Community Economic Development Fund


All about people and processes.

How do you handle an employee’s big mistake?

There’s a well-worn business story, likely worked over by the internet to the level of urban legend. The tale’s wisdom makes it much too good to debunk. Thomas J. Watson, the CEO of IBM supposedly is confronting an employee over a very expensive mistake. The employee naturally expects to get fired, but Watson is said to have replied, “Fire you? I just spent $$$$$$$ (legendary amount of your choice) educating you.”

Small business owners aren’t usually the victim of an employee’s million dollar mistake. Or at least none survive to recount the story. But serious and costly errors do occur. The question is how to respond. Retribution? Sanctions? The options may be limited by employment law, if not practicality.

It may be hard to take much of a leadership lesson from an executive who last worked for the corporate giant in 1956. A more contemporary and easily appreciated story comes courtesy of Philadelphia Eagles quarterback Nick Foles. This article recounts how he counseled receiver Alshon Jeffery recently after he missed what could have been the game-winning catch.  You don’t have to follow football or be familiar with the Cinderella story of the Eagle’s Foles to admire his reaction to his devastated teammate as he processed his own disappointment at losing the big game.

This episode allows business owners to ask themselves whether they could control their own anger and disappointment over a big loss and instead use compassion and long-term thinking in the recovery.

Does 1 + 1 equal more than 2 ?

The work, worry, and sacrifices required of those going into business is not much of a secret. Any entrepreneur paying attention knows they will be in for an experience with the potential to drain their health, wealth and heart. So why don't more small business rookies look for a partner to share the burden?  This article describes five reasons that connecting with a partner may be a smart move and four realities that should make you think twice.

To these lists let's add some additional considerations. Among the reasons listed in CEDF's Financial Fundamentals course for why some businesses fail is: Too dependent on a collaboration. Partners can be great until you no longer have a partner's critical skills contributing to the operation, and that will  probably be combined with insufficient cash flow to replace the talent. Then you might be doomed.

If you imagine, instead, that your operation would be better if you lost your partner, then either a wrong choice was made or the collaboration was unnecessary from the outset.

Settling the wisdom of taking on a partner or not should be a matter of simple arithmetic. 

Does one plus one equal more than two?  In other words, is the combination of talents likely to create more productivity than the sum of the same individuals working at identical endeavors alone? This might be because of a game-changing innovation that collaborators produce. Or it might be because of scale. The work required to get a foot-hold in an industry might simply need to operate at a speed higher than a single person can generate.

Or is the partnership a substitute for lonesomeness that could be better solved by just turning on the radio?

Action -- the best insurance of all

When personal computers began making their way into businesses in the late 1980s the country saw a huge boost in productivity and companies quickly became reliant on their cyber-servants and the information and crucial processes they controlled.

In those days, a computer crisis almost always involved a technical failure of a component and/or the ineptitude of a human being who failed to make a data backup or triggered the erasure of records. Those problems still exist in varying forms but the biggest worry now is the malicious intent of human beings, whether inside our organizations or hiding in some distant cyber “back alley” waiting to burglarize and seize control of our systems.

Jennifer McEwen, who earlier this year presented the seminar “Why Bad Things Happen to Good Business Owners” a program explaining the basics of prudent insurance coverage, has written an article for her company’s blog highlighting cyber security best practices. It’s a great summary of the threats and provides a useful checklist for every small business owner to avoid disaster.

Unlike natural disasters that can’t be prevented, only defended against, many of these threats can be averted through proactivity.


Goals and systems can work together

By Frederick Welk
CEDF Business Advisor

Having begun my business career in a chain store retail environment the importance of achieving measurable goals -- particularly sales increases -- was baked into my brain. This was an era of very high inflation and a business that was not growing in step with rising prices was actually losing ground. It still makes for a feeling of puzzlement inside me now, decades later, when I encounter CEDF clients who do not establish relevant, defined goals for their own business growth.

Along the way, by owning my own retail operations, I began to better understand the nuances of defining goals and motivating teams to accomplishing them. If for example, one has a location impacted by a major change in customer traffic due to the disappearance of a nearby major store, the underlying need to accomplish growth doesn't go away, but the management approach sure does. When your team is feeling discouraged over the difficulty -- if not impossibility -- of achieving a goal, you need something besides a bigger whip.

This is just one situation where systems should take the spotlight. Like a baseball batter in a hitting slump who refocuses on fundamentals, systems can mitigate or even turn around what seem to be intractable challenges.  But effective systems have to already be in place and ready to reach for. Perhaps, because I spent so many of my early years as a systems-builder in the organizations where I worked, the need for systems and processes seemed so obvious, for years I didn't understand their real value in supporting the accomplishment of goals.

I've run across a few articles in recent years about using systems over goals. Some by cartoonist Scott Adams inspired discussions in our Small Business As Usual podcast 18-4 with Caleb Roseme.

It appears others were impressed with the Adams approach because this author wrote a great straight-forward interpretation.

But I don't completely agree. A ship can have an efficient crew, working with great efficiency, but the rudder has to be pointed in some direction. As baseball great Yogi Berra supposedly said, "If you don't know where you are going, you'll end up someplace else."

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