Recent Events

Steve Jobs died tonight. It is a sad day for us who are still here without a man who changed the world.

Years ago Steve offered me a career at Apple working for him spearheading the LISA project. Although I was leaving Mattel Electronics, as the digital game division was known in 1981, I turned down the offer. Any success would be his, any failure mine. I thought.

As history shows, Lisa (named after a girl friend) failed. It's competitive platform at Apple, Macintosh, succeeded.

The big idea is the question of opportunity lost. What would my life have looked like had joined Apple reporting to him?

There is no answer, but the key learning is how decision paths for corporate executives or entrepreneurs influence life long term. Looking at Apple today versus 1981, looking at Steve Jobs in historic terms rather than real time in 1981 still offers no answer to me. Hindsight is not 20:20, but Steve's passing for me emphasizes the need to identify life changing, key strategic decisions compared to other hot issues that have little lasting consequence. Long term outcome reflects leaders' choices.

My 1981 career decision punctuates the question, what if...

 

 

 

People don't follow titles, they follow courage. In a society with as much dourness as there is today, I attribute this condition to a lack of courage in decisions being made in both public and private institutions. This is causing citizens and employees dissidence in reaching alignment with the people we follow because leaders seem to make decisions based on personal interests rather than the courage of following strategic principles.

Often we think of leaders in terms of politicians. Democrats and Republicans alike have demonstrated self - serving hubris rather than the transcending mission of government. Examples are everywhere, but on the Democratic side we have Eliot Spitzer disgraced AG from New York and Charles Rangle censured Senator for ethics violations and tax evasion. Republicans fare no better with Tom Delay jailed for money laundering and Duke Cunningham jailed for bribery and corruption.

Many leaders in private industry also appear to have self interest as a guide for their behaviors lacking courage to honor strategic principles.  For example, despite all corporate posturing about being solid citizens, twenty five of the largest one hundred companies pay their CEO more than the corporation pays in taxes (Reuters, August 31, 2011). Examples are GE, eBay and Boeing. The accounting is presumably legal, but is this socially in the best long term interest of shareholders, other stakeholders and overall global wellnes?

As simple as it sounds, I work with CEOs and boards to find decision making courage within the framework of their company brands. As the Constitution is the time - honored strategic guide to public mission, brand is the corporate commitment to customers and embodies the company's mission. Thus a brand model becomes a process, like the Constitutional one for government, which causes deep reflection on the promise to customers. And if used to its fullest, brand concepts serve as a management decision making platform from employment to investment, from social initiatives to fiscal imperatives.

An corporate example of this principle i.e., using brand credos to frame complex management decisions, is when James Burke, CEO of J&J during the 1982 Tylenol - cyanide crisis. Burke believed that J&J's first responsibility was to its customers, second to its shareholders. During the crisis management meeting he asked his executive team what the basis of the J&J brand was with its customers. The response: TRUST.

He had the courage to order a recall Tylenol product, which could have been the death march for the leading analgesic brand in the US. He said: "It became clear that our value system had been vital to our ability to outperform the competition for nearly one hundred years.  Whenever we cared for the customer in a profound-and spiritual-way, profits were never a problem." After pulling all product from the shelves, Burke's courage was vindicated within three years when Tylenol regained its market share which increased later based on demonstrated goodwill and innovative tamper proof packaging and new product forms like caplets.

Net, decision making, whether guided by the Constitution for government or brand strategy for business offer frameworks for leaders to use in building commitment to goals and actions that achieve results.

 

Executives in middle-market companies we work with frequently model marketing, sales and even operating processes used by larger companies. More often than not, results do not meet expectations. My observation is because the solutions chosen do not suit the company's given objectives and require more resources than the organization has available. Furthermore, employees and teams are not trained sufficiently to execute the demands placed on them with such imported systems.

A basic truism is that middle-market businesses need to improvise, innovate with limited resources and inspire employees to find simple but elegant solutions to challenges. Specific business to business examples offer insights, but I find metaphors are more memorable in illustrating how unconventional solutions to problems, inspires new ways to think, and can be used to lead teams to achievements never before conceived.

That's where jumping cows comes in.

A German teenager,Regina Mayer, wanted a horse so she could jump, but her parents said no. Because the family apparently had cows on the family farm, Regina decided to teach one cow, Luna, to jump like a horse.

As Steve Hoffer reported: "Luna wasn't ready for cow-back riding right away, however. The transformation from stubborn farm animal to long rides in the German countryside was nearly a two-year process, gradually progressing from strolls through the woods to Mayer finally mounting her trusty steed." Here is a link to the story and video, a must see illustration how frustration can be turned into inspiration.

We see companies trying too many tactics without matching resources to activity. We see them looking big and smart rather than  achieving meaning and substance, and concentrating on doing things versus focusing on essential customer needs. Today, companies are advised to use social media, link video on Facebook to web pages, go viral with YouTube and stay in touch via Twitter. Lost in the conversation and analysis is a deep discussion about  who the customers are, how they acquire information, and compatibility between the essence of the message and trustworthiness of the medium.

Regina Mayer and Luna remind us to be centered on results, patient with process and indifferent to style as long as we are true to purpose and mission.

Perhaps someday we will all be jumping cows.

 

Herman Melville’s Moby Dick opens with one of the most famous lines in American literature, “Call me Ishmael.”  The novel is also the inspiration for the logo of Howard Schultz’s Starbucks coffee empire. The siren acknowledges both the seafaring nature of the historic coffee business and the irresistible lure of Starbucks coffee.  Moreover, Starbuck was the first mate on the story’s legendary sailing ship Pequod.

To mark its 40th anniversary, Starbucks has redesigned the familiar logo, removing both the name “Starbucks” and the reference to “Coffee.” As a recent Knowledge@Wharton article asks: Logo Overhaul: Will Customers Still Answer the Siren Call of Starbucks? The simple answer is of course they will, because Starbucks is a loved brand that offers a social–coffee experience that few businesses have been able to develop or sustain.

My view is that redesigning logos is generally a poor investment and a distraction.  Logo redevelopment may be justified under the flag of re-branding, changing business mix or internal leadership; all are examples of over-intellectualization of what is needed to create and sustain a great brand.

To me, a brand is the bundle of attributes that a product or services promises and delivers every day to its customers. Add to that definition that it does so profitably, which in turn means the brand’s message is meaningful, clear, interruptive and memorable and its pricing is value-based.

The Wharton article is worth reading because it embodies a rich discussion of issues to be considered when engaging in any brand development or redevelopment initiative.  Some key considerations covered in the article include:  

  1. Significant shift in strategic business mix: Starbucks’ business mix has changed, and will continue to evolve, beyond coffee, so management apparently believed the “Starbucks Coffee” moniker was limiting.
  2. International growth: Global expansion made translating the Starbucks message into different cultures and languages challenging. The goal was to simplify. Apparently management argued that the symbolism of the name “Starbucks” would not translate well.
  3. Dilution of brand message: By not standing for what made a business great to begin with or what management believes will make a great business, customers will not understand why the product or service claims are uniquely the best choice and thus consider supporting competitive brands. Clearly, company management decided to accept this risk.
  4. Backlash by loyal brand fan. The article cites a study by Vikas Mittal from Rice University’s Jones School that supports this conclusion. Backlash to change is a risk that must be considered carefully as businesses expand geographically and culturally.

Strategically there are other options to logo redesign and the management distraction caused by this activity in managing brands. The first and most significant principle of branding is to engage current and prospective customers.  One must question whether there is a significant flaw in the existing bundle of communications and deliverables that limits growth and/or greater opportunity in a strategic shift of all brand-related elements.

In my experience, logo design is one of the most over-emphasized brand development elements and one of the least significant attributes of brand experience. My recommendation is to treat, and invest in, this activity with the limited weight it deserves in the total brand decision-building program.

 

Over the last several weeks executives from both Fortune 500 and mid-market companies, in talking about limits to top performance, said the big barrier to their personal and team success was not understanding where their company was going or what the Big Idea was. 

It’s the vision thing. 

Vision is often hard to define but starts with the leaders of organizations.  P&G’s vision states, in part: “We will provide branded products and services of superior quality and value that improve the lives of the world’s consumers.” Its vision is anchored in improving the lives of its customers.  Similarly, Wal-Mart’s vision focuses on consumers:  “The values that guide our decisions and our leadership are the 3 Basic Beliefs: • Respect for the Individual • Service to our Customers • Striving for Excellence. “ 

Where is this going? Ideas create exponential value, up or down.  Ray Kurzweil, a well known inventor, futurist and author, argues that because technology is growing exponentially, the future we will experience is not linear. Just look at current events in Egypt if you want confirmation of exponential progression of ideas from thought to action.  Using the Internet, a small group of activists has quickly mobilized millions to protest. 

Management has to think in this new dimension. The rate of change has become exponential. Vision, translated into action, creates monumental change.  For example, Rupert Murdoch’s recent launch of “The Daily” promises a revolutionary new publication exclusively on the iPad.  My sense is that this project is going to change the publishing industry by disseminating news to consumers on a profitable basis. The Daily integrates text, video, audio and tactile experience into news. The vision is that the under-35 audience gets its media from the Internet, not print or TV. Hence, make news and information available where people look for it, in ways that consumers are willing to pay. Fifteen million iPad users will determine if the vision translates into reality. 

On the other hand, action without vision has the potential for disaster. The GM Volt electric car illustrates the idea. One can argue there is a dream of a green planet, but the Volt exercise is only possible to the extent that government subsidies prevent financial failure. 

Without a unifying vision of what “green” means, establishing the concept in consumers’ beliefs and enabling a process to build infrastructure are not possible; thus, individual projects are destined for economic failure.  If “green” is the real vision and not a day dream, it seems to me that government and companies would sponsor rapid development of technologies such as thorium-based nuclear energy because the technology is particularly well-suited for use in molten-salt reactors, or MSRs, eliminating the risk of meltdown. Simultaneously, leaders in the US would exploit the natural advantages our country has with coal and natural gas to facilitate a “green” vision that is economically viable. These are viable infrastructure-based energy sources that enable low cost electricity, which in turn would catalyze exponential innovation in battery design and manufacture, thus leading to rapid adoption of electric vehicles at the expense of petroleum-based fuels. 

We all dream of a better life, a stronger company and a fulfilling family. It’s the vision of making those dreams happen that translate thought to strategies, strategies to plans, and plans to action. Sharing those visions and plans inspires those around us to join, multiplying results exponentially.

 

Travelling home to New Jersey from California over the Christmas 2010 holiday, I and thousands of other travelers experienced a total failure by Continental Airlines management to lead in an obvious national crisis.   Like many others, my return home was delayed almost a week.  With over 4,000 passenger flights cancelled in the US alone due to weather and related events, there was no question that this was a crisis without a simple solution.  The absence of any leadership by Continental, however,  mocked and undermined its advertising slogan “Work Hard, Fly Right”®.

What occurred was an abdication of responsibility for the care, comfort and perhaps even safety of its customers. For starters, many flyers did not know their flights were cancelled after printing their online boarding passes. That signaled the start of interminable waits at airports or in planes sitting on runways. 

Those of us made aware of a flight cancellation before heading to the airport suffered an odyssey of three-hour waits on Continental’s telephone reservation system without ever reaching an agent, hours more online trying to book flights only to receive a “transaction could not be completed” message at the end of the booking process, and even more hours at airports trying to rebook.  In brief, there were failures on Continental’s part both to communicate and to act. 

While Continental could not fly its planes into the New York area, a banner could have been posted on its website that flights could not be booked due to overwhelmed logistics.  Management could have reassigned staff or contracted temporary staff to handle calls, or at a minimum, added a detailed message to the airline’s automated telephone attendant system that calls could not be handled for hours.  Both on and off line, management could have set realistic expectations for passengers and offered suggestions of the best means for re-booking as well as a check list of steps to take to get through the travel mess. 

Finally, additional employees could have been brought into airports to help stranded passengers re-route flights.  At a minimum, a portion of airline staff could have been allocated to handle stranded passengers while others attended to passengers with active flights; clear signs could have been posted to identify which lines were for current passengers and which were for stranded ones.  In our case, all employees were left without guidance so that they all handled active travelers, and no appropriate signage was displayed, resulting in added delays, confusion, frustration and alienation from the Continental brand. 

Here’s a suggested short list for a company’s crisis management:

  1. When in doubt, do something; lead.
  2. Focus on customers.
  3. Communicate – give guidance and frame expectations about solutions. 

In his October 1, 2010 letter to customers announcing the merger of Continental with United Airlines, Jeff Smisek, President and Chief Executive Officer of United Airlines, wrote, “As a loyal Continental customer, you might be wondering what this [merger] means for you. For now, it's business as usual.”  With respect to  future crises, let’s hope that he’s wrong.

 

As advisor to mid-market company presidents, I often recommend the use of independent contractors to cover capacity shortfalls or to gain expertise in residence at their companies. That's why recent moves by the government to target employee classification as a revenue source caught my attention.

The US Department of Labor (DOL) and the IRS in their respective FY11 department budgets plan an intensive increase in targeting companies to assure compliance with Appendix D of the IRS Independent Contractor Test. That means DOL is hiring 17,800 full-time equivalent employees (FTE) tasked with this increased oversight.

The initiative is positioned by the Department as a top Administration priority as it seeks to spur growth in the U.S. economy, important to promote the creation of "good jobs" and protect workers. Parenthetically, the federal government predicts this new effort on employee misclassifications will reap at least $7 billion in federal revenue over the next ten years.

Consultants as independent contractors must review their own status with clients. Company owners retaining them along with other skilled workers are well served reviewing the new regulations. One change the administration made is to shift the proof of status burden onto the company and away from government. The caution here is that a DOL challenge to labor practices will be costly either by retaining outside counsel or using internal resources.

The IRS formerly used what was known as the "Twenty Factor" test. Under pressure from Congress  it has recently attempted to simplify and refine the test, consolidating the twenty factors into eleven  and organizing them into three main groups: behavioral control, financial control, and the type of relationship of the parties. This IRS publication is useful in assessing current practices and well worth the time for a quick read.

The Marketing Executive Network Group (MENG) is a community of C level marketing and sales executives. It is a valuable resource for business leaders dedicated to building high performance careers and companies.

One of the outstanding characteristics of MENG is the unselfish volunteer-ism of professional support among thought leaders in the various disciplines that make up marketing and sales technologies.

In that context MENG launched a Social Media Counsel of Advisors. They collectively ran a (free for MENG members) webinar on business application of social media that focused on Twitter. The live program was insightful. However, one question I had concerning strategies small companies could deploy to deal with the probable damaging commentary from dissatisfied customers, competitors, former employees or even social activists. I Tweeted my frustration that this question was not answered and received a direct Tweet message from Lisa Petrilli a MENG member directing me to a terrific blog by another MENGer, Mack Collier on the subject.

That discussion focused on how companies strategically could use social media to redress real and substantial product or service issues, whereas my concern brought on by client presidents, was what to do with rogue comments.

This is when another conversation started with Amber Naslund founder of Altitude Branding switching from Twitter to e-mail due to the depth of the discussion. I want to share that conversation because it underscores the professional activism of MENG and the real ability of social media to sponsor meaningful conversations and healthy on line acquaintances:

Cal - Question 1:  Strategically, how do small businesses address inevitable spam messages about products / services that are inconsistent with the significant majority of facts and customer satisfaction ratings?

Amber - Reply: First of all, I'm glad to hear you say "inevitable" because they most certainly are something you cannot avoid, and can actually be valuable to you.  Here's a few notes on what I consider when evaluating negative comments:

1) Are they specific? Specific complaints can point to a shortcoming in product or service that needs to be addressed. If that comment comes directly from a customer using your service, you should treat it with the same timeliness, attentiveness, and seriousness you would if that person went through other customer support channels.

2) Are they owned? I'm not in support of allowing anonymous comments on things, mostly because if an attack is going to be mounted, someone should be accountable for that (except in the obvious cases of things much more serious than the online or business world, like being put in personal danger of harm). If you know who made the comment, find out some context about who they are, and address them directly and by name, providing full disclosure of your own identity as well.

3) Never feed a fire. Judgment prevails here. You have to be able to tell when comments are deliberately starting a war or trying to be inflammatory. In most cases, if those comments are being waged by someone identifiable, I simply respond and say something like "Thanks for sharing your concerns with us; I'd like very much to talk with you further and see how we can help. I'd be happy to reach out via an email address you provide, or you can reach me at amber@radian6.com anytime." This diffuses the situation a bit, takes the conversation to a more private channel, but demonstrates publicly that you're acknowledging it and addressing it.

Same goes for competitors. If the competition is openly making negative statements, you can choose to refute any factual inaccuracies, but do so with diplomacy and by taking the high road. Something like "Appreciate your comments, Jeff, but you have some misinformation about our product. In actuality, XXX...." If the comments are opinions rather than something you can address calmly and objectively, it's better to acknowledge with something like "Thanks for your feedback, Jeff. We appreciate having outspoken colleagues in our space and look forward to seeing your additional contributions to the industry." More flies with honey and all of that. The community can see who is acting like an adult, and who is slinging barbs for no good reason.

4) Have a comment policy on your own properties that allows for removal of comments that are defamatory, offensive, or otherwise libelous. Do NOT make the mistake of deleting all negative comments, but this gives some recourse if things are vulgar, personal attacks, or otherwise deliberately out of line.

5) When possible, for comments that actually have merit, round back with the individual in the forum where the comment was originally made, and let them know what you're doing to address it. Nothing impresses folks better than seeing not only that you heard their criticism, but that you took it to heart and are committed to doing something with it.

Cal - Question 2: How do small companies staff social media initiatives?

Amber - Reply: That all depends on what your social media effort entails. Are you just listening and gathering information or are you actively engaging and responding? Are you just centered around your brand or are you participating in industry discussion? Are you just conversing, or are you also creating content?

In general, your listening/monitoring efforts for an active brand should take a couple of hours per day. The amount of time you dedicate to engagement - say, conversing on Twitter or on your Facebook page or LinkedIn Group - is up to you, but I'm going to say that it'll take at least 2-4 hours a day of time, whether exclusive to one person or distributed. The more engaged you are, the more active your networks will be, and the more maintenance and cultivation they'll require.

You're definitely going to need at least one full time equivalent in terms of hours, maybe more, if you're serious about adding social media to the mix. I'd also recommend evaluating and auditing your current marketing and outreach efforts so that social media can be integrated, and not be a standalone element (they should all work together and in a complimentary fashion). And I would recommend that the people you delegate to handle this be mature business professionals with an understanding of your organizations goals, customer attitudes, brand presence, and the like. This is a business management role first, with a specialization or a focus in social media. But you definitely don't want to delegate this to your intern; it really demands a more mature, seasoned business person if it's ever going to become a well-oiled part of your business processes.

Social media is an ongoing commitment, like customer service. You're not "done" with it, you maintain your presence and adapt to how your networks and communities respond to you. That's why it's important to not only dedicate proper resources, but to be sure they're individuals that are personable, business savvy, and committed to the long-term health of your relationships with your customers, as that's what engaging through social media is all about.

Amber

Symbols powerfully communicate meaning quickly. To me one of the most significant is North on a compass. It symbolizes mission which implies knowledge of a person's goals which in turn infers a purposeful journey.

Thus, there is a compass rose on the MacDuff site inviting people, business owners and leaders to explore big ideas for the benefit of their customers, employees and themselves. Even if one goes off course, having awareness of true North, any person can always find his way home or to another destination.

A friend, Bob Ward, sent the following article by Charlie Reese who has been a journalist for forty nine years. Since I could not say it any better, I offer the following article by Mr. Reese, which I use without permission. To me he captures why, as a nation, we are lost and have been for quite awhile.The same applies to our corporations.

If Congress, or even boards of private companies, really understood the concept of true north, my best guess is we all would be on a different heading now of fiscal responsibility, personal accountability, and real concern for members of our community.

545 People

By Charlie Reese

Politicians are the only people in the world  who create problems and then campaign against them.

Have you ever wondered, if both the Democrats and the Republicans are against deficits, WHY do we have deficits?

Have you ever wondered, if all the politicians are against inflation and high taxes, WHY do we have inflation and high taxes?

You and I don't propose a federal budget.  The president does.

You and I don't have the Constitutional authority to vote on appropriations. The House of Representatives does.

You and I don't write the tax code, Congress does.

You and I don't set fiscal policy, Congress does.

You and I don't control monetary policy, the Federal Reserve Bank does.

One hundred senators, 435 congressmen, one  president, and nine Supreme Court justices equates to 545 human  beings out of the 300 million are directly, legally, morally,  and individually responsible for the domestic problems that plague  this country.

I excluded the members of the Federal Reserve Board because that problem was created by the Congress.  In 1913, Congress delegated its Constitutional duty to provide a sound currency to a federally chartered, but private, central bank.

I excluded all the special interests and lobbyists for a sound reason.. They have no legal authority.  They have no ability to coerce a senator, a congressman, or a president to do one cotton-picking thing.  I don't care if they offer a politician $1 million dollars in cash.  The politician has the power to accept or reject it. No matter what the lobbyist promises, it is the legislator's responsibility to determine how he votes.

Those 545 human beings spend much of their energy convincing you that what they did is not their fault.   They cooperate in this common con regardless of party.
What separates a politician from a normal human being is an excessive amount of gall.  No normal human being would have the gall of a Speaker, who stood up and criticized the President for creating deficits.  The president can only propose a budget.   He cannot force the Congress to accept it.

The Constitution, which is the supreme law of the land, gives sole responsibility to the House of Representatives for originating and approving appropriations and taxes.  Who is the speaker of the House?   Nancy Pelosi.  She is the leader of the majority party.  She and fellow House members, not the president, can approve any budget they want.  If the president vetoes it, they can pass it over his veto if they agree to.

It seems inconceivable to me that a nation of 300 million can not replace 545 people who stand convicted -- by present facts -- of incompetence and irresponsibility.  I can't think of a single domestic problem that is not traceable directly to those 545 people.  When you fully grasp the plain truth that 545 people exercise the power of the federal government, then it must follow that what exists is what they want to exist.

If the tax code is unfair, it's because they want it unfair.

If the budget is in the red, it's because they want it in the red.

If the Army &Marines are in  IRAQ ,  it's because they want them in IRAQ  

If they do not  receive social security but are on an elite retirement plan not available  to the people, it's because they want it that way.

There are no insoluble government problems.

Do not let these 545 people shift  the blame to bureaucrats, whom they hire and whose jobs they can  abolish; to lobbyists, whose gifts and advice they can reject; to  regulators, to whom they give the power to regulate and from whom they can  take this power.  Above all, do not let them con you into the belief that there exists disembodied mystical forces like "the economy," "inflation," or "politics" that prevent them from doing what they take an oath to do.

Those 545 people, and they alone, are responsible.

They, and they alone, have the power.

They, and they alone, should be held accountable by the people who are their bosses.

Provided the voters have the gumption to manage their own employees.

We should vote all of them out of office and clean up their mess!

Charlie Reese is a former columnist of the Orlando Sentinel Newspaper.

 
This might be funny if it weren't so darned true.
Be sure to read all the way to the end:
 
     Tax his land,
     Tax his bed,
     Tax the table
     At which he's fed.
 
     Tax his tractor,
     Tax his mule,
     Teach him taxes
     Are the rule.
 
     Tax his work,
     Tax his pay,
     He works for peanuts
     Anyway!
     Tax his cow,
     Tax his goat,
     Tax his pants,
     Tax his coat.
     Tax his ties,
     Tax his shirt,
     Tax his work,
     Tax his dirt.
 
     Tax his tobacco,
     Tax his drink,
     Tax him if he
     Tries to think.
 
     Tax his cigars,
     Tax his beers,
     If he cries
     Tax his tears.
 
     Tax his car,
     Tax his gas,
     Find other ways
     To tax his ass.
 
     Tax all he has
     Then let him know
     That you won't be done
     Till he has no dough.
 
     When he screams and hollers;
     Then tax him some more,
     Tax him till
     He's good and sore.
     Then tax his coffin,
     Tax his grave,
     Tax the sod in
     Which he's laid.
 
     Put these words
     Upon his tomb,
     Taxes drove me
     to my doom...'
 
     When he's gone,
     Do not relax,
     Its time to apply
     The inheritance tax.
 
     Accounts Receivable Tax
     Building Permit Tax
     CDL license Tax
     Cigarette Tax
     Corporate Income Tax
     Dog License Tax
     Excise Taxes
     Federal Income Tax
     Federal Unemployment Tax (FUTA)
     Fishing License Tax
     Food License Tax
     Fuel Permit Tax
     Gasoline Tax (currently 44.75 cents per gallon)
     Gross Receipts Tax
     Hunting License Tax
     Inheritance Tax
     Inventory Tax
     IRS Interest Charges IRS Penalties (tax on top of tax)
     Liquor Tax
     Luxury Taxes
     Marriage License Tax
     Medicare Tax
     Personal Property Tax
     Property Tax
     Real Estate Tax
     Service Charge Tax
     Social Security Tax
     Road Usage Tax
     Sales Tax
     Recreational Vehicle Tax
     School Tax
     State Income Tax
     State Unemployment Tax (SUTA)
     Telephone Federal Excise Tax
     Telephone Federal Universal Service Fee Tax
     Telephone Federal, State and Local Surcharge Taxes
     Telephone Minimum Usage Surcharge=2 0Tax
     Telephone Recurring and Non-recurring Charges Tax
     Telephone State and Local Tax
     Telephone Usage Charge Tax
     Utility Taxes
     Vehicle License Registration Tax
     Vehicle Sales Tax
     Watercraft Registration Tax
     Well Permit Tax
     Workers Compensation Tax
 
STILL THINK THIS IS FUNNY?


Not one of these taxes existed 100 years ago, and our nation was the most prosperous in the world.  We had absolutely no national debt, had the largest middle class in the world, and Mom stayed home to raise the kids.
What in the hell happened?


Can you spell 'politicians?'


And I still have to 'press 1' for English!?
 

From compensation for my daughter who is a junior sales executive at a national company to chairmen - friends at global ones is a critical topic in the righting of the American economic ship.

In my daughter's case the answer was a corporate wide pay freeze due to "business weakness" despite her and few others' personal high achievement. In the case of top executive at publicly traded ones the issue of re-balance total compensation between cash and stock options to insure long term effectiveness of  decisions.

Lost in the conversation is the topic of making public employees or government accountable for decisions along with private company executives and the subject of integrity. We'll talk about government issues at the end of this piece.

I believe any of the three alternative approaches above, i.e. total lock down. cosmetic rebalancing or status quo, are solutions to the fundamental problem of self - serving focus of people in authority.

What I am helping several private company clients do is position their businesses for eventual sale or IPO, is restructuring executive roles to be more strategic than functional and linking total compensation to the long term performance of the organizations. We are doing this through a gradual re-alignment of the organization to fit the concurrent evolution of the businesses in complexity and adding a layer of non cash compensation.

Revised compensation structure, along with standard cash, tailored insurance vehicles and bonuses are warrants that are exercisable with change of ownership or longer term under special circumstances if the executive leaves the company in good standing. This is a work in progress with counsel, compensation consultants and business valuation advisers, but offers owners an ability to encourage and reinforce behavior that is in the optimizes the total performance of the company and not the individual income for selected employees. It further does not dilute owners' executive control or create unfunded tax obgligation to executives.

The current Administration is trying to foster regulations that require banks and others financial institutions (except Fannie Mae and Freddie Mac employees) to craft incentives along lines proposed by Professor Kane of Boston College. His idea is to bonus senior executives with a special class of stock that has claw back provisions require a return of capital if the company becomes insolvent. This seems like a smart but unworkable idea.

The second proposal is to establish a "West Point for regulators" according to Jason Zweig at the Wall Street Journal. The concept is to instill "a sense of honor and duty" with those charged with oversight. With these goings on in Washington, I wonder where all the adults, all the educators, all the parents have gone so that smart people think we need an institution to teach adults in responsible position about honor.

Integrity and honor, traditional concepts, are fundamental to motivation. Beyond that, compensation issues are central to behavior that potentially maximizes executive conduct that benefits all stake holders. Contemporary boards and managers have arranged compensation to optimize personal returns while sub-optimizing benefit to their cohorts. Under a capitalistic system it appears to me a straight forward; tie wealth creation to long term performance whether executives stay or leave organizations.

Jason Zweig, in is WSJ article, rhetorically notes: "It's probably too much to ask for Congress to abide by the sample principles (honor, duty and long term accountability even after leaving office), but we can dream. Could anyone possibly doubt this would wake up the watchdogs?"

Earlier I discussed the need for business owners to reconsider government created markets as part of their strategic plans. McKinsey illustrates this point extremely well in an article called Electrifying cars: How three industries will evolve.

The essence of strategic thinking is understanding that there is enormous wealth and brand equity to be created due to the inherent volatility of government legislated or controlled markets. The issue for each entrepreneur is to identify the strategic entry point, develop a plan to exploit the opportunity and take action.

I am not taking a moral or political stance. This is about wealth creation (freedom) within government created economies. Pharmaceutical, oil, nuclear, tobacco, mortgage and even liquor industries experience the vicissitudes of political action. Scale of opportunity and threat of loss is beyond historical precedence in our current economic ecosystem.

Yet, it is impossible today to forecast where opportunities will lie. First, most of congress does not even read bills they pass (excerpt from healthcare discussion). Senator Hoyer from Maryland, for example, even derides the concept of reading them because it takes too much time.

Secondly. unexpected events may subvert a seemingly winning decisions. For example, unions stopped the building of solar panel plants and solar farms in California by issuing a 62 page data request with the California Energy Commission related to alleged environmental violations. (California mandated renewable energy use a a percent of total. Never-the-less politicians sided with unions to extend the reach of environmental laws originally intended for other purposes, and apply them to desert land being developed for solar farms.)

Despite uncertainty and volatility, my belief is entrepreneurial businesses must participate in legislated new markets. The entry point is likely to be in supporting core infrastructure companies. Through analysis, get to know target customer needs. Either building information or e-commerce web sites or coaching executives in high stakes presentations; whether advising gas station chains to install electric recharging units or junk yard facilities to convert from metal reprocessing to battery recycling, opportunity calls. Analyze market data. Anticipate and respond to the future politicians are creating.

Think deeply and act boldly now or prepare to reap the winds of inaction.

In a meeting last week, a business-owner client with about thirty full-time employees made a comment that the pending changes in health care would bankrupt him in several years despite reductions in his work force to control operating costs.

Later, I asked Scott Peloquin, CEO of benefEx, a leading New Jersey employee benefit consultancy for small and mid-market companies, how I should begin advising my clients to think about the upcoming changes in federal health insurance mandates.

Scott said: “First, I don’t think the reforms now being discussed could possibly go through.  Even if they do, the most efficient solution today is for employers to deploy a consumer driven program, rather than retaining more traditionally designed – and expensive - plans. This was innovative thinking to me about how to rebalanced risks and costs, so I rhetorically wondered how the program worked and what a representative cost impact could be.

“In a nutshell traditional plans charge about $4,000 monthly in premiums to insure about $3,000 of up-front risk, or ‘deductibles’ (think about this as though you were lowering your annual auto insurance premium by increasing your deductible from $ 500 to $ 1,000).  The current higher cost arrangement is profitable for the insurance company commission-based insurance brokers.  High-priced insurance also produces disproportionate revenue for state governments which further increases health insurance costs. 

This ‘dirty little secret’ rarely enters the discussion, that states embed a premium tax into insurance rates as a flat percentage of gross premiums.  New Jersey is so concerned by the potential loss of premium tax revenue as companies switch to consumer driven programs that it is requiring a “declaration of understanding” attestation – part of a effort to dissuade employers from offering these more efficiently designed health care financing programs.

For example,  a 7-employee company paying nearly $98,000 / year for their health care program, before proposed rate increases to more than $111,000 in 2010.  Working in conjunction with the company accountant and HR administrator, they were able to restructure the health care financing so the worst case scenario cost was under $75,000.

Employee contribution rates and out-of-pocket maximums were reduced, and – if the plan performs better than expected, the employer may recover as much as an additional $25,000, thanks to a federally approved ‘dividend’ structure  an important, recurring part of the plan’s architecture.

Though he did caution that each company situation is unique, he stressed “…the same principal applies whether an employer has seven, seven hundred, or seven thousand employees!”  He also pointed out that benefEx converted 85% of clients to some form of consumer-driven healthcare solution – as compared to an industry standard still hovering around 7%.  Not a single employer group has returned to a traditional plan, which speaks well to both the sustainability of consumer driven program, and their popularity with covered employees.”

This issue is of major interest to company owners.I believe significant tax increases targeting small businesses next year are inevitable, thus recommend that owners spend at full available. Invest specifically on building a rock solid team of employees, along with a strong brand.Companies that do so will be best positioned in their markets six – eight years from now (when tax policy reverts to a more rational structure) to gain profitable market share, or enter into a profitable merger / sell transaction.

Other insights Scott shared with me is that businesses must proactively assess their Family Medical Leave Act (FMLA) and COBRA compliance. Speculation is that federal regulatory actions positioned as worker protections may be launched as “revenue enhancement” initiatives. From a cost management standpoint, outsourcing the complex administration of these federal mandates is more effective than in-house administration and more efficient since outsourcing costs dropped by 50% over the last three years.

Business owners building a highly profitable company in this political and economic climate need consider implementing a thoughtfully designed disability program. Done smartly it could mitigate some risks associated with FMLA. Communicated properly, more than two thirds of employees may actually volunteer to pay these premiums rather than having employers pay, due to the adverse tax implications inherent in most employer-paid disability plans.

The lesson to be learned is that owners must ramp up innovation throughout their companies. Innovation is required not only for profitable new revenue production but also for ongoing cost management. Building a highly profitable company demands customer focus more than ever, supported by a cohesive employee team.

 


With the ongoing economic dislocation in 2009, many small - midsized enterprises (SME) lost significant revenue and profit. Business owners I talk to from car dealers to commodity traders have seen revenue and profits drop significantly and apparently see a slow return to pre-2009.

However, offsetting the decline in traditional markets, such as retail, consumer products manufacturing, or clothing as well as discretionary services from cosmetic surgery to luxury vacations.

Earlier I blogged about the pressing need for owners to offset revenue losses by assessing their company's strengths, weaknesses, opportunities and threats (SWOT) and then matching the strength and opportunity with government-legislated markets.

Yesterday I attended a NJBIA workshop "How to Get Government Contracts and Federal Stimulus Funding" focused on New Jersey simply to help client focus on new opportunities and how to get financial resources. Kick off understanding of NJ programs by exploring first the NJ state business site about available financing and then the NJ Recovery Site . Funding is available in NJ specifically opened up by the 2009 Recovery Act . (A broad starting point would be at Federal Grant Opportunity Resources.).

  • infrastructure primarily roads, pavement, bridges and light rail tunnel to Manhattan
    1. see Port Authority of NY & NJ Procurement Guide. Port Authority has separate and distinct protocols from balance of government agencies.
    2. see NJ Department of Transportation. There is a 10 year statewide capital investment strategy (SCIS) which will open markets from engineering through machinery cleaning
  • green or renewable energy of a special kind (solar, wind or geothermal)
    1. see Workforce for green job training support and funding
  • hiring and training new workers primarily in areas of high unemployment
    1. see Grant Opportunities for customized and literacy
    2. to apply see Training Grants
  • environmental infrastructure
    1. see 2009 Stimulus Loans - NJ Infrastructure
    2. see NJ Projects by area
  • new funding available through government agencies
    1. NJ Regional SBA (William Boone Assistant District Director)
    2. Economic Development Authority Fast Start for new business funding

I urge owners to critically think through strategic ways to fit current core business competencies into these new, well funded markets. Whether it is technology to create web sites as a vendor to government - private partnerships, sub contractors for major infrastructure vendors or a printer to support all the new forms government requires, there is opportunity in this new vertical called "recovery" and a new venue for wealth creation.

We are working with colleagues to construct new wealth creating business strategies in the wake of unprecedented growth in federal government control over free markets.

The first strategy is to actively pursue markets congress and the administration legislate into existence.The second is to pursue innovation and nimbleness to accelerate go to market efforts. The third is to investment spend on people and brand so as to minimize taxes while creating a strongly branded company with an up-beat, can-do team of employees. We believe those ideas, executed soundly, create a company the is ultimately more salable in any environment and is the platform for wealth creation and freedom.

The rhetorical question is this:"Is wealth, by definition, the new social quicksand?". In a period when local governments claim eminent domain to confiscate one taxpayer's property and deliver it to another for "common good", in a period when Government deems one company's bonus policy (AIG) unconscionable and another's  (Fannie Mae) acceptable,  one company too important to fail (GM) and another not (Lehman Brothers), we lose the connection between market performance and customers and enter one where bureaucrats decide winners and losers. 

Coincidentally, I have been re-reading "Civil Disobedience" written by Henry Thoreau, published in 1849. The US at that time was struggling with the political and moral "correctness" of slavery and the war with Mexico. His reflections are as relevant today when we face different problems, 160 years after he published them.

Thoreau speculated on individual responsibility in democracy and cynically observed:

All voting is a sort of gaming, like checkers or  backgammon, with a slight moral tinge to it, a playing  with right and wrong, with moral questions; and  betting naturally accompanies it. The character of the  voters is not staked.  I cast my vote, perchance, as I think right; but I am not  vitally concerned that that right should prevail. I am  willing to leave it to the majority. Its obligation,  therefore, never exceeds that of expediency. Even voting for the right is doing nothing for it.

Simply, voting is an essential part of a democracy, but generally is only a feel good exercise in personal responsibility. Elected officials do what they want, not necessarily what they were voted into office to do.

As a capitalist, I am shocked by the government's egregious seizure of power and consequential loss of our economic and personal freedom that directly and proportionately evolves. By simple ukase, industries are born like the one for ethanol, and others killed like domestic oil and gas exploration.

I stand in wonder over the seismic change we face. Thoreau made a statement that goes to explain the paradox private citizens encounter with government citizens:

There will never be a really free and enlightened State until the State [sic. politicians, my translation]comes to recognize the individual as a higher and independent power, from which all its own power and authority are derived, and treats him accordingly.

While Thoreau was talking about slavery and citizens' behavior / association with it he said:

...All men recognize the right of revolution; that is,  the right to refuse allegiance to, and to resist, the  government, when its tyranny or its inefficiency are  great and unendurable.

His solution was to stop paying taxes. A tax revolt to him was a non violent revolution. To me that is a naive but elegant solution that is not workable today but becomes a strategic element of a business practice. Together we may force government citizens to think hard about real solutions to our common problems.

In an prescient statement, Thoreau's conclusion about politicians is more apt today than probably it was 160 years ago:

There are  orators, politicians, and eloquent men, by the  thousand; but the speaker has not yet opened his  mouth to speak who is capable of settling the  much-vexed questions of the day.  We love eloquence for its own sake, and not for any  truth which it may utter, or any heroism it may  inspire. Our legislators have not yet learned the  comparative value of free trade and of freedom, of  union, and of rectitude, to a nation. They have no  genius or talent for comparatively humble questions of  taxation and finance, commerce and manufactures  and agriculture. If we were left solely to the wordy wit  of legislators in Congress for our guidance,  uncorrected by the seasonable experience and the  effectual complaints of the people, America would not  long retain her rank among the nations.

Quicksand is the footing we are in now. There is no action certain, but know that "when in doubt, do something". Something to me is reinvesting in our businesses, our employees and our customers in terms of service and experience to build solid greatness in real terms and not simply with words.

Too small to be saved is in a perverse way is a building block for future personal wealth. To achieve prosperity, now more than ever and in the New Jersey more than other places, taxes and political considerations are more significant in the business decision mix than it has been since the 1950’s.

We do not know specifically where Congress is going, but it is generally moving into more regulations and penalties for company owners that violate these regs.. An essential exercise for all business owners is to pay more in depth attention than ever before to political developments.


On the other hand, government is creating new markets through massive spending increases. Taking advantage of opportunities opened by current (June 2009) political decisions is imperative. Owners must be sensitive to political – market risks of emerging regulation and oversight. These factors significantly rebalance weighing competitive market variables versus political ones in decision making.

From an operations standpoint, product and innovation remain key to customer satisfaction and top line revenue growth as before. However, legal tax - minimization efforts weigh more heavily in the decision process that a year ago in terms of long term wealth creation. We will explain later.

Pricing is always both a strategic and practical issue, of course. We ask clients not to change price structures that reflect their brand value proposition. Rather, we recommend adjusting to near term economic turmoil by structuring trade, distribution channel and end user pricing with short term promotions. Longer term value perception will be based on how company sets its product line valuations now. Seek and get professional counsel on these strategies.

We also characterize all customers in categories such as triers, loyal buyers and heavy users. As budgets allow, we recommend rotating promotional activity through each customer cohort or category based on an understanding of the business cycle. What this means is grasping customer behavior and develop programs specific to their needs.

In terms of debt, my bias is to use short term working capital loans to help liquidity and long term debt only for well positioned asset purchases that have demonstrable payout. Revenue volatility and inflation will be issues forefront on our radars; negative leverage can be catastrophic.

Back to the wealth creation strategy –we suggest investment spending in relationship building, even in terms of lost revenue now which means both trade and end user brand equity. Spend to achieve deep employee relationships and strong teams. Taxes on profits do not increase brand value.  Investment spending on brand, inside and out, does. In future years capitalism will return, as will a premium value on strongly branded companies based on a committed team, strong trade and end user brand.