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Why I Know Voltaire & Rousseau Weren’t Savvy Business Owners

Lying is hardly a new phenomenon. The Bible tells us the first lie ever told was in the Garden of Eden, when the snake lied to Eve to manipulate her to eat the apple God had forbade her to eat. And look how that turned out: apparently horrible child bearing pains, a ton of farming and a lot less Eden.

Recently the Scrabble Tournament world — yes, there is one — was rocked by a cheating scandal when a young player was disqualified in the national tournament in Orlando when he pocketed blank tiles.

More than 125 Harvard students were accused of cheating by allegedly working together on a take-home exam after being instructed to work alone.

Cheating at Scrabble? And Harvard, the highly revered alma mater of more presidents than any other university? What’s next? Did Mr. Rogers never pay his income taxes?

The press will probably spend a lot of time debating and analyzing whether dishonestly is on the rise among young people. They may blame it on societal problems and the dissolution of the family, or perhaps the pressure put on youth. They may blame the well-publicized, poor examples adults are setting.

Athletes take illegal, performance-enhancing drugs (the most recent case being once-7-time Tour De France champion Lance Armstrong). Journalists fabricate quotes. Money managers steal millions from their clients.

As the Turnaround Authority, I’m not all that interested in exploring the reasons people cheat, lie, embezzle and commit fraud. Jean-Jacques Rousseau thought people were born innately good and turned corrupt through forces of society. Who knows? I’m not hired to delve into embezzlers’ childhoods or wax philosophical.

The important point for my clients is to make them recognize that not everyone is honest. People lie on their résumés to get jobs, then commit fraud or embezzle once they have them.

Some business owners assume their employees are trustworthy. They have what I call the Candide syndrome. In Voltaire’s satiric novel, despite suffering numerous tragedies, Pangloss persisted in his belief that this world is “the best of all possible worlds.”

Our world needs optimists. Heck, if it weren’t for optimists, our country’s founders would never have risked their lives sailing over the Atlantic in search of a better life.

It’s nice to believe that man is innately good and trustworthy and that this is “the best of all possible worlds.” But as a business owner, that’s a luxury you literally can’t afford. You always have to be on alert to the possibility of embezzlement, fraud and theft.

No matter your business, always watch your back door and keep your eyes open.

What’s really going on at your company?

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Labor Day: A Celebration of American Achievement

Workers marched from Fifth Avenue to Union Square in New York City in the first Labor Day parade in 1882

If all the cars in the United States were placed end to end, it would probably be Labor Day Weekend.

     ~Doug Larson, columnist

Americans flock to the lake or beach, attend picnics and parades or just enjoy a day off work every year on the first Monday of September. The celebration of Labor Day turns 130 years old in 2012, having originated in 1882.

History isn’t totally clear on the origins of Labor Day. The two prevailing theories are that it was either started by a machinist in New York, Matthew Maguire, while he was serving as secretary of the Central Labor Union, or our celebration of the holiday was imported from our neighbor to the North after labor leader Peter J. McGuire of the American Federation of Labor brought the idea back from Toronto.

What isn’t in dispute is that the first Labor Day parade was in September 1882 in New York City, and in 1894 President Grover Cleveland declared the first Monday in September as National Labor Day.

Yes, the American economy is in tough shape as we celebrate the achievement of American workers this Labor Day. Americans need a combination of hard work and austerity to weather our current economic situation, a New American Ethic, as I called it in a previous column.

However, according to the CIA’s World Factbook, the U.S. is still the largest and most technologically powerful economy in the world. Not that they’re biased or anything.

Either way, that’s something to celebrate.

Excelling in our current economy may be no picnic, but we can recognize the value of hard work and the entrepreneurial capitalistic enterprise that built this country in the first place by celebrating with one.

What will you be doing this Labor Day?

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The $5,000 Dollar Magician and the Real Element of Disbelief

Maybe we should be more jaded by now when we see wasteful government spending. Perhaps it was believed that we would shrug off  the scandal over the General Services Administration spending $823,000 on a Las Vegas conference. But I’m not going to. I’m still appalled. I don’t know if it was the clown, the mind reader or the $5,000 motivational magician who sent me over the edge, but at least one of those entertainers didn’t belong at a government conference in the midst of one of the worst recessions our county has ever faced.

While we may be shocked and wonder how these things could possibly happen, the reality is that they happen every day.

I’ve written previously about the necessity of reviewing the expense reports of senior people, which is one of the first things I do when reviewing a company that is losing money. I’ve uncovered a lot of fraud that way, from CFO’s writing themselves checks for thousands of dollars to them depositing large rebate checks into an account only they know about.

But it’s not only theft that should concern you. Overspending on company events or inappropriate business expenses can be costly as well. Putting the morality of infidelity aside, is it appropriate for a married CEO to charge trips with his girlfriend on the company credit card?

I thought of how costly fraudulent and inappropriate business expenses can be not only to a company’s bottom line but also to its reputation when a scandal erupted recently in Atlanta.

This scandal involved a $106.22 wine cooler from Pottery Barn.

Brian Leary headed The Beltline, a non-profit, partially government-funded organization that is developing a multi-use trail on a former railway corridor around Atlanta.

His staff purchased this wine cooler – among other questionable expenses – for his fiancee. I dare say it cost a previously well-respected CEO more than $106.22. It cost him his job.

When a city audit turned up that expense plus payments of parking tickets and dry cleaning bills for Brian, $500 kegs of beer and a $2,100 tab for food for employees at a baseball game, well, people started asking questions. Shortly thereafter Brian was out, unemployed and disgraced.

I find theft and inappropriate expenses by C-level execs much more egregious than many. After all, these people have been trusted with the management, reputation and future of their companies. With their high salaries they should be the people least likely to need the money. Does an exec with a six-figure salary really need his company to pay his $7 dry cleaning bill?

I don’t know what causes senior-level executives to turn dishonest and steal from their companies or exceed the limits on appropriate business expenses (wait, is it as simple as money?) – I just know that they do.

Have you checked expenses at your company lately? Are your employees clear on what can be considered an appropriate business expense?

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My Recent Trip to the Michael Hart Show: Lessons in Fraud

I recently had my second guest appearance on the Michael Hart show. Michael and I had a rousing conversation about Fraud and other things that business leaders can do to protect themselves from making the mistakes of past CEOs.

I hope you enjoy these links, which will allow you to listen to the two segments of the show.

Lee Katz Part One

Lee Katz Part Two

There wasn’t a lot of time for call-ins or listener comments, but I’d love to know what you think and if you have any questions or comments.

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Quick Tip: Leave a Negotiation on a Friendly and Open Note

This quick tip comes to you courtesy of a client’s recent negotiation that I had to step in to salvage.

My client and his partner (or I should say in this case, adversary) in negotiations could not come to an amicable arrangement. Neither’s request was that far from the others, but they wouldn’t split the difference and move forward.

Believing his own offer to be justified, my client got a bit nasty about the situation and left the negotiation in a hostile manner. What he had failed to consider were two factors:

1. He didn’t have a good BATNA, which means that he had no better alternative to a negotiated arrangement. He needed this deal to go through, and

2. Had he come to an amicable arrangement, his current adversary could have been a future partner to his extreme benefit.

In short, this move – this hostility – was short sighted. Had my client said that he was sorry that they couldn’t reach an arrangement and offered to work with his negotiation partner in the future could they come to more mutually agreeable terms, he would have left something on the table: friendliness. And in a negotiation, friendliness can be a huge ally.

Upon coming back to me, I showed him that he had been a little hasty, and we agreed to apologize for the hostility. Once he apologized, the other party said that he appreciated that gesture so much by comparison that he agreed to my client’s offer! He said that it was the hostility that he perceived during the process that prevented him from yielding to my client’s offer in the first place, and that this gesture of friendliness meant so much that he could make it work this time.

Look what a little friendliness does!

Always walk away from a failed negotiation with a friendly air. It can go miles in ensuring that you may get what you need in the future.

Do you have any negotiations strategies to share with us?

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How You Know You’ve Made a Bad Plan

There’s nothing I love more than a good maxim from an ancient writer. Today’s comes from the writings of Publilius Syrus:

“It’s a bad plan that can’t be changed.”

Well said, Publilius. Let’s address the issue of changing a plan from two sides.

In the first place, every business and every business plan should have contingency plans. It is of the essence. You shouldn’t even consider a contingency plan to be as much a contingency as part of the plan. “If X happens, we will then proceed down road Y.” This is incredibly important and oft ignored by many business people.

On the flip side and despite the need for a contingency plan, it is important not to waffle between plans, especially during a crisis. When a business is going through a crisis, it’s important for the CEO or leader to pick a particular plan or direction and stick with it. Nothing breeds a lack of confidence in staff like plan hopping. That doesn’t mean you shouldn’t have a contingency plan, but it does mean that you need to go down road Y only when X happens and not just willy nilly.

As Publilius said, if you can’t change your plan, it’s a bad one. In that case, it’s not a plan. It’s a tunnel out of which you can’t see the other side. Even if you don’t emerge from a tunnel the way you expect, you need to know that you’ve created some way to get out. That’s what a contingency plan is.

How do you create your plans? Do you always build in a contingency plan? Why or why not?

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Why Should People Follow Your Lead?

You are a leader. Most likely, leadership is not a position for you, but an attitude and a way of life. People at work, home and in your social circles turn to you for advice. Your wife (or husband) lets you be the spokesperson in confrontational situations. People listen to you. But what was it that got you where you are? Did you work your way up the career ladder? Were you given a great opportunity and took advantage of it? Were you always this way and running your own business crystallized this approach in your life?

No matter what some may tell you, it is unimportant how you became a leader. The essential point is how you use your power to motivate and inspire, to scold and fire, to teach and support others.

You may have been to some leadership seminar and learned the “key principles of leadership.” They told you that by following their 7-step program (or 4-step plan, or whatever it was) that you will be a revered leader.

I want to try something different, though. Rather than offer steps, I want to offer questions. I want you to ask yourself the following three questions, and then I want you to answer them honestly and understand how the answers can make you a more effective and motivational leader.

Question 1: Would you rather be loved or feared?

You may already be familiar with the Machiavellian dilemma of The Prince: is it better to be loved or feared as a leader? This question explores both your preference and abilities. Do you rule with an iron fist or joke around with your colleagues over drinks? Many people work with friends or want to maintain a very cordial working relationship with employees. It is in our DNA to seek approval. But are you capable of confrontation when necessary? Consider this: your good friend (and you are his superior) is underperforming at work and you notice. What do you do? What do you think you should do? Explore the normative and positive aspects of your answer and decide what actions and words would make you the best leader at your company.

Question 2: Do you seek advice or work in isolation?

When you are facing a challenge, you may close your office door and work until you solve the problem. Alternatively, you may write a set of e-mails and schedule some meetings to explore the problems with others. Do you seek the advice of others and hope for their buy-in or do you rely entirely on yourself? In my experience, leaders who openly share their challenges and ask for advice resolve their problems faster and more creatively than their counterparts who do it by themselves. However, there are a few leaders I know who are best at relying solely on themselves. They consider the situation objectively and without any input they devise brilliant solutions. Know how you work best and perhaps consider an alternative method to problem-solving. Ask for advice! It rarely hurts, especially if your team feels that it has your ear and you get buy-in.

Question 3: Do you inspire people to trust your leadership?

There are some leaders who keep their teams focused by frequent and harsh criticism, yelling and threats. Very few of these leaders (though there are some) build a good team with a solid focus that produces good results in the long run. Recently I visited an Atlanta-based online retail company (not a failing one) and arrived early. I go there once every few months and each time people greet me like I am their favorite uncle. It feels strangely good to be there. What do they do differently? – I asked myself. As I made my way to the waiting area I could hear the CEO chatting with the customer service team.

Technically, he did not have to be there (there is a customer service manager after all), yet he was sharing how great the team was doing and the few challenges they needed to work out. He did not go into too much detail, just excitedly elaborated on a few broad themes. He mentioned key priorities for the company over the next few months. He asked anyone who had a problem that they felt needed his attention to come directly to him. I felt like he could send out a memo the next week saying that they were moving the company to Oceania and everyone would follow excitedly. That is how much they trust their leader. Sure, this type of open environment does not work at all companies, but it works for this one. The CEO found a way to inspire and motivate people as the right kind of catalyst for the right kind of team.

As you answer these questions for yourself, I again encourage you to reflect on the consequences of those answers and how they benefit – or not – your business.

What kind of leader are you?

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5 Ways to Find Direction When You Feel Lost

The most powerful businessmen are the least likely to admit when they are lacking direction. You are used to helping others find their way, and it seems unimaginable that, with so much on your plate, you’ve lost focus. But it happens, and it’s nothing of which to be ashamed.

Here are some great ways to gain clarity on your purpose and leadership direction.

1. Rest 

It’s easier said than done, but rest is necessary to function efficiently through your long workdays. Whether sitting down for a proper meal, sleeping in, going to the beach for a weekend or just taking a night off to be with friends, guilt-free downtime is an absolute necessity to offset high intensity days.

2. Discuss challenges with a partner or colleague

Do you ever find yourself in the middle of a sentence, trying to explain a business challenge to others and suddenly realize you have the answer? Sharing with others forces us to synthesize information and clarifies problems (I also recommend the whiteboard). In some cases the person listening may not even need to be informed of the topic, but having to explain it to them requires you to think differently.

3. Find one thing to get back your inertia

Sometimes what we lose is inertia, and we just need to swing ourselves back in motion. Pick just one thing that will contribute to your business – not the most important or best thing. Just pick one easy thing. After completing the task, acknowledge how easy it was to make a small change that will positively benefit your business in the long run.

4. Help someone else

You’re probably not the only one who’s stuck or could use a little help. Find someone who needs to talk things through or even be assigned some mindless task that helps them get their inertia back. You’ll be contributing, taking a look at something you otherwise wouldn’t have that may trigger ideas and getting back your inertia.

5. Go for a walk

Little clears your head like fresh air and moving your body. It doesn’t have to be long – 20 minutes will do it. Just take a walk, preferably outside, though if you have to lap the floor of your office building, that’s fine, too. Just move around and clear your head. Busy with phone calls? Take one of those on a walk with you!

Keep these easy solutions in mind for when you feel you’re losing focus (and perhaps motivation) despite knowing how much there is to do.

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8 Tips for the Entrepreneur in Us All

Who said running your own business or managing your own team would be easy? Most people I interact with, whether CEOs or managers, function in at least one role as an entrepreneur.

I compiled the top actions to which they credit their success, so that I can share them with you. You’ll notice that they are all actions because moving forward is the most important element of running a successful operation.

1. Take smart risks

Don’t be reckless, but you must make bold moves sometimes. Caution is important, but beware of too much circumspection. Any growing business will require risks on its path forward – make sure you choose the risks with the most potential for reward to cost ratio.

2. Hire wisely and accept that you won’t be able to do everything yourself

One of the biggest challenges leaders face is letting go of certain tasks they should no longer be doing. But tying your time up with things that others could do will only hold you back. Learn to delegate, choose the right people for the right positions and make it your personal challenge to train them well at the tasks you pass along.

3. Spend money on healthy business growth

Penny pinching seems to be a wide-spread attitude as well as a reality in the years since The Great Recession. It’s an admirable change in many ways, and I encourage you to be cautious financially and eliminate unnecessary costs. However, don’t be afraid of spending money on development. It takes money to make money – trite but true.

4. Learn from mistakes and don’t let them devastate you 

Mistakes are a part of life and business, and you will inevitably make them. What matters is less the mistake and more that you learn from it. In addition, you have to learn to move on from your mistakes. Dwelling on the mistake will not make you a better businessman – dwelling on the lesson will.

5. Make ambitious goals

Some days you may want to conquer the market in your field, while other days you may feel burdened just maintaining the status quo. Set ambitious goals, share them with your team and use them to motivate yourself and to hold yourself accountable. You started a business to grow it – not to maintain it. Ambition does not mean outrageous. Make them possible, but make them ambitious.

6. Don’t box yourself (or others) into one role

When people find something they are good at (especially if others notice it and praise them for it) they tend to keep returning to the same activity. This is great for becoming a specialist in one specific area, but being an entrepreneur and business leader means doing much more than specializing. By the same token, let people try new things and experiment with new roles – you never know what hidden talents you’ll uncover.

7. Challenge your business model and operational plan routinely 

Can you name a single business that was successful throughout the centuries without changing the way it operated? I can’t. Look at your business plan and the way you operate – find one thing that exposes you to a lot of risk and find one thing that may leave you behind if you don’t change it now. Brainstorm ways to improve these areas and see if any of the improvements are viable. Consider potential mistakes that could take a huge toll or technological advances of which you have not yet taken advantage.

8. Don’t be greedy

When business leaders taste the sweetness of success, they want more and more and more. This natural ambition is a fantastic catalyst for growth, so don’t lose it! But you must ask yourself if the actions you are taking now may only benefit you in the short term while proving detrimental in the long term. Don’t let the desire for instant gratification and visible success cloud your judgement.

What are some points you would add to these tips to help your fellow entrepreneurs run an even more successful business?

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4 Tips to Start Your Own Business

In my line of work I encounter many entrepreneurs, a lot of whom are serial entrepreneurs. I’ll share a few of my key findings based on their experiences starting businesses. As you read these tips, consider the actions you can take to positively impact your own business.

1. Start now

I hear business contacts and friends say things like this all the time:

“I want to start my own business.”

“I have a great idea, I should start a company.”

“I could do this job so much better than my boss, and I don’t like working for others anyway.”

Well, your time is now. People delay taking risks, and they find a dozen reasons to do so. But the main reason is this: they are uncomfortable with uncertainty. They are scared of the unknown. They sometimes are too cautious or lack self-confidence. If you truly have a great idea, bet on yourself. I won’t tell you that you won’t regret it, but I can almost guarantee that not taking a smart risk will be worse. If you want to start your own business, take the first step this week: come up with the company name, register your LLC or take any other concrete step.

2. Have a plan and a contingency plan

Acting on your business idea does not mean that you should act on it without careful consideration of the risks involved, preferably before you get too far along. Find business partners, identify your widget or service exactly, have brainstorming sessions with friends or family members and outline a preliminary business plan. Be prepared for roadblocks and, if you have the time and energy, create a contingency plan. What’s your exit plan if this goes up in smoke? A contingency plan can help if your initial plans face a significant challenge and you are unsure where to turn.

3. Set your timeframe

I see many people get scared in the early stages of a business plan and retreat to jobs at which they feel safe and comfortable, though perhaps less happy. Others are so determined to actualize their ideas that they are unable to objectively evaluate when it is time to stop trying and call the endeavor a good, but failed, learning experience.

Set a time frame – for example, twelve months – for how long you will try your business idea. Make sure to identify specific times (preferably specific dates rather than “every 3 months”) when you will evaluate the time investment and if you’re where you need to be in your business plan. If you give yourself one year, that is not set in stone. If things start picking up in the 11th month, you should probably keep working on the venture for a while and reevaluate the timeline.

4. Create a solid foundation before you focus on growth

Entrepreneurs are ambitious! They also want to show themselves and the world that their business is successful in just a few months. Set your pride aside (also known as checking your ego at the door) and focus on creating a solid foundation on which long-term growth is possible. The wider and better quality the foundation, the more it will be able to hold as you grow vertically.

Are you ready to start your business? Outline three concrete steps that will get you started and try to complete those steps (or set them in motion) in the next seven days.

Do you already own or run a business? Please share your own thoughts and advice.