Distributors and Dealers

Here is a good work lesson. It's pretty specific, but definitely isn't obvious -- sometimes it's a good idea to have contractual agreements with your dealers or distributors, and other times it isn't. And where you do have contracts, it is important that they conform to local laws.

Within the United States, commercial contractual arrangements are regulated by state laws -- either the general commercial code for that state, or specific regulations that have been passed. In many states, it seems like the laws were set up to favor local car dealerships in their "struggles" with automotive manufacturers. They cover things like notice periods on cancellation, cure periods, and the buyback of inventory. Because these laws vary considerably from state to state, it is important to know what you can and can't do before you start to do anything that impacts territory, length of the agreement, renewals, inventory requirements, and similar things.

But what's a supplier to do? Learn the details of fifty different laws -- laws that can change, by the way? Can't you write a contract with your dealer/distributor that is universally valid in the U.S.?

If you try going that route, it's likely the agreement will be so weak, that you'll be completely hamstrung. One advantage of a universal agreement, however, is it does set expectations for you and your distribution partners. And you only have one agreement to learn. If you make the contract too restrictive, however, it is likely some paragraphs won't stand up if there's a dispute that ends up in court. That's probably about as good as you can do.

If there's no contract, then general commercial law in the state prevails -- which is probably even more disadvantageous to a supplier.

So what's the best strategy?

In the United States, I suggest having a very knowledgeable attorney write a universal contract -- one restrictive enough to give you some options when your distributor doesn't perform -- but also checking state laws before you make an major changes in the relationship.

Outside of the United States it is a different ball game altogether. Laws in the U.S. vary a lot. Internationally, they vary even more.

In one instance, I was sued by an international dealer for hundreds of thousands of dollars for "brand development" he had supposedly done on my behalf. Of course, we were cancelling him for non-performance, but the way this particular country's laws worked, since we had a contractual commercial relationship, he could come after us. And he did. And it cost big bucks.

I later learned that if we hadn't reduced the relationship to a contract, we would have only been subject to normal commercial law, and the "brand development" stuff would have been excluded.

Outside of the U.S., you will, unfortunately need to ask a local attorney what is the best policy. It is a slow, tedious and expensive process, but done correctly, it can save you bundles later. Absolutely don't just take your U.S. agreement and have your distributor sign it -- you could be setting yourself up for some huge problems down the line.

Country Risk

I was burned in Argentina. And in Saudi Arabia. China, too. Personally.

I've watched others within companies where I've worked experience disasters in India, Pakistan, China, Libya, etc.

These disasters were mostly commercial issues. Mostly related to legal maneuvers by either the government itself, or advantage taken by local business people utilizing leverage their local governments provided. Mostly limited in scope, but only through good fortune.

Most of these countries have a history of business train wrecks. They go back on promises, change the rules, toss agreements aside when it is convenient, or use their legal system to take advantage. Then they "reform", claim they are anxious for direct foreign investment, invite capital back in. And then the cycle happens again.

Why these situations happen is all over the map, and could undoubtedly fill volumes.

My work lesson is in how you deal with these types of opportunities/problems as an individual manager. So here are my thoughts, developed through a couple of trips to the school of hard knocks on this subject.

1. Just say no. If a country has a history of fleecing foreigners, or of foreign investors being mistreated, it will probably happen again. If possible, just stay out altogether.

2. Limit your exposure. Put as little in the country as possible. Take out what you can whenever possible.

3. Find a solid partner. A manager, investor or adviser. Get someone who can see trouble coming and help you develop a plan to deal with it.

4. Trust but verify. Trust should be earned in such places, not assumed. Check out the reputation of anyone you will be dependent upon.

5. Control the venue. Contracts are great, but they are even better if you control where they will be enforced. Don't accept a third world court venue where you will lose on knowledge of local law, access to resources, and sympathy.

6. Anticipate problems. Use history, current events, and adviser information. Put together plans to deal with issues before they happen.

7. Communicate with your superiors. Sooner or later something bad will happen. It's important they are aware of the risks before a bomb drops.

International business is hard. But for many companies, it's essential to success and can't be ignored. But appropriate caution and preparation will prevent a disastrous or, at the least, a very unpleasant experience.




If you enjoy my blog posts, check out my novel, LEVERAGE, now available at Amazon, and Barnes & Noble.

Get Your Customer Input from Multiple Sources?

I've used a lot of methods to get customer input for new products or services. Surveys, focus groups, partnering, or just winging things without any customer input at all.

But what works the best? Or the worst? What is the best trade-off?

The "experts" insist that getting maximal customer input will give you the best results. In my (not so) humble opinion, I think that is the path to mediocrity. And it may be the best path in many cases.

The biggest businesses successes I've seen, have been development projects where the "inventor" has a game changing idea and relied mostly on their own instincts and thoughts to design it. But there is an inherent bias in looking at big successes developed using this method -- you rarely hear about the failures! And I'm aware of a few spectacular ones. I'm just guessing, but I believe a lone inventor is more likely to come up with an idea that is revolutionary, but also more likely to miss the target completely. It's a high risk proposition, with a greater potential reward. If you're going to use this development method, your organization better have an exceptionally high tolerance for failures.

Conversely, projects where I sought multiple inputs from customers through surveys, focus groups, and the like, tend to "regress to the mean". That phrase means you tend to develop a "jack of all trades, but a master of none" -- a device or service that does a mediocre job of satisfying a broad range of needs, but doesn't excel in any particular dimension. My personal experience is the design ends up loaded with options and variations, and cost go too high. Additionally, customers are usually pretty poor at understanding radically different solutions to their current problems, and so they tend to push you back toward the familiar.

So how about partnering? That seems like it might be a good compromise -- some customer input, but still enough innovation to allow a big hit.

My personal experience is this combination results in the worst of both worlds.

There is still the home-run aspect of the lone inventor scenario, moderated only slightly by having a second voice involved in the project. But the partner organization tends to pull your development efforts toward their particular needs and idiosyncracies. If they represent the market at large, you win. In my experience, they will lead you to an ideal solution -- for them. And usually a miss for almost everyone else.

On one particularly large and expensive project I managed, we used a customer partner for the development. The customer insisted on safety, maintenance, and operating parameters for the product that added significant costs. Once we finished the development and started trying to sell it to others, we discovered the customer-partner's payback economics were significantly different than those of other organizations. And some issues other potential buyers had were not a problem for the partner, and so were ignored. The project was ultimately shelved, probably a couple of years later than it should have been.

So while customer input can reduce the risks of project failure, it can also reduce the reach and level of innovation you might otherwise achieve. As to partnering, I can't think of any time it would be an improvement over broad customer input or none.

The Way Things Start is Usually the Way Things End

Business relationships are usually at their easiest, their friendliest, their lowest friction, in the beginning.

People tend to be on their best behavior then. People are exploring the potential partner's thoughts and beliefs, and know their own are being probed as well. People tend to be focused on what they can gain from the relationship, and what they must give. And they normally do it cautiously.

If there is conflict at this stage, it is a clear warning of what most likely lies ahead.

This lesson was probably most clearly pointed out to me several years ago during the negotiation of a share purchase in another company -- a partnership. The target firm needed cash, and we were looking for geographic expansion -- it looked like a natural fit. We needed the owners to stay with the business, and they were keeping half the stock, so it seemed like the arrangement should work. The first round of discussions went fairly well -- but I got significant push-back when the subject of salaries came up.

When you own your own business, you set your salary. There were two owners in the business, and neither of them had paid themselves very much over the last several years. When I suggested a market-based salary for the both of them, their loss of control over their pay immediately became an issue.

Through several additional meetings, it became clear that "market" to them meant an outrageously high number they heard whispered by the owner of a similar business. I produced data, they resisted. The dispute took the investment agreement to the brink of dissolution.

It should have been a warning. But, alas, I was going to have to learn this lesson the hard way.

Rather than tabling the deal, I pushed forward. I developed counter arguments, more data, and ultimately compromised, giving them most of what they wanted.

It was a mistake.

Over the next ten years, the same pattern was repeated over and over in a tumultuous relationship that ultimately ended up with one owner quitting, one being fired, and the business going into serious decline. The conflict orientation the two owners had shown in those first few meetings played out over and over again on variety of subjects. It was the conflict, more than any other factor, that caused us to fail to make the kinds of improvements originally envisioned when the deal was cut. Conflict that undercut trust.

My advice? If the relationship starts bad, no matter how theoretically attractive the project/deal is, drop it. The way things start is usually the way they end.




If you enjoy my blog posts, check out my novels: Leverage and Incentivize.

Don't Get Sucked in by that Sexy Idea

I'm sure I'm not the only one who's been sucked in by a cool-sounding idea. They tend to float past at just the moment you think you need them. When a brilliant move will extend your already great reputation. Or when their successful implementation will save you from a problem you're struggling with.

Caveat Emptor -- While the idea might not necessarily be bad, your ability to rationally and dispassionately evaluate it probably is.

Yes, I've made this mistake. More than once.

The problem is the "want" and "need" aspect. When we want or need a success, we are pre-disposed to ignore contrary arguments, brush aside risks, listen to advocates, and vilify critics.

Watch particularly for the last category. You'll find yourself saying things like: "She's not a team player." or "He's always so negative." Remember -- it takes guts to oppose. Agreeing is the easier path. When someone criticizes a direction or path, there's usually a good reason for it.

One of my former associates used to say: "I love it when the facts and my pre-conceived notions come together". Just make sure when they do, it isn't wishful thinking, and the seduction of a sexy idea driving the convergence.


If you find my blogs interesting, you might enjoy my novels. Check out Leverage and Incentivize.

How much "New" is too much?

American corporate culture celebrates the new, the radical, and the innovative. In our lifetimes, we've seen some incredibly ambitious projects roll to success -- projects following the "go for broke" theme. Things like the personal computer, the Apollo program, amazing medical advances, and many many more innovations. We love being pleasantly surprised by that new device that rocks our world, and so we love hearing about positive progressive change -- even if we're not personally the type of person to immediately adopt the latest and greatest.

But is going for broke the best way? Or are we focusing on the few winners, and ignoring the many losers in this game? Should we swing for a home run with every pitch, or would it be better to try for singles?

On the broad playing field of countries and cultures, the answer isn't clear. Radical innovation and ambitious projects have served America and American companies well -- resulting in irregular fits and starts in particular firms or industries, but in overall steady progress. The often-sited norm in Japan -- that of smaller, steady, incremental gains, also seems to have allowed their companies to succeed on the world playing field. In some years one process may appear to work better than the other, but over longer time horizons, the approaches seem to be about even.

When we look at the micro level -- at the circumstances surrounding those engaging in the projects -- the picture is radically different. The big-bang method produces a few spectacular successes, but many more failures than the incremental approach. That means if you are an innovator, project leader, or investor in organizations engaged is such projects, your chances of ending up on the losing end of the process is much higher. The hero of my novel, LEVERAGE, plunges into a murder investigation where his experience and skills ill equip him for the work. It is all "new" to him, but he blunders ahead hoping for his "home run". The results are predictable.

I'm not advocating only engaging in small incremental change projects either. They tend to distract you, pull your focus in many different directions, and make life very complicated. And they aren't nearly as fun or as inspiring.

As in many areas of life, there is a golden mean.

My rule of thumb, learned through many experiences of success and failure on projects, is never try to innovate significantly along more than two dimensions. A new product is a great project, it has only one "new" dimension. Make it a new product for a new market -- and you're pushing it. New product, new market, new manufacturing process -- you're courting disaster. You get the picture.

Imagine you have only a ten percent chance of a failure along any of your "new" innovation dimensions. With only one "new" dimension, your chances of success are 90%. If you introduce two "new" dimensions, the chances drop to 81% (90% times 90%). Add another "new" dimension, and the odds of success on the project drop to 73%.

And let's face it, our ability to accurately assess the chances of success at the outset aren't all that great. I've always had a chronic bias to underestimate risks. I suspect most other people do as well.

So spend a little time thinking about the "new" dimensions in your innovative project, and assess the chances of failure along each of these. Then double that estimate to counter your natural bias (or whatever factor your personal history suggests is reasonable). If you're happy with the resulting odds -- go for it. But you just might need to consider a safer and more incremental approach.

Check out my novels: Leverage -- A Corporate Thriller, and Incentivize -- A Corporate Thriller

Before the Project Becomes Yours

Ever "inherit" a project? Ever inherit one where the expectations seem unrealistic? Or just plain crazy?

Yeah, I've had a few of those, too.

So what do you do? Your boss calls the project as an "opportunity" for you to show your stuff? It's a vote of confidence. Or is it? Could you be the scapegoat being positioned to take the blame for someone else's brain fart?

Or perhaps while the expectations may look high, you agree it's a noble endeavor -- good for the company, that is.

But is it good for you?

Maybe. But maybe not. It all depends on what you do. And what you do never matters more than what you do when you first take the reins.

What are the choices?

You could dive right in and start problem solving -- that's probably your natural reaction. It certainly was mine. The usual rationalization is there's no time to waste, or that you can learn what is going on best by doing, digging, and responding.

You could review status, testing the resource levels versus the targets. Checking to make sure the right people are deployed in the right roles. You could develop a new pathway to a successful project end. This is a useful step, but not where I recommend you start.

Before the project becomes yours, you should review the justification. Review the project documents. The write ups, the financial analysis, the presentations. Test and evaluate the underlying assumptions. There is no more important place to start than here. Why? Because I've observed that the vast majority of projects are already successes or failures BEFORE they are started.

Someone in senior management wants to do something (for example: open a new plant, or maybe close an old one). Do you think they waited for a thorough analysis to support their desired project? Most don't. And even if they do, they, or at least their staffs, already know what the "right" answer is. They often bend and twist the analysis to support their preconceived outcome. I've seen it happen over and over again. Conversely, the number of times I've seen objective analysis drive the decision (without the pre-existing prejudice) could be counted on two hands.

If you're inheriting the project, it probably comes complete with such assumptions -- ones that aren't particularly realistic or well founded. And if you don't raise the red flag early and often, they will become your assumptions. You will own them, too.

So what do you do? Test every assumption, especially the ones that look risky. Bring up your concerns with bosses at every opportunity. Call foul if you can. Better to say -- "This project is never going to pay off" on day two, rather then being assessed as a failure on day two hundred.

Of course, you have to play politics as you do this. If you just inherited your boss'es pet project, and he drove all those crazy assumptions, your hands will be at least partially tied. But do what you can to protect yourself and your reputation from the faulty project

And remember -- silence is viewed as agreement. Always.

Express Concerns until Success is Assured...

I once had a guy who worked for me, say: "This project is the best one we've ever done". He made this statement to our CEO during a review meeting.

I silently cringed when I heard this -- not because the execution of the project hadn't been pretty good up to this point -- but instead, because he was just setting himself up for huge criticism if even the smallest thing went wrong. At the same time was getting very little credit for the brag -- an eye-roll over his stupidity, rather than an 'atta boy.

This incident helped me learn an important work lesson -- it is safer and more prudent to raise issues about any project or activity going on within your area of responsibility, than it is to communicate any certainty of success. There are several reasons for this.

• Until the project is at its end, unexpected things can happen to derail success. You are better off having people recognize there are risks, than for them to be counting on an easy win. Call it the psychology of disappointment -- it is better to be a last minute hero.
• If it doesn't look a little bit like a struggle, then you won't get as much credit. Overcoming significant obstacles is more highly valued than cruising across easy finish lines. Perhaps unfair, but definitely human nature.
• It gives you a platform to show off your thinking and managing skills. Issue -- analysis -- action. Management loves to see this process self-initiated by an employee. Just remember not to stop at the Issue stage.

Yes, there are downsides -- you will often get help you don't want. Sometimes there will be suggestions from higher up that you know won't work. Often, senior intervention will be clever, but the timing will be bad, causing you to back up and redo something already put to bed. There might a resource assigned that will make the task more difficult, rather than easier. You could even lose the project if you overplay your hand. That's why you should use this technique with a light touch. Use it sparingly, but use it. And never, never, ever brag about work still in progress.

So what happened to the guy and his project? He ran into problems from an unexpected angle soon after making this statement. The problems added huge complexity to the project, increasing costs and delaying it significantly. Eventually the project had to be abandoned. And the CEO brought up the statement made in that review meeting regularly until the employee eventually left the company a couple of years later. It was the impression stuck in his head about the employee -- not the impression you want to make...

Don't rely only on your own observations

Some people can quickly assess others. Some take a long time to get a clear picture. Many more think they can make a quick judgment, but are often wrong.

One place where the chances run particularly high that we will "get it wrong" is during the interview process.

In interviews, the normal reality is for the candidate to be in hardcore sales mode. "Doing your homework" as a job candidate means understanding what the company is looking for, and trying to "morph" your education, experience, and personality into the required mold. If you can make yourself into an ideal candidate, then at least you get to make the call when it comes time to take or reject the job.

Doing this is probably in the best interests of the candidate, and as a result, I don't fault them for trying. The downside is, of course, many people end up in companies and positions that aren't well suited to them.

Why does this happen?

Because candidates don't recognize and/or accept the implicit responsibility they are taking on when "morphing" for interviews -- they don't make good judgments when it comes to fit with the company. By "morphing", the candidate must take responsibility to assess fit. After all, the company can't do it -- you're not really letting them know who you are.

And even when the candidates accept the theoretical responsibility for assessing their fit, the don't execute it very well.

Candidates often see what they want to see, or look only for the things that were missing from their last job. And they systematically rely on their own observations alone, rarely asking for outside opinions or information.

So here's a wild idea -- why don't candidates ask to see references from employers? Why not check social media to find out what their bosses and coworkers will really be like? Why not independently track down former employees and ask them why they left, and what the environment was really like? The companies check candidate's backgrounds of employees, so why not the other way around?

Had I done this, I would have avoided a couple of difficult employers/positions during my career, and the resultant pile of angst, discomfort and agitation. I would have wasted less time, and disrupted the lives of my families a lot less.

So here is a modest proposal -- you as a candidate have as much obligation to check out potential employer, boss and coworkers, as they have to check out you. Perhaps more so, if you are doing the typical "morph" stuff during the interview process. So make sure you do it, and turn down opportunities where there is poor fit.

Examine the Whole Picture when Job Hopping

This lesson is one I personally learned, rather than something pointed out to me by another or discovered from watching someone else's implosion. Here is the basic concept...

When you change jobs, don't focus exclusively on those items which seemed to be "missing" from your last position. If you do that, you will most likely trade one set of unfavorable characteristics for another.

One of the jobs I worked during my career was with a company which had a very aggressive management style -- one which I grew to despise. The style included screaming and yelling during most meetings with senior management, which didn't fit with my personal beliefs of how to treat or motivate others at all. And as a pretty non-confrontational person, it really stressed me out. Unfortunately, there was no exemption for good performance, just a slight reduction in decibel levels.

So what I inevitably did when moving to my next position was to look for the absence of that aggressiveness. I wanted a place where there was little to no shouting, or any other overt confrontation. And after a little looking around, I found it.

All sounds peachy, right? It didn't turn out that way.

Okay, here is what I missed. One of the things I really appreciated about my old employer (which I didn't fully recognize until I was ensconced in my new position) was the clarity of goals and the analytical approach to setting them and measuring performance. You always knew where you stood.

The new employer had very unclear goals and targets, which seemed to present a constantly moving target. There were many unclear, unspoken criteria for judgment -- known in sarcastically as "management by hinting-around" -- which tended to polarize the staff and make the company exceptionally political for an organization of its size.

Had I been a bit more complete in my strategy, I would have been willing to accept a more aggressive employer in exchange for a less political and more straightforward criteria for judging success and failure.

Admittedly this is an example of hindsight being twenty-twenty. It is definitely difficult to do on two fronts -- first, it is a lot easier to recognize what you don't like than what you do like; and second, understanding likes and dislikes requires a fairly thorough knowledge of self. For me, that understanding didn't come until mid-life, after banging my head against the proverbial wall repeatedly.

I'm sure there are better learners out there than I was, but it seems to me most of the people I meet on the management ladder are much more focused on trying to hammer themselves into the round hole (no matter how many sharp corners they have) than in really finding work and an employer that fit with who they are.

The main protagonist in my novel, LEVERAGE (http://tomspears.squarespace.com/leverage/) goes through this same learning process while in the midst of solving a murder. Ultimately, he discovers that corporate life isn't really for him, a realization many people make late in their careers.

http://outofcorporatelife.blogspot.com/
http://www.tomspears.com/home/

Sometimes in business, you have to eat your own children

This piece of advice was offered to me by one of my many bosses. And while the notion "eating our own children" sounds bizarre, or perhaps even a little comical (and knowing this boss, it was meant to be comical), there is wisdom in the underlying message.

The point of this lesson is: We become overly attached to our own ideas, and we have to be willing to let them go, or even be proactive in destroying them in favor of the next great thing.

I remember a book I read a few years ago (years after I learned this lesson) which nicely illustrated an aspect of this idea. The book was Clayton Christensen's "The Innovator's Dilemma". In it, Christensen gave us example after example of companies that became highly attached to specific products, technologies, market channels, and ways of doing things. Those products, technologies, market channels and ways of doing things served the companies well -- sometimes for generations. In a sense, they became the sacred bedrock on which the companies operated. Or, you could think of them as the company's "children".

In more of a micro-cosmic way, the same thing happens with each of us. We become attached to those behaviors which seem to work, and avoid those which don't, getting stuck in our own ruts. Those beliefs become like "children" to us -- magical formulas for success. But like the larger corporation, we often cling to those magic formulas long after they cease to work.

So why "eat your children"? As my former boss used to say -- it is better to eat them yourself, than have them eaten by others.

Discarding old ideas and embracing what is new and innovative launches us into a process of renewal and re-invigoration. If we are on the lookout for the pitfall of becoming comfortable with, or even loving our "children", we can avoid the painful disasters that comes from clinging to outdated ideas, products, technologies or channels.

To find my novels, follow the link below:

http://www.tomspears.com/leverage/

To read my blog on Corporate politics, follow the link below:

http://www.tomspears.com/corporate-politics/

A Ditch to Die In

This concept I owe to a colleague at one of my more recent employers.

We all love to be right -- in fact, we love it so much that sometimes we lose track of whether being right is actually important. Knowing when to gracefully accept a loss rather than pushing something to its extreme is an important survival skill in business.

Hence, the concept of carefully selecting your "ditch to die in".

The idea: As you cling to unpopular positions on issues -- usually convinced you're right and carrying that I'll show them attitude -- the stakes surrounding the situation continue to rise. It doesn't take long before you are putting your reputation, relationships, and even your career on the line. So select these battles carefully, making sure they are extremely important, and that you are absolutely positively certain that you are on the right side of the issue and can win the battle.

The consequences of failure are high.

Make sure engaging in such battles is the exception, rather than the rule. While you might be bright, driven, perceptive, and right most of the time, there is a whole world of circumstances outside of your ability to control them, which can still deliver a defeat in a seemingly un-lose-able situation. History is filled with such examples.

Completed Work

I've blogged about the negatives and problems of the Corporate world. Meanwhile, some of my recent writing has called to mind the positive I learned during my time in Corporate Life. So I think I'll do a series of posts on some of these lessons -- I hope someone out there in blogdom finds some value in them.

Completed Work:

This tidbit of thought was contributed by a former boss of mine. He originally referred to it as "Admiral Rickover's Theory of Completed Work", but a can't vouch for the reference to the admiral.

The "theory" goes as follows: A person should never bring only a problem to their organizational superior (boss). Instead they should bring the problem, their analysis, the possible ways of solving the problem, and their proposed solution.

Another way I've seen this stated is to never "delegate upward".

Why is this rule important?
Managers are busy, directors busier, VP's...well, you get the idea. No one appreciates having additional work tossed in their laps. I can remember getting "suggestions" from employees and thinking "okay, you've done three percent of the work, and now expect me to do the other ninety-seven". With hundreds of employees, the task of solving these problems rapidly becomes impossible.
Finding a problem is not a credit to you. Analyzing it makes you appear smart (assuming you don't make a huge mistake). Developing alternatives makes you appear smarter. Offering your recommendation shows courage. In a world where the employee has limited opportunity to "show what they've got", completed work is one of the easiest ways to do so.