Good Strategy/BadStrategy: The Difference and Why It Matters

Video - http://www.youtube.com/watch?v=UZrTl16hZdk

Speaker(s): Professor Richard Rumelt
Chair: Professor Gordon Barrass

Developing and implementing a strategy is the central task of any leader. Richard Rumelt shows that there has been a growing and unfortunate tendency to equate motherhood and apple-pie values and fluffy packages of buzzwords with "strategy."

Richard Rumelt is the Harry and Elsa Kunin Professor of Business and Society at UCLA Anderson.

9 Habits of People Who Build Extraordinary Relationships

The most extraordinary professional relationships are built by ordinary actions like these.

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Professional success is important to everyone, but still, success in business and in life means different things to different people--as well it should.

But one fact is universal: Real success, the kind that exists on multiple levels, is impossible without building great relationships. Real success is impossible unless you treat other people with kindness, regard, and respect.

After all, you can be a rich jerk... but you will also be a lonely jerk.

That's why people who build extraordinary business relationships:


1. Take the hit.
A customer gets mad. A vendor complains about poor service. A mutual friend feels slighted.

Sometimes, whatever the issue and regardless of who is actually at fault, some people step in and take the hit. They're willing to accept the criticism or abuse because they know they can handle it--and they know that maybe, just maybe, the other person can't.

Few acts are more selfless than taking the undeserved hit. And few acts better cement a relationship.

2. Step in without being asked.
It's easy to help when you're asked. Most people will.

Very few people offer help before they have been asked, even though most of the time that is when a little help will make the greatest impact.

People who build extraordinary relationships pay close attention so they can tell when others are struggling. Then they offer to help, but not in a general, "Is there something I can do to help you?" way.

Instead they come up with specific ways they can help. That way they can push past the reflexive, "No, I'm okay..." objections. And they can roll up their sleeves and make a difference in another person's life.


Not because they want to build a better relationship, although that is certainly the result, but simply because they care.

3. Answer the question that is not asked.
Where relationships are concerned, face value is usually without value. Often people will ask a different question than the one they really want answered.

A colleague might ask you whether he should teach a class at a local college; what he really wants to talk about is how to take his life in a different direction.

A partner might ask how you felt about the idea he presented during the last board meeting; what he really wants to talk about is his diminished role in the running of the company.

An employee might ask how you built a successful business; instead of kissing up he might be looking for some advice--and encouragement--to help him follow his own dreams.

Behind many simple questions is often a larger question that goes unasked. People who build great relationships think about what lies underneath so they can answer that question, too.

4. Know when to dial it back.
Outgoing and charismatic people are usually a lot of fun... until they aren't. When a major challenge pops up or a situation gets stressful, still, some people can't stop "expressing their individuality." (Admit it: You know at least one person so in love with his personality he can never dial it back.)

People who build great relationships know when to have fun and when to be serious, when to be over the top and when to be invisible, and when to take charge and when to follow.

Great relationships are multifaceted and therefore require multifaceted people willing to adapt to the situation--and to the people in that situation.

5. Prove they think of others.
People who build great relationships don't just think about other people. They act on those thoughts.

One easy way is to give unexpected praise. Everyone loves unexpected praise--it's like getting flowers not because it's Valentine's Day, but "just because." Praise helps others feel better about themselves and lets them know you're thinking about them (which, if you think about it, is flattering in itself.)

Take a little time every day to do something nice for someone you know, not because you're expected to but simply because you can. When you do, your relationships improve dramatically.

6. Realize when they have acted poorly.
Most people apologize when their actions or words are called into question.

Very few people apologize before they are asked to--or even before anyone notices they should.

Responsibility is a key building block of a great relationship. People who take the blame, who say they are sorry and explain why they are sorry, who don't try to push any of the blame back on the other person--those are people everyone wants in their lives, because they instantly turn a mistake into a bump in the road rather than a permanent roadblock.

7. Give consistently, receive occasionally.
A great relationship is mutually beneficial. In business terms that means connecting with people who can be mentors, who can share information, who can help create other connections; in short, that means going into a relationship wanting something.

The person who builds great relationships doesn't think about what she wants; she starts by thinking about what she can give. She sees giving as the best way to establish a real relationship and a lasting connection. She approaches building relationships as if it's all about the other person and not about her, and in the process builds relationships with people who follow the same approach.

In time they make real connections.

And in time they make real friends.

8. Value the message by always valuing the messenger.
When someone speaks from a position of position of power or authority or fame it's tempting to place greater emphasis on their input, advice, and ideas.

We listen to Tony Hsieh. We listen to Norm Brodsky. We listen to Seth Godin.

The guy who mows our lawn? Maybe we don't listen to him so much.

That's unfortunate. Smart people strip away the framing that comes with the source--whether positive or negative--and consider the information, advice, or idea based solely on its merits.

People who build great relationships never automatically discount the message simply because they discount the messenger. They know good advice is good advice, regardless of where it comes from.

And they know good people are good people, regardless of their perceived "status."

9. Start small... and are happy to stay small.
I sometimes wear a Reading Football Club sweatshirt. The checkout clerk at the grocery store noticed it one day and said, "Oh, you're a Reading supporter? My team is Manchester United."

Normally, since I'm pretty shy, I would have just nodded and said something innocuous, but for some reason I said, "You think Man U can beat Real Madrid next week?"

He gave me a huge smile and said, "Oh yeah. We'll crush them!" (Too bad he was wrong.)

Now whenever I see him he waves, often from across the store. I almost always walk over, say hi, and talk briefly about soccer.

That's as far as our relationship is likely to go and that's okay. For a couple of minutes we transcend the customer/employee relationship and become two people brightening each other's day.

And that's enough, because every relationship, however minor and possibly fleeting, has value.

People who build great relationships treat every one of their relationships that way. (That's a lesson I need to take to heart more often.)

Jeff Haden learned much of what he knows about business and technology as he worked his way up in the manufacturing industry. Everything else he picks up from ghostwriting books for some of the smartest leaders he knows in business. @jeff_haden

Good Strategy/BadStrategy: The Difference and Why It Matters

Video - http://www.youtube.com/watch?v=UZrTl16hZdk

Speaker(s): Professor Richard Rumelt
Chair: Professor Gordon Barrass

Developing and implementing a strategy is the central task of any leader. Richard Rumelt shows that there has been a growing and unfortunate tendency to equate motherhood and apple-pie values and fluffy packages of buzzwords with "strategy."

Richard Rumelt is the Harry and Elsa Kunin Professor of Business and Society at UCLA Anderson.

Good Strategy/BadStrategy: The Difference and Why It Matters

Video - http://www.youtube.com/watch?v=UZrTl16hZdk

Speaker(s): Professor Richard Rumelt
Chair: Professor Gordon Barrass

Developing and implementing a strategy is the central task of any leader. Richard Rumelt shows that there has been a growing and unfortunate tendency to equate motherhood and apple-pie values and fluffy packages of buzzwords with "strategy."

Richard Rumelt is the Harry and Elsa Kunin Professor of Business and Society at UCLA Anderson.

How The Most Successful People Think Differently To Solve Their Biggest Challenges

Paul B. Brown, Contributor

Invariably, when presenting a new approach to solving problems, authors, pundits and commentators go to great lengths to “prove” why everything that existed before they presented their argument has been a waste of time.

That’s just silly. 

You know why people attack everything that has come before. We live in a hyper-competitive environment when it comes to getting someone’s attention and so if you have something new, you may feel compelled to come up with a gimmick such as “everything you know is wrong” in order to get people’s attention.

We understand why they do this, because it would have been extremely tempting to go down this road ourselves.

We have developed a proven approach to dealing with uncertainty in all forms, i.e. what you should do when you don’t know what to do. 

We know it works because it is the same approach that the people who are masters at dealing with uncertainty—successful serial entrepreneurs—use. (There is nothing more uncertain than starting a business, and serial entrepreneurs are masters at it.)

The clichéd image of entrepreneurs coming up with an idea, laboring feverishly to perfect it, and delivering their creation to the market fully-formed is not what usually happens. The much more typical path is that they come up with an idea. They take a small step toward implementation to see if anyone is interested, and if it looks like some people are, they take another step forward. If they don’t get the reaction they want, they regroup and then take another step in a different direction.

In other words, they:

• Act.
• Learn (from that action)
• Build (off that learning)
• Repeat, i.e. they act again.

That cycle continues repeats until the entrepreneur succeeds, knows she is not going to, or decides there is another, more appealing opportunity to pursue. As we said, the approach serial entrepreneurs use when faced with the unknown (starting a business) will work for you when you face the unknown of any kind.

So, does this mean you should scrap your traditional ways of problem solving?
 
Absolutely not.

You shouldn’t use this approach exclusively. The way we all were taught to solve problems that are predictable—how do we introduce our existing product into an adjacent market; how many refrigerators will we sell during a recession—works just fine. You have historical precedents and data to draw on.

When you do, predict away.

When you don’t, try what we are advocating. It gives you an additional tool. It does not replace the ones you have.

We concede presenting a new idea this way is far less dramatic then screaming “EVERYTHING YOU KNOW IS WRONG.”

But it is honest, the process has been proven, and it should be helpful.

Paul B. Brown is the co-author (along with Leonard A. Schlesinger and Charles F. Kiefer) of Just Start: Take Action; Embrace Uncertainty and Create the Future recently published by Harvard Business Review Press.

9 Habits of People Who Build Extraordinary Relationships

The most extraordinary professional relationships are built by ordinary actions like these.

Professional success is important to everyone, but still, success in business and in life means different things to different people--as well it should.

But one fact is universal: Real success, the kind that exists on multiple levels, is impossible without building great relationships. Real success is impossible unless you treat other people with kindness, regard, and respect.

After all, you can be a rich jerk... but you will also be a lonely jerk.

That's why people who build extraordinary business relationships:


1. Take the hit.
A customer gets mad. A vendor complains about poor service. A mutual friend feels slighted.

Sometimes, whatever the issue and regardless of who is actually at fault, some people step in and take the hit. They're willing to accept the criticism or abuse because they know they can handle it--and they know that maybe, just maybe, the other person can't.

Few acts are more selfless than taking the undeserved hit. And few acts better cement a relationship.

2. Step in without being asked.
It's easy to help when you're asked. Most people will.

Very few people offer help before they have been asked, even though most of the time that is when a little help will make the greatest impact.

People who build extraordinary relationships pay close attention so they can tell when others are struggling. Then they offer to help, but not in a general, "Is there something I can do to help you?" way.

Instead they come up with specific ways they can help. That way they can push past the reflexive, "No, I'm okay..." objections. And they can roll up their sleeves and make a difference in another person's life.


Not because they want to build a better relationship, although that is certainly the result, but simply because they care.

3. Answer the question that is not asked.
Where relationships are concerned, face value is usually without value. Often people will ask a different question than the one they really want answered.

A colleague might ask you whether he should teach a class at a local college; what he really wants to talk about is how to take his life in a different direction.

A partner might ask how you felt about the idea he presented during the last board meeting; what he really wants to talk about is his diminished role in the running of the company.

An employee might ask how you built a successful business; instead of kissing up he might be looking for some advice--and encouragement--to help him follow his own dreams.

Behind many simple questions is often a larger question that goes unasked. People who build great relationships think about what lies underneath so they can answer that question, too.

4. Know when to dial it back.
Outgoing and charismatic people are usually a lot of fun... until they aren't. When a major challenge pops up or a situation gets stressful, still, some people can't stop "expressing their individuality." (Admit it: You know at least one person so in love with his personality he can never dial it back.)

People who build great relationships know when to have fun and when to be serious, when to be over the top and when to be invisible, and when to take charge and when to follow.

Great relationships are multifaceted and therefore require multifaceted people willing to adapt to the situation--and to the people in that situation.

5. Prove they think of others.
People who build great relationships don't just think about other people. They act on those thoughts.

One easy way is to give unexpected praise. Everyone loves unexpected praise--it's like getting flowers not because it's Valentine's Day, but "just because." Praise helps others feel better about themselves and lets them know you're thinking about them (which, if you think about it, is flattering in itself.)

Take a little time every day to do something nice for someone you know, not because you're expected to but simply because you can. When you do, your relationships improve dramatically.

6. Realize when they have acted poorly.
Most people apologize when their actions or words are called into question.

Very few people apologize before they are asked to--or even before anyone notices they should.

Responsibility is a key building block of a great relationship. People who take the blame, who say they are sorry and explain why they are sorry, who don't try to push any of the blame back on the other person--those are people everyone wants in their lives, because they instantly turn a mistake into a bump in the road rather than a permanent roadblock.

7. Give consistently, receive occasionally.
A great relationship is mutually beneficial. In business terms that means connecting with people who can be mentors, who can share information, who can help create other connections; in short, that means going into a relationship wanting something.

The person who builds great relationships doesn't think about what she wants; she starts by thinking about what she can give. She sees giving as the best way to establish a real relationship and a lasting connection. She approaches building relationships as if it's all about the other person and not about her, and in the process builds relationships with people who follow the same approach.

In time they make real connections.

And in time they make real friends.

8. Value the message by always valuing the messenger.
When someone speaks from a position of position of power or authority or fame it's tempting to place greater emphasis on their input, advice, and ideas.

We listen to Tony Hsieh. We listen to Norm Brodsky. We listen to Seth Godin.

The guy who mows our lawn? Maybe we don't listen to him so much.

That's unfortunate. Smart people strip away the framing that comes with the source--whether positive or negative--and consider the information, advice, or idea based solely on its merits.

People who build great relationships never automatically discount the message simply because they discount the messenger. They know good advice is good advice, regardless of where it comes from.

And they know good people are good people, regardless of their perceived "status."

9. Start small... and are happy to stay small.
I sometimes wear a Reading Football Club sweatshirt. The checkout clerk at the grocery store noticed it one day and said, "Oh, you're a Reading supporter? My team is Manchester United."

Normally, since I'm pretty shy, I would have just nodded and said something innocuous, but for some reason I said, "You think Man U can beat Real Madrid next week?"

He gave me a huge smile and said, "Oh yeah. We'll crush them!" (Too bad he was wrong.)

Now whenever I see him he waves, often from across the store. I almost always walk over, say hi, and talk briefly about soccer.

That's as far as our relationship is likely to go and that's okay. For a couple of minutes we transcend the customer/employee relationship and become two people brightening each other's day.

And that's enough, because every relationship, however minor and possibly fleeting, has value.

People who build great relationships treat every one of their relationships that way. (That's a lesson I need to take to heart more often.)

Jeff Haden learned much of what he knows about business and technology as he worked his way up in the manufacturing industry. Everything else he picks up from ghostwriting books for some of the smartest leaders he knows in business. @jeff_haden

Why CEOs Don't Want Executive Coaching

A recent study by the Stanford Business School found that nearly two-thirds of CEOs don't receive executive coaching or leadership development. And almost half of senior executives in general aren't receiving any, either. Paradoxically, nearly 100 percent said they would like coaching to enhance their development, as both Bloomberg BusinessWeek and Forbes reported in recent articles.

So, why do CEOs and other senior leaders say they want coaching but don't seek it?
I think the answer lies in what they've learned to think coaching provides, in contrast to what they think they need. Both views create a gap between desire and action. Ironically, that gap is unwittingly supported by most coaching programs, themselves. 

That is, most omit or misconstrue the core coaching element that CEOs need to grow their skills and effectiveness: Increased self-awareness, honest self-knowledge, about one's motives, personality capacities and values. The consequences of this absence play out in ways that diminish the relevance of coaching in the eyes of most senior leaders.

Self-awareness is crucial to leadership and it can be heightened through coaching. To explain why and how, consider the obvious but insufficient explanation for the paradox that CEOs want coaching but don't pursue it. Stephen Miles, CEO of the Miles Group, that partnered with Stanford on the study, pointed out that to CEOs, "coaching is somehow "remedial" as opposed to something that enhances high performance, similar to how an elite athlete uses a coach." Moreover, CEO's say they're most interested in such skills as conflict management and communication. Yet they put the need for compassion, relationship and persuasion skills far down on their list. They think of the latter as "soft skills," ancillary at best.

Both views reflect CEOs' perceptions. But those, in turn, reflect the failure of coaching programs to show that the infrastructure of successful leadership vision and behavior is heightened self-awareness about one's motives, values, and personality traits. That's especially true within today's challenging, fluid environment. Because of this failure, coaching programs unknowingly collude with CEOs' view that self-awareness is either irrelevant to leadership or of minor importance.

The higher up you go in companies, the more you're dealing with psychological and relational issues. Successful CEO leadership requires astuteness about others: their emotional and strategic personal drivers; their self-interest, overt and covert. These relationship competencies rest on a foundation of self-knowledge, self-awareness. And you can't know the truth about another without knowing it about yourself. 

Self-knowledge and the relational competencies they're linked with are central to a CEO's ability to formulate, articulate and lead a strategic vision for a motivated, energized organization. Self-knowledge builds clarity about objectives; it fine-tunes one's understanding the perspectives, values, aims and personality traits of others. When that's lacking, you often see discord and conflict among members of the senior management team; or between some of its members and the CEO.

Power and Empathy
Being able to see, understand and deal effectively with others' perspectives is key to successful leadership (as well as personal life). That capacity, part of self-awareness, is empathy. Two recent studies show its crucial role. One looked at the impact of power in an organization upon behavior; the other, its impact upon brain activity. Both studies found that increased power reduces empathy. 

One study, conducted by Adam D. Galinsky and colleagues at Northwestern's Kellogg School of Management, found that increased power tends to make one more self-centered and self-assured, but not in a good way: The researchers found that power makes one "prone to dismiss or, at the very least, misunderstand the viewpoints of those who lack authority." High-power individuals "anchor too heavily on their own perspectives and demonstrate a diminished ability to correctly perceive others' perspectives," according to Galinsky and his team, adding that, "As power increases, power-holders are more likely to assume that others' insights match their own."

The other recent study, by Canadian researchers, found the same thing by looking at brain activity when people have power. They found that increased power diminishes the ability to be empathic and compassionate because power appears to affect the "mirror system" of the brain, through which one is "wired" to experience what another person is experiencing. Researchers found that even the smallest bit of power shuts down that part of the brain and the ability to empathize with others.

These are highly important findings, because empathy, compassion and overall self-awareness are qualities of a developed, mature mind. One that's resilient to stress, able to manage internal conflicts, experiences interconnection with others, and maintains well-being. And, that therefore stimulates broad perspectives for understanding the problems and unpredictable challenges facing CEOs.

Much research shows that such capacities are essential personal strengths; certainly important to effective senior leadership. Moreover, studies find that you can grow them with conscious effort. The emotionally detached, un-empathic person, unaware of his or her personal motives or truths is not going to be very effective as a CEO or senior leader. We see examples of the consequences from time-to-time, when a CEO resigns or is fired. 

Building Self-Awareness
Self-awareness builds from honest self-appraisal about emotional strengths and vulnerabilities; your values and attitudes, personality traits and unresolved conflicts. You're a total person, not just a set of skills performing a role. 

One of Google's earliest executives, Chade-Meng Tan, teaches a popular course for Google employees that helps build such qualities. It's demonstrated positive benefits for success and wellbeing. And much research confirms that self-examination is critical for leaders' positive development. For example, Scott Keller, a director at McKinsey & Company, described the importance of overcoming self-interest and delusion in the Harvard Business Review. He emphasized the need for openness to personal growth and development, because "deep down, (leaders) do not believe that it is they who need to change..." and that "the real bottleneck...is knowing what to change at a personal level." Self-awareness also expands the capacity to know what not to pursue, not just what to go after, as Greg McKeown, CEO of THIS, Inc., described regarding what he learned from an Apple executive.

Coaching can provide several ways to enhance self-awareness. Here are a few I've found helpful to C-level and other senior executives.

Learn From Your Personal Time-Line: Describe key turning points in both your career and personal life, with an eye to what shaped your values, attitudes and behavior; how your career decisions and experiences have affected your personal development. Identify the consequences, both positive and negative. What does this knowledge point you towards, in terms of reclaiming and growing dormant or neglected parts of yourself?

The Capacities-Gap Exercise: List what you believe are your most positive personal strengths, qualities and personality capacities. Describe how each one has become stunted, blocked or deformed in their expression, in daily life. It happens to everyone. For each gap, describe what steps you could commit to taking, to enlarge those capacities and reduce the gaps in your role as a leader as well as in your overall life.

Identify Your Personal Vulnerabilities: All of us tend to develop a "cover story" along the course of our lives - what I called the narrower, "false" self in a previous post - beneath which is our "secret plot" - the real story, including our emotional blind spots, fears and pockets of dysfunctional behavior that can become hidden drivers of our lives. How can you rectify and grow through them?

Needless to say, effective leadership must also include necessary skills, vision and perspectives. For example, sustainable practices for long-term success, as business executive and sustainability thought-leader John Friedman regularly writes about, here.
Another is the movement towards joining business success with addressing social needs, as Richard Branson has described, where "taking care of people and the planet are at the very core of all businesses everywhere in the world." Adding that our current world of transparency and social media demands that "business reinvents itself and becomes a force for good in the world," he's leading a new effort in that direction, called The B Team.

Self-awareness and the growth it supports, combined with such business perspectives and practices, can and should be the heart of executive coaching and leadership programs.

Douglas LaBier, Ph.D., a business psychologist and psychotherapist, is director of the Center for Progressive Development in Washington, D.C. and writes the blog ProgressiveImpact.org. You may contact him at dlabier@CenterProgressive.org.

How The Most Successful People Think Differently To Solve Their Biggest Challenges

Paul B. Brown, Contributor

Invariably, when presenting a new approach to solving problems, authors, pundits and commentators go to great lengths to “prove” why everything that existed before they presented their argument has been a waste of time.

That’s just silly. 

You know why people attack everything that has come before. We live in a hyper-competitive environment when it comes to getting someone’s attention and so if you have something new, you may feel compelled to come up with a gimmick such as “everything you know is wrong” in order to get people’s attention.

We understand why they do this, because it would have been extremely tempting to go down this road ourselves.

We have developed a proven approach to dealing with uncertainty in all forms, i.e. what you should do when you don’t know what to do. 

We know it works because it is the same approach that the people who are masters at dealing with uncertainty—successful serial entrepreneurs—use. (There is nothing more uncertain than starting a business, and serial entrepreneurs are masters at it.) 


The clichéd image of entrepreneurs coming up with an idea, laboring feverishly to perfect it, and delivering their creation to the market fully-formed is not what usually happens. The much more typical path is that they come up with an idea. They take a small step toward implementation to see if anyone is interested, and if it looks like some people are, they take another step forward. If they don’t get the reaction they want, they regroup and then take another step in a different direction.

In other words, they:

• Act.
• Learn (from that action)
• Build (off that learning)
• Repeat, i.e. they act again.

That cycle continues repeats until the entrepreneur succeeds, knows she is not going to, or decides there is another, more appealing opportunity to pursue. As we said, the approach serial entrepreneurs use when faced with the unknown (starting a business) will work for you when you face the unknown of any kind.

So, does this mean you should scrap your traditional ways of problem solving?
 
Absolutely not.

You shouldn’t use this approach exclusively. The way we all were taught to solve problems that are predictable—how do we introduce our existing product into an adjacent market; how many refrigerators will we sell during a recession—works just fine. You have historical precedents and data to draw on.

When you do, predict away.

When you don’t, try what we are advocating. It gives you an additional tool. It does not replace the ones you have.

We concede presenting a new idea this way is far less dramatic then screaming “EVERYTHING YOU KNOW IS WRONG.”

But it is honest, the process has been proven, and it should be helpful.

Paul B. Brown is the co-author (along with Leonard A. Schlesinger and Charles F. Kiefer) of Just Start: Take Action; Embrace Uncertainty and Create the Future recently published by Harvard Business Review Press.

7 most expensive words in business

The Do's and Don'ts of Cash Management

By: Bronwen Roberts

Working capital is a highly effective barometer of a company's operational and financial efficiency and effectiveness. The better its condition, the better placed the company is to focus on developing its core business.

The early, primitive attempts at maximizing cash management can be traced back to the late 1970s. Unbelievably, there are still some companies who haven't yet understood that putting cash trapped in the balance sheet to better use can give them a competitive edge over their rivals. 
 

A most recent report shows a further reduction of working capital in companies in the US and Europe compared with the previous year, of between 3 per cent and 5 per cent. This demonstrates the continuing increase in the importance of working capital management to help companies achieve their strategic objectives.

 How to do It
There is more to working capital management than simply telling a company to collect its debtors as quickly as possible, to delay paying its suppliers as long as possible, and to keep stock levels as low as possible. A properly conceived and executed improvement program will certainly focus on optimizing each of these components, but will deliver additional benefits that extend far beyond the merely operational. It will demonstrate the need for ambitious corporates to integrate working capital management into their strategic and tactical thinking, rather than view it as an optional bolt-on extra.

There are a number of dos and don'ts to help guide corporate thinking. Firstly, do think of working capital management as a strategic objective that can enable your corporation's goals. We cannot over-emphasize this opening point. The same factors that drive a company's working capital also drive its operating costs and customer service performance. Therefore, by addressing the drivers of working capital a company will also experience significant improvement in operating costs and customer service.

For example, a company's working capital is deteriorating due to an increase in past due accounts receivable (AR). A review of the overdue AR illustrates a high level of customer disputes. The disputes are taking on average 30 days to resolve and consuming significant amounts of sales, order entry, and cash collectors' time. By tackling the root cause of the disputes, in this case poor adherence to pricing policies, the company can eliminate the disputes, thereby improving customer service.

This will free up the time of staff in sales, order entry and cash collections, enabling them to be more effective at their designated roles. This in turn increases productivity, reduces operating costs, and potentially increases sales. Working capital will improve, as customers will have fewer reasons to hold payment. This example illustrates how working capital is one of the best indicators of underlying inefficiency within an organization.

Consider Another Perspective
Don't think of things only from your own company's perspective. If you can help your own customers plan their inventory requirements more efficiently, for instance, you can match your production to their consumption, efficiently and cost-effectively, and do the same with your own suppliers. The potential implications for inventory levels are huge. By aligning ordering production and distribution processes, you increase inherent efficiency and achieve direct cost savings almost instantly, as a by-product. And then you discuss the best way to bill or to pay.

Do educate your organization to consider the trade-offs between different working capital assets when negotiating with customers and suppliers. Depending on the usage pattern of a raw material, there may be more to gain from negotiating consignment stock with a supplier versus pushing for extended terms. This could apply particularly in cases of long lead-time items, or those that require high minimum order quantities.

Agree On Formal Terms
Do agree on formal terms with suppliers and customers and document those terms carefully. Keep them up to date, and communicate those payment terms to employees throughout your business, particularly those involved in the customer to cash and purchase to pay processes, including your sales organization.

Don't allow prolific new product introduction without a clear product range management strategy. Poor product range management creates inefficiency in the supply chain, as companies are required to support old products with inventory and manufacturing capability. This increases operating costs and exposes the company to an obsolete inventory that may have to be disposed of.

 
Collect your Cash 
Don't forget to collect your cash. Many businesses fail to implement effective ongoing collection procedures to prevent excess overdue funds or build-up of old debtors. Ask customers if invoices have been received and are clear to pay. If not, identify the problems that are preventing timely payment.

Confirm and reconfirm the credit terms agreed upon with the customer. Often, credit terms get lost in the translation of general payment terms and what's on the payables ledger in front of the payables clerk. Do devote the requisite amount of time and attention to the critical issue of dispute management.

Don't set top-down targets uniformly across the business. For instance, too many companies impose a 10 per cent reduction in working capital for each division. This fails to take into account the potential opportunity within a division and can result in setting an impossible target that acts to de-motivate. Instead, balance top-down with bottom-up intelligence when setting targets.

Targets Drive Behaviour
Do set targets that drive the desired behaviour. Many companies will incentivise collections staff to minimize the aged AR over 60 days. Does this mean that customers who pay one to 60 days late are good payers? No, aged AR over 60 days will result in increased costs and time it takes to collect the debt. By incentivising staff to lower the amount over 60 days, you keep your costs down. Do educate staff, customers and suppliers that cash and cash management are important, and are an integral part of a successful business relationship.

Look Within Yourself
Don't assume that all the answers are to be found externally. Before approaching existing customers and suppliers to discuss cash management goals, fully understand your own process gaps so you can credibly discuss poor payment processes.

Do treat suppliers as you would like your customers to treat you. Far greater cash flow benefits can be realized by strategically leveraging the relationship you have with suppliers and customers. In addition, a supplier is more likely to support you in an emergency if you have treated them fairly.

Don't however, treat everyone the same. Use segmentation tactics to split your customer supplier into similar groups. This may be based on a basket of criteria including profitability, sales, AR size, past due debt, average order size and frequency. Define strategies for each segment based around the criteria and your strategic goals.

Do celebrate success in hitting targets. Emphasise the actions that helped you get there.

Conclusion
To summarise briefly, following the dos and don'ts will enable you to optimize cash and to highlight inefficiencies in your processes that must be remedied to better serve customers. It will enable you to build stronger partnerships with your suppliers across the total working capital value chain. This translates ultimately into improvement in bottom-line results, often a good deal quicker than you might expect, and helps clarify the senior management focus on strategic imperatives. 

Author Bio
REL Consultancy Group www.relconsult.com are global specialists in generating cash improvements, cost reductions and service enhancements by optimizing working capital. They are the only international corporate financial consulting firm that focuses exclusively on increasing operational efficiency from working capital and operations. They work with people to transform your organization, your customer's and your suppliers in more than 60 countries around the world.

Good Employees Make Mistakes. Great Leaders Allow Them To.

As a business leader, I found that one of the scariest things to do was to give your people the freedom to make mistakes. While mistakes allow individuals to learn and grow, they can also be very costly to any company. Scared as I was, I knew that truly great leaders found ways to allow their people to take these risks, and I genuinely wanted to be a great leader. I wanted to help my employees to grow. So I set out to discover how to accomplish this without placing my company in jeopardy.

“Courage is not the absence of fear, but rather the judgment that something else is more important than fear.”  - Meg Cabot

I quickly discovered that the first step was to determine the areas of the business where a mistake could take place without causing too much damage. I took careful attention to make sure that any areas where we would damage our clients and the trust they had placed in us were off limits for significant risk without serious executive involvement and oversight. I identified other areas where I could feel more comfortable allowing people the freedom to experiment on new and better ways of doing things.

The second step was to communicate to the employees that we were setting an official company policy:  Making any mistake once was OK, so long as it was an honest mistake made while attempting to do what they felt was the right thing. Making any mistake once was OK, but repeating that same mistake a second time was NOT OK. The hard, fast rule was that if you made any mistake for the first time the entire team would have your back in fixing that mistake if anything went wrong. However, if you ever repeated the mistake a second time, then you were 100 percent on your own to face the consequences.  This rule applied for every first-time occurrence of each new mistake you made.
 

We all make mistakes. Every one of us. If we aren’t making mistakes, then we likely aren’t trying enough new things outside our comfort zone, and that itself is a mistake. That process is the best way to learn and grow as a person.  As John Wooden once said, “If you’re not making mistakes, then you’re not doing anything.” Mistakes are the pathway to great ideas and innovation. Mistakes are the stepping stones to moving outside the comfort zone to the growing zone where new discoveries are made and great lessons are learned. 

Mistakes are not failures, they are simply the process of eliminating ways that won’t work in order to come closer to the ways that will.

Great leaders allow their people the freedom to make mistakes. But good employees are those who when mistakes are made 1. Learn from them, 2. Own them, 3. Fix them, and 4. Put safeguards in place to ensure the same mistake will never be repeated again.

1.       Learn from them:  Good employees recognize that they have, in fact, made an honest mistake.  They do not get defensive about it, rather they are willing to look objectively at their mistake, recognize what they did wrong, and understand why their choice or actions were the wrong thing to do.

2.       Own them:  Good employees take accountability for their mistakes. They admit them readily.  They don’t make excuses for their mistake, rather they acknowledge that yes, they made a mistake and they express openly what lesson they have learned from that mistake. They go on to express steps 3 and 4 below.

3.       Fix them: Good employees do what it takes to rectify their wrongs. They are willing to do whatever they can to fix the problem and make it right. Certainly there are times when the damage is done and recompense cannot be made, but good employees do their very best to repair whatever damage has been done to the best of their ability. They always establish a timeline with follow up for when the problem will be fixed and make sure that progress is communicated throughout the process so everyone feels the urgency and care with which they are correcting the problem.

4.       Put safeguards in place to ensure the same mistake will never be repeated again: This is the most critical step in the learning process. When a mistake has clearly been made, the most important thing anyone can do is figure out what safety nets and roadblocks can be carefully established to ensure that this same mistake will never take place again. Document this step so the lessons learned and the safeguards setup can always go beyond you. Do everything in your power to help others learn from your mistake so they don’t have to experience them on their own to gain the lesson you’ve learned.

The steps to correcting mistakes apply to any area of life. Whether it’s business life or home life or personal life, the principles of apologizing remain the same. Good employees make a lot of mistakes, and truly great employees are those have mastered the art of apologizing for those mistakes:

Great People Practice The Six A’s of a Proper Apology:

• Admit - I made a mistake.
• Apologize - I am sorry for making the mistake.
• Acknowledge - I recognize where I went wrong that caused my mistake to occur.
• Attest - I plan to do the following to fix the mistake on this specific timeline.
• Assure - I will put the following protections in place to ensure that I do not make the same mistake again.
• Abstain – Never repeat that same mistake twice.

People who implement the Six A’s will find that the level of trust and respect others have for them will grow tenfold. People who implement the Six A’s will find that others will be quicker to forgive them and more likely to extend a second chance. It’s not the making of a mistake that is generally the problem; it’s what you do with it afterward that really counts.

Amy Rees Anderson, Contributor