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People Development – Stewarding People

A primary factor in most business’ success is the people who work for the business. Caring for the people who work for your business by investing in their education, training, compensation, motivation and empowerment creates a culture and environment where people will want to give their best work for the company.

The idea of people development has gone through many changes and descriptions over the past one hundred years. I believe words matter and when people are called assets and capital it conveys a sense of ownership by the company over its employees. In my mind these terms are completely opposite of what stewardship and people development represent. People should not be considered an asset to be used, given occasional repair and maintenance, depreciated and eventually replaced.

The concept of managing people and being aware of training and compensation strategies is not new in the business world. The idea of managing personnel emerged as a clearly defined field by the 1920s. It began largely as addressing the technical aspects of hiring, evaluating, training, and compensating employees. Personnel management did not typically focus on the relationship of employment practices on overall organizational performance.
Economist Theodore Schultz invented the term “human capital” in the 1960s to reflect the value of human capacities. He believed human capital was like any other type of capital; it could be invested in through education, training and enhanced benefits that lead to an improvement in the quality and level of production. The term Human Capital is a measure of the economic value of an employee’s skill set. The concept of human capital recognizes that not all labor is equal and that the quality of employees can be improved by investing in them; the education, experience and abilities of employees have economic value for employers and for the economy as a whole.

In recent years companies have been emphasizing that the most important asset at their company isn’t something they can put their hands on. It isn’t equipment or the physical plant, and it isn’t data, technology, or intellectual property. The most valuable part of their company is the people. They use the term human capital to describe this asset and believe any plans to move their business forward has to start there.

Human Resource Management began to develop in the late 1970s in response to the increase in competitive pressures in American business as a result of such factors as globalization, deregulation, and rapid technological change. These pressures prompted businesses to begin to engage in strategic planning. This was a process of anticipating future changes in the conditions of the working environment and aligning the various components of the organization in such a way as to promote organizational effectiveness. William R. Tracey, in The Human Resources Glossary, defines Human Resources as: “The people that staff and operate an organization,” as contrasted with the financial and material resources of an organization. A Human Resource is a single person or employee within your organization.

Today companies are starting to see that an effective people development strategy is an important key for business success. This strategy needs to be able to react to changing business conditions. However, people development is not an easy strategy to implement. Many firms think they are training their people. Unfortunately many of their people do not think they get enough training.

People development strategy is about growing and developing the business. If the business does not grow and change, then there will be no business. Development of business processes needs to be in step with developing our people. The goal is to develop people at the same time as the business changes or adapts.

If the business changes but people don’t, the people in the business can feel threatened or stresses. When businesses develop their people but the jobs and roles do not change, then often people get frustrated and leave. Or they forget the training they have been given! The idea is to develop people just ahead of when they need new skills or knowledge. Train too early and people forget. Train too late and mistakes or safety implications occur whilst people learn. An effective People Development Strategy will ensure that the changes a business needs to grow and be successful are linked to appropriate people development.

You may have heard the quote by Zig Ziglar “What’s worse than training your workers and losing them? Not training them and keeping them.” I would suggest that being a good steward of people is to train them regardless of whether you think they may move to a different job. People move to new jobs for many reasons, but the majority of them don’t leave because you have invested in developing them as better workers and people. Besides, people development makes for a better community as a whole and therefore will be better for your business.

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CFO Book Review – The 8th Habit by Stephen Covey

The 8th habit was written as a response to the profound changes that we are experiencing in world since the author wrote The 7 Habits of Highly Effective People. Dr. Covey believes that finding our voice in life will help alleviate much of the pain and frustration that so many people are experiencing in their jobs and relationships in this new Knowledge Worker Age. He believes that by following the advice and path that he lays out in his book the reader will be able to discover and give voice to their deepest passions and talents. By discovering and harnessing our passions and applying it to the great needs of the world we will find the true calling in our lives. This will provide us with a great sense of satisfaction and will help inspire others to discover their passions and calling in life.

Dr. Covey goes on to describe the significant changes that are occurring in our society. We are entering into an age that more and more people are being given the ability to make a variety of choices in their lives. However, we are poorly prepared to make these choices in self-management. This is causing much pain and frustration in the work world, in our communities and in our relationships. We have organizations that respond by controlling people and we have people not knowing how to change the system so as not to be controlled. The author then proceeds to outline a path where one can begin to make the changes necessary to change their own environment. By successfully changing one’s own environment you will inspire others to follow. This will eventually create the paradigm shift that will allow the majority of people to find their voice in society and live a fulfilled productive life.

What Dr. Covey presents in this book is really nothing new. I believe human kind has always desired to find his/her voice in this world. Man was created for a purpose, and only finds true fulfillment and satisfaction when that purpose is discovered and lived out. Perhaps because of the tremendous amount of information and knowledge at our fingertips we as a society are more aware of the possibilities and have a better venue to voice the frustrations of life, but as the author of Ecclesiastes tells us in chapter one verse 9 “History merely repeats itself. It has all been done before. Nothing under the sun is truly new.” This book does provide some good insights into the work world and how we have a tendency to deal with problems in our work place as well as in our relationships. Unfortunately, much of what Dr. Covey encourages people to do, will take a tremendous amount of discipline and courage. Most people that are frustrated and discouraged in the workplace won’t make the effort to follow his advice.

The one theme that resonated with me was the concept that one person can make a difference. By being courageous and steadfast in pursuing what’s right in a particular work environment, walking in grace and compassion for people and leaders, changes can happen and others can be inspired to follow in your footsteps.

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Blue Ocean Strategy Book Review

Blue Ocean Strategy was written with the aim of challenging companies to create uncontested market space by executing a strategy that is both systematic and actionable. It is the author’s contention that many companies could break out of their current competitive, often-times shrinking market, and create new markets that render the competition irrelevant. The cornerstone of the blue ocean strategy is what the authors call value innovation. The conventional wisdom in business is that if a business person increases value to his/her customers through innovation, then that person is also going to be increasing his/her cost. Likewise if a business person uses a strategy that decreases cost he/she is going to have to lessen the value he/she can provide to his/her customer. The blue ocean strategy suggests that a company can pursue both innovation and low cost simultaneously. Value innovation occurs only when companies align innovation with utility, price and cost positions.

The author suggests that if a company understands the principles and strategies behind creating blue ocean markets, it will be able to maximize the opportunities while simultaneously minimizing the risks in the execution of a blue ocean strategy. The strategies fit within what the author calls the four actions framework. A company must identify factors that have under served or compromised value to customers. A company must identify factors that could be created that the industry has never offered. A company must eliminate factors in its industry that are taken for granted even though they no longer add value to the customer. Finally, the company must identify factors that provide products or services to its customers with little or no benefit but increases costs.

One of the key principles of blue ocean strategy is to successfully identify commercial opportunities that will reconstruct market boundaries and break away from the competition. The author has identified six basic approaches to remake the market boundaries. First a company must look across alternate industries that fulfill the same basic purpose as their own industries but is in a different form. Second a company must look across strategic groups within their own industry. Third, a company must look across the chain of buyers, looking at the purchaser, the user and the influencer. Fourth, the company must look across complimentary product and service offerings. Fifth, the company must look at the functional or emotional appeal to the buyer. If a company’s product is traditionally functional then how can it appeal to the emotional buyer, and if the company’s product is primarily sold because of its emotional appeal, how can the company market to the functional buyer. Finally the company must look across time. It must look at trends with the right perspective to take advantage of blue ocean markets.

The challenge with following these principles and strategies is how to influence the majority of people within an organization to want to think outside the box. Many times a company may have an innovative marketer or manager who comes up with a great idea, but lacks the support and structure to implement the idea. With the faced pace environment that we work in, there seldom seems to be time to think deeply and innovatively about blue ocean strategies. The author admits that companies have a tough time translating thought into action, particularly when the blue ocean strategy is a significant departure from the status quo. The author identifies four major hurdles to overcome in order to execute a blue ocean strategy. First, the employees must be made aware that there is a need for a strategic shift. Second, there seldom is an abundance of resources to tap into to execute a new strategy. Third, is the ability to motivate key employees to work hard and fast to accomplish a strategy that may seem unorthodox. Finally, with most companies the political environment is such that most people do not want to change for fear of losing their own power or position.

The bottom line for a company to have a chance at succeeding in the execution of a blue ocean strategy is that trust must be built deep into the ranks of employees. They must feel that the execution strategy is fair. Key employees must be engaged in the process. There needs to be a clear explanation as to why things will be done a certain way. Finally, an expectation of playing by a new set of rules must be instilled.

//www.blueoceanstrategy.com/

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Your Business Life Cycle

From the moment you make the decision to set up a business, you’re in the “business lifecycle.” This lifecycle will see your journey go from idea to startup, to the growth and maturity phases, and finally if all goes well, to a successful exit.

Starting and growing a business has multiple challenges. As we look at each of the stages of the business lifecycle we will see a unique set of obstacles to deal with and overcome. You will have to be flexible in your thinking and adapt your strategy as you move along. Indeed, different approaches are required for market penetration versus, for example, what may be required to achieve growth or retain market share.

According to the recent Startup Genome Report, an estimated 90% of those startups that fail do so primarily due to self-destruction. It was their founders’ own bad choices or lack of preparedness rather than so-called “bad luck” or market conditions that were out of their control. Understanding your position in the business lifecycle just might help you stay a bit ahead of the game here and defy the odds, as you anticipate the potential challenges and obstacles that are upon you or are on the way depending on what phase you are in or about to transition to.

Simply put, as your business grows and develops, so too do your business aims, objectives, priorities and strategies– and that’s why an awareness of what stage of the business lifecycle you are currently in can be helpful.

Stage 1: Seed And Development
This is the very beginning of the business lifecycle, before your startup is even officially in existence. You’ve got your business idea and you are ready to take the plunge. But first you must assess just how viable your startup is likely to be.
At this stage, you should garner advice and opinion as to the potential of your business idea from as many sources as possible: friends, family, colleagues, business associates, or any industry specialists you may have access to. Ultimately the success of your business will come down to many factors– including your own abilities, the readiness of the market you wish to enter and, of course, the financial foundation in place (how are you going to finance your launch?).
In some ways, this is the soul-searching phase. It’s where you take a step back and consider the feasibility of your business idea, and also ask yourself if you have what it takes to make it a success.

Stage 2: Startup
Once you have thoroughly canvassed and tested your business idea and are satisfied that it is ready to go, it’s time to make it official and launch your startup. Many believe this is the riskiest stage of the entire lifecycle. In fact, it is believed that mistakes made at this stage impact the company years down the line, and are the primary reason why 25% of startups do not reach their fifth birthday.

Adaptability is key here, and much of your time in this stage will be spent tweaking your products or services based on the initial feedback of your first customers. It can even get to the point where you are making so many changes to your offering that you start to feel a bit of confusion. That’s just noise, and the main advice here is to power through the blurriness, because extreme iterations upfront will naturally seem confusing. Rest assured the clarity will once again come.

Stage 3: Growth And Establishment
If you’re at this stage, your business should now be generating a consistent source of income and regularly taking on new customers. Cash flow should start to improve as recurring revenues help to cover ongoing expenses, and you should be looking forward to seeing your profits improve slowly and steadily.

The biggest challenge for entrepreneurs in this stage is dividing time between a whole new range of demands requiring your attention– managing increasing levels of revenue, attending to customers, dealing with the competition, accommodating an expanding workforce, etc.

Hiring smart people with complementary skillsets is necessary to make the most of your company’s potential during this phase, and so any good founder will be spending a lot of time directly involved in the recruitment process.

It is essential that you start to come into your role as head of the company in this stage. While you’ll still be on the front lines often enough, you need to be aware of how your expanding and highly qualified team is going to be taking over a great deal of the responsibilities that were previously tightly under your control. It is your job now to start establishing real order and cohesion as you mobilize the teams according to clearly defined and communicated goals.

Stage 4: Expansion
At this stage you might feel there is almost a routine-like feel to running your business. Staff is in place to handle the areas that you no longer have the time to manage (nor should you be managing), and your business has now firmly established its presence within the industry. Here you might start to think about capitalizing on this certain level of stability by broadening your horizons with expanded offerings and entry into new geographies.

Businesses in this stage often see rapid growth in both revenue and cash flow as the blueprint has now been established, but be warned about getting too comfortable. In business, if you are not moving forward you are moving backwards, and without a constant, almost nervous itch or desire to expand, complacency can set in, and you might get caught off guard.

There are, of course, two sides to this coin, with the other involving a risk of expanding too carelessly. While there is no crystal ball and it is very hard to get an idea of what will be the results of your undertakings, you can give yourself the best possible chance of continued success through careful planning. Look at your resources, be realistic about the effort and cost and potential returns, and always keep an expert eye on how expansion might impact the current quality of service you provide your existing customers.

Remember, while having a successful business model behind you is undoubtedly an advantage, it is not a guarantee that it will work elsewhere within other markets, or that new offerings will result in the same success. The business graveyard is littered with organizations that took on too much and failed. Your task is indeed to take on new challenges as you look to constantly expand, but measure your risk and do your best to secure the company for all eventualities.

Stage 5: Maturity And Possible Exit
Having navigated the expansion stage of the business lifecycle successfully, your company should now be seeing stable profits year-on-year. While some companies continue to grow the top line at a decent pace, others struggle to enjoy those same high growth rates.

It could be said that entrepreneurs here are faced with two choices: push for further expansion, or exit the business. If you decide to expand further, you will need to ask yourself the same questions you did at the expansion stage: Can the business sustain further growth? Are there enough opportunities out there for expansion? Is your business financially stable enough to cover an unsuccessful attempt at expansion?

And, perhaps most importantly, are you the type of leader who is up for the task of further expansion at this stage? In fact, many companies change leadership here, bringing in a seasoned CEO who is more fit to navigate the new challenges.
Many at this stage also look to move on through a sale. This could be a partial or full sale, and of course depending on the company type (for example, public or private), the negotiation may be a whole new journey in itself.

Navigating The Business Lifecycle
Not all businesses will experience every stage of the business lifecycle, and those that do may not necessarily experience them in chronological order. For example, some businesses may see astronomical growth right after startup, and the founders may decide to cash out right away, jumping straight to that “exit” stage.
For many companies, though, there will be some sort of resemblance to the stages defined above, and awareness may help you anticipate what is coming next and how you can best prepare yourself and your team to maximize your chance of success. Making the right decisions at each stage is another thing altogether, however, and that will require your usual mix of gut instinct and practical business sense.

Contributions to this article are primarily from
NEIL PETCH the Chairman at Virtugroup.

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Servant Leadership

This is a CFO Business Partner review of the book Servant Leadership: A Journey into the Nature of Legitimate Power & Greatness by Robert K. Greenleaf

This book was written out of a concern for students that seemingly had no hope of change in the institutional leadership. Secondly, the author had a desire to influence both leaders and followers to serve willingly with skill, understanding and spirit. This was brought out by an overarching concern for the total process of education of leaders. Mr. Greenleaf was observing an indifference to what makes up a leader beyond the mere intellectual preparation.

The author goes on to define a servant leader as one who has a natural desire to serve first. With this desire to serve as foremost the leader then takes the initiative to move forward with the ideas and structure down a path for the good of those he is leading and the organization he is a part of. The servant leader is a good listener and has a desire to understand the issues and concerns of his followers. He accepts the individual and empathizes with his position, even though the performance itself may be subject to correction. The servant leader operates with foresight, awareness and perception in leading an organization forward.

While most of the discussion on leadership and servant leadership centers on individuals, Mr. Greenleaf contends that institutions often are the medium that servant hood is carried out. “If a better society is to be built, one that is more just and more loving, one that provides greater creative opportunity for its people, then the most open course is to raise both the capacity to serve and the very performance as servant of existing major institutions by new regenerative forces operating within them.” (62) His focus is on three primary types of institutions: churches, universities, and businesses. His main focus is on the structure of leadership. He proposes that both the trustees as well as top leadership in organizations should be structured as a team of peers. They would be led by a primary leader, but this leader would have no more authority then anyone else on the team. He also believes that the Trustees of an organization must take a much more active role in servant leading.

As with any theory or philosophy, challenges always arise when theory meets practice. In an ideal world everyone would be eager to serve one another. Those leading would always have the best interests of others in mind and those being led would willingly submit to any servant leader that steps forward. Institutions would rise with the ethos of servant hood and Trustees would spend time serving in their capacity because they love the organization and the people they serve. The reality is we live in a world that is often rife with greed, jealousy and self-centeredness. Many leaders are corrupted at least partially by power, and will often times have a self-advancing agenda as a motive to lead as a servant. Yet, I believe that many of the principles put forward are valid and should be the expectation we have of our business leaders.

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Your Business Should be a Force for Good

This is an open letter written by the founders of B Lab to business leaders, Andrew Kassoy, Bart Houlahan, and Jay Coen Gilbert.

B Lab has spent the past ten years serving a community of credible leaders who are using business as a force for good. We want to live into the values expressed in the Universal Declaration of Human Rights and our B Corp values, which state:

That we must be the change we seek in the world,

That all business ought to be conducted as if people and place mattered,

That, through their products, practices, and profits, businesses should aspire to do no harm and benefit all,

To do so requires that we act with the understanding that we are each dependent upon another and thus responsible for each other and future generations.

Those values make the path forward clear to us. In the current environment of rising insecurity, fear, hate speech, and violence, and in the absence of trust in our economic system, all business leaders have an unprecedented responsibility and opportunity to build a more inclusive society.

We speak now not to one political party, or one niche group — our community of business leaders, our workers, our customers, and our investors span the political spectrum. This is a universal call to live into our values and to build a global movement of people using business as a force for good.
At this moment we call on all business leaders to do two things. First, in this chaotic moment, to stand up and to speak out, together and unequivocally, when we see injustice, hate, and the violence they produce. Second, to take concrete action in our own businesses to create an inclusive economy that is equitable and creates opportunity for all for the long term.

Stand for justice

When we speak with collective voice, business leaders have the power to stand in the way of injustice, to honor the inherent dignity of all people, and to make it possible for us to reach our full potential as human beings, as organizations, and as a global community. Our responsibility to stand for universal human rights and civil liberties is not simply a business imperative, but a moral imperative.

B Lab rejects discrimination, no matter where it comes from or who is targeted. All businesses, which benefit from our diverse society, have an obligation to do the same. We must stand with those civil society and social justice organizations fighting on the front lines to protect the most vulnerable. This means working against any forces that would divide and disenfranchise people based on their identity or circumstances at birth.

We do not want to sell this commitment short. This will be hard. It will require businesses to look beyond what regulation
demands. It may require business leaders to speak out against unjust laws, or to resist them in order to protect vulnerable workers or communities. It may require much more. It will always be worth it.

Take action to build an inclusive economy

As business leaders, we must also look to where we are most powerful. It will not be enough to call for justice in this particular moment; we must also create justice through our organizations.
Your business is an employer, a place where people spend their day and a source of salary and benefits for families. Your business has purchasing power that can support communities and causes you care about. Your business’s activities and products affect the global environment — and rely on it. And as a business leader, you have an influential voice in your community and with your elected officials.
Our businesses are powerful tools that we can use to create a more inclusive economy, and ultimately a more inclusive society. Doing that effectively will require listening to all those who are systemically disaffected and disenfranchised — whether through racism, misogyny, xenophobia, classism, ableism, homo- and transphobia, or other institutional and historic forms of oppression. People who have been marginalized and exploited by our current economic system exist across the political spectrum in rural and urban communities around the world. In order to restore trust in business, the business community needs to respond to those people’s legitimate desire for jobs with dignity. The business community also needs to make the case that economic justice for all is inextricably tied to, and dependent on, social and environmental justice.

It is clear that government alone cannot or will not solve the problems facing us right now. In their absence, business must play a leadership role in forging a path forward. Thankfully, there are businesses around the world that have been proving that profit can come with the pursuit of a higher purpose — that we can build an inclusive economy that works for all.
What does an inclusive economy look like in action? In Grand Rapids, Michigan, a plastics manufacturer called Cascade Engineering welcomes formerly-incarcerated returning citizens and offers on-site benefits that have helped hundreds of employees transition off of social support. In New York City, a worker-owned cooperative of home health care workers in the Bronx called CHCA provides exceptional care for patients while creating secure jobs and ownership for women of color. In the heart of Pennsylvania Amish country, The Stroopie Co employs recently-settled refugees and offers ESL classes to help them move into leadership roles. In Chicago, Method Products PBC is bringing high-quality manufacturing jobs back to the Midwest, including the South Side of Chicago.

An inclusive economy looks like a living wage for all workers. An inclusive economy looks like a boardroom and management team with the same demographics as the company’s factory floor. An inclusive economy looks like a world in which business creates opportunity for those who have been marginalized, instead of maintaining the status quo while lamenting the constraints of market forces. These ideas don’t require government regulation; they can be realized through the leadership and stewardship of the business community — if we choose to take action.
We are inspired by the leadership of 2,000 Certified B Corporations. They’ve proven that you can do well and do good, and they offer a path forward. But they can’t build an inclusive economy alone. We need everyone. We need you.

One way to begin is for every company to take concrete, measurable steps to build a more inclusive business. Every change your company makes has a real impact on real people.
Think about what matters to you. How can your company contribute? If you need a starting place, consider picking two or three of the practices and policies we have identified in our Inclusive Economy Metric Set. Make a public commitment to improving on those two or three. Hold yourself accountable, even (especially) when you fall short. Listen to your employees and your customers. Let us know what you are doing and what you learn along the way so that others can follow your lead.

Your business has the power to make the change you want to see in the world. If businesses like yours take action to build a more inclusive economy, we will improve the lives of millions of people that are touched by our businesses as workers, suppliers, customers, and local communities. We will rebuild an economic system worthy of people’s trust. We will create a more shared and durable prosperity for all. We will change our society — for good.

For more information about B Lab please go to //www.bcorporation.net/what-are-b-corps/about-b-lab

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CFO Book Review “Getting Naked” by Patrick Lencioni

If you, or your company interacts with a customer base, you inherently know that low prices and a quality product no longer guarantee success. Customers have more options than ever, and they’re using this leverage to look for something more. They want an experience; An interaction that goes beyond a simple transaction. They want to build relationships with their brands. We’re entering a world of professional intimacy that harkens back to the days of “Small Town USA”, days when the neighborhood butcher knew not only what cut of beef a customer preferred, but the names of their kids as well. We built relationships with our vendors and customers because we inherently knew that people do business with people they like, people they trust, people they know.

In Getting Naked, Lencioni teaches how to exemplify the one core trait that builds professional relationships faster than any other. “Without the willingness to be vulnerable, we will not build deep and lasting relationships in life.” Getting Naked is a book about the very real value of breaking down the walls so many of us put up when interacting with our customers and, instead, connecting with them on a human level. It’s a book about being comfortable being wrong, about worrying about the customer first, and our own ego second.

There are many lessons to be gleaned from the book. However, the lesson that stands out most prominently is that clinging to our ego prevents us from achieving our greatest business successes. Lencioni’s fictional Lighthouse Partners relies on its partners and consultants showing vulnerability and complete transparency to their clients, with the result being that they charge the richest fees in the industry, achieve the highest profitability and create unprecedented client stickiness, while minimizing the time spent on “pitching” business.

The way that Lighthouse’ consultants showed up with clients reminded me of the qualities of Level Five leadership, as detailed in Jim Collins’ book “Good to Great.” Whereas Level Five leaders “are ambitious for their company, not themselves” “naked” consultants are ambitious for their clients, not their selves, always putting their client’s interests before their own. Level Five leaders “display a compelling modesty, are self-effacing and understated.” The “naked” consultants of Lighthouse Partners check their egos at the door, when they show up at a client site.

At the end of the day, being a good service provider is simply a matter of focus. Are you focused on the best interests of yourself, or of the customer? Being focused on the customer means making some difficult choices; choices that could in fact hurt you. The irony, of course, is that working in the best interest of the customer is always the right decision and, more often than not, will reward you in ways you never would have experienced had you chosen the self-preservation mode instead. Just like personal relationships, magical things happen when you open up to the people who are important to you, and act in their best interest first. Getting Naked may be a business book, but I think it’s also a great reminder for all the relationships in our lives – professional and otherwise.

In the last chapter of the book, titled “The Model”, Lencioni summarizes the principles of “naked” consulting which center around the three fears that prevent us from building trust and loyalty with our clients. Below are the three fears and specific actions that a “naked” service provider can take to achieve client loyalty.

1. Fear of Losing the Business – What clients want more than anything is to know that we are more interested in helping them than we are in maintaining our revenue sources.
a. Consult, don’t sell.
b. Give away the business
c. Tell the kind truth.
d. Enter the danger.

2. Fear of Being Embarrassed – Naked service providers are so concerned about helping a client that they are willing to ask questions and make suggestions even if those questions and suggestions could turn out to be laughably wrong.
a. Ask dumb questions.
b. Make dumb suggestions.
c. Celebrate your mistakes.

3. Fear of Feeling Inferior – Naked service providers not only overcome their need to feel important in the eyes of their clients, but also purposefully put themselves in a lower position.
a. Take a bullet for the client.
b. Make everything about the client.
c. Honor the client’s work.
d. Do the dirty work.
e. Admit your wea

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Season’s Greeting

This is the season for me to reflect on the past year and look forward to what 2017 will bring. I am now entering my 5th year as an independent CFO serving small businesses in the Puget Sound area. As I reflect on my journey, I am extremely grateful for each of you that are part of my extended network. I can honestly say that without your willingness to have coffee with me, connect with me on LinkedIn, and share your wisdom and experience with me, I would not have been successful in this business. So thank you, thank you, thank you!

2017 will be a year of bringing on several new clients. As part of this initiative to grow my business, I am using a new tool called Refer.com. This tool will help me track and organize referrals that you give me as well as help me do a better job of keeping in touch with many of you. Would you do me a favor? Would you be willing to take a short survey that rates me in several key categories? In addition, if have experienced my work or character, would you be willing to offer a brief testimonial? And finally, if you know of a business owner that could benefit from a conversation with me, please leave me the name and contact info at the end of the survey. Thank you again.

Please enter the survey at this link //refer.com/ArtZylstra/survey/bqQb6t

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CFO Book Review – Drive by Daniel Pink

The Industrial Revolution gave the world a new found efficiency in production and distribution in business. This revolution had a profound impact on employees and how they were motivated to produce an ever increasing supply of goods. Our current business operating system, in many ways, remains unchanged from over a hundred years ago.

The primary approach to employee engagement over the years has been built around external, carrot-and-stick motivators. Science has long recognized that humans respond to rewards and punishments in our environment. However history suggests that this approach in business doesn’t usually work long-term and in many cases can actually do harm and become counter-productive.

Daniel Pink expands on the research of behavioral scientists of the last few decades that have discovered a different human drive. Motivation in the past has been fueled more by extrinsic desires than intrinsic ones. Motivational behavior was concerned more about external rewards to which an activity leads rather than the inherent satisfaction of the activity itself.

Daniel Pink suggests that business today needs to take a different approach. This new approach has three essential elements: Autonomy, Mastery, and Purpose.

1. Give Employees Autonomy
By nature, humans want to be “autonomous and self-directed.” Pink suggests empowering employees to explore new ideas, allowing them to work flexible schedules, giving them a say in hiring new talent, and letting them decide how they want to tackle a problem.

2. Give Employees Mastery Opportunities.
Pink says “making progress in one’s work turns out to be the single most motivating aspect of many jobs.” You can help employees achieve a sense of progress by working closely with them to assign tasks that match their skill levels, so employees are neither anxious nor bored.

3. Give Employees a Sense of Purpose.
“Humans, by their nature, seek purpose—to make a contribution and be a part of a cause greater and more enduring than themselves,” says Pink. You can fulfill your employees’ sense of purpose by making community service part of your corporate culture. Try organizing in-office food drives, or inviting the team to spend a day volunteering.

This new motivational drive, if business owners understand and can tap into, will strengthen our companies, elevate our lives, and improve the world.

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Cash Conversion Cycle – Big Companies Squeezing the Little Companies

One of the more interesting business phenomena of the past decade has been the flow of cash in and out of large corporations. A metric called the cash conversion cycle looks at the amount of time needed to sell inventory, the amount of time needed to collect receivables and the length of time the company is afforded to pay its bills without incurring penalties.

At department store chain Macy’s, it’s 71 days; at the legendarily efficient Wal-Mart, 12 days; at Costco, with its limited inventory and super-fast turnover, it’s just four days; at Amazon, the cash conversion cycle was negative 24 days in 2014. That is, on average the company took in cash from customers 24 days before it paid it out to suppliers.

How does Amazon make this happen? Here’s the explanation that the company gives every quarter in its earnings reports:
“Because of our model we are able to turn our inventory quickly and have a cash-generating operating cycle. On average, our high inventory velocity means we generally collect from consumers before our payments to suppliers come due.”

The reality is Amazon’s inventory turns is the same as Wal-Mart’s at 45 days, and is higher than Costco’s 30 days. What explains why its cash cycle is negative compared to Wal-Mart and Costco is how long it takes Amazon to pay people. Amazon’s average Days Payable Outstanding is about 90 days, meaning it takes an Amazon supplier 90 days on average to get paid for a sale they made to Amazon. Costco and Amazon are between 30 and 40 days.
Amazon is clearly making a choice to boost its own cash flow by making life harder for its suppliers. Unfortunately for the small business, other large corporations are taking notice and working hard at reducing their own Cash Conversion Cycles. Delaying payments to suppliers is becoming fashionable according to Stephanie Strom as reported in the New York Times in April 2014.
In the past, extended payment terms often were a signal that a company was experiencing worrisome cash flow problems, but these days big, robust companies are imposing new schedules on suppliers as a business strategy, analysts say.

The suppliers who have to deal with these extended payment terms tend to be smaller and have fewer resources than the companies delaying payment.
“Eventually,” said V. G. Narayanan, chief of the accounting practice unit at Harvard Business School, “the additional financing costs that suppliers incur because they aren’t being paid promptly work their way back into higher prices for consumers.” The practice is often crippling for suppliers, especially smaller businesses that have little cushion. Banks have tightened up lending, especially to small businesses, so it becomes even harder to manage. You still have a payroll to make, your own suppliers to pay, electric and other utility bills — they can’t wait four months for payment.

“I think the whole idea is very bad,” Professor Narayanan of Harvard said. “They essentially are going to their suppliers for credit, rather than their banks — and for big, creditworthy companies like these, that’s ridiculous.”

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