Managing in a Downturn

I spoke at a NextNY event last night along with several others, including fellow entrepreneur David Kidder from Clickable and angel investor Roger Enhrenberg about this fine topic (Roger wrote a great post on it here) and thought I’d share a few of the key points made by all of us for anyone trying to figure out what to do tactically now that Sequoia has told us to be afraid, very afraid.

Hope is Not a Strategy:  Your business is not immune. It will do what everyone else’s will. Struggle to hit its numbers. Struggle to collect bills. Lose customers. There is no reason to hope you’ll be different.

Get Into the Jet Stream:  Develop your core revenue streams — and make sure they’re really your revenue, not just skimming tertiary revenue out of the ecosystem.  Investors will look to see how sustainable your model is with more scrutiny than ever.

It’s a Long Road to Recovery:  I don’t care what people say. There is no true “v-shaped” bounceback from a true downturn. Plan for a long (4-8 quarter) time to return to normalcy.

Budget Early and Often:  Things change rapidly in this kind of environment. Make sure you reforecast, especially cash flows and cash, monthly when you close the books.

Don’t Stop Thinking About Tomorrow:  If you have a real business, you need to be it for the long haul. Keep pursuing opportunities. Keep investing in the future. Don’t pare back your vision and ambitions. Just make more conservative investments, insist on shorter payback windows, and adjust expectations about timeframes.

Leadership Counts:  Your people are nervous. They’re concerned about their own bank accounts. Their jobs. Be even more present, more transparent, and more communicative. And set the right tone on expenses with your own decisions. The troops need to know that you care about them — and that the big boss has a steady hand on the wheel.

Doing Well by Doing Good, Part IV

This series of posts has mostly been about things that people or companies do that help make the world a better place — sometimes when it’s their core mission, other times (here and here) when it becomes an important supporting role at the company.

Today’s post is different — it’s actually a Book Short as well of a new book that’s coming out later this fall called Green to Gold:  How Smart Companies Use Environmental Strategy to Innovate, Create Value, and Build Competitive Advantage, published by Yale Press and written by Daniel Esty (a Yale professor and consultant), and a good friend of mine, Andrew Winston, a corporate sustainability consultant.

Green to Gold is a must-read for anyone who (a) holds a leadership position in business or is a business influencer, and (b) cares about the environment we live in.  Its subtitle really best describes the book, which is probably the first (or if not, certainly the best) documentation of successful corporate environmentalstrategy on the market.

It’s a little reminiscent to me of Collins Built to Last and Good to Great in that it is meticulously researched with a mix of company interviews/cooperation and empirical and investigative work.  It doesn’t have Collins “pairing” framework, but it doesn’t need to in order to make its point.

If you liked Al Gore’s movie, An Inconvenient Truth, this book will satisfy your thirst for information about what the heck the corporate world is doing or more important, can do, to do its part in not destroying our ecosystem.  If you didn’t like Gore’s movie or didn’t see it because you don’t like Al Gore or don’t think that many elements of the environmental movement are worthwhile, this book is an even more important read, as it brings the theoretical and scientific to the practical and treats sustainability as the corporate world must treat it in order to adopt it as a mainstream practice — as a driver of capitalistic profit and competitive advantage.

This is a really important work in terms of advancing the cause of corporate social responsibility as it applies to the environment.  Most important, it proves the axiom here that you can, in fact, Do Well by Doing Good.  If you’re interested, you can pre-order the book here.  Also, the authors are writing a companion blog which you can get to here.

Help Me, Help You, Part II

Thanks to the nearly 100 readers who responded to my reader survey this past week.  While I’m not sure it’s a truly statistically significant base of OnlyOnce’s audience (I’ll have to ask my friends over at Authentic Response), I’ll treat it like it is.  Here’s what I learned.  First, the general results:

• Satisfaction levels are good – 46% are regular readers and love it, 48% read occasionally and think it’s ok, and only 6% gave it an “eh – wouldn’t miss it if it went away”
• Entrepreneurship is the most popular topic, with 86% interest, and Leadership/Management is a close second at 82%.  Online/Email Marketing came in at 61% and Book Reviews at 43%.  Current Affairs and Travel (which I almost never use) were 31% and 25%, respectively
• 72% of people feel frequency at 1-2 posts a week is on target.  Only 4.5% want fewer posts, and 24% (those kind souls) want it more often
• Most people other than Return Path staff found the site through a link on another blog rather than search

Next, the open-ended comments were interesting.  A summary snapshot:

• Positive comments were generally about tone and candid approach, succinct posts, and topics.  One nice person noted his/her favorite thing was “the author” (thank you Mom/Dad/Grandma/Mariquita/Michael)
• Constructive comments varied.  Some good ones are noted below:
• “assumes a level of knowledge not everyone has”
• “too heralding of the VC view of the world”
• “too much focus on email/marketing,” “too local/American” (that’s who I am, though)
• “ I would like to see more about what it takes to be a CEO in day to day operations. what skills do you find you need, what obstacles do you come across, issues with driving a company.”
• “A little too much PRish in regards to Return Path”
• “It seems like everything you write about is too positive. Or at least a negative story with a happy ending. Nothing about what sucks to run a company. I run one and a lot of it does suck.”
• “Not enough personal stuff — who is the author?” (see the About Me link on the blog)
  
• “The word vigilante is bandied around way too much by the author”
• And of course someone noted as constructive feedback that I haven’t yet mentioned my mother’s name (sorry, Mom/Joyce!).  And one person suggested I shave.  Thanks, really.

Finally, the demographics of my audience:

• 3 % are under 24, 45% are 25-34, 41% are 35-49, 11% are over 49
• 80% male and 20% female (surprising)
• Company data wasn’t so interesting, or I phrased the question poorly – but one takeaway is that about 1/2 of readers seem to be “in the industry” generally speaking, with lots of Return Path staff subscribing as well as lots of other entrepreneurs and a handful of VCs
• Level/title was more interesting – nearly half the audience is SVP-level or above at their company

Thanks again, everyone, and I’ll take note of this feedback for future postings!

Book Short:  Virtuous Cycle

Danny Meyer’s Setting the Table: The Transforming Power of Hospitality in Business is a fun read if you’re a New Yorker who eats out a lot; a good read for entrepreneurs around scaling leadership skills as the business grows; and a great read for anyone who runs a serious customer service-oriented organization.  I’ve eaten at all of his restaurants multiple times over the years except for the new ones at MOMA (perhaps a few too many times at the Shake Shack), and while I like some more than others (perhaps the Shake Shack a bit too much), they all do have great hospitality as a common theme.

While there are a lot of good lessons in the book, Meyer talks about something he calls the Virtuous Cycle of Enlightened Hospitality that matches the general hierarchy of constituents or stakeholders in a business that I refer to at Return Path:   employees, customers, community, suppliers, investors.  His general point is that if you have happy employees, they make for happy customers, and returns for investors will follow.  While the specifics may or not be true of all businesses, I bet the first and last item are — especially for service-oriented businesses in any industry.  I wish we had a better handle on the Community aspect at Return Path, but we at least do an OK job at it, especially given the geographic diversity within the company.

(Note this was one of Fred’s favorite parts of the book as well from his review — nice to see a professional investor in agreement!)

Book Short:  Crazy Eights

In honor of Return Path being in the midst of its eighth year, I recently read a pair of books with 8 in the title (ok, I would have read them anyway, but that made for a convenient criterion when selecting out of my very large “to read” pile).

Ram Charan’s latest, Know-How:  The 8 Skills That Separate People People Who Perform From Those Who Don’t, was pretty good and classic Charan.  Quick, easy to skim and still get the main points.  The book lost a little credibility with me when Charan lionized Verizon (perhaps he uses a different carrier himself) and Bob Nardelli (the book was published before Nardelli’s high profile dismissal), but makes good points nonetheless.  Some of the 8 Skills he talks about are what you’d expect on the soft side of leadership — building the team, understanding the social system, judging people — but his best examples were particularly actionable around positioning, goal setting, and setting priorities.  The book reminded me much more of Execution and much less of Confronting Reality (which is a good thing).

For years I’ve felt like the last person around to still not have read The 7 Habits of Highly Effective People, so I thought I’d skip straight to the punchline and read Stephen Covey’s newer book, The 8th Habit:  From Effectiveness to Greatness.  Fortunately, as I’d hoped, the new book summarizes the prior book several times over, so if you haven’t read the first, you could certainly just start with this one.  The book also comes with a DVD of 16 short films, some of which are great — both inspirational and poignant.  Unlike most business books, the 8th Habit is NOT skimmable.  It almost has too much material in it and could probably be read multiple times or at least in smaller pieces.  The actual 8th habit Covey talks about is what he calls Find Your Voice and Help Others Find Their Voices and is a great encapsulation of what leading a knowledge worker business is all about.  But the book is much deeper and richer than that in its many models and frameworks and examples/tie-ins to business and goes beyond the “touchy feely” into hard-nosed topics around execution and strategy.

Now I’m looking for the DVD of the first season of Eight is Enough!

Collaboration is Hard, Part I

Every year when we do 360 reviews, a whole bunch of people at all levels in the organization have “collaboration” identified as a development item.  I’ve been thinking a lot about this topic lately and will do a two-part post on this.  So, first things first…what is collaboration and why is it so important?

Let’s start with the definition of collaboration from our friends at Wikipedia:

Collaboration is a process defined by the recursive interaction of knowledge and mutual learning between two or more people who are working together, in an intellectual endeavor, toward a common goal which is typically creative in nature. Collaboration does not necessarily require leadership and can even bring better results through decentralization and egalitarianism.

What does that mean in a business setting?  It means partnering with a colleague (either inside or outside of the company) on a project, and through the partnering, sharing knowledge that produces a better outcome than either party could produce on his or her own.  Interestingly, the last sentence of the definition implies that collaboration can happen across levels in an organization but is generally more effective when the parties who are collaborating are on somewhat equal footing.

Why is collaboration important?  There are probably a zillion reasons.  Let me take a stab at what I think are three important ones:

1. It’s not about hard assets any more. In a knowledge economy/company, sharing information and learnings is critical.  And that’s what’s at the heart of the collaborative process.  Each person in the organization does a different job; even those who are in the same role have different experiences with their role and different interactions both internally and externally as a result.  A collaborative process that by definition involves learning drives the organization forward and to a better place.  An example…if you have a deep working knowledge of your product, and your counterpart in marketing has a deep working knowledge of public relations, collaborating on a PR strategy to launch the product’s latest feature means that you will learn more about public relations and your colleague will learn more about your product.  In the end, you both get smarter, and the collective intellect of your organization grows — so your company gains incremental advantage over the competition as a result.
2. No man is an island. Most functions and business units are in some way interdependent.  Think back to the example of product and PR above.  Both parties learn through collaboration and make things better for the future.  Here’s the rub, though — the collaboration in that example is the only way to produce the right outcome.  So the prior point illustrates offense, but this one illustrates defense.  Failure to collaborate in this simple case would lead to a misguided PR launch strategy for the new product feature.  Either product would dictate the release strategy and text — missing some important subtleties about what reporters will/won’t pick up or without thinking through how different constituencies will react to the messaging — or PR would dictate the release strategy and timing — missing important but subtle points of competitive differentiation in the product features or botching a market-specific window for the announcement.
3. Leverage is king. If the first point illustrates offense (collaboration moves the organization forward) and the second one illustrates defense (failure to collaborate suboptimizes the quality of results), this one illustrates productivity (perhaps a subset of offense).  Collaboration gives leverage, which in turn gives productivity.   Let’s not pick on our poor product and PR people this time, though.  Let’s think about one of the most difficult things to do, which is to hire good people.  As I wrote a few years ago in The Hiring Challenge, the three things to do when hiring (which are all hard) are defining the job properly, finding the time to do it right, and remembering that the process doesn’t stop on the person’s first day on the job.  So where does collaboration come in?  Once your company is big enough to have a good HR person or team, the collaborative approach to having them help you with recruiting is the best option.  Sure, you can “throw it over the wall” to HR — give them a job title and location and comp range and see what happens.  And you will get some candidates, some of which might be ok.  Or you can forget about HR and try to do it yourself and not have time to get it right.  Or you can collaborate, bring HR into the discussion about the need for the position, the skills required, and the fit with your organization, even write a job description with HR and discuss which companies or types of companies you want to see on candidates’ resumes — and voila!  HR can go off and do 10x the work at 10x the quality.  For a little more up-front effort than the “throw it over the wall” approach, you leveraged yourself tremendously through what can be a very time consuming process.

Although my examples are by nature from my own industry for the past 12+ years, it’s hard to think of too many organizations or industries where collaboration isn’t critical to success.  Even in companies like investment banks or strategy consulting firms, which traditionally are very hierarchical, command-and-control organizations filled with brilliant individual contributors, the most successful companies (think Goldman Sachs, McKinsey) are the ones that seem to foster more collaboration than others in the development of their people and the development of shared intellectual capital that helps drive the organization forward and ahead of its competition.

In Part II, I’ll answer the title question here…why is collaboration hard?  Stay tuned!

Book Short: How, Now

Every once in a while, I read a book that has me jump up and down saying “Yes! That’s so right!” How: Why How We Do Anything Means Everything in Business (and in Life), by Dov Seidman, was one of those books.  But beyond just agreeing with the things Seidman says, the book had some really valuable examples and two killer frameworks, one around culture, and one around leadership.

It’s a book about the way the world we now live in — a world of transparency and hyper-connectedness — is no longer about WHAT you do, but HOW you do it. It’s about how you can have a great brand and great advertising, but if your customers find out via a blog and YouTube clip that you run a low quality sweatshop in Malaysia, you are toast. It’s about you can…not outwork the competition, not outsmart the competition, but how you can out-behave the competition.

The book, which talks about principles like mutual gain, and thriving on the collaborative, reminds me a lot of a basic tenet of negotiation I learned years ago at the Harvard Program on Negotiation about finding a “third way” beyond a “me vs. you” negotiation by expanding the pie so both parties get more out of a deal.

Here are a few snippets from the book to inspire a purchase:

– How encouraging doctors to say “I’m sorry” radically reduces lawsuits

– How “micro-inequities” can subtly leech productivity from an organization

– How the majority of workers expect from their workplaces: equity, achievement, camaraderie

– How companies whose employees understand and embrace their mission, goals, and values see a 29% greater return than companies whose employees don’t

– How reputation is the new competitive advantage

– How people will do the right thing because in self-governing cultures, not doing the right thing no longer betrays just the company; it betrays individuals’ own values

– How increasing self-governance means moving values to the center of your efforts and making it clear — in how you reward, celebrate, communicate, and pursue — that those values form the guiding spirit of the enterprise

What type of organization do you run? One based on Anarchy & Lawlessness, one based on Blind Obedience, one based on Informed Acquiescence, or one of Values-Based Self-Governance? (Hint, it’s most likely the third category.) Read the book to find out more.

Book Short:  On The Same Page

Being on the same page with your team, or your whole company for that matter, is a key to success in business.  The Four Obsessions of an Extraordinary Executive, by Patrick Lencioni, espouses this notion and boils down the role of the CEO to four points:

1. Build and maintain a cohesive leadership team
2. Create organizational clarity
3. Overcommunicate organizational clarity
4. Reinforce organizational clarity through human systems

Those four points sound as boring as bread, but the book is anything but.  The book’s style is easy and breezy — business fiction.  One of the most poignant moments for me was when the book’s “other CEO” (the one that doesn’t “get it”) reflects that he “didn’t go into business to referee executive team meetings and delivery employee orientation…he loved strategy and competition.”  Being a CEO is a dynamic job that changes tremendously as the organization grows.  This book is a great handbook for anyone transitioning out of the startup phase, or for anyone managing a larger organization.

I haven’t read the author’s other books (this is one in a series), but I will soon!

Lessons from the Election

There will be so many of these posts flying around the web today and in the coming weeks, but there’s at least one lesson from yesterday’s election that really struck me in the context of business leadership:  the importance of authenticity.

Obama won — and McCain lost — for many reasons.  But I think one of the main ones is that McCain didn’t run as McCain.  The number of Democrats and Independents who I heard say things like “I would have voted for the McCain who ran in 2000,” or Hillary supporters who said they’d never vote for Obama against McCain and then did, was huge.

McCain is a maverick.  There’s no doubt about that.  But he didn’t run as one — he tried to be something he’s not by pandering so much to the Republican Party’s base that he forgot who he was.  The result was a candidate who didn’t look comfortable in his own skin, who lacked a focused message, and who didn’t come across as himself. 

In politics, lack of authenticity is worse than the “flip flopper” charges that get thrown about so often.  Everyone’s entitled to a change of opinion on a key issue here and there as circumstances change.  Mitt Romney may have switched his view on abortion, for example, but you never had any doubt where he stood on it in the present and future.  With McCain, on the other hand, no one could tell how he’d actually govern and what positions he’d really take on a bunch of key issues because his whole persona seemed to shift.

The lesson for business leaders?  BE YOURSELF.  Could you see through McCain?  Your people can see right through you.  They may or may not appreciate you, your style, your humor, your decisions — but as long as they can tell where you’re coming from, you have a good shot at leading them.

My 360 on Your 360

Last year, I wrote about the 360 review process we do at Return Path, which is a great annual check-in on staff development and leadership/management.  In Part I of What a View, I described the overall process.  In Part II, I talked specifically about how my review as CEO worked, which is a little different.

This year, we changed the format of our reviews in two ways. First, for senior staff, we continued to do the live, moderated discussions, but we dropped having people also fill out the online review form.  It was duplicative, and the process already consumes enough time that we decided to cut that part out, which I think worked well. 

Second, for my review, instead of having the Board review me separately from the senior staff, I combined efforts and had all of them participate in my live moderated discussion together.  I also think this worked well, although we did receive some feedback about how to modify the format slightly for next year.  It was great for the Board to get a window into how the team feels about me, and vice versa, and it produced a single, unified development plan for me, which is much more helpful than two sets of feedback about different questions and issues.

The one theme that came out of this year’s live reviews, which is definitely worth thinking about, is the impact of the Heisenberg Uncertainty Principle, that once something is observed, the act of observing it can actually change it.  Because the live discussions are face to face (anonymous to the person being reviewed, but not anonymous among the reviewers), some people mentioned that they were conscious of what they were saying in the presence of others in the company.  Others didn’t particularly care about that but did say things that could be construed as negative about some of their fellow reviewers.  Someone came up to me after one session and said "I wonder what the rest of the group thought of my comments — I need a 360 on your 360!"

The reality is that transparency is a good thing.  There shouldn’t be any state secrets about someone’s performance, especially when the person is in a senior management position.  All people always have things they can improve upon, and the open discussion around what they are and why they happen produce MUCH better results for the people being reviewed, uncomfortable as it may be at times.

The sessions are confidential, so participants should feel comfortable that their thoughts won’t be shared outside the room.  Plus, we provide a mechanism to give feedback that really is hard to provide in public for whatever reason via email or one-on-one conversations with the moderator.

Fig Wasp #879

I have 7 categories of books in my somewhat regular reading rotation:  Business (the only one I usually blog about), American History with a focus on the founding period, Humor, Fiction with a focus on trash, Classics I’ve Missed, Architecture and Urban Planning (my major), and Evolutionary Biology.  I’m sure that statement says a lot about me, though I am happy to not figure it out until later in life.  Anyway, I just finished another fascinating Richard Dawkins book about evolution, and while I usually don’t blog about non-business books, this one had an incredibly rich metaphor with several business lessons stemming from it, plus, evolution is running rampant in our household this week, so I figured, what the heck?

The Dawkins books I’ve read are The Selfish Gene (the shortest, most succinct, and best one to start with), The Blind Watchmaker (more detail than the first), Climbing Mount Improbable (more detail than the second, including a fascinating explanation of how the eye evolved “in an evolutionary instant”), The Ancestor’s Tale (very different style – and a great journey back in time to see each fork in the evolutionary road on the journey from bacteria to humanity), and The God Delusion (a very different book expounding on Dawkins’ theory of atheism).  All are great and fairly easy to read, given the topic.  I’d start with either The Selfish Gene or maybe The Ancestor’s Tale if you’re interested in taking him for a spin.

So on to the tale of Fig Wasp #879, from this week’s read, Climbing Mount Improbable.  Here’s the thing.  There are over 900 kinds of fig trees in the world.  Who knew?  I was dimly aware there was such a thing as a fig tree, although quite frankly I’m most familiar with the fig in its Newton format.  Some species reproduce wildly inefficiently — like wild grasses, whose pollen get spread through the air, and with a lot of luck, 1 in 1 billion (with a “b”) land in the right place at the right time to propagate.  At the opposite end of the spectrum stands the fig tree.  Not only do fig trees reproduce by relying on the collaboration of fig wasps to transport their pollen from one to the next, but it turns out that not only are there over 900 different kinds of fig trees on earth, there are over 900 different kinds of fig wasps — one per tree species.  The two have evolved together over thousands of millenia, and while we humans might take the callous and uninformed view that a fig tree is a fig tree, clearly the fig wasps have figured out how to swiftly and instinctively differentiate one speices from another.

So what the heck does this have to do with business?  Three quick lessons come mind.  I’m sure there are scores more.

1. Collboration only works when each party benefits selfishly from it.  Fig wasps don’t cross-pollenate fig trees bcause the fig trees ask nicely or will fire them if they don’t.  They do their job because their job is independently fulfilling.  If they don’t — they probably die of starvation.  They’re just programmed with a very specific type of fig pollen as their primary input and output.  We should all think about collaboration this way at work.  I wrote a series of posts a couple years back on the topic of Collboration Being Hard, and while all the points I make in those posts are valid, I think this one trumps all.  Quite frankly, it calls on the core principle from the Harvard Project on Negotiation, which is that collaboration requires a rethinking of the pie, so that you can expand the pie.  That’s what the fig trees and fig wasps have done, unwittingly.  Each one gets what it needs far more so than if it had ever consulted directly with the other.  The lesson:  Be selfish, but do it in a way that benefits your company.

2. Incredibly similar companies can have incredibly distinct cultures.  900+ types of fig tree, each one attracting one and only one type of fig wasp.  Could there be anything less obvious to the untrained human eye?  I assume that not only would most of us not be able to discern one tree or wasp type from another, but that we wouldn’t be able to disdcern discern any of the 900+ types of trees or wasps from thousands or hundreds of thousands or millions (in the case or urbanites) types of trees or bugs in general!  But here’s the thing.  I know hundreds of internet companies.  Heck, I know dozens of email companies.  And I can tell you within 5 minutes of walking around the place or meeting an executive which ones I’d be able to work for, and which ones I wouldn’t.  And the older/bigger the company, the more distinct and deeply rooted its culture becomes.  The lessons:  don’t go to work for a company where you’d even remotely uncomfortable in the interview environment; cultivate your company’s culture with same level of care and attention to detail that you would your family — regardless of your role or level in the company!

3. Leadership is irrelevant when the operating system is tight.  You think fig wasps have a CEO?  Or a division president who reports into the CEO that oversees both fig wasps and fig trees, making sure they all cross-pollenate before the end of the quarter?  Bah.  While as a CEO, you may be the most important person in the organization sometimes, or in some ways, I can easily construct the argument that you’re the least important person in the shop as well.  If you do your job and create an organization where everyone knows the mission, the agenda, the goal, the values, the BHAG, whatever you want to call it — withoutit needing to be spelled out every day — you’ve done your job, because you’ve made a company where people rock ‘n’ roll all night and every day without you needing to be in the middle of what they’re doing. 

I’m sure there are other business lessons from evolutionary biology…send them along if you have good thoughts to share!