem like overkill, but it is the opportunity to make the business leaner and meaner and it is making up for years of unnecessary overhead growth.

Lesson 3 – Plan, Plan and then Plan Again

Planning is paramount. Plan for contingencies, plan for disasters, plan for everything. Then plan some more. And never have a “worst case” plan. You have no idea what worst case really is.

A critical part of the plan is preparing a realistic budget. After determining the correct and realizable revenue and contributions start calculating your costs. The first and most important cost is your profit. Too often we plan for a breakeven profit or a marginal profit. This is dangerous because inevitably there will be additional costs or reduced revenues somewhere along the way. Having a buffer is critical so you won’t have to do this again in 6 months’ time.

Lesson 4 – Respect the Process and the People

Once there is an action plan in place – follow it. It will be easier emotionally. Then it is critically important to go out of your way to demonstrate that you care about any employees being laid off by creating the best possible exit program you can. This will make this entire process much less painful and easier for all concerned. Also, your remaining employees are watching and assessing how you handle this matter. If you do it with great care and concern, they know you will be kind to them as well.

 

Lesson 5 – Respect the Law for Layoffs

It's important not to allow the legal department to design a layoff, but just as important to respect employment laws. If you have planned your lay-off according to real business needs, and not on headcount, seniority, or your personal biases, you will have no problem upholding the law. You will find yourself in legal trouble when you base your layoff on factors other than business needs.

Lesson 6 – Honesty and Communications

It is critical that you communicate honestly with your employees. After the initial rightsizing decisions are announced, share the big picture plan with the end game desired. Keep them in the loop going forward. This will create a bond and build respect with the team by telling them the truth, as painful as it might be to hear.

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I hope this is helpful

Darrell Pardy, CPA CA

Utilize 5 Simple T's for Business Success

Keeping strategy and execution in business as simple as possible is often a key to success. We have a tendency to overcomplicate and over think things as business leaders. One simple and effective tool I have found useful when starting a new business or major project is framing the undertaking with what I call the Five Simple T’s: Talent; Treasure; Time; Tactics and Transparency.

As a case example of how this can work, I will use a recent startup Aventure Management are partners in. Brown Dog Carriers & Logistics (www.browndogcarriers.com) which was started in June 2017.

Let’s start with the Talent component. This might be the most obvious. You need talented people to run a successful company. But first you need to identify the type of talent you need for your business to be successful. There are common areas of talent all businesses need. Sales, Production, Accounting/Finance, HR, IT, and Legal. Then there are the specialty talents you need based on your business. If you are building a software company, you probably need a top-flight CTO/Programmer. In our case with a new Transport/Logistics business we needed an experienced operator who knew the ins and outs of trucking and logistics. In a start-up, people usually wear more than one hat. In our case our President was the talent when it came to the Operations of the business but was also the Sales and Marketing talent the company needed. The other partners brought Accounting/Finance, HR and IT expertise. In areas where we didn’t have the expertise, we made sure to outsource that. I can’t emphasize enough that if you don’t have talent in an area that you perceive you need it, then go get it through a hire or an outside agency.

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The second component is Treasure (Capital/Cash). This is just as critical as talent. One major cause for business failures is the lack of upfront capital/cash when starting the company. See the blog posting; http://www.aventuremgt.com/blog/2016/12/10/cash-the-oxygen-of-your-business When we started Brown Dog, my partner and I did extensive financial forecasting for the first year and calculated the amount of capital we would need to operate, pay bills, meet payroll and expenses while trying to build revenues. Many companies under-estimate the cash needed and just before they are about to start generating positive cash flow they run out of cash. Then it’s panic time and often loss of momentum or even the business when having to negotiate from a position of weakness. When we started Brown Dog, we came up with an amount of Treasure we thought we would need and then doubled the number assuming we missed something. This helped us through the lean months that most startups go through.

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My third component is Time. This is not a measurement of how long before your operation is successful. This is a measurement of the amount of time you as an owner/investor are willing to put into the business to make it successful. A simple axiom for business owners; Lazy people need not apply. This means that as an owner you work whatever hours are needed to get the job done. That means you need to be the first into the office in the morning and the last one out in the evening. In our case it means our President spent weekends painting our new offices, jumped in one of our trucks at midnight to help a potential customer who was left in a bind (they are now one of our best customers). Driving another truck in the day and then just before ending a 16-hour day willing to take the trash out. For me it means working evenings and weekends to mentor and review finances and meet potential clients, for our Accounting/HR partner it means working Sunday mornings to get a week of billings up to date or while on vacation getting the payroll completed. Basic rule is that business is 24/7 and you need to be available the same amount of time.

The fourth element is Tactics. Having a set of Tactics (strategies) to implement will give focus to your business and will help you keep on schedule and on budget. Both critical to long term success. When we started Brown Dog, we made a list of key Tactics that we believed would be needed to meet our defined goals of growth, service and profitability. These included everything from incorporation and web site design to asset purchase and management. We then set sub tactics with budgets, timelines and identified the responsible person for each Tactic. This enabled all of us to see at a glance where we were in keeping the project moving forward.

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Finally, I cannot stress enough the importance of Transparency. Being open and honest with your partners, customers and employees will go a long way to fostering support for you personally and your business. I have found it always better to be up front and honest regardless of whether the news is good or bad. People know if you are being honest with them or bullshitting them. So be honest and genuine and you may find them going an extra mile to help you through a problem. That’s always been my experience.

I have been lucky enough to have been involved in half a dozen successful companies both as an employee and an owner/operator. Over the years I have refined my pitches and one of them includes having the right Talent, ample Treasure, Time invested, sound Tactics and lots of Transparency in place. That’s my key to success!

Darrell Pardy, CPA CA

Partner/Co Founder

www.aventuremgt.com

 
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The Secret of Great Living ...Great Giving

“What we do for ourselves dies with us. What we do for others and the world, remains and is immortal” – Albert Pike 1809-1891

A friend of mine told me last week that “the secret to great living is great giving”. I love how some people can encapsulate a philosophical mantra into eight words. Myself, it takes eight sentences … But, however long it takes to convey … the message rings true. 

As a trustee of different charitable organizations over the years I have always subscribed to and promoted the idea that we should give of our “time, talent and treasure”. Some of us can give of all three but all of us can give of at least one. 

And now here is what every-one who gives knows but we aren’t supposed to say so - while the recipient benefits from such giving, as donors it makes us feel good, reduces stress, and increases our self-esteem … and there is science to back that up. I’ll leave it to you to read through the science study but it involves charitable giving, sex, and eating chocolate so who am I to dispute that science! [1]

Let’s all benefit by giving more of the what we can offer to our neighbors and friends. 

Here are three ideas to make great giving to enjoy better living:

  1. 1. Strategic Giving - In our household, we give to three areas – education, arts and poverty alleviation. And we set an annual budget for giving. It makes it easier to pick among the many wonderful well-meaning charities and saying no to great causes without guilt. We know we can’t give to, or volunteer for everything, and usually the person asking is completely understanding when you say no for a strategic reason. 
  2. Impactful Giving - We try to give impactful gifts and I always make that argument when asking for a gift. I remember asking an alumnus of an Ivy League college for an educational gift and was told that they were writing a check for $10k to their college but would give me $1,000. I persuaded them to reverse the donors. That $10k meant the world to the local educational institution that received it and would not have impacted at all on their alma mater school’s $30B endowment. We often give meaningful gifts to service staff (especially housekeeping staff) when they least expect it. $10 left on the bedside table of your hotel room or an extra $50 tip for a server makes a huge impact on the recipient. Ask yourself if the gift will make a real impact on the recipient?
  3. Giving of Time - For those who don’t have the financial means to give … most organizations need your time as much as your money. There is a great Jewish concept called the Kibbutz from which the slogan “many hands make for light work” was born. Call any community center, local church, synagogue or mosque and you will find a multitude of opportunities to be one of the many hands helping in great work and meeting new like-minded friends. 

I encourage everyone to start giving of their time, talent and treasure or give at greater levels. The USA is one of the most charitable giving countries in the world but has slipped from 1st to 2nd in the World Giving Index. My native Canada has dropped from 2nd to 6th. So, to my American buddies … let’s get back to # 1 and to my fellow Canadian’s it’s OK to be # 2 but not 6th. 

Cheers

Darrell Pardy, CPA CA

 

Why Business Leaders Must Act to Protect and Promote the Arts

The “Arts” are under fire again. We have been hearing for the several years that we should be focusing more on math and science in our schools and less on humanities. Now the NEA[1] and NEH[2] along with other organizations that promote the arts are under siege by the new administration in Washington. The budget that our President has proposed eradicates any federal funding to those organizations.

Why… because there are those that believe the arts do not bring any measurable value to the economy and are only for the liberal minority.

If you don’t mind me saying so … that’s rubbish or dare I say, an alternate fact.

I will let others tell you of the pure economic benefits that the arts create both on a local and national economic level that is measured in the billions of dollars[3]. My purpose here is to make the argument that the arts are also important in developing great managers and decision makers and as business leaders we need to do everything we can to protect and promote the Arts.

Let me pause for a minute and state emphatically that science and math are very important and noble disciplines. I do not advocate that we stick our heads in the sand and ignore major global problems that science can help solve. What I am saying is that the arts play as important a role in helping us identify complex solutions to complex issues. And we need that in business.

Here is my reasoning.

  1. The best critical thinkers and problem solvers I have worked with over my career have all been people who have a background in the arts. There are no multiple-choice, or answers by rote, for most of the real problems business leaders face every day. The best managers bring a human element of curiosity to problem solving not just a spreadsheet. That makes for longer and stickier fitting solutions.
  2. Managing highly motivated and creative people is not easy and there is no one solution fits all answer. That type of thinking still exists in the military (probably for good reason) but is not the right fit for the dynamic business world of 2017. Managers I have worked with that have experience in the arts bring creativity and compassion to the management of their teams. Their teams excel over those run by military style drill-sergeants.  
  3. We need mentally tough leaders in business. Something very few business schools teach. I am not talking about prepping for a test or writing a case exam. That doesn’t prepare you to manage and deal with failure in the real world. An arts college does a much better job at this because artists have their work/performances critiqued every day in a real world setting with real world participants. By the time they graduate artists typically have learned to deal with embarrassment and failure and are mentally tough.

There are many great examples of the types of leaders I have been describing. Sir Richard Branson, Susan Wojcicki, John Mackey, Howard Schultz, Carly Fiorina, and Jack Ma to name a few. They all have a strong background in the arts that shaped their leadership and problem solving abilities and helped them achieve business success.

I have not had the business success of those mentioned in the last paragraph. But I have learned more about leadership and problem solving in my executive roles on non-profit “arts” boards than in my seven years in business and graduate school or in any singular business role I have had. I have solved many perplexing and seemingly no-win scenario problems while sitting in a hall listening to a concerto.

In September 1965, in a Rose Garden ceremony President Lyndon B. Johnson signed into law the National Foundation on the Arts and the Humanities Act of 1965. The act called for the creation of the National Endowment for the Arts (NEA) and the National Endowment for the Humanities (NEH).

He stated “Art is a nation's most precious heritage. For it is in our works of art that we reveal to ourselves and to others the inner vision which guides us as a nation. And where there is no vision, the people perish.” And I would add our business and economy.

Support for the arts from governments, setting the national tone, is a key distinguishing feature of progressive societies where business can thrive and prosperity follows. Those societies where the government devalues, controls and suppresses creative expression have a long, dark history of ultimate failure. 

As business leaders, we can’t let the arts be relegated to second-class or non-status. We need graduates who have a combination of arts and sciences on their resumes. We need to give the art and arts education equally footing with other disciplines. Right now, only 8% of American colleges have Arts as their primary discipline. This is half of what the number was thirty years ago.

I urge all business leaders to do two things

  • Support the NEA and NEH and the local arts community
  • Give that job applicant with an art based degree serious consideration when applying for a key position in your company.

Your business and our economy will be better for it.

See you at the theatre!

Darrell Pardy, CPA CA

My Mobility Challenge Lessons

An accident this winter has laid me up with a major knee injury that needed surgery and has severely limited my mobility for the next few months.  My disability is not permanent and as a self-employed consultant I can work from home where I get to modify the environment to suit myself. But here are some things I have come to realize post-accident.

1.     Getting around on crutches is harder than it looks.  Especially if you can only put weight on one leg.  You are always worried about falling. Hallways, doorways and doors are never the right angle or partially blocked.

Check your hallways and doorways today.  Clear things that have ended up in the hallways and that protrude into doorways.

 

2.     That piece of paper on the floor or the spilled drops from a coffee cup become a major slip risk when you are mobility challenged – whether you need crutches, a cane or wheelchair. 

Good housekeeping is good safety for all.  Install a culture of cleaning up all spilled and dropped items immediately. We are all responsible for housekeeping.

3.    Good grab bars are very useful.  Grab bars in washrooms help all people who have a challenge with mobility of any type.  In my house, I have no grab bars, so I must improvise with window ledges, fixtures, furniture and my husband. I am finding that grab bars would be useful in many spots – like near the sink, near the shower and in the kitchen. 

Do you have secure and solid grab bars in your washroom stalls, near the sinks and anywhere else that someone may need help with balance or to change positions?

4.     Elevators are a necessity if you cannot walk on stairs and open many experiences to those who have a mobility challenge.  Elevators  added to meet accessibility codes are often tiny and may only hold one person in a wheelchair and their companion.  In a regular elevator, it is much easier if the person in a wheelchair can enter first and turn around to face the door before everyone else gets on. 

Check your manners and be considerate of those in wheelchairs, on crutches or using a walker or cane.  They may be slower but have every right and probably a need to get to their destinations.

5.     Inviting me out?  Great I need the break.  But first look at the proposed location and make sure I can be accommodated.  It doesn’t take much and I will gladly share my needs and bring any special items that you would not have. 

Plan how you could accommodate various disabilities in your company meeting locations and add accommodation planning to all checklists for company outings.  This pre-planning will allow you to quickly and easily meet the needs of employees and visitors with disabilities, whether they are permanent or temporary.

6.     Emergency evacuation procedures for those in wheelchairs have always struck me as rather lacking – stick them in the stairwell to wait for someone to carry them down.  Now that I am using crutches or a wheelchair to get around these procedures positively scare me! 

Take the time now to work out details on how you would evacuate people with any kind of mobility problem. Even if a person uses a cane or just has a problem going up or down stairs they deserve to know and be involved in designing a complete evacuation plan.

7.     Self-pity and inactivity are an easy reaction to the realization that you now have a permanent disability.  Those that move beyond that and get on with their life have a lot of skills that can help your organization. They have had to become problem solvers, engineers and do-it-yourselfers. 

Ask them what they can do and present your environmental problems to them. You might be surprised at the innovated solutions they can propose!  And in doing so you will find not only applicants that are qualified to do the key requirements of the job, but that will bring a can–do attitude and problem solving skills to the work place.

8.     The saying “There but for the grace of God go I” is so true.  I have been skiing for over 20 years and I am a skilled skier.  So, a transverse across a beginner trail was done without concern – until I found myself landing hard on my knee and rolling and sliding down the hill.  With the help of surgery, my knee will heal and I will regain my mobility but not everyone is so lucky.  There are so many ways to become disabled and it is not anyone’s fault that they are disabled. 

Approach each person with a positive attitude, not pity.  That paraplegic confined to a wheelchair may be exactly the skilled designer you need and a champion wheelchair basketball player on the side!

Our world is built for those with two good legs who can move themselves confidently through their environment.  If mobility is a requirement for most jobs in your organization, you need to re-evaluate your work environment and plan changes that would accommodate various mobility difficulties.

A bit of thought and planning now will prepare your organization to hire that person whose disabilities may at first glance blind you to their truly amazing abilities.  It will also help you to accommodate short term disabilities.  Planning and building in accommodations for mobility problems is a good business decision.   Who knows who your planning might help – it might be yourself or the CEO!

Carolyn Hughes

Five Business Lessons From The Five Time Super Bowl Champs

For those who watched Super Bowl LI last night you may have seen the single most impressive one-game victory in sports history. It will be hard to find a comparable come from behind victory on such a grand stage.

But should we be surprised? Bill Belichick and Tom Brady must own every meaningful Super Bowl record. Much has been written about the most successful Coach-QB tandem in NFL history, trying to pinpoint their secret to success. I am not a football expert. I’m a casual fan but I do know a thing or two about successful organizations and Robert Kraft has built an organization that is the envy of all sports and should be one to be emulated by non-sports business as well.

Since 1994 when Bob Kraft laid out $175 million for the team the value has climbed to $3.4 billion[1]. A return of almost 2,000%. Since Belichick was hired in 2000 the Patriots have outdistanced the value growth of the rest of the NFL by almost 200%. Any business would aspire to have those numbers for their shareholders. And after yesterday these numbers must be higher.

 

I have written about the importance of leadership and good organizations in the past and many others have written about the Patriots and leadership. Here are my five lessons from the five time Champs.

Lesson 1 – Understanding clearly the roles and responsibilities of the leadership team.

When Tom Brady was recently asked how he and Bill Belichick have avoided major disagreements in the sixteen years together his reply was “we have discussions but in the end, he’s the coach and I’m the player”.

I have worked with organizations where senior management is never fully on board with their role and responsibilities. This leads to infighting, poor messaging and a leadership team working at cross purposes with each other. Limping from one internal drama to another these companies ultimately fail.

Organizations should emulate the Patriots ability to clearly define each player’s role and responsibility. And if you can’t do what is expected then you are gone. No time for drama.

Lesson 2 – Having mutual respect and confidence in those around you.

“I know what they expect of me and they trust me to do my job.”- Tom Brady.

Winning organizations are ones that have built strong leadership teams that trust and respect each other. In addition to understanding roles and boundaries it is critical to have trust in your teammates and especially your leadership. I worked with a client where the entire leadership team had no faith in the company CEO. I sat in on a meeting and noticed two things. The CEO often answered my questions to his team, and after the meeting the team headed out together without the CEO. The lack of confidence that exists in both directions between the leadership team and the CEO is undermining the company’s success.

In last night’s game there was no one on the Patriots bench who didn’t believe in Brady. And Tom Brady knew his team would execute the plays that Belichick was calling. The team played the full game – they didn’t give up when they were down 25 points – they kept playing, putting in the hard work and expecting the next play to be better. Trust and respect for each other’s ability to get the job done in a difficult situation was what led to victory.

Lesson 3 – Have good boundaries inside the organization.

“He (Tom) doesn’t need to be personal friends with the coach. He’s got more personal friends than he needs. He just needs to have a coach, have the organization going in the right direction.” Tom Brady Sr.

Friends and business often make for really bad companions. Successful leaders will have empathy for their team but do not need to be their pals. It is hard to tell your close buddy that their job performance is hurting the company.

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Lesson 4 – Team Work On and Off the Field

When you think of the New England Patriots you think of the team – there are star players but it is the whole team that is the focus. When congratulated as the best coach for winning a record 5th Super Bowl, Belichick replied, “It’s all about these players.”[2] In Tom Brady’s post-game interview, he answered questions about plays with the words “us”, “our”, “we” – it was all about the team play.[3]

The team gives back to the community – through the Patriot’s Charitable Foundation and personal initiatives, everyone in the organization from the Owner Robert Kraft on down are encouraged to make a difference in the New England region and beyond. Current players, staff and alumni, friends and family all come to together to help many non-profits and charitable causes.  

Lesson 5 – Having depth of talent in the organization.

No matter the roster, the Pats have kept plugging out winners, and Randy Moss has a good idea why. “I just see a team that still buys into what Bill Belichick is selling,” Moss said. “You look at a coach, and it’s very rare where you see a coach stay for so long and be so effective. Just looking at Bill Belichick, the model of do your job still sends volumes throughout the league[4].”

Belichick has amazing winning statistics but not every year has been easy. In 2005 the Patriots won 11 games and claimed their third straight division title by using their depth – 45 different players started that year, a record for an NFL division champion. In 2008 the Patriots had a 11-5 season record without their star Quarter Back Tom Brady and we saw it again at the start of this season as the team won with Jimmy Garoppolo and Jacoby Brissett at Quarter Back while Tom Brady served his suspension.

Every company needs to have a continuous recruitment and training program to ensure continuity of excellence. In the sports world, a dynasty is often considered a five-year run. What the Patriots have complied is on a level with the Celtics in basketball, the Canadiens in hockey and the Yankees in baseball. Organizations that have over long periods of time delivered championships. What makes the Patriots run even more remarkable is that it has been accomplished by the same core leadership, Brady, Belichick and Bob.

So why not take a page out of the playbook. Evaluate your own business and see how you are performing in the five areas where the Patriots have shown can lead to sustained success.

Congratulations Patriots Fans!

Darrell Pardy

[1] Cork Gaines – Business Insider Sport http://www.businessinsider.com/robert-kraft-new-england-patriots-2017-1

[2] http://www.patriots.com/video/2017/02/05/belichick-its-all-about-these-players

[3] http://www.patriots.com/video/2017/02/06/tom-brady-was-exactly-how-we-didnt-plan-it

[4] http://nesn.com/2016/12/randy-moss-gushes-about-his-patriots-tenure-tom-brady-bill-belichick/

Avoid Stereotyping When Hiring!


Hiring for cultural fit is a common phrase in many companies.  It needs to be applied carefully to avoid stereotyping people and making your employees all fit into the same cookie cutter mold.  A good fit should be thought of as pieces of a multi-colored puzzle.  Each piece is different but together they fit to make a picture.  When hiring look for a fit with the style of your company – will this person be able to communicate well within your company; will they be able to work within the normal parameters of your company; will they be able to grow with your company?  Look at the gap that their skills would fill and how they would enhance your business.  Don’t be afraid of diversity, it makes for a much more interesting and dynamic company.


Stereotypes help us make sense of our world, but they are never the full story and often lead us to incorrect conclusions.  The definition of a stereotype is “a widely held but fixed and oversimplified image or idea of a particular type of person or thing”[1].

[1] Google Dictionary

While stereotypes help us to make decisions in times of danger by quickly connecting our past experiences and knowledge to a current situation, they rarely prove true or helpful in the long run.  There are as many exceptions to the stereotype as there are truths. 

For example, imagine a person with a mask over their face and a gun as a stereotypical robber.  Now imagine yourself running to extract yourself from the situation and giving a description to the police about the robber. What description did you give?

How many of you gave the robber characteristics not mentioned in the description?  Is it a man or a woman?  What race is this person?  Are they old or young?  Too often we subconsciously place people in our personal bin of “bad guys” and develop a fuller description based on the oversimplified image we hold in our mind.  Stereotypes are one reason why our memories are often wrong and we are poor witnesses.

·      Stereotypes breed fear – When we harass or over react to others out of ungrounded fear such as in many published cases of harassment of young black men.

·      Stereotypes breed mistakes – When we don’t see reality our actions may not be correct.

·      Stereotypes breed divisions– When we judge others only by our over simplified view of the group we place them in we fail to connect fully and understand other points of view.

·      Stereotypes breed isolation/alienation – When we feel only comfortable dealing with those in “our group” and remove ourselves from fully interacting with the actual world around us.

Where do stereotypes come from?  They come from our family, our friends, our education, our chosen news channels, social media, the movies and TV shows we watch.  The games we play, our age, where we live and work, our travels, and our personal experiences all are factors.  Everything about our lives is reflected in our stereotypes.  Though we all have stereotypes the more limited our experiences with other groups, the stronger we rely on our stereotypes.  This is as true for the person in the big city working and socializing within a limited group as it is for the person in a rural town with little diversity

We need to consciously open ourselves to the diversity of the world around us, to recognize our stereotypes and move forward with and open mind.  Good pre-schools and schools where children are taught in an open and diverse environment work to set-up the next generation to operate beyond their parent's stereotypes.  But it is never too late to change our thought patterns and train ourselves in new ways of looking at the world.

So, stop using a cookie cutter to choose your employees and see beyond your subconscious stereotypes to find the piece to fill the gap in skills and experience to complete your puzzle.  It will take a conscious effort to find that candidate who will fit and enrich your company.  But in the end, you and your company will be better for this effort.

 

Carolyn Hughes, SPHR, SHRM-SCP

Operate Lean and Skip the $200 Lunch

I am sitting at Logan Airport in Boston suffering yet another flight delay (the subject of an entirely different blog) and thinking about lunch. A sandwich and coke at the local Hudson News is about $15.00 in total. But next door is a nice restaurant with table service. Entrée and glass of wine - $40.00 with the tip.

A month ago I would have opted for the $40.00 meal. That’s before a colleague of mine told me how he changed his thinking about operating lean. He explained that if you spend $40.00 on a lunch that has no real economic benefit to your company then you should actually multiply that expense by the earnings multiple you hope to get when you sell your company.

Let me clarify.

When a company’s market value is being determined one of the ways to arrive at a selling price is to multiply the average adjusted EBITDA[1] of the company by a factor. The factor or multiple is usually based on the industry and risk associated with the company and the likelihood that the discounted present value of future earnings will be achieved. What is really important to know is that this factor can be anywhere from 5X to 10X in most companies.

So if the average EBITDA of a company in a low risk industry was $1,500,000 and the multiple was determined to be 8X then the value of the company would be $12M on the sale (8 X $1.5M).

Now back to the that meal that was going to cost me $40. Since I could just as easily spend $15 on lunch the $25 difference is generating no real additional economic benefit to my company’s bottom line. When it comes time to sell my business the $25 is going to become $200 ($25 X Multiple of 8). Wow… I doubt the food at the airport was worth that much! Imaging doing that once a week for an entire year – that’s $10k!

Now think about this in other non-production costs and overheads.

Let’s assume you don’t shop your annual building and liability insurance and you end up paying an additional $15k per year. Really you are paying $120k. That extra $5k salary bump you gave the underperforming person is going to cost you $40k on the sale of your company. The trade association that you are a member of that hasn’t generated a single dollar of revenue for you but makes you feel good … you get the picture.

I am not advocating that money spent on producing revenue isn’t worthwhile. However, I doubt many entrepreneurs would spend $1,000 to earn $500. But that is really what you might be doing if you are not always thinking lean and looking closely at the economic benefits of every dollar you are spending.

So the sandwich and coke wasn’t as nice as the entrée but when I add up all the savings from my new lean thinking I could walk away with a cool extra $500,000 in cash when the business was sold.

Remember cash is the oxygen of your business and every dollar you save is worth maybe 8 times the amount! 

For additional help on operating lean and better managing cash flows contact us at Aventure Management.

Have a Happy and Prosperous 2017!

Darrell Pardy

[1] EBITDA = Earnings Before Interest Taxes Depreciation and Amortization. Calculated by taking the pre-tax income of the company and adding back interest expense from all debt and leases and depreciation and amortization charges for the period.