To Manage or to Lead

With the changes in the business economy, companies must understand the vital and significant difference between managers and leaders. Too often there is merely a differentiation in semantics when it comes to the definition of these terms. What I am proposing is a shift from management to leadership across the board.

When a company assigns a management position, what is it asking the incumbent to do? In most cases, the companies focus is on driving business objectives through the management of personnel, assets and business strategies. In effect, this practice helps to maintain a necessary order for the business model, but the unfortunate side effect is an overall ineffective push to maintain the unnecessary hierarchy of the business. To merely manage, by definition is to maintain the status quo and place a person or group in charge of a particular aspect of the business. We've seen the detrimental results of many businesses trying to merely maintain their place in the market, and their own profitability levels. The failure of many businesses can be directly attributed to the failure of the business to bridge the gap between mere management and actual leadership.

A business can't thrive and prosper in a culture of mere management. Without the emergence of a leadership mentality, business will continue to falter, or at best maintain a moderate growth. The true strength of any business can be seen in a down economy. Increased revenues and profitability can be obtained by almost any business in a robust economy, but when business starts to drop off, the true leadership driven businesses emerge. It is time for each company out there to realize that without proper leadership at all levels, the down turns will last longer and become much more pronounced.

If we take a look at a branch business based model where profit centers are utilized to gain or maintain market share and presence we will see a similar hierarchy throughout. Although the titles may differ, the basic set up will be similar. At the top, there will be a regional VP or director responsible for all of the locations within a certain geography, below them will be a number of area managers or directors who in turn are responsible for a number of those locations. Finally, at the bottom of the management structure will be the cost center managers. This places three levels of management between the revenue producing locations and the operations manager. I've intentionally left out many of the other mid level managers such as sales, safety, HR and other industry specific individuals in the interest of brevity. With this system in place, there are many advantages and disadvantages which will directly impact the business.

The biggest advantage should be having extra support for the day to day operations. Above the cost center manager, the other managers should have the ability to analyze the business, create efficiencies throughout the region and support the operations of the individual cost centers. Above them, the regional VP should have the ability to further analyze the business and support the area managers with issues that arise from the day to day tasks. This additional level of management's primary responsibility should be to support the growth of both the lower level management team as well as the business itself. Far too often this advantage is not utilized. Instead of being a support group for the cost centers and the cost center manager, they become more of a police force, trying to enforce the corporate regulations and guidelines. Instead of training and coaching their direct reports, they spend their time inculcating them with rules and procedures which often times are irrelevant at the cost center level. In many cases, the area managers and higher spend the majority of their time performing tasks that should be relegated to the cost center managers.

This type of system is doomed to failure. Within it, there is an inherent culture of mistrust where a business can't bring itself to believe that anyone within the system is knowledgeable enough to make decisions and thereby withholds the ability to make decisions from those that are closest to the action. Within this culture of mistrust, there are a select few individuals holding on dearly to as much knowledge and power as they can. The only disbursement comes in trickles and only when absolutely necessary. Within this culture of mistrust the seeds of fear are sown, and grows into overall operational ineffectiveness. When the business is inefficient, a manager begins to fear for their job. By holding as many cards as they can, they try to mitigate the situation by holding their direct reports to higher standards than they hold themselves too. Instead of their position being complimentary and supportive, it becomes combative and isolated.

The first and foremost responsibility and duty of a leader is to train their replacement. Where a manager is trained within the cycle of mistrust and fear to keep the hierarchy intact, a leader welcomes and supports the ideas and decisions of their direct reports. While a manager disciplines an employee for making a bad decision, a leader embraces the opportunity to coach and support their direct reports. A manager takes a difficult decision away from their direct report where a leader pushes the employee to understand all of the aspects of the decision and has them make it. Managers thrive in an environment where their self worth is based on the amount of decisions they make for their employees where a leader has no regard for self worth and measures themselves as a part of a team. While a manager creates an environment where their employees perform their tasks at a level just above keeping their jobs, leaders create an environment of trust and confidence that allows their direct reports to perform their tasks at the highest level of their ability. A manager looks at the financials and operational reports and focuses on delegating tasks designed to overcome inefficiencies while a leader involves their direct reports in all of the aspects of the operations and utilizes the input and ideas of their team to create a cohesive and knowledgeable group working towards eliminating inefficiencies. A manager surrounds themselves with direct reports who can be easily managed and understand the hierarchy while a leader surrounds themselves with people willing to push the boundaries of the hierarchy and contain the potential to take a leadership role themselves.

These are just a few of the important differences between a leader and a manager. Once companies begin to understand that a large gap exists between management and leadership, they will have taken the first step at creating a more efficient and sound operational environment. If a company begins abate their fear of their employees and celebrates the individuals as equal contributors, it will be on the road to success. When a company starts to bring this attitude into their hiring process, and looking for people with the potential to succeed, they will have come to a place where the culture of mistrust can be eliminated. As soon as the company starts replacing managers with leaders, and committing to the process they will be well on their way to becoming industry leaders themselves. Finally, when a company is not only willing, but able to overlook the necessary obstacles that will come with this culture change and continue to push forward with their new leadership team, they will have finally broken the cycle that has caused so many failures in so many businesses.

Stuck in a rut

Lately we've all watched the economy grind to a slow and deliberate halt. We've seen institutions and companies decline at a pace never before seen. Companies like GM, Chrysler, and numerous financial institutions falling by the wayside, or relying (far too heavily in my opinion) on government money to get them out of trouble. Where did the days go when the businesses were self sufficient and wanted nothing more than the government to stay out of their way?

Most business, like the economy, are stuck in a rut. In most cases, we're not talking about little mountain bike tire grooves on a wooded pathway, we're talking covered wagon, groups of settlers heading west after a rain storm ruts. Too many businesses and industries today are operating the same way they have for the last twenty years or longer. While I wholeheartedly agree with maintaining a degree of integrity and dedication to a company's founding principles, continuing to run a business like you have for the last two decades doesn't always work. Life changes, people change, technology changes and thus, business should change relative to the rest of the world. What these ruts have caused is a reliance on an ineffective workforce in a stagnant environment. The ruts have gotten so deep, it's near impossible to get the wheels out without damaging the vehicle or veering off the road entirely. The unfortunate consequence of this nearsightedness is the perceived necessity to hold back the reins and wait patiently for the road to clear.

LOST IN TRANSLATION

One of the underlying difficulties a company will face when trying to steer clear of the ruts in the road lies in the inability to get beyond the translation factor. Every business I have worked with or for has had some sort of major growth initiative designed to get the proverbial "ball" rolling, or to get out of their own rut. Where each one, in their own varying degree, failed was their inability to properly translate their old system into their new one. They weren't able to effectively or efficiently continue their old practices with the new initiative: as hard as they tried, and as much money as they spent, they just couldn't fit the old processes into the new mold. Where did they go wrong? Not everything translates, and trying to translate often times defeats the purpose of trying to change in the first place. If a change is on the horizon (as it should be on everyone's horizon), looking at what you are trying to change and more importantly why you are trying to change it becomes the underlying reason for that change.

Not all change is necessarily thought up, some just happens and some comes through a long stretch of inculcation. The important changes, the ones people get all fired up about and know are going to make a difference, are those that stem from a desire to increase the efficiency and flow of the business. In those cases, when you have decided to make a change, no matter what, commit: commit to making the change, commit to your reason for making the change, commit to a goal and commit to having the change be an improvement. When you are ready to make these commitments, then you are ready to make the change. When you are deciding on the course of the change, make the decision having your goal in mind and working towards your current system. In other words, pick up your wagon and put it down on a new road that isn't so worn instead of just putting nicer wheels on and at least making the rutted road you're currently travelling on a little less bumpy. If you're going to spend the money on new wheels, wouldn't it make more sense to have the ability to try them out on the whole road instead of the same old path you and everyone else has been travelling on.

Household Task Analysis

There aren't too many guarantees we can make to one another, but here's one I feel comfortable with: I guarantee that I will make wrong decisions. The only people who can make a guarantee like that are those of us who have the confidence to make decisions in the first place.

What that leads to is the concept of everyone being a manager. Maybe we don't all manage people, but we all need to manage ourselves. Confidence is the key to success in any arena, in any area. Every major breakthrough, every successful business, and every great invention all started with a person who had the ability to manage themselves and lacked the fear of being wrong. When Thomas Edison was asked how many tries it had taken to succeed in making a light bulb, he answered that it had only taken him one try to succeed, but he had over a hundred opportunities at failure.

Now, we know we can feel comfortable making a mistake, but what do we do with our mistakes. Yes, the old adage about learning from them rings true, but let's take it a couple of steps further. When a mistake is made, there are a couple of things to do before you worry about learning from them. The first is to identify the mistake. This may seem easy, but things are not always what they seem. Let's look a common household mistake. The Visa bill was due and we sent it in late. This of course incurs credit issues and late fees. Both of which are detrimental to a successful household. What was the mistake?

The first way to look at it is that sending it in late was a mistake. Sure, that was part of it, but what can we learn from that? If that is all you see, there's not much to stop it from happening again.

Let's go a little further. A great tool for understanding where mistakes come from is what I call a Household Task Analysis. This HTA is an important tool in gaining a better understanding of where the potential for error comes from. It is a very easy tool to use, and once you get started on a couple, it becomes almost second nature. The key for mistakes is avoiding them. In order to avoid them, you have to see them coming and put preventative measures in place. Let's use our late Visa bill as an example for the an HTA.

The first thing to do is take out a piece of paper. On that sheet, make three vertical lines down the paper. Label the first column, "Action", the second column, "Potential", and the third column "Prevention". Now, in the first column, write down all of the steps between receiving the bill and sending in the payment. Don't forget the little steps, like making sure you have the money to cover it, and that you have checks in the checkbook (or even know where the checkbook is). When you are done with that, in the second column (Potential) write down next to each action item what potential things can happen during that step which will cause a delay in the payment. When you have completed that, in the third column, write down what you can do to prevent the potential mistakes from happening.

Once you have completed this, you see that identifying the mistake is a little more involved than you may have thought. In order to make it not happen again, you have to make sure you have put the preventative steps in place for the next time. One of the things I have done in the past is used this tool as both a learning tool, and sometimes even a sort of punishment. Next time someone in your household makes a mistake, have them do an HTA for whatever it was. If understanding the flow doesn't help prevent costly mistakes, perhaps the thought of having to do an HTA will.

Remember, making mistakes is part of the learning process. Just make sure you are learning the right things from them and putting something in place to prevent them from recurring.

Teaching our Children About Money

There is no better time than the present to start teaching children about money. The reality is that if they don't learn it at home, they probably won't learn it anywhere. They may learn how to write a check or balance their account, but that will be the extent of it in schools today. While it would be a dream come true for those of us in the financial community to have a full curriculum of financial instruction begin early on in a child's education, and take them all of the way through high school, that is unfortunately not a reality at this time.

Good financial management is a culture more than anything else. Bringing your children up in a positive and educational environment helps to promote this culture and the lessons will last them a lifetime.

The most important rule in educating children about money is to be consistent. Like anything else, bad habits are hard to break, and in the case of finances, may cause many years of heartache. When you give them a lesson, make sure they understand all of the rules, and stick with them. Children, like adults, need to understand the benefits and consequences of financial management.

One caveat to the education of children is not to involve them in your adult finances. Bringing children into your own financial issues will only serve to add a certain level of stress. Children need to be taught the correct way to handle their finances, and the last thing we want to do is add any apprehension to their already limited view of money.

Start them saving. Children get money as gifts, they find money on the floor, and in some cases they get paid for chores or get an allowance. This is a great opportunity to start teaching them about savings. We suggest that you get your child a jar, a piggy bank and a box. Bring your child with your to get these items and buy something that is rather plain. Along with these three items, get some art supplies and work with your child to decorate and make them unique.

The jar- The jar represents the hard work they children have done to earn the money. This is the money they get to do anything they want with. Using a clear jar will let them see the money that is adding up. Along with the money that goes in there, have them put a small piece of paper in the jar that has whatever they want to use the money for written down on it. If they start to see more paper than money, they'll know they need to work harder.

The piggy bank – The bank represents the money they will be saving. The money they put into the bank will stay there until enough has accumulated to transfer into an actual bank. The fact that the children can't see in the bank enforces the point that they need to leave their savings alone.

The box – The box represents a gift. The money they put into the box is money that they will give away to others. One great thing to do is whenever your child is going to a birthday party or special occasion for one of their friends, have them take some money out of the box and give it as part of their gift. They can even use part of their own money towards purchasing a present, but we feel that giving the gift of cash they have earned themselves gives them a better sense of stewardship.

For every dollar they earn, we suggest the following percentages for splitting among the items listed above:

Jar(Income) – 50%
Bank(Savings) – 35%
Box(Donations) – 15%

Clip coupons. We all get stacks of coupons in the mail on a regular basis. Have your child help you to sort out the ones for items you use in your household. This gives them an understanding of what coupons are. As an added bonus, give them a percentage of each coupon that gets used. This will further enforce the concept of getting the best deal for the money, and give them a benefit when they use the coupons. It will also help to keep you on your toes.

Making a list. When it's time to go shopping, have your child help you with the list. Whether it's groceries, clothes or other items, show them how you decide what you need. Take them to the store with you and have them cross off the items as you get them. It may take a few times, but make sure that you are only getting what's on the list. This is an important lesson for your child. If we go to the store with a list of what we need, we eliminate some of the impulse buys, and getting things that we don't really need. This will also help to enforce the need for taking a few extra moments to make sure the list is complete before you leave the house.

Budgets. Children need to understand budgets. While they still shouldn't become involved in the major finances of the household, and should still be sheltered from any financial issues that may exist at home. This is a good time to talk to them about budgets where it pertains to them. Let them know how much money you are able to spend on their needs, whether it be clothing, toys or anything else. When you go to the store with your list, make sure your budget for that day doesn't cover the list. Have your child help in making the decision on which items not to buy. As you make your lists, have them help you try to figure out what things are going to cost. If they can't make it to the store with you, give them the list and receipt when you get back and have them put the costs from the receipt onto the list. They can use this information on future lists.

An Organic Approach

Green business is the new rage. Everywhere you turn, companies are advertising the use of "green" products and "green" technologies. The hope is that it entices consumers to buy their products in an attempt to help the environment and feel good about doing their part. The cynic in me wonders how much truth there is to the "green" movement, and wouldn't the right way to help the environment be just not to buy as many products. The realist in me, which wins out most of my internal arguments, realizes the futility of the former assumption as people in this country have it in them to continue purchasing products in exactly the amount they feel they need or want. Trying to buck the "green" trend or any other trend which utilizes fad marketing to attract buyers would be as much a lesson in futility as practicing baseball in the rain. Instead I pose this question: Aren't all products and technologies designed to be "green"? Of course it is a different kind of green, this is the green that our whole economy is based on and is the color of our money.

That being said, perhaps we can use this phrase to better understand how we can be successful with this approach beyond the marketing aspect. What if we looked at the foundation and success of a business based on a more organic approach? Environmental Capitalism can be used as a term to better describe my idea. What it doesn't mean is using or abusing the environment to achieve sales or profitability goals, but instead, using organic thoughts, ideas and theories to better manage today's business. Maybe at the end of it all, a compromise can be found where products move off the shelves at the same pace, but getting them there has less of an environmental effect.

The first environmental theory I want to throw out is "Carrying Capacity". Carrying capacity has long been used to describe the amount of life a certain eco-system can contain. In its most simple terms, carrying capacity is the total number of inhabitants a system can support without causing permanent damage or taxation to the system itself. As a business term, carrying capacity describes the total amount of revenue or profit available within a given parameter. Whereas in nature, the parameters can be modified or affected by changes in technology, breeding, or the arrival of different species, in business the carrying capacity can be affected by similar changes where breeding and the arrival of a new species can be transferred to product variations and competitive pressures. CC in a business sense can be figured by looking at your current business volume as a relationship to market share, footprint, headcount and operational efficiency. While it may be easy to change one or more of the variables over time, to find a true Carrying Capacity, you would have to take everything as it is today and work from there. By taking your current volume and comparing it to the effectiveness of your business today, you can figure out your carrying capacity. While this is a somewhat drawn out process with many variables to consider, figuring out what the most volume your can obtain with your current system, process, assets and headcount is an important step in understanding and pinpointing the gaps in your current business model. The Carrying Capacity Gap is the difference between your current volume and the maximum volume you are capable of achieving within your current parameters. The size of the gap depends in large part on the efficiency level of your current structure.

The second theory has a wider range of current usage and with that a wider range of interpretation. "Sustainability" has long been used by both economists and environmentalists in an attempt to edify the necessity to continue or abate current structures and or strategies in order to prolong the effectiveness of a certain system. In environmental terminology, it is used to quantify the length of time and in what manner a certain system can maintain its current load. When we look at an ordinary business, the importance of sustainability is paramount to the long-term success of that business. Most businesses wear their longevity as a badge of honor; using it as an effective marketing tool. Very few successful businesses have a goal of only lasting a short period of time. As staying power is a measure of success, sustainability is the impetus for marking it. In order for a business to remain viable and marketable over time, it must have in place a sustainability plan taking into account the minimum necessities for long term stability. Where environmentalists utilize environmental, social and economic dimensions as their three pillars of sustainability, a business would use production, marketing and fulfillment. In neither case would it be possible to have any level of mutual exclusivity in order to maintain a level of sustainability. For a business, planning for the future should necessarily determine the current course of action. As with Carrying Capacity, Sustainability has a high number of variables. In business, sustainability should be treated as a destination instead of a journey. Quantitative and qualitative data should be used in conjunction with one another to determine the most efficient and effective course for sustainability. As with any journey, the quest for sustainability should be planned and the progress tracked throughout.

There are a number of other organic theories which translate well into the economic and business world. The key factor to organic business understands the connection between the frailty and strength of the current environment and how a business can influence it without exceeding the boundaries that nature has necessarily set forth.

A challenge?

OK, so this is a bit of a personal issue with me lately. For those who don't know me very well, I have spent the last year looking for employment. I was one of the many whose last company decided to cut their losses and lay-off a large number of employees. This particular company went from 27 individuals across the country in my position, to a total of around 9. I don't know what the overall expense savings were, but I do know that in no way was it going to offset the lack of revenue and overspending that had put them in the hole in the first place. What were they thinking? It's not necessarily a personal matter with me, I understand that the easiest way to see an immediate reduction in expenses is to cut head count. I just happened to be one of the ones who had been there the least amount of time. What I'd like to know is where are those companies who actually see their employees as assets instead of liabilities. I've been there and seen the way many companies decide to advertise themselves as being "employee friendly" or a "great place to work". What it really comes down to is dollars and cents, or in many cases, dollars and lack of sense. I have to admit, I've had the proverbial wool pulled over my eyes on more than one occasion. What I would love to do is really challenge those American companies who advertise a great place to work and an employee friendly environment. I would love to see a CEO or HR VP illustrate to me what exactly that means. More than that, I'd like to see what any company did prior to cutting headcount to try and avoid having to do just that.

I'm really not a cynical person and am waiting (rather impatiently) for someone to practice what they preach. Businesses don't usually grow themselves and are often limited to the ability, drive and intelligence of their management staff. Nothing would please me more than to find a company who actually takes to heart the promises they make, and the words they write down on a job description. I understand that business today is limited by a repressed economy. They have to do the same amount of work in many cases with less people. This in turn puts a huge burden on those that were fortunate enough to remain behind, especially the mid to upper level management. Regional and director level managers have had to make some unfortunately hard decisions with their own direct reports. With the overabundance of work trying to dig out of the financial hole most of them find themselves in, they have to rely on their direct reports for more support and for less time requirements. The problem this creates is a void based on the type of managers they are and have below them. The void I'm speaking of is the managers who want to make a difference.

It's corporate nature in this type of economy to look for the path of least resistance. When you're putting in 70 hours a week just trying to get through all of the emails and projects the normal business puts on your plate, how are you going to feel when one of your direct reports wants your time and input on a proactive marketing plan or process efficiency improvement that will require you to actually spend time listening and understanding it's basics? It's a lot easier to just say no isn't it? Heaven forbid that manager actually takes some pride in what they do and push the issue a little more. What are you going to do then? If you are like most managers, you will start with the PC "We don't have the budget for that type of project" or "You really need to focus on growing the business with what you already have" speech. I can tell you from many years of experience that both of these speeches are what got you to where you are in the first place. Maybe if you had surrounded yourself with direct reports who had a brain of their own and you allowed and encouraged its use, maybe you would have some time to spend looking at their new ideas because you wouldn't have had to lay off so many people.

Don't get me wrong, it's not the direct report's fault they have been trained by their manager to be a toady. It's not their fault the only training they have received in their job is where and how often to sign their names on the numerous redundant reports they are required to review for "compliance" purposes. (Note to self: Maybe you should do a blog on the cause and effect of Sarbanes Oxley reporting and how it has led to the demise of many corporate cultures.) It's not their fault that your conference calls and meetings with them focus mainly on the employee issues that are running rampant instead of why your customers are leaving in droves. I can't even blame them for not wanting to take the initiative to grow their own employees. After all, what kind of manager would want their direct reports knowing too much about their job? That could make them less important, and we all know that the main objective for a manager these days is to stay employed.

My challenge to employers out there is simply this:

• Hire managers who have a solid business acumen and know their way around both the balance sheet and the customer's office. Don't just put someone in the position because they understand your business based on the time they have been with you. Business is business, sales is sales. Don't think just because your product may be specialized, your way of selling it, managing it and accounting for it is much different than anyone else's.
  
• Mean what you say. If you are offering a "great place to work" make it that. Don't let your employees continue that sense of entitlement that kills the morale and handcuffs the management. An employee should enjoy their workplace because they enjoy their work, not because they're afraid of not enjoying it because they can't afford to find another job.
  
• Hold your people accountable for their actions and push them to succeed. Start with the top and go down. Not everyone in your company is doing the job that best suits their abilities. The jobs should stay consistent, and your assets should be utilized accordingly.
  
• Reward the ones who actually deserve it. Accolades should not be showered on someone based solely on the number of opportunities they took to agree with and say yes to their boss. Instead, look at rewarding those who took the time and energy to come up with an alternative. A new idea, good or bad, is worth ten times that of the status quo.
  
• Put your assets in the correct column. Not all of your employees are an expense. In most companies, there are two types of employees, those who earn revenue and those who don't. Look hard at your ratio of one to the other and next time you are bound and determined to make head count changes, use that opportunity to improve your ratio. If you look at headcount as a controllable expense the same way you look at toilet paper, that should say something to you.