Tough Love in Your Business

What do oil and water and family members who are employees in your small business have in common?

They rarely mix and are frequently toxic to the environment.

Although it should be noted that there are of course occasions of success, the most likely outcome is entrenched employees that are nearly impossible to remove, strained relations and uncomfortable holiday dinners. In fact, you could probably make an argument that it is easier to remove a unionized government employee than a family member who is your employee.

I recently read an interesting article that deals with this topic in the New York Times on February 11, 2010, entitled “Fire Your Relatives. Scare Your Employees. And Stop Whining” by Kermit Pattison. (Click here to read).

While some of his suggestions may be too aggressive for your average small business owner, they get right down to my point.

As a business owner you are either in it to win it or you are not.

Which are you?

This article was written by Jay Kossen, CPA at Numerico, PC. Click here to view Numerico’s website.

Is it a Rat Race?

Business is war. It’s a jungle out there. Never give a sucker an even break. Nice guys finish last. It’s a dog-eat-dog world. We’ve all heard at least one of these bits of wisdom in our lives. Some of us even use them on a regular basis to describe business or personal philosophy. Though they are effective and hard-hitting, there’s one basic flaw. Each one of these statements is premised on the idea of business or personal relationships as a fight to the death.

Though the idea of life as an endless struggle or fight for survival is romantically appealing, it’s not very efficient. Those who go through life in this way waste so much energy and time waging short-term battles that they lose the long-term war. In this case, the long-term war is productive change.

Though you can force some productive change through continual frontal assaults, there are more efficient means of accomplishing your objectives. It is shortsighted to handle all challenges with the same tactic. Different situations require different methods. By understanding the environment around the situation, you can use tactics that blend into and solve the conflict harmoniously.

If a conflict is solved in a way that creates discord (future conflict), then the situation hasn’t been resolved. You may think you have come out on top, but the conflict will usually be revisited, with much more intensity. Your short-term gain will produce long-term pain, either for you or for the other parties involved.

A basic law of the universe is that “for every action, there is an equal and opposite reaction”. The universe demands that equilibrium is maintained. Imbalances have a way of righting themselves, with the unknown variable being the time it takes for resolution. If we push a situation toward further imbalance, the time table is accelerated. The greater the imbalance becomes, the greater the force against us.

The principle of avoiding negative conflict, yet accomplishing your objectives, is the essence of a martial art called aikido. In aikido, the aggressor’s strength is never met head-on. Instead, the aikidoist, yields to the force in such a way that it is unable to cause harm and, at the same time, the force is redirected, usually to the opponent’s detriment. This is like redirecting the flow of a river instead of opposing it. Much less energy is expended, equilibrium is maintained, and the objectives are met. This principle works in most every situation.

All things in life have a balance. By approaching all situations in life as confrontations and attacking relentlessly, we eventually, upset many balances. This is not to say that you should never use a direct attack. However, by looking at the environment (which shapes the situation and its outcomes) and considering alternatives, we can accomplish our objectives and maintain a healthy, natural balance.

Employee Time Theft – You Can’t Afford To Ignore It

Do you have an employee who is always late? One who makes or receives personal phone calls daily or one who sneaks out a couple of minutes early on a regular basis? What about an associate that is on their cell phone texting through out the day or who clicks off the computer screen as soon as you walk into their office? If you do you have an employee that is stealing time pure and simple.

Have you ever stopped to consider what these types of employee time theft are costing you? An employee who robs you of 5 minutes per day 5 days per week is stealing the equivalent of approximately 2.8 days per year assuming an 8 hour work day.

If you pay an employee $15 an hour and that employee is stealing 2.8 days per year, it’s costing you $396 per year considering a factor for payroll taxes and employee fringe benefits.

If your employee steals an hour a day 5 days per week the cost of the theft has just skyrocketed to 33 days per year and $4,680 again considering a factor for payroll taxes and employee fringe benefits.

How can you control expensive employee time theft? Clearly state policies in the personnel guide and have employees sign it to be sure they have read the guide and understand the policies. The guide should include policies on personal phone calls, cell phone use, internet use and working hours as well as policy relating to tardiness.

Let your employees know how much you are willing to tolerate—you can disallow personal phone calls except in the case of an emergency. Talk to “tardiness” offenders—tell them their pay will be docked or worse—remind them that everyone in the office is a professional, and professionals don’t punch a time clock. Make it clear that cell phone use of any sort or “surfing the net” will not be tolerated UNLESS it is business related.

The key is to be aware of the situation, bring it to the employee’s attention, specify the ramifications should they fail to modify their activities, and consistently enforce the penalty you have set. If it’s clearly a matter of policy, you take the emotion out of your reaction and simply make a good business decision.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

How to Succeed Where Others Have Failed

Stop anyone you meet and ask “what’s the biggest mistake a new business owner can make?”  Odds are they won’t know. A more insightful respondent (perhaps one who knows from personal experience) might mention “undercapitalization” or “lack of cash flow”.  They’re usually right. But the truth is, the biggest mistake is usually not one but a combination of the following maladies: “being overly optimistic when projecting revenue”, “having a weak (or nonexistent) business plan”, “pricing problems”, “a failure to seek professional advice”, “rushing to market”, “insufficient experience”… the list goes on.

On the other hand, ask them what makes an entrepreneur succeed, and you should hear statements like “owner’s self-confidence”, ”emphasis on service (quality) rather than price”, “working hard”, ”luck”, “devoting full time to the business”, “industry expertise”, and “making a significant capital investment”…

The point is, to succeed, you need not only the desire, but a well-rounded understanding of the pros, the cons, and how to exploit or avoid them.

A prudent business owner does his homework by considering the possibilities mentioned earlier and determining, in advance of their occurrence, how to avoid the “pitfalls” and ensure success. One of the keys to success is turning to experts for professional advice.

If you make a practice of turning to objective professionals early on in the planning process, you’ll increase your likelihood of finding the avenues which will lead to your success.  For example, a good banker can be very helpful in identifying credit needs, an insurance agent in identifying risks that need covering, an attorney concluding on the appropriate business form (sole proprietor, partnership, LLC and “C or S” corporations) and CPA can advise as to cash flow needs, accounts receivable control, tax planning direction and much, much more. Consider bringing your local banker, insurance agent, attorney and CPA on board sooner than later. By doing so what you will find is you can focus on what you do best – managing your business – knowing you’ve got a team working with you to handle matters outside your realm of expertise.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

He Who Hesitates is Last!

As a business owner, the quality of your decision-making determines your success or failure. By decisions, we don’t mean what suit you’re going to wear or whether to go to the gym or not. Those are choices. In a decision, the issue you’re facing is unconventional. This means there’s going to be some uncertainty, particularly when the stakes are high.

In today’s business environment, decision-making is becoming more complex. There are many more variables to consider, which makes dealing with a new situation even more difficult. But there are ways of honing our decision-making skills to simplify the process.

Knowing your objectives is one of the most important, but often overlooked, ways to sharpen your skills. The more you are aware of your core values and objectives, the easier your decision-making will be.

Attachment to one outcome will limit your effectiveness as a decision-maker. The problem-solving process should unearth many viable alternatives. Your job is to decide which solution is best in light of the facts. If you’ve pre-selected an outcome, without considering other options, you run the risk of making the wrong decision. This can be costly in the business world.

Involving those people affected by the decision helps clarify objectives and eliminates some alternatives right away, simplifying your choices. Further, if the wrong person is making the decision, you can be assured that the potential for failure is much higher. Decisions are always best when made by the people closest to where the decision will be implemented.

Gathering too much information is a common problem in decision-making. Generally, only 20% of all decisions need to be put off to gather more information. How do your know when your have enough information? Ask yourself this simple question, “how much impact will additional information have on my decision?” Once you’ve answered that, consider the costs of gathering the additional information and add the costs (if any) associated with delay.

So what’s the solution to poor decision making? Practice. Start with small decisions, strengthening your skills, and move up to the bigger decisions. As your skill level increases, so will your success rate. And always remember, it’s your choice.

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.

History Repeats Itself

I contributed a column to a newsletter in March of 1992 which was headed as “Straight Talk from Gary Field, CPA.” The column started out as follows;

“Last year, General Motors (GM) lost $7 billion in North America. Management’s long overdue response: close the Willow Run plant and others. The UAW leadership’s response to the Willow Run closing: belligerence and inflexibility. GM, the UAW, and all of us business owners need to get the message: the market has a way of sifting out the weak, the lazy and the uninspired.”

The column continued;

“Allegedly, GM has a long – term rebound plan on the table, but I have to wonder. Without responsible leadership at both GM and the UAW, the plan is meaningless. The leadership from GM and the other “Big Three” recently made fools of themselves with their incessant whining about Japanese competition. Is this responsible management? The UAW and its membership’s Japan bashing and position regarding Willow Run are equally irresponsible. Until GM and the UAW assume responsibility for their poor management, they can forget the “rebound plan”, its not going to happen”

I hate to say it but as the adage goes “the rest is history.”

As business owners, we must vow to build our companies on a foundation of responsible employees. We must understand that there are only two types of employees: those who produce reasons (irresponsible) and those who produce results (responsible.) Your job is to identify, hire, train and retain those who recognize that they are the cause that creates the effect. An “it’s not my responsibility” mentality is a prescription for disaster. Witness the current state of the auto industry.

By making good hiring decisions, our employee base is composed of people who understand the importance of responsibility, integrity, purpose, excellence, self development, service and cooperation; a base of people who are of the right character and interested in creating. With a well thought-out hiring process employers can make good, sound hiring decisions and avoid employing a “union mentality” such as that spawned by the luxury of a labor monopoly the UAW once had.

Despite an excellent hiring process, however, occasional bad hiring decisions are inevitable. They can only be minimized. Nevertheless, with a foundation of responsible people, an irresponsible person inadvertently hired cannot

survive for long. Responsible people connected to the “success principles” will purge their ranks of people that are not like – minded.

Perhaps some readers will think that I’m kicking the auto industry when it’s down. Quite frankly, I don’t care. They are a clear and timely indicator of what one can expect from bad management. Certainly, an unwillingness to assume responsibility isn’t limited to the auto industry. I am equally appalled at the teachers that don’t teach and public servants who don’t serve.

The list goes on, but that’s not the point. The point is that success can only be attained after a solid foundation of principles have been laid down and adhered to. Attempting to build a business without the base of principles would be like straightening the chairs on the deck of the Titanic.

So, now hear this. Like the game we all played as kids, “tag, you’re it!” Now what are you going to do about it?

This article was written by Gary Field, CPA at Numerico, PC. Click here to view Numerico’s website.