Thursday, August 26, 2010

Foreseeable Crises

This week we mark three milestones: the 90th Anniversary of the 19th Amendment, the 5th Anniversary of Hurricane Katrina and the last combat troops just left Iraq. Disparate as these events appear, I actually think that there’s some interesting connections between them. These incongruent events have a common lesson about the impact of planning during times of crisis.

Crisis Management is a unique skill set. In my consulting business when people call it’s rarely because things are going well and they want to chat. Issues may have been simmering for a long time and then one day something happens that crystallizes all of the problems. And then we kick into action based on whatever circumstance has emerged.  The trick is to work on the underlying disease rather than the latest symptom.

Women had been seeking the vote for more than a century. The 19th Amendment states: “The right of citizens of the United States to vote shall not be denied or abridged by the United States or by any State on account of sex.” August 26, 1920 the Amendment was certified after more than two years of votes from Congress and the States. This lengthy process, one of the great hallmarks of the US Constitution, requires an elaborate process to change the document. I am really grateful for this laborious effort because preparing to make a change to the governing document of the nation shouldn’t be a spontaneous action. The Republicans (42) and Democrats (22) have proposed 64 Amendments in this session of Congress alone! Only 27 have ever been added since 1776.  So far. 90 years ago there was just the one.

The Great War (WWI) was just finishing. The Industrial Revolution was underway. America was changing. It was in the midst of this turbulent environment that actually allowed for the Amendment to pass. I think it’s only because of the tectonic shifts in the social fabric of the United States at that time could such a contentious change occur.

I was brought into a company early in my career to handle the paying of bills. In surveying my cubicle I opened drawers and cabinets – and like the old jack-in-the-box – papers sprang out. Envelopes were piled up unopened. The phone rang incessantly. Outrage and venom spewed forth from individuals and companies who demanded payment. Six months had passed since regular payments had been made even though there was sufficient cash to pay the bills. When Executives needed a check they’d stand at my station and watch while I hand-typed the check for fear that the request would disappear. Chaos ruled. After a few weeks of 18-hour days and the implementation of standardized check-runs and other procedures everything stabilized. Introducing the dramatic change in day-to-day structure happened because of the chaos. Chaos was able to be managed because of the planned systems that ultimately eradicated the problems.

August 23, 2005 Mother Nature lashed the Gulf Coast with Hurricane Katrina. More than 1,800 died, 135 went missing and it has cost, so far, in excess of $80 billion. The airwaves, newspapers and magazines are full of before and after stories this week. They are compelling. People suffered, and perhaps needlessly. Here the chaos from an unexpected event requires a different level of response. The Government response (Federal, State, Local) might become a case study in what not to do. News organizations were able to get into the area and help rescue people while rescue organizations were bickering over jurisdictions.

In the years that have followed the region has emerged from chaos. The physical, emotional and financial damage may never fully recover. In its place, however, has been innovation and resurrection. Celebrities have helped creates hundreds of new eco-friendly homes. New businesses have sprouted up to serve the needs of a changed community. It’s sporadic because the same entities that failed during the Hurricane are charged with planning the renaissance. Anticipating disaster and planning for rebuilding is the lesson which hasn’t been fully realized.

I’ve learned to back up my data. It’s a common-sense lesson that we all should do. Granted I’m a little neurotic about it using an online system that has 4 redundant copies under high encryptions spread throughout the globe insuring that my bits of 1’s and 0’s are retrievable. A client’s disaster taught me. Their daily backup system failed but nobody noticed the warning messages on the screen, they just regularly changed out the tapes and hit reset to the software. Then the server died. All the data was lost, irrecoverably. Then the backup tapes were blank. It took months to rebuild the basic data infrastructure of the business – during which time we were able to apply efficiencies that we otherwise would never have been able to. It was classic making lemonade out of lemons – but it was so preventable.

Prevention is boring, costs time and money and more often than not isn’t needed because things tend to work out. But in instances where they don’t – such as with my client, or on a larger scale Katrina, prevention is a game-changing differential.

This week the last U.S. combat forces left Iraq, bringing the 7-year military effort to an end. (Well it’s not quite “Mission Accomplished” and I’m not quite sure I believe combat is over, but let’s go with what the President has announced.) The merits (or lack thereof) of the invasion and occupation are the subject of another blog at another time. The crisis that Iraq became was one largely of our own making and is rooted in this issue of prevention. The U.S., for the first – and I hope only – time in our history preemptively attacked another country based on a threat, real or perceived. The theory was that additional attacks on the U.S. would be stopped if Iraq was stopped. The theory didn’t quite pan out and, in fact, the attempt at prevention has resulted in thousands of deaths and cost so far over $1 trillion, with many more trillions to be spent in providing care of our soldiers. In trying to prevent some deaths, many others resulted. That was quite a choice, but it was made, and made in our name whether we individually agreed or not. Regardless of the choice – the result was fully foreseeable. The site Truth about War is an extraordinary site that is frozen in time from its creation in 2003 that foresaw nearly all of the consequences that ultimately materialized.

Good planning is equally foreseeable. Crises change us based on the circumstances at a particular moment in time. How we as people adapt, evolve and respond to the crisis is what defines us as individuals and as a people.

Are you planning?

Thursday, August 19, 2010

Why we can’t get along

Dr. Laura just channeled her inner Sarah Palin. She just quit her 32 year #3 rated radio show. Buh-Bye. I’ve never actually listened to Dr. Laura, or Rush, or Sean or Howard or any talk show personality but that won’t stop me from blogging about it! So there’s no mistake: I’m offended by Dr. Laura’s use of the “N” word (11 times!) and her ignorance on a range of issues (especially GLBTQ) and her simple-minded approach to complex issues. Imagine my surprise to find myself agreeing with her departing statement.

“When I first started out in radio," she said, "people would disagree — they disagreed, they didn't hate. They didn't try to censor, they didn't try to destroy an opposing point of view. Instead, they just argued and debated, and argued and disagreed, and debated and argued." Now, she continued, "self-appointed activist types breed hate, breed anger, breed destruction should anyone hold up a mirror or dare to disagree.” It’s an interesting point of view from somebody who used her show to spout against individuals and groups of people whom she doesn’t understand or like. Setting aside the hypocrisy, though, she makes a valid point about the venom which populates our discourse.

There is an intolerance of opposing opinions that has emerged in my lifetime. President Obama (and others) has said that we can have our own opinions, but not our own facts. It’s a catchy truism that doesn’t do much to help distinguish between the two. 18 months into unemployment I tend to talk about the 10% unemployment rate rather than the 90% employment rate. Both facts are true. Whichever focus one puts on the issue begins to frame the fact. It’s inevitable and understandable, the question is how to do it without hyperbole.

While managing a company’s turn-around a few years back I evaluated their training program. They had a customized and intense program that lasted four to six weeks before a new hire could be put into the day-to-day operations. It ensured that the highest possible skill level was attained before billable work began. It was also extremely expensive with 40% of the people not making it through and a lot of resources dedicated to training and learning. Lots of spirited discussion ensued before a new plan was put in place. The program was recreated and capped out at 3 days training with more than 80% making it through the program. Making this transition meant that some who disagreed left the company (voluntarily or not). They lost their jobs because of their actions, not their agreement or disagreement. Several who continue today at the company were the most resistant, but they were willing to try it if only to prove me wrong!  Those whose communications lacked respect for the need for change and the messengers of change didn't make it.

Lack of respect is reflected in many businesses. Customers are often a means to an end. “Buy this pill and your life will be perfect.” (Don’t worry about those pesky side-effects.) Brokers telling clients to invest in a fund their corporate parent simultaneously short-sells. Airlines may be the most egregious – from monitoring your searches (to see how often you’ve looked for a route and raising the prices each time you come back to the same route) to Spirit Airlines charging for carry-on bags ($45). Individual response ranges but often includes backlash, a sense of entitlement but mostly a matched level of respect that mirrors what we experience.

Government fosters the sense of entitlement. Programs exist to assist those in need. The distinction between who is in need and thus deserves government’s largess is where disagreements exist. The conflict over which group government should help manifests in strident and apocalyptic communications. (“Don’t take away my farm subsidy.” “Don’t touch my Social Security.”)

What’s your last experience with the DMV? Did you have an “appointment” (as I did) and arrive on time only to wait 15 minutes in the line to check in and another 20 minutes to do the 2 minute task? Or did yours go perfectly and you were done in 4 minutes flat --- or better yet --- perhaps your state allows mundane tasks to be done online (for free)? Or perhaps you just stopped by at lunch and spent the afternoon getting the car registered. It’s not a slam against the DMV, it’s an example of how we’re treated reflects how we treat ourselves and others. Put another way “Love our neighbors as ourselves.”

“Can’t we all get along?” Rodney King famously asked during the 1992 Los Angeles riots. We can’t. We shouldn’t. Of course we shouldn’t be beating each other up. I deplore violence. I cherish freedom of speech..for everybody, and especially those whom I disagree. I cherish my ability to criticize, challenge and congratulate. I don’t have to be respectful, but I choose to be. Freedom of Speech is messy, it’s unpleasant and it is the essence of being an American.  It sets us apart.

Translating freedom of speech to freedom of action is where it gets tricky. I am guided by the Libertarian Party’s Statement of Principles that is on my Membership Card. “We hold that all individuals have the right to exercise sole dominion over their own lives, and have the right to live in whatever manner they choose, so long as they do not forcibly interfere with the equal right of others to live in whatever manner they choose.”

I used to love Crossfire on CNN. In the early days the “left” and “right” hosts would actually talk with their guests and often “cross” over traditional lines. By the late-1980 and into the 90’s the political system evolved from policy disagreements to nothing more than a marketing effort for a brand candidate or party. On the show discussions became a tedious back and forth of sound bites and talking points. Today on cable news that’s nearly all that exists – a recitation of opinions with little listening or dialogue. Many listen and appreciate hearing their views reflected, but many many more just aren’t tuning in.  I think people are tuned out because of the rancor, not the complexity or because of apathy.

For about 25 years I have effected change within organizations – large, small, for-profit, not-for-profit. Engaging stakeholders and having effective two-way communication about what works, what doesn’t work and what will work seems straight forward enough. Putting it into daily practice in all areas of our lives is the challenge. Like all of us, I prefer to engage with something that aligns with my thinking rather than having to be uncomfortable and look at something in a different way. That bubble gets old, though. I’m stimulated in looking at businesses, people and the world from multiple points of view. I have little tolerance for blather.

I agree, don’t you?!?!

Thursday, August 12, 2010

Magic Thinking

I didn’t win MegaMillions this week. Living by the motto that you have to “be in it to win it” I bought 10 tries for the $65 million prize. Nobody won…which somehow is totally satisfying. Why play the lottery? I have magic thinking syndrome.

Magic thinking syndrome is not a real disease (according to WebMD). It is, however, part of the human condition. And I am very human. I’ve been thinking about how this syndrome affects us individually, as business people and as citizens.

Some years back I was in a committee meeting for a Church I was working with and we were looking at ways to balance the upcoming years’ budget. When the figures simply were not working I suggested that the expenses would have to be pared. Several of the members of the committee would not consider it. “God will provide,” they said. “Fine,” I said. “Let’s itemize how.” I have faith. I also believe in basic financial principals such as having expenses not exceed income – regardless of whether it’s for a charity, an individual, a business or government.

I have spent the bulk of my career working with entrepreneurs. I have worked with people as they are in the embryonic stages of their business, often with the seed of an idea. I help plant, water, feed and nurture until it becomes a sapling and then a strong tree. Some think they’re building a forest from the get go…even when surrounded by an ocean, or by concrete.

In the early days of the “dot-com” phenomenon I sat in the living room of two entrepreneurs who engaged me to write their business plan and extrapolate financials based on an idea, without any metrics, supporting documentation or proof of concept. Three days later I delivered a draft. Within a week there was a million-dollar funding commitment. Three months later a fully operational office with computers, furniture and staff was in place. Six months later the business was shuttered. At any one of the stages of this businesses’ life-cycle I would counsel caution…only to have magic happen…amazing us all. Were the investors hoping that this idea would be the miracle that would make them rich…their own magic thinking? Such thinking can perpetuate itself, like Bernie Madoff’s investors (or contributors to Social Security). More than likely we were all caught up in the excitement that created a mini-bubble…a form of group think…and reality became the bubble’s pin-prick.

Excitement and enthusiasm are needed characteristics of business leaders. So too is careful, diligent planning. This is strategic element is missing from many organizations today because it is difficult to quantify the short-term ROI (Return-on-Investment) of strategic planning. It’s not immediately cost-effective. In a few years businesses will be suffering the consequences of having pared back on their long-range thinking. Government already suffers because of its myoptic focus on the next election.

Making aggressive projections is part of building a business, and when based on quantifiable circumstances expectations can be realized. Managing the reality is leadership and the way to minimize failure. Operating within a strategic vision is vital and can lead to making decisions based on present conditions rather than just future opportunities.

A colleague is in the running for his “dream” position. It’s exciting that there are 3 potential offers and he has been courted by one company who flew him to their headquarters to meet with all of the "important" people. Everything and everyone clicked. Excitement was building. Then the CEO said he had to wait 2 weeks for an offer. The fantasy of the situation is that a huge offer with every conceivable benefit will arrive as scheduled. The optimist interpretation justifies the delay and expects the industry-standard offer to arrive. The realist is talking to the other 2 companies assuming that there’s something wrong with the third. The pessimist has written the whole damn thing off and is watching daytime television and eating popcorn. All of us have a bit of each type in us and finding the balance in each situation is what we must do individually, as businesses and as a citizenry.

There is no balance in the financial condition of the world right now. There’s a lot of caution and, indeed, a lot of fear. Evidence can support it. Trillions of dollars of wealth has disappeared since 2008. Tens of millions of people are unemployed in the US and even more world-wide. Consumer spending is down. Greece had to be bailed out. Italy may be next. Iceland went bankrupt. England is about to embark on an austerity program unlike anything in recent history. China is loaning money to everybody. When will they start collecting and what will happen if repayment can’t be made? World War III is the worst case scenario and the result of too much “realistic” and “pessimistic” thinking…and the subject of a whole other blog!

In 2006 the worry was about the US Savings rate. It was near zero – occasionally even going into negative territory as US consumers borrowed more than they kept. As of June 30, 2010 the Savings Rate is approx. 5% according to the US Department of Commerce.

This dramatic shift in one economic indicator exemplifies the lack of economic balance. Money is out there. The Fed has printed it. People are saving it. Businesses are reportedly holding $1.8 trillion in cash as of July. There is a lack of confidence in the stability of our individual circumstances so rather than spend it people are holding onto it, which is totally understandable, reasonable and prudent if done as part of plan and not the result of fear. Business reflects its lack of confidence by maximizing efficiencies and profits but not taking any risks with its cash by investing in research, development or planning for what’s next. Government fosters the lack of confidence in two ways, depending on your politics. One way is that Government does nothing and that stymies employer’s ability to invest and grow. The other way is when there are ever-changing regulations, policies and priorities causing disruptions and uncertainty – and ultimately the inability to plan. Neither way works.  Reasoned detailed and long-range plans and implementation is needed from Government so that businesses can invest thus allowing individuals to plan. And it’s magic thinking to think it's going to happen.  We have a political system that seems to be built on marketing rather than policy.

We as a people (individually, as businesses and as citizens) must adapt to the current financial reality and settle into the next present. Then the future can be explored, imagined and realized with specific plans and projections. I know. It’s terribly boring and unlikely to manifest itself. More than likely fantasy and wishful thinking will return and with it a wealth of ideas, products and services and a new bubble will grow only to be punctured. The cycle continues.

Meantime, Vegas beckons.

Thursday, August 5, 2010

Today I am a Missourian

The first week of the month and $324 flies out of my bank account to Blue Cross for Medical Insurance. Medical increased by 30% ($100) this year – even amidst all the brouhaha about Anthem’s rate increases assisted President Obama’s quest to remake the Health Insurance of Americans.

Missourians voted Tuesday 3-to-1 to opt out of the President’s mandatory health insurance plan. What is the best way to provide Health Care to Americans? That question is different than deciding on the best way to provide Health Insurance to Americans.

I have run many businesses and know that the cost of providing health insurance is significant ... the most volatile expense to budget for. There simply is no other expense line that increases 15, 20, 25% per annum while the provider simultaneously decreases services delivered.

Several years ago I was implementing a restructuring of a small business. After a yearlong experiment where employees were charged 30% of the cost of insurance - the owner wanted to return to the halcyon days of providing 100% employer paid health insurance. I resisted under the assumption that it would be prohibitive. Nonetheless I worked with our broker to identify a plan that would save even more premium dollars, allowing for 100% coverage, yet provide an increased level of care. The solution’s potential drawback was that it was a Managed Care program and employees had to go to their facility and give up their current doctors. There was much concern and resistance.

A few months into the new plan the financial condition of the company was strong, productivity increased, people were happier and healthier. Providing 100% coverage even became a key distinguishing factor in recruiting new staff. The competitive marketplace proved to be a tremendous success!  Chalk one up for capitalism.

In May 2005 my father suffered a brain stem stroke, spent 21 days in the ICU, the maximum "allowed" days rehabilitation facilities and then came home. Almost a year ago, after more than four years at home, we transitioned him to a Nursing Home. During his time at home we spent every dollar Dad ever saved or inherited. He spent ever dollar to provide for his Physical and Occupational Therapy and Home Health Aides that Medicare and his Health Insurance wouldn’t cover. Once penniless I spent six months facilitating Dad’s entry into the Medicaid program, a critical part of this country’s safety net.  Chalk one up for socialism.

As a card-carrying Libertarian who generally believes that limited and effective Government is what the founders intended, I am at cross-purposes with myself. It’s like switching between Fox and MSNBC.  Philosophically I passionately believe that if we as a nation remove every regulation, rule and restriction that has been placed on the Health industry (since Richard Nixon started regulating the industry in 1972) that the free market would correct many of the ills that affect Health care today.

What’s the solution? I generally eschew compromise – finding a practical solution to complex problems that please nobody 100%. That’s what I think “ObamaCare” has attempted. I’m afraid it’ll be a disaster. In this instance I think we need an extreme – one or the other – no compromises.

We need to either get out of the way of providing superior medical care in a true free-market environment and remove all regulation and let it be a free for all. New not-for-profits will thrive in this environment helping the poor and needy. The rich will spend more and innovation will yield extraordinary discoveries and efficiencies. House calls will become good customer-service once again. Americans will get to compare prices for procedures and facilities.  Some people will be left out of the system and be hurt, some terribly. That’s the consequence (and essence) of capitalism.  Good for the majority and for the economy.

The other extreme is that we say that human health is not something to be profited from, that it is a fundamental right as citizens. The practical application is that doctors, hospitals, clinics are open to all. No bills. Some rationing will occur (as now) but the vast majority of needed services will be available.  Costs will decrease as patients will be served with what they need rather than what can be billed. Insurance companies would go out of business and tens of thousands would lose work. Millions would be healthier. Large numbers of homeless would come off of the street and be treated for mental illness. Some sort of tax replacing the Medicare tax would ultimately fund it...not so good for the economy but great for nearly all.

There is no compromise between these two. We either as a nation believe in free enterprise and apply it to every area of the economy or we say that human health is not a profit center and a healthy citizenry is vital.  I’ve had too many experiences of managing companies and budgets as well as my own family situation to know which is “right.” What I do know, however, is that today I am a Missourian. Mandating insurance isn’t the answer – because it doesn’t address the cost or access to health care. Co-pays and deductibles are still stringent. And mandating every American to buy a service seems wrong to me. As we navigate to find the best solution today I will eat right and excercise.  Really.