Business Management | The Happy Future Group

Be happy that your customer complains!

May 24, 2009

All businesses have it, and most hate it: the customer complaining about the product or the service.
Properly handling customer complaints is actually one of the most powerful ways of creating loyalty. Similarly, poor handling will guarantee your company bad publicity and a poor reputation.
One of the main reasons why complaints are handled in the wrong way is when you take the complaint personally. This happens very easily because in many cases the customer brings his emotions in the picture and makes accusations using “you” while he means “the company”. Entering such a personal argument only escalates things and the discussion usually ends in a conflict.
Not only must you realize that complaints are rarely of a personal nature, they are in most cases legitimate. Of course, there always will be the customer who wants to get some financial advantage by complaining, or those who never will be satisfied regardless of how good your product or service is, but there is a good reason why your customers complain. It might always be rational or logical to you, but be assured that it is to them.
The art of proper complaint handling is in finding out what the actual reason is. Be aware that this can be different from what the customers said at first. You must also realize that emotions are part of complaining and that the customer may need to blow some steam. Unfortunately, he will do so to you even while he knows that you have nothing to do with it. It is just part of the process. Just ask questions, and listen to the answers. If the customers yells, let him yell and do not get involved in a war of words.
Once you have identified the real cause of the problem, deal with it professionally and correct it in the proper way! Once the customer gets what he expected to get in the first place, he will be satisfied again. Just make sure that he realizes that he owes it to your dedication to him.
Be assured that he will remember that special personal service. This way, you will win his loyalty.
So, be happy that your customer complains, because it will give you precious feedback about the actual quality of your product and service, and it offers a unique opportunity to secure future sales! The worst that can happen to your business is losing a customer without knowing why he is not satisfied, because this does not give you any information on how to improve your product.

Comments Off on Be happy that your customer complains! | Business Management, Sales | Tagged: Customer complaint, Customer satisfaction, Sales | Permalink
Posted by Christophe Pelletier

Why do great employees leave?

May 21, 2009

That is a question that I have found on the LinkedIn group “Executive Suite”.
I love those questions, because there is an army of consultants and specialists and experts showing off all they know, and their comments are incredibly detailed.
But the reality is much simpler. Employees, especially the great ones, do not leave the company, they leave their boss.
High turnover, especially of great employees, is the best indicator of poor management!
Many companies use the “grandfather” principle, but in reality, when there is a problem between the “father” and the “grand child”, grandpa almost always backs daddy, while the departure of great employees should tell him that daddy is being naughty, and daddy should be reprimanded. But that rarely happens, and the grandfather principle is kind of a joke, really.
But one thing is sure: when great employees leave, the average quality of what is left decreases, and the company is heading towards the ground.
I have seen that just too many times, in color, 3D and Dolby stereo.
The good thing about it is that companies who appreciate talent always win in the end!

Comments Off on Why do great employees leave? | Business Management, Happy at Work, Leadership | Tagged: Company Culture, Human Resources, Leadership, Management, Talent | Permalink
Posted by Christophe Pelletier

What has happened to good old-fashioned headhunting?

May 18, 2009

The more I dig in the world of recruiting and hear from those many talented people who never seem to get any response from their applications, the more appalled I become!

In my view, the whole recruiting process is going in the wrong direction. Everything is set up to just provide companies with “adequate” candidates, but there clearly is no effort anymore to go find out that special someone who will really add competitive value to his/her employer.

I can understand that recruiters seek some help in technology, but only if it creates quality to the customer. What they are doing is adding cost savings for themselves as they do not even read resumes anymore but let the computer do the screening. The keywords matching will sort out who will pass and who will lose. This is sheer laziness and if you ask me, it is cheating the customer. What happens with all the very valid words that are in the resume but just are not the right ones? Bad luck my friend, you used the wrong word, and therefore you are a loser!

And the beauty of it all is that thanks to this “black hole” nobody will ever know that very solid candidates were wrongly rejected. That is the greatest CYA I can think of. And companies keep paying obscene fees to such charlatans in a time where they should cut costs by eliminating all the useless suppliers! Companies do not get the best anymore, they only get the luckiest resume owners.

In my life I have hired quite a few people, and the only few times that I did it through recruiters, it has always been disappointing. They never have been able to send people who had the right personality and solidity for the jobs I wanted to fill in. All the real talents I have hired I found myself and trained myself, with simply the most amazing results and a performance for the company that our competitors envied and our customers valued.

I believe that technology’s purpose is for people to do their work better, not just easier. I also believe that when technology replaces the people using it, then those people purely and simply have no function anymore. They are redundant and irrelevant. Recruiter, you are fired!

I believe that if the way of the future is to screen job applicants by a computer program, then companies can just as well buy the program and do the work themselves. After all, placing a job posting on Monster or whatever job website does not require a genius and the result will be the same.

As far as I am concerned, except for my first job, I never had to write and send a resume for any position I have held; and even for my first job, I had sent my resume while there was no job opening at that time. I guess that they hired me because they saw something in me. After that, all the jobs I have had have been offered to me or created for me. I wonder what my life would have been if they had had a computer keyword screening.

In the future, I see two groups of recruiting activities:

The real talent search, by this I mean looking and finding people who have above average abilities, will still be done by headhunters who will tap in their networks and actively work the field to find them one way or another. This will be a quality niche for quality employers. Talented people most of the time are passive job seekers. They are working, either employed or have their own business and can be attracted to another employer if this latter has matching values and offers a job at the level of those over performers.
The bulk or commodity job market, in which companies are not looking for superstars, but just adequate ones, as they are expendable. This market does not justify the level of fees that recruiters charge (but neither do real estate agents, to whom recruiters actually are quite comparable). Companies will have the computer program and will go “purchase” the average commodity, and will try to underpay them, as is currently the case already.

Here is a link to an article I found in the National Post that present the current situation: Losing the best: the technology trap in hiring

I really feel sorry for all those people who currently have to find jobs in a very difficult economic environment and who are treated with such little consideration and who have about no way to get around the modern practice of recruiting.

Comments Off on What has happened to good old-fashioned headhunting? | Business Management, Talent at Work | Tagged: Human Resources, Recruiters, Resume, Talent | Permalink
Posted by Christophe Pelletier

Management & Leadership lessons from my dog – Part II: Recruiting the Boss

May 14, 2009

This is the second article from my dog Slider. This time she shares her views on how to recruit a proper boss.

Dear readers,

At first, I thought that I would deal with recruiting the boss in a similar way as bosses recruit their employees: by asking for a resume.

Unfortunately, this appears rather useless very quickly, as all the candidates refer to the same great things about themselves. They have had experience with or owned dogs in the past and they can walk on two legs! For how impressive their skills and experience are, for a simple dog like me, this is not convincing, and that by a long shot. It does not tell me much about their qualities as bosses and from my experience, I am more stable on four legs than on two, so that particular skill might even be overrated; and I, too, can do some impressive tricks.

Leading is not a given So, let’s forget the resume, as it not giving me the right information and let’s try to see if a personality test would work better. In my doggy world, we establish who the leader of the pack is in a very simple and primal way: the more dominant one leads. Could it be any simpler than that? Although we need to take a slightly different approach with people, establishing a relationship dog-boss follow a rather similar process. We will accept you as the boss only if you are able to earn our respect. Look around and you will see all those dog owners who failed to get to that point: they simply do not have us under control. We run away, we pull in a different direction than the one they want us to go to, or we are aggressive. In short, we behave badly. Well, that is from the boss’s perspective. For us there is another truth: we behave that way because we have no boss. There is no one we respect enough to follow, so we set our own course. Does that sound familiar to you humans? Interesting, isn’t it? We do not have the ability to do politics; neither do we have any awareness of our pedigree. Therefore, respect is about all we have. Also, remember that you do not spell respect F-E-A-R. If you lead us by fear, we probably follow because we prefer to avoid the consequences, but we will not like you, we will not respect you, and when the time is right, we will turn against you; unless we just become dysfunctional and neurotic, as I have sometimes seen.

Of course, there are those who think that buying us is enough to make them our bosses. No, it just makes them our owners. We do not feel too much for hostile takeovers. The merger and acquisition process needs to happen in a firm and effective manner. Of course, some bosses deal with the problem by getting rid of the “difficult” ones among us, but they probably will experience a similar situation with our replacements anyway.

To conclude, I will sum up like this. In order to be our boss, you must demonstrate that you indeed have the ability to lead the pack, which you only will do effectively by earning our respect. Being a two-legged creature or repeating us that you are the boss is simply not enough. Once you have earned our loyalty, you will be amazed by how much you will get in return!

Next time, I will return with Part III: Leading the Pack.

(The opinions expressed in this article are those of the dog only, and do not necessarily reflect those of the Happy Future Group Consulting Ltd, although they usually do.)

Comments Off on Management & Leadership lessons from my dog – Part II: Recruiting the Boss | Business Management, Dog Series, Leadership, Team and Performance | Tagged: Human Resources, Leadership, Management, Mergers & Acquisitions, Performance, Resume | Permalink
Posted by Christophe Pelletier

The only true Mission Statement

May 12, 2009

Nowadays, about every company has a Mission Statement. It has become part of the business culture and it is included in every business plan.
In many offices, you can even see it framed near the reception desk.
And yet, those mission statements, for as sophisticated as they may be, do not matter that much. OK, I already hear some denial, and I probably am just nothing else than an iconoclast.
Just ask your staff to tell you what the official mission statement of your company is, and you very quickly will see my point. Most employees, and that includes senior executives, simply do not know it! The reasons for that are many. The employee joined the company recently, there is a poor communication from the top, there is lack of interest for it, and in most cases: the statement is too long and too complicated to memorize.
Here is another disappointment for those who worked hard at formulating those magic words: your customers do not know your Mission Statement, either. Why? Because they care about their business first. Moreover, they have seen your Mission Statement in many variations at your competitors’ places, too.
Too many mission statements just sound all too familiar. They are all about your company being the first choice supplier of top quality that cherishes the customers to whom they add value, etc, etc.
When companies differentiate themselves in the same way, they just go back to square one: making themselves commodities.
So what is the only true Mission Statement? The answer is “To make money”! It is true, it is simple to remember by your employees, and the way to do it is to do all the right things right.
Simple, isn’t it?

Comments Off on The only true Mission Statement | Business Management, Competitors | Tagged: Business plan, Communication, Company Culture, Competitors, Management, Mission Statement, Profit | Permalink
Posted by Christophe Pelletier

Management & Leadership lessons from my dog – Part I: Communication

May 11, 2009

Please allow me to introduce a very distinguished (as you can notice by the neck tie and the grey temples) guest blogger to present this topic: my dog Slider.

Studying Human Behavior

She has a proven track record of interaction with her peers and with her bosses and is highly qualified to talk about effective management and leadership.
In today’s article, the first of a series of 3, she will address the topic of communication between the boss and the followers. Here she comes:

Hello dear readers!

After years of interacting with other dogs and people, as well as by hearing the tone of my boss’s voice when he talks about managers and companies, I believe that our simple canine wisdom could be of great value for business leaders and leaders to be.

I now will review a few very important aspects of effective communication.

Call me by my name!
That is the most effective way for me to know that I am the one being talked to. Calling my name will get my attention, and then I am more inclined to listen to the order. People have this strange way of not calling each by their names that much, unless most of you are all called Hey? I do not know. I believe it makes communication a lot more effective. Moreover, it is super friendly to be called by your name. It gives you the feeling that someone cares about you.

Clarity
We, dogs, are not particularly sophisticated when it comes to read between the lines, so it is utmost critical that your message be very clear. If it is not, we will not understand it, and of course we will not do what you instruct us to do.
In order to be effective, just give us simple and short orders. In most cases just one word will do, like “Sit!”, “Stay!”, “Enough!” or “No bark!”.
The worst you can do is to start giving several orders at the same time, or gesticulate and shout, like unfortunately I have seen in many occasions. This just confuses us, and sometimes even freaks us out. We just wonder what on earth the boss’s problem is, and since we are not sure what s/he means, we just do nothing or do the wrong thing, which in turns seems to frustrate him/her. Poor communication. Not good.

Consistency
This is one of the most important aspect of effective communication. Remember we are simple beings and we need to be trained into patterns.
In order to be effective, your instructions must not leave any room for confusion. If one day, your order means one thing and the next day it means something else, do not expect us to figure out what it will mean. Then, we will act according to what we believe is requested from us. The sad thing is that we will be reprimanded, while you were the one who mixed up the message.
In the same area, your actions have to be consistent with your instructions. Just as an example, and you know we like to beg and try to get some treat from you once in a while and we can really cute at doing it. But, we also can understand “no!”. However, if you give us what we want once, we will expect you to repeat that. You create a pattern. Inconsistency will teach us bad behavior, begging is this case.

Patience
If you want to train us to do what you want, it might sometimes take some time. Sorry, but our brain is a bit small and before we get the message, we will need to learn from you.
Patience will be necessary for you, and if you want us to do what you instruct us to, you will need to repeat several times, and also send us the right feedback to let us know how we are doing.
Shouting at us will not really work, as we do not see this as the alpha way of communicating. In our world, this is more what the wounded weak dog does. All you will do with that is to scare and to confuse us. That will be your fault if we get stressed and neurotic. We will end up barking for all reasons and even become aggressive.
On the other hand, when you choose the right approach, your patience will be rewarded: we will become obedient and respectful, but neither stressed, nor scared.

Importance of body language
Sorry, but we are simple creatures, and we do not have much of a vocabulary. We just understand a few words. We are pack animals and most of our messages have to do with physical interaction.
In order to be effective in your communication, you will have to be short and to the point. Do not give us a long lecture, because we will lose focus after the third word.
To enhance your message, you will achieve a lot by combining short instructions with a clear and consistent body language. Do you know that you actually can lead us by only communicating with us in a non-verbal manner? This is true, and it is more powerful that all those long boring tirades we sometimes have to listen to, but we cannot runaway because we are stuck with that leash!
From our end, most of our communication is non-verbal. Therefore, you, as our boss, need to be able to read the signals that we send and deal accordingly and properly with them in order to lead the pack harmoniously!

Well, people, this is all for this time. I will return later with Part II: Recruiting the Boss.

(The opinions expressed in this article are those of the dog only, and do not necessarily reflect those of the Happy Future Group Consulting Ltd.)

Comments Off on Management & Leadership lessons from my dog – Part I: Communication | Business Management, Dog Series, Leadership | Tagged: Communication, Leadership, Management | Permalink
Posted by Christophe Pelletier

The Resume Black Hole

May 11, 2009

Here is an article from The National Post by Cathy Graham titled The Resume Black Hole.
It sums up quite well how resumes are handled these days, and how job seekers are just treated as a commodity. So much for real talent search, just in case you believed there was such a thing.
It connects rather well with my previous post on this blog “Death of the Resume”

Comments Off on The Resume Black Hole | Business Management, Talent at Work | Tagged: Human Resources, Recruiters | Permalink
Posted by Christophe Pelletier

Signs of a good company culture

May 11, 2009

You know what they say to job candidates: you have only one chance to make a good first impression! This is valid for a company, too.
Regardless of any PR work done or how well crafted their website might be, nothing compares with just the possibility of walking around and watching.

First, take a good look at the surroundings. Are they inviting? Is this a place where you would like to spend half the time that you are awake? If the place reminds you of a hospital or a prison, you probably do not want to work there, unless of course the place is a hospital or a prison.
Nothing spells sadness more than empty silent corridors with closed doors. A high-energy high performance place is alive. It is buzzing with people and communication, and generally most doors are open.
Another thing that catches my attention is the presence of those business posters on the wall. You know, the type that will celebrate the virtues of teamwork or of customer service. Unless they have been placed by the employees themselves, it might be a good indicator of the management style and communication style. Instead of leadership by walking around and frequent contacts, the company probably prefers totalitarian regime-like propaganda. Some of those posters are really pretty, though.

In Good Company Secondly, just observe the people. In the great places to work for, people exude happiness. They will smile at you in the corridors and they will say hello. Beware of the workplaces where you will not even get eye contact, forget about a smile.
A good place to go for a quick assessment of the culture is the water cooler/kitchen/coffee machine. When you pop in, watch what happens! In a good company culture, you can be sure that the employees present will look at you and greet you with a smile. If, instead, your arrival causes the voices to turn down or simply stop, with straight faces and an awkward silence, then you can be pretty sure that the discussion topic is not about how to beat last month’s results.
A brief chat with the employees will show you the company culture. In a good company, people are genuine and enthusiastic; when they talk about their workplace, you can see their eyes and faces come alive and do not be surprise if you have the feeling that they try to convince you that you should work there, too.

In a good company culture, everyone makes sure that the workplace is friendly and inviting. The main signs of a good company culture are happiness and absence of fear! And this describe exactly the “happy” (using vicious would be inappropriate) circle. Fostering happiness and fulfillment increases the commitment of the employees and their performance. They will go the extra mile for the company without asking anything (well not much) in return. They will not watch the clock to decide when to go home. They will leave when they have that sense of completed work. The absence of fear allows the employees to be more entrepreneurial and to dare more. This increases the performance of the company, reinforces its competitiveness and, success breeding success, this creates more happiness and fulfillment in the workplace. Full circle.

Comments Off on Signs of a good company culture | Business Management, Happy at Work, Leadership, Personal Fulfillment, Team and Performance | Tagged: Company Culture, Fulfillment, Happiness, Human Resources, Leadership, Management, Performance, Success | Permalink
Posted by Christophe Pelletier

Energizing frustrated employees

May 11, 2009

Here is one of my favorite ways to help the staff focused on work, and not get distracted for too long by the frustrations that their work sometimes causes them.

We had two main rules:
1) There had to be a good reason, as I had no interest to be disturbed for insignificant problems. After all, my staff had to be able to deal with most issues themselves.
2) They would make sure that I would be available at that very moment and, if not then, we would agree on a time to review the matter. “Can I come in and vent?” would be the password.

This technique has delivered wonders, and the funny thing about it is that in most cases I hardly had to say much at all. I just would ask a few questions about what, who, how, when or why and they would tell me all about the issue.
In most cases, they would know how to solve the problem that had arisen, but they actually were looking more for support and confirmation that they had the right solution in mind.

Back to Serenity This is just an example of how important presence and availability are in managing people. If you have done your hiring properly and brought in the right people in the right jobs, they will understand very quickly how to do what is expected from them and deliver the performance that meets, and in most cases exceeds the targets. The role of the manager in such a situation is a little comparable with a shepherd. You keep a good oversight of your troops, but if any one wanders in the wrong direction, you just bring him/her back on the right track.

Further, once people have vented, they can “breathe” normally again and they will get back to work, not only happier than before the session, but actually energized to go out there and deliver more results.

Comments Off on Energizing frustrated employees | Business Management, Happy at Work, Leadership, My True Stories, Team and Performance | Tagged: Human Resources, Leadership, Management, Performance | Permalink
Posted by Christophe Pelletier

Death of the resume

May 11, 2009

Does a resume still have any use nowadays?
I am asking the question because more and more screening of candidates is now done through a computer system.
Further, more and more resumes are written by “professional” writers, so one can wonder how much of the candidate they can truly find on the piece of paper.
For having recruited quite a few people myself, I must admit that reading all the resumes can be quite a lot of work, but on the other hand, I always found much more information in what was not written and in the overall layout and style of the resume than in the factual data.
I have not hired many people based on their past history, but much more on their personality, because once at work, that is much more important.
Moreover and very understandably, the name of the game has become to get the interview. This actually supports the point I just made above. So, what you see more and more is tactical writing to make sure that the keywords that the computer screens upon are included. The next step, which is made in many cases is to simply lie and give false information.
Of course, I am not saying that resumes are useless, but I believe that they are overrated.

Um, if you look at it as a first date, which could lead to a long-term commitment, what would you think of someone telling you only what they think you want to hear and/or telling you lies, instead of showing their true self? You probably would not want to have to do anything with that person. Oddly, this seems to be a normal state of affairs when recruiting. Interesting, isn’t it?

There are simple ways of assessing a person even without having a resume at all, but unfortunately, this is not used much. Maybe because they are a bit unconventional and less mechanical. Yet, progress and improvement only come from innovation!

Comments Off on Death of the resume | Business Management | Tagged: Human Resources, Resume | Permalink
Posted by Christophe Pelletier

Networking? Yes! but…

May 11, 2009

It is everywhere and on everyone’s lips: networking. The panacea for success!
Last week, I could read an article on CNBC hinting toward a different look at networking. According to the writer of the article, networking and spraying business cards all over the place might have you appear a loser, eventually.
Like everyone else, I have networked and I still do, but I have also changed my views on the topic. I do not believe that networking as such is a bad thing, but just like any other “strategic” activity, it needs to be carried out with a clear plan.
There are lots of networking venues and formats, being in the physical world or being online. Therefore, you are not short of possibilities.
The main problem I see is that the cheapest and the most open to the largest number, the lower the efficiency of your networking. This, in my view, happens for a simple reason: all the people looking for help join these venues.
For instance, I am on LinkedIn. Great system as such. However, I got invites out of the blue from people whom I do not know, who do not introduce themselves, who do not seem to have the slightest interest in knowing who I am and what I do. All I receive is a spam email asking me to join their network or some unknown group, in which most of the time nothing ever happens. Surely, I will be able to show off, claiming that I have 10,000 contacts, out of which probably 9,997 will be absolutely of no help. Of course, this is not appealing for me, and most of such requests end up in the archive file!
Therefore, with such mass networking, you end up meeting mostly people who cannot help you, as they are already so busy keeping their heads out of the water. But, of course, maybe over a few years from now, and if they remember you out of the thousands of other unknown contacts that they have met, it will benefit you.
Although research shows that we all are connected within 6 degrees of separation, the best and most reliable contacts we have are our first degree ones. They are the ones that can recommend us or introduce us to the second degree. Generally, second degree contacts will be willing to get to know you, as they will trust what our common contact tells them. In my opinion, this is the best way to start developing a network. Go one degree at a time!
Another efficient way to get to know the “right” people is to network within your profession and/or your hobbies circles. People who share similar interests will be more open to expand their contact list.
If you are in a hurry to get help, get the help where it really is: with people and organizations that actually help others, not with the ones who just organize venues where you are left at your own devices with the wrong crowd.
If you are looking for a job, get in touch with people who actually are involved in job seeking (and finding for this matter)!
If you want yourself and your talent to be noticed, you need to do more than distributing business cards and sending dull invites. You must make some impact. Do something that people will notice and, most of all, will remember. This way, you will have demonstrated what you can offer to others and to organizations.
Your networking will be more successful by helping others, than by hoping that others will help you.

Comments Off on Networking? Yes! but… | Business Management | Tagged: Networking | Permalink
Posted by Christophe Pelletier

My experience with experience… and talent

April 5, 2009

Experience is one of these words in business that need very specific description to be understood. Just like quality, everyone wants it, everyone offers it, but what does it really mean?
Experience is very valuable, and nobody would argue about that. One of the most common misunderstandings about experience is to confuse it “number of years of experience”. Although one might legitimately think that the quality of experience is proportional to the number of years, this still needs to be proven. For having met people claiming more than 20 years of experience in their field, what they were actually showing was 20 times of only one year of experience, as they had been doing the same over and over again in the same position in the same company in a very routinely manner. Actually they were little adaptable and often acted as resistance agents to the change needed to improve the company performance.
Other people show an impressive list of many different experiences in very diverse fields, and yet this would not prove that they master any of these fields, either.
Too often, when recruiting, we tend to focus more on the quantitative side of experience than on the qualitative side (yes here is the “quality” word). A common misconception is to think that experience and talent are some of the same. They are not.
When recruiting people for my teams, I always have looked at their personality, and mostly their area of talent. This is what I have always looked for in a resume, and not so much for diplomas or the succession of jobs. This has always worked quite well, as each and every one of these teams has delivered superior performance.
The funny thing about the recruiting process is that job postings almost never list personality traits or talents. Instead, they focus essentially on education and experience (which in this case is actually job history).
Experience is valuable to an employer only if the potential employee knows how to share it and transfer it to his new colleagues and to his new employer, and this why personality is at least as valuable as experience.
Another misconception about experience is that people who have been in the business longer have more experience. As my personal experience has showed me, this is as untrue as youth being a guarantee for energy and dynamism. In fact, this is where the talent factor plays a paramount role: talented people, besides being more talented than their peers, also have the ability to learn much faster in their area of talent, and thus can catch up very quickly on any apparent shortage of experience.

Comments Off on My experience with experience… and talent | Business Management, Talent at Work, Team and Performance | Tagged: Human Resources, Management | Permalink
Posted by Christophe Pelletier

The best time for prospecting

April 5, 2009

In most cases, companies do their prospecting at the worst time, which is when they have surpluses to sell.
This statement might sound a bit surprising at first, but as I am going to explain, this will make quite some sense.
As long as sales are in balance with production, most companies will try to find commercial arrangements with existing customers to deal with minor volume fluctuations. After all, when you deal with a regular business contact who knows your company and products, it is easier to set up some promotion deals and move extra volumes.
In the same idea, as long as companies can move their own production without much trouble, they do not see the point of actively going out there prospecting for new customers, as they have nothing to offer. Or so they think.
When surpluses reach levels that are not manageable anymore with the regular customer base, then they initiate a massive prospecting campaign to be able to move the extra volume.
All of this will sound like plain logic to most business owners, so why is actually the best time for prospecting the time when you are sold out?
The answer is simply because it puts you in the driver’s seat, which is not the case when you need to get rid of your products.
In many industries, surpluses for sale rarely happen to an isolated company, but very often the whole sector is suffering. The reason can be because the recent times had been quite good and everybody thought that they should increase their volumes to meet demand, but when a whole sector takes this kind of action at the same time, you can be sure that this volume increase is also going to come onto the market at the same time. The result is a saturated market, in which all participants need to move the extra volumes, sometimes at any price (and also at any cost). So prospecting in such conditions gives all the power to the buyers, who have nothing else than being patient as the sales people will come over and over again trying to out-price each other so that they can move their production. This results only in margin erosion.
In the same way, when you are short of product, in many cases there is a fair chance that your competitors have to deal with the same, and are not able to satisfy demand from their own customers
Why prospect when you have nothing to sell?
There are two main reasons for this. First, because this way, there is a lot less pressure to reach a deal, which helps you being much stronger in the commercial negotiation. Secondly, because this could be the time that you mean the most to a customer by helping out, as you could fill a gap left by one of your competitors.
Of course, you might ask how to help out and sell something you do not have. Massaging your sales and production planning can be a way to do this, or playing broker for once can do the same, and helping out makes your company look quite good, which will be useful when you are the one who needs to be helped out.
Prospecting, not out of necessity, but as a strategy to grow your business at the expense of your competitors is the way to go, and is also the most cost-efficient way. After all, remember that, on average, prospecting to get a new customer costs between 10 and 20 times as much as growing with an existing one. So, it better be well-targeted, margin oriented and fitting in a sound business strategy!

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Posted by Christophe Pelletier

Always be market-driven!

April 5, 2009

This is always the right approach, even when the market is good. The alternative, being production-driven will only bring you gloom eventually.
A very recent example to illustrate this is the construction industry in the USA. The reason why they are in trouble is because they forgot to be market-driven. As their market was good, and easy, they became overconfident and instead of being business people, they actually became speculators. They assumed that the market was to never change, that the only way would be up, and they built more and more houses without having any contract at all, as they thought that there always would be buyers.
By ignoring how markets function, they created their own demise. First, markets always fluctuate; they never go up in a straight line, so they had to prepare for a downturn. Secondly, they ignored the simple law of offer and demand. By taking demand for granted, they did not anticipate the possibility of ending up with more offering than the market would absorb. And thirdly, they did not produce according to what they could sell, but they produced an inventory; that is the production-oriented error.
Of course, one could argue that the situation they face is the result of the sub-prime mortgage fiasco. This is untrue. The sub-prime issue just accelerated the problems for the construction industry. If they had built only on the basis of solid contracts, all their houses would have been, per definition, sold.
Of course, the number of mortgage defaults and foreclosures is pushing prices of houses down, but this is by far not the only reason why houses in the US are losing so much value. The inventories of unsold newly built houses are huge and the market will have to absorb the surplus.
By not being market-driven, the builders have brought themselves in a working capital crunch. Their accounts payable are going up (yes they have to pay their bills) and their accounts receivable are not coming in fast enough because of the inventories. So, in order to pay the bills and not get into bankruptcy, they have to move the inventories. Profit becomes second to cash. This is why they are selling much cheaper than they had speculated. If only they had been market-driven…
The US builder story is just a superb illustration of the advantage of being market-driven, but this is actually a very common story. Especially when a market is good, companies tend to think that this is the normal state of affairs. Add to this a normal dose of greed and then you have the perfect recipe for a disaster to happen.
Know your market and do not let yourself drag into overconfidence!

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Posted by Christophe Pelletier

Do you feel lucky, CEO?

April 5, 2009

Just a little bit of paraphrasing Dirty Harry to bring up an unusual topic of business management: Luck.

This is an almost taboo to discuss in business circles where everyone prefers to talk about plans of all sorts, about talents and skills, and about management, like luck would not exist. Well that is except for bad luck, which is still valuable as an excuse.

Unlike you might think by reading the first lines of this article, I am not a proponent of luck in business management. Actually, I am quite the type that will consider all sorts of scenarios and contingencies beforehand, but I also have to admit that luck, good or bad, does exist. So instead of arguing if luck is real or not, I have chosen to find ways of having some handle on it.

Luck exists

I would define luck by the occurrence of something that was not expected (or in many cases not anymore) to happen and which has positive impact on the performance of the business.

Every manager has experienced it. Sometimes the business environment is tough, you have tried everything you could to get the results you need and for a long time, nothing seems to work, most of the time as a result of adverse external reasons. You are not alone to experience it, your competitors struggle with the same challenges, and then when you are starting to wonder how to turn around the situation, it happens! You get what you wanted and business looks bright again. It has happened to all of us and yes then we all think the same: we have been lucky!

Luck is not a management tool

Although we all experience luck once in a while, this is not something that a manager can count on, just because of the unexpected character of luck.

Luck is not something that you can factor in, and yet it still is a factor in too many businesses. This is especially true in businesses that have been very successful or that have thrived in a very positive environment.

Just to give some examples, I would mention some hedge funds companies that instead of hedging were more interested in speculating. As long as the environment was positive, the speculation worked superbly, making some traders make personal fortunes and looking like finance wizards, until that day when things were just not as usual and the hedge fund goes bust. Actually, such traders were always doing the same, it mostly the environment that changed and they did not anticipate.

Another recent example I see of a business running too much on luck is the mortgage industry: just by making the assumption that a home is an investment that can only grow in value, some terrible mistakes have been made. Everything was going quite well until that day, when the interest rates had increased again and the mortgages had to be reset, getting home owners in trouble and also the lenders with all the ramifications that we still currently see.

A business runs on luck when people do not analyze what the company is doing so well. It is very human to be less concerned about when a business is doing well than when it struggles. At the first sign of a bad result, you see management starting to ask lots of questions to know why the results are under forecast. When the business does well, then management tends to think that they really had it all figured out and tend to minimize the impact of external factor in the good performance. They are lucky, they take it for granted and become complacent, thus setting the stage for future bad luck!

Attracting luck

Running on luck and being complacent is just bad management. But what good managers can do and will do is to create conditions to attract luck. This can be done very easily.

The best way to attract luck is to assume that you will not be lucky and that you as a manager must make it happen. Assume that nothing will go as you wish, plan a worst case scenario!

Too often, I have seen companies heading to a disaster, just because they took action too late. They reacted instead of anticipating.

Anticipation is indeed the key, and it starts with a critical attitude towards planning and forecasting. A simple rule of thumb is to consider that you will achieve only half of what you aim at, that it will cost twice as much and that it will twice as long to achieve. Once you have your operations and departments working on that worse case scenario, you are creating more opportunities because you are planning to achieve a lot more than what is in the actual business plan. Of course, it costs more energy and time, but in the end you create more conditions for “luck”.

And should be really lucky and achieve more than you can handle, like generating more sales than you can fill in, just realize that you only have a luxury problem. It might not easy to solve but it is luxury!

The conclusion of this story can be sum up by the saying “Fortune favors the audacious”.

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Posted by Christophe Pelletier