The Right Stuff About Buying a Franchise – Lesson 5: Your Accountant is God

Yes, I mean it.  It is not rhetoric or hyperbole but is truly grounded in reality.  Your accountant or financial adviser is God (or very close to it!).

 

I began with the best of intentions.  My former accountant was a well-meaning guy with a number of small businesses in his portfolio.  His specialization, however, was the not-for-profit sector.  Their philosophy and that of this budding franchisee could not have been more different.

 

Believing that I should ground myself in all aspects of the business, he encouraged me to purchase bookkeeping software and complete all of the data entry associated with paying suppliers, receiving books at the store, processing credits, and so on.  Unfortunately, not only did I struggle with accounting at college, my desire to undertake such laborious processes was even more underwhelming now that I was distant from academia.  Thus, I let the bookkeeping drift while hoping that it would sort itself.  While the elf may have repaired all of the boots in the old fairytale, nothing of the sort would occur for me.

 

You see, I am a book keeper, not a bookkeeper!

 

Before telling you about the inevitable disaster that loomed over me, allow me to digress briefly to discuss the value of a franchise-familiar accountant prior to making the decision to buy a franchise.  In short, an experienced financial adviser is worth gold to you.  They can review the most important metrics underlying the success or failure of your proposed business and put their finger quickly on the flaws in your thinking.  If it is an existing business, they can spot whether the owners have been paying themselves a reasonable salary, whether they have or have not been squirreling funds between accounts to create the perception of inflated profits and revenues, and let you know if the value placed on the goodwill of the business is reasonable or overstated.

 

Oh, how I wish I had received that type of advice at the time!

 

Okay, back to my disaster.  While I was keeping up with paying my suppliers, my cash reserves were rapidly diminishing.  Cash is the lifeblood of any business and is the very heart and soul of every small business and franchise.  Despite sales revenues looking okay, I was losing the battle to stay afloat.  In addition, while not completing the critical accounting tasks, I was also neglecting to return overstocks to suppliers, a fatal sin for any bookseller.

 

I was just about ready to throw in the towel when I received a phone call from the franchisor.  A new employee in the accounting department had spotted a major error.  Every month since I had purchased the business I had been sending in a check to cover my royalty payments and advertising levies.  At the same time, my franchisor had been direct debiting my bank account for the exact same amount each and every month.  I had been paying the franchisor double and no one had spotted it.

 

When the head office employee stated that I was about to receive a refund of almost $30,000, I could hardly speak, such was the feeling of relief.  When I phoned my wife, who teaches part-time rather than working in the franchise, she cried.  While not nearly as naturally emotional as I tend to be, she had been sharing the same strain.  We shared tears of relief.

 

Now, I have an accountant who services the financial needs of three other stores in this franchise network in addition to mine.  He knows all of the ins and outs, can organize the leasing of new equipment, and can complete the critically important financial deliverables on which the franchisor relies.  Not only that, Doug drops by the store every few days to pick up my paperwork and discuss any financial matters that either he or I need to resolve.  He makes sure I pay my taxes on time, processes the salaries of my staff, and keeps a supportive eye on me, the financial luddite.

 

So, while it may be an overstatement to equate Doug with the holy father, it is nonetheless that he was an overdue answer to prayer.  For your own peace of mind, find a Doug at the outset!

The Right Stuff About Buying a Franchise – Lesson 4: Are You an Entrepreneur or a Frentrepreneur?

Many people buy a franchise because they want to work for themselves.  The phrase, “I want to be my own boss” is often the first on the lips of budding franchisees.  However, buying a franchise is arguably a step back from pure entrepreneurship.

 

For the pure entrepreneur, consider someone such as Richard Branson, now CEO and majority owner of one of the biggest and most admired companies in the United Kingdom.  From a very young age, Branson always sought to go his own way.  His first business venture was a student newspaper he started from scratch, a business he later sold to a multinational company for a tidy profit. 

 

Richard Branson considers himself to be a business and brand creator, someone who can reshape an industry through both innovation and an incredibly strong commitment to seeing things from the customers’ perspective.  By better responding to meet their needs than anyone else in the sector, his Virgin companies almost always carve out significant chunks of the market.  Clearly, Branson could never work for anyone else and, in fact, has never done so.

 

In the United States, Donald Trump is a superb example of an entrepreneur who always demanded total control of his business and his future.  While he worked with and for his father Fred, a Brooklyn-based real estate developer, during his college years, Trump created The Trump Organization during his early 20s.  His aim was to create the instant perception among potential clients and customers that his corporation was far more significant and expansive than it appeared, even though at first he was its only employee.  Like Branson, Trump has long been a lone ranger who has always needed to maintain primary control over any business venture with which he is associated.

 

If this approach is also your own favored approach for getting into business, buying a franchise may not actually be for you.

 

In summary, the franchising organization retains substantial control over what you can do, how you can do it, and when and where you can do it.  This information is contained in the franchise agreement that every new franchisee must sign.  While the restrictions on your behavior will differ from one franchisor to the next, the motivation for such constraints on your freedom is common to all.  That is, they are seeking to ensure that their offerings are standardized to the highest possible extent and that they maintain maximum control over their empires. 

 

If you have ever read Michael Gerber’s excellent book, The E-Myth, you will understand why this is so.  Developed appropriately, the policies and procedures to which you will be subject serve both franchisor and franchisee in positive ways.  They ensure that customers who visit any of the franchises receive similarly high levels of service.  They ensure that franchisees don’t drop their standards or personalize them in ways that compromise the franchisor’s reputation and brand.  Most importantly, they are designed to ensure that anyone with a reasonable degree of intelligence and a commitment to hard work can achieve them, thus limiting the reliance of the franchisor on the vagaries of individual brilliance and talent.

 

For the franchisee, the rules under which they operate limit the risks associated with starting a new business, since they are less likely to make dramatic mistakes.  Their potential customers may be already familiar with the brand and its characteristics, thus making it easier to develop customers and patronage.  Many decisions, particularly those associated with marketing, purchasing, and the creation of IT systems and databases, may be out of the hands of franchisees, therefore encouraging them to focus their efforts on building sales.  In all likelihood, franchisees will also benefit from the buying power and managerial support provided by their franchisor.

 

If this is more your ballgame, you are what I call a “frentrepreneur” rather than a pure entrepreneur.  Yes, you retain many of the characteristics of the traditional entrepreneur and likely associate yourself with their stories, but you act within a somewhat different operational context.  In essence, you deliberately choose to trim your wings in the knowledge that you will likely fly longer than other birds, recognizing too that you may also not get to fly as high as they do.

 

While accepting the downsides, this can still be a personally rewarding and totally appropriate business decision.  The world is full of franchisees who remain enthusiastic about self-selecting into a franchise system rather than starting from ground zero.  In fact, I walk past one every day, a bakery and pastry franchise, who proudly stated to me that he is the nation’s highest revenue franchise.  Not only is he delighted about this achievement, he is clearly making a great deal of dough with his dough!

 

In buying a franchise, it is therefore essential that you first examine yourself, your motivations and your relative need for control and autonomy before concluding whether you are an entrepreneur or a frentrepreneur.  In whichever industry you are exploring, ask existing independents about the benefits and costs of remaining outside a franchise group.  Also, ask current franchisees about the pluses and minuses that they consider to be part and parcel of being a franchisee.  It is only after you’ve reflected on this information that your true identity, as entrepreneur or frentrepreneur, will become clear.  Armed with this self-knowledge, a critical early decision will have been made.

The Right Stuff About Buying a Franchise – Lesson 3 – Do Your Homework Better Than I Did Mine!

The Right Stuff About Buying a Franchise – Lesson 2: Will You Make Money?

In late 2007, I purchased an existing franchise bookstore whose revenues had dropped by about 30 percent during the previous four years.  The owner and his wife were genuine sellers, having already relocated to another part of the state where they were to care for a seriously-ill relative.

 

I was confident that I could restore its glory.  After all, I had doubled the membership, revenues, and staff numbers of a real estate industry association just before buying the bookstore.  I knew how to revitalize a business.  Surely I could do the same for the bookstore, right?

 

Well, yes, or at least a qualified yes.  Revenues are now approaching their former highs as a result of some very long hours and the implementation of some innovative marketing strategies.  Yet, for all this, I haven’t realized significant profits to show for this effort and these outcomes.

 

Why not?  Because, in the case of books, and probably for a heap of other products, the economics of the business model work against the creation of lucrative outcomes.  I was reminded of this by an insightful quote in the wonderful book, The Guernsey Literary and Potato Peel Pie Society by Mary Ann Shaffer,

 

“I love seeing the bookshops and meeting the booksellers—booksellers really are a special breed. No one in their right mind would take up working in a bookstore for the wages, and no one in their right mind would want to own one—the margin of profit is too small. So, it has to be a love of readers and reading that makes them do it—along with first goes at the new books.”

 

So, it’s a tough business.  But we each have to work at a place we find interesting, feel enthusiasm for, and is within our span of knowledge and expertise, don’t we?  For me, this had to be the world of books, particularly since I can’t fix or repair anything, am a dolt and a luddite when it comes to anything technical, and have had a love affair with books since my childhood.  Added to that, I self-selected into a lower-risk, lower-returns industry by buying a bookstore rather than something newer and more glamorous.

 

Nonetheless, it seems to me that the vast majority of franchise business models are designed with the primary expectation that it is the franchisor who will benefit most.  They pass most of the potential risks on to the franchisees, require the franchisees to undertake almost all of the “grunt” work of the business, and are not especially accountable to their franchisees except in an indirect, relatively weak manner.

 

Yes, they are required to monitor the health of their franchise networks, provide opportunities for franchisees to get together, and create marketing and logistics support for their franchisees, but these are arguably less onerous, less risky, and less committed tasks than those demanded of franchisees.

 

If it’s prosperity you seek, there are a few options you should consider.  Otherwise, you will find yourself in the very large pile of mom-and-pop franchise owners who have bought themselves jobs but do not achieve the returns deserved from their labors.

 

First, you can get in early and buy a franchise in an industry or niche in its early to late growth phase rather than one in its late maturity like the book business.  McDonald’s in the 1970s, Subway in the 1990, and fruit juices, salads, and sushi bars during this decade are all examples of this phenomena.  Cast your creative minds toward the growth curves of the new wave of franchises.  Perhaps there are businesses available that help people better manage the finances they have (or don’t have) that will be in real demand as the economy contracts.  The fitness and health sectors are likely to continue to grow at impressive rates, while services for our aging baby boomer generation will undoubtedly mushroom during the years ahead.  The earlier you are in, the more that you can take advantage of the above-average margins earned by those facing fewer direct competitors in the short to medium term, and the more that you can establish yourself and take advantage of further opportunities to purchase additional franchise stores or territories before the rest of the world learns about the money to be made there.  Of course, there is a higher level of risk here, but higher rewards usually follow if the risks pay off.

Second, you can snap up existing franchises with low-ball offers that may be accepted, with a little luck, by those desperate to sell.  In this way, you won’t find yourself taking years to pay back the goodwill that may or may not have been in the business you have just purchased.  I definitely paid too much goodwill for my store, adding years of additional work to pay it down.  In contrast, I know of one colleague who has recently added a second franchise to his existing store.  His timing was great for both stores, and he paid little more than the value of the inventory he was acquiring.  For him, there is a much greater potential upside than there is for me.  Live and learn, right?  

 

Third, you can scout around to see if there are any franchisors offering more of a win-win deal than those who cream off a flat rate of your revenues.  In my view, a truly abundance-focused franchisor would take less of your hard-earned cash as you scale up, and then a higher percentage as you move beyond your break-even to increase your overall margins.  I’m not sure if such franchisors exist, but if I was just starting out I would certainly check this out.  If you have already decided on your industry, I would also closely examine, from every angle, the slice of your money taken by all of the existing franchisors in the industry before settling on any one.  Don’t forget, 8 or 10 percent of your gross revenues may not seem like a lot, but when it is considered next to your bottom-line, you quickly realize that every dollar given to them is one that you won’t keep.  It is a dollar you can’t use for local promotions, a dollar you can’t use to pay yourself a higher salary, and a dollar unavailable to pay down your business loan.  You will never see that dollar again.  Consider this fact very, very carefully and understand its serious implications for your business and your lifestyle before buying your franchise.

 

Finally, you can always take on some extra work outside your franchise or establish another business to help bring in some extra cash.  This is not without its potential problems, however.  Any time spent elsewhere may take your eyes off your most important asset, your core business, and thus compromise your most critical business outcomes.  In addition, your franchisor may not look at your outside work in a benevolent way.  Check the franchise agreement carefully and, if in doubt, discuss it with someone you trust in the franchisor’s organization before moving outside the business.

 

If you are going to go the extra mile to make your new franchise a success, think very carefully about your expectations for the bottom-line.  If they are unrealistic and inconsistent with the likely profit flows from your business, you may quickly jeopardize your own morale and that of your people, sending the business into a downward spiral.  With some solid homework, however, you will enter and run the business with a healthier business philosophy and with more realistic expectations for its results.

The Right Stuff About Buying a Franchise – Lesson 1: The L Word

Location.  Location.  Location.  It’s true.  Location is the most critical factor in the success or failure of any new franchise business, and most other businesses, for that matter.

 

Some franchisors have locations already available for the consideration of potential franchisees.   Some facilitate the purchase of existing outlets in established locations from franchisees looking to sell.  Others may leave the choice of location entirely up to you, although they will normally keep a watching eye on your choice.

 

When I returned from teaching an MBA class in New Venture Creation at Utah State University in 2001, I explored franchise ownership for the first time.  I had enjoyed teaching about franchising and had enjoyed excellent customer experiences at franchises such as Subway, Cold Stone Creamery, and Boston Market.  At the time, none of these brands were established in Australia in any meaningful way.

 

Thus, soon after our return, I attended a Subway meeting for potential franchisees held at south-western Sydney.  After Subway’s Regional Manager informed us that franchisees must first select their own location, I discussed with him two possibilities I then had in mind.  To the first, he said that the site, a shopping centre under construction, was already taken by a new franchisee.  My second suggestion was a regional shopping centre then several years away from development.  Unfortunately, it too was taken, this time by an existing franchisee in a nearby area.  Since I had no other good alternatives, I let the idea drop for a time.

 

I got back on the franchise horse via the purchase of an existing bookstore franchise in late 2007.  Fronting a pedestrian plaza in the middle of a regional business district, I confirmed the value of its location by sitting out front of the store and counting customers as they entered and left one afternoon.  I counted both buyers and browsers for about 20 minutes.  The numbers looked good.

 

Looking back, they were good, but perhaps not as good as I had first hoped.  Why?  Because I had observed the store during that time of day when it was, by far, at its busiest.  It was lunchtime, and I have learnt since then weekday lunchtimes, from noon until around 2:00pm, can account for 70 percent or more of the day’s takings.

 

Therefore, while the store continues to perform well, it would work a whole lot better if the lunchtime crowd was representative of customer flows and revenues across the entire day.  It’s not, and that’s life.

 

At another time in the recent past, I created two temporary retail stores at other locations, taking advantage of the busy pre-Christmas period to sell as much as I could in as short a time as possible.  The first was again at a place disproportionately favored by the lunchtime crowd, however the rent and overheads were sufficiently low to make the economics of the store work in my favor.  It did pretty well.

 

The second store was much larger, something all retailers would normally see as a huge positive, however the building itself was isolated from the main center of a regional shopping mall.  While it received plenty of passing automobile traffic as they entered and left the car park, the effort required for shoppers to actually come across to the building worked against its success.  While I didn’t lose money on the deal, I had paid a much higher rental for the site in the hope that the additional space would mean higher sales.  I was wrong.  It was not nearly the goldmine I had hoped it would be.  Ironically, the building had formerly been a Boston Market, a franchise that didn’t last long in Australia since it didn’t catch on.  Perhaps I should have learnt from their failure at the site some years before.

 

The other day, a friendly supplier gave me a great piece of advice.  He said that the target for any new retail store should be an average of 15 people walking past the location every minute.  While I suspect that many stores may still succeed with fewer pedestrians than this, it is a great “rule of thumb” against which we can evaluate any locations we are seriously considering.

 

This is the kind of research that only you can undertake.  Franchisors will cover themselves in legalese to ensure that they are not held accountable for any preliminary estimates of customer numbers and turnover.  The owners of shopping malls will do the same.  This is a job for you. 

 

Learn from my mistake.  If it is an existing site, survey the traffic flows at various times of the day and at different days of the week.  If you are thinking about an entirely new site, find comparison shopping centers and malls that have similar demographics to yours and a similar mix of tenants and make counts of the shoppers walking in and by stores like yours.  You will need to allow for the fact that the center may have grown its traffic over time, whereas a new mall will take time to pull a crowd, particularly in today’s challenging retail environment. 

 

If you get it right, however, a great location will ensure that your franchise business is a true boomer rather than a business which is here today and gone tomorrow.

Can Good Leaders Be Good Everywhere?

Richard Branson’s latest book, Business Stripped Bare (Random, 2008) is, like Losing My Virginity, an absolute cracker.  For business leaders and entrepreneurs, it provides some marvellous examples of entrepreneurial success and failure as well as a great deal of food for thought.

It is thanks to global business leaders like Richard Branson that we can drill down into the roller coaster world of the global entrepreneur.  It is also thanks to Branson that we can see how business leadership can be infused with a sense of humour, a truck-load of passion, and a focus on working backwards from the real needs of the customer.

The Virgin empire extends from planes and trains to credit cards and mobile phones.  It has successfully diversified in an era in which diversification was viewed as a strategy of last resort.  Despite growing to become one of the globe’s biggest companies, Virgin’s corporate culture retains the energy and dynamism of its founder.

One of Branson’s most powerful insights is that even the most complex of businesses should be reducible to a simple understanding of its key elements.  If, like the failed dot coms of the last decade, it remains complex and impossible to understand, it is thus either shrouded in the mists of jargon and technocrap, and thus ripe for a new entrant or, at its core, is fundamentally flawed.

On this basis, none of us should be scared about learning the ins and outs of a new industry, winnowing our deepening understanding into a progressive search for new business opportunities.  Branson records, for instance, that he learnt the basics of running a new airline in just four months,

Four months to learn how to deliver an airline.  Not easy.  But definitely doable.  Those business leaders who seek, in interviews and in their writings, to turn their industries into complex puzzles…these people really, really annoy me…To listen to them, you’d think you must be born into an industry to make any headway in it.  And this is rarely true unless you are truffle hunting…The volume of information you’ll need to hack through will be high…but the underlying business model is always fairly simple.

For entrepreneurs, this is great news.  With hard work, you should be able to understand the mechanics of an industry and detect who is doing well and who isn’t.  Poorly or unmet customer needs will often arise as you undertake your homework.  Opportunities to establish a start-up, buy an existing player, or form an alliance may well appear.  Alternatively, you may conclude that the returns of pretty much everyone in the industry do not justify your further efforts and capital.  If so, nothing dramatic has been lost.

For business leaders and executives, however, I think that we need to take care in applying the Branson philosophy across the board.  Consider the Coles Supermarket brand in Australia, for example.  Coles has long sought to match its major competitor, Woolworths, in its offerings, customer service, and brand image, but has yet to succeed.  Recently, it was purchased by Australia’s Virgin-equivalent, the diversified Wesfarmers Group, however it has not shown any serious signs of improvement.  Prior to the Wesfarmers takeover, it had given a high-profile and highly-respected business leader, John Fletcher, the time and resources to bring it back to health.  Fletcher, however, could not sufficiently improve an extremely tired corporate culture and declining brand.

In the global context, consider too the business career of “Chainsaw Al” Dunlap, who rode on the coat tails of a slash-and-burn philosophy that had appeared successful at Sunbeam in the United States and at Kerry Packer’s Australian Consolidated Press.  Appointed to save the languishing paper products giant Scott Paper, however, he failed miserably. 

The lesson for executives is that we must seek to match strength to context.  If a leader’s philosophy and style do not align with the array of variables together contributing to outstanding outcomes, all may be lost.  Some of these variables, such as the global and national economic environment, the support of one’s board, and the availability of key personalities to complement and support the leader’s approach, may be wholly or partially outside one’s control.  At times, an organisation’s decline may be terminal, impervious to whatever the leader tries.  Just this week, the giftware firm Wedgewood, as old as industrial life itself, sputtered to an end for this very reason.

So, while the critical ingredients for great leadership may be true everywhere – commitment, passion, ethics, and so on – these may be necessary but not sufficient ingredients for great leadership outcomes in specific situations.  What is missing?  Being in the right place at the right time and, perhaps, a dollop of luck.  Hardly the things that can be taught in MBA schools, but the reality of the messiness, and excitment, that is organisational life.

The Relevance of Our Management Theories for China

Last week I had the privilege of giving two and a half days of management education to HRM managers from China’s Customs Department.  What an amazingly part of the Chinese Government that must be, especially given the phenomenal growth of China’s trade during the last two decades.

My teaching philosophy has changed in recent years as I have reflected on my experiences living in China last year while teaching at a university in rural Henan Province, as well as having taken teaching visits to Guangzhou during 2000 and 2002.  I am now certain that our most popular theories of management and leadership must be taught cautiously and with qualification in the PRC, and perhaps with similar caution in other parts of Asia.

To start with, the Chinese culture is, for the most part, radically different to that of North America, the UK, much of Europe’s, and Australia’s.  To recall Hofstede’s influential studies of cultural difference, the Chinese are high in their long-term orientation (a value Hofstede referrred to as the “Confucian orientation”) and power distance (expressing an ongoing preference for centralised power), medium in uncertainty avoidance (that is, they prefer more certainty over less, but not as strongly as elsewhere), and low in individuality.

In contrast, Australians are extremely high in their focus on the individual (rather than the collective and group) but much lower than the Chinese in power distance (Australians consider themselves egalitarian), uncertainty avoidance, and in the possession of a long-term orientation (for most of us, a month is the long-term!).

So, consider a few examples.  Maslow’s hierachy of needs, for instance, starts with the assumption that individual needs are important.  Try telling that to someone who subsumes their own needs to those of their families, living in far-off cities and living as modestly as possible in order to send as much money home as may be spared.  The Maslow pyramid also suggests that our ultimate need is to “self-actualise”, or to truly fulfil our potential and desires.  As far as I can tell, there is no direct translation into Chinese for the concept of self-actualisation.  It’s focus on individual fulfilment as the ultimate end has historically found no basis for comparison in the Chinese culture.  While there may be exceptions as some aspects of Hollywood culture seep into the behaviour of young Chinese, the reality remains that meeting one’s own needs is a flow-on benefit from first meeting the needs of one’s family, not an end in itself.

Let’s consider another example.  A great deal of western leadership theory relies on notions of shared power and empowerment, as well as a distinct preference for a good dollop of decentralisation of authority and responsibility.  In the vast majority of Chinese organisations, you may as well be recommending that they trade sandwiches for rice in the lunchroom.  Deep within the Chinese culture, taking root over many centuries, the philosophy of knowing one’s place, doing one’s duty, and seeking to rise up from one level to the next on the basis of one’s seniority and loyalty to boss, organisation, and party, continue to take great predence over pursuing any of the perceived benefits that may arise in a less rigid approach.

Thus, while some movement towards western practise has been detected by organisational researchers, particularly in the offices of some multinational corporations, across-the-board evolution is sometimes slow, often patchy and, in many locations, non-existent.  Yet, the vast majority of MBA and similar programs in China use western textbooks translated directly into the local idiom.  While there may be the odd example of a Chinese company, theoretically the books reflect the view that western theories may be transplanted without reflection or adaptation.

I do hope that this changes in time, since to do otherwise does a disservice to the Chinese students of our programs and the fields of leadership and management more generally.

The Meaning of Success

What is the meaning of success?

Our culture defines success as having achieved all there is to achieve, as amassing all of the assets one can amass, and as earning as much as is humanly possible during our alotted three score and ten years.

In his book How to Get Rich (Ebury Press, 2007), British entrepreneur Felix Dennis ponders this critical question.  Over four decades, Dennis has established a global magazine empire valued at hundreds of millions of pounds.  Beginning with nothing in the 1960s, he springboarded off a biography of the late kung-fu icon Bruce Lee to aggressively dominate the market for computer magazines before diversifying into other segments of the publishing industry.  His mens’ magazine, Maxim, remains one of the most popular in the world.

While the business grew, Dennis spent years in a self-professed life of debauchery, wasting millions of pounds on wine, women, and drugs.  These days, he oversees his empire from afar, living on the Caribbean island of St Vincent, writing poetry and feeding stray cats.  He is, he says, generally content.

Felix Dennis performs a great service in his “anti self-improvement” book.  He lays the process of getting rich before us, as well as its associated costs, in brutal starkness.  He tells us that we will not become rich if we lose focus, nay, obsessiveness, in our pursuit of success.  He states that there will be significant costs in the journey.  We may lose friendships and will inevitably destroy those relationships we would now claim are of most value to us.  We will inevitably become harder, coarser, and more uncouth.

Will riches make us happy?  Dennis responds resoundingly in the negative,

  I am now very rich.  Am I happy?  No.  Or, at least, only occasionally, when I am walking in the woods alone, or deeply ensconced in composing a difficult piece of verse, or sitting quietly with old friends over a bottle of wine.

Further, he argues that the rich are generally an unhappy lot, so exhausted by the demands of others to share their wealth that they become paranoid and insular, turning inwards and finding solace only with those who share their burden, their similarly-wealthy friends.

In spite of these claims we recognise for their inherent truthfulness, many of us remain on the treadmill of success and riches.  Our culture and our mind screams at us that only in achievements and possessions can we find true meaning.  Only in glorifying in our status and our money can we truly self-actualise.

Felix Dennis concludes that it has all been very much a life of chasing the wind.  Too much time is wasted in the chase.  He would gladly give you or I every penny of his wealth if we could give him back his youth and, that rarest of resources, time.   Accordingly, to those who are young, he says, you are infinitely richer than I can ever be again.

Instead of engaging in such meaningless, costly pursuits, perhaps a healthier approach is that outlined by Timoth Ferris in his wonderful book, The 4 Hour Workweek (Random, 2007).  Ferris would say that Dennis approached his quest for riches arse-about.  Rather than moving with the vague notion of “getting rich”, potentially creating a never-ending quest as we pursue a rubbery definition of “rich” that ratchets up as our lifestyles demand, we should first begin by defining how much we need each week and month to sustain the lifestyle to which we reasonably aspire. 

Thus, rather than needing $10 or $20 million to afford the lifestyle residence, holiday homes, and first-class travel, we need only enough cash to sustain a comfortable residence, holidays based on rentals and lower-cost destinations, and sufficient funds to buy our way out of the 60 and 80 hour weeks currently killing so many of us, one way or another.

Having a nice lifestyle is not impossible, even when we wish to also maintain our friendships and intimate relationships.  It means, however, that we should redefine success and its fruits in a new way.  To paraphrase Stephen Covey, we must begin our quest with the end in mind.

The Last Word on Office Affairs

On Channel 7 this week, we saw the last episode of Alan Sugar’s UK version of The Apprentice.  The series, originally shown in the UK in 2006, saw Michelle Dewberry, a 26 year-old telecoms consultant, snatch victory from the hands of Ruth Badger, a hard-talking and tough sales consultant from England’s north.

Checking to see what became of Michelle Dewberry following her victory, I was astounded to read that she’d had a fling with fellow contestant Syed Ahmed during filming, and appears to have continued the relationship for some time afterwards.  In fact, several months after The Apprentice, Dewberry miscarried Ahmed’s baby.  On this basis, the fact that Dewberry picked Ahmed as her second choice team-member in the last episode is far less surprising than it might have been.

This raises the question of office affairs, an issue especially relevant as we radidly move toward the season of office Christmas parties.  Are they acceptable or unacceptable?

Unless two singles with no other attachments and who don’t work directly with each other happen to meet and develop a relationship (which is something different to an affair, since an affair implies that the relationship is occuring in secret or alongside existing attachments), the bottom line is that office affairs are always out of order. 

For those already attached, someone (or more than one someone) will be hurt, often catastrophically.

For those whose work is negatively affected by the relationship, the coupling is both unwelcome and unhealthy.

If the affair brings down the productivity and personal effectiveness of those involved, it is similarly unhelpful.

This one is close to home for me.  My late father began an affair with his secretary some years before I was born.  When I was six, he left home for the last time, subsequently marrying his secretary and moving away, wanting little to do with his former life.

In a possible echo of my father’s life, I was once tempted in a similar fashion.  Thankfully, sense prevailed, after much angst, and I can happily say that my 18-year marriage to Wendy was strengthened rather than diminished through this challenging time.

Why are office affairs more common than they once were?  First, we live in a culture that encourages us to move on to the next model of whatever it is we value.  Don’t like your car?  Upgrade.  Don’t like your house?  Borrow some more and move up?  Don’t like your wife?  Trade her in or carry on illicitly.  Second, family law has evolved to the point that divorce need not be anybody’s “fault”.  For anyone who strays, that means that they can keep half of their assets even though they may have been almost completely responsible for the breakup of their partnership.  The “progressive” Family Law Act of 1975 is behind this outcome.  Perhaps that’s why my father left in 1974 and divorced in 1976!

Perhaps most importantly of all, we tend to spend much more time in the office than we once did, expect to build friendships and solid relationships in the office, and build our identities around our professions and our status in the organisational hierarchy.  So, we are less often at home, exhausted and grumpy when we are, and rarely feel the satisfaction from tasks at home than we take when given a promotion or bonus or pat on the back at work.

For us aging guys, the possibility of an illicit affair can also create excitement in that potentially challenging middle period of our lives.  It can remind us of our virility, of our perceived attractiveness, and of our continued standing as “masters of the universe.”

Bollocks and tosh.  In reality, it is a failure of self-discipline and a victory for the boys within us, still demanding to be kings of the playground, to be envied as ”the guy with the best girl in the class”.  It is an indicator that there are significant parts of us yet to mature to adulthood.  It is a sign that parts of our lives require radical reshaping if we are to reach old age with any shred of dignity and self-respect.

That’s a tough call. 

It’s also a true call.

I’m with you.

Corporate Crap and Leadership

A few months ago, I brought a guest CEO along to an MBA class I was leading.  Don Grover is CEO of the Dymocks Group of Companies, a privately-held, diversified corporation comprising significant holdings in the rural and commercial property sector, in addition to Australia’s oldest and best-known retail book chain.

One of Don’s comments stuck with me.  He stated that ‘leaders who fail are often the ones who start to believe their own bullshit.’  In other words, leaders need to keep their feet fully grounded in reality.  They also need to understand that their feet are made as much of clay as the next person’s.  When power corrupts and pride prevails, however, this is far easier said than done.

One strategy that can help corporate leaders to remain rooted rather than “rooted” is to remain sceptical of the latest buzzwords and jargon.  The old game of “Buzzword Bingo” for non-managers to use during boring, jargon-laded meetings had more than an dollop of truth.  Words and phrases like leverage, core-competence, synergy, and value chain were progressively bent out of all shape, becoming hollow excuses for meaningful communication.  Similarly, picking the low-hanging fruit and stepping up to the plate are still bandied around with joyful abandon.

There is another beauty I’ve extracted from today’s Sun-Herald.  The Premier of NSW receives public sector correspondence on pink paper.  Where the Premier wishes to receive a departmental briefing, a bureaucrat had decided to publish such requests on paper of a lime colour.  Thus,

When pinks are prepared in response to limes, the lime must be clipped in front of the pink.  The pink, with lime, should be submitted as usual…Once approved, the executive officer ODG wil copy and deliver the lime to the appropriate member of the Premier’s office.

Before those of us outside the goverment sector chuckle too loudly at such bureaucrap, consider some of the rubbish being written by HR professionals (recently lambasted by Leo D’Angelo Fisher in Business Review Weekly):

Once attracted, if emplloyees are not transitioned into a seamless, tailored, proactive and evolving retention program, employers will not retain their team members in the long-term…Our approach to employee retention is based on a fluid employer branding strategy, which is open to change and adaptation pending ongoing feedback from our team members.

Why does anybody continue to write such nonsense?  Because it keeps them in a job.  Because information is power.  Because manure-heaps of unclear sentences provide rules and guidelines and policies and procedures that can cover nicely cover one’s arse at the first sign of trouble.  And, in a corporate environment in which odd-balls can take offense or sue or complain at the first sign of conflict, such reasoning contains a certain logic.

That doesn’t excuse it, however.  Whilever corporate crap continues to flow, customers are queueing and our most critical external relationships are flagging.  Inefficiencies are mounting, productivity is plummeting and, as time passes, moving against this indefensible nonsense becomes more risky and less appealing.  As we move into more challenging economic times, it will thus take smart, tough leaders to sort this out.  Fiefdoms will need to be dismantled and those whose work is no longer moving the organisation forward will require redirection, assuming that they can provide future organisational value.  If not, their worth must be questioned.

Do it.  Unless you do, your organisation will drift through the coming recession with less flexibility and resilience than ever.  Challenging periods actually provide the best possible time for the style of leadership that redirects and renews.  The starting point is to cut to the chase and confront the crapsters with brutal directness.  It also demands that we confront ourselves with our own crapster tendencies.  How often do we resort to the inane and the cliched when avoiding the hard work of meaningful communication? 

As always, real change starts with each of us.  Only then can we expect anyone else to take our views seriously.

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