Life has a way of presenting us with difficult circumstances. Sometimes it’s in our personal lives, and sometimes it’s in our business.
If the circumstance is severe enough, it can create a crisis, which can often cause a feeling of hopelessness. When things outside your control come at you in droves, it becomes difficult to cope with them. Entire organizations can be overwhelmed and pulled down by external circumstances, which if not dealt with promptly and correctly, can destroy the company.
The CEO’s role is to right the ship and rally everyone around a solution — and it most likely won’t be easy. People are always looking for the easy way out, but that path is rarely an option. When facing a difficult situation, you have to play the ball where it lies, which means the resources you have in people, dollars or equipment are all you may have to work with.
But challenges also present opportunities. Faced with a crisis, you and your leadership team will be forced to look at your assets in new ways. You’ll be required to take a careful look at your customer base, your market and your processes. This kind of in-depth evaluation may uncover not only a possible solution to your problem, but it may open your eyes to markets or applications you never considered before.
Take Netflix for example. The company was the king of DVD-by-mail, and had already knocked off the once mighty Blockbuster. With the increase in streaming video content, however, customers began moving away from DVDs, threatening Netflix’s main revenue channel. It reacted by creating not only streaming content, but also by creating its own unique content. Customers can stream video from many outlets, but it’s tough to beat Netflix’s reputation and ease of use.
Often, the resources you need are already at hand; they just need to be used in new ways. Netflix already had the capabilities; it just needed to apply them differently.
You may find that after assessing what you have, you have started to create a new path that leads away from the crisis.
At the beginning of a difficult time, you may not be able to see a way out, which can lead to despair. By starting with an initial step and continuing, however, you’ll soon see the light. Start by calling your bank or suppliers to ask for better terms or whatever it is you need, and then build from there.
No matter what you do, though, don’t compromise your integrity. Always do the right thing in the wrong circumstances, because depending on how severe your crisis is, your reputation might be the only thing you have to negotiate with.
If you work hard, do the right thing and stay positive, a solution will likely present itself. It may not always be in a form that you anticipated — you may need to change your products or your market — but if you keep an open mind and work with what you have, everything will work itself out. ●
Most weeks I get on a plane and attempt to have an out-of-body experience to deal with all the hassles of flying as I travel from point A to point B. When flying, I have a few simple rules. One, I almost never eat the food. Two, I attempt to talk to no one other than obligatory hellos. Three, I never argue with or say a cross word to flight attendants.
One other very important practice I follow on land, sea and especially in the air is that I constantly scan my surroundings for potential troubles and new ideas.
On a recent flight, upon boarding, I quietly and obediently proceeded to my assigned seat.
As I began to sit down, a gentleman asked if I would mind trading seats with him so that he could sit next to his wife. Like most seasoned travelers I try to accommodate reasonable requests. In this case it seemed a no-brainer to agree to move.
Notice the details
As I started to settle in and fasten my seat belt I noted that my new seatmate was very hot. No, it’s not what you’re thinking. I mean she seemed to be flushed and radiating heat, ostensibly from a high fever. I’m thinking, this is not good, plus it proves the age-old adage that no good deed goes unpunished.
In the next minute I had an epiphany, which happens frequently as I believe that many problems come disguised as opportunities.
I rang the call button and, when approached, asked the cabin attendant to please bring me two cloth napkins. I stated that the purpose was to construct a makeshift face mask by tying the two pieces together to prevent possibly contracting some dreaded disease.
I feared that my intentions could be misinterpreted if I were to don a mask without an explanation; this could cause a well-meaning passenger to drag me to the floor thinking I had nefarious motives.
The stewardess smiled, nodding approvingly of my plan. She then summoned all her co-attendants to my seat and proceeded to whisper what I was attempting. Otherwise, she explained, they, too, could misunderstand my appearance and cause me bodily harm.
As founder and CEO of Max-Wellness, a health and wellness retail and marketing chain, I’m always looking for that next special something to share with my team. Therefore, while burying my now masked face in a newspaper so as not to frighten or offend the sick seatmate, I began dictating a memo to my merchandise product group proudly asserting that I just had another “aha!” moment, for which I am well-known, among my colleagues. For full disclosure, however, I am sometimes known for being a bit “out there” on occasion — but no one bats a thousand.
Turn an idea into a product
This particular predicament gave me the idea to develop a product kit that we could sell to weary travelers in our stores and in airports. I suggested a handful of complementary products, including a mask, a disinfectant spray and, if all else fails, relief remedies. I also noted that it probably would be prudent to include a cigarette pack-type “Black Box” warning stating that the mask is not what some suspicious flyers might think, but instead it’s for prevention of disease only. I even proposed we market these kits directly to the airlines to dispense as an emergency prophylactic for passengers exposed to airborne (pun intended) pathogens.
Fleeting thoughts have value
A key role for business leaders is teaching a management team to use fleeting thoughts as a springboard, to pair common problems with sometimes-simple solutions.
Just because it is a simple fix, though, doesn’t mean the idea couldn’t be a lucrative breakthrough.
When something sparks an idea it needs to be taken to the next level before being pooh-poohed. Most likely the vast majority of these inspirations won’t see the light of day, but that’s OK. Just think — what if one transient idea translates into the next Post-it Notes, Kleenex or bottled water?
The next time you sit by a masked man on a plane, it most likely won’t be the Lone Ranger. Instead, you might be witnessing the incubation of the next best thing since sliced bread. ●
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at firstname.lastname@example.org.
The government has increased tax rates and implemented other changes for 2013. However, companies may be able to employ tax-saving options — deductions, depreciation provisions or deferrals — prior to Dec. 31.
If companies review before year-end, they are better able to maximize potential savings, and it may even spur thoughts for future tax planning, says Sean Muller, partner-in-charge, Houston Tax and Strategic Business Services at Weaver.
Smart Business spoke with Muller about the opportunities to save on your 2013 taxes.
How can businesses utilize enhanced Section 179 deduction limits in 2013?
Enhanced Section 179 deduction limits were enacted for 2013, which allow companies to immediately deduct up to $500,000 of equipment purchases made, rather than depreciating over a number of years.
The deduction applies to 2013 equipment purchases of up to $2 million. The deduction is slowly phased out for taxpayers with $2.5 million or more in purchases. Section 179 deductions can be applied toward tangible property purchases, but real property doesn’t qualify.
In 2014, the Section 179 limitation will decrease to $25,000. Companies that plan to make large capital expenditures in 2014 may wish to purchase in 2013 instead. The deduction can be used to reduce tax liability to zero, but it cannot put you in a net loss position.
How does bonus depreciation differ?
Taxpayers in some states may be able to utilize a 50 percent bonus depreciation rate for qualified property placed in service during 2013. Unlike the Section 179 deduction, bonus depreciation is not limited to net income and does not limit the deduction amount.
Bonus depreciation applies to new, original use U.S.-based property with a recovery period of 20 years or less.
The 50 percent bonus depreciation and Section 179 deduction can be used together.
What savings are available through like-kind exchanges?
Another tax-saving opportunity to consider is like-kind exchanges. IRS Code Section 1031 enables a taxpayer to defer capital gains tax if the property sale proceeds are reinvested in similar property within a relatively short time. The exchange may be a simultaneous swap of properties or a deferred exchange. With a deferred exchange, one property is disposed of and the proceeds are then used to buy one or more like-kind properties.
Section 1031 exchanges exclude inventory, stocks, bonds and partnership interests.
Who can take domestic production activity deductions (Section 199)?
In 2013, businesses with qualified domestic production activities may be able to receive a 9 percent tax deduction. Qualifying activities include the manufacture, production, growth or extraction of qualifying production property within the U.S., as well as real property construction, oil and gas drilling, and engineering and architectural services related to real property construction.
Generally, a taxpayer is allowed a deduction equal to the lesser of:
- Qualified production activity income (QPAI), which is a modified calculation of income related to qualifying production activities.
- Taxable income.
- 50 percent of the form W-2 wages deducted in arriving at QPAI.
The level of complexity in calculating the appropriate deduction depends on the nature and structure of the business.
What are other year-end tax strategies?
Companies also should consider potential residual tax-saving activities, such as:
- Deferring income to 2014 if cash flow and current income permit.
- Making additional charitable donations.
- Writing off and disposing of damaged or obsolete inventory to reduce carrying costs and garner tax deductions.
- Writing off bad debt that cannot be collected. Companies should keep supporting material like phone logs, correspondence, collection agency contracts, etc., to prove a reasonable effort was made to collect.
Invest the time now to plan for your 2013 taxes and reap the benefits later. ●
Insights Accounting is brought to you by Weaver
With the economy returning, hiring is playing catch-up to meet increased business demands. As companies search for new talent, the ever-present challenge is identifying the right candidate.
A variety of pre-employment tests and screening procedures exist to help weed out unworthy applicants and identify potential stars.
Select the proper tools to assess
Some include cognitive tests, medical examinations, skill assessments, credit reviews, criminal background checks and drug tests:
■ Cognitive tests assess reasoning, memory and skills in arithmetic and reading comprehension, as well as knowledge of a particular function or job.
■ Physical tests measure an applicant’s ability to perform a particular task as well as strength and stamina in general.
■ Sample job tasks, such as performance tests, realistic job simulations and work samples, assess performance and aptitude on particular duties. A data processing applicant may have to demonstrate basic keyboarding skills while a copywriter may have to provide a portfolio of past projects.
■ Medical inquiries and physical examinations, including psychological tests, assess physical or mental health. These are often conducted for high level or high stress jobs.
■ Personality tests and integrity tests assess an applicant’s character traits and disposition. They can measure to what degree a job candidate is creative, reliable, cooperative and/or risk adverse. As a result, they can help determine an applicant’s fit for the job and the company’s culture.
■ Criminal background checks provide information on arrest and conviction history. These provide some level of comfort that employers are protecting the security of their business and the safety of their employees.
■ Credit checks provide information on credit and financial history, while drug tests verify that an applicant has no illegal drugs in their system. From the results, employers extrapolate a person’s financial stability or tendency toward drug use.
Use care when testing
These evaluations can be a very effective means of determining which applicants are most qualified for a particular job. Applicant testing can be controversial, however, if the methods are perceived to be overly invasive or potentially discriminatory. In fact, improper use of assessment tools can violate federal anti-discrimination laws.
Several years ago, the Equal Employment Opportunity Commission published a fact sheet outlining some best practices for administering applicant testing and other job selection procedures, which still hold true for employers. Here is a brief overview:
■ Employers should administer tests without regard to race, color, sex, national origin, religion, disability or age (40 or older).
■ Employers need to ensure that employment tests and other selection procedures are valid for the positions and purposes for which they are used. It is important to note that employers are ultimately responsible for ensuring that their testing procedures are in fact valid, even if they engage outside vendors to administer their tests.
■ If a selection procedure seems to screen out a protected group, employers should look for an equally effective alternative selection procedure that has less adverse impact, unless the employer can legally justify the rationale for the test.
■ Employers should stay abreast of changes in job requirements and update testing procedures accordingly to ensure that they continue to accurately predict job success.
■ Employers should not casually adopt tests and selection procedures with no consideration or regard for its effectiveness, limitations or appropriateness.
As managers and employers, we all look for effective tools to assist in accurately assessing the skills and qualifications of a potential employee. When administered properly, applicant testing can provide an unbiased assessment of an applicant’s aptitude and character, and that objective data can be invaluable when faced with a tough hiring decision.
John Allen is president and COO of G&A Partners, a Texas-based HR and Administrative Services company that manages human resources, benefits, payroll, accounting and risk management for growing businesses. For more information about the company, visit www.gnapartners.com.
Steve Stagner cultivates a positive sense of discontent to engage the Mattress Firm team to spring into actionWritten by Dennis Seeds
Mattress Firm and Mattress Giant had been competitors for years. So when Mattress Firm took over the rival 180-store Mattress Giant last year it was imperative for Steve Stagner to build camaraderie, teamwork and a foundation of common culture between the two teams.
That’s why he closed all the stores — temporarily — and held a team-building exercise at seven locations across the country.
“We had about 400 of their sales associates show up along with a couple hundred of our people,” says Stagner, president and CEO of Mattress Firm. “In the first four hours, they spent it in shorts and T-shirts, running around the community finding things together, creating videos on their phones and trying to help (each other) do things.”
The modified scavenger hunt was a success, creating a clean slate for the team members and allowing the foundation of a new company culture to be built.
“The idea was to take our culture and their culture, strip our titles and our ‘badges’ — badges meaning what company you work for, Mattress Firm and Mattress Giant — and get people to work together, play together, laugh together and solve problems together for a few hours,” Stagner says.
“What was amazing about that was that by noon or so when they all returned, they were wearing the same shirts, high five-ing, knowing each other on a personal level. We had been fierce competitors for 25 years, and by noon, we were all sharing ideas. To me, that is the foundation for how a culture is built. It is built on trust and on a relationship.”
Stagner believed a crucial component of building a merged culture was for people to let go of their egos and their assumptions on what really counts on both sides of the ledger.
“Then it’s to figure out how one plus one equals three,” he says, “and how together we could be more powerful than separately. That is the way I like to do things. It’s sort of an experiential process because I don’t believe in sending out a memo. Whatever I write, it’s going to be thrown away in about 30 minutes anyway.
“When you bring them together and you let them go through an emotional experience, and then two years from now, they will have a foundation. That’s really the key to growth and how you bring cultures together.”
Stagner is seeing positive results from last year’s acquisition.
“We had anticipated there would be a certain level of attrition, as a result, and it hasn’t happened,” he says. “The people have stayed.”
To Stagner, it is critically fundamental to maintain the culture to support the very aggressive growth plans Mattress Firm is undertaking. Here’s how Stagner and his team focus on culture to generate $1.1 billion in annual revenue from 1,200 locations with 3,000 employees.
Find the pillars of culture
Look at a successful business, scratch the surface and underneath you will find a company culture that ties together some great people. Building a company culture often starts with a leader eager to develop an equally eager workforce.
Stagner became CEO in 2010, but he had been associated with Mattress Firm since creating a business plan for the company in 1995. He credits having several strong mentors and thousands of hours studying leadership and the art of selling as helping him mold his philosophy.
Stagner developed his business plan based on hiring the best of the best, assembling a team that was focused on building something greater than itself, which would be a national chain.
“We always challenge each other to grow as individuals,” he says. “The hours that we spend at work are not just about selling mattresses; it’s about how can we grow into better leaders, better people and better performers in that role. Those pillars are the key underpinnings of the culture.”
In comparison to other retailers, turnover at Mattress Firm is low. Stagner gives credit to investing in the individual growth of employees.
“So what happens is you invest in your people, in their individual growth,” he says. “I look at it as a hiring promise. When the company hires someone, the hiring promise is basically that we really want to invest in you as an individual.”
At Mattress Firm, employees go through Ground School, an education process like a college degree program in the sense that it doesn’t just end after the first couple of weeks on the job.
“We are not only investing in you when you first start, but all the way through your career so when you leave here, you are better off than when you came here,” Stagner says. “You’ve learned critical work and life competencies that will help you for the rest of your life. I don’t believe in my heart that people work for companies solely because of their compensation.”
Many companies, in addition to salary, significantly invest time and money into leadership training and communication. Mattress Firm goes beyond those tangible benefits, and significantly invests time and money into community involvement. For instance, last year, the company spent about 5,500 hours in community work across the chain, and raised and invested more than $1 million for various causes, particularly working toward a cure for pancreatic cancer.
“Measure that by things that you do to make sure that you are investing time into your people and that way, the idea is that the culture will take care of the strategy,” Stagner says. “The company can have a strategic plan, which we do, and we execute on that, but the culture is really what makes the plan work.”
Positively seek continuous improvement
Capturing the gist of your culture in a catchy phrase is a great idea if you want your team to remember it. Stagner puts the unique description simply: a positive sense of discontent.
“Ours is a culture that is highly positive,” he says. “But the sense of discontent is that we always believe we can do better. There is a humility that goes through our culture based on the fact that we are just very aggressive about winning but humble about achieving success.”
To put it in perspective, the positive discontent drives a desire to improve continuously and in effect, to become, perhaps, a little larger than life.
“So that is the positive sense of discontent — never set sail; there’s always so much more that we can do for each other,” he says. “That is a key component to why I think our culture works.”
Another fundamental is to have employees who demonstrate passion in some areas of their life.
“Whether or not they are in operations, advertising, communications or sales, acquire people who are successful, who are highly passionate about what they do,” Stagner says.
He finds that recruiting heavily on college campuses increases the chances of acquiring future managers as well as sales associates.
“I think it is unique that about 60 percent of our team has college degrees,” he says. “But people are like, ‘Well, I just spent four years getting a degree. Why would I want to go sell mattresses?’”
The reason? It’s not just about selling mattresses. Rather, at Mattress Firm it is about the opportunity for employees to learn critical work and life competencies that will help them for the rest of their lives. Stagner has created a brand promise to invest time in helping them grow.
“It’s, ‘Come work here and learn how to run a business. Learn how to become a better leader,’” he says. “And as a result of that, there are 400 to 500 students every year who come and work for us right out of college. Most of our management team is stacked with people who have been with us for 10 or 15 years.”
Once Stagner stripped away all the layers, he defined a sale as a transfer of enthusiasm so that employees would understand the transaction in its basic terms, as a core principle.
“It is simply that if I am trying to convince you to do anything, whether it is to go on a trip or to buy a mattress, it happens to the degree that I can transfer my enthusiasm to you,” he says. “Selling a product is really about transferring the passion and enthusiasm I have about that product to you. When you feel that passion and enthusiasm, action is taken.”
That becomes evident in the organization in many ways: from the way employees answer the phone, to the way people are greeted in the stores, to the way employees talk about things, everything is around that passion.
“So if I am happy about my iPhone, I tell you how cool my iPhone is, and I am passionate about it being used and excited about it, and then maybe you start thinking ‘I, too, should have an iPhone.’ And that is really important because that is what perpetuates the brand. The brand is not just a transaction to us.”
How to reach: Mattress Firm, (877) 384-2903 or www.mattressfirm.com
Find the pillars of culture.
Positively seek continuous improvement.
Transfer the enthusiasm.
The Stagner File
president and CEO
Born: Lubbock, Texas. I grew up in Kingwood here in Houston.
Education: I went to Stephen F. Austin State University and received a degree in marketing.
What was your first job? I was working in a warehouse for on office supply chain, pulling orders. What I learned while I was doing that was that hard work is important. People do hard jobs. The summers in Houston, especially in a warehouse, are not exactly that enjoyable. But I also saw a lot of how the culture works, how culture works when there are people who are dissenting leadership or supporting leadership because you hear the guys. I can kind of remember how they talked about their bosses and stuff like that. So I learned a little bit about how cultures worked and how quality control is really impacted when people don’t care about their jobs.
Who do you admire in business? One of my mentors actually just passed away. His name was Larry Wilson. He co-wrote books called “Play to Win: Choosing Growth Over Fear in Work and Life” and “The One Minute Sales Person.” His theory was really based on a couple of different things, one of which is the wonderful paradox of if you help enough other people get what they want, you get what you want. So I have kind of modeled my personal life around not worrying about what happens to me at all, financially or anything. I don’t even pay much attention to that. It’s spending time making sure that you are helping others get the success in their careers they want. The paradox is that things just happen to work out.
What is the best business advice you ever received? Invest in yourself and hire people better than you. And the way I would capture that is to be very humble. One of my favorite chapters in the Jim Collins book “Good to Great: Why Some Companies Make the Leap … and Others Don’t” is the chapter on Level Five Leadership. He talks about the balance between humility and will, to really follow people because they want to, not because you have to. It’s by demonstrating the strong balance between being humble, being real with everyone and being willing to do what they have done.
What is your definition of business success? Success can be measured in many ways. Certainly there is no reason to apologize for achieving financial success and growth. If you are good at what you do, then you should be rewarded for it. But I don’t measure my success based on how much we sell or how much we make, because I don’t believe that on my deathbed I’m going to be worried about what our success was in the first quarter of 2013. I believe the true measurement of success is the value that we as an organization of people provide our communities and our customers, because if we do that, we add value, then we will be rewarded for that, and then the shareholder value will go up. It’s kind of the same paradox. I measure success on the value of creating and then the financial measurements happen. That’s my definition.
In July, the 5th U.S. Court of Appeals ruled in Asadi v. G.E. Energy (USA) LLC that whistle-blowers aren’t entitled to protection under the Dodd-Frank Act’s anti-retaliation provision unless they report directly to the Securities and Exchange Commission (SEC).
This ruling — currently limited to Texas, Louisiana and Mississippi — may provide incentive to bypass the internal process for reporting suspected fraud or misconduct.
When going directly to the SEC, employees not only get monetary awards for information that leads to successful enforcement actions but also have the assurance of protection against retaliation, says Carolyn Bremer, senior manager in Forensic and Litigation Services at Weaver.
“Already, many companies are struggling to keep internal compliance programs strong, actively looking for ways to encourage employees to utilize their internal reporting processes,” she says.
Smart Business spoke with Bremer about how to instill trust in your internal compliance program in the Dodd-Frank era.
What has been the impact of Dodd-Frank on whistle-blower reporting to the SEC?
According to its annual report on the Dodd-Frank Whistleblower Program for fiscal 2012, the SEC received 3,001 whistle-blower tips and awarded a second whistle-blower award this past June. There may be an uptick in tips because of the announcement of these recent monetary awards, the expected increase in future awards and the court ruling.
Why do employees hesitate to internally report fraud or suspected misconduct?
Employees often hesitate because of bad experiences either personally or from co-workers’ stories. Reasons for not reporting potential fraud or misconduct include the fear of not remaining anonymous, fear that no one will believe them, or fear of retaliation such as losing their job, not receiving a raise or being demoted. They also fear discrimination or isolation from co-workers, or sense that the tone at the top doesn’t support the policies.
What can be done to alleviate hesitation?
A company can instill trust in reporting internally by focusing on strengthening its hotline process and whistle-blower policy.
Your hotline must provide a way to report in confidence, while being monitored by an appropriate party. Avoid having tips go directly to human resources or management. Employees should see the monitor as more independent — such as in-house counsel, head of internal audit or a compliance officer — especially if they fear retaliation.
Ensure there are clearly defined timelines or checkpoints for follow up, which include communicating back to the whistle-blower that the tip is being handled discreetly and the issue is being addressed appropriately.
Have a documented whistle-blower policy that addresses retaliation protection. What is considered retaliation and the penalties for it should be clearly outlined. For example, ‘harassment or victimization for reporting concerns under this policy will not be tolerated’ is insufficient. A better statement is: ‘No employee who in good faith reports a violation of the code of conduct or potential fraud or misconduct shall suffer harassment, retaliation or adverse employment consequences. An employee who retaliates against someone who reported in good faith is subject to discipline up to and including termination of employment.’
By voluntarily extending the whistle-blower protections afforded under Dodd-Frank to all employees who report internally, companies introduce additional trust.
Why is it important that employees feel comfortable reporting matters internally?
In bypassing internal compliance, employees deprive the company of the opportunity to investigate and remedy a wrongdoing before regulators get involved. Many tips don’t warrant the SEC’s attention but do warrant corrective action or communication within the company. However, management can’t address a problem they don’t know about.
Nevertheless, there are obvious instances that warrant direct reporting to the SEC, and it’s always advisable for employees to seek legal advice when deciding whether to report internally or externally.
Strengthening your hotline process and whistle-blower policy, and educating your employees, can be key to instilling trust in internal whistle-blower reporting.
Carolyn Bremer is senior manager of Forensic and Litigation Services at Weaver. Reach her at (972) 448-6951 or email@example.com.
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Say the word “innovation,” and immediately you think about business legends like Steve Jobs and Jeff Bezos, as well as the companies they created – Apple and Amazon. Too often, however, we focus on the people who have been tabbed as innovators and the companies that develop those breakthrough products, services and solutions, such as Apple’s iPod and iTunes, or Amazon’s marketplace and unique ecosystem.
True innovation goes much deeper than a single leader’s vision. It is an all-encompassing philosophy that permeates an organization and defines its purpose for being. For me, at least, I prefer to think about innovation in its broadest terms, extending its definition to include corporate cultures and innovative management styles. Think about how Facebook and Microsoft are run, and how at both organizations employees are a key factor in the idea creation, or ideation, process.
Now, think about the breakthrough products that eventually went bust. Hopefully, you don’t have a basement full of Beanie Babies, boxes of Silly Bandz, or a home library filled with laser discs. It is more common to land on a singular breakthrough product that temporarily revolutionizes your industry rather than develop a product through a process that’s repeatable or scalable. And, just as true, no matter how innovative and creative your management team’s style may be, without the proper processes in place to push ideas through a system that takes them from mind to market, you’ll eventually have trouble keeping the lights on.
It all comes down to developing a culture imbued with innovation at its core. But this also requires having a servant culture in place where every person who works for the organization thinks about the customer first.
Consider San Francisco-based Kimpton Hotels, where employees strive to create “Kimpton Moments” by going above and beyond with guests and delivering memorable experiences.
Kimpton overcomes the inherent limitations for creating new innovative products that being a boutique hotel chain includes by approaching innovation through its employee interaction – and then rewarding employees for their creativity. For example, when team members put in the extra hours to ensure world-class service delivery, the hotel chain has sent flowers and gift baskets to their loved ones. And when they create an innovative service experience, the company rewards staff members with such things as spa days, extra paid time off and other goodies.
And then there’s the Boston Consulting Group, a management consulting firm that’s known for developing innovative business processes and systems for its high-end clientele. Part of BCG’s internal process is a focus on team members maintaining a healthy work-life balance. When individuals are caught working too many long weeks, the company’s management team issues a “red zone report” to flag the overwork.
Talk about innovation! And no product, service or solution was developed, marketed or sold.
And finally, few organizations are more innovative than DreamWorks Animation. But beyond plugging out groundbreaking animated movies, the studio’s culture embraces empowerment and innovation. Employees are given stipends to personalize their workstations so that they create whatever inspirational atmosphere they need to succeed. And, as the story goes, after completing Madagascar 3, the crew presented a Banana Splats party, where artists showed the outtakes.
Not only are these three companies known for being innovative in their respective industry spaces, they also share the honor of being members of Fortune’s 2013 “Great Places to Work” list.
So how do you take the first steps toward transformation or put those initial building blocks in place to begin the journey? There’s no magic formula, but there are some common traits – and they revolve around empowerment and establishing a culture that cares.
- Are open-minded and ask “What if?”
- Teach team members how to see what is not there and identify opportunities in the marketplace to take advantage of those gaps.
- Develop cultures where innovation thrives through open and honest communication.
- Flatten the organizational structure and recognize that innovation can come from anyone and anywhere.
- Make innovation, itself, a cyclical and continuous process.
Stop and take an internal assessment of your organization, your team and of yourself. If you can’t check a box next to each of these five traits, stop and ask yourself why. Then begin your own journey to greatness.
Sir Tim Berners-Lee recalls a time when computer users around the world were quite nervous about the power of Netscape.
“A lot of people thought, ‘Oh, wow, a clingy and controlling Web company. What do we do about it?’” says Berners-Lee, director of the World Wide Web Consortium (W3C) and inventor of the World Wide Web. “Then they weren’t worried about Netscape anymore. They were worried about Microsoft, and they worried about Microsoft for a long time. Then they woke up one day and said, ‘Wait, the browser is not the issue. It’s the search engines.’”
Today, it’s the social network that has people worried, says Berners-Lee. But whichever medium is in society’s crosshairs, he says the fear is very similar in each case.
“When you have a monopoly, it slows innovation,” Berners-Lee says. “It reduces competition, and it’s generally not good for the market. One of the most important things about the Web is it being an open platform. The ’Net is a neutral medium. I can connect and you can connect, and we can talk. That is really important to an open market and democracy.”
One of Berners-Lee’s primary missions with the W3C is to ensure the Web is being used to its full potential. But it is also to make sure it remains an independent entity so that everyone who wants to has the opportunity to tap into that potential.
“If you can start tweaking what people say or you can start intercepting their communications, it’s very powerful,” Berners-Lee says. “It’s the sort of power that if you give it to a corrupt government, you can give them the ability to stay in power forever. It’s healthy for us to not put the Internet directly under the control of the government, but to have a set of multi-secular organizations at arm’s length from government acting responsibly and taking many views.”
Still plenty of room to grow
Berners-Lee helped launch the World Wide Web Foundation in 2009 to bring the power of the Web to more people.
“Maybe now 25 or 30 percent of the world uses the Web,” Berners-Lee says. “That’s still a massive gap and a massive number of languages where there still isn’t a lot on the Web. There’s a lot of culture that isn’t represented and a lot of countries where they haven’t the backbone for a good Internet base.”
The foundation has designed and produced the Web Index, the world’s first multi-dimensional measure of the world’s growth, utility and impact on people and nations. It covers 61 developed and developing countries, incorporating indicators that assess the political, economic and social impact of the Web in that country.
“The higher level of the Web Index is looking at impact,” Berners-Lee says. “Is it really affecting the way people do politics? Is it really affecting the way you do education? Is it affecting health?”
The recent turmoil in Egypt was a wake-up call to many who are connected to the Internet, but have started to take its power for granted.
“They thought the Internet was like the air, that it would always be there,” Berners-Lee says. “And people started asking the question, ‘Who could turn off my Internet?’”
Fortunately, there are countless efforts underway from those in the technology industry not to restrict access, but to take the Web to even greater heights.
“The art is designing it to work with all kinds of devices because different customer segments are going to use different devices in different countries,” Berners-Lee says. “If you’re designing something new on the Web, you need to make sure it works on all devices.”
How to reach: World Wide Web Consortium, www.w3.org
The greatest challenge of opportunity is said to be the ability to take the next step and understand what it will take to maximize that opportunity and achieve growth. Amy Rosen knows the importance of that comprehension.
“The skill set of an entrepreneur involves understanding how to create a business,” says Rosen, president and CEO for the Network for Teaching Entrepreneurship (NFTE).
Andres Cardona, who grew up in a rough neighborhood in Miami, is one of the best examples of this entrepreneurial spirit.
“He was on the verge of dropping out of school because his mom had lost her job, and he had to help contribute to the household,” Rosen says.
Fortunately, Cardona had become involved with NFTE. His natural leadership skills, along with the knowledge he was gaining from NFTE, empowered him to do something that would not only help his family, but also other youngsters in Miami.
Cardona founded the Elite Basketball Academy, an organization that would help kids hone both their basketball and leadership skills. He began with one kid and was making 70 cents an hour. Now, he’s a CEO with more than 150 kids, a staff of employees and he’s making money. He’s enrolled at Florida International University studying finance while he runs his business and supports his mom.
“I’m sure it will be the first of many businesses he runs,” Rosen says. “This is just a kid who needed to have his eyes opened to opportunity and learn some basics about business.”
A great place to start
The mission of NFTE is to work with young people from low-income communities, such as Cardona, and engage them in a different vision of opportunity and success.
“It’s basically an entrepreneurship class where they actually go through the whole business-creation process,” Rosen says. “At the end, which really gets to our mission, we want kids to actually connect school with opportunity so they stay in school. Kids start learning how to multiply fractions because they are figuring out their personal return on investments in their new company. We want them to start much earlier thinking about their future.”
Rosen points to Cardona as an example of a youngster with a great gift. But in too many cases, with too many young people, those gifts go unrealized and the child becomes an adult with nowhere to go.
“We want them to have a vision of success and whether they become entrepreneurs and create their own businesses or bring to their jobs and their employers an entrepreneurial mindset. That’s going to give them a much better chance at success,” Rosen says.
The work being done by NFTE fits like a glove with EY’s mission to drive entrepreneurialism in the business sector.
“Our cultures are so aligned around entrepreneurialism in general and we are all running competitions and promoting the notion that we need more entrepreneurs to solve problems,” Rosen says. “Now we have partners on every single one of our boards worldwide. They don’t have to be asked to do it. They really like doing it.”
Cardona was featured at the recent EY World Entrepreneur of the Year Award program in Monte Carlo. Other budding young leaders who have risen through NFTE also have been honored by EY.
“In every city where we have an operation, they feature our winning entrepreneurs,” Rosen says. “So the kids get an opportunity to network and see what success looks like and to go to the kinds of places they’ve never been and participate that way. And they get a sense of recognition for their work.”
Rosen says there’s nothing better than working with young people to prepare them for what lies ahead.
“If you’re going to give back, why not work with kids who need it the most and actually teach them and help them to be entrepreneurs,” Rosen says. “That’s what is going to grow our economy and create stability.”
How to reach: Network for Teaching Entrepreneurship, (212) 232-3333 or www.nfte.com
Although manufacturers can expect modest 2 percent growth through the remainder of 2013, the brief lull gives opportunistic executives a chance to prepare for an uptick in business next year.
Gus Faucher, senior economist for The PNC Financial Services Group, attributes his optimistic forecast to a rise in business investments, fueled by the resolution of murky tax and sequestration issues, and the continuation of record-low interest rates.
“I think the U.S. will maintain an edge in high value-add manufacturing because we have highly skilled, productive labor,” Faucher says. “Maintaining our competitive advantage requires ongoing development of our manufacturing workforce.”
As the economic recovery proceeds, in what areas will spending accelerate most? Manufacturers of home building products and materials, furnishings, appliances and so forth should have a strong 2014, thanks to the rebound in the residential real estate market. In turn, those manufacturers will purchase more production equipment, raw materials, parts and other items. The wealth effect in real estate will stimulate growth throughout the supply chain.
Will rising global demand for U.S. made products including semiconductors, medical devices and specialized materials manufacturing propel employment gains over the next few years? Post-recession hiring will wane next year as manufacturers look for productivity gains from workers added since employment levels bottomed out in early 2010. Although manufacturing is back up to 12 million workers, that’s still well below the 2006 peak of 14.2 million. The mantra continues to be: Do more with less.
How could the expansion of the shale oil industry affect manufacturing? Shale oil exploration and extraction will be a boon to ancillary industries and all U.S. manufacturers that rely on natural gas for production, since it will lower energy costs over the long-term. Moreover, it will give America a much-needed competitive advantage in today’s spirited global marketplace.
Augustine (Gus) Faucher is a senior economist for The PNC Financial Services Group. He is responsible for contributing to the preparation of PNC’s U.S. economic forecast and alternative economic scenarios.