This Ends Larry on Business. Tuesday We Begin Larry on Scholarships

I will stop posting Larry on Business with this post. I appreciate you following this blog.

I began this blog in July 2011 to help business owners grow their businesses. I’ve helped thousands of owners in the past two decades. I’ve worked with business owners in 30+ countries. I’ve helped them develop business plans, marketing plans, operational plans, and human resource plans. My client businesses improved revenues, sales, and profits. I am grateful for those who read this blog over the past 18 months. I also wish to announce that this will be my last post for Larry on Business.

Decide What to Do and What to Stop Doing

Business owners should focus their businesses on what they do extremely well. Authors proclaim “Stick to the knitting”. Jim Collins researched that great companies develop and adhere to hedgehog. To find that one thing your business does better than anyone else, and do it over and over and over.

He also encouraged businesses to stop doing things they may do well. They needed to avoid things that distract distract them from their core skills and business. Eliminating efforts on good things allows business owners to focus on better things.

For that reason, I will no longer post about business growth. Others enjoy better competence and thoughts.

Join Me to Learn How to Get Scholarship Money for College

I will replace Larry on Business with a new blog www.LarryonScholarships.blogspot.com. I will post the new blog on Tuesdays, Thursdays, and Saturdays.

LarryonScholarships will focus on five steps to help youth, their parents, and other adults who want to get money to pay for college—money they don’t have to pay back (though we will also deal with loans a little bit):

• Set a goal for how much you want and believe they want to reward you
• Find sources of scholarships, grants, and other financial aid
• Prepare master applications so you can complete applications in less than 60 minutes
• Write reusable essays to submit with applications
• Obtain impressive letters of recommendation that verify your accomplishments

Tuesday, January 1, we begin our new blog www.LarryonScholarships.blogspot.com

Set Goals that Will Grow Your Business Next Year

Each year people, including business owners, set resolutions (I prefer goals) to grow

People set New Year’s Resolutions. Businesses set projections, targets, objectives, or goals. Unfortunately, resolutions frequently become the but of jokes because few last until March. Stock prices rise and fall based on large corporations meeting their projections or not. The consequences for smaller companies fall short of stock fluctuations. It impacts revenues and profits. It reduces money the business owner get to take home to provide for their family.

Typical Goals Businesses Set

Each business and each industry set unique goals. However, several goals remain common to almost all businesses and industries. These common goals include:

• Increase profits to $XX
• Increase revenues by $XX
• Increase sales by XX%
• Improve productivity by XX%
• Improve your current product or service
• Research and develop a new product or service
• Improve efficiency in production by XX%
• Increase accounting accuracy and efficiency by XX%
• Reduce overhead by $XX
• Add or reduce the number of employees
• and others

I realize that many of these goals seem obvious as you read them. However, I’ve talked to thousands of business owners that failed to consider, let alone set, many of these goals. Goals inspire us to grow and to improve.

Set SMART Goals

People generally subscribe to two thoughts on setting goals:

• Set aggressive goals that you may not achieve, but will cause you to do more than you might have done
• Set goals you know you can achieve because the consequences of failure overshadows improvements short of the projections

I promote the first option if failure to achieve goals will not affect your psyche or stock price. I find I achieve more when I set a goal that will stretch my efforts. I accomplish more by trying. The old saying “Aim for the stars and hit the moon” represents the first thought.

On the other hand, publically traded companies and others must use the second option. Plummeting stock prices devalue the company when you don’t meet projected earnings.

Saturday we will announce the end of the Larry on Business blog posts

Merry Christmas! Look Beyond the Season’s Shopping and Business

Merry Christmas to business owners, employees, and clients. May Christ’s peace be yours

Today, we celebrate the birth of Jesus Christ in Bethlehem. Magi came from the East to honor the King of Kings they saw in the stars. Following a new, bright star, they came to the City of David to see the child. They bestowed gifts upon the new king of gold, frankincense, and myrrh. Their generosity affiliated gift giving with Christmas to this day. Unfortunately, the commerce of gift giving has overtaken the original intent of the Magi’s presents to the King of Kings.

Christmas Not Commercialism

During the Great Depression families bereft of cash and money made their own Christmas gifts. Since that time consumerism combined with commercialism changed the tradition of gift giving. Today, we concentrate on finding the best, most unique gift. Black Friday and Cyber Monday replaced Christmas Eve and Christmas Day as the most important days of the year.

“City sidewalks [are still] busy sidewalks, dressed in holiday style.” However, I doubt that “above all the bustle, [we] hear Silver Bells.” Too many people fail to even try to listen to them. They focus on the deal or discount they can find. They forget that giving honored the King of Kings.

True Purpose of Gift Giving

Gift giving honors those we love. We honor our children, our parents, our extended families, and our neighbors. The Magi loved the King. They gave very expensive gifts. The costs of the gift were not relevant. The depth of their love and adoration mattered more. The gifts we give matter little. The depth of our love and charity (the pure of love of Christ) matter most.

Christmas is a time to receive the greatest gift—the atonement of Jesus Christ. “For what doth it profit a man if a gift is bestowed upon him, and he receive not the gift? Behold, he rejoices not in that which is given unto him, neither rejoices in him who is the giver of the gift.”

Thursday we discuss specific goals you set to grow your business during the new year

Successful Business Operations 3: Client Relationships Grow Business

This continues our series on successful business operations and how the grew the business

Jared and Sarah Stewart teach “People do business with people they know, like, and trust.” They also share that “Every opportunity has its root in a relationship.” Their counsel resonates with me. I believe it resonates with you. I know thousands of business people who accept and act to build relationships. Let me share another example.

Built the Business on Relationships

Lance Black and Jarid Love founded Eli Kirk to help clients connect more effectively with their targeted market. Their services include strategy, design, and development. They develop mobile apps, software development, media, branding, web, and other services.

Their web site proclaims “We Love Better. Loving better means loving strategy. Our purpose in every engagement is to help clients communicate as effectively as possible while achieving maximum ROI—but that doesn’t happen by accident. It happens through well planned, thoughtfully conceived strategy. An oft-quoted New York department store executive once said, “I know I waste half the money I spend on advertising. The problem is, I don’t know which half. Our response? Hogwash.”

Notice they speak in relationship terms like loving and engagement. Their clients includes Mitt Romney, Donny Osmond, Landesk, and Novell.

Give Back to Your Clients and Friends

Eli Kirk believes that giving back to clients, friends, and others is good business. They provide volunteer work to civic, non-profit, and other worthy causes. Lance, Jarid, and many of their staff serve on community boards of directors. They contribute financially and in-kind to the community.

Another example of giving back to the community includes their annual Slash Bash. For the past five years they host more than 500 people and their families to the Slash Bash the day after Halloween. They provide free doughnuts, apple juice, and gifts. They offer activities like paint gunning pumpkins, slashing pumpkins with samurai swords and machetes, and dropping pumpkins 80 feet from a crane box.

Every opportunity has its root in a relationship.

Tuesday we discuss how Randy & Kelli built their carpet cleaning business by great service

Successful Business Operations 2: She Grew a Successful Craft Business

This continues our series on people who grew small family businesses into thriving ones

Many people start businesses because they have a good idea. Others start businesses out of desperation. Some start their business with grand ideas of amazing profits. Many people, however, start a business to add a small income to support their families. For a few, their business grows unexpectedly into a fantastic revenue generating machine.

Creative, Organized, and Active

I will call this owner Mandy, since she has not chosen to make her name public. Mandy grew up in a very creative family. Her father, who died recently, loved music, creative farming, and fixing things. Her mother enjoyed creating things with her daughters. Mandy carried on the tradition. She decorated her home with stenciled wall coverings, hand painted clocks, toll painting, and more.

Soon, she and another sister blogged Simply Home and Family. They shared recipes for sugar cookies, ideas for cute hair ribbons and braids, and place’s to take the family. They showed beautiful pictures on their site. While Mandy and her sister intended to show people how to do it themselves, many people wanted to buy the crafts she displayed.

Web Tools Extend Everyone’s Reach

On June 15, 2009 Mandy joined Etsy as Abbie’s House. She described her purpose on her about page “At Abbie's House, we are working to create great products that will help organize your home and family life. We offer high quality, durable, and helpful products to busy families. We would love to hear your questions. comments and ideas. Thanks for stopping by.”

Etsy allowed Mandy to expand and reach a much larger audience of millions. People loved her child’s measuring board, her personalized family money, and her magnetic chore charts. Sales increased exponentially. Mandy’s daughters helped her, around the kitchen table, manufacture each product, hand painting, gluing, and more.

Recently, sales expanded so much that Mandy and her family started a much larger home with a manufacturing workroom for the expanded business. She’s another success.

Saturday we will share how Lance and Jarid helped Donny Osmond, Mitt Romney, & others

Successful Business Operation 1: She Turned a Family Business into Success

This begins a short series on family business operations that led to successes

Women start a lot of businesses. Many start a business so they can stay home with their children while adding to the family income. Many create good companies because they possess entrepreneurial interests and inclinations. Women starting their own businesses avoid the glass ceiling that some of their sisters encounter in a more traditional workplace.

Start with Something You Love

Alison Chuntz started Alison’s Pantry in 1987. She loved fine food. She saw a business opportunity providing families with good restaurant quality food they could prepare themselves at affordable prices.

“Alison's Pantry is a wonderful, local company that truly cares about their customers.  Alison Chuntz works closely with her sons, Joshua and Jesse Kissee.  Their efforts are to offer you the finest tasting products on the market at the most affordable price.  This is a company that sincerely enjoys helping you save money.”

Established in 1987, Alison's Pantry™ began distributing food products from a small building in Pleasant Grove Utah, to many of the rural Southern Utah communities.  Our company grew rapidly and we soon expanded our service to rural farming towns in the Rocky Mountain states.  In 1994 we built a large warehouse just off State Street to house our growing business.  We began delivering from a pick up truck and trailer in the early years of our company; we graduated to two beautiful, modern semis in the mid 90's.  Our facility is 23,000 square feet and houses all our food products until shipped out fresh to your home.”

Recognized Similar Needs in Others

Alison recognized that other women also loved fine food and needed additional money. So, she decided to distribute her great food through a network of sales representatives in rural communities. They sold the product in a variety of methods from parties, door-to-door, referral and more. Alison resisted setting up down-lines like in multi-level marketing preferring to keep her sales representatives part of a family.

Alison successfully sells food in 6 states.

Thursday we will share another family business operation that grew exponentially

Business Failure 15: Solutions That May Help You Avoid Failure

This concludes our series on reasons for business failures

Businesses fail for a variety of reasons. In the pervious posts we discussed several reasons. While many of the causes for business failure rely on the economy or other causes out of your control, you can prevent most of the causes we discussed with a good (yet flexible) business plan, a mastermind team, and visits to public or private consultants. 

A Good Business Plan

Most business owners prepare a business plan for banks or investors to get money. One very successful owner prepared and operated from his business plan. He believed preparing everything on paper before he spent a dollar helped build his business. His plan was dirty, dog-eared, and marked up because he referred to it almost every day.

Preparing and using a business plan  forces you to consider and contemplate your:

• Business idea, uniqueness, management team, and other people assets
• Market analysis, competition, client profile, and product schematics
• Marketing plan including market research, marketing message, strategy, campaigns, methods, vehicles, sales, and client retention
• Financial plan including funding, financing, milestones, accounting, statement of accounts, general ledgers, accounts payables, and accounts receivables
• Purchasing plans, discounts, suppliers, vendors, and cost analysis

Mastermind Team

Mastermind teams work together to help one another achieve their goals:

• A mastermind team consists of 4-5 people who want to improve their lives.
• The team meets once a month for about 90 minutes
• Each team member
  • States their goal
  • Outlines the action they took with results
  • Asks for brainstorming ideas from the others with challenges or problems
  • Describes 2-4 actions they will take before the next meeting

 Public or Private Consultants

You can also avoid business failure through the advice of public or private consultants. You don’t have to pay a lot of money for public programs such as

• Small Business Development Centers (SBDC)
• Service Corps of Retired Executives (SCORE)
• Business Resource Centers (BRC)
• Centers for Entrepreneurship
• Manufacturing Enterprise Programs
• Business Incubators

Private business consulting firms also exist in your community or on-line. Find good ones for you.

Tuesday we begin a series containing stories about business operations

Business Failure 14: Refusal to Hear Bad News or Make Excuses

This continues our series outlining reasons businesses fail so that you can avoid failure

We mentioned denial as one of the human follies. Refusal to hear bad news or make excuses goes deeper. Some businesses or industries react to bad news by sticking their metaphorical head in the sand. Others rationalize bad news with excuses casting the blame for their own decisions on other people or circumstances they perceived as out of their control.

Refusal to Hear Bad News

Bad news comes from all sources and about all facets of your business:

• Equipment and facilities break down and need repair
• Suppliers inform you of their bankruptcy or major price hike
• Your biggest client cancels a major order or tells you their sales dropped by 80%
• You find your best employee has been embezzling from you for years

Ignoring the news will close your business. Acting on it may save it.

Make Excuses and Blame Circumstances

Forbes published a story about business failures. The article said “Refusal to hear bad news immediately.  Great companies don’t make excuses, including excuses about how they didn’t do well because the economy was against them or prices were not good.”

We have been inundated the last four years with business owners who never had trouble with their business for 10-15 years. They also never developed a business plan or learned how to market. Instead of recognizing their own failures, they blamed the economy. They blamed the big national stores that moved into the neighborhood. They blamed the big plant, who was their only client, that closed.

The key is not that the bad things happened. Nor is it that the bad things affected their business. What matters is what the business owners did about it.

• One answer, complain and blame it on the business environment. This answer does nothing to solve the problem or save the business.
• Another answer, accept what happened and plan a way to adapt, resolve, or solve the problem. This allows you to move forward and possibly save the business.

Saturday we will conclude and summarize our series on business failure

Business Failure 13: The Familiar Stuff of Human Folly

This continues our series outlining reasons businesses fail so that you can avoid failure

Business owners are human. They are not perfect. They don’t possess super hero powers. Sometimes they make mistakes or suffer from common human frailties and follies. Frequently, these human errors can result in problems with the business. These errors can result in business failure. They may lead you to invest in product lines that will not give a good return on investment. They may cause you to ignore good advice from others. You may chase a dream that cannot deliver results.

Familiar Stuff of Human Folly

First, let’s examine what might be considered the familiar stuff o human folly:

• Denial: I coached business owners who denied all the good advice they received. They denied clear evidence that their business idea lacked sufficient earning power. Others denied poor sales figures and lack of client response and continued pouring money into poor quality products.
• Hubris: The dictionary defines hubris as “excessive pride or self-confidence; arrogance” It can lead you to proceed on the assumption you can do no wrong.
• Ego: Your ego may prevent you from seeing mistakes or challenges arising in your business. Conceit can taint your perception of things.
• Wishful thinking: I’ve seen businesses fail because the owner’s wishful thinking caused him or her to chase fanciful or ill-conceived products, advertising, or plans.
• Poor communication: Owners may miscommunicate product guarantees or miscommunicate instructions to employees that result in costly errors or lawsuits.
• Lax oversight: Running your business may dull you to employee theft, overcharging from vendors, and corporate information hacking.
• Greed: Taking money out of the business that you should reinvest can ruin your business. Raising prices to satisfy your greed can lose your clients. So can paying wages so low that you can’t keep good employees.
• Deceit: You lose trust with your employees, clients, or suppliers when you cheat or lie to them. I mentioned earlier a dishonest boss who lost his business because of his deceit.

Learn from these follies.

Thursday we discuss how refusal to hear bad news immediately can affect your business

Business Failure 12: Toxic or Rotten Corporate Culture

This continues our series exploring reasons business fail so you can save your business

A lot of businesses fail because of a rotten corporate culture. Sometimes the culture’s rot stems from underhanded dealings with others. Rotten cultures can come from vindictive even intimidating owners. Some rotten cultures fester when owners and executives cover up secrets, illegal acts, or unethical behavior. Maintaining a rotten culture requires a lot of work and resources that divert resources from success. Eventually toxic cultures erode and destroy the company.

My Personal Story

My first full-time job after graduating from college was with a company with a rotten corporate culture. The rot began with the owner. He kept  copy of the book Winning Through Intimidation on his desk—facing those who sat across from him. He had cut 1/4 of an inch off of the front legs of the chairs facing his desk to keep people off balance when they met with him.

His dishonesty permeated the business. He falsified performance numbers which determined bonuses for his employees. He would call the office every morning at 8am and again at 5pm for no reason other than to verify people were at their desks. Yet, he would lie about where he was and what he was doing.

He pitted employees against one another. For example, he came to me and told me the branch manager was incompetent and he needed me to step up and exert more control in the office. At the same time, and unknown to me, he told the branch manager that I was too uppity and that she needed to put me in my place and manage me better. Then, he waited to see who won. He did the same thing with 3 employees when I became manager.

Examine Your Corporate Culture

Determine any rotten or toxic habits in your corporate culture. Counter them with positive principles, values, and mission statement. Create situations in the company to enhance and internalize those positive values and virtues. Practice them. Live them.

Tuesday we will explore how the familiar stuff of human folly can destroy your business

Business Failure 11: Greed & Make Money for the Money’s Sake

This offers another insight into why businesses fail so that you can avoid them

Charges of CEO and business owner greed ricochet around our media sources. Headlines decry “Greedy CEO’s eat away at our economy”, “Greedy Hostess Executives will fill their own stockings with bonuses” and “It pays to be a greedy CEO and screw over your workers”. However, you probably are not one of those $12M executives. Nevertheless owner greed or zest for making money for money’s sake can still doom your business.

Getting Greedy & Focusing on Money Hurts Your Business

Businesses your size depend on good relations to succeed. You build relationships with clients, vendors, suppliers, and your staff. Relationships suffer when money becomes your focus. Greed distorts your perceptions and thoughts. When greed and money becomes your focus you may tend to

• Pressure vendors and suppliers to cut costs, provide shoddy materials, & then delay paying them
• Provide products that lack quality, while charging higher margins than they deserve
• Pay penurious wages to your employees, outsource, and deplete morale and loyalty
• Cut moral and ethical corners to get more money
• Lose sight of why you started the business in the first place
• Neglect your family to spend more time working when you don’t need more money

You may fall prey to any or all of these problems if you allow greed or making money for money’s sake to enter your life.

How to Avoid Greed & Making Money Your Prime Motive

You may take several steps to avoid feelings of greed or money:

• Change your view of the world from one of scarcity to an abundance mentality
• Identify a good charity or cause and donate money to those worse off
• Stay close to your staff, family, clients, and vendors so that you see them as people
• Know when to reduce your drive for money, create a team to help stay on target
• Keep your money low key and avoid ostentatious symbols of wealth
• Read scripture and good books that will help you focus

Saturday we will highlight how a rotten company culture leads businesses to fail

Business Failure 10: Solutions to Lack of Cash or Overextended Cash

This continues our series analyzing why businesses fail, how to avoid business failure

While your business may experience cash flow or cash strapped problems occasionally, persistent cash problems represent serious problems with your business plan or implementation. Fortunately, several solutions exist to resolve the problems. Unfortunately, many business owners resist many solutions. 

Possible Solutions

Business Know How provides several possible solutions:

• 12 ways to get startup funds
• Avoid being ripped off by business loans scams
• 5 Steps to grow beyond the $5 million mark
• 39 cost-cutting tips for your small business
• Should your purchase or lease business equipment?
• Get loan with the bank that turned you down
• and many more tips and suggestions

Crowdfunding

Alan Hall shared 5 Ways of Funding a Business: How to Get Your Peace of the Pie for Forbes.com. He lists Crowdfunding as the 3rd most effective way to fund your business (right after personal funding and family and friends). Crowdfunding represents a relatively new way (the term first appeared in 2006 from Michael Sullivan) of raising capital.

My daughter used Crowdfunding to obtain special supplies for her public school district pre-school class for autistic children. She wanted to buy special equipment for her class and needed about $2,000 to do so. She posted her project on a Crowdfunding web site. People go to these websites and commit so much money. She raised all $2,000 within 24 hours.

Currently Crowdfunding for businesses reminds me of the wild west—out of control. The JOBS Act which President Obama signed into law on April 5, 2012 established a timeline for the Securities and Exchange Commission to clarify guidelines for business Crowdfunding. Currently, some serious benefits and drawbacks exist. Explore the pros and cons before listing your project. Don’t rely on Google to help you. The first 8 pages of my search for pros and cons only listed paid ads.

If you want to know more, several sites offer this unique source of funding. Check them out, but use caution.

• GoFundMe.com
• Crowdfunding Professional Association
• GoBIGnetwork.com

Thursday we examine how undisciplined greed & money for money’s sake leads to failure

Business Failure 9: Lack of Cash or Overextended Cash

This continues our series outlining reasons businesses fail so you can avoid them

Running out of cash may define business failure, as in “We’re out of money, so we’re going to close the doors”. In this post, however, we’re going to discuss how poor funding or mismanaged financing contributes to business failures. Many businesses begin with too little money and never overcome that hazard. Others possess enough money for well planned growth, but cannot support reckless overextension and growth.

Problems for Underfunded Startups

Studies indicate that most companies begin with too little cash. Startups receive their initial funding from any one of prime sources:

• Income from a full-time or part-time job
• Personal funds
• Family funds
• Credit cards
• Collateral based personal loans (including second mortgages)
• Small Business Administration guaranteed loan
• A wish and a prayer

Frequently business owners start their businesses knowing they have less money than they should, but hoping it is enough. Actual startup expenses regularly exceed anticipated budgets. Starting with less money than you forecasted, coupled with actual spending exceeding forecasted, quickly closes many new business.

Other business owners keep pouring additional money into their business in a desperate attempt to recoup earlier losses or resuscitate a struggling startup. The additional funds trickle in from other income, family, or other sources—too small to alleviate the problem—just big enough to keep the business going.

Overextending Finances

In addition, to starting with insufficient cash, you may overextend the cash you possess. Overextending means that you decide to do more in your business than your cash can support. Common actions that may overextend your cash include when you:

• Commit to a lease on office space you really don’t need
• Sell more product than you can produce or purchase with the money you have
• Open too many stores or locations in a gamble they all will succeed
• Hire too many employees (especially for seasonal or cyclical times, but keep them on afterward)
• Advertise through expensive and less productive methods
• Begin production on your idea, with expensive prototypes, with little feedback

Tuesday we discuss solutions to lack of cash or overextending your cash

Business Failure 8: Another Word About the Closure of Hostess Bakery

I was vacationing at Disney World when they announced the closure of Hostess. I wanted to add my own insights and lessons we can learn.

Many people remain shocked that the makers of Twinkies, Ding-Dongs, and Hostess Cupcakes closed their doors. They cannot believe that an American icon would fail. The signs indicating potential failure, however, glared like a freeway billboard directing you to the right off ramp.

Failure to Keep Your Product Niche

Hostess produced snack food. Most adults remember sucking the cream out of Twinkies or peeling the marshmallow covering off of a Hostess Snowball. Millions of consumers unwound their Ding-Dongs. Hostess maintained a loyal following—through the 60 and 80s.

Upon reflection, however, you will have noticed that Hostess had lost its product market niche in the last 15 years.

• Hostess failed to answer a growing demand for healthy or natural snacks
• Little Debbie, an upstart company that did not start selling packaged snacks until the 1960s, began taking shelf space. Soon Little Debbie displays took valued front of store end racks, leaving Hostess relegated to end racks at the back of the store
• Hostess relied on their old brand names with few new brands in the last 20 years
• Hostess purchased scores of companies in the 1970-1990s, yet failed to keep markets

Bewildering Ricochet Changes

Hostess experienced poor management, constant changes in leadership, and financial upheavals. The company could not sustain a workable business strategy. They:

• First filed bankruptcy in 2004 and named a new chief executive
• Stock prices fell from $34 $2.05 a to share
• Fought off a hostile takeover bid from Mexican baked good giant Grupo Bimbo
• Emerged from the bankruptcy in 2009 because a group of investors took them private
• Filed for bankruptcy a second time in 2011.
• Changed company names five times in one decade
• Stopped paying future pension benefits, breaking its contract with the union
•  Bakery, Confectionery, Tobacco Workers and Grain Miller’s International Union resulting in a strike by the union
• Filed for closure on November 21, 2012

Thursday we will also discuss other ways companies run out of cash and fail

Thank Your Employees, Your Clients, Your Suppliers, Your Family, & Your God

Take time this weekend to give thanks to all who help your business survive and thrive

We at the Larry Stevenson Group thank you for reading and commenting on our thoughts

Business Failure 7: Adapt to Change Too Slowly

This continues our series outlining reasons businesses fail so that you can avoid them

An increasing number of business fail because they do not adapt to change fast enough. New technologies and global markets generate rapid changes in products, markets, and consumer expectations. Businesses must adapt and do it quickly to survive. Owners need to stay aware of new demands and trends.

Examples of Failures

Let me share examples of businesses that failed to adapt appropriately:

• Hostess Bakery announced closure rather than survive its 3rd bankruptcy because it did not offer healthier snacks and lost its market to Little Debbie
• Sears, the innovator of catalogue and credit card sales, failed to adapt to discount and big box retailers like Wal-Mart, Target, and Costco. Sears continues to close stores
• Borders failed to adapt to eBooks and online booksellers: closed all its stores
• Pan American Airlines incurred too much overhead and did not adapt to discount airlines and failed
• Circuit City did not adapt to online sales, big box electronics at Costco, and retailers like Best Buy. Circuit City (one of Jim Collins best companies) failed in 2009

Examples of Successes That Adapted

In addition, you may follow several examples of companies that adapted, survived, and thrived:

• Apple adapted and reinvented itself several times: Mac, IMac, IBook, IPod, IPhone, and IPad. Each time expanding its market share
• Dominos Pizza recently completely adapted it's pizza sauce to reengage consumer’s who claimed their pizza “tasted like cardboard”
• IBM after almost completely failing at the beginning of the century adapted to a service model that did not include manufacturing computers a complete transformation
• Hyundai and Kia adapted the style, type, and class of car they manufactured to begin to rival Honda and Toyota for their market

The Innovator’s Dilemma

Clayton Christensen describes the challenge businesses face in The Innovator’s Dilemma, The Innovator’s DNA, and other books. He shows that the success of a business may initiate its inability to open new products and services. He describes five principles you must consider. I suggest you purchase and read it.

Thursday we wish you a Happy Thanksgiving

Business Failure 6: Prolonged Successes Can Dull Decisions

This continues our series on factors that can cause your business to fail

You may consider that too much success can lead to business failure paradoxical. However, many businesses fail because of prolonged success. I consult with a lot of businesses each month. Many existed for 14 years or longer. They did well during the great economies during those same years. However, most had not developed a business or marketing plan. Their success had lulled them into a sense of security, which proved unsustainable when tough times came.

Reasons Too Much Success Dulls Decisions

Business owners crave success. They do everything they can to increase profits, revenues, and sales. They do not realize that too much success may lead to poor decisions. The success affects decision making for different reasons. Too much success may:

• Increase your confidence so that you assume you will always be right and do not analyze as deeply as you should
• Overwhelm your time management so that you do not have time to do sufficient research or study for decision making
• Create new product or seasonal cycles that make previous decisions inaccurate
• Move you into a market position that makes you the target for competitors that previously ignored your business
• Mistakes and small failures teach you new skills and problem-solving that you don’t learn with too much success
• Lock you into a strategy that does not adapt to changing markets (the success of Kodak film prevented them from foreseeing digital photography and inkjet printers)
• Prevent you from looking deeper into the unseen or hidden reasons for the success

How to Avoid Losing Perspective

You can avoid losing perspective or dulling your decision-making process by several methods:

• Analyze your processes and results for success as well as problems and failures
• Conduct an annual SWOT analysis using outside sources as well as inside sources
• Regularly read articles about new trends, inventions, and products in your industry
• Listen to your clients, your employees, and your competitors wisely
• Get outside advice during good and bad times

Tuesday we discuss what happens when your company adapts to change too slowly

Business Failure 5: Too Close to the Edge or Too Much Risk

This continues our series on reasons businesses may fail and how to avoid them

People hear that businesses fail because they overextend themselves. Frequently, the overextension relates to the business owner taking their business too close to the edge or too risky. Sometimes, business owners succumb to the temptation of high profits or high return on investment which pushes them to take their business to the edge or to take risks with the promise of high profits or high revenues.

Some Take it Too Close to the Edge or Make It Too Risky

Why do business owners take the business too close to the edge of the cliff? What would induce a business owner to put their business at risk?  Answers vary:

• Sometimes the higher the risk, the higher the possible profit or return on investment
• Many times the business owners keep extending their financial burden in hopes that it will eventually pay off until they suddenly find themselves at the edge or even over the edge financially
• Frequently, the same sense of adventure or risk that enthuses an entrepreneur drives them to take unacceptable risks or push their companies to the edge
• Occasionally, the business owner, a technician, does not possess the financial or managerial skills to realize the risk or how certain decisions will send them over the edge

Whether the business owner does it on purpose or in ignorance, taking too many risks or getting too close to the edge can cause business failure. Occasionally, however, the risk pays huge financial rewards.

Avoid Too Much Risk or Taking it Too Close to the Edge

You can avoid too much risk or going too far with some discretion:

• Establish clear guidelines for how much risk or how close to the edge you will go before you act
• Create a secondary safety net to guide how to react when you reach your guideline
• Act with a partner or professional financial consultant to advise you about when you get too close to the edge or too risky

Saturday we discuss how too much success may dull your decision making process

Business Failure 4: Subordinates Hold or You Have Inaccurate Information

This continues our series on situations that can cause your business to fail

Businesses run on information. Market information defines clients, competition, and market opportunities. Information about overhead, supplies, and costs establish the minimum you can price your product or service. Employee information clarifies what you can expect employees to do, how to act, and how much you can rely on them. You make poor decisions if your information is inaccurate, or your staff holds information back from you or gives you false information.

Subordinates May Hold Back Information

As your business grows, you begin to rely more heavily on your staff or subordinates for information.

• Your accounting clerk relays daily revenues, accounts payables and receivables
• Your sales clerk and point of purchase systems provide daily sales information, cash received, and cash given
• You rely on your shipping clerk or inventory control system to tell you how much product you have on hand
• Your suppliers or vendors maintain information about competitive pricing and discounts

What if the people you rely on for information withhold it or give you false information? Many reasons could influence the information you received:

• The person preparing the information is incompetent and inaccurate
• They receive wrong information from their sources and don’t verify it
• They have an overriding reason to withhold information i.e. loyalty to others, cover a mistake
• They don’t understand the information you really want and inadvertently give you the wrong data
• You offended or embarrassed them and they want revenge or payback

All of these reasons, and more, can result in your subordinates holding back or giving you inaccurate information

You Have Inaccurate Information

You may also receive false or inaccurate information for other reasons:

• We increasingly rely on automated information for monitoring or decision-making purposes. What if a key formula in a spreadsheet or database is improperly entered? It can give you inaccurate information and you would not know it.
• We Google questionable information sources

Bad decisions based on inaccurate data can ruin your business

Thursday we review how living too close to the edge or loading too much risk causes failure

Business Failure 3: Rationalizing Rather than Confronting Brutal Facts

This continues our series on situations that cause business failures so you can avoid them

Every business possesses flaws, weaknesses, and problems. Sometimes the business itself generates the problems. Sometimes situations or circumstances outside the business create the flaws or weaknesses. Jim Collins describes one of the characteristics of great companies. He labeled one characteristic: Confront the Brutal Facts. Ignoring or rationalizing them may cause your business to fail.

Rationalize or Ignore the Brutal Facts

Avoiding confrontation feels like the easier thing to do. Several brutal facts arise in a business:

• Tough personnel or interpersonal problems in your team
• Low performance and productivity
• Low sales month after month
• Cash flow or financial woes hamper growth or stress your family income. All of these brutal facts pile up on business owners
• A national big box store moved across town from your neighborhood hardware store
• Your profit & loss statement for the last three months showed consistent losses
• You & your business partner see very different visions for the company’s future

You choose how to respond to the brutal facts about your business. You may choose to ignore them and hope they disappear with time. However, consequences follow rationalizing and ignoring:

• Personnel issues grow & fester when ignored or rationalized that they will disappear
• Ignoring poor performance and low productivity will drive your business into failure
• Using excuses to justify low sales, cash flow, or financial woes prevents you from confronting and finding solutions to improve them
• Failure to confront a big box store or consistent losses could cost you your business

Confront the Brutal Facts

Business owners who confront the brutal facts resolve them and grow their business. Your success will increase exponentially when you involve others to confront the brutal facts of your business. Various methods will help you:

• Study and research data related to the facts you need to confront
• Brainstorm ideas with your team, mentors, SCORE coaches, or others
• Consult with free or paid business consultants specializing in your problem
• Plan actions to resolve problems

Tuesday we will consider how managers may have faulty information to make decisions

Business Failure 2: Managerial Error

This continues our series on reasons businesses fail so you can avoid them in your business

According to Forbes article Why Do Companies Fail?, managerial error leads as the number one reason companies fail. Michael Gerber, the author of The E-Myth Revisited, highlights that most “entrepreneurs are technicians having a spasm of entrepreneurship.” He describes the designers, plumbers, programmers, or inventors who start businesses because they love what they do. However, they may not manage well. They focus on doing the work, rather than moving it forward.

Typical Managerial Errors

Examples of management errors:

• Continuing to do the work, when you should manage others doing the work
• Neglected and poorly managed risk management contributes to employee dishonesty and theft alone causes 30% of all business failures
• Focus on the technical work and not the sales, marketing, billing, or accounting
• Spending more money than you possess or can earn in enough time
• Failure to adapt to changing market conditions
• Growing too fast financially, or hiring too many employees
• Renting facilities too soon, too large, or in the wrong location
• Lack of technical know-how, managerial know-how, or vision

Avoiding Managerial Error

You can avoid management errors through several methods:

• Read or listen to great management books
• Attend management seminars or workshops
• Join the Chamber of Commerce or other business association
• Develop a mastermind team to give you feedback or brainstorm ideas
• Consult Small Business Development Centers or SCORE on key decisions
• Outsource accounting, sales, purchasing, or other skills you do not possess appropriately
• Agile, Lean, & Pivot before spending money

More Information

Check out these sites ideas about how to avoid common managerial mistakes:

• Lyve Alexis Pleshette shares 8 Deadly Mistakes of Small Businesses
• Starting Up Tips contains multiple articles that may help
• Gaebler outlines Family Business Mistakes
• Budget Tracker reviews Small Business Budgeting Mistakes (Are you making one?)
• Dummies.com published Recognizing (and Avoiding) Common Management Mistakes
• Goke Ilesanmi wrote 13 Fatal Errors Managers Make and how You Can Avoid Them
• MindTools provides 10 Common Leadership and Management Mistakes

Saturday we examine explaining away the brutal facts rather than confronting them

Business Failure 1: Overview

We begin exploring reasons businesses fail to inspire you to avoid the same problems

More businesses fail than succeed. Dunn & Bradstreet reports that census data shows that “69% of new firms with employees survive at least two years, 51% survive at least five years…Bureau of Labor Statistics shows that 49% of new businesses survive five years or more…34% of new businesses survive 10 years or more, and more than a quarter (26%) at least fifteen years after being started.”

Business Fail

The numbers above look good, but they still indicate a

• “49% fail rate in five years and 74% in fifteen”
• “More than 550,000 business opened in 2009, 660,000 closed in the same year”
• “In 2009, the Department of Commerce estimated that there were 27.5 million businesses in the United States”
• “Only, 18,000 of those businesses had more than 500 employees, the rest were considered small businesses”

Reasons Businesses Fail

Ken Makovsky wrote an article for Forbes Why Do Companies Fail? He offers the following reasons:

• “Most companies flounder for one simple reason: managerial error”
• “The key sign—the litmus test—is whether you begin to explain away the brutal facts rather than confront the brutal facts head on”
• “Sometimes CEIs don’t get the information they need to make informed decisions. Subordinates are afraid to tell them the truth”
• “Some companies simply live too close to the edge—loading up too much risk at once”
• “People are less likely to make optimal decisions after prolonged periods of success”
• “Companies (e.g. Polaroid and Xerox) are slow to confront the changing world around them”
• “Companies run out of cash”
• “Too often CEO’s succumb to an undisciplined lust for growth, accumulating assets for the sake of accumulating assets”
• “Rotten corporate culture. Arthur Andersen, Enron, and Salomon Brothers were all brought down (or nearly so) by rogue actions of a tiny few”
• “What undoes companies is the familiar stuff of human folly: denial, hubris, ego, wishful thinking, poor communication, lax oversight, greed and deceit”
• “Refusal to hear bad news immediately…don’t make excuses”

Thursday we will analyze business failures related to lack of management by a technician

Seasonal Marketing Campaigns 3: Cross-Promoting Seasonal Campaigns

This concludes our short series on seasonal marketing campaigns to boost your business

You can enhance your seasonal marketing campaigns with cross-promotions with other companies or products. A cross-promotion involves offering an item to clients who purchase your product. Most companies cross-promote with another company. Some large diversified companies offer cross-promotions from within their own subsidiaries.

Examples of Cross-Promotions

True cross-promotions offer a product or service free of charge for the purchase of your product. You may also exchange cross-promotions with the other business so that they promote your business or product. Cross-promotions may work especially well with seasonal promotions. For example:

• A photographer offers a free family meal at a local restaurant for mothers day portraits
• A car dealership offers a weekend stay at a hotel for Valentines with the purchase of a car
• A manufacturer offers a free trip to Hawaii for two through a local travel agent for winter purchases over $15,000
• A vacation resort offers free car rental for guests who book a week during the slow season
• A CPA firm offers a free will through a law firm for doing corporate or personal taxes for large amounts

Almost every business can find a possible cross-promotion if they think creatively. A few rules may help. Cross-promotions typically offer:

• A free item or gift certificate, not discounts or partial payments offers
• Items of equal value to your offer (a free meal for a set of four tires would be unequal, but if the restaurant offers 50 meals for the 25 sets of wheels it equalizes)
• A specific time period to both obtain and redeem the cross-promotion, typically within the season of the seasonal campaign

More Information

You may find additional information at these links:

• Marketing Solutions offers Successful Cross Marketing & Bartering Strategies for Salons & Day Spas
• Conwed Global Netting Solutions offers Enhance Produce shelf awareness
• QSR highlights Combating the Seasonal Swing
• Supermarket News states Cross Promotions Called Big Scorers for Seasonal Events
• Cooperative Grocer made cross-promotions part of Delightful Shopping

Tuesday we will share some reasons business fail so that you can learn from them

Seasonal Marketing Campaigns 2: Fulfill a Successful Seasonal Campaign

This continues our series on successful seasonal marketing campaigns for your business

Once you recognize your seasonal campaigns and needs, you need to prepare to fulfill your increased orders, sales, and deliveries. That means ordering more supplies and raw material. It also means either hiring additional staff or paying your current staff for overtime. Seasonal increases require planning and preparation.

Techniques to Plan for Seasonal Fulfillment

Some advice for fulfilling your seasonal purchasing, producing, and shipping:

• Forecast what you need
  • Analyze your orders, sales, & production for at least four years to forecast this year
  • Compare stats on competitive products, services, shippers, raw materials, & more
  • Consider any new products, new services, new marketing campaigns or sales efforts
• Increase capacity to
  • Notify suppliers, vendors, and shippers of projected increases
  • Many industries earn 40-80% of revenues during seasonal sales. They start stockpiling material and product throughout the year
  • Hire temporary employees from staffing services, monitor their performance. Hire the best to fill full-time openings throughout the year
  • Plan your shipping through drop shippers, commercial carriers, or others
  • Many companies now offer free shipping on seasonal activities and sales
• Test your digital sales and order systems
  • Online businesses need to ensure they have enough memory for Cyber Monday
  • Run tests on the user interface, payment processing, and auto-drop shipments before Cyber Monday

Surviving a Seasonal Businesses

Sarah Pierce at Entrepreneur offered the following advice to Surviving a Seasonal Business:

• Be financially disciplined
• Make the most of your peak season
• Maximize your time during the off-season
• Start a complementary seasonal business

More Information

You can find more information at the following:

• In Fifth Gear’s 3 Tips for Holiday Sales Forecasting
• Prospect Stream’s case study on HoneyBaked Ham Co.
• Marketing Savant’s Marketing Through the Seasons
• Fourth Source shares this for digital marketing Seasonal Marketing—using data and insight to create campaigns that work
• BDC Canada suggest Forecasting production for seasonal manufacturing
• PBS did a series on Seasonal Manufacturing
• eNotes’ excellent article Seasonal Businesses
• Monster’s article on Make Seasonal Hiring Easier and More Efficient

Join us Saturday to learn about cross-promoting your seasonal campaigns with others

Seasonal Marketing Campaigns 1: Recognize Seasonal Opportunities

This begins a series focusing on successful seasonal marketing campaigns

First, I love Christmas, not the Happy Holidays, by the celebration of Christ’s birth. I listen to Christmas Carols at times throughout the whole year, because they remind my of my Savior. Having said that, I do not like Happy Holiday displays in stores before Halloween. I do not like the fact that I cannot find a swim suit in department stores after May. I recognize the beauty of seasonal selling. I just think it spiraled out-of-control 15 years ago. I will focus, however, on recognizing and calendaring seasonal marketing campaigns for your business.

Identify Your Seasonal Opportunities

Your business will fluctuate depending on buying cycles. Every business does. Yet, many business owners fail to recognize the seasons of their business. Some seasons remain obvious.

• Professional photographers increase sales for Mother’s Day, June Weddings, High School graduations, Back-to-school, and Christmas.
• Candy stores sell well during Valentine’s day, Mother’s Day, Halloween, and Christmas. Their sales go down during the summer months from June-September.
• Sporting Good manufacturers increase production 3-4 months prior to winter sports, hunting seasons, water sports, and summer camping seasons.
• Sales and maintenance of heaters increase during Fall and Winter seasons. While sales and maintenance of Air Conditioners increase in Spring and Summer months.
• Sales for health spas and diet aids increase immediately after the Christmas holidays and before swim suit seasons
• Housing sales typically increase in the Spring and late Summer so family’s can move without disrupting school or because moving in snowy conditions is more difficult.

Other companies may be what I call counter seasons because their sales decrease in certain seasons because sales increase elsewhere. People spend their money on other purchases. The tough economic times, with associated money crunches, decrease how much people can spend.

More Information

Read the following blogs and articles to learn more:

• SCORE offers an entire series on Seasonal Sales
• Practical ecommerce shares Tips for a Successful Seasonal Marketing Campaign
• The Barefoot Executive published Seasonal Marketing for Online Business Owners

Thursday we continue our series by describing fulfilling successful seasonal campaigns

Recognize & Appreciate Employee Performance & Enhance Performance

This concludes our series on motivating your employees to perform better

Many business owners institute incentive programs that do not succeed. As we discussed earlier, factors related to generational, intrinsic, and extrinsic motivations affect how your employees will respond to incentives. Offer the wrong reward and you not only may not achieve your desired result, but destroy trust with that person. Selecting the right rewards and avoiding the pitfalls will improve your reward system.

The Carrot Principle

Adrian Gostick and Chester Elton wrote The Carrot Principle How the Best Managers Use Recognition to Engage Their People, Retain Talent, and Accelerate Performance. They outline how giving employees carrots (recognition and appreciation) motivates workers better than sticks—or worse neglect. They described the benefits and elements of recognition programs. They proved that recognition was key to transforming positive work experiences into a self-actualized workforce.

• At Carrots.com you can sign up for their free
• Esprit de Corps weekly team tips
• A Carrot a Week—52 fun recognition tips

O. C. Tanner

O. C. Tanner provides a wonderful web site for you to learn more about how to successfully appreciate employees. In addition to selling wonderful recognition items, they provide:

• Global Research
  • Towers Perrin research on Determining Worldwide Drivers of Employee Engagement and the Role Employee Recognition Plays in Contributing to It
  • Cicero Groups research on Optimizing Your Employee Recognition Program
• White papers
  • Optimizing Employee Recognition Programs
  • FIS: Aligned for Success
  • Pepsi Beverage Company: Bottling Engagement
  • Improving Staff Engagement: a practical toolkit
  • Papers delivered at Recognition Summits held from 2005-2011 
• Industry Resources
• The Relationship Between Employee Satisfaction and Hospital Patient Experiences published by the Forum for People Performance Management and Measurement
• Building a True Recognition Culture in the Workplace published by Scott Trumpbolt
• Employee Engagement Rooted in Managers Leadership Skills a study of 450 organizations conducted by the Aberdeen Group
• The Value and ROI of Employee Recognition a white paper from the Human Capital Institute (HCI)

O. C. Tanner and the people at Carrots.com can help you implement a great appreciation and recognition program within your business.

Tuesday we will share tips for seasonal marketing campaigns

Employees from Different Generations & Different Motivations

This continues our series on how to motivate your employees to better performance

Managing employees from different generations confuses and frustrates many business owners. A typical workplace may contain people from four different generations. The different generations have unique names, and unique personal and lifestyle characteristics. The following list will help you understand each generation’s outlook toward work, money, and motivation.

Veterans

• Born 1922-1945
• Influenced by the great depression and World War II
• Core Values: respect for authority, conformers, & discipline
• Traditional, nuclear families
• Considered education a dream
• Communicates one-on-one, writes memos, and used rotary phones
• Puts money away, pays cash for purchases
• No feedback “no news is good news”
• Seeks long-term jobs
• Motivated by loyalty

Baby boomers

• Born 1946-1964
• Influenced by the economic boom following WWII and the Vietnam War
• Core Values: optimism and involvement
• Disintegrating families
• Considered education a birthright
• Communicates with touch-tone phones and an attitude of call me anytime
• Buys now, pays later (high credit)
• Accepts annual or quarterly reviews
• Willing to stay at a job, but doesn’t want to be slaves to it
• Motivated by opportunities to shine, self-help books and tapes

Generation X

• Born 1965-1980
• Influenced by Space Shuttle explosion
• Core Values: skepticism, fun, informality
• Grew up as latch-key kids
• Considered education as a way to get there
• Communicates on cell phones, but asks that you only call them at work
• Extreme savers in a cautious and conservative manner
• Require frequent feedback because parents were encouraged to give praise
• See their job as a career step instead of a destination
• Motivated by flexibility, family-friendly environments, and relationships with colleagues

Generation Y (or Millennial)

• Born 1981-2000
• Influenced by 911 trade towers falling and dot com bust
• Core Values: realism, confidence, extreme fun, and socially motivated
• Grew up in merged families
• Considered education as an incredible expense
• Communicates via the Internet, picture phones, and email
• Earns money to spend it
• Requires more feedback than any generation to prepare for the next job
• Want immediate promotions
• Motivated by feedback, tools to perform, and time to play

Saturday we will review the various ways to reward your employees

Extrinsic and Intrinsic Motivators for Your Employees

This post explores how employees motivate themselves from within or outside themselves

I attended a national convention two weeks ago. During a problem solving session, two people at our table highlighted the same problem even though they were from different states. The problem: how to motivate employees. Motivating the workforce challenges many business owners. This post will examine motivations from within the employee and motivations outside the employee. The next post will examine motivational quirks unique to the five generations currently working in America.

People Motivate Themselves

Many studies indicate that managers, leaders, and others cannot motivate people. Studies emphasize that motivation must come from within. The University of Michigan wrote

“People who appear to be motivated in everything they do have just been successful in understanding how to motivate themselves in a variety of settings and tasks.  Two things contribute to your motivation for any task: what you expect from yourself and what value you place on achieving a goal.  The key to motivation is understanding that you have the power to change both your expectations of yourself and the value placed on a task.”

People respond to intrinsic and extrinsic motivation. Intrinsic motivation comes from values and ideals within you: helping people, changing the world, and making a difference. Extrinsic motivation comes from outside: more money, vacations and trips, praise and awards from others.

Carter McNamara wrote an article on Understanding Motivation. He lists several links to other articles. You may also enjoy Steve Chandler’s book 100 Ways to Motivate Others.

Additional Scholarly Research

You may want to read some of the articles listed below:

• Mark R. Lepper, Sheena Sethi, Dania Dialdin, and Michael Drake wrote Intrinsic and extrinsic motivation: A developmental perspective
• Brent D. Russo, Kathryn H. Dekas, and Amy Wrzesniewski authored On the Meaning of Work: A theoretical integration and review
• James L. Perry published Introduction to the Symposium on Public Service Motivation Research
• Adam M. Grant researched Does Intrinsic Motivation Fuel the Prosocial Fire? Motivational Synergy in Predicting Persistence, Performance, and Productivity

Thursday we analyze what motivates Baby Boomers, Gen X, Gen Y, and Millennials

Using Subjective Criteria and Opinions in Measuring Performance

This continues our series analyzing how to measure business and employee performance

“Not everything that counts can be counted. And not everything that can be counted counts.” Albert Einstein

Previous posts discussed how to measure performance metrics, scorecards, benchmarks, and indicators. We shared the benefits and how to create them. This post will share additional opinions about adding subjective opinions to your performance evaluation process.

The Myth of Performance Metrics

Dick Grote outlines The Myth of Performance Metrics in The Harvard Business Review Blog. He calls the concept of measurable, objective assessments that require quantifiable metrics a myth. He defines a performance appraisal as "a formal record of a manager’s opinion of the quality of an employee’s work.”

He presents several points:

• “Your opinions, feelings, and judgments are what the appraisal process demands”
• “Managers must make judgments even when—or particularly when—all of the facts are not available”
• “Insisting that there must be quantifiable metrics can lead us astray in accurately evaluating performance”
• “Despite the myth that objectivity requires metrics, people generally want to know their supervisor’s opinion of their performance. They want honest answers to their most important questions”
• “Don’t get hung up trying to find quantitative metrics to support every judgment in a performance appraisal”

Neil Kokemuller added in What Is a Subjective Performance Evaluation? “A subjective performance evaluation typically relates to intangible employee qualities and is based on subjective feedback from the manager as opposed to objective, measurable feedback. Use of subjective evaluation criteria can offer employees a better overall picture of their performance, but overuse of subjective criteria does pose some risks.”

Berating Employees About Negative Aspects of Performance

Arnold Anderson published Myths About Performance Evaluation for The Chronicle of Houston. He said “employees sometimes see the annual performance evaluation as a way for management to berate them about the negative aspects of their performance.”

He lists the following myths:

• “Appraisals are not important”—they are
• “Performance appraisals are manager-employee only”—others help
• “Your appraisal determines your raise”—predetermined budgets do
• “Employee input is not considered”—employees’ views matter

Tuesday we will discuss using intrinsic and extrinsic motivation with your employees

Center for Management & Organization Effectiveness

This continues a series of posts dealing with measuring the performance in your business

The Center for Management & Organization Effectiveness (CMOE) provides another resource you can use to research how to improve the business. The center includes experts from around the world who specialize on managing more effectively.”

Scoring Employee Performance

Dr. Richard Williams wrote an article for the Center for Management & Organization Effectiveness titled Scoring Employee Performance is Better Than the Annual Performance Appraisal. He wrote:

“When performance is measured, performance improves; when performance is measured and reported back, the rate of improvement accelerates.” –Thomas S. Monson

While working in the publishing industry Thomas S. Monson discovered that when workers were kept in the dark about their job performance they frequently became average performers, and for some workers less than average. But when workers were provided timely, relevant, and easy to understand information about their performance, many became superior performers.”

He asks you if you want an employee who “merely ‘meets expectations’ or one who smashes beyond ‘meets’ and consistently hits home runs.” He points out that “we measure something to see if it is wrong. We keep a scorecard to track what is correct."

Creating a Scorecard System

Dr. Williams outlines 10 characteristics essential to a “report back” system:

• "The employee must have psychological ownerships of his or her scorecard”
• “Scorecards must be based on specific measurable results”
• “Scorecards must be posted near the employee’s work area”
• “Scorecards must be updated by the employee every day, or at least every month”
• “Scorecards must include an agreed upon performance line”
• “Scorecards must include an agreed upon goal line”
• “Scorecards must include a way for the employee to compare his or her performance against past performance”
• “When a scorecard shows performance below a performance line, an action plan must be connected to the scorecard”
• “The employee’s coach must pay attention to scorecards and give daily, or at least weekly feedback and coaching”
• “The employee must feel a sense of celebration when his or her scorecard performance exceeds the goal”

Saturday we’ll discuss Dick Grote’s article criticizing performance measurement