An Ally’s Advice

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What Are You Doing for Fraud Prevention Month?

“Every young man would do well to remember that all successful business stands on the foundation of morality.”

– Henry Ward Beecher

This quote seemed like a good way to address the month of March, which is National Fraud Prevention Month. Last year, I wrote the following post encouraging you to be aware of fraud and to seek it out.

As I’m fond of saying, if you haven’t found anyone at your business committing fraud, you’re just not looking hard enough.

If your controller is required to look at only transactions above $5,000, during the month of March encourage him to look at all transactions over $4,000. Think about it. If someone wanted to steal money and knew that all transactions over $5,000 were routinely reviewed, wouldn’t that person steal money in the amount of, oh, say, $4,999?

If you’re saying, “No way!” you better believe that I have uncovered more than one case of fraud on just this basis.

Here’s something else I would like you to do for the month of March: kick your CFO out. No, not permanently (well, hopefully not permanently). Just ask him to leave for 2 weeks. Perhaps right before taxes are due is not the best plan for some businesses, but perhaps his vacation is coming due just after that. If this is too short notice GOOD! You don’t want him to be aware this is coming. You just want him out for two weeks.

Now you do his job. Sit at his desk. Open his mail. Talk to his secretary or assistant. And don’t let him back in the building for any reason. Just see what comes up – trust me.

If you don’t find anything unusual, wonderful. Be glad you did this and move on. But if you do find something, know that you’re not the only one out there who did. This is one of the number one ways I uncover fraud, and I encourage you to do it annually.

So, over the course of this month, I hope you’ll enjoy some of my many stories of fraud, and when I say enjoy I mean I hope they’ll inspire you to put more strict measures in place at your business to prevent fraud.

Remember, if you haven’t found fraud, you’re not looking hard enough.

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The Relationship Between Your Debt and Your Happiness (P.S. It’s Obvious)

In my last post about happiness, I wrote about 4 ways you can be happier and less stressed in order to run your business more effectively:

1. Do Good Deeds

2. Get Exercise

3. Get Hugged

4. Get a Pet

I want to keep on with this idea of happiness and focus even more closely on the things you can do to increase your happiness as it relates to money and finances, both personally and for your business.

It may come as no secret to you that debt makes people unhappy, but you’d be surprised at how little debt it takes to sour relationships, create tension and stress and ruin a business. Therefore, whenever possible, make sure that you and your company are carrying as little debt as possible.

To tell you to spend money paying down debt that your business doesn’t have might seem foolish, but what’s foolish is spending money that your business doesn’t have in the first place!

TIme and again I am brought in to resolve the problems of businesses with inordinate debt and money owed to a wide variety of lenders and creditors. As I look back to see what debt is really in front of us, who’s owed what and at what interest rate, when loans are coming due, etc., I often uncover a similar pattern.

Those who are in debt need not be in debt – or at least not the kind of debt they’re in.

They are in debt because they didn’t take the opportunity to pay down some of their initial debt when they had the chance. Instead, they sought to use their capital for further investment (or unsavory things), thereby driving themselves further and further into debt when paying that debt off in the beginning would have done wonders for the future of their business. That is to say, they would have been able to keep their businesses.

It is true that sometimes the answer to a cash flow problem is a loan, but I have been in numerous situations where any loan would have been throwing more money at a sinking ship.

That is why it’s important not to take loans to supplement loans. This may seem like obvious advice, but you’d be amazed at how often these are the problems I’m dealing with. When given the opportunity to pay the principal down on a loan or to pay off a credit card you’ve been using to finance your business, do it. Don’t think that buying a new piece of fancy equipment for your factory is the perfect way to grow your business faster or that hiring a new employee will solve all of your problems. Pay your debt down and continue to own your business. It will keep you focused by ultimately keeping you less stressed and helping you avoid crises and debt in the future.

Want to be happy at your job? Then keep your business debt free.

Is your business buried under debt or has it been? What did you do about it?

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The Importance of Preparation as Taught by Benjamin Franklin and Alexander Graham Bell

Before anything else, preparation is the key to success.

– Alexander Graham Bell

I’ve recently seen some rather poor planning, and I want to take a moment to emphasize the value of preparation.

The initial preparation-based document of most businesses is the Business Plan. You know, that document that your angel investor, banker, spouse, partner, etc. wanted to see to make sure that you weren’t totally out of your mind when you told them you were going to start a business that did this, that and the other?

The point of that document was, in part, to prepare you for many of the issues that arise over the course of doing business. Do you need special permits or authorization? How much will your operating expenses be the first five years? When do you initially expect to turn a profit? What are your competitors’ barriers to entry or can anyone steal your idea?

See? These are questions of preparation. Despite Mr. Bell’s assertion, answering these questions does not guarantee your success, but it’s certainly a step in the right direction.

Have you found that your business is flagging recently, that there’s a certain stagnation or that things aren’t headed in the direction you’d hoped? Perhaps things are going well, but you’re about to embark on a huge project.

Don’t just flail around grasping at straws and hoping for the best outcome. Do some preparation before you have a crisis and things move too fast for you to adequately prepare. I’ll invoke one of my 10 Ways not to Hire a Guy Like Me: leverage your business plan! That document is probably buried away in saved files – or maybe you put it together before the ubiquity of computers and it’s in your file cabinet, weathered and dusty.

Either way, pull it out!

Now make an effort to leverage it. What did you say you would do if things turned south? What were your contingency plans? Even if you’re not in this state, updating your business plan for posterity and ensuring that there is a plan in place should something happen to you and your ability to move the business forward is important.

Not sure where the business plan is, you don’t have one or it’s not proving helpful? It’s time to rethink your business plan, and use that as a means of preparing yourself to solve your problems before you have a crisis on your hands.

Remember the company that thought it was going to move from Minnesota to Orlando over the weekend? That was not preparation. We went in and got them adequately prepared for their move – and it was successful. In order to be successful yourself, I encourage you to spend more time preparing – before anything else.

Are you ready?

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4 Ways to Be Happier – A Scientific Approach

I talk a lot about ways to keep your business from experiencing crises, how to manage your business during a crisis, and stories of those who went through crises and how we got them out the other side. But today I want to touch briefly on a topic that I’ll revisit from time to time because it’s very important as well: happiness.

Running a company or being a manager or whatever leadership capacity you inhabit that makes you read this blog (and I say thanks to all you readers and those who have subscribed recently) can be stressful. And a central topic of this blog is crisis, which is also particularly stressful for most people – that’s why I wrote my list of 5 Foolish Faux Pas of CEOs in Crisis (that result mostly due to stress they don’t know how to manage).

With all this potential stress, it’s important that you are happy. Sure, you can’t walk around with a smile on your face all day long, but you can be a happy – or happier – person and business leader. If you’re not, you should rethink your day job.

What I want to share with you was inspired by a quick blurb in a magazine I was recently reading. It’s 4 ways that studies and research show are scientifically proven to boost your happiness. Without further ado, here they are:

1. Do Good Deeds. We’ve talked about this a lot before – how you can use your time and work and energy to help others. If you want a refresher, check out my 7-Part Series, Giving Back During Tough Economic Times. Helping others, as long as it doesn’t become a repetitive activity, makes us feel happier.

2. Get Exercise. It’s been repeatedly shown that exercise doesn’t have to be intense or sustained to be effective. Just 30 minutes of walking a day is literally the single best thing you can do for your health. No joke! How can you do that in the office? Take your meetings while walking around the office or outside the office for some fresh air or vitamin D. You can also do your phone calls this way. Trust me, a little walk always clears the head, releases endorphins (if you get your heart rate up) and makes you happier.

3. Get Hugged. I don’t mean to be encouraging inappropriate office conduct, but people who get hugs are happier. We need basic human contact. Make sure you’re hugging your spouse or parents or whomever can provide you with this bit of happiness.

4. Get a Pet. This one isn’t for me, because I have allergies, but I love stopping by my kids’ place and seeing their pets. Pets are proven to lower stress and make us feel better.

All four of these ideas are great ways to increase your happiness and destress as you run a business – especially a business in crisis. Make sure that you’re doing the things that let you care for yourself and be happy. That happiness and self care will go a long way in its positive effects on your business and corporate culture.

If you haven’t subscribed yet to my blog, please note that it’s free to do so, and updates of my latest posts will come right to your inbox. Just subscribe by entering your email in the box at the top of the right hand column.

As usual, I welcome comments and questions below! I’d love to know which of the methods above helps you increase your happiness.

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Your Employees Always Know

Have you ever thought to yourself, my employees have no idea what I make, or they have no idea what our profit is on this or something similar? Well let me tell you something: you’re wrong.

There are no secrets in a company. Your employees know.

I once took over at a refrigerator warehouse company and began my job by dramatically slashing the owner’s salary, which was not simply too high for the owner of a failing company in need of a turnaround professional but too high for the owner of any company this size. Oh, and I also fired his grandmother whose salary was also a pretty penny too high.

Later that same afternoon I was surveying the warehouse which was a mile away from the offices and headquarters, and a forklift driver pulls up alongside me. He says, congratulations on firing grandma and reducing the boss’s salary – he should never have been making so much money.

Not only did this random employee already know that I’d done both of these things, but he knew that grandma was on the payroll and the boss was making way too much beforehand.

I’m telling you – your employees always know. There are no secrets.

That leads me to a few pieces of advice:

1. Ensure that all of your employees sign a non-compete/non-disclosure confidentiality agreement. All of them, no matter their position.

2. If you have things that truly must be kept secret, think longer and harder about who has access to that information, what computer(s) it resides on, etc. Despite the fact that everyone is working on or around it, I’m sure that the secret formula for Coca Cola is still secret.

3. Accept that certain information will be public, and use the knowledge of its publicity to your advantage.

What have you been surprised to learn that your employees know?

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Crazy Is As Crazy Does So Keep It Wrapped Up

Turnaround is a very high stress game. I don’t mean for me – it’s my job to stay calm, cool and level-headed and avoid letting the CEO do anything rash while he’s worried about losing his business and life.

But the CEO isn’t the only person at a company stressed out by a turnaround and with the ability to do something stupid. Every employee has the potential to set off and do something idiotic, embarrassing and detrimental to a company’s successful emergence from a crisis.

That’s why, as the CEO, president or leader, you have got to maintain your composure. Do not blow off steam publicly, do not be seen to publicly rant and rave and do not be an idiot in the light of day. Employees will follow your example. If you need to blow off steam go to the gym, get a punching bag, go to the driving range or the shooting range or join an underground fight club. Just keep it under wraps.

In times of no crisis, if employees see you taking cash from the register or inventory from the warehouse, they’ll think it’s okay to do the same. You’re the leader.

In times of crisis, when they see you lose your head and freak out, they will follow suit. At the very least, they’ll become disillusioned and less productive, which is the last thing that a company needs in crisis. While going through a crisis, a company needs to operate at the highest level, churning out the best widget at the fastest rate (pending the crisis isn’t in production) and doing its best to stay ahead.

And you don’t have to be a CEO to be a leader. If you’re a manager or just a regular employee, you can set an example as well. Though it’s hard to make your calm contagious the same way your panic might be, just maintaining your stability and work ethic will show others that this is the right course of action.

I’ve talked about crazy Charlie before, who tried to stab his mother in one of the more hostile corporate takeovers I’ve been involved with, and as a result of his crazy actions, the deal to sell the company fell through.

Crazy people doing crazy things – especially in crisis – is ruinous. Keep your head, lead by example and deal with problems immediately. You don’t need mutiny on a sinking ship if you’re hoping to stay afloat.

What’s the craziest thing you’ve seen an employee do?

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Sometimes Winning Isn’t as Important as This One Other Thing

I like winning. And learning that winning is not always the best outcome in a negotiation is one of the hardest lessons I’ve had to learn in my 30 years in business.

My father used to tell me that being successful in making deals is strongly tied to the ability to leave something on the table for your counterpart – even if you are in a position of power.

“But isn’t it always better to pay less for the same items or to make more money on a particular deal?” – you may ask. Not always, because the “buy low, sell high” principle fails to account for a crucial element in business: relationships.

Back in the day I used to be a very tough negotiator, and I wasn’t even aware of it. I was simply unwilling to settle for a deal that I thought could be more advantageous for me or my side. And I got the best deals. But what happens after you close a deal?

Life goes on and other negotiations and business opportunities come around. And, somewhat inevitably, some of these opportunities arise with folks who know you or have heard about you. Following what I considered to be successful deals at the beginning of my career, I was confronted with the ramifications of the experiences of those with whom I had previously negotiated.

That is when I began to truly understand the meaning of win-win solutions in business environments: the benefits of leaving something on the table so people enjoy working with me and feel like they’ve won, too.

Because of my reputation as a fair negotiator for the past few decades, business partners often seek me out even if the deal with me is slightly less financially advantageous for them. Most negotiation counterparts also come to me with fair deals to start (as opposed to starting at extreme positions) which cuts down the negotiation time and leads to more efficient business deals. Saving time and minimizing stress in business situations is often overlooked when evaluating the process of getting to a solution in a case.

Due to the many good relationships I developed in my industry and other fields, business partners trust me. And trust is one of the most valuable assets you can have in business.

Is my “always leave something on the table” advice applicable to all cases and situations? Of course not. You must know when to focus on a mutually advantageous outcome, and when getting the absolute best price or deal is the only objective. But don’t forget, you may not be seeing the last of the person on the other side of the table.

Do you believe in win-win solutions in business? Do you find them challenging to achieve? Share your story in the comments below.

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The People You Want in Your Business

There are all kinds of people you don’t want working for your business. If I did a list post of those kinds of people it would be a mile long – a 100-part series.

But there’s one kind of person you do want: you want the kind of person who is internally driven.

This is a rare person indeed.

If you started your own business you would be described as an entrepreneur. That means that you are, 10 to 1, internally motivated. Perhaps money, fame or success is a driving force, too, but one way or another, the drive to take the actions that lead to those things is intrinsic.

Finding similar people is not easy.

I recently had the pleasure of working with a company where nearly everyone I spoke to was motivated internally (this was not a turnaround – the CEO was just experiencing an interesting situation and needed some advice).

As I spent a little time at this company, I had the opportunity to speak with a number of employees. Every single employee (who are called team members, not employees) I spoke with declared his or her intent to stay with this company for the long run. Employment at this company was “a career” and “not just some job.” It didn’t matter what their pay was or what their titles were. Each and every person I spoke with said that the kind of person who never fit in at this company was “a lazy person.” Every person here wanted to succeed because this was a culture of big moves, success and hard work. And they loved every minute of it. Multiple people said that this was the first place that they didn’t feel like they were going to work. They were finally doing what came naturally.

And as I tried to figure out what kind of company I was surveying, I realized that it was one where the employees were very carefully chosen. They were not just hired to do some job. They were brought in to be a part of a team where everyone was driven to succeed – and not for external reasons but for internal ones.

I encourage you to seek out those kinds of team members who are internally motivated to succeed and to do a great job. They’re hard to come by, but I assure you your company will benefit as a result.

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The Key to Surviving Hard Times

Chainsaw Dunlap was a workout guy twenty years ago, who would go into companies, slicing and dicing, laying people off, cutting product lines, and selling off assets as fast as he could. As his name suggests, he took the chainsaw approach.

Chainsaw was a pro at Turnaround 101, but he did it with no finesse. After the slash and burn lay-offs and asset sales, there’s still a company at which you don’t want everyone to be demoralized and miserable.

Not So Chainsaw

I do it slower – more sensually, shall we say, because I like to talk during.

I always make an effort to educate a company’s personnel throughout the process and solicit their buy-in for what I’m doing. This kind of interaction and buy-in doesn’t just need to happen during a turnaround – it should happen all the time.

I suggest that you regularly sit down with your team(s) and have them understand your solutions and decisions – something Chainsaw never did. I’m hardly suggesting that your team gets to vote – a business is not a democracy – but you do need to get buy-in for big ideas and especially to get through hard times or a turnaround.

Buy-in is Key

The reason you need this kind of buy-in is because, as president of a company, it’s unlikely that you’re out there day to day screwing on the wheels of a car, fixing machinery, bolting your widget together, etc. You can’t assuage the negative feelings running through a company when you don’t have access to everyone in the day to day. When you get the buy-in of your team and allow them to understand what you’re doing and why, they will help educate the survivors of the turnaround process to know that they’re going to be better off after the turnaround.

I was taking my son to school years ago, and he asked me, “What are you doing today?” I told him that I had a rough day in store because I was going to Philadelphia to layoff 200 people and close a division of the company I was turning around.

He looked at me like I was on ogre, and asked how the kids of those laid off would be able to afford camp, get baseball gloves and enjoy candy. I told him that I understood his questions and concerns, but by laying off 200 people and closing one plant, I was saving 600 jobs and keeping the company alive. It’s not that what I had to do didn’t stink for some, but it was for the greater good.

The challenge at that moment is to ensure that the 600 employees remaining are reenergized, reengaged and brought into the process of what comes next. That is, you’ve got to communicate and get buy-in.

Communicate Fully

If you go through a rough patch at your business and the people there really hate you then they will cease to fully contribute, leave, cripple your company and make you conclude that you shouldn’t have spent money on a turnaround in the first place. You should have resigned to call it a day and get on with your life because everyone else will have, too.

Companies – like militaries, countries, families and people – face hard times. As your company’s leader, it’s your job to get everybody through the hard times and make sure that they are prepared to see the good ones again.

Only the best innovators, products, companies and employees will survive a turnaround. If you insist on every social program that keeps everyone around, no one will have enough. It’s better that some do, and it’s best that they understand what’s happening and why. Open communication and buy-in will steer your company through hard times.

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If You Don’t Sweat the Small Stuff, It May Come Back to Haunt You

Do you remember that book, Don’t Sweat the Small Stuff: And Everything in Life is the Small Stuff?

I can appreciate the life philosophy, I really can, but let me tell you: in business, everything that’s small could become big if you don’t pay attention. If I have a cut on my finger and I ignore it and don’t put Neosporin and a Band-Aid on it, my finger could get infected and need amputating (gross). I’m not saying it’s common, but it could happen.

A leader, especially in hard times, needs to make sure he doesn’t overlook the small stuff.

Once, I was installed as CEO of a company, and I relied quite heavily on the CFO who’d been with the company a long time. I listened to his assumptions and projections. However, I never checked up on his assumptions or double checked the formulas in his spreadsheets. It just all seemed like little stuff.

Unfortunately, midway through the turnaround, the numbers headed south and the bankers got upset. As it turned out, the CFO knew about these mistakes and what was likely to happen.

Making mistakes is not a problem. Not admitting one’s mistakes and sharing this kind of knowledge with me is a problem. When I found out the CFO had known about these mistakes and never raised his hand, I fired him immediately. These were small things whose impact could have been mitigated a few months earlier, but at this point, I had to go crawling to the bank for an extra million dollars. Fortunately, they were pleased with my decision to fire the CFO.

The controller who had actually been prevented from checking the numbers earlier became the new CFO, and we emerged from bankruptcy.

As a CEO you have to rely on people, but you also have to trust your instincts, question assumptions and double check the world around you. It’s hard to rely on one person. I did so because it was the quickest way to move forward, but I learned from my mistake, and now I go through budgets line by line and question all assumptions, projections and spreadsheets. I take care of the small stuff (without sweating it) in order to keep it from turning into big stuff.

Many CEOs blindly listen to others without question because they need answers and they need them fast, but as a CEO it’s your job to ask twice and then thrice. Take care of your business by taking care of everything, big and small.