Fire fast, not last.

Posted on May 4, 2010 by Dave Berkus

                 Here is one that takes a real leap for a younger manger or CEO to believe.  After hiring someone with all of the attendant enthusiasm followed by the training and learning curve, if an employee shows signs of weakness in the job or problems dealing with contemporaries, it is the natural tendency for most of us to go first into coaching mode, and reset the observation clock to see if our excellent coaching does the job.  A month or so later, when no apparent change has been noticed, we may move from coaching to a polite warning and maybe even the dreaded note-to-file.  Another month, and the probability of a decision to separate becomes obvious and the move initiated.  Lawyers will tell you that this progressive chain of moves is good for the company, protecting against lawsuits by a disgruntled former employee.

                But surprisingly, in post-exit interviews after emotions have dissipated, most former employees (who were handled respectfully during the separation process) and most all managers will agree that the move should have been made sooner.  The former employee will often state that he or she was at least somewhat unhappy in the job, knowing that the fit was not as good as it should be. The manager will most often admit that he did not move aggressively, following his best judgment in coaching the employee toward separation much earlier.

[Email readers continue here…] Firing fast in most every case is best for everyone, as opposed to long, drawn out sessions and stressful employee periods of waiting for a verdict in between sessions.  It does sound counterintuitive. But I would believe the post-exit interviews.  Why not conduct your own survey of fellow executives and managers and see what they think.  If they agree, you should recalibrate your expectations and act sooner, all with the important caveat that employees must always be treated with respect, and there are many times when documentation to file is a required protection for the company against possible lawsuits, especially by protected classes of employees.

Posted in Depending upon others, Surrounding yourself with talent, The fight for quality | 3 Comments

Hire each employee as if your survival depends upon it.

Posted on April 28, 2010 by Dave Berkus

Second to visionary leadership, this is your most important job. 

               Many of us go through the motions of hiring to fill a position, trying to use our intuition and skills to find the best candidate for the job.  Sometimes we use consultants or recruiters; many times we use internal talent to fill most positions. 

                And over the years, we students of business success have learned that there is a science to the hiring process that continues through the life of an employee’s tenure with the company.  Bradford Smart captured this succinctly in his book, Topgrading. His thesis is that “A” players amount only to the top ten percent of the talent pool at any given time, and that your job is to find, recruit and retain only “A” players to make a successful business.  It is hard to argue with that.  What is hard to find, is the rare CEO that makes the process of hiring top recruits such a priority that he or she spends personal time deeply involved in the specification, resumé review, interview and selection of top employees.  Most of us are “far too busy” to do all of that.  And yet, aside from managing the vision of the enterprise, the most important job of a CEO is to find, recruit and make productive “A” players for the team.

                As an investor and board member for numerous companies, it is increasingly easy for me to quickly evaluate the quality of senior team members in an organization as I probe for strengths and weaknesses in the enterprise.  Teams where the CEO is comfortable enough to delegate to “A” players and manage the strategies for growth stand out as rare and powerful.  Conversely, it takes very little for a CEO to derail what could be a great team and company, by ignoring the details involved in finding the right talent for each senior position, and by failing to communicate the strategies and empower the team to execute.

[Email readers continue here…] A successful hire is not just the responsibility of the recruiter and manager to whom the recruit will report.  Many companies require that finalist candidates be interviewed by a number of contemporaries, good employees who fill similar level positions. Some even encourage interviews with those the candidate would manage.  Agreement among the interviewers becomes an empowering experience for those conducting the interviews and agreeing to the decision to hire, and paves the way for a quicker assimilation of the new employee into the organization whose cohorts are already prepared to receive and encourage the new hire.  This is not an inexpensive process when considering the cost in time and productivity of the interviewers.  But finding “A” players is not an easy job, requiring a stretch of resources at each stage of the process.

                Earlier, we explored strategic planning within the enterprise. We spoke of developing strategies and tactics that are measurable for each department.  Now is a good time to complete that chain by suggesting that paying significant incentive compensation to the people empowered to execute those strategies and tactics is critical to the success of the plan as well as to the organization.  Aligning everyone toward the same goal and using the practice of rewarding for achievement of milestones defined by the tactics from planning, makes for a great business, managed by a leader who understands the process.

                What makes a great leader great?  Of course, it’s great execution by great employees acting as a unit in the best interests of the enterprise.  No-one can do this alone.  No CEO can do this with “B” players or less.

Posted in Depending upon others, Growth!, Surrounding yourself with talent | 2 Comments

Know and avoid “time bankruptcy.”

Posted on April 21, 2010 by Dave Berkus

Time bankruptcy results from the deliberate over-commitment of core resources. 

          I created the term “time bankruptcy” almost thirty years ago when the computer software business was young, and I was a software developer building a young company based upon quality first.  Asked to speak at a number of software industry events, I found my voice and immediate audience understanding as I described variants of the following problem to my audience. The insight became clearer as I was hired again and again to pick up the pieces of failed programming efforts by other software companies in this then young industry.

          A developer would take on a new customer, customize programs as needed, and install perhaps an 80% completed system upon the customer’s brand new minicomputer system.  The customer would pay for all or at least 90% of the system, perhaps holding back a retainer awaiting completion.  Burning through the payment and needing more to cover fixed overhead, the developer would do the same for the next 80% customer, moving on to the third.  About that time, the first would call asking for completion of programming or training, firmly but politely.  The fourth installation was interrupted as the first customer suggested that he would stop giving glowing recommendations for the vendor, insisting upon a completion date, while the second customer interrupted with its first call for completion.  By the fifth or sixth (who keeps count for these stories?), the first threatens suit, the second becomes demanding and the third makes that expected call for a completion date.  So the vendor stops work on the newest installation to complete earlier installations.  Revenues dry up while overhead continues to burn though the developer’s pockets.  It’s a classic case of time bankruptcy.  The developer deliberately overcommitted his prime or core resources (in this case his personal time) leading to a loss of income and reputation that it could not recover.

[Email readers continue here…] The same story could be constructed for any company selecting a limited number of test customers for a new product. Select too many, and pay too little attention to each.  Commit all of your core resources to solving the resulting problem, and new work stops.  Time bankruptcy. Not a pretty sight, and completely avoidable.

          Be aware of this trap.  No-one but yourself can be blamed for allowing core resources to be overcommitted, even if by subordinates.  That’s because you now know the term and the impact of such an error in judgment, and understand that the simple but important remedy is to slow the commitment of those most critical resources to the front lines.

Posted in Growth!, Positioning, The fight for quality | 2 Comments

No second chance to create first quality.

Posted on April 13, 2010 by Dave Berkus

                Let me illustrate this insight with a personal story.  As my enterprise computer software company which produced innovative lodging systems for hotels and resorts grew quickly, we found ourselves straining to keep up with the hiring and training of good customer support representatives, a critical part of the equation then and still so today in the 24 hour environment of hotel front desk operations.  If a front desk clerk called support at 11.00 PM in the evening, it usually meant that there were guests lined up waiting to check in, anxious to pass beyond this necessary but inconvenient bottleneck between a tiring plane ride and a comfortable bed.  The result would be very frustrated clerks facing angry guests if the wait were to be long.  It was simply not acceptable to be backed up in customer service, forcing either a ten minute wait or a call back from support.

[Email readers continue here…]  It took several months to hire and train enough new support reps to keep up with the rapid growth of our company.  But the problem was solved, and response times returned to “immediate” for at least this class of customer call.  There was no wait, and the quality of response was rated as “excellent” by callers later surveyed.  But “There’s the rub” (the snag) wrote Shakespeare in Hamlet. It took two long years for the company to fully recover its lost reputation after the actual problem was fixed to the satisfaction of all.  Aided by salespeople from competitors and long memories from unhappy customers, the myth of continued quality problems in customer support bounced around the industry for those years, until finally good press, great experiences and a marketing campaign together overwhelmed bad memories to put this issue to bed.  

                If the problems had been in product stability and customer service together at the same moment, there might not have been enough time and resources to recover.  There are plenty of young companies that died trying to recover from such a combination.

                Your reputation hinges upon delivering a quality product at the moment of release, and maintaining product quality throughout its life.  The smaller the company, the more is at stake.  There are fewer resources and much less of a reserve of good will among the customer base to absorb a problem release or in the example above, inability to fill the void in customer service created by rapid growth.

Posted in The fight for quality | 1 Comment

Haste makes waste; but to lag is to sag.

Posted on April 7, 2010 by Dave Berkus

                 Here we examine the relationship between time, quality and competitiveness. If you are getting the impression from these many insights that complex relationships cause simple problems, you are right.

                We have heard the “haste makes waste” ditty since childhood.  There is little need to reinforce the obvious.  On a larger scale, there are epoch stories of giant companies eating massive losses in a recall of product, often based upon limited testing before release. 

                A marginal example was the Intel release of the Pentium Pro and new Pentium II processor to rave reviews – until a math professor found an obscure error in the chip’s code that made a rare floating point calculation error.  Posting that finding on the Internet, quickly Intel found itself defending against fears by others using the processor for math work that the processor could not be relied upon.  Intel rushed to fix the bug and offered to replace the processor to anyone requesting such a replacement.  At a cost of millions and a reputational hit, Intel recovered.  The lesson here is a bit obscure, since it is not clear whether the kind of testing then common in processor design would have surfaced the error.  It is quite clear that such an error would be found immediately today based upon changes in testing procedures made by all processor manufacturers after that event.

[Email readers continue here…]  The waste from haste in this example was in not pre-thinking of enough testing scenarios for a new product.  There is always a trade-off between cost for testing, time to market and risk of problems. 

                 Perhaps better examples to point to are easy to find in the toy industry, where recalls because of small parts that could be swallowed by infants or lead-based paint or flammable components make the news on a regular basis.

                And the other side of this coin, “To lag is to sag”, addresses the two issues of loss to the competition because of delays in release of a new product, and burning of fixed overhead while products are redesigned.  

                It becomes obvious then that there must be a balance somewhere between rushed release and too much rigor in pre-release planning and testing.  Perhaps that balance can be measured in estimating what a company could endure in lost overhead and hits to reputation before becoming crippled and unable to recover.  With that measure based upon pure estimates, the balance point changes between companies, with the largest, most profitable companies able to suffer the most risk as to resources, and the smallest suffering by far the most when measuring reputation.

Posted in Growth!, The fight for quality | 1 Comment

Wasted time is money lost. (And another story of lost opportunity.)

Posted on March 30, 2010 by Dave Berkus

                There is a relationship between time and money that is more complex than most managers think.  Fixed overhead for salaries, rent, equipment leases and more make up the majority of the “burn rate” (monthly expenses) for most companies.  Since this number is budgeted and pre-authorized, managers tend to focus upon other things such as sales, marketing and product development issues.

                There is an art to efficient management of a process, whether that is the process of bringing a product to market from R&D to production or developing a new product’s launch program.  What most managers miss is that every month cut from the time it takes to perform such tasks cuts the cost by the value of a month’s worth of fixed overhead or burn.  Although young companies rarely measure profitability this repeatedly, more mature companies usually can bring from five to ten percent of revenues to the bottom line in the form of net profit.  Ignoring cost of product for a moment to make a point,  saving a month’s fixed overhead by making processes more efficient, could easily double profits for the year.

                That relationship between fixed overhead and production time is as critical as any other factor in success of a young company.  Many of the start-ups my various angel funds have financed died a slow death, not because of poor concept but because of poor execution, wasting fixed overhead and draining the final resources from the company coffers. 

[Email readers continue here…] In the technology sector where I most often play, extended unplanned software development cycles account for the majority of these corporate failures.  We often accept that development schedules for young companies are almost always too optimistic.  But we investors often allow too little slack in our estimates as well.  The great majority of young companies developing complex products such as semiconductor-based products, new software-based systems and technologies based upon new processes greatly underestimate the time needed to bring the product to marketable condition.  So the CEO comes back “to the well”, asking for more money from the investors to complete the project.  It is not a strong bargaining position for the CEO to ask for money to complete a product promised for completion with the previous round of funding.  And professional investors often penalize the company with lower-priced down rounds or expensive loans as a result.

                I have one story that remains as vivid in my mind as when it happened several years ago.  Helping the founder create a company and build a much-needed product in an industry I knew very well, I served as chairman for the newly formed company, and along with my several rounds of early investment, led rounds of other angel investors in what I knew as a successful opportunity to fill a need in an industry I understood.   

               The company grew to be well known in this limited niche and was operating at slightly above breakeven, when the Board and CEO decided to seek venture investment from what we hoped would be a first tier VC firm in Silicon Valley.  And we were able to secure that investment along with a partner from that firm joining our board.  It did not take long for the partner to become impatient with the relatively small size of the opportunity.  Dreaming of a company many times the size, he led the board to approve a complete reversal of course, even stating that the company should ignore the existing market niche completely and redesign the product for the broad Fortune 500 corporate market.  Every one of us on the board expressed our concern that the time to make these product changes and position for the new, broader market, would eat away all of the company’s capital.  Promising the full weight of his VC firm’s resources, the board voted to make the change against the best judgment of those of us who knew the original market niche so well and thought that there was growth to spare in that niche alone.

              So the company turned the ship, slowly it seemed, as R&D worked to develop an appropriate product using the base of the original design.  Time slipped; fixed overhead continued.  And exactly as you’d expect, there came the time when the company ran out of money as it ignored its original market.  Surprise.  Since the company slipped in its R&D schedule, the partners of the VC firm voted to not add new money to the company for the project.  Not long after, the company was sold in a “fire sale” amounting to slightly less than the debt on the books. All investors, including the VC firm, lost everything.  Do you remember a previous insight, that “the last money in has the first say”?  That is what happened within the dynamic of the board, and the result is that the board was completely at the mercy of the “last money” VC to save the company in the end.  Yes, there were other issues such as a protracted patent rights fight that drained cash, but the largest problem, inefficient use of R&D time burning fixed overhead, led to the demise of the company.  Lots of good jobs were lost and many investors including myself were left with the question. “Why did the company abandon a profitable market, even if it could not generate $100 million a year in revenues?”

                We will revisit the relationship between time and money again in future insights.

Posted in Growth!, Hedging against downturns, The fight for quality | Leave a comment

Greatly excceed your customer expectations.

Posted on March 24, 2010 by Dave Berkus

First customers are critical. Greatly exceed expectations at all costs.

                 There is so much history behind this insight, and so many stories that illustrate this point.  Your first customers for any product or service form your reference base, the important group of allies that your marketing and sales people rely upon when attempting to create buzz and make a mass market for a new product.  If you’ve been involved in the launch stage of any product in the past, you should recognize the overwhelming feeling of panic when initial customers make first contact with complaints about quality, functionality, speed of service or other critical part of the new release.

                The best advice I can give is to allocate all of your resources to supporting the roll-out of a new product, at least for a short period.  Respond immediately to every question and complaint.  Capture every compliment and ask if you can use it for marketing purposes.  If the product or service is especially complex or expensive, send someone from sales or marketing or even R&D to the customer location at the moment of first use. 

                Of course most of us have limited resources for such overwhelming support of a new offering. So make the first release a limited one, sized so you can support it with existing resources, even if that means releasing it to only three carefully chosen customers at first.

                And I am serious about the “…at all costs” admonition in this insight.  If you must provide a free backup unit, personal on-sight service for a month, your personal cell phone number for the customer CEO, or any number of unexpected offers of superior service and accountability to those first customers, do just that.  Make your customer a partner in the process.   Send flowers to the staff in the department using the product for the first time if appropriate.  Call the customer CEO and thank him for helping launch a product so very important to your success.

                The result of doing this right will be to blunt criticism, reinforce compliments and provide a solid user base to build upon.  And the alternative is a lost opportunity to shine, perhaps a first wave of negative public reviews that post and report across the Internet, and a loss of reputation and goodwill that will take years to overcome.

                I don’t know about you, but I would much prefer to spend dollars reinforcing a great first customer’s experience than fighting fires in the marketplace after seeing negative reviews.  Make sure your entire staff buys into this mantra. “These first customers are critical.  You are personally empowered to do everything possible to exceed their expectations.”

Posted in Growth!, The fight for quality | 1 Comment

Ten essential items for mobile digital natives

Posted on March 17, 2010 by Dave Berkus

                An amazing transformation is taking place in the work place.  As the new generation of digital natives enters the work force, management is being pressed to open their networks and their thinking to allow social networking inside the firewall, workers who are more productive and comfortable anywhere but in a cubicle, and management of a virtual workforce.  Mobile workers are quickly overtaking the fixed desk worker in developed countries, quickly catching up with Japan, where this has been the majority behavior for several years.

                To enable these new nomadic workers to be productive, developers have created over 120,000 applications for the iPhone alone, and over 100,000 applications for Facebook users.  These applications enable desktop connectivity from smartphones, netbooks or iPads, list the latest airport delays, provide  GPS traffic and route guidance and so  much more.

                Which brings us to my personal list of the ten most important – essential – things we digital natives need to un-tether from our cubicles and desks and be at least as productive home or anywhere.  You may have a different list, but here is mine…  [Email readers continue here…]

1.           A great smartphone.  More than half of the people on the planet now have cell phones, and the smartphone with Internet and enterprise system access is the fastest growing segment, approaching 25% of all phones sold.   Most any of these models work well for a digital native who can then state with passion, “I have an office in my pocket.” 

2.          Collaboration tools:  GoToMeeting, WebEx, FreeConference.com, Skype, Google Docs, and others:   Some are now available on the smartphone as well as desktop and even built into some newer HD-TV’s.  Skype provides the infrastructure for cost-free video and audio conferencing and long distance dialing with sound quality often exceeding that of normal communication channels. 

3.          Internet access via cellular networks:  If the theme is “un-tethering” from a fixed broadband land line, then a great wireless card is a must.   Variations on the theme include cards that broadcast WIFI signals to a small area, built-in cards in netbooks and tablets and more.

 4.        Wireless desk phone system:  I discovered the power of this one recently when installing the new Plantronics Calista system, allowing me to walk up to 300 feet from my desk with a belt-clipped remote and up to 30 feet from that remote with the included Bluetooth earpiece.  The Calista seamlessly receives calls from my desk phone, my cell phone and my desktop Skype with equal ease as I roam the office environment.  

5.        A follow-me account :  Although many digital natives have cut the cord literally and done away with landlines (21% at latest measure), the rest of us would like to have up to five phones ring simultaneously, and roll over to a single voicemail if we do not answer any of them in a set time.  Vonage, Google Voice and YouMail are services providing this great feature at minimal cost for the freedom it provides. 

6.       A compact all-in-one:  When we are at home with our limited space and resources, a great all-in-one printer, scanner, fax is a necessity.  I prefer a black and white laser unit with a small footprint for low cost pages and quiet operation, delivering quiet inexpensive pages when needed, and color scanning to the computer. I prefer the Brother MFC7840W, but lots are available for under $230.00. 

7.        A netbook or tablet:  I no longer carry a large notebook, but rather a mini-note (or netbook or tablet). All in the name of longer battery life, less space and less weight.   The arrival of the iPad and competing devices add both complexity and simplicity at the same time. I will carry both my netbook and an iPad wherever I travel, combining the book reader and application-friendly iPad with the workhorse netbook for office work and presentations.  

8.        A portable scanner and / or portable printer:  If you haven’t seen or worked with a pencil-thin portable scanner such as PlanOn’s Docupen Xtreme, you haven’t experienced the ability to digitize at will anything you run across in your travels.  Only ½ inch by 9 inches in size, you will forget you have this in your bag or pocket until you need an instant copy of a news article, a document or an invoice. And sometimes, we just have to give in to the fact that the paperless office is not going to be a reality soon, especially when we are away from our desks for more than a few days.  PlanOn produces the ultra-portable Printstik PS905, a mobile printer with a 20 page self-contained roll of paper (or plain paper printing) from a smartphone or computer through Bluetooth or USB.  It weighs only 1.5 pounds and measures 1” by 2” by 11” in size. 

9.         The small resource bag:  All of us need an extra USB memory stick, chargers, cables and even a second battery.  Some of us add a wireless remote for presentations, a laser pointer and a few small screwdrivers.  

10.       The wild card:  Here is your chance to add that tool relevant to your needs. I would split the wild card into two items if I could:  a docking station with keyboard and monitor … and a portable projector, which is not for everyone, but for most of us who make presentations on the road and sometimes on the spot. There is a new generation of tiny projectors hitting the market to allow the mobile worker to share without notice.  For full room size presentations, I carry the slim Casio XJ-S38 XGA projector, only 1.7” high and 8×10” in size, weighing 4 pounds and able to fill a large room with a beautiful picture.   For smaller projections, the Aiptek PJT21X PocketCinema can be carried in your pocket.  New cell phones with digital projectors built-in were shown at this year’s Consumer Electronics Show and will soon be available. 

                So that’s my list of things I cannot do without as I work from anywhere and at any time.  Yes, I understand that any list becomes obsolete before it is published.  You’ll have your own “must have” list.  Whatever our disagreement, let’s celebrate our personal digital empowerment and collective un-tethering from a fixed business desk.  And sure, add your comment with your “indespensible” road warrior or SOHO technology…

Posted in General, Surrounding yourself with talent | Leave a comment

Find your “teacher-customer.”

Posted on March 10, 2010 by Dave Berkus

Your customers know what they want more than you do.  Find one to teach you.

                  This insight came from personal experience and from a good friend who advanced the notion of the “teacher-customer” years ago.  I internalized this phrase, recalling the many times I had partnered with customers to design new feature-functionality into my hotel computer system back when such systems were brand new to the industry. 

                  It was an ideal partnership between my growing company, as it approached one hundred employees on the way to almost two hundred fifty, and selected special customers anxious and willing to spend time telling us of their pain points.  Together we would work out solutions in the form of new functions, new controls, new reports, and new safeguards.  The customer would be the first to receive the new functionality in a new release.

                 At the annual user conference, I would often make sure the entire user community present knew of these extraordinary collaborations by naming the teacher-customers in the presence of their contemporaries.   Sometimes the audience would cheer one of their own, knowing that everyone benefited from the extra time and effort spent teaching their vendor the needs of the industry not yet addressed by competitors or by our firm to date.

[Email readers continue here…]   This is not to bend this insight into a claim that a company should wait to develop new, groundbreaking products and services until a customer asks for them.  If that were the ideal mode, many game-changing concepts would never have made it to market, including Fred Smith’s FedEx, first explained to a college professor in a paper returned with a C+ grade and the professorial comment that the idea was “good but impractical.” 

                Even if you are an expert in an industry segment, partnering with one of those rare, willing teacher-customers during the design stage for your proposed product or service is empowering and fruitful for both parties.

                All companies whether service or product-oriented must fight to gain and maintain quality of product, or fall to the bottom of the competitive heap. ..

               We have explored feature-functionality and finding your ideal niche.  Next week, we’ll take time out to explore the ten essential technologies for a mobile “digital native” then in following weeks focus upon stage four in our exploration of insights, product quality and its effects upon the organization.

Posted in Depending upon others, Finding your ideal niche, Growth!, Positioning | Leave a comment

BERKONOMICS book and workbook now available.

Posted on March 7, 2010 by Dave Berkus

I am happy to announce the availability of BERKONOMICS in book channels worldwide, including the eBook edition from Amazon.

Purchase either for yourself or for an entrepreneur, board member or executive of a growing business. This book and workbook contain all the material from the BERKONOMICS emails and blogs and much more.

Organized into eleven chapters from start-up through a sale of the company with focus upon growth of the enterprise, the unique combination of book and workbook helps ensure the success of a growing business by providing insights and tools to those who are responsible for building business value. The workbook becomes a personal journal for entrepreneurs and executives to apply the lessons of BERKONOMICS for their own business enterprise, helping business-builders sharpen their message, create value and avoid pitfalls. The book contains over fifty stories of entrepreneurs who have done it right or from whose mistakes we can learn.

Here are easy-to-folow links to find more information and order copies in the form just right for your use, or as gifts to others:

BERKONOMICS hard cover with author signature ($30.00 your cost, $37.50 list)
– Hard cover is available only from the Berkonomics crew

Soft cover book ($20.00 your cost, $24.95 list) direct from the crew

Workbook direct from the crew ($15.00 your cost, $19.95 list)

Soft cover from Berkus.com($24.95)

Workbook from the Amazon bookstore ($19.95)

Workbook from Barnes & Noble Booksellers ($19.95, members $17.95)

(All editions subject to tax and/or postage as appropriate)

 
 

 

 

Posted in General | 1 Comment