5150 Business Strategy

Life in the Corporate Fast Lane and Still Remaining Intelligent

Archive for the category “Swimming Against the Tide”

Is that Whip or WIP

A wise and sage person once said, “manage your project, don’t manage WIP”. For years the idea of Work in Progress (WIP) has eluded the understanding of senior management at many companies. Senior management labors under the impression that there is a WIP God that is all seeing and all knowing and will swoop down upon the company if anything is awry. What senior management in many companies fail to understand is that the way the company estimates projects makes the calculation of WIP immediately suspect. Many projects are already upside down before they even get out of the gate. Pointing this out is to no avail when senior management is convinced that WIP is the problem, not poor estimating or project management. Of course, the problem of profit fade and poor performing projects never goes away when management remains convinced that WIP, or is that WHIP, caused the project to lose money.

A short primer on the critical elements of WIP for the uninitiated. There are three key elements that are needed to insure that the process of WIP operates as accurately as possible:

  1. You need an estimate that is in the ballpark. This was the beginning of the problem at one firm. Estimates were so far out in left field that the math to calculate percent complete was immediately whacked.
  2. This part most firms cannot screw up too much – contract value. Although firms never stop trying to screw this up by not updating the contract value throughout the contract, both up and down. At this point this becomes just one other piece of the calculation that goes wrong.
  3. Competent project managers who can actually manage projects. SURPRISE! What a concept, there must be capable project managers who know where they are in the project and can accurately forecast an estimate to complete (ETC).

Simple enough, don’t you think?? Yet those at many companies cannot wrap their brain around the concept and continually come up with processes and procedures to manage WIP, versus manage the projects or change clearly deficient estimating procedures and project management.

A case of dumb and dumber, the blind leading the blind, etc… We know that if we manage the WIP that the projects will make money, you MUST be calculating it incorrectly. Bwaa Haa Haa, such ignorance. Folks, WIP is just a timing mechanism that matches revenue to expense and has no impact upon a projects profitability. That is the main purpose of WIP – match revenue to expense was what I wanted to yell at the top of my lungs after sitting through the 100th meeting where the same pronouncement regarding how WIP needed to be managed. The usual Jim Carrey look came when they would make these statements – “we know the truth, you can’t fool us”, LOL. I am convinced this was done to WHIP me into submission. As if telling me over and over  would make me a convert to the insanity. To this day the senior management at many companies is clueless to the concept of WIP.

Being able to effectively estimate projects is where many companies have real issues that doom projects to profit fade from the beginning and/or during the project when an estimate to complete is needed. I recall asking for an estimate to complete from a senior manager at one company for a project in Southern California. He sticks his finger up in the air, gauges the direction of airflow, and says “we only have another $150,000 worth of work left on this project”. This was at yearend when preparing for audit so I asked “are you sure?”. Yes, absolutely was the reply by not only this senior manager but others as well. The first quarter of the new year the firm immediately proceeded to spend $1.5 million to complete the project – whoops, a little off. WTF. You got it – the WIP was wrong, we lost money because of the WIP, LOL. Unfortunately, this is not the exception but the rule at many companies. Estimates and estimates to complete are many times about as accurate as a Tarot card reading. Actually Tarot card readings are probably more accurate. My apologies to all Tarot card readers.

Trying to get accurate estimate to complete in some companies on any project is like whack a mole. They keep guessing until the end of the project when it is  impossible to get it wrong anymore!! Consistently profit fade on projects follows a pattern of 35%, 30%, 15%, to 9% once the project is done. There are always estimates given to substantiate the profit percentage of the month. You got it – the WIP was the culprit. Gotta manage that WIP better. Senior management actually many times increases focus on WIP everytime a project loses money and then cannot understand why the same profit fade continually occurs. DUH, the root cause was poor estimating and project management.

Many companies are populated with “C” players at the senior management level. From the Harvard Business Review (I have added emphasis), “There are three main types of C players, and what you should do depends on which you’re working with. The first are those who have been promoted beyond their level of competence (a concept popularly known as the Peter Principle). They simply don’t possess the capability to perform in their current job. These are the individuals you need to manage out of your team. Perhaps they can flourish in less-demanding roles or in other parts of the organization, or perhaps they simply need to leave entirely.“. Unfortunately, the senior management of many firms aren’t going anywhere even though they clearly lacked the competence to perform at the level required. They truly have risen to their highest level of incompetence.

As in many companies, staff can see senior management for what they are. Only management themselves are blind to the issues that originated with their lack of competence in key areas. I suppose it is the only way this type of senior management survives in many companies. The feeble minded band together and validate each others bad decisions. In that way they survive in the only environment they can, one in which they can control and elude performance measurements which would doom them in any other company. I have a recurring nightmare where Moe, Larry, Curly and Jane show up and we are working together. No, this can’t be real – and then I wake up and am overcome with a feeling of relief. It was just a dream.

Lesson learned: manage your projects, not WIP. Beware of those who speak authoritatively on a subject and attempt to lead when they have no inkling of what they speak of.

 

This is a work of fiction. Names, characters, businesses, places, events, locales, and incidents are either the products of the author’s imagination or used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.

 

 

Advertisements

Castles in the Sand….

…fall into the sea eventually. Having just spent, in my opinion wasted, years building what I thought was a stable relationship, both internally and externally, with several companies this statement rings so true. The experience also validates another truism – always go with your first gut instinct. Had I done so I would have ditched this company within the first couple of years or, at the very least, at five years when it became very apparent that those in senior management had no moral compass but, even worse, no business instinct needed to grow the firm past where it already was.

From Harvard Business Review, “The problem is about 70% of leaders rate themselves as inspiring and motivating – much in the same way as we all rate ourselves as great drivers. But this stands in stark contrast to how employees perceive their leaders. A survey published by Forbes found that 65% of employees would forego a pay raise if it meant seeing their leader fired, and a 2016 Gallup engagement survey found that 82% of employees see their leaders as fundamentally uninspiring. In our opinion, these two things are directly related.”.

What were the signs you ask. The immediate sign was the lack of leadership skills the senior management had. There was no ability to rise above the petty, personal, and vindictive nature that they possessed. Everything was taken to the personal level – I don’t like so and so because they are friendly with Jesse, or whoever happened to be the flavor of the month. It was akin to mean girls and being in high school again. Talk about those in positions of power wielding that power inappropriately. “Because they could” became justification for tremendously bad judgement. Initially I thought this was just an immaturity that eventually the company would grow out of but, alas, this was not the case. There were so many warning signs but there was also always the hope that the various shortcomings would resolve themselves. Kind of like staying in a bad relationship because you kept thinking the other person was going to change. In the end, however, it became the lack of business acumen that convinced me it was time to the pull the plug on this patient. An inability to understand the difference between gross margin and net margin and figure out why we weren’t making money.

You would think that with all the shortcomings the smart thing to do would be to surround yourself with those of a higher caliber. That would have been the smart thing to do in order to prevent disastrous business decisions being made due to the egocentric nature of the top management. The most polite thing I can say about the inner circle is that they were very entertaining from a Three Stooges perspective. There was Moe with the page boy haircut and whose only claim to fame was his nickname which is the only thing he could speak to authoritatively. Curly was the one who scratched his balls in every meeting and hemmed and hawed when he got upset with something you were saying. Larry was the newest of the group and he was never one to rock the boat, just go whichever way the wind was blowing. Read this as whichever way the senior management said was up. Not one to be bothered with doing the right thing, just do whatever was politically expedient. Against this backdrop is it any wonder that things lurched from one disaster to another. It was life on a roller coaster of one bad decision after another with no one wanting to listen to ways to improve the situation. As I had written in another of my posts – it was going over the cliff over and over again even when warnings were constantly given.

The upside to this is that it personally validated what I have come to see as the sorry state of leadership and management in many firms. In fact, the experience described spans a spectrum of companies across 30 years of experience. It also precipitated a career move which has been very satisfying in validating from a business perspective that there was a better path. Many more stories to share regarding business ethics and morality, stay tuned. A teaser – how wiggling toes in the sand can lead to federal intrigue.

Lesson learned: your first instinct will in most instances be right. If the situation does not feel like a fit you should look to make a change in your environment, not necessarily wait for the environment to change since it may never do so.

From Harvard Business Review, “Dominic Barton, global managing director of McKinsey & Company, says that selflessness is the foundation of good leadership. Leadership is not about you, but about the people and the organization you lead. With selflessness, you take yourself out of the equation and consider the long-term benefits of others. Selflessness does not mean you become a doormat for others and refuse stand up for yourself. Selflessness comes out of self-confidence and self-care.  Here is a simple way of checking whether you are selfless in your leadership: When you make decisions, check your motivation; are you doing it for personal gain, or for the benefits of others?”.

This is a work of fiction. Names, characters, businesses, places, events, locales, and incidents are either the products of the author’s imagination or used in a fictitious manner. Any resemblance to actual persons, living or dead, or actual events is purely coincidental.

Vindication – ERP Nirvana

Vindication

Life has a funny way of making things right in the long run. Heading up a consortium of the largest architectural firms my final recommendation was at odds with the eventual failed choice – Lawson Software. WTF, how could anyone believe that software that, at the time, was predominantly in grocery stores could fit in the engineering/architecture space. I have expounded on this lunacy in previous posts so will not belabor the points again.

My choice was JD Edwards as it was a Tier 1 ERP system that was heads and tails above the competition, this was circa 2000 . Dial forward to 2015 and, lo and behold, the ERP system of choice being installed is JD Edwards. Granted this is the “new” Oracle JD Edwards but it still retains functionality that is above the competition for this market.

JDE2

I harken back to the days of doing a site visit to London in order to see JDE in an installed environment and how everyone was totally satisfied with the selection. Another site visit to St. Louis to see Lawson installed in a live environment where everyone was lamenting the need for a multitude of workarounds. Can you say cluster fu*k? Then coming back reporting the results to “senior” management who turned a blind eye to reality. JDE is not for us but this Lawson software is the cats meow. Who are you to come here telling us otherwise. This on the way to pissing $5.0 million down a failed implementation drain. LOL.

 Yes, things do have a way of working out………… and, yes, I believe in Karma.

karma

I am Positive it Won’t Work or the Power of Groupthink

A long and tortured tale of a failed ERP implementation at a large architectural firm headquartered in San Francisco.

pospiss1The best moments are only available upon reflection as at the time it was a period of total lunacy in my career. Dominated by a culture so dysfunctional that it allowed $5.0 million plus to be pissed down a hole. Of course, I was painted as the dysfunctional one since, as the SF Regional manager, so astutely told me during one discussion, “You need to be positive about the ERP implementation!”, in her chirpy upbeat way. To which I replied, “OK, I am POSITIVE this implementation will fail”. How is that for being positive. This was several months into an implementation that saw us christening the project management module of the software as “Project Uranus”. Very appropriate, given that you could stick this software up “your anus” since it was never going to work.

Talk about swimming upstream, every person on the project team fell in line behind the founders son in proclaiming that the software implementation was going to be a success. This against every single indication that it was failing. A countdown clock to the “go live” date was established so everyone could eagerly await the dawning of the new day for the firm. It was a joke of huge magnitude which only I could see.

Everything was done according to the book to insure success – a focused evaluation and implementation team was formed that included outside consultants, outside accounting firm, and representatives of other firms. The consortium of outside keefe031607firms was a who’s who of the architecture industry in the United States. It was impossible to fail, or so some in upper management thought. With so much brain power, and I use the term lightly, there was no way that we could go down the wrong path. The problem was that, to a person, everyone on the implementation “team” had no facility for independent thought and/or it was not in their vested interest to buck the trend if it would be perceived negatively. The prodigal son made it clear that what he wanted is what would be chosen and implemented, regardless of whether it would work – everyone was to MAKE it work, or else. That was the environment which caused everyone to fall in line and follow each other over the cliff even though it became a forgone conclusion that the implementation was going to fail. Questioning the decision was a career limiting move or it would cost the outside consultants their fees.

I recall one meeting held in a large conference room when things were already going sideways in which everyone formed a circle to encourage openness and unity, LOL. Did I mention this firm bought into, and probably still does, buy into every management craze that happens to be in vogue. Doesn’t matter whether the latest trend works, just that we did them so we showed our intellectual prowess, again LOL. They were high on appearance but low on execution – they had not figured out that without execution the latest theories are nothing more than opiates for the masses – we are doing OK because we are doing what everyone says is right!! I digress, we are in this room in a circle and the prodigal son goes around the room one by one and asks each person to give their impression of where the project stands. Remember, this was to be his way of getting to the truth of the situation, whether his belief that things were OK could be validated by the assembled “experts”. I am standing next to one of the founders of the accounting firm we utilized at White-liesthe time, he leans over and whispers, “..this is a cluster fuck”. I nod my affirmation that, indeed, this is an exercise in stupidity as not one person uttered what was overwhelmingly the only conclusion a sane person could come to – the ERP system chosen was a complete failure and would never work. It was as clear as the nose on everyone’s face but no one wanted that nose cut off by the prodigal son, easier to go with the flow over the cliff and over they all went. All telling little white lies to keep their positions within the firm intact. Several went on to become principals in the firm when they rightly should have been terminated for gross negligence. Nothing so harsh – they were “team” players, no matter they cost the firm $5.0 million as the culture of this firm was better to go along with the dysfunctional behavior because that was part of our culture, and our culture is what got us here. Whacked.

To this day I gag every time I see quotes from senior managers of this firm, or in particular the ex-CEO, who speak authoritatively on management theory or techniques. Unless they have somehow pulled their heads out of their asses, which I doubt, their words of wisdom fall on deaf ears as experience has shown they lack the ability to execute.

Lesson Learned: without execution all the management theories are not worth the paper they are written on. Groups who are not empowered to speak freely are capable of tremendously stupid decisions. When the overpowering emphasis is on going with the flow there is real danger in going over the cliff.

Raider Nation – Brand Identity Part 2

cheer4bEarly on I scored several major coups by enlisting the aid of various Raiderettes to the cause of Raider Nation. This drove the competition bonkers as they were driven insane by the very real speed by which Raider Nation was becoming the acknowledged leader for Raider fans on the Internet, and beyond. First they lost the coveted Raider Locker Room outlet by which the image and name of Raider Nation could be advertised daily through a brick and mortar outlet. Then they lost the battle for the very hearts of Raider fans when the Raider Nation moniker started to appear on the backs of cheerleaders – WTF, this is adding insult to injury. It was a brilliant execution of strategy aimed at making the Raider Nation brand well known and adopted as a symbol of Raider fans worldwide.

Read more…

Raider Nation – Brand Identity Part 1

vellakat3OK, there may be several teasers to the real lesson of building brand identity. What is undeniable is that a product or service can fail or succeed based upon the image that consumers have in their minds.

In 1996 the internet was secondary to the traditional marketing channels that existed at the time – meet and greets with the cheerleaders!! What was becoming clear, however, is that the internet could spread news and photos on current events much faster and across a much more diverse geographical base. Instead of only fans in the San Francisco Bay Area being able to see the latest news in the local rags there was now the ability to spread this info across the globe. No one appreciated the impact of the internet in this area more than I did when it came to formulating a strategy which would propel Raider Nation to the pinnacle of success.

The photos shown here were all published on the Raider Nation website exclusively and I, in effect, became the official photographer for events that were taking place at John Vella’s Raider Locker Room. The Raider Locker Room and Raider Nation became strategic partners in spreading the Raider Nation brand. Traditional brick and mortar retail was still the predominant method of sales in 1996 but to sell to a global fan base the internet was becoming the preferred marketing and sales channel. The symbiotic relationship between most retail outlets and the internet is taken for granted now, in 1996 Raider Nation was on the cutting edge.

Read more…

Raider Nation – The Concept in 1996

2013-03-17 16.53.04

Think back to 1996…… The internet was in its infancy and no one had yet fully tapped the true potential in the area of internet commerce. Netscape, anyone remember them?, was the dominant player in internet browsers. They spun off multiple firms that hoped to capitalize on the internet – from hosting solutions to content creation. Digital cameras were archaic and the size of a shoe box if you could afford one – think about cell phones or portable computers as a comparison for how they developed. Going from big and expensive to small and cheap in a span of ten years or less. Hard to believe but in 1996 the wave known as the internet had not yet started to crest, but all the signs were there. Internet commerce was just a glimmer in various enterprenuers minds and how to truly capitalize in this area was also on a scale of small to large – the individual with some HTML skills all the way up to those implementing grand shopping schemes. Some were spectacular failures – does anyone remember Webvan?

Now think back to 1996 as the year after the Raiders had returned from Los Angeles. Oakland Raider fans from the days of Kenny Stabler, Freddie Biletnikoff, Dave Casper, etc. were riding a surge of adrenaline from their beloved team returning to where they should never have left. I happened to be one of those “old” Raider fans who looked to rekindle the glory of the Oakland Raiders but little did I know that I was about to catch the wave of the internet at just the right moment in time.  A time when fan pages were popping up anytime a fan wanted to post pictures or comments regarding the team. The majority of the sites at that time were primarily sites designed to talk about the team, the games, and trash talk with the other fans. No one had a concrete vision to combine the fan page with a concept such as Raider Nation – it did not exist.  The plethora of “Nation” sites you see now were all given birth by the success of Raider Nation. There would be no Red Sox Nation, Bachelor Nation, Niner Nation, etc. without the first website designed to capitalize on the internet and fanaticism – Raider Nation.

The official filing with the US Patent and Trademark office:

USPTO

Many have come forward after the success of Raider Nation claiming to be the originators but none have the conclusive documentation being presented here to substantiate their claims. What I am presenting here is the history and origins that fueled the success of the concept known as Raider Nation. I will present the original graphics that were used to develop the Raider Nation website for which, of course, I owned the domain RaiderNation.com. Intertwined in the history will be the business lessons learned along the way.

I will take you on a journey that validated many things taught in business schools and the journey itself was an education in business that many never receive in an entire lifetime. Are you ready to rumble………..

Raider Nation – A Case Study

Coming soon – the genesis of a Nation, from concept to implementation. Below is original mock up design for t-shirt.

 

2013-03-17 16.53.04

Mas Tequila

What drives me to drinking…….

Those who can influence the success or failure of a business but have never run a business on their own. Generally, these folks make decisions based upon book learning where everything fits into nice little boxes. They have no clue what the true business drivers are behind the financial ratios they learned. They pontificate about debt to equity and cash flow but can’t relate that to real life outside what they have been told is acceptable. Mas Tequila.

You would be surprised that some of the worst offenders of this are in the banking or surety industry where decisions are critical to the ongoing success of a business. Too many times I have seen knee jerk decisions made based upon sterile financial analysis with no consideration given to the surrounding circumstances. According to one bank and one surety my current company should not be in business. What they failed to take into account is the environment in which the company operates. All they know is that debt to equity over 3.0 is bad and having a balance in the line of credit is equally bad. Why, you ask? They would not have a clue as to why this is bad except that someone told them it was. Mas Tequila.

Same for the auditor in Lafayette who was so convinced that management needed a wake up call regarding the accounting function of the company even though he had no clue about what really drives a business. According to him the company was on the verge of bankruptcy and he was hell bent on spreading the message. At the end of the day I fired him and we are still here better than ever. Mas Tequila.

Ask yourself why we as a country are where we are. I would put forth that one reason is that we have allowed those with limited intelligence to exert undue influence on who succeeds and who fails. In my experience there are simply too many people in positions of great power who have no clue about what they are charged with managing. It is easier to say you are the problem and deflect responsibility for their own shortcomings. To the extent everyone believes them they continue to cause businesses to fail that might have otherwise succeeded. They would have gotten the the line of credit they needed, the bonding for the big project, or the credibility needed from an intelligent audit. Mas Tequila.

Lesson learned: stand up against those of limited intelligence and expose them for what they are – those who have truly risen to their highest level of incompetence. Unfortunately, some have gotten into positions that influence the lives of others.

I Don’t Give a Rat’s Ass 2

The partner of an accounting firm we utilized for the annual audit turned out to personify all that is bad in the public accounting world. He had his head up his ass and turned out to be a member of the whack pack. The bank that referred him to us turned out to be official members of the whack pack as well. This audit partner barely knew what work in process was all about but he pontificated as if he originated the term – can you say bullshitter.

I can only assume that the audit partner and the banker involved did not realize that accounting and finance required an affinity for understanding, not only numbers, but what drives the numbers. Neither could find their way out of a paper bag if it involved understanding what financial ratios were about or what they meant to a business in reality. To them the numbers were just numbers and the underlying processes were lost on them. Trying to work with them was a losing proposition. So, we showed them the door.

I was told by the auditor who we hired to replace the whack packer that it was the first time he had heard of an auditor being fired prior to finishing the audit engagement. In retrospect I should have seen it coming since the audit team was staffed with what appeared to be foreign nationals where english was a second language, along with contract auditors who were brought in to supplement this firms thinly experienced staff. In the interest of keeping peace I allowed the incompetence to go on for way too long. By the time I pulled the plug this whack packer had already done all his damage, or so I thought.

Enter the whack pack banker who chose to contact the newly fired auditor. Of course, if you fire an auditor there must be something wrong with the company versus something wrong with how the auditor is performing, right? Ignore the fact that we, as the banks client, had provided copious amounts of data to the bank and kept them in the loop throughout the entire relationship. Another example of supposed professionals not understanding the parameters they are charged with monitoring. The extent of their understanding was that debt to equity should not exceed 3.0. Ask them what might drive debt to equity and their eyes would glaze over and the response was ,”..we only know it should not exceed 3.0, don’t question our requirements”. Head up ass syndrome.Completely clueless.

According to the auditor and the banker we were on the edge of failure, had no future, and the doors would be closing. Funny, three years down the road and the business is thriving. What gives? What gives is that nothing these whack packers predicted through their great expertise came to pass because they were wrong, wrong, wrong. Wow, what a surprise – auditors and bankers who are clueless. Unfortunately, it is not an isolated incident – incompetence in critical positions which influence the future of businesses is far too common.

I still remember the whack pack auditor and our last meeting where he declared that, “.. your charts and tracking are bullshit” when it came to identifying financial trends. Well, Einstein he was not as the benchmarks we utilize have proved to be invaluable despite this whack packers pronouncements. He was so convinced that all the accounting processes we had in place were deficient – funny, seems like his skills were the only thing deficient as the auditors we brought in to replace this numb nut found no deficiencies. Say what!! Of course this is the same numb nut who refused to work on the account because we had not paid his firm as per the terms. I pointed out that he should review the executed contract and, guess what, we were in compliance. This was typical of his incompetence. Adios, dipshit.

Similarly, the bankers thought we were too deficient to be granted lines of credit. We were schmucks that would be destitute in very short order. WTF, we not only got a larger line of credit but better loan covenants as well when we kicked them to the curb. Tell me it ain’t so Joe DiMaggio. How can this be?? It can be because incompetence appears to know no bounds, it pervades organizations at every level and can be devastating to a business. Luckily the “I don’t give a rat’s ass attitude” allowed us to persevere and rise above the whack packers.

Note: a good audit firm works with you to get the job done, not against you. They understand the inherent limits in working in the real world that prevent following accounting rules to the “T”. The same goes for a good banker, they work with you and understand that the world businesses operate in is not perfect – not everything happens as scheduled.

Lesson learned: don’t let the whack packers get you down. Make changes as necessary until you find the relationship that works for all parties involved. Jettison those who lack the intelligence to understand the realities of the environment your business operates in.

Post Navigation