This short film from Nic Askew has a few good points in it (and it is just plain fun). I think that we are all someone on a journey…and the best learning is the learning we take from everyday. Enjoy!
The following is the second of 3 posts from our guest blogger Paul Schoening, President of Plan C. He is bringing a unique perspective on what it takes for a small business to survive. In his first post (here) he talked about the difficulty of starting a business based on passion and how that passion is both good and bad. He discussed how entrepreneurs need to look at building a sustainability plan and not a business plan. In this blog are his next two tips. Over the next few weeks, the final post will outline the final two survival tips. Enjoy!
2. Show me the money: When starting a new business, oftentimes entrepreneurs focus on sales revenue or profit figures to assess how they are doing. I know I did. In fact, we had record sales in our final quarter as a business and yet we couldn’t make it last.
While it is good to be profitable and increase sales – it is absolutely critical to have a positive cash flow! You need to have enough cash flow to give yourself time to get off the ground and pay your ongoing bills. Fast growth and increased sales are great, but this can create a sense of overconfidence that can skew your decision-making especially with early business success. Conversely, when times are challenging and a business owner is under pressure we can easily make rash decisions fueled by emotion, not logic (i.e., “how the hell am I going to pay for this?”).
One example of cash flow issues was custom cabinet seller M&J Kitchens – who had survived the Great Recession even when its revenue from homeowners and builders dropped by more than half in 2009. They weathered the storm. Then, late in 2011, with sales almost 42 percent higher than the prior year, they were unable to pay their bills and owner Drew Davies was forced to shut the 26-year-old company down. What happened? M&J highlights how important cash flow is. The issue was a “cash-flow crisis precipitated by his bank and trading partners, who Davies says, abandoned payment agreements that had been in place for decades.” M&J’s cash inflows were coming in slower and it’s payments still needed to be made. In this instance “M&J had to float their customers—builders, architects, and home remodelers—who had slowed their payments, typically from 30 days to 60 or 90. At the same time, his own suppliers changed agreements that had been in place for decades by cutting credit lines or requiring deposits, which Davies says could tie up between $60,000 and $120,000 per month.” After more than 25 years of business, the company was forced out of business, not because sales were down, but because it couldn’t cover its cash flow.
Source: Businessweek.com February, 2011
What happened to M&J is not atypical. It can happen to all of us. Which is why we need to have cash flow plan. One way of looking at this to think about how much cash is required to make payroll, pay suppliers, and cover other expenses each month – then figure how many months of cash reserve you will need to have if things don’t go smoothly. In my case with the bike business, I usually looked out 3 to 4 months. I should have been looking out 6 to 9 months. Each business is different – so think hard about what a downturn or change in situation would mean to you. How fast do your customers pay? How long can you push out your own payments.
One way to avoid these mistakes is by finding a great accountant or financial consultant and using them to map out a plan for this. Look at ways you can collect money faster by offering discounts for payments early or requiring a deposit. See how you can restructure payments on goods and services that you use. Look at payroll differently – offset high bi-weekly pay by using quarterly or annual bonuses that provide flexibility for you and rewards your employees for great work. If you can’t afford to hire an accountant full-time, there are many firms that you can outsource part of the accounting of the business to or hire in for consulting. The voice of reality (a shrewd accountant) will keep you in check.
3. Double the time you think it will take: Time is a resource that is often underestimated when starting a new adventure. In the passion of developing out this great new idea, we forget about how long things can take. Particularly the little things. You can celebrate that you are the President or CEO of your business and be very happy to have the title. But you are also the janitor, the sales person, marketer and customer service rep. You need time to handle all of these responsibilities, take time to do research and to ensure that you are continuing your education and staying on top of the latest trends and facets of the marketplace.
Here are a few examples of some rough time estimates that an entrepreneurial friend put together for me for some of the things that he does that are not part of his core business.
This totals up to over a day and a half out of the week for work doesn’t even include business development, sales, or anything that has to do with the work that drives value for his customers (granted, he could probably reduce his Social Media Outreach – I mean really, 3 hours on Twitter, Linked-In and Facebook?).
One way to overcome this time crunch is to look at outsourcing some of the functions of your business so you can focus on the areas of which you have immediate control and greatest value-add. This might require you to increase your outflow of cash (which can be troublesome – see #2) but if it can allow you the time to focus on the important things for success, then it is worth it. Another option is to think outside of the “box” and look at creating partnerships and alliance where you can trade services or leverage each others core competencies.
Having a 5 year old and a 2 year old…this was just too classic.
With all the new ways of communicating – the old fashion bedtime story is still one of my favorites – but I’m not sure how long it will be for our children. Your thoughts?
For those few of you who might have noticed, the number of blog postings on this site over the last two months has been significantly down. This was on purpose as I realized that I needed a sabbatical of sorts from writing.
After my crazy experience of working through Hurricane Irene (see here) I was a little burned out. I could tell because the writing ideas that had come easily (well relatively easily) to me before, were now few and far between. There was not that burning desire of “Wow – I need to share this with people.” In fact, it was just the opposite, whenever I came up with an idea, it was, “Who cares?” I was burnt out on it. It was adding stress to my life (more than what I felt was necessary) and was becoming an “issue.”
So I cut back.
Not completely, but enough that I felt like I was taking a break. I did not post every week. The posts that I did do were short and mostly updates. I tweated less.
I did not take a complete sabbatical. I still worked. I did my day to day things. I jumped into creating some new workshops. I worked on developing some new business ideas with a friend. I sold a bunch of projects for this fall/winter.
But I didn’t write.
And it felt like I had some time off. I felt like I had a break. Which is what I needed.
And I found out a few things.
1. The world did not end (I knew that would be the case, but still, one never really knows)
2. My readership dipped, but when I did post something, it popped back up right away
3. I want to write stuff again (now that I’ve had some reflection time
Most of us don’t have the opportunity to take a real sabbatical. However, I bet that each of us could find one or two things that we could take a sabbatical from. For me it was writing this blog and keeping up on the social media stuff. By taking a conscious break from it, I feel more motivated to do it now.
What is your mini-sabbatical going to be? What do you need a mini-break from? Is it new product development? Leadership meetings? Working on next years annual conference? New sales? Worrying?
And remember, the world won’t end…even if you think it might.
For your mini-sabbatical
1. you need to reduce your thinking on the topic/issue (not completely give it up)
2. You should give yourself a set amount of time to take off (I did it for two months, but I could see it working in as little as two weeks)
3. Keep a journal or log of ideas that come to you regarding your mini-sabbatical area – but don’t work on those ideas (this is to help with your motivation later)
4. Do things so that you don’t fret too much about what you’re not doing (I did not look at the number of viewers to the blog because I knew that it would probably distress me)
5. Remember, the min-sabbatical is supposed to rejuvenate you – if you feel it adding more stress, you need to change something about it (either how you are doing it or the fact that you are doing it at all)
Leave a note and share your ideas on this. Let us know how it goes.
A recent post on PsyBlog outlines the distinct difference in performance between people who “fantasize” about future success and those who “expect” future success. The blog article was based on research by Oettingen and Mayer (2002) in which they concluded, “Positive expectations (judging a desired future as likely) predicted high effort and successful performance, but the reverse was true for positive fantasies (experiencing one’s thoughts and mental images about a desired future positively).”
The PsyBlog article explains the difference between expectations and fantasies as follows: “Expectations are based on past experiences. You expect to do well in an exam because you’ve done well in previous exams, you expect to meet another partner because you managed to meet your last partner, and so on” while “fantasies, though, involve imagining something you hope will happen in the future, but experiencing it right now.” The difference might seem small, but in fact, had a big difference in outcome. People who had high expectations about finding a job did much better in actually finding a job than those who just fantasized about finding a job. See more results here.
Which leads us to our potential problem with incentive programs.
Do we end up communicating to everyone that they can achieve the highest payout or reward? If we do, then does that lead to fantasizing about the reward instead of expecting the reward? I’m not sure.
On one hand, I know that in the communication work that we do, we typically use examples and highlight top earners – the ones who achieve in the top 10% of participants. How does that communication play with the 50% of participants who are in the bottom half of earnings and probably will not achieve that level of success? We show pictures of what people can buy with their earnings – a new boat, travel to a tropical island, new coach bags, a 62 inch t.v. Are we inadvertently leading these people to fantasize about what they can do with that extra $20,000 when they don’t have the history to expect that they’ll ever earn it?
Companies often use annual reward trips, short-term contests or non-cash incentives that reward the top 5% or 10% of performers – do these by their nature create a split between those who expect to earn them and those that just fantasize about earning them? Does this then lead to poorer performance by those who just fantasize about winning them with no real expectation of actually winning?
This is just one study, but it resonates with other information on this subject from Locke and Lathum; Badovick, Hadaway, & Kaminski; and Bandura to name a few. So what does it all mean?
Are there solutions for this besides just chucking the entire incentive system out the door?
Of course. When we take a holistic approach and think about this differently.
A few ideas that would help include:
While we all like to dream, we might need to ensure that our incentive programs offer a little more grounding.
So what do you think – is this all just ivory tower research that has no application in the real world, or is it something that we need to take into consideration? Let us know your thoughts and leave a comment.
My 5-year old son is starting to become afraid of “monsters” in our house. This has not been a problem until just a few days ago – but now he is reluctant to go anywhere in the house alone. It culminated last night, when he wanted a specific book read to him before going to bed. That book was located in our 3rd floor attic bedroom. We were on the 2nd floor when the 5-year old requested this book.
“Ok. Go get it and I’ll read it to you” I said.
“I can’t” he said very quickly.
“Why not? Do your legs not work?” I asked teasingly.
“I’m scared – I don’t like being alone” he replied seriously.
“But I’m right here and you just have to go up the stairs that are right over there” I said pointing to the stairs just 20 feet away.
“Can you come with me?”
“No – I’m right here and you’ll be fine.”
“But I need you to come with me.”
After 10-minutes of this back and forth conversation that included discussions on what type of monster it was, the fact that monsters were imaginary, and the fact that he would be no more than 50 feet away from me at any point in his under 60-second journey and within easy calling distance, he was still firmly planted on the couch not willing to go get the book by himself. I even tried my best motivation and psychology tactics to get him to go up by himself (incentives, peer pressure, challenge, etc..) – to no avail. Then he said this most insightful statement:
“Just because its imaginary doesn’t mean that I’m still not scared.”
Wow…that’s when it hit me, I wouldn’t be able to rationally talk him into going upstairs to get the book. No matter how many facts we agreed on. No matter how well reasoned my arguments were. No matter how simple the solution was. He was going to still be scared.
I needed to respond to him on an emotional level. I needed to make him “feel” safe. I needed to hold his hand or walk halfway up the attic stairs or go up first and clear the attic of any monsters before he was ever going to go up in the attic alone.
And sometimes we and our employees are the same way. We make up monsters.
We extrapolate all the bad things that could happen and they get blown out of proportion. We understand all the rational discourse on why the company needs to change, but in our guts we are scared by that. We get caught up in the emotion of how we feel about what somebody said to us and not about what they actually said or meant. We spin our wheels in the mud worrying about not getting a project done instead of just working on it.
And no matter how rationale the argument is against this imaginary thing – we are still scared. When people are scared – we don’t work well. We don’t go up the stairs to get the book. Instead we sit in our cubes and wait. We spread rumors and try to get others to believe in our imaginary monsters too. We worry and fret and stress.
Our brains trick us because we are not rational beings.
We are emotional beings. Our imaginary fears and worries are not going to dissipate with rational discourse or well reasoned arguments or even facts. Sometimes the only way over it is to have someone figuratively hold our hand, or walk halfway up the stairs or go chase out all the monsters first.
Too often as leaders we miss this fact!
As leaders we want to be the shining knight that comes in and vanquishes all the monsters. So what do we do – we focus on the facts. We layout well reasoned arguments. We rationally explain away all the potential downfalls.
Our communications highlight all the great benefits of the new program – but don’t address the emotional side of things. We discuss program rules and miss out on leading people through an example of what it is going to be like. We provide all the facts on a new change initiative but don’t go out and show them how we have to change as well.
We don’t bring in the human side of things.
We need to get better at holding hands. We need to work on our empathy. Communication, no matter how good, won’t solve all our problems. As leaders, we need to lead. We need to go up the stairs first. We need to put skin in the game. We need to feel the pain too.
We can’t always talk people out of being scared – even when they are scared about imaginary monsters. As a leader it is not about being right or getting the facts straight. It is about emphasizing with what your team is going through and being there for them. It means that we have to start thinking and acting with our more with our heart and less with our head.
That’s what makes great leaders.
Let us know what type of imaginary monsters you face…leave a comment.
Ok, this is how information should be presented!
Too often we don’t have a reference point for data…really, do you know how tall 80.1 inches really is? The Boston Globe (see here) created this info graphic to represent the snowfall in 2010/2011. They did a fantastic job.
Here is why it works:
1. Shows data relative to something that we know – we can put it in context
2. Graphically simple – yet conveys a lot of information
3. Fun – how can you not chuckle when you see the Shaq-o-meter
Here is a little bit of psychology that most of us know intuitively. People hate vacuums. No not the kind that you use for cleaning your carpets…the kind that exist when there is an information void.
Our brains work overtime to fill in any vacuums that they encounter.
This is a good thing mostly since it has helped us survive, such as when one of our ancestors filled in this unknown, “hmmm….I’m not sure what the growling noise is, but I bet it’s not good so I better run.”
We fill in these blanks all the time – often at a subconscious level. In the 1930’s, Gestalt psychologist conducted a number of experiments that focused perception and filling in missing information. They named this phenomena “the law of closure” famously demonstrated by the Kanizsa Triangle where there are no triangles or circles in the image – yet that is what we see.
While filling in missing information has often helped us, it can also be very detrimental. Take for instance what would occur if your company made a statement to employees such as “we are going through some difficult times and some changes will be announced next week.”
Not knowing what those “changes” are, people will automatically tend to fill in the blank…and what do you think they will fill it in with? Positive thoughts on the future…probably not.
In fact, we can pretty much guarantee that different people will interpret this differently. Some positive, some negative, and others not even registering on their radar. Psychology shows us that ambiguous stimulus will most likely be translated into multiple perceptions by different people – based on their current emotions, past experience, personality make-up, and a variety of other factors.
People will also fill in the blanks based on information they can gather – thus, the “changes” are associated with “difficult times” so the conclusions they will draw will probably be focused on what they have seen or been part of with other changes in difficult times.
But what a company wants is to make sure that a large proportion of people are not filling in the information with negative or wrong information. For instance, the above statement probably would cause a number of people to go back and start talking about the “layoffs” that will probably occur next week – even though nothing of the sort was said.
While we can never fully make sure that everything is 100% clear and absolutely understood – we can do things to mitigate the negative aspects of this:
1. Eliminate as much ambiguous information as possible – be as clear and complete as you can in both verbal and written communication
My wife’s company has just gone through a layoff of 125 people. This layoff was announced a few weeks ago and came as a surprise for most people (mostly the employees working there). Of course I had concern for my wife’s job and those of her co-workers…but I also had a curiosity of seeing firsthand from a very close proximity the effects that the layoff had on motivation. This is a qualitative look from my perspective and as such, should be taken with a grain of salt – but still, I think there are some useful nuggets here.
Here are a few observations that I saw:
1. Layoffs suck motivation out of people
From talking to people and listening to my wife, the overarching fact was that this layoff sucked the motivation out of almost all the employees. They were nervous. They were mad. They were making contingency plans. They were talking one-on-one or in small groups about what was going on. They were frightened.
What they weren’t doing was being motivated and productive.
Any company that thinks its employees are going to be motivated because they are afraid of losing their jobs, needs to rethink that assumption. From what I saw, it acted in exactly the opposite way. There was a sense of apathy and one of giving up once the upcoming layoff was announced. People started updating their resume’s, they added people to their Linked-in network (I got quite a few of these from my wife’s co-workers), and they called their friends and acquaintances (either to prospect for jobs or to have a sympathetic ear to vent to).
My wife said to me one day during this, “I feel like I’ve been at a funeral for a week.”
2. Communication is vital
From the time of the announcement of the layoffs to the final layoff occurring took a total of 10 days. During that time, there was a great deal of confusion, fear and anxiety. The communication coming from the company was limited and often led to more chatter at the “water cooler” than it prevented. I would be hard pressed to say that the communication put forth by the company helped much in alleviating any of the discomfort and anxiety that the employees were going through. I know that the company was limited to a degree by certain laws about what they could or could not say, however, that is not an excuse for having people be confused about the reasons for the layoff and how they would happen. I think that any company that is going through or thinking about a layoff needs to think very hard about their employee communications. Specifically, they need to let employees know:
It is important to communicate about resources people can go to regarding dealing with the stress of the layoff, but that should be just a part of the communication campaign.
Also key to this is to make sure that whatever is communicated is followed through. If you communicate that layoffs are not going to start until next week, don’t layoff directors this week (even if it is only a handful). The damage that does to trust, motivation and stress is significant.
3. The unknowns are the worst
Most of the anxiety, anger and stress that I observed were caused not by what was known, but by the unknown. This plays into much of what I discussed in the communication section – but the entire process would have been better if there would have been more transparency in the process. The biggest unknown that faces an employee is will they have a job or not – but that isn’t the only one. Unknowns also include: what are the layoff criteria? How will the different departments be impacted? What do I do about my on-going projects if people on them might not be here in two weeks? What is going to happen after the layoffs are done? How will we cover the increased workload? What will happen to the people let go?
4. After the fact
The big challenge now comes after the fact. What will the company do now that the layoffs have occurred and the survivors are left. From the few people I’ve talked to (including my wife) there is a feeling of “survivor’s guilt” going around (e.g., “why was she let go instead of me – she has 3 kids and is going through a divorce?”). There is also sense of “is this the end?” Will there be more layoffs in the future? What is going to happen next? How will my job be effected?
This is the moment that the company needs to shine. They have put in place listening sessions with senior leadership (kind of a venting process as much as an information transfer) – this is a good start. There is need for more. They need to communicate their plan for growth to ensure that this will not happen again. Employees need to feel like they are not just numbers in a big machine that are expendable at any moment, but instead feel like they are a vital component to the success of the company. They need to be heard and appreciated. A new energy needs to be instilled – one that drives motivation up and not down.
There is an opportunity over the next month or so for the company to do this. If it doesn’t happen, I fear that it will be a long climb back to the level of engagement and motivation that was there prior to the announced layoffs.
Have you gone through a layoff? Let us know what you feel about how it impacted motivation – good, bad or ugly.