BERKONOMICS – Business insights from Dave Berkus

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.

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.

Surely you’ve been exposed to articles, courses and lectures about various styles of management, and how each is appropriate for some companies and for some levels of organization and at some times.  For example, a consensus-building leader works well in that style until someone yells “fire!,” and the emergency requires a dictatorial style of management to act quickly, protecting lives.

If you’ve ever been on the board of a non-profit organization, especially one in education, you know that a dictatorial style of management has no place in the organization (again unless there is an emergency requiring life-saving decisions).   In the non-profit sector, all decisions move slower, frustrating many board members who are business tycoons or entrepreneurs used to making rapid, final decisive moves in the workplace.

But wait a minute.  Is it appropriate for managers in any business to make a habit of making rapid, decisive moves as a matter of style?  In a past insight, I used the phrase: “Bet the farm only when the crops are on fire!” to underline the risk in making continuous bold decisions that obligate a company’s resources in a single transaction.

[Email readers, continue here...]  It is much more appropriate and certainly more appreciated if you take the time to bring your direct reports along in the thinking process, to obtain their input with issues that affect them, and to attempt to gain consensus from the leadership team before moving into implementing decisions where risk is involved or where the others are affected.  Many a time I have thought a solution was obvious until one of my board members, peers or direct reports pointed out a facet of the problem not previously considered.  Bold decisions seem to reflect strong leadership.  More often, they reflect a deficiency in willingness to cede power to the group unless for some reason necessary to withhold that power.

A decision made by consensus is probably a wiser decision and surely one that will be received down the line with more willingness to implement it than one posted as an order.  Orders come from somewhere up there in the minds of most people below direct reports.  And there is no better way to destroy a company’s culture than having the majority of those in the workforce believing that they are just “workin’ for the man” (woman) when they walk in the door.

Almost all of us in our leadership roles are looked upon to provide clues for behavior by those who look up to us, whether family members or subordinates in the workplace or even those we associate with as peers, suppliers, or customers.

In your business and personal life, there will be moments that will define you forever in the eyes of those you might not be aware are watching.  And nowhere is this more evident in the way you respond to issues where your actions require extraordinary sacrifice financially or in personal ambition.

If a clerk in a store gives you too much change from a sale where you paid cash, do you think before returning the overage?  Is your decision effected by whether someone is with you and watching?  If an error is made that results in a customer or office superior asking “who could have done this?,” do you step up to take responsibility quickly to avoid casting the focus upon another person?  If your company could achieve inordinate short term profit from the lack of knowledge on the other side in a new sale, do you take advantage of the moment and profit from the ignorance of the individual on the other side?

[Email readers, continue here...]  The temptation to do these things is great.  But in every case the lasting negative effect is worse than the gain temporarily made.  For the short term profit in reputation or financial gain, you have established one piece of evidence that you are not living by the golden rule, whether someone is watching or not.  And somehow, there is always someone who finds out what you did, even if months later.

On the other hand, think of those individuals you trust to always make the right decision morally and ethically even when at great personal expense.  Your respect for that person is unwavering, and you would defend and trust that person if called upon to do so, likely without question.

Your subordinates, employees, family members, and peers are looking to you to measure your moral compass and perhaps to point their way as well as yours.  “Good people finish first” is a statement that requires a leap of faith that in the end, those that take advantage of others almost always find themselves behind those who step forward to do the right thing.

Start or maintain your business life with an unwavering moral compass.  Doing so is not the quickest way to profit, but the most honorable and ultimately most rewarding in so many ways.

Ever had a manager who hung those motivational posters around the office, spoke of “pushing together,” or “you’re empowered to give great service” – and then acted at least once in complete disregard of those statements?

It takes only one time caught by subordinates to lose the faith of an entire group of faithful followers.  And that certainly counts for customers too, although the customer jungle drums don’t communicate quite as fast as the virtual water cooler system, even with today’s many ways of posting negative reviews about company behavior.

[Email readers, continue here...]  On the other hand, there are great examples of managers who put their reputation or large amounts of company resources on the line to reinforce just such statements.  Think of a surprising positive interaction you had with a call center employee or store clerk who resolved your problem and calmed your anger by exceeding your expectations.  That happened to me recently when I made an off-handed complaint to a call center employee solving another problem for me and she immediately said, “I’ll take care of that by crediting you in full for the cost of that unit.”  I was floored, and told dozens of people about the unexpected service offered without an angered demand or even a request for compensation.

How do you empower your people to actually do what you claim as your motto or standard of service?  Some hotel chains have a policy that any desk clerk can make a problem right up to a cost of over a thousand dollars.  Now that’s showing faith.

I have told the story of a customer of our company whose facility was destroyed in a catastrophic fire which took with it all of the records of guests staying at and reserved to be coming to the property.  The catch: the property was on a remote island in Australia, and the manufacturing plant in Southern California.  Without a second thought, our people gathered to help the distraught property management recover data from backups, interview present guests, and quickly install the brand new computer diverted from another installation shipped overnight to theirs.  The benefit to the customer was obvious as was their continuous praise for the company and our people in helping them in their hour of need.  But just as important, the employees of the company participated as a unit in following the stated promise in our motto, “Customer first, always!”

Actions always speak louder than words. Always.

You’ve heard the old one – that a banker always seems willing to offer a loan when you don’t need it.  For small businesses, there is such truth in that statement that you can trust the story to be based in reality from experience.

There are great exceptions for growing businesses and for businesses that have a track record with a banker.  Working capital loans and lines of credit are needed for growth and during times of business stress.  If a business were operating above breakeven and revenues and expenses steady, profits would flow to either the shareholders’ pockets or to working capital and taxes. Each cycle gives the CEO a chance to use those profits to some positive advantage, including increasing the marketing budget, paying down loans, building working capital, increasing “sticky cash” balances or paying shareholders.

[Email readers, continue here...]  But if a good business finds itself in a bad downturn, there may be a need that did not exist before for temporary cash, even as management reacts and moves to trim fixed overhead.

Approaching a banker during such times tests relationships.  If there was no previous relationship, few bankers would rely upon anything but a personal guarantee backed by hard assets before considering a loan.  But for those wise executives who included their bankers in occasional update calls, press releases, invitations to company events and an occasional personal visit, the strength of the relationship will often show its benefits during times when lending rules of the bank are near the “can’t do it” point.

For those with existing bank loans, that constant attention is more than just important.  As loan covenants become closer to being violated or after such an event, bankers have some latitude in deciding how to handle their accounts.  Upon discovery without prior notice or updates, bankers sometimes turn the company over to the bank’s workout group – a place you never want to visit.  In the gray area where covenants are broken but barely, covenants can be waived for a period of time as companies rectify the problems, all based upon the quality of the relationship between banker and client.

It is during those challenging times that it is most difficult to tell the story to your banker, but just then the most important of times.