The importance of values in value chains

October 1, 2010

When it comes to looking for partnerships as part of a value chain, one area tends to be neglected. Usually, business people will develop their business plan properly, identify their market and their source of supplies, and make sure that the math is solid. Beyond the numbers, there is always the human factor that will play a role. Every company, therefore every partner in the chain has its own specific culture. This is important to realize, because when cultures, and values, do not match, the relationship will always bring some hardships at some point. This is not a simple problem to solve, and usually, only few potential partners share your values. It is also important to realize that the word “values” does not necessarily imply good ethics and honesty. After all, hyenas move in packs. Sometimes, the partner that can help grow your business the fastest might not be the right one for the long-term, but it might be the best choice for now. Depending on in which region of the world you do business, the sense of time, sometimes even of urgency, can vary a lot. For instance, North Americans tend to want to start business immediately, while the Japanese will take all the time they need to find out whom they do business with, and build enough of confidence in their potential partner before starting business. In the land of the rising sun, it can take several years before the first transaction takes place. What are the risks of a mismatch of values? It can have serious consequences, depending on how much of your business is engaged with the “wrong” partner. It can range from dissatisfaction about the profitability of your business, constant disagreements and tensions with your business partner, to your being ripped off. One thing is sure: there will never be complete trust and loyalty when values are not aligned. Several years ago, I developed a quantitative system to evaluate the value of a business partnership. It is rather simple in its design and very powerful in its implementation. It helps identify the strengths and the weakness of the business relationship, and it is an amazing to tool to use to address potentially damaging issues over time, and create clarity for future dealings. By realigning values, both business partners can develop a plan of action and look beyond the price negotiations alone.

Advertisements

CNN – TED Talk – Big bonuses do not mean big results

March 2, 2010

Really interesting presentation that makes you think on HR policies and performance.

http://www.cnn.com/2010/OPINION/03/02/pink.motivation.bonuses/index.html?hpt=C2


Maybe money does not buy happiness after all

January 12, 2010

Interesting article and slide show found on CNBC. Here is the text:

As it turns out, some of the highest income states are among the unhappiest, according to a recent study by economists Andrew J. Oswald and Stephen Wu, of the University of Warwick and Hamilton College, respectively.

Taking into account both subjective and objective factors such as sunshine, congestion and pollution in a survey of 1.3 million Americans between 2005 and 2008, the researchers determined which states have the happiest – and unhappiest – residents. Among the happiest are Louisiana, Hawaii and Florida.

“Some might be surprised that states in the south with lower income ranked as high as they did,” said Wu, economist at Hamilton College. “States with high income rate fairly low on the happiness levels. To some it might seem counterintuitive; it’s not just about income levels, but those places might be more crowded, more congested on the roadway, [have] less available land.”

For the slide show click on this link: The Unhappiest States in America


Rent or Buy?

January 2, 2010

It can be very tempting to buy a home before you are ready.  Why pay rent when you can pay a mortgage instead, and own your home? 

When you buy, you have to pay the mortgage, and property taxes, and pay for repairs that become necessary.   When you rent, you only have to make the agreed-upon rent payment.  Most repairs are not your responsibility.  You can move easily when your lease is up if your life changes.

If you borrow $300,000 to buy a home, and the interest rate is 5%, you must make a payment of at least $1250 a month just to cover the interest that is accumulating.  If you want to pay down the principal of $300,000, then in the first year, for example, to reduce the principal by $12,000, your mortgage payment would be $2250 per month.   If you only pay the interest, you are just renting from the bank, and you are still responsible for repairs and property taxes. If interest rates go up, which will happen eventually, as they have been at or near historic lows for many years, then either your payments must increase, or it will take longer to pay off the mortgage.

There are many mortgage calculators on the internet. The calculator on the Coast Capital website, https://www.coastcapitalsavings.com/Tools_Calculators/RentvsBuy  provides a good comparison between renting and buying.  Create a few scenarios, and pay close attention to the amount of interest you pay.  The numbers may shock you. 

Take the time to accumulate a good down payment, and funds for property taxes, closing costs, and unexpected repairs.

Buy when the time is right for you, not because your family or friends or news reports say that now is the time to buy.


In the end, it is all about happiness

November 11, 2009

Although we sometimes tend to deny it or to forget about it, but in the end all our actions are about happiness.

At work, people want to have a rewarding job, they want to feel appreciated and make the money they think they deserve, the boss wants to see good results, and the customer wants to get the proper quality. In our personal lives, we look for the right relationships, we have hobbies, and we like spending time with our friends and loved ones.

Why do we wish for all of the above and for more? The answer is simple: when things go our ways, it makes us feel good, it makes us feel happy!

Why do people change jobs? Why do people divorce? For these questions, too, the answer is simple: we change our lives when we are not happy about them.  Yet, not everyone makes such changes and some settle with the unsatisfying situation. Does this make sense?

It does if we listen to the theory of Henri Laborit, a French neurobiologist and writer who studied human behaviour when people face adverse situations. According to him, we have three ways to deal with unpleasant situations such as conflicts: running away, fighting back or inhibition. In the French movie Mon Oncle d’Amérique, we can see illustrations of his works thanks to a comparison of life situations with the lab experiments. The research background he shows are experiments with lab rats. In the first experiment, the rat is in a cage with two compartments separated with a wall with an opening allowing the rat to change compartments.  Only one compartment has a floor that can be electrified. The rat gets a warning with a buzzer and 4 seconds later the current flows in the floor.  Very quickly, the rat realizes that when it goes into the other compartment where the floor is insulated, it escapes the punishment and all physical tests carried out show that the rat is in perfect health. The rat is fine.

Then the operator shuts the opening between the two compartments, the rat cannot escape the punishment. Very quickly, we can see the rat being completely stressed with its hair straight up and breathing quickly. The rat is not doing well at all.

Then, they add a second rat in the cage, and both rats have no other choice than take the electrical current. Instead of getting stressed and ill, the rats fight with each other, and it appears that this helps the dominant one to be perfectly healthy again.

We face this type of situations everyday in our societies. Sometimes, we choose to run away from difficult situations such as quitting a job because of a bad boss, instead of enduring stress every day. We sometimes can fight back, even fight, although our laws do not accept violence as a way of resolving conflicts. When people have no possibility to run away or fight, Henri Laborit’s theory is that they choose inhibition and do nothing at all. They simply take the punishment. Some can compensate this by fighting with their spouses at home, but this usually does not bring much good, either. According to Laborit, inhibition is the stage of angst, and angst is the result of the inability to cope with a situation that seems to have no solution. This usually results in ailment and even diseases, be it physical like ulcers or even cancer, or be it psychological leading to neurosis or depression. Turning against the own body becomes the way of fighting back, and the ultimate act of violence, one can commit against oneself is suicide.

On the other hand, he also noticed that when the rat experiences something that brings satisfaction and pleasure, its natural impulse is to get more of it. If it feels good, then it must be good!

I believe that this illustrate nicely how important it is to always try to look for satisfaction in our lives, at work and at home.

Excerpt from Mon Oncle d’Amerique (In French)


Communication and persistence can make almost impossible assignments happen.

October 17, 2009

Some years ago, I got the project to set up a fish processing operation in Klemtu on the central coast of British Columbia. Some agreement had been made a couple of years earlier, as the whole project started with the set up of fish farms.

For the processing, we needed to not only equip the plant, but also train the staff of this small coastal community isolated on an island with no road connection to the mainland. Therefore, the logistics were quite adverse: an isolated island with about no choice of carriers except the one that had been appointed on a sea that is often dangerous to the point that barges do not even venture on it. The risk was that the fresh fish could be stuck and not be delivered on time. Of course, that would have been unacceptable for our customers, who were located thousands of km away.

When it came to the facilities, the local community was providing for the plant, meaning a very basic building with no specific equipment for salmon processing. In the plant’s yard we had to browse through a pile of old tables and pipes to figure out something. Since volumes were starting rather low, it would not have been sensible to buy automated processing equipment, because the cost per pound of fish would have been horrendous. Further, the isolation of the place would have made any call for a technician about useless, as it would have taken him a couple of days to be on the premises. All the work was to be manual.

The equipment was probably the easiest part, though. We needed to train the staff to modern food production and educate them about to all aspects of food safety and quality, as they had never been exposed to this. Everyone who has dealt with First Nations knows that they are dealing with a number of social issues and poor physical health and condition, unfortunately the result of past colonization and the destruction of their traditional society. As such, this exercise was a great way of merging two worlds and recreating a feeling of community between this village and the international food business including large retailers and food service companies in the US and Canada.

We developed the training program covering all theoretical aspects as well as the practical realities of fish processing. A few chosen crew members were sent to an experienced fish plant to get exposure to modern processing. We set up an exam to have an incentive for the potential employees to study our material. As it appeared the day of the exam, half of the students did not show up and someone explained to me that some felt uncomfortable with writing. Of course, this was an awkward situation and there was a chance of losing some of the workforce, which is not good when that workforce is already limited, and replacement not easy to find. I turned this around by giving only one collective grade. After all, I had repeated so many times that this would be teamwork, what better example could I find to illustrate that than giving the team the grade, instead of individual marks?

Considering how important it is to gut and cut the fish properly, I was more interested in the quality of the work than the productivity at first. Once they would master the technique, we could think of increasing the pace of the processing line. So, we started with the equivalent of half a truck the first day, and the second half for the following day. In a normal plant, a full truck was processed in five hours in those days. I was expecting that our first half load would be done in eight hours at most. The reality came out quite differently. After two hours, the staff got physically tired and I could notice that moment when all the shoulders started to drop. After eight hours, many of the workers went back home because they were tired. We finished the first production day in thirteen hours! The second day was even worse with some people not showing up at all, and it took 23 hours! The situation looked lost. However, my sense of persistence made me refuse to give up so quickly. I re-planned the next round of harvests to be only a third of a truck per processing day. This was the magical number, and from there, our staff was able to work within normal hours, and get more productive, while producing the proper quality. Within two weeks after this, they were able to process a full truck in 9 hours! What a turn-around! As production volumes were increasing, we were able to justify for the purchase of machines to help speeding up the operation and by then we were able to process fish as quickly as any other regular plant.

As time went by, some of the locals showed capacities to take charge of more and more things, and even the original agreement was clearly that management activities had to be carried out by non-locals, we created several positions that they could fill successfully.

Yet, beyond the business case, the most valuable experience for me had been to see activity coming back in a community plagued by 80% unemployment before this project started. Getting work did not only give them money, but it helped them become healthier, with many of the employees recovering from diabetes. The most important of all was a boosted self-esteem, as they found a new purpose in their lives.

They felt successful, happy and fulfilled again!

Copyright 2009 The Happy Future Group Consulting Ltd.


Genchi genbutsu

October 16, 2009

This is an interesting article from Economist.com about the Japanese way of getting out of your office and about having a look at what is going on in the plant.

I like the part in which the author tries to compare the Japanese way and the American way. In my opinion, there is not much point in doing that. The best is to review what the strengths of both approaches are and build an even better system from there.

If you want to be an effective manager, you need to have a hands-on approach!