Articles

Management Support

If you’re part of an organization and the boss doesn’t advance your ideas up the management ladder, you might be wondering how one can change that.
You can find people complaining about this everywhere in organizations, in project teams, frontline departments and every group that needs someone from upper management to approve their ideas. All in all, almost everyone has this problem.

People are frustrated when they think that they’re not listened to. This can be an issue because plenty of people think that respect is the same with listening. There is a good chance that the listening skill is good enough. The problem is usually that they don’t want to implement that idea or they don’t agree with it.
Below you can find some suggestions in case you want to get an improved response to the proposals you make.

Find out what the needs are. The proposal might be great, but the management might not be interested to improve that area of the company. Even if the problem that you solved is important, the bosses might not be aware of that, and their focus might be another one. Wondering how can you use the creative energy to solve the problems that actually interest the company leaders?

Make a business case. You probably know that if you want to get someone’s attention to your ideas, making a business case gives you a much better chance at success. It’s not always something easy to do though. For example, if your idea has a $20,000 price tag attached to it, even if the employee satisfaction is dramatically improved, you can’t be sure that they will accept it. What a manager really wants to know is how much money will the company make if they invest those $20,000. Learn to put a price on employee satisfaction and the increase in profits that it can bring. Don’t invent stuff, make sure it’s realistic.

Why Creating a Dashboard is a Must

I got a partner, and her name is Katri. She works in a big corporation, as a sales analyst. She compiles the sales data and makes it into a format that can be understood by the decision makers at the highest level. This way, they can pick the best tactics and strategy for the company.

At one point, I look over to her computer and she was making a spreadsheet that was similar to a car’s dashboard. It even had dials!
Asking how the thing worked, she explained that in a car you wouldn’t do much if you didn’t have a dashboard. You wouldn’t have the speed, fuel consumption and many other bits of information.

Thinking about this, I realized that a lot of small companies don’t have a dashboard of their own.

Just because you have some accounts, it doesn’t mean that you have a dashboard. It resembles more an annual MOT. The part that is important is how you use that information to create great tactical and strategic decisions, which help your company grow and avoid problems that are bigger.

Wondering how such a dashboard should look like? Here are some things that a lot of people don’t know about their business, and a dashboard can fix: how much each client yields, net and gross profit for each client, the size of the average size, the client acquisition cost, the income that is recurring per client and the lifetime client value.

Think about all the possibilities for your business if you had this information at your finger tips. You can get rid of work that isn’t profitable, so you can get as much money as possible from your business.

You might not realize it, but the importance of such a dashboard can be huge and the information it provides you can be crucial for you business during times of crisis.

Motivation in Management

What motivation does for management can be spectacular sometimes – it helps your employees reach their goals and objectives. You can usually find two types of employees in an organization: one of them has some internal self motivation, while the other one will only need motivation from time to time. Motivation can be temporary and external. If you’re dealing with the second employee type, emotions are what you’re dealing with, not logic.

If you want the output from your organization to be high, you should know that motivation is very important for your management. If an individual is motivated in a good way, you can feel the effects fast, even if the stimulus is external and they’re in a professional environment. It’s like when you go to a game and the crowd cheers the team that is playing.

Employees are the biggest resource that an organization can have. Even if you got the best equipment that money can buy, if you don’t have the people to operate it, your business doesn’t exist. Your employees should be taken care of like they are highly priced equipment. Just like you maintain your equipment, motivate your employees, to make sure they are prepared to work and they do it at maximum productivity. Motivation can be a simple pat on a manager’s back, but the best type of motivation is the timely one.

Some will want motivation to be goal oriented, so if reaching a target comes with a reward, the employees will be more performance geared. You can see benefits from this immediately, but the problem signaled by experts is that this type of motivation can make employees more competitive among each other, which can damage your organization’s environment of work. Basically, if we’re talking about motivation management, you should make sure that it brings the best rewards for the investment.

Failure and Success in Business

A few years back, when I started my first company, I really missed a real business plan. Actually, I didn’t even know what that was. Trying to look back at that time, it’s actually kind of scary thinking about it and that decision wasn’t very smart. Ask any business expert out there and he will tell you that you should always have a business plan for your company and if you don’t have it, the chances of success are limited. Even though most startups are similar, in the beginning and failing department they can be different. You can define an entrepreneur as someone that starts and works on a business. What I use as a definition is “one that starts and works on a business despite the problems”. Statistically, 19 out of 20 new businesses will fail in the first 2 years of their existence.

What successful companies have in common is that they want to succeed even though there are many obstacles in their path. Speaking from my own experience, there were plenty of days when I was ready to quit. But, I continued despite all the problems. The key here is not as much your desire to succeed, but your refusal to fail. Failure shouldn’t be an option. When you make a decision, the process lets you choose either pain or pleasure. Your decision is based on what pleasure you get from the result, or on avoiding the pain. For me, failure has always been my pain. That’s why in business and life I will do everything possible to avoid failure.

You should never start a company dreaming that you will be in a sports car or on a yacht someday. You also shouldn’t be influenced by failure. Consider your success as being only based on your own performance.

Creating Growth Opportunities

You know, nobody enjoys to think that they might fail. A leader though, should not even think about it. Still, in the real world, you should know that if you want to grow as an individual, failure is something that you go through and learn from. If failure is followed by insight and thought, you can grow and learn from it.

When there is recession, in times when businesses are closing and a lot of people lose their jobs, you should find ways that are less traditional, which allow you to perform better, both as an organization and as an individual. With the economy being as it is right now, you have a great opportunity to think over and re-evaluate yourself as an organization and an individual.

You can take NASA as an example, and their Sputnik experience. Once Sputnik was launched by the Soviets, NASA really kicked it off and scrambled to get back on track. The first rockets they launched without people crashed and burned. Still, they continued to work on it and eventually they were the first to step foot on the moon.

If you want to make sure you’ll regroup once you failed:

• Find perspective. Find out the failures of the past, like the early blunders that NASA made, or Edison’s and Bell’s disappointments. Your workers should be reminded that on the road towards success you will find failure.
• Examine the lessons. What I like about failure is the fact that it teaches you lessons. Remind yourself in the future, about the lessons that you learned.
• You should recognize the contributions of others. A lot of your workers have put as much hard work in that failure as you did. Their efforts should be praised and recognized.
Think about the successes of the future, learn the lessons of your failures and keep working.

Focus on franchise value

Last fall, the Texas Bankers Association adopted the mission statement “Mapping the future for the financial services industry.” The TBA Board of Directors and staff, led by President Rick Smith, are poised and ready to take on the goals and objectives that will help us map the future of the industry.

But what can we do as bankers to help map the future for the industry? We need to focus on franchise value, because the value of our banking franchise is extremely important to our stockholders, communities and customers, not to mention our personal retirement plans, salaries and net worth. When competition, regulation and legislation have a negative effect on our franchise values we need to be prepared to act. I heard a statement the other day that said, “A person doesn’t really get involved until an issue gets into his or her pocketbook.” The question is, how deep do these issues have to get into a banker’s pocketbook before he gets involved?

Unfortunately, we see many of our fellow bankers sitting on the sidelines, watching those of us who make the investment of time and money carry the load. It is time that we strongly encourage those on the sidelines to get involved in TBA. I’ve made this one of my top goals as your chairman.

The importance of a larger membership is not just increased dues, but more importantly, a stronger voice to influence these issues that affect our franchise value. Our goal at TBA is to expand and strengthen member relations as well as broaden and deepen volunteer involvement and leadership. In that light, we are looking forward to reinstating a leadership program for young bankers, which will broaden the volunteer involvement and develop leadership for the future.

How would the passage of a state CRA bill, crop duster lien bill or additional burdens of privacy, money laundering and predatory lending bills have on your franchise value? These are issues that John Heasley and Ann Graham have battled or are presently battling in this year’s legislative sessions. They have found that the concerted voice of bankers does make a difference.

Coordinated calls from many of you to the Senate Business and Commerce Committee kept the state’s CRA bill from coming out of committee, and coordinated calls to state representatives defeated the Crop Duster Lien Bill. Our voice does make a difference, and the more bankers involved, the stronger the voice. That is why the implementation of the Team 21 Program will be so important.

Another very effective tool is BankPac. The more people we have investing in BankPac, the stronger voice we will have. Last year, we raised $180,000 in BankPac and our goal this year is $215,000. Needless to say, I am a little embarrassed to compare that to the $800,000 that the realtors raised in the state of Texas. There is no question why we have trouble getting additional home equity legislation passed, when we’re up against greater involvement and larger dollars.

The goal of having every CEO write at least a $100 check was not accomplished last year, but I hope that you will help us strongly encourage those who don’t invest to invest so that we may exceed our goal and continue to protect and enhance franchise values.
It’s time that those bankers sitting on the sidelines get into the game. Needless to say, with the expanded involvement and investment we have a great future of opportunities and rewards because TBA will be there helping us map the future for the financial services industry.

Franchise Players

For sales growth and store growth, Starbucks and 7-Eleven are two of R the biggest brands in retail, both at home and around the globe. Their franchise strategies differ, but they have one major similarity: They’re expanding.

The strategy of turning over the reins of the retail brand to an outside investor in the form of a franchise opportunity isn’t for every business model. But according to one franchise advisor, it’s a growth strategy that should be considered by more companies-especially those faced with the difficult proposition of closing stores. ”

“Why don’t more people franchise? A lot of folks think of franchising as fast food,” said Michael Seid, managing director of Michael H. Seid & Associates, a franchisor advisory service based in West Hartford, Conn. “And they just don’t understand it. It’s as simple as that.”

Starbucks and 7-Eleven have been following and adjusting their franchise strategies for years.

In North America, the growth of Starbucks’ company-operated locations has been the stuff of legends in real estate circles. But its licensed locations have grown even faster. In the last three fiscal years, the percentage of franchised store locations has risen steadily from 809 in 2001 to 1,475 in 2003. As a percentage of total stores, franchises accounted for 21.4% in 2001. The figure grew to 26.5% in 2003.

Dallas-based convenience store giant 7-Eleven has a much higher franchi se-to-corporate ratio. At the end of last year, independent franchisees operated 3,338 7-Eleven stores in the United States. That’s more than 60% of its U.S. store base.

While the mix has remained steady, a 7-Eleven spokesman said the company has expanded the opportunities for franchising domestically. The company also began sharing more gross profits with franchisees, beginning this year. In the past, franchisees generally have received 48% of the store’s gross profit. The new agreement splits the pot 50-50. In the 7-Eleven franchise model, the company owns or leases the stores and equipment used by the franchisees.

Seid, who co-authored “Franchising for Dummies” with Wendy’s founder Dave Thomas, said there’s a larger trend toward an increase in the mix of company-owned vs. franchise stores in the retail industry. he said he’s aware of a few “household names” that are planning franchise expansions in the near future. he declined to identify them, but said they include homefurnishings, automotive-aftermarket and Internet-related store franchises.

There are as many corporate franchise strategies as there are franchises. Fast growth, low risk and shared expenses provide the basic attractions. But Seid would like to add to that list improved control, contrary to the perception of the franchise model. While a company-owned store manager can, and often does, quit, a franchise location owner “is on the hook” and bound by strict contracts to live up to the image of the brand, he said. The same dynamic helps explain why franchise stores typically outperform company stores, Seid claimed.

In fact, Seid promotes the idea that companies faced with closing stores have little to lose by considering finding franchisees for the stores.

“There is little reason not to look at it,” Seid said. “It’s a strategy that can cut costs while maintaining the channel of distribution and the customer base. Because the customers don’t know the difference between a franchise store and a company-owned store.”

He pointed to Gateway’s recent decision to close its 188 stores as a possible example of a lost opportunity for franchising. Gateway did not return calls seeking comment on whether it considered the option.

The concept of moving from company-owned store to franchise store has precedent. In fact, 7-Eleven has converted its company-operated stores in southern Maryland to franchise stores within the last two years. Each company store was offered as a franchise opportunity first to the store managers, then to the public. “The interest was quite high, and these stores are operating as franchised stores now,” said spokeswoman Margaret Chabris.

Seid believes the franchise strategy could have been used by many retailers in the past, as opposed to merely closing stores and losing customers. There’s no reason why a franchise strategy can’t work for a big box, he suggested.
“Could you have saved all those Kmart locations? I don’t know. But typically, the franchisee will outperform a company store, because the franchisee is on the hook.”

More and more people pick franchise option

Phil Gates knew it was time to leave corporate America.

He was working in sales, and although he was trained as an engineer, that wasn’t his passion either.

“In high school, I wanted to be an architect,” Gates said. “But I kept hearing about people having a tough time finding a job in that field, so I went into engineering.”

He said he thought about changing his major to landscape architecture halfway through, but decided to stick it out with engineering.

“I figured it was close enough,” he said. “I was OK with trying to fit a square peg in a round hole.”

But last winter, Gates knew enough was enough. He wanted to be his own boss and do something that made him happy. After months of research, he became interested in opening a franchised business, specifically Outdoor Lighting Perspectives, an architectural and landscape lighting company.

“Franchising appealed to me because I’m not smart enough to start something completely on my own,” Gates said.” Or, as some people say, I’m not dumb enough to start something on my own.”

Last June, Phil and his wife, Gina, opened Outdoor Lighting Perspectives of Iowa, working out of a home office. Gina, who previously worked for Principal Financial Group Inc. in human resources, manages the office and raises the couple’s three boys, ages 6, 4 and 2.

“It was a risk, but my wife and I thought the bigger risk was staying in an office where we weren’t happy,” Gates said.

Interest in franchising is growing, said Joe Cooney, president and owner of Frannet of the Heartland, a franchise coaching organization. He said many more people are investigating the possibility of owning a franchise than ever before.

According to the International Franchisors Association, if sales by U.S. franchise businesses were translated into a gross domestic product, they would qualify as the seventh-largest economy in the world. In Iowa, there are 9,407 franchises currently operating, employing nearly 120,000 people, according to a study by PricewaterhouseCoopers. In the 3rd Congressional District, which includes Des Moines, there are 2,037 franchises employing more than 28,130 people, the study said.

“Most people have a misconception about franchising, that it is all restaurants and retail, but that just isn’t true,” Cooney said. “The service industry is the fastestgrowing segment of the business, and for a lot of people, it can be a good fit.”

A franchise agreement conveys the right to sell a product or service. When purchasing a franchise a person is paying for the right to market an already established product or service owned by somebody else (the franchisor). Under a franchise agreement, the franchisee is expected to market the product or service successfully.

This route to business ownership has some distinct advantages. Risk is minimized, since a well-established franchise has a proven business method with established products or services. Franchisors like McDonald’s Corp. already have a well-known name that will bring customers to the business and provide a competitive advantage for the franchisee.

Many franchisors also provide extensive assistance in terms of marketing, advertising, even managerial support. Often, management training and followup assistance are provided. In many instances, a franchisee can obtain inventory items, supplies and equipment at a reduced cost due to the purchasing power of the franchisor. Some franchisors also assist franchisees in securing financing, while some provide the funding themselves. Franchisees find it easier to persuade banks and other lenders to provide loans because franchises are less risky than businesses built from scratch. Support can also be given in finding the right location, while some franchisors provide the layout, display, facilities and business techniques that have already proven successful in previous operations.

“You definitely gain in the marketplace by attaching your business to an established name,” Cooney said. “It gives you automatic credibility.”

That was one of the factors that motivated Wendy Christman to get involved with PostNet, a franchisor focusing on digital copy and document services, private mailboxes and domestic and international shipping. She started her business, located on Westown Parkway in West Des Moines, in 1995.

“You’re buying a brand and a market plan that has been proven to work,” she said. “I’m in my 11th year, and I’m still here.”

Christman said one of the best benefits to franchise ownership for her is the network of other PostNet franchises she has access to.

“Whenever I have a question, I can turn to them,” she said. “Who better to help me out than someone who has already been through the same thing?”

But franchising isn’t always a golden ticket. Robert Purvin is the founder and CEO of the American Association of Franchisees & Dealers, the oldest and largest organization representing the interests of people who own franchised businesses. He is also the author of “The Franchise Fraud: How to Protect Yourself Before and After You Invest,” published in 1994, and has practiced franchise law for 30 years. He said the myth that franchising is always safe can be very dangerous. “The typical franchise in today’s marketplace is an indentured servitude, by contract, with provisions that make it hard for the franchisee to continue in business following the franchise relationship,” Purvin said. “The advantages and disadvantages depend on the quality of the franchise system you choose. Franchising can be the answer to your dreams or your worst nightmare.”

Purvin said franchising isn’t so much business ownership as a license to operate someone else’s business for a fee, or “buying a job.” Franchisees are not entrepreneurs, he said, because they are obliged to operate according to the franchisor’s business model and operations manual.

“Whether the deal is good or bad depends on the established success of the franchise system,” Purvin said. “Buying a franchise that is a proven success can be a great career and investment, but many franchises are unproven and perhaps troubled.” In addition to the upfront fees, which could total into the hundreds of thousands of dollars for some franchises, royalty fees must be paid on a monthly basis. The royalty fees are based on a certain percentage of the franchisee’s income or sales, varying between 1 and 20 percent, and have to be paid even if the business is not profitable.

Cooney said matching a buyer with the right franchise is the most crucial step to success. That is why his company gives each potential franchisee who comes to it for guidance a personality test to see what type of business would best work for him or her.

“We help build a business model, and look at things that may affect the type of business they may be interested in, such as lifestyle, amount of work, income,” he said. “That will usually eliminate 90 percent of the options right there, then we simply focus on what fits them.”

Christman said for people who like to do things their way, franchising probably isn’t a good fit, because you have to follow the plan laid out by the company, as well as offer the services it wants you to offer. But, she said she would never have the time or the ability to keep up with national trends, which is something PostNet does for her as part of the franchise agreement.

“They keep an eye on the big picture, and keep me informed about what I need to do to stay competitive,” she said.

Gates agrees, saying franchising has given him the opportunity to own his own business, something he never dreamed he could do.

“I like being in control of my own destiny,” he said. “A lot of people told me that once you get into business for yourself, you will find more opportunity than you ever dreamed of. I see that now every day.”

Cooney said one of the biggest misconceptions about franchising is that if you like a product, you would be good at selling it.

“That just simply isn’t true, and more times than not, we help people realize that and try to point them in a more positive direction,” he said.

With many franchise agreements involving more than $150,000 in initial costs, Cooney said using services like his, which are free for franchisees, and consulting experienced franchise attorneys are important steps when considering operating a franchise.
“It’s a change of lifestyle and a significant investment, so you don’t want to do this wrong,” he said.

Wholesale business unclear

A lack of transparency in the accounts of wholesale businesses run as subsidiaries of European PTTs does not increase investor appetite for the segment. That was the view expressed by Bridget Cosgrave, the president of Belgacom Carrier and Wholesale, speaking at last month’s Carriers World conference in London. “We want ‘full cost’ financial transparency and that should results in a more rational segment structure,” she said. She believes it’s only a matter of time before financial analysts start knocking on doors demanding the sort of disclosure that pin-points exactly who is losing what where. And as long as investors can’t be sure of what they are buying - apart from a stake in a very tough market - they are likely to stay away.

“I think PTTs are still going through the process of truly establishing what the costs are in their infrastructure businesses,” agreed Tony Lavender, director of telecom research at Ovum. “They run a multiplicity of platforms and still haven’t bitten as much as they could in terms of rationalisation. I wouldn’t be surprised if costs were higher than pricing would suggest.”

TeliaSonera, the result of the merger between the Norwegian and Finnish incumbents, has had transparency in its wholesale business ‘for a very long time’, said Eva Lindqvist, president of TeliaSonera International Carrier. She added that she saw question marks over any consolidation of PTT carrier interests in Europe. One would be financial viability of such a move. “Even if you got all the networks for free, it would still cost a lot,” she said. However, she nonetheless believes that Europe can support a maximum of three wholesale players - of which TeliaSonera would aim to be one.

The speakers at Carriers World nevertheless agreed on one thing: in a market where prices are continuing to shrink, a wholesale carrier needs scale. How to get that scale was more of an issue.

“Our search to increase the scale of opportunities is the most challenging aspect of strategy,” said Cosgrave. Her professed solution to this is for Belgacom to become the focus of consolidation in the market - though not in the M&A sense. “Be a hero, go and tell your CEO that you want to shut your business down and outsource it to me,” she said.

Lindqvist’s remedy for the wholesale industry’s pricing ills would be to make end-users pay for what they actually consume. “One of the key problems is that broadband penetration is moving very fast, but pricing to the end-user is often a flat fee for almost unlimited bandwidth,” says Lindqvist. She believes that wholesale carriers should co-operate more and she wants stricter peering policies. “To have a stable industry, you have to have enough money in each of the value-creating steps to ensure the longer-term,” argued Lindqvist. “I don’t see why regulators would question steps to ensure that.”

“Wholesale is a profitable business,” said Dr Juergen Graf, senior executive vice president of ICSS at T-Systems, a subsidiary of the German incumbent, Deutsche Telekom, though he adds that the company does not disclose the return on capital that its carrier business generates. Graf agrees that scale is key, though he does not necessarily expect to see consolidation in the market. “Carriers need to co-operate to offer better prices,” says Graf. However, he does admit that DT views being the incumbent as an advantage in that it offers the cushion of a fairly reliable revenue stream. “One of the main goods for sale is traffic generated in Germany and traffic terminated there,” he said.

Lavender believes that “people do need to raise their heads above the parapet and start talking about pricing”. However, he is not sure that they will. “That would require consolidation,” he said. “And where is the rationale for buying? I think consolidation will happen more by bringing specific value chains together, but even then you get arguments about ‘why would telcos want to be content aggregators?’” Though the market is ’still as tough as it has been for the past three years’, Lavender does think that a ‘properly dimensioned’ industry can emerge - over time.

Starting a Not-for-Profit Organization

Not-for-profit organizations (NPO) generally are exempt from paying taxes, including income, transfer and sales taxes. Most of us think of NPOs as charities, universities, churches, as well as professional and technical societies such as ASHRAE. While such large organizations can contribute greatly to the welfare of their members and society, a need also exists for smaller NPOs.

Unlike for-profit organizations (FPO) there is no individual ownership of stock in NPOs; NPOs exist as public, non-stock entities. When revenue exceeds expense the difference must be reinvested in the organization for growth or improvements consistent with the NPO’s mission: income cannot be disbursed to members of the organization.

The first step in starting an NPO is to define its purpose or mission. The Internal Revenue Service has several classifications. Under Internal Revenue Code § 501(c)(3), an organization can qualify as an NPO by engaging in research, education and training, or public outreach. A section 501(c)(6) NPO qualifies by promoting industry or professional organizations, and may have as its primary activity lobbying or the influencing of legislation. This article focuses on 501(c)(3) NPOs.

To qualify as a 501(c)(3), the entity must demonstrate that its research, training or outreach activities will be conducted to benefit its members, government agencies, other NPOs, or the public in general. A major opportunity for small NPOs is to focus on special areas of expertise that provide these benefits, often in synergy rather than competition with a large NPO. For example, the Building Diagnostics Research Institute has worked with ASHRAE, the Air-Conditioning Contractors of America (ACCA), and the National Energy Management Institute (NEMT) in its mission to disseminate information to government agencies, the industry, and the general public on criteria and procedures to ensure improved building performance during normal conditions and extraordinary incidents.

The second step in forming any NPO is to select directors. These individuals will be responsible and accountable under fiduciary standards established by the State in which the organization is registered. Directors are also responsible for making sure that the NPO’s activities comply with its stated purpose.

Directors serve without salaries and must be independent of situations that could cause a conflict of interest. The primary role of the directors is to oversee the technical and fiscal operations of the organization. In starting an NPO, the initial directors will be listed in the articles of incorporation, and should have assisted in the formulation of the NPO’s mission.

The third, and probably most difficult step in forming an NPO is to develop a sustainable funding program. A substantial percentage (e.g., 70% to 80%) of funds entering the NPO’s coffers must come from grants, research contracts, tuition and/or donations. A small percentage may come from consulting, so long as the consulting is compatible with the mission of the organization. One of the greatest pitfalls in starting an NPO is to be overoptimistic that sufficient funds will be available in a timely manner.

Once the NPO has received approval of its articles of incorporation from the State in which it is registered, a set of bylaws must be developed and adopted by the directors. After the bylaws have been adopted, the NPO must apply for tax-exempt status with the IRS, which includes submission of the state-approved articles of incorporation and bylaws. IRS issuance of 501(c)(3) status typically takes six to eight months. During that time, the NPO can function according to its articles of incorporation, which should stipulate that the requirements of IRS § 501(c)(3) will be met.
In conclusion, NPOs and FPOs have similar opportunities and pitfalls. The selection of the business model and the success of the organization really depends on the purpose and mission that is agreed upon by those who are willing and committed to start the organization, the intended recipients of the products and services, the State in which the organization will be incorporated, and the IRS.

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