Planning Archives

High Quality is a Recipe for Failure

Posted on October 11, 2016June 23, 2018 by TurnAround Executive Coaching

I live in a mixed income neighborhood. I was delighted when a new restaurant opened with a lounge style, creative tapas, and space for mingling. The staff were well dressed and professional. There was a waiter for every 3 tables! No more Joe the Bartender nights. It was worth twice the price 🙂 What a shock when Volcano suddenly closed its doors. I’m still in mourning,

BUT Business success balances quality against cost.

We all want to hire a lot of Grade A staff. Let’s assume that you own a restaurant. In this example, you hire only specialty chefs – pastry chef, sous chef, saute chef, fish chef, glacier, etc. Add professional waiters with 5 years previous experience. Just to be perfect, add a maître d’ to die for.

Would you get the Zagat Award?

No. In my neighborhood your restaurant will be bankrupt after 3 months. You cannot afford a staff team where everyone is a superstar and there’s too many staff anyway. You need a mix of employees at different levels and just the minimum number of staff.

Success in business requires a few Grade A staff, a few Grade B staff who are teachable, and constant firing of Grade B staff who won’t learn and also quickly fire Grade C staff who actually hurt your business.

A great business uses a Salary Cap. The Salary Cap is simply the total amount of money that you can spend on payroll. You can split the Salary Cap any way that you want. If the Salary Cap is $1 million, you can hire 10 people at $100,000 each or 20 people at $50,000 each.

The Salary Cap is easy to find. Start with your total revenue and subtract Fixed Costs (lease, taxes, mortgage, depreciation, interest, and insurance.) Now subtract all supplies and inventory purchases. If you own the business, subtract your return on investment.

The remainder is your Salary Cap. You can hire as many people as you want as long as the total salary is under the Cap. See how it works in this example.

Example:

Revenue: $5 million

Minus Fixed Costs: $1 million

Minus Inventory and Supplies: $1.5 million

Salary Cap = $2.5 million

Won’t people pay more for quality? Why not hire all the chefs in the first example and simply raise the price of every meal by $10. Your revenue goes up and so does the Salary Cap.

It depends on your market. If your business is in a high poverty area, people may enjoy very competent waiters at the restaurant and great food, but they will still eat at McDonalds. Your recipe for success may be to hire some Grade B- people and hire one good trainer and one good supervisor who can fire people regularly. The combination will give you enough Grade A staff to be a success.

I’ve always hated cooking. It takes so long and not easy either. You have to experiment with the recipe. Of course, people who like to cook get better and better at it. You have the same challenge with your company. The only way to get good at it is to experiment to find the right mix of staff. No one likes to fire people or move them around. It’s hard to find new people and train them. What a headache! Just like using recipes 🙂

Have patience. Keep practicing until you have the perfect recipe. Bon Appetit.

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A Computer is About to Terminate Your Strategic Plan

Posted on August 14, 2016June 23, 2018 by TurnAround Executive Coaching

Most strategic plans assume a static future where the basic costs and use of labor remain the same. That is a critically false assumption.

Machine learning started in the 1990s. Anthony Goldbloom states that machines were trained to look at credit applications and determine a score. Since then the trend line was arithmetic but recently has climbed more steeply. Now we actually have cars on the road which are one step from being self driving.

The rapid dislocation of labor from human to machine is one major factor in the unusual American election. It’s a global challenge on how to make all humans necessary. At this point, the economy does not need grocery checkers, cab drivers, subway drivers, live telephone reception, farm workers, and a host of other tasks which have been human based for time immemorial.

Will your Strategic Plan survive the onslaught? Only those that account for machine learning and avoid that competition will be here in 15 years.

Machine learning requires tasks which are high volume and have limited causal factors.

High Volume – Machine learning thrives in high volume. For example, one study had volume reports on police in Philadelphia and teachers. The goal was to hire police officers who are productive and not violent and to promote only worthy teachers (Chalfin et al. 2016). Since the variability is significant between exceptional performing teachers and future failures, the machine learning was able to discern patterns which would predict correctly in both scenarios – better, more productive police and teachers.
Limited Causation – checking out groceries involves a group of products with bar codes, passing the scanner, settling the price and payment. Presumable bagging will be computerized too. The causation for the checkout system is simple – a consumer wants to process items one at a time and pay for the results and take them from the store.

Machine learning is not effective in novel situations, or with creativity, or with relationships

Novel – Novel situations occur where original reasoning trumps learning. For example, some of the best American scholarship looks at problems from the perspective of 2 disciplines. Sociobiology looks at sociological problems and traces evolutionary causes. It’s a terrible discipline for machine learning at this stage. There is not a high volume of reports from which to learn.
Creative – Machine learning will never produce the creativity of Mozart, bell hooks, or Monet. Creativity is a unique human fountain that never runs dry, While machine learning can produce copies of the Mona Lisa, it cannot jump ahead and create a new Mona Lisa. It’s work will always be derivative.
Relational – So much of business success depends on 8 socio emotional skills
1. Goal persistence
2. Awareness of others
3. Awareness of Self
4. Optimistic Thinking
5. Decision Making
6. Relationship skills
7. Self Management
8. Personal Responsibility

Those skills work together to build teams, invent new solutions to business problems, and consider unique value propositions based on available resources.

So how does your Strategic Plan match up?

Test your vision based on the strengths and weakness of machine learning.

Are you planning to manufacture a product without investing in robotics? It’s likely that robotics locally with lower transportation costs will be cheaper than cheap human labor in other locations.
Is there new infrastructure planned in an area that you exploited? NYC plans to go green in 14 years. Any business that moves quickly can compete with old energy guzzlers that don’t see the problem coming.
Did you create a unique value proposition that uses relationship skills for success? Edith Penrose says that effective teams become the real competitive edge of a company.

The coming and current dislocation will be a time for some Strategic Plans to gain the advantage and many others will collapse. It may be an opportunity for a start up to move shrewdly where a larger company could not change.

Is your Strategic Plan going to be terminated?

References:

Bloom, Anthony. “Machine+learning+ted+talk”. TED Talks, n.d. Web. 14 Aug. 2016.

Chalfin, Aaron, Oren Danieli, Andrew Hillis, Zubin Jelveh, Michael Luca, Jens Ludwig, and Sendhil Mullainathan. “Productivity and Selection of Human Capital with Machine Learning†.” American Economic Review 106.5 (2016): 124-27. Web. <https://econ.tau.ac.il/sites/economy.tau.ac.il/files/media_server/Economics/PDF/seminars2015/AER%20picking%20people%20ML%2020151228_final%20complete.pdf>.

Nickerson, Amanda B., and Callen Fishman. “Convergent and Divergent Validity of the Devereux Student Strengths Assessment.” School Psychology Quarterly 24.1 (2009): 48-59. Web.

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The Divorce Between Two Partners – What You’re Doing and What You’re Really Doing

Posted on August 7, 2016June 23, 2018 by TurnAround Executive Coaching

People often ask me what I’m doing at work. If I want to get rid of them, I start to talk about what I’m doing. I do meetings, phone calls, and interviews. They quickly get bored and turn to another conversation. If I want to get their attention, I tell them that I get kids to college who don’t have English as a home language. That’s what I’m really doing. And that is dramatic and meaningful.

The most important part of Strategic Planning is to decide what service or product you are really offering. The risk of failure jumps when you divorce the purpose of your product or service and only think about manufacturing / service activities.

Example:

I bought a GE dishwasher. Dishwashers last so long that I decided to go towards the top end. This machine offers a normal cycle, a cooking pans cycle, and an antibacterial cycle.

How could I go wrong? I assumed that the dishes would come out clean but it doesn’t wash dishes very well.

Now I have to rinse all the dishes and scrape the plates in the sink with a scrubber, load the dishwasher after I’ve run the water to get it as hot as possible, and then the dishwasher works. That’s not really what I expected.

It turns out that I don’t want a dishwasher. I want clean dishes. My Aunt Ina cleaned her own dishes with a rag and drip dried them. Bloomberg hires a maid to clean dishes but I’m cheap and want a machine. Bloomberg and I and my Aunt Ina all have the same need even after 60 years and with very different states of wealth.

We want clean dishes.

So let’s practice

A restaurant makes meals. McDonalds says that you deserve a break today

Detroit makes cars. Hummer gives self respect to pathetic wimps

You’re selling bracelets Tiffany says that memories start here

Churches hold services Marble Collegiate inspires a second chance

Schools teach children My school gives tools to struggle and win

How to create your purpose

The purpose statement has to include 3 elements. (Carver)

Who is it for?
What result will people expect?
At what cost for highest value ?

Who is your market? That may take some work to decide but it’s an easy idea to understand. If you want to sell Hummers, don’t include me in your market. Your market should also exclude some people who want to be in your market. For example, we all like Southwest Airlines prices, but most of us would like free snacks and free checked baggage. Southwest decided to focus on customers who only cared about price. They cut out the free chip lovers.

What result? Don’t decide this too quickly because people have a lot of hidden desires. My grandfather bought Buicks to show he was a working man who turned professional and succeeded. He would never give that reason if you asked him. He always said that the Buick was the most reliable car. I think Buick would be a larger brand today if they understood my grandfather J

Manfred Max-Neef made a chart of 36 basic human needs. Make sure that your product or service is carefully grounded. Some group of people in the market must want it and benefit or you will not succeed.

At what cost and value? Start with the value. You need to be the best for the market group and result that you have already identified. For example, if you’re going to include my grandfather in your market, then you want to make a car that shouts success better than Buick.

Your problem may be that you don’t even have enough money to make a Buick

In this example, you keep working on the equation until you realize that there is a senior housing nearby where people no longer drive. You do have enough money to make a stately carriage called Sundays that stops at each senior center and takes elderly non driving people in style to the mall. They get a free soda as they enter the car. Your market is people who need to feel that they are a life success. Your method is semi public transportation with frills. And people value it enough to pay $20 for one ride and that covers your costs.

Don’t stop working on this equation until your product or service is the best for the market you want at the right cost and value.

Barriers:

Your biggest enemy is to try to be all things to all people. This is pernicious in non profits. It is far better to limit your market and have incredible success than to reach to everyone with a service of such poor quality that no one wants.

Conclusion:

Strategic Planning always starts at the most basic level. If you have been in business for a while, you need to repeat this exercise to make sure that you still have a good plan.

You need to identify the market you will serve (and the markets you ignore), the results that your market of people will receive from your work, and the highest value at a cost you can afford. Then start manufacturing for success!

Marry what you’re doing with what you’re really doing. You will focus on the results and activities together. And that will keep you in business for a long time.

Which you like because the result for you is that you always wanted to feel like a success!

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References:

Max-Neef, Manfred. “Human Ecology: Following Nature’s Lead.” Ecological Economics 48.4 (2004): 490-92. Web.

Carver, John, and Miriam Mayhew. Carver. The Policy Governance Model and the Role of the Board Member: A Carver Policy Governance Guide. San Francisco: Jossey-Bass, 2009. Print.

The Divorce Between Two Partners – What You’re Doing and What You’re Really Doing

torn piece of paper with divorce text and paper couple figures

Are Your Employees Wrecking Your Company?

Posted on July 24, 2016June 23, 2018 by TurnAround Executive Coaching

President Obama said in a recent interview on Face the Nation that the most critical quality for a good President is to form an effective team because the job is simply too big without great support (7/24/2016). His comment is actually the Key Performance Indicator for anybody who is leading a company.

Your job is to choose wisely, lead the team, and solve team disputes!

It’s critical to know if you have chosen staff wisely. Most companies now spend more on service and administration than manufacturing. The balance sheets of older days focus on hard assets but most of your company is likely to be service and administrative. You need a balance sheet that measures whether your staff are building your company or wrecking it.

The literature on determining the asset value of employees is still emerging. While various models each have their benefits, it’s easy just to set up parameters and starting thinking in this new way.

I will present 12 elements of an Employee Asset Based approach. I follow that with three examples of a new staff hire, a valued older staff member, and a problem staff.

Elements of Employee Asset Based Value

Value of Job Ability -Training and certification which leverage effectiveness
Determined DNA – to complete company mission
Continuing Education
Historical Knowledge of Company and Culture
Network
Ability to contribute to team with justice and peace (honesty, harmony)
Willingness to accept accountability
Impact on Profit of Company and Retention of Students
Impact on Critical Number
Is the compensation too high for this position?
Would you enthusiastically rehire this staff member?
Check for liabilities. Does the new staff member destroy value because of poor performance on one of these scales?

How would this look in the real life examples of Jim, Elisa, and Beth?

Jim – The New Hire

Assume that you pay market rate for Jim who is capable of fulfilling the position description for teacher. That is all expensed as payroll. Assume pay of $40,000 per year. Debit that amount to payroll expense (just as normal)

Review the list of 9 Elements –

Value of Job Ability -Training and certification which leverage effectiveness
1. Training and certification which leverage effectiveness

Jim has a Masters in Bilingual education and the DOE would pay $52,000 for this. Credit $24,000 to Equity Professional Added Capital and Debit $24,000 to Professional Assets. Since you expect the teacher to stay for 2 years before the DOE discovers the difference, credit a depreciation account for Professional Assets for $1,000 a month (2 year schedule) and debit expense for Professional Expense.

Determined DNA

Add nothing because there is no history to indicate

Continuing Education

Add $6,000 because he will take CLASS Professional Development and depreciate over two years – his expected tenure

Historical Knowledge of Company and Culture

No addition because there is no knowledge of history and culture

Network

Add nothing because he has no network

Ability to contribute to team with justice and peace (honesty, harmony)

Change nothing because he is not yet part of a team. You need his truthfulness, compassion to others, and willingness to live for company results more than his own. If he steals, lies, cheats clients – these will all reflect badly. If he has a reputation for peace and justice, then it adds value.

Willingness to accept accountability

Change nothing because you do not know about accepting accountability

Impact on Profit of Company and Retention of Students

Add $9,000 in expected future profit because you believe that the presence of a Dual Language UPK teacher will add two seats to the three year old program and 2 retention effect students in After School programs. Add this in the same manner as # 1 and Depreciate over 5 years to account for the final residual effect.

Impact on Critical Number

Add nothing because this will be established by Jim’s performance

Is the compensation too high for this position?

No, subtract nothing as the compensation is correctly established.

Would you enthusiastically rehire this staff member?

Change nothing because you don’t know. This score is the sum total of all the desired attributes fitting into a package that adds value

Check for liabilities. Does the new staff member destroy value because of poor performance on one of these scales?

Change nothing because there is no history to indicate

Summary for Jim:

You hired him at $40,000. He adds $39,000 of value to the balance sheet. That amount will be depreciated over the remaining expected time of employment. The balance sheet should be adjusted in the yearly appraisal with Jim. He should see his value to the company and propose how to increase it. He correctly may feel that his compensation should be adjusted in Year Two.

On the surface, you have made a smart opening choice. The continuing months are critical as they will add or destroy value.

Elisa – Hired 10 Years Ago at Age 40

Assume that you pay less than the market rate of $50,000 for Elisa who is capable of fulfilling the position description for Human Resources. Assume pay of $40,000 per year. Debit that amount to payroll expense (just as normal). The $30,000 remaining is added to Professional Assets and Professional Added Capital and depreciated over 3 years)

Review the list of 9 Elements –

Value of Job Ability -Training and certification which leverage effectiveness

None, so no added asset

Determined DNA

Elisa is totally committed to the mission of the company and stays late and takes work home. She is a model for younger employees. Add $60,000 and depreciate over 3 years.

Continuing Education

You will propose a certificate course online for $5,000 because it will give her more skills and increase her expected date of departure by one year. Add to Professional Assets and depreciate over 3 years.

Historical Knowledge of Company and Culture

Significant knowledge of history and culture. It will take 3 months of compensation to replace. Add $10,000 to Professional Assets and Professional Added Capital and Expense over 3 years.

Network

None, so no added asset. It is carried with Historical knowledge

Ability to contribute to team with justice and peace (honesty, harmony)

Elisa has age and experience and a kindly manner. She works in the background with you to keep the team together and let you know quietly about unresolved issues. It’s worth $30,000.

Willingness to accept accountability

Elisa rarely makes an error. She knows that her value to you is in being correct. Her determination not to disappoint relaxes you to focus on the leadership job. It raises your effectiveness by $60,000 over 3 years.

Impact on Profit of Company and Retention of Students

Not a consideration since she has little effect in Marketing or Program

Impact on Critical Number

Add nothing

Is the compensation too high for this position?

No, subtract nothing as the compensation is correctly established.

Would you enthusiastically rehire this staff member?

She is highly valued and the overall fit with the team is worth $45,000 over three years

Check for liabilities. Does the new staff member destroy value because of poor performance on one of these scales?

Change nothing

Summary for Elisa:

You hired her at $40,000. She adds $240,000 of value to the balance sheet. That amount will be depreciated over the remaining expected time of employment. The balance sheet should be adjusted in the yearly appraisal with Elisa. She should see his value to the company and propose how to increase it. She correctly may feel that her compensation should be adjusted in Year Two. She may have other proposals because she understands the appraisal and company very well.

You have made a smart choice in Elisa and retained her. Your leadership skills will be tested to retain her but it’s worth the struggle.

Beth – Hired 20 Years Ago

Assume that you pay less than the market rate of $40,000 for Beth who is barely capable of fulfilling the position description for Secretary. Assume pay of $28,000 per year for 10 years. Debit that amount to payroll expense (just as normal). The $120,000 remaining is added to Professional Assets and Professional Added Capital.

Review the list of 9 Elements –

Value of Job Ability -Training and certification which leverage effectiveness

None, so no added asset

Determined DNA

Beth is unfocused. She isn’t determined to accomplish the job because it’s all hazy in her mind. Showing up is her idea of determination. Unless she has a critical errand for her family. Debit $10,000 per year to Professional Added Capital and Credit Professional Assets. Unfortunately, you assume she will work until retirement in 10 years so the total debit and credit is $100,000

Continuing Education

Ha. The last thing that she learned was where a new restaurant opened for lunch

Historical Knowledge of Company and Culture

$1,000 ($12,000 over 10 years). Beth knows how the boiler works when there is a problem

Network

None, so no added asset.

Ability to contribute to team with justice and peace (honesty, harmony)

Beth has disappointed many employees over her career. They see that she gets paid for doing very little. She actually accounts for $100,000 ($10,000 per year) in reduced effort by others because they see that hard effort does not pay.

Willingness to accept accountability

Beth always has a reason that a phone call was lost or mail that wasn’t sent. She costs about $120,000 over 10 years.

Impact on Profit of Company and Retention of Students

Not a consideration since she has little effect in Marketing or Program

Impact on Critical Number

Add nothing

Is the compensation too high for this position?

Would you enthusiastically rehire this staff member?

No, She destroys about $5,000 of value annually ($50,000)

Check for liabilities. Does the new staff member destroy value because of poor performance on one of these scales?

See above

Summary for Beth:

You hired her at $28,000. The sum total of credits and debits to the Balance Sheet is a negative $238,000. Debit to Professional Added Capital and Credit to Professional Asset. That amount will be depreciated over the remaining 10 years of expected time of employment.

You have a choice to make and your leadership skills will be tested to fire her and replace. Beth has one skill and that is to keep this position. She knows a Board member or she scares people or she is older and can’t get another job or she has an alcoholic husband and pays the bills. You can only remember that you’re not her father, mother or banker. You have a responsibility to the company and the people who receive its benefits.

Conclusion

Notice in these three examples (drawn from real life examples) that the real value is added by longer term employees who are effective (+$240,000). The biggest effect is not firing those who are destroying your company (-$238,000). New employees typically add the least (+$39.000)

In this example, you can increase the asset value by $279,000 or $41,000. The non performing staff member will kill your business.

What will you do this week to add Professional Capital to your company?

Notes

Russ, Meir. Management, Valuation, and Risk for Human Capital and Human Assets: Building the Foundation for a Multi-disciplinary, Multi-level Theory. N.p.: n.p., n.d. Print

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Strategic Plans Miss the Bullseye When There’s Too Much Bull

Posted on July 11, 2016June 23, 2018 by TurnAround Executive Coaching

Most strategic plans are neither plans nor strategic. Most people have dreams instead of plans. Their target is so big and their arrow is so small that no one knows that they are even in business. And I admit, with frustration, that the line between daydreams and vision is often hard to determine.

There are 4 arrows to test and refine your first draft of a Strategic Plan.

Can you tell me the mission and strategic objectives from memory? If you can’t remember the core of your strategic plan, then you have either a dream or a problem. How can you achieve goals that you can’t remember?
John and Miriam Carver ask three things about the mission statement
1. Who benefits?
2. With what results?
3. At what cost?

Very helpful questions that test the clarity of your mission statement. For example, different hotel brands know who may benefit from their hotel. Some hotels are for conventions, some for business, some for economy, some for vacation luxury, some for families. Motel 6 and the Intercontinental both understand who benefits from their unique approach. You are never going to arrange a board meeting at Motel 6.

Similarly, the focus of the mission statement should be on intentional results that can be measured. It’s easy to focus on activities but missions that actually work change something in our world. Denny’s does not serve food. Denny’s provides a comfortable experience for people who watch their cash. The focus is on the results.

Roger Martin and Lafley tell us to focus the mission statement only in areas where we are determined to be the best. Just like in war, there’s no prize for 2^nd place. Let’s say that your business is to build a hotel that targets business meetings to make them effective and comfortable.

Suddenly, you notice that Marriott will be a competitor and they have enough money to keep competing until they kill you. What’s the answer? Find a niche where you can be the best and succeed. In my example, you might discover a city where flea market owners get training to display and sell. As you can imagine, they will look for a low price for their business meeting. They need a Motel 6 bed with a simple meeting room and sandwich catering from a nearby restaurant. Marriott will never compete for that business and you can build your hotel and win.

Scaling Up is all about taking the mission and strategic objectives and creating daily quick meetings where everyone says what they will do in the next 24 hours to achieve the mission and strategic objectives.

Implementation is just as important as clarity of mission. If your company does strategic plans once a year and then files them, you will never get to where you want to go. Strategic plans are always difficult. Silicon Valley entrepreneurs are taking nootropic drugs and strategies to think faster and stay awake longer. Their plans are difficult to achieve.

John Maxwell says that some people see great success for a while with little effort. He calls it surfing the wave back to the shore. The strategic plan involves working every day to swim out to where the wave started.

Conclusion

Your first draft of a strategic plan and the mission statement cannot be 100% perfect. Consultants don’t necessarily help. I was part of an expensive consulting process that led to a lengthy strategic plan mission statement that promised vague results to the entire world. As you might imagine, its 10 years later and the plan is mentioned at formal business meetings once a year. The impact? – Zero.

One way to succeed is to start with what you have and look for ways to test and refine. Four arrows which may help are

Can you remember your plan?
Carver – Who benefits? What results? What cost?
Lafley and Martin – What mission will win over all competition?
Harnish – What strategic objectives can be worked on daily until you win?

And the time to start aiming at the bullseye……. is – Today !

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Notes

Carver, John, and Miriam Mayhew. Carver. Implementing Policy Governance and Staying on Track: A Carver Policy Governance Guide. San Francisco: Jossey-Bass, 2009. Print.

Harnish, Verne. Scaling Up: How a Few Companies Make It… and Why the Rest Don’t. N.p.: n.p., n.d. Print.

Lafley, A. G., and Roger L. Martin. Playing to Win: How Strategy Really Works. N.p.: n.p., n.d. Print.

Maxwell, John C. Failing Forward: Turning Mistakes into Stepping-stones for Success. Nashville, TN: Thomas Nelson, 2000. Print.

The Best Non Profit That Nobody Wants

Posted on July 3, 2016June 23, 2018 by TurnAround Executive Coaching

I’m always envious of the for profit companies. I know they have their bad days (Tesla after it’s car crash) but their business plan is so simple. Make Money. Two elegant words that everyone understands.

The non profit world is messy business. We are mission driven. That one phrase leads to our great challenge – arrogance. If you are really good at understanding your mission, then criticism from stakeholders runs off your back like water off a duck. We actually like criticism because it shows us how the peasants really don’t understand. Criticism becomes a compliment.

Who criticizes?

Government

Government contracts often struggle against the unique mission of a particular non profit. Government does not want to cut individual deals with 1.5 million nonprofits in the USA. They simply specify what they want to do and we rush to respond to the RFP.

Government contracts are often written to prevent failure rather than strive for success. Youth diversion contracts are written to count kids in seats, not to measure more peace and confidence for an angry teen from a broken home. Mission driven non profits often are organized for more specific results.
Government contracts are politically driven. That means that the next President, Governor or Mayor can ruin the excellence that you built. Contracts get cancelled. New contracts veer off in new directions. I honestly understand the many non profits who have given up on excellence in mission and simply supply whatever minimums are required.

Families and Clients

Families often don’t understand what they need or why we offer specific resources. Example: While you may be the specialist in lactation therapy for babies, that does not mean that parents will simply rush to fill your appointments. They don’t connect their need with your resources.

People live for their fears and your mission may not connect. Do you know how many parents ask about gluten in food programs? Only 1% of the nation is allergic to gluten. From parent comments, you would think it’s the silent killer of America.
People have trouble measuring the quality of service industries so they look for symbols of quality that have nothing to do with your mission. You provide quality daycare and parents look. They look to see if you bought Little Colorado train tables. And are the tables low formaldehyde? The symbol has little to do with the quality of your service.

Self Criticism

The most painful critic should be the management and board. Sometimes the mission has not been carefully considered and you have critics because you deserve critics. Is your agency really providing (1) measurable results (2) at a reasonable cost (3) for a worthy group of stakeholders? That key question (Carver) needs to be reviewed regularly.

I was recently at a gala for another agency. The evening was filled with spectacular comments about getting basic rights for prisoners across the globe. The speakers were inspiring. The reasonable cost and how to raise it was never mentioned. The speakers were traveling constantly and regaled us with stories of trips. Perhaps they should change the mission to bringing prisoner care packages on their trips.

How to Stay the Best and Survive

Let’s assume that you have done the self criticism and your mission is clearer and better than ever. What are some steps to protect it without irritating all your stakeholders?

Reduce the areas where you are unique to the bare minimum. This is no time for grand gestures that add little value to the end results. If your need to add your special elements to a government contract at your own expense, most contractors have no trouble with that.
1. Any unneeded extra uniqueness has to be paid from your free cash. Ouch.
2. All parts of a program need staff orientation and professional development. The simpler program requires less effort in training and will be easier to achieve highest quality results.
Tie your mission to stakeholder fears. The Challenger Sale is a six step process for sales. Two of the six steps are Rational Drowning and Emotional Impact (Dixon). Both steps show the customer more about the problem before talking about the sale. Example: Why do I have to pay $2,000 for Test Prep? I’m ready to accept that price after someone teaches me why kids are struggling with the Common Core. Once I understand that most children will spend their career saying “You want fries with that burger?”, I’m ready to listen to why I need your non profit service.

Conclusion

NonProfits are mission driven which gives us great privilege to look at society and direct resources to areas of strongest need. We have to accomplish that mission with humility and realize that we need the good will of the stakeholders. They are trying to make the best decisions too. We have to be smart as to how to apply our mission to contracts and we have to understand client fears before we announce that we are the magic cure.

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Works Cited

Carver, John. Boards That Make a Difference: A New Design for Leadership in Nonprofit and Public Organizations. San Francisco: Jossey-Bass, 1990; 3rd edition, 2006. Print

Dixon, Matthew, and Brent Adamson. The Challenger Sale: Taking Control of the Customer Conversation. New York: Portfolio/Penguin, 2011. Print.

Does Your Non Profit Need a Strategic System or Strategic Plan?

Posted on April 17, 2016June 23, 2018 by TurnAround Executive Coaching

A Story of Two NonProfits –

When I started my first nonprofit, I bought a computer before I paid myself. That should have been a sign of trouble ahead. The truth is that I’m in love with systems. It was no trouble at all to set up systems for the nonprofit. I had enough credibility to get a board of directors from respected colleagues. I got bank accounts started, hired staff, started fund raising, and began flying between Madison, Chicago, Knoxville, Buffalo, and New York.

The devil was in the details of the strategic plan. The mission was too broad and the staff were more academicians than strategists. We had great meetings twice a year with the Board and theory flowed like wine. We did not notice any weakness. If we had been a for profit company, we would have noticed immediately how few people wanted our services. As a nonprofit, we were drunk on grand theories of broad vision, dreams of how the world should be, and my administrative competence.

Another nonprofit was set up at the same time. That director understood the strategy and created an aggressive, manageable vision. She did not like systems and ignored legal and financial details as much as possible. The early days had time when paychecks did not arrive and the IRS impounded the account twice for nonpayment of taxes. There was very little in writing, but oral history and a staff team of 2 people made communication easy. There was no computer. What was happening was that she was getting activities started and results for clients.

Which agency survived? The agency with the defined vision and strategic plan (not mine). Thirty years later, it thrives as a $3 million program to support refugees and has 100 staff members.

Systems sink small nonprofits, sustain large nonprofits and suffocate dying nonprofits

Small – If your nonprofit is under $500,000 in revenue and in a human service area of low risk, you can possibly ignore some systems while you get your vision and strategic plan working. Your licenses may not have all the right dates but regulatory agencies often don’t worry about small agencies. If you work in high-risk human services (ex. children or medicine,) you have the worst of worlds with a need to be good at everything.

Large – In a larger nonprofit, the strategic plan is in place but needs the cooperation of many people. It’s no longer a fluid set of tasks that two or three people hand off easily and interchangeably. After $500,000 in revenue, your nonprofit is ready for an increasing round of systems to sustain the vision. When you hire more people, there will be more unemployment claims. The cost of the audit escalates with higher revenue and more time is needed to provide paperwork for the audit. At $5 million in revenue, my company struggles to keep up with the regulatory requirements. Size increases regulation and I have no time for the internal tasks that I used to enjoy.

Dying – Many agencies that are declining have an odd combination of insufficient vision but strong systems and strong systemic need. Let’s use religious congregations as an example. Thom Rainer states that ‘between 8,000 and 10,000 churches will likely close this year’. (2013:Huff Post, The Blog). The Archdiocese of Chicago speaks of closing 100 churches this year. Clearly, there are many religious groups in the middle of retrenchment in the USA.

In the middle of their trials, most of these groups have expensive fixed assets – buildings with towers, special windows, complex organs, and years of neglected maintenance. These remaining assets of the nonprofit and denominational regulations require finance committees, Trustee meetings, and other systems.

Most small nonprofits just don’t have these systemic needs because they have not had the chance to accumulate the assets!

The systemic needs of over asseted J churches overwhelm their strategic planning energy. There is rarely the energy in a small group to discover and refine a Strategic Plan at the same time that a Systemic Plan is being operated. Declining groups are usually loathe to give up a fixed asset. They don’t want to be known as the group that sold the church as long as there is any life left. That is precisely when they should be divesting to shift the remaining energy resources into Strategic Planning.

Conclusion:

Operating any corporation is a mix of skill and blessing. Very few companies in the United States of any size have existed for 100+ years. It’s not easy

One of the issues that plague organizations is the balance and need for both Strategic and Systemic Planning – and divesting as well as investing in systems.

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McSwain, Steve. “Why Nobody Wants to Go to Church Anymore.” The Huffington Post. TheHuffingtonPost.com, 14 Oct. 2013. Web. 17 Apr. 2016.

When Government No Longer Loves You

Posted on April 12, 2016June 23, 2018 by TurnAround Executive Coaching

Synopsis: If you have noticed that fewer government RFPs are arriving for your mission, it’s a possible sign that political priorities have changed and your great agency no longer has a private key to the statehouse. This article proposes 4 ways a nonprofit can respond to cuts in contract funding.

Background

Higher Education is a jilted lover.

At the end of WW II, the President feared that the USA would return to peacetime with riots (this had previously occurred after WWI). The economy could not absorb all of the returning soldiers into the work force. The GI Bill was an elaborate ruse to divert soldiers out of the work force temporarily until the peacetime economy resumed.

You know the rest. Soldiers went to college, the Marshall plan created demand for USA goods, and the national standard of living advanced steadily in the 1950’s and 60’s.

By the 1980’s, Higher Education was cast aside while Crime and Medicaid projects flirted with government. The City University of New York lost its free tuition and the rest of the NYS system was no longer cheap. While almost all states have cut funding since 2008, Alabama, Arizona, Louisiana, Pennsylvania, and South Carolina have the sad distinction of removing 35% or more funding for higher education (Center on Budget and Policy Priorities, (2015:Mitchell and Leachman).

What can you do if you are in education, AIDS, or some other downsized priority?

I suggest that you choose one of four alternatives:

Reduce your mission to a niche that can be funded
Acquire a similar agency
Look for a hero and negotiate your surrender
Start a forprofit partner

Reduce Your Mission

In good years, we all tend to broaden our mission. Our best stakeholders demand it with considerable pressure. We gracefully yield, impressed by our own capacity. The trick is to understand the core where we are determined to be the best and return to our true love when our government suitor is found with a new friend.

In my agency, our core is academics for kids who don’t have English as a home language. We have supplemental programs as well and many additional students from English speaking homes participate because they like our quality.

NYC does not always have our constituency at heart. The last administration proposed stopping all after school programs throughout the city for fiscal reasons. The current administration thinks more about diversion to avoid youth violence than college prep.

We accept some of those contracts but we also understand our core for those times when the love affair with government falters. We work hard to keep our tuition based programs filled and expanding to guard against the day when funding cuts occur

Acquire a strategic company

Notice that I say acquire rather than merge. Mergers often fail as two living organisms try to live as one.

Weak finances of many nonprofits make bad mergers. Owen et al. state that “…. many organizations have grown quite weak in the present economy and are today in an extremely vulnerable position. ….. it would be difficult to carry out effective mergers with organizations that had grown financially desperate as demonstrated by an inability to meet ongoing monthly expenses or the loss of significant revenue sources.” (Owen, 2011:46)
Unusual leadership is needed for mergers– While there are examples of successful mergers, the success depends on skills of boards and executives. I submit that these skills are the exception more than the rule.
Less conflict in acquisitions– The power of the acquisition is simply for one organization to surrender its resources in the expectation that the combined company will have more efficiencies and two networks for its continued mission. There will be staff reductions, but the acquired organization may easily have some talent that will get preference in merit based selections. The spirit of the acquisition under the lead executive will be understood. People accept in advance in an acquisition that difficult decisions will be made to protect what we do for the people we serve.

What do acquisitions provide?

Key contracts– The acquired agency may have a key contract or lease that is hard to obtain.
New networks– assuming that the acquired agency has done quality work and managers will not leave precipitously, you can quickly expand your own network
New talent– if some positions are now duplicates, you may find that some of the better talent should be chosen from the acquired organization. This is a strategic chance to strengthen your bench
Efficiencies of scale– while service organizations do not profit from scale as much as manufacturing, acquisitions with a total revenue of less than $10 million will likely benefit.

Look for a Hero

There are too many nonprofits even without the cutbacks and fickle behavior by government. Kobara (2015) states that new nonprofits started at a rate 50 times faster than small businesses in the last decade. He points out that there are no investment banks, specialists, and attorneys that assist non profits as they begin operations. Since the funding is not provided by the persons served, the market forces that cause forprofit companies to succeed or fail don’t affect nonprofits as quickly.

If you have less than $5 million in revenue and contract revenue is at risk, consider surrender rather than acquisition. Verne Harnish calls the revenue of corporations between $1 million and $5 million the ‘Valley of Death’. Your agency has not attained the efficiencies of scale. While you still may have the talent to lead a combined organization, you probably don’t have the experience.

There is no dishonor in strategic planning to keep the mission alive in a different corporate form.

Create a ForProfit Partner

For Profits are helpful vehicles for attracting social investors and business plans that could throw off tax or ownership benefits.

Investors Easier than Donors– For long term fixed assets such as buildings, friendly investors such as board members and friends may be more willing to invest in stock than to donate. The building can be purchased with their capital down payment, financed by rent from the nonprofit, and sold if the rental stream fails. The nonprofit gets use of a property that is normally not available.
Higher Rents– For government contracts that discourage ownership, a leasing structure from the forprofit partner may permit more contract funded repairs and lease money that essentially pays the mortgage.
Exploiting Assets– If the nonprofit has unused assets, the forprofit corporation can rent them from the nonprofit and exploit them for unrelated purposes.
Managing Risk – if the programs have significant risk, the nonprofit can accept the risk since it has few fixed assets. The forprofit keeps the fixed assets at arm’s length and cannot be touched in the event of a lawsuit.

Conclusion

If your agency is largely funded by contracts, changes are inevitable. The needs of communities change and politics change. Even friendly legislators retire or move on. Many of us assume a relationship with government that is not reciprocal. Why wait until your nonprofit is one of the many unlucky ones that fail? Choose your backup strategy now and rejoice that you could survive singleness!

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A maximum of 10 companies per year develop a relationship for Business Coaching to turn around their company or scale up past a growth barrier.

References

Harnish, Verne. Scaling Up: How a Few Companies Make It… and Why the Rest Don’t. N.p.: n.p., n.d. Print.

Kobara, John. “Facilitating Mergers and Acquisitions for Nonprofits” Huffington Post. 9/09/2015

Owen, Greg, et al. “What Do We Know about Nonprofit Mergers?” Wilder Research (2011): 1-49. Wilder Research. Web. 12 Apr. 2016.

Three Waves that Sink Strategic Planning

Posted on March 26, 2016June 23, 2018 by TurnAround Executive Coaching

My father was in the Navy so I’ve been immersed in dreams of boating. Boating is 80% planning — considering destinations and choosing, planning supplies for the trip, studying the charts closely, watching the weather – there’s a lot of ways to sink a boat if you don’t plan strategically.

I first worked on Strategic Plans in college. I’ve had Training on Microsoft Project. All of my plans sank or had no effect on the company until recent years. I’ve been through more 5 year plans than the Communist Party. The planning conversations were thoughtful and sincere. The stakeholders were smart people. So I looked through my swamp of sunken failures to see if there were any common planning traps that turned sincerity and brilliance into a vessel foundering in waves.

Too Much!

Half of Strategic Planning is deciding what not – not — not to do. Lafley and Martin take the concept further in Playing to Win. Only make plans for products or services where you intend to be the best. There are no prizes for 2^nd place. Throw all of the other good ideas overboard.

Some of my historical plans were collections of every good idea. It’s an easy way to run a planning committee because no idea gets turned down. Perhaps you don’t have clarity about the 5 year planning so you’re unwilling to criticize untimely ideas of others. Poor planning is like the Costa Concordia. The captain should have planned by deciding what not to do.

Lafley and Martin turn Strategic Planning on its head by insisting that we only determine to be the best in each planned objective. That is facing the waves beyond the harbor wall and heading into them. Poor planning accepts all ideas uncritically. Strategic planning only takes the plans with commitment to win. That change of attitude refines strategic objectives and gives a team a chance for buy in or back out. They have to consider the cost to get clarity.

All Tomorrow, No Today

Strategic Planning usually results in a document that is edited, voted, and stored. There is no way to look at a chart once a year and successfully steer the ship. If I asked you right now to spontaneously recite the major objectives of your strategic plan – can you do it? I was recently in a training where the staff could not remember the purpose of the company!

In Scaling Up, Verne Harnish uses a one page strategic plan, quarterly goals, and daily quick meetings to keep answering the question – what did you do today to help the Strategic Plan? Brilliant! Who would take out a ship without watching the chart and making regular course corrections?

All Work, No Results

You will discover that it was easier to plan attempts and action than to plan results and consequences.

The Logic Model points out that listening to the weather forecast and reading the chart hourly is not the same as safely landing at the destination. Many managers focus on doing the right things but the Strategic Plan can only be about results – not activities!

Two captains get the tourists to Puerta Vallarta. The modern captain has a new ship, the food is best, and the crowd is great. The cheaper captain has an older boat. The cheaper captain constantly monitors fuel and weather. Weather conditions change and waves fight both ships. The cheaper captain changes course for waves and tide that will save enough fuel to finish the voyage. The modern captain filled her boat with extra shrimp instead of extra fuel. She can only afford to keep the engines on low to head into the wind and the rocking of the boat means that no one wants the shrimp. The cheaper captain makes landfall a day earlier because the captain knew that getting to Puerta Vallarta was the real plan. The modern captain finally gets there and all the passengers want their money back because they know that planning is about actually getting there!

Conclusion

You may be thinking that your company just doesn’t have the capacity to add this planning to everything else that you’re doing to stay afloat.

True.

You may be like a captain of a 16 foot Sunfish. You don’t have the capacity to face ocean waves but you’re quite capable of a lake journey. You do have capacity to choose one key result you want from your work, choose one key time each day to spend 5 minutes working on your plan and choose one key objective about which you’re prepared to win. You will be amazed at how often you make safe harbor!

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Lafley, A. G., and Roger L. Martin. Playing to Win: How Strategy Really Works. N.p.: n.p., n.d. Print.

Harnish, Verne. Scaling Up: How a Few Companies Make It… and Why the Rest Don’t. N.p.: n.p., n.d. Print.