It’s Not Nepotism, He’s My Brother

Okay, the joke is, perhaps, a poor one, though you likely laughed because you can think of people who would say exactly such a statement.

I was asked recently regarding an inherent bias toward hiring people from my community. While many of the people in my office are from my community, there was actually another reason for this that had little to do with nepotism. It was more a matter of convenience, which, after a few years of operating this way, has demonstrated certain limitations.

The convenience is the fact that these people are easy to find via existing community listings and mailing lists. An email to my network can produce several responses with resumes, usually within a couple hours. If background information on a candidate is needed, it’s usually pretty easy to get that information.

However, the cost is in regard to time away from work – as the employees all are from the same community, their holidays all coincide, and they will all have the same restrictions regarding when they will work.

That’s not to say that I would not hire within my community or network, or even that I would not give preference to someone from that group over a candidate from without. However, the evaluation, to avoid the accusation of nepotism, must start with qualifications for the job, and then the cost to the business of hiring each candidate. Only when those two qualities have been met can nepotism raise it’s head to make a choice.

Businesses do not succeed because of nepotism, but rather, despite nepotism. Success is found by hiring the best qualified people, factoring in their existing skills, their dollar cost, the amount of training they will need, and how they will fit into the culture of the business. Hiring family or friends will often (though not always) meet the last of these criteria, but this is only one of several factors to be considered.

Only once all factors have been considered, and the candidates have been found to be equal in all other respects, can you fairly say “It’s not nepotism, he’s my brother!”

Not Everyone is a Customer

In a recent article I wrote for a local organization, I discussed an approach to networking that involves whispering, not shouting. The article addressed a common issue with organized networking events in which people shamelessly self-promote without establishing connections, turning the event into a mass marketing forum.

What many people fail to realize at such events is that not everyone is a [potential] customer, but that does not mean they are not worthy of your time. The next big lead for your business can come from anywhere or anyone.

Once you realize this fact, though, your approach to networking may change significantly. Instead of trying to push a product or service, you might try to inform. Instead of trying to sell, you might start to listen and have conversations.

Networking is about establishing connections that will endure long beyond any short-term benefit. As an example, you might be able to close a sale with some aggressive marketing for a few cans of paint to someone who just moved into a new house. If you spent time to connect with that person, though, they may have referred you on to their contractor, who would continue to buy from you for many years. Does that mean that you should not sell to anyone who could use your service?

Not really – it just means that your approach might need to be fine-tuned. Listen, connect, interact. Eventually, the sale will come. If you provide paint, as in my previous example, then the person who moved might ask you if you sell privately, or only to contractors and professional painters. Not only have you opened yourself to the possibility of referrals, you have managed to close the immediate sale as well with far less effort.

Oddly enough, many people are well aware of this sales technique, and yet they persevere with the bullhorn approach to networking. Perhaps this is because when they enter the events, they are seeing other people behave this way, and they immediately try to fit in.

From personal experience, though, I’ve found that you’ll actually make more of an impact if you use the soft-sell approach – you’re at the event not to sell products or services, but to meet people. When you tell others this, they will be initially surprised, and try to find the ulterior motive. But if there truly isn’t one, you’ll have made great progress is establishing new connections that will have the potential for huge returns over the long-term.

The Value of Your Time

Over the last few weeks, I have been sent requests for articles from a variety of people, for many different reasons. In each case, there was to be no direct compensation for my work, though there would be significant exposure and references back to my website. As the revenue model of my site itself is mostly indirect, the conversion rate on my site from viewer to client is extremely low. The one direct revenue model, being an Amazon affiliate, has shown minimal value to me over the time I’ve been recommending products on their site.

When the most recent request for articles came in, I decided to run a basic calculation of what that article would cost me, and whether or not it is worth my while to write for yet another site. Essentially, I was trying to predict what the return on my investment, or ROI, would be based on the new exposure.

The first part of this was fairly simple. Writing an article for another site, once I have a topic or subject selected, takes me about 15 to 30 minutes on average. Writing one such article a week puts the cost of the article at about $50 of my time, considering that I will also have to spend some time thinking of a topic to write about. For a given site, I would write about one article a week, which translates into an annual cost of $2,500 worth of my time.

The second part was harder – how do I compute my conversion rate for my site? As mentioned above, the purchases made on Amazon are negligible, and so do not factor into the equation. What I needed to determine was how many people would contact me, via my site, for more information about a service that I offer, and how many of those would eventually become clients. Additionally, since some projects are really small, and others fairly large, determining the average revenue generated by a single client is a fairly complex task.

Additionally, many of the clients I’ve acquired via my site have required additional work on my part, and have actually been driven to my site by my efforts elsewhere on the web. Gaining additional readers on my site might have a measurable value, but without direct interaction, it could have no value at all.

The question bothered me – how can you calculate the potential ROI for gaining additional exposure for a site which has no direct revenue model, and is being used almost exclusively as a networking tool to gain introductions to new people?

Through discussions with several other people, I determined that the question I was trying to answer had no simple answer – it was asking what value I place on an introduction, and what value I might place on getting thousands of introductions in a short period of time. Does this have value? Absolutely, but perhaps not one that can be quantified.

The value of my time, therefore, could not be measured against the potential return, since there is no metric available for this purpose. As a result, I decided to take the opposite approach, and determine my potential loss if I did not write additional articles.

In this case, the loss would be exposure of a non-quantifiable value, but I would gain 30 minutes per week. Since I don’t have additional writing to do, I would also reduce any associated stress. I could focus on writing articles for this site, which would improve the quality of content here, thereby increasing the likelihood of gaining introductions to my readers.

As such, the case was closed – for the purpose of marketing, I didn’t really need the additional exposure, and so would not, in general, write more. For other reasons, such as supporting a cause, I might write, but it would not be for the sake of additional leads.

I value my time higher than those abstract potential returns.

The View Matters

In reading Scott Berkun’s book Making Things Happen, I learned quite a bit about managing projects. Scott’s background is similar to my own – for years, he was (and possibly still is) a project manager for Microsoft, overseeing large teams working on fairly extensive projects. With a technical background, he wrote the book with a leaning toward developing IT products, though many of his lessons can be applied to any type of project.

One of the points he raises is in regard to the groups of people who establish the vision for a project – that is, who it is that should decide what the project is attempting to accomplish. This is a question that should be of interest to anyone even remotely involved in the management of a project – poor delegation of authority at this point can doom a project. As Scott describes this, there are 3 primary interests that need to be represented in establishing what the goals of the project are.

Customers

Naturally, there should be significant input from the ultimate consumer of the new product, as that consumer knows what they need, and ensures that there will be an ultimate use to the product produced. Often, they are also the ones paying for the work, and therefore need to ensure that they are getting what they pay for.

Marketers

Perhaps a poor word to describe this group, this is the portion of the team that understands how the product will be sold, how money will be made through the project. This group is concerned with the finances of the project, and the product it ultimately produces.

Engineers

Again, not the best word to describe this group, but these are the people who will actually be building the project, whether it be code, a bit of machinery, or some other good. Their concern is feasibility – that is, whether or not the product can be built according to the needs of both other groups, within their limitations and conditions.

Balancing it all out

In a perfect team, there would be equal weight given to each of the three groups, and components of the project would be negotiated between the groups. If any one group exerts too much influence, the result can be disastrous – either going over budget (if the finance aspect of the project doesn’t have a voice), not meeting consumer needs (if the customers don’t have a voice), or not being built at all due to technical limitations (if the engineers don’t have a chance to speak).

In most cases, this balance is quite hard to achieve, and this is, perhaps, what makes project management such a difficult task. It is the job of the project manager to balance these views, to ensure that concerns are addressed, and that authority to make decisions is appropriately delegated. A project manager who can handle this balancing act may be well on the way to running successful project, while one who cannot may be left wondering why each project seems to perform poorly, no matter who’s voice is listened to.

Breaking Down Barriers

In yesterday’s article, I discussed the deal from Dragons’ Den that went to Jason Bellissimo with his novel product, the Handi-Tray. Further investigation, though revealed that the deal did not make it through due diligence, despite the fact that the product was a good one, and the market known. However, Jason was having difficulty in getting restaurants to adopt the tray, and so Brett Wilson walked away from the deal, for the time being.

What fascinated me about all this is the fact that I’ve recently been reading the book Blue Ocean Strategy by W. Chan Kim and Renée Mauborgne (click here for my brief review of the book), in which they address this exact problem in marketing. To break their book down into its most basic pieces, the authors describe two fundamental methods of marketing a new product or service.

In the one method, which they title Red Ocean Strategy, the creator of the product or service is looking to compete in a predefined market for which there are already competing products. As an example, a business might create a new travel mug, and try to sell it in coffee shops and housewares stores. They will compete against all other travel mugs, comparing size, durability, effectiveness, and price. At the end of the day, though, there are a finite number of buyers for the product, and many of them are already committed to other brands. As such, this is a difficult type of market to break into.

The other method is that described by the title, Blue Ocean Strategy. In this, the product defines a new market, which does not have any competition because the product or service is really that new and unique. One example from the book is that of Cirque du Soleil, which combined the circus with stage theater to create a completely new genre of entertainment. Since it is a new market, the competition is not [yet] relevant, and other forms of marketing the product become possible. In my opinion, the Handi-Tray really has the potential to make use of such a strategy.

The Handi-Tray combines a quality serving tray with an advertising medium, which is fairly unique. While either portion on its own would be difficult to market – there are other (possibly inferior) trays available, and there are many ways to create advertising space in a restaurant. However, the two combined is a unique product. This would, perhaps, create a candidate for a Blue Ocean Strategy, with a caveat – they are still competing against existing trays.

Perhaps on of the approaches they may want to take is to look at event-based advertising to get the trays into restaurants. If, for example, a company is booking an entire restaurant for an event, they may be interested in having the trays featuring their company logo be used during their luncheon. At the end of the event, the trays might be left at the restaurant, or they may be taken away with the patrons. However, the wait staff would have been given a free taste of the new tray, the management would have seen some of the possible applications, and look into buying them.

If you’re looking to start a new product or service, it would be worth looking into new and alternative ways of marketing your product. If you can find a way to do so in a novel way, and the product has merit on its own, you may be well on the way to creating a successful product.

Handy Solution Catches a Deal

As with many of the pitches airing this season on Dragons’ Den, it’s somewhat difficult to get a good feeling for the business side of the presentation, with more of the focus of the show being on the banter between the dragons, and less on the actual information in the pitch. One presentation that got a deal, though, displayed something that oddly enough, appealed only to one dragon, and not the one who might have best connected with the product.

Jason Bellissimo came onto the show pitching his new tray to assist waiting staff at restaurants, which he called the Handi-Tray. (In my search for his site, I discovered that there’s actually another product called the Handi-Tray, which is not, as far as I can tell, in any way connected to Jason’s product.) It was designed to allow for easier use by wait staff, along with a spot for including advertising around the edge of the tray.

The first dragon who I thought would be interested was Jim Treliving, who could easily get it into his chain of restaurants, Boston Pizza. However, while he liked the product, Jim didn’t feel it was right for him, with a limited appeal and a lack of connection to the advertising component of the tray.

Next was Arlene Dickinson, who might have been interested on account of the marketing aspect to the product. The display around the rim could have been a secondary product to the tray with its own marketing appeal, but again, Arlene indicated she could not connect to Jason or his Handi-Tray.

Brett Wilson, though, was interested in the product and in investing, but not at the stated terms. While Jason offered a royalty based investment ($1.50 per unit sold), Brett wanted more say in the business itself, and offered the $100,000 investment in exchange for 50% of the business.

The concern Jason had was that he wanted to retain creative control of his company, though he seemed to understand that his need for cash and connections far out-weighed his need for control of the business. An equal partnership also meant that he was likely to gain significant input from Brett along with the cash, the kind of mentorship that many small business owners dream of having. The deal was struck.

Sometimes, it really is worth giving up control of the company, if the person gaining that control can bring more value to the company that you currently have. Additionally, if your business is facing more than just cash flow issues, then looking to banks and such for loans and lines of credit may only serve to lengthen a problem while hiding another.

Reduce Debt or Increase Savings

A lively debate broke out at the office regarding whether it is better to save or better to pay down debt. While the conversation in the office was in regard to personal finances, much of what was said has implications to businesses as well.

A business generally runs a budget that balances both short-term and long-term needs. Every month, money comes in from certain sources, expenses have to be paid, and debt, if any, needs to be managed. In the long-term, money might be needed for acquiring new equipment, or to make a hire. Additionally, some months might have lower than usual revenue, so funds may be needed to cover for that eventuality. Last, there may be some long-term expansion goals that will require significant amounts of money, which will have to be drawn either against debt or against savings.

Of course, there is also the issue of taxation. Depending on the sums involved, the taxes on any unused funds may be quite high, and there may be certain advantageous ways to make use of that money to reduce the tax load. In some cases, spending the money to reduce debt may carry certain advantages, in other cases, investing the money may be better, and in some cases, declaring a dividend to the owners of the company may be the route to take.

However, the thought process that goes into saving over debt-reduction in business is not quite the same as for a personal investor. While a personal investor needs to deal with feelings, since their personal equity is being placed on the line, businesses are concerned with absolute results. The potential savings or costs of each route can be determined with a high degree of certainty, and the eventual needs of the business can likewise be measured. What cannot be measured is the potential returns of a given investment, but that question can be made irrelevant by the savings in other sectors (such as taxation).

Should your business save, or reduce debt? It’s not all about the numbers.

That’s not exactly right – ultimately, any question asked to help settle this decision will involve numbers, more so, perhaps, than with personal investment strategies. However, many of the questions will also involve goals – do you anticipate a need for the money in the near future, or do you see the business rolling along without it for years to come? How much money will you need when it comes time to make certain purchases? If you will need to borrow those sums anyhow, then perhaps an investment strategy is not relevant.

How would you decide? The interest rates alone won’t help you, nor will the tax implications. What you need is a financial advisor who understands not just these two factors, but also the nature of your business and your industry. This creates yet another position on your dream board of directors – a financial advisor who is concerned with more than just budgets, but also with long-term financial planning.

Hiring Without Cultural Change

When a company undergoes expansion, especially in the early years, there is a risk of changes being made to the culture of the company. When the entire company switches from being able to fit into a single [large] room to requiring several thousand square feet of space in each of their 14 new offices, cultural change is viewed as being inevitable.

One company I work with, though, is currently undergoing such a transformation, and they’ve managed to figure out how to expand without any major change to the culture.The CEO of the company, to date, works in the same room as all the employees of the company. While there’s no pool table in the middle of the room and nerf balls are noticeably absent, it still has the feel of a start-up. The culture is pretty laid back, with a focus on the work produced rather than the time worked. Meetings are generally avoided unless absolutely necessary, and delegation of work rules the day.

With the arrival of several large projects requiring a significant staffing increase, his company is about to be put at risk for changes to this culture. After all, while he is able to both pursue new clients, work on the details of any of his projects, and manage his team of half-a-dozen people, in addition to the inevitable trouble-shooting when incidents arise, with the number of staff about to double in the very near future, and possibly double again within 6 months, the style of the business is about to be shocked.

However, as someone who has worked with large corporations, he understands how management does and does not fit into a business, and he is reluctant to create a level of management that could precipitate the company becoming top-heavy.

Instead of looking outside the company for the needed level of management, he has turned inside the company to create an environment that promotes from within. Forget the MBA-toting personalities – he’s looking for people with solid technical skills who have lived and worked inside the culture he wants to maintain. Those who demonstrate leadership qualities may find themselves directing other people in the company on various projects. As new people are brought into the company, they are given a mentor in the form of a more senior employee who inducts them into the culture.

When sufficient employees have been brought into the company, a new team is formed, with one of the existing employees taking on the role of team lead. That person is intended to act as the CEO of that team, being able to delegate work to the team, manage entire projects, and run small budgets for acquiring resources outside the company.

The CEO himself could then distance himself slightly from his involvement in the management of the individual projects. While he would not want to reduce his involvement to the point where he is out of touch with the realities of the business, he can reduce his workload and begin to delegate more. He could continue to wine and dine new clients, getting them to sign on for more projects. He can work on promoting the business. When problems arise, he can step in and help as required.

However, the culture of the company can still remain unchanged, since growth is being done organically, from within. People are brought in at the bottom, and rise according to their aspirations and abilities. As they are brought in, they are shown the culture, and are given the chance to adopt it as their own.

While this strategy begins to degrade as the size of expansions increases, it can work well when working with smaller companies who are undergoing moderate staffing changes. Start the changes from the bottom, not the top, and you’ll see the culture remain stable. Start at the top, and big changes may occur, with little ability to control those changes.