Paying Your People

One of the more difficult business concepts for most people to understand is compensation. How much do you pay your people, and why? How often do you increase - or decrease - their comp (and why)? Do you offer an annual bonus? If so, is it a gift or an incentive (and why, always why)?

Let's start with the basics. Every pay plan, regardless of employee or department, must do the following:

• Reward production 
• Punish lack of production 
• Cause the extinction of undesirable behavior

People tend to do the things that reward them, avoid whatever punishes them, and stop doing what does neither.

Your job is to figure out what each employee's goals must be in order to reach your organization's goals. Sales is easy, but your accountants must have goals, too, and your IT folks. This requires that you understand each employee's role well enough to know what those goals must be. If they hit each goal, they receive the corresponding pay (everything is a transaction, remember?). If they don't, there must be a clearly defined (and clearly communicated in advance) penalty (your company is punished in a very real way when employees miss goals; to drive success, employees must feel the pain, too). If they surpass a goal, there should be a corresponding - and well-defined - reward.

Any behavior that is neither rewarded nor punished tends to go away on its own, with the exception of sexual harassment, bullying, prejudice, etc., where the behavior itself is the reward. Your other employees have enough to do without worrying about losers who engage in any of this crap. Fire them on the spot, and throw rotten tomatoes at them all the way out the door. Remember to follow through so that you get a nice, solid impact.

As I've mentioned before, performance is not a once-a-year report. You (and your managers) must meet with direct reports at least monthly to assess progress, obstacles, and provide requested resources and support. Performance review is an ongoing responsibility for both you and the employee. If they're doing better than planned, they have a right to expect recognition and a reward. If they are experiencing difficulty, they have a right to expect you to pay attention and mentor them (but not do it for them). In both cases, your attention is required.

The simpler your pay plan - including your pay plan for salespeople - the better. If an employee has to use a calculator or some kind of an outline to figure out how much money they're going to make, you didn't do your job. A 10-year-old should be able to figure out any given employee's paycheck in their head. You want employees to spend their time working, not worrying about how much they're going to make (or when they're going to get it). Because it is usually the most important thing on any given employee's mind, it must always be:

• Transparent 
• Accurate 
• On time 
• Simple

This includes reimbursements for business expenses. And when I say on time, I am a big fan of paying salespeople their commission no less often than once a month. I do it weekly, if I can. I've found that salespeople perform better when they have immediate feedback, whether reward for effort or punishment for lack of effort.

I'm also a firm believer in transparency. That means I have no problem with everyone knowing how much everyone else makes. This topic always starts an argument, but here's my reasoning:

If you are running your organization correctly, everyone knows exactly what milestones must be hit to make a given amount of money, right? Likewise to advance. If your employees know that the criteria is objective, and you're not going to promote someone just because you happen to go to the bar with them from time to time, they will work harder to reach the next level. And anyone who doesn't want anyone to know how much they make is hiding something.

My mom always said that, if you have to sneak, it must be wrong. I agree.

As a side note regarding promotions, it is vital that you be objective. If someone hits all of the necessary goals and does not advance, even though a position is open, they will leave. And you know where they'll go? To your competitor, who runs a business instead of a social club.

Also, never advance someone as an excuse to give them more money. Organizations that do this invariably become top-heavy. This makes your organization less profitable, slower to react to the market, and makes communication and the chain of command a complete mess. Always have as few managers (and employees in general) as you possibly can. Lean is healthy!

Last idea for today: Yes, of course you should know what other employers in your area pay their people for the same job. Don't bother with national tables; they tilt toward both coasts, neither of which may be realistic for your region. While you want your pay for a given job to fall about in the middle of the pack (too low, people leave; too high, people get lazy), there are other factors to consider besides pay. Employees leave managers much more often than they leave jobs. If you provide supportive, growth-oriented management, the right people will work to stay, even if a competitor pays slightly more.

People value being valued.

The D Word

Let's improve our vocabulary, shall we?

Discount: (Noun) A way of telling Customers that what you sell isn't worth what you said it was.

We've talked before about the difference between price and cost. But how do you show loyal Customers your appreciation if you can't offer them a break?

Sales is a transaction, right? You offer a product or service, and the Customer offers money in exchange for that good or service. If you're doing it right, every step of the sales process is an exchange: You tell me your name, I tell you mine, you tell me your needs, I tell you what solutions I have for those needs, you tell me your budget, I give you a proposal. If you are doing Sales right (and most companies don't), you never give anything without getting something in return.

The same is true for any breaks that you give Customers. To get a break, there must be a transaction, and i don't mean just for doing business with you. To pay less, a Customer must buy more.

This shouldn't be a secret. You should have a written breakdown of exactly how much a Customer must spend to get each specific break. That makes the break an incentive, not a discount.

Discounts are given; incentives are earned.

You don't give discounts because your products, services, and company are superior to your so-called competitors. You don't have to give discounts.

That list of incentives should be passed out to every Customer. Your process is transparent; you don't need to hide anything because you don't run that kind of business. And no Customer gets an incentive without the corresponding increase in spend.

By now, some of you are shaking your head, saying, "What about high profile Customers? They draw other Customers because of their name. Surely they get a discount?"

No.

Remember what we said about the "special situation"? If you allow even one, all of your sales will slide down that slippery slope, eat into your profits, and before you know it, your Customers and business are gone.

Because you stick to your incentive process, you have predictable metrics. By knowing your marketing conversion rate, retention rate, and sales close rate, you know how many Customers you have and will have. You can forecast revenue because each Customer has told you what they expect their spend to be.

Wouldn't you rather live inside this process than one where you have no idea where your money is coming from, or if it will continue to come, or why? Of course you would, because it makes sense, and you are a sensible person. That's why you're here.

If your organization is B2B, the same rules apply. If you have repeat Customers, B2B or not, there's no harm in applying an incentive for their loyalty, too, if you like. And if they bring you more Customers - not by reputation, but via an actual referral. Again, make sure that the terms are spelled out, clear, and followed to the letter.

Welcome back to sanity.

Chopping Up Customers

In a prior article or two, I talked about different behavioral styles and a little bit about social media. Today, we're going to tie those together and convince you to abandon ads on TV, radio, and newspapers.

First, let's talk about what those three mediums really are: shotgun marketing. You have one message, and you shoot it at the crowd that each medium's salesperson tells you they have a lock on, and then you sit back and hope that your buckshot hits enough people to at least cover the cost of the ad (you do measure that, right?).

It's easy, right? They probably even put the ad together for you, or your agency does, and everyone tells you that that's where you need to spend your money because that's where the people are. And they're right - there are people there. The problem is, those people aren't Customers. They're media salespeople and ad agencies who make a lot of money every time you produce a shotgun ad.

The problem with shotgun ads is that they're not very measurable. This is to the advantage of everyone but you. If you can't measure the results, all you have to go by is how many people buy from you in general following a campaign. How do you know that it had anything to do with your ad? And even if you have a coupon code or something similar, and your reps don't let Customers have the special even if they don't have the coupon or the code (they never do that, right?), your typical response rate is probably somewhere between 1% and 3%, and you marketing people will tell you that's good.

Missing 97% (or more) of the people we aim at is good? Since when?

The core issue is, you're trying to hit several different kinds of slippery fish with buckshot. You don't use buckshot on fish; you use bait. And each type of fish has different tastes when it comes to bait. And some like bait that floats on the surface, some like bait that moves around or has a particular scent or color or feathers or or or...

You don't need a shotgun. You need a tackle box!

The first step in fly fishing, before you ever tie a fly, is to know what kinds of fish you want to catch, and then what those fish like. That means gathering information about your Target Customers - as much as you possibly and legally can. (At this stage, not necessarily information tied to a specific person; we'll talk about that in another post.) This is the bare minimum (bearing in mind that the needs of your business may require additions):

• Age 
• Sex 
• Household Income 
• Dependents 
• Interests 
• Ethnicity 
• Sexual Orientation* 
• Sources of Information (what used to be called 'news') 
• Behavioral Style

Once you know what your Target Customer's answers are to each of these questions - and remembering that you may have more than one target Customer - you can begin to break down their demographics. (Note: The old media that I mentioned before - radio, TV, and newspapers - will try to tell you that they have demographics, too, already all broken down for you. This is a lie. At best, they have guesses and hopes, none of which are something that you should risk your revenue on.)

Now look at as much information as you have on your actual Customers. How closely do they match your Target Customer? If it's not a close match, you just learned a bunch about whoever decided what your Target Customer looks like (hope their resume is up to date). Adjust your Target Customer to more closely match your actual Customers.

Now, how many Target Customers did you come up with? If you only have one, you'd better be a military contractor, or you're in trouble. You want a minimum of three or four to sustain your business if interest in your product or service wanes in any one group (or, in the case of B2B companies, in case one of your Target Industries has a financial downturn). As a general rule, more is better.

Once you have your target Customers finalized, you can begin to break out where your marketing money should go, and how you need to rewrite your message so that it speaks in the language that each Target Customer wants to hear and how it addresses the needs that each one has.

This is called Segment Marketing, among many other names. And while it definitely takes more work and time on your part, it doesn't need to cost more than what you already waste (I can't say "spend", because I only spend money on things that benefit me) on old media marketing - and your conversion rate will show a drastic improvement. It's hard not to like something that earns more for the same investment.

And, lest you think I forgot my promise to tie in social media, check out Mashable's lovely infographic. If your brain isn't buzzing with new marketing ideas by the time you get to the bottom, it may be a good time to take a nap.


* You are not asking Customers to come out of the closet. But knowing if a gay person is a potential Target Customer for your product or service - because they tend to have more disposable income, for example - may help you decide whether or not to spend money with a gay-focused publication or event. You could just as easily add religious or political orientation, too, depending on whether or not these factors are related to your core business.

Margin, Margin, Margin!

To run a business, you must have a basic understanding of a few key metrics. Margin is about as key as you can get. If you don't understand margin, you are already losing money, plus you're a sucker. How did you even get this job? Let's cover the basics quick before someone finds out you don't already know them.

Margin is a percentage of the total revenue produced by a good or service. What the percentage means depends on what kind of margin we're talking about - gross margin or net margin. Gross margin is the relationship between gross profit and cost-of-goods-sold (COGS, also known as 'cost-of-sales' - how much it costs to produce the item or sell and provide the service; it doesn't include office expenses, rent, administrative costs, etc.).

Let's do some math:

(Revenue - COGS)/Revenue * 100% = Gross Margin Percentage

Let's say we sell a particular product for $50, and our COGS is $12:

($50 - $12)/$50 * 100% = 76% (or $38 per product sold)

The amount of Gross Margin that you assign to a given product is not arbitrary; although COGS covers your overhead and fixed costs such as wages, etc., it does not necessarily take into consideration the things that make your business last, such as future product development, future growth (including additional payroll), future technology requirements, etc. All of that has to come out of that $38. And if you are partnered with a venture capital firm or your organization is part of a public corporation, you may not see any of that $38 at all.

Another pressure on Gross Margin is competition. If you have a competitor who can produce a similar good or service to yours for a lower COGS, your margin is going to be squeezed. (Think of how the iPad squeezes other tablet makers, and how the Kindle Fire squeezes the iPad.)

In general, depending upon sales frequency (or inventory turns, if you're in retail), you want to choose a Gross Margin percentage that allows you to cover all of the tangibles plus unforeseen expenses such as the above. Once you figure out what that percentage is, and you know the COGS, it's easy to figure out how much to sell the product for:

Gross Margin + COGS = How Much It Costs the Customer

If we know that we want a GM of 6% and our COGS is $32, it goes like this:

((6/(100-6)) * $32 = $2.04 (this is your Gross Margin in dollars)
$32 + $2.04 = $34.04

Here are couple more formulas to add to your tool box:

Net Sales = Gross Margin + COGS

(Gross Margin/Net Sales) * 100 = Gross Margin

And here's one more that is always a toughie: Suppose you have salespeople (even if you don't call them that). How do you figure out whether or not what you pay them (or their manager) is "right"? Easy, and it's a formula that will help you stay out of trouble when it comes to compensation:

An adequate salesperson (or sales manager) should sell 10 times their wage (including commissions, bonuses, and other perks).

See how easy that was? Now gimme 10 laps and hit the showers.

Social Media Suckage

Social media is the number one marketing topic of the day. You can't turn on your PC without a PR pundit telling you how social media will totally change your business, help you sell more, turn your customers into content co-creators, and make your life perfect.

This is bunk, of course. Social media is just one more thing that someone will pretend to know more about than you do in order to make money from your lack of knowledge. Social media is not so readily pinned down; it's fluid, and moves with the crowd. Companies that have tried to use FaceBook to sell product (other than games) have wasted their money.

So what is social media good for?

Communication. Social media can be one of the best ways to communicate with Customers, because it is perceived as more direct and honest than plain old PR. But there is a price to pay: To be effective and not come off as out-of-touch or, worse, evil, you must do the following:

• To cover your backside, write specific rules regarding who is allowed to write about what happens at work, and what they are allowed to say. Make certain that everyone in your organization signs it, and fire anyone that violates it.
• Have a plan. Since when has anything gone well for your business when you just let things happen? Social media is no different. You need to know what you want to get out of it, the steps to get there, the metrics you want to see and the timeline by which they must be accomplished. See? You already know how to do this.
• Manage the conversation. Have Customer Service read all posts every day and immediately respond to the ones that need responding to. Some companies make the mistake of having the PR department respond to posts. PR is not a conversation; Customer Service has always been one. Social media is just a continuation of that conversation.
• Unless you are a game developer, don't believe anyone who says that they can help you make money on FaceBook. They're lying.
• Don't settle on one platform. Social media blows with the wind. To be part of the conversation, you have to be where your Customers are. New social media platforms arise seemingly out of nowhere and get hot fast (witness Pinterest). They disappear just as quickly (MySpace much?).
• Never, ever remove a post. You will instantly lose all credibility. Forever.
• Never pretend to be a customer. You will be found out, and you will burn for it.

One of the benefits of the social media conversation is that your fans and your enemies tend to congregate in one spot. If you respond quickly and positively to the latter, you grow the former. And that is where the real value comes in: as always, anything that a Customer says about you has infinitely more weight than anything that you say. No one believes your TV and radio ads; no one is seduced by your mailers or your stuffers or your email blasts. But one fan saying nice things about you on the platform of the moment resonates. (They also don't cost you a dime.) But bear in mind that it resonates just as loudly when an unauthorized employee says how much work blows on FaceBook, Twitter, or your company blog.

If you want to know what the current hot platform is, ask your kids. If you don't have any of your own, ask your neighbor's kids. They'll know. They can also tell you far more than you want to know about how each works. And at most, you'll have to buy some Girl Scout cookies that you were going to buy, anyway.

See? Social media isn't scary. Now go paste some pictures of food and kittens on Pinterest.

The Cult of Personality

As I mentioned before, most salespeople tend toward high "I" behavior styles. This means that they are Influencers, which makes total sense for their role. Part of being an Influencer is the drive to find one's way around obstacles - again, a necessary trait for anyone in sales. It only becomes an issue when this trait and this drive are allowed to subvert the organization.

To spell it out: Don't let the tail wag the dog.

One of the things that tends to happen in any organization with a sales department is that sales receives the majority of the attention, accolades, rewards, and power. But since when can any organization function without any department other than sales? Any organization is an organism, and every department and every person in every department is necessary to sustain the whole. Take any cog out of the motor, and the motor no longer runs.

Salespeople will seek their way around internal obstacles, even when they are rules set up to protect the company. (See "Special Situations".) You cannot blame them for trying; it's in their nature, and it's a part of what makes them so effective in the field. Your job is to hold the line - even if it's not your line - and never let them cross it. Because once you do, the tail begins to wag the dog. (And this is coming from a several-time sales manager; I know whereof I speak.)

Also, because being "high I" means that you are often likable and persuasive, a disproportionate number of people in management tend to be "high I", even when their actual business skills are poor, and even in departments where a "high I" manager doesn't necessarily make sense (such as accounting).

Also, because of sheer force of personality, some salespeople can come across as prima donnas. In fact, many managers encourage them to be so, in the mistaken assumption that this will drive results. It doesn't. All it does is drive the perception that the sales department can do whatever it likes, and that no one else in the company has as much value as a salesperson.

What drives sales results are clear expectations, constant monitoring of results, and mentoring. (You must inspect what you expect, as a friend used to say.) And it is always better to have a salesperson that consistently hits 100% of quota than a salesperson who hits 105% one month, 85% the next, and 97% the month after. The kind of sales rep that hits those numbers is not a professional salesperson - they are someone who works on and off and occasionally gets lucky. That's not who you want on your sales team.

To make your organization work better, make certain that everyone knows that they are equally valued. Make sure that President's Club (if your organization has such an animal) is equally accessible to people from all departments (because everyone should have growth and performance goals, right?). If more than 50% of the people who attend are from sales, you're doing it wrong. Also, make sure that everyone who goes gets the full experience.

Make sure that your managers become managers because they are the best qualified person for the job - not because they are the nicest guys or the most persuasive. (Companies that boast that they only promote from within limit their success by doing so.)

And, above all, remember that internal obstacles are often there for a reason. Give careful thought to any attempt to step over them, and avoid salespeople who blow smoke to benefit themselves in the short term at the expense of your organization.

Mothers & Daughters, Fathers & Sons

We've talked about not hiring (or being hired by) friends and family, yet one of the most common small business types in the U.S. is the family business. Obviously, for many reasons, if you can pass a business on to your children, it can prove to be a good move - provided that it's done right. By now, you've probably seen it done wrong at least once. (And there's no such things as doing it a little bit wrong, is there? Every example that I can think of from my own experience has been spectacularly bad. )

Here are some tips on doing it right. Write these down and chant them for the next month or so:

• First, make sure that your son or daughter wants to take over the business. If they don't, don't push it. Remember: They are not you. Starting this business was your dream. They have dreams of their own.
• Start them early and start them low. I have made it a practice to sit with the Customer Service team for at least a couple of weeks when taking on a new position. Everything, good or bad, eventually flows through Customer Service, and they often know more about what's really happening in an organization than anyone else.
• If you can, rotate them through every department and job function. You learned the business by doing all of these jobs yourself, before you could afford someone else to do them. There is no better way for your son or daughter to learn them than hands on. Not only that: By actually getting their hands dirty, they will earn street cred with employees and open up communication pathways that have long been closed to you.
• Just because you would perform a task a particular way doesn't make their way of doing it the wrong way. From what I've seen, this is the hardest skill for entrepreneurs to master: Shutting up.
• Your child is going to make mistakes. Let them. If they do everything correctly, how will they ever know what to do when things go wrong? You made mistakes. Let them make their own mistakes, too, and profit by the lessons they learn from them.
• Don't call them by demeaning names in front of employees. You know what? Scratch that. Don't call them by demeaning names at all. They are adults, they are employees, they will be the boss one day. Treat them with the same respect that you expect. I've never been "Davy". Would you like for them to call you "Old Fart" or "Evil Stepmother" all the time?
• Let go. Don't hang on forever. Agree on a firm date that you will either retire or expect them to knife you, then stick to it. As long as you are around, employees will still go to you, no matter what title you have or what title you give your son or daughter.
• Never, ever, ever countermand anything that your son or daughter says, ever. Even if it is wrong. Employees cannot for one moment think that they can go to you to get a reversal on a decision, or they will do it all the time - and vice versa. How would you like it if your spouse did that with every rule you set for your children? If you want your children to run the business, you have to be able to let go. If you can't, your son or daughter has to find something else to do for a living.
• Make certain that your son or daughter takes (and passes) classes that are relevant to running a business, including as many management classes as possible. Leading people is a science; it can be learned. Working for you will only expose them to what you know, much of which may be out of date. Let them be exposed to other ideas, and your company will only benefit from the result. 
• The first time your son or daughter has to manage a team, after they have had management classes, make certain that they have a mentor. Most first-time management positions do not include this. As a result, many employees who had excellent management potential floundered in their first management role. The mentor doesn't have to be at another company (although that helps), but they absolutely can't be you. The temptation to tell them what to do is simply too strong. LinkedIn and other networking groups are an excellent place to find mentors. I know that you want to impart all that you have learned, but the time to do that is before they became a manager.
• Be supportive. You'd think this one would be obvious, but it's not. I have been in management positions where the original owner asked me to lie to their child about what they were doing because they knew that their child - who was the CEO (at least in name) - would disagree with it. Holy King Lear!

Betty White, Plato, and the Titanic

There is a natural tendency for any congregation of human beings to become insular. This is just as true for organizations and departments within those organizations as it is for states, regions, countries, religions, political groups, and on and on.

Human beings are herd animals; we always have been. We don't have thick hides, claws, or fangs. We're not particularly fast on foot or when swimming. A 3-year-old chimpanzee can literally tear our arms out of their sockets. What we do have is each other, and the need to communicate and defend each other led to big brains, an amazing aptitude for pattern recognition and, eventually, fully-formed language.

But even now, there are issues regarding the formation of effective new ideas in the face of emerging needs, threats, and appropriate responses to both. There is nothing new about this. In fact, Plato spelled the whole thing out in something called The Allegory of the Cave.

In Plato's story, a man wanders into a cave in which are imprisoned a group of people. These people are chained facing the cave wall, and have been since birth. Because of the chains, they are unable even to turn their heads. In the center of the cave, behind the prisoners, a large fire burns. As people, objects, and people carrying objects pass between the fire and the cave wall, they cast shadows on the wall that the prisoners can see. The prisoners attempt to build an explanation of the entire world, its contents, and its processes based on these distorted shadows.

The man who wanders into the cave, of course, has a lifetime of experience other than being chained to a cave wall, plus the added benefit of being able to see and accurately interpret everything he sees. From an organizational perspective, this is why it is so important to frequently engage outside consultants and to hire new employees from outside your industry. You and everyone in your organization that has been there for any length of time already see things with a very fixed lens.

New eyes are clear eyes.

The natural tendency, of course, when you hear the ideas of these new folks is to say, "That won't work, and here's why: You don't really understand our business." Those words are often the epitaph of the organization. You can only see things one way, because you are chained to the wall of your experience, and cannot see things objectively or from the outside.

Another issue regarding our hard-wired response to threats is that nature plays the odds.

In any group of people facing a mortal danger, a certain percentage will do one of the following:

• Act instantly based on recent information (10% - 15%)
• Panic and go crazy (15%)
• Stand around and do nothing (everyone else)

From a survival of the species perspective, this is a good strategy. Two of the answers will likely always be wrong, but at least one will probably be right. From nature's perspective, having enough members of a species survive to reproduce is a win. (The fact that so many people who survive a disaster tend to feel very close to each other afterward is nature's next step in this process.)

The problem is, from an organizational perspective, it is very easy for the third group to delay action until any decision no longer matters.

A good example is the town that I grew up in. When a mall opened up outside of the city limits, the downtown merchants debated for years about how to address this competition, talking the city into bringing in expensive consultant after expensive consultant with plan after plan until all of their stores closed for want of customers. What was once the center of commerce became a ghost town.

Another excellent example is the newspaper industry. Every month or so a journalist writes a new story that explains how newspapers can save themselves from extinction. The problem is, for everyone outside the newspaper industry and its dependents (such as the wire services), newspapers died a long time ago. As the new NPR CEO once said, "No one under 30 has ever read a newspaper. And they never will".

Newspapers are Abe Vigoda. They are not Betty White.

To avoid this trap, obsessively collect and listen to your metrics. Intelligence gather from your competitors and those in industries that are outside of your own, but who serve a similar Customer, or have similar business models.

Standing still while your ship sinks guarantees that you and everyone around you drowns. It is still going to sink, and an irrational belief that your ship will not sink because it never has and so it can't will not help you any more than it did the captain of the Titanic.

To survive, you must constantly adopt, adapt, and improve based on changing conditions. Action must be swift, decisive, and stem-to-stern.

Just ask T. Rex.

Working with Developers

We've previously discussed the DISC system of behavior profiling, and touched on the very real personality and language barriers that exist between departments. Nowhere is this more apparent than when working with Developers - a situation compounded by the fact that many of the most widely-used development groups today are based overseas.

It is difficult for a Sales Manager (for example) to understand that whatever he or she asks for from a CRM tool will be built exactly as they specified. On the surface, this sounds positive, but the truth is that anything that is left out of the description will not exist at all, and anything even somewhat loosely defined will end up a complete mess. The Developers will, of course, make modifications - all during billable hours, and typically at rates much higher than their original proposal, because this is all 'extra work' that you did not originally specify.

The fault, of course, is yours.

Think of it this way: If you say to your teenager, "Please take the wet clothes out of the washing machine and put them into the dryer", what are the odds that they will start the dryer? With a Developer, the odds may be 0%. Bear in mind, this is not the Developer's fault. Their job is to build exactly what they are asked to build - no imagination, no guessing, no assumptions. They are not rewarded for thinking outside the box - they are the box. To be good Developers, they have to be the box.

So when a Developer gets your laundry request, they have several questions, because they want to get it right and any mistakes they make come out of their pocket:

• In which room is the washing machine?
• In which room is the dryer?
• If the washing machine and the dryer are in different rooms, by which route should the clothing be transported?
• Which machine is the washing machine?
• Which machine is the dryer?
• At what time of day do you wish this task to occur?
• Should the clothing be removed from the washing machine immediately after it becomes wet, or at some later time? If at some later time, exactly what time?
• Should all of the clothing be removed, or only some of the clothing? If only some of the clothing, please specify which clothing is to be removed.
• Should all of the clothing be transported to the dryer, or only some? If only some of the clothing, please specify which clothing is to be transported.
• Should clothing be immediately transported after removal from the washing machine, or at some later time?
• If at some later time, exactly what time?
• Should clothing be transported from the washing machine to the dryer one article at a time, in groups, or all at once? If one article at a time, please specify the order of articles. If in groups, please specify which articles should be in which groups, and in which order the groups should be removed.
• Do you wish to have some type of confirmation when the clothing has been removed from the washing machine? Do you also wish confirmation when the clothing has been transported to the dryer?

This list could be pages longer (Business Analysts, you know it's true), but you get the idea. And notice the critical point: Because you did not specify turning the dryer on, it never made it to the list of questions.

Here's the real problem:

• Developers assume that you know what you want. (And that you will spell it out.)
• You assume that the Developers know what you want. (And that they will build it without being told to.)

Successful Development takes time and work on everyone's part. But more than that, it takes understanding of how the Development process actually works - how it has to work.

This is the reason that large organizations have Project Managers, Business Analysts, QA's, etc.: their real, unspoken job is translator. And - even if you are in a large organization, with the benefit of all of those folks - it will save you months (if not years) of frustration dealing with budget overruns, late launches, bugs, unworkable interfaces, unmet priorities and lack of sleep if you learn to look at every Development project from the Developer's point of view, and give them exactly what they need to give you exactly what you need:

A good night's sleep!

Hiring Friends & Family

Don't. Period.

You: "But, but, but..."

Me: "Okay, obviously you didn't hear me, so I'm going to spell it out for you: If you hired them, at some point you may have to fire them. And if they hired you, at some point they may have to fire you."

Think about that.

You: "Yes, but I know for a fact that they are a great worker." (Or, if you were the one hired by your friend, we'll assume that you're a great worker, or you wouldn't be reading this and trying to improve yourself.)

Me: "The best worker you could have chosen? Even when their best friend hires them?"

It doesn't mean that your friend is evil. It doesn't mean that, in other circumstances, they don't excel. But working with a friend is a distraction at best, and it's only a matter of time before one of you starts to let things slide.

Now let's go a layer deeper: Your friend does indeed turn out to be a great worker, the best, and when a juicy promotion or opportunity for a pay raise comes up, you give it to them, right? Right?

Not unless you're a fool. Here's why:

Everyone else sees it as cronyism. It doesn't matter how good your friend is (or how good you are, if your roles are reversed). Everyone else - even people not up for that pay raise or promotion - absolutely knows that the only reason that your friend got it is because they're your friend. And that will cause these other employees to leave, because who wants to work somewhere that you have to be friends with someone to get ahead, and where your work means nothing?

They won't even say anything about it - not to your face.

And if your friend gets wind of it, how do you think this kind of talk makes them feel? How do you not begin to question your own abilities when everyone else around you questions them, or just assumes that everything good that you do only happens because you're pals with the boss?

You're right - it's exactly like the sex-with-a-colleague scenario, and with exactly the same results. Eventually, the best that you can hope for is to lose a friend. At worst: litigation for unlawful discrimination.

So we end where we began: Want to hire a friend or family member? Don't. Period.

Liar!

The average human being lies 4 times each day (this number does not take politicians into account, because they obviously throw off the scale). So why in the world do you expect someone to be honest with you on a survey?

Long, long ago, when dinosaurs ruled the earth, I worked for a software publisher and reseller that was building an online catalog. Online catalogs were a new thing at the time, as was the idea of a user interface that was actually geared toward an average user. To do it right, we met with a fellow who did consulting for companies that wanted to do business with big players like Microsoft, Apple, and Amazon, or to emulate them.

We walked him through what we had, and our head of new product development explained how we had structured each page to push Customers toward other pages to control their experience and expose them to useful content.

"Stop," he said. We stopped. "How successful have you been at getting Customers to go to that page?"

Not very, we admitted, but we had this great plan to change that by doing this, that, and another thing.

"Stop." We stopped again. "What makes you think Customers want this?"

"We did surveys," said our product development guy. "And the majority of..."

"They lied," said the consultant guy. "They told you what they thought they should say, not what they really do." Silence.

"Why would they lie?" we finally said. "It's in their best interest to tell the truth."

"Because people lie," he said. "The U.S. spent $24 billion on porn last year, but if you ask anyone, they don't buy porn. Somebody's buying it."

Furrowed eyebrows around the table while we digested this.

"So what do we do?" we said.

"Do what Amazon does: Don't listen to what Customers say. Watch everything they do. If they don't go to a particular page, get rid of it. If they go to another page a lot, give them more of whatever's there. Don't make anything more than one or at most two clicks away from where they start out. And recheck your results every single day, so you can anticipate shifts before they become widespread."

Another note about surveys: They are hollow. By that I mean that most people don't do them, and those who do tend to be people who are strongly motivated to say something positive or strongly motivated to say something negative. If you are like most organizations, 80% of your customers fall somewhere in the middle. And, since the average survey response rate is around 3%, why are you making business decisions based on what 1% or 2% of your Customers took the time to say?

I am not saying don't provide Customer for Life (perfect, on time, personalized) service. I am saying that watching what your Customers do - how many respond to offers and when, how many you lose or retain and why, increases or decreases in spend, etc. - matters more than what a small number of them say. Don't make major changes because of a single complaint or two, or reward based on a compliment or two. Which leads us to GAS:

Don't Guess. Assume, or Speculate. Find out. Eliminate G.A.S.

DISC, By Any Other Name

By now, you've likely been in business long enough to recognize that the employees in each department tend to have similar personality traits to other employees in the same department. In fact, despite individual differences, personality traits within one department often seem to be more a matter of degree than anything else. The important thing is to learn why this is, what it means to internal and external communication, and why it's a good and necessary thing.

A psychologist named William Marston created a way to rank personality traits according to 4 main behavior styles. Everyone has all 4, but the degree of each style and the blends between them differ from person to person. Marston called his ranking system DISC, an acronym of the 4 styles:

• Dominance - relating to control, power, or dominance
• Influence - relating to social situations and communication
• Steadiness - relating to patience, persistence, and thoughtfulness
• Caution - relating to structure or organization

I took my first DISC assessment and class in 1984. The class was sponsored by the National Association of Music Merchants, or NAMM. Out of all of the profiling and communication classes that I have taken at dozens of seminars in the years since (some of which took the fundamentals of DISC and simply renamed them), I still consider it the single most important business class I have ever taken, and I have shared it with every team I have managed since.

It's probably no secret to you that individuals with a strong 'C' drive tend to end up in Accounting, high 'S' individuals tend to gravitate to IT, 'I' to Sales and PR/Marketing, and high 'D' to Management, but this is a black-and-white perspective of a shades-of-grey reality. High incidence of these traits make these employees well-suited to their roles. They would not be as good at what they do as they are if their personalities were different. Unfortunately, this often means that communication between different departments is strained, because the personalities and communication styles of the people involved are so different from each other.

Communication with external Customers is just as difficult. Salespeople with high 'I' may actually turn off Customers who are high 'C'. Customer Service reps who are high 'S' may frustrate high 'I' Customers. Every behavior style wants to be spoken to in its own native language. Isn't that what you expect as a Customer? And what's wrong with that?

For this reason, I recommend DISC profiling and training for all employees, beginning with Management, then PR/Marketing (if they haven't already had it), Sales, Customer Service, IT, Accounting, Development, Production, etc. Profiling so that each employee is aware of how they are perceived and what their own needs are, and training so that they understand other styles and learn to communicate with them in their own language.

Be aware, too, that certain behavior styles can have a tendency to bugger advancement and chain of command. For example, people with high 'I' personalities tend to move up quickly because they are social animals and often well-liked. But they also tend not to be detail-oriented or results-driven. Why advance someone into a management position if they are not likely to be any good at it? This does no one any good. By the same token, someone with a high 'D' personality has a tendency to believe that codes of conduct and process do not apply to them. Is that who you want as your CEO?

Again, people are rarely this black-and-white, nor am I saying that a high 'D' person can't be a good CEO (especially if paired with a high 'S' COO). Everyone is a blend. Just be aware of how different behavior styles can influence your thinking when hiring, managing, and promoting.

An overly complicated DISC matrix. (I had a little trouble with the scissors.)

Price vs. Cost

As we've discussed before, language defines culture. Putting a word to something conjures an image and an expectation of the thing named. That's why shamans and occultists put so much store by names - they understood that naming a thing gave them power over it. And for any business that sells any good or service, nothing is more important than the definition of and the distinction between cost and price.

Price is the sticker on that new car. It is a liquid word, and implies flexibility and negotiation. It also identifies the thing to which the price is attached as a commodity... that is, an item that exists in identical form at the business down the street. Anything that is a dime a dozen has a price, and we just named it. (But we'll give you fourteen for that same dime if you buy today.)

Cost is a fixed quantity. In the Customer's mind, it is an immovable object. "The cost of X is Y." There can be no negotiation with cost; it is what it is, and that's what it costs.

Now here's the part where you learn a new language: Everything sold has a cost. Nothing has a price. Ever. This is not a negotiating tactic, nor is it a sales formula. If price has ever passed your lips, you have used the incorrect word. That is a fact, and I can prove it to you:

To have a price, an item must be a commodity - that is, an identical item must be available elsewhere. If you have the only one of a given item that exists anywhere in the world, what you charge for it is not negotiable, simply because it does not need to be. The Customer cannot purchase the exact same item elsewhere, so he must pay what you ask or go without.

"But we sell X," you say, "and the guys down the street have X, too."

To which I say, "No, they don't. No one sells what you sell. And you know why? Because X is not what you sell. X may be included in what you sell, but what you sell is you - your organization and how you do business. Your customer service, your terms, your speed of delivery and accuracy of execution, your satisfaction ratings, your industry awards, your knowledge, and on and on. That is what you sell. And it has a cost."

Make a list of these things (they're called Points of Differentiation, or POD's). Trumpet them. Be the best at them. Don't make anything up or spout half-truths. Make them things that you can say to your kids or your reflection without blinking, looking away, or laughing. Make sure that everyone in your organization - not just the salespeople - knows them by heart. And if you don't believe them, sell your business to someone who does and go home, because you have already given up. Why take everyone else down with you?

One final note: Slap anyone who says that a service has a price, ever. A service is as individualized as you can get - no two haircuts are any more alike than two snowflakes or the services performed by hookers in Vegas.*

*Or so I'm told.

Shaking the Tree

It is always a good idea to change territories, customers, etc. Why?

1. Initially, to even out the number and size of the accounts that each rep is responsible for. Everyone deserves an equal opportunity. And remember – the sign of a fair settlement is that neither party is entirely happy with the results.
2. Comfort is the enemy of a good sales team. It inevitably leads to sloth. Because of this, it’s always a good idea to shake things up, and on a regular basis. It forces you to snap out of comfort zones, to grow, and to really think again. Change should be constant – an endless refinement of the engine.
3. If your reps have physical territories or repeat customers, over time there is a tendency to offer discounts before the customer asks for them – a variation of Helsinki Syndrome. The rep begins to identify more with their long-term customers than with their organization, shaving margin to “stay friends”. Shrinking margins – especially self-inflicted shrinkage – are death.

If you happen to run a call center (sales, service, or support), once a quarter or so, make everyone change desks. You can either randomly assign the new seating or (my preference) choose who sits next to who based on each employee's development stage. Here's the reasoning:

• You have one rep who is consistently the best on the phone. Why not put everyone on the team next to them, one at a time, so that a little of their competence rubs off? 
• Call center reps who sit next to each other too long have a tendency to get chatty. Don't get me wrong - you want some chatter, because congruity is part of your culture - but not to the point that it gets in the way of work. 
• Every rep does things slightly different, and every rep has different areas of expertise. By exposing your reps to everyone else on the team, you help to 'homogenize' the call process and prevent knowledge 'pocketing'. 
• Moving reps around helps to prevent the development of cliques (remember those from high school? remember how badly they sucked?), which inevitably lead to conflict. 
• Anyone who complains about sitting under an air vent, not sitting next to a window, sitting next to someone who is a loud talker, sitting in the cube that smells funny, etc., you officially get an equal shot at every seat in the house. For awhile. 
• Excitement. Call center life is dull, dull, dull. Anything different is good. 
• Bonus: When people change desks, they clean. Everything. That means that the rep who's been using that outdated price list that's been up on their cube wall so long that it's grown a beard throws it away and asks to copy someone else's updated price list. It also means that people re-evaluate what's really important, because who wants to move junk? Ditto those old salad dressing pouches and dusty memos.

Hiring

Just as directing a film is largely about choosing the correct cast and crew, hiring is the single most important step to ensure that your organization surpasses its goals and thrives over the long term. Nonetheless, many hiring managers treat the interview process and its all-important prep as a chore. Some even put it off until forced, and then often make poor choices that only have to be replaced a short while later.

Employees are your most important asset. If you don't believe that with all of your heart and soul, you will fail. Employees do all of the real work in any organization. They are the public face of your business, day in and day out. They are the lifeblood of every organization. Without them, there is just you, and you can't do what needs to be done alone.

If you hate interviewing and prepping for interviews, imagine what it's like for the person on the other side of your desk. They have a limited amount of time to guess what you want to see and hear and to dazzle you - and that's after they've made it past resume-screening software (which turns away better than 95% of applicants), any headhunters you may work with, and your HR department.

Of course prep for the interview; you should have a set of questions sitting in a file folder at all times, so that you are ready whenever you need to hire someone. And you know the best place to get those questions?

From the people who already do the job.

Let's face it: They probably know the requirements better than you do. You can ask the basics, too, if you want, all of the "What did you do there?" and "What is your greatest strength?" stuff, but know that any applicant that's gotten as far as your desk has already rehearsed the answers to those tired words a hundred times before. You will learn exactly nothing that isn't already the story they've told on their resume.

So: Get 5 - 10 questions from employees that already do the job that you're hiring for. Next, ask the things that matter long-term:

• What kind of corporate culture are you looking for? 
• What do you find is the best way to network? 
• What do you do to relieve stress? 
• Would you rather stay in one position for a long period of time with regular raises, or move up quickly with no change in compensation? 
• Are you interviewing with a competitor? What made you come to us? 

These are questions that help define whether or not the candidate is a match for your culture (or at least the culture of the team that they will likely join). Listen carefully to the responses and think not just about what the candidate says, but how they say it.

There are two questions that you will want to ask at the end of every interview, unless you're already sure that the candidate is a "no":

• You win the lottery tomorrow - $164 million after taxes. What do you do? 
• Tomorrow morning, you find out that you have 6 months to live. What do you do? 

There are, of course, no right or wrong answers to either question, but the applicant's answers and how they answer are revealing. Let's take question one and break it down:

• If the candidate hesitates for an extended period, doesn't answer, or sounds like they are saying what you want to hear, don't hire them. If you hire them and something goes wrong, they will either fail to tell you until you find out on your own, hide it from you, or blame someone else. Trust me on this one. 
• If the applicant says they want to take care of their family and/or friends or give money to charity, and they are applying for a customer service or tech support role, they will likely be a good fit for that role, even if they add other things to the list. 
• If they say that they will quit working and travel, they will likely be a short-term employee. This in and of itself is not always a bad thing, but it depends on whether or not that is your plan for the position. 
• If they say that they would likely start their own company doing X, they may be a potential team lead or manager. 
• Anyone who says lots of different things is likely never to be satisfied in any role. For them, the grass will always be greener elsewhere. 

You can probably figure out the rest.

Question 2 is a different circumstance. Rather than fulfillment of a dream, it presents an opportunity to see what your applicant's priorities are when faced with the grimmest of all realities: Death. Most if not all of your applicants will not have given this question any thought, ever. In fact, some may actively resist answering. If they do, or have a great deal of difficulty answering, they will likely never rise to a higher position. If, however, they are able to accept the question at face value, think it through, and present a cogent answer, they will likely be good planners who are capable of acting on their own without as much supervision as candidates who have no answer. They may even explain their answers to you as they figure them out. Bear in mind that they are probably explaining these answers to themselves, as well as to you.

Any candidate that asks why you asked either question is dead in the water. If they're that suspicious of your motives before they've even had a chance to see how devious you really are, you'll only have to replace them at some point, anyway. Why not choose someone better from the start?

Second Interview
For the second interview - if the applicant is good enough to earn one - invite employees in the department to which the candidate will be assigned to ask the questions. You should do this whether the person that you hire will be their co-worker or their manager. Do not tell them in advance what you think of an applicant; let them make up their own minds. Give each person who volunteers a copy of the applicant's resume.

After they are done speaking with the applicant, sit with them alone somewhere quiet and ask them what they think. Then listen. Then thank them for their input. Do not at any point try to persuade them to think differently or lead them to think what you think.

This process serves several important functions:

• Knowledge. Remember, these employees do this job every day. Who better to kick the applicant's tires? 
• Rapport. Your applicant will ask questions of potential team members that they might hesitate to ask you. This way, they can get a clear picture of what your corporate culture really is - rather than what you'd like to think it is - and whether or not they are likely to be happy there. 
• Ownership. Whether co-worker or manager, each employee has a stake in every new hire, since they will depend on the new person for some kind of support. 
• Buy-in. Because they were an active part of the decision-making process, your employees will more readily accept any potential hire - even if it's not the one they picked. (You, of course, always make the final choice. Never present your employees' thoughts, to them or to anyone else, as anything more than recommendations.)

Special Offers and Slippage

From time to time, you may offer your Customers some kind of discount or other special offer by means of some type of coupon, etc. Here are a couple of rules regarding offers of this type that no one seems to follow, and which end up costing you more than the coupon is worth:
The whole point of this type of offer is to make sure that as many Customers as possible know about it. Make certain that you send it out on a day that it will be seen (if via email, Tuesday or Thursday are best; if via social media, try Wednesday just before lunch in your target markets; snail mail, use an unusual envelope or arresting graphic on postcards).

Especially today, when Customers are barraged by marketing messages in literally hundreds of mediums, the best way to keep your message from getting lost in the howl is to send it to your Customers more than once, and in a variety of mediums. Post it ahead of time on your company's website, send snail mail the week before, do an email or newsletter blast the day of, have your reps call key Customers the next day to make sure they got the flyer/email/etc... The squeaky wheel really does get the best results and, if you do it in several mediums instead of hitting Customers multiple times using just one, your opt out rate is far less likely to spike.
Make sure that your employees - especially support and sales - know about the offer before it goes out. Nothing is more unprofessional than a Customer who knows more about your marketing efforts than your employees.

You have enough competition, right? So make certain that other departments don't have competing offers going out at the same time. (How dumb is it to compete against yourself? Yet I can't count the number of times that I've seen this happen, simply due to a lack of communication between departments and/or managers.)

Now let's talk about a key component of any special offer: slippage.

Let's say that you send your special offer out to 1,000 Customers. The offer should require that Customers validate the offer in some way - bringing in a coupon, entering a code into a web form, etc. This serves two purposes:

• It allows you to count the number of conversions so that you know the response rate. Without this, you have no idea whether or not the offer was successful. Remember: This is a business, not a club; guesstimating is for hobbyists. 
• It allows us to exclude Customers who did not actually respond to the offer - a practice known as 'slippage'. The worst thing that you can do is allow employees to push your offer to Customers who have never heard of it (and they will, believe me, unless you order them not to). 

There are two reasons for this:

• Your metrics regarding the actual response rate go out the window. 
• Your employee is offering a discount to a Customer that was willing to pay full price! Don't get me wrong - you want as many Customers to respond to your offer as possible. But you don't want to offer a discount to a Customer that was willing to pay full price, or you'll go broke, because it becomes habit and then 'the way we do things' overnight.

I can already hear you: "But Dave, if our Customers find out afterward that we had a discount and they didn't get it, they'll be mad at us!"

Bullshit. They may take it out on you, but they'll actually be mad at themselves for missing your offer. And we even have a way around that: Have a second offer available for exactly these Customers, not quite as good as the first offer, and let them know that you are doing this one time only and only because they are such a good Customer. (This will only work if everyone in your chain of command holds the line.)

You want everyone to hear about your offer, but you only want a certain number of people to cash in. That's how offers work: They drive additional business your way without you having to give up revenue. Of course, you honor the offer for everyone who complies with your terms, but for no one else. And from then on, your Customers will watch for your offers, and make sure they save them.

Out of the 1,000 Customers that you sent your offer to, you'll likely get 20 to 30 who convert and comply - 2% to 3%. But your traffic should bump at least 10%. That's a 7% to 8% uptick in business without any discount beyond what you would normally give a Customer without a special offer.

Ain't slippage grand?

YG5FWXED2V2D

Club or Business?

Your organization is either a club or a business. You have to decide which, because it can't be both.

Don't ask employees to perform personal tasks for you, such as picking up your dry cleaning, shopping for you, etc. Employees don't work for you - they work for the business, and asking them to perform these tasks - in addition to degrading them professionally - steals time away from the business.

Do you have any employees that you keep simply because you like them, even though their work is sporadic or mediocre at best? You don't have a business; you have a club. And you know what happens when a club competes against a business? It fails, because a business has its eye on the prize, and a club is all about comfort zones. It's not a question of whether or not your club will fail - only when.

That employee that you keep, maybe they're a friend of yours, or someone who's been with the company from the beginning, and you have some notion (or they do) that this accords them some kind of special status. Your other employees, most of whom are more productive and who produce better work, are aware of this and resent it - especially since, because you run a club instead of a business - this friend of yours likely makes more money than they do and may even have some special privileges as a long-standing club member. And you know what happens when those other, more talented employees figure this out?

They leave. And they get jobs with your competitors, because your competitors run businesses, and their businesses reward employees based on performance, rather than longevity or whether or not they play golf with the boss.

A club is a hobby, something to dabble in, but not to be taken seriously. That is why so many new so-called businesses fail: they are run by hobbyists. A business is run by professionals, people who want and expect to work every day, to actively compete, and to produce the best work that they are capable of.

Here's another yardstick to determine whether you have a business or a club: How often do you measure and assess each employee's work, sit down with them, and together plan ways for them to improve? If it's not - at minimum - once a year, you've got a club. And don't think you're off the hook if that annual meeting doesn't have at least a monthly touch-base to measure results against the plan that you and your employee put together. If that annual meeting is the only one that you have each year about their progress toward reaching their performance goals, you're still in a club.

Better start polishing your resume now.

The Power of Belief

The problem with trying to win people over regarding anything - issue, product, service, cause, etc. - is this:

No amount of information changes a belief.

It does not matter if you have the most prominent climate scientists in the world, or how many; if someone believes that climate change is fabricated, they will continue to believe that. If you believe that black is white and white is black, no matter how many flash cards you are shown, you will never see what anyone who does not share your conviction sees. Belief is that powerful.

Why? Because belief feeds pleasure- and comfort-inducing centers in the brain, even for those who tend to be thinkers rather than believers.

Basically, humans who believe something that is not based on fact are those whose cognitive mind is based more on intuition than on reflection. That is, they are more apt to 'skip ahead' to answers that require less conscious thought. For reflective minds, a series of easily confirmed facts presented by a source whom the observer recognizes as an authority is often enough... it's just a matter of getting your message out there. But for 'believers', even recanted statements and authoritative proof are not enough (witness Toyota's debacle with unintended acceleration). And because most people tend to congregate with others who think as they do, this confirmation of belief is constantly reinforced.

One of the positives of social media is that it is easier to directly interact with Customers than ever before. But one of the negatives is that, if a proportion of your Customer base is intuitive rather than reflective (and they are), a comment by someone who is not a fan of your organization on a blog, Twitter, or Facebook has the potential to drive away large numbers of other Customers - even if what they say has no facts to support it.

So what can influence belief in a positive way?

A better, 'hookier' story (that is, one that is more 'intuitively true') and a peer group whose ratio tips at least 70% in favor of the new belief, so that the believer feels that they are part of an easily recognizable majority. (This does not mean the majority of humans - just the majority of the people with whom they spend the bulk of their 'voluntary' time - that is, time away from work.)

The first part is relatively easy, but how do you encourage people to regularly interact outside their usual (like-minded) peer group? Especially when social media applications - for purposes of marketing demographics - keep herding us into ever-smaller, more narrowly defined 'communities'?

The first step is to identify which of your Customers are reflective and which are intuitive. This is easily accomplished with surveys, monitoring of Twitter, Facebook, industry-oriented blogs, etc. The next step is to state the facts in language that is appropriate to each group (the days of "one message fits all" are gone), and in forums that identify your organization as part of or affiliated with the group in question (obviously, not if they are a hate group or part of some other objectionable organization). This is most easily accomplished by explaining how your organization has supported Customers like the Customer whom you wish to reach, using examples that have value to that particular Customer segment.

Bear in mind, if your Customer base has a wide demographic variation, you may have to craft several different versions of your story to communicate it most effectively to each group. It also never hurts to enlist the help of prominent members of each group to help explain your position and to learn more about the concerns of each Customer segment.

At the end of the day, it is always better to build your base of support before something negative is said, so that your Customers already communicate with you regularly, consider you 'one of them', and are more apt to listen to your side than to someone who has no facts to support them. The most important thing, if something negative is said, is to answer instantly, invite the speaker to discuss the issue off-line, listen carefully to their issue without interruption, respond in a way that actually addresses their concern, and then ask for feedback.

Miserable SOB's & the (Self) Entitled

I have run a few call centers, now, and one of the things that you learn early on in that business is that customers come in a few basic buckets. Each bucket has its own needs and requires its own approach. Today, we're going to talk about two of the hardest buckets to tote.

MISERABLE SOB’S
Let’s start with the group that everyone really wants to talk about, anyway: Miserable SOB’s. Don’t you hate those? They have a shitty attitude and a shitty life, they’re having a shitty day, and all they want to do is spread that shit around. Whether complaining about something that was actually their fault, a change that actually makes things better for everyone but them, or some perceived bit of tomfuckery that was actually an honest mistake, Miserable SOB’s are the bane of customer service and support teams everywhere.

I know that you or your call center manager(s) and staff have probably been to more seminars and classes regarding this class of customer than you can count. How can so few people (roughly 3% of customers - less, if you’re lucky) inspire so much attention and dread?

And, of course, the big one: How do you handle them?

That’s not really what you’re asking, though, is it? If you’ve been to even one webinar on the topic, you already know what to say. The real question is, how do you successfully rebound from an MSOB call so that it doesn’t make you feel shitty for the rest of your day?

Simple: Pity them.

They have a shitty attitude, a shitty day and a shitty life for a reason. You’ll probably never know what it is. You don’t need to know. Maybe their parents were just like them, or worse. Maybe their spouse, boyfriend, or girlfriend treats them badly, or just left. Maybe they just found out that they got passed over for a job or a raise that they deserved, or found out that they’ll be laid off right after the holidays.

Maybe their son or daughter died.

The thing is, no one thinks of themselves as a Miserable SOB, but all of us have been one. The secret to not letting that call shit on the rest of your day is to ignore your natural instinct to bitch back or talk down. Instead, feel sorry for the miserable SOB. They have a shitty life, and you (hopefully) don’t. Why not be the little bit of sunshine in their otherwise shitty day? Whether or not they reciprocate, you’ll feel better, and isn’t that what you wanted to hear, anyway?

THE (SELF) ENTITLED
Who died and made them king (or, more likely, queen), anyway? No one, that’s who! You don’t give a rat’s ass that they’re doctor so-and-so’s wife, or that your company or another employee has ‘always done’ this or that for them, even when you know damned well that they didn’t, or they shouldn’t have, or that you’ll get in trouble if you do.

These royal-pains-in-the-ass constitute about 5% of customers, but consume roughly 20% of your resources, including your time and the time of your employees. And in return, they wheedle for every discount (whether entitled to them or not), freebie, and exception that you’re dumb enough to give them.

And there’s the issue in a nutshell: It’s not them, it’s you. They wouldn’t act like this if you didn’t encourage it by letting them have what they want. In the end, they are no different than spoiled children (hell, we both know that’s exactly what they’ve been since conception), and should be treated exactly the same way that you cure a spoiled child:

Say no.

Don't Screw Employees

Okay, you're right, what I really mean is, "Don't fuck employees". And before you click away in disgust, please allow me to explain the reason that this word is the one and only correct choice for this particular subject:

The fellow who deliberately cut you off in traffic, spilling your coffee and nearly giving you a heart attack, was he inconsiderate or an asshole?

There is no such thing, my dears, as an inappropriate word. All words are appropriate, given the proper context and timing. If the usage is apt, the word is appropriate.

Now let me explain why "fuck" is the appropriate word in this situation: It refers not only to the physical act in which you are the aggressor, but also to what happens to the career of the employee in question.

In this day and age, you would think this one would be a no-brainer, but we still see it happen on a daily basis. If you are ever tempted, or one of your managers is tempted, hit the affected individual in the side of the head with a brick until these thoughts go away. Aside from the fact that it may lead to a lawsuit that may cost you your company, consider this:

• If you think your diddling is a secret, you're wrong. At work, nothing is a secret. 
• Because nothing is a secret, all of the other employees at or below the position of the person that you're diddling will automatically assume that every choice assignment, promotion, or benefit that your diddlee receives is only because of the diddling. Even if your diddlee doesn't sue you, chances are pretty good that one of these folks will. Seen through the eye of diddling, everything looks like favoritism. And let's face it - it probably is. 
• Or - because you know how it looks - you withhold promotions or key assignments that the person you're diddling actually deserves, causing them to feel righteous anger, hurt, and sorry that they ever met your sorry ass. Oh - and if they don't sue you, you can bet that they're going to make sure before they leave that everyone in your organization knows what a sleazebag you are. They may even tell your Customers, as they are busy moving them over to their new employer. 
• It's just plain wrong, moron! Putting people below you (no joke intended) in this kind of position (sigh) is one of the worst abuses of power. They used to guillotine kings for this type of behavior, sportsfans, and rightly so.

Your honor, I rest my case.

Compensation as Behavior Modification

A currently popular saying regarding compensation goes like this: Hire 5, work them like 10, pay them like 8.

This philosophy is interesting, if a bit simplistic. You should of course keep your boat's crew as lean as possible, not only because it keeps costs low and productivity high, but because in the long run it will also save the overhead and stress of layoffs. Rewarding people for working hard is also good compensation policy, but the real issue is that lumping all of one's employees into this pot means that some are going to make more money than they earn, while others will make less.

There is a tendency to see compensation as one of two things: a necessary evil (in the case of hourly and salaried employees) or a means to drive performance (for salespeople and executives). But compensation is actually one of the most powerful tools that you have to shape all employees' behavior.

Employees tend to do what they are rewarded for, and tend not to do what they are penalized for. Setting an employee's entire compensation package according to some arbitrary measurement (such as local cost of living) or fixed rate (a so-called "industry norm") does not drive a desired behavior or penalize an undesirable one. Instead, why not start with a base package of some kind that is based on the lower end of the suggested range for a given position, and let anything above that - up to 20% of the employee's total possible compensation, let's say - be earned according to the accomplishment of specific, beyond-the-minimum-effort milestones over the course of the year?

The milestones, of course, must be mutually agreed-upon, and the reward clearly spelled out. You must schedule regular meetings to closely follow progress and ensure that the employee has the resources necessary to accomplish the agreed-upon tasks. And there should be public recognition for those who do (for some, this is even more motivating than money).

If employees fail to accomplish agreed-upon goals, they should not be rewarded. This may seem obvious, but it is amazing how often it happens. If you're running things correctly, only those who perform according to clearly defined metrics should get anything - not those who go out for a beer with you or happen to work in the home office, where promotions seem to happen faster than at any other location in the company.

A reward system allows employees in each department to communicate where they think the holes are in the organization, empowers them to address them, helps them to grow (and shows you who is ready to move up), rewards employees for doing more than the minimum, and even makes them feel good about it.

If you're lucky, it might even take that chip off of everyone's shoulder about how salespeople are paid.

Customer = Prospect

Customer loyalty is at an all-time low. On the plus side, this means that competition is fierce. Fierce competition has a tendency to shake out the dross. No dross drives good organizations to either play their best game or fail.

Exciting, isn’t it?

It is a terrific time to win new Customers. There’s just one problem: They’re not new Customers, even if they purchase from you. Today, tomorrow, and for the foreseeable future, every Customer is actually a Prospect.

Prospects must be won over each and every day, with every at bat, over and over again, no matter how many times they purchase from you.

Again, the good news is that organizations that deliver the 3 Expectations (Zero Defects, Timeliness, Personalization) have the opportunity to win unprecedented market share.

The bad news? Those that don’t will lose it.

Customer Retention: The Holy Grail

Most organizations receive the bulk of their revenue from Customer retention, yet spend most of their rewards, time, attention, money, and focus on Customer acquisition. It is almost taken as a given that, once acquired, Customers will stay. If they leave - unless they are a major account (in name, revenue, or both) - little or no thought is typically given to the cost... not just of the lost revenue, but to acquire another Customer to take the departing Customer's place. (This also does not take into account the ripple effect of dozens - even thousands - of other Customers who hear bad things about you from your lost Customer, in person or via the dozens of social media tools currently available.)

Lost Customer Cost = Lost Customer's Revenue* + Cost of New Customer Acquisition

Companies that ignore this basic fact have a tendency toward lower profits, overspending on marketing to attract new Customers, and acquire new Customers that have a lower revenue value than lost Customers. The end result is often failure of the business.

The true value of a given Customer is not determined by their most recent purchase or payment, despite the fact that salespeople (and, all too often, their managers) have a tendency to think this way. A Customer's true value is the revenue that they produce over the lifetime of their account, less any costs associated with that account (overhead, discounts, commissions or bonuses, entertainment, etc.).**

The cost of each new Customer acquisition is the total amount that your organization spends on marketing each year divided by the annual response rate (that is, how many Customers purchase from you vs. how many you sent your marketing material to).

New Customer Acquisition Cost = Total Annual Marketing Costs/Annual Response Rate

Let's say that you put out a catalog 4 times a year, and that the cost of each issue (production + mailing) is $2.50. If 2% of the people that you send your catalog to order from you (a reasonable response rate), your cost to acquire a new Customer is $500 per Customer. (This same formula can be applied to radio, TV, Google Adwords, social media campaigns, etc.)

($2.50 x 4)/.02 = $500.00

Now let's say that your average Customer spends $200 per year with you, and that it takes you an average of 6 months (or half a year) to acquire a new Customer. In that case, each lost Customer costs you $600.

($200 x .50) + $500 = $600.00

If you keep your Customer retention rate at 80% or per year - considered a reasonable metric, in many circles - you still have to replace 20% of your Customers each year just to stand still.

Let's say you have 1,000 customers. That's 200 customers at $600 each that you have to replace - $120,000 right off the bottom line - each and every year.

You might as well set your money on fire.

Some organizations respond to this pressure by raising prices for those Customers who remained loyal. This is like taxing your Customers for doing business with you instead of your competitors. Your competitors will love you, of course, but they'll be alone. Unfortunately, so will you.

At this point, you have essentially burned your business to the ground.

Let's consider an alternative: Suppose you took 1/4 of the money that you normally spend on replacing lost Customers and applied it to Customer retention. Spread across your 1,000 customers, that $30,000 could go a long way, and at a cost of just $3 per Customer. And each Customer that it saves also saves you $600. So what do you do with that $30,000?

Here are some ideas (I'm sure you can think of more):

• Give loyal Customers a discount on any orders above their traditional spend. 
• Award bonuses to sales and/or support staff who surpass a certain retention rate with their assigned Customers. (Make it a stretch - the money it saves is yours.) 
• If you like team-building, create a team-based contest with an overall retention goal. The team that beats the goal by the largest percentage gets a dinner on you, an extra paid day off (everyone loves these, and they cost you virtually nothing), a trip, etc. It all depends on your budget. 
• Whoever collects the most Customer referrals or positive quotes that can be used for marketing (such as on your website) receives free tickets to a show or sports event of their choice. 
• The employee with the highest retention rate for the year receives formal recognition from the entire company. President's Club, if your organization has such a thing, and the full deal, not some watered-down version (remember, this person likely saved you more money than your best salesperson made for you).

* The figure for your lost Customer's revenue is the revenue they would have generated during the period until you find another Customer to replace them whose annual revenue equals or exceeds the annual revenue produced by the lost Customer.

** Harvard Business School Publishing has an excellent Flash-based tool to calculate this.

Pocketing & Knowledge Retention

Two of the most frequent communication failures for organizations are pocketing and knowledge retention.

Pocketing occurs when an employee - anyone from an entry level hire to the CEO - learns something new and does not share the information. This is most frequently unintentional. In many cases, they may assume that what they have just learned is something that everyone else already knows. Even if they do share this knowledge, it is unlikely to travel beyond their immediate working group or hierarchical strata. As a result, their knowledge exists in a pocket. Unfortunately, oftentimes this knowledge is something that would have helped the organization make or save more money.

Knowledge retention works like this: You spend a great deal of time, money, and effort training new hires. The longer they stay, the more they learn on their own. Because of pocketing, when layoffs occur or when a knowledgeable employee leaves the organization for other reasons, their accumulated knowledge goes with them. The loss of this information often costs the organization money, if for no other reason than that anyone new is likely to make many mistakes learning the same lessons on their own. Leaving aside the cost of having to train someone new from scratch, why in the world would you want to keep reinventing the wheel?

There are two solutions, and both are necessary: First, run your organization as lean as you possibly can - especially mid-level and senior management staff, where costs and knowledge tend to pool. Second, invest in a shared knowledge base.

Originally, knowledge bases were the province of technical support. Today, any organization without one operates at a serious deficit. Whether a full-blown wiki, intranet, or something as simple as a collection of Google Docs, encourage everyone to contribute (and I do mean everyone), and make sure that everyone has access to view everything (but limit edit rights to each document's author or work group). Make it a living, breathing resource, with someone in charge of keeping it organized, up to date, and eliminating redundancies.

Think of it this way: What would happen to your organization if you were hit by a bus tomorrow? What if it was your head of sales, marketing, product development, or a key member of your sales, customer service, or technical staff? The amount of information that goes into your knowledge base should be complete enough that if this actually happened, your replacement (or theirs) could walk in tomorrow and immediately take over, with minimal impact on the organization.