The Only Constant is Change

Author Peter DeHaanBy Peter DeHaan

As I look back, I see how things have changed. I have changed, my family has changed, technologies have changed, my business has changed, and the industries I work in have changed.

In today’s business environment, a culture of change is essential for every organization. In my younger days, I would recommend change for the sheer fun of it. Now, older and wiser, I only advocate change when there is a real reason to do so.

For most people, change is difficult. Change takes something familiar and replaces it with something unknown. Each organization has people who are change resistant. And each leader, manager, and supervisor knows exactly who these people are. With such folks, their aversion to change varies from unspoken trepidation to being overtly confrontational. Regardless of the manifestation, we need to be compassionate, realizing that these reactions are merely their way of responding to fear – fear of the unknown.

To establish a change-oriented culture in our organizations, the first step is to minimize employee fears towards change. Generally employees can accept change if 1) the change is incremental and small, 2) they have a degree of input or control over the change, and 3) the change is clearly understood.

The key is communication. Address change head on. For every change, employees wonder how it will affect them:

  • Could they lose their job?
  • Might their hours be cut?
  • Will they be asked to work harder than they already are?
  • Will they be made to do something unpleasant or distasteful?
  • What happens if they can’t learn the new skills?

These are all worries, worries about the unknown. As with most worries, the majority will never happen. But with a lack of reliable information and top-down assurances, these irrational worries take on a life all their own.

Successfully orchestrating change requires effective communication. Not once, but ongoing; not to key staff, but to all employees; not by one method, but by several: group meetings, written correspondence, and one-on-one discussions. A true and effective open door policy helps, too. Also, it is critical that a positive attitude is set, at the beginning, from the top of the organization, which never waivers. Celebrate milestones, generously thank staff along the way, and provide reasonable rewards at the end.

Successfully taking these steps will send a strong signal to staff. Even though the change may still concern them, they will be comforted knowing they have accurate information and the assurance that they are safe and will be protected. And for each successful change, the next one becomes easier to bring about.

We will know we have successfully created a change-friendly organization when our employees – all of them – get bored with the status quo and begin seeking change on their own. They will ask for more challenging work, seek to expand their job, and want to add new technology. At this point, the potential of our organizations becomes unlimited; the personal growth of our staff, unshackled; and the future, inviting. We don’t know what that future will entail, only that things will change for the better.

So, sit back and enjoy the ride, fully confident that the only constant is change.

Peter DeHaan is a magazine publisher by day and a writer by night. Visit www.peterdehaan.com to receive his newsletter, read his blog, or connect on social media.

 

Hunting in a Farmer’s World

John F DiniBy John F. Dini

Everyone in business is either a Hunter or a Farmer. The working style that fits you best isn’t really a matter of choice, nor is it determined by your job description. It is ingrained by eons of cultural evolution.

The working styles of a hunter and farmer are markedly different. Hunters are linear. It is their nature to focus on the kill. A hunter moves towards a goals, and on reaching it begins to immediately look for another objective to accomplish. A farmer’s work is cyclical, tracking the seasons from planting to harvest. Their evolutionary traits apply to an office environment as well as the outdoors.

Ten thousand years ago we were all hunters. Until humans developed agriculture, hunting was the only way we survived. Those whose job it was to hunt for the tribe knew that failure wasn’t an option. They persevered through fatigue and bad weather until they had accomplished the objective—bringing home food for everyone.

As mankind started farming and domesticating animals, nomadic tribes were able to settle in one place, build permanent living quarters and begin developing societies. Skilled workers could specialize in pottery or tool-making, and tribes began trading goods with each other. Hunting kept people alive, but farming built civilizations. As villages grew into cities, the majority of their populations became involved in growing, transporting and distributing agricultural products. Hunting was relegated to a sport.

The cyclical nature of farming, tilling, sowing, tending and harvesting have morphed into the business cycle of planning, budgeting, implementation and measuring the results. Just as the populations of cities focused on farming, the majority of employees in any business are dedicated to production, along with managing and tracking the production of others. Hunting is left to a small minority; the entrepreneurs, salespeople, executives and creative talent whose jobs are to look ahead and focus on the next objective.

For business owners and leaders, the challenge is to support the linear attitudes of a hunter in a business environment that concentrates on the cyclical tasks of farming. Computerization has given managers exponentially more data to track and measure, but management is by its nature farming, and management books promote farming methodologies. Balanced scorecards, six sigma quality and ISO 9000 are valuable tools, but for the typical hunter, they pose a problem…they are boring.

Thousands of business hunters spend millions of hours each year trying to master the intricacies of process and procedure without understanding why they are doomed to fail. They start to implement an initiative, but then become drawn to the “next big thing,” or simply lose interest in the effort and let things slide. They aren’t excited by potential for incremental improvement, but rather by the newness of the latest management fad. They enjoy building new things, but don’t fare as well in managing them. Their inability to follow through makes them think of themselves as “bad” business people.

The real problem is letting dynamic, creative problem solvers waste time and energy trying to adopt a style that doesn’t suit them. How much more productive could your business be if everyone, including you, worked only on things they enjoyed?

The stereotypical example is that of a top salesperson who is promoted to sales manager. The salesperson is a hunter. She enjoys working independently and “bringing the meat” of a closed deal. It isn’t hard to understand why moving her into a manager’s role is counterproductive. She has no inclination to oversee the work of others, prepare reports, or think about improving the sales process. She wants to hunt, and managing is the farthest thing from hunting.

Of course, the opposite is also true. Take the case of an excellent controller who has advanced to Chief Financial Officer. As a controller, he was focused on detail and deadlines. Measuring and analyzing were his core competencies. Faced with the prospective-looking duties of the CFO role, forecasting, projecting, and seeking new financial opportunities; he is lost. The mere fact that both positions involve financial skills doesn’t make them interchangeable.

Most job descriptions involve both some hunting and some farming. One job recruiter once remarked that “When job descriptions require strength in both styles; you begin seeking a ‘flying mermaid’ to fill the position.” That’s someone who is willing to do detailed and repetitive work all morning, such as balancing accounts and data entry, then shift to an aggressive sales job in the afternoon. Even if you could find someone willing to take on a flying mermaid job, the odds of achieving success in both roles are nil.

Farmers far outnumber hunters in most organizations. Regardless of the owner’s natural style, however, it’s a mistake to seek out similar people for management responsibility. We all want to interact with people who understand us, but duplicated personality traits come with two pitfalls.

The first is when the two of you agree on a course of action, it may be because it’s the best decision, or merely because you just have the same point of view. Including someone who sees things differently than you do in your decision-making team creates better debate and more options. Two hunters together may skip critical details, while two farmers could be putting too much emphasis on avoiding risk.

The second pitfall is that the managerial duties you tend to shun personally also don’t receive much attention from your key manager. Two farmers might focus on process over marketing initiatives, or two hunters who spend their time driving sales without looking at production efficiencies.

Hunters have always needed farmers. They keep things together when the hunter is off chasing the next objective, and make incremental improvements through the business cycle. Farmers depend on hunters to create new opportunities and develop a long-term vision. Both are necessary, and neither is nearly as effective without the other.

John F. Dini is a coach, consultant, speaker and author of Hunting in a Farmer’s World, Celebrating the Mind of an Entrepreneur (winner of the New York Book Festival’s “Best Business Book”), 11 Things You Absolutely Need to Know About Selling Your Business, and Beating the Boomer Bust. Recognized as one of the nation’s leading experts on business ownership, John has delivered over 10,000 hours of face-to-face, personal advice to entrepreneurs. For more information on John F. Dini, please visit www.johnfdini.com.

Beating the Boomer Bust

John F DiniBy John F. Dini

More than 60% of U.S. business owners are over 50 years old, and many of them are looking toward retirement and the process of attracting and vetting potential buyers to take the reins. The differences in yesterday’s and today’s business landscapes are stark—as Boomers were raised in a highly competitive environment, many face the problem of having built companies that won’t attract a new generation of buyers. Three major trends impact the salability of a business. Understanding these trends can help owners transition successfully in a challenging market, and ultimately identify the buyer who will carry their company’s torch going forward.

Why Do Boomers Work So Hard?

Baby Boomers are 2 ½ times more likely to own a business than the generations before or following. Between 1975 (when the first Boomers turned 30), and 1986 the formation of new businesses in America jumped from 300,000 to 700,000 annually. Faced with fierce competition on the pathway to success, many Boomers chose to chase the brass ring by going into business for themselves. New business start-ups have never again reached that level. The result is that nearly two-thirds of all businesses with fewer than 500 employees are in the hands of people who are preparing to retire.

The impact of the Baby Boomers at each stage of life created a one-time surge in many statistics. They tripled the number of college graduates, and brought over 50 million women into the workforce. Between 1970 and 1980 the population of the United States increased by 11%, but the employment base grew by an astonishing 29%. Replacing such a massive portion of the population in the business sector is no easy feat.

The Perfect Storm

There are three major trends that challenge a small business owner preparing to exit. Like the movie “The Perfect Storm,” these three trends; demographic, psychographic and sociographic, are combining to create a Tsunami that will change the entire landscape of independent business ownership.

Demographically, the generation following the Boomers (Gen X) is much smaller. From a supply and demand perspective, there simply aren’t as many available buyers as the number of potential retirees seeking them.

The psychographic profile of the buyer generation is unfavorable. What business owner hasn’t complained about the work ethic of the younger generation? Raised in a forty year period of economic growth (the longest sustained period of expansion in our history) Generation X and their successors (The Millennials) are more likely to choose family first, and perceive jobs and employers as merely the means to a personal end.

They aren’t wrong. The parents of the Boomers’ understood the difference between work and personal life. One started when the other ended. In their drive for success, the Baby Boomers mixed the two and created the term “work/life balance”. Younger generations are actually returning to an older set of values.

Sociographic trends favor alternative careers over business ownership. Corporate America is well aware of the issues and attitudes of the younger generations. They have already made many adjustments. Telecommuting, sabbaticals, family leave, and flex time are benefits designed to attract younger workers who have a different set of priorities. Few small businesses have the depth or breadth to allow skilled employees to come and go according to their individual priorities.

Young entrepreneurs have little interest in the service-oriented brick-and-mortar companies that dominate small business. They seek a level of freedom that doesn’t require being on call, schedules driven by customer convenience, or a 55 hour work week. Combined with the sheer lack of prospective buyers, a reduction in the number of small businesses becomes more than likely, it is inevitable.

Yet, many small business owners are depending on their company to fund a comfortable retirement. Their plan goes something like this: “I will work really hard until I am tired, and then I will find some energetic younger person just like me who is willing to commit everything for this great opportunity.”

Beating the Odds

Fortunately, if you are a successful business owner, you’ve already proven your competitive instincts and abilities. With some planning and foresight, you can still beat the Boomer Bust and achieve your retirement objectives. There are two pathways to succeeding in a crowded sales marketplace.

Build to Sell: Your first option is to build a business that is attractive to your younger buyers. It allows for personal flexibility. It can’t require a huge down payment, since these generations were raised in a “buy-now-pay-later” world, where they are carrying substantial debt from the day they graduate college, and have little opportunity to amass liquidity.

Your technology doesn’t have to be cutting edge, but it needs to be current. Nothing turns off the tech-savvy young buyer faster than a company that is limping along on outdated software or (heaven forbid) paper. Of course, the other attributes of an attractive acquisition; growing margins, a distributed customer base and predictable revenues, are a given.

Hire Your Buyer: The second option is to hire your buyer. The stereotypes of different generations aren’t universal. Certainly we all know Boomer slackers, as well as young people who are ambitious and hard-working. Lacking capital, many of those younger go-getters would like to own a business but have difficulty seeing how they can make it possible. Identifying such a buyer in your own organization, or even reaching outside and recruiting one, is a viable option if your target date for exiting is a few years away.

Creating your own successor requires a commitment to planning and development, but the financial aspects are fairly simple. A few years of selling equity in small amounts can let your successor build a minority stake. Then he or she can obtain third-party financing for the balance of the purchase so you can maintain control through the process, and take the proceeds with you when you leave.

Remember “The more you work in your business, the less it is worth.” Everything you do to reduce your business’s dependence on your personal talents, to reduce the time commitment of running it, and to make it easier for any successor (whether internal or external) to take over the reins, also increases its value to any buyer.

You can’t change the factors that create the most competitive selling environment in history. Understanding what the future looks like, and realizing that your buyer is unlikely to be someone “just like me” is a critical first step in the process.

John F. Dini is a coach, consultant and author of the award-winning book Hunting in a Farmer’s World, Celebrating the Mind of an Entrepreneur and Beating the Boomer Bust. Widely recognized as one of the nation’s leading experts on business ownership, John has delivered over 10,000 hours of face-to-face, personal advice to entrepreneurs. For more information on John F. Dini, please visit www.johnfdini.com.

An Organizational Structure that Works for Change

By Tom SomodiTom Somodi

Many, if not most people, would argue that the ability for an organization to change over time is critical to that organization’s long-term survival. To this end, the literature is full of theories, methodologies, recommendations and analysis on how an organization should be structured in order to maximize the likelihood of obtaining successful change.

It is explained that organizations need to be structured to provide employee empowerment, lean operating techniques, and continuous improvement philosophies as just a small sampling of examples. Yet, we still hear about organizations failing to obtain desired change even though they possessed exemplary efforts to support such structural recommendations.

The reality is that if we want to see advancement in this arena, a major paradigm shift needs to occur regarding the dynamics of change and organizational structure and the best place to begin this shift is by leveraging off of concepts found in Change Science.

Step 1 – Develop and Communicate a Proper Perspective of Change in the Organization: One of the first things Change Science tells us is that change is constantly and continuously occurring around us on a universal basis. Therefore, it is important for everyone in the organization from the board of directors down to individuals in frontline administrative and production positions to recognize this fact.

Every time a new customer order is received, an engineering drawing is created, a product is produced, an invoice is generated, and the list goes on, a change has occurred within the organization. Therefore, an organization is continuously inundated with change and assuming that the organization has managed to survive, this change (both expected and unexpected) on a whole has been successful change.

So, step one is for everyone to stop thinking of change as strictly specific efforts and/or events and recognize that the organization is already successfully dealing with a continuous stream of change at every level in the organization.

Step 2 – Develop an Organization Wide Understanding of Responsibility: So how does an organization manage all this continuously occurring change? The answer is simple – delegation of responsibility. From the person who pushes the button to start the production machine, to the person who enters the customer order and to the manager that resolves a conflict, responsibility for the control of these various changes has been delegated.

It is important to recognize that the concept of employee empowerment automatically exists as soon as that individual is given responsibility for managing and controlling the change that has been assigned to them. What is most often lacking is a top to bottom organizational recognition of the fact that not only is there a significant amount of change continuously occurring in the organization, but through the assignment of responsibility, all the employees in the organization are already masters at managing and executing all of that change.

Step 3 – Recognize and Communicate Two Broad Categories of Change within the Organization: Given that organizations are already managing and executing a continuous flow of change, why all the discussion about how organizations struggle with change? The answer lies in the fact that organizations have allowed the lines of responsibility between day to day operational change and strategic change to get blurred. More importantly, the lines of responsibility have not only become blurred but it is common that the interrelationship between operational change and strategic change has become disconnected.

Strategic change is in response to both internal opportunities for improvement and reaction to external influences that can threaten the organization.

Operational change focuses on the short term expected and unexpected change that needs to be executed in support of the customer and is based upon strategic change that has occurred within the organization on a historical basis.

It is critical that everyone in an organization understands that both operational change and strategic change is equally important in order for the organization to survive. There needs to be an understanding and an acceptance on the part of all individuals within the organization that operational change needs to be continuously executed in order to support the customer in the here and now, while strategic change needs to be continuously executed in order for the organization to survive into the future.

Step 4 – Adjust Organizational Responsibility to Clearly Support Operational and Strategic Change: Assuming an organization is successful in Steps 1 through 3, it can still face challenges when addressing change within the organization if there is not a clear delineation of responsibility for operational and strategic change amongst the workforce. The following guidelines will help:

  • Drive responsibility for day to day operational change as far down the organizational pyramid as possible. Ideally, the more operational change that can be executed and controlled at the administrative and production levels of the organization, the better. These are the people closest to the operational change and generally have the greatest ability to address opportunities and issues that may arise.
  • Clearly indicate (i.e. including through appraisal and compensation arrangements) that the primary responsibility over strategic change is from the lowest management levels on up to the executive and board level. There will always be operational change that requires involvement at the higher levels of management. Even a major customer contract could easily require signoff by the CEO. However, it should be clear that the main responsibility for management should be related to the accomplishment of strategic change. For example, the allocation of focus related to strategic versus operational change by management level might look something like the following:
Allocation Of Focus Between Strategic And Operation Change

Strategic Change

Operational Change

Board of Directors

100%

0%

Chief Executives

90%

10%

VPs

85%

15%

Directors

75%

25%

Managers

60%

40%

Admin & Production

5%

95%

  •  There should be a clear understanding at the ground operational level that it is management’s responsibility to make sure there is continuous strategic change occurring in the organization with an objective of long-term improvement and survival of the organization. However, it is also important to make sure a communication loop exists that supports the delineation of responsibility. This includes communication of the whys and what behind strategic change to those with a primary responsibility over operational change along with feedback communication to those responsible for strategic change regarding the performance of strategic change initiatives and other opportunities for improvements that might exist.

By following these four steps, the formula associated with an organizational structure that will greatly enhance the ability to support the change required for growth and long-term survival is really quite simple. The real challenge lies in executing the paradigm shift that requires a clear understanding by everyone in the organization that change is already constantly successfully executing within the organization and a new delineation of responsibility between strategic and operational change is required.

Tom Somodi is a speaker and expert on change, applying his extensive domestic and international business experience, including reorganizations, acquisitions, strategic change initiatives, and taking a company public during the difficult 2011 financial markets. Tom has held CEO, COO, CFO and board level positions. Tom’s book, The Science of Change: Basics Behind Why Change Succeeds and Fails is now available. For more information, please visit www.changescienceinstitute.com or email info@changescienceinstitute.com.

The Truth about Trading in a Family-Owned Business

By Lois LangLois Lang

“If you give me some new kitchen cabinets, I’ll redo your website and give you free hosting and SEO for a year.” Trading the products or services of the family business for something in return is more common than most people like to admit. Sure, we all enjoy getting something for “free,” but when it comes to trades, that freebie often has a steep cost.

In fact, even though you may think doing the trade is good for the family business because it builds friendships and can lead to referrals, often the trade is unequal, decreases employee morale, and creates a “who is getting more” pile of resentments within the family. So while trading may be common, it’s a practice you need to avoid or curb immediately. Following are some key points to consider the next time you contemplate trading your family business’s products or services.

Swapping quickly escalates. A little trade with a neighbor usually starts out innocent. Perhaps you swap a few haircuts for piano lessons for your child. Since that turned out well, you may keep trading with the person, but then you branch out and do other trades with more businesses. Before you know it, you start to think it’s okay to use the business any way you want to, which could ultimately lead to issues of embezzlement. So even though trading is not seen as taking the company’s assets, it’s a slippery slope that is truly a misuse of the family business.

Trading decreases employee morale and productivity. Would you like to put in a full day’s work and not get paid for it? Often, that’s how employees feel (both family and non-family) when they have to do trade work. Think about it from their perspective. Whoever would have normally sold the product or service no longer gets commission for the sale, yet he or she still has to process the paperwork and possibly even do the hands-on work. On top of that, the employees see the owner (or the person who did the trade) reap all the personal benefits of the trade, while the business as a whole gets nothing. And despite this extra work now on their plate, the employees still have to meet their usual goals and quotas. But what’s the motivation to do so when the owners or managers let product walk out the front door?

Employees often do what you do, not what you say. When employees see the owner or other family members doing trades, they often take up the practice themselves. After all, why should the owner be the only one with a club membership, white teeth, or new carpeting in their home? Once trading escalates, your inventory gets depleted and your profits shrink. Ultimately, all employees start to think of the business as their personal pocketbook instead of as a stand-alone entity that has a responsibility to all employees and shareholders.

You devalue your offerings. When you trade, the value of the item or service (for both parties) diminishes. Because no money is being exchanged, neither party truly understands the real value of the product or service received. Even worse, when word spreads that you’re willing to work for trades (and it will), the value of what you do shrinks even more. Before you know it, a good number of your sales leads are from people interested in trading. And no company can pay its bills when trades dominate the workload.

You can’t get equal service. More often than not, trades leave someone with the short end of the stick. Because you’re getting the product or service for “free,” it’s difficult to complain when something isn’t quite right. Didn’t like your haircut? Want the yard service to do a better job weeding the garden? Didn’t like the last batch of organic produce? If you had paid full price for the product or service, you’d have no problem complaining. Yet when it’s a trade deal, you often feel that you can’t make demands. When that occurs, feelings of resentment grow, making the trade an unpleasant situation for at least one of the participants.

End the Trades for Good: If someone really wants your product or service, and you really want theirs, then engage in each others offerings the right way—by going through the sales channels and paying for the deliverables. While trading is perceived as cheaper and easier, when you consider all the damage it does to your employees, your product or service’s value, and ultimately your business, you’ll see that trading is actually a very costly option. To keep your family business going strong, swap out the trading mentality before it’s too late.

Lois Lang is a speaker and consultant with Evolve Partner Group, LLC where she helps organizations become high performance workplaces. Lois works with clients on management succession readiness, organizational/team strengthening, executive coaching, executive compensation design, wage studies and mediated conflict resolution. For more information on Lois’ speaking and consulting, please visit www.evolvepartnergroup.com or contact Lois at lois.lang@evolvepartnergroup.com or (209) 952-1143.