Some three decades ago the mantra was to go paperless. This was to be the office of the future. I remember working at a high tech company then, when the order went out to go paperless only to find out that the information that everyone was supposed to be on top of was not being actively monitored. With computer files at ones fingertips it seemed like a waste of time, paper, and money to print things out when they could be brought up on one’s screen at any time in a much more efficient manner. Actually the transition from paper to electronic document management has not solved the problem to quickly find the documents needed.

Fast forward to today. Many people are not reviewing what is not printed out for their inspection in hard copy. To get everyone’s attention they need to be on the preverbal same page. I recently experienced this at a meeting with one of my clients. We were going over delinquent accounts receivable payments, but not everyone was seeing the problem in the same way. Some people were focusing on a problem client they were responsible for, another person was working with the bank to increase the line of credit, did not know the dynamic growth of A/R and another was focused on something else entirely. The problem stemmed from the fact that there was no aged accounts receivable report printed out for their inspection at our weekly meeting so everyone could see the same A/R document with notes. They could discuss what was happening: who was in each of the 10-30, 31-60, 61-90 and 90+ DSO categories. Nor was there any prior report to compare to and see whose A/R was rising, who was slipping from one category to the next and what action was being taken from the comments section. We went from everyone operating independently to working efficiently together at each meeting, discussing red flags, monitoring their progress, prioritizing their actions, bringing down their DSO and living within their LOC.

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It is important to know what the economy has in store so business can plan ahead; hire to expand or cut expenses, borrow money or payback loans, etc. We have had sustained economic growth for the last 6 years+. Some economists think that it’s time for another recession. This is based on the fact that something seems to upset the apple cart every 6 years since 1960, or 8 years since 1982. The 2 longest expansions have been 9 and 10 years. Opinions regarding another recession run from a 10% chance (by the Fed) and 25% (by JP Morgan) and by Bloomberg news predicted a 65% chance last year, though the stock market did fall due to lower oil prices, which was thought would to cause a recession (recession generally causes oil prices to decline, not the other way around). In fact no one knows what will really happen and these forecasts as good as a 10 day weather forecast.

Recessions can’t be timed like the old faithful. There are underlying factors that cause a recession and nothing lasts forever, sooner or later some events will precipitate a recession. Here are a few that have led to the recent few downturns: wild market speculation (like the dot.com/Y2K bubble and housing booms): raising interest rates and tight money; oil price changes; high unemployment; unfunded borrowing; defaulting on our debt: financial shenanigans; the failure of large financial institutions (S&L’s, investment banks like Lehman Brothers) as well as key industries like autos; etc.

High growth (5%+) eventually cause a recession like in 1981, 1990, 2001 and 2008 vs. a more sustainable growth of 2-2½ % which we are having now. Modest sustained growth would reduce the chance of a near term recession. But the conditions that led to the sub-prime mortgages and derivates recession has not fully been dealt with. And there are always new and unrecognized risks (purple squirrels), i.e. cyber and physical terrorism, war, political instability, natural disasters, etc.

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As a decision maker and leader, do you have to balance the interests of sales as well as finance, or do you simply allow sales to do whatever they believe is necessary to obtain business? Most well run companies set parameters as to what kind of orders sales can take, which are to be passed on and where discussions need to take place first.

One of the problems often is that the parameters for sales are rigid. For example, our minimum margin on new orders must be 25% for all sales under $50,000, and no less than 20% for orders over $500,000. The first potential problem is, is the customer a good credit risk for any amount of sales at any margin rate at all. Accounting should have certain credit policies in place to determine if the client is credit worthy in the first place. This is a simple form of checks and balances that is often ignored. If the client is not credit worthy, the sale can still be made, but not on standard credit terms of say 30 days. They may be required to pay in advance, or put the order on a credit card, or have progress payments, etc.

Another factor may be the company’s ability to finance the cost of the service being provided. Say that this is a labor intensive operation where you pay your employees weekly and don’t receive payment for 60 or 90 days, without a sufficient line of credit or cash reserves you may grow yourself into bankruptcy before you every get your first check. Your finance department should be able to let you know if you have the financial strength to even take this order.

Then we have the issue of what is a fair margin and which orders you need to take to keep the doors opens vs, which are too high to be competitive. If you are trading dollars that might not be a good idea, unless you are trying to break into lucrative account or serving an important client which sales is in better position to assess then accounting or finance. If you are on the other hand charging too high a price you may be opening up the account to your competitors, unless you are providing value added services which saves them money, their quality and service make pricing a moot point, they have a special relationship with the client, there are other factors at work which again sales would know in order to justify a high price, etc. But there is no harm in accounting asking these questions and letting the decision maker or leader decide what is in the company’s best interest.

Being in business is by definition taking risk, but there are sensible and not so sensible risks. Nevertheless, when sales and finance/accounting are both involved in the process there is less of a chance for mistakes or oversights.

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In case you were off the planet for the past year, you might have noticed that the world has changed. The old standbys of the “establishment,” experience and wisdom is out of favor and has been replaced by some radical thoughts that these traits don’t matter very much when it come to the levers of power and running the country. These changes could have important and long lasting ramifications for businesses and employment.

The stock market which is off some 10% even though profits are up, the cost of oil which is down 70% tends to increase income as well as disposable consumer spending. And over the last decade profits are up 42%, yet a paradigm shift has been taking place. Nevertheless people are upset and for good reason. The problem lies in wealth distribution. Over a protracted period of time, millions of people have been left out in the cold during this period of prosperity and are now angry and demanding what they believe is their fair share of the gains. The rich have gotten richer and the poor and lower middle class have not prospered much at all.

Usually only in periods of great unrest and desperation, like the 1930’s depression did the US flirt with radical ideas such as Communism and in Europe did the great state of Germany give power to the National Socialist Workers Party. It is true that special interests have had undue influence in Congressional legislation at the detriment of those without clout and financial power. The danger is in the throw the bums out approach, is far too risky for the most critical country which is the United States. Radical ideas will greatly impact economic issues, taxation, social agendas, but also in dealing with world affairs and diplomatic relations. Elections are not a game show. Letting untested and risky proposals take hold have unintended consequences for the US which is the lynch pin of the world. The line from the movie Network, “I am mad as hell and will not take this anymore” was entertainment and not intended to be played out in the real world. For sure reforms need to be made, but in a reasonable way. Some politicians have used these problems to serve their own interests and set one group against another.

Untested policies will likely impact the economy and employment in unpredictable ways with a high probability of unfavorable and unintended consequences. Do we really think we can bring back low skilled jobs that were lost due to higher labor costs and outdated plants will not be closed once again? Do we really think that a $15.00/hour wages across the board for everyone is feasible? Do we not think that a country with a government in gridlock is a bad idea? Do we not think we can create tariff barriers without retribution to our $1.5 trillion in exports? Do we really think those unpleasant agricultural and menial domestic jobs mainly done unskilled immigrants will be taken up by Americans? As we restrict access to the US, do we not know that immigrants’ spawned hundreds of new industries from Sergey Brin (Russia) who co-created Google and Elon Musk (South Africa) founder of PayPal, Tesla and SpaceX, back to Andrew Carnegie (Scotland) who founded US Steel? And do we really think we can dictate to other world leaders what is only in our best interest?

We need leaders who will not sell out to special interests and are not looking to set themselves up for a high paying private sector lobbying gig. Reforms do need to be enacted, but by trustworthy representatives with experience we can unite the country.

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For sure many people’s wages have stagnated due to the realities of the new normal economy. One simply can’t compete where manufacturing wages are so low that no amount of increased productivity can make up the gap. Even China can’t compete with the likes of Vietnam. Thailand and the Philippines which is 50% less than even China. Thousands of Northeast US factories closed long before offshoring, during the 1970’s Sunbelt relocation. India’s tech wages are some 20-25% below ours which is where much of the help desk and lower level support have gone. That may be unfortunate but it’s a realty; make a profit or go out of business. Many people who have lost their jobs or stagnated, due to factory closure or technological changes, and have not upgraded their skill set and have been left behind. To give these people a false sense of hope that the happy days of the 1960’s will return is a fable and a cause of unrest in the populace. There are 4 solutions, 2 good ones and 2 bad ones. 1: Get retrained in a viable occupation. 2. Enter the growing workforce as a temp. 3. Stay in a stagnant job and occupation and accept reality. 4. Be angry, blame others and get nowhere.

To get ahead one should get retrained for a higher paying job with a future. Here are just a few jobs not requiring post graduate degrees: Nurse Practitioner $110K: growing 33.7% by 2012 with 37K new openings; Software Developers $93K up 23%, 140K openings; Dental Hygienists $71K up 33%, 66K openings, Physical Therapists; $113K, 33% growth, 44K openings, with many more in the tech and healthcare sector. Outside these areas are substantial opportunities: Market Research Analysts at $114K salary/year, Marketing Managers at $123K, Accountants at $65K, School Psychologists at $68K, Mechanical Engineers at $82K and Operations Researchers at $75K.

Then there are temps job which can provide entry into full time corporate jobs. Temp jobs have grown at a compounded rate of 5½% or almost over 2½ times the general employment rate overall, with a workforce of over 3 million, up 340K over the last decade.

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When it comes to a general audience, client, prospect, or new hires this becomes particularly dangerous ground to tread on. In certain parts of the country it may feel safe to express generally widely accepted beliefs, but just a few outliers in the group may lead to unforeseen consequences. An employee at one of our client companies in a major south central city was working into his conversation with customers and prospective employees his person views on various political issues of the day. Although many of the people he spoke with were of a like mind, a significant minority of the people he engaged in conversation felt that his comments were inappropriate and turned them off on him and the company. In addition some of his calls were not even business related, but was using his connections simply to express his thoughts on political issues. The owner had been aware of this situation as well as his lower efficiency, but until she was encouraged to examine his poor performance related in part the way he was conversing with others, she did not see a relationship. It was simply easier to retain the status quo situation. Eventually she explained that this type of communications had to stop. The employee decided to resign and we replaced him with someone who avoided these sensitive areas and our results improved.

The country has become much more polarized and it is better to stay away from controversial subjects that have nothing to do with business. In addition, in our highly litigious and politically correct society, these kind of subject areas can be taken out of context and can become the basis of a law suit and attendant legal fees or just plain bad publicity.

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The average turnover rate of sales reps is 26% with 10% of the sales force often being disengaged. Well managed companies trim the bottom 10% of their sales reps each year as they are either not paying for themselves or a better person can serve in their place. The cost of replacing a sales rep is approx. 38% of their salary. The top ¼ of sales reps typically generate 57% of a company’s new business, while the lower ¼ had a new reduction in sales. One can breakdown retaining sales reps into three phases.

HIRING Social media and Boolean searches narrow the field for prospects, but referrals from trusted sources often bring the best results. Testing to weed out people is a good start, while reference checking is rarely useful. There is also no substitute for in depth interviews to get beneath the veneer of a good first impression, really successful companies like Google take this to an extreme.

MANAGING Training new sales reps in your culture, how you do business and your standards of performance is essential and having new reps work alongside an experienced solid producer helps. There is no substitute for the innate talent of a sales personality, either you have it or you don’t. Nevertheless, “what is measured is respected” in terms of productivity and efficiency. We will discuss how you can convert sales metrics into both margin $ generated and motivational comp plans

MOTIVATING Everyone needs something to turn them on. For sales reps it’s always about the money, but having a good company culture, recognition, competition and perks are very important. We recommend having a modest but competitive base with a high commission that contain steps and escalating risers where you can properly reward the best reps with win-win comp and retention plans

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Recent surveys have indicated that a third of all employees are always on the lookout for a new job and twice that ratio are still fielding offers during their first few months of joining a new company. Chalk this up to a combination of wanting more responsibility and advancement opportunities, wanting a more compatible workplace environment, being with people they like and a proper balance with their work and leisure time. This is not like their fathers credo of wanting a secure job where they didn’t have to worry about being laid off after the next and inevitable downturn in the economy, keeping their nose clean and being seen as a productive and loyal employee.

Today’s employees are young, Gen Y and Millennials who have also been called the entitled generation. They are educated and tech savvy and have been generally rewarded for just showing up. They have been told that everything they do is just great and most importantly they have not really experienced adversity. They feel that their employers’ job is to make them feel fulfilled and there is always another and better job around the corner if their present one does not suit them. Many corporations are guilty of reinforcing this attitude themselves in a competitive marketplace for people with talent; real or not. Needless to say, not everyone 20 or 30 something fits this stereotype, but enough do so that there is enough of this mind set to warrant both finding “good” employees and having a supply of bench players ready to step in when attrition sets in.

Having said this, how much bench strength is enough? For a company with lots of money, profit and in a strong growth mode, they can afford to have a substantial surplus of staff on the sitting bench, learning and doing enough work until they are needed to be on the first team. But for the typical company where money is tight and the national average runs from 3-5% per annum, a good rule of thumb might be to have 4-8% of the staff as productive benchwarmers. If your turnover is high this should be adjusted accordingly, particularly for highly skilled and critical positions and a high portion of Millennials.

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A recent book called “Leadership is Half the Story” has been making the rounds. The basic tenet of the book is that if one is not the leader they can still be very influential in a support role, sort of like the power behind the throne.

The standard company model may be that if one is not the chief honcho they should go elsewhere to do their thing. Well, to start with there are only so many CEO jobs to go around and most people can get more done by playing a critical support role. This is not to be mistaken as a blind follower or yes man who just doesn’t want to make waves and carries out whatever the boss says, rather this is a skillful team member, often the number two person in the organization. They are confident self-starters who through careful maneuvering can bring out the best in their boss without making that person look indecisive or inept.

We have worked this process in the past with generally good results. It starts with the process I call mutual discovery, whereby one does not bring a fully formed solution to the CEO and ask them to approve it, which is ham handed and often seen as a threat to the CEO’s usually substantial ego and/or intelligence; i.e.: “why did I not figure that out before; am I stupid? A better approach is to deliver a set of facts and alternative set of actions that when analyzed in private with the boss, the alternative that the number two person has put into the mix obviously is seen as the best choice without rubbing a possible poor decision the CEO could have made in their face. But the boss has become the decision maker via this process of mutual discovery, without having to be told what to do. He or she is usually smart enough to understand the finesse demonstrated by their number two person, who becomes a trusted confidant.

Let me provide an example. The company is ready to do an acquisition into a new field. This has long been in the planning process and sold to the team. The only problem is that times have changed and what was a static environment is no longer, with a new technology that will very likely make that deal a very bad one. You as the number two person have just put all the pieces of the puzzle together which no one was fully aware of before, but the CEO has however gone out on a limb, sold the deal, obtained the financing and is ready to go ahead. However, instead of bursting forth with your discovery which might make you look smart at your boss’s expense, you roll out all of the newly discovered intelligence in private, cobbled together very carefully through a variety of sources and let him look like the hero in squelching a bad deal due to his new insight.

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There has been much written about what traits it takes to make a good entrepreneur who starts their own business vs. perhaps the many people ideas of a Fortune 500 Company CEO’s. Entrepreneurs are not necessarily the earth shaking innovations like Bill Gates, Steve Jobs or Mark Zuckerberg, but the ordinary person with a need to start their own company because they think that they have a better mouse trap or simply want to work on their own and have enough self-confidence to think that they can make it independently.

Of course not all entrepreneurs are the same, as not all large Company CEO’s are cut from the same cloth. But here are some generalities. Entrepreneurs tend to be introverted. They are usually self-confident, risk takers, are creative, have high energy and passionate about doing their own thing. They have worked for others long enough to know that they are not the typical corporate types who find self-satisfaction and are energized by their relationships with others. They find working on their own and interacting in small groups gets more results. They cultivate working relationships with others and solid networks, do the time consuming analytical work and work synergistically with other likeminded people rather than just having social friends. Does the name Buffet come to mind? This is not to say that extroverts cannot start out as entrepreneurs and become very accomplished people, but for the extreme extrovert getting to the top, having power, boasting about their accomplishments and wealth and wining the adulation of others is their real goal. Does the name Trump come to mind?

The introverted entrepreneur has a limited tolerance for small talk, meaningless meetings and is fulfilled when being in charge of their own destiny. They don’t need the reinforcement of others to validate their opinions or status. Although they are not hooked on social media, they welcome the validation of their ideas by those they respect. Many are engineers who by their nature are introverted and creative would love to do their own thing, but the majority are not techies, just people in general just are not risk takers and are more concerned about security. But most entrepreneurs are not techies, just people who believe that they can get more accomplished on their own.

A good and successful entrepreneur has a plan as well as a backup strategy. They are constantly checking how things are going and willing to modify their actions accordingly. They will create prototypes, test market new ideas, maintain a feedback system and use whatever tools they need and can afford to make either sure things are going as planned or make necessary changes. They know how much money they have to spend and watch their remaining funds carefully as they move ahead. This is not to say introverts are all successful entrepreneurs; far from it. But most successful ones are focused (introverted) on their business.

To see all articles in this series please go to http://optimal-mgt.com/blog.