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Diversify Your Business Risk through Shared Risk and Reward Programs

Diversify Your Business Risk through Shared Risk and Reward Programs Risk assessment is a principal tool used to make current environmental decisions, but it is still crude, expensive, and controversial.

While diversification is indispensable to managing financial investment risk, business leaders need to prevaricate their bets and manage their financial vulnerabilities.

Risk taking is the part of business strategy that involves assessing how a business’s decisions will damage or benefit the company. Every business encounters risks, which may or may not be anticipated or controlled by the company.

This does not mean you attempt into markets or embrace technologies you don’t understand, but instead that you look at what you are already doing and categorize natural market synergies and product line extensions. In addition, it is best to be ahead of the curve on market trends and changes rather than lagging behind them.

Leaders Comprehend the Value of Shared Risk and Reward Programs

'Enterprise Risk Management' by James Lam (ISBN 111841361X) There is no seamless diversification strategy. It is more of an art than a science. The significant thing is to protect your margins and stabilize your cash flow while growing your top line. For example, you may have some parts of the business that are in a fast growth mode and eating cash. In this case, it would be helpful to have other areas of the business that are growing more incrementally, generating surplus cash flow and steady margins.

Risk assessment is a form of analysis of the probability and magnitude of harm from various events and activities. Related to the science of risk assessment, risk management determines how to plan for and communicate about risks. Risk perception is a science devoted to examining the qualitative aspects of risk, not simply its quantitative aspects.

To bring together the various disciplines and implement integrated risk management, ensuring the buy-in of top-level executives is vital. These executives can institute the processes that enable people and resources across the company to participate in identifying and assessing risks, and tracking the actions taken to mitigate or eliminate those risks.

'The Essentials of Risk Management' by Michel Crouhy (ISBN 0071818510) You may also have become too reliant upon one client and need to have a marketing strategy that pushes you to identify multiple new prospects that have the potential to grow with you in the same way. You may entered one market as much as you can and need to expand to other geographies. Never rest on your marketing laurels or get too self-satisfied. Companies needed to take advantage of regional management contracts.

I realize that business size does come into play here. However, regardless of how big you are, do not become a “one trick pony.” Anticipate that your business will have up and down periods and then think of imaginative ways to smooth out this curve. All good leaders understand and embrace the importance of diversification. To the maximum degree possible, put your fate in your own hands instead of being subject to whims of the marketplace.

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How Corporate Executive Education Programs Could Collaborate with Universities

How Corporate Executive Education Programs Could Collaborate with Universities

Executive education programs are comprehensive and wide-ranging. Everything from off-the-shelf programs focused on significant business challenges to made-to-order programs. Great faculty-people who can stimulate and invigorate executives-teach these programs. Executives go back to their firms with great recollections and ideas. They feel cherished by their company because the company has invested in them. Hurrah!

How can lessons from these involvements be applied to enhance business results? The answer lies in cultivating the relationship between the corporation and the university.

Curriculum design in Corporate Executive Education Programs The first step is to tailor the executive education program with the university. To do this, the firm must have specific goals that the core curriculum can address. These goals could aim at specific business problems or performance. Class makeup is important in any made-to-order course designed for impact. Attendees must be responsible for that impact.

The firm will need an executive sponsor who can enunciate the goals and contribute to the curriculum architecture. Inherent in this design is the post-program application. Useful goals are measurable. Measure their state of achievement before and after the course to understand impact. When the core curriculum is designed around these goals, attendees then can be expected to conclude the program with a plan to apply the lessons. If at all possible, the executive sponsor should hear those plans and follow their progress.

Curriculum design must integrate scalable learning. If the lessons learned during the course are to generate operational results, those who attended the course must teach them to those who did not attend. This can be a challenge given time and location constraints. Scalability often necessitates innovative solutions such as interactive e-learning sessions where employees anywhere, anytime can partake in online sessions that deliver the key message to implement. Future programs for smaller teams targeting a specific problem can be launched through virtual white-board sessions with faculty. CDs also provide a useful medium to capture and share key sessions. Workbooks can be used to scale the plans.

Corporate Executive Education Programs partnership between a corporation and a university Our universities include impressive thought leaders who spend their careers studying business challenges, pursuing solutions across industries. This talent can do far more than share their insights. If properly reinforced, they can channel their classroom work towards corporation-specific goals. This support includes pre-program preparation. Meeting with the faculty and educating them on the firm’s business and the goals is vital. Investor relations’ performances and annual reports are useful tools for this meeting. They cannot customize their teaching if they do not understand the business and the issues. Depending on the content necessitated, a non-disclosure agreement may be needed.

Faculty must also understand the attendees and their roles in the goal achievement. Once the faculty understands who does-what-where, they can effectively tailor discussions for individual and group needs. Knowledgeable faculty can also participate in study group discussions beyond the classroom and help create solutions. Also, sharing the attendees’ biographies or leadership profiles can give the faculty an understanding of their partners in this impact-focused learning journey.

The elements of a working partnership between a corporation and a university are the same ones we use for any partnership. Both parties must have an open working relationship with identified, measurable goals. Clear communication is imperative. Both parties must be focused on results and know the talent they have to achieve those results. Scalable solutions are indispensable. We approach business this way every day. Developing our key talent deserves nothing less in commitment or rigor.

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Quotations from Starbucks Founder Howard Schultz’s Book “Pour Your Heart Into It”

Howard Schultz‘s Pour Your Heart Into It touches on the best management and business practices and the techniques that Schultz used to found and lead Starbucks to the international coffee corporation it is today.

Starbucks has become an emblem of the current specialty coffee movement and a “hip” lifestyle. Starbucks coffee bars have opened in small towns and major cities alike, first in America, then around the world.

Starbucks Founder Howard Schultz

“Pour Your Heart Into It” Chapter Titles and Lead Quotations

Starbucks is a international coffee house chain with more than 17,000 stores. Founded in 1971 to roast coffee and sell it straight to drinkers at branded shops, it was only a regional company until Howard Schultz purchased it in 1987.

  • Chapter 1: Imagination, Dreams, and Humble Origins
    “It is only with the heart that one can see rightly. What is essential is invisible to the eye.”
    Antoine de Saint-Exupery in The Little Prince
  • Chapter 2: A Strong Legacy Makes You Sustainable for the Future
    “A hundred times every day I remind myself that my inner and outer life depend on the labors of other men, living and dead, and that I must exert myself in order to give in the same measure as I have received.”
    Albert Einstein
  • Chapter 3: To Italians, Espresso is Like an Aria
    “Some men see things as they are and say ‘Why?’ I dream things that never were, and say ‘Why not?'”
    George Bernard Shaw, often quoted by Robert F. Kennedy
  • Chapter 4: Luck is the Residue of Design
    “Whenever you see a successful business, someone once made a courageous decision.”
    Peter Drucker
  • 'Pour Your Heart Into It' by Howard Schultz (ISBN 0786883561) Chapter 5: Naysayers Never Built a Great Enterprise
    “We judge ourselves by what we feel capable of doing, while others judge us by what we have already done.”
    Henry Wadsworth Longfellow, Kavanagh
  • Chapter 6: The Imprinting of the Company’s Values
    “The ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.”
    Martin Luther King, Jr.
  • Chapter 7: Act Your Dreams with Open Eyes
    “Those who dream by night in the
    dusty recesses of their minds
    Awake to find that all was vanity;But the dreamers of day are dangerous men,
    That they may act their dreams with open
    eyes to make it possible.”
    T. E. Lawrence (of Arabia)
  • Chapter 8: If it Captures Your Imagination, it Will Captivate Others
    “Whatever you can do, or dream you can, … begin it. Boldness has genius, power and magic in it.”
    Johann Wolfgang von Goethe
  • Chapter 9: People are nor a Line Item
    “Wealth is the means and people are the ends. All our material riches will avail us little if we do not use them to expand the opportunities of our people.”
    John F. Kennedy, State of the Union address in January 1962
  • Chapter 10: A Hundred-story Building First Needs a Strong Foundation
    “The builders of visionary companies … concentrate primarily on building an organization—building a ticking clock—rather than on hitting a market just right with a visionary product idea.”
    Jim C. Collins, Built to Last
  • Chapter 11: Don’t Be Threatened by People Smarter Than You
    “The best executive is the one who has sense enough to pick good men [and women] to do what he wants done, and self-restraint enough to keep from meddling with them while they do it.”
    Theodore Roosevelt
  • Chapter 12: The Value of Dogmatism and Flexibility
    “The only sacred cow in an organization should be its basic philosophy of doing business.”
    Thomas J. Watson, Jr. “A Business and Its Beliefs,” quoted in Built to Last

How Starbucks Became Successful

  • Chapter 13: Wall Street Measures a Company’s Price, Not Its Value
    “There are only two guidelines. One, what’s in the long-term best interests of the enterprise and its stakeholders, supplemented by the dominant concern of doing what’s right.”
    Robert D. Haas, President, Levi Strauss & Co.
  • Chapter 14: As Long as You’re Reinventing, How About Reinventing Yourself?
    “The difference between great and average or lousy in any job is, mostly, having the imagination and zeal to re-create yourself daily.”
    Tom Peters, The Pursuit of Wow!
  • Chapter 15: Don’t Let the Entrepreneur Get in the Way of the Enterprising Spirit
    “No organizational regeneration, no national industrial renaissance can take place without individual acts of courage.”
    Harvey A. Hornstein, Managerial Courage
  • Chapter 16: Seek to Renew Yourself Even When You’re Hitting Home Runs
    “To stay ahead, always have your next idea waiting in the wings.”
    Rosabeth Moss Kanter
  • Chapter 17: Crisis of Prices, Crisis of Values
    “It is by presence of mind in untried emergencies that the native metal of a man is tested.”
    James Russell Lowell, “Abraham Lincoln,” in North American Review, ]anuary 1864
  • Chapter 18: The Best Way to Build a Brand is One Person at a Time
    “What comes from the heart, goes to the heart.”
    Samuel Taylor Coleridge, Table Talk
  • Chapter 19: Twenty Million New Customers are Worth Taking a Risk For
    “Security is mostly superstition. It does not exist in nature, nor do the children of men as a whole experience it. Avoiding danger is no safer in the long run than outright exposure. Life is either a daring adventure or nothing.”
    Helen Keller, The Open Door
  • Chapter 20: You Can Grow B1g and Stay Small
    “The fundamental task is to achieve smallness within large organization.”
    E. F. Schumacher, Small is Beautiful: Economics as If People Mattered
  • Chapter 21: How Socially Responsible Can a Company Be?
    “The evidence seems clear that those businesses which actively serve their many constituencies in creative, morally thoughtful ways also, over the long run, serve their shareholders best. Companies do, in fact, do well by doing good.”
    Norman Lear, Founder of the Business Enterprise Trust, Quoted in David Bollier’s Aiming Higher
  • Chapter 22: How Not to Be a Cookie-cutter Chain
    “Art is an adventure into an unknown world, which can be explored only by those willing to take risks.”
    Mark Rothko, In The New York Times, June 13, 1943
  • Chapter 23: When They Tell You to Focus, Don’t Get Myopic
    “If you can keep your head when all about you
    Are losing theirs and blaming it on you,
    If you can trust yourself when all men doubt you,
    But make allowance for their doubting too; …
    If you can fill the unforgiving minute
    With sixty seconds’ worth of distance run,
    Yours is the Earth and everything that’s in it,
    And—which is more—you’ll be a Man, my son!”
    Rudyard Kipling, “If”
  • Chapter 24: Lead with Your Heart
    “Leadership is discovering the company’s destiny and having the courage to follow it. … Companies that endure have a noble purpose.”
    Joe Jaworski of the Organizational Learning Center at Massachusetts Institute of Technology (MIT)

Starbucks Founder Howard Schultz's 'Pour Your Heart Into It'

Selections from Howard Schultz’s Analysis of Starbucks’ Spectacular Success

Schultz sponsored Starbucks as the “third place,” distinctive from home and work. Many of its shops have comfortable padded chairs and sofas. In recent years they offer free Wi-Fi for customers who want Internet access for their computers. Some Starbucks are in shopping malls, bookstores, supermarkets, college campuses, and airports. Baristas mix a range of coffee drinks.

  • “When you really believe—in yourself, in your dream—you just have to do everything you possibly can to take control and make your vision a reality. No great achievement happens by luck.”
    Howard Schultz
  • “I believe that the best way for an entrepreneur to maintain control is by performing well and pleasing shareholders even if his or her stake is below 50 percent. That risk is far preferable to the danger of heavy debt, which can limit the possibilities for future growth and innovation.”
    Howard Schultz
  • “It’s one thing to dream, but when the moment is right, you’ve got to be willing to leave what’s familiar and go out to find your own sound.”
    Howard Schultz
  • “Whatever your culture, your values, your guiding principles, you have to take steps to inculcate them in the organization early in its life so that they can guide every decision, every hire, every strategic objective you set.”
    Howard Schultz
  • “Every step of the way, I made a point to underpromise and overdeliver. In the long run, that’s the only way to ensure security in any job.”
    Howard Schultz
  • “If you want to build a great enterprise, you have to have the courage to dream great dreams. If you dream small dreams, you may succeed in building something small. For many people, that is enough. But if you want to achieve widespread impact and lasting value, be bold.”
    Howard Schultz
  • 'Onward How Starbucks Fought for Its Life' by Howard Schultz (ISBN 1609613821) “Treat people like family, and they will be loyal and give their all. Stand by people, and they will stand by you. It’s the oldest formula in business, one that is second nature to many family-run firms. Yet in the late 1980s, it seemed to be forgotten.”
    Howard Schultz
  • “While Wall Street has taught me a lot, its most enduring lesson is an understanding of just how artificial a stock price is. It’s all too easy to regard it as the true value of your company, and even the value of yourself.”
    Howard Schultz
  • “At a certain stage in a company’s development, an entrepreneur has to develop into a professional manager. That often goes against the grain.”
    Howard Schultz
  • “Whatever you do, don’t play it safe. Don’t do things the way they’ve always been done. Don’t try to fit the system. If you do what’s expected of you, you’ll never accomplish more than others expect.”
    Howard Schultz

The Recipe to Starbucks Success

The name Starbucks is borrowed from the first mate of the whaling ship in the Herman Melville novel Moby Dick. The logo for Starbucks is also nautical, a siren who in the original image had a mermaid’s tail.

The first Starbucks location opened in the United States, in Pike Place, Seattle in 1971 and the company developed globally with a brand recognition that has been compared to the longer standing, brand-distinctive McDonald’s Fast-food Empire.

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Posted in Business and Strategy Leaders and Innovators

Small Remedies Reap Big Rewards

When is a dirty bathroom a broken window? This question could govern your success or failure. Answer that question properly—and use that answer as a guiding light—and your business could dominate its competition forever. Ignore the answer, and you will soon reprove your business to failure.

The “broken windows” philosophy was first set forth by criminologists James Q. Wilson and George L. Kelling, deliberating on petty criminal acts like graffiti, purse snatching, or jay walking, and how they can lead to larger crimes such as murder. Something as small as a broken window sends a signal to those who pass by every day. That means more serious breaches—theft, defacement, violent crime—might be overlooked in this area.

If a window in a building is broken and left unrepaired, all other windows will soon be broken since people perceive that the owner of this building and the community around it don’t care if this window is broken: They have given up; disorder reigns here. Do as you will, because nobody cares.

Broken Windows in Business

Pay attention to every detail in leadership That same theory applies to the world of business. If the restroom is out of toilet paper, it gestures that management isn’t paying attention to the needs of its people. Perceptions are a vital part of every business, and if a retailer, service provider, or company sends signals that its approach is lackadaisical, its methods halfhearted, and its execution indifferent, the business could suffer severe—and in some cases, irreparable-losses.

When broken windows are ignored, fatal consequences can result. Small things make a huge difference. A messy reception area might lead customers to believe that the company doesn’t care about cleanliness or quality. We all bear some responsibility to stand up for what we want and have every right to expect from a company to which we give our hard-earned money. In a capitalist society, we assume that a company will do its best to fulfill the desires of its customers. If the company sees sales slipping but doesn’t have data from consumers as to what made them decrease their spending, the company will not know what to fix.

Still, businesses that don’t notice and repair their broken windows should not simply be forgiven because their consumers don’t make a fuss. Leaders are responsible to tend their own house—and the time to repair broken windows is the minute they occur.

Prevent Broken Windows

Since small things can snowball into large problems, smart owners prevent broken windows at—or before—the first sign of trouble.

In a business, the broken windows can be literal or metaphorical. Sometimes a broken window really is a broken window, and a new pane of glass needs to be installed quickly. However, most of the time, broken windows are the little details, the tiny flaws, the overlooked minutiae that signal much larger problems either already in place or about to become reality.

Companies that fail to notice and repair their broken windows suffer greatly. Those that attend to every potentially broken window win.

People want to feel that the businesses that they work for and those they buy from care about what they want. Consumers are looking for businesses that anticipate and fulfill their needs and do so in a way that makes it clear the business understands the consumers’ needs or wants and is doing its best to see them satisfied.

Broken windows indicate to the consumer that the business doesn’t care—either that it is so poorly run it can’t possibly keep up with its obligations, or that it has become so oversized and arrogant that it no longer cares about its core consumer. Either of these impressions can be deadly.

Tiny details—the smaller, the more important—can make a big difference in success or failure. A broken window can be a sloppy counter, poorly located sale item, randomly organized menu, or an employee with a bad attitude. It can be physical, like a flaking paint job, or symbolic, like a policy that requires consumers to pay for customer service.

The Broken Windows Pledge

Small Remedies Reap Big Rewards Broken windows are everywhere, except at the best businesses. I invite you to take the Broken Windows for Business Pledge. It’s a serious statement outlining the tenets of the broken windows for business theory.

  • You can pay attention to every detail.
  • You can correct any broken windows I find in my business, and you can do so immediately, with no hesitation.
  • You can screen, hire, train, and supervise my people to notice and correct broken windows as soon as possible.
  • You can treat each customer like the only customer my business has. You can be on constant vigil for signs of Broken Windows Hubris and never assume my business is invulnerable.
  • You can mystery shop my own business to discover broken windows.
  • You can make sure every customer who encounters my business is met with courtesy, efficiency, and a smile.
  • You can exceed customer expectations.
  • You can make a positive first impression and assume that every impression is a first impression.
  • You can make sure that my online and telephone customer service reps solve a customer’s problem perfectly the first time.
  • You can be obsessive and compulsive when it comes to my business.

If you live up to the promises in the pledge and make them second nature, you will discover your business—and your life—running more smoothly than ever before. You will never look at a broken window-or an unbroken one—the same way again.

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Posted in Management and Leadership Philosophy and Wisdom

How to Foresee Vision-Related Conflicts in Your Company’s Strategic Innovation Framework

How do you uphold growth and profitability in an age in which rivals quickly erode most any competitive advantage? One option is to initiate entirely new businesses.

Consider how some companies have redefined their customer, the value offered, and the delivery method—a process we call strategic innovation:

  • In 1996, General Motors formed a new business unit, OnStar, to commercialize an integrated information, safety, and communications system.
  • In 2001, Procter & Gamble launched Tremor, a new marketing service for other companies.
  • In 2003, the Walt Disney Company introduced Moviebeam, a wireless, no-hassle, in home video rental store.

How to Foresee Vision-Related Conflicts in Your Company's Strategic Innovation Framework If you follow several such innovation stories—each a tale of a new businesses (New_Company) within established and successful organization (Core_Parent_Company). You will be less interested in where the path-breaking ideas came from than how companies managed the process of going from idea to profitability. Nurturing creativity within an organization usually merits a great deal of attention, but the need for creativity is high only at the beginning of New_Company’s life. Once a business plan is in place, the need for creativity begins to decay rapidly.

An entirely new approach is needed—one that emphasizes neither the creativity that inspires New_Company’s launch nor the discipline that Core_Parent_Company demands to deliver bottom-line results.

New_Company Faces Three Distinct Challenges in Its Journey from Idea to Profitability

  • Forgetting: New_Company’s business model is invariably different from Core_Parent_Company’s model. The answers to the most fundamental business questions—Who is the customer? What value do we offer? How do we deliver it?—are intensely different. The essence of the forgetting challenge is ensuring that Core_Parent_Company’s success formula is not imported to New_Company.
  • Borrowing: New_Company’s biggest advantage over its competition is the wealth of resources and assets within Core_Parent_Company. The essence of the borrowing challenge is gaining access to these resources, and doing so in a way that does not damage Core_Parent_Company’s own commitment to excellence.
  • Learning: New_Company’s business is highly uncertain. It must methodically resolve the specific unknowns within its approach as quickly as possible, and zero in on the best possible approach. Learning requires an entirely different approach to planning.

All three challenges obviously create tensions. To forget, New_Company must be distinct from Core_Parent_Company. At the same time, to borrow, New_Company must be linked to Core_Parent_Company.

At points of interaction, stress inherently arises unswervingly because of the differences in business models, values, styles, and priorities. Learning also leads to stress, because it requires an analytical discipline—much different from the operational discipline of execution and performance.

These are the types of tensions that can be healthy for New_Company, and when a corporation achieves them well, the journey from idea to profitability is a smooth one.

But is it worth the risk? Contemplate the risk of the alternative—sticking to the knitting—a choice that inevitably leads to decay. Without growth, CEOs lose jobs, employees stagnate, organizations become stale, and competitiveness languishes. Strategic innovation, on the other hand, can deliver breakthrough growth and generate new life-cycle curves. It enables companies to stay ahead of change by creating, growing, and profiting from new business models.

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Posted in Management and Leadership

The Gift of Customer Loyalty Begins with Employee Loyalty

Customer Loyalty Flourishes

Employee and customer loyalty are one in the same. The gift of customer loyalty begins with employee loyalty. Nurtured and directed employee loyalty will create worlds of energy, inoculating against the apathy and distrust endemic in many organizations. It can also result in synergy, the energy-laden connection that emerges in a group channeling momentum toward the common good. Trust, added to the mix, instills confidence, which helps employee loyalty grow, and customer loyalty flourish.

Employee & Customer Loyalty Case Study: Sam Walton and Wal-Mart

At the time of Sam Walton’s death in 1992, Wal-Mart had annual sales of $44 billion. One out of every five retail items purchased in America came from a Wal-Mart store. His personal fortune exceeded $23 billion. Sam once said: “There is only one boss: the customer. And he can fire everybody, from the chairman on down, simply by spending his money somewhere else.” When asked how Wal-Mart was able to grow so fast, Sam replied, “The answer is always the same-people. Not only the right kind, but interested, dedicated, enthusiastic, and loyal people. That makes our company exceptional.”

Southwest Airlines Customer Service

Employee & Customer Loyalty Case Study: Herb Kelleher and Southwest Airlines

Southwest Airlines devotes a considerable budget to celebrating its employees with parties, banquets, gifts, birthday cards and outings. Accountants have told Herb Kelleher how much money he could save if he didn’t budget for these activities. His reply: “Southwest Airlines has the fewest customer complaints in the industry. How much is that worth?”

Kelleher believes that the front office is there to support the employees. He said: “Southwest has its customers, the passengers; and I have my customers, the airline’s employees. If the passengers aren’t satisfied, they won’t fly with us. If the employees aren’t satisfied, they won’t provide the product we need.” Southwest employees make flying a fun experience. They try to surprise and delight the customers.

Employee & Customer Loyalty Case Study: Nordstrom Rules

Nordstrom leaders also inspire employees with actions and directions that are surprising. For example, the Nordstrom Handbook says: “Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them.” And Rule 1 simply reads: “Use your good judgment in all situations. There will be no additional rules. Please feel free to ask your department manager, store manager, or division manager any question at any time.”

The founders of Nordstrom maintain what they call a “worshipful relationship” with the customer, resulting in delighted customers, enthusiastic salespeople, and high profits. They actively practice “doing virtually anything possible to please the customer.” The founders also do virtually anything possible to please their employees.

The Gift of Customer Loyalty Begins with Employee Loyalty

Employee & Customer Loyalty Case Study: Ritz Carlton: Discovering what customers savor

A few months ago, I was involved in a seminar in Pasadena at the Ritz-Carlton Hotel. During lunch I asked my waiter for a burger and a chocolate shake. When he let me know that they didn’t offer milkshakes, I setfled for a glass of water. I was surprised when a chocolate shake arrived with my hamburger. Manuel Avila, my waiter, on his own initiative, found chocolate ice cream and cold milk in the kitchen and created a shake. Manuel felt free to exercise initiative on my behalf because of the positive creative examples set by his leaders.

When Employees are Cared for, They Care for Customers

The way employees treat customers reflects directly on the way they are personally treated. Many employees are truly loyal. The question is; how do we retain and increase our loyal employees, thereby increasing our customer loyalty base?

The way employees treat customers reflects directly on the way they are personally treated. How can you emulate these four cases to improve loyalty in your organization?

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Posted in Business and Strategy Uncategorized

Customers Expect Rewards in Exchange for Their Loyalty

'Customer Loyalty: How to Earn It, How to Keep It' by Jill Griffin (ISBN 0787963887) If you are over sixty, you may remember the thrill of filling S&H Greenstamps books and taking them to the redemption center.

That is how loyalty programs suck us in: we buy the things we always buy, but we get something extra. The more we buy, the bigger the reward. Today we expect loyalty programs to be part of our purchases, hence the popularity of frequent-flyer miles, supermarket discounts, merchandise rewards for credit card spending, and lower fees for maintaining higher bank balances.

But Loyalty Programs are Not Enough

You must offer a compelling value proposition and ensure that the customer’s experience is positive.

The financial value of a loyal customer is well documented. It costs a company to acquire (buy) customers with advertising, loss-leader items, and other incentives for initial purchases. If customers buy again, the company makes back its money. If they keep buying, more money is made. It becomes cheaper for the company to satisfy customers because repeat customers do not need as much support and understand the value of the brand. They even send new business. Therefore, companies need enticing ways of keeping customers.

You now have many options for incenting loyalty. You can offer discounts, provide points redeemable for free stuff, offer improved service (such as free shipping or fast turnaround), or priority treatment. As you look at your loyalty programs, determine which rewards appeal most to your customers—and then match the rewards to their desires.

Three Motivators for Loyalty

Three Motivators for Customer Loyalty Programs I see three reward programs, each supporting a different motivation for loyalty. Each motivation can be expressed positively or negatively:

  1. Reward/Greed. This is the “I get something for nothing” motivator. Flyer miles, and membership points are examples that appeal to people on a personal level. S&H Greenstamps recently reinvented itself as S&H Greenpoints (www.greenpoints.com). Their motto is “Earn them on the things you buy. Spend them on the things that make you happy.” You now register as a Green–points user and collect electronic points for shopping at affiliated stores or Web sites. You redeem your points from an online catalog of products.
  2. Philanthropy/Guilt. Some customers react more on a community level. These customers respond most positively to loyalty rewards such as donations to charity. A good example is the affinity credit card. I have accepted credit card offers from banks because a small donation in my name will be made to my alma mater. You can get affinity cards for your favorite charity. It is a painless method of philanthropy because you do not take anything out of your wallet; the vendors with whom you do business give the money.
  3. Love/Obligation (or Fear). This loyalty program is targeted at customers who want rewards to serve them as a family rather than an individual. These customers also want relief from the financial burdens of family obligations. A new company that has endorsed this motivation for loyalty is UPromise. Its loyalty program makes donations in their children’s names to tax-deferred college funds when purchases are made from participating companies.

Most companies have a mix of customers with different hot buttons. You can offer different types of reward programs to appeal to each type of customer.

Dangers of Outside Loyalty Programs

Customers Expect Rewards in Exchange for Their Loyalty Loyalty programs provide rewards separate from the brand of the company sponsoring the rewards. In addition, there are dangers inherent in promoting outside brands as a bonus.

  1. More expensive to fulfill. When you offer a product from a different company, you may pay less than its list price, but the cost is still tangible, and you do not control it.
  2. Loyalty to the reward, not the brand. The biggest danger of offering rewards that are not part of your brand is that customers become more loyal to the reward system than to you.
  3. Held hostage to your loyalty program. As a company offering rewards you are, in some way, being held prisoner by your rewards provider.

As appealing as loyalty programs may be, they are not enough to keep customers coming back. Unless the customer finds value in your products and finds it easy and pleasant to do business with you, no loyalty program will work. You must have a compelling value proposition independent of any reward system. Your customers must value you! The loyalty reward is just a bonus.

Identify the motivators and incentives that appeal most to your target audience and customers.

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Posted in Business and Strategy Management and Leadership

How to Use Benchmarking as a Strategic Leadership Investment

Benchmarking in Strategic Management

Benchmarking is more than simply making a collection of statistical comparisons. If handled properly, the technique can be used to create significant efficiency improvements in your organization.

A company measures its performance against that of other companies to assess whether it standards are higher or lower.

Collecting snapshots of what that so doing, but failing to examine the reasons for differences in performance, and not using the data to identify and developing best practice.

Benchmarking in Strategic Management

There is little point in spending time and effort collecting comparative data for its own sake, or if managers use it is only to justify current standards.

There are five main stages to effect a benchmarking.

  1. Selecting aspects of performance that can be improved, and defining them in a way that enables relevant comparative data to be obtained—in effect, producing performance indicators that will make sense to other organizations.
  2. Choosing relevant organizations from which to obtain core or headline data
  3. Studying the state to improve possible opportunities for improvement.
  4. Examining the procedures of the best performing organizations to pick ideas that can be adopted or adapted to achieve performance improvements.
  5. Implementing any new processes.

'Benchmarking for Best Practices' by Christopher E. Bogan (ISBN 0070063753) In selecting performance indicators the call for in pieces of initial data collection, it is helpful to distinguish between input and output measures and, unpredictable, the place priority on the latter. It is often easier to define inputs and outputs. Examples of input measures include staffing ratios, per capita expenditure on training or, in manufacturing companies, the wearying proportions of labor, materials, and overhead costs.

The drawback with input measures is that they greatly provide an indication of the quality of outputs. Take, for example, the widely used indicator of response time to customer enquiries. This provides only part of the picture because it gives no indication of the quality of service. Apparently, good figures may conceal significant customer dissatisfaction, while longer response times may result in clients being delighted with the results.

Benchmarking for Strategic Leadership

Benchmarking for Strategic Leadership

Ideally, this practice involves high standards in both inputs and outputs. Indexes of customer satisfaction one form of output measurement. Some personal departments conduct surveys in which their international clients—the line managers—are asked to rate the quality of the various services provided by the Department. If other organizations conducting similar surveys can be found, these ratings can for part of a benchmarking study and may indicate areas where a change of procedures could lead to improvements.

There are two different approaches—genital and selective—are choosing organizations from which to obtain comparative data. The main purpose of the fourth month in is to produce a whole range of performance measures across an entire sector. Examples of general data sources include the government’s ratings of people performance in every primary school; the audit commission’s performance indicators for local authorities et cetera.

The state must be considered with caution. Misleading conclusions can be drawn from individual performance indicators when they are viewed in isolation.

Approach that is more selective is required when an aspect of performance and that requires attention has already been identified.

In this case, it is necessary to identify organizations of brought similar nature—preferably those with a reputation for effectiveness in the relevant activity.

With the topic-based benchmarking, it is possible to collect more data about a single issue than can be obtained from a general survey. It may also be feasible to ask but spends to supplement their answers by sending details of specific policies, such as copies of absence control procedures of performance appraisal guidelines.

Performance and Competitive Benchmarking

'Benchmarking The Search for Industry Best Practices' by Robert C. Camp (ISBN 1563273527) The purpose of obtaining benchmark data needs to be kept firmly in mind: identifying potential improvements in performance. Once such opportunities have been spotted, the more intensive aspects of benchmarking can begin.

The score beyond the study of comparative statistics and the documentation of other people’s procedures. They involve a detailed, on the ground study of the methods of high performing organizations. Understandably, this requires the full co-operation of the group concerned, though it is encouraging that many companies are willing to provide extensive information and facilities.

The organizations that have benefited from the suspect of benchmarking recommend the use of steady teams including staff from different functions and levels.

The final stage of the benchmarking process is the implementation of new systems. Here, it is important to recognize that the success of other businesses may be influenced by the motivational and cultural context in which their systems operate, as much as by the technical characteristics of the systems themselves. As a result, of the issues for steady teams to investigate is the nature of the homework environment—physical and psychological—in which best practice flourishes.

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How to Increase Profits with Ethics

The Ethics of Profit, the Profit of Ethics

Amid an ethics crisis, we can’t fake credibility. Trust is now a function of ethical behavior, not stated intention. To be believable is now a matter of substance, not image. Once you’ve baked this attitude into your organization’s DNA, you’ll find that responding to customer needs, outpacing competitors, and introducing groundbreaking innovation becomes an organic part of how you do business.

The Ethics of Profit, the Profit of Ethics Executives are required to be whole persons and create whole companies. Excesses in one area—such as ruthless acknowledgement of facts and numbers exclusively—and neglect in another—such as minimizing the emotional catastrophes that accompany downsizing, mergers, and acquisitions—predict ruin. Being razor sharp strategically—as was Enron—but lacking the common courage to put wild risks into cool perspective, cascaded a company from the crowning jewel of opulence to the dark abyss of bankruptcy. Refusing to be whole is the recipe for meltdown.

Incomplete human beings become defective managers. To survive today’s ethics breakdown requires executives to mobilize their full potential.

Answers lie in courageous decisions—to be authentically open-minded, to make self-transcending commitments, and to be responsible to help co-create a communal culture. That is ethics!

You increase real profits with true ethics through attitudes and actions.

If a tree is dying, don’t just prune it but examine the soil. And if a business is failing, examine the leadership attitudes for lack of excellence and greatness. Authentic leaders send messages to their people that transform the culture. Leaders help awaken these attitudes in their people. All attitudes are needed. All are ethical values. One alone will not do. Attitudes precede the techniques. How-tos without right attitudes are empty gestures.

Principle #1 for Ethical Profits: Freedom is the Foundation

How to Increase Profits with Ethics The foundation of leadership is knowing that we are born with free will, we have free will, and we can never relinquish our free will. Until our dying day will we have free will. Free will is a clear experience. Free will makes ethics possible. Free will is the source of our power and the origin of our anxiety.

Usual leadership theory tells us to influence people’s thoughts and feelings. And coaching is to help leaders convince people to think and to feel in ways helpful to a business’ bottom line: think of the mission of the company and feel loyal and joyful towards the company. What is missing is the will. We believe that workers think and feel, have ideas and emotions, but we ignore the reality of a free will.

Leadership is to know, learn, and teach freedom, free will, consequences, responsibility, ownership, accountability, and ultimately choosing accountability for the sake of both financial necessity and existential honor. Here, in the inner zone of freedom and free will, lies the bedrock of the health of your body, your loves, and your pocketbook. As leader, you are a secular apostle preaching the power of freedom.

Principle #2 for Ethical Profits: Leaders Choose Principle

Leaders freely choose to live by principle. Immanuel Kant wrote; “Two things fill the mind with ever-increasing wonder and awe, the more often and the more intensely the mind of thought is drawn to them: the starry heavens above me and the moral law within me.” The moral law within me! Don’t we all sense it, if we hold still and listen in silence?

We all have a conscience. It draws us like a magnet to principle. It is never selfish. Conscience and the moral law have a mysterious draw or claim on us. Because of it, we can distinguish good from bad, right from wrong. It is related to respect, pride, dignity, and self-esteem. We know that we have a duty, a destiny, a task in life.

Authentic Leadership It is aroused by words, such as fairness, justice, equality, and liberty. The Declaration of Independence and the Constitution resonate movingly to something inside that can only be called our conscience. Unless we respond to our inner soul, we skirt the perilous edge. Authentic leaders turn back from greed and selfishness, from narcissism and naive values, to return instead to things that matter most—to things that are eternal, genuinely worthy, honest, generous, and clean. True value is not what one person or one sect dictates to the rest of us. True value results from honest and collective examination of who we are, where we come from, and where we are going. The poet Rilke said, “Do not seek answers; live the questions.” Leaders heed this call.

Principle #3 for Ethical Profits: Realism is a Way of Life

Realism is more than the numbers: it means you never lie to yourself, you do not deny the truth about yourself. You know that when something hurts, when you get inordinately angry, upset, enraged, or irrational, it is because you are threatened fundamentally, for you secretly agree. You can’t let it go and, in fact, as a last resort, expel this insight about yourself forcibly from your consciousness. Each person has a point of inferiority. There, when touched, you are sensitive, and there, when reminded, you become virulently defensive. There you say, not that you think you are inferior, but there in your depraved image of yourself you say that in fact you are inferior! But you keep the secret and get furious at anyone who dares to point it out to you.

Coming to terms with that reality, accepting that perception of yourself, is the very heart of your strength and your power as a rightful leader of men and women. You can take criticism, fair or unfair; you can take put downs, deserved or not; you can tolerate defeat, expected or not; and you can survive disgrace and humiliation.

To get there is realism beyond the statistics and strikes at the core of your emotional intelligence. People with power are both adulated and hated beyond what is reasonable. They can take it, even thrive on it and learn from it, and teach others how under such circumstances—not only to preserve their dignity but to magnify it. To restore your inner self-respect when logic is against it is to “pull yourself up by your bootstraps.” That is why life confronts us with its tests and furnishes us with their messages. This is that bit of the soul which gets its baptism of fire. Have you passed the test?

Principle #4 for Ethical Profits: Grand Strategy is a Rare Virtue

The mark of an authentic leader is commitment to grand strategy. To enlarge the scope of your strategy, take any big news story—the War on Terror, once envied and lionized CEOs now facing censure, suicide bombers, and terrorist attacks—and ask: what deep lessons are there for me in how I conduct my business and my life?

What messages, what learning, about the things that you control can you derive from an enlarged perspective of any monumental event? Impeachment teaches us that dubious actions have unexpected and dramatic consequences, and sports victories teach us the power of persistence, commitment, focus, and dedication. You then ask: How does that apply to me and to my business? Do this with inspiration and creative innovation.

Principle #5 for Ethical Profits: Lead Through Language

Intelligent Leadership Conversations Language is all the action you have. But it has power. At every opportunity, you engage workers in intelligent leadership conversations. You talk knowledgeably and authoritatively about free will and responsibility, of principle and conscience, of hard facts and self-knowledge, of grand strategy and innovation, and of greatness and chaos, as the ineradicable structures of the human mind. You talk through stories and metaphors—sports, politics, religion, entertainment, adventure, family, career moves—and relate that to work and company. You let everyone know: “This is how we do business here.”

Relationship between Business Ethics and Profits

The notions of business ethics and profits must once have had originality; they did not start out of the ground populous, lettered, and versed in many of the arts of life; they made themselves all this, and were then the greatest and most powerful nations of the world. More seriously, the more comfortable managers grow with the ingrained abuses of ethics in their businesses, the harder it is to make any changes, and the more vulnerable their companies become to uncertainties around the corner.

Relationship Between Business Ethics and Profits The combination of all these causes forms so great a mass of influences hostile to Individuality, that it is not easy to see how it can stand its ground.

Many unconventional marketing practices are not yet governed by clear rules regarding ethics. This is a big turning point in the transformation, both practically and emotionally.

The three phases of change can be managed in such a way that people understand the strategic rationale for the decisions handed down, even when they are tough, and clearly understand their role in shaping the new organization.

Ethics, in the end, is not something we do. It is something we become.

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The Best Leaders Model Their Stated Priorities

Leaders Model Stated Priorities

Everyone is a boss-watcher. “Other people take their cue from the leader—not from what the leader says, but what the leader does,” says Colin Powell.

The leader is always in a glass house. People listen to the words, but what really interests them is what the boss does. People carefully track what questions he asks, what reports she asks for and reads, what meeting agenda priorities he sets, what resources she allocates, whom he criticizes, what thrills or angers her, whom he lauds, whom she promotes, whom he assigns to which project, and whom she visits and hangs out with.

People observe these things, and then, regardless of the boss’s words they draw conclusions about what’s really important, what’s truly urgent, what must be the top priorities, and who the leader is. When the leader’s words and deeds match, the leader’s credibility and influence go up in their eyes. When they don’t, credibility and influence are diminished. This is such a powerful and predictable process that leaders have no neutral actions. Each action or decision has great symbolic impact.

Too often, leaders aren’t aware that they’re being observed, and that colleagues have long memories. Some leaders think nothing about promising something and not delivering, or stating a priority and not “living” it. If an executive states that being customer-centric is a priority, but he is not spending more time with customers, then he’s not walking the talk He’s not doing the work of leadership. If she doesn’t personally insure that capital allocation, performance metrics, sourcing, logistics, scheduling, information systems, and compensation reflect a customer-centric priority, she’s not walking the talk She’s not doing the work of leadership. In both cases, it’s not likely that innovative, proactive customer-centric work will be done.

In contrast, effective managers know that their glass house offers enormous leverage in boosting performance, as well as their own credibility and influence—but only if they become the ultimate role model. For example, if a leader talks about honesty, candor, open-door communication, collaboration, or risk-taking, then that leader more than anyone else—must model and support those virtues. The leader must not only be honest and candid, but also ensure that employees who do the same are properly acknowledged, rewarded, and protected. When people see these actions, they know that they can count on their leader, and are more likely to cultivate those virtues themselves. The leader’s power and integrity are enhanced in the process.

Effective managers become the ultimate role model

How powerful is the “glass house effect”? Well, consider how it might be applied to a current vexing national problem. Over the past 24 months the integrity and liquidity of our capital markets have been assailed by a wave of scandals revolving around fraudulent financial reporting, sleight-of-hand accounting, piracy in the executive suites, and incestuous self-serving relationships among accountants, consultants, analysts, and investment bankers. The effect not only extends the economic recession, but it also breeds doubt and cynicism about the market system.

When President Bush spoke about corporate malfeasance, about righting wrongs and putting the bad guys away, few question his sincerity. But to take advantage of the “glass house” effect, he could use the “bully pulpit” of his office to do the following:

  • Talk frankly about honesty, full disclosure and transparency in reporting.
  • Decry phony revenues, bogus earnings, spinning IPO’s, cozy analyst investment banker relationships, and risk-free executive compensation.
  • Cite high-profile examples of greed and deceit, express serious concern, and offer inspirational alternatives.
  • Refer to abuses in governance and underscore the fiduciary responsibility.
  • Discuss accountability for illegal activity, including civil litigation, criminal prosecution, and imprisonment.
  • Tell new SEC head William Donaldson to aggressively pursue corporate corruption and market abuses to avoid conflict-of-interest charges.
  • Tell us that his new team will be packed with people of impeccable independence, integrity, and competence.
  • Raise the SEC’s annual funding as the agency copes with many cases. Leaders define their agenda by the resources they allocate to it.
  • Insist that the agency aggressively pursue corporate corruption.

Great leaders mobilize people to do extraordinary things with simple ideas. During the 20 years that Jack Welch transformed GE, he was only committed to a few strategic priorities: globalization, total quality, boundaryless, de-bureaucratization, and e-commerce. None of these initiatives were new. Many companies had similar objectives. But Welch demonstrated a fanatic obsession with driving each initiative, and held his managers accountable for achieving results. GE people knew where their CEO stood. Welch’s approach was aligned with Powell’s advice: “Figure out what is crucial, and stay focused” When people see that resolve, they “get” what their mindsets and behaviors ought to be.

Great leaders clearly state their principles and goals and follow through. They live the principles, own the goals, and ensure that everyone is aware of it. If you’re a leader, learn to use your visibility to your advantage.

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