Bob MacDonald on Business

Sage Advice for Superior Business Management

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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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IRAQ IS BACK!!!

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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Having a Sense of Urgency is the Only Way to Avoid a Sense of Panic

August 3rd, 2014 · Business Management, Improving Your Business Leadership, Politics and Politicians Gone Awry

When a sense of urgency is missing, crisis management becomes the SOP.

All of us have experienced the feeling of panic as the deadline to complete a task that seemed buried in the distance future suddenly hangs ominously before us. Remember those school days when we were given ample notice of a term paper due, but kept putting it off till the last minute? Then, when we were reduced to panic city we just threw something together to get by.

There is no better example of this adolescent lack of a sense of urgency than the spectacle we witnessed this week in the halls of the US Congress. Members of Congress panichave known since the icy winds of January blew down Independence Avenue that they faced an August 1st deadline to pass critical legislation. That’s when lawmakers would break for a five-week vacation.

That reality should have created a sense of urgency to get things done in a systematic fashion. But noooo. They dallied for seven long months until the deadline was mere hours away. Then they were forced to cram all of the work into the three final frenetic days of the session. It is no surprise that neither our term paper nor the actions of Congress received passing grades. And it didn’t have to be that way.

The Magic of a Sense of Urgency

When decisions are made under crisis pressure they have the high risk of being bad decisions because they are targeted to meet the short-term predicament, rather than provide the needed long-term solutions. Having a sense of urgency means making decisions on important issues now, not pushing them off to when the pressure of a deadline forces panic choices. And the advantage of having a sense of urgency is that opportunities, issues and problems are tackled and dealt with when they arise and are not pushed off into the future when – facing a fixed deadline – they become a crisis.

The lack of a sense of urgency in facing change, opportunity or issues is a symptom of complacency. We may have successfully dealt with these issues in the past so there is no reason to worry about them now. There is often the complacent attitude that the deadline is so far off we have plenty of time to “get ‘er done.” The problem is that complacency – in any form and for any reason – ultimately leads to failure. And worse, it can become an egregious habit, a standard operating procedure.

It is my belief that measuring the sense of urgency exhibited by an individual or an organization to get things done is the best indicator of future performance – be it success or failure. Study the rise of a successful individual or organization and you will discover that there was always a high intensity sense of urgency to get things done in order to achieve success. Study the downfall of any successful individual or organization and you will find that as success was achieved complacency crept in and a sense of urgency was lost; leading to an environment of constant crisis management.

So what is this sense of urgency? Some confuse it with frenzied activity; the idea of doing something, anything, just so there is activity, but that is wrong. Just having a meeting about a problem is not exhibiting a sense of urgency, but making sure that a decision comes out of the meeting is. A sense of urgency means that all tasks, decisions and actions are tackled in a consistent timely fashion. But there is a difference between having a sense of urgency and shooting from the hip or making off-the-cuff decisions, just to be doing something.

The truth is that for a sense of urgency to be effective it calls for much more communication, teamwork, organization and planning than it does to be ruled by a looming big deadline. Exhibiting a sense of urgency simply means that you or the organization has a firm determination to get things done; and that calls for preparation, organization and planning.

Having a sense of urgency does not mean there are not deadlines to meet, but the deadlines should be simple and short-term in nature. When a sense of urgency is in place, that ultimate deadline waiting out in the future is never a problem, because all has been done that needs to be done before the deadline arrives; and it has been reached in an organized, systematic and efficient way – with little or no panic.

A Sense of Urgency is not Mystical but it can be Magical

At my former company – LifeUSA Insurance – every effort was made to embed a sense of urgency in the culture. When it came to service – for policyholders and agents – the objective was quality service, delivered quickly and efficiently. To this end the company established a standard called “the 48-hour challenge.” The objective was to issue a new policy within 48 hours of receiving the application at the company. (The industry average at that time was six weeks!) Many steps are required to issue a new policy, but with a deadline of 48 hours always in front of us, there was a high sense of urgency to accomplish the task. Simply put, there was no time for complacency.

You might think this high standard of urgency is easily doable when the company was an eager startup with little business and few employees. But the fact is, we maintained that gold standard when the company grew from five policies a week in the beginning to the time when the company MacDonaldQuotewas issuing thousands of policies each week. And all during this time our rate of success was never less than 98 percent.

Considering the desire for a sense of urgency at LifeUSA, when it came to providing general information and service to agents, can you guess what the group charged to perform this function was called? It was called – “The Fast Team.” Members of the group were proud of that moniker and worked with urgency to make it a reality.

Another big advantage of operating with a sense of urgency is that it wards off bureaucracy. A culture focused on a determination to get things done, leaves little room for the stultifying goo of indecision and delay that comes with bureaucracy. That’s the stuff that only leads to last minute, panicky actions in face of looming deadlines. As opposed to a bureaucratic culture, when a sense of urgency exists, the objective is to make decisions and move forward, not to avoid them and protect the status quo. Individuals working with a sense of urgency focus on what needs to be done and they are not distracted or delayed by the inconsequential aspects of process and procedure so evident in a bureaucracy.

A sense of urgency doesn’t just happen; successful leaders create it.

There is a general belief that the concept of urgency works only in smaller ventures, but that is incorrect. Whether or not an organization operates with a sense of urgency is not determined by the size of an organization, but by the quality of its leadership.

The effective leader of any group recognizes that the anxiety over a looming deadline may stimulate urgent action, but this is the wrong type of urgency that can be more destructive than productive. The strong leader understands that a sense of urgency to do things and to do them now – not tomorrow – is a type of glue that will bind a group together to operate efficiently and effectively.

The challenge for the leader is to focus on and drive a sense of urgency throughout the entire organization, motivating each and every employee. The effective leader understands that start-and-stop efforts cannot instill or retain a sense of urgency in the organization. Priorities need to be clear, consistent, achievable and staunchly supported. Deadlines must be set, adhered to and achieved. Those charged with the responsibility to do what needs to be done must be given the authority to do the job and be held accountable; with clear rewards offered for success. So long as the leader operates with this philosophy, the organization will adopt and maintain the sense of urgency needed to attain and retain success.

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