Tag Archives: understand your options

Customers First, Investors Last: What were they thinking?

For years now, my colleagues and I here at BoardBench, have been saying that Wall Street has it backwards.  In the boardroom, directors have been fed, with a very large spoon, the mantra that they are beholden to the shareholder, that their purpose is to “maximize shareholder value.”  If you asked a large group of directors if this is true, you’d see a lot of bobbleheads in the room.  Many believe this is a legal requirement and in line with good business sense and good corporate governance.  Unfortunately, the concept of “shareholder primacy” is a relatively recent phenomenon.  It is also simplistic (shareholders’ wants are not homogeneous), has no legal basis anywhere (go ahead, try to prove me wrong), and, as many are now pointing out, usually damaging to companies, and the economy as a whole.

What we believe is real, and will eventually be proven again as real to the Street, is that customers, and employees are the two key drivers of corporate success.  When I say “again” I’m referring to Peter Drucker’s famous quote from decades ago: “the purpose of a business is to create and keep customers.”  So many seem to have forgotten this, or have never even heard of it.

But the basic premise is this: if you take care of your customers, and have great employees who are well supported and appreciated for being curious and excited about what they do such that they will ensure that customers love the products and services that the company offers, the company and shareholders will reap the rewards, too.  Of course other things come into play, like managing R&D investments (with the customer in mind), operations, and supporting a corporate culture that has strong values and morals.  The basic premise may be slightly oversimplified, but it applies, and should resonate with the board.

It appears that I’m finally not standing alone on this either.  In a recent interview, Jack Ma, the world’s newest CEO darling, made two bold public statements.  He basically shunned the current thinking of the Street by stating, on national TV, that “our customers come first, our employees second, and our shareholders third.”   He continued: “We aim to be larger than Wal-Mart by 2016, or sooner.”  If – no, when – Jack succeeds, and executes flawlessly on his statement, that customers and employees take a front seat over shareholders/investors, then he’s got an excellent chance of passing Wal-Mart as the world’s largest retailer.  Note, Wal-Mart just slapped some of its employees, who have the most direct relationship with their customers, by cutting their insurance benefits. This was probably done to cut costs, but it will probably also have a long-term impact on their customer relationships, too. But, I digress.

It seems that too many directors, CEOs, and business leaders, have become obsessed with what Wall Street, its analysts, and shareholders think.  Many have learned to play these groups exceptionally well, too. Countless analysts and shareholders have been taken in by companies’ projections, quarterly earnings estimates, and highly creative financial management and reporting.  Don’t get me wrong, the importance of the exchanges and the markets cannot be downplayed, but a balance is needed.  Focusing on Main Street is just as important, if not more so.

If you follow Main Street, you know about big box discount stores. Costco Wholesale Club, founded by Jim Sinegal and Jeffrey Brotman, believe in serving the customer first, and that if employees are treated properly, they will work with, and treat the customer well too.  Jim, the public face, is a “hands on guy” who is known for visiting each individual Costco store.  Jim is also outspoken about his views on Wall Street.  He’s been known to say that he puts his customers and employee needs above “pleasing shareholders.”  This philosophy must be working: Costco’s five year return is +116.73%.  If you bought the stock earlier, your return would be closer to 354%.

American Express is another company known for taking good care of its customer/members.  Personally I’ve been a fan of the company’s customer service representatives over the years, and tell them that every time I’ve called for help.  Don’t get me wrong, working at this company must be tough: when I was younger, AmEx employees were nicknamed The Dragons.  Perhaps because they were seehat2.jpgn as willing to fight for the company and their customers nearly to the end.  By the way, if you invested in American Express five years ago, your return on investment would be up 149.46%.

If you’ve worked with the general retail public, as I did during my college years, then you know just how tough this can be.  Sadly, not everyone who enters a store, calls a helpline, or dines in a restaurant is a kind and thoughtful customer.  Amazon deals with all sorts of customers from nearly every continent in the world, and I’m sure they have some interesting stories to share.  However, the company is noted for being one of the best customer service organizations in the world.  Amazon has more than one customer base, as many do: retail members, and consumers.  Jeff Bezos clearly divided the customer’s connection to Amazon into two categories: the experience and the service.  At this level, he notes that customer service is part of the full customer experience.  If it’s unpleasant, it’s a negative customer experience.  He supports the idea that a positive customer experience creates greater loyalty with Amazon.  If you’ve ever dealt with an Amazon Customer Service rep, you know that they work quickly to resolve your issue, they get the job done for you, and you are nearly always satisfied and left feeling good about your relationship with Amazon.  And, if you invested in Amazon five year ago, your return on investment is now up 236.64%.

While it’s much more pleasant to focus on the “good guys,” there are dark clouds.  Some companies are noted for their poor customer service.  Some survive because there are few alternatives: think of phone companies and cable providers, and some you can name on your own (take a look at their five-year ROIs).  However, when it comes to poor customer experience these days, I think sadly of that American icon Sears.  Whenever I bring them up these days, all I hear is: “Oh my gosh, I could tell you about the time when…”  Sears is a sad story101.jpg about the decline of a once great and loved retail giant.  Many years ago, the Sears catalog used to be called a “wish book.”  Families would anxiously wait for it to arrive in the mail.  It was nearly 5 inches thick. Moms, dads, sisters, and brothers would argue over whose turn it was to browse through and select from among the items they wanted for birthdays, holidays, special occasions and more.  Some people even bought their homes out of the Sears catalog.  But, it has lost its way, and it’s touch with its customers and has already begun its drop down that magical slide once pictured in its own catalog.  The entire company and its hopes for the future look pretty dismal: sell off of units and real estate, store closings, etc.  Sadly, if you invested in Sear’s five years ago, your return on investment would be -58.50% and it’s still falling today.

To sum up and put things into even sharper perspective, I recently spoke with the General Counsel of one of the largest, most recognized corporations in the world.  He told me, succinctly, that the biggest problem with their board is that not one director had any understanding of who their customers were and are or what they want.  I can also assume that they don’t understand their employees either.  So I will watch how this company slides in the next few years (Note: their record has been negative for some time), and report back with an update, unless, that is, they somehow figure it out and turn it around.

Do you need to focus on board improvement: composition, strategy, direction, execution, oversight?  Boards are our specialty. Give us a call.

Nancy May

Risk is free, risk-free costs

Enough said.

Designing Your Work for Dummies

If you peruse the online booksellers, or wander into a bookstore, you’ll quickly find volumes from one of two series, labelled either “(whatever) for Dummies” or “The Idiot’s Guide to (whatever)”. These two lines — which started as a way to produce manuals you could learn from rather than the incomprehensible ones delivered with computer products — now cover everything from cat care to knitting, fixing outboard motors to baking.

So, with chapeau doffed in admiration to the concept of making complicated things simple, let’s talk about designing your work.

Notice I didn’t say “find a job”. It may be that the design you come up with leads you down that road (it’s hard to be in certain roles without fitting into an existing societal structure). But if you start by thinking about your future in terms of designing around the work you’ll do, you will have a lot of the thinking necessary to consider creating your own job.

The person who is employed by someone else can find themselves out of work because of external events that cause the enterprise they’re a part of to cut back or fold — or they can be on the street (or never hired) because of the pique and incompetence of a manager (as sketched daily in Dilbert by Scott Adams). The person who creates their own situation is still at risk of the first — but is unlikely to fire themselves in a malicious way.

The tool I’d like to point out to you is called a business model canvas. The million-copy seller for designing a business is Alex Osterwalder’s Business Model Generation. Its counterpart for designing an individual’s life-work plan is Tim Clark’s Business Model You. The latest improvement to the concept is Antony Upward’s “Strongly Sustainable Business Model Canvas”, built around triple bottom line concepts (Antony has a number of interactive presentations, YouTube videos, and a LinkedIn group available on the web; the process of turning his dissertation into a friendly book is underway).

All you need is a hunk of wall. Some people draw the canvas outline on a white board, others tape up butcher paper. Get some post-it notes.

What the process of working with a canvas asks of you is to identify the answers to questions. When using it to design your life’s work, you can start with what you’re good at, or needs you’ve seen that could be fulfilled, or connections you have. When you use a canvas to design an enterprise (creating your own job), you do the same questions but with more business-like terms such as customer segments, value propositions, key partners, and the like.

It’s decidedly simple stuff, but powerful. Four people gathered toward the end of February to think through the creation of a new not-for-profit organization to promote local business webs in a major city. None worked in the field (although all were running their own enterprises). None had training in the use of the canvas. Two hours later, the wall was absolutely covered in post-it notes, real reasons why people would pay to join such an organization had been identified, its staffing needs had been uncovered, and so on.

If you take away the right conclusion from that — hey, I don’t have to be an expert on business to do this — good for you. You don’t. Which means you could work on your canvas with friends, with family, with anybody. You move the post-it notes around, you throw some out, you add some new ones. Collectively, they tell a story about what would work for you — or how this new business would feed you.

Although Tiffinday wasn’t built using one of these canvases, it was thought through the same way. Tiffinday is a company that delivers hot, fresh lunches in Toronto’s financial district. The containers are reusable. The food is prepared by mothers with children in school. It’s put together in the mornings using a parter — an evenings-only restaurant whose kitchen was free (there are laws about food preparation). A bicycle courier company delivers the containers, then picks up the empties after lunch for cleaning. Everyone’s home again in time for the kids to come from school.

Would you have thought to provide an ever-varying menu to workers in cubicle land, employ people who would likely not work because they’re only available between 9 and 3, partner to use underutilized resources and avoid having to capitalize your own using all the traditional “follow your passions” business development advice? Canvases can see all sorts of opportunities that traditional methods don’t.

This is just one of the way Personal Due Diligence advisors work with clients to expand their opportunities. Are you ready to expand yours?

Entrepreneurs, optimism, prudence and saving a generation

Every time a Canadian moves south of the border to realize a dream because he or she couldn’t find someone here who believed in him or her, we’re diminished. A little bit of our potential, a little bit of our pride, a little bit of our future and a little bit of us slips out of our grasp. That’s not what the immigrants who came here expected when they sacrificed so that they and their children could build a life as Canadians that they couldn’t build in the old country. Those immigrants were our grandfathers and grandmothers, fathers and mothers.

These are tough times. Great downsizings were topical a dozen years ago. They’ve given way to lesser downsizings and restructuring. Both are still very much with us. Rows of vacant desks are still a feature of buildings with exteriors that show no sign of what happened inside. Learning why those downsizings took place will help you avoid them in the future.

I’ve seen 2000 desks and workstations that used to be occupied by 2000 people, each of whom I met personally minutes after they discovered that they no longer figured in their employers’ plans. This chapter of Canadian history is recent enough that most working people and those aspiring to be working people must be aware of it. Our post-secondary-education-bound young people and those holding undergraduate and postgraduate degrees and little else know almost nothing about it. They still believe that they’re entitled to find work in their chosen field. There are no entitlements.

If we’ve learned anything from this period, it’s that the good life is not a right guaranteed under the British North America Act and the Constitution. An ounce of prevention will always be worth a pound of cure. That’s another way of describing personal due diligence

Technologically, intellectually, creatively and socially, Canadians don’t have to take a back seat to anyone. You have options but you have to know where to find them. There are entrepreneurs and visionaries who are looking to you to help bring their dreams to fruition so that we all benefit. You will have to become aware of them.

The only way we can take from Canada is to give something to Canada because no one else is going to give it to us. If you can’t find work in your chosen field, you may have to choose another field. That’s one of the reasons Personal Due Diligence is here.

In his inaugural address, John F. Kennedy said: “… Ask not what your country can do for you — ask what you can do for your country.” High levels of youth unemployment suggest Canada is at risk of losing one generation if not more. We’re dependent on one another, and not only in times of high water or fire or blizzards. But we have to become aware of each other. It’s what a country is. If we’re going to be one, we have to act like one.

Robert Kennedy said: “There are those who look at things the way they are, and ask why… I dream of things that never were, and ask why not?” He also said: “All of us might wish at times that we lived in a more tranquil world, but we don’t. And if our times are difficult and perplexing, so are they challenging and filled with opportunity.”


What’s going on underneath the surface

Let’s presume, for the moment, that you’ve got two different opportunities staring you in the face.

Your friend Mike at MegaCorp has called you to tell you there’s an opening just announced — the incumbent’s getting his outplacement treatment even as he speaks — and that he can broker a lunch meeting with the hiring executive today to help you bypass the whole hiring process and just be the one who gets the job.

At the same time, you’re reading an email from your friend Jill, who left the corporate world two years ago, and who’s telling you about how happy she is with her community green energy business installing solar power and water heating systems — and how you could be doing the same sort of thing in your town of Happy Valley. “I don’t make anywhere near the money I used to, but I sleep better”, she says.

Well, in today’s world, we’d all be delighted to have choices.

Still, how do you decide between two very different things like these two?

The Personal Due Diligence answer is to look beneath the surface, and figure out which of these is in tune with the times, and which is pushing against fundamental forces shaping the world.

MegaCorp is a global player. It’s exposed to risk and opportunity in over ninety countries. It’s been gaming the currency markets and playing the tax game to manage its earnings nicely, and its price/earnings ratio is high.

Much of its true growth in the past few years, though, have come from the BRIC (Brazil-Russia-India-China) countries and some of the other less developed nations rising in their wake. In core markets like the United States, Europe, and so on, it’s pretty stable.

While MegaCorp has had some interesting new products lately, it’s also attracted a slew of lawsuits all over the world, as competitors have played the patent card to slow them down.

You’re also aware, having done a little digging, that MegaCorp’s operations in your country are deeply indebted, even though corporately there’s billions in the Treasury sitting around. But that money’s offshore, and bringing it in to retire the debt would expose it to tax. Thank goodness for record low interest rates, because without them there’d be mass layoffs and closures to deal with the burden.

Underneath MegaCorp’s own situation, we have the slowing in the global economy (showing up as a complete stall in Brazil and India and a near stall in China), and the creeping up of interest rates in the bond markets even despite frantic quantitative easing by central banks all over the world.

Underneath that, of course, is the growing global impoverishment of the masses, as global employment falters.

Mike’s opportunity, in other words, comes with a slew of risks, and not just from the normal cut-and-thrust of office politics in a large global organization with competing power centres.

MegaCorp, despite its track record of late, is at the top of its curve. On the downside — and there is always a downside to contend with — the effort to keep that share price from tumbling will lead to all sorts of pain.

So, really, going to MegaCorp at this time should be seen as a high risk venture. Any share options in your compensation package aren’t likely to be worth anything. Yes, the money will be good even so, but how long will it last — and what will the market for opportunities look like a couple of years from now if you’re dumped then?

Jill’s situation is quite different. She needed very little capital to start her venture, and has been ruthless about keeping it manageable since, so that all its funding needs come from clients. She’s avoided debt, avoided having a footprint that requires growth just to sustain it, and avoided the need for keeping the stock market junkies happy.

She’s also keeping it in her town of Slatesville, not expanding beyond that. She’s been able to build a cracker-jack team because it’s small — she can be picky about who she takes on, since she’s not always in expansion mode.

Her business is steady, as one person after another comes to realize they can save money using what she offers. (The solar hot water systems, in particular, pay for themselves incredibly quickly — and whether the customer used oil-fired, gas-fired or electricity-driven hot water systems before, the utility rates aren’t going down. The solar electrical systems are a longer term investment for the buyer, which is why she does both.)

She isn’t offering you a job, just network effects: advice, counsel, hooking up with people who know how to do this who can help you get started. You’d be your own boss.

You’re aware that more and more of the world’s oil and gas supplies are coming from more expensive sources, which means the price for these isn’t coming down anytime soon. (The more expensive sources not only use more capital more quickly and use more operating monies to process the product, they also go downhill faster and produce less net energy per unit invested — guess those “crackpots” talking about peaking might have been on the right track after all, since that’s what they said it would be like.) Even electricity costs more each year. So Jill might be on to something with legs.

But why isn’t she going for the gusto, and rolling out a nationwide company?

Then you realize that keeping it small and local is part of keeping it out of the same waves of trouble that MegaCorp might be heading toward. Sure, as a small town local business, it’s got limits, and so you can’t take that much out of it in pay.

But it’ll be there for years and years — in fact, the harder it gets for the rest of the economy, the more likely it is this will continue to find business.

Different people react differently to different situations. Many would choose Mike’s opening: it comes with a name brand, a title, big bucks, all the items that make the people you meet at receptions and conferences go “ooh! wow!” when you answer their “where do you work?” question.

Jill’s suggestion, on the other hand, won’t impress most anyone — but if it’s security you’re after, it’s probably got more in it (even despite that nasty statistic that four out of five start ups don’t make it to age five that keeps being flashed about) than MegaCorp ever could.

That’s not how it was twenty years ago.

As you perform your own personal due diligence, make sure you’re not operating with an old instruction manual for the world. Really look at what’s going on, getting underneath the surface. It’s the only way to judge, for yourself, whether Mike or Jill is pointing you in the right direction when opportunities come to your door.

And, if you’re having trouble seeing the world clearly, that’s where we come in. Give us a call or drop us an email — let’s talk.

The beat of a different drummer

If you were contemplating a road trip to a destination that was out of the way and out of the ordinary, you might consider buying tickets for a performance of the Ballet Folklórico de México in Mexico City. You can make the 4111-kilometre (according to Google Maps) trek from the Greater Toronto Area in 39 hours non-stop.

As part of your preparation you’d factor in time to refuel, rest, eat, sleep and detour around road construction while being mindful of check-in times at hotels and motels. You’d want to remember one-hour wait-times for Canada-US and US-Mexico border crossings. You’d prepare your car or trailer or SUV and pack travel and insurance documents, prescriptions, emergency names and telephone numbers, appropriate currencies, a valid passport—and your tickets.

Ballet Folklórico de México is real. The trip is a metaphor for the road from suburban Formal Education through Greater Metropolitan Work to Retirement Park. The second road is longer and more winding than the one to the Ballet. You won’t find an endpoint on a metaphoric map, no signs telling you how soon you’ll arrive. But these two things you will know for sure: (a) one day you will arrive; and (b) the world in which you’ll find yourself won’t be the one our grandparents wanted for our parents and our parents wanted for us. That world has changed. Making the trip with no safety net, no destination, no road map and no guarantee about being able to retire comfortably, if at all, won’t bring it back.

PDD has no crystal ball. What we do know for sure is that governments and individuals march to the beat of very different drummers and that they, too, have no crystal ball. But people have bills to pay today and they’re worried about tomorrow.

PDD marches to the beat of your drummer and your family’s. We understand the process that transforms facts into information and information into decision-making. We’ll show you how to evaluate the economic upside and downside in the career or educational plans you may be contemplating. We’ll review your conclusions with you so that whatever choices you make you’ll make with your eyes wide open. Your choices, not ours, are the only ones that matter.

We’re neither career counsellors nor financial advisors. We represent over 180 years of business experience, each in our own, distinct discipline. We want you to be in a position to understand how your work- and education-related options look and what to do about them. What we share with you will be yours to keep. We work at an hourly rate you’ll find affordable.

Like OnStar™ or the CAA™ or AAA™, PDD will be there to answer your questions and point you in the right direction when the need arises. Call or write to us and we’ll be happy to tell you more.