Loss | Business Solutions

Seven Easy Steps to Failure

Normalization of Deviance: How to Lose Your Business

Failure is insidious even for the smartest and brightest entrepreneurs. It sneaks up wearing a cloak of invisibility woven from the gradual acceptance of what used to be unacceptable. That is the normalization of deviance. Here are seven examples from society and business. It has never been easier to destroy your business so why wait? Here are seven easy steps and one bonus suggestion.

Remove performance standards & Incentivize lassitude. Yes, it has been difficult with over two years of government lockdowns. A virtual workforce based at home has been a winner for some businesses but others are suffering from employees who have essentially retired on the job with quiet quitting. Every low performer you tolerate sets a new low standard for everyone to emulate. Each now low becomes the benchmark to follow; straight to failure. Poor performers can drag down ten peers. A non-performing employee will change your business culture whether you like it or not.

Suggestions: Measure performance and clean house. Eliminate mediocrity as quickly as possible. It is sometimes easier to change people than it is to change people. Reconfigure your staff. Hire slow and fire fast. Adjust your people, process, equipment, product and/or hours to handle vacancies. Consider hiring older people or others you might not have included in the past. They just might surprise you with their work ethic and knowledge.
Spend, spend; spend like there is no tomorrow. Cash is fuel for every business. You are out of business when you run out of cash. Now is the time to be careful with your cash and your debt. The business may be past saving if you get to the point where those online offers for easy loans look attractive. Easy money can quickly become a bottomless pit of interest and fees.

Suggestions: Listen to the pessimists in your organization and the market to help you to understand the risk environment and pivot your spending. Listening does not mandate agreement but it will give you new information for better decisions. Listen to what the sales data is telling you to see how your customers are adjusting to this troubled economy.
Deny the facts in favor of the loudest voices. Be an informed consumer of the news. There are highly skilled propagandists out there with big megaphones. Repeating a lie does not make it true. Changing definitions does not change the facts. Listen to both sides with an open mind. Make considered judgments. Be careful of listening to only your own voice.

Suggestions: It helps to talk to trusted advisors and mentors. Be deliberate about checking your position and pivoting if needed. Run SWOT and PEST analyses as tools to help visualize the situation.
Risk it all. Just do it. Business has always been risky. Smart entrepreneurs analyze and manage risk.

Suggestions: Redo your market research and understand your business economics. Develop options and test the riskiest elements of your plan before you bet the ranch on them.
Deny that the rule of law is fundamental to life, families and civilization. It is a fact that civilization and freedom do not exist when the criminals rule the streets. Businesses cannot exist in chaos. Do you really want to live where those in power want to defund civilization?

Suggestions: Talk to the people in power and vote wisely and with your feet if necessary. Consider if it is time to move to a safer location.
Ignore inflation. The truth is that inflation is a killer. It wipes out businesses, jobs and bankrupts families. It destroys dreams and drives people to the bread lines. You are seeing the impact now at home and in your business. Know that this impact will not go away!

Suggestions: Raise your prices faster than your costs. Fire unprofitable products and customers. Apply the principles of profit improvement and look at every aspect of your business.
Cook your books like Enron and Congress. Clever bookkeeping can hide a lot of sins. Resist the temptation to keep massaging your business plans and forecasts until you get the numbers that you want. Reality wins.

Suggestions: Start with a blank piece of paper to create a new business plan.
BONUS: Deny that the American Constitutional Federal Republic and Capitalism work for society by creating jobs that raise us all up. Your job and your business depend on this as the very foundation of freedom.

Suggestions: Celebrate this great nation and work every day to make America great. Save your business and the jobs of the people who depend on you to continue to do the right things for the greater good.

Thank you to the work that you are doing to create and sustain jobs; even your own.

References:

JK Pinto – International journal of project management, 2014 – Elsevier

https://tinyurl.com/2p89x6pz

J Albright – Business & commercial aviation, 2017 – code7700.com

https://code7700.com/pdfs/bca/bca_normalization_of_deviance_2017-01.pdf

MG Everson, BA Wilbanks, RR Boust – AANA journal, 2020 – researchgate.net

https://tinyurl.com/4hdyrh36

K Davis, JK Pinto – IEEE Transactions on Engineering …, 2022 – ieeexplore.ieee.org

https://dspace.lib.cranfield.ac.uk/bitstream/handle/1826/18178/corruption_of_project_governance-2022.pdf?sequence=1&isAllowed=y

S SCOTT – 2021 – starlingtrust.com

https://starlingtrust.com/couch/uploads/file/the-normalization-of-deviance-starling.pdf

High-Value Purpose-Driven Meetings

Even with a good heart and the best of intent some people can derail a meeting if allowed. See if you recognize any of these in your next meeting. Consider how to use the seven strategies to stay on course in spite of them.

Your meetings may not be productive

Meetings often waste more time and destroy more value than they actually create. Here are seven strategies beyond the agenda that help meeting leaders to stay on course when the five common time consuming characters work to derail us.

Seven Strategies Beyond the Agenda

Begin With Purpose: Reiterate global and meeting mission and vision to set the stage. Great leaders ignite commitment and enthusiasm around the shared purpose for the organization and the group. Begin with “why” and insure value in understood before you begin.
Role Expectation Setting: Attentive listening is the fundamental expectation of all attendees. Teach your membership how to play their appropriate role in meetings. These may include the chair, presenter, participant, guest or student. It helps for everyone to understand their role and when they are expected to participate by speaking or by listening. Empower everyone with the skills and expectation that they will actively engage in keeping the meeting on track.
Focus: Mandate a singular focus on the agenda topics at hand. Explain this before and during the meeting and make sure that it is acknowledged. Understand that some of the time consuming characters (see below) may not have heard you.
Chair Facilitation: Empower whomever is leading the agenda to act to keep the meeting on time and on topic. Redirect the time consumers to the appropriate time outside of the meeting. A “parking lot,” discussions on break or other meetings are often more appropriate.
Preparation: Do not allow committee work in a general meeting. Make sure that this is done before hand with electronically distributed reports and summaries in advance so that only the highlights need to be covered in the general meeting.
Invitation: Invite only those who have something to contribute and/or gain from the meeting.
Be Results-Oriented: Clearly communicate the expected outcomes for each meeting. Focus on those results; the “why.” Is it to deliver information, to educate, to reach a decision, form a consensus, to entertain, to socialize and develop comradery, or other defined outcomes? Design the agenda and clarify the roles to meet those desired outcomes.

Close with action. Summarize and communicate with next-steps and expected actions. Thank everyone for their contributions. Evaluate how well you all did toward achieving the purpose of the meeting. Use this as an opportunity to learn.

Five Common Time Consuming Characters

The Pontificator: Their opinion must be heard and right now.
The Talker: With no sense of time or the agenda clock, they love to include the gory details when they have the floor. Or they may have side conversations during the meeting.
The Distracted (AKA The iPhone-ator): So tuned out that their potential contributions are lost. They may interrupt with their comments when least expected if at all.
The Hijacker: Takes over the floor to focus on what they want, damn the agenda.
The Good-Hearted: Feels that everyone should be heard when they want to speak no matter how unrelated it is to the meeting purpose.

Summary

Time is the most precious individual commodity we have and it is multiplied across all of those who are attending your meetings. I’ve presented but seven strategies. There are more. How do you achieve High-Value Purpose-Driven meetings? How do you deal with a time consumer?

The Astounding Cost of Passive-Aggressive Behavior

Passive-aggressive behavior is one of the most insidious and costly forms of sabotage a business can encounter. I have personally seen individuals and groups cost their employers millions of dollars, damage the business reputation and actually put people’s lives at risk with these behaviors.

A detailed study by Booze Allen Hamilton showed that entire companies can take on passive-aggressive traits. These passive-aggressive companies fare poorly compared to their peers with about half less profitable. They are marked by second-guessing of decisions, poor communication, poor decision-making and a general ability to make progress. The best workers leave.

Passive-aggressive personality disorder (also referred to as negativistic personality disorder) is a controversial personality disorder marked by a pervasive pattern of negative attitudes and passive resistance in many interpersonal situations both on and off the job. The passive-aggressive can smile and say “yes” while they have absolutely no intention of doing anything other than “no.” They can ruin your life and damage your company if you let them.

You may refer to the passive-aggressive person in less than endearing terms as, it seems, they try to turn your life upside down. The passive-aggressive is one of the most distracting, disruptive and generally unpleasant personality types that most of us ever come into contact with. Since the passive-aggressive doesn’t wear a sign, you’ll only recognize them by their behavior. Some their behaviors are listed in this list.

Common Passive-Aggressive Behaviors

·      Sulks or argues
·      Intentional inefficiency
·      Complains without justification of unreasonable demands
·      “Forgets” obligations
·      Believes he is doing a much better job than others think
·      Resents suggestions from others
·      Fails to do his share
·      Unreasonably criticizes authority figures
·      Avoiding responsibility by claiming forgetfulness
·      Blaming others
·      Chronic lateness and forgetfulness
·      Does not express hostility or anger openly
·      Fosters chaos
·      Making excuses and lying
·      Obstructionism
·      Resentment
·      Sarcasm
·      Sullenness
·      Mad at the world
·      Envious and resentful
·      Feels cheated by life
·     Procrastinates
·     Alternately hostile and clingy

A passive-aggressive may not have all of these behaviors, and may have other non-passive-aggressive traits. Cecil Adams writes: “Merely being passive-aggressive isn’t a disorder but a behavior — sometimes a perfectly rational behavior, which lets you dodge unpleasant chores while avoiding confrontation. It’s only pathological if it’s a habitual, crippling response reflecting a pervasively pessimistic attitude”

Very few individuals have the disorder but all too many people have the bad behaviors associated with passive-aggressive personality. And, as the saying goes, one bad apple will spoil the bunch.

Dealing with the passive-aggressive person:
I agree that the passive-aggressive response is a great way to get out of doing things. Just say you will and then don’t. It’s often simpler and more effective than justifying your real thoughts to a less than receptive audience.

The problem comes when the passive-aggressive tries to take over your life to suit their needs. You need to recognize the situation and take action.

As an individual you have very few choices in dealing with passive-aggressive behaviors by others:
1. You can stop providing a payoff to the passive-aggressive by not giving in to their manipulation. You teach people how to treat you – and some may learn.
2. Ask them to stop and pray that they’ll change their behavior toward you. Yes, I said “pray” because the truth is that you can do essentially nothing to change other people.
3. You can withdraw from the situation. Take care of yourself and associate only with people who treat you as they should. This may be the only solution in extreme cases.

As a co-worker you may find your own satisfaction and career at risk because of the actions of passive-aggressive co-workers. Options may include:
1. Asking the offending party for cooperation and better behavior.
2. Document situations and clearly identify responsibilities to substantiate a claim to management.
3. Remove them or yourself from the situation.

As a boss or employer you carry the responsibility to take action.
1. Don’t hire passive-aggressive personalities in the first place.
2. Make it clear that the passive-aggressive behaviors are not tolerated in your organization.
3. Find out who is passive-aggressive and offer guidance and corrective action promptly when you observe these negative behaviors. The passive-aggressive is often very skilled at flying below the radar so you’ll have to look hard. A good place to start is with departments, groups or teams that are not meeting their goals. Then you’ll have to be a detective to find the truth.
4. Take disciplinary action quickly when appropriate and if necessary following your company employee policy manual.
5. Make sure you company has clear lines of communication, well delineated responsibilities and well defined decision making.
6. Remove recalcitrant offenders from the organization.

My first working title for this paper was “Passive-aggressive Poison.” That’s really what these behaviors do to relationships and the workplace…poison them. Take the cure before it kills you.

What are you going to do now that you know better than to tolerate such behaviors?

In my real-world experience, applying the Profit Improvement Process is an effective and efficient way to expose and neutralize negative behaviors.

Cycle time savings $110,000

Measuring the time that repetitive operations take from start to finish (cycle time) gives you the opportunity to make better use of time. One business, for example, examined the time it took for customer service to process orders and found that by making several process improvements they could reduce their headcount and save $110,000 per year.

Another business looked at cycle times and found that they could run a number of operations concurrently rather than sequentially and were able to increase productivity and revenues significantly.

It doesn’t matter if you are making pizza or processing an order. Cycle time information is fundamental to understanding the capacity and throughput of any manufacturing or business operation.

Time is money. Time is opportunity gained or lost. Reference “Instant Profits: Making Your Business Pay” which contains examples of how to apply cycle time and time lines for business improvement.

Who is Stealing Your Profits

The question for you is not “if” your profits are being stolen but the only question is “Who is stealing how much?”

The estimate of embezzlement for the US alone in 2018 was almost $50 billion. This included robbery, cargo theft, larceny and burglary. The top incidents were organized retail crime, employee theft, fraud, burglary, counterfeiting and robbery. Note that employee theft far exceeded the losses due to robbery. In a 2017 survey by Hiscox* the median dollar amount for small or mid-sized businesses (under 500 employees) was $289,864. The median loss for companies with over 500 employees was estimated to be $452,025.

Hiscok provides the following common characteristics to look out for:

Intelligent and curious – eager to know how everything in the office works
Extravagant – often flaunt their wealth
Egotistical risk-taker – rule breaker on and off the job
Diligent and ambitious – beware of the person who does not take vacations
Disgruntled – feel treated unfairly and may want to even the score

I’ll add one more from experience: They are the manager, accountant, controller, bookkeeper or clerk who just can’t get the reports straight and on time. They love disorder in which to hide their own dealings.

According to the National Retail Federation retail goods shrinkage of $48.9 billion is due to four major sources: employee theft (30%), shoplifting (36.5%), administrative error (21.3%), vendor fraud/error (5.4%) and unknown loss (6.8%).**

None of these figures include the billions of dollars lost to employee time that is deliberately wasted, time card falsification, inflated expense accounts, office supplies that end up at home and countless other ways in which employees waste company time and money. Excuse me while I check my FB account…

A number of years ago a senior sales executive (over 25 years with the company) warned me not to make him work from home because he assured me that he would extract the “cost” from the company in any number of ways that the company could never detect. I was no longer with that company when that move was finally made to save money so I don’t know how much, if any, this long-term employee extracted in “payment.” I often wondered which of his supervisors allowed him to harbor such a terrible attitude.

Just within this year two priests in my city have been indicted for embezzling hundreds of thousands of dollars from their churches. Prevention is a wise thing to do and don’t forget to help keep your employees honest with good systems and audits while you are locking the front door. Embezzlement and shrinkage is just two aspects of the element of Loss which is part of the Profit Equation.

How much of your hard-earned profits can you afford to allow the thieves within and outside your business to take?

References:

*THE 2017 HISCOX Embezzlement Study

** 2017 National Retail Security Survey

Reconcile Now or Pay $600,000

A local law office recently reported that they lost well over $600,000 to embezzlement by their bookkeeper over a 5 year period. The perpetrator was caught, convicted and sentenced to jail for up to 4 years and to pay restitution of $400 per month for 16 years ($76,800).

There are two primary reasons for reconciling your bank accounts every time a statement comes out.

The reconciliation allows you to maintain the accuracy of your accounting records and those of the bank. The sooner an error is caught, the easier it is to correct.
A bank reconciliation is an opportunity to detect fraud and theft.

Either of these reasons should be adequate so don’t let reconciliations fall through the cracks. Small businesses with small accounting departments are especially vulnerable to fraud and theft so it is wise to use this powerful and inexpensive tool. Oh yes, it is absolutely necessary that someone you trust do the reconciliations.

If your business has been subject to loss by theft at some level from office supplies to money, you are probably the only one in the world. Think about it. The theft of time happens every single day.

Reconcile Now or Lose Big

Small businesses with small accounting departments are especially vulnerable to fraud and theft so it is wise to use this powerful and inexpensive tool. Oh yes, it is absolutely necessary that someone you trust do the reconciliations.

A local law office reported that they lost well over $600,000 to embezzlement by their bookkeeper over a 5 year period. The perpetrator was caught, convicted and sentenced to jail for up to 4 years and to pay restitution of $400 per month for 16 years ($76,800).

Once you look for them, you will see that the news feeds are filled with similar stories of embezzlement and the miss-use of funds.

There are two primary reasons for reconciling your bank accounts every time a statement comes out.

The reconciliation allows you to maintain the accuracy of your accounting records and those of the bank. The sooner an error is caught, the easier it is to correct.
A bank reconciliation is an opportunity to detect fraud and theft.

Accounts Receivable as a Loss

Two companies I worked with, for example, were able to take steps to recapture $150,000 and $900,000 per year respectively by being more aggressive with accounts receivable, more selective with credit limits and by monitoring and managing cash as a “business” within the business.

How much money are you losing by giving interest free loans to your customers – $150,000 to $900,000 per year? This is a valid target for cost reduction and profit improvement.

Take a quick look at the accounts receivable line on your balance sheet. What is that amount? Now look at the line item(s) on your financial reports that capture your interest payments. Do the math to calculate what your borrowing costs are to carry the amount you are loaning to your customers.

Stop the Losses

Stopping losses is often as important as finding improvements – especially in a worsening business climate such. Your sales and credit departments are going to come into conflict over this matter so it is going to take strong management leadership to make the right decisions.

“We’d been doing business with Samssco for about 15 years and they were an important customer to us. We held their hands and were patient with them over the years when they were late making payments off and on over the years. I’d call Sam, he’d tell me what was going on and we’d ship him more product and wait. He’d always pay us. We got a really large order from Samssco – almost twice the normal size but they were already late on the last payment. I called Sam but he wasn’t available. That worried me so I asked our shipping department not to ship. I called Sam again and had to leave a message. Two weeks later I learned that Samssco had filed for bankruptcy. I was devastated. I thought Sam was a friend. We lost over $25,000 but if I had let the last shipment go it would have been over $75,000 and we would have been in trouble along with Sam.”

Revenue may be nice but sales that are written off are far more than lost revenue when they eat the profits from other sales! Make sure you understand the credit health of your customers at all times and don’t rely on sales people to make the credit judgments that you need a financial professional to make. You’ll save yourself a lot of tension and morale in the sales force and probably a lot of money in the long run. How large is your reserve for such losses? In what ways could you reduce it?

Here are six warning signs that may indicate credit trouble ahead before a meaningful change shows up in their credit rating – which you should be monitoring in any case.

Credit Warning Signs

1. Delays in payments. This is an obvious sign and your accounts receivable system should be set up to monitor and report on this on a continuous basis. Make sure you have a team of managers who are in the loop so they can see this and any of these other warning signs and take action quickly.

2. Changes in ordering patterns. The first sign may be a slowing in order volume. This is usually an indication that your customer is experiencing a slowdown in their business. The last sign may be a surprise order of a much larger size than usual. This could indicate that your customer is trying to stock up in advance of getting cut off.

3. Communication problems. You or your staff may have more trouble than usual getting through to your contacts at the company that owes you money. This is especially worrisome when the usual channels of communication for following up on open invoices suddenly slow down.

4. Pressuring the sales force. Your sales force might start getting pressured to make sales in spite of existing credit limits. This is the time to advise your sales team to keep their eyes and ears open for any signs of trouble at the customer or changes in the market.

5. The business sector is in trouble. Know which sectors your customers service directly and indirectly. Remember that that business slow-downs trickle down.

6. The grape vine is humming. Keep your ears open for those tidbits of information that are known to make their way through the industry. Ask all of your people who are in the field or talk to people in the industry to pass on information for the good of the company. Use any “casual” information legally and responsibly and only with appropriate verification.

Manage your credit risk deliberately

It is very costly to write off bad debt because you not only lose the profit on the original sales (if derived from sales) but you also have to make additional sales to cover the cost of sales just to break even.

Profit Improvement

Bad debt is a profit killer. A good profit improvement process invariably includes measures to reduce losses. Don’t give your profits away.

Paper Losses

A typical office may have anywhere from 4 to 20 different types and brands of paper in its inventory at any one time. This may not seem to be a significant issue but paper costs anywhere from $0.006 (low-end standard copy paper) to $1.00 (fancy letterhead) or more per sheet when all costs are included.

An analysis for one organization found that the lack of standardized purchasing allowed them to spend about $85,000 each year in extra costs just for copy paper. We conducted the analysis in this manner:

-Examine purchasing invoices for copy paper

-Tabulate the costs paid for each quantity

-Calculate the savings possible if the lowest cost supplier had been used

The recommendations were to centralize purchasing decisions and to communicate standardized purchasing procedures to those people who managed the paper inventories at dispersed locations.

The analysis did not determine how much could have been saved if less paper had been used but the qualitative judgment was that the savings could have exceeded the purchasing savings.

Paper losses like these are an indicator of even deeper loss of control over expenses.