It’s always fun to watch new managers and small businesses discover a business trend. As long as you can watch from the outside.

It’s popularity peaked a few years back, but the E-Myth series is popping up in my circles again. In the E-Myth books, Michael Gerber argues that new businesses fail because people who are good at a thing–painting, writing, plumbing, whatever–start a business and figure they can be successful because they’re good at the thing they do. He says these folks need to be good at business if they want to succeed. I won’t dispute that point, but he goes on to argue (and I’m going to over-simplify here) the way to do that is to set up processes and systematized workflows to run the business in such a way that the entrepreneur is freed of responsibility for daily operations.

Which I guess makes sense if you’re running a factory.

Process is Good…

I’m not contra-process. I’m a process guy. Dismantling and rebuilding a proposed policy or process so I can create an exhaustively thorough and detailed flowchart is something I often bemoan having a natural affinity and mental compulsion for doing. Processes make a lot of things easier, but like love, processes cuts both ways.

…But Not Great

If you want to experience first hand why this matters, go to your local downtown and find a locally owned, non-franchise business. Spend 30 minutes asking paying customers why they chose the small business over the chain stores.

They sure as hell won’t say process.

They’ll probably say something like customer service, small town feel, or unique offerings. You know, the things small businesses can do that most big companies can’t.

Processes Work…

Now perform the same experiment at McDonalds and you’ll get process-centric answers: convenience, low cost, speed. You know, the things that make big companies big.

…But Will They Work For You?

If your business is built of processes, you can hire unskilled workers, pay lower wages, have more control and get reliable, measurable output. But you’ll be hiring robots, not people.

If you want people capable of using their judgement, creativity and innovative thinking, then you need to work on your culture and values. Scrap the processes.

Small businesses have the most to gain and the most to lose in the marketplace of talent because one employee makes up a much larger portion of the team. Without the infrastructure to buffer the failings of an underachiever, small businesses can live or die on just a few hires.

So why do managers in small businesses give so little thought to how they reward (and thereby attract) talent? My experience is that these managers think they lack the resources for competitive compensation, but what they really lack is imagination.

Talented employees don’t need a complicated “Compensation and Incentivisation Program.” They need rewards. Done properly, this gives you the tools to attract great talent and to develop your employees. Fortunately for managers in small businesses, one only needs a few kinds of tools:

Salary, Wages, Benefits

This is what you give employees for showing up on time, working as part of the team and not screwing anything up terribly. Sadly, this is the beginning and end of most “Compensation and Incentivisation” packages. Since it’s the baseline, it only encourages baseline behavior.

Performance-based Rewards

Most fast-talking, book selling “management gurus” like to call this “incentivizing” employees. I chose not to call it that because the ideas and culture that have grown up around the term are limiting. Performance-based rewards are useful for any behavior you can measure and track responsibly. Sales Commissions are a good example, but unfortunately most businesses stop there.

Example

A common performance-based metric in service and repair businesses is turnaround or time-to-completion. The faster you repair a customer’s car, computer, or appliance the happier the customer is. In scope-limited, repetitive tasks, employees can be rewarded for getting faster. In variable-scope tasks employees can be rewarded for the degree to which they surpass a productivity baseline.

Warning

Performance-based rewards can be powerful, but consider what you measure very carefully because quantitative metrics will always sacrifice a qualitative human factor. You need to balance this with other rewards or corporate culture.

Warning Example

Because shorter support calls mean shorter wait times, nearly every call center on earth tracks and rewards call times (that is to say, they fire reps with long times). But fast Reps are likely to be terse to the point of curtness and focused on closing the call quickly, not on empathy or customer experience.

Targeted Rewards

Encourage positive behaviors that cannot be easily or responsibly measured. That may seem challenging, but it is by far the easiest reward to implement. Pick out a handful of positive behaviors or positive outcomes and publicly share competitions or rewards for them. You won’t be able to find these behaviors in your timekeeping or business process systems, you have to actually work with your employees and customers to find them. Anything that you’ve had to repeat in staff meetings is a candidate for a targeted reward.

Example

Errors in pricing and informational signage are embarrassing and potentially costly for a retail business. Reward employees for pointing out errors, discrepancies, or out-of-date information. Don’t give away the farm, but make sure your rewards scale with the value of the behavior.

Spontaneous Rewards

Encourage positive behaviors or outcomes that you have not stated–or even decided upon–in advance. This requires constant vigilance on the part of managers, but can pay off in a big way. I’ve noticed that spontaneous rewards are most effective when they’re frequent, small, and non-monetary: two movie tickets are often more appreciated than a $20 bill.

Spontaneous rewards also have a valuable ripple effect: they encourage employees to look for and practice new types of behaviors–often subconsciously–in hopes of earning a reward. To capitalize on this you must recognize behavior regularly, or you’ll lose momentum and instead encourage dissatisfaction among employees: they will think, and rightly so, that your rewards were all lip service.

Example

An employee stops in the parking lot to pick up trash in front of your building on the way in. It demonstrates that the employee cares about the business: that it is clean and well-perceived. A targeted reward for this would be unmanageable or dangerous (encouraging coordinated littering and cleaning) but the positive impact on your culture and business as a whole is worth recognizing and the attitude behind it worth cultivating.

Here are a handful of questions that just about any business could answer:

1. How did you choose your location?
2. How do you set your pricing?
3. What is your marketing strategy?
4. How do you set staffing levels?
5. How do you set your compensation packages?
6. How are you different from your competition?
7. How did you settle on your technology infrastructure?

Here is one question very few businesses can answer:

1. How does your corporate culture contribute to your profitability?

Actually, that was a little disingenuous. A good many businesses can answer that question, but the answer is “It doesn’t.” Not because culture and profitability are unrelated, but because their relationship has been given no thought.

If you could make employees more productive by removing workplace conflict and confusion about expectations, would you do it? If your employees looked forward to Monday morning, would they hit the ground running and work harder? If employees enjoyed their jobs, would customer service improve? If your employees were excited about your direction as a company, would your customers notice?

If you employ human beings, then your corporate culture is important. It’s also hard. Harder than any of the items on the list above because people are much more complicated than a technology infrastructure. But if you don’t leave your location, pricing, or marketing to chance, why would you leave your culture to chance?

The Mission-less Statement or Mission-less Business?

I’ve mentioned worthless mission statements in the past, but this week I had the extreme misfortune of encountering a wholly unremarkable business with the following “mission statement:”

Our Foremost Mission is to Empower our Customers with Solutions through Trust and Knowledge and Provide Experience above and Beyond Expectations.

Capitalization aside, is it any wonder that there was nothing about this company worth remembering? Is this a product company or service company? Business, Education, Government or Consumer focused? In what industry?

This mission-less statement feels like the kind of thing a business should say, it contains all appropriate buzzwords, and is properly paced. But it says nothing; it’s worse than nothing. It obscures all meaning, feigning communication with meaningless business-speak.

There is a chicken and egg question here: do wholly unremarkable businesses write wholly unremarkable mission statements or do wholly unremarkable mission statements create wholly unremarkable businesses?

The answer, of course, is “Yes.” Or, to be for a moment less cynical, “They correlate, of course.” If a business doesn’t have a succinct purpose is it any wonder that it grows amorphous, fumbling in the dark?

I’ve been surprised to find myself thinking so much about business lately.

Having so many irons in the fire has given me the opportunity not only to reflect on their similarities and differences, but also reflect on the work I have done in the past. Since I have been in leadership since before leaving university, there is lots to think about.

So I have developed (or under-developed?) a number of high-minded theories about leadership, management, corporate culture, customer service and the like.

Lest anyone reading this think that I believe myself irreproachable, these theories have been developed as much by those things I look back on as failures as those I look back on as successes. Many of the ideals I will sharing here are not always the experiences my past employees have had with me, and that’s precisely the reason I will continue to write them.

Getting distance has helped make sense of these experiences, and hopefully this will help someone else as well.

I am perpetually amazed how many businesses make the mistake of promoting people who are good at their job.

I’ll cross reference the Peter Principle here if you want a slightly different take on the issue.

It seems that somehow we’ve run out of ways to tell our employees that they’re kicking ass and we really appreciate it. We toss them an assistant management title and and force them to do busywork instead of the stuff they’re so good at. What kind of recognition is that?

Promoting people is the fastest way to get them doing something they’re not cut out for. Don’t promote because someone is doing a good job, or because they’re been with you for a long time.

When to Promote

They’re Already Doing It

This is a no-brainer. If you have a team member who is already coordinating work, helping people, doing ad-hoc training, taking responsibility, then you’re got someone who’s not at the right level in your organization. But, you did already recognize this potential in your employee, didn’t you?

You’ve Prepared Them

An employee shouldn’t be put into leadership cold. Once you’ve recognized the potential and cultivated those skills and given the employee the opportunity to grow, let her go. This is a little harder than the first situation; they’ll need more active development from you. But then, that’s your job, isn’t it?

They’re a Better Coach Than Pitcher

Sorry to use a sports metaphor, but in a small group you probably have a “generalist” who, as the team grows, will be replaced with several specialists. In many businesses, this is the natural order of things. And a generalist is typically a much better leader and decision maker than a specialist.

They’ll be Better at Your Job Than You Are

This is the hardest to admit. But if you’re a leader, you’ll do it.

What are the alternatives?

Stay Flat

The Chicken/Egg dilemma of promotion within a business is that if you have “middle management” positions, you’ll fill them. But if you feel compelled to promote people, you’ll also create positions you don’t have. Both are mistakes. Mandate the maximum depth of your organization and do not violate it.

Just Pay Them More

The best reason to promote someone is because you want to recognize the awesome work they’re doing. But if you promote an Engineer to a leadership position, you may be promoting that Engineer right out of a core skillset. If your Superstar isn’t a leader, don’t force it. More money is always welcome recognition.

Perks

Perks are the most underutilized tools in a manager’s tool chest. In most cases perks are more meaningful and cost effective than any other solution. Vehicle allowances, a (nice) company laptop, more vacation days, and so on.

The Most Important Thing?

Be Genuine

If your organization is bloated and inertial none of this will work for you; everyone knows that the plaques and certificates you issue are not heartfelt. If your culture does not value people, you’re already losing this battle. Which means you’re also losing your best people.

Between conferences, webex demos, conference calls and vendor meetings, in the last 2 months I’ve sat through 24 presentations. Of course with few exceptions, they were all full of imbecilic PowerPoint presentations, composed strictly of bulleted lists that were either obvious or irrelevant and punctuated with distracting, inappropriate animations.

Listening to “expert consultants” give me list after list of how to be successful doing something they do not do is a sure fire way to send me to my happy place. Fortunately, while there I was able to codify an idea that had been hounding me for some time.

While a particular “expert consultant” was detailing Vogue-style for me the 10 Things That Will Cause A Creative Venture to Fail and the 4 Quick Fixes for Something Something Not Listening I wrote this, my only note from the presentation, on a note card.

Everything Works. But Not for You.

Listening to practicing experts is great, and I do it as much as I can. But every project, every venture, every artist, book, blog, website, podcast and business is unique. Listening to the lists pushed by Snake Oil Salesman and Industry Pundits will have you imitating the success of someone they’ve only read about, and you’ll fail because you are not that person.

Everything works. But that doesn’t mean it will work for you. Your situation is unique, so don’t fail by trying to follow the lists you found on the internet. Brew some coffee, sit down with a sharpie and blank sheet of paper and try something crazy.

This post is as much for me as it is for you.

I’ve been thinking about Free lately. NoiseTrade offers a service that costs money. Similar services with more flexibility but fewer features (and no way to make money yourself) are available for free. In the middle of thinking about his, @jasonfried linked to an old Mashable article where Pete said “…I do think moving to a paid-only model is a supremely stupid business decision.”

Oh Really?

No offense to Pete, but I’m of the opinion that NOT having a pay service is stupid.

Ultimately if people aren’t willing to pay money for what you’re doing, then you don’t have a business. Hell, you don’t even have customers. You have users that will fall into one of three categories, none of which make you money:

• Pay Nothings who want your service but wouldn’t pay for it no matter what. They only use you because you’re free. Fortunately in the web world, they only cost you bandwidth. In the physical world, they cost a lot more.
• Do Nothings who have a lot of time on their hands. They’re looking to burn some time and that is all. They’ll be gone shortly.
• Care Nothings who aren’t interested in what you’re doing. They’ll sign up for anything and everything free, just because it is free. Do they care about sharing photos online, uploading trail waypoints, or whatever? No. Not at all.

The Conclusion

If you aren’t creating something that people are willing to pay for, then what are you actually trying to accomplish? If you’re giving away something that isn’t worth buying, you’re wasting everyone’s time.

Creating something worth buying and then giving it away doesn’t make a lot of sense either, but as part of an overall marketing and customer acquisition strategy, at least it has a shot at being sustainable.

While I was editing this brief article, another relevant article from Good Experience presented itself in Google Reader. “If you can’t get people to pay for what they love, we’re all out of business.”

Aside: I do not have an iPhone, I am the last of my friends to be stuck using a internet-less, regular-toothed, rotary-dial, steam-powered, hand-cranked flip phone. This post is not about about why that is ($$) or a revelation that I am caving (again, $$).

Disclaimer

I know nothing about the Mac Business Unit within Microsoft, I don’t know anyone at Microsoft anymore, and have no inside information related to the topic of this post.

January 2007: Apple Announces the iPhone

What a fateful day it was. A cell phone. From Apple. That ran “Mac OS X,” whatever that meant. Then thousands of voices cried out in unison, “No Third Party Apps!” A sentence which most reasonable people knew was succeeded in Steve Jobs’ mind by the word “…yet.” [Press Release]

October 2007: Steve Jobs Announces iPhone SDK

Steve shares in an open letter that there will be an SDK, third party apps!

March 2008: SDK Released

SDK, App Store, much rejoicing. [Press Release]

July 2008: App Store is Open for Business

The biggest orgy since the iPhone hit the shelves.

February 2009: Still No Word, Excel, or PowerPoint for iPhone

It’s been nearly a year since the official release of the SDK, and even before that it was clear that the iPhone was a smash hit and likely to be the standard against which mobile handsets would be judged for a long time to come. Microsoft had plenty of warning.

I don’t know who at Microsoft has a black turtleneck phone that connects straight to Steve Jobs’ old office, but if I was that person I would have spent a lot of time on it between October 2007 and July 2008 making sure that iPhone Office Companions were some of the first apps out the door.

Instead, Office is not represented on the most influential OS in the most coveted market with the most projected growth in the technology industry. That’s crazy. People are downloading iPhone-Ocarinas and farting applications, yet there is no Microsoft Office.

Microsoft could sell 1 Million copies of a $0.99 app that did nothing but sync and view Office files with no editing capabilities at all. Throw in basic editing and charge $10, or just include a code for a free license when you buy Office for the desktop. This isn’t rocket science.

The iPhone economy, as they call it, is instead slowly developing replacements and workarounds. It won’t be long before this won’t matter because no one will need Office for the iPhone. Which is good for users, but bad for Microsoft. Considering Office 2008 for Mac wasn’t worth buying, I don’t know how they’ll be able to hang on to any customers.

21st century economies will be powered by smart growth. Not all growth is created equal. Some kinds of growth are more valuable than others. Where dumb growth is unsustainable, unfair, and brittle, smart growth is sustainable, equitable, and resilient.

-Umair Haque on HarvardBusiness.org

I’m glad someone else is talking about this. I mean, besides my paranoid, raving tirades on Porch Night en Studio (Hi guys!).

The Problem Is…

The ingrained business culture in America is based on rules for a system that hasn’t existed for a long time. We manufacture very little, outsource a lot, subsidize too much, and send (for all practical purposes) all our raw materials overseas.

As long as this makes financial sense it will happen, but that doesn’t mean it is good for our economy in the long-term. We’ll soon have “too many chiefs” as they say; if we eliminate the domestic intellectual, creative, and skilled-worker “classes” who will be left to afford college, go out to eat, and buy the things we manufacture and ship back from Taiwan? There is a limit to this growth that in my mind is approaching faster than we think.

The Solution Is…

We can change direction, restructure large segments of our economy, or realize too late that we were being short sighted and foolish. I personally think the last option is the most likely.

The Reality Is…

Culture, regulation, and “mindsets” are always years behind fundamental changes in the way we do things. Just as the average American harkens all civic and scientific knowledge back to primary education, despite intermediate progress in those fields, the average business person harkens business understanding and operations back to their “formative” years in business. Changing ingrained knowledge, understanding, and practice is very hard. This a phenomenon I call “Being a Human.”