Small Business Owners are the Same Everywhere

I’m returning to this space almost exactly a month from my last post. It’s the longest period that I’ve missed in the last 6 1/2 years, but I heartily recommend a refresh break to business owners, and it was worth taking my own advice.

A brief apology to those readers who received some 30 posts on Friday. It was a glitch in a program update, and it happened so fast we couldn’t stop it. Fortunately, it appears to have gone to only a fifth or so of subscribers. If you were one of them, I’m sorry for the inconvenience. I loathe spammers, and it was embarrassing.

Also, while I was gone our staff undertook a revamp of this site. I am so pleased by their work. I hope you like it. Huge kudos to Christi and Devin for their creativity and hard work. On a technical note, it you are still seeing the old red titles for the posts, delete your Temporary Internet Files and it should show in the new fonts and colors. Thanks.

We spent much of our time over the last few weeks in Paris and Barcelona, where many of the businesses are larger and run by employees. One week was in the small towns of Southern France, where most of the establishments we patronized were run by their owners. Although service was excellent with only a couple of exceptions, businesses run by the owners were universally outstanding.

On our first night in Paris the hotel clerk mentioned L’Entredgeu as nearby (in the 17th arrondissement) and the best in the area. We were beat from the plane trip, and walked in at about 8:00 looking for a table. We later found out that reservations usually need to be made 3 days in advance. The owner was clearly surprised at our lack of a booking, but consulted her reservation list, and conferred with the chef as to his supplies for unexpected guests before deciding she could seat us. As the restaurant filled completely with locals (it was very small) we obviously had snared the only free seats for the evening. The food was fabulous, and we never once felt that we were “allowed” in. She was a gracious and attentive hostess, and the experience was a highlight of the whole trip.

Ventenac en Minervois is a very small town along the Canal du Midi. At Le Grillade du Chateau the owner hustled among 30 tables, directing multiple staff and the open kitchen (although clearly with no control over the chickens wandering the outdoor seating area.) She was a Maestro, while serving up some of the best seafood ever in gorgeous presentations.

Escriba kitchenIn Barcelona, locals tipped us to the paella restaurant for the cognoscenti, Escriba. We wore out a lot of shoe leather trying to find it, which was by no means a certainty, so again arrived on a Saturday night without reservations. The hostess apologetically said that the only way they could seat us was near the open kitchen. They had no idea what a treat that was, as we spent our evening watching their two chefs handling up to 10 giant paella pans simultaneously. A great meal and a cooking lesson in one night! Most importantly, one of our party has a severe allergy to peppers, which makes consuming any paella a challenge. After initially advising her to order something else, the owner returned to tell us he had consulted with the chef, who had prepared one of the base formulas only an hour before and not yet fully seasoned it. If we would order that specific dish, he felt confident that he could deliver their usual quality without using peppers.

Of course, any of these three or others may not have actually been the owner. Our language skills were insufficient to determine their positions exactly. Perhaps they were just terrific managers with an ingrained appreciation for delivering a memorable experience and taking care of the customer. Certainly they all knew that we were tourists, and unlikely to return much less become regulars. It doesn’t matter, they each had the Hunter’s attitude, working frenetically and going the extra mile for their customers.

With all the big attractions, from the Mona Lisa to Sangara Familia, it’s funny how some of the most lasting memories are made by a single person. Keep that in mind when your next new customer calls.

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One Response to Small Business Owners are the Same Everywhere

  1. This sounds like a fantastic trip. Fun, food, and the ability to see how the rest of the world runs their small businesses. Lots of lessons learned and ready to share. And, a hardy welcome back.

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Wageflation and the Talent Wars

Why are so many employers complaining about the availability of talented workers and the cost of hiring them? Government statistics indicate that real, inflation-adjusted wages are now below 1986 levels. In 2012, the Federal Reserve tracked both an all time high in want ads, along with an all time high in the long-term unemployed, especially among recent college graduates. How can we have both a surplus and a shortage at the same time?

unemployedThe talent wars are heating up. There are three major reasons why things will continue to get tougher for employers at one end of the spectrum, and for some workers at the other.

1. Demographics: As Boomers retire, the generation that follows (GenX) has about half the birthrate from the early 20-teens to the late 2020s, meaning that for every 8,000 Boomers who hit 65 years old daily, there are about 4,000 people reaching age 45. Supply and demand alone will drive pricing for the top echelon of workers.

2. Disparity: The Gini coefficient measures the gap between rich and poor by country, and it is widening in all of the industrialized economies. Technology is replacing mid-level white collar workers (salespeople, data entry,  customer service). Those who lose a task-based job seldom move up into a higher knowledge or decision making position. They more frequently have to settle for lower-paying task-based  employment. So wages decrease for the semi-skilled, while they increase for the highly skilled.

3. Disconnection: I’ve written before about the “Follow your passion” mantra. I have no statistics handy, but we all know that unemployment for college graduates is worse among the psychology and sociology majors than it is for engineers. The higher education system is built to generate revenue from kids sitting in big lecture halls, who support the institutions’ research and academic stars. I identified this gap between the workers that business seeks and those our education system produces as the major issue for employers over the coming decades in my interview with Bob Morris a few weeks ago.

So on one end of the scale, average wages are declining for workers, even those with degrees, who are underemployed in relation to their skills. On the other end we have increasing competition for those whose skill-set is in demand, from electricians and engineers to managers and executives.

That is why I hear complaints such as “He just got his engineering degree. I’ve hired those kids for years at $45,000. I offered this one 70K, and he turned me down for another job that paid 90!” It will get worse.

Small business has always been the training ground for employees entering the workforce. We take people with a specific skill set, and teach them general job skills like showing up on time, following directions and getting along with coworkers. As partial compensation for that investment, we’ve been able to pay “entry level” wages. The challenge going forward will be how we sustain higher pay scales based on the specific skills, while still bearing the cost of general job training.

NOTE: I regularly use these pages discuss a business owner’s challenges in maintaining balance between work and life. After 6 years of dedicated weekly posting, I am going to take some of my own advice. My wife Leila and I are celebrating 4 decades together by taking something that is longer than a vacation, although not quite long enough to be called a sabbatical. I’ll see you in a month.

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2 Responses to Wageflation and the Talent Wars

  1. John H. says:

    John,
    One very important contributor to the high wage expectation is the enormous levels of student loan dept new entries to the workforce bring with them. My friend, an experienced engineer out of work for a year, was recently offered a job at $20 an hour. He requested $24, largely because at $20/hour and a relocation to suburban DC he couldn’t have made ends meet. His prospective employer passed, and cited the position as being done away with.

    What happens to our spending-driven national economy with graduates saddled with life-long levels of college loan debt? What happens to home sales?

    More importantly, what happens to future generations in terms of saving for college for their children,l and what appears to be a self full-filling prophecy for generations to come?

    • John F. Dini says:

      Great point John. We are proud of our “lifestyle” as Americans, but we have also put ourselves in hock over the last 50 years on every level. Every parent I know who makes the college visit rounds is shocked at the level of creature comforts that are now considered standard for student living. Those apartments, on campus eateries and mega fitness centers were built on $1.6 trillion in student debt. It really isn’t sustainable.

      BTW: There are 2 million Americans over 60 years old who still have outstanding student loans, and 140,000 are having their Social Security payments garnished.

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Reputations are Sticky

“We have a great reputation in our industry.” In thousands of hours of coaching and facilitating I’ve never heard a business owner say “We have a lousy reputation.”

Customer FeedbackThe myopia of working hard to deliver a product or service leads us all to the belief that customers and vendors understand the effort we put in and appreciate it. How do you validate your reputation objectively?

ABC television has released its NBA schedule for the coming year. The Cleveland Cavaliers, although almost a completely new team (albeit with LeBron James) have five national dates. The Oklahoma Thunder also has five, obviously due to MVP Kevin Durant, and despite the fact that they’ve been ousted from the playoffs by San Antonio in two of the last three years. The reigning champion Spurs will be on the air twice, and one of those dates is Christmas Day as part of a five game marathon.

Why? Because the Spurs are boring. They are at or near the top of the league in most offensive categories, with dazzling assists and three-pointers galore. NBA Commissioner David Silver has proclaimed their performance in the 2014 finals as the best basketball he’s ever seen. They won the championship by the widest scoring margin in history.

But to the casual basketball fan, the core of the television audience, they are boring, defensive stoppers in low-scoring games. That is a reputation built a decade ago, when they won their first three championships to miserable viewership ratings. Reputations stick, and television networks aren’t in the business of reeducating their viewers.

Many years ago I sold auto parts to independent repair shops. My employer was often in a cash bind, and we needed to sell what we had in stock. A mechanic would call for shock absorbers. “We don’t have those,” I’d say, “but we have some great deals on air filters today. Why don’t you stock up?” It always seemed that what we had, everyone else had as well, so we’d haggle price to make a sale.

Years after I had moved on I ran across a friendly competitor. I mentioned to him how hard it was to meet our margin targets, because everyone else seemed to sell for a lower price. “Are you kidding?” he responded. “Every shop in the country knew that you guys would do anything for a sale. Whatever you had in stock drove the price down for everyone.”

I was shocked. I thought we were the class of the industry, but we were perceived by our competitors and customers as the bottom feeders.

Customer surveys are valuable, but you have to assume some bias because the respondents are already doing business with you. Validate your reputation in the marketplace by asking people who are objective. Query your vendors’ salespeople as to what the competition says about you. Ask customers who don’t do business with you, or who don’t do business with you any more, why they choose the competitor and not you.

Reputation is important. Make sure you know what yours really is.

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One Response to Reputations are Sticky

  1. Great topic. This is a continuing problem with most businesses. They have blinders for their own reputations or they don’t really want to know the answer to the question from former customers or people who’ve never bought. Asking the really hard questions is never comfortable.

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My Interview with Bob Morris: Part II

Robert Morris is the number one reviewer of business books for Amazon.com. A few weeks ago he posted a great review of Hunting in a Farmer’s World, and asked if he could interview me.

Bob MorrisBob’s questions were really fun, and the interview went rather long. To my surprise, he is publishing the entire thing in two parts. Here is the second half.

Morris: When and why did you decide to write Hunting in a Farmer’s World?

Dini: I started out writing a book about the culture in a small company. The original analogy was going to be a Tribe. As I thought through the stories I wanted to tell, I realized that I wasn’t thinking about culture. I was really thinking about the character of the people who create cultures; the founders and owners of small businesses. It really doesn’t matter how many employees they have, their thinking is always dominated by a sense of personal responsibility for all stakeholders, and the knowledge that, regardless of the resources that are (or more often aren’t) available, failure is not an option. They work without a net. If they screw up, it isn’t merely a missed budget or a couple of points off the stock price. Their failure means that their families and their customers as well as employees and their families are all going to suffer.

Morris: Were there any head-snapping revelations while writing it? Please explain.

Dini: I had read Thom Hartmann’s book on ADD in the 90s, Attention Deficit Disorder: A Different Perception, and thought then that his description of hunters applied very well to the entrepreneurs I work with. I came across it again when cleaning up my bookshelves at home, and realized that what I was discussing in the book was really the thinking process of entrepreneurs. To go back to Simon Sinek’s work again, I suddenly understood that I wasn’t writing about how entrepreneurs behave, I was writing about why they behave that way. Once I locked in on the hunting analogy, the rest came pretty quickly.

Morris: To what extent (if any) does the book in final form differ significantly from what you originally envisioned?

Dini: I could have prattled on and on with great stories about terrific people. I realized that I would wind up with a book that would leave many entrepreneurs saying “Great. So now I understand why I hate farming, but why didn’t he tell me what to do about it?” I went back and rewrote the middle section about the things I’ve seen owners do that allowed them to run good businesses without getting bogged down in farming tasks.

Morris: What are the most significant differences between hunters and farmers?

Dini: Hunters hunt. They can’t help it, and it isn’t always the best thing for them or their companies. I talk a bit in the book about how dangerous they can be to an organization when bored or underutilized. They tend to approach the world from a perspective of what they want it to be, while farmers deal with what is. Make no mistake, hunters kept humanity alive for thousands of years, but farmers allowed us to settle in one place and build civilizations. One of the things I hope comes out of the book is that they are complementary talents. If people accept each other’s tendencies, they can form tremendously effective teams.

Morris: To what extent do the Welch comments (quoted in Part 1) express what you call “the hunter’s mindset”? Please explain.

Dini: I think that corporate executives have the Hunter’s Mindset as much as any entrepreneur. If you read them again, Welch’s comments aren’t about differences in perspective as much as they are about size and scale. He is right, smaller businesses have short lines of communication, direct influence by the CEO, and the resulting ability to be nimble. That’s because they are small. I think his is as much a logistical observation as a cultural one.

Morris: To what extent is that mindset relevant to the challenges that a “farmer” faces? Please explain.

Dini: Hunters tend to think that everyone should hunt. We developed a fun quiz, “Are you a Hunter or a Farmer?” for the book’s website. [Please click here.] When we tested it, people tended to be unhappy about getting a Farmer result. We rewrote it several times to make it as objective, as neutral as we could. There isn’t anything wrong with being a farmer, but we are all biased towards that Great Man view of the solitary hunter. We are inundated with media that puts hunters on a pedestal (Bruce Willis, Mel Gibson, Harrison Ford), and frankly, so does my book. It is human nature to think that if something is good, anything else is less good. Farmers don’t get enough credit for “only” making things work.

Morris:
A number of films portray the sometimes violent confrontations between farmer and ranchers, and Shane is among the best of them. In your opinion, how relevant is that film to the material in your book?

Dini: Wow! You picked another of my favorites. Jack Schaefer’s book was the first I ever bought for myself. (It was 35 cents in paperback.) The whole concept of an eminently capable hero who chooses not to use his skills unless he has to taught me that being impressive or showing leadership can be as much about what you don’t do as what you do. The ranchers were only trying to protect their ability to raise cattle. I never saw the objective as evil, but rather their greed, the zero sum game of “I can only be happy if I have it all and you have nothing.”

By the way, Alan Ladd was way too short, too blonde and too buckskinned to be the Shane that I read about. Did you know that they had to dig trenches for Jean Arthur to walk in so she didn’t tower over Ladd? Now I can’t watch the movie without noticing that every scene that they have together is shot from the waist up.

Morris: For millennia, hunters searched for food to survive. Who are today’s hunters and what is it that they seek?

Dini: I think a hunter today is anyone who shoulders the personal responsibility of providing for others, especially those who do it without a net. Most folks begin an action with the thought of a fallback objective if it fails. Hunters don’t have much of a plan B. That doesn’t mean they succeed every time, but they only see setbacks, outcomes that temporarily delay reaching the goal. The plan changes, but the objective doesn’t.

Morris: In terms of their respective functions, it seems to me that in today’s business world, many (if not most) organizations need both hunters and farmers and there seems to be many more farmers than hunters. Your emphasis on the hunter’s mindset suggests that how people think, the way they see the world and their place in it — rather than what they [begin italics] do [end italics] — determines whether they are a hunter or a farmer. Is that a fair assessment? Please explain.

Dini: Absolutely. I think hunters really are born that way. Even when I was an employee, I always felt that my personal skills were being sold on the employment market. When I am interviewing entrepreneurs, many tell stories about their childhood enterprises. They performed a chore for a neighbor, and immediately connected the dots about how many other neighbors would pay to have that chore done. It isn’t surprising that many entrepreneurs went into business for themselves because they saw an opportunity that their former employer was missing.

Morris: Also, is it a fair assessment to suggest that hunters tend to challenge the status quo and farmers tend to defend it? Please explain.

Dini: I’m not so sure about that. It is more complicated. Hunters challenge things that get in their way. The Hollywood Hero stereotype is “You can take my badge and gun, but I won’t stop working the case.” That may not be a good idea, but hunters tend to put their own goals first. Farmers clearly have the ability to change systems, but they do it incrementally. Hunters are more likely to blow it up.

Morris: I just read Michael Malone’s new book, The Intel Trinity. He focuses much of his attention on three men: Robert Noyce, Gordon Moore, and Andrew Grove. Together, they built what became “the most important company in the world” for almost four decades. There are times when, in my opinion, each of the three demonstrates the hunter’s mindset, other times the farmer’s mindset. They engage whichever is more appropriate to the given situation. In today’s business world, I think CEOs need to master both mindsets. What do you think?

Dini: I like Daniel Goleman’s work on situational leadership styles. Few really successful people, particularly those who are consistently successful over a long time, do it with one approach to every problem. There are times when a good commander says “Let’s take this hill!” and other times when he says “Let’s hunker down and figure out what is going on here.” Effective partnerships are most often between two players who have differing perspectives. With three, the dynamic is much more complex. If the partners don’t shift their mindsets for different situations, they can fall into a pattern of constant disagreement.

Joshua Wolf Shenk wrote a great article in The Atlantic about Lennon and McCartney. John was a hunter, and Paul much more of a farmer. Their greatness grew from their ability to switch roles when necessary. They pulled the best out of the relationship by supporting each other’s natural tendencies, but also by stepping into the other partner’s shoes when the situation demanded it.

Morris: In my review of your book for various Amazon websites, I point out that several books published in recent years examine the complicated relationships between leaders and followers. The U.S. Marine Corps offers an excellent case in point. It has, heaven knows, a crystal clear chain of command but a general will defer to the expertise of a private when an important decision must be made if the private has better information, sharper skills, etc. to answer a question or solve a problem. Hard-charging entrepreneurs such as Steve Jobs may chew up people like a rolling ball of butcher knives but will defer to better-informed and better-qualified managers in a comparable situation.

Your own thoughts about all this?

Dini: Jobs was brilliant, but as you’ve probably guessed by now leaders who don’t value their people aren’t my favorites. Apple’s products are innovative, but I don’t use them because I dislike the arrogance of their closed universe, and the level of control they demand over it. That clearly reflects Jobs’ attitude. A general may accept a private’s knowledge in a given situation, but he doesn’t bring privates into every strategy meeting. In the absence of a true genius (and Jobs was one) who can see farther than everyone else, most organizations have to rely on the brainpower of a group of people who are informed, experienced, and buy into the same vision. Within practical limits, the bigger that group is, the better the decisions will be.

Morris: I agree while pointing out that Jobs valued those who were insanely talented. I never thought he was a great leader and still don’t. Great leaders inspire ordinary people to achieve extraordinary results.

Of all the great entrepreneurs throughout history, with which one would you most want to share an evening of conversation if it were possible? Why?

Dini: I have always had a favorite – Benjamin Franklin. I think his scientific vision was broad enough to understand the amazing world that electricity has brought us, and his business sense would love all its applications. Other than that, he was a master diplomat and a great negotiator, a raconteur and lover of fine food and drink, so we could anticipate a most entertaining evening!

Morris: Walter Isaacson refers to Franklin as “America’s first yuppie.” If you were asked to speak at an elementary school graduation ceremony and explain why innovative thinking is important to personal growth as well as one’s career (no matter what it turns out to be), that would be your key points?

Dini: This may be your most difficult question. Elementary-age kids are innovators by necessity. Everything is new to them, so they make up the solutions. Their lives are one big journey of discovery. I don’t know that I would address innovation by name. It’s an abstract concept, and most adults struggle with it. I’d tell them to never stop asking “Why?” and “How?” about everything. If they practice asking the questions long enough to get them ingrained, some of them will grow up to ask “What if…?”

Morris: Let’s say that a CEO has read and then (hopefully) re-read Hunting in a Farmer’s World and is now determined to establish or strengthen a workplace culture within which an entrepreneurial spirit is most likely to thrive. Where to begin?

Dini: It starts with accountability, not just for the CEO, but for everyone who wants to have a say. In large organizations, you can succeed for a long time just because you are on the right teams, or are in a hot division. Those people tend to fall out of the race when they have to put their own fingerprint on decisions. Whether you are leading hunters or farmers (probably both), your culture starts with how much people take responsibility (and credit) for their own actions. The CEO, in turn, needs to accept setbacks as part of the developmental process. The best entrepreneurial cultures are those where people aren’t afraid to make mistakes.

Morris: For more than 25 years, it has been my great pleasure as well as privilege to work closely with the owner/CEOs of hundreds of small companies, those with $20-million or less in annual sales. In your opinion, of all the material you provide in Hunting in a Farmer’s World, which do you think will be of greatest value to leaders in small companies? Please explain.

Dini: Develop a second in command whom you trust implicitly, and who is good at the things you don’t like to do. Too many small business owners are attracted to a “mini-me” because they are lonely, and having a like mind around is comforting. They don’t understand that a balancing influence, in most cases a farmer, frees them to be even more effective.

Morris: Which question had you hoped to be asked during this interview – but weren’t – and what is your response to it?

Dini: How’s this?

Q: “How does it feel to be on the New York Times bestseller list?”
A: “I don’t know, but I’d sure like to find out!”

 

bookIn business, everyone is either a Hunter or a Farmer. Which one are you? Take the quiz. www.hiafw.com  

 

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2 Responses to My Interview with Bob Morris: Part II

  1. Really interesting interview. Just wanted to say thanks

  2. Dolores says:

    I missed this when originally posted, but I found under your Top Posts. I really enjoyed the interview and hope you make the NY Times best sellers list soon!

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You Shouldn’t be Your Own Second in Command

Business owners are accustomed to wearing many hats, and many don’t have the financial resources or personnel to field a full management team. The owner winds up wearing one or more functional hats in addition to that of the CEO.

If you have managers in several areas, one usually assumes the mantle of Second-in-Command (SIC). He or she provides leadership in your absence, and assumes decision making responsibility. Whether that person is a true SIC depends on how many roles he or she can fill when needed.

Circular Organization ChartThis is a circular organizational chart. It’s a different way of looking at the management responsibilities in your company. In the second circle, outside the CEO, are the functional areas of running the business. You company may combine a few (like finance and HR), or have one or two more (such as R&D.) The point is to illustrate that the responsibility for day to day supervision and direction gravitates to the center. Each functional area that isn’t assigned to a specific manager becomes the CEO’s by default.

The more that you spend your time in a functional area, the less time you have to be CEO. Just as important, if you are working full time in one or more areas (sales, operations) then it is unlikely that you have any time to back up the others if an employee leaves or is incapacitated.

Most small business owners, especially founders of companies, are utility infielders. They began by doing everything, and can still handle most functions when necessary. That isn’t unexpected, and it is often necessary to be every manager’s backup.

Further, businesses with less than 50 employees usually can’t afford a President; someone who serves as the first option to cover every functional position, and who leaves the CEO to full-time CEO duties. Until you reach that level, one of the functional managers in the second circle has to serve as your SIC.

Determining whether you have a real Second-in-Command starts with discussing who bears responsibility for gaps in other functional areas. Too often the CEO has one (in this chart lets take sales) and the presumed SIC (a Controller in Finance, for example) another. The unspoken assumption is usually that a vacancy in any other area automatically becomes the CEO’s. The so-called SIC is unwilling or incapable of stepping in anywhere but his or her own specific area of responsibility.

That isn’t a Second-in-Command. That’s a manager who is merely first among equals. Being the CEO is a real job. It can’t just be shunted aside every time there is an operational need. There should be clear delineation between the two of you as to which roles each is expected to back up. Until you have a key manager who specifically understands that covering other areas of management when needed is a part of the job, you will remain your own Second In Command.

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