BERKONOMICS – Business insights from Dave Berkus

As a manager, you have a number of critical tasks that are general to your position as opposed to specific to your industry.  These include ensuring the continued health of the organization, setting the moral compass for your stakeholders, providing for succession by training and documenting, leading the effort in compliance of regulations and safety needs, and … elimination of all possible bottlenecks that impede the efficiency of your organization.

The definition of a bottleneck in your business is one that constricts the flow of work from one area to another in the flow of product or service through your organization.

[Email readers, continue here...]  A bottleneck in your organization’s flow of product or service can happen, shift, or disappear quickly.  Common to all bottlenecks are three factors:

1. All product, labor, and cost before the bottleneck are impeded from creating maximum efficiency by being forced to slow output or build inventories. This is a costly loss for any business and one that should be a focus for your management as soon as identified.
2. The bottleneck itself strains to keep up with demand, often to the point of reducing its own efficiency in the process of attempting to keep up with demand.
3. All processes after the bottleneck are slowed for lack of flow into their zone of control and waste time, money, space and output, always resulting in reduced revenues and profits.

You can be the bottleneck.  If people are waiting for you to respond to a question or make a decision about design, process, spending for a core need, or any of tens of critical decisions, you are creating a slowing or stoppage of work before you and idle resources behind you.  If this describes you at any moment in your day, you should consider removing yourself from the bottleneck list by delegation, reduction of your non-critical workflow, or (heaven forbid) increasing your hours of production.

If failing to hire a critical employee is the cause of reduced efficiency, you must act quickly to either make an effective hire or alter the environment that creates the urgent need, all to remove that bottleneck.

And if an inefficient or undersized machine or department or process is creating a backup of critical path work flow, you must address this as an urgent matter whose cost is much more than the cost of the machine or person needed, but the amplified cost of the lost output it affects.

You, as a successful manager, must be attuned to and responsible for elimination of all forms of bottlenecks within your span of control.  Watch for, and stamp out, all those you identify as soon as you find them.  The effect of your action is magnified several-fold at the output stage of your business, leading to increased customer satisfaction and increased profits.

Reduce the emotion; reduce the threat of lawsuit.

You’ve certainly experienced the angry outburst from an associate or employee who has just learned of an event that the person took as “unfair,” no matter how rational the explanation by the decision maker.

Most emotional responses to decisions in business are generated not because the person making the response feels the decision was unwise, but rather unfair.

So I’ve created the “Fairness Doctrine,” as a stated element in the cultural fabric of businesses where I am involved.  Simply stated, a decision or action that affects an individual must be made with consideration of the affected individual’s view of the fairness of that decision.  This doctrine is a variant of “do unto others” but with a twist.  The recipient of the decision in this case usually has little opportunity to respond in kind (“as you would have them do unto you”).  It is this frustration coupled with the simple outcry of “That’s not fair!” – that can affect the culture of a company in ways never considered by the original decision-maker.

People sue others and their companies usually because they feel emotionally that they have been treated unfairly, not just because they were affected financially.

[Email readers, continue here...]  Firing a person considered a key associate without any advance warnings or public revelation for the reason, such as the need to consolidate or downsize, is a good example of setting up such a groundswell of accusations of unfair treatment.  Public dressing down of an employee in front of associates is inhumane and often generates a negative response from all who witness or hear of the action.  Closing a highly effective department, shutting down a marginal company, canceling a promising project all are good examples of management setting up a visceral response of “unfair” among those affected.

I have often addressed the issue of maintaining the dignity of the individual in a business environment.  The two are linked: the fairness doctrine and treatment of an individual with dignity, no matter how distasteful the decision implemented.

So my advice is to take the time to establish the reasons for pending actions – if not in an emergency environment.  Speak privately to employees who are in danger of being fired, documenting the discussion to the employee’s file.  Open up to the general group with facts that might later affect them, even at the risk of losing one or more to a hunt for a new job.  Most employees and associates, treated with respect and dignity, will respond with understanding and lose the emotion that might have accompanied receiving the later news of a negative event.

In fact, many times over the years, I have seen whole companies rise to new levels of efficiency, creativity, and sense of urgency when informed of the alternatives being considered by a board or management.

At the risk of losing talent not targeted, it is only fair to treat people as intelligent beings capable of understanding the dilemmas faced by management, and sometimes able to find solutions to problems not seen by those in control.

It is an unfortunate truism that most of us become a bit stale in our jobs after some time, even if we are most successful at it and appreciated by all who work for or with us.  It is human nature to start in a new position with enthusiasm, lofty goals, new ideas, and a heightened awareness of those around us and their ideas for the business.

And it is equally human for anyone to become complacent to some degree after an initial flurry of effort, ideas, reorganizations, brilliant decisions, and early successes.  Complacency is relative.  There is no direct measure to determine when a manager, even the CEO, has run out of new ideas and that sense of heightened awareness.  Usually this is masked by our having a better grip on the real drivers of the business, able to quickly see when things are not going right or people not performing to their peak.

But think back to those first days on the job.  You were ready and willing to effect change, to listen to anyone, to take in ideas, and share yours with your peers.  You spent extra hours more often in creative efforts, encouraged discourse, and delved into new ideas and projects with enthusiasm.

You exhibited a sense of urgency that charged your direct reports, made you want to come to work every day refreshed, and demonstrated to all that something special was happening in their world.

[Email readers, continue here...] Can you honestly state that your sense of urgency remains today at the same level as when you first started at this position?  Few of us could, and that is the reason why investors often feel that turnover in executive ranks is not so bad after all.  The average life of a CEO in the position is shorter today than ever before, partly because investors expect continual acceleration, and partly because a person seems to have only so much new material to offer.  If each of us could maintain that same sense of urgency that drove us to succeed early on, our peers, direct reports, investors, and stakeholders would all notice and respond accordingly.

Challenging your peers and reports to come up with new ideas, solutions, projects, and improvement in processes – all are signs of a good manager still in control of his or her sense of urgency.  It is hard for those around you to slack off with such a whirlwind adjacent.

I have previously told the story of the successful CEO who drove to work each Monday morning asking himself, “What if this were my first day on the job as CEO?  What would I do?”  He kept his company and his peers always thinking ahead, if nothing else to prevent his surprising them with ideas and solutions to problems that should have been uncovered and acted upon earlier.

It is not an easy task – reinventing yourself to be that person you were on the first day, but with the knowledge and experience since gained.  But it is an important part of being a great manager and retaining the focus upon excellence that certainly drove you to succeed back then.

It is hard to separate this kind of advice from economic lessons in running a business, when office politics can threaten a business in ways that are subtle, but sometimes just as devastating as economic shocks or continuing poor management.

Most any office with more than one level of management (more than ten employees) can become a Petri dish for office politics.  It may be human nature to attempt to gain the good graces of one’s superior in the work place.  But it is a perverse form of human nature to do so at the expense of others.  Some employees disrupt a business intentionally in order to gain attention and an advantage over fellow employees.

Other times, people with personal agendas or personal dislikes of other individuals will disrupt the harmony of an office environment with negative statements, rumors, and damning comments.  We’ve all seen this unhealthy form of human activity in an office environment at one time or another.

So here’s the advice:  Never repeat, encourage, or even listen to the personal attacks by one individual against another within the organization.  The first time you join in the conversation instead of stopping it, the first time you nod in agreement, the first time you take a side as a manager –is the last time you rule over an office-politics-free organization.

[Email readers, continue here...]  A boss has power that person doesn’t often realize s/he has, when viewed from the lens of a subordinate.  That power becomes perverse when a boss takes a side in any disagreement that is personal as opposed to business-problem oriented.  The result is almost always hurt, frustration and anger from the party on the wrong end of such manager reinforcement, and a loss of work time and certainly good will toward the organization and toward management itself.

To set the example by stopping the personal attack, refocusing the parties on productive work and moving on is to state by your words and actions that you will not tolerate such behavior in the work place.  To ignore such action when observed is to allow one person or a small group to undermine the organization in subtle steps that can only increase in size and effect.

Worse yet, to take a side in a personal dispute is to reduce your authority and alienate one person or group and reinforce bad behavior.

It is not common for the CEO of a rapidly growing company to think of slowing down the furious pace enough to have each manager (including the CEO) document the job process managed, as well as see to the documentation for each process managed below.

And it is even more of a challenge to consider documenting the tribal knowledge of a company’s key employees.  Examples include forcing the entire sales and customer support team to use a single database such as SalesForce or Sugar or Act to document the interactions with prospects and customers, or using “REM” statements liberally inside software code to notify future coders of critical information contained and reasons for making code branches, assigning variables with unusual names or more.

[Email readers, continue here...]  As CEO, have you made a list of your critical chain of advisors, including bankers, accountants, industry advisors, and more?  Do you have a “secret spot” for critical information someone might need if you were incapacitated or worse?  Especially when we are young, we feel invincible, and documenting tribal knowledge seems a chore with no reward.

Then inevitably a key employee gives notice and we begin to worry over what knowledge we will watch walk out that door, wonder how we will recover in the short term and grow out of the problem in the long term.  We worry that asking our subordinates to document their processes will look like the first step in removing them from their job. And we worry over lost productivity during this effort.

But if we make this a part of the culture of the corporation starting at the top and from an early point in the life of the organization, this process becomes an accepted way in which managers learn and leave behind, able to move up the chain with minor disruption both in the job left behind and the job assumed.  It makes for a smoother process for seeking outside hires by providing a model for the job specification to be written.

And it allows everyone to better appreciate the organization, understanding the limits of each position and the duties performed, avoiding conflicts between managers when in the future changes are made in the organization and in personnel during periods of growth or even downsizing.

Tribal knowledge is an asset of the corporation, to be protected as much as cash in the bank.

This simple statement is not what it seems at first.  I quote this from a frequent family exhortation by parent to child in the Kemp clan, going back several generations.  The late Jack Kemp, famous as quarterback for the Buffalo Bills and later as US Secretary of Housing and Urban Development then Vice Presidential candidate, told this story about his mom, as he continued the tradition with Jack’s now-grown family.

“Be a leader!” each would say as they sent their offspring out into the world each morning.  As Jack explained it, the call was not for his children to lead in the traditional sense, but to enable others to grow and prosper – the definition of true servant leadership.

This short statement is a reminder of what it means to be a great leader – to focus upon the welfare and growth of one’s peers and subordinates.

[ Email readers, continue here...]  Think of what internalizing that and making it true would do in this business world.  There would be no office politics, no suspicion of the intent or hidden agenda about management, no wasted time protecting that part of the anatomy we must protect when making many of our decisions in management.

Used in this context, servant leadership turns the leadership pyramid upside down, causing each level nearer the customer to have more empowerment to serve the customer than the level formerly above it.  Nordstrom, Zappos, and an increasing number of retail-centric companies practice this religiously.   It may not be appropriate for your enterprise at this time or in this niche, but it certainly is always appropriate in your family and social lives.

“Be a leader!”

Some of the world’s best companies to work for are those that encourage employees to spend time following their own paths of curiosity toward development of new products or services.  Google, 3M, Facebook, and Microsoft all allow their employees to take time to explore new ideas they conceive and attempt to develop.

Famously, the post-it note is an example of such a product coming from employees of 3M who were looking for quite another market for their newest light adhesive product.  And many free products and services have been spawned by Google employees working during their one-day-a-week personal curiosity time.

It is an opportunity that is open to any CEO to encourage creative thinking, problem solving, product creation, efficiency-creation among the troops.  Rewards don’t have to be financial, but certainly, when the gains are measured in dollars, that seems appropriate when the new development is not just a part of the job specification for a creative employee with a great idea.

[Email readers, continue here...]    Every company has hidden talent, creative thinkers that are not in a position to demonstrate their talents.  CEO’s often focus employees on the company’s goals, without allowing time to explore the edges to create alternative solutions, or to think ahead toward new possibilities.

What if you encouraged each of your associates to spend ten percent of their time working alone or with others on cost-saving or efficiency improvements,  sketching new ideas for products or changes to products that they may not be directly involved in creating?  What if that refreshing opportunity actually were to make each person return to the assigned job with a fresh new look and appreciation for the creative time spent?  It could happen, but only if you as manager develop the culture of curiosity that makes such creativity a part of your company DNA.

Sometimes it is the first thought you or your managers have when in need of skilled talent, especially for sales or product development.  It is not hard to find and observe the best employees of a good competitor at work, skillfully moving the competitor forward in a visible way.

And it is a tempting slice of pie – two slices for one price – to take a critically needed employee from a competitor, damaging that firm while building yours.

The problem is that a visible hire that “cuts” the competitor makes the competitor’s management bleed.   And you’ve heard of blood revenge.  That’s the worst kind, because it results in emotionally lashing out at the offender (you) with a response that is greater than the action that precipitated it.  In many cases, your firm can withstand the response.  In some though, cross-raiding of employees by offering unsustainable salaries or perks you cannot offer to all because of your size and financial position will leave you in a position to pay grandly for your action.

Consider the relative size of the competitor, the visibility of the target employee, and your ability to withstand a backlash before exercising the two slice tactic.

It has happened to all of us who have been leaders in business long enough.  One of your employees is approached by an employee of a customer or of a supplier, stating that “It sure would be great to work in your company.”  And without a policy or sometimes without thinking, your employee responds with a “Let me help,” or worse yet, “I have a position open.”

You should be clear from the start that no one at your company may offer a job to any current employee of a stakeholder – a customer, a partner in development or in distribution, or of a supplier. The rule should be one that includes only one “out”: if a person resigns from the position with the stake-holding company, then you will be happy to talk about a position.  No winking, sending signals, or quiet promises.

[Email readers, continue here...]  There are instances where such an existing stakeholder employee offers to go to his or her boss and ask permission to speak with you, and the boss not only concurs but agrees to call you (not just to take your call).  In that case alone, it is proper to continue as far as the offer and beyond.

Let me tell you the story from one of my companies that recently learned about the recruiting boomerang the hard way.  The CEO checked into a hotel that was a customer for its enterprise management system, and through a few innocent questions found that the owner was about to purchase several new systems for his new projects.  The front desk clerk cheerfully gave the CEO the owner’s contact information.

So the CEO called the owner that day.  “I will never deal with your company again!” was the short reply from the owner to the CEO.  It turns out that a manager from the CEO’s company had recently thrown the recruiting boomerang at that very same cheerful clerk, hinting that a job would be available if she’d like to apply.   The clerk told the owner, and the rest is history.

Properly, the CEO begged the owner for forgiveness, immediately sent an email to all managers reinforcing the existing policy of not hiring a stakeholder, and spoke to the person making the offer in a non-threatening tone, again reinforcing the policy.  During the phone conversation with the owner, the CEO carefully set the stage for a later call to mend fences and check on progress with the existing system already installed.  He made all the right moves given the situation.

But wouldn’t it have been easier to avoid throwing the recruiting boomerang in the first place?

So, we’ve discussed why it is important to build consensus in an organization in most every major decision.  To do so, a CEO must be able to relinquish some degree of power, overriding decisions made by consensus only with some thought and certainly with an explanation to those involved.

A manager secure in the position should never fear empowering direct reports to make decisions that fall within the resources allocated to them and within the budget agreed to with them.  A micro-manager cannot cede that kind of authority, even within pre-arranged limits, and as a result meddles with decisions made by direct reports, removing authority from each whenever such moves are made, and rendering the individual more impotent in the eyes of that person’s reports.

On the other hand, a great CEO or manager not only empowers his or her direct reports, s/he directs those people to do the same with their reports down the line.  All this is done within limits that should seem obvious: financial impact has been provided for within the plan; and no other individuals or departments are affected negatively by such an empowered action without notice and involvement.

[Email readers, continue here...]  The more power you cede, the more you become a teacher and the more your direct reports grow in their positions.  Further, the more you share your decisions, the more you prepare those below to assume your position if ever necessary or appropriate.

If you cannot or will not empower your direct reports, you must ask yourself: why?  If it is insecurity that is the root cause, then the best course of action is to share the power even more quickly, as you’ll look and feel more like the group is supportive of you and your position.  If you are a micro-manager and are unwilling to allow those below to fail, even with more minor decisions, then you are restricting their growth in their positions, certainly causing dissatisfaction in their ranks, and missing the most important opportunities to enable scaling your organization to a much larger size.