Planning – Need a Game Changer? Ford, Seahawks Are Good Case Studies

 

If your business is performing in a mediocre fashion, chances are your company needs an overhaul. A culture change, if you will. For positive case studies in change-management for a game changer, take your pick – either Ford or the Seattle Seahawks will suffice. Such best-practices in cultural change-management work for nonprofits, too.

Game-changing requires an assertive, strong administrator, especially because all such organizations go through humbling experiences. Strong visionaries know how to profit from ego-destroying events.  Effective managers have been the catalyst for Ford and the Seahawks.

First, let’s consider one of the salient Ford headlines, such as: “Ford Makes Comeback From the Brink to Billion-Dollar Profit.

Actually, Ford’s fortunes began to improve when it looked outside the carmaker for solutions to its challenges. The automaker recruited Alan R. Mulally from Boeing.

The irony is that Mr. Mulally had his own ups and downs, of sorts. He had been bypassed twice by Boeing for the CEO’s job. But he was able to put his full talents to work at Ford. 

Not to oversimplify, Mr. Mulally has notably installed a competitive, sustainable business model. He simplified production processes. Managers, in effect, were told to change their perspective on change. He inspired a positive balance sheet by taking strategic steps on Ford’s cash flow. 

Unlike Chrysler and General Motors, he didn’t seek a government bailout. This meant Ford was able to focus on being proactive, for example, development of new vehicles – cars consumers would buy. Ford would not be hamstrung by bailout cash-flow constraints. Chrysler and GM became beholden to the government – bureaucrats called the shots. Ford didn’t have to resort to discounting and incentives to attract car buyers.

Ford’s brand image skyrocketed as Chrysler and GM suffered from poor images – they were only able to survive with the help of bailouts and bankruptcies.

In other words, Ford’s success was summed up by this headline: “Ford Says Culture Change Has Led to Success.”

Seahawk lessons

So why are the Seahawks a good case study? For starters, let’s consider the headlines, such as: “Seahawks stun defending champion Saints.” There were more than 2,800 such headlines on the Internet referring to the Seahawks upsetting New Orleans, 41-36, in the first round of the National Football League playoffs in the 2010 season.

Just as Ford’s comeback was launched when Ford hired Mr. Mulally, the Seahawk comeback started when owner Paul Allen hired Pete Carroll as head coach. Mr. Allen has a good eye for talent.

Previous, Mr. Allen astutely hired Green Bay Packers Head Coach Mike Holmgren. Among his many accomplishments, Mr. Holmgren won at Green Bay, and he’s credited with the development of quarterbacks Steve Young and Brett Favre.

The management mistake, however, was that Mr. Allen installed Mr. Holmgren as both his executive vice president/general manager and head coach. As a Biz Coach, I wrote then that Mr. Holmgren couldn’t adequately handle executive and coaching responsibilities – a classic case of the Peter Principle – people rise to their level of incompetence. Mr. Holmgren is very talented in coaching and developing quarterbacks, but being an entrepreneurial chief executive requires much-different skill sets.

It’s not just a matter of knowing football. Many businesspeople make the same mistake. They only consider hiring people from their industries without regard for all the necessary skill sets. Mr. Mulally didn’t have automotive experience, but his management and manufacturing skills were transferrable from the aircraft industry. Simplly put, solid business principles are applicable in all industries.

It wasn’t until Mr. Allen removed the executive chores from Mr. Holmgren that the Seahawks finally made it to the Super Bowl in 2005 to play the Pittsburg Steelers. Only bad officiating kept the Seahawks from being world champs.

Meantime, Mr. Holmgren appears to be making the same mistakes. He’s been president of the Cleveland Browns since late 2009. Press reports indicate Mr. Holmgren is searching for a new head coach, and may consider being the team’s coach, too.

Mr. Carroll’s initial 7-9 season was judged to be lackluster, at best. But all was forgotten when his team, a 10-point underdog, upset the New Orleans Saints in the first-round of the playoffs. Most fans consider the game to be one of the biggest playoff upsets of all time.

True, I’m located in the Seattle area, but my Biz Coach sense is that the Seahawks are the most-dangerous team in the playoffs. Why? They continue to evolve and will continue to be under-rated, even though the playoffs are, in reality, a new season.

It’s obvious Mr. Carroll, like Mr. Mulally at Ford, has adroitly installed a change in the team’s culture. With the general manager, John Schneider, Mr. Carroll has overseen 275 roster changes on the 53-man squad.

Despite his sub-.500 2010 record, Mr. Carroll is not embarrassed and motivated his team to great heights. Twice, the Seahawks trailed the Saints by 10 points but didn’t give up and stayed with a resourceful game plan. They put 41 points on the board against a superb defensive team.

Not to overlook everyone’s play, among the highlights: Matt Hasselbeck, a 12-year veteran, had his first four-touchdown playoff game. To ice the game Marshawn Lynch delivered the team’s first 100-yard game this season in breaking eight tackles in his miraculous 67-yard touchdown.  

Much has been written about the cacophony of the Seahawks’ twelfth man – their raucous hometown fans at Qwest Field. But guess who motivated the fans in the week leading to the playoff game?

Mr. Carroll made good use of his Twitter account (or at least his representative did) in inspiring fans to be loud and vocal at the game. His boyish enthusiasm is fun. Mr. Carroll’s attitude is contagious and worth catching.

Such passion begins with enlightened management. That’s what I’d call Messrs. Mullaly and Carroll.

Steps to success

Here are the basic ingredients for a business game-changer:

Management – True leaders are strong, knowledgeable, and manage risks. They oversee all fundamentals but delegate – finance, marketing, operations, product management and customer service. Executives must also have a team spirit – an environment of collaboration.

Vision – Top managers possess skills in analyzing their strengths, weaknesses, opportunities and threats in strategic planning. They avoid complacency and must continually fine-tune the company when appropriate. That means habitually practicing the Principle of Contrary Action, which is a process of learning how to keep an open mind.

Focus – Managers must outline their master plan, stay focused and inspire the staff – the frontline responders to the marketplace – where the proverbial tire meets the road. Nothing great has ever been accomplished without enthusiasm and passion.

Best Practices – Senior management must inspire best practices for quality in all areas. Creating value is job one.

Mobility and flexibility –The 21st century marketplace requires quickness and mobility. This also means empowering all workers in decision-making and in being proactive.

Listening skills – Effective managers are approachable. In a proverbial sense, they walk the floor twice a day to interface with their employees. They hire managers and staff members who, too, are effective in listening skills. That’s the first step for a motivated staff and creating profits. Without even looking at financials, an astute outside participant will always be able to ascertain the success potenial of a company merely by watching the interactions between management and staff.

Communication – Good, open communication is required internally with the team members and with the customers and marketplace. In this way, you’ll take great steps in inspiring loyalty from customers.

From the Coach’s Corner, here are related topics:

Solutions to Rejuvenate Yourself and Business

Leadership, HR, Marketing Lessons from HP’s Executive Turmoil

How to Get Results from Your HR Training Investment

Business Got You Down? Tips for a Morale Boost

Leadership Strategies to Profit from Employee Respect

Largest Ever – Is GM’s IPO Political or Practical?

 

Aug. 19, 2010

A leading expert on initial public offerings, Francis Gaskins, is not wowed by General Motors’ IPO – to say the least. That’s despite GM being profitable in the first two quarters of 2010. Its Q2 sales of $33.2 billion led to a $1.3 billion profit.

In filing the IPO, the company is anxious to return to Wall Street by shedding its nickname, “Government Motors.” The manufacturer’s demise resulted in an unpopular bailout and the second-largest industrial bankruptcy in history.

GM’s bid to return to the New York Stock Exchange followed a 700-page document filing at the U.S. Securities and Exchange Commission. GM plans to use the ticker symbol “GM.” It also hopes for a listing on the Toronto Stock Exchange. But the ticker symbol hasn’t been determined.

To fully pay back taxpayers and all stakeholders, GM’s IPO would probably have to raise$70 billion. The government has a 60.8 percent stake in GM after giving the company $50 billion in 2009. The United Auto Workers Union has a 17.5 percent ownership. But $2.1 billion in preferred stock is owned by the government and will not be included in the IPO.

Widely respected for his views, Mr. Gaskins gives the IPO a thumbs-down. He publishes IPOdesktop.com, which is called “Forbes Best IPO Site.” His Twitter account: www.twitter.com/ipodesktop.

His succinct tweet: “No rational reason to value GM’s IPO more than Ford. Implies big loss to taxpayers.”

Far from being a mere harsh critic, Mr. Gaskins is scholarly, one of the nicest people I know, and is even artistic as a violinist — except he doesn’t fiddle around in an IPO analysis.

The Wall Street Journal reports 10 investment banks will implement the IPO – historically, the largest group of financial institutions ever in a U.S. IPO.

The newspaper reports the banks include: Morgan Stanley, J.P. Morgan Chase, Bank of America Merrill Lynch, Citigroup, Goldman Sachs Groups, Barclays Capital, Credit Suisse Group, Deutsche Bank, RBC Capital Markets and UBS.

Each is reportedly providing as much as $500 million in credit.

My recollection is that GM got into trouble following its weak sales, high material costs, and too-high union wages and pension costs. Many taxpayers and pundits criticized the government’s bailout of GM by calling it an administration payback to union supporters without enough consideration for taxpayers.

Now, questions abound over GM management’s expertise and financial reporting, which are among the reasons Mr. Gaskins isn’t confident about the IPO.

“They don’t know what’s happening,” he says.

What about the IPO’s timing? My sense is it appears the government is pushing the deal in advance of the Nov. election so politicians can escape more criticism of the unpopular bailout.

If asked, Mr. Gaskins says he’d tell the government: “I would say don’t do the IPO.”

Translation: If you are an investor, read the 500+ page IPO prospectus and do your due diligence. This IPO appears more political than practical.

P.S. The irony is that GM is now producing some outstanding vehicles, especially Buick. The legendary model’s sales are up 137 percent.

From the Coach’s Corner, to see Mr. Gaskins’ astute analysis on Bloomberg Television: http://bit.ly/dd1LE4.

Disclosures:

• Mr. Gaskins and I are fellow members of Consultants West, www.consultantswest.com, an association of veteran consultants.
• My firm has had multiple GM dealers as valued clients, and has benefited financially by recommendations from GM sales management.

Investor: Tips for Increasing Cash Flow, Profits

 

For a growing business, cash flow is crucial for profitability. That’s also true for the biggest companies and sectors traded on Wall Street – airlines, cars, financial services, oil or technology.

Every company is concerned about cash flow; but in 2008, 128 of the Fortune 500 companies in the nation had red ink. They include General Motors, Citigroup, Motorola, AIG, Merrill Lynch, ConocoPhillips, and Time Warner.

Cash flow enables you to make productive decisions to navigate and grow in the competitive marketplace.  

No one knows that better than angel investor John B. Dimmer, the managing member in FIRS Management LLC, a private investment firm based in Tacoma, WA.  He is also a director at three companies and has extensive management experience.

Here is a sample of his cash-flow solutions:

Q: How do you recommend predicting a cash-flow crunch in time to do something about it?

A: You need monthly income and expense forecasts that are established at the beginning of the business year. These must be realistic numbers that all of the management staff has agreed are reasonable. The second things you need are timely and accurate financial statements.

It is very much like planning a road trip in the car. You are trying to get from point A to point B, so you plot a route. You know that there are landmarks along the way. Every now and then you need to stop and check for these landmarks. If they show up where you expect them, you know you are on the right track. If not, you need to evaluate how far off course you are, and take corrective action.

Q: What strategic process do you recommend to evaluate the causes of cash deficits? What are the most promising solutions?

A: Getting back to our roadmap analogy, if you don’t see a landmark that should be there, or you find a new landmark that wasn’t on the original plan, you need a process for getting back on track. You need to take the time to evaluate where you are, where you should be, and what went wrong.

When you are off plan, there are some fundamental questions that need to be asked: Was the original plan flawed? Has there been a fundamental shift in the business such that the original plan is no longer applicable? Did we make an execution error? When, where, and what was it? Can it be corrected? What are the critical variables with respect to getting back on plan?

Usually this involves one primary variable, which is money. Whatever solution you take, you need to make sure you have enough money to fund it through implementation.

Q: How do you recommend finding creative ways to keep the business alive until sales pick up?

A: One of the mistakes I often see are entrepreneurs who staff their organizations under the assumption of optimum activity. The truth is that there are cycles to business. While not all business can use contract help, I like to try and have my companies staffed to a smoothed-average that is just above the troughs and just below the peaks. In this fashion, you can quickly and effectively reduce your labor costs in times of a slowdown without causing a morale-crisis with your permanent employees. I would also use slower times to beef up on training in preparation for when the good times return.

Finally, encourage your staff to make things happen. When we hit a slowdown in the car business, we ask our sales staff to get on the phone and start calling people. This usually starts with former customers and takes the form of a friendly call simply to inquire how everything is going with their car. Often times, you discover that they love their car, and they have a friend who is interested in buying a new car. Sometimes you find that they love their car and they want to buy another. And sometimes you find that there is a problem. Problems, however, create opportunities. If you invite them to come in, and then solve their problem, they will remember that you were proactive. They will tell their friends about their experience, and their friend will come and see you for their car needs.

Q: What about negotiating with investors or other financial supporters until cash flows increase?

A: Investors hate bad surprises, especially when the surprise is accompanied by an emergency need for funds. Assuming you created the roadmap, and are tracking your progress, you should be able to see the bump in the road well before you actually hit the bump. Most investors are business people who have been down the road before and know that everything is not smooth sailing. They will appreciate the fact that you have a plan, that you are tracking your results against the plan, and that you have foreseen a problem before it hits.

Generally cash flow problems mean you need to borrow more money or raise more equity. If such is the case, have your presentation for raising new money ready to go so that you can transition from the communication stage to the pitch. Be humble, because the last thing I really want to hear as an investor is how smart you are and how great everything is going when, in fact, you are off plan and running out of money.

Part of the negotiation is an acknowledgement of the problem, a rational analysis and a well-crafted solution. You, as the owner, may need to take a bit of a hit in order to implement a solution. This might come in the form of a down round of fundraising where you are force to make up the dilution to the other shareholders out of your own holdings. Know what you are and are not willing to do. If you are forced to give up something to keep the company alive, figure out how to get it back, perhaps via options, if your revised plan was the proper call and the company comes roaring back.

Q: How do you know when it’s time to close or sell the business?

A: I always want to stay in the game, even when it is two outs in the bottom of the ninth inning, you are down by five runs, and the count is full, there is still a chance you can pull off a win. Nonetheless, I try to keep entrepreneurs from getting in so deep that if their company fails, they are wiped out.  I’ve been involved with two companies where I had to tell the entrepreneur that they shouldn’t put any more money into the operation.

In one of those instances, we were able to locate a buyer for the company. The purchaser was a publicly traded entity that, since the purchase, has taken a bit of a down-turn, so the jury is still out as to whether the entrepreneur will come out whole. Nonetheless, it was a better option than closing the doors. With the other company, we have what we feel is great technology; we just can’t seem to get a revenue stream developed. We are in the process of procuring a patent, and think that it will have good commercial value once the patent is issued. Accordingly, we have put the operational aspect of the company in suspense, and are pursuing acquisition opportunities.  The biggest risk on this strategy is a failure to cut a deal followed by an impotent patent.

I never advocate simply closing the doors. If you are doing proper planning, you should see the problem coming down the road. There should always be something saleable about your company, even if it is less than a full recovery.

From the Coach’s Corner, Mr. Dimmer’s other tips: 

• “How to Attract an Angel Investor” – www.bizcoachinfo.com/archives/1367
• “How Investor Has Fun in Business and Technology” – www.bizcoachinfo.com/archives/1272