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When Sharing the Pain is a Bad Downturn Strategy

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How should you do business in a recession?

Answering that question is the new growth business in the blogosphere.  Naturally, some common themes get voiced with frequency.  And some of those are not good.

Example: John Caddell points out in If Your Key Suppliers are in Trouble, So Are You that the common strategy of stretching out payables has some serious downside effects.

Anyone with payables has to be thinking of stretching out payments.   I don’t have stats on just how that’s playing out, but my educated guess is, it’s pretty common.

Free cash flow on the backs of someone else.  Your suppliers.  It has to look tempting, particularly if you grew up on the mother’s milk of competitive strategy in the last few decades.  One of the Five Forces of competition, after all, is the competitive dynamic of a company and its competitor-suppliers.

But this ain’t your father’s supply chain anymore.  Caddell points out that sticking it to your suppliers just could have downstream consequences in a year or two when the economy rebounds that don’t look so great.

On one level this is nothing new.  I remember a paper wholesaler explaining to me why supply agreements with paper companies always broke down: “because the paper cycle lasts 7 years, and the tenure of an individual in that role is 4 years.”  Self-interest and short-term gain have been the bane of business relationships for a long time.

What’s different now is that the structure of commerce is fundamentally changing.  The corporate boundaries are porous.  Business is no longer done in vertical, hard-walled entities; it’s done across them, in the white spaces and the contracts between and among companies.  The action is not in internal collaboration and external competition, it is in collaboration across corporate lines.  Collaboration is the new competition.

Which is why I noticed two things lately. 

One client suggested to me that they were cutting my rates because “times are tough and we’ve all got to share the pain.”  It clearly wasn’t meant as a way to keep their consultants happy; it was a way to gain advantage over them in a tough time.  That ticked me off.

Another client suggested they were having to cut back on my business—but they were very welcoming of other ideas, and never suggested issues with rates.  That made me like them.

I think that’s just how people work.  If they keep you but try to gain advantage, that stinks.  If they fire you but apologize for having to do it, you don’t feel so bad.  One you want to work with again, and one you don’t.

That’s the thing about tough times.  The people that treat you well when it counts are the ones who earn your loyalty.  This is not a recession: this is the down-half of a business cycle.  How you behave now determines the profit impact of the up-cycle.

Is your business model to make money by squeezing your partners when they’re down?  Or is your business model to make money by having committed partners when times are up?

You’d think that would be a no-brainer.  
 

How Business Underestimates the Power of Belief

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The other day I had a conversation with a client about how to change belief systems in an organization.

In Hellhole, a disturbing article from the March 31, 2009 issue of The New Yorker (may be accessible online only to subscribers),  Atul Gawande writes about the effects of solitary confinement on prisoners, convincingly arguing that it amounts to torture.

The story has a lot to tell us about psychology and civil rights. It feels almost like trivializing to draw conclusions from it about business, but I’ll do so anyway.   It is an object example of the power of ideology—beliefs on steroids—to overcome data. So it has lessons for changing corporate beliefs.

Gawande describes rhesus monkey experiments from the 1950s, which evoked public revulsion against animal rights abuse. The monkeys—acquired as infants—were raised like hospitalized infants of the day. They were kept in isolation to prevent infection. This meant, however, they were raised without mothers.

They ended up obliterated socially, permanently withdrawn, incapable of social interaction.

Prisoners of war put in isolation routinely describe solitary confinement as the worst form of torture. What John McCain described about his North Vietnam experience was what Terry Anderson described in Beirut: severe mental debilitation. And it is precisely what we in the US impose on prisoners—more than any other country in history, and more than our own country did only 20 years ago.

The question Gawande poses for us is:

If prolonged isolation is—as research and experience have confirmed for decades—so objectively horrifying, so intrinsically cruel, how did we end up with a prison system that may subject more of our own citizens to it than any other country in history has?

The US now keeps about 25,000 to 100,000 people in solitary confinement. Worse yet, as Gawande says, “It wasn’t always like this. The wide-scale use of isolation is, almost exclusively, a phenomenon of the past twenty years.” A federal court ruled it torture back in the 1890s.

Does it work? The overwhelming answer is, no. It doesn’t reduce violence. The UK has abandoned the approach, and now has fewer prisoners in solitary than we do in Maine alone. It is hugely expensive. Most state prison commissioners are against it. A federal study recommended against it.

Yet even John McCain won’t label it torture. Nor has Barrack Obama. Prisoner commissioners won’t speak openly against it. 

Why? Because the people—meaning the American electorate of the last several decades—don’t believe it. If a politician were to suggest isolation is torture, he or she would rapidly become an ex-politician.

Instead, the American people have come to believe that bad behavior deserves punishment. Very bad behavior deserves more punishment. And a subtle jump occurs here—from arguing that people “deserve” punishment to arguing that punishment changes people or conditions.

This is wrong, as in "incorrect." Solitary confinement doesn’t change behavior or conditions. It doesn’t cure people. It makes it all worse.

But the fact that it is wrong is a pitiful thing compared to people’s beliefs.

In today’s business, beliefs are belittled. What matters is results, behaviors, outcomes—facts. We get there by data, numbers, analytics, metrics. Great managers are data-driven.

They are not. 

Most business people are as belief-hobbled and ideologically blinkered as any other human being, which is to say, a great deal.

Worse yet, one of the strongest belief systems in business today is that centering around corporate change: that it is driven by altering stimulus and response. Not unlike monkeys, or the reward-punishment cycle in prisons. This model is true generally—often not true specifically. It matters how we handle it.

Believing that we are primarily rational creatures is one of our more irrational of our beliefs—and one of the strongest as well.

Giving Away Green and More

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In bad economic times, sellers need to pay attention to what’s important.

Their knives are dull from slashing costs. But you can’t cut your way to profits. Now is the time to hug your best customers and nurture relationships with prospects.

However, in-person meetings with sellers keep dwindling.

How can sellers make an impact with a less available audience?

How do you create value even when you’re not in front of your client?

One of the best ways is free sampling. Give something away for nothing. It feels counter-intuitive at a time of cost-cutting. And I don’t mean rebates or discounts, either. I mean free. Here’s why.

One of my clients, Perry OP, an office products and furniture dealer in Temple, Texas, “walks the talk” when it comes to their core values of service, integrity and community. Earlier this year, they gave away a $25,000 Office Makeover that garnered local radio and TV attention.

At the same time—much more quietly–they delivered a check to a battered women’s shelter. The shelter was selected by Perry employees, who volunteered to contribute through payroll deductions. This they did behind the scenes, without fanfare. They just showed up with a check and blessed the shelter.

Perry’s current initiative is free “green”. Their “Bright Ideas for Going Green This Spring” campaign unashamedly occupies half the real estate on their homepage. Perry’s genuine customer focus demonstrates to prospects and customers alike that they are less interested in selling you something than developing a relationship with you. Their customer and lead nurturing program is sure to build trust between the Perry team and prospects/customers. Their “free samples” are real, fun and unique, for example:

• Bringing emphasis and awareness on Green “days” to calendar (St. Patrick’s Day, Earth Day, first day of Spring)
• Win a free HP tote bag by taking a green quiz
• Offering “green” product alternatives
• A Blogpost : “5 Easy Ways to Add Some Green to Your Office”

What did it cost Perry to give all this away? My guess is HP will donate the branded tote bags and everything else is just time invested in electronic info in various forms.

How big a deal is this? Very. It’s easy for days to become weeks, then months, between contacts. According to a recent CSO Insights study, 80% of sellers fail to follow up after the initial contact.

Since relationships are what differentiate sellers, out-of-sight easily translates to a decrease in buyer loyalty. Therefore, nurturing relationships electronically is a great way to stay in touch between visits.

What can you do to provide free sampling to your clients?

Here’s my top 5 list:

1. Blog (500-800 words) on something of interest to your audience, yet not self-promoting.

2. Publish an electronic newsletter. For about $15 per month, Constant Contact or iContact offer a user-friendly way to develop and track email marketing efforts with your audience.

3. Offer a free one-hour “strategy session” with a prospect. This is a great way for them to “free sample” you—the idea behind Selling by Doing, not Selling by Telling.

4. Send them out a timely email with topical information. Industry trends, regulation news, competitor updates, your new offerings that will help them (note: careful not to self-promote)

5. Client Spotlight – you’re reading an example of a “client spotlight” that features something unique from one of my clients. Why not show some love to your clients by sharing the things they care about that others can potentially learn from?

We’re really just scratching the surface of ways sellers can create value for buyers.

Why B2B Salespeople Love Value Propositions – But Shouldn’t

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I wrote yesterday about how value propositions play a role in B2B sales analogous to models in economics. Useful, but not to be confused with what really happens.

In the real B2B world, buying decisions are far more emotional than salespeople—or buyers!—like to admit. And while salespeople will admit the truth of this, only the really natural salespeople actually incorporate it into their selling.

Why is that? Why are B2B salespeople afraid to bring emotional connectedness to the sales game? Even when they acknowledge its power?

Let me clarify what I’m talking about. I’m not talking about shooting the breeze, ‘how ‘bout them Bulls,’ or commenting about the kids’ pictures on the bookshelf. I’m not talking about cheap fake intimacy, scripted active listening, or golf outings.

I’m talking about genuine concern for the whole-person well-being of the buyer as individual, and the buying organization as a group. Why do most sellers find it hard to go there?

It’s partly about fear, of course—it usually is. But in this case, something else is at work. It’s an inner conflict that too many salespeople contain within themselves: a battle between the desire to help other people, and the feeling that they must betray those same people to serve the capitalist imperatives of their corporate parent.

In other words: most salespeople think they are fundamentally at war with their customers. They think that business is a zero-sum game. They feel that “good social skills” exist ultimately to con the customer. (A study once showed that insurance salespeople all felt trust was very important, but they themselves were extremely untrusting of others).

They are hardly crazy to think this way. The reigning strategic model of our time is based on Five Forces of competition, including competition with our customers and our suppliers. Salespeople, whose job it is to make nice with customers, are simply internalizing the contradiction—no surprise if they feel schizophrenic.

As a result, they are torn. They know they have powerful skills—they can seduce buyers. But they believe those skills must be deployed on behalf of their company—and therefore against their customers’ interests. Hence to sell well is to harm the people they sell to.

Psychologically, there are only three resolutions for this dilemma. Some salespeople give in to the dark side and simply accept that their role is to move the merchandise, gain share of wallet, get the sale.

Most, I suspect, just live with the contradiction and suppress thinking about it.

But the really great salespeople rise above it. They realize that the best short-term performance comes not from managing short-term, but from managing long-term.

That means relationships–not transactions. And relationships mean emotional connections.

The great salespeople ignore the sales managers’ pleas to tweak end of quarter numbers, because they are truly in it for their customers. They know not only that long-term relationships are more profitable, but also that you don’t get them by re-inventing value propositions on every sale.

You get relationships the same way you get them in the real world. You take risks, you invest, you absorb the minor irritations, and subordinate your ego to the larger good of the relationship.

The best salespeople have opted out of the “competition” game. They do not obsess about “closing,” and don’t worry too much about short-term metrics. They don’t constantly ask themselves how they’re doing, but rather whether they’ve been doing enough right for their customers and for the relationship. They know that sales are simply the fruit on the tree of relationships.

They are other-oriented, not self-oriented; more collaborative than competitive (at least, with their customers). And above all, they don’t shy away from deeply emotional selling. Because they care—big time and long term. And it pays off.

Those people don’t sell by economic value propositions. They sell by personal commitment. They have resolved the schizophrenia problem by squarely opting for the side of the relationship, and realizing there really is no contradiction between doing that and enjoying great economics.

And paradoxically, they do better as a result. Not because they try harder to do better. But because doing better is the byproduct, the side-benefit, of doing the thing that val-prop selling just doesn’t do.

Trust-based selling just works.

Random Acts of Kindness

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One cardinal blogging rule I try to live by is to say something original, something beyond “yeah, and I agree!”

But every once in a while, you can’t improve on the original.

danah boyd (that’s not a typo) is a Berkeley PhD currently working for Microsoft Research, while at Harvard’s Berkman Center for Internet and Society. She made her career (so far) by studying online social networks for teens—Napster, Friendster, Second Life, and everywhere in between.

She was speaking at the recent SXSW conference in Austin. Here, slavishly quoted, is what happened to her on the way back to Boston:

Due to poor planning, G and I were on different flights back. I was already booked on the early flight and had already been assigned my upgrade. So when we reached DFW, we raced across the airport to get him on standby. Success, but of course, he got stuck in a middle seat in coach. Standing around waiting to board, I’m feeling all mega-guilty about being in first while he’s in coach so I’m more affectionate than normal.

The plane boards and I proceed to 1A. The guy sitting in 1B looks at me and says, "Aren’t you traveling with someone?" After I nod, he says, "Why don’t I switch with him?" I explain that he’s in coach and he shakes his head to say "no problem" but I proceed to protest and point out that he’s in a center seat in coach and he protests further by saying that he flies all the time and no problem, no problem, I should sit with my partner…

By this time, first is wide-eyed. I mean, what business traveler in their right mind wants to give up a bulkhead first seat to sit in a center in coach? But before I manage to protest louder, he grabs his stuff and heads back to coach. The woman behind me and I laugh uncomfortably with big eyes, verbalizing what we were thinking: "did that really happen?"

Sure enough, he proceeds to sit in coach. The flight attendants are astonished and find him a seat in the back with more room and continue on to send back ice cream and food and whatnot. At one point, I asked one of the flight attendants how he was doing and she smiled and said that he was an extremely kind man and that the flight attendants were all loving him. That she had never in her day seen someone give up a first class seat as a random act of kindness. We were all quite floored.

The truth is that I was completely flabbergasted and without a script in which to operate. I never caught the man’s name. I couldn’t find him after we landed. I never really got to properly say thank you. But, Mr. Nice Businessman, if you’re out there, I want you to know that your random act of kindness made me a giddy happy kid; flying home next to G was really wonderful. And you made a lot of people smile. So THANK YOU!

I’ll resist my temptation to comment beyond thanks danah!

 

Trust and New Media: Request for Favorite Stories

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I’m giving a talk in a few days to a large software company about trust and new social media.  I want to use examples to demonstrate the power of social media to increase trust–and to destroy it.

I’ve got several, but would love to hear from you.  What are some examples of trust creation or destruction involving new social media that you consider to be important, archetypal, paradigmatic (or any other big impressive adjective)?

Please add your stories via comments below: it could be a really interesting list we all could benefit from.

Thank you!

Oprah and Two Trust Tests

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Trust is bustin’ out all over. Or, to be more accurate, its perceived absence is creating a lot of press.

It’s one thing to become a focus for Steven H.R. Covey Jr.—but it’s yet another level of phenomenon when Oprah puts trust on the front page of O Magazine.

Of particular note is a self-scoring “trustometer” self-assessment trust test by Martha Beck.

It’s a good quiz; go take it, you’ll learn something.

There are three kinds of trust surveys: those that measure trusting, those that measure trustworthiness, and those that measure the combination, i.e. trust. Ms. Beck’s trust test measures the first—trusting.

The thrust is: how clearly can you see things for what they are, rather than as they appear through your own obscured ego-driven lenses? Your gut feelings are probably very good—unless you get in their way.

This is a good message—the ability to intelligently take risks, to trust, is a powerful thing. In the Age of Madoff, where trusting is an unpopular concept, this is a welcome reminder of the importance of trust.

So much for trusting: how about, can we measure how much people trust us?

Yes we can. If you’ll forgive the shameless self-promotion, that’s what the Trust Quotient™, or TQ™, measures—our level of trustworthiness. (To be precise, since it’s also a self-assessment, it’s our best guess about how much others trust us).

Unlike the Beck trust test, which gives you a one-paragraph “if your score was between __ and __, you are ….”, the Trust Quotient trust test gives you several pages of analysis and recommendations about the various components of trustworthiness.

Take them both: the Beck Trust test on your ability to trust: and the TQ Trust Quotient test to assess your trustworthiness.

 

 

Show Me the Elephant

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Why is that leaders and the teams they lead often ignore their issues until they have no choice but to take action? This despite the fact that, more often than not, waiting longer limits their universe of available responses.

I work with a practice group in a professional services firm. They have regular meetings of timekeepers and staff. Lately at those meetings there was an elephant in the room – anxiety about how the economy was going to affect them. Rather than talk about what was really on their minds, they discussed administrative matters and client issues.

In a recent discussion with the practice group leader, I asked – “so what are you and your group going to to do to address the downturn?” My client hadn’t really thought about it. Like many, the leader hoped the team could ride it out. I suggested “name it and claim it." It was simple – raise the issue for the group and talk about it. Some questions to ask:

· How busy are we?
· If we keep doing things the way we are now, what will happen?
· What do we need to do differently?

In such discussions, keep nothing off the table. On the cost side, address reductions – staffing, salary and other expenses. On the revenue side, consider new business activities, think about rates and fixed fee alternatives, figure out how to get paid sooner. Address the issues that have to be addressed. Get cveryone to take ownership of the problem. Put the elephant front and center, and deal with it as a group.

What happened? People got to share their anxieties in an appropriate way, own the problem and develop a solution together. They appreciated the opportunity to think out loud with each other.

Does it really matter why we procrastinate on such issues? Fear is probably at the heart of it. But the origin doesn’t necessarily alter the action. What needs to be done is to name it, so we can claim it.

Do you have an elephant in the room that needs to be called out?

Does Closing Kill Sales?

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Jill Konrath has a great little podcast titled Closing Can Kill Sales, at salesopedia.com.  

Right there, you may be tempted to say, ‘oh come on, that’s old hat.  Nobody does that anymore; it’s totally schlocky and manipulative and in (B2B, consulting, telecom—pick your choice) no one does that anymore.’

Well, just last week I came across a sophisticated B2B software/communications company, and guess what they wanted to know: how to close more sales.

They may not be thinking old-school “assumptive closes, constant closing,” or “you want more fries with that?”  But they are still focused, as a critical operational goal, on how to “close more sales.”  Plus ça change…

Jill is refreshingly direct.  Pure Midwest, corn-fed charm, you betcha; and she’s the real deal in person.  She came up the classic way, selling Xerox copiers.  She cut her teeth on the “ABC” rule—Always Be Closing.  But, like Huck Finn, she always felt badly about not being able to do it.

About closing, she is direct: “I hate it.  It always felt like a violation of the way people normally behave.  It’s about manipulative strategies to get people to say yes, and I just hated it.”

She sold a lot of copiers, though.  “One thing Xerox did teach us was to ask a lot of questions, and I was good at that.  I was really trying to find out the business case, and I didn’t know if it was there or not.  So I kept asking so I could find out, for myself.”

What does Jill say to people about closing?  “I say to them, never close; never be closing.  But always advance the sales process.  They need to know the next step, whatever it is, that’s true.  And eventually, you’ll hear a magic word—they start to say ‘we.’ Then, after a while, it’s ‘how do we buy this?”

There are others—Phil McGee is one, I hope we hear from him—who I think might say that’s exactly what ‘closing’ is supposed to mean—not manipulation, just relentlessly exploring questions. 

But Jill is no dummy either, and she’s quite insistent about ‘never close.’  Why the passion?

I think it’s because the word ‘closing’ is encrusted with nearly a century of subtext of control and manipulation.  It is too baked in for the niceties of alternate definitions to have an effect.

Take my B2B software example.  They don’t want old-school scripted trick lines; they think they’re too sophisticated for that.  But they’re kidding themselves.  Just as much as an old door-to-door vacuum cleaner salesman, they’re looking for a way to get a customer to do what they want them to do—namely buy their product.  They just want it done in a hip, 2009, Sales 2.0, CRM, modern kind of way.

Control and manipulation by any other name is still the same.

The real meaning of Jill’s dictum is deeper, I think.  It means, stop, stop stop trying to force your will on others.  Allow yourself to believe that if you really treat customers well and help them to make the best decision, you’ll get your fair share of that opportunity—and way, way more than that in the opportunities that follow.

For most of us, closing does kill sales.  Paradoxically the best way to sell is to Stop Trying to Sell, and Stop Trying to Close.  Just help your customer.     

Sacred Cows, or Goals Gone Wild

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Personally, I love seeing sacred cows sacrificed. Maybe it’s that contrarian thinking helps learning. Maybe skepticism came with studying philosophy and doing strategy consulting.

Maybe I’m just a little bent. Whatever.

Let’s take goal-setting. That’s about as big a sacred cow as you get in business. Googling “goal setting” gets you 5.6 million hits.

Jack Welch praises it. Scottie Hamilton and Michael Phelps get cited as examples of it. Martial artists swear by it. Management by objectives is built around it.

I’m not sure there’s any more common theme in self-help and business success books. It’s just so, like, obvious. Goal-setting may be the secret behind the success of Motherhood and Apple Pie. I’m pretty sure it explains the Boy Scouts.

So–what an unexpected delight to find a balloon-pricking, mellow-harshing, skeptical piece of inquiry in, of all places, Harvard Business School.  (Actually, it’s in the HBS Working Knowledge series, which does a fine job of exploring quirky ideas. They’re just not usually so big as this one).  A little bonus: the smirky title, "Goals Gone Wild: the Systematic Side Effects of Over-prescribing Goals Setting."

The paper is summarized here and co-author Max Bazerman is interviewed here:

From the executive summary:

• The harmful side effects of goal setting are far more serious and systematic than prior work has acknowledged.

• Goal setting harms organizations in systematic and predictable ways.

• The use of goal setting can degrade employee performance, shift focus away from important but non-specified goals, harm interpersonal relationships, corrode organizational culture, and motivate risky and unethical behaviors.

• In many situations, the damaging effects of goal setting outweigh its benefits.

But surely, you say, this is a case of excess, of bad apples. Goals are not the problem, people who use goals badly are the problem. (You remember–guns don’t kill people, people kill people).

No, says Bazerman. When the adoption of goals so predictably and systematically produces negative results, it is fair to say it is goals themselves that are the problem. (Are you listening, NRA?)

Well, you might say, if goal-setting is so dangerous, how’d we get to use it so much and so deeply?

Says Bazerman:

It is easy to implement. It is easy to measure. It is easy to document successes. And in laboratory experiments, it has been shown to be extremely successful at improving the measured behavior. [we] simply argue that goals have gone wild in terms of their impact on other unmeasured outcomes. When we factor in the consistent findings that stretch and specific goals both narrow focus on a limited set of behaviors while increasing risk-taking and unethical behavior, their simple implementation can become a vice.

Bazerman and his co-authors are not saying goal-setting is bad per se; they’re not raving nut-jobs. They’re just asking a question that doesn’t get asked nearly often enough.

They have taken a sober, holistic look at one of the most pervasive, unchallenged, unexamined mantras of business—and brought some welcome fresh air to the issue.

Bravo.