Abonar’s Blog

Great team, great leadership, tremendous skill and a 1^st place finish in the regular season. We had everything we needed to win the title this year, but we got knocked out in the semi-finals. What happened? We played well but still lost. Sometimes you can’t explain the dynamics of sports and just like in business things don’t always go as planned. So what next? What do we take from this failure? What’s most important is realizing that failure is “part of the game” and not to dwell on the “loss”. Instead it’s important to learn from these experiences, what you did well and what could be done better next time. It’s how you respond that matters.

There are a lot of competitors out there and you’re constantly trying to figure out how to put together the right pieces to achieve success. You have to continually evolve and change as time goes by. For example, the playoffs are a different game than the regular season. It’s a higher tempo game with tighter checking and less room for error. When things are going well, you don’t think you need to change things up and individuals often get complacent. But when competitors come out with new ideas, technologies, or more efficient ways of doing things, it might be too late to respond. You always have to remember. What works now, doesn’t guarantee success in the future.  You have to continually try to improve, even when things are going well. Focus on improving your weaknesses and build from your strengths. You have to be able to adapt. When the competition knows what you’re doing, you need to change things up.

Business, like sports and many other things in life, involves success and failure. After speaking to a lot of business owners, I realized that almost every single one of them had experienced a business failure at one point in their careers.  What was common between each one of them was that they didn’t give up. The lessons they learned from their “losses” were valuable in helping shape their actions in the future. And they didn’t blame their failures on bad luck. There was always something they could have improved on or done differently. They also didn’t make excuses. My hockey team was short players, but that’s part of the game.  There are always things that are out of your control. A downturn in the economy, new competition and many other variables can negatively affect your business but great companies are prepared for these risks.

It’s important not to let a business failure deter you from trying again. I know my father was involved in a business early in his career but after it failed he never talked about business again. It just wasn’t him. He wasn’t a risk taker and didn’t want to risk failing in another business so he went back to his 9 — 5 job. I’m not saying it’s a bad thing. Business isn’t for everyone and given the high failure rate of businesses it’s reasonable to be cautious. But if you want to succeed in business, you have to realize that it won’t come easy and failing is a realistic possibility.

Over the years, I’ve realized the path to success is often failure and it’s the lessons learnt that are key to success in the future. So keep your chin up guys, we’ll be back next year.

Congratulations! You are about to begin an exciting chapter of your career. Your power and responsibility have surged. Regardless of how much training you’ve received, there is no substitute for experience. I’ve seen a lot of supervisors get off on the wrong foot. Some survive this, others don’t. Here are some of the most common errors of new supervisors and how to avoid them. Like with all safety rules, these tips are written with the blood of the victims.
Mistake #1: Confusing supervisor with tyrant
Many new supervisors get stressed by the thought of being responsible for a staff of several people. One way they deal with this stress is to impose ridiculous rules and controls. These tyrants will demand to know everything happening with staff and require approval of any and all decisions. This is probably the worst mistake, and sadly, one of the most common. It is common because it is caused by fear.

This guy has definitely made mistake #1.

Before supervising, these new people were only responsible for their own performance. Now they are responsible for a whole department! It can also be caused by a misplaced sense of prestige associated with the promotion. When faced with a tyrant, employees react by reducing effort, avoiding the supervisor and sometimes quitting or transferring out of the department. This behaviour can escalate to insubordination and even outright mutiny.
You can avoid this trap by assuming your staff knows what they are doing, or at the very least, are adults who can figure things out on their own. Your job is to manage the department, not the individual tasks. Instead of thinking up rules to control your employees, think of the objectives of the organization. Once you have established this, present issues to your employees and get them to help you solve them. I guarantee they will come up with better, more innovative answers that you will. In addition, you will break through the resistance they will have for your “half-baked ideas.” Just be sure to give credit where it is due.
Mistake #2: Doing everybody’s work
Many employees are promoted because they were really good at their jobs. When they become responsible for a department, a natural reaction is to do or revise the work of all their employees. This comes from their best intentions for the company. They want all the work of the department to be to their personal standard. The troubles arise from the fact that time and energy are limited, and supervisors that do this become bottlenecks. In addition, employees will reduce employee output because they will rightly assume that any mistakes will be caught.
The way to avoid mistake #2 is to take a long-term view of employee work. Sure, all workers were not created equal and there will always be errors to deal with. If you share these issues as teaching opportunities, you will get employees to take ownership over their output. If you manage your employees’ performance this way, you will move towards your department’s long-term goals of higher output and quality.  Again, regardless of your energy and talent, you cannot out-perform your entire department.  Your job is now to get the best performance from your employees.

This supervisor is guilty of making mistake #1, but nobody could accuse him of mistake #2.

Mistake #3: Being a pushover
Many new supervisors try to avoid mistake #1 by trying to be friends with the staff and not rocking the boat. Mistake #2 can sometimes result from this. Supervisors promoted from within the ranks  are susceptible to this. In addition to being weak with employees, supervisors can face undue pressure from managers or other supervisors. You may be asked by a manager to discipline an employee based on the manager’s dislike for them or an old dispute. While this mistake doesn’t have the problem of pitting the employees against you, if you are a pushover, you aren’t doing the job you were given. If you don’t manage your staff, why does the company need a supervisor at all?
Mistake #3 is intellectually easy to avoid but emotionally difficult. Nobody wants to discipline his or her former peers, but sometimes the job requires this. You must be principled when you do this. Employees realize that there are parts of a supervisor’s job that aren’t pleasant. Many of them have passed up promotions because they don’t want to deal with the tough job of supervision. As long as you take action based on the principles of the organization, you will gain your employees’ respect, if not their total agreement. When assigning tasks, tell your employee what needs to be done instead of asking them if they feel like helping out. In dealing with the manager that wants to use your proxy to settle their score, remember that the employees report to you, not the manager. If he has a legitimate issue, then deal with it. If not, remember, just because the manager has a problem doesn’t mean that you have one.
If you are able to avoid these three mistakes, you will be in a better position to succeed than the vast majority of new supervisors. This should give you enough time to learn your new role and get really good at it.  Good luck!

There are many reasons people look at going into business for themselves. It could be that they hate their current job and yearn to be their own boss. Maybe a tradesperson feels that he or she could run a better business than the company they work for. It’s important that people go into business for the right reasons. Failure lurks around every corner and if someone is in business for the wrong reasons, he or she is much more susceptible to it.

There has been some research on what makes an entrepreneur successful. One study found that the entrepreneurs they interviewed had the following charactoristics in common.

1. A propensity to take risks
2. A need for achievement
3. A belief in one’s ability to control the outcome of a situation
4. A tolerance of uncertainty
5. Self-confidence
6. Innovativeness
7. A need for autonomy

In my experience, these charactoristics are useful in running a business. Different people have them to different degrees. Some of these charactoristics are developed in the business owner as he or she becomes more experienced. The Business Development Bank of Canada, a federal crown corporation, has an online quiz that will test you in the attributes above.

It is important to have a passion for the industry the business is in. If someone starts a business based solely on where the best possible financial returns are and without passion for the space, it will be very difficult to succeed. Things will get tough, so tough that only a passion for the business can carry the business person through. A person without passion in this situation will quit before they become successful. Very few businesses become successful without experiencing a period of adversity.

It is important to have the right foundation in place before getting started. Most new businesses won’t be able to pay a predictable salary to the owner right away. If a business owner has an expensive personal lifestyle, he or she needs to be prepared to reduce that lifestyle to one the business can support.

A person starting a business also needs to be able to contribute cash towards the start of the business. Every business needs some cash to get started. The amount can vary widely depending on the nature of the business, from a few thousand for a home based business to millions for a manufacturing business. Some of this needs to come from personal savings, while the remainder can come from borrowing against personal assets or through business loans.

Family support is essential. Starting a business takes a lot of time and financial sacrifice. Starting a business without complete, informed buy-in from your spouse and family will lead to a lot of stress when things become difficult. This will compound the problems the business is having. While it is necessary to put some money at risk when starting a business, a business owner should never take a risk so large that failure would wipe his or her family out financially. Sure there are those stories of the plucky entrepreneur who maxes out his credit cards to start what becomes a billion dollar business. Unfortunately, the guy who did the same thing but had his business fail and push him into bankruptcy, costing him his marriage, never gets any press. He represents the vast majority of people that try this move.

Starting a business is difficult and requires a lot of hard work, but it can be very rewarding for those who prepare themselves well to accept the challenge.

When looking at ways to improve businesses, managers have resorted to many methodologies over the years. People around long enough remember Total Quality, Just In Time, Manufacturing Resource Planning and their modern counterparts: Six Sigma, Lean and Enterprise Resource Planning. While we have heard of the companies that have benefited greatly from these efforts, it’s more common to hear about firms implementing them with disappointing results. Why would these powerful techniques work for some but not others?
In addition, people debate whether Theory of Constraints (TOC) or Lean is the way to improve their business. The answer you get depends on whom you ask. Lean practitioners will tell you that Lean is the best system and will give a great list of successful implementations. TOC professionals will tell you that much of the effort expended on Lean is wasted because it never impacts the bottom line.
Velocity is a book by TOC professionals Dee Jacob and Suzan Bergland, along with the original co-author of The Goal, Jeff Cox. Velocity tackles the question of TOC versus Lean combined with Six Sigma in the form of a business novel. It describes Hi-T Composites Company, already using TOC being bought out by Winner Inc., a company using Lean/Six Sigma.
The authors describe how the Winner Lean/Six Sigma team began to implement their programs in Hi-T. They saw the extra capacity around the constraint and the extra workers in the constraint area as waste and began reducing this waste. When results were disappointing, the implementers said that results would come when the implementation was complete. After a year of floundering, the President of Hi-T found herself in jeopardy of losing her job. When she was given three months to turn the company around, she assembled a team that used current reality trees and the five focusing steps to reestablish protecting the constraints. Once they did this, they saw the benefits of the Lean/Six Sigma efforts — the non-constraints now had more surge capacity and they were able to solve a chronic product quality problem that led to increased sales. The title of the book, Velocity, is what the new system was called. In physics, velocity is defined as speed with direction. The Lean/Six Sigma was the speed component while TOC determined the direction.
Below is a table describing some of the key differences between the two methodologies.

So what is my answer to the question Lean or TOC? Why not both? TOC on its own is great at setting priorities for the firm but can fall down in the implementation stage. Lean/Six Sigma are great tools, but lack the focus to find the best projects. If you use TOC to determine the constraints and use Lean/Six Sigma to improve them, you can get the best of both worlds.

Most people don’t know Marcel Lacroix’s name, but anybody who watched our Canadian Speed Skating team at the Olympics saw him coaching our athletes. My kids are at the Olympic Oval in Calgary this week in a speed skating camp. He is giving talks to the kids about what it takes to get to the elite level of the sport. As I listened to his talk, I drew a lot of parallels to business and the challenges our clients face in getting to the top of their industries.
Participation Versus Commitment
Marcel has worked with many athletes and puts them into two general categories — participants and competitors. Participants typically have a lot of skill and natural ability. They tend to like the sport and have fun. They usually don’t fulfill their great potential, as they are satisfied with moderate results. They are happy to make a team, or make an event. They are happy to “get the jacket.” The second type is the competitor. The competitor may start out without the skill and natural ability of the participant, but makes up for it in passion, hard work and sheer determination. Competitors love the sport and push themselves and their coaches to be as good as they possibly can be. Marcel cites Christine Nesbitt, Olympic Gold Medalist, as a competitor. When he started coaching her, Christine was extremely strong but was not a good skater. Together they worked on her fundamentals and eventually were able to transfer her great strength to the ice. She took everything he set out for her seriously and put in maximum effort to reach the podium in Vancouver.

Christine Nesbitt accepting the gold medal, 1000 m speed skating at the 2010 Winter Olympics.

Quality Versus Quantity
The second main point Marcel made was quality versus quantity of work. He would much rather have a skater do two laps in perfect position than 10 laps in poor position. He said that practicing the wrong things makes you good at the wrong things. Practicing in the right form will build your endurance in the right form.
Work on Weaknesses
Third, he said that to improve, you need to work on your weaknesses. If a skater has good endurance, but lacks balance, her times will greatly improve if she improves her balance. This is analogous to a manager elevating the constraint in the business instead of improving areas that won’t improve throughput.
Finally, his recipe for success comes with a series of short term goals leading to the eventual goal. If a skater and coach can map out a series of short term goals that are challenging, yet achievable, they can reach their ultimate goal. This is very similar to the flywheel concept described in Jim Collins’ book Good To Great.
So how can Marcel’s advice help you in growing and improving your business? Firstly, you should ask yourself whether you are a competitor or a participant. While there is nothing wrong with being a participant, a competitor is required to reach the full potential of your business. Work on your weaknesses. In business, you can buy a remedy to your weaknesses. Improving them will hit your bottom line. Thirdly, having a roadmap to your ultimate goal with short term goals along the way is extremely powerful.
Marcel Lacroix is available to give talks to groups to share in person his recipe for success. You can reach him at lacroix@ucalgary.ca

Franchises are attractive to the first time business owner. They are sort of like one of those home theatres in a box. The business owner doesn’t have to pick individual components and make sure they work together. The franchisor has already determined all of that. The franchisee has to take the training, follow the instructions and the business should operate successfully.

This can be true in many situations but not in all of them. Franchises should be investigated with a level of due diligence that compares to that done for the purchase of an existing private business. You are going to be investing a lot of time and money into this franchise so make sure you have your eyes wide open going in.

The first thing I would consider is the strength of the brand. Is the brand so strong it will automatically drive sales? Is it just a regional brand that has no customer awareness in your area? The answers to these questions will have a big impact on the value of the franchise and the effort you will have to expend to build business.

How strong is the management system? Is the system really strong in that all franchised outlets are run identically with a consistent customer experience or is there wide variation between locations? How well run is the franchisor’s head office?

What is the return on your investment? Will you get a sufficient return for the risk you are taking? There is no point getting involved in a franchise to basically buy a job for yourself. You could take a job somewhere and get paid the same amount with no investment at risk.

Look at the overall industry and identify any trends that could affect you. Are there competitors that are starting to rise up to provide a real challenge? Talk to franchisees and get revenue and cost data from them. Don’t rely on proforma financials from the franchisor.

Talk to your banker. If the bank has a formal franchise package for your particular franchise that is a very good sign. It means that the franchisor has a relationship with the bank and there might be buy-back agreements or other agreements between the two parties that will make your loan application process much easier.

Most of all, make sure you have a passion for the business. If the business doesn’t interest you, it doesn’t matter whether it’s a franchise or a private business, you won’t have the drive to succeed during the tough times.

Picking the right banker to deal with can make all the difference when it comes to get financing for your business. You might think that picking the right bank is the most important thing, and while it’s important, picking the right individual to deal with is equally important.

The first thing I would look for in a banker is experience. Unfortunately, age does not equal experience. When banks have difficulty filling a commercial account manager position, they have been known to persuade one of their personal lending staff to take the job. These personal lenders are usually very good at their jobs and they know their way around the bank, but it takes experience with business lending to be really good at the job. Personal lending is based a lot on credit scores and well defined rules, which makes lending decisions straightforward. Businesses vary widely between industries and because of this, a simple decision model for lending isn’t possible. Commercial lenders have a lot more responsibility for coming up with a decision on their own.

Commercial account managers don’t have very much lending authority at the branch level so most larger loan requests will go to a regional risk management centre for approval. Having the respect of the credit managers will get a commercial account manager the benefit of the doubt when a decision is close. It takes some experience to gain this respect.

Take a look at the branch where you are considering doing business. If everyone is under 30, it implies that the bank has trouble hanging on to staff in that location and you may not get the most capable service. It’s like a hockey team; you need a few veterans around to make sure the job gets done when things get tough.

Business knowledge is a very important attribute for a commercial account manager. This can be gained on the job but real world experience in business can be a great help in many instances. This is particularity true in specialized lending like real estate or agriculture. Don’t be too worried if your banker does not have direct knowledge of your particular business. For example, if you are a manufacturer, your banker might not have direct knowledge of your product but he or she might have knowledge in other manufacturing that he or she can apply to your situation. Remember, your banker doesn’t have to run your business, he or she only has to know how to lend to it.

It’s important to have good communication with your banker. Invite him or her to your place of business for a tour. It’s a lot easier to lend when he or she has seen what you do firsthand. It’s even more important to keep in contact with your account manager when things are going badly. Everyone wants to see you succeed. If your business fails and you can’t repay your loans, everyone loses. Your banker won’t give you consulting advice, but if they feel your business is viable in the long term, they will adjust financing and payments to help get you through a difficult time.

Take time to pick your bank and your banker. There is a cost to switching banks and a long term relationship can be worth a lot.

On Friday, I bought a 2004 Nissan Maxima off a dealer lot.  It’s a nice looking car that filled my requirements – price, space, perceived reliability and safety.  While this is all fine and good, it doesn’t make for an interesting blog.  How the deal was made makes for a much more interesting story.

On Friday afternoon, I decided to move to the next step in the buying process.  I had done the research and test-drove the vehicles I wanted.  It was time to float some offers.

I had the search lowered to five vehicles and called in the order of personal preference.  I asked the first dealer (Bill*) to give me a cash price.  He told me that he wasn’t budging an inch on price, saying he had already reduced it and was getting ready to retire in 3 weeks.  He also sold another one just like it that day.  He was confident that he would get his price.  If I didn’t like it, tough.  So much for the first choice.

An artist's depiction of me car shopping.

The second choice was the same make and model, with fewer options and higher kms.  When I called the dealership, the salesman, Jake, turned out to be somebody I knew from years ago.  After some small talk, I gave him a cash offer for the car.  He told me he would run it past his manager and would call back.

The third call I made was to a dealer selling a model a year older than the previous two.  I made a cash offer, and like with the second car, Tom told me he would run it by his boss.

The Response

Jake called me back saying his boss accepted the offer but was adding a $250 inspection fee.    This was within my wiggle room so we made the deal.  About 20 minutes later, Tom called back and told me that his boss accepted my offer.  I told him that he was 20 minutes late, and thanked him for his assistance.  It turns out that I didn’t harm them because he had another buyer interested in the car.

Lessons

So what did I learn? Here’s what I took from the experience:

• I am an amateur car buyer and I was dealing with professional sales people.  If you call our interactions a battle, I’ll admit I was outgunned.  I tried to mitigate this disadvantage by dealing with as many dealers as was practical.
• I picked Friday afternoon to try to assert some pressure on the salesmen.  In Spin Selling, Neil Rackham explains how this pressure can push people to a buying decision.  I thought that the prospect of a cash sale on Friday afternoon could induce a better deal for me.  It’s hard to tell if it made a difference.
• For all the analysis I did on this purchase, it’s impossible to deny the psychological aspect in coming to a decision.  There were several things that got me into buying mode.  The first was sitting in the Maxima earlier in the week.  When Tony** was trying to scare me into buying a car with 130 air bags, I remember sitting inside the car and thinking, “this is really nice.”  The second came when Bill told me he wouldn’t budge on price and he just sold a car just like it.  This jolted me to get moving on some offers on cars I like.  Bill and Tony didn’t get the sale, but they pushed me down the line to a purchase.  In fact, I might have helped Tom sell his car by instilling some urgency in his alternate buyer.

In our professional practice, we tend to use our research, skills and experience to help our clients come to a rational business decision, be it buying or otherwise.  All of that can go out the window when a buyer’s lizard brain kicks in with fear, lust or greed.  If you think as your higher brain functions as an advisor, the limbic system, or lizard brain is definitely the boss.  The boss is the one who ultimately signs the cheque.

*Like last week, names have been changed.

**See Part 1.

Two weeks ago, my car was flooded in a flash rainstorm. It’s a 1998 Honda Accord with 280,000 km on it and I bought it new. That car is by far the best I ever owned and I was pretty sad to see it go. It was as inexpensive and reliable as it gets. Here’s my experience so far.

The day started with my visit to the insurance adjuster. When I first sat down, he appeared be pretty nervous. After the regular pleasantries, he went over what they were going to pay out. We made some adjustments based on some options they missed, but I could tell they used a rigorous process to determine the value of the car. I told him that it sounded fair and a look of relief washed over his face. He then told me about how a number of clients came in owing $30,000 on their vehicle and getting $22,000 in settlements. No wonder he was nervous about this.

Now with my cheque in hand, I went out looking at vehicles. I had spent the last couple of days looking online and had a fairly good idea of what I was looking for – 4 door family sedan, $10,000-$15,000, Japanese brands. I’m not anti-Detroit, I just put a lot of importance on reliability, and I know these brands have the best reputations.

Here's who I have been dealing with for the last couple of days.

The first place I went to was a brand new dealership. The “sales office” was a trailer and the salesman was as new as the dealership. It looked like he was happy to have a customer and took me through the vehicles that might interest me. He took down my information and promised to hunt around his network for what I was looking for.

Next I went around to a number of dealer lots in Saskatoon. Although these were firms in competition with each other, their sales tactics differed immensely. The first salesman, Jerry*, is a veteran of car sales and has sold every make and model of car over the years. I went there looking at a car that I found online. I took it for a test drive and when I came back, we had a very interesting conversation. When I told him why I wanted used, he started giving me the same story that the adjuster told me earlier — people are buying new cars and getting the most car they can afford based on the largest monthly payment they can withstand. He told me of how a number of his customers still owed several thousand more than their trade in allowance and stacked the debt on their new car loan.

The second salesman, Mike, was the manager of the used car lot for a very well established, large dealer. The car I went there to see had just been sold, so I decided to inquire about how business was and how motivated they were to make deals. I asked him if it was a slow time of the year for them. He replied “no, this is actually a very busy time for us.” Although I was the only person on the lot, his answer made it clear — “This isn’t my first rodeo. Don’t try to get cute with any lowball offers.” I went to a couple of other lots where nobody even came out to make contact with me. That seemed to imply that they weren’t appearing too eager. That, or their sales staff called in sick.

Finally, the one guy I thought did a poor job was Tony. When I told him what I was there to look at and why I was car shopping, he told me that it was a great time to buy because car safety was so much better. He showed me a car whose price was $3000 higher than the car I came to see. He tried to engage my lizard brain by painting a mental image of my family in a car accident, and how that difference was so small compared to the safety of my family. Tony also said that he would feel bad about selling me the other car. He said, “I don’t want you sitting in your new car looking at other cars thinking ‘Boy, that’s a nice car.’” He mistook me for somebody that puts a lot of self-esteem in the car that I drive. Although these tactics were a miss for me, I can see how this can get others in a buying mode.

So now I have looked at hundreds of vehicles online, test drove several, and have made a short list to make offers on. What has this experience left me with?

• None of the sales people I talked to buy new cars for themselves. Their business is to know the value of cars versus their price. Because of the huge depreciation of new cars, they make for a bad investment.
• These guys are adept at the psychological aspects of selling and negotiating deals. They want to ensure that they have the upper hand in the deal.
• There are a lot of ways to sell cars that will work. I saw three different approaches in one day. The one that appealed to me was the guy who was honest and generous with his time.

Now the fun begins when I start talking deals. I’ll see if I can make a good deal by being aware of the rules these guys follow.  Stay tuned for how I make out.

*All names have been changed to protect the innocent and guilty.