Meta-Programs

We're ignorant as %$*%... OK, I can only speak for myself, but it is appalling to see how much of my business life I have lived in interpersonal ignorance.

Rather then explain, let me give you an example.

Let's say that you are interviewing for a job. What is the optimal interview you can give? Any ideas?

Well, there is no optimal interview.. It's a trick question. Why? The reason is that how "good" your interview goes depends on who your interviewer is as much (if not more than) who you are.

The same exact answers can yield both positive and negative emotions from the one interviewing.

So how do we know how to act? Well, some would say "act yourself" which is a vague and ineffectual answer. This assumes that your best self is your lazy self and that people do not have different sides to their personality, which is just simple wrong. (if you were truly acting yourself you would dress in boxers, not shave, and burp in front of your interviewer).

The truth is that, as I mentioned, everyone has different aspects of themselves. Everyone has felt dominant in some aspects of their life. Everyone has felt like the underdog at some time. Everyone has even felt rich or poor (comparatively), why do you think Obama strikes a chord with both poor people and hedgies (hedge fund managers)?

The real question is not what "your natural self" is. The real question is what is your optimal self for connecting with the individual (notice how I said connecting not sucking up, they are clearly not the same thing).

The answer is as simple as it is easy to implement.. that is if you listen (something I obviously did not do for the majority of my life). The truth is that MOST people will tell you all about themselves in the way they speak and react to things. Most people will talk about their backgrounds and what they admire.

This is where you get clues, from the customer, who in this case is the interviewer.

If the customer says he is from a middle class family, guess where you're from? You say you're from Chicago. If he drives a BMW, guess where you're from? You're from Hinsdale (a very nice suburb of Chicago). BTW, in this case both answers are true, if you are in Indianapolis you say you're from Chicago, when you're in Chicago you say you're from Hinsdale, it is in no way a distortion of the facts.

Bottom Line: Listen to your interviewer and watch his/her reactions to different things that you say. Unfortunately, us humans normally take action without looking at feeback.. even if this means banging our heads against the wall 1000 times. The point is that you choose to highlight certain aspects of your life and personality that you have in common with the interviewer.

This is how you execute an optimal interview.

For more reading check out metaprograms by Tony Robbins.

P.S. By the way, this is not just about interviewing well but about generally creating rapport with people which is very important for any type of negotiation/sale.

Sometimes what is right doesn't matter..

There is a point of maturity that every business person must face where he/she gives up on what is "right" and focuses on what is most effective for the company, at least in terms of customer service.

Business people are often faced with ridiculous and unethical customers that quibble over $20. Sure, if the case was taken to a higher court, etc. you would win, but is it worth it?

By refunding the $20 (or some trivial amount) you don't have to say that the other party is right. All you are saying is that it is more effective to refund the amount then to go through the hassle of dealing with it.

This attitude is the most optimal way of doing business and it is the "right" way to allocate your most precious resources: time and energy (which result in money).

P.S. It is not always right to give in to the other side. A good business person must understand the continuum: when to fight and when not to. With every transaction a separate cost-benefit point exists, the idea is to consider it rather than being rigid or having absolute rules of fight-or-flee.

Another Use for "Start with No"

Another way to use Jim Cam's concepts is when giving advice to people that are very reluctant to take advice. A lot of these individuals feel that it is an attack on their character to get a tip.

Try this:

"Tell me if you disagree with this and if you think it's not applicable but I've heard some people say that... "

By starting the advice this way you get past the individual's blocking sensors and you establish a safe environment for discussion without hurting their ego.

An Interesting Site Recommendation from my friend Max

https://www.rescuetime.com/

Start With No.. why Jim Camp is Brilliant!

In my humble opinion, Jim Camp is the greatest authority on negotiation I have ever read.. and I'm only 51 pages into his book "Start with No".

Here's a nugget for you (I hope I do him justice in summary):

Before every negotiation he recommends saying the following: "before we start this negotiation I want to say that if you don't want to do this deal at any time feel free to say 'NO' and we will reserve the right to do this as well."

There is quite a bit of psychology behind this, I'll try to keep it short:

1) Most negotiations are made through "emotions" while "rational" negotiations are much more effective and beneficial to all parties. Empowering others to say "No" cuts out the BS.

Here is an example from the book:

"The Korean are also known as tenacious negotiators. The Korean company was rightly convinced they should get this technology for free. This was a perfectly natural demand, because, as many readers know, a lot of American companies believe they need to give the technology away for free to get their foot in the door...I'm not talking about a $200k technology, but rather one worth millions of dollars. To my knowledge no American company has said to the Koreans, "No, we don't think so, we believe in a fair profit for our business. Feel free to say no to us in return, but we're not giving you a good piece of our business for nothing...

(Based on my recommendation) the president insisted that he didn't want to give anything away to the Koreans for free. The Koreans protested, "You can't do business like that here!" The team answered to the Koreans at every step of the negotiation inviting them to say "No"...The Koreans placed an order for $30 million."

**David's Note: What in the world was the above example about? The above example, inviting the other party to say NO, is an incredibly effective and courteous way to bargain hard and call out the other parties bullshit.. Simply brilliant. **

2) For people that don't want to come off an asshole (Yes, even me..) empowering the other party to say NO allows us to feel that we are not being pushy yet push for the greatest possible deal. (It's not personal it's business).

Ironically, by giving the other party the ability to say NO we are able to take more NO's from different suppliers (emotionally) and bargain for better terms.

Do you see the power of this? The application of this is both broad as it is deep and significant.

Here are some examples:

1) You see a piece of real estate listed for $150,000 in a poor area, you call up the realtor and say:

"Tell me No if this doesn't work for the client, and my feelings won't be hurt but can you sell this piece of property for $75,000." <--- There is a very likely chance they will counter for a much lower amount.

2) You are looking to get a real good bargain on the VIP suite:

"Tell me No if this doesn't work for the client, and my feelings won't be hurt but can you upgrade us to the VIP suite for $20?"

As you can see, you can apply to virtually any negotiation.. which, by the way, is virtually all yes/no decision.

-Of course, the above method does not guarantee that no one gets upset or offended, but it is certain to cut out 99% of the cases and the other 1% will come from people that are acting very immature anyways.. you can rest assured it is not your fault they are upset.

Advice from experienced entrepreneur and Professor Gerry Hayes

What is the driver of success?

1) Knowing how to read people and relate to them (see: metaprograms and eliciting values)
2) Connections and who you know.
3) Hard work / persistence

Advice from Tech Entrepreneur Bismarck Lepe

"Hire the right people. Ultimately, it's about the people. Any time that we've been unsure about a candidate—sure enough, six months down the line it didn't work out."

The Opposite Frame

Over the years, I have come to the realization, that in order to truly understand a business concept you must understand seemingly opposite perspectives on it.

That is, after all what a paradox is: something that seems to be contradictory but in practice is not.

If you want to learn about negotiation you need to reconcile books on Win-Win negotiation with books like "Start with No".

Until you learn to approach issues with different perspectives you will always be relegated to using the same approach on every issue. You will be like a one trick pony.

The reality is that.. reality is more complex and requires flexibility in thought. Learn the extremes on an issue (business or otherwise) and you will gain the wisdom to deal with it.

The Great Game of Business by Jack Stack

The Higher Laws of Business
1. You get what you give.
2. It's easy to stop one guy, but it's hard to stop 100.
3. What comes around comes around.
4. You do what you gotta do.
5. When people set their own targets, they usually hit them.
6. If nobody pays attention, people stop caring.
7. Shit rolls downhill. By which we mean changes begin at the top.

The Ultimate Higher Law: When you appeal to the highest level of thinking you get the highest level of performance.

Chapter 1: Why We Teach People How to Make Money

It's easy to stop one guy, but it's pretty hard to stop 100.

Winning the Great Game of Business has the greatest reward: constant improvement of your life and your livelihood.

The only way to be secure is to make money and generate cash. Everything else is a means to that end.

No one shows employees how they fit into a bigger picture. No one explains how one person's actions affects another's, how each department depends on the others, what impact they all have on the company as a whole.

At SRC, we teach everybody those rules, and then we build on that simple knowledge and take people all the way to the complexity of ownership.

The Biggest Barrier is Ignorance

1. The ignorance of top management assumes that people down the ladder are incapable of understanding its problems and responsibilities.

2. The ignorance of people on the shop floor and chalk up every mistake in the company to a combination of greed and stupidity.

3. The ignorance of the middle managers means they are constantly torn between the demands of top management and those of the work force.

Workers think profit is a dirty word. They have no idea that more than 40 percent of business profits goes to taxes. They've never heard of retained earnings. They really can't get too excited about making money for somebody else.

What you need is a willingness to learn the rules, master the fundamentals, and play together as a team.

We also give them a big stake in the outcome - in the form of equity, profits, and opportunities to move ahead as far as they want to go.

The Basic Tools of the Game

When people come to SRSC we tell them 70 percent of their job is to do the work and 30 percent is learning. We offer them sessions with accounting staffs, etc.

Then we provide a lot of reinforcement. Once a week, for example, supervisors hold meetings throughout the company to go over the updated financial statements. Each person in the company writes those numbers down and those numbers show how we're doing in relation to our annual goals.

To understand it you have to look at the totality. That's what happens in most organizations: people develop a very narrow focus. The Game takes down walls. It forces people to realize that they're on the same team, and they win or lose together.

In the past, on Fridays, I'd go to a staff meeting where the plant manager said, "We gotta make more money, we gotta be more profitable." But he never taught me how to make more money.

If people don't know, they won't understand, and they won't do the right things, and they'll blame you when the company fails.

Why We Play the Game

Reason #1 for Playing the Game: We Want to Live Up to Our End of the Employment Bargain

I have always believed that you take on a big obligation when you hire somebody. Employment is a two-way street. But as much as possible I want it to be someone's choice whether or not he or she leaves the company.

Everything we do is based on a common understanding that job security is paramount - that we are creating a place for people to work not just this year or five years from now, but for the next fifty years and beyond.

We developed a system that, in effect, delgates the responsibility for job security by giving people a scorecard and a way to influence the score. The Game lets you see for yourself how safe your job really is and shows you what you can do to make it safer.

How ofte have you heard this: "All we ask you is to do the job, nothing more." Well, I don't want people just to do a job. I want them to have a purpose in what the hell they'r edoing. I want them to be going somewhere.

You have to show them that there really are pots at the end of the rainbow, and you can get your pot if you want it and are willing to work for it. Business is a tool for achieving your highest dreams - your financial dreams, that is.

The Game is an attempt to create an environment wherein everybody can take pleasure in their work, even the people who put washers on bolts.

When you teach people, they don't only push washers on bolts, but they think about ways of making her environment better, her position better, her life better.

We can do all that because we have a company filled with people who not only are owners, but who think and act like owners, not like employees. They take initiative and responsibility.

The numbers are an important part of that. They serve as the bond, the basis of trust. By giving people the numbers, I can say to thme, "If you don't believe me, look it up. See if what I'm saying isn't true."

What machines can't do is figure out how to make money. Only people can do that. If you have people who know how to make money, you'll win every time.

Chapter 2: Myths of Management

Myth: Don't Tell People the Truth - They'll Screw You.

"If you've got enough parts to last you a couple weeks, tell em you'll be out of stock by Friday." It got to the point where nobody trusted anyone else's numbers and for good reason. They were all lying to each other to cover their asses.

I discovered that the more honest I was with them, the more they relied on me.

Not only the manager comes up with the answers, everyone needs to come up with the answers. That's what I mean by sharing problems. It's a shared learning experience. It's a way of teaching each other.

The secret is to make contingency planning a habit of mind.

The broader the picture you give people of the company the fewer obstalces they see in their path. It means showing them the challenge, letting them experience the fun of the Game, the fun of winning. It means motivating people with humor and laughter and excitement, which go a heck of a lot further than yelling and screaming and throwing tantrums.

It was a case of taking a big problem and dividing it into a series of little problems, which is the best way to solve any problem.

-The numbers kept going up. When we hit 300 tractors everbody took notice. We put up bar charts, showing exactly what parts we needed, where they were coming from. People could see the whole picture. On Halloween, the last sign went up outside my office window: 808 tractors shipping.

What a celebration we had! We put balloons all around the sign. We had a party. There were pizzas all around. Nobody could believe that we'd beaten the Russians out of their penalty clause. It was great, just great. And I learned something else as well. The experience absolutely convinced me that secrecy is baloney.

Chapter 3: The Feeling of a Winner

How do you start the Great Game of Business? By creating a series of small wins - by showing people how it feels to be a winner. Believe me, that's one of the rarest feelings in business today. Even successful companies are filled with people who are depressed, scared, or dissatisfied.

In a healthy company, you can see and feel the enthusiasm. People nod and smile and look you in the eye.

There are two conditions that have to exist before people are ready to learn about business:

1. Management has to have credibility.

There must be a minimum level of mutual respect and trust. At the very least, they ahve to be willing to give you the benefit of the doubt.

2. Employees have to have some fire in the eyes

You must have enough self-esteem and pride to think winning is important, to want to have fun.

Pride before Ownership

For people to feel like winners, they must have pride in themselves and what they do. Without the sense of ownership and responsibility, they won't play the Game.

We brought in tractors, and people invited their moms and dad and kids to come in and see where they worked. We created a lot of goodwill. It was a way of letting people feel important.

We figured that people would be more likely to keep the shop clean if it was theirs, if they put their mark on it.

We never turned down a chance to compete. We took part in relay races against other companies. If you had perfect attendance for a certain period of time, we would give you a plaque to take home, and we'd take you and your family out to dinner.

We got to the point where people were ready to learn financials, which allowed us to do much more than we could in the beginning.

Winning is not a matter of pride, of course. It is also a habit. Unfortunately, losing can get to be a habit as well.

You have to begin by creating wins and celebrating wins - by making a big deal out of little victories and then building on the little victories to achieve bigger victories.

1. Business is a Team Sport

There are all kinds of games you can set up in a company. Avoid the ones that are divisive. The best games are those that promote teamwork and togetherness, that creates a spirit of cooperation.

Any problem can serve as the basis for a game. Think, "Okay, here's a problem. What kind of game can we set up around this one?"

We began measuring housekeeping as well. We'd have inspections. We quantified the results by giving points, say, if the floor was swept clean, or by taking points away if there was stuff on top of the lockers.

At the same time as you're fostering team spiring, you can also be using the games to build credibility (the safety issue also gave me an opportunity to send a strong message throughout the organization that we care about people).

2. Be Positive, Build Confidence

Managers have a bad habit of focusing on the negative. I've seen statistics showing how managers tend to react quickly to anything that goes wrong and overlook everything that goes right. Keep in mind: one of a manager's main responsibilities is to build confidence in an organization.

We made some mistakes. For example, we decided to give out a scarecrow to the department with the lowest housekeeping score. It didn't work. People quickly lost interest in the game. They got mad, and that defeated the purpose. When you make someone mad, they don't want to compete, and they quit.

Every record represents an opportunity for management to compliment people - to make them feel good, to build confidence and self esteem.

Celebrate every win, even the small ones. If you celebrate a small win, people will follow it up with another, and another, and another. Then the manager's job becomes making sure the fun goes on.

The point is that it's got to be a game. I hadn't realized the fear I was building into the system. When you think about it, the fear came out of being alone. Security comes from being with other people. There's a lot to be said for knowing that everybody's in the same boat with you.

TOO MANY GOALS ARE USELESS. You should have only two or, at most, three goals over the course of a year. What's important is to make sure each goal encompasses five or six things (root cause analysis).. you don't have to tell people to get the parts on time if you can get them to concentrate on getting the tractors out (a form of chunking).

Figure out how much work you have to do each day to get to the point where yo have just one day's stock out on the floor. Then put up a chart and set up a game.

We also set aside special days when people bring their kids into the factory: to build pride and self-esteem.

By sponsoring outside competition, you provide a way for people to take out their anger and frustration in a nonthreatening environment, and you give them opportunities to win that they may not have in their jobs.

We definetly encourage the managers to take part in these competitions. It's another way of knocking down walls.

I really don't want people to work more than forty hours a week. That's enough. People should have balance in their lives. If they do, they'll be happier. Working all the time doesn't help the business, not over the long term.

Sponsorship of outside competitions may be the best bargain in business today. For example, it costs us about $500 to sponsor a softball team consisting of twenty people from the company. They get together, outside the business, at least three hours per week for twenty weeks. That works out to about 42 cents per person per hour. You can also do a golf league.

In return, we get people talking about business after hours. We get a spirit of camaraderie.

Chapter 4 - The Big Picture

Paint the Big Picture for them. Tell them why you're in the business using terms they already understand. Then the numbers will make sense when you get to them. Most of the problems in business today are a direct result of our failure to show people how they fit into the Big Picture. The Big Picture is all about motivation. It's giving people the reason for doing the job, the purpose of working. If you're going to play a game, you have to understand what it means to win.

So the steps so far are:
1. Create a series of small wins.
2. Give people a sense of the Big Picture.
3. Teach the numbers.

Market your products to your employees, don't assume your employees understand those products.

Part of the problem, I realized, was that the work was meaningless to them. These guys had no idea that they were building the trucks that went out on America's highways and moved goods around. They had no idea that they were doing something important.

We brought in beautiful posters of the trucks and tractors... And it worked, I'll never forget the day a guy came to me and said he'd been driving down Mannheim Boulevard with his kid in the car and a big Harvester truck pulled up alongside them. He said, "I told my kid, 'Your daddy built the engine in that truck." And he did build it.

The lesson was: Market to the people who are producing the goods. In fact, you should sell your people before you true to sell the customer.

Move people around - cross utilization gives employees a good sense of how things work in the company. Even if people don't actually move from one job to another, you can broaden their perspective by taking them out of their usual roles and putting them in direct contact with another part of the business.

Suddenly everyone realized that there were real people at the end of this remanufacturing process, that businesses out there depended on the quality we produced.

Draw a Picture - Don't just tell people about the Big Picture, show it to them. Put it in the form of charts and graphs. Anything that can be measured can be turned into a picture - net profits, retail sales, etc... and those pictures are very dramatic.

But the most effective pictures we have aren't charts at all, they are stock certificates that we distribute as a way of giving people physical evidence of their equity in the company and how they have increased their holdings in the past twelve months.

When you don't teach people the Big Picture, you run a constant risk of sending people mixed messages. I know one Fortune 500 company president who sent out word he wanted to improve customer service, so people began building up inventories at the product distribution centers. What he didn't tell them was that he was being evaluatied based on return on assets - that is, net income as a percentage of total assets. Compensation systems are the primary way that companies send mixed messages. You need to get everyone to focus on the Big Picture.

5. Open Book Management

You will always be more successful in business by sharing information with the people you work with than by keeping them in the dark. When you communicate with people through the financial statements, knowledge gets to them quickly, and everybody is able to work together to solve the problem.

I am second to none in believing that business ought to be people-oriented. But no company services its people well by elevating emotions over numbers. That's one of the things I like most about open-book amangement: it takes the emotions out of the business, or at least out of the decision-making process. Emotions can cloud the brain, but the numbers don't lie. Our people see that success in business depends on making sure one plus one comes out to three.

I think emotions have a legitimate role to play in business. I just don't think they should replace solid information about the condition of the company. Let people evaluation the situation for themselves. You can communicate more clearly with numbers.

And when you have bad news to deliver, the numbers are crucial. So the person who is supposed to deliver the news tends to put in the best possible light, which often undercuts the message. But if the message doesn't go through, the problems are only going to get worse.

People hear the message backed by numbers loud and clear. They say, "Boy, we've got to do something about that."

The best way to control costs is to enlist everyone in the effort. That means providing people with the tools that allow them to make the right decisions.

The odd p art is t hat nobody hates surprises more than the manipulative control freaks who practice old-fashioned, secretive, need-to-know management. That way of operating virtually garauntees a steady stream of surprises, because people don't have the tools they need to forecast and project, to live up to their commitments.

Getting over the fears of disclosing your numbers

This is not to deny that it's possible to use a company's numbers to compete against it. We try to find out all we can about our competitor's numbers... Dun & Bradstreet and the other credit bureaus often provide this information.

When the numbers are hidden, people make assumptions, and they're often crazy ones. It's amazing, for example, how many people confuse profit with sales.

The truth is that you've got to give people the bad as well as the good news. It's the only way to build trust and you must have trust, if only because you're bound to make mistakes.

Don't rely on the kind of financial statements provided by CPA's, the numbers have to matter. You want to report the numbers accordingly, emphasizing the ones over which people have control.

Break down categories into controllable elements - if labor is a variable expense, you want people to see it vary. The more information we provided, the more they wanted to know. Their questions told us what information we should be reporting.

The system is so damn logical, you don't have to pound a guy over the head because he doesn't want to work, you pound him over the head because he's missing opportunities that could put money in his pocket.

Almost every element of the company is quantified, from the percentage of the budget spent on receptionists' notepads to the amount of overhead absorbed each hour that a person puts in grinding crankshafts.

6. Setting Standards

Numbers have gotten a bad reputation. Most companies use them as punishment, as tools to supervise, intimidate, control. They don't use numbers as tools to build - to teach people to be more productive.

A standard is the number to shoot for in any particular category you are measuring. It may be a ration, it may be a percentage. Whatever the category, you need a number against which you can compare your results and thereby determine how you're doing (this is benchmarking). That number is standard - the level you can reach if you apply yourself and do a good job.

Within a particular company, moreover, people with different functions need standards that are tailored to their specific jobs and reflect the factors over which they have direct control. Rick Heddon, who runs the warehouse, may be curious to know how the company's current quality compares to past performance and general industry standards, but he is most concerned about meeting his own standards for inventory accuracy and turns.

Don't overdo it, try to track as many high up numbers which have to do with metrics that truly matter.

Numbers don't have to be more complicated then batting averages in the MLB. In business, however, people don't do the calculations because they don't understand the rules. Standards help you teach them.

Numbers Make the Team

Most important, numbers like these help everyone play the same game. People need to have some way of keeping score. Pretty much any target will do, as long as you can explain why it's worth aiming for.

The good news is that it's generally pretty easy to track down your critical numbers, assuming you know your business reasonably well. Pay attention to what keeps you up at night. Better yet, ask your people what keeps them up at night.

Magic aren't magical and they aren't sacred. They are important only as clues to the reality that produces them. Many a profitable company has gone out of business because people neglected to find out the reality behind the number on the bottom line.

You have to understand what really happens in the workplace, how people go about their jobs, and then come up with tools they can use to measure their individual contributions to the common goals.

No matter what business you're in, there are benchmarks and standards, and the chances are that someone has already calculated them. You can usually find them out by digging around.

You can also learn a tremendous amount of information by studying great companies, especially if they're in your industry. Most people are happy to tell you what you want to know unless they see you as a direct competitor, and even then they are often willing to swap information.

Numbers are not a substitute for leadership. What's important is how you use them. Never get so far into the numbers that you leave out the human factor. Tell the stories behind the numbers so that people understand.

What turned people on was the challenge, the fun of the game, the fun of winning. But you can't set up a game like that if you don't have standards.

Key Point: If you can get people beyond the day-to-day issues, if you can appeal to something they really want to do, they'll blow by every obstacle.

Numbers are a critical tool for the CEO. I can see trends emerging before they become crises. The numbers serve as a guide for me. I generally won't stop in until the number begins to establish a pattern... But the nice thing about the financials is that they allow you to develop those trends. It doesn't bother me to see that we have problems. The important thing is whether people are working toward solutions.

Moral: don't accept any number until you know where it came from.

7. Skip the Praise - Give us the raise

If a bonus program works, it can be an incredible motivator. What a bonus program does is communicate goals in the most effective way possible - by putting a bounty on them. Every year, we figure out what is the greatest threat the company faces, and we get the entire work force to go after it in the bonus program.

The program brings us together as a team. It ensures that everyone has the same priorities and that we all stay focused on the same goals. It eliminates mixed messages. When one department is having trouble, another department will send us reinforcements, and everybody understands why.

The program helps us identify problems fast. The bonus program forces the problem out into the open. Once it's there, you can go to work on it. You can solve it.

"This Game is all about equity and job security." Short-term incentives like bonuses are fine, but we want to make sure people never lose sight of the long-term payoffs.

I am strong believer in operating a company, any company, as if its future were always on the line, as if something could happen at any moment to threaten its survival. The numbers help communicate urgency.

When you don't bootstrap you grow fat and sloppy. You get into the habit of buying solutions to your problems.

A good bonus system can help you build a bootstrapping mentality into your organization. It does that by putting a great deal of emphasis on job security - by reminding people what it takes to protect their jobs and by showing them how they can get more.

Stick to two or three goals - giving people a long list of goals is like not having any goals at all. If you only have two or three the pressure is on to perform.

Whenever you can quantify a goal, you can set targets. You can decide how big a bonus people will earn by improving the current ration a specific amount.

Give people a chance to win early and often. What gets people motivated? Winning.

Make sure people are focusing above the survival point, and that you don't communicate that it's ok to be surviving or to break even.

Bonuses won't motivate people if they think the company is being cheap or greedy. They must feel that the plan is both a fair deal and a way to earn some big bucks. Make it possible for people to earn bonuses frequently enough to keep them involved in the game. In our company, individuals earn bonuses every three months.

Not every bonus program should be quarterly. Monthly bonuses can work as well as semiannual ones, but don't go longer then that or motivation will go down. The pool should start smalla ndg row after that.

Above all, make sure you communicate well and that people understand how the bonus program works. I garuantee that they will think you're manipulating the numbers if there is any doubt about the bonus formula, or if you lack a system for monitoring and checking the results.

Of course, if the bonus program makes sense, explaining it shouldn't be all that difficult. Start by teaching the teachers.

That's perhaps the most important benefit of a good bonus program. It provides a powerful incentive to make sure people throughout the organization have a clear understanding of their roles and the information required to perform them as well as possible.

Don't pay the bonus unless it is earned. A bonus should not be seen as a gift from management, but do everything you can to help people win and deserve them. That can be very hard for a CEO, if people have tried and missed the goal by a little, resist the temptation to pay the bonus.

Once you start changing the rules, you step into a slippery slope.

The real power of the bonus program lies in its ability to educate people about business. Once they understand the math, they see how everything fits together, and how business can be a tool for getting them what they want.

8. Coming up with the Game Plan

The planning process is a time to think about the future, to dream a little. It's also a time to think about what dangers may lie ahead, so that you can figure out how to minimize them.

All planning begins with a sales forecast:

-There's a reason why the sales figure is a the top of the income statement. Without a sales line, you don't have an income statement. You can't feed anybody. There is no payroll to meet. The game is over before it begins.

We get people excited for the process by scheduling rooms at a resort and associating good feelings with the meetings (neuro-associative conditioning).

A vague forecaset is useless. People can't respond to it, and you can't base plans on it. Spell out precisely what you expect to sell, how much, and when. It's better to be wrong than vague.

Converting dollars into things is important. In an airline company, the pilots will want to know how many flights they'll have to make. Show them exactly what they'll have to do. Make it easy for them to participate in the debate. If they don't have a chance to contribute, they won't take responsibility for the plan, and you may make mistakes that could have been avoided. Listen to what other people say it should not be simply a public relations exercise.

The middle managers get back together with the salespeople to report what they've heard from the front lines and to come to a consensus on the forecast.

There's another reason to get approval of the standards. In giving it, people are making specific commitments to one another for the next twelve months. They are agreeing to carry their weight by meeting the standards.

It doesn't matter where the dangers may life - in the economy, the marketplace, or the company itself. You want people to look over the entire landscape and talk about their most pressing concerns and urgent desires.

We do that first by identifying the biggest threats to the companies (bottlenecks) and putting a bounty on them and rewarding getting them taken care of.

Once you know what people are concerned about look for benchmarks for which they can aim. let people choose their own goals. Remember, when people set their own targets, they usually hit them.

9. The Great Huddle

We are all anticipating is the weekly ritual of calculating the score, everybody is on show, and nobody wants to let their colleagues down. When I see what our Huddles do for us, it amazes me that so many companies get by without having regular staff meetings. The most important thing about our weekly meetings is that everybody knows it begins at 9:00 every Wednesday morning. Rockafellar Habits has different types of daily meetings as opposed to weekly meetings.

If they don't hear anything, they speculate, make sure communicate to your employees.

Often times, bosses will talk about the results they want but they they won't provide any tools for achieving them.

-invite anyone with something to contribute to these meetings. Make sure it's an environment where there is joking, commiserating, congratulating, and laughing.

Be a Leader not a boss - What's important is for me to keep putting back in their hands the responsibility and the tools for earning more. It's easy for me to come in after the fact and say, "You should have done this or that." But, if I do, they'll start leaving the decisions up to me.

Push to get the stories behind the numbers. Good or bad, we want to hear the stories behind the numbers so that everyone can learn from the experience.

Make sure everyone understands the numbers and writes them down.

The CEO's job is to be on top of the organization's numbers. He must use those numbers to guide him and see trends emerging before they become crises.

It doesn't bother me to see that we have problems. The important thing is whether or not people are working toward solutions. The numbers give me perspective. They tell me what's really important and what isn't. The numbers protect me from paranoia.

10. A Company of Owners

You can accumulate more wealth by sharing equity than by keeping it all yourself. That's because a company of owners will outperform a company of employees any day of the week. People will think like owners if they have a larger purpose, if they are not just working for the paycheck (you can also incentivize them by showing how it helps their career).

Equity is the basis for long term thinking. Companies that don't share equity are making a mistake. They are leaving up a barrier that should be taken down.

Equity won't motivate people if they don't know how they can improve it and you don't educate them.

Chapter 12: The Ultimate Higher Law

When you appeal to a higher level of thinking you get the highest level of performance. You get people to rise above the day-to-day frustrations and think at the highest level - that is, use all their intelligence and ingenuity and resourcefulness to help each other achieve the common goals.

Change begins at the top.

Embracing vs. Deflecting High Value Problems

I have found an interesting phenomenon in business and entrepreneurship. The highest achievers tend to embrace conflict. That's right. As crazy as it sounds, the most successful people look at conflict as a way to improve their skill sets and to let their creative problem solving juices flow.

In fact, these high achievers have psychology re-framed the whole issue of problems into problem solving... you can imagine what a powerful frame this is.

The alternative is what the other 95% of the population, the problem deflecters. They see every issue as a problem that must be deflected and avoided. Their entire day is spent deflecting and trying to get out of problems until 5 o'clock, then they say to themselves "Whew, at least the day is over." How sustainable is that over a 40 year career, yet people are not even conscious of the fact that they do this.

Of course, when we embrace problems it is not effective to embrace every type of problem. The goal is to embrace high value problems that will lead to real development, not low-value tasks that should be delegated to someone else.

When you see the next high value problems look at it as a problem to solve. Tell yourself, how would I solve this problem? After all, most of us love doing puzzles and solving issues and NONE of us love dealing with problems even high achievers. The question is how you look at it, and that is in your hands.

Championships Are Won In Practice

The greatest college basketball coaches have always said that championships are won in practice.

Unfortunately, most people do not understand this.

Most people believe in the "Hollywood" version of success where a team does poorly all year round and then "by an inspirational speech by a coach" suddenly outperforms a far superior team. This, of course, only happens in the movies, yet people believe it.

Of course, people also point to last second shots and things of these nature to show how it's all about "luck", when in reality success has to do with not being "unlucky" much more then being "lucky". I can assure you no team in the history of collegiate/professional sports has ever won a team by luck. Before they could lucky they always to play well throughout the whole game to even have the opportunity to win.

Of course, what is the alternative. The alternative is not nearly as fun or sexy. The alternative is hard work day in and day out. The alternative is taking the time to invest into developing your skills, endurance, etc.

In business, Brian Tracy calls it the Law of Accumulation. That successful people become successful as the result of many accumulated successes and triumphs over the years. Yes, to outsiders it seems like an "overnight" success, but this is almost never the case.

If you want to become really good at something focus on practicing hard. In business, this involves a combination of strategic reading/education and the direct hands on implementation of concepts. You can not go far without it.

Need Based Innovation

It is interesting that people talk about innovation without considering the need. For example, how often do you hear about cell phones that will be as small as your fingernail in 5 years.

The reasoning is:
1) The technology will be there
2) Cell phone sizes has decreased to the same proportion over the last 5 years.

Do you see anything missing in the reasoning. Perhaps the question: Who the hell would want a cell phone this small? The only possible benefit I see is the "uniqueness" factor which can be catered toward 15-17 year old boys.

Conversely, many innovations can be easily predictable using demographics and other such data based on NEED.

For example, I can with very high confidence predict that assuming demographics stay the same self-driven cars will be invented and mass-produced within the next 50 years. Why? Because the constraint (room and fuel) will force the innovation of self driving cars to be invented.

We can all learn a lesson from this. As entrepreneurs or leaders we need to always remember that EVERYTHING is customer-driven, ESPECIALLY technology and innovation. Yes, perhaps new technology will be invented so that my fed ex package can turn into a brick oven, but does the customer really want it. BETTER yet, is the customer willing to pay more for it (as innovation by add-on/feature almost always adds a higher cost).

Luckily, consumer products company don't make this mistake.. because unlike "visionaries" who give speeches at futuristic conferences they actually have to... make money.

(It is not a "great invention" if it provides no value for any customer base. It is simply a cool magic trick.)

Bottom line: Listen to your customers and make their feedback the integral part of your innovation.

The best quote from Thinker Toys

"Imagine a person learning to hit a baseball. At first, he will miss the ball many more times than he hits it. With practice, his misses will gradually diminish, and the hits will come more frequently. If mere repetition were the key to improved practice, his practice should make him more expert at missing the ball than hitting it. However, even though the misses outnumber the hits, he hits the ball more successfully because his mind remembers, reinforces, and dwells on the successful attempts rather then the misses."

Self-Leverage

There is a "myth" out there that you can motivate yourself at any second at will.

Except it is true... and the proof I have is that I have learned to do it myself. (By the way, what's the best way to convince someone of a concept: have them experience it for themselves, you can't get more convincing then that... so forget whether you agree with me or not try it and judge for yourself).

Here is how you do it:
-Read the Unlimited Power chapter on meta-programs, and learn what motivates you. Instead of randomly having your motivation button pushes from time to time, you will be able to consciously push it by referring to how you are truly motivated.

**Here is a teaser preview: People are either motivated by avoiding something like (failure, poverty etc.) or by going towards something (being rich, having luxurious things, etc). The point is not which one is the "right" one, the point is to figure out which one you are and to motivate yourself accordingly. Very successful people have been motivated by both. (By the way, obviously you can learn other people's meta programs and motivate them accordingly as well).

-Learn to re-engineer your motivation once you learn the metaprograms. Next time you really feel motivated, ask yourself why and learn to consciously push these buttons.

What are the consequences of not being "self motivated"? Well the consequences vary, from mediocrity to something even worse: never being able to work for yourself. You see, the issue of motivation is not as great when you work for someone else. You either do the work or you get fired.

However, when you work for yourself there is often dual interests that conflict inside us (the need to be successful vs. the need to party per say). Therefore, you will often feel anxiety which doesn't exist at your normal job (of course instead of anxiety you feel contempt)

The positive consequences is that you will start producing on a significantly high level. The only true constraints that you will encounter are physical power constraints which are rarely tapped by self employed individuals (cause there is no self leverage).

IRONICALLY, the ability to force yourself to do something makes you enjoy the time off. I know that I can go party for 10 hours, go into the office tomorrow and work for 24 straight hours (if need be). Knowing that you have the power to self motivate yourself makes you not worry about the future and live in the moment, both in the personal and professional setting.

"When you succeed, you party, when you fail, you ponder." - Tony Robbins

Wise words. Failure is a great opportunity to improve your skill set and create the desperation that you need to motivate personal development.

I am currently on somewhat of a race against myself to make sure I can my personal development up to my desired level before I have a chance to become complacent as a result of my personal development..

Who pays the salary?

From The Knack:

Elaine, for her part, used the sessions to reinforce the customer service message. "I'm not paying your salary," she would say. "The customers are. They just funnel it through me...When you see Norman or someone else giving people a tour, those are usually prospective customers. We want to make them feel welcome. That means smiling and saying hello."

Felix Dennis Quote (founder of Maxim)

"Most of us would prefer that things stayed the same way so that we can carry on making money in the way we have grown comfortable with. But things NEVER stay the same. Either you learn to go with the flow & change (as a conscious act) as rapidly as you are able, or you will be left stranded."

David's Note: Change creates opportunity, it is a positive if you are entrepreneurial, a negative if you are not. Change makes life interesting,dynamic, and favors those who are bright, optimistic, and seek to create wealth.

A Check-List for Making Sure Your Organization is A Great Place to Work In

From "First, Break All the Rules":

1) Do I know what is expected of me at work?

2) Do I have the materials and equipment I need to do my work right?

3) At work, do I have the opportunity to do what I do best every day?

4) In the last seven days, have I received recognition or praise for good work?

5) Does my supervisor, or someone at work, seem to care about me as a person?

6) Is there someone at work who encourages my development?

7) At work, do my opinions seem to count?

8) Does the mission/purpose of my company make me feel like my work is important?

9) Are my co-workers committed to doing quality work?

10) Do I have a best friend at work?

11) In the last six months, have I talked with someone about my progress?

12) At work, have I had the opportunities to learn and grow?

Benchmarking Attitude: Why not?

There is a popular misconception out there that positive people are "naturally positive" and negative people are "naturally negative" as if by deposition. This is false.

People call it "positive attitudes" and "negative attitudes" because they are not able to define it more accurately. In fact these positive attitudes are a result of thousands of beliefs that create a belief system. As Hitler showed us, belief systems can be reprogrammed, and it is my belief that they can be a source of significant competitive advantage in business.

"Naturally positive" people are positive because of the way they see the world. Two entrepreneurs can look at failure, one as a stepping stone of success and one as just failure.

The only thing that differentiates them is their education surrounding the issue. It is something that can be learned.

Unfortunately, the business world only benchmarks techniques not mentality. It is the big GAP between knowing and doing.

I personally believe there is a huge gap in inefficiency that can be improved if businesses start to model the mentality and thought processes of top performers, not just the techniques.

The Proposal Frame

The world's best negotiators look at "No" as the starting point of negotiation. How do we adopt this same mentality?

Here's what I've realized: most people try to optimize their attitude AFTER hearing "No" where the high performers' attitude starts with the proposal itself.

That is, the world's best negotiators don't learn to accept rejection better, they simply don't see their bid as anything more than a proposal.

They go in with the framework not that they are trying to test their friendship/self worth with the question, but that they are proposing an aggressive bid that they expect to be the first point of negotiation.

The world's best negotiators are careful not to associate their ego/self worth with the bid.

Work on your mentality BEFORE negotiation and you will see your result DURING and AFTER the negotiation.

Entrepreneurial Junkies

Outsiders, that is.. normal people look at entrepreneurs that fail and think : "Wow, he overcame so many failures and he's still going." Normal people think that entrepreneurs are constantly asking themselves "should I keep on being an entrepreneur or not?"

Yes, of course, some entrepreneurs may ask themselves this, but not the ones I hang out with.

The ones that I hang out with are junkies, the equivalent of drug dealers. Yes, they may feel burned from previous businesses and never want to start another one. But as soon as they get in a position where they make that first sale and make that first profit, they are hooked again.. like a cocaine addict.

It really is like this, if you normal people can believe it ; )

"If You can Dream it You Can Do it" - Walt Disney

It seems when Walt Disney said this he was not referring to magical kingdoms and talking animals. He was dealing with technology implementation and business process development (or at least I like to believe this).

Here's the deal: there is no voodoo in programming/technology/processes, if you/anyone on the team can't imagine how it can be achieved then it can't be programmed or recreated. However, the converse is almost always true: if you can think it out in your mind then it's almost guaranteed that someone could program or develop it.

The important thing is to get rid of the magic thoughts that technology could solve problems you can't identify in your head. Technology is only an accelerator of human thought it cannot replace it.

P.S. Walt Disney was a business builder who was a visionary, he couldn't have achieved everything without having a fundamental strong foundation in business skills. Let us not forget the lessons in my previous post.

Cycling through Failure/Pain/Rejection

There is no intrinsic business value in suffering through pain/rejection/failure. However, there is an undeniably correlation between # of failures and eventual entrepreneurial success. How do we reconcile this?

Easy. You divide pain/rejection/failure into two buckets: 1) Lesson Learned 2) Negative feelings.

Here is what the greatest entrepreneurs do:
1) Ask themselves, what lessons can be learned from this experience. Ignoring which party was right or wrong, the entrepreneur asks himself "What can I have done differently to improve the situation?"
2) Once the lessons are removed, the entrepreneur moves on. At this point there is NO LONGER A PRACTICAL value in feeling down or discouraged. If anything, it delays your chances of success in the future.

The concept of cycling through pain/failure/rejection is applicable not only in terms of project failure. It also concerns the ability to get over firing people, breaking partnerships, etc.

Here is the truth: In order to have a high growth start-up you must fire quickly the people who are not a good fit in the company. EVERY high growth entrepreneur goes through this.

Therefore, instead of trying to "live through" all these negative feelings, the greatest entrepreneurs embrace this state and learn to accept it as an everyday reality. As soon as you embrace it, you will stop dreading it, and trying to avoid it and instead become better at it. As you embrace these feelings you will start to gain more confidence in dealing with these situations and the positive momentum will roll you forward to success.

If you stay with this route, I guarantee that you will experience the above process.

Bottom Line: There is no value in feeling down in business... time to move on my friend.

How Prejudice Works

Prejudice does not typically work like this: "That dude is incompetent he's __________". In reality, people aren't THAT prejudice.

I believe that prejudice works by attribution error. The first mistake a minority makes the person will say, "He made that mistake because he's __________".

How do you know about this prejudice? Try being 18 year old and negotiating partnerships, you'll see what I mean.

Hard (Personal) Lessons Learned from a Partnership

1) Get personal relationships early on, they will be leverage later on (improve likeability, not sure why I didn't think of this before!) Make sure you are likable with the decision makers, preferrably founders or CEO's, they trump all.

Ways to get to the decision makers:
-Linked In / Personal Contacts
-Conferences
-MBA Network

2) Make sure you are making enough margin with your partner or tensions may spike up about small issues. Small margins increase hostility, bickering, ill feelings, etc.

3) Don't deal with people who are not innovative and reject your model, it's a relationship that will be short lived. You can't cram innovation down someone's throat who is risk averse, no matter how hard you try. People just live under different meta programs.

4) Who is "right" and who is "wrong" is almost irrelevant. The relevant thing to consider is WHAT IS THE REALITY. Deal with reality, not with how "things should be".

By the way, just because the other side is "wrong" does not make you "right." What I mean by this is that even though the other side can be wrong, doesn't mean that the way you deal with it is the right way. If you don't get a successful outcome it means that you applied the wrong strategy to the other party's stance. It is almost irrelevant whether the other party is morally or logically correct, it only matters whether you executed the right strategy.

If you ALWAYS focus on who was right, you will miss VERY crucial lessons that can be learned for the future, IRRELEVANT to who was right.

The Seperate System Method

This is a method that I am proud to say I personally defined (although people have been using this method both consciously and unconsciously for thousands of years).

The separate system method is the antithesis to synergizing, so use it with caution. NEVER use the separate system method if it is quicker or more effective to synergize.

Let me explain:

Seperate System Method - Create a system that is not compatible with another and link the processes one after another = Apple + Orange

Synergizing - Standardizing everything and having a complete flow-through solution = Apple + Apple.

***
Here is why you might consider the seperate system method. The seperate system method is a piece meal solution.

Here is when you should use it:

1) When the current solution is the seperate systems method and the consequences of synergizing the process is minimal (remember consequences mean profit which means substantial increase in revenue or decrease in costs).

2) When the current solution is good enough and you don't want to spend the company's limited resources (money, people, and focus). By the way, if I can digress: every company in the world has limited resources, that is to rephrase "not unlimited resources". Every resource deployed has an opportunity cost whether you acknowledge this fact or not (you can sit in a corner, close your ears and yell, but it won't change this fact) - aka potential new projects. If something is by nature a low value task, to use an extreme example, it can save you $1/year and takes 5 hours to implement, YOU SHOULD NEVER IMPLEMENT IT. That's right, you should keep on losing that $1/year into the inifinite. Why? Because, THERE WILL NEVER BE A TIME when there is no opportunity cost to your time and money (I hope you followed me on this logic).

Note: In order to be a successful entrepreneur you must give up your perfectionist tendencies... YOU MUST. (one of my biggest personal issues).

3) When there is no flow-through apple-to-apple solution that can be created. For example, when one version is electronic and another (for some reason) must be paper and pencil.

Now to a real world example from Norm Brodsky of The Knack:

"We needed a tracking-and-billing system that could handle all those variables, which wasn't easy to find. If you came up with one for fixed bins, it didn't work for rolling bins, and vice versa. What's more, nothing you did with the bins could be applied to the special jobs. That's why everybody was stumped.

People were searching for a global solution - a system that would cover every type of job a document destruction company might handle. What if, instead, you took one piece of the problem at a time?..."

David's Note: To paraphrase the rest of the story, he finds an already viable solution using current technology for the regular orders and finds out that although the special orders accounted for 40 percent of revenues they were just one out of ever 100 orders. What they ended up doing was using the traditional pencil and paper method for the special orders and implementing this solution for the traditional orders.

I wanted to point out a couple points about this case and what makes it interesting and valuable:
1) Norm Brodsky figured out something that most people never figure out their entire lives: for something to be successful it must result in better results not be perfect. Even if we, in theory, said that the new system could computerize and automate 60% of orders, it would still be superior to no automation. I know that this could be a hard pill to swallow, but it is necessary understanding. I transferred this concept from the concept of measuring where a measurement, to be useful, doesn't have to be 100% accurate it just has to improve the probability of making the right decision.

2) Norm Brodsky, whether he realized it or not applied the consequence test and looked at the actual consequences of not standardizing the special orders. What changed as a result? He found that since it was only 1 out of 100 orders then that is the only effect of not standardizing it.

3) Of course, he applied the 80/20 rule very effectively.

4) Most importantly, Norm Brodsky dispelled the common myth that oranges and applies can't work with each other. Yes, you can't have systems that internally don't flow through, meaning a system that randomly doesn't work for 1 out of 10 transactions. But, you definetly can have two CLOSED loops systems that communicate with each other. In fact, the entire world is filled with them. (Is the phone synchronized with your credit card processor? Probably not. They are two closed loop systems that have worked together to fulfill telephone orders for many decades).

Bottom Line: Saying all that, having one flow-through system is the best. Especially, if it saves a lot of time and effort. But remember, two closed looped systems that work together are also possible solutions, don't rule them out and always consider the consequences that is the result of using or not using a system. As obvious as this sounds most people do not consider them.

Visionaries vs. Business Builders

What is the difference?

Business builders account for 99% of entrepreneurs. The most successful business builders make millions of dollars, some millions upon millions (but almost never become billionaires). They apply best practices, enter markets where they know they can dominate and build a strong competitive advantage, hire the best people. Many times, business builders do it all over again and bounce from one success to another.

Visionaries are those that create the wheel, that revolutionize the market.

-One important thing that people do not get is the following: all visionaries (that succeed) are business builders, although not all business builders are visionaries.

YOU CANNOT VISION your way into a business. Regardless of how brilliant your idea you must be able to execute and perform the hundreds of functions that every business needs to do on a daily basis. Once you got your bases covered, that is when you iterate, innovate, and become a visionary company.

Managing by Numbers and Minimizing Emotions

I have learned over the last several months how to make business much less emotional. I have learned to lead my company through numbers and science, which has worked much better. Here is another passage from Norm Brodsky's The Knack:

"Sooner or later, though, you're going to wind up in trouble unless you stick to the rules and stay on top of the numbers. Because the numbers help you balance your emotions. They keep success from going to your head. They remind you that, while your cash may be self-generated, it is not unlimited, and it can still run out." (David's Note: Numbers can also help keep you sane when things are going really bad as they provide an objective true measure rather then a measure that is based on subjective, emotional, catastrophic-type thinking that we humans, by default, fall into.)

David's Note:

What numbers? There are some universal numbers like cash and profit that are important to every business. However, there is not a "one size fits all" to what other numbers are important (although most industries have standard numbers which I recommend benchmarking to at least find out whether they are relevant). Make sure your numbers are related to drivers of the business. If the number of trucks going out of your office has no effect on revenue or costs DO NOT TRACK IT. Apply the consequences test to every number that you track so that you can commit on improving the numbers that matter (keep in mind even if it does make a difference, make sure it is a substantial difference before spending time and focus on tracking the number. Make sure the numbers are actionable.

To add some psychology into the mix: make sure that you track numbers on which you can take action. What's the big deal if you have some numbers that you don't pay attention to? The big deal is that it creates a culture inside the company where not caring about numbers is fine... then when you get a number that actually matters, guess what? NOBODY CARES. Be very selective in the numbers you track and strict on making sure you are taking action on these numbers.

Keep in mind, the numbers do not have to be financial in nature, they can be "number of phone calls made, etc." as long as they are important for the business and driver of sales/profit.

Focus, Focus, Focus - advice from Norm Brodsky (the Knack)

"Aside from resilience and the ability to learn from mistakes, what an entrepreneur needs most is a capacity for discipline and focus. People who've never built a business don't understand that. They think the secret to success lies in spotting great opportunities [...] That's one of the greatest myths of entrepreneurship, and its gets many would-be entrepreneurs into trouble. They waste time and money chasing after business opportunities, hoping to identify one that will guarantee success.

But the world is filled with great business opportunities, and none of them guarantees success.
Spotting them is the easy part. What's difficult - and essential - is developing the discipline and the stamina to stay focused on a single opportunity until you've turned it into an established business that can stand on its own."

On Cash (advice from Felix Dennis, founder of Maxim)

"Obsessively monitor your cash flow." This is something that is absolutely crucial in either a start-up or high growth company.

Yes, the other numbers are important, but cash flow is the lifeline of the company and deserves to stand apart as "the number".

You cannot be "too paranoid/too concerned" about cash. Monitor it often. Once a week works as does once a day (not more often).

Two things to improve your health

If you do the following two things, you will improve your health and decrease your need for sleep by 2+ hours a night (not an exaggeration).

1) Fruit is the most perfect food. Eat it, but eat it on an empty stomach. Fruit gives a very high energy return. Most food takes more energy to digest then it gives. Fruit is the opposite, but you have to eat it on an empty stomach so that it is digested through your small intestines.

I recommend going on an all fruit diet for two days. Yes it is very tough, but you will become stomach conscious and will understand how fruit plays a role in your health.

2) Proper food combining. Google it, this really matters.

It is important to note that even though the above things are important you don't have to go 100% into them to gain a lot. You can be selectively vegatarian for lunch, for example. I usually have a vegetarian lunch but sometimes I don't. This way, I don't feel like "im forcing" myself into anything and I have no trouble keeping it up.

If you are serious about implementing health changes read the chapter on health in Tony Robbin's Ultimate Power, I garauntee you it will be worth your time and money (you can buy it for like $6 on Amazon).

Lessons Learned from Alibaba.com

Lessons I learned from reading today's WSJ article on Alibaba.com which has seen a significant increase in profits throughout the recession.

-Their big new initiative was creating a Gold Supplier start-pack price which was significanly lower then their traditional Gold Supplier pack which sells for just over $7300/year.

"The lower prices mean thinner profit margins, but executives believed the move would let Alibaba.com expand penetration among smaller exporters during what Mr. Wei calls the economic "winter."

Lending Support

"Alibaba.com has also launched initiatives to help clients survive the financial crisis. The company partnered with four lenders to help 800 of its members apply for loans amounting to 1.4 billion yan as of February... Without the program, says Mr. Wei, bank loans were "not accessible at all" to these companies. The capital is used to help business owners build up inventory, and give the sellers more flexibility to offer trade credit to customers."

An interesting point on cannabilization:

"Some existing members have chosen to renew their memberships at the cheaper rate, cannibalizing revenue earning from the more expensive memberships. But Mr. Wei says most existing members stayed with the original package.

Many analysts applaus the company's shift in strategy, saying it was necessary to continue growing. Richard Ji, an analyst for Morgan Stanley in Hong Kong, says Alibaba.com's growing market share makes it well positioned for when exports recover, "The lower priced starter pack is appealing to the price-sensitive in a market downturn," says Mr. Ji.

*Overally, solid article and it's nice to have the WSJ publish a whole section of positive articles.

Another WSJ classic about entrepreneurship: http://online.wsj.com/article/SB123498006564714189.html

Conscious Flexing

This is another trick my friend Sam taught me:

While working out focus on the muscle that you are working out. This gives you a more precise workout and ensures that you are applying the correct technique.

Here's my innovation: by consciously flexing you actually gain more strength and stamina. Why is that? When you consciously flex you are activating testosterone in your body and your body goes into a fight-or-flight state. This state leads to higher concentration, and strength.

You destroy any passive-aggressive thoughts in your head like "I don't want to do this set wah wah wah" and get right down to business. You use your aggression and testosterone to feel more powerful and to execute the set more successfuly.

Try it for yourself, flex the muscle that you are working out. Attack the set with aggression and you will see your strength and motivation increase.

P.S. This is also why starting out with lower weights for your first set, makes you feel more powerful, increases motivation (since you feel like you are succeeding), and gives you more power and aggression for the 2'nd and 3'rd set. The converse is true as well, starting with a weight that is too high can make you feel weak and demotivate you.

The Need to Win (too much)

Some people are competitive and want to win. This is good.

Some people are TOO competitive and want to win every single argument, regardless of consequence. This is bad.

Have you ever met someone that needs to be right about everything? How did you feel about him or her?

Having to be right about everything is a big sign of insecurity and low social intelligence. People who need to be right about everything often times end up alienating others. The need to be right about everything is negatively correlated with likeability.

Some people think that by being right you can impress others and get them to like you. The truth is, no one is impressed, instead most likley they will associate negative feelings with you and will avoid you like the devil.

Don't be that guy... please.

The Lowest Possible Beginning Offer

STUDY AFTER STUDY, shows that the lower your initial bid (assuming that it can be considered reasonable) the lower the negotiated price will be.

Still, people, such as myself have a natural impulse to offer a more "central" starting point.

Why is that and what can we do about it?

The reason we do this is because we are ALL by nature conflict averse. We have a fear of getting rejected and having the other person being upset. Understanding this, we can improve this by desensitizing ourselves to negotiation upset (role playing with another individual that person getting mad that you offered so little money), in reality this almost never happens but it's good to desensitize yourself.

It's OK, everyone has confrontation aversion. The important thing is to understand that and do a cost/benefit analysis on it. Perhaps offering $15.50 makes no sense if you could get it for $16, is the 50 cents really worth a conflict? No. However, if the difference is $1550 and $1700, then it probably is worth it.

Once you have realized that it is worth it go ahead and put that low bid in and negotiate away. By being conscious of our natural conflict aversion we can override this natural instinct and become better negotiators.

Weisburd Exclusive: Negotiaton tip that works

1) Bargain very very hard.
2) After you have "won" the negotiation, put in a sweetener.

Let me give you an example, I just bargained some tickets down from $3000 to $2089. I bargained very hard.

What did I do after I "won" the negotiation, I said the following, "I really appreciate doing business with you, I'll just go ahead and send over the $2100."

Why in the world would I do this contradictory act? There is a lot of psychology behind this, but here are some thoughts: People don't really remember the actual negotiation, people remember the way the negotiation ends and the last feeling they had after. In general people remember two things about an experience the high/low point and the ending. Therefore, you can significantly influence how someone views a negotiation by influencing the last part of the negotiation.

Bringing in this sweetener allows the individual to feel like they won the negotiation and brings him/her personal pride and a feeling of well being.

Other sweeteners, after you win the negotiation give psychological benefits such as: praise, good attitude, "have a great day, it's great to do business, I can't wait to do business again."

P.S. Another reason this works is because you are showing kindness after showing strength rather then the opposite which is showing weakness but trying to overcompensate with quasi strength. If you are coming from a place of strength you will be seen as legitimately nice out of personal choice.

The Optimal Attitude (updated)

In the last three months or so I have focused on the issue of "What is the optimal attitude for business, especially in times of crises?"

Some people might find this question either obscure or trivial. It is neither. The reason being that attitude is controllable, and attitude is of out-most importance. I would actually say that attitude is the easiest and is the most low-hanging fruit one can change in order to improve productivity (a skill set may take months or years to change and can have marginal effect while attitude can be changed quickly and improve general skills like problem solving, etc.).

Without further ado here is the optimal attitude that I have adapted in times of crises:

The 3'rd Party Consultant Attitude: In this attitude you approach your own business as if you are a 3'rd party consultant. Which means, it is your job to solve a problem. In fact, the best way to deal with a crisis is to look at it is an interested problem to solve. The best way is to approach it is with the scientific method, trying one approach after another ALWAYS objectifying the results and not taking anything personally (imagine if a scientist took results from an experiment personally).

Whenever you find yourself becoming emotional, ask yourself "Am I a professional or am I a pussy amateur?"

At the same time, this approach allows you to be iterative in nature (to keep on trying new methods) and relentless in your pursuit. It also allows you to COMMIT to the task at hand to COMMIT to the fact that you will find a solution, as any consultant would do (imagine a consultant throwing his hands in the air and saying "I give up", pretty ridiculous eh?).

You CANNOT solve a large problem with "one foot in, one foot out," problem solving of a complex nature requires 100% absolute commitment. Paradoxically, once you commit to solving the issue your commitment anxiety is removed and you can focus on solving the problem.

At this point of time, this is the most optimal attitude I am aware of.

Part One: Thinker Toys

Preface

Suppose you are with the person you love more than any other person on the face of the earth. Most likely, you will give the one on the right because it feels valuable, feels worth giving, and feels the most meaningful of the three.

The majority of us feel an emptiness and incoherence in our lives, which is why we think of ourselves as blanks or squiggles instead of diamonds. We know the diamond-shaped dot was what we wanted to select but, in some way, our sense of self made us feel unworthy, and so we rationalized why we selected the squiggle or the blank. It is the same way in life.

He decided not to go to psychologists because psychologists always focus on what's wrong with you, explain why you feel worthless, and why it's not your fault. He saw no value in this kind of treatment. Cohen says, "The one thing that's always in my control is what is going on in my head."

Creators are joyful and positive. Creators look at "what is" and "what can be" instead of "what is not." Instead of excluding possibilities, creators include all possibilities, both real and imagined. They choose to interpret their own wold and do not rely upon the interpretation of others.

An Albert Einstein who is fearful of looking stupid for presenting theories about the universe as a patent clerk.. A Michelangelo refusing to paint the ceiling of the Sistine Chapel because he had never painted fresco... A weeping and wailing Mozart blaming an unfair world for this poverty... Can you imagine this??

It's impossible to be creative if you are negative. Most people assume that our attitudes affect our behavior, and this is true. But it's also true that our behavior determines our attitudes. You can pretend or act your way into a new attitude.

Every time we pretend to have an attitude and go through the motions, we trigger the emotions we create and strengthen the attitude we wish to cultivate. By mimicking happy people we become happy as is done at a wedding.

We have a choice to be happy and have the power to do so.

Introduction: The Barking Cat

Creativity is not an accident. It is not a result of some easily learned magic trick or secret, but a consequence of your intention to be creative and your determination to learn and use creative-thinking strategies.

Becoming more creative, you will find yourself looking at the same information everyone else is looking at yet seeing something different.

The techniques were selected for their practicality and range from the classic to the most modern. I started with the ideas (fish) and worked backwards to each creator (fisherman). You can produce ideas using both linear and intuitive techniques and should not limit yourself to one or the other - the more ideas you generate the better.

It is not enough to read the book - to create your own ideas, you have to use the techniques. Try to explain the joy of skiing to a bushman who has never left the desert. If you merely read the techniques you will have no more than a suggestion of how to get ideas.

Each chapter contains a specific technique for getting ideas to solve your problems.. I call them heroes because they left behind a mark, sign, idea, an enterprise, a product, or service that reminds us of their innovation.

A friend of mine, Hank Zeller once describe creativity as: "When you realize that you just came up with an idea that betters anything that has been done, well, your hair stands up on end, you feel an incredible sense of awe; it's almost as if you heard a whisper from God."

Chapter One: Original Spin

Lecky believed that humans have an inherent need for consistency. If a thought is inconsistent with other, stronger ideas and concepts, the mind will reject it.

Lecky found that there are two powerful levers for changing beliefs:

1. The belief that one is capable of doing one's share, holding up one's end of the log, exerting a certain amount of independence.

2. The belief that there is something inside one that makes one equal in talent and ability to the rest of the world, and that one should not belittle oneself to suffer indignities.

General Patton, when asked about fear replied that he often experienced fear before, and even during, a battle, but the important thing was "I never take counsel of my fears."

Thomas Edison once said that the only road to success was through failure.

You can not "overpower" your negative thoughts. Rather you must replace them with positive ones, get a bigger Yes. In Tick-Tock, your negative thoughts will recede like the black shapes as your positive thoughts become dominant.
After studying a staff of creative vs. uncreative people for two years, the psychologists discovered only one difference between the two groups: The creative people believed they were creative and the less creative people believed they were not.

Once their attitudes changed, they began to pay attention to small and large challenges and to flex their creative muscles in extraordinary ways. The following year, this group generated many innovative programs and blockbuster books.

Self-Affirmation

To increase your self affirmation, get in the habit of remembering your successes, your good qualities and characteristics, and forgetting your failures. It doesn't matter how many times you have failed in the past; what matters is the successful attempt, which should be remembered and reinforced. A successful salesperson, for example, must be willing to fail in closing an order several times before succeeding once.

Success breads success. Small successes are stepping stones to greater ones!
If you make a practice of remembering your successes and good personal qualities and paying less attention to your failures, you will begin to experience more success than you would have thought possible.

Imagine a person learning to hit a baseball. At first, he will miss the ball many more times than he hits it. With practice, his misses will gradually diminish, and the hits will come more frequently. If mere repetition were the key to improved practice, his practice should make him more expert at missing the ball than hitting it. However, even though the misses outnumber the hits, he hits the ball more successfully because his mind remembers, reinforces, and dwells on the successful attempts rather then the misses.

What you imagine to be true becomes, in fact, true. Hold a given picture of yourself long and steadily enough in your mind's eye and you will become that picture. Picture yourself vividly as winning and that alone will contribute immeasurably to success. Write that you are a creative person and you are likely to become creative. Writing is a powerful way of affirming to the mind that something is true.

When you expect to be creative you will influence your brain to be creative. Once you believe you are creative, you will begin to believe in the worth of your ideas, and you will have the persistence to implement them.

Chapter Two: Mind Pumping

It is not enough for the monk or priest to have the intention of being religious: the monk most rotate the wheel; the priest must say Mass. If one acts like a Monk, one will become a monk. If one goes through the motions of being a priest, sooner or later, one will become emotionally involved in religion.

If you act like an idea person, you will become one. It is the intention and going through the motions of being creative that counts.

**Idea Quota**

Give yourself an idea quota for a challenge you are working on. You'll find the first five are the hardest, but these will quickly trigger other ideas. The more ideas you come up with, the greater your chances of coming up with a winner.

**Dukes of Habit**

Dukes of Habit must always do the same thing every day in the same routine. Go the same place to eat, drive in the same route, etc. Dukes of Habit are loimited problem-solvers. Improve your problem solving by taking different routes, reading new things, making new friends, changing the type of restaurants you go to, etc. Other ideas: Read biographies, how to books on various subjects, read nonfiction, read interesting ads, and my own personal favorite (reading fiction) think as you read and try to solve the character's problems.
-Attend as many business conferences, seminars, and lectures as you can

Pyschologists have demonstrated that we are able to keep only about five to nine pieces of information in our mind at one time. After about twenty seconds we forgot what was on our mind. The only way to avoid this is by writing things down. Writing signals your brain that this is a piece of information that is more crucial than others and should be stored in your long-term memory.

The above techniques allow you to build mental muscle and to exercise your brain. As you do this more new ideas will come as a result of having a stronger brain.

Chapter 3: Challenges

Before you start looking for ideas, you need to know what your goal is. A problem is nothing more than an opportunity in work clothes. A successful businessperson pays attention to problems, converting problems into opportunities and deciding which opportunities are worth pursuing.

As a focusing exercise, select a color at random and spend an entire day looking for items that are that color or contain it.

Unless you set your business problems down in writing, your attention is constantly shifting and you become indecisive about what, if anything, you should focus on.
In the same way, the mere act of writing a challenge may trigger your mind to create something meaningful to fill the gaps and solve it.

Just writing the challenge provoked him to think of an idea for a new business venture: a DNA bank. His bank stores DNA samples for parents who are worried about identifying their children in case of a kidnapping or a baby swpa. It costs $200 for collection and eighteen years of storage.

Write down what bugs you and select the challenges that you find most interesting. Remember, that a worthwhile problem for one person may very well be boring for another. An accountant and salesperson will not likely be stimulated or challenged by the same problem; indeed two people in the same discipline may not be challenged by the same problem.
The best ideas come from those hungry for success and those who cultivate the spirit of enterprise. Thomas Edison learned the imporatnce of realizing a personal benefit from his work early on. After presenting an idea to help Congress and getting rejected, from that point on Edison would often state that the only reason he invented was to make a lot of money. He didn't have the time, energy or interest to modify the world to fit his inventions.

Before you decide which challenges to resolve, make a list of the benefits that may be gained if you are successful in developing a creative solution. What are the direct benefits: money, pleaseure, recognition, property, and so on? What are the direct benefits: money, pleasure, recognition, property and so on? What are the indirect benefits: new skills, knowledge, attitudes, etc? Do the benefits outweight the costs in terms of your time and energy?
If you feel that it is not necessary to realize any personal benefits before you dedicate yourself to a challenge just lean your head sideways and watch the bullshit pour out of your ear.

After you decide what challenges are most interesting and likely to yield solid benefits it is important to accept the challenge. To accept a challenge means to ACCEPT RESPONSIBILITY for generating ideas as possible solutions to the problem. The more you accept responsibility and dedicate yourself to generating ideas, the higher your probability of reaching an innovative solution.

Some problems need total dedication, others may need little effort. Whenever I think of total dedication, I'm reminded of a story I once heard about a samurai who had the duty to avenge his overlord's murder. Once the man spat in the warrior's face, he stood up and walked away becuase he had become angry. If he had killed the man in anger it would not be an act of vengeance but rather a personal act.

"A victorious army wins its victories before seeking battle." - Sun Tzu

The more time you devote to perfecting the wording of your challenge, the closer you will be to a solution. Conversely, the less time you take to define and center the challenge, the great the chances for a not-so-great idea.

You must have a good centered challenge question in order so that you can become centered like sumo wrestler when there is a sudden attack or problem. That way you will be ready for an immediate response.

Make sure you don't create assumptions that are unnecessary. Don't only ask, "how can I decrease costs on the computer" ask "How can I increase profits on the computer (which includes costs and revenues)", expand your list of possible answers by expanding your question.

To go beyond the boundaries of your mind, you need to become an active thinker, to organize information into new patterns. Linear Thinkertoys are for the left brain, intuitive Thinkertoys for the right brain.

The left side is used more by writers, mathematicians, and scientists; the right side by artists, craftspeople, and musicians. The left brain processes pieces of information sequentially, one by one, bit by bit. The right brain processes information all at once, holistically, intuitionally.

You may be tempted to just use one or two thinkertoys but try some other ones out. If you pick just one, you might choose a perfectly adequate technique. In school, when you add a column of nubmers, you get a sum. If you have the right answer, you move on the next problem. Many people carry that idiom over into creative thinking. As soon as they have an aswer, they stop thinking. Reality though, is different from arithmetic. Some answers are better than others: They cost less, afford more status, are made better, easier to use, more aesthetic are easier to install, etc. There is absolutely no reason for supposing that the first answer is the best one.

The second reason for using a variety of different techniques is to cultiave a creative attitude. A good actor plays many different parts, and plays each to their fullest, depending on which mask he is wearing. Agood actor will take pride in being versatile.

Once you have experienced all Thinkertoys you can call them up when you have a particular problem. Thinkertoys generate so many good ideas that you will feel like you're in a candy store and you want to sample every piece of candy. Of course, if you tried, you would get sick to your stomach. You can't try all your ideas either, so you'll need guidelines to help sort through and judge them.

Stretching the Challenge an Excercise in Thinker Toys

Great exercise:

Suppose your challenge is: "In what ways might I sell more IBM computers?

Step one: Why do I want to sell more IBM computers? "Because our overall computer sales are down."

Step two: Why do I want to sell more computers? "In order to improve our overall sales volume."

Step three: Why do I want to increase our sales volume?" In order to improve business. In order to increase my wealth."

Step three: Why do I want to increase my wealth? "To lead a good life."

Now the challenge is reshaped into:
"In what ways might I sell more computers?"
"In what ways might I increase my overall sales volume?"
"In what ways might I improve my business?"
"In what ways might I increase my wealth?"
"In what ways might I lead a better life?"

A phrase such as "increase my wealth" allows your thinking to embrace far more opportunities than "sell more computers." You could negotiate for higher commissions, go into another career, get a part-time job, make some investments, sell other products, and so on.

By coining your challenge as broadly as possible, you put yourself on the top of a mountain from which you can view all possible approaches to the top.

***

The shipping industry formulated their challenge as: "In what ways might we make ships more economical at sea and while in transit from one port to another?"

Costs still kept going up, but the industry kept concentrating its efforts on reducing the specific costs related to ships while at sea and doing work.

They were doing things right, but they weren't doing the right thing. They were about as effective as an expert salesperson who spends all her energy, time, and talents trying to sell veal door-to-door.

Finally, a consultant stretched the industry's challenge to: "In what ways might the shipping industry reduce costs?"

The innovation that saved an industry was to separate loading from stowing, by doing the loading on land, before the ship is in port. It is much quicker to put on and take off preloaded freight.

We Can’t

Often times, we write off certain ideas. Without re-examination, we file it into the “we can’t” aspect of our brains never to be considered again.

Let’s do “sample idea”. You answer, sorry we can’t do that, without second thought. Worse yet, often times we don’t volunteer the information ourselves because, again, it is filed off in the realm of impossibility in our minds.

The problem is that most of the time we answer “we can’t” without even saying why we can’t or thinking through this. Since it is already filed away in our brains, saying “we can’t” is a heuristic, or mental shortcut.

The problem is that by limiting our thinking and phrasing questions incorrectly we aren’t able to produce solutions.

The Solution: The solution to this is both powerful and simple. Instead of generalizing with “we can’t” statements we need to be as specific, descriptive, and accurate as possible. This is both so that we are able to solve our own problems as well as others.

Rather then saying, we can’t build the steps by tomorrow. You might say, “we don’t have the labor to build the bridge steps by tomorrow” or “we don’t have the capital to build the steps tomorrow.” By phrasing it this way, you consciously get all the constraints into the open so that they can be solved by yourself or others. The statement goes from “We can’t” to “HOW can we get the labor by tomorrow” or CAN we get the labor by tomorrow?”

What you will find often happens is that at the time of filing the solutions into our “we can’t” aspects of our brain things were different. We were operating with different resources and different constraints. Yet, unless we consciously state the constraints or reasons we can’t do something they will still be hidden in the realm of impossibility.

Bottom line: be specific and never say we can’t. Always consciously state why we can’t unless it is absolutely impossible, like flying to mars in 10 minutes. The truth is that very few things you are trying to do will ever fit the bill, so challenge yourself to state the constraints.

Is there a link between happiness, creativity, and business success?

In short, yes.

I have found that when I am happy I am in my most resourceful state.

Interestingly enough, I happened to be reading Thinker Toys today, here are some quotes of relevance:

"When you are depressed, your thoughts are quite different than when you are happy. When you feel rich and successful, your thoughts are quite different than when you are happy. When you feel rich and successful, your thoughts are quite different than when you feel poor and unsuccessful. Similarly, when you feel you are creative, your ideas are quite different than when you feel you are not.

Nothing is more harmful to a positive creative attitude than fears, uncertainties, and doubts; yet, most people let FUDS control their lives."

The moral of the story is that it is your duty to be happy. You must be happy not just for the sake of being happy, but for the sake of success, you must be happy ; )

Little Red Book of Sales Answers by Jeffrey Gitomer

-What's the best way to make a sale?

-The best way to make a sale is to become friendly before you start.
-The best way to make a sale is to ask intelligent questions that draw out both needs and motives.
-The best way to make a sale is to relax throughout the sales conversation.
-The best way to make a sale is to ask for a date of beginning, or some type of commitment to move forward after you are certain you have removed all the risks.
-The best way to make a sale is to create an atmosphere where the other guy wants to buy.

The reality is that there's no "one best way" but there are best elements.

1. What is the meaning of sales?

There's no magic wand, there's no secret formula. If you ask any magician how he or she became incredibly proficient at performing their magic, they will all answer with one word: Practice.

2. How do I do my best every day?

1. Love what you do
2. Take every "no" as "not yet"
3. Watch little or no television
4. Write for twenty minutes a day - clarify your thoughts and ideas through writing.
5. Call people you love and tell them you love them. Love is inspiration.
6. Tell yourself you're the best, everyday.

3. How do I attain a positive attitude?

Attitude is not a feeling - it's a state of mind that is self-induced:
1. Surround yourself with positive things and positive people.
2. Read and listen to positive books.
3. Say all things in a positive way.
4. Believe you can achieve it.
5. Don't listen to others who tell you you're nuts. They're just jealous.
6. Start now and work at it every day.

Attitude is something you give yourself over time. There is no "Instant Positive Attitude" only "Instant Negative Attitude." Re-read The Little Engine That Could , it's not a children's book it's a philosophy for a lifetime.

4. How can I improve my writing skills?
-User writer's privelege: writing in vernacular, not grammar. Write like you speak.
-Make me smile, think, or act at the end. End with impact.

Writing is the credibility you need to create buyer confidence.

5. How do I get a mentor?

You find mentors by earning their respect - not by asking them to be your mentor. They just become one over time.
-Don't overuse your mentor.
-Don't ask your mentor for money (biases advice)
-Your mentor takes pride in your growth - show them how you applied what they suggested and how it worked.
-Find mentors at the top! If you're seeking help, get it from those who have been through the battle - and won.

6. What is the secret to worry free living?

Worry is a symptom not a problem. Source the cause. Before you can get rid of worry, you must identify its real cause. The real cause of your worry may surprise you. Write down everything that bothers you and create a seperate plan for each item.

7. Should I change jobs?

The main reson people leave their jobs is that they don't love it. If you leave, make some progress first and make sure you leave a winner.

8. Should I sign a noncompete - only if its fair.

**Prospecting**

To get past the gatekeeper, "Hi, my name is Jeffrey, and I'd like to speak to Mr. Jones. It's a business matter of a personal nature."
-The object of a cold call is to set an appointment. The secret to a cold call is engagement.
-The biggest secret of cold calling is preparation.

How can I stop making cold calls and still make appointments?

1. Write an article.
2. Get on a talk show.
3. Give a speech.
4. Send an e-idea of the week/month.
5. Hold a free seminar.
6. Network at a business function.
7. Get a referral from someone who loves you. Referrals beat cold calls 100 to 1.

The secret of cold calling is not who you know - it's who knows you. If they know you, they will invite you in. If they don't know you, you're toast.

17. How can I get around a lower-level person?

The higher you start the easier it is to get a real decision maker.

You have to go in with a white paper, full of ideas to possitively affect your prospects productivity and profitability. Critical information that doesn't interest the lower-level person, but that is crucial to the higher-level person.

High-level people want to make a profit. Low-level people insist on saving money. Just say that you have information that you consider crucial to the higher-level person, and that you wanted to deliver it to him personally. When you meet with the higher-level person, close the sale as fast as you can because I garauntee you that the lower level sniveler will do everything he or she can to puke all over your birthday cake.

18. What is the best way to get information to a prospect?

Answer: Bring them an idea that helps them build their business.

19. What is the best way to get past a gatekeeper?

1. Know the name of the decision maker.
2. Have a response for "What's this in reference to?"
3. Be friendly.
4. Ask for help.
5. Be sincere.
6. Have a real good reason for calling beyond wanting to sell something.
7. Be original.

Be aware that bosses will often ask gatekeepers what they thought of the salesperson. The gatekeepers thinking will often determine your fate.

20. Google information on the prospect you are meeting before you go to them. Used LinkedIn as well.

21. What is the best way to set an appointment?

-Tell the assistant that you want to know what's a good time to conduct a 30-minute interview - and that you'll be bringing a photographer for an ezine or newsletter.
-The key is to get to the highest level person possible. You can find out exactly who they are by going to their web site, or using a research tool like Hoover's. This will allow you to know who they are.

If a prospect stands you up, blame yourself first, and reschedule.

-MORE SALES ARE LOST WITH POOR QUESTIONS AND POOR SALESMANSHIP THAN ARE LOST TO LOWEST PRICE.

27. Why did the last 10 prospects say yes?

Find out, and try to replicate the situation.

28. What are the two most killer questions in sales?

1) "Mr. Jones, when buying [copy machines], what are the three biggest mistakes people make?

Remember, fear of loss is greater then desire to gain.

2) "Mr. Jones, when I say [copy machine], what one word comes to mind?

This is the most powerful question because it not only gives you top of mind awareness, it also tells you their attitude towards it.

-Stalling is a type of objection, it is an indication from the customer that they want to buy, they just may not want to buy from you.
-The bottom line is conversion. You have to convert their lack of confidence, their lack of trust, and their lack of perceived value into a sale.

How can I prevent objections?

Somewhere you in your presentation, address it, "You know, Mr. Prospect, a lot of people tell us our prices are too high, before they become customers. I would like to share a few testimonials with you before we get too deep in our conversation."

The most powerful buying signal is when a prospect says "how much?"

-Your job is to try and figure out some ANSWERS to what keeps your customers up at night, and have IDEAS about what might make them sleep better. Your job is to be an expert at what keeps your customers up at night. And how to get them to rest peacefully.

-In sales, it's not who you know. In sales, it's who knows you.
-The secret to true differentiation is the "value-first" proposition.

-I would much rather find out that our kids play soccer in the same league or we that we went to the same college, etc.

-If you have something of value to sell and a great approach, no one will perceive you as a "solicitor."

-The best way to ensure a reorder is deliver a good product or service.
-When you've made a delivery, that's when you begin to build the relationship for the next sale.
-Anticipate the buyer's remorse. Remind the buyer why he purchased it and how to deal with buyer's remorse. Remember, that you purchase it for "X return on investment."

-When a ballplayer or a golfer has a slump, they take extra coaching, and they practice extra hard. Is that what you're doing if you hit a slump?

What are the biggest mistakes salespeople make?

1. Getting into sales for the money.
2. Failure to realize that their attitude is at the core of their success.
3. Blaming other people/circumstances.
4. Trying to push instead of pull, asking for sale instead of giving value.
5. Not believeing in what they are selling.

"In 25 years of selling I've never had a salesperson come up to me and say, I didn't make the sale and it was all my fault."
-Never refer negatively on the competition.

-First 1/3 of lunch or 9 holes of golf should be about gaining rapport and talking about common interests outside of business. The back nine in golf are the business nine. If you've gained enough rapport on the front line, business should be an easy subject on the back nine.

-The best way to apologize is to let your customer vent first. Tell them you understand how they feel and that it will be taken care of in 24 hours.

-Price is a complex objection and rarely the true reason why someone is declining to do business with you.

-Use video testimonials, these have the highest level of reputation. These video testimonials should support your claims, overcome all customer objections, and talk about using your biggest competitor and then switching to you, if you don't have this you are operating at an extreme disadvantage.

-Call reluctance is not a problem it's a symptom. It often means you aren't properly trained and are unprepared.

-Most salespeople don't make quota because they don't have enough in the pipeline. If it doesn't go down the pipe it will never come out of the pipe.

-When do you quit? You quit when you believe in your heart that you can no longer help that customer, or that your solution is not the best for that customer, but unil then, you hang in there until they say "No" ten times (maybe eleven).

Say: "Mr. Jones, I must be doing something wrong becuase you continue to reject me. In my heart, I believe that we're the best value and the best answer for your needs. And until we are able to do business together, I'm hanging in there. With your permission, I will continue to follow-up with you until you scream at me to go away or you simply throw me out a window. Is that fair enough?"

The object of sales and the object of life are the same: be the best person you can be for yourself and then you can be the best for others. People who continue to sacrific themselves for other snever achieve their full potential and most of the time resent the people they sacrificed themselves for.

-People carry the value-added material that you give them, people do not carry ads.

-The biggest mistake businesses make is advertising before they have become well known.

-The customer doesn't care about how good your company is. The customer wants to win for themselves, and once you understand this, you are on the right path.

Loyalty is earned with friendliness, responsiveness, ease of doing business, and the good feelings customers get when they call you, visit you, or interact with you.

-Learn the existing objections and make sure you address them.

-Hire friendly people, it matters a lot for your reputation.

-Have prospects talk about themselves, everyone loves talking about themselves, 50% of sales are made through friendships and it is highly unlikely people will stop doing business with friends.

-Take your customer to a ball game, theater, concert, etc.

-Results from networking don't happen in a short space of time. Your best results will come from consistently showing up and giving value.

-Testimonials, and video testimonials especially are the single surest route to risk-removal in the mind of the prospect.

-Make sure you incorporate customers into your improvements of your products.

-Value is what you do up front, before the sale, and what you do during the relationship. You don't add value - you give value.

-The best way to get referrals is to give them first. The second best way is to earn them.

-Think profit and productivity not price and sale.

-If you're doing your best, eventually you'll become BEST. You may not see your own growth, becuase you're too close to it. But take a moment and look back over the last few years. Have you grown?

-The worst reason to keep a job is because you're making a lot of money. When money is your motive it's about making the sale without regard to building the relationship - a formula for long-term disaster. However, if you love it, it will be ever so easy for you to put your full heart into it.

-Attitude is not a feeling. Attitude is a life-long dedication to the study of postive thought and the character/charisma that you display as you interact with others. If it's not internal, it can never be external.

From Jeffrey Gitomer's Little Red Book of Sales Answers

48. What is "give value first?"

Value first means they have bought it. I want to be on the buy side.

Since March 23, 1992, I have understood and benefited from the concept of giving value first.

That's the day my first column appeared in the Charlotte Business Journal. Since that day, I have booked more than 1500 seminars, sold 750,000 books, collected millions of dollars in revenues, and I've become one of the best known salespeople in the world without making one sales call, thus proving my #1 rule of sales: People don't like to be sold, but they love to buy.

All I do is share a little of my sales knowledge, share a little of my sales wisdom, share a few of my sales ideas, for free.

I would challenge any marketing genius who tells that an ad is better than a column in the paper to get notoriety and response. (one of the reasons you'll never see a "value first" campaign run by any marketing firm is because they don't make any percentages giving things away for free.

I put myself in front of people who can say yes to me and I deliver value first.

Start writing articles in front of your customers who will then perceive you as an expert, not a salesperson. Start speaking at trade shows instead of just attending them.

Notes from Chris Baggott - Co-founder of Exact Target

- When you are starting company you have to fire people quickly that don't fit. Design metrics that weeds out low performers quickly. One or two bad apples can mess things up. "Organization is more important than the people."

-Modeled their sales team off of Career Builder which uses teams of 23 and 24 years old.

-Used service companies as partners that didn't compete with them. Very hard to be both software and service company so don't even attempt it.

-Get good sales process going before you get good sales people.

-Everyone is measured.

-After salespeople get sales it goes to account managers.

-Programmers program based on feedback from customers.

-Used initial money on PR and contracting.

Sphere of Knowledge

There are two problems:

1) Our sphere of knowledge is limited
2) Most of us do not realize that our sphere of knowledge is limited

In reality, regardless of how much we have learned, our sphere of knowledge is incredibly limited.

What is the solution? The solution is realizing that our sphere of influence is limited. We can overcome this liability by tapping into others' sphere of knowledge. Rather then asking someone "do you know how to sell product using Google Adwords" ask "What do you recommend for our internet marketing" or better yet "What do you recommend for our marketing plan?"

How much do you widen the question? The answer depends on how experienced the individual is in his domain. If the individual is very experienced then you want to widen the question as much as possible to tap into his complete sphere of knowledge (do not limit his usefulness by asking very pointed specific questions). On the other hand, if someone is a one trick pony or has spent their entire lives in one domain then it may be best to ask them about this specific domain.

Just remember, as you and I have limited spheres of knowledge so does the other person. Do not believe when someone says "this is the only way that is possible", there is almost ALWAYS another way.

Salvation Seeking

As humans we are naturally salvation seeking, especially as aspiring entrepreneurs.

In order to be successful, we must override the natural impulse that taking action in the future will somehow be easier or simpler than taking action today.

One way to do this is to look at individuals that are 5 or 10 years older than us but have similar interests. One thing you will notice is that most are "still waiting" for the right time or opportunity to strike it on their own. The only difference between them and us is that they have more bills and responsibilities.

Noise

The business world is 99% noise, 1% insight.

In fact, the more I learn about business the more I learn to leave out rather then put in. The more I am able to filter out the daily noise from the truly important.

Let me give you an example:
Some brokers process credit cards over the phone, some do it through their internal databases, some do it by purchase order, etc. Everyone has their own method.

An amateur business person (like me back in the day) would start to analyze, why do they do it this way or that. A more experienced business person learns to apply the consequence test: is there a consequence to processing the credit cards the various different ways. Is there an increase in revenue or a decrease in cost.

The answer is, of course, no.

The main benefit from learning about business is about understanding what DOESN'T matter so that you can focus all your attention on the things that do.

Science by Exception

Can you imagine if science books were filled with theories and laws made from exceptions?

Well, surprisingly, much of the available and "pop-culture" information surrounding entrepreneurs is just that.

Most successful entrepreneur have done a great disservice to aspiring entrepreneurs by teaching by exception. Entrepreneurial "pop-culture" has done a great disservice as well.

What am I exactly talking about?

I am talking about the 100's of stories you read about entrepreneurs starting in their vans, eating ramen noodles, going for 10 years with no success, and having to overcome "incredible challenges."

While these stories can, of course, serve as inspiration, the issue is that they are often touted as the path that is necessary in order to start a successful business.

In response, I would ask the following question, how many of these entrepreneurs start their second businesses in the same manner, going door to door looking for funding, etc. The answer is none.

The reason is that they learn that it is NOT an effective way to do things.

Just because someone can endure great hardships and perservere doesn't mean that they had to in order to be successful. After listening to some of these entrepreneurs you may even start to value hardship and self sacrifice in and of itself, not even as a means to an end. You may even believe that you haven't suffered long enough to be successful.

This kind of "science by exception" is touted all over the media. You hear about entrepreneurs dropping out of high school or college to start their businesses.

Never do the commentators or even entrepreneurs stop for a second and think that while their success is unquestionable, they could have achieved the same level of success (and had better lives) had they not created unneccesary barriers.

Perhaps instead of going door to door for 7 years they could have went out and networked and gained the trust of others. Perhaps, they could have even got an MBA at a top business school and gotten access to thousands of potential funders.

My issue is not with these entrepreneurs, they certaintly more then deserve all their success and they are the heroes of the American economy. The issue is when these entrepreneurs negatively affect the next generation of entrepreneurs and make it more difficult to succeed rather then more easy.

If entrepreneurs really wanted to inspire the next generation they would do this by teaching the skills and information that aspiring entreprenurs need in order to successful. There is nothing that is more inspiring then the first taste of success.

The Significance Test : Real World Example

It is interesting how limited our thinking can become when we are too close to our business. I believe that this is the case no matter how "entrepreneurial" once is. For example, my partner and I were discussing how to quickly and strategically grow with limited cash flow. Only after a few weeks did my partner say, "Why don't we increase margins?" Of course, an outsider would have suggested this in 10 seconds but we had become so ingrained in our thinking and way of doing business that we had not thought about it. (by the way, this is why it is good to have a board of directors or board of advisors).

One ironic twist of this limited thinking has to do with my not using the significance test. Every day, we get phone calls and emails asking us the shipping dates of individuals tickets. The process of calling box offices and brokers is time consuming and leads to a loss of focus in our business.

This week, I implemented the following solution: we tell all of our customers that tickets will arrive as late as 10 days before the show. This answer is all encompassing and takes care of all these issues.

Before we invest into any activity in a business, we must make a test of significance: will this lead to increased revenue or decreased cost (aka: profitability). If it will not, chances are you are wasting your time on it and it is an activity that can easily be replaced or solved in a simple manner.

Do Squats Lead to Business Success?

Roughly two months ago I noticed a significant correlation between doing squats and success in business. Of course, like half of my theories, most people thought it was ridiculous. Well, today, I have the proof. This proof is significant not because it "proves me right" but because it is relevant and replicable and can lead to your own personal success. Read on..

Recently, I've had the following question: What makes people with $10MM want to have $20MM. On a logical level it makes very little sense. Why do people with $100MM strive for $200MM? Not to mention, a lot of these people are fairly modest individuals.

Yesterday, I posed this question to a one of the most successful entrepreneurs in the state of Indiana (who will rename anonymous). He had a paragraph long answer but what I gathered from it was the following: he likes winning and he is very competitive.

Hmmm winning, competitiveness, sounds like ... testosterone, the natural chemical that drives both males and females to have an innate and sometimes uncontrollable desire to WIN and DOMINATE. (by the way, this is not only relegated to doing squats, but also any other testosterone producing activity, including eating certain foods which you can research on your own if interested).

Following the logic we get: Squats = Increased Levels of Competitiveness = Driver of success in business. Therefore Squats = Driver of success in business.

BTW (by the way), why even bother going into what drives these individuals? The answer is both simple and important. In order to replicate other individuals' success we must both know what they do AND what motivates them. Once we know both of these facts only then can we replicate their success... not to mention what motivates them is 100x more important then what they do, because there are 1000's of ways to achieve the same goal but only a few drivers of motivation.

P.S. The following finding contradicts what some people believe as "the only route to success." There is a school of thought that believes that improvement and success is only driven by discomfort and a disgust at current conditions.

Therefore, people pose the question, "Can you be happy and grow you business at the same time."

While discomfort is also a significant motivator, it is not the ONLY motivator, nor is it necessary for high levels of success.

Chemical reactions, aka testosterone, will always override any sort of "logical" or "emotional" thoughts or beliefs you may experience (ever hear of someone falling in love with logic?).

Using testosterone you can have your cake and eat it too. Be happy and grow your business quickly.

Lag and Some Inspiration

Isn't it interesting that one of the most profitable TV shows in the past decade, American Idol, was not a "great idea" but was rather adapted from a similarly successful British show?

This is a concept called "lag", where businesses take an idea in a different market with similar demographics and replicate it. Guess what, these businesses have a very high chance of success and profitability.

Now for your inspiration: http://www.cnn.com/2009/SHOWBIZ/04/15/singer.simon.cowell.youtube/index.html.

The Leader Must "Fill The Gap"

Filling the gap is what every accountable person does.

A lot of times "leaders" conclude meetings where they are not quite sure what decision has been made on several issues (as ludicrous as this sounds). The leader "hopes" that the other people will understand or make the decision for him/her. This is bad.

It is the leader's responsibility to make decisions and to be accountable for all of them. The leader doesn't have the luxury in hoping that other people "get it" nor the luxury of relying on other people to make the crucial decisions. The leader must lead and make everything crystal clear to everyone in the organization.

One of the speakers of the panel yesterday mentioned: "You cannot over-communicate an important issue." Clarity of communication in organizations is of paramount importance.

The Rules Appeal

Negotiation is an interesting game.

It is the game of who can appeal to non-existent rules better.

The truth is that in business, unlike Chess, or sports, rules are made up as they go along.

Whoever can make more of a rational appeal to a made up rule wins.

To win an argument you have to make it seem as if your rule is standard (although it is by nature arbitrary) and the other person's rule is arbitrary. You have to make it seem as if your rule is cemented in logic and the other individual's rule is based on random choice... and you have to make the argument in a matter of fact way as if it's not even an argument. This means you have to state it, not ask or propose it.

That's how you win a negotiation.

Should You Do It?

Often times people are confronted with the question, should I take this action.. should I take this internship/job, should I contact this person, should I...

There is a very simple test you can apply to see whether you should do it. For lack of better wording, this is the "Will it take me to the goal that I am striving for" test (very similar to the consequences test).

I know, this test sounds elementary and well.. obvious.

But here's why it's important: The reason this test is important is because despite the common sense behind it very few people use it or even consider it.

I know many people with a long term goal of being an entrepreneur who choose to go into consulting or investment banking. It's one thing if they see this action as a way to improve their chances of being an entrepreneur. However, often time it is not related. By the way: if your ultimate goal is to be an entrepreneur you should either start a business or work underneath a very successful entrepreneur, this is the most direct path.

People also get distracted and end up like a dog running behind every single car. As CRAZY as it sounds, people make decisions (even large decisions) without connecting it to their long term plans. People make decisions when "great" opportunities come up. What exactly is so great about them if they are not related to your goals? (of course your goals can change but that's a different topic). People make decisions on what they believe they "should" do or what others think they "should" do or "would" do.

Don't be these people.

And - The antidote to argument

I have an assignment for you:

I want you to start an argument using the conjunction "And." Try to do it with as much venomous hate and passion as you can muster. At the end of the day you will find it very very difficult.

"President Bush is a terrible person." response "And he gave billions of dollars of aid to Africa."

This is why And is such a powerful and useful tool when you are in a discussion. No one is asking that you not voice your opinions or hold your tongue. The only thing people want is to be understood and respected.

The most secure and wise people don't always need to be right at the expense of others. In fact, I would make the following argument -> Those who don't demean others = higher like-ability (see Likeability Factor by Tim Sanders) = Higher earning power (proven by research).

Use the word "and" the antidote to the word "but" and report back to me.

Bad Advice and how to avoid it

I hear advice from both employees and entrepreneurs that is either pure anecdotal and based on limited experience or is frankly plain wrong. How do you avoid this type of advice?

One way is to limit advice seeking from three sources:

1) Business scientists. What I mean by this is individuals that have done research and have a sample of a hundred or thousand trials, this brings legitimacy in the topic they have researched.

2) Mature entrepreneurs in growing industries. For example, if you are a high tech entrepreneur who has run a business for 20 years you have pretty much had to recreate your business several times. Therefore, your view on business and entrepreneurship is based on several trials and tribulations.

3) Serial entrepreneurs. They have created new businesses over and over again, they really know what drives business and how to do it (especially if you can get a serial entrepreneur that has switched industries). By the way, did you know that one person started Blockbuster, Waste Management, and Auto Nation (the first and only individual to start 3 fortune 500 companies), damn impressive if you ask me.

Converting Hourly to Incentivized Work

I believe in incenting people. I am sure you believe in the same. The question is, how do we do it?

First, before I explain how we do, let me tell you a couple of reasons why converting hourly to incentivized work is great:

1) Consistency. Businesses are paid for results not for number of hours their employees work.

Let's say you make boxes that you sell for $20. Let's say your margin is $10.

You get paid based on the number of boxes that are produced, not the number of hours people spend producing boxes. Incentivizing workers decreases volatility, by the way, Gary Harpst and the Six Disciplines team did a study on company valuation and found that valuation on steady growth companies $1M to $1.5M to $2M received a 40% greater valuation then companies with volatile growth but same earnings like $3M - -1$M $500k, etc.

2) High performers - incentivized pay attracts high performers by nature. It also allows you to benchmark high performers and get significantly higher results even though you might be paying higher. Statistics show that there is over a 3:1 ratio of high to low performers. Meaning, it's better to benchmark high performers (who will also have high moral) and pay them $15/hour (effectively), then pay low performers $10/hour.

3) Management - creating incentivized pay takes away the need to "manage" and "motivate" people.

So how do we convert activities?

Simple:

1) Benchmark high performers. Take a stopwatch and count how many boxes the top people in the company produce per hour. If you are creating the position, take a stopwatch and do the function yourself or get someone who is talented in the activity.

That's it. After you see what could be done you now have a benchmark. You also have a good argument for why you are requiring that people perform to this level: it's obviously achievable.

Like I said, this naturally attracts high performers. The point of your business, if you want to be successful, should not be to appease lazy or low performing individuals, you want and need a system that weeds them out naturally.

3) Allows you to benchmark high performers and

Notes from Presentation by Walter Buckley (who once ran a $9B Internet Fund)

-ICG (Internet Capital Group) had an advisory board of Chief Information Officers and Chief Marketing Officers to make up for the two perceived weaknesses on the executive team.

-ICG got some top names from Fortune 50 companies such as the CMO of Microsoft to get on the team. The way they convinced them was through convincing these individuals about the passion and direction of the fund whose mission is still to lead the country into the 21'st Century of B-2-B Internet.

-Sometimes you like low performers as people and it is hard to disattach yourself from them and get rid of them. However, it is necessary to have a good culture and stable company.

-During the dot come crisis, ICG did weekly projections for every one of their 16 portfolio companies on a weekly basis to make sure they knew exactly what was going on.

-Great leaders are those that find a way to replenish their energy, especially during crises. Buckley did this through rigorous exercise programs, good diets, family and faith.

-The main driver of business is people. Hire the great CEO's and everything will follow including a good management team and the implementation of best practices.

-One of the biggest points of advice was to form an advisory board and to REALLY use them. Too many people put big names on their advisory board and never get in contact with them or have access to them.

-Be Open and Transparent during crisis or people will assume the worst (this point is echoed by Mark Hill). In one company they posted weekly revenue at the end of each week for all to see.

-CEO does have to play a role of cheerleader and make sure morale is high in the company as well.

-Culture is most important and least understood aspect of business.

-One interesting point was how ICG divided their fund into "financial engineers" and "operations people with management experience". These two types of people and positions have completely different skill sets so they made sure to utilize both of them.

-Everyone on the panel emphasized capital intensive growth.

-CEO's need to make sure to have a clarity of message, so that if you pull aside someone from the bottom or middle of the company they will know exactly what the company is doing (Six Disciplines helps with this).

-Keep a personal balance sheet of personal strengths and weaknesses so that the weaknesses can be delegated and the strengths leveraged.

-When choosing a VC call up 2-3 of CEO's in currnet portfolio and talk to them (note: Topgrade or use methods from Hire with Your Head), especially call up the CEOs of failed companies, this is where the truth will come out.

-VC's should be more then a funding source, make sure they bring strategic value and can help with next round of financing. DO DUE DILIGENCE ON THE VC'S, just like they do due diligence on you. Due Diligence is a 2-way street when it comes to investors and companies seeking investment.

-Appropriate use of advisory boards - make sure you have diversity in board among competencies. Advisory boards are better 1-1 then meeting like a board of directors. Make sure the advisors can be reached once or twice between quarterly meetings for help or advice (although don't use them as consultants).

-ICG used advisors during new business creation which helped them a lot with the process.

-When strapped for cash consider using strategic partners who offer resources such as engineers or distribution (you would have paid cash for these anyways so it is almost as good as cash).

Who by Geoff Smart and Randy Street

Intro: Who, Not What

What refers to the strategies you choose, the products and services you sell, and the processes you use. You can spend your whole career chasing solutions to the million what problems plaguing your business. That is what most managers do. (Note: they fail to do root cause analysis).

The financial pain of mis-hiring was great, but Thompson suffered personally even more. He spent his time dealing with crises back at work.

As Joe Mansueto, founder of Morningstar, put it, "Your success as a manager is simply the result of how good you are at hiring the people around you."

Who mistakes happen when managers:
1) Are unclear about what is needed in a job
2) Have a weak flow of candidates
3) Do not trust their ability to pick out the right candidate from a group of similar-looking candidates.
4) Lose candidates they really want to join their team.

Peter Drucker and other management gurus have long estimated that the hiring success rate of managers is a dismal 50 percent.

Decide to make better who decisions, and you will enjoy your career more, make more money, and have more time for relationships that matter most.

Chapter One: Your #1 Problem

The fact is, all of us let our who guard down sometimes. We realized how inflated resumes can be. Yet we accept at face value claims of high accomplishment that we know better than to fully trust. Due diligence, after all, takes time, and time is the one commodity most lacking in busy managers' lives.

When we met with Buckley, he got straight to the point: "One of the hardest challenges is to hire people from outside the company. One of the basic failures in the hiring process is this: What is a resume? It is a record of a person's career with all of the accomplishments embellished and all the failures removed.

Management guru Peter Drucker has long predicted that 50% of company employees are mis-hires.

Voodoo Hiring - People unfamiliar with great hiring methods consider the process a mysterious black art. Managers cling to their favorite methods even when evidence suggests they don't work. With executive hiring, people who think they are naturally equipped to "read" people are setting themselves up to be fooled big-time.

At the bottom line, all these voodoo hiring methods share an assumption that it's easy to assess a person. Just find the right gimmicks, pop the right quiz, and trust the scattered chicken bones to point the way, and you're certain to have great hiring outcomes.

An A player is not just a superstar. Think of an A player as the right superstar, a talented person who can do the job you need done, while fitting in with the culture of the company. We define an A player this way: a candidate who has at least a 90 percent chance of achieving a set of outcomes that only the top 10 percent of possible candidates could achieve. Hiring an individual like this can take longer in the short tun, but it will save you serious time and money down the road.

Who cares if somebody has a 90 percent chance of achieving a set of outcomes just about anybody could accomplish? You want to be great, and A players have a 90 percent chance of accomplishing what only 10 percent of possible hires could accomplish.

Hiring A Players takes hard work. As we'll see, it's not always for the faint of heart. You have to dig hard, ask tough questions, and be prepared sometimes for disturbing answers.

You Are Who You Hire - Hire C players and you will always lose to the competition. Hire B Players, and you might do okay, but you will never break out. Hire A Players, and life gets very interesting no matter what you are pursuing.

David Bonderman, founding partner of Texas Pacific Group: "After years of exhaustively studying our databases of dozens of deals across twenty years, we concluded that the keys to success in private equity are: 1) buying right 2) having an A management team 3) selling right. Everything else is just conversation. (Note: see root cause analysis).

How do you get an A team?

Scorecard - It is not a job description, but rather a set of outcomes and competencies that define a job done well. By defining A performance for a role, the scorecard gives you a clear picture of what the person you seek needs to be able to accomplish.

Source - Systematic sourcing before you have slots to fill ensures you have high-quality candidates waiting when you need them.

Select - Selecting talent in the A Method involves a series of structured interviews that allow you to gather the relevant facts about a person so you can rate your scorecard and make an informed hiring decision.

Sell - Once you identify people you want on your team through selection, you need to persuade them to join.

But the fact that the method is simple doesn't mean that implementing it won't require real effort on your part. The payoff, though, is huge.

Chapter 2 - Scorecard - A blueprint for success

Scorecards are your blueprint for success. They take the theoretical definition of an A Player and put it in practical terms for the position you need to fill.

You wouldn't think of having someone build you a house without an architect's blueprint in hand. Don't think of hiring people for your team without this blueprint by your side.

The first failure point of hiring is not being crystal clear about what you really want the person you hire to accomplish. Finally, the hiring manager said, "I was about to offer my top candidate the job. It sounds like I should put that on hold while we define what we really want."

In hiring everything is situational and no situation is entirely replicable. You are going to need different types of leaders at different phases of organizations.

The scorecard is composed of three parts: the job's mission, outcomes, and competencies.

The mission for the VIP of sales clearly captures why the role exists: to grow revenue through direct contacts with industrial customers. That's it. For a mission to be meaningful it has to be written in plain language.

Example Outcomes:
1) Grow revenue from $25 million to $50 million by end of year three.
2) Increase EBITDA margin from 9% to 15% by end of year three.
3) Topgrade the sales organization by end of year one.

Mission statements help you avoid the most common hiring trap : hiring the all-around athlete. All-around athletes are the candidates who walk into our offices bearing impressive pedigree, polished attire, and admirable accomplishments in a wide variety of roles.

Yet one of the most consistent findings from our interviews with dozens upon dozens of CEOs and top executives is that hiring all-around athletes rarely works. By definition, they are generalists. If you've defined the position correctly from the outset, you should be looking for narrow but deep competence.

You wouldn't let your family-practice doctor perform open-heart surgery on you, and in the same way you shouldn't look for a full team of generalists to solve your business problems.

As Nick Chabraja, the CEO of General Dynamics, puts it, "I think success comes from having the right person in the right job at the right time with the right skill set for the business problem that exists."

There is a tendency to gravitate to the best all-around athlete; you know - tremendous skill set, resume that is knock-your-socks off.

Like Nick Chabraja, Gores has learned to rely on people with job-specific talents, rather than gunning for all-around athletes.

If I am hiring for ap osition, I ask myself, what is this person going to be doing? Are they a quarterback? A center? I don't try to get the quarterback to operate like a center or a linebacker.

You can't just pull a mission off the shelf, scorecards need to be evolving documents, not static ones.

Not only did Rock evaluate Intel's needs at each point in its history; he deliberately sought leaders whose skills were optimized for each phase of the company's growth. While each CEO was generally talented, all three brought something different to the table along the way.

Most of the jobs for which we hire have three to eight outcomes, ranked by order of importance. Outcomes are that clear, and because they are, they cull the pool of possible candidates right from the start.

People don't want to fail, and they don't want to go through the dislocation of moving to another company, or possibly another city or country, if they know their chances of success are minimal. Set the outcomes high enough - but still within reason - and you'll scare off B and C players even as you pull in the kind of A Players who thrive on big challenges that fit their skills.

Typical job descriptions break down because they focus on activities or what the person will be doing rather than on outcomes or what a person needs to do. Not all jobs allow you to quantify the outcomes so easily. In these cases, seek to make the outcomes as objective and observable as possible. Our clients over the years have come up with plenty of objective criteria, everything from customer feedback to plans delivered on time for budgets met.

The specificity frees new hires to give the job their best shot. They know what they'll be judged on. They know what the company and the boss think is important in their position.

Critical Competencies for A Players:

Efficiency - Able to produce significant output with minimal wasted effort.

Honesty/integrity - Does not cut corners ethically. Earns trust and maintains confidence.

Organization and Planning - plans, organizes, schedules.

Aggressiveness - Moves quickly and takes a forceful stand without being overaly abrasive.

Follow-through on commitments.

Intelligence - Learns quickly.

Analytical skills - able to structure and process qualitative or quantitative data and draw insightful conclusions from it.

Attention to detail

Persistence

Proactivity - acts without being told what to do. Brings new ideas to the company.

Because every job has different requirements and every scorecard different outcomes, every set of competencies needs to be tailored to the position in question and the peculiar nature of the hiring institution.

Are the potential hires coachable? Are they thinking about the job at hand? If they are thinking about the next job, they will fail. They must be focused on the job they have.

In our interviews for this book, fully one in three of the billionaires and CEOs we talked with told us that not evaluating cultural fit was one of the biggest reasons for hiring mistakes. People who don't fit fail on the job, even when they are perfectly talented in all other aspects.

Try gathering your leadership team in a room and asking the question: "What adjectives would you use to describe our culture?"

We saw a client hire her single most productive salesperson because he was so argumentative. Culture fits - or misfits - inevitably affect the bottom line, but they are about much more than money.

Don't be afraid of writing down obvious things. In the heat of a hiring crisis, the clearest things sometimes get overlooked. Translate culture and values into a set of competencies so that you can hire against them. Part of successful hiring means having the discipline to pass on talented people who are not a fit.

The beauty of scorecards is that they are not only hiring tools but they link the the theory of strategy to the reality of execution. Scorecards translate your business plans into role-by-role outcomes and create alignment among your team, and they unify your culture and ensure people understand your expectations. No wonder they are such powerful management tools.

The whole key, whether you are hiring, promoting or managing for performance is that you have clear expectation. Sure, we want all our employees to be great at everything, but in fact few are, and those who are may well demand higher salaries that makes us pay for "features" that we don't need. Remember, it's all about the sepcific skill set you need, when you need it. A scorecard forces the manager to make choices and be consistent with those choices. (see Six Disciplines).

How to Create a Scorecard:

1. Mission - Develop a short statement of one to five sentences that describes why a role exists.
2. Outcomes - Develop three to eight specific objective outcomes.
3. Competencies - Competencies include efficiency, honesty, high standards, and a customer service mentality.
4. Ensure Alignment and Communicate - Pressure-test your scorecard by comparing it with business plan and scorecards of the poeple who interface with the role.

As the chairman of the selection committee said, "We found the process of gathering data from each candidate and comparing it to our scorecard very helpful and worthwhile. It really enriched our process."

Chapter 3 - Source - Generating a Flow of A Players

Getting great candidates doesn't happen without significant effort. The CEOs of billion dollar companies recognized being chief recruiting officers as one of their main tasks. These successful executives don't allow recruiting to become a one-time event, or something they have to do only every now and then. They are always sourcing, always on the lookout for new talent, always identifying the who before a new hire is really needed.

The traditional hiring process looks something like this. A vacancy opens up in a manager's division and the manager panics. He calls HR and begs for help. HR asks him for a job description, which he copies from an old one he finds and submits to the HR team to post.

Of all the ways to source candidates, the number one method is to ask for referrals from your personal and professional networks. This approach may feel scary and timeconsuming, but it is the single most effective way to find potential A Players.

Sourcing is an instance where innovation matters far less than process and discipline.

The industry leaders we interviewed didn't speak with one voice on every topic, but on the subject of sourcing new talent through referrals they were nearly unanimous. Without any prompting from us, a full 77 percent of them cited referrals as their top technique for generating a flow of the right candidates. Yet among average manager it is the least often practiced approach to sourcing.

Top 5 Methods for Sourcing Talent According to Interview with Top Execs:
1. Referrals from Business Network 77%
2. Referrals from Personal Network 77%
3. Hire external recruiter 65%
4. Hire a recruiting researcher - generates possible candiates but doesn't interview - 47%
5. Hire internal recruiter - 24%

I guess the one thing that I have done over the years that is different from most people is that I am constantly on the hunt for talented people to bring to my company. "I set a goal of personally recruiting 30 people a year at Aon. And I ask my managers to do the same. We are constantly asking peoople we know to introduce us to the talented people they know.

Whenever he meets someone new he asks: "Who are the most talented people you know that I should hire?" Talented people know talented people, and they're almost always glad to pass along one another's names.

You can almost certainly identify ten extremely talented people off the top of your head. Calling your list of ten and asking the simple question: "Who are the most talented people you know that I should hire?" - can easily generate another fifty to one hundred names.

But don't stop there. Bring your broader business contacts in on the hunt, too. Ask your customers for the names of the most talented salespeople who call on them. Ask your business partners who they think are the most effective business developers. Do the same with your suppliers to identify their strongest purchasing agents. Join professional organizations and ask the poeple you meet through events. People you interact with everyday are the most powerful sources of talent you will ever find.

Tell someone what you do and then say, "Now that I have told you what I do, who are the most talented people you know who could be a good fit for my company?"

Referrals from Employees

As valuable as outside referrals are, in-house ones often provide better-targeted sourcing. After all, who knows your needs and culture better than the people who are already working for you? Yet while this is far from a blinding insight, we're constantly amazed at how few managers actually take the time to ask their employees for help.

At ghSmart in-house referrals are a key part of staffling policies and promotions. Principals have to source three candidates who pass a phone screen by our CEO to earn eligibility for promotion to partner.

Try including something in the description along "Source [number] A Player candidates per year, then reward the effort by providing a financial or other incentive such as extra vacation time for those who achieve and exceed the goal. Like us, you will quickly find yourself fishing a greatly enriched pond.

One company we know offers as much as $5,000 if the company hires somebody the deputy sourced, depending on the level of the hire.

Many early stage companies set up advisory boards that serve the purpose of sourcing key employees.

WHI Capital Partners' manager partner says, "To date, we have not used any recruiters to hire the five CEOs and ten other high-level executive in our portfolio. We do it in a few ways. We bring people in through a trusted network.

"It's kind of like dating. If you are introduced to someone randomly in a bar, there is a chance it might work out, but you are more likely to have a higher success rate if you have a friend or family member introduce you.

Remember, you want your recommendations to come from A Players. As the old playground taunt goes, it takes one to know one.

Think of recuriters the way you think of a doctor of financial advisor. The more you keep them in the dark about who you are, what's rong, and what you really need, the less effective they will be. Recruiters who do not understand who you are will be counterproductive.

Being open at the outset, sharing your scorecard, and doing everything else you can to bring an outside recruiter inside both streamlines the process and ehances the result.

Hiring Recruiting Researchers

Researchers won't conduct interview themselves. Instead, they'll identify names for your internal recruiting team or managers to pursue. The benefits of this concept are obvious. For minimal cost, companies get a pipeline that taps into a rich source of talent.

The downside with researchers is that they won't qualify candidates as thoroughly as you might like.

You can help tailor the flow of candidates to your needs by taking time at the front end to orient recruiting researchers to your culture, business needs, and even management style and preferences. Unlike external executive resarchers, researchers aren't likely to become your new best friend, but the more they know going in, the more you will get out of them at the end.

Sourcing Systems

Sourcing talent through these proven practice is easy. The challenge is less a matter of knowing what to do than of putting a system in place to manager the process - and having the discipline to follow through.

Don't be lulled into technology. The most high-tech tracking system in the world won't do you any good if you don't use it on a systematic basis.

The converation goes something like this, "Sue recommended that you and I connect. I understand you are great at what you do. I am always on the lookout for talented people and would love the chance to get to know you. Even if you are perfectly content in your current job, I'd love to introduce myself and hear about your career interests."

When you are done with the call, assuming you were impressed be sure to ask the follow-up question: Now that you know a little about me, who are the most talented people you know who might be a good fit for my company.

Hiring needs ebb and flow with the business, but simple systems and disciplines - and simple questions such as the one just shown - will enable your sourcing networking to grow exponentially over time.

We asked potential candidates about:
1) What they thought about our company and our status
2) Other candidate names - people we may have not even considered

We even met with people who were not interested in the position.

How to Source
1) Referrals from professional and personal networks
2) Referrals from your employees
3) Friends of the Firm - giving referral bounty
4) Hiring Recruiters - Take the time to hire and educate the right recruiter. Make sure she understands your needs and culture, and don't miss the opportunity to learn from her. Source from everywhere you can, including the board's network.
5) Hiring Researchers
6) Sourcing System that : 1) Captures names and contact info 2) Schedules weekly time on your calendar to follow up

Chapter Four: The Four Interviews for Spotting A Players

Collectively, these interviews provide the facts you need to rate a person against the scorecard you have developed for the role.

The four interviews are:
- The Screening interview
- The Topgrading interview
- The Focused Interview
- The Reference Interview

The Screening Interview

To tell the truth, we used to shortchange this front end of the interviewing process. Our clients, though, kept reporting that they were spending too much time conducting subsequent interviews with people who never should have survived the first interview cut.

We recommend that you conduct the screening interview by phone and that you take no more than thirty minutes. Inviting candidates to your office or out to lunch is sure to gobble up an hour or more of your time.

***Screening Interview Guide***

1. What are your career goals?
2. What are you really good at professionally?
3. What are you not good at or not interested in doing professionally?
4. Who were your last five bosses, and how will they each rate your performance on a 1-10 scale when we talk to them?

This means following a COMMON set of questions every time you screen somebody. The commonality fosters consistency and accelerates your ability to discern differences between candidates.

What your career goals?

The first question is powerful because it allows you to hear about a candidate's goals and passions before you taint the discussion with your own comments. You give the candidate the first word, rather than telling the person about the company so he or she can parrot back what you just said.

Ideally, a candidate will share career goals that match your company's needs. If he or she lacks goals or sounds like an echo of your own web site, screen the person out. Talented people know what they want to do and are not afraid to tell you about it.

No matter how talented or qualified a candidate might be, someone who wants to be a manager is not going to be happy if you are trying to hire an individual contributor. Pass the name along to one of your colleagues if some other role in the company seems right for an able candidate, but don't waste any more time considering him or her for the original position.

What are you really good at professionally?

The second question always generates plenty of dialogue. We suggest you push candidates to tell you eight to twelve positives so you can build a complete picture of their professional aptitude. Ask them to give you examples that will put their strengths into context. If they say they are decisive, press for an example of a time when this trait served them well, and remember, you are listening for strengths that match the job at hand.

What are you not good at or not interested in doing professionally?

The third question captures the other side of the balance sheet. You could ask for weaknesses outright, but too often these come with cookie cutter answers. If they say something like this push back and say, "That sounds like a strength to me. What are you really not good at or not interested in doing?"

If they still resist say, "If you advance to the next step in our process, we will ask for your help in setting up some references with bosses, peers, and subordinates. Okay? What do you think they would say are some things you're not good at?"

You will be amazed how much of a truth serum this technique can be at this stage of the screening interview.

Who were your last five bosses and how will they each rate your performance on a scale of 1-10?

Notice the language, "How will they rate you when we talk to them not if we talk to them." In our experience the slight nuance to the question is key to unlocking the truth.

You are looking for a lot of 8's, 9's, and 10's. A 7's a neutral and 6's or lower are really saying 2.

Then begin the call by setting expectations, saying something like : "I am really looking forward to our time together. Here's what I'd like to do. I'd like to spend the first twenty minutes of our call getting to know you. After that, I am happy to answer any questions you have so you can get to know us. Sound good?

If you don't like the answers simply accelerate the questions. We regularly finish calls in fifteen to twenty minutes. On the other hand, if you hear a strong potential match you can always ask the candidate if he or she has more time or is willing to schedule more. While you don't want to waste time with the wrong people, you waqnt to make all the time necessary for the right ones.

You want to have the feeling that you have found the one. If you have any hesitation, or if you find yourself thinking you want to bring candidates in just to test them a little more, then screen them out. Online invite in those whole profile appears to be a strong match for your scorecard.

Getting Curious: What, How, Tell Me More

The screening interview questions are simple to remember and easy to administer. That's one of the beauties of the A Method. But unless you follow up on the four primary questions, you won't get all the answers you need.

Rather than create a screening guide that tries to cover all the possibilities, we use a simple process called "getting curious". Here's how it works. After a candidate answers one of the primary question above, get curious about the answer by asking a follow up question that begins with, "What, How or Tell me more." Keep using this framework until you are clear about what the person is really saying.

"What do you mean?"
"How so?"
"Tell me more."

Sure, it can seem like you are probing a lot, but this is a key step in an important who decision that can affect your entire company. You should be pushing candidates to be as clear and precise as possible by asking "what" and "how" questions. When you have no idea what else to ask, just say, "Tell me more." They will keep talking. We promise.

It usually didn't take long for the judges to figure out who was a dud, when this happened, one of the judges would stand up, do a dance, and hit a giant gong. Hitting the gong fast is exactly what good screening is all about. Too many managers make the costly mistake of lingering with candidates who are a bad match. Some are simply avoiding confrontation. Other think, "My colleague may see something I don't." That may sound collegial but you are just wasting everybody's time. Better to miss out on a potential A player than waste precious hours on a borderline case that turns out to be a B or C Player.

"My team and I didn't pay much attention to the screening interview when we first started using your system. We did them, but we weren't rigorous enough. We found we were spending far too much time with people we had brought in for the day who were clearly not a fit. We should have known better. We wasted a lot of time."

Today, only 10-20 percent of the poeple they talk to on the phone pass their rigorous screening interview. "My team spends much less time with the wrong people." That enables them to spend much more time with the right people, which makes a more efficient process.

John Sharpe offers another persepctive on screening. "I think gut feet and instinct is particularly important in determining who NOT to hire." "I don't think you can hire based on gut feel along. You have to examine their record. But when everything looks good on paper, if you have the gnawing feeling that you don't feel comfortable with the person, or if you don't totally trust the person, then you should pass.

This guy told the flight attendant he only had Canadian dollars but I could see he had American dollars. "I did not feel comfortable with this deceit." In this case, the gut picked up something important that did not show up in any resumes, interviews, or references.

Screening interviewers seperate the what from the chaff, but they are not precise enough to ensure a 90 percent or better hiring success rate.

***Topgrading Interview Guide***

1. What where you hired to do?
2. What accomplishments are you most proud of?
3. What were some low points during that job?
4. Who were the people you worked with? Specifically:
i. What was your boss's name, and how do you spell that? What was it like working with him/her? What will he/she tell me where your biggest strengths and areas for improvement?
ii. How would you rate the team you inherited on an A/B/C scale? What changes did you make? Did you hire anybody? Fire anybody? How would you rate your team when you left on an A/B/C scale?
5. Why did you leave that job?

So what is a Topgrading Interview? It's a chronological walk-through of a person's aceer.

These five questions are so straightforward that the discussions they generate seems more like a conversation then an interview.

What where you hired to do?

The first question is a clear window into candidates' goals and targets for a specific job. In a way, you are trying to discover what their scorecard might have been if they had one.

What accomplishments are you most proud of?

Question number two generates wonderful discussions about the peaks of a person's career. Most candidates naturally focus on what really mattered to them in their career rather than regurgitate what they put on their resume.

On the flip side, we are always wary when a candidate's accomplishments seem to lack any correlation to the expectations of the job. A Players tend to talk about outcomes linked to expectations. B and C Players generally about events, people they met, or aspects of the job they liked without ever getting into results.

What were some low points during that job?

The disclaimers are understandable, but there isn't a person alive who can seriously make the claim of having no lows. Everybody, and we mean everybody, has work lows. Ask, "What would you have done differently if you are not getting a response."

Who were the people you worked with?

This is the first threat of reference check. Forcing candidates to spell the name out no matter how common it might be sends a powerful message: you are going to call, so they should tell the truth. Next, ask what they thought it was like working with John Smith. At the positive extreme, you will hear people offer high praise for their bosses and how they received mentoring and coaching from them over the years.

At the low end they will call their former bosses a jerk. Oddly, some candidates fail to make the connection that you will be their new boss. Being called a moron might be the least of your worries.

Now ask, "What will Mr. Smith say were your biggest strengths and areas for improvement? Be sure to say will, not would."

Threat of reference check has a way of uncovering a mother lode of data about a person. "How would you rate the team you inherited?" - is applicable to managers. The focus here is on how candidates approach building a strong team. Do they accept the hand they have been dealt when they inherit a new team, or do they make changes to get a better hand?

The point is: people rarely change so look for ways they have acted in the past.

Why did you leave that job?

Were the candidates for your position promoted, recruited, or fired from each job along their career progression?

A Players are highly valuable to their bosses. It is an important piece of the puzzle to figure out if somebody decided to leave a job after being successful (an A player cue) or whether he or she was pushed out of a job by a boss who did not value their contribution (a B or C Player cue).

Don't accept vague answers like "My boss and I didn't connect." That's a non-answer. Get curious. Find out why, and stick with it until you have clear picture of what actually happened.

Suspend your judgment during the interview and get curious. You never know what you might hear as the picture fills in and the person's true identity is revealed.

Conducting an effective Topgrading Interview

To put the Topgrading Interview into practice, divide a person's career "story" into the equivalent of "chapters." Each chapter should be a single job, or a group of jobs that span three to five years.

Then Haugen asked the five questions above for each of the eight chapters, starting with the earliest set of projects and working his way forward toward the present day. Don't start at the most recent job and work backward. Candidates can't think clearly that way. Instead, walk through the career history chronologically - as the events really happened.

The Topgrading Interview takes three hours on average to conduct. It might take five hours for CEOs of multibillion dollar companies, or ninety minutes for entry-level positions.

The length of the interview will help you in two ways initially. First, it will encourage you to get really good at the screening interview so you are able to spend most of your time Topgrading the best candidates. Second, it will enable you to reduce your hiring failure rate by such a wide margin that you will never hire another person again without using this methodology.

For every hour you spend in the Topgrading Interview, you'll save hundreds of hours by not dealing with C players.

In practical terms, this means that you, the hiring manager will want to conduct the Topgrading Interview yourself. You own the hire. You will suffer the consequences of making a mistake. Your career and job happiness depends on finding A Players.

That said, we also recommend that you conduct the Topgrading Interview with a colleague - perhaps eomoene from HR, another manager or member of your team, or simply someone who wants to learn the method by observing you.

One person can ask the questions while the other takes notes, or you can both do a little of each. Either way, two hears are always better then one (and minimize error rate considerably).

"Thank you for taking the time to visit us today. As we have already discussed, we are going to do a chronological interview to walk through each job you have held. For each job I am going to ask you five core questions. What were you hired to do? What accomplishments are you most proud of? What were some low points during that job? Who were the people you worked with? Why did you leave that job?

At the end of the interview we will discuss your career goals and aspirations, and you will have a chance to ask me questions. Eighty percent of the process is in this room, but if we mutually decide to continue, we will conduct reference calls to complete the process.

Finally, while this sounds like a lengthy interview, it will go remarkably fast. I want to make sure you have the opportunity to share your full story, so it is my job to guide the peace of the discussion. Sometimes, we'll go into more depth in a period of your career. Other times, I will ask that we move on to the next topic. I'll try to make sure we leave plenty of time to cover your most recent, and frankly, most relevant jobs.

Do you have any questions on the process?"

Setting expectations will put the candidate at ease and enable you to launch into the first chapter of his or her career with minimal confusion or intimidation.

Master Tactics

After training thousands of managers on this approach, we commonly hear that it is suprisingly easy to do.

Master Tactic #1: Interrupting

You have to interrupt the candidate or he/she will talk for ten hours straight. Tell them "It sounds like that and that was important, can you tell me about launching the direct mail campaign, I'd love to hear about it."

Master Tactic #2: The Three P'S

Ask them:

1. How did your performance compare to the previous year's performance?
2. How did your performance compare to the plan?
3. How did your performance compare to that of peers?

Master Tactic #3: Push Versus Pull

People who perform well are generally pulled to greater opportunities. People who perform poorly are generally pushed out of their jobs.

Why did you leave the job?

1. Push. "It was mutual." "It was time for me to leave." "My boss and I were not getting along."

2. Pull. "My biggest client hired me." "My old boss recruited me to a bigger job."

If it's not a pull, assume its a push.

Master Tactic #4: Painting a Picture

You always want to put yourself in the other person's shoes. You are trying to put yourself in their shoes to understand how and why they are making decisions and handling problems, says Wayne Huizenga, who has founded three Fortune 500 companies.

For example, a candidate might say she is an excellent communicator. Ask her what she means. it might mean she is a good writer or a good presenter (but not the other).

Master Tactic #5 : Stopping at the Stop Signs

The biggest indicator, as it turns out, is when you see or hear inconsistencies. If someone says, "We did great in that role," while shifting in his chair, looking down, and covering his mouth, that is a stop sign.

The idea isn't to gather dirt. Think of yourself as a biographer interviewing a subject. You want both the details and the broad pattern, the facts and texture. That's how you make an informed who decision.

The Focused Interview: Getting to Know More

This interview's purpose is to talk specifically about an important competency of two on the job.

Focused Interview Guide:

1. The purpose of this interview is to talk about ____ (specific competency).
2. What are your biggest accomplishments in this area during your career?
3. What are your insights into your biggest mistakes and lessons learned in this area?

Stress that everyone follows the scripts for the interviews or else everyone else will fall into their vodoo hiring methods.

The focused interview is similar to the commonly used behaviorial interview with one major difference: it is focused on the outocmes and competences of the scorecard, not some vaguely defined job description or manager's intuition.

Suppose your competencies are:
1. Aggressive
2. Persistent
3. Hires A Players, etc.

Make sure you ask about these competencies and follow through on gathering information on them.

Typical Interview Day:

8:30-8:45 : Meeting about the candidate with interview team.
8:45-9:00 : Orientation for candidate.
9:00-12:00: Topgrading interview.
12-1:30: Lunch
1:30-4:30: Focused Interview on specific competencies
4:30-5:30: Wrapup and discuss candidate with other interviewers.

Many successful hires were made solely through screening interview + topgrading interview.

The Reference Interview: Testing What You Learned

You may be tempted to skip reference checks and make an offer now. What can a reference tell you that you and your colleagues haven't already gleaned after that exhausting day of interview? A lot, it turns out.

In fact, 64 percent of business moguls we interviewed conduct reference calls for every hire, not just the ones at the top.

1) Pick the right references. Don't just use the reference list the candidate gave you, call up the people that the candidate mentioned during the interview.
2) Ask the candidate to contact the reference to set up the calls. You may hit the brick wall if you try to call them directly but ask the candidate to do it for you.
3) We recommend seven total references, three past bosses, two peers or customers, and two subordinates.

***Reference Interview Guide***

1. In what context did you work with the person?
2. What were the person's biggest strengths?
3. What were the person's biggest areas for improvement back then? (makes it easier to talk about weaknesses).
4. How would you rate his/her overall performance on a 1-10 scale? What about his or her performance causes you to give that rating?
5. The person mentioned that he/she struggled with _______ in that job. Can you tell me more about that?

Use the What, How, Tell me More, framework to probe further.

"What were the person's biggest areas for improvement back then?" These two words liberate a reference to talk about weaknesses that existed in the past. Surely, they might assume, the person has corrected those weaknesses. They don't see it as being critical of the candidate in the present.

Remember, the 6 rating is a 2. In the end, you are looking for people who consistently get ratings of 8, 9, and 10's. A 7 is a neutral and likely a B or C player.

For the weakness question you might say, the person mentioned you might say he was disorganized. Can you tell me more about that?

Again, the phrasing is important, "You might say" suggests to the reference that she has permission to talk about the subject because the candidate raised it. You might hear something like "Wow, he told you that. Now that you mention it he was very disorganized."

Avoid accepting a candidate's reference list at face value:

Jay Jordan says, "The best way to learn about a CEO is not to talk to their bosses, but to their subordinates. You want to get down two or three levels to the district sales managers, and learn how the person interacts.

Hearing or Understanding the code for risky candidates

References want to avoid conflict and they don't want to nail somebody in references. If somebody really thinks that a preson is good, they're going to go above and beyond and really show positives. Um's and er's are another code for spoken problems. The reference who hesitates with a question is a bad sign. Say, it's ok, several of the references have had some negative things to say about the candidate, is there something that we should take into consideration that you have not mentioned?

The absence of enthusiasm is a terrible sign. You don't have a positive reference just because everything sounds good. Neutral, ho-hum references are bad references. A truly positive reference should brim with tremendous enthusiasm and obvious admiration. It will lack hesitation and hedging.

Make sure you evaluate both skill and competency. When you believe the candidate has 90 or better chance of completing job rate him an A in competency. Do the same with will, which is measured by a history of successfuly completing similar tasks. When you are 90 percent sure that the candidate has both skills and will you have an A player.

Red Flags:
-When candidate doesn't mention past failures.
-Candidate exaggerates his or her answers.
-Candidate teakes credit for others' work.
-Candidate speaks poorly of past bosses.
-Candidate cannot explain answers.
-For managerial positions, candidate has never had to hire or fire an individual.
-Candidate seems more interested in compensation and benefits then job itself.
-Candidate tries too hard to look like an expert.
-Candidate is self absorbed.
-Candidate wants to win too much even small battles that are not important.
-Candidate makes sexcuses

Deciding to do something and actually doing it are two different things. You have decided who you should hire.

Review of How to Select an A Player:
1. Screening Interview
2. Topgrading Interview
3. Focused Interview
4. Candidate Discussion
5. Reference Interview
6. Final Decision

Chapter Five: Sell - The Top Five Ways to Seal the Deal

Most managers fail to sell a candidate. Imagine putting all of that work into finding Mr. or Ms. Right and then losing them in the eleventh hour! Imagine the frustration, the embarassment, the anxiety.

The key to successfully selling your candidate to join your company is putting yourself in his or her shoes. Care about what they care about. It turns out that candidates tend to care about five things: fit, family, freedom, fortune, and fun.

-Fit ties together the company's vision, needs, and culture with the candidate's goals, strengths, and values. "Here is where we are going as a company. Here is how you fit in."
-Family takes into account the broader trauma of changing jobs. "What can we do to make this change as easy as possible for your family?"
-Freedom is the autonomy the candidate will have to make his or her own decisions.
-Fortune reflects the stability of your company and the overall financial upside. "If you accomplish your objecties, you will likely make [compensation amount] over the next five years."
-Fun describes the work environment and personal relationships the candidate will make. "We like to have a lot of fun around here. I think you will find this a culture you will really enjoy."

Selling Fit

Fit is by far the most important to sell. The best candidates are looking for roles where they can be A Players. The better the fit, the higher the likelihood of success.

People want to make an impact in the world. They want to be needed. They want to be part of something that feels right.

"Show that you are as concerned with the fit for them as you are in the fit for you. Ninety-nine percent of your competitors are not doing that. It's a key differentiator. You will be the one who cares enough to see if there is something for them there.

The first thing you have to do is talk to them about the company. You have to sell the company and the vision of the company and the potential of the company. Nbody who is worth anything is going to go into a company where they don't see real potential with the company and a strong fit with their goals and abilities. The most valuable commodity they have is their time. If they are truly an A Player, they are going to value the potential of the company.

Selling Family

Gabriel Echavarris also makes heavey use of the second F in the five F's of selling: family. Spouses and children quite reasonably resist job chances that threaten to turn their lives upside down, seperating them from friends, changing schools, and forcing them to start from scratch.

During conversation with Greg, I asked, "How is your wife feeling about this? How excited are your kids to live in Denver?"

Times and times again we have seen A Players from amangers to CEOs showered with gifts and attention only to drop out of the process at the eleventh hour because their families were not on board.

"When hiring for small companies, the person who needs to be sold is never the candidate. The candidate would not be there if he were not sold."

Be sincere and keep the five 5's in perspective but don't manipulate people.

As all these stories suggest, once you are sold on a candidate you have to sell all the people who come along with him (from kids to parents). Hire a real-estate broker to give them a tour of possible neighborhood and schools.

Selling Freedom

A Players have never liked being micromanaged. It runs against the grain - the inherent characteristics that make them standouts in the first place. That's even more true of Gen-X and Gen-Y A Players.

Great leaders gain more control by ceding it. They know thay are bringing A players on their team. The scorecard tells them that, and the scorecard also tells new hires the outcomes by which they will be measured. Once it's all out on the table like that, there is no need for micromanagement. Instead, you need to create an environment where A Players like these can thrive.

I encourage the candidate to do reference checks on me and ask how people work and interact with me. Some organiations build their entire culture around freedom.

Selling Fortune

Research shows that you can't just throw money at a candidate and that although it can be a disincentive if it's too low, it rarely is the key motivator.

That doesn't mean you can ignore it. Compensation will enter the equation eventually, and you can take advantage of the fact by demonstrating how a candidate would be rewarded if he or she joined your company.

Liddy's advice, "pay people on perfromance basis." He added, "We have used it here at Allstate very successfully. That gets you good people, people who believe in themselves."

Link bonuses to scorecard attainment ensures you pay top compensation only when you get A performance.

By selling fortune in the context of fit with the company's growth potential, Echavarria has been able to attract A Players who are in it for the long haul. "People join us not for six months, but for six years or ten years or thirty years."

Five Waves of Selling

In reality, selling is something you should be doing throughout the entire process. Like sourcing, selling requires constant attention.

Do it when you source, when you interview, before acceptance, after acceptance, and the new hire's first 100 days.

Use the candidates questions to emphasize the parts of the job that are important to that candidate.

Instead of putting people in the deep freeze, assume they have received an attractive counteroffer from their current employer and are considering other options at the same time. These are A Players after all. Silence is your worst enemy at this stage.

Stay in touch with them on a regular basis. Pinpoint their concerns using the five F's as your guide. Occasionally, you will turn a candidate off by being too ardent a suitor, but our experience has been that mangers undersell far more often then they oversell.

Even after they get an offer, candidates still have counteroffers and competing offers on the table. Their families are still concerned. Until they have committed 100 percent to their new lives, they will be at risk of leaving and not be as effective as they might be.

We suggest celebrating their acceptance by sending something meaningful, such as flowers. Make a splash. Keep listening for concerns related to the five F's and address them as soon as they come up.

Keep on selling throughout early months. Research shows an alarming failure rate among new hires in the first one hundred days. People get buyer's remose during these early months and are tempted to cut their losses.

Persistence Pays Off

Great leaders are persistent. They don't take the first no for answer. Ask them what it would take to hire them.

How to Sell A Players:
1. Identify how the 5 F's apply to them (fit, family, freedom, fortune, and fun).
2. Create and execute a plan to address the five f's.
3. Be persistent. Dont' give up until you have your A player on board.

Do whatever it takes to get the A player, figure out what they want and give it to them.

Chapter 6: Your Greatest Opportunity

What makes a successful business (according to survey by billionaires, CEOs, and entrepreneurs):

52% Management Talent
17% Strategy
20% Execution
11% External Factors

Even execution is just management talent because people execute strategy.

If you want to install the A Method of Hiring you need to do 10 things:

1. Make people a top priority. The leaders we interviewed spend as much as 60 percent of their time thinking about people.

2. Follow the A Method yourself. Lead by example.

3. Build support among your executive team and peers for this method.

4. Cast a clear vision for the organization and reinforce it through every communication with the broader team.

5. Train your team on best practices.

6. Remove barriers that impede success. Eliminate policies, standards, and practices that get in the way of successfully implementing the A Method.

7. Implement new policies that support the change. Remember, people do that which they are checked on.

8. Recognize and reward those who use the method and achieve results.

9. Remove managers who are not on board.

10. Celebrate wins and plan for more change. The best leaders celebrate their wins by giving rewards such as fancy dinners, a team event, or a nice gift. They use the goodwill generated by this recognition to inspire more action in the next year. Never satisfied, they seek new and better ways to achieve the results they desire and go back to stop one to implement those changes.

In fact, that's a large part of what motivates us at ghSmart. We get to watch successful people become even more successful because they put the right teams in place.

People who don't hire A players burn out more quickly. A Players hire more A Players so your success at the top trickles down. You can do the A method within any department, function, or business unit.

Don't discriminate. If you keep on processes of the method then you will by nature by nondiscriminatory. An A Player is someone who accomplishes the outcome you define in a manner consistent with your culutres and values.

One client told us he thought his company's entire aspirations rose with every A Player he brought on board.

Building a team of A Players means thinking long and hard about your business strategy and contemplating what roles you need to fill to execute it.

Cheetahs became successful 100 percent of the time in our study. These were CEOS who moved quickly, acted aggressively, worked hard, and demonstrated persistence, and set high standards and held people accountable to them. Every single one of them created significant value for their investors.

Emotional intelligence is important but only when matched with the propensity to get things done. Too many executives have fallen into the trap of accentuating their Lamb skills at the expense of their Cheetah qualities.

The difference is that Cheetahs know when it is time to stop asking for feedback and to attack a target to achieve key outcomes that move a company forward. (The Lamb was successful 57% of the time).

If you have the choice to hire somebody who errs on the side of being too fast and focused versus being slow and extremely collaborative, we recommend going with the fast and focused option. In this fast-paced age of business in which we all exist, it appears that speed and focus really count when it comes to delivering great financial results.

Beyong Hiring

We have found that most people fall back into Voodoo hiring when thinking about development, promtion, and succession planning. This is bad. The scorecard changes every time somebody climbs in an organiation which means how you think about a person's capabilities must change.

"I was following the lessons I learnd from my MIT days. I fired the "best athlete" and took time to hire a replacement who fit his role better. Morale went up. Not everybody was good at everything. They just had to be exceptional at one thing."

To figure out the scorecard for what matters in a job, just think about what success looks like for the role and how you could measure it through metrics or observation. The A Method for Hiring is simple. The A Method works.







Ideally, a candidate

The Optimal Attitude

Note: The following will make no sense whatsoever for any non self employed individuals:

What is the optimal attitude surrounding work and play? After all, as entrepreneurs we need to have a good balance of both. How do you balance work and play? How do you think about both while they are going on?

As entrepreneurs, especially those of us who are self disciplined and successful it may be very hard to switch between work and play. You might find yourself, on your off days, disciplining yourself not to have too much fun or thinking about the work that needs to be done the following week.

The solution is complete immersion. This is especially true for the off days. During the days that you have off and in the evenings, completely immerse yourself in doing things that you like to do. Allow yourself to feel a sense of bliss and complete immersion into fun.

Part of this has to do with self belief. If you have complete belief in your ability to get back to work on Monday (even if you start out a little slow) the self punishing and self disciplining part of your brain will turn off and allow you to completely forget about work matters on the weekend.

In order to do commit to forgetting about your work for one full weekend. If you find yourself not being able to get back to work on Monday then never do it again. Once you see that nothing happens then you are likely to repeat it again (after all, the greatest way to get someone to believe something is to have them experience it first hand). Good luck.

Breaking the Plane - How to do it and why it matters

Over the last several years I have noticed a phenomenon experienced in almost every single aspect of my life: in health, wealth, and relationships.

Let me give you an example:

In working out: In the beginning it is both most difficult and most ineffective. That is, you put in 100pts of effort and get, 10 pts of results.

What happens as you continue your regime? Well what happens is that the effort needed goes down while the results go up. Eventually, in many activities, you will actually experience the reciprocal effect: 10 effort points 100 pts of results.

This is applicable to every aspect of your life. This is why it pays to stick out important activities: it gets easier and the results get better.

How to Break Negative Neuro-Associations and Why It Matters

You may remember I first blogged about neuro associations several weeks ago after reading Tony Robbin's book "Ultimate Power". Every day, I start to see how these neuro associations affect my every day life.

Let me give you several examples:

Example 1:

Lately, I've been very pissed off about the weather. I really hate the fact that it has changed from good to bad day in and day off.

In fact, it has pissed me off considerably more then I have ever imagined.

I told this to my father and he reminded me that I had never complained this much about the weather. He suggested that it was not the weather that had pissed me off but rather two weather related events: a) getting up in the morning when it's cold b) getting into a cold car. Interesting, I thought to myself..

The next evening I was traveling to Chicago and stayed at my parents place. When I woke up I was in a warm room. I immediately felt much better and I realized it.

Basically, in my mind, because of the initial cold I experienced waking up, I had associated the following things: waking up = cold = it sucks, and I don't want to wake up = I'll never be happy waking up in this weather = I can never live in cold weather... Interesting eh?

Example 2:

I've noticed another neuro associations while working out. How do you increase the chances that you will work out more often and enjoy it. Well, you create more positive neuro associations with working out. But, how do you do this?

One way to do this is to lower the weight on your first repetition of every set. Why do you do this?

When you lower the weight and perform the first set successfully you start to feel much more confident. You feel like the man, because you are killing the set. Not only does give you momentum going into the heavier 2'nd and 3'rd sets but it makes you feel better about working out in general and makes it much more likely that you will sustain the workout.

Another way to improve neuro associations to going to the gym may be to go with a close friend. A close friend going to the gym and high fiving you after every set, as trivial as it seems, does make a significant difference.

So what's the point? The point is that neuro associations are not simply something you should be aware of. Neuro associations are something that you can USE to your advantage.

Crucial Confrontations by Kerry Patterson

The hallmark of a crucial conversation is disagreement. Crucial confrontations, on the other hand, are about disappointments. They're made up of failed promises, missed expectations, and all other bad behaviors. Confrontations comprise the very foundation of accountability. They all start with the question: "Why didn't you do what you were supposed to do?"

"One of my problems is that I internalize everything. I can't express anger; I grow a tumor instead." - Woody Allen

Although Leo and Sarah work in completely different jobs, they faced the same issue: What do you do when other people aren't doing what they're supposed to be doing?

We all face crucial confrontations. We set clear expectations, but the other person doesn't live up to them - we feel disappointed. Lawyers call these incidents breaches of contract.

Leo went for option 1: He chose violence. Sarah opted for another alternative: silence. This book is about the method that falls in between and is more effective.

We studied them not because they were the best communicators, but because they achieved the best results and had the greatest influence.

So what was the cause of the real tragedy? The copilot didn't have a method for confronting the pilot in a way that he believed was both direct and respectful. To the copilot, it was unthinkable and tactless to confront the pilot. In short, he didn't know how to step up to a crucial confrontation and deal with it well.

Seventeen years later when the Columbia shuttle exploded, it had the same root cause: people were afraid to express their concerns openly.

As it turns out, crucial confrontations lie at the root of all chronic family and organizational problems. This part they do know: they need to talk face to face about an extremely important issue. Second, if they fail to resolve the issue, simple problems will grow into chronic problems.

Some people are caught in an agonizing silence. Rather than speak directly and frankly about the problem at hand they drop hints, change the subject, or withdraw from the interaction altogether.

We've trained 200k people across the world and they've changed. They've learned the skills necessary to deal with some of the most challenging confrontations imaginable.

For the bad news: If you can't step up to and master crucial confrontations, nothing will get better. It will be a SKILL SET, not a POLICY, that will enable people to solve their pressing problems. Don't count on new ground rules or new systems to propel the changes you want. Not by themselves at least.

After teaching Crucial Confrontations to employees of a large telecommunication company, we found that an increase of 18 percent corresponded with over 40 percent improvement in productivity.

Our own research shows that between 20 and 80 percent of a company's potential performance is lost due to an inability to step up to and master crucial confrontations. For examples, we've asked leaders in over a dozen industries to estimate the ratio of the contributions of their highest performers to that of their lowest and it is often 8 to 1... and the lower performers often make about the same amount of money. They're typically not confronted, but are just called "deadwood" and are left to languish while the top performers carry the load. These inequities can only be reduced when leaders learn how to step up to and hold people accountable.

Part One: Work on Me First

When we approach a crucial confrontation it's important to know we must work on ourselves first.

Chapter 1: Choose What and If

Example: Your boss promises you a rise and then recants on the promise a second time.

You need to answer two questions before starting: What & If.

First, what violation or violations should you actually address? How do you dismantle a bundle of problems into its component parts and choose the one you want to confront?

When problems come in complicated bundles, and they often do, it's not always easy to know which problem or problems to address.

For example, a teenage daughter swears to her farther she'll be home on time and comes late.

What's the problem?

"That's easy," you say, "She was late." Here are several other potential problems: She broke a promise. She violated her father's trust. She purposefully disobeyed a family rule.

Although it's true that the daughter came home 60 minutes after curfew, this may not be the exact and only problem. If he selects the wrong problem and solves it, he may be left with the impression that he's done the right thing.

However, if you want to join the ranks of the world's best problem solvers, you have to identify and deal with the right problem or it will never go away (root cause analysis). This still leaves us with the question: What is the right problem?

Example:

"The woman who works for the front desk is constantly coming in late to work."
"Have you talked to her?" "Yes, repeatedely." After this, she's on time for a few days and maybe even a week, and then she starts coming in late again.

This situation presents a terrific example of what seperates the best problem solvers from everyone else. The owner has the courage to confront the desk clerk. However, the fact that he returns to the same problem each time puts him far below the best.

This is an indication that there is some other problem that needs to be discussed. The front desk clerk isn't living up to her commitments, she's disrespecting company policy, etc.

The first time a person is late, she's late; the second time, she's failed to live up to her promise; the third time she's starting down the road to discipline, etc.

In summary, if you find yourself having the same problem solving discussion over and over again, it's likely there's another, more important problem you need to address.

"It's killing me that she's taking advantage of our relationship. She's my neighbor and she's helped me out a lot, and now she knows that I won't discipline her since we're good friends. At least, that's how it feels to me"

Being late is the frozen tip floating above the chilly waters. Taking advantage of a friendship is the iceberg itself.

As you can see from these examples, getting at the gist of an infraction requires time and practice. Feeling pressured by time constraints and hyped up by emotions, most people miss the real deal. Along a similar vein, most parents who pace the floor as a teenage daughter breaks curfew can't see beyond the hands of the clock in truth when what really has them concerned is the fact that the girl didn't have the courtesy to call them. The ability to reduce an infraction to its bare essence takes patience, a sense of proportion, and precision.

The first time the problem occurs, think Content, "You drank too much, talked too loud, etc.". The next time the problem occurs talk Pattern, "This is the second time this has occurred. You agreed it wouldn't happen again, and I'm concerned that I can't count on you to keep a promise."

Warning: It's easy to miss the pattern and get sucked into debating content.

Your concern is not today's meeting, it's the long standing pattern.

As the problem continues, talk about Relationships. The issue is not that other people have disappointed you repeatedly; it's that the string of disappointments has caused you to lose trust in them.
Consequences
Problems are almost never contained in the behavior of the offender. They're much more likely to be contained in what happened afterward. When you want to clarify the issue you need to confront, stop and ask yourself, What are the consequences of this problem to me? To our relationship? To the task? To other stakeholders? Analyzing the consequences helps you determine what is most important to discuss.

Whether the father and realtor are correct in their assessments will remain unknown until they confront the offending parties with their suspicions.

The best tool for choosing from the host of possible problems is to ask what you really want and don't want. Consider the consequences that result from whatever wrong is committed.

There are no simple rules that dictate which problems are imaginary, which are real, and which you should deal with. Here are some Rules:

-When It's Clearly a Broken Promise - These failed promises represent a clear opportunity to have crucial confrontations.

-When It's Unclear and Iffy

You can't hide your emotions for long. When you've gone silent, but your body language keeps sending out hostile signals or you're dropping hints or relying on sarcasm, you probably ought to speak up. What are we thinking when we set aside pressing problems hoping they'll somehow get better?

-Peer pressure can both cause people to lie and to omit facts and keep silent.

-Our two favorite methods for tricking ourselves into remaining siltent are 1) downplaying the cost of not speaking and 2) exaggerating the cost of expressing our views.

-We rarely think of influence skills as something that a person should and can learn through actual study. But, as this book asserts, these skills can be learned and improved.

Often when you've weighed the consequences, it is a better option to remain silent about an issue. Like for example, one time projects.

Problem solving is never done in a vacuum. Every company and family has an unwritten history of rules and the way things work. All expectations, contracts, and promises aren't equally binding. Worse, in some organizations people aren't held accountable for delivering on any promises, or at least accountability is unpredictable. Sometimes erratic approaches to accountability stem from the fact that leaders take the path of least resistance.

Once you've decided to confront a problem, you have to make sure that you yourself are in the right frame of mind. You have to work on yourself first. Before you ever open your mouth, how do you tell a more complete and full story? One that's more conducive to a healthy discussion than the all-too-common question: "What's wrong with those bozos?"

2. Master My Stories

Anyone who has ever dealt with crucial confrontations realizes that a person's behaviors during the first few seconds of the interaction sets the tone for everything that follows. If you set the wrong tone or mood, it's hard to turn things around.

More often than not we're completely immersed in the details of what just happened.

Less punitive folks rely on cold stares and sarcasm but the results are probably the same. Employees fail to deliver on a promise, and the bosses jump to a conclusion and jump hard.

What makes these crucial confrontations interesting is that the underlying cause doesn't really matter. If leaders start out with strong emotions, believing that they are on the moral high road, the interaction is likely to turn out badly for everyone regardless of the underlying cause.

The Hazardouse Half Minute

We establish a hazardouse climate the moment we assume that the other person is guilty and being feeling angry and morally superior. In a study made during the 50's and 60's researchers tried to figure out how normal people determine the cause of the problem.

The chief error we make is a simple one. We assume that people do what they do because of personality factors (mostly motivational) alone. Why did that woman steal from a workers? She's dishonest. Why did that man yell at his children? He's mean. Why did the program fail to conduct a test? He's arroganct and lazy.

Most of the time people apply a dispositional rather then situational view of others. We argue that people act the way they do because of uncontrollable personality factors as opposed to doing what they do because of forces in their environment (situation).

We make this attribution error because we see their actions rather then the forces behind them. In contrast, when considering our own actions, we're acutely aware of the forces behind our choices. Consequently, we believe that others do bad things because of personality flaws whereas we do bad things because the devil made us do it.
Assuming that others do contrary things because it's in their makeup or they actually enjoy doing them and then ignoring any other potential motivational forces is a mistake.
The more tainted the history is and the more severe the consequences, the more likely we are to assume the worst, become angry, and shoot from the hip.

We've learned that the majority of people were inclined to walk away from broken promises rather then confronting them in either a constructive or destructive way. We've also learned that most of the research subjects avoided taking action for fear of getting into a heated argument, which they assumed could lead to even more problems.

When you see a violation but move to silence three bad things happen:

1) First, you give tacit approval of the action. If you see an infraction and say nothing, the other person can easily conclude that you've given permission.
2) Others may think you're playing favorites.
3) Each time the other person repeats the offense, you see the new offense as evidence that your story about his or her motives is correct.

Rare is the sudden and unexpected explosion that wasn't preceded by a lengthy period of tortured silence.

Sometimes, in society we praise coaches for their incredible records and if they happen to be abusive, we attribute this to their success. Let's put this foolishness to bed. People don't deserve to be abused, physically or emotionally. It's not good for them. Yes, people should be held accountable. When people gain success through abuse, they succeed in spite of their method, not because of it (coming out of the mouth of the experts).

Acting unprofessionally never earns you points. It takes the spotlight off the original offense and puts it on you at a time when you're on your worst behavior.

Here's the deal: you can't solve a problem with a villain. You can do that only with a human being. Before starting a crucial confrontation, use everything in this chapter to help you come to see the other person as a person, perhaps a person doing really rotten things but a person nonetheless.

Instead of arguing that others are misbehaving only because of personal characteristics, influence masters look to the environment and ask, "What other sources of influence are acting on this person? Since this person is rational but appears to be acting either irrationally or irresponsibly, what am I missing?"

You can answer these questions only be developing a more complete view of humans and the circumstances that surround them than the traditional "What's wrong with them?"

Unless you are working in a vacuum, if your coworkers dont' do their part, you're dead in the water. What if the person responsible for keeping the server online went off? Maybe that's why the software is giving final assembly fits.

When your style or demeaner causes resistance you won't even know you're the cause of the problem. You'll just hear excuses, particularly if you're in a position of authority. In this case, you need to ask yourself, "What, if anything, am I pretending not to notice about my role in the problem?"

Guess what happens when money is aimed at the wrong incentives? For instance, managers are rewarded for keeping costs down, and hourly employees are rewarded for working overtime. This leads to constant arguing. It is a sheer folly to reward A while hoping for B. Savvy leaders and effective parents get this.

When it comes to the frequency of human interaction, proximity (the distance between people) is the single best predictor. Individuals who are located close to one another bump into each other and talk.

Gadgets can have a profound impact on social structure than people imagine. Use them to your advantage. Cooks and waitresses used to fight over what has been ordered and whose order got filled first until a researcher invented the metal wheel that controls and organizes orders. With the advent of the wheel, waitresses stopped shouting commands at cooks and cooks stopped getting angry and fouling up the orders.

Data

A financial services company couldn't get people to help cut costs until it published both cost data and financial records.

After endless memos encouraging people to save money, administrators posted the cost of the gloves in prominent locations, and glove expenses dropped overnight.

Completing the Story

We mature a little bit every time we expand the story to include a person's ability. Maybe others don't know how to do what they've promised to do. We also cut off our anger at its source. Not knowing for certain what's happening, we have to replace anger with curiosity. This puts us in a far better position to discuss infraction as a scientist, not a vigilante.

The fact that social forces are likely to be a huge part of any infraction doesn't escape a savvy problem solver. Only a fool purposely pits people against friends and colleagues. Understanding the influence of other is a prerequisite to effective problem solving.

How About Our Software Testing Friends:

-A supervisor had been sent to the scene, where she learned that the programmers were unfamiliar with the latest version of the testing software (individual ability)

-The team leader never got the material because he was stopped in the hallway, where he was told to prepare for a "walk-by" from a big boss from headquarters (social motive).

Tell the rest of the story. Ask why a reasonable, rationale, and decent person would do what you've just seen as well as if you yourself are playing a role in the problem.

Confront with Safety

Leaders know how to prioritize competing demands from their subordinates, and they know how to discipline when necessary.

3. Describe the Gap

"Speak when you are angry and you will make the best speech you will ever regret." - Ambrose Bierce.

Osmosis is broken. Almost nobody should be harboring the illusion that he or she has been groomed to solve touchy and complicated interpersonal problems. Almost nobody has.

Professors and students come face to face with crucial confrontations every few minutes, but almost nobody teaches how to handle them.

We're about to share the best practices of people who know how to walk up to someone and hold a genuine face-to-face crucial confrontation.

Exactly what are we confronting?

We're stepping up to a broken promise - a gap; a difference between what you expected and what actually happened.

Anybody can sidle up to a cheerful and eager employee and discuss a minor infraction. You don't need a book to take that kind of trivial action. We'll be exploring challenges such as the following: What's the best way to confront your boss for micromanaging you? We call these crucial confrontations because their stakes are high. Handle them poorly and you could lose a job, a friend, or a limb.

Know What to Do and don't Pass the Buck. Be being the "pleasant one". Here's the kind of stunt they pull, "I know you don't want to work late, but the big guy says that if you don't we'll write you up." This strategy is disloyal, dishonest, and ineffective.

When we first chose to tag along after top performers, we were surprised to see how similar their styles were, independent of their industry.

It's easy to find a leader who creates a warm and lasting relationship but struggled to get things done. It's not much harder to find a no-nonsense, hard-hitting leader who you might send in to put out a fire. When you find someone who can manage both people and production, you've got a real gem.

Describe the Gap:
1) Start with Safety
2) Share Your Path
3) End with a question

Start with Safety

When another person has let you down, start the confrontation by simply describing the gap between what was expected and what was observed: "You said you were going to have your room cleaned before dinner. It's nine o'clock and it's still not done."

Don't play games, merely describe the gap. Describing what was expected versus what was observed is clear and simple, and it helps you get off on the right foot.

As we suggested earlier, we watched skilled individuals talk about incompetence, mistrust, and even embezzling, and the conversations, though not pleasant, ended successfully.

The Big Surprise

At the foundation of every successful confrontation lies safety. When others feel frightened or nervous or otherwise unsafe, you can't talk about anything. But if you can create safety, you can talk with almost anyone about anything - even about failed promises.

Of course, the more controversial and touchy the issue is, the more challenging the confrontation will be.

People feel unsafe when they believe one of two things:

1) You don't respect them as a human being (you lack Mutual Respect)
2) You don't care about their goals (you lack Mutual Purpose)

When others know that you value them as a person and care about their interests, they will give you an amazing amount of leeway. They'll let you say almost anything. That's why your four-year-old granddaughter can tell you you're "fat" without offending you.

However, if what you say or how you say it causes others to conclude that you don't respect them or that you have selfish and perverse motives, nothing you say will work. Here's why:

As you talk to others about a problem, a warning flag goes up in their minds. After all, there is a problem discussion. They immediately want to know one thing: Are they in trouble? They ask themselves, are bad things going to happen? People assess their risk on the basis of two factors: Are bad things currently happening to them? Are bad things about to happen to them?

Of course, this lack of respect is typically communicated subtly, not overtly. In any case, the other person believes that you think he or she is incompetent, lazy or worse.

If we see a problem, tell ourselves an ugly story, and then charge in with an accusation, the other person is going to feel disrespected. Even if we find others guilty in our heads and do our best to hide it, the verdict will show on our faces. Show others respect by giving them the benefit of the doubt. Tell the rest of the story. Think other people as rational, reasonable, and decent.

To deal with this predictable misinterpretation (people have a bias to think you are criticizing them, you must overcome this bias), first, imagine what others might erroneously conclude. Second, immediately explain that this is what you don't mean. Third, explain what you do mean. The important part is the don't portion. It addresses misunderstanding that could put safety at risk.

"I don't want you to think I'm unhappy with how we work together. Overall I'm very satisfied. I just want to talk about how we make decisions together."

"I know you tried your best to improve your grades, I'm satisfied with your effort. Please don't hear me as being less than proud of your progress. I'd just like to share a few study ideas that might help you maintain your grades more easily."

The bigger the problem, the more likely it is that the other person is going to feel disrespected.

Of course, you can also use Contrasting in the middle of the conversation when you suddenly become aware that the other person is feeling disrespected.

When a conversation turns ugly, quickly, it's usually because others misunderstood not your content but your intent.

If you think you are likely to harbor bad thoughts, take another kind of preventive measure: Establish Mutual Purpose.

Build common ground before you even mention a problem. Let others know that your intentions are pure - that your goal is to solve problems and make things better for both of you.

Ask for Permission

If the topic you're about to address is traditionally off limits, particularly sensitive, or something a person in your position doesn't normally discuss, ask for permission to discuss it.

Speak in Private

This safety tip is both obvious and easy: always discuss problems in private. No matter where you may encounter a problem, retire to your office or another secluded setting where you can talk one on one. Never conduct public performance reviews. Never discipline your children in front of friends. Never talk about about friends, loved ones, direct reports behind their backs.

Inappropriate Humor - Don't violate policy by masking a public performance review with thoughtless humor (passive aggressive behavior): "Well look who arrived. Forget how to find the meeting room?"

If you can create enough safety, you can talk about just about anything with just about anyone - even a defensive boss.

Bruno explained nothing in clear terms. He constantly prodded people with expressions such as "shape up," or "get a better attitude." People can't improve if they don't know the specific details of the infraction.

When we share our harsh stories, others know what we have concluded, not what they have done. They can only guess at what we're talking about. This strategy can be unclear, inaccurate, and costly.

START WITH THE FACTS

As a general rule, when you are sharing your path, it's best to start with the facts: what you saw and heard. Don't start with your stories. If you do, people are likely to become defensive. Instead, describe what the person did, along with the result.

Stay external - Describe what's happening outside your hut. ("You cut the person off in mid sentence.") as opposed to what's happening in you rhead ("You're rude).

Explain what, not why. Facts tell us what's going on ("You spoke so quetly, it was hard to hear"). Conclusions tell us why we think it's going on ("You're afraid").

Gather facts. If others complain to you about their friends and coworkers, they're likely to tell stories and leave out the facts. Ask them to share what they actually heard and saw.

Even when it comes to our own thinking, it's often difficult to remember the original facts. Most of us have an experience ("You spoke nonstop about yourself and didn't ask me a single question"), tell a story ("You're egotistical"), generate a feeling ("I don't like being around you"), and then forget the original experience.

Here's the bottom line: every time you share a vague and possibly inflammatory story instead of a fact, you're betting that the other person won't become defensive and can translate what you're thinking into what he or she did. That's a bad bet. Share the facts. Describe the observable detials of what's happening. Cut out the guesswork.

Tentatively Share Your Story

"Martha, I was wondering if we could talk about something tha thas bothered me."
"Sure, what's the deal"
"I've talked to you four different times about coming into work between twenty and thirty minutes late, and I'm beginning.."
"Like I told you, it's not always easy to make it on time."
"I'm beginning to wonder if the fact that we're friends and neighbors isn't getting in the way."
"How's that?"
"Well, since we're friends, it feels to me like you're coming in late, knowing full well that it could be hard for me to hold you accountable. Do I have this right, or am I missing something here?"

By taking the attitude that you could be wrong and using tentative language, you're being fair.

"I'm not calling you a thief. I am trying to come up with explanations for what just happened. Can you see how I would wonder given the facts I just described? My intention here is not to accuse you but to find out what is really going on so I can solve this problem. Can we talk about it?"

End with a simple diagnostic question: What happened?

Avoid Groundhog Day

They want to keep treating the problem, no matter how develishly recurring, as if it were the first instance.

Moment of Truth

You're now at a critical juncture. You have two problems, not one: 1) The price violation, or the content of the problem, and 2) a whole new problem: She didn't live up to her commitment to you. Unfortunatley, if you talk only about the price formula, you're forced to relive the same problem. Savvy problem solvers know better. As new violations emerge, they step up to them:

"Let's see if I understand. You agreed not to cut prices but you wanted the commission, so you did so anyway. Is that right?"

This follow-on statement leads to a very different discussion. Instead of talking only about pricing, you're now talking about failing to live up to a commitment. That is a far bigger issue.

To see good and bad examples of describing the gap, visit crucialconfrontations.com/book.

4. Make it Motivating - How to Help Others Want to Take Action

Since this was the first infraction, you've decided to talk about the content: She didn't complete the quality check.

Remember to Diagnose

The way Myra responds to your description of the gap will determine what you do next. She determines your path, not you.

If Myra replies, "Come on. What's the big deal? It's a stupid quality check. I don't really have to do it, do I"? you're staring at a motivation problem. Which of the motivational forces is at work here?

Other signs that a person isn't motivated include the follwoing: "I had more important things to do." "It wasn't my idea to switch jobs." "If you think I'm goin to work on something that isn't on my performance review, you're wrong." All point to an underlying motive. All imply, "I chose not to do it."

How do we make it motivating for Myra? Hint: Your power doesn't matter all that much.

This kind of thinking leads to a false dichotomy. You believe that when it gets right down to it, you must either put up with the current problem or motivate the kids through power and threats; those are the only two options.

Getting to the Root of Motivation

In fact, it's better if we don't think of ourselves as large-than-life figures burdened with the challenging of bringing the nearly dead back to life through various methods of motivation. That kind of flawed thinking is exactly what gets us in trouble.

Motivation, it turns out is actually rather boring. It has little to do with clout, chutzpah, charisma, or making great speeches.

People are always motivated. To say that someone isn't motivated is patently wrong. As long as people are moving their msucles, they're motivated to do something.

Here's how the human brain and the surrounding world combine to propel individual behavior. Human beings anticipate. When deciding what to do, they look to the future and ask, What will this particular behavior yield? When they choose one action over another, it's because they're betting that the action will generate the best result.

If you want people to act in another way, you have to let them know how a different behavior would yield a better consequence bundle. Here's what motivation comes down to: Change others' view of the consequence bundle and their behavior will follow.

Three Approaches to Avoid

One thing is for certain : Three of the more popular methods - charisma, power, and perks - don't work very well.

Nevertheless, the myth of charisma continues to thrive. Charisma makes for good drama in Hollywood, but has little to do with leadership. Rest assured that you don't have to be charismatic to be influential.

Dont Use Power - This simple idea would never have made those pages if not for the fact that parents and leaders alike routinely turn to power as their first tool for motivating others.

The Reason We Intuitively Rely on Force - We believe that others are capable only of being selfish. It's in their genes. It's their disposition. It's not a cohice; it's a calling. Individuals aren't going to change their personalities through pateince and long suffering on our part. They're not going to change their proverbial spots after we give them an inspiring pep talk. In fact, they aren't going to change their inherent and immutable personalities because of anythign we say. They can't.

The more we feel the need to apply force, the greater is the evidence that our own thoughts are the problem.

The Cost of Force

We move from enjoying a healthy partnership based on trust and mutual respect to establishing a police state that requires constant monitoring. It's a horrible thing we do when we decide to routinely unleash our power as a way of motivation. When we do, our relationship with others is forever changed. We move from respected partner to feared enforcer. And then we play.

Force Motivates Resistance

When we quickly move to use force to influence change, people intuitively understand that we do that becuase we believe they have bad motives. We don't respect them. In addition, it communicates that we care only about our goals, not theirs. In other words, it destroys safety. And when safety dissapears, people immediatley become defensive.

Perhaps the largest avoidable cost in every organization is the loss of energy that comes every time someone abuses his or her power.

In the mid 1930's Kurt Lewin along with several colleagues conducted a fascinating study. As expected, the authoritarian (power-based) style produced the highest results when the leader was in the room. Also as expected, forec yielded the lowest results once the leader left the room. When people produce solely out of fear, once the fear is removed, so it the motivation to continue to follow orders.

Be Careful with Perks - Unfortunatley, extrinsic rewards often kill intrinsic satisfaction. The problem with power, perks, and charisma is not that they never work or never should be used. The problem is that people turn to them too quickly, and there are almost always better methods.

Explore Natural Consequences

When you watch people who have been singled out by their bosses, peers, and loved ones as the best at handling crucial confrontations, it should be no surprise to learn that they change people's hearts by changing their minds.

What are these compelling factors? They are the natural consequences associated with any behavior. For example, if you don't manage your diabetes well, you are likely to face amputation later in life. That's a natural consequence.

This sequence of events make up the consequence bundle. Among these consequences, there is a subset of "natural" consequences that exist independently of the intervention of the authority figure. These methods require no force, no chutzpah, and no charisma.

Consequences make up the reasons behind all behavior, so savvy influencers motivate others with a consequence search: They explain natural consequences until they hit upon one or more that the other person cares about.

Link to existing values -

What does he or she care about the most? This will be your point of greatest leverage.

"Dear, I honestly believe that if your eating habits don't change, you won't raise our children, I will. Do you have the same concern? What do you think?"

Here you're trying to deal with your loved one's eating habits, and rather than nagging or attacking, you're linking to his or her core value of being around to help raise the kids.

Connect Short-Term Benefits with Long-Term Pain

"I'm sure it's a hassle to double-check appointments when you enter them on my calendar, but our current error rate is so high that the assistants of the other vice presidents are calling me to ask my confirmation. I worry that your reputation here is going to be hurt if we can't solve this."

It's also the single best predictor of lifelong success. If a person can suffer a little now - delaying gratification in order to serve a longer-term goal - life gets better (think dieting, weight lifting, studying, etc.).

As the researchers tracked those children over the years, they found that those who had waited for the researchers to return did far better in life than those who ate the confection right away, and in almost every domain. To help people stay the course, take the focus off the short-term challenge by placing it on the long-term benefit.

"I know that putting up with some of the kids' messiness is really hard for you. I also believe that your relationship with them is at risk if you can't learn to let some of the smaller things go."

Introduce the Hidden Victims

This is perhaps the most widely used method of explaining consequences. You describe the unintended and often visible effects an action is having on others: "Louisa, I know your little brother gets on your nerves a lot. But did you know that when you made fun of his weight, he cried the rest of the morning? I know your goal was to get him to stop following you around and not to hurt him so deeply. Is that right?"

Hold Up a Mirror

To help introduce the social implications of a particular action, describe how a person's action is being viewed by others. "It's starting to look like you don't care about the team's results." Remember, when it comes to the way we're coming across, we all live on the wrong side of our eyeballs. Help others gain a view from the other side.

Connection to Existing Carrots and Sticks

This is typically not the best starting place, but eventually you may want to talk about rewards. Help others see how living up to an expectation advances their careers, enhances their influence, puts more money in the bank, or reduces their risks: "You've mentioned wanting to be the art director. In my view you will be much more successful in that position - and more likely to get it - if you have solid working relationships with both the editing staff and the video team.

Watch for the Line Between Dialogue and Threats

There's a fine line between sharing natural consequences and threatening others. Well, in most cases it's not that fine a line. If your motives are wrong, sharing becomes threatening.

"When you fail to complete your assignments we start giving you less relevant assignments to protect ourselves from failure" can sound like a personal attack or a job threat.

If you notice that others appear nervous, step out of the conversation and restore safety by explaining your positive intentions.

Listen to Others' View of Natural Consequences

"Yeah we can do it the way you want, but it'll blown up our lawn mower." Your view of what should be done may change in the process of jointly discussing consequences. In the end, you may be convinced that they shouldn'd do what you originally asked.

As you help others see consequences they didn't realize existed, explain those consequences only until you reach critical mass. Stop once you believe others will comply. Your job isn't to keep piling on information. It is to share consequences until the other person understands the overall effect and shares your view of what needs to be done. Don't sell past the close.

What they really want to know is whether it's really worth it. As we suggested earlier, effective problem solvers are teachers, and much of their teaching is about the consequences of varying stakeholders: "Here's why it's worth it." They make the invisible visibly by whatever means work. They do this to avoid gaps.

When it comes to parenting, the younger the child, the greater the need to teach the child the relationships between behavior and outcome. Newborns do not understand consequences. Almost everything a parent does during the early stages of child rearing is to protect a child from invisible bad consequences and then to teach.

You'll need to examine the motivational role of self, others, and things to determine which ones are making the task undesirable. The idea is to examine each area with simple questions: Is the job hard to do? Is it repetitive, boring, uncomfortable, and so on? Is that why you don't want to do it? Are others encouraging you not to do it? Finally, is the task at todds with what the other person is getting rewarded for?

The goal of exploring consequences is to bring to the surface the issues that make the task undesirable.

When Priorities Differ

Here's a big one: perhaps they were hoping that nobody would care if they dropped that part of the job. They eliminated it and watched to see what would happen. Whatever the reason, people know what to do but choose something else. Let's be honest: More often than not they already know what the consequences will be.

Note: Sometimes the job isn't a good fit and it's better to find out early on so that you can move the employee or terminate his employment.

Some people feel that "others fight them at every turn." Fortunately, the basic principle is the same: explain natural consequences until the person genuinely agrees to comply. In this case it's a delicate search. You keep searching for consequences until you find the one the other person values. Consider: consequences to coworkers, consequences to shareholders, consequences to the boss. This conversation calls for both patience and skill.

When to Use Discipline

Despite your best efforts, sometimes you will have to start down the path of discipline. Maybe you've explained consequences and the other person isn't going to do what you ask no matter what you say. It's time to change tactics. It's time to move away from natural consequences and start imposing consequences of your own (discipline).

Be Appropriately Somber - keep the tone serious and speak about what has to be done, not what you now get to do.

Explain the Next Step - As you explain what will happen as a result of the infraction, cover what will happen if the person does the same thing again. Explaining the next level of consequences informs and motivates. It also helps eliminate surprises: "Nobody said I was going to be fired!"

Be Consistent - Don't play favorites.

Don't Back Off under Pressure - Once you've started the process, stick to it. Follow the steps and don't be dissuaded simply because the person puts up a fight. If discipline is called for, stay the course. If you waffle you'll gain a reputation for making hollow threats.

Consider making a work-around or coping strategy. We create a work-around that enables others to continue doing what they're doing, unaware and guilt free. Our dad is grumpy and abusive, and so we buy him his own wide-screen TV and build him a den.

Coming to an agreement is one thing; deciding what's going to happen from this point on requires one more step.

Summary of Chapter:

Make it Motivating - when the other person isn't motivated, it's our job to make it motivating. Consequences motivate, people already want to do things. They're motivated by the consequences they anticipate.

When dealing with someone who is pushing back, resist the temptation to jump to power. Search for consequences that matter to the other person.

5. Make it Easy - How to Make Keeping Commitments (Almost) Painless

Don't misdiagnose - don't misinterpret an ability problem as a motivation problem and vice versa.

Being the steely eyed smart person you are, you would note that Kyle was motivated to do the job. Piling on more reasons for doing something he wasn't able to do in the first place woudl be the wrong cure. Better still, what can we do to make it easy, even painless, for others to complete their assignments?

Motivation and Ability are Inextricably Linked - They aren't seperate entities. More often than not they blend into one another. Here's why. If something is hard to do - perhaps noxious and boring - it's demotivating.

If the task is difficult we need to thin about it as a composite problem with both a motivational and capability component.

Motivation and ability can be confused - as completely different as the two things are, people don't always make it easy for us to tell whether they don't want to do what's been asked or can't do it.

More often then not you'll get a response such as "You know, stuff came up." This response is just ambigious enough to be dangerous. You need to proble for can't or won't. With this in mind, you ask, "Are you saying that you ran into a problem or that you didn't want to do it?"

Wanda continues to baffle you by saing, "You know how it is. I just never got around to it." You probe one more time: "I'm not sure what you're saying. Did you choose not to do it, or were you unable to do it?"

There you have it: she didn't want to do it... and as is often the case, she was not all that motivated because she was not all that able.

Masked Cause

If they fear that they'll get in trouble for not being able to or not wanting to do what's been asked, they may stretch the truth to avoid new problems. He thinks he'll be fired if you find that he can't read so he says, "I hate doing these things."

If you misinterpret this you may start to explain the natural consequences of not doing it. This, of course, is a doomed conversation because no matter how many consequences you explain, John is still stuck.

As weird as this may sound, it is not uncommon to discover that employees who are being disciplined for excessive resistance or even insubordination are hiding the fact that they couldn't do what they have been asked to do. They chose discipline over shame or worse, the possibility of being fired.

Probably the most common form of masking takes place when people cover up their lack of motivation with a bogus ability problem.

Your Job : To make it easy for your employees.

It's your job to remove the barrier. It can be gratifying to be an effective motivator, but the best leaders don't simply inspire people to continue to do the gut wrenching, mind boggling, and noxious. They help people find ways to ease the gut wrenching, simplify the mind boggling, and nullify the noxious.

Skilled problem solvers take pride in helping others make things easy. It's part of their Golden Rule. It's what they do. While others love the power trip and love power more then they love relationships and results.

Desiring to get out of hard and noxious work doesn't reflect a character flaw; it's what smart people do. Make it easier by improving the ability and motivating the employees.

We need to know whether others can't do something because of self (they don't have the skills or knowledge), others (friends, family, or coworkers are withholding information or material), or things (the world around them is structure poorly).

Avoid Quick Advice

When people come to you and explain that they're at their wits' end, it's nearly garaunteed that you're going to tell them what to do. After all, they're asking you to tell them what to do. Nevertheless, jumping in with your answer isn't always the smart move.

Smart problem solvers fight their natural tendency to jimp in with and answer and instead involve the other person. They get their buy in.

If you involve other people in solving problems several important things happen. First, you get to hear their ideas, ask them "You've been working on the problem. What do you think needs to be done?"

The feeling of the conversation should be one of partnering. You're working together as intellectual equals, both of you throwing in your thoughts.

Motivate

There's an important secondary benefit in involving others. When people are involved in coming up with a potential solution they're more likely to be motivated to implement it, and that's important:

Effectiveness = accuracy x commitment

A solution tha is tactically inferior, but has the full commitment of those who implement it, may be more effective than one that is tactically superio but is rested by those who have to make it work.

We're not suggesting you manipulate people into thinking that your ideas are theirs. Inviting others is not a cheap trick. We're simply proposing that other people do have ideas, that way they see why things need to be done a certain way and are motivated to do it that way. By involving others, you empower them.

Don't Bias the Response

"So you haven't been able to get in touch with the lawyers. Here's an idea: Drive over to their office and wait until they return. What do you think?

Unfortunatley, when you're speaking from a power base, offering up your idea first and then asking for the other person's approval misses the mark. Second, you may inadvertently be sending the message that your idea is what you really want, and so others are not about to disagree with you.

Don't Pretend to Involve - As you might suspect, this technique comes off as glaringly manipulative. It looks like sending a rat through a maze and periodically throwing in a pellet. then like a legitimate effort to involve another human being in removing an ability barrier (remember though you might not say it, people can tell by your facial expressions).

Don't Feel the Need to Have All the Answers - Newly appointed leaders often think that they must know everything and don't ask their direct reports, this is not the right streategy>

Of all the ideas circulating the grapevine, pretending that leaders must know everything is among the most ridiculous and harmful.

Completing the conversation in one's head - before one actually speakers - nullifies the whole purpose of a crucial confrontation. The idea should be jointly to create shared solutions that serve your Mutual Purpose.

When it comes to motivation one source is all it takes. With ability, the opposite is true. Any single barrier can trump all the enabling forces. You know what to do and have the right materials to do it, but you don't have the authority. You're missing only one element, but you're dead in the water (see: bottleneck theory).

Brainstorming personality ability issues can be tricky. As suggested, people often mask inability. They'd rather point to other barriers. Make it safe for the other person to talk about personal challenges. Calmy ask about his or her comfort with doing the job, and other skill factors. Keep the conversation upbeat.

Others

The enabling or disabling role others play is typically easier to discuss. This is about what others are or are not doing, and so it can be less threatening.

Things

The role the physical world plays is generally the easiest to discuss. People willingly point fingers at the things the company is doing to make their life more difficult - if they remember to think about them. Ask about everything from systems, to work layout, to policies and procedures.

While you are considering everything consider these questions:
1) Will this person keep facing the problem?
2) Will others have similar problems?
3) Have we identified all of the root causes?

Think Physical Features

As we suggested earlier, most people have a hard time seeing organizational or environmental factors. We have a hard time noticing subtle forces such as the design of the environment, the availability of tools and technology, the chain of command, and policies and procedures.Be sure the natural flow of the physical world supports the goals.

With time and constant exposure, people start to accept rules, policies, and regulations as a given. They start treating them like commandments or laws of nature. Soon these highly constrianing walls of bureaucracy become invisible.

Make them visible. If a policy is no longer relevant, do away with it.

By all means give people easy access to the information they need to make the right choice. Make sure that form the mass of data that's out there, the right data are in front of the right people at the right time.

Ask, "If you ran this place, what would you do to solve the problem? Asking people to assume the role of the big boss can be extremely liberating. Freed form the shackles of thinking form within their own fields of influence, they begin to look for ways to remove every company-made barrier.

Pop the question - the fact that people start by identifying an ability block doesn't garauntee that once it's removed, they'll want to do what they've promised to do. Ask: "If I get the workup to you by two o'clock, are you willing to do what it takes to finish the job by five?

Popping the question means that you end a discussion by checking for motivation. Of course, it goes both ways. If a person starts with a motivation issue, check for ability problems: "It sounds like you're willing to do this, but is there anything standing in your way?"

Once you've dealt with motivation, check ability. If you start with ability, check motivation.

Prime the Pump -

Your job in leading a root-cause discussion is to let others know that you see them as people of worth who are currently unable to do what's expected. This isn't about fixing their character, it's about fixing a problem.

Priming only works if you take your best guess in a way that tells the other person that you're okay with him or her admitting to what you just described. Considering the following question: "Is that too hard for you?"

When it is done well, priming provides others with real time evidence that you're not goin gto demand or critcize them for honestly discussing the real issues.

When others can't identify all the cause, jointly explore the underlying forces - include self, others, and things. Remember the model.

6. Stay Focused and Flexible

The ideas in this book are principles and skills, not fixed roads laid down on an unmovable terrain. This means that the principle and skills have to be woven into a workable script on the spot, as the conversation unfolds.

If the new emergent problem is more serious, time sensitive, or emotional than the original one or if it's important to the other person, uou have to deal with it right there on the spot. You can't allow the new and more important issue to be at the mercy of the original problem (often new problems will arise after original have been raised).

You can't allow an employee to become insubordinate. If you don't say something right away, you undermind your credibility.

Contrast: "I didn't mean to imply that you weren't a good friend. I think you are. I just wanted to talk about the one job."

People Violate Your Trust

The problem with what just happened is that you allowed it to become a conversation about payroll instead of training. It should be a conversation about trust.

To mask this breach of accountability, the other person focuses on the context (payroll) rather then the relationship.

Something Came Up - Companies that continually allow things to come up without dealing with the breach of promise don't survive very long.

Giving family mebers the luxury of arbitrary choosing which promises they'll keep - turning life into a cafeteria of commitments in which people can keep one but not another - drives people insande.

At the heart of every workable accountability system there is one simple setence: "If something comes up, let me know as soon as you can." This sentence represents the marriage of flexibility and focus.

The individual might have a good alternative solution, but it is his responsibility to clear it up with his boss. The problem isn't that he didn't attend the class, it's that he made the choice on hiw own, and didn't have the courtesty to call you. He left you completely out of the decision. That's a trust problem.

-In fact, in a huge number of companies, the following is true:
Results = no results + a good story

Create a Bedrock of turst - Set clear and firm expectations. Stay flexible. End by stating: "If something comes up, let me know asap. FInally, when you're talking with someone who tries to excuse a missed assignment by saying that "something came up," deal with this emergent problem - this violation of trust - as a new challenge. Never let it slide.

If a new problem emergies in an existing problem. Pull out the original problem, announce the change in topic, confront the new problem, bring it to a satisfactory resolution, and then decide whether you need to return to the original issue>

"What I'd like to talk about is not your practice time; we'll get back to that later. I want to talk about the fact that you lied to me just now."

Of course, this can work only if you spot the new problem and then choose to dela with it. This can be difficult when you're already tryin gto handle another problem, but that's how the world of human interaction unfolds. New problems emerge all the time.

To create a strong feeling we tell a story that includes a strong value. For instance, a coworkers let you do on purpose. She disrespects you. Your boss double-checked your work because he doesn't trust you.

You're not picking up the argument in the beginning. You're picking up the conversation in the middle of a lengthy argument Carl has been making to himself, keep this in mind.

Dealing with Anger

People go to silence more than they go to violence. They complain to their loved ones. They play the martyr and despise you. They carp and seeth, but they don't explode.

It'd ludicrous to assume that you can have a rational argument with a person who is under the influence of a mood-altering stimuli. Therefore, don't deal with the content of the argument until you've dealt with the emotion. The other person isn't very likely to listen to you - or for that matter, explain his or her own argument clearly and calmly until the chemical surge has subsided.

Don't Get Hooked - Left to our natural tendencies, most of us respond to anger in kind. We get hooked. We become the very monsters we're facing.

Don't One Up - It's hard to imagine that anyone would treat anger with smug indifference, but it happens. Don't try to take away their anger thunder.

Don't Patronize - Telling people to calm down or grow up throws gas on the flames of violated values.

Ask to get the conversation rolling, paraphrase for undersetanding, and prime to make it safe for the other person to open up.

Say, "You seem kind of low energy, is something wrong." This makes it safe for the other person to discuss.

Paraphrasing serves two functions. First, it shows that you are listening and that you care. This alone often calms the other person down enough to allow a rational conversation. Second, it helps you see what you do and don't understand.

Part 3 - Move to action.

The best problem solvers create a complete plan. They build the foundations of accountability by being specific about what comes next.

7. Agree on a Plan and Follow Up

But don't exhale too quickly. The way you complete a crucial confrontation is as important as the way you start it.

Don't Assume - Jane and Joe made a sketchy plan. Without agreeing on a specific deadline the plan was doomed.

By not confronting his daughet after several days of coming late, he let her know that what she was doing was OK. Confront it from the very beginning.

A complete plan assumes nothing. It leaves no details to chance. It seats clear and measurable expectations. It builds commitment and increases the likelihood that we'll achieve the desired results.

The solution is created a plan that takes into account: Who, does what, by when, and a follow up.

For accountability to work, a person needs to know what he or she is expected to do. Therefore, when it comes to large jobs, make sure one personal is responsible for the entire task.

Ask - ask at the end if there are any questions about quality or quantity. Ask if everyone has the same characteristics in mind.

Contrast - If you suspect misunderstanding, contrast "I don't want you to implement them until we've had a chance to talk, but I do want you to take the initiative to present them."

When the stakes are especially high, leave nothing to change. Make sure you are clear about "by when" you want it, specifically.

The importance of the task determines in what way and how often you follow up. If it is a large project then assign milestones and follow up on them.

Don't use following up to violate trust. When people feel as if they're being watched too closely they tend to trasmute into "good solders". "Just tell me what to do and I'll do it." They "check their brains at the door." Unfortunatley, abandonment at the other end of the spectrum has equally as bad consequences.

This hands off style is usually interpreted poorly as "the boss doesn't care about me or my project."

You can use a checkback when the task is routine and easy and the person will check back to you.

"Can you see anything else that we haven't talked about that might cause a problem?" Never walk away from a crucial confrontation satisfied with a vague nod. If you care about gaining genuine commitment, give the other person the opportunity to say yes to a very specific agreement.

-Make sure put the following up of tasks on agendas and calendars. If you don't follow up, you're being very unkind to everyone. Allowing failure eventually destroys results and relationships.

Some people believe that it is better to be "nice". Of course, you can believe this semitortured logic only if you believe that being honest and holding poeple to their promises are inherently stressful and bad.

8. Put it All Together

Be careful not to tell yourself a story before you get the facts. As you explore alternative explanations you will find yourself naturally calming down and becoming more curious. Of course, be careful not to let this kind of reasoning put the blame on yourself without warrant.

9. The Yeah But's..

Marginal Work

When someone is always doing marginal work, it can test your ability to have a clear and specific crucial confrontation: taking a vague position like this can be hard to defend and makes you vulnerable to counter attacks.

The Solution

First, you need to gather data. Approach your "research" conversation with a genuine desire to discover underlying barriers and then see if you can find ways to resolve them.

Next, gather facts - that will allow you to differentiate mediocrity and excellence (think of benchmarking performance). This is crucial. Most people are so vague about this that they ask others to "give 110 percent."

"I've noticed that after you finish a letter you skim it once and hit send. We found that it helps to run spell check and reread it."

You will not succeed in showing others the gap in their performance unless you do the homework and benchmark their performance.

Finally, connect your homework with your research. Explain how your recommendations will not only resolve others' concerns but also help them achieve their aspirations. If you can show the other person how achieving the goals will link to his or her own goals there's a good chance that he/she will be motivated to learn and grow. If you can't do that, don't expect the person to improve.

Chapter 14 - Unlimited Power - Metaprograms

In terms of motivation, what is more important, knowing how to motivate others or knowing how to motivate yourself? This may seem like a ridiculous question. How do we motivate ourselves, aren't we inside ourselves already? Without a single doubt in my mind, I will say that knowing how to motivate ourselves is far more important then knowing how to motivate others.

We motivate ourselves by knowing what drives us. Once we know what drives us, we can mentally focus on this objective. It becomes a button that we can push inside our minds at any moment. Thanks to Tony Robbins, I have found the button that is a perpetual source of motivation (it is private so it can't be shared!). The following is a chapter from Tony Robbin's on meta programs, the chapter that helped me discover my biggest source of motivation.

Chapter 14:

-You can't help noticing how differently people react to the same thing. You tell a motivational story, and one person will be transfixed, another bored to tears.

-If you address someone in the right key, you can do anything. The most inspiring message, the most insightful thought, the most intelligent critique, are absolutely meaningless unless they're understood both intellectually and emotionally by the person to whom they're being addressed.

-Metaprograms are the internal programs we use in deciding what to pay attention to. We distort, delete, and generalize information because the conscious mind can only pay attention to so many pieces of information at any given time.

-Even though the situation may vary, there is a consistent structure to how people understand things and organize their thinking.

-The first metaprogram involves moving towards something or moving away. All human behavior revolves around the urge to gain pleasure or avoid pain. One person may read Faulkner because he enjoys his prose and insight. Another might read him because he doesn't want people to think of him as an uneducated dunce. He's not so much seeking pleasure as avoiding pain; he's moving away from something, not towards it.

Everyone moves toward some things and away from others. No one responds the same way to each and every stimulus, although everyone has a dominant mode, a strong tendency toward one program or another.

To find out which way people move, ask them what they want in a relationship - a house, car, job, or anything else. Do they tell you what they want or what they don't want?

If you're a businessman selling a product, you can promote it in two ways, by what it does or by what it doesn't do. The strategy you use should depend entirely upon the strategy of the person you're dealing with.

-The second metaprogram deals with external and internal frames of reference. If you have an internal frame of reference you can design a building that wins all sorts of awards but if you don't feel it's special no amount of outside approval will convince you. A truly effective leader needs to lean towards having an internal frame of reference.

-The third metaprogram involves sorting by self or sorting by others. If you sort only by self, you become a self-absorbed egotist. If you sort only by others, you become a martyr.

-You may wish someone moved towards something rather then away. If you want to effectively communicate with him, you have to do in a way that works, not in a way that plays to your idea of how the world should work.

-Some people look for sameness, others are mismatchers - difference people. To figure out what someone is ask him about the relationship between any set of objects or situations and note whether he focuses first on the similarities or the differences.

-Mismatchers are valuable after the brainstorming stage as analytical thinkers. Mismatchers represent 35% of the population.

-If you have a job that requires the same repetitive work, a sameness person would be very very happy in this type of job. If, however you have a job that requires a great deal of flexibility and constant change, would you want to hire a sameness person in that position? Obviously not.

-Can a matcher and mismatcher live happily together? Sure - just as long as they understand each other.

-Another metaprogram is possibility versus necessity. Some people are motivated primarily by necessity, rather then by what they want. They do something because they must. They're not pulled to take action by what is possible.

Others are motivated to look for possibilities. They're motivated less by what they have to do than by what they want to do. They seek options, experiences, choices, paths.

-There are jobs that require attention to detail and consistency. Let's say you're a quality control inspector. What you need is someone who has a sense of necessity.

Some jobs place a particular virtue on permanence. When you fill them, you want someone who'll last for a long time. A person motivated by possibilities is always looking for new opportunities, not a good person to hire in this case.

-When you speak in the wrong key, the message that comes through is the wrong one. It's as much a problem for parents dealing with their children as it is for executives dealing with their employees.

What I'd said would have been an insult to me. I used to get frustrated with people when they behaved in ways that were the opposite of mine until I learned that different people have different metaprograms and patterns.

-There are some people that are turned on by beginnings, other are turned on by completion.

Go Hard or Don't Go At All...

On a daily basis, I am reminded about how brutal entrepreneurship can be... which is OK, because I am 100% committed to my current business.

However, this can become a problem if you are merely "dabbling" or "trying something out." This may work , of course, if your business is setting up a lemonade stand, however if you are starting a real business either Go Hard or Don't Go At All.

Perhaps you already know what I mean.

Great Post on Excellence vs. Perfectionism

http://www.leadershipnow.com/leadingblog/2009/04/are_you_a_perfectionist_or_an.html

Tragic Flaws

Quite often I see businesses that have several strong aspects: financing, sales, etc. Unfortunately, many of these businesses have one tragic flaw: perhaps it is an accounting system or operations system that is broken.

Here is the tragedy: these businesses fail.

That's why it's so important to have a comprehensive understanding of business. It's not that not having a good marketing, operations, finance, etc. will hurt your business in some porportion. Any of these aspects has the power to KILL your entire business, not just one segment of it.

It doesn't mean that you have to be excellent in each parts of your business. If you have average operations you can still beat your competitors with superior sales and marketing. But, you must have all aspects of the company up to par (these are called hygiene factors).

The Success Addiction

Momentum is important for one specific reason: when you do something good you receive a flow of endorphins into our brain. If you make a sale that results in a couple hundred dollars profit, you start to feel really good. You naturally start to want to do more of the action alongside the work that is needed to make more money (by the way, this is why competence is closely related to motivation).

The issue is this, sure it's easy to go from $200 to $400 or $2000 to $4000, but how do you go from $0 to $200.. That's the hard part.

When we are not getting the flow of endorphins and instead we are experiencing feelings of failure we get the opposite effect. We feel negative feelings and associations towards what we are doing. We might think, "what's the point, I don't like doing this anyways." The POINT IS that you may simply not like doing it because of your negative association and lack of success in that activity.

The bottom line is that being aware of this "endorphin discrepancy" will make you realize that the pain is momentary and the pleasure is long lasting. This belief will help you get off the ground when you seem to be "lacking motivation", in reality you may just have a negative association to the activity.

An Interesting Anecdote from Mark Hill

Yesterday, Mark Hill, a very successful Indianapolis entrepreneur said that throughout his 20+ years of running his company there was at least one salesperson every year that earned more money then him.

What's interesting about this (other then the opportunity that exists for salespeople) is that he was completely comfortable with this fact. This is what the best leaders do, they put their ego at check in favor of the company.. and that is why they ultimately get the big bucks.

The Science Behind Perserverance

We have all heard the cliché : those that are most successful are those that persevere. I don’t know about you but for me hearing what others say is not enough. I believe in a discipline called.. science.

So here is a little science for you:

Why does perseverance work? Perseverance, in and of itself, doesn’t lead to success. You can persevere by hitting your head against a brick wall 10, 100, or 1000 times. You’re not going to learn anything nor will you gain anything.
Perseverance works only in conjunction with some basic common sense. As Einstein said, “Insanity: doing the same thing over and over again and expecting different results.”

Perseverance works because of what activity it encourages: trying new methods and directions.

And here’s the best part, our brain CAPTURES successes and automatically internalize them. For example, if you tried to open a door handle in many different ways and eventually succeeded, the next time your brain would automatically know how to do it, subconsciously.

Fortunately, the brain will not think of the 100’s of ways that you were not able to open the door handle. It simply reminds you how you did it before.
Success is not hard, the path to success is hard because it requires a lot of corrections and errors. However, once we get a success, our brain captures and stores this successful attempt, making it automatic and quite frankly, easy to replicate.

Bottom Line: Perseverance creates an environment where you will stretch yourself and encounter new circumstances and situations. Inevitably, you will succeed in several of these attempts at which point your brain will store them for easy use in the future.

How to Establish a Market

The problem: Sometimes we don't know what something is worth. How do we make sure that we get a fair value?

The solution: Get 5 offers from a qualified buying source. Usually, within 5 offers, you will get at least one low ball. The other 4 offers will help to determine a market for your product or service.

Keep in mind, the more valuable this product is the more offers you will want to get. Conversely, if it is really invaluable then 2 or 3 offers will do the trick.

Why You Can't Outsource Entrepreneurship

As an entrepreneur, you can outsource almost everything. That is, you can outsource tasks both within the company (hiring) and outside the company (contracting).

One thing you can not outsource, and will never be able to outsource, is the entrepreneurial drive and persistence that is necessary to successfully launch any new venture. One or two individuals must be behind the iterative (try, fail, improve) process that is evident at the beginning of each venture.

A venture simply can not be started by a "committee" or an outside party.

Lessons from the Founder of Aprimo

- IPO is an event, it is not an end in and of itself.

- To be a good sales manager you need to be a good sales rep, but not every sales rep is a good sales manager.

- Make a list of conscious values that your company will have and then ask potential employees about their values.

-Never acquire company for their IP, acquire companies that have recurring revenues with good customer base.

Raising money – lessons
-don’t take early stage money right away, take it in stages so that you can get better valuation (entrepreneurs are tempted to put the money at work if there is too much and often it leads to bad decisions)
-Trade off valuation for better terms (look into the terms for preferred stock and all that). Some Venture Capitalists will screw you on the terms even if their initial valuation seems better.
-Get expert legal advice to negotiate the deal for you not just to read the terms. Get someone who has experience with these type of deals.

-Go into a field that has competitors. If the industry doens't have competitors then it is a bad sign. Competitors will accelerate the growth of your company.

Software specific:

- When you are starting out you need to get smaller contracts. Smaller contracts will lead to more momentum and to the larger contracts.

- Big alpha or top name clients make great reference selling opportunities for your company.

- Configuration vs. customization - When you are starting out try to engage in configuration (changes to the software that can be scaled out) versus customization (one time changes that can not be added to other clients). If you customize too much you will get stuck as a consulting firm.

- The process of getting small/midsized companies and big blue chip companies is different. The same developers and salespeople will not be able to go after both of them. In the case of developers, the two platforms need to be developed seperately and there are actually few synergies that can go between these two groups.

- Think about the future and focus on constantly reinventing the company. Invest into getting new platforms that will position you to stay competitive in the future.

Good Management Starts with Clear Expectations

It is interesting that one of the top complaints of employees and reasons for their not completing tasks is that they do not know what is expected from them.

Often times, managers leave out crucial information on what needs to be done based on the idea that "they should know." This is both a lazy and negligent type of management and one that will always lead to problems.

Why Broken Processes Aren't Necessarily "Broken"

Imagine the following scenario:

You run an online business.

For every order here is the process: Customer Order Comes in Electronically -> You call the supplier ensuring that the item is still available -> You accept the order through your system and a confirmation is sent directly to your customer.

In other words, the process can be broken down to "Automatic Internet - Phone - Automatic Internet". Many ops people would say, this is a broken process. The reasoning for this being that the middle part of the process was non-automatic and therefore the entire process did not flow through end to end automatically.

While this is true, there are several important considerations. Both of these considerations have to do with consequences.

What would be the consequences of having a fully automated process system? Let's examine the consequences on both revenues and costs.

Revenue side - Due to the automatic nature (a rep may take 10 minutes), the odds of the item being available increases. In this case, if it is a normal item (which has a 1 in 30 chance to sell out in a certain day, the odds of it selling out at that time may be 1/30 * 1/50 = 1/1500) 1/50=10 minutes / entire day.

Mathematics aside, the point is, that having a complete flow through process would not have a significant impact on revenue. In other words, it's insignificant, or inconsequential.

Next, let's examine on the cost side. We may be tempted to count the amount of time that is saved in labor hours per day. For example, 10 minutes * 80 orders = 800 minutes per day.

Tempted as we are, we have to remember the reverse bottle neck theory. That is, we do not realize the cost savings on labor unless we have employees whose entire task consists of confirming these orders. If this is just another task that employees do then eliminating it will not result in cost savings.

As highly competent business men, tech, or operational guys, we often lose sight of the point of what we are doing. Instead, we want to make everything look good or flow through. Sometimes, me included, we even lose sight of the whole point of business : to make a profit.

To grow quickly, we must grow strategically, and constantly question our actions. Is what we are doing consequential, in other words, will it result in an increase of revenue or decrease of cost? If so, will this increase of profit be minimal or significant.

It is my belief that the GDP of our country could spike up pretty quickly if everyone had a sign above their workstations asking them this question.

The Cost of Excuses

Sometimes we make excuses. We make excuses to our bosses, friends, and random people that may ask about how business is going.

Excuses are harmless right? After all, when we say them, on some level we know that they are after all just.. excuses.

Here's the problem. The more we use these excuses for OTHER people the more we start to believe them OURSELVES. This change is subtle and sometimes takes weeks or months to set in.

However, I can say with utmost certainty that over time, we start believing our own excuses.

This is how the human mind works, make sure you are conscious of it.

"Crisis"

Going to visit MBA schools has partly been an embarrassing event. Why? Throughout the day, I have found myself having to get away for a few minutes to take care of a "crisis".

This is embarrassing because I know that people/organizations that experience these kind of crises often experience them because of poor preventative activities.

Management guru, Peter Drucker, once said that 97% of what companies considered crises was a result of poor management/policy and that only 3% were true crises. In fact, as a consultant he quickly determined how to tell the best run factories apart from the worst factories. The best factories were dull and boring, everything looked very routine, the worst factories always had "emergencies, crises and fires to put out".

How can you prevent "crises"?:

-Improve your processes
-Make better hiring decisions ("Hire Smart or Manage Tough", as they say)
-Plan ahead of time / contingency planning

Save your energy for things that really matter, like growing your company and going into new markets, not on solving preventable problems.

What makes business hard?

I have made it my obsessive pursuit (the last 6 months or so) to figure out what makes business so hard.

After all, the basic concepts are not that difficult.

Here is another nugget that I have picked up on in the past month or so. This one comes from my personal experience:

What makes business difficult is the number of distractions that come up. The ONE thing that has made me a better business person is my ability to quickly understand whether something is a distraction or an important issue.

The problem with distractions is that some of them do bring value to the company. For example, optimization projects and other marginal improvements for example. The problem is that these issues often come at the cost of focus on the core drivers of the business.

This is where future business leaders need to learn to understand the difference between core activities and marginal improvements. The latter need to be avoided in favor of the former.

The truth is that time and resources are limited. We do not live in a world where we can do "this and that". Decisions are not made in a vacuum. Focusing on marginal issues means not focusing on core issues, period.

***
Other things that makes business hard:
1) The complexity and layers of organizations (can be helped with programs such as Six Disciplines)
2) Incompetent People (can be improved with good hiring practice through Hire with Your Head and Top grading)
3) Lack of optimism and inability to persevere (this is a little tougher to fix but books such as Pyscho Cybernetics and anything by Tony Robbins can give you pragmatic tools to become more optimistic)

How to Deal with Underperforming Employees

The following is a method taught to me by my friend Sam Yudes:

Before you can even apply the method, consider this: good management starts before the task begins. To be a good manager you must set clear goals/objectives that are SMART (specific, measurable, attainable, realistic, and timely).

Assuming that the employee doesn't meat the SMART goals you bring him/her in and say the following: Draw a 2 by 2 matrix (motivation, skills) and ask them where they believe they themselves fit.

Immediately, this will bring out why exactly they are underperforming. If it has to do with skillset, consider some training. If it has to do with motivation, discuss the individuals motivation and what drives him/her (perhaps the employee is not a good fit).

Next, make sure to ask, is there anything ELSE that is keeping you from achieving your numbers. This is an important question as there is often something hidden that is keeping the employee from success. For example: the employee might say: "70 sales calls is too much". To this, you can bring in industry averages or other employee's performances".

These hidden concerns are very important to bring out. Once an employee voices his concern, keep on digging, "what else", until the employee is out of reasons and says, "that's it, no