Getting the Most Out of Your Advisors

Welcome to part two of my three-part series on working with advisors. Last week, I discussed How to Find the Best Advisors for Your Business. This week I share my top tips on utilizing their expertise to foster the growth and success of your business.

  1. Be clear about your expectations and create accountability

A new advisor may have been planning on a phone call every quarter, while you envision monthly face-to-face meetings. In the article “How to Use Advisors to Supercharge Your Business,” Eli Portnoy writes about giving up some equity in his company to his advisors and getting nothing in return. “Our advisors were fantastic and really wanted to help. The problem wasn’t them, it was me. My advisors were brought on at random, and furthermore, I failed to create structure and accountability.”

Leveraging the lessons he learned the first time around, when he brought on new advisors he made it clear what he was looking for from them. He drew up a two-year contract that stated they would meet or talk on the phone every other week and have an in-person session or dinner once a quarter. If all obligations were met, they would receive equity in his company after the two-year period.

  1. Be honest with them

To get the most out of your advisors, you have to operate in an arena of mutual trust. That means you have to share the challenges you are facing and your financial situation accurately.

This may be uncomfortable at times if things are not going so well. But perhaps especially in bad times, your advisors can prove crucial to weathering a difficult situation by first forcing you to confront the issues.

I devoted an entire chapter to facing your harsh realities in my book, “How Not to Hire a Guy Like Me: Lessons Learned From CEOs Mistakes.” Failure to do so is one of the major mistakes I have seen CEOs make, time after time.

If you share your information honestly, your advisors can be the ones forcing you to face your harsh realities before it’s too late. Maybe you are having a cash flow problem and aren’t sure how to resolve it. One of your advisors may have dealt with a similar scenario and have suggestions on the best way to deal with the situation. You can’t get the best advice without revealing the true picture of the financial situation of your company.

Your advisors may have some other great ideas to share with you even when it’s not a time of crisis. Let’s say you’re having your most successful year yet. Your advisors may have ideas on how to build on and leverage that success.

  1. Listen to their advice

While this sounds like just common sense, I can’t tell you how many people I’ve dealt with who had ended up in dire financial shape and it wasn’t because they weren’t getting good advice. They just didn’t listen to it.

I read an article in the Wall Street Journal last week, “Tuning Out: Listening Becomes a Rare Skill.” The article cited a study done in 2011 in Organizational Behavior and Human Decision Processes that found that the more powerful the listener is, the more likely he is to dismiss advice from others.

You can gather the best advisors in your industry and share details about your business. But none of that will do a darn bit of good if you don’t actually follow it. These leaders are those that John Steinbeck was speaking of when he said, “No one wants advice – only corroboration.”

Finding the right advisors and working with them in the best way possible can make a huge difference in the success of your company. Eli Portnoy, the young man who made mistakes the first time around and then instituted structure and accountability, saw a huge difference in his company. “Thinknear took off within months of creating the new advisory board and structure. My personal weaknesses as a CEO became strengths and with the help of my advisors I was able to supercharge our trajectory.”

Advisors can make a big difference in your business, but there are still professional advisors you need to hire. For part three of this series, I’ll talk about those.

Joining the Team at GlassRatner

I’ve been chuckling to myself about the rumors of my retirement that I discussed in a previous column, “No Desire to Retire.” I wanted to let you know that I’m embarking on an exciting new opportunity.

I’ll be joining the well-respected team at GlassRatner Advisory and Capital Group LLC as a principal effective July 1. GlassRatner is a nationally known financial advisory services firm. I was attracted to the integrity of the GlassRatner team members, its national platform and reputation, and the work the firm has done in providing solutions to complex business problems.

They seem to be excited to work with me, too. And they love “How Not to Hire a Guy Like Me,”which of course, is an effective way to win my loyalty.

It’s funny; this opportunity just presented itself a few weeks ago and we’re off to the races already. In my work as a turnaround authority, I’ve learned to recognize good opportunities for growth and success when I see them. I am excited and honored to be joining GlassRatner and believe we will both benefit from the partnership.

Another aspect of GlassRatner I found attractive is its reputation as a collegial firm and the way they function as a team. Look for some of those team members to be guest contributors to my blog. I’m sure you’ll enjoy getting to know them as much as I will.

Creative Ways CEOs Communicate

One of my favorite features in my hometown paper, The Atlanta Journal-Constitution, is the “5 Questions for the Boss: Lessons Learned by Georgia’s Top Executives” that runs in the Sunday paper.

As readers of this blog know, I’m all about lessons learned. In fact, my book is called “How Now to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.”

A few weeks ago the reporter, Henry Unger, interviewed Phil Horlock, the CEO of the Blue Bus school bus company. Based in Fort Valley, GA, the company has 1,500 employees with sales reaching nearly $800 million this year.

Previously an employee at Ford, Phil was asked what he learned from Ford chief Alan Mulally, who is credited for that company’s remarkable turnaround. Phil’s response? “He taught me and others that you can’t manage a secret.” Phil said he learned that a company needs an open environment where people feel they can communicate what the issues are.

Every Thursday morning from 8 a.m. to noon all the leaders at Ford from all over the world would gather in a room or join by video conference and take turns discussing all the issues they were facing.

Phil says he brought that strategy to Blue Bird, cancelling a lot of the other separate meetings to hold one meeting on Thursdays. He noticed that productivity started to improve and he felt confident he knew what issues they were facing each week.

George Alvorson, chairman and CEO of Kaiser Permanente, has been sending companywide emails to close to 200,000 employees for six years. He termed them “Celebrations” and intended to continue the Friday afternoon practice for just a year. But as an article in the Chicago Tribune reports, he got a strong response to the emails and felt that writing them made him a better manager.

The emails contain data and information about what they are doing well in an effort to make the employees feel good about the company, but are based on absolute honesty, Halvorson said.  (If you’re interested you can read several of them in the book “KP Inside: 101 Letters to the People of Kaiser Permanente.”)

There are 6,500 employees of Epic Systems Corp., a privately held medical records company in Verona, Wisconsin with $1.5 billion in revenue in 2012. Most days, many of the employees are traveling around the world for installation or training on its software system. But once a month, every employee is on the 800-acre campus for the monthly meeting run by Founder and CEO Judy Faulkner. They enjoy free soft drinks and popcorn as they meet in the huge auditorium to be updated on company news.

Good communication is not just about making employees feel good about the company and about themselves, although those are worthy goals. Good communication also equals higher productivity.

According to an article written in 2011 by David Grossman, “The Cost of Poor Communications,” the total estimated annual cost of employee misunderstanding in the U.S. and the U.K in companies with more than 100,000 employees is $37 billion. On the flip side, companies with leaders that are effective communicators had 47% higher total returns to shareholders over the last five years compared with firms that have leaders who do not communicate as effectively.

I see ineffective communication all the time in my position as the Turnaround Authority. In fact it’s one of the common denominators of the companies that I work with. In addition to experiencing financial difficulties, just about every company I am brought in to turn around also suffers from poor communication among its management and employees.

One of the first things I do when I take over as CEO is to gather all the employees together and tell them exactly what is going on. I hold my own town hall meeting to quickly squash the negative effects of the rumor mill.

Is your company suffering from ineffective communication? I suggest you work on improving it. Or, well, you may just have to hire a guy like me.

 

Boots to Business: Veterans Succeed as Small Business Owners

As our country celebrates Veterans Day in recognition for those who have served in the military, there is good news about their unemployment rate. It has been going down in 2013 and in October was at 6.8%, compared to 7.4% in October 2012.

In honor of Veterans Day, I wanted to highlight a government program that is helping put more veterans to work and can actually benefit business by teaching veterans to use the skills they learned while serving in the military to start their own business. Operation Boots to Business is a U.S. Small Business Administration-sponsored training program to help transition service members to business ownership.

Studies conducted by the SBA concluded that veterans are more than twice as likely as the general population to start their own businesses and have those businesses succeed.

Operation-Boots-to-Business-Logo“Being in the military and being an army vet or a veteran, I have been built and trained to run my own business I think it’s a perfect fit and a perfect fit for veterans,” said Jenna Bazaric, Owner & Operator of a Tropical Smoothie Café in a video about the program. “We have the ability to react to change and to talk to and interact with all different types of people.”

Brian Iglesias served 13 years in the Marine Corps and is now President & CEO of Veterans Expeditionary Media. He credits his success to the training and education he got through the program and agrees that veterans have the skills to become successful.

“There are a lot of transferable skills that you can take from the Marine Corps and apply to your own business,” he said. “We have this take-the-hill mentality where we’re goal oriented. We don’t make comfort-based decisions. I have a dream and a vision to own my own business and my comfort comes second. And I’ll push myself and drive myself. That will to win, that will to succeed and to not surrender, to not give up has really helped me. Because it’s tough. Things go wrong. The best part about being a marine and having the military service is that we have the ability to thrive in chaos. Small business ownership is chaos. Things happen all the time and you have to be fast, smart and flexible to overcome those and continue to drive forward and succeed.”

Active duty military members and their partners or spouses are eligible for the program, which includes an intensive two-day intro at a local military installation, followed by an eight-week online course offered by the Institute for Veterans and Military Families, Syracuse University.

I’m in favor of any program that successfully helps those who served our country acquire the skills they need to succeed on their own in the world of business. I wish all the participants in this program the best of luck in their new endeavors.

Happy Veterans Day weekend to all of you and to all the veterans, thank you for your service.

 

Valuable Lessons from the Busch Family

A friend of mine learned to water ski by watching another friend as he desperately tried to rise up out of the water, but instead took a face plant into a wave every time. A guy in the boat was coaching him with each effort. My friend listened, and when it was her turn, got up on the first try.

Bitter-Brew-cover-e1342374617214I’m a big believer in learning from others mistakes. In fact, I’ve written a book about it. My new book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes,” will be available in early 2013.

There’s another new book that anyone in business would enjoy, particularly if you have a family business. “Bitter Brew: The Rise and Fall of Anheuser-Busch and America’s Kings of Beer” is a fascinating account of the infamous Busch family. Author William Knoedelseder recounts the story in all its lurid, scandalous detail of how Adolphus Busch, a German immigrant, came to the United States before the Civil War, and with the purchase of a beer recipe from monks in a Bohemian village called Budheis, founded Budweiser.

The company, which became Anheuser-Busch Cos, was sold in a takeover to InBev, a Belgian-based holding company, in 2008 for $52 billion amidst flattening stock prices and a drop to a number 2 position.

Although Busch family members walked away with hundreds of millions, America lost a $19 billion a year Fortune 500 company and 1,000 people in St. Louis lost their jobs. Anheuser-Busch was the last remaining independent beer company, still owner and operated by the founding family.

There are so many lessons to learn from their mistakes. I’ll talk about two.

1. Not picking the best successor for the company.

Rather than analyze who would be best suited to take over the company, as I discuss in a recent post, responsibility for running this huge company was automatically passed from father to first-born son. The board of directors ignored most of the proper successor analysis and genes were selected over ability. Not a formula for long-term success.

August IV, commonly known as “The Fourth,” was the sixth in the Busch family to run it and was CEO in 2008 when the company was taken over.

His qualifications included several drunken driving accidents, including one in which a young woman was killed; leading police on car chases and taking young women along with him on business trips. His father, August III, had seized control of the company from his father, known as Gussie, in a boardroom coup in 1975. Hardly an ideal method of succession.

2. Not paying attention to the competition and changes in the marketplace.

In 1969 the tobacco giant Philip Morris bought Miller Brewing Company. Gussie was in control of Anheuser-Busch at the time and failed to see the threat this acquisition posed to its market share. The seemingly insignificant beer company rose to become the number 2 brewer in the United States.

Early in the 21st century beer sales began to fall. In 2000, beer accounted for 55.5 percent of alcohol sold in the United States. In 2006, that percentage had dropped to 50.7 percent. And In 2007, Anheuser-Busch’s two main competitors, SABMiller and Molson Coors, merged, putting the company in an even more vulnerable position.

I often reference the saying, “If the alligators are biting it’s too late to drain the swamp.” The alligators were definitely making a meal out of Anheuser-Busch.

Ironically, in a speech The Fourth made in 2006 while accepting an award, he said, “Mistakes will happen, mistakes are inevitable, but in failure there is learning and in learning there is experience. That’s how you improve and grow.”

I agree with his sentiment. If only he had taken it to heart.

CEO Not Best Person to Handle Crisis

I deal with a lot of crises in my business as a Turnaround Authority: bankruptcies, family feuds, failing businesses, gun-toting union members, just to name a few. So I’m always interested in reading articles about the topic of emergency situations — particularly about those who regularly deal with crises as part of their job.

Dr. Thomas Frieden knows a thing or two about handling emergencies. As head of the Center for Disease Control and Prevention, Dr. Frieden deals with public health crises all over the world while also leading 11,000 employees in 50 countries and overseeing an organization with an $11 billion budget.

Sometimes it takes more than a Band-Aid to fix problems in your business. Know when to call in a professional.

Sometimes it takes more than a Band-Aid to fix problems in your business. Know when to call in a professional.

In a recent interview with Sunday Business Editor Henry Unger in the Atlanta Journal-Constitution, Dr. Frieden said one thing that I wish every CEO or business leader who is in a crisis situation would read.

When asked if the top leader of a business or organization should manage the crisis, he was quite clear.

“No,” he said. “The CEO should not be the person running the day-to-day crisis response. That would be a mistake … If a CEO tries to manage every aspect of an emergency, he or she is going to mess it up. Other things are happening and the CEO will never be able to focus as much energy as you need to.”

It’s a smart CEO who knows when to call in an outside professional like me.

As a turnaround guy, I am like an ER doctor. The patient is in an emergency situation and I first have to stabilize the patient and prevent shock. Then I can perform the necessary surgery to save the patient.

Unfortunately, many CEOS in crisis think they can handle their emergencies themselves. They are bleeding from the jugular and think they can slap a Band-Aid on and stop the bleeding.

As Dr. William Osler, considered the father of modern medicine, said, “The doctor who treats himself has a fool for a patient.”

You’re not going to cut your own appendix out, right? You hire someone with years of experience doing just that. So if you’re facing a crisis, why not hire someone who has years of experience handling crises?

I am used to skepticism on being hired to turnaround a company. When I’m discussing conducting an initial assessment with a client I often hear, “Our business is failing. We can’t afford to hire you.”

I always respond, “How can you afford not to?”

Then I tell them, “If I don’t save you five to ten times what you pay me in the first year, I’ll give you your money back.”

I’m not saying I’m smarter than any of these CEOs. I’ve just been doing this a long time and have seen just about every situation. And one of the reasons that I have the ability to succeed where CEOs faced by crises do not is because it is not my business. It’s not my company, my employees, my money, my wife, or my life. That allows me to keep a clear head and an objective perspective where the CEO does not have one.

Personal involvement compromises the CEO’s ability to understand what’s important and what is not; the facts and information that manifest themselves during an assessment and what ultimately resolves a turnaround are rarely the same facts and information that the CEO initially deemed relevant.

If your company is in crisis, do yourself a favor. Hire a professional.

The High Cost of Fraud and How to Prevent It

More than a trillion dollars. That’s how much fraud is costing companies in the US each year.

The Computer Evidence Specialists LLC released the “2011 Report on the Cost of Fraud in the United States” earlier this year. The goal was to put a figure on the total cost of fraud in the United States from six industries: corporate, securities, financial, mortgage, healthcare and insurance.

Here was their conclusion: “Through our research, compiled from the most recent data available on the subject, we conservatively estimate that fraud annually costs victims $1.32 trillion.”

The figure is conservative, as a lot of fraud is underreported by victims or not reported at all.

Shocking, isn’t it? The truth is that no company is immune to the cost of fraud and you need to be vigilant in your efforts to prevent it.

The Woodruff Arts Center this week learned that a former employee embezzled $1.48 million over the course of five years.

The Woodruff Arts Center this week learned that a former employee embezzled $1.48 million over the course of five years.

The arts community in Atlanta was saddened this week to learn that $1.48 million was embezzled from the Woodruff Arts Center, the largest cultural institution in Atlanta.

Seems a mid-level administrator, who wasn’t even in a finance-related job, figured out a way to set up a fake company. Over a period of five years, the man regularly submitted invoices from the fake company and raked in big bucks. He wasn’t caught until after he left, for unrelated reasons, and someone took note of suspicious invoices.

A simple set of checks and balances would have caught the thief before he collected his first check.

Here are some key things to remember when considering your own system of checks and balances. Remember that any place money or goods exist or move is a place where theft or fraud could occur.

Remember that anyone can commit fraud. Family member, long-time employee, revered CFO. Don’t consider anyone above suspicion. I worked with a company once where the son was stealing from the family business after his dad died. He felt he wasn’t being paid enough and stealing was his way of claiming his inheritance.

Always poke around your books. No matter how large your company gets, take some time to peruse the checkbook or QuickBooks. Ask where the money is going. In the case of the Woodruff Arts Center, the fake company was one of only 13 that were regularly paid. How long would it have taken to do a Google search on the fake company or question someone about the services supposedly being rendered?

Monitor and review monetary trends. Determine what types of numbers are most meaningful to your company—the cost of goods or services, employee expenses for example—and determine the acceptable range for those numbers. Graph the data for those numbers and pay attention if any numbers fall outside of that range.

Change the standard by which you review transactions. For example, if your company only reviews expense reimbursement requests that are above $1,000, regularly review those at around the 80 percent level. I’ve found that seems to be a favorite spot for thieves. The Woodruff Arts Center thief got away with his fraud for so long because even though the amounts that were paid to the fake company increased over time, they remained under the limit that may have drawn attention.

Trust your instincts. If something in your company seems a little off, investigate further. Don’t feel guilty about asking questions. You’re in charge.

Don’t let fraud cost money at your company. Tighten up those checks and balances.

Read more about fraud prevention in my upcoming book, “How Not to Hire a Guy Like Me: Lessons Learned from CEOs’ Mistakes.” The book will be available on Amazon in early 2013.