Bob MacDonald on Business

Sage Advice on Insurance and Financial Services from the Perennial Maverick

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Setting Goals and Realizing them is Critical to Success – Maybe

May 14th, 2012 · Business Management

Sometimes the worst thing about having a goal is attaining it.

We live in a goal-oriented society. All of us – individuals and organizations – are expected to delineate, plan and commit to achieve certain specific, end-point goals. And if we don’t have these detailed goals or can’t explain what they are, it must be because we are a laggard at best, a shirker at worst. Not only that, but we are expected to advertise our goals like they were plastered on a sandwich board as we hawk our plans down Main Street.

The problem with all this frou-frou is that sometimes the worst thing about having a goal is attaining it.

Don’t get me wrong, specific objectives are important; they cause us to focus our vision and effort on a specific path to reach a predetermined goal. But as helpful as goals can be to identify what we want to accomplish, they can also inhibit our ability to achieve our true potential which is likely to be much greater.

This happens all the time when goals are viewed like a pot of gold at the end of the rainbow: When we find it, there’s nothing to do but sit back and enjoy the spoils of success. In other words, all too often we mistakenly believe that achieving goals is the end of the effort, when goals  should be treated only as signposts on a long road that ends only when the future ends. In fact, the only goal that should be so finite is the goal to stay alive till we die.

The Ghost of Goals We Relied On

All too often we witness an individual or organization marshal their ideas, plan  their plans and work diligently to achieve the goal of success as they define it. Then, when the goal is reached and success achieved, they give it all back.  I call this the “agony of success.” What most don’t realize (especially those who have not been successful) is that as difficult as success is to achieve, it is even more difficult to maintain. Once a goal has been achieved, there is a natural inclination to ease up the throttle and become complacent. If you need any evidence of this phenomenon, just compare a list of the top 50 Fortune 500 companies of today with the same list 10, 15 or 25 years ago. This list is in a constant state of flux and new companies edge out old ones that have lost their way.

And it’s easy to identify individuals or companies who have lost their way. They are the ones that have set and attained specific goals for success, but then let up and lose it by falling prey to that aforementioned “agony.” They find that they are too busy with success to take the time to do the important little things they took the time to do in the past. They become smugly satisfied with what worked to achieve yesterday’s goals, rather than trying to find new things that will work tomorrow. They become more interested in process and procedure, than in performance. They begin to define success by what they have done, rather than what they could do.

Avoiding the Agony

The only way to avoid the “agony of success” is to set goals that are clear and understandable, but not actually attainable. Specific objectives should be set to measure explicit progress toward a goal, but the goal itself should always be illusive and just out of reach,  forcing you to always strive for more and to never be satisfied.

One example of just such a goal that would provide a target to aim for and, at the same time, inoculate against the “agony of success,” would be:

                     Always make history.

That means being focused on always doing something new, discovering a better way to do things, finding new challenges and never being satisfied with the history that you have already made. It is important to understand that if you are not making history, you are history. So having a goal of always making history imbues one with the understanding that continued success is not based on what you have done in the past, but what you will do in the future. The fact is, if your goal is to always “make history,” you will continue to win because you will never be content with what has been won.

Another example of a goal that is not specific or attainable, but which clearly offers an aiming-point for success is:

                       Always try to get better.

If you are constantly focused on the goal of “getting better” at everything you do, you will always be moving forward toward success. But because you have not limited yourself with a predetermined definition of success, the goal will always be in front of you; challenging you to do more and be better. If your goal is to always get better, no matter how successful you become, you will never fall prey to the “agony of success,” because success will be defined by how good you can be, not how good you have been.

Another big advantage that comes from having goals that can never be specifically quantified, copied or attained is that you are able to write your own rules and define your own success, rather than being influenced or controlled by the attitudes, expectations and actions of others. The most obvious example of this is the dreaded “peer group pressure.” Individuals and companies shackled to the traditional concept of setting specific, end-game goals become obsessed comparing their performance with those of peers in their group. Peer group comparison becomes an artificial – and often misleading – way to determine if their goals will lead to success, because it is a success defined by what others are doing. As if that were really important.

For those with goals such as “always making history” or “always getting better,” there is significant peer pressure, except the pressure comes from your own performance and your definition of success. Fact is, if you are always making history and always getting better at what you do and how you perform, there will never be a need to compare yourself with others. In reality, you will become the “peer pressure” for others who will never be able to keep up, because they are mired in the limitations of specific goals. With the right type of goals, you will win, not by being on a par with the competition, but by being the competition. And you will never fall prey to the complacency that can trigger the “agony of success.”

And the Moral of the Story …

It is great to have goals, but it is never good to have goals that are just goals. If a goal becomes the end, rather than a successful path to the end, it can inhibit, even limit the potential for true, lasting success. The most effective goal is one that you can explain and understand, but is never finite and constantly challenges you to do more. This allows you to measure yourself and your success based on the ultimate potential of your commitment and talent. When you do that, there is no limit to your success, because you have not put a limit on your success.

 

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The Best Way to Plan for Business Success is to Can the Business Plan

May 7th, 2012 · Business Management, Improving Your Business Leadership

The better plan is to plan to get better

It may strike you as the utmost heresy and against the grain of accepted thinking, but the most over-hyped, over-sold and over-rated concept in business is the need for, and the value gained by,  expending time and effort creating a business plan that seeks to project specific, quantifiable business performance goals. Conversely,  setting and reaching goals – both in life and business – is a critical element to achieving ultimate success. The reason for this seeming incongruity is simple: Few understand the difference between a goal, a plan and a prediction.

The accepted – indeed required – principle of any business is to systematically, meticulously and consistently set specific performance goals, most often referred to as a “business plan.” Countless companies allocate precious resources and time  to create the perfect business plan. The depth of messianic belief that many have in the criticality of developing a quantified business plan cannot be exaggerated.The problem is that these plans are virtually worthless; they do little or nothing  to determine the success of an organization. Worse, they provide their creators with unwarranted confidence that these plans actually work.

What Plan? We Have no Business Plan.

The lunacy of the business plan charade was brought home to me when I was involved in the start-up of LifeUSA as a new life insurance company. Needing financial support to launch the company, we approached Transamerica. After countless meetings, working our way up the bureaucracy, we finally received funding approval from the corporation’s board of directors. But, there was one condition.

While we had convinced all those in authority as to the veracity and potential of our ideas and concepts for growing a successful new life insurance company, we had failed to do one thing:  submit a business plan. And Transamerica would not release the funding until we delivered a business plan.

Here was a start-up company being asked to forecast (predict) what the specific performance and results would be for the next five years. We rushed back to our office, sat around a table picking numbers out of a box like letters for a Scrabble game and committed to our plan “proving” that we would be successful. The “business plan” was submitted to Transamerica and the funding was released. I kid you not!

Once this happened,  our mercurial “business plan” never again saw the light and Transamerica never asked us about it. Of course, the reason for this was because LifeUSA became more successful than even our make-believe business plan had prophesied.

Look to Your Own Experience

Anyone who has ever worked for a large company knows the pain and pestilence of the business plan process; and that once it is completed and approved, it is seldom seen again. But the pervasiveness of the business plan ritual infects all sizes of companies.

Recently, I was approached to counsel an individual with a dream to open a retail store. At the first meeting I was presented with a beautifully bound, detailed business plan. This plan, diligently prepared, purported to present a full five years of sales, expenses and profits. Ninety percent of the “plan” dealt with the numbers in a way designed to convince the reader that success was virtually preordained. Ten percent of the “plan” offered the vision, passion and ideas of the entrepreneur who felt they would differentiate her store from the competition.

You can’t fault this person for approaching her dream this way, because that is the way it is “supposed” to be done. It is de rigueur. But the truth is that success – both for start-ups and established companies – will ultimately be based on the vision, passion, ideas and efforts of those owning and involved in the effort. In short, their success will be based on the ability to make the future, not predict it.

Don’t get me wrong. It is important to have goals and a plan for success. The problem is that typical business plans are a waste of time and and about as prescient as a deck of Tarot cards. The biggest fallacy of the business plan process is that, like a battle plan in war, they are developed in a static vacuum—not in the changing dynamics of the real world. No battle plan for war has ever survived the first shot and no business plan has ever survived the first quarter. (I would love to have a $1 for every business plan that is “re-forecast” during its term.) The fact is that the projections made in every business plan ever developed have proved to be wrong. Why on earth, then,  would you want to put time and effort into something that you know, from the start, will be wrong?

The Smart Way to Approach the Planning Process

First, one has to understand that business, like golf, is a game that can never be won. You may be able to win a golf tournament by beating the other golfers, but you can never beat golf. Professional golfers understand this concept and for that reason you will never see a golfer start a year with a “golf plan” for success that attempts to predict how many shots they will take, how many birdies will be made, what their “market share” of the prize money will be, or how many tournaments they will capture. They recognize that you can’t control the environment or what the other golfers will do, so they focus on what they can do to get better. They know that if they do the things they need to do to improve their performance, they will ultimately be successful. This is why you see the greatest golfers in the game – no matter how many tournaments they have won or no matter how old they are – in a constant search and effort to simply get better at playing the game.

The game of business is much the same. You can win at the game but you can never win the game. There will always be a changing environment and new challenges; you can’t control what the others are doing in the game. All you can do is get better at playing the game and that is the “business plan” you should develop. Just like the professional golfer, if you constantly improve your ability to perform in the game, you will achieve success, even if you can’t predict the specifics of that success. The Japanese have a word for this process; it’s called Kaizen. And it means a business philosophy that focuses on continuous improvement in product, procedure and service.

Let me give you an example.

At LifeUSA, our original “Five-Year-Plan” was simple: At the end of five years we will be a national insurance company competing effectively against the largest companies in the industry. There was no effort to predict how many agents would be recruited, how many applications would be received, how much premium would be collected or how much profit would be made. Instead, like the successful professional golfer we focused on what we could do to get better and had confidence that the numbers (whicht we could not predict or control anyway) would take care of themselves. This freedom allowed us to focus on and plan for what we had to do to constantly get better and make our plan happen.

Thus, the LifeUSA business plan was a 180-degree change from what is considered “acceptable” in that 90 percent of the plan dealt with how we planned to do business and why; and 10 percent on the numbers. (The numbers were used – not as a goal – but as a base for budgeting and expense control.)

To measue the progress of the company during this period we developed a simple list of critical performance activities. This list included things like, agents recruited, applications received, premiums collected, expense per application and premium per employee, etc. We knew that if each month, quarter and year these numbers and ratio continued to get better, then we were on the path to success. And guess what? At the end of five years LifeUSA was a national company competing effectively (and profitability) against the largest companies in the industry. LifeUSA had recruited thousands of agents, was producing billions of dollars in premiums and had become the fastest growing company in the industry. The truth is that no “business plan” could have predicted these results and nobody would have believed had they been promised. Instead, our simple plan to consistently do better at what we do could be believed — especially by those working with the company — and as a result it created remarkable results.

And the Moral of the Story …

Traditional “business plans” are a fabrication, fallacy and fool’s gold. The premise of such planning is false on its base, intimidating and often counter-productive. It starts with the premise that the business environment will not change, that competitors are a standing army rather than a constantly improving force,  and that it is possible to predict the future. The plans can become intimidating because everything is focused on the end, rather than how to achieve the end. They can become counter-productive because if the targets are missed – even if the company has dramatically improved – the year is considered a failure. Even if the numbers are achieved – and everyone feels good about the results – it masks the potential that the numbers could have been even better.

It all comes down to the fact that if your plan is to consistently get better at what you do and plan to do that, then the end result will always be better than what you could have ever planned for.

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WARNING: The Potential Side Effects of Discussing Health Care Reform may Include Elevated Blood Pressure, Early Onset Dementia, Constipation of the Brain and Excessive Paranoia.

April 30th, 2012 · Business Ethics, Politics and Politicians Gone Awry

No blog subject – no matter how controversial – brings a quicker, more passionate and vitriolic response than does one discussing health care reform. The good news is that any blog dealing with health care reform causes an immediate spike in web site visits, but the downside is that most responses end with something to the effect, “I will never read your #?& blog again!”

This reaction was epitomized following my recent blog “Health Care Reform: Complicated Problem – Simple Solution.” Frankly, I was neither surprised nor offended by the negative, passionate viewpoints of many who read the blog. (Hell! I am just happy so many people read the blog.) But I am disappointed that many of the respondents exhibited such a lack of independent, individual critical thinking and instead fell back on the tired old pabulum of disingenuous arguments dished out by the insurance industry and other special interest groups that have a financial stake in the current health care system. (I know this attitude may upset those respondents, but they are unlikely to read this anyway; so who cares?)

I sometimes wonder if real people are actually posting these comments since their carping exhibits certain mirror-like qualities, and – most telling – they ignore the specifics of what was actually written in the blog. You’d think these hasty missives were generated by a seditious Internet “bot” that uses “health care” as a keyword to post these comments. (Am I being paranoid here?)

Missing The Mark

For example, the central theme of my health care blog asked one, simple question:

Should basic health care be a right or
a privilege for all American citizens?

That seems like a simple, straightforward, yes-no, binary question. Either you believe that basic health care should be a right afforded to all citizens just as they are guaranteed free speech, the right to vote, a public education and “life, liberty and the pursuit of happiness.” Or, you believe that receiving basic health care is a privilege available only for those who can afford and find it. In other words, it’s akin to attending a private school, flying first-class or buying a more expensive new car.

Yet, as simple a choice as that may be, not one of the respondents made an effort to address or answer that question. I guess this means the question was too complicated for them, they didn’t have the courage to take a stand, or they have the mental capacity of a parrot that can repeat, but not understand, the specific words and phrases said to them over and over.

Look, I can respect –even if I don’t agree with — those who sincerely believe basic health care for American citizens is a privilege available only for those who can afford and find it and not a right for the rest of us. After all, one of the rights we all have is the right to disagree. But I disdain those who lack the guts to take a stance by directly answering the key question. I even have a modicum of respect for health insurance companies (and we all know “corporations are people”) that have made it abundantly clear by their actions, lobbying and political contributions, their stance that health care is a privilege and not a right. It may not be possible for these blog bashers to be forthright in their response to the most basic question in the health care debate, but we can examine the logic of the arguments they make opposing health care for all Americans. Most of these arguments center on what they view as the sanctity of “personal liberty” and “right of free-choice.”

The argument as espoused is that individuals – not the government – should be free to decide if they even want health coverage, what form it takes and where they can buy it. For them, it is a violation of their “personal liberty” for government to “mandate” that individuals must purchase some type of basic coverage. I have no problem giving people the freedom to make that choice. But if they do decide to forgo health coverage for themselves or their family, they should be willing to sign a waiver agreeing that if they ever do get sick, they are fully responsible for all costs of care. Because if they don’t, you know who will end up paying for their “freedom” to decide not to have health care coverage. But more importantly, the issue is not about those who have the resources to “self-insure” or can find private coverage; the concern is for those who lack the means to buy private insurance (at prices set by companies) and those who have the resources, but can’t find an insurance company willing to issue a policy. Shouldn’t there be some option – private or public – for these groups to have the “individual freedom” to have access to and acquire basic health care coverage (which at the present time is made up of almost 50 million Americans)?

The Mandate

The real hang-up for those who oppose health care reform is the idea of a “mandate” coming from government requiring the purchase of some type of health coverage. For them it is the litmus test in the battle between individual freedom and government oppression. It is their sincere belief that government has neither the moral authority or constitutional power to compel an individual to do what they don’t want to do or to buy what they don’t want to buy.

This, of course, is ludicrous logic, which if taken to its full course, leads to anarchy. The essence of any government is the power to mandate compliance with the rules of society. Without the power to mandate, any government ceases to exist and soon thereafter, so will organized society. Of course the power of any government must only come as a mandate from the governed and it must be balanced in a way to benefit all of society, sometimes even at the expense of unfettered individual liberty.

The real problem in the health care debate is that the power brokers and special interests that oppose health care for all Americans have consciously corrupted the intent and objective of the “health care mandate” by tying it to the emotional issue of “individual freedom,” as opposed to what is best for society in general. People are being led to believe that they are being “mandated” to do something they don’t want to do and therefore their individual rights are being violated. But, that is not the case.

The “mandate” is simple and far less nefarious than people are led to believe. It starts with the assumption that everyone – rich, poor, old and young – need and want basic health care coverage. Then it says you have two options: You can either be covered by programs offered by the government or required to be provided by your employer or you have the freedom to purchase any private plan you desire and can find. However, for the overall protection and benefit of society, you are “mandated” to pick one of the options. And the reason why is patently (and fiscally) clear: If you don’t pick either option and get sick, then society will be stuck paying for the cost of your freedom to decide not to have health care coverage.

Unfortunately, the success of those opposed to health care reform to link the emotional issues of “individual freedom” and “mandates” together in a way that makes them seem in conflict, when in this case they are actually complementary, has led to some deeply irrational and kooky arguments.

An example of just how kooky things can get is one response to the previous blog on health care. It earns the first prize in the category of convoluted thinking. Here is the argument, reproduced as submitted:

“do people have the right to drive a car or is it a privilege. everyone needs transportation. must we then mandate that we buy everyone a car. As long as your asking someone else to pay your bills through a mandate it’s wrong. health care without some restrictions would drive the price out of site for all private companies and individuals. That’s what obamacare will do for everyone, but health care will be worse for most except the very rich.”

Beside proving that he slept through his (mandated) middle school English class, give the writer credit for one thing: In one tortured, convoluted paragraph he is able to cover the entire waterfront of the health care debate even though his logic went out with the tide.

The person is correct when he writes that everyone needs transportation, but he seems to be oblivious of the fact that cities, states and the federal government spend billions of dollars to provide “public transportation,” that is available for those who exercise their freedom not to buy a car or cannot afford either car or bicycle. Of course, we are all “mandated” to pay for this with our taxes, even if we don’t use public transportation, or sleep through English.

It is hard to tell, but his paragraph seems to suggest that “individual freedom” for anyone who needs transportation is defined by their ability to find it on their own or do without. While it is a big leap from figuring out how to get to work to figuring out to how to obtain and pay for basic health care, his logic seems to be leading us to believe that “individual freedom” for those who need health care coverage but can’t afford or find it – is to do without. The writer clearly believes it is wrong “asking someone else to pay your bills through a mandate.” Which leads me to wonder if he has ever received benefits under Medicare, which, if he has, means that others have helped pay his bills? (Lest we forget, Medicare is a mandated government program requiring all to contribute to and participate; which, unlike Obamacare, offers no “individual freedom” to opt out and secure private coverage. Even if one can afford and find it.)

This person argues elsewhere that, “health care without some restrictions would drive the price out of site…” (sic) I could not agree more, but no one – specifically not Obamacare – is asking for health care without restrictions; just that everyone have a right to receive “basic” health care. This gentleman may have forgotten that one of the main Republican attacks against Obamacare was that there were restrictions on coverage. Does he not recall the infamous brouhaha raised by the Republicans over the Obamacare “Death Panel” that would supposedly restrict and control benefits?

In one final killer dagger to the heart of health care reform this guy nails it when he declares that under the mandate of Obamacare, “health care will be worse for most except the very rich.” What is worse than no coverage at all? And isn’t that the real problem now, that health care really only works for the very rich?

As long as we have gone this far, let’s address one final issue that is central to the health care debate. Many are genuinely concerned with the propriety (if not legality) of “mandating” individuals to “pay” for benefits received by others or to receive benefits “paid for” by others. One respondent put it succinctly: “Do I have the right to force someone else to pay for my health care? If so, then that person no longer has the right to their liberty. One cannot have BOTH the right of liberty AND the right to health care. I prefer freedom.” This person is obviously sincere, but once again, the reality and logic of her comments are faulty.

It is the fundamental nature of any insurance program – public or private – that the benefits received by one are paid for by others. For example, if you buy a $250,000 fire insurance policy on your home, you will never come close to ever paying $250,000 in premiums, but if your home burns down, you will receive a check for $250,000. Where does the extra amount come from? Do you think the insurance company just gratuitously ponies up $250,000 of their own money? Of course not; your benefits are paid for by all others who also have a fire insurance policy with that company. Likewise, if another person’s home burns down, a portion of the premiums you have paid will go to pay the benefit they receive. Is this wrong? No, it is how insurance works.

Consider Social Security. We are all “mandated” to buy into the program and pay “premiums” during our working years, so that we can begin to receive benefits at retirement. It only takes a few years of receiving Social Security payments for them to exceed the amount of taxes we have contributed. Does that mean the payments stop? Of course not, they continue for as long as you live. So who pays for these benefits? They are paid for by others who are still working and contributing to the plan; just as you did when you were working. Is this wrong? No, it is how insurance works. With universal benefit programs such as Social Security it is necessary for financial soundness to “mandate” that all participate. (The financial problems with Social Security are not the fault of the soundness of the plan, but because our friendly politicians have “borrowed” money out of Social Security to pay for other things.)

If it is determined that basic health care is a right for all citizens, then to work effectively and to be on a sound financial basis it must be structured like any other insurance program. As such, others will pay much of the benefits you receive in the program and some of your payments into the plan will be used to pay benefits for others. As with any universal benefit plan, all must be “mandated” to participate in order for it to be financially sound. But, unless you never go to a doctor or get sick, the benefits you receive will always exceed the amount you have contributed and those benefits will be paid for by all the other participants.

Give me Liberty or . . .?

The final part of the respondent’s comments argued that the concept of a “right” and “liberty” are mutually exclusive. That you can’t have both and you must pick between the two. This is faulty logic. We all have a “right” to a basic public education; does this mean that we lose our “liberty” to go to a private school? We have a “right” to police protection; does that mean we lose our “liberty” to hire a security service? We have a “right” to free speech; does that mean we lose our “liberty” when the government “mandates” that we can’t yell “FIRE!” in a crowded theater? When women were given the “right” to vote; did that mean that men lost their “liberty?” (Well maybe, but that is for another discussion.)

The beauty of this country and the government we have selected is that as “rights” have been recognized and made available to all, it has expanded “liberty” for all. All American citizens deserve the right to receive basic health care; if for no other reason than it is the right thing to do.

And the Moral of the Story …

This all leads us back to the fundamental question at hand: Should every American citizen have the right to receive basic health care? If the answer is “no,” then we are done. We are saying that we are satisfied with the current system that allows private insurance companies to ration health care with the objective of making a profit. We are satisfied with a system that excludes 50 million Americans from any coverage and provides inadequate, prohibitively expensive coverage to millions more. If the answer is “yes,” that basic health care should be a fundamental right of all Americans, then we have a lot to do. But the debate will switch from emotional and irrational arguments about the problem to finding ways to solve the problem. And we have always been better as a society when we have sought to work together to expand the rights of others in a way that expands freedom and liberty for all.

 

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