Bob MacDonald on Business

Sage Advice for Superior Business Management

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Bureaucracy is the Ebola Virus of the Business World

August 24th, 2014 · Business Management

Once a business is infected by bureaucracy, very few survive, let alone thrive.

Everyone likes to rail against the stultifying impact of bureaucracy, but most believe that, like an Ebola virus, once a business culture is infected, nothing can be done about it, so they just shrug their collective shoulders and accept their fate.

That’s a shame. Because by doing the right things at the right time, bureaucracy, just like the Ebola virus, can be defeated. But also like Ebola, if the virus of bureaucracy is not eradicated, or at least contained, it can kill anything it touches.

Breaking Free from the Bureaucratic Straightjacket

The striking thing is that inoculating yourself against the ills of bureaucracy is a fairly straightforward process and it’s almost always effective. While you might not be able to eliminate the plague of bureaucracy, you certainly can become immune to it and still function effectively, even in its midst.bureaucrat_2

There are a number of actions that  savvy businessmen and women have learned to confront bureaucracy—the Ebola of business. The first thing to understand is that the intensity of bureaucratic resistance to a new idea or action is in direct proportion to the potential benefit for the business. In other words, the more opposition your proposed initiative generates within an organization, the more you should be encouraged to pursue it, because it likely is a good idea.

Remember that a bureaucracy exists in an organization to protect the status quo of its existing business model. The philosophy is simple: The organization would not have grown large enough to be bureaucratic if its business model had not been a success, so everything must be done to protect and preserve “the way we have always done it.”

The trouble is, you can’t beat an entrenched bureaucracy by butting heads with it. But you can circumvent its power by going around it. And when you find yourself trapped in a bureaucracy, look for ways to beat it without attacking it.

A Lesson from History

Remember the highly fortified Maginot Line constructed by the French before World War II? This string of concrete obstacles, fortifications and weapons was installed to thwart the advance of the Germans during the 1930s. But surprise, surprise! Rather than attack the French line head-on, the Germans simply went around the formidable barriers and rendered them irrelevant.

The trick to beating a bureaucratic Maginot Line is to outflank the existing business model as much as possible, while still allowing the bureaucrats to believe the ultimate result and control rests within their power. This may seem conflicting – if not confusing mumbo-jumbo – but in reality this “end-around” strategy can be simple.

How 3M Outgrew its Bureaucratic Leanings

3M is a fantastically successful company. But along the way from its meager beginnings in 1902 as a manufacturer of sand paper, it also developed a  famously bureaucratic culture. And because of that bureaucracy, the flow of new products virtually dried up.

In an effort to thwart the embedded bureaucracy, the management of 3M fortuitously decided that new product ideas should be explored outside the existing business model. The company allowed those pushing the new ideas to set up small, independent “companies” to delve into and develop new product ideas.

Since these initiatives were set up outside the existing “business model” they were not a threat to the company bureaucrats who were likewise virtually helpless to stop them. Yet, because they were still part of 3M, the bureaucrats felt that ultimately they would have control.

As a result, some of the most creative and profitable ideas that have helped 3M continue to be successful have come from “outside” the company. Small wonder the company that started as a manufacturer of industrial abrasives now sells some 55,000 different products worldwide, from dental implants to Post-it notes.

Seek approval for your idea or plan at the highest possible level within the organization.

The security system for bureaucratic control of an organization is based upon layer upon layer of approval and checkpoints that become a “black hole,” from which no idea can escape. The way to avoid the roadblocks of bureaucracy and not get sucked into the black hole is to make your proposal as far up the power-pyramid as possible.

When as president of ITT Life – a subsidiary of Hartford Insurance – I developed a marketing plan that was in diametric conflict with the Hartford business model. (I wanted to compete against the other insurance companies, rather than with them for business.) If I had followed the process and procedure of the Hartford bureaucracy, my plan would have been immediately sucked into the black hole, never to be seen again.

Instead, I waited until the annual “business planning” meeting. This was a large, long meeting in which all the subsidiaries of Hartford presented their business plans to the CEO and senior management of the Hartford. It was at this meeting that I sprung my plan. Needless to say, all the staff bureaucrats attending the meeting were a tad bit upset since this was the first time they had heard of the plan. But this meeting was not a place for the bureaucrats to raise a protest. (For one thing, they did not know how the CEO would react and they certainly didn’t want to be on the wrong side his opinion.)

Bear in mind, my only objective at that meeting was to receive the CEO’s acceptance of the concept of my plan, not the details. Once the concept of the plan had been approved by the CEO (he had assumed the bureaucrats had reviewed the details) the path was not cleared for our actions, but it gave us powerful ammunition to fight the good fight with the bureaucrats.

Agreement from the “bigwigs (at least bigger wigs than you are) on you concept is all the license you need to battle the bureaucrats over the details. No true-blue bureaucrat ever wants to appear to be in a position of disagreeing with those at levels above him or her. As a result, the more levels of bureaucratic roadblocks you can outflank to present your idea to higher levels of the company, the more chance you have to beat bureaucracy and be successful.

Always allow the bureaucrats to believe they are still in control.

I call this the “Br’er Rabbit” strategy because your success rests on being a trickster who wins using wits rather than brawn. Use your wits and planning to overcome those who seek to block your plans. In simple terms, never get in a planning (or pissing) session with bureaucrats. Remember, your objective and those of the bureaucrat are invariably in direct conflict. The way to resolve this conflict is to present the bureaucrat with a plan and what appear to be various options. Bureaucrats are less threatened and can sometimes even help, when you lay out specific plans and offer them the right to be involved. And if you do it right, whatever option they pick you can live with because you have selected the choices.

Once the concept has been approved, be relentless moving forward without waiting to gain agreement on the details.

If you live and operate in a bureaucratic world, you will never ever receive final sign-off on the details, so don’t waste your time waiting. The Bureaucracymantra for the bureaucrat is, “Okay, we approve what you are doing, but we just need you to make a few changes and everything will be fine.” Don’t believe it. There will always, always be “just one more thing.”

The best way of avoiding being bogged down in a debate over details is to move forward under the assumption of implied consent. You know the old saying about keeping one step ahead of the sheriff? Well, if you are to be successful fighting bureaucracy, the same logic needs to apply. You have to constantly keep one step ahead of the bureaucrats. If you let them catch up or get ahead of you, they will build roadblocks. If you keep them in your dust, all they can do is shake their fists at you.

And the Moral of the Story …

Never forget that bureaucrats never give up. Bureaucrats have nothing to do but be bureaucrats. If they stop trying to do nothing, they will have nothing to do. Bureaucrats are more dangerous than a jilted lover who works in a gun store. A good bureaucrat is nothing if not relentless. Understand that they have more resiliency and comeback power than crabgrass on steroids. The only way to outflank them is to be even more determined and resilient.

Never talk yourself into believing that you can eradicate the Ebola virus of bureaucracy, but you do have the power to take simple actions that allow you to circumvent and contain it. But to do so you have to be just as committed – if not more so – to getting something accomplished as bureaucrats who define accomplishment as doing nothing.

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Keep It Simple, Stupid

August 17th, 2014 · Building Better Business Managers, Business Management, Insurance Marketing

When it comes to solving problems or taking advantage of promising opportunities, all too often too many confuse complex and complicated with innovation and creativity.

Do you remember the first time someone explained the “KISS” formula to you? For me, it was probably my first day as an insurance agent in 1965. A grizzled veteran (he was probably 35) sat me down and said, “Kid, I want you to know that the secret to success is the KISS.” Seeing my perplexed look, he leaned forward and said, “Keep it simple stupid.” It was a lesson I took to heart, but over the years I was struck by how often that concept was propagated and then totally ignored.

Even today, I never cease to be taken aback by the extent some business wonks will go to take Kisssomething simple and make it complicated. The life insurance industry is certainly not alone in doing this, but it does set the gold standard when it comes to offering incredibly complex solutions for simple, straight-forward problems. In falling prey to the fallacy that complexity equates to creativity or innovation, the life insurance industry lost touch with the three attributes that were the basis for its past success – simplicity, safety and security. In so doing, the industry has put its success, profitability and even future viability at risk.

You don’t have to be in the life insurance business to learn from its missteps. By understanding the false assumptions, critical mistakes and shortsighted actions taken by the leaders of the life insurance industry, anyone in any industry, can learn that simple is better. Those responsible for the success of an organization can be more effective, efficient and successful when they recognize that byzantine solutions to simple, straightforward problems – such as those adopted by the life insurance industry – often only make the problem worse.

The 20th century was glory-time for the life insurance industry. By offering a simple solution to a vexing problem, the life insurance industry evolved from an obscure group of small companies catering to the elite into a ubiquitous highly-powerful industry meeting the needs of the masses. As the Industrial Revolution drew people from a self-sustaining life on farms to the cities and onto the payrolls of factories, the survival of families became dependent upon a salary earned by the husband, instead of crops raised by the family. Families soon recognized the risk to financial survival should the head of the family die and the cash stopped. For the first time in history, people became concerned about the economic cost of dying young; and during most of the 20th century people did die young.

The life insurance industry perceptively recognized the emerging opportunity and stepped up with a simple solution to the problem. They began to offer an easy to understand, affordable product that made the simple promise that the insurance company would be there to provide cash for the family if the breadwinner died. Using this unpretentious approach to a pressing consumer need, by the 1950’s life insurance was considered a necessity for any young family; so much so that even the government gave the product tax-favored status. And for their effort, life insurance companies became some of the largest and most profitable financial institutions in the world.

But times changed. By the latter stages of the 20th century longevity for men had been extended from 42 to 74 years. (Even longer for women!) Almost overnight consumers became less concerned with the cost of dying too soon and became focused on the cost of living too long. By the end of the 20th century, the pressing – even frightening – financial question changed from: Will I live as long as my family needs income? to “Will my income live as long as I do?

This new financial concern created an even greater opportunity for life insurance companies, because of all financial-type companies, life insurance companies were best structured solve this problem and benefit from the opportunity to do so. Unfortunately – happy with the past – the industry was late to recognize the change and was even more reluctant to respond to it. The life insurance industry paid a high premium for this recalcitrance to change; seeing its products move from the forefront of consumer needs to nothing more than an afterthought. The result was what might be expected: reduced sales, declining profits, consolidation and even failure within the industry.

When the honchos of the life insurance industry finally acknowledged the change in consumer needs and wants, they compounded their tardiness by ignoring the very strengths that initially built the industry – simplicity, safety and security. And even worse, they exacerbated the problem by attempting to replicate the products of banks and investment companies, rather than concentrating on the strengths and advantages of their own industry.

When it comes to an individual’s concern for financial security between the time of retirement and death, the vast majority of consumers have only two questions: Will the money I have be safe? Will the income my money produces last as long as I do? That’s it – nothing more – simple and sweet. All else is extraneous and of declining value that only serves to complicate and confuse the solution; while delaying action.

I know there are those who believe the primary motivating factor for the consumer is the level of income, not the safety or longevity of the income, but they are wrong! Striving for the maximum level of income as the basis for a sale, is only an excuse and invitation to make the solution more complex and complicated. (Just like investment products!) The race to provide the most income leads to layer upon layer of complexity and convoluted “benefits” that only serve to confuse and confound; literally losing sight of the simple problem to be solved.

As the life insurance industry has painfully learned, this mindset can lead to troublesome regulatory Insurance_Stabilityissues, suitability questions and expensive litigation, caused by products so complicated and complex that not even the salesperson can understand them, let alone the consumer. And it is all for naught, because the reality is that not all, but the vast majority of consumers would opt for lower income in exchange for the absolute certainty that their money is safe and the income will continue, no matter how long they live; as opposed to a little higher income, but with less certainty that their money is safe and that the income will live as long as they do. (People can adjust their standard of living to a guaranteed fixed income much easier than they can to one that is variable and uncertain.)

In doing research for this blog, I looked at “product sheets” for two companies selling income products. One company offered 37 different variations of product, while the second company topped its competitor by offering 47 different products; all intended to meet one simple problem. That’s two companies – out of a very large industry – offering 83 different types of income products; just imagine how many there are in total!

Why is it that companies would respond to such a simple need, with so much complexity and befuddling products? Well, believe it or not, one answer is – because they can. Lacking an understanding of the true creativity of simplicity, insurance companies have defined innovation and ingenuity as the number of “new products” that can be put on the street. Another problem is that often insurance executives (most whom have never been face to face with a consumer) believe that the best strategy to increase sales is to be all things to all people. This philosophy requires products that target even the smallest sliver of the market, rather than the largest segment of the market. This approach leads to increasing complexity and confusion, both among consumers and salespeople charged with selling the products.

In fairness to the companies, insurance agents are also at the root of this complexity. Agents tend to believe that if the company will give them “just one more new product,” their sales will significantly increase. This belief is born out of the idea (hope) that a product can sell itself, but that never happens. The value of the agent is to sell the product, not take orders. The more products there are to offer and the increased complexity that comes along with them means the agents spend more time explaining (often what they don’t understand themselves) and less time selling.

Insurance companies and their agents will do better and their future will be brighter if they get back to the same formula that sparked industry success 100 years ago – KISS! The insurance industry should remember its name – insurance – and develop income products based on simplicity, safety and security. The insurance companies should take advantage of the fact that they are the only institutions that can provide a simple solution to financial needs, guarantee the safety of capital and offer the security of providing an income that cannot be outlived.

Sure, these products would not be flashy and sexy, but they would be simple, easy to understand and meet the needs of most consumers to protect their money and security in retirement. Remember, life insurance was never a sexy product, but people bought it in droves because it met their needs for safety and security. The life insurance industry enjoyed its greatest growth and prosperity when its products were simple, easy to understand and based on the inherent value of meeting a financial need and they can again if they just remember KISS.

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August 10th, 2014 · Building Better Business Managers, Business Management, Improving Your Business Leadership, Politics and Politicians Gone Awry

Despite promises to the contrary, America is creeping back into the internecine sectarian conflict in Iraq.

In the immortal words of Chester A. Riley, “What a revoltin’ development this is!” (Except for regular readers like Marvis Anderson, you probably are too young to remember this iconic line often evoked by William Bendix on the 1950′s television show Life of Riley) Nevertheless, the sentiment almost certainly best expresses the feelings of most when it comes to America’s active military reengagement in Iraq.

One has to ask: Will we never learn from the mistakes of the past to prevent mistakes in the present? It’s not the purpose of this piece to explore or take sides in the debate over past, present or future involvement in Iraq, but our history in Iraq can serve as a superb leadership “teaching lesson.” For those who seek to be strong, effective leaders, knowing the history and observing the actions – good or bad – of those in position of leadership during our years in Iraq, is a great way to learn lessons that can help anyone become a successful leader.

History should teach us

Any objective analysis of the history of America’s involvement in Iraq since the launch of the “shock and awe” aerial attack in March, 2003, right up to last Friday’s bombing of Islamic militant positions in northern Iraq will show that virtually every fundamental principle of good leadership has been violated — again and again.

Starting with President Bush’s flawed justification for involvement in Iraq – based on nonexistent or manufactured intelligence – right up to President Obama’s rationalization for the current bombing – to protect American diplomats – virtually every decision was reactive rather than proactive. They all lacked the must-have components of successful leadership.

Fortuitously, anyone who recognizes, understands and seeks to learn from these mistakes can’t help but be a better leader. So what are we to learn from the muddled leadership that plagued the incursion in Iraq resulting in the loss of thousands of American lives (not to mention several hundred thousand Iraqis killed) and trillions of dollars – American dollars – wasted?

The first – and maybe most important – lesson to learn is that:

Any objective, large or small, must be realistic, transparent and achievable.

When a goal fails to meet any of these prerequisites – let alone all three of them – the chances of success become unrealistic. The result will be confusion and dissent among followers, causing efforts to be wasted. When President Bush said the objective of the American invasion of Iraq was to “build a free democratic society in Iraq,” he was setting an unrealistic goal; ignoring centuries of sectarian and religious conflict between the sects and tribes that populated the area of Iraq. Ironically, President Obama committed exactly the same error by setting the same objectives in Afghanistan.

Another basic lesson to learn is that as a leader, never promise more than you can deliver and always deliver more than you promise. When MissionaccomplishedObama “ended the Iraq war” and withdrew all troops, he made the promise that “America’s involvement in the war was over” and Iraq would have to rise or fall on its own; America would not return to the war. Now stuck with that pledge, he has to search for excuses to go back on his promise. “We are not getting back into the conflict,” says Obama, “but just protecting our people who are there.” (If Obama’s real objective is to protect the American diplomats in the Kurdish capital of Erbil, why not just evacuate them?) Making a promise that can’t be or isn’t delivered on by the leader only serves to weaken the leader.

One could go on and on with specific examples of how those who propagated and managed the war in Iraq violated fundamental principles of leadership, but it would be better to explore the core tenets of effective leadership that were so utterly nonexistent from our political leaders in the Iraq war.

Successful leaders always exhibit the four Cs: They are clear, constant, consistent and concise in what they say, seek and do. It sounds so simple, but these four Cs are essential and powerful elements of true leadership. In short, leaders not only “talk the talk,” they “walk the walk.” (The Cs displayed by those leaders running the Iraq war were: Contradictory, inconsistent, complicated and confusing!)

Effective leaders paint a vision of the objective that is clear, focused and easy to understand. And while the objectives may (should) be difficult and challenging, they must be seen as realistically possible. Ask yourself: How clear, focused, understandable and realistic was the vision painted to justify America’s war in Iraq? From effective leaders once a vision has been offered and accepted, there are no contradictions; there are no broken promises; there are no half-baked or shifting agendas.

Consistency must be a hallmark of leadership. Consistency comes down to something very simple: When communicating with followers say what you mean and mean what you say. Measure that type of consistency against what we heard from leaders during the Iraq war. A leader must constantly remind and reinforce the objective in a consistent way. Being consistent does not mean being inflexible in adjusting to shifting conditions, but it means not easily changing direction away from the ultimate objective.

Leaders understand that the best way to keep things moving toward the objective is to always be consciously concise in their communications and direction. The best way to accomplish this is to focus on keeping things simple. The truth is that anyone – especially political leaders and bureaucrats – can take a simple issue and make it complicated, but leadership can be defined as taking a complicated issue and making it simple and understandable. Something we didn’t see much of in the Iraq war.

There is no doubt that always being clear, constant, consistent and concise is not easy. The challenges any leader faces are dynamic, challenging and often changing, but what often differentiates successful leaders from failed ones is the effort to use the four Cs of leadership as their guidelines for their words and action.

And the Moral of the Story …

An effective and ultimately successful leader employs techniques that are – without fail – clear, constant, consistent and concise. Without uniform application of these principles leadership becomes rudderless and ineffective. Inconsistency from a leader breeds confusion, frustration and loss of respect from followers.

The answer for any leader is to consistently say what you mean and mean what you say. Speak the truth concisely and avoid the urge to confuse and complicate. And, above all establish a clear vision of the objective and constantly keep that vision before those charged with making it happen. One final thought: Effective leaders never promise more than they can deliver and always deliver more than they promise.

The truth is that if this style of leadership had been applied to Iraq, our actions would have been significantly different and there would be no discussion of going back in to make the same leadership mistakes again. Particularly the kind open-ended military mission which Obama admits, ” . . . will be a long-term project.”

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