101 Things I Learned in Business School Page 2

  Directors of not-for-profit corporations do not represent stockholders, but the general public. Some boards—both non- and for-profit—consider themselves responsible to everyone with an interest in the corporation’s activities, including customers, employees, suppliers, and the communities in which they operate.

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  How to run a meeting

  Create and distribute an agenda three to seven days in advance. Put the highest priority items at the top. Let the participants know ahead of time your expectations of them so they will be prepared.

  Depending on the formality of the meeting, consider designating someone to keep notes or minutes and watch the time.

  Begin on time. Review the agenda and ask if any changes are needed. Depending on the makeup and size of the group, the issues to be discussed, and other factors, you may need to set rules for behavior, e.g., only two minutes per person, everyone in the room must be heard from, etc.

  Follow the agenda and stay on subject. Encourage participation and debate by all, but other than scheduled break-out discussions, allow only one person to speak at a time.

  Draw clear conclusions, and vote on discussion items when appropriate.

  Outline the next actions to be taken by the group (things to do, next meeting, etc.). Provide a brief recap and reiterate assigned tasks.

  Shortly after the meeting, distribute notes or minutes, organized in a format similar to the agenda. Include the major discussion points and the conclusions reached, and solicit comments, questions, corrections, and clarifications.

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  There are three ways to grow a business.

  Fastest Growing U.S. Industries, 2006–2016

  Industry Predicted growth

  Management, scientific, and technical consulting services 78%

  Services for the elderly and persons with disabilities 74%

  Gambling industries 66%

  Home health care services 55%

  Educational support services 53%

  Community care facilities, elderly 50%

  Other financial investment activities 47%

  Facilities support services 46%

  Securities and commodity contracts, brokerages, and exchanges 46%

  Internet publishing and broadcasting 44%

  Source: U.S. Bureau of Labor Statistics

  Increase market share. In a stagnant market (one with a constant overall size), a business can grow only by taking market share from competitors.

  Grow with the market. If a market is growing, a business can expand by maintaining a constant market share.

  Expand into a new market. In any market circumstance, but particularly in a stagnant market, a business may grow by expanding into a new (and usually related) market—for example, a dry cleaner that begins offering shoe repair or tuxedo rental.

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  Don’t just compete in existing markets; anticipate new ones.

  Businesspeople sometimes restrict their vision of the future to a better, but vaguely defined, version of the present business. In doing so, they may miss opportunities for expansion into new and related industries. For example, a cable TV company that defines itself as providing television programming may be framing its future too narrowly. By redefining its mission as the transfer of information to and from homes, it positions itself to provide internet service, home security, home automation, and telephone service through the same cable.

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  “I skate to where the puck is going to be, not where it has been.”

  —Attributed to WAYNE GRETZKY

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  Six degrees of Lois Weisberg

  Malcolm Gladwell

  Personal connections are the best way to generate new business opportunities. But rather counterintuitively, the people to whom we are closest are often less likely to open new doors for us than those we barely know. This is because those we know well introduced us long ago to the opportunities they can provide, but those with whom we are barely familiar are connected to an entirely different network of opportunities.

  Most localities have a few individuals who know a lot of people across social and professional boundaries and facilitate networking among them. The writer Malcolm Gladwell calls these people, such as Lois Weisberg in Chicago, connectors.

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  A mission or vision statement that is impossible to disagree with might not be saying much of significance.

  A mission statement describes the current central purpose and goal of an organization, to guide daily decision making and performance. A vision statement describes what an organization seeks to become, or the ideal society to which the organization seeks to contribute.

  When drafting and evaluating potential mission and vision statements, ask if the opposite of a proposed statement is obviously undesirable. If it is, the statement probably isn’t saying anything particularly helpful. For example, a university mission statement that says the institution “seeks to produce highly effective, productive citizens” is unlikely to have any real influence on employees or students, since no university seeks to produce its opposite—ineffective, unproductive citizens. A more meaningful statement will assert that which is truly specific to the organization; it describes what the organization seeks to do that many or most of its peers do not.

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  Learn an organization’s culture before working with or for it.

  Organizational culture is the set of behaviors, norms, attitudes, priorities, and beliefs accepted by and within an organization. Cultures vary widely; in some, executives are aloof while in others they are more accessible. In some, processes and behaviors are ad hoc and quirky, while in others regimentation and predictability are norms. A poor cultural match not only can create discomfort for individual workers, but can compromise endeavors at a corporate scale—even undermining large mergers and partnerships that are a good match by other, non-cultural measures.

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  The most difficult and time-consuming problems in business are not business problems.

  Business endeavors are often complicated by human factors: misunderstandings, absenteeism, selfish agendas, ego clashes, personal business performed on company time, and more. The wise manager identifies and minimizes root factors in the work environment that contribute to people problems, works to resolve the problems that do occur, and conducts him- or herself as a model for others.

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  “If your thinking is sloppy, your business will be sloppy. If you are disorganized, your business will be disorganized. If you are greedy, your employees will be greedy, giving you less and less of themselves and always asking for more.”

  —MICHAEL GERBER

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  Most employees want to do good work.

  Components of extrinsic motivation

  Workers may be motivated extrinsically or intrinsically. Extrinsic motivation derives from anticipation of external reaction, including praise, recognition, money (positive motivators), or punishment (negative motivator). Both positive and negative motivators have advantages and drawbacks: Positive motivators can lead workers to expect additional rewards for merely doing their jobs, while negative motivators may help get a task done but usually have a detrimental effect over the long run.

  Intrinsic motivation comes from a worker’s internal sense of purpose, personal enjoyment of the work, and satisfaction of a job done well. Intrinsic motivation can be furthered by employers by designing jobs to best suit employees, aggregating tasks in appealing ways, enlarging worker responsibilities, and increasing employee control over their own duties.

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  Top-down and bottom-up

  Top-Down

  Example: U.S. auto industry Bottom-Up

  Example: computer industry

  Manufacturers dictate design and production to suppliers. Inventors, manufacturers, and suppliers create/provide components; other manufacturers select and bundle them into larger products.

  Top-down models of production and management are authority
-based: The flow of information and processes originates in and is controlled by the upper tiers. They work best when a company’s products and services are similar to those that were previously successful, when the upper tiers possess expertise or resources the lower tiers do not, and when the cost of mistakes by inexperienced staff would be prohibitive. Top-down models can be predictable and efficient, but also can become locked into outmoded habits.

  In bottom-up models, information and processes originate in the lower tiers, usually in an open-ended, ad hoc manner. Bottom-up can work well in industries that are relatively new, in situations where the lower tiers possess unique expertise or resources, and when the cost of errors is not prohibitive. Bottom-up models often generate alternatives that top-down models cannot, but can also be chaotic and inefficient.

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  Command, consensus, or consultation?

  Command decision making is the traditional top-down, hierarchical management model. It is most effective when processes or products are similar to previous examples and when management has knowledge and experience that lower-level staff does not. It is efficient but can be overreliant on old ways when a new approach is needed. Also, in a large, highly layered organization, command decisions by upper management may seem irrelevant to lower-level employees.

  Consensus or democratic decisions are made by a majority of those most directly affected by the decision. Voices that might otherwise be unheard are allowed into the decision making process, but it can be inefficient, cacophonous, and confusing.

  Consultative decision making hybridizes the preceding models. It is an authority-based model in which managers solicit input from the affected before making decisions. It is valued for allowing diverse voices into the process while yielding clear, final decisions for which one party is accountable.

  A manager may use all three styles, switching from one to another depending on the situation.

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  A manager usually should have no more than six to eight workers reporting to him or her.

  When a small business expands, one frequently finds that a new layer of management is needed when it grows larger than six to eight people. Another layer is typically required at around thirty-six to sixty-four employees, and so on.

  The ideal span of control depends on the nature of the work, the abilities of managers and workers, and the similarity or divergence of tasks being managed. Highly redundant processes such as manufacturing can have a very large span, while creative businesses such as architecture and filmmaking may have a span of only a few persons. But a good place to begin analyzing the span of control for most organizations is in the range of six to eight.

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  The party that cares less about the outcome of a negotiation is in the stronger negotiating position.

  There is no stronger position at the negotiating table than indifference—to be able to walk away without negative consequence. This is not to say that a walk-away strategy is the best in every circumstance or over the long run; one can win many individual negotiating battles but lose a larger negotiating effort by alienating those with whom business could otherwise have been done in the future.

  Win-win negotiating aims to satisfy both (or all) parties in a negotiation by employing meta-strategies: What is the next higher level of thinking that will give everyone what they want? Are the needs of the parties truly at odds with each other? Do the individual parties really know what is most important to them? Are they holding on to the things that are truly to their benefit, and willing to let go of the things that are not?

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  There’s a trolley every 15 minutes.

  With regards to Professor Patrick Liles

  The opportunity in front of you may seem once-in-a-lifetime, but business opportunities are numerous. It is usually better to wait for or seek another opportunity than to rush into the present opportunity without performing due diligence—whether buying a car, house, or company. A “successful” entry into a bad business venture may be far worse than missing out entirely on a good business venture.

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  “You can always recover from the player you didn’t sign. You may never recover from the player you signed at the wrong price.”

  —BILLY BEANE, General Manager of the Oakland A’s, quoted in Moneyball by Michael Lewis

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  Do your marketing while you’re busy.

  Opportunities can develop very slowly; it may be years from the time a new contact is made until it develops into business. If one waits until business slows down to initiate a marketing effort, it may be too late for it to help one get through the downturn.

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  Cannibalize your own sales.

  Cannibalization is the diminishment of the sales of one’s own product through the introduction of a competing product. But it is better to suffer a loss at one’s own hands than to have a competitor introduce a product that takes away those same sales.

  Putting an improved product on the market does not necessarily mean your older product must be discontinued. Because development, tooling, and other costs for the old product have been covered, the old product usually can be sold at a considerably lower price than the new product, giving customers the option of buying the old product at a low price or the new one at a higher price. It is important, however, that the new product offer something the older one does not in order to prevent confusion or resentment among customers.

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  Substitutes are competitors.

  Automobile materials by weight

  Source: Bayer Material Science AG

  When evaluating competitors, consider indirect competition as carefully as direct competition. Competition from substitutes can occur at many levels, including product, ingredient, service, and convenience. Plastic, for example, is a common product or ingredient substitute for, and thereby provides competition to, metal, glass, ceramics, and other materials. Online travel services are service substitutes for (and have largely eliminated) bricks-and-mortar travel agencies. Grocery stores that provide take-out food are convenience substitutes for traditional fast food restaurants. Even a clothesline is a substitute competitor to a clothes dryer.

  Protections against product substitutes include strong brand identity, patents, and deliberately incompatible standards, such as the Apple versus PC computer operating systems.

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  Targeting the safe middle market is not necessarily a safe marketing strategy.

  Consumers in the large middle market are often attracted to average quality products at decent prices. Targeting this market, particularly in the early years of a product’s life, can be a viable strategy in many instances. But as a market matures, other factors compete with and take precedence over price for many consumers: styling, quality, features, and exclusivity. Brands that continue to target the middle of the market with a mid-priced product without giving a specific and compelling reason to buy it usually end up losing a lot of customers to niche competitors.

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  Free can be part of a successful business model.

  Older businesses can be caught off-guard by the giveaway policies of newer businesses, for example newspapers that struggle to compete with online providers of free news content. But free has long been central to marketing: free admission before 7 p.m.; buy two get one free; children eat free when accompanied by (hungry, paying) adults.

  Because free isn’t really free, a giveaway must help a business sell its core item. Adobe gives away its Reader software but charges for its Acrobat program that makes screen readable documents. Google offers a free, stripped-down version of its SketchUp drawing program, which builds the skills and demand for its higher-powered for-sale version. Gevalia gives away coffee makers with the expectation that their new owners will fill them with the coffee Gevalia sells.

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  Double-entry bookkeeping

  The record of a business’s finances are maintained in a general ledger. A ledger shows the numerous account
s and sub-accounts in which the business records receipts and expenditures—Sales, Salaries, Utilities, Rent, and so on. “Double-entry” simply means that every transaction is recorded in two places, with the entry in one account offset by the entry in another. In this way, the books are always—except in the event of error—balanced.

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  Cash versus accrual accounting

  Accrual accounting

  Cash accounting shows income and expenses at the time cash is actually received or paid out. It works best in small organizations such as sole proprietorships.