Archive for 2011

Management Consulting – A Strange Business?

Tuesday, December 20th, 2011

Our guest this week is Paul Chato, CEO at Your Web Department™, the world’s first and only hosted website management system that lets people update and design their websites without programming. It’s hard enough to succeed in one career. Paul has succeeded in four different pursuits. See below…………

Jim Stewart, the custodian of this ProftPATH blog has given me some space here. I just hope he doesn’t regret it.

Management consulting is that strange business whereby if we only ran our companies better, more efficiently and with an attention to the obvious we wouldn’t need the service. Sure, there is the argument that having an outside opinion is a good thing but I tend to think we use that ‘outside opinion’ as a way to confirm long-held beliefs and then we use the assessment as a cudgel on the inefficiencies that we always knew existed. Some of us are blind to the obvious, but most are just insecure about doing anything about it. Maybe if we had better employees, or trusted them more we wouldn’t need management consultants.

But you know why having a relationship with a competent management consultant is a good thing? It gives you someone you can just plain talk to about stuff you can’t talk about to spouse or subordinates. It’s pretty lonely running an SMB and a good MC is vital to your mental health. Forget about the details about capital expenditures, or going over the P+L, sometimes you just need someone to talk to about the pressures and frustrations of running a business.

I think, as a trusted advisor, that’s the greatest role a management consultant can play. We’re only human.

More About Paul:

At first pursuing a potential career in nuclear physics, Paul chose, instead, to develop his creative skills. After graduating from Ryerson’s Radio Television Arts program he started Chato Art Ink, one of Toronto’s more successful independent design firms. He stopped designing to take up comedy, helping to form the now legendary Frantics Comedy Troupe, and will be forever remembered as Mr. Canoehead, “Canada’s aluminum-headed crime fighter.” Paul then joined the Canadian Broadcasting Corporation rising to the position of Head of TV Comedy. After considering a move to Los Angeles to take up a position as VP of Development at a major Hollywood studio, Paul instead chose to exercise his interest in computers. He started Electramedia and in the intervening years produced the hugely successful CD-ROM game Jewels of the Oracle, hundreds of corporate presentations, videos and Internet sites. In 1997 Electramedia switched its focus 100% to the Internet and most recently has become Your Web Department™.

If you would like to contact Paul email him at


I’m Not Alone………

Thursday, December 15th, 2011

It started last year.

It continued to bother me this year but I didn’t say anything to anyone. I couldn’t, I wasn’t sure how to put it.

Then I found out that someone else felt the same way. He has a much higher, more public profile than me. And he wasn’t afraid to speak out.

That tipped me over the edge.

Just as I took my first couple of tentative steps, I discovered there’s someone else, also with a higher profile than mine, who is talking about it too.

I feel so much better. So I’ll say it out loud……..

The words strategy and strategic are being overused and misused. And it’s wrong because it’s causing confusion and doing harm.

It first became clear to me………….

…..when I read Richard Rumelt’s book “Good Strategy: Bad Strategy, The Difference and Why It Matters”.  I believe 3 of Rumelt’s 4 major hallmarks of bad strategy involve misuse of the words strategy or strategic.

He describes “Fluff” as a superficial restatement of the obvious combined with a generous sprinkling of buzzwords.

Rumelt’s example of fluff is a major bank stating “Our fundamental strategy is one of customer-centric intermediation.” Intermediation, accepting deposits and lending them to others, is what all banks do. And this one’s processes didn’t make it any more customer friendly than its competitors. The statement is fluff not strategy.

Then there’s “Mistaking goals for strategy”. For example he talks about a document labeled “Our Key Strategies” which was no more than a list of goals with no reference to a key strength the company could leverage to achieve the goals.

The third one is “Bad strategic objectives”. Rumelt talks about “dog’s dinner objectives”, a list of things to do with the label strategies or objectives, where 1 of the “to do’s” is to create a strategic plan. There are also “blue sky objectives”, which are simply a restatement of the desired state of affairs.

And now there’s someone else……………….

…..who is making a similar point. This week Harvard Business Review published a blog post by Joan Magretta called “5 Common Strategy Mistakes”. I think 3 of them also involve confusing strategy with something else.
First is confusing marketing with strategy. Doing that, she argues, means overlooking the point that a strategy not only requires a value proposition, it also requires a unique configuration of (companywide) activities that best delivers the value.

Next is confusing competitive advantage with what you’re good at. Companies often look inward, see a strength – and overestimate it. But to form the basis for a strategy a strength has to be something the company does better than its rivals. And that judgment can only be made by the market.

Finally there’s thinking that growth or reaching a revenue goal is a strategy. Sound familiar? Mistaking goals for strategy is on Rumelt’s list too. It’s not the goal (e.g., reach $50 million in revenue), nor is it a specific action (e.g., launch a new product, enter a new market, make acquisitions). Strategy is the set of integrated choices that define how you will achieve the goal; the actions are the path you take to execute or realize the strategy.

Now that I feel better, that I’m not alone…………

…..I’m going to continue speaking about it.

Because it will only get better if we get it into the open, get people, business owners, talking about it.

We have to stop overusing and misusing strategy and strategic. It’s causing confusion and doing harm to the most important part of a company – its business strategy.

By the way, you can see my first couple of tentative steps here and here

So Tell Me, What Is Strategy?

Thursday, November 17th, 2011

Look anywhere and you’ll see tweets, posts and articles containing the word strategy. Marketing strategy, social media strategy, sales strategy, financial strategy, meeting strategy – in fact every kind of strategy you can think of.

Strategy – and strategic – are becoming greatly over used words. And in some cases they’re being imbued with mystique and complexity in order to create a need for “expertise”.

Why should we care? I can think of 2 reasons.

1. Strategy should be simple.

A strategy shouldn’t be an ethereal concept or a complex by design – in fact quite the opposite. Look at the Wikipedia definition – “a plan of action designed to achieve a particular goal.”

What could be more straightforward? A strategy has 2 parts. Part 1 – designing the plan and part 2 – translating it into action which achieves a specific goal.

It sounds simple – but the mystique and complexity can start with the words and phrases that are used to describe the design part of business strategy. I’m thinking of environmental scans, key competencies, scenario planning, strategic options etc.

To be fair there are some companies and clients with whom it is essential to use these buzz words in order to be considered credible.

But for everyone else – particularly for companies which haven’t worked with consultants before – the strategy design process should be kept clear and simple.

Another thing I’ve never been comfortable with is the point of view that a strategy must be perfect, a thing of great beauty. Making things of great beauty is the job of artists and plastic surgeons. Business people need to be pragmatic.

Anyway, many strategies which were judged imperfect or impossible – e.g. Steve Job’s strategy for Apple in 1987 and Herb Kelleher or Richard Branson’s entry to the airline industry – resulted in great successes.

And if a strategy isn’t made to work, to deliver results, what does it matter how nice it looks or sounds – which brings me to the second reason we should care.

2. The focus should be on the translating into action, achieving the goal part.

Research has shown, fairly consistently, that the majority (around 70% by some estimates) of strategies aren’t implemented or they fail.

Assuming that at least some of them were practical and simple, and yet still were never turned into action, what chance do complex strategies stand?

And here’s something that has always struck me as ironic.

Some of the reasons for designing a new strategy or changing/adapting an existing one are outside the control of the business owner and his/her team – e.g. competitive action, changes in the industry.

But all aspects of translating a strategy into action are totally under their control.

Makes you think, doesn’t it?

3. Final thoughts.

A business strategy is the means by which owners achieve their vision for their company. To do that it can’t be shrouded in mystique or only be a thing of ethereal beauty. And it can’t be complicated.

A good strategy informs all parts of the company about what they must do and how they must work together. It translates into the specific actions that must be completed to achieve clear goals which lead to the realization of the vision.

It turns the vision into results.

And don’t forget – a weak strategy implemented strongly will always beat a strong strategy implemented weakly.

 If you enjoyed this you’ll also enjoy 3 Things Which Shape A Good Strategy and 6 Tips For Getting Better Results in 2011 and Why You Want A Consultant With Hands-On Experience

Being Profitable and Strong Increases Valuation

Wednesday, November 9th, 2011

In my last post I talked about 4 things every owner of a successful business must think about. They are the 6 reasons a company is sold, the 2 factors which apply to each of those situations and what being “profitable” and “strong” mean.

I promised then that I’d talk about how to make a company profitable and strong. So here we go.

1. How do you achieve consistent profitability? Here are 6 things every business owner can do to increase the odds that her/his company will produce consistent, industry beating profits:
a. Develop a strong product line – not only having width and depth in current products but also always having new products under development.
b. Build a great reputation – and recognizable identity or brand – in your target market(s) by delivering quality products and services, on time, that meet your customers’ needs.
c. Be in more than one market (which ideally do well in different phases of the economic cycle).
d. Have a broad customer base built on strong companies or affluent consumers.
e. Generate a stream of recurring revenue rather than working solely on projects which have to be replaced when complete.
f. Innovate – and create some intellectual property, products or processes, which can be protected, creating a sustainable advantage or a barrier to lock out competitors.

2. How do you make a company strong? Here are 6 things an owner can do to survive the loss of key people and keep his/her company’s balance sheet ratios looking good:
a. Document all processes. Especially the sales process which can be mapped, then managed, using a CRM system.
b. Involve all of the key people in a formal, annual business planning (and budgeting) process, which is completed 2 months before the start of a fiscal year and which includes formal, quarterly reviews.
c. Maintain strong internal financial controls, including cash flow forecasting, and insist on timely, monthly reporting.
d. If the management team doesn’t know and understand the drivers of the key balance sheet ratios have your accountant run a training program for them.
e. Always put leases and contracts – for everything and everyone – in writing.
f. Make Human Resources management a key part of your strategy and culture by e.g. driving accountability and responsibility through job descriptions; making decision making independent of the owner; identifying talent and training people for growth.

A company which is profitable and strong can survive the prolonged absence of the current owner as a result of injury or illness because it will continue to: 
• Execute its proven strategy.
• Be innovative, building barriers against competitors.
• Operate day-to-day without missing a beat.
• Produce revenues and profits at, or above, previous levels.
• Keep and attract good people.
• Attract financing should it be required.
• Survive any unexpected crises in the industry or economy.

The ability to do that also makes this type of company very attractive to a potential buyer – because the risk of the company failing in the short term is reduced significantly. And that means the valuation of the company – which determines the selling price – will be at the high end of the scale.

So by doing the 12 things I mentioned (and, in all fairness, some others like them) a business owner wins in 3 ways.

She or he makes great money while they run the company. They build security for themselves and their families in the event they are injured, fall ill or even die. And they maximize the return on the long hours, missed vacations and risks they’ve taken by getting a great price for the company if it’s sold.

How good is that?

If you enjoyed this you will also enjoy The 2 Truths Every Business Owner Has To Face and The Future Of Your Business: Succession or Exit

4 Things Every Business Owner Must Think About

Monday, November 7th, 2011

A few years ago one of our clients was unexpectedly made an offer for her company. It took her totally by surprise and so we had to react quickly to the situation.

She thought the offer was low and she tried to negotiate it up.

That’s when I realized that, until then, she’d given no thought to selling and even less to maximizing the valuation of the company.

That situation taught me there are 4 things every owner of a successful business must think about. Here they are.

1. The 6 Reasons A Company Is Sold. We now tell business owners that there are 6 things that will make them sell their company. They:

1. Accept an unsolicited offer.
2. Become so ill they are no longer fit to continue running the company.
3. Die young and unexpectedly.
4. Choose to retire.
5. Are no longer able to run the company – but this time because of old age.
6. Die of old age.

Some of the owners laugh saying that it will never happen to them. Some get annoyed that we even bring it up saying things like “I’m far too young to have to worry about that now” or “I’m not ready to retire/I will never retire.”

But the one thing they cannot do is argue that the 6 reasons are illogical or incorrect.

2. The 2 Common Factors. Then we tell them there are 2 factors common to all 6 situations:

a) They will only get an unsolicited offer, for top dollars, if the potential buyer believes that the business is profitable and strong.
b) They may not have to sell if they become ill – even so ill they can’t run the business – or if they retire. But if they retain ownership the company will have to run without them. And to do that it has to be profitable and strong.
c) If they do have to sell because of illness or when they retire, they will only maximize the return on their hard work – get top dollar – if the business is profitable and strong.
d) If they choose to retire; become too old to continue running the business; or die – young or old – they, their estate or their heirs have the same choice. They can either retain ownership or sell. And, once again, to get the most money out of the business it needs to be profitable and strong.

So what does it mean to be “profitable” and “strong”.

3. A “Profitable” Company is one that consistently produces industry beating profits.

Why consistently?  Because that’s the only test that making a profit was more than just luck. (As an old friend used to say – never confuse success with a growth market.)

Why industry beating?  Because what’s to say that even consistent profits couldn’t be improved. What better comparison than with other companies in the same industry? It removes one major variable – because every company in the industry goes through each phase of the economic cycle at the same time. And key indicators are available by either looking at the annual reports of public companies or by using the industry data published either by (some) associations or magazines like Inc.

4. A “Strong” Company can meet 2 criteria. One, it can maintain profitable operations despite the loss of 1 – or more – key personnel. Who are key personnel – the owner and anyone with specialist knowledge which would be hard to replace. Two, all key balance sheet ratios – liquidity, debt to equity etc. – are in great shape – in other words the company could borrow money from the most conservative of lenders.

What makes a company profitable and strong? I’ll tell you in another post.

By the way there are at least 2 other reasons a company could be sold – divorce and the break-up of a partnership. We’ll also deal with those in another post.

A “BEMI” – Does It Work And Is It Really New?

Friday, October 21st, 2011

In the last 2 weeks I’ve seen 3 blog posts talking about growth, all more or less claiming that their concept is the best or only way to grow companies in the future.

But do these concepts really work (in anything smaller than a global corporation)? And are they really new?

The first one is all about “big-enough market insights” or BEMIs¹  and is based on the argument that real, rather than incremental, top-line growth can only occur when there’s a significant change in the nature of demand.

That change is caused by either a shift in customers’ circumstances or in their thinking e.g. when the housing bubble burst or when tablets became simple, affordable tools for use at home and at work.

1.    What is a BEMI?

When a business owner can see the connection between a change in demand and the lucrative market the change will eventually create she has found a BEMI.

That Insight becomes the foundation for either a blockbuster product or for a suite of offerings.

2.    Identifying a BEMI

BEMIs are usually spotted first by employees at the fringe of the organization. For example in the 80’s, a Toyota executive in California saw that increasing affluence and the growing number of yuppies was creating an opening for a new kind of luxury car – the Lexus.

More recently, the Air Wick Freshmatic originated with a brand manager in Korea.

Closer to home, one of our clients realized in the late 90’s that, as cell phones began to be adopted, users would want cases, rechargers and extra batteries for them. Consumers would be more easily upsold if these accessories were packaged in a kit rather than sold as individual items.

3.    Embracing a BEMI

BEMIs often face a lot of resistance from inside the company. Many critics opposed the Lexus because e.g. setting up a separate network of Lexus dealerships, had the potential to alienate existing dealers. They also attract opposition if the company doesn’t have the necessary expertise to develop the product e.g. Reckitt Benckiser had little experience with the electronic technology required for the Air Wick Freshmatic.

In the late 90’s the cellular carriers were the major distributors of accessories via their retail outlets. Our client had to overcome the carriers’ resistance to kits by acquiring the technology and resources to design, assemble and package for them.

4.    Exploiting a BEMI

Pursuing a BEMI can take a lot of perseverance because they rarely lead to a surge in revenues and profits over the short term. That’s because they originate in an understanding how shifts in current trends will change markets – and using that insight to create an opportunity for the future while sidelining competition.

Pampers disposable diapers, introduced in 1961, took advantage of the growing desire for greater convenience, and the fact that women were increasingly joining the workforce. But they had to be made by hand, making them uncompetitive with diaper services. It took years before P&G could mass-produce them and that did not come cheap. However Pampers created a multi-billion dollar market.

5.    So do they really work and are they new?

It took time to launch cellular accessory kits but consumers really took to them and sales took off. So I’d say that the concept works equally well in any size of organization.

However I’m not sure they’re new. I think strategists and business owners have been doing this for a long time but just calling it something else (trends analysis springs to mind).

But regardless of what you call it – it works and works well.


¹Where Top-Line Growth Really Comes From HBR, 6 Oct 11

Design Thinking and Strategy Development

Friday, October 14th, 2011

A little while ago I asked our LinkedIn group the question “Is design thinking dead in the water or does it still have something to offer strategy?”

I did it because I was on the fence a bit and Bruce Nassbaum who was one of Business Week’s major advocates for design thinking, had recently come out¹  and said he was moving on to something new.

But now I don’t agree with him and here are a couple of reasons why.

1. The Baby and the Bathwater.

Nassbaum states, quite correctly I believe, that design thinking is a process which generates the real deliverable – creativity.

He goes on to argue that because it had to fit with the existing concept of business process, design thinking “was denuded of the mess, the conflict, failure, emotions, and looping circularity that is part and parcel of the creative process.”

I can certainly see a few of the more analytically oriented CEOs and business owners I’ve known taking that stance! But Nassbaum goes on to say that in the few companies where CEOs and managers accepted the “mess along with the process” then “real innovation took place”.

So what’s the real issue? If it’s that design thinking only works where the culture supports it then the process isn’t the problem. As is so often the case, the real culprit would appear to be the execution or implementation of the process.

To abandon the process in these circumstances would appear to be throwing out the baby with the bathwater.

2. And In the Other Corner….

The MIT Sloan Management Review says that “Design thinking — distinct from analytical thinking — has emerged as the premier organizational path not only to breakthrough innovation but, surprisingly, to high-performance collaboration, as well.”²

And the Rotman School of Management (in the interests of full disclosure, I am an alumni) offers a “unique program that merges the practices of business and design at our Strategy Innovation lab”³

Being the skeptic that I continue to be, I am reluctant to believe something simply because an academic has said it.

But you have to attach credibility to an academic with an MIT pedigree (no pun intended). While Rotman, with its mission “redesigning business education for the 21st century” has it’s MBA program now ranked in the top 15 in North America by the Financial Times.

3. The Clincher.

I’ve encountered and read several other articles and blog posts which suggest that design thinking is alive and well and continues to have a role to play in strategy development. But the clincher is an article4 I read recently (oddly enough in the Rotman magazine) which lays out a design thinking tool kit for managers.

The authors link the concept of design thinking to the process they’ve laid out and the 10 tools they recommend. I like the logic and I’m familiar with the tools. I can see how it would complement the strategy development process we use.

I have some questions still about the practicalities of the tool kit but, for now at least, I’m off the fence.

There’s still time for you to express your views – either here or on our LinkedIn group

If you enjoyed this you will also enjoy Why Strategy Is Still Worth A Business Owner’s Time and Adaptive Strategy – A Way To Profits In The New Normal?

¹Design Thinking Is A Failed Experiment. So What’s Next?

² Design Thinking – Hard skills from a soft science

³ Rotman School of Management

4 Designing For Growth: A Tool Kit For Managers, by Jeanne Liedtka and Tim Ogilivie in the Rotman Magazine, Fall 2011, page 17

Why You Need A Consultant With Hands-On Experience

Thursday, October 6th, 2011

The word on the grapevine is that the “brand name” consulting companies are getting push back from their clients.

Why, because business owners want results not just recommendations. And the “brand name” companies may not be able to deliver.

One reason is that they use associates in their mid-twenties or early thirties, usually the recent products of MBA programs, to do the front line work. While they bring a ton of theory to a project they have absolutely no practical, operational experience.

1. Why is operational experience so important now?

It’s the difficult economic times – which, if you believe the pundits, are here to stay for much longer than in recent recessions. The pressure is on to not only get an acceptable return on every dollar spent/invested, but also to get it quickly.

But the nature of a consulting assignment – particularly strategy consulting – is that the consultant is long gone before the actual results of acting on the output from the assignment can be determined. If the output – e.g. recommended action, new systems or processes – doesn’t work the dollars spent/invested in fees will either fail to produce an acceptable return – or produce no return at all.

So unless some way can be found to keep the consultants around, or bring them back, when the actual results appear, there is no way to hold them accountable. This means that the most a client can do is minimize the risk of the new systems or recommendations failing.

2. There are at least 3 factors which affect the risk of failure.

The first is the analytical skills, knowledge of business models and process, logic and creativity the consultant applies to the situation. Even MBA’s in their mid-twenties or early thirties should have the first two.

Second is industry or subject matter knowledge. Consulting companies provide this by focusing on either one or two industries or business processes and developing repeatable “models” which they apply with future clients.

Finally there’s operational experience gained actually implementing similar recommendations or installing similar processes/systems while responsible and accountable for the results.

This kind of experience comes from holding a management/executive role in an operating company. The more senior the role, the greater the experience. Because there’s no substitute for the stomach churning, cold sweat inducing realization that the buck stops with you.

3. A consultant with operational experience offers a client 2 clear advantages.

One – she will use the lessons learned from her practical experience to reduce the risk of her recommendations failing in ways that a consultant who only has theoretical or subject matter knowledge cannot.

Two – she is used to being held accountable and will expect it from a client.

4. The consulting industry has to change too.

I believe that the industry, built on telling everyone else what to do, is going to have to change itself. Consultants – particularly strategy consultants – have to develop business models which enable them to:
• Put more people with operational experience in front of clients.
• Remain involved until the results of our advice become apparent.
• Link our fees to our performance.

We, and some others, are working on ways to do both of those things (call us if you want to know more). But many are not. It’s as if the industry that’s paid to show other companies how to adapt for the future is firmly in denial.

If you enjoyed this post you’ll want to read “How to Keep Control When You Work With Consultants” and “3 Reasons Why Consulting Assignments Fail“.

Why Entrepreneurs Need a Parallel Plan

Tuesday, September 20th, 2011

This week’s guest blog post is provided by Rona Birenbaum CFP, a Professional, fee-based Financial Planner and President of Caring for Clients, a full-service financial planning firm, Rona has worked in financial services for over 20 years within the Credit Union, full-service brokerage and independent Financial Planning industries.

Entrepreneurs are eternal optimists.  And that is a blessing because optimism is a necessary ingredient when starting, and building, a business.

When naysayers tell them the risks are too high, the optimistic entrepreneur focuses on the opportunities as well as the risks.

When new competitors emerge, the optimistic entrepreneur evaluates the new threat and makes the necessary adjustments to stay on top.

When an economic downturn threatens profits, the optimistic entrepreneur seeks creative ways to survive until the recovery.

So, why do entrepreneurs need a parallel plan?

A parallel plan is the safety net for the trapeze walker, the lifejacket for the sailor, the secondary rip cord for the skydiver.

No, it’s not insurance.  It’s better than that.

In brief, here are the five components of a parallel plan.

1.  The personal savings program – The savings program builds creditor proof, non-business assets that can support the entrepreneur, and their family, in the event the business underperforms in the short or long term.

2.  The personal and corporate insurance program – Disability insurance will replace lost income if the entrepreneur is ill or injured and cannot work and key person insurance will fund buy-sell provisions of shareholder agreements.

3.  The business succession plan – Make sure that the entrepreneurs have (or are working towards) monetization of their business efforts.

4.  The estate plan – Personal and corporate wills and powers of attorney empower specific parties to manage and disburse personal and corporate assets with minimum taxation and conflict.

5.  The family communication strategy/plan – Regular meetings between the entrepreneur, their spouse and other appropriate family members.  These reviews keep everyone “in the loop” on progress, and outline steps that each individual can take to keep things moving in the right direction.

Only a small percentage of businesses succeed in the long term.  Entrepreneurs know the stats. Their optimism is the voice that says, “My business will be the one that wins”.

A parallel plan will support them, and their family, win or lose.

Culture Eats Strategy for Breakfast

Thursday, September 15th, 2011

This week’s guest blog post is provided by Kate Erickson.  Kate has over twenty years experience in professional services including organization design consulting, human resources leadership and employment law.  She was the head of HR for Coca-Cola, did the HR start-up for Ontario Power Authority (OPA) , and is currently working with Walmart Canada to effect culture change.

Over the years, the statistics are consistently grim – 70% of change efforts fail and 70% of business strategies are not executed.

Yet we know from John Kotter’s 11-year study of high performing organizations that great corporate culture has a significant impact on a company’s long- term performance, resulting in:

  • 4 times higher revenue
  • 12 times higher stock price and
  • 756 times higher net income

So if culture is so critical to success, why don’t we have it handled?  Here are 5 things that leaders can do now to narrow the cultural divide.

1.  Be honest about what your culture is now.
Arrange for an objective assessment of your culture and be prepared to make the necessary changes.  No matter what your particular Achilles heel is, whether your people lack focus, drive or a commitment to excellence, you can upgrade to a culture of teamwork, accountability and stellar results.

2.  Consciously design your culture
By now, everyone knows the story of Zappos’ meteoric rise.  The company was  chronically losing money until its owner brought on a young entrepreneur, Tony Hsieh, as its CEO.   Within 12 years the business was bought by Amazon for $1.2 billion.  Tony credits this extraordinary success to focusing relentlessly on creating culture as his top priority.  Under Tony’s leadership, nothing went forward unless it supported Zappos’ strong culture of WOWing customers. As a result Shieh’s strategy of year-over-year earnings gains has been successful since 2003 and the Company gives tours so others can learn from its experience.

3.  Treat culture as your North Star
Nordstrom is also well known for its laser beam focus on customer service.  Legend has it that one day a new customer walked into Nordstrom’s shoe department and asked to try on various pairs of shoes in two sizes.  It turns out one of his feet was a full size larger than the other.  When he found the shoes he wanted, he stepped over to the cash and prepared to pay for two pairs of the same shoe, one in each size.  However, the Nordstrom’s salesperson, well trained and empowered to create customer loyalty, made the decision to sell both pairs for the price of one, telling the customer, “It’s not your fault that Nordstrom’s didn’t have a single pair of shoes to fit you.”  At Nordstrom, a culture of accountability for stellar customer service makes it easy for people at all levels of the organization to make the right decisions for the business.

4.  Recognize the importance of social relationships

From the last Ice Age to the current time, humans have survived and prospered because we rely on each other.  Ancient tribes recognized the value of diverse strengths –  hunters, gatherers, toolmakers, medicine men & women – and combined forces for the good of the group as a whole.  Successful organizations today can also structure for powerful collaboration.  A great place to begin is with small groups.  Get them working on projects that have meaning for them and for the business, and add people as it becomes obvious that other strengths and skills are required to achieve more.  In organizations that do this deliberately and well, results jump a factor of 300-500% as employees naturally form well-rounded and collaborative teams.

5.  Measure the Results
Currently, the most widely used people metric is Employee Engagement which measures individual employees’ concerns about their leaders, their compensation, their best friend at work.  Zappos and other top employers whose engagement scores were high, don’t do these surveys anymore because it doesn’t tell them anything they need to know.  As you build a vibrant culture, trying to measure progress through an Engagement survey is like putting a bicycle speedometer on a Ferrari – it quickly becomes irrelevant.  What is important to measure now is the stage of your culture, the quality of work relationships, and the results produced by people working in vibrant collaboration.

These tools and methods are readily available and those who take advantage of them now will have a competitive advantage.

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