22 August, 2015

Setting the tone

Some staff have an unfortunate sense of what’s appropriate. How you react will set the tone of your organisation. Your people will watch you closely to pick up that tone.
  • A customer mailing list file called “ratbags” (or somesuch). As soon as I saw it, I insisted the name be changed. There was some shame-faced bluster about it just being someone’s silly sense of humour, but a glowering look stopped that. The word went out - always treat customers respectfully.
  • Walking past some staff drinking wine at their desks in the middle of the afternoon, I came back. simply said “That’s not appropriate” and walked off. The wine was gone in a minute and the staff later apologised.
  • On hearing that I wanted a more effective approach to late payment for electricity supply rather than simply cutting off customers’ power, the team leader responsible for credit control and payments proclaimed that “they’re all liars, and it’s the only thing that works”. I said I doubted that, and asked him to produce an analysis of the past year’s late payers and their frequency. Out of 40,00 customers, approximately 10% had been referred for late payment - most only once, and only 200 were chronic bad payers. He acknowledged he was wrong, but didn’t change his approach. He didn’t stay long and we made credit control part of a new customer service approach under a team leader who saw her job very differently, looking for ways to help customers not fall behind.
  • On hearing a product manager suggest that we make unsubstantiated claims in our product specifications, I respond “We don’t lie to customers.” On hearing the justification that “everyone else does it,” I reply “I doubt that, and in any case I don’t care. We don’t lie to customers.” That product manager didn’t last long either.
  • A product development team, given the challenge of designing a new antenna product platform at half the cost of the existing platform, started calling itself the CNA team which, on hearing for the first time, I learnt stood for “Cheap and Nasty Antenna”. My instant reaction: “You will drop that name immediately. I never want to hear it again. From now on, you are the EYE team - Elegant Yet Economic”. It not only set a different expectation for the new product platform; that name became a badge of honour and they still called themselves the EYE team years after that particular project had successfully finished.
You don’t always have to be quick on your feet; sometimes, a measured reaction is appropriate. Sometimes you’ll want to take a more consultative approach; asking people to think about the matter and decide what’s appropriate. But an instant reaction sends a very powerful message, as does a direct order, especially if you don’t usually act that way. Importantly, be consistent. And always remember, who you hire or fire, who you give an important project, who gets promoted, rewarded or praised - these all send important and closely-watched signals. What you do sets the tone.

Update in answer to Josh Forde
Jim : What do you think gave you the authority to do that with other people? We all have situations of seeing behaviour that we disagree with but don’t always feel we can effectively confront it or that we carry the respect to do so. It can’t be just about being the boss, it has to resonate with something larger than that?:
Good question, Josh. Actually being the boss does give you positional authority, but you use it carefully, and it only works well if it is backed up by personal authority - being assertive rather than authoritative, having confidence and conviction, and having earned respect for your past actions, knowledge and demonstrated behaviour. That’s something you build over time. Even if you don’t have it yet, it’s never too late to start. Most people recognise valid thinking when they see it, and although you may not persuade them this time, you’re building a personal ethos and reputation which will evolve into personal authority as a formal leader or as an important and respected influencer. And sometimes, all it takes is for you to speak out; you’ll be surprised at how often someone else jumps in to support you - the world is full of good people who want to do the right thing.

First published 28 November 2009

07 July, 2015

Buying cheap versus buying results

Why do corporate (and especially government) buyers keep confusing cheapness with value? Time and again I’ve seen the best vendors lose on price because the buyer could “get it much cheaper elsewhere”. The classic example is professional services charged by the hour. Any good manager of people knows that you pay your better staff more because they are more than worth it to you. For example, a good IT designer/developer will work out many times cheaper in the long run. They understand the business need quicker, design quicker, design better, write code quicker, write better code with faster performance and fewer bugs, and their software is cheaper to maintain. That can equate to a 10-30 fold lifetime cost difference - the saving more than outweighing any hourly rate difference. And that’s before you factor in the risk of non-delivery - much lower with better suppliers.

But many corporate buyers persist in penny-wise, pound-foolish buying practices. I have interests in several firms who sell products and services to other businesses, and my attitude is clear. I put a lot of emphasis on getting the price/value/cost proposition right, but if I can’t persuade you of the value for our prices, I’ll walk away before discounting. I’m not in business to subsidise anyone else’s business.

As a board member, I often see proposals for approval brought forward by managers proudly telling me that they’ve got the lowest input costs. All too often, I send them away to redo the basis of purchase and decision. Get me the best price and the best people to deliver the best outcome, not just the lowest cost of the inputs. If it has to be input-based, hire the best you can (while avoiding bloated suppliers and being sensible on price). It may cost more theoretically on paper, but I’ve rarely seen it cost more in actuality. On the contrary, the lowest input cost approach usually blows out on time, cost, reliability and efficacy.

Managers and buying teams - take note: top executives and boards much prefer effectiveness over cheapness.  But that's not a reason to buy only from big-name suppliers.  A small agile supplier can often be an innovative, effective and low-cost option.

First posted 29 July 2009

03 June, 2015

Exports are not enough!

Here's an article I wrote for the Dominion Post newspaper in August 2001, but I think it's still relevant today.

“Export or die!” We have heard that message so often - and for many companies, it is the right message. Getting the world to buy a New Zealand product or service is an important milestone for a developing business. Lots of successful exporters are needed for a healthy economy - but they are not enough. The world’s most successful companies do not just export globally - they operate globally. That means having sales, service, logistics, production and development operating around the world. Look at the world’s greatest companies. How many do things only at home to ship out to the rest of the world? I can only think of one - Boeing. The others made the leap from exporting to international operations. Our own Dairy Board/GlobalCo [Fonterra] has substantial and growing offshore development, procurement, manufacturing and logistics. More Kiwi companies need to recognise when to make that change.

Why? To minimise the cost of distance - freight, duties, foreign exchange risk and in-transit inventory; to reduce production costs, through greater volumes, lower material costs and lower manufacturing wages (an unpleasant reality); to get closer to customers for more efficient service and faster reaction to changing needs; to build critical mass for future investment; and to build credibility with large global customers.

I speak from personal experience. Deltec developed an advanced antenna technology for mobile phone networks - Teletilt - that enables network operators to adjust their cell coverage remotely and with improved signal quality. We began in New Zealand and Australia, explored SE Asia, and then expanded sales rapidly in China. Our products were key components of large infrastructure projects. We were the world leader in our niche. But as we grew and started to explore Europe and the Americas, our larger customers demanded the cost and service benefits of in-market operations. By mid-2000, we were getting a consistent message from global customers like Motorola and Nokia: “Set up full-scale sales, service, manufacturing and logistics in North America, Europe, China and Brazil. Do it now. Or don’t expect to get our business in future.”

The time had come to switch from a Kiwi exporter to a global business.

The capital requirements and the risks were large. Then the tech sector went into meltdown, and technology investors took fright. So we decided to sell. Andrew Corporation, a global competitor with complementary products and a similar vision for the future, recognised the value of Teletilt and our expertise. Our Wellington development facility will become their worldwide centre for developing advanced antenna systems. New Zealand will continue to play a key role in the technology. It won’t save the mainstream manufacturing, which would have gone to China eventually anyway, but we can reinvest in new opportunities.

My point is that New Zealand should not wistfully expect its companies to export everything from home. Global companies like Nokia, Vodafone, and Nestlé operate in many countries. The interesting thing is that large numbers of their high-value jobs are still at home - in development, marketing, and corporate administration. They are surrounded at home by a plethora of supporting organisations in banking, IT, law, accounting, advertising, travel, short-run early-stage manufacturing, research, education, etc. Together, they bring home huge revenue and profit streams.

If New Zealand wants a high-value economy, it needs more than just exporters. It needs global businesses that operate offshore in all facets of their business. New Zealand should encourage its businesses to invest offshore, not deride them for it. Without global operations, we won’t get a Kiwi Nokia or Vodafone. With global operations, we look like getting a Kiwi NestlĂ©. We could sure do with some more.

PS. At the HiTech2000 Awards, Deltec won the High Growth Company of the Year Award, the Investing in People Award and the Supreme Award. When the tech-wreck got even worse in 2002, Andrew’s NZ R&D centre went too, but that could happen under any owner, and only validates my argument that we need our own global players based here. The home R&D is usually the last to go.

First published 13 August 2001 in the Dominion Post.