Why Employees Stay

From Google’s VP/People Operations: “It’s not the company-provided lunch that keeps people here. Googlers tell us that there are three reasons they stay: The mission, the quality of their fellow workers, and the chance to build their skill sets. All our analytics are built around these reasons.”

Motivating The Generations

With so many generations in the workplace right now, and often interrelating on projects, to manage them requires an understanding of what’s “of value” to them.

Here’s some guidance, provided by Melissa Borowica and Stephen Utech of Utech Consulting:

• Traditionalists (Before 1945): Want to leave a Legacy, so create opportunities that will have lasting impact. Learn from them. (75 million)

• Baby Boomers (1946-1964): Want to build a Meaningful Career. Challenge them. Use their Creativity. Insure they have Impact. (80 million)

• Generation Xers (1965-1980): Want to build a Portable Career. Invest visibly in their development. Show them a career path. (46 million)

• Millenials (1981-1999): Experimenting. Give them new positions, new challenges, a relocation opportunity. Title isn’t as important as personal growth. (76 million)

You’re Over-Burdened and Aren’t Achieving What You Want To

Mary Gulden-Lindstrom of FOCUS/CPA: “What do you need to STOP DOING so you have time to do WHAT’S NEEDED to Get What You Want?”

How To Sell Value To A Price Buyer

One of my favorites is Jim Nelson of Exsell in Green Bay. He has great ways of explaining what you should do in selling situations. Here’s the short version of one of his approaches:

• Your Mindset: To proactively discover with the prospect what his fear is, and how he can relieve it with your help!

• Why people will use you or your product:

To move away from a Pain.

To Exploit a Possibility/Opportunity

To Acquire a Gain.

Fear of the Uncertainty in the Future.

An Unmet Need, that usually can’t be easily described.

• The prospect is usually UNCLEAR about what the objective is, and it’s your challenge to help him work through to CLARITY about the problem. Interestingly, it’s often the case that they don’t understand the problem/objective, and are very amenable to your help in trying to understand and articulate it. It’s your OPPORTUNITY. Then, the solution is usually much easier to see and understand, and you will be explaining it in terms of what YOU can do to help.

• If you’re not successful, it’s because you didn’t make him feel SAFE about using you.

Corollary

You want to be seen NOT as what you do NOR as a PROVIDER OF SOLUTIONS, but as an ADVISOR who works with the prospect to understand a problem and its potential process. You are appreciated for your PROCESS, HOW you do what you do ... NOT WHAT you do.

I constantly hear TEC members beginning to understand this revelation. It’s their REAL POINT OF DIFFERENCE.

St. Norbert's Breakfast & Strategy Program: Poberezny

I’m a big advocate of this program, which spotlights 6-7 local leaders annually on how they think and lead their organizations. I learn a lot, and so might you.

A recent speaker was Tom Poperezny, CEO of the EAA/Experimental Aircraft Assn. Among his tidbits:

• The most important intangible that you want to find and nurture within your organization is Passion. It’s critical to understand it, and know how to leverage it.

• Know Your Cause. If you’re believable and trustworthy, people will adapt their beliefs to follow you. But remember, being believable and trustworthy isn’t about what you say, but how consistently you act.

• As a leader, you have to raise the bar of performance every year ... starting with yourself. What are you doing this year to build yourself further towards excellence?

• Be proactive about developing a successor. You are taking your organization to a new level, but your replacement needs to be capable to taking it even further than you can. Are you finding that person?

• Preparation and Practice mitigates Risk! Are you doing that constantly in your organization? Business tends not to, although athletic teams do it constantly. Even Flying isn’t very risky if you do your preparation!

The United Way "Culture" Change ...

Recently, I had the opportunity to hear Brian Gallagher, national president of the United Way organization, speak in Green Bay about how they are trying to be relevant ... WHAT they are trying to accomplish, and HOW.

• “We’re in the human development business.”

• Here’s the Big Three we’re focusing on: Education, Family Income and Health.

• Within these three areas, pull together local leaders to decide what are the most urgent areas to attack. Then, decide what Metric(s) to use that will impact all others, and get community attention. Supplement that with being proactive about raising the visibility of the emotional needs and desires.

• Then, Mobilize around those thrusts ... Focus, Visibility, Impact!.

• Make sure Social Media plays a part in the campaign so as to reach younger mindsj.

Sounds good.

Famous Last Words ...

"I DID IT M-Y-Y-Y-Y WAY!"

Next Chapter: Why Is Our Government System So Obtuse?

I’m informed by a friend at Associated Bancorp, which will now have to deal with the cost increases of the Dodd-Frank reaction to the credit crunch/mortgage problem, that the paperwork reporting requirements will skyrocket. Whereas now there are about 30 key Regulations that bankers must follow and report on, the Dodd-Frank bill proposes 263 more. These are for banks which didn’t cause the problem. In addition, there will be required 22 new annual reports, and 67 one-time ones.

Two Great Recent Books by Local Authors

On the Mend: Revolutionizing Healthcare to Save Lives and Transform the Industry, by John Toussaint and Roger Gerard of ThedaCare. The two have led a revamping of the ThedaCare culture to do what America’s healthcare system ... to switch from doctor-centered to patient-centered. They’ve done it through embracing the Lean continuous improvement concepts, constantly starting with what the patient needs. The results in area after area are solid, resulting in significant cost reductions ... the reverse of where the industry is going, but where it needs to go.
Blame in the Workplace, by Dan Linssen. Dan has a great background with local companies, and this book is a good contribution. He talks about WHY we’re prone to blame (it separates us from accountability/responsibility for problems, exactly the opposite of what is needed ... to get more involved), and what happens with the person who is blamed (not good, not productive). He helps us understand the differences between blame, accountability and responsibility.

Lee Thayer on High Performance Leadership

My favorite leadership guru is Lee Thayer, now 83-years-old and living in a glass house in the mountains of North Carolina with no fear of confronting anyone as long as it is on high performance leadership!
In August, he presented to a number of my members on his views, which are summarized below.
If you decide to purchase one of his books, be prepared for a difficult read. As he says, "It was difficult to write it, so I want it to be difficult to read."

His books include: “Conversations,” “Leadership: Thinking, Being, Doing,” and “Leadership Virtuosity.” He is working on “The Competent Organization.”
Who does he read? Romanian Emile M. Cioran (1911-1995) on philosophy.
Here are some of Thayer’s points:

• Of Delta Airlines: “Sorry, there’s no hope for you.”
Of McDonnell Douglas two decades ago, with its 44 SVPs: “Too much bureaucracy to be high performance.”
• “A high performance organization is one that does everything it does better than anyone else ---- and improves upon that every day --- giving that organization a sustainable competitive advantage.”
• How to objectively see reality: First of all, Self-Deception. You don’t know who you are or they are, so you misinterpret what you are looking at. Make sure you know your Cause. Secondly, start with what people are saying about you. That’s the reality that matters.
• How to recognize a High Performer:
1. He/she sees/recognizes/thinks “out of the box” ... trends that most don’t see easily, not conventional observations.
2. Asks questions about “how to be better.” Are those the questions being asked?
• We don’t measure or pay for Intentions or Entitlements. We measure and pay for Performance.
• Exceptional CEOs ask FOUR questions to every one statement. They are consummate question-askers. They are not in the “Answer Man” trap.
-- We have Habits ... No, Habits have Us!
-- If too used to providing your answers, then get a neck brace which prevents your jaw from working.
• CEO’s job includes:
Setting the Cause/Vision of the organization ... and then “composing” the organization to achieve it. “Here’s our Cause. Do you want to pursue that? If so, join. If not, don’t.
Reading people for their ability to contribute to the CEO’s Cause.
Measuring the things that count ... not just what’s countable.
• “Don’t tell me what you know. Tell me what I need to know.” That will make the organization obscenely effective.
• Micro-Managing: Incompetents will never improve. Competents will leave.
• On Teams: Teams are ineffective because they’re the wrong emphasis. The correct emphasis is on “personal Competence.” Decide the roles you need, and then find people who are the Most Competent in those roles.
• The payoff from “training” itself is small ... but the payoff from an individual with drive to be Competent (more and more Competent, a True Learner) is enormous. A Competent person is ALWAYS Dis-satisfied, always growing before your eyes. If a recruit is interviewing YOU, and not vice versa, you have a “live one.”
-- People don’t learn from their experience, but from their interpretation of that experience. Our job is to help them arrive at the interpretation that best moves us to serve our customer. Thus, each person needs a Mentor, the same mentor for each type of challenge so that the interpretation message is the same.

On Hiring
• Hire people who are in a Learning Mode, not worried about credentials. How many questions did he/she ask you that are of an “advancing his/her knowledge” mode? Approach: Convince me you’re the person for the job! See if the person asks questions, or talks about himself/herself. You want the former to happen before the latter.
• Questions to ask ... and see if the answer reflects prior research and thinking:
1. Tell me the problems we have and what to do about them?
2. What books are you reading?
3. Why do you want to work here?
• Learning is about Changing an Understanding ... not just adding to the knowledge bank.
• Always make the correct decision based on what you know will further reaching your Cause.
-- There will always be collateral damage. Ignore it. It’s a distraction.
• (A college boy is simply a penis with a backpack.)

On Necessity
• An organization’s structure should be determined by its Customers’ Necessities. From that Necessity, you build Competences to serve that cascade.
• Make it Necessary for people to OWN the problem ... if they don’t, their job is threatened, or their income is threatened, or a self-esteem challenge will occur.

On Competence
• The only people who are stressed are those who are incompetent, not yet competent in their roles.
• Competent people will OWN the problem. They will see it as theirs. They will also see what should be others’ problems, and will NOT own them.
• Competent people do not react to general goals. “Be the best I can be.” “Be the employer of choice.” NO! “Make the first team.” “Have a waiting list of at least ten for each job.” YES!
• See the Appendix for a listing of characteristics of The Competent Person.

On Systems
• Have a Role Description ... not activities, but Accomplishments expected at various terms. Does the person aspire to these accomplishments?
• Performance Goals ... What continuing to be best should achieve. Make these Necessities: “Raise contribution to profits by 10% annually.”
-- If they ask How?, say: “I don’t know and I don’t care. That’s not my job. It’s yours! (High Performance people will figure out how to do it.)
• Learning Plans ... that address the shortfalls in reaching the Performance Goals.
• Dumb Systems:
-- Receptionist only trained to greet.
-- Salespeople beating the system ... sales incentive systems generally.
-- People not sharing, knowing stuff that others need.
-- Dumb systems persist just because people are attached to them.
• All Sales Incentive Systems are Dumb Systems:
-- All incentive systems can be gamed, and are.
-- Instead, hire salespeople who are Consummate Learners, constantly increasing their competence ... they will always perform at their peak, and keep getting better. Don’t need a sales incentive system, just a general profit sharing system of some sort. A paradigm that’s often hard to grasp.
• If you have mediocre people, they serve as internal competitors. They impede progress.

• Organization Charts: They should include ALL Stakeholders, including Investors, Customers, Suppliers, Regulators, etc. People should know about all those who impact their job and the organization’s success.
• Caring: “I refuse to allow you to default to yourself. I require you to aspire, to grow, to do things today better than you did them yesterday. You’ll get there!”


Some Quotes
• “I don’t know what you’re talking about.” “Well, that makes two of us!”
• “I’m not sure ...” “Well, we know that.” “Well, I didn’t.”
• To Ralph Stayer: “You don’t like my price. Okay, let’s do this. You pay me half of that then. If at the end, we meet our agreed-upon goals, you pay me double.”


Appendix
(Notes by Lee Thayer, in preparation for his next book.)

A competent person –
• Is continuously learning how to perform his or her role(s) today better than yesterday.
• Is ready, willing, and able to own every problem that arises in the performance of his or her role.
• Is capable of anticipating the problems that will arise in the performance of his or her role.
• Is capable of precluding most of the problems that arise, and of obviating all of the others that arise.
• Requires no praise, punishment, or incentives for his or her performance, and is capable of providing a better critique than any other might offer.
• Has learned that growing in competence is its own reward.
• Owns the problems of his or her performance, AND of his or her destiny.
• Seeks out, rather than avoids, challenges.
• Is a question-asker, not an opinion peddler.
• Knows that competent people are happier, more in control of their health and their lives, and live longer.
• Lives by this fundamental premise: Learning = Growth, and Growth = Life.
• Can determine what he or she needs to know, and acquires it.
• Can provide others with what they need to know, when and where they need it.
• Nurtures and demands competence from others.
• Cares for people by refusing to let them default to themselves.
• Is not ambitious, except to be the best there ever was in his or her role/endeavors.
• Loves life.

Leonhardt On Life!

Recently, I had lunch with Dave Leonhardt, our former chair, friend, and business development person for N.E.W.

He is spending all his time with his wife, Phyllis, who is ailing and in the assisted living part of a facility here in Green Bay.

As part of the conversation that involved Dave in repartee with the restaurant owner, he shared two of his favorite aphorisms, which I thought I would share with you:

• Life ISN'T Fair. We are NOT created Equal. There are NO Guarantees. Now, let's GET ON with Living.

• When hiring someone, ask yourself:

Would you be willing to work for him/her yourself?

Would you trust him/her with your money?

Will he/she represent you accurately regarding your principles, values, ethos?

If so, then hire the person. Nothing can't be overcome! And their direct reports will be in this same mold, too.

Sugar: The Very Costly Stealth Lobby

Not only is sugar the most addictive (and legal) “drug” extant and drives our national obesity epidemic, it’s also often ignored that because of the U.S. sugar lobby and cartel, Americans pay rates for sugar not lower, which you would think based on volume purchasing, but dramatically higher than the rest of the world.

By about 40% at a minimum!

It’s little known that until the 1900s, most of the federal budget dollars came from tariffs on imported goods. The sugar problem started in 1816 when high tariffs were imposed on imports to placate growers in the newly-acquired Louisiana territory. And they’ve been heavy ever since ... especially hiked during the Depression.

A 1998 study indicated that every U.S. sugar grower reaps an average of a $3 million benefit. At one point, sugar sold for 21 cents a pound in the U.S. when the world sugar price was 3 cents a pound.

This year, there has been more interesting developments, as the USDA began lowering quotas in response to sugar users who have heavy demand and feared the U.S. supplies would be insufficient.

An indication of the supply/demand squeeze: At mid-year, U.S. domestic sugar prices had increased 30% in the past 12 months to about 34 cents per pound ... while global prices were soaring to about 20 cents per pound.

This is the current situation, but the disparity isn’t unique. The U.S. quotas and tariff policies have been bolstered via the sugar lobby for decades ... and we as U.S. consumers have been paying the much higher price.

Being Entrepreneurial Older is Getting Better

According to a Duke University study of 549 successful technology startups, older entrepreneurs have higher success rates .. due to their greater accumulated expertise, deep knowledge of customer needs, and a larger network of supporters.

And, according to the Kauffman Foundation which studies business entrepreneurism, the highest rate of entrepreneurship in the U.S. has shifted to the 55-to-64 age group, with people over 55 twice as likely to found successful companies as those 20-to-34.

Other studies also suggest the dropoffs in creativity and productivity are happening much later in life than previously.

Where Wisconsin Rates Among Best, Worst States: 42nd

Chief Executive magazine, in its annual analysis of the best and worst states in which to do business, still ranks Wisconsin in the bottom 20% ... this year at 42nd compared to 43rd last year.

Here’s how we did:

• Taxation and Regulation: D (Bad)

• Workforce Quality: B+ (Good)

• Living Environment: B- (Okay)

• 2004-2008 GDP Growth (1 is highest): 40th. (Bad)

• 2000-2009 Population Growth (1 is highest): 30th (actually a loss). (Bad)

• State Debt/Resident (1 is lowest): 35th. (Bad)

• State/Local Govt. Employees/10,000 residents (1 is lowest): 6th. (Good).

Reflect Back To Your Customers

I appreciate a newsletter from marketing/branding specialist Steve Yastrow (www.yastrow.com) of Chicago. In a recent one, he reminded us of a Journal of Experimental Social Psychology article that said that when a restaurant server repeats your order back to you for confirmation, that tips were 68% higher than when he/she doesn’t.

Why? Several reasons based on the increased comfort that has resulted:

1. People like others who “verbally mimic” them.

2. It feels good that the server was unusually attentive and caring towards you.

3. People feel more “pro social behavior” after being mimicked.

It’s a matter of connection ... described in Neuro-Linquistic Programming ... via body language, laughing together, aligning moods, sharing language.

Implications: When you demonstrate that you have connected with what your customer says, as well as integrating the ideas and interests into your ongoing conversation, you build the relationship and the resulting trust, and increase the likelihood of an agreement.

Per Yastrow: “As Aristotle said, ‘The fool tells me his reasons. The wise man persuades me with my own.’”

Zuckerman on Upgrading Skills

Mortimer Zuckerman penned this opinion in the Aug. 16 WSJ:

“If there is one great policy failure of this recession, it’s that we have not used the crisis to introduce structural reforms. For example, we have a gross mismatch of available skills and demonstrable needs. Millions drawing the dole to sit around should be in training for the jobs of the future that require higher education skills.

“Given that nearly eight in 10 new jobs, according to the administration, will require work-force training or higher education, it furthermore makes no sense that we have reversed the traditional American policy of welcoming skilled immigrants and integrated them into our economy. ... We send home thousands upon thousands of foreign students who have gotten masters and doctoral degrees in the hard sciences at American universities. These are people who create jobs, not replace them. The incorporation of immigrants used to be one of the core competencies of our economy. It’s time to return to that successful model.”

“Higher education is another critical issue. As President Obama pointed out recently, we have fallen from first to 12th in college graduation rates for young adults. The unemployment rate for those who have never gone to college is almost double what it is for those who have.”

QR Codes: A Coming Thing!

QR stands for Quick Response. You’ll soon begin seeing a very visible square of mish-mash designs near the bottom of product labels and advertisements. If you have the right App on your smartphone, you can snap a photo of this Q/R design, and it will take you instantly to a website providing more information about that product.

Or, it might be on the product itself, and will take you instantly to a set of maintenance instructions.

Or, a set of discount coupons for another product.

Although initially used for tracking parts in vehicle manufacturing, QR Codes are beginning to be used in much broader contexts, including commercial tracking applications and convenience-oriented applications workable by mobile phones. Most Japanese mobile phones, where the technique is fairly advanced, come with the capability built in.

QR Codes store web addresses, URLs, and phone numbers ... and may appear in magazine ads or articles, on signs, etc. ... just about any object about which users might want more information.

Users with a camera phone equipped with the correct reader App (like optiscan or QR scan) can scan the image of the QR Code by taking a picture of the image, causing the phone's browser to launch and redirect to the programmed URL or phone number.

Users can also generate and print their own QR Code/image for customers/prospects to scan and use by visiting one of several free QR Code generating sites (known as QR Code Generators).

Google “QR Codes” and begin your journey.

What Must Wisconsin Do To Stimulate The Economy ...

One way of looking at it:

If creating jobs is so important, why aren’t our governments putting in place initiatives that will do so, with enthusiasm!

For several years back in the late 1980s, Wisconsin ranked in the top three states for job creation. Now, it is back to well back in the pack ... and more than a few companies have moved operations out of Wisconsin to other, more inviting states.

Why can’t we be one of those inviting states ... especially considering that wherever business people go, others extoll the virtues of the upper Midwest work ethic.

There are several factors that keep businesses from expanding here or moving here:

1. We are not a Right To Work State. We’re heavily unionized, and they don’t want to run their businesses with a third party approving decisions.

2. We’ve got higher business taxes than the others (14th highest).

3. It still takes too long (longer than elsewhere) to get permitting to build a facility here.

4. Energy costs are still high.

5. Other states are more aggressive with incentives.

For a good example, Google Texas’ initiatives (or Georgia’s) which are receiving much publicity lately and are yielding much relative job growth. Texas’ income is largely from a sales tax, because there is no state income or property tax, for instance.

Why is this important? According to Fred Monique, GB Chamber VP of economic development, here are the corporate priorities in selecting an epansion location:

Highest: Income tax ranking.

High: College attainment, Right to Work, Individual income tax ranking, and Business inventory tax.

Here in Wisconsin, business research and economic development groups have made strong recommendations that don’t get much attention ... despite lipservice by politicians.

Here’s the website of a very recent set of recommendations (Be Bold Wisconsin) by a very distinguished list of Wisconsin economic organizations: www.weda.org/be-bold-wisconsin.

The recommendations they are proposing can be a great set of questions for candidates this Fall.

Leadership Green Bay's Mission

LGB is a Green Bay Chamber initiative that provides a one-day-a-month course for ten months for people to understand Green Bay, how it works, and how to improve it. It's very popular, with many companies supporting key employees' participation.

Their Mission is very well done:

Challenge the Process.

Inspire a Shared Vision.

Enable Others To Act.

Encourage the Heart.

Model The Way

Change is as Simple as a Ladder

Dennis Rader, the incoming president of the Bay Area Community Council, a study group of which I'm a member in Green Bay, led a recent discussion on how to create a Visioning meeting regarding Brown County's future, and shared the following story:

Change is as Simple as a Ladder

• Have a Firm Foundation.

• Go one rung at a time.

• Maintain Balance.

• Be ready with an Extension so you can go further.

• Know where the Top is. It’s where you’re going

• Be Strong.

• Don’t make the journey too steep.

• People only see your behind, so make sure they know where you’re going.

Comeback America: Turning the Country Around and Restoring Fiscal Responsibility, by David Walker

A very interesting book, well worth your time if you're concerned about the implications of the deficit. David Walker was head of the Government Accountability Office from 1998 to 2008, so has uniquely good insights into the challenge, and has recommendations. He maintains he's still positive that we can come back, but I don't see why. He says the changes have to be made soon, and it's unlikely they will be.

Some of his thoughts:

• Pentagon: "This huge bureaucracy is the only major agency whose books are so jumbled that it cannot withstand a financial audit." "Too many decisions are made based on local economic considerations rather than our national interest." (i.e., a political leader needs a contract.) "The financial cost of recruiting National Guard and Reserve volunteers: Rather than modernizing the model, money is thrown at it. Those who have compiled ninety days of aggregate service qualify for an enhanced GI bill that pays full in-state college tuition and fees, a monthly housing allowance, and a annual stipend for books and supplies. They are also eligible to be part of the military health system with its huge subsidies."

• Priorities: Require measures. Baseline national health care performance according to coverage, cost, quality, personal responsibility, and other factors. ...compare America's results with those of other industrialized nations." "At the bottom of the priority list we might find federal subsidies to sugar farmers, which were put in place during the New Deal, and will total $1.4 billion between 2008 and 2017. Should the federal government be subsidizing this "white tobacco," a leading contributor to our obesity epidemic?"

• "The government has overpromised and under-delivered for far too long. How can we fix things? Will we cut benefits, those mandatory payments that are chiseled into law? Or will we raise taxes to onerous levels? We will probably have to do some combination of both. That is, we will have to renegotiate the social contract with our fellow citizens and raise taxes. However we do that, our kids iwll pay the price. And the bigger the bill we pass on to them, the bleaker the future we will bequeath to them. ... So much of their money will be devoted to keeping the government afloat that they'll have relatively little for everything else in life. Their homes will be smaller and drabber. There will be less to spend for cars, vacations, dinners out, and big TV sets, all of which their parents took for granted."

In addition, he talks about the Social Security commitments whose funding has always been spent on other things, and of course, the health care challenge, pointing out that other countries put limits on how much will be funded by the government. He has lists of solutions that he proposes.

How You Say It Is All-Important!

In an article in the current Harvard Business Review, "Stop Trying to Delight Your Customers," authors Matthew Dixon, Karen Freeman, and Nikolas Toman cite this example:

The lighting company Osram Sylvania sifts through its call transcripts to pinpoint words that tend to trigger negative reactions and drive repeat calls -- words like "can't, "won't," and "don't" -- and coaches its reps on alternate phrasing. Instead of saying "We don't have that item in stock," the rep might explain, "We'll have stock availability of that item in two weeks." Through such simple changes in language, OSram Sylvania has lowered its Customer Effectiveness Score from 2.8 to 2.2 -- 18.5% below the average we see for B2B companies.

Wisconsin/Green Bay Econ. Devel. Rankings: Not Good! Shouldn't we be reacting? Or don't we care?

Recently, GB Chamber Economic Development VP Fred Monique gave a Wisconsin economic development overview to the Bay Area Community Council, which showed some disturbing facts about our state, if we care about economic growth:

1. Wisconsin ranks in the bottom half of states within the definition of "Pro Business". In 2009, it was ranked 35th.

2. How does our MSA rank?

• On current economic strength: 48th out of 366 areas in 2010, better than in 2009 but down from 20th in 2005.

• On initiatives to create jobs and growth: 171st out of 200 areas. (We're slipping in providing incentive.)

3. How does Wisconsin rank regarding factors considered by corporations for location expansion decisions?

• Importance: Very High

Corporate Income Tax Ranking Grade: C

• Importance: High

High School Completion Grade: B

College Attainment Grade: C

Right to Work Grade: F

Individual Income Tax Ranking Grade: F

Business Inventory Taxation Grade: A

In addition, Chief Executive magazine released a survey of CEOs looking at the best states in which to do business, and Wisconsin came in 42nd.

Number 1, again, is Texas, and Number 51 is, again, California.

Areas assessed: Taxation and regulation (we're a D), quality of workforce (B+), and living environment (B-).

There should be good questions for state government political candidates in these results!

Major Impacts of Declining Birth Rates Worldwide ...

Recently, my TEC Groups heard Herb Meyer, a senior CIA official back in the 1980s; he prepared the overnight national security intelligence report, and was the first to forecast the probable decline of the Soviet Union. Today, he talks to groups about trends that he sees. This one is particularly interesting:

Key Trend #2: The Coming Death of Europe, Japan, Russia, et al ...

• Why? Declining and VERY LOW Birth Rates! Replacement rate is 2.1 ... many at 1.3 (within 30 years, will lose 30% of population ... very big deal!) and declining. No region has ever recovered from a 1.1 rate.

• With fewer young/fewer workers, means fewer people to support a longer-living retired class. Coupled with trend towards welfare states where more and more expenses are supported by the state, it becomes a financial disaster! The death spiral supports itself: As prospects get dimmer and dimmer, couples become less and less likely to have children. (You see that in the U.S. today. See further below.)

• Europe’s birth rate overall is 1.5 ... a disaster. Germany’s is 1.3. In 30 years, Europe will have 30 million FEWER PEOPLE, with even fewer workers supporting more elderly. Only 40% of college-educated German women have children. Lowest is in Italy and Spain at 1.1 and 1.2. RUSSIA is in the same fix, and knows it: Medved has declared Sept. 12 each year a Day of Marital Contact! Huh!

• France is giving a woman with two kids $3,000 a month to have a third.

• How to compensate: Allow immigration of Muslims escaping from their dire economic straits ... but aren’t integrating them into the population. Big Mistake: Younger Muslims frequently want Western mores and culture (and jobs), but Europeans are keeping them poor, helping to radicalize them. Lesson to the U.S. In France, 20% of people under 20 are Muslim.

• Muslim areas are all above replacement at 2.4 to 6.8, altho declining.

• We wonder why European states don’t support us in Iraq and Afghanistan. A major reason is that those states are now up to 10% Muslim, and leaders need their votes to get re-elected.

• Other bad trends overseas: Only 1 of 7 couples is getting married. Trends toward stability of family life are negative. Putting AGE limitations on surgeries, so once you reach certain ages, you can’t get certain health care. Also, trend toward Euthenasia (bad for elderly!). Parents encouraging bright kids to emigrate to where there are greater opportunities ... can’t get into U.S. because of small quotas, so are going to Canada, Asia.

• Also, Europeans don’t like to work. One country has 400 MORE vacation hours on average than the U.S. ... TEN WEEKS! The average work week is less than 38 hours. Any effort to change is made with great resistance ... witness riots in France, and the current refusal by Greeks to acknowledge their bankruptcy.

• Japan: Birth rate is 1.3, forecasting 50 million fewer people in 30 years. Have already closed 2000 schools, at 300 per year. Closed two universities. In 20 years, 20% of population will be over 70 years old.

• Canada: No better. A 1.5 birth rate.

• You need PEOPLE ... to be customers, buyers, workers, to support an economy and provide money for a family to live on and pay taxes.

The U.S.’s Prospects ...

• The bad news is that the Anglo birth rate is 1.8 and slipping. The good news is that the Hispanic rate is 2.8, putting us at the desired 2.1. For the first time, more kids are being born to Mothers NOT born in the U.S. than U.S.-born mothers.

• Of interest, there is a political context with an underlying cultural phenomenon: Red states vs. Blue states, or areas. Most economic growth, and higher birth rates, are occurring in Red states/areas ... and the reverse is in Blue states/areas. Also, “people of faith” live more normal lives, and pro-create. (Corollary: Europe is going more and more sectarian.) The more you have an increasing tax burden, with less and less discretionary income, the less you are likely to have a child, or another child. Yet, children are essential for the future.

• Utah has highest birth rate, Vermont the lowest.

• Projections are that we will need an additional 50-60 million people to support a growing economy and our aging baby boomers ... and most of the new people will be Hispanic immigrants, critical to our future economic health just as immigrants have been in the past. Another key: Have POLICIES to INTEGRATE them, to avoid Europe’s catastrophes. Yes, they take an inordinate share of school expenses in early years, but on balance they are tax-neutral ... what they pay is what they use.

• Needs will include: New homes/clothing/home needs/education/food ... and ENERGY.

• Challenge: As we move towards a State-ist economy, we will be hard-pressed to pay for increasing entitlements for increasingly large financially-stagnant (and declining) recipient bases (social security, medicare, medicaid, etc.).

Reflections on Job Creation

1. On "jobless recoveries": Coming out of the 2000-2002 downturn, the general consensus of my members was that FINALLY their investments in enterprise software, etc., were having a productivity impact ... they were able to add considerable volume without adding as many people percentagewise. This 2008-2010 recession, again a jobless recovery, their thinking is different. This time, as they laid off people, they formed employee committees to figure out other ways to cut costs and improve productivity ... which they've done very effectively. One member told me that he laid off 150 people, and to achieve the same volume as growth occurred again, because of the productivity improvements his people had found, they would only have to add back 87 people.

So, the first "jobless recovery" they attributed to software efficiencies, and the second to just old-fashioned value stream analysis.

2. Of interest, the American businessperson is very entrepreneurial/reactive. Give me a problem ... and I'll find a way around it. Example: The DAY after the health care insurance reform bill was passed (Mar. 23), I heard discussions of my members saying, "Okay, our personnel costs are going to rise ... but we have to keep costs down. What do we have to do?" They are figuring ways to add robotics, do without, find even more non-value-adding activities, etc. ... all with the intent of reducing the employee base per volume (reducing the need for people). (Not what the nation needs, but in the long run, preserves job retention and allows creation.)

3. At a recent TEC meeting, we did Significant Event Sharing of the nine members present. Most are now trying to add people. Of interest, FIVE of them (more than half) said that despite the high unemployment and lots of applications, they are unable to find enough "qualified" people to hire. They are struggling to find people! (One member said in one remote plant, more than 50% of applicants are being turned down because of drug use.)

Knowledge Doesn't Lead To Change. Understanding Does.

If I tell you, "There were a million heart attacks last year", unless you're one of those million, you don't care.
But if I can show you a picture of an artery, and you can see the plaque rupturing, now the heart attack isn't abstract, it's a real story. And you're much more likely to take care of your own heart because you don't want that same story to affect you.

Source: Dr. Mehmet Oz.

Another Reason Women Die Later Than Men: Arteries

Our arteries take a beating ... more than 100,000 new pulses every day. They eventually go bad.
In our 20s: Generally healthy, but tobacco smoke, cholesterol and sedentary lifestyle begins accumulating.
In our 30s and 40s: Plaque begins to accelerate in men. Delays in women occur until after menopause. Cholesterol, smoke, high blood pressure and high blood sugar are causing persistent injury to the inner linings.
In our 50s: Artery walls become stiffer, more fibrous, putting more pressure on heart pump. High blood pressure creates damage. Women are now 15 years behind in deterioration, but now accumulation of plaque begins to accelerate.
In our 60s and beyond: Left ineffectively checked (lifestyle), plaques can rupture or erode, leading to blood clots that can cause heart attacks.
Source: Wall Street Journal, June 1, 2010.

To Lose Weight: First Reduce Calorie Intake, Then Exercise To Maintain

Research indicates that vigorous exercise is NOT the way to start the process of weight loss, although it’s essential later on.
Rather, weight loss must be primarily due to better control of diet, in particular volume. Calories In (Volume) must be less than Calories Out (Daily Effort) for an extended period of time to move your body to your desired weight level.
“The body aims for homeostasis,” or current equilibrium, says expert Barry Braun. It wants to remain at the weight level it is used to, especially for women because of their child-bearing health needs. If all you do is exercise to create weight loss, the body will immediately kick in with appetite-increasing hormones so that you eat enough to get back to the current equilibrium.
This is where it gets interesting. First, eat fewer calories to drive your weight reduction. Then, exercise regularly! The exercise helps re-establish the homeostatic steady state at the new level! (Study after study shows this, although there’s not yet a clear explanation as to why.)
Here’s the bonus: You can eventually return to your previously normal caloric intake ... or at least eat more than you needed to in order to lose the weight. The exercise maintains the new homeostasis level for you, just as it maintained the old one.
And it doesn’t have to be “vigorous” exercise. Research indicates that enough low level activity (walking, etc.) can be sufficient.
So, what is “vigorous exercise” needed for: Well, for the aerobic benefits ... bringing in higher oxygen levels that create greater energy and thinking capability (oxygen blood cells to the muscles and to the brain)!
Tip: If you drink a glass of water before every meal, you're less likely to over-eat.
Source: Gretchen Reynolds, New York Times Magazine, April 11, 2010.

Among Biggest Health Mistakes
• Working out simply to burn calories. What matters more is exercise intensity. Vigorous exercise dulls your appetite, while moderate exercise stimulates it. That's the difference between a walk and a jog/walk.
• Keeping eating until you go to bed. Make a hard-and-fast rule: No eating within two hours of bedtime.
Source: Bob Greene.

Atwell's Solution to Financial Crisis Regulation

In his recent Nicolet Bank Blog, CEO Bob Atwell made some interesting points about the financial breakdown of the last several years, as well as insights into the current 3,000-page regulatory reform bill ... insights which were also reprinted in Investors Business Daily. Among them:
• The goal must be to ELIMINATE (not just reduce) the systemic risk at the core of the problem, which is NOT the direction of the bill. The bill as proposed further centralizes and politicizes finance and financial regulation. Centralization of financial power and regulatory power is the CAUSE of the problem, NOT the solution.
• The premise of the bill is that systemic risk must be managed by more and tougher regulators. Regulatory complexity favors the large players in any industry because they have the people who can manage and lobby it. Smaller organizations don't.
• What we WANT is a system which has RISK ELIMINATED, not managed. The best way to ELIMINATE system risk is to stop using policy approaches that create it. It can be ELIMINATED very simply by imposing HIGHER CAPITAL STANDARDS on banking institutions. Taxation of system's risk would also reverse the implied public subsidy that creates it.
• "We hate Congress because we don't like what we see in the mirror (our going along with what they do), but we refuse to recognize it as our image."
Source: http://www.nicoletbank.com/thevault/?p=758

The Alabama Theatre, Myrtle Beach.

Recently, we vacationed in Myrtle Beach and happened upon the Alabama Theatre for a three-hour variety extravaganza. It featured a hilarious comedian whose style was understated country. Among his contributions:
• Things haven’t been so great with the recession and all, so we’re changing the name of the Alabama to the Al-Obama, so that we can apply for stimulus funds to keep our high quality offering featuring world-class entertainers serving our audiences ... at a loss.
• Be careful wandering around our theater building. It’s fairly old, and hasn’t had the benefits that newer buildings have since the government decided it would protect us from stupid people.
• That Pelosi woman. What’s with her? She tells us we need to pass the health reform bill so we can find out what’s in it?
• His recent divorce? We kept arguing about the same things, time and again ... like that commode seat up or down bit? I told her that if it’s causing a problem, we should get rid of it. So, I took the seat off and threw it out. She's a quick learner. She decided I was causing a problem and got rid of me.
• Taco Bell. I’m worried about Taco Bell. I don’t think they’re doing so well, and I’m worried that the government will take them over. Can you imagine Taco Bell run by the government? Taco Bell has a challenge making a good burrito itself. Can you imagine what a government-made burrito would taste like?

Kohler CEO on Economy ...

David Kohler, CEO of Kohler Co., told another St. Norbert CEO breakfast these points:
• The last recession, also a “jobless recovery,” took 49 months to get its job loss back. We’re now 27 months into this one, and just beginning to add jobs. This will be much slower to emerge.
• The New Consumer Mindset, based on recent surveys: 1) 45% have stopped buying from companies they feel operate unethically. 2) 69% have become more environmentally responsible within their homes. 3) 71% will stick to its cost-cutting tactics even as the economy and their household income improves. 4) More are moving towards a “more balanced lifestyle.”
• The Internet interactive communications techniques must be at the center of any consumer business’ stratgegies. Especially with Generation X and Millenials.
• On Sustainability: 1) By 2013, 26 states will have signifricant water shortages that the state must deal with. 2) COs concentration is 35% higher than before the industrial revolution. 3) Innovation is not about massive tradeoffs. We can make it work for all stakeholders. 4) Healthy product sales are increasing fast.
• Global: Kohler is now in 630 stores in China, it’s fastest growing , most profitable market. Right behind: India. They are where the people are.

School Specialty CEO on Education Trends ...

Recently, Dave Vander Zanden, CEO of School Specialty, Appleton, told a St. Norbert CEO Breakfast & Strategy audience these points about the U.S. educational process that are important to School Specialty’s strategies:
• The U.S. educational system is very slow to adopt new ideas, especially technologically-based ones.
• His company’s objective: To help educators engage and inspire students to learn. Increasingly, the initiatives focus on “accelerated learning” techniques. Slowly, he said, textbooks are on their way out as a primary learning resource.
• With only 20% of students going on to post-secondary education, the emphasis of learning must be on “the path to adulthood.”

More on Wellness/Nutrition ...

John Whitcomb, a Yale-educated Chicago doctor who leads Aurora’s wellness education efforts, recently made these points to a wellness-oriented Green Bay business audience sponsored by the Chamber of Commerce's CEO Groups:
• We are “hard-wired” to crave that which is Sweet, Fat and Salty.
• In 1980, a Harvard study declared these to be appropriate elements of a wellness strategy: 1) No smoking. 2) Exercise4 every day (30 minutes of a fast walk). 3) Five fruits and veggie servings. 4) A BMI less than 25. And, 5) a glass of wine daily. If you are 60 years old and doing all five of these, there’s a 54% chance you’ll live to 90. If you’re 60 and doing none of the five, only 5% will live ‘til 90.
• Calories delivered within liquids are the biggest sources of Weight Gain. So, get sodas out of the workplace.
• Low Vitamin D intake causes many, many documented problems, including many types of cancers.. Typically in Northeast Wisconsin, we take less than 10 mg daily ... when we should be taking 60 mg daily. Example: In Japan, breast cancer incidence is 5% that of the U.S. Why, because Japanese women eat seaweed, which contains iodine which retards breast cancer. Another example: This past winter, Aurora gave its employees the 60 mg of Vitamin D, and reduced its flu absences by 50%.

Within the Effort to Reduce Health Insurance, More Mandates

States can impose mandates at will on health insurors regarding what must be covered within all plans, regardless of whether the insured might want to pay for that coverage. During the past session, the Wisconsin Legislature added mandatory coverage of: “mental health parity,” autism, contraceptives, dependent care, hearing aids/cochlear implants, and colorectal screening.
Wisconsin still remains one of very few states not to allow state tax deductions for employer contributions to Health Savings Accounts.

On the Good Side: In March, the legislature enacted a Disclosure of Health Care Costs by Providers that will provide some simple disclosure in the future.

The Awakening of GE CEO Jeff Immelt

“A couple of Fridays each month, Jeff Immelt hosts a sleepover. The CEO of GE invites one of the 185 officers of his company, and only one, to his home in New Canaan, Conn., for a leisurely meal. After a few drinks, some laughs, a plate of pasta, and a wide-ranging discussion of what’s going on in the world, the two executives part. Immelt, 54, stays home while his guest heads to lodging at GE headquarters in nearby Fairfield.
“When they reconvene the next morning, things get personal. ‘We spend Saturday morning just talking about their careers,’ says Immelt. ‘Who they are, how they fit, how I see their strengths and weaknesses -- stuff like that.’
“‘The personal connection is something I may have taken for granted before that I don’t want to ever take for granted again,’ he says.
In addition ...
• He’s holding monthly dinners with ten executives and an external “thought leader” to debate leadership.
• He launched a pilot program to bringin in personal coaches for high-potential talent.
-- Fortune magazine

Our Future Workforce: Kids

At a meeting recently of the Bay Area Community Council, we heard some eye-opening statistics about the importance of Birth-to-5 education from Sue Vincent, exec. dir. of Encompass child care and head of Start Smart:
• Brain (i.e., learning) development has to be actively nurtured beginning at birth ... or it’s very likely development will be stunted and never catch up later on! If a child’s vocabulary is “behind” at age 3, it will be behind in First Grade ... and will most likely still be behind at 11th grade. The U.S. ranks 21st in developed countries in supporting this development. “According to literacy expert Andrew Biemiller, ‘Vocabulary at age 3 predicts first grade reading success; first grade vocabulary predicts 11th grade reading level.’”
Some stats:
• By Age 3, children of parents on welfare have a vocabulary foundation of about 500 words, of working class parents, 700 words, and of college-educated parents, 1200 words. Reading to your child matters!
• By Age 5, a child’s brain reaches 85% of its adult weight, developing 700 neural synapses (the connections that help learning) every second.
• Of 50 children who have trouble reading in first grade, 44 of them still have trouble in fourth grade.
• Children who are chronically hungry (think at risk schools, students using the federal free breakfast/free lunch funding) are more likely to be in special ed, to repeat a grade, to get into fights, and to have lower test scores. It can cost up to four times as much to educate a child who doesn’t have enough to eat compared to one who does.
• “Researchers ... found that ‘extra talk’ -- where parents ask questions and use a large vocabulary to elaborate and extend what children are doing or saying -- is strongly connected to emotional and social growth, and creates a positive relationships with the child. The richness of language children are exposed to appears to be a cornerstone of emotional, social and intellectual development.” (Hart & Risley)

Some other learnings:
From Green Bay School Superintendent Greg Maass:
• He wrote his graduate thesis on leadership. Today, he is “strongly challenging our accountability measures within schools. I am now looking for better leadership capability at the school principal level. There’s a difference between being a good administrator and a leader. We need to develop and emphasize the latter more.”
• He’s gone to a “professional learning communications” model, where teachers meet regularly with their grade and/or specialty peers, share results, share practices, and make changes.

From NWTC CEO Jeff Rafn:
• A quarter of his 43,000 students come from each of these age brackets: 18-25, 26-35, 36-50, and 51+. Very surprising. A much older skewing “student’ body than suspected.
• Only 17% of jobs today require only a high school education. Fully 83% require learning beyond high school.
• NWTC”s English Language Learning program supports over 39 different languages this year.

More on CEO Ineffectiveness ...

Cleaning out my computer archives, I found this summary which I find enlightening, and in sync with the premises and solutions of the book that Ken Utech and I wrote together:

Rationality May Not be on the Job Description
Diane L. Coutu with Manfred F. R. Kets de Vries*

"If you study executives, you quickly see that they don't behave rationally all the time. Indeed, irrational behavior is common in organizational life. It was my realization of this-and my desire to understand that irrationality-that led me into the fields of psychiatry and psychoanalysis.
Once I started, I found that business leaders were much more complex than the subjects most psychologists studied. People in mental hospitals are actually easy to understand because they suffer from extreme conditions.
The mental health of senior executives is much more subtle. They can't be too crazy or they generally don't make it to senior positions, but they are nonetheless extremely driven people. And when I analyze them,
I usually find that their drives spring from childhood patterns and experiences that have carried over into adulthood. Executives don't like to hear this; they like to think they're totally in control. They're insulted to hear that certain things in their minds are unconscious.
But like it or not, people have blind spots, and the nonrational personality needs of decision makers can seriously affect the management process."

"Curiosity May Be Best 'Position' For Listening"

Worthwhile reprint from Tom Foster's ManagementBlog.org:

Cheryl was determined to turn things around with her team. She was hired as a troubleshooter in Quality Control, but finding the problem and fixing the problem are two different things.

"So today, you said you were going to listen?" I asked.

Cheryl nodded "Yes."

"What position will you be listening from?"

The question caught Cheryl off-guard. "I'm not sure what you mean."

"The way we see the world is often influenced by our position. In fact, you have listened to your team before, but you were listening from a position of judgment, so you didn't hear what they had to say." I stopped to let that sink in. "What position will you be listening from today?" I repeated.

"I guess I will try to understand their point of view."

"Not bad, but not aggressive enough to be effective. What position do you want to be listening from?"

Cheryl was stumped. "Curiosity?" she finally blurted out.

I nodded. "So, when you sit in your meeting today, you will be listening from the position of a curious child?"

Cheryl smiled.

"And curious children always have a lot more fun than stuffy old Quality Control managers," I said. "And curious children often invent interesting ways to solve problems."

What H/C Reform will look like in a year or two ...

On Friday, April 2, there were two articles that together tell the story of what's coming in the health insurance debacle that Congress has created:

Maine became a forerunner of our upcoming national disaster when in 1993 it declared that everyone applying for insurance must be provided it, regardless of pre-existing conditions ... with no requirement that healthy people also had to join up, nor any leverage on holding provider costs down. Today, for Anthem, 1% of its Maine insureds account for 50% of its claims. It has to raise rates greatly on the other 99% to pay for the 1%. The insurance commissioner feels Anthem's 2009 increases are too high and has nixed them, requiring a "no profit" year or two for Anthem. The premium levels, she says, are too burdensome for Maine citizens. What kind of a business model is this?
It's not insurance companies who are creating the cost problem. (They do create other problems in trying to operate a profitable business) They are trying to deal with it and provide a "broker" service between providers and citizens. The cost problem is driven by medical providers.
That same week, Massachusetts' insurance commissioner rejected 90% of the current requested increases in its state. You will see this in more and more states. Insurance companies won't be able to cope, and will withdraw.
Also that week, a New York state hospital/physician provider group said it needed a 15% price increase from a major insuror, and the insuror said it couldn't turn around and charge the resulting premiums without losing customers to competitors ... so it dropped the provider group. Now, the provider group has fewer patients and a big fixed cost problem.

Everything described above is happening just as it should from a cause/effect standpoint. High cost providers get pressure to reduce costs ... and pay the penalty of losing money and volume when they don't.
Do you see any good in the above? The health care reform package didn't solve the cost problem. It exacerbated it. What you see above is the beginning of the negative experience. The Administration says that the penalties imposed on people and businesses if they don't sign up for insurance will cover the over-spend. Yeah? The average cost per person of our health care system is $7,600 ... and the penalties are far, far less than that. It's better to pay the penalty ... another rational cause-and-effect you will see. It will be interesting to see what that drives ... people predict it is a purposeful way to get to government-provided health care.
PS: Running the system nationally (i.e., price-fixing a la Medicare) won't help ... as it hasn't in any European country. Yes, it "works," but not the way it could have if you understand what drives people to excel regardless of pay levels, and put that situation in place.

Reaction to Health Reform ... not positive!

Okay, so why can't we get enthusiastic about the new health care "reform" legislation ... supposedly the biggest reform since Medicare in 1965?

Well, because it was done irresponsibly. No "family", no "business", no one who has responsibility for their own money would ever do it this way.

Even if you agree that universal coverage is important, which I do, this has NO substantive cost control. (Too, it was not engineered in a way that would create the "true reform" of a "broken system" that was needed ... but that's another topic.)

And it wouldn't have been that hard.

Here's what should have been included ... without even beginning to reform the "broken system."

1. Expand/Incent use of individual Health Savings Accounts coupled with High Deductible plans. It would put more of a person's money "at risk," incenting more careful spending. Says economist Gary Becker, "In the U.S., we spend 17% of GDP on health care, but out-of-pocket expenses make up only about 12% of total health care spending (businesses pay the rest). In Switzerland, the out-of-pocket is 31% of the spend, controlling the total cost at 11% of GDP (still one of the highest in the world)." Our third party reimbursement system is a total disaster.

2. Extend tax deductibility to all individuals, not just those covered by businesses. This puts everyone on the same footing and sends the message that health care is of national importance.

3. Transparency: Require some form of disclosure to patients/users of the approximate cost before they are exposed to the service. Forbid the non-disclosure/confidentiality clauses in the pricing agreement contracts between providers and insurors.

4. Medical Liability: Control it at a low level, such as non-economic damages caps of $250,000. To be sure, medical liability premiums aren't much (just $2 billion, although they are astronomic for such specialties as gynecology), but estimates are that they drive extra, un-needed tests to the tune of $210 billion ... almost 10% of our $2.4 trillion spend.

5. And finally, the quid pro quo: If we're going to subsidize the cost of health insurance, then there must be a "health/wellness/fitness" requirement of each person. They must be doing prescribed things that can be third-party verified to reduce the likelihood they will need the sick care system, and certainly the more expensive parts of it. Many businesses are requiring this of their employees; extend it. What are they: Diet/nutrition and exercise that controls such costly disease-causing factors as glucose, cholesterol, and triglycerides that can be analyzed by blood draws. Forbid smoking. Let's finally establish and enforce national standards, since parents and other adults aren't doing it.

A Great Innovation Process ...

Paul Lemens, Director
UWGB Institute for Entrepreneurship & Innovation
Business Assistance Center Presentation Mar. 16, 2010


The Innovation Process


Paul’s presentation went extensively into what innovation is all about, which we will cover below. However, these are his critical insights:

• Innovation is increasing the utility of the product/service so as to create higher value for the user and economic rewards for the provider.
• Innovation can change the marketplace, creating new winners ... and losers.
• All Value Starts with the End User. So, start there. If you lose there, nothing else matters ... so improve there, and protect there. If the End User is solid, innovation at other places in the Value Chain (from raw material to installation) is positive.
• It can be Incremental/Sustaining or Disruptive.
Incremental/Sustaining is Improvement of the existing offering, or Evolution of the existing offering to a new level.
Disruptive is an Invention (something new), or a Game Changer, transforming how the consumer or company does things.

• To be Disruptive requires ...
New Knowledge and Categories, and a Broader Context and Understanding. Think Broadly!
Worse product performance ... KEY. Most innovations create new opportunities at the lower end of the marketplace where there are lots of users and little technology. If you’re the market leader, proactively protect the bottom end.
Less expensive, smaller, simpler.
Almost always EASIER TO USE.
Appeals to a niche customer base.
Technology used is not an immediate threat (but will be!).

• The Process:
I. Get Smart ... Know the market thoroughly.
II. Understand the End User, those who will be the final buyer/user.
-- In addition, know thoroughly your customer (e.g., Walmart).
-- Know where the problems are.
III. Identify Opportunities. Needs. Are they big enough?
-- How to Uncover User Needs. Look at length at each of the Four elements of the Human Experience around use of the offering: Activities (Do?); Artifacts (With What?); Actors (Who?); Atmosphere (Where?).
IV. Brainstorm Solutions.
-- Identify problems/needs, and opportunities.
-- Stay away from product features; stay at the Benefit level.
V. Create Concepts ... continuing with the solutions/ideas from IV.
-- Draw pictures. -- Create a “war room.”
VI. Create Solutions and Refine.
-- Quick and dirty. -- 3-D Models. -- Involve users/customers.
VII. TELL THE STORY. “A day in the life ....” How will lives change, get easier?
-- Develop the Model.
VIII. Prototype.


Other Insights:
• Innovation is about People ... fulfilling user needs.
• Major innovations result in new Business Models.
• We are all born creative, but we “unlearn” as school teaches us science and math and logic.
• Think about the World. (What did you see: Globe? Map? Diverse Cultures? Environment?)

• Who invented the ubiquitous Fridge Packs for soda and beer we buy these days? (Alcoa!)
-- They did an ethnographic study of the life cycle of the product from beginning of creation thru delivery thru use and disposal. They looked for “Where are the inconveniences?” Where does usage slow down?
-- Coke increased sales 10%(!) by adjusting the packaging to usage, not from any change in the product itself.

Reaction to Job Creation ideas ...

The previous post, on Job Creation, was also printed in the Green Bay Press-Gazette. If a blog is about opinions, here's one. I received this reaction directly from a reader who's hot button I pressed. I liked the thoughtfulness(?) of my reaction that I sent to him. (He did sign his name, to his credit.)

His reaction:
"I read your op ed with great interest, then with great laughter, and then with disgust! Typical pro-business BS.
"You don't want business to pay taxes. You don't want business to be subject to any reasonable regulation. Thank you Wall Street and the banking industry.You don't want business to pay social security, unemployment, and health insurance costs. You want someone else to pick up the tab.You want grants, another name for handouts, You don't want business to have to pay for its own capital investments. It's no wonder this state is broke! From a workers perspective, when will business create jobs that pay enough to keep us off of assistance or having to work two and three of those great jobs?
"You want it all and you don't want any responsibility. You and your republican cronies are outright crazy!"

My reply:
Thank you for responding. I appreciate knowing how people are reacting, even though, as with you, you think it is off-base.
Might I respond, please?

From my perspective, I agree that it's "typical pro-business BS." But may I explain regarding several of your points.

1. Actually, I do want businesses to pay many taxes and fees. They should pay for the ones where they are getting services from government, such as sewer, water, trash pickup, as well as services they use from any other source.
Basically, all income that is created comes from a business providing a service or product that a customer values enough to pay more than it costs. That income goes to people to spend on themselves and their families, less the portion that government takes to provide government services (schools, streets, trash, sewer, water, Medicare reimbursements, Social Security payments, defense, enforcement of regulations, police, fire, etc., etc.). If a business has money left over after its costs (including paying down working capital principal and interest), it can invest it in new facilities (buildings, equipment) needed to expand. It can also pay more dollars out to employees or shareholders, which will then be taxed like other income to individuals.
My point is that people should be taxed based on their income levels (yes, progressive), not the job-creating business enterprise. The more dollars are left with a business after true operating expenses, the more that is available to be used to develop new products, do R&D, test, promote, sell and finally manufacture ... creating more jobs. Costs and prices can go lower, all else being equal, only when a business expands. If a business can't expand, its costs will only increase on average ... and it obviously not only won't add jobs, it will probably lose some.
In summary: Yes, there should be taxes on services they incur ... no others. Let as many dollars as possible stay with the enterprise so it can do what it is supposed to, which is to sell more and create jobs. Tax individuals.

2. On Regulations. Regulations are important. They are society's way of telling a business what it doesn't want that business to do, to provide its code of conduct. Plus, obviously, our ethical habits that we would apply anyway. So, yes, "reasonable regulations" are extremely important. Wall Street greed? Way out of proportion! Yes, either better regulations need to be put in place, and/or the ones in place have to be enforced. Probably both.

3. Businesses paying Social Security, Unemployment and Health Insurance costs. Social Security is a tax applied to people; the business simply pays it on the person's behalf. Unemployment: Debatable. Why should a business have to pay more for an employee it doesn't need? If society wants that person to have some income as a welfare payment, then it's part of government taxes. That's one view. Another is that businesses don't mind paying Unemployment at all. They can't use the person right now, but they have probably been very appreciated employees and the business leaders are happy to contribute to a fund the laid off employee can draw from. They are sorry the situation exists. Some Unemployment is important. Health Insurance costs? Yes, you're right. Personally, I don't think a business has any business paying health insurance costs. We wouldn't be in this fix if people knew what the actual costs have been. We would have fought back and corrected this problem we have now a long time ago. Third party payments don't work. Let's go back to where we pay our doctor directly, based on what we can afford. Health Care is not a Right; it is a Benefit to the extent we can afford it. The medical community wants income; they should only have what we can afford to compensate them. Needs a longer story.

4. Grants ... regarding training, I assume. I don't care whether a company has to pay for the training of its new employees to have entry-level skills (which are increasingly sophisticated, as you know ... to operate machine controls, CAD systems, etc.), or government does through the technical colleges. If a person comes to me with the skills I need, he gets hired. If he doesn't have the skills, it's debatable. Either way.

5. Capital investments? Of course a business should pay for its own capital investments. It does that through retaining income and borrowing. Unfortunately, if I invest $100,000 in a capital investment (building or new equipment), I can't deduct those dollars as expenses this year even though they are gone and no longer available to me. I can only deduct a portion of them based on how long the government tells me I have to depreciate or amortize the equipment. Accelerated depreciation would be good, allowing me to charge off those expenses faster and use the freed-up dollars for job-creation activities (see #1, above).

6. The state is broke? We have a State Senator, Rob Cowles, who keeps reminding us that when you commit to pay out dollars into the future, that creates a structure that is certain. Is there a certainty that a revenue stream will pay for them? If not, a "structural deficit" will occur. That's what we have ... lots of certain commitments, that don't flex based on available revenue. That's what's causing the state to be "broke." I'm not sure I understand your exact linkage of the state's deficit to how a business operates.

7. When will business create jobs that pay enough to keep us off assistance or having to work two and three of those great jobs? Good question. The world is becoming much more competitive, which drives prices down. Costs ultimately have to come down with them. Right now, we have lifestyles and "structural commitments" that are allowing virtually no savings capability for families. It's not a question of asking businesses to raise salaries based on revenue dollars they don't have. They can't do that. (It's just as bad as asking an insurance company to take on anyone regardless of "pre-existing conditions". Would I take on someone whom I KNOW will be more expensive than he/she is able to pay me?) It's more a question of figuring out how to live within the global conditions that are creating the top line restrictions. It's not "business as we have known" by any stretch.

8. I want it all and don't want any responsibility. Actually, I don't want very much. And I do try to take responsibility. I expect that you do, too. You cared enough to write.

9. Republican cronies. I'm not a Republican, but you're right, I do have Republican cronies. Democratic cronies, too. More and more Independent cronies, though.

We all have the same objectives, we just see different ways of trying to get there. It is all about people, not businesses ... but the capitalistic system we have, with all the required regulations to provide its morality, is the best the world has created to take care of people long-term. It requires A GREAT DEAL of responsibility, as you know. We haven't operated it very well in the past three decades or so, I would agree.

Regards, and best wishes in all that you are doing to make things better as well,
Phil

TEC members on Job Creation Ideas

As Congress and Madison recently looked at the economy and job creation at the urging of polls, they began to develop legislation that might propel job creation. I took this issue to my 30-or-so TEC members, who are the people who actually DO create the jobs, and asked them what "environment" they would like to help them begin growing again and creating jobs. Their thoughts follow. We sent it to our list of state and national politicians who represent us.

Job Creation Ideas
1. Put/keep as much money in people’s pockets as possible so that they can buy ... and provide an environment that stimulates them to buy. Don’t take our markets away!
• When people feel that tomorrow will be better than today, when the uncertainty about tomorrow is replaced by confidence, they will begin buying more goods made by our companies.

2. Eliminate all business taxes except usage taxes.
• The business is the “golden goose” whose efforts eventually create jobs. Taxes on businesses take dollars away that could be spent on job-creating efforts. The business of a business is to fulfill a customer need/want. They should not be impeded unnecessarily in doing that. Taxes should be paid by people, not the job-creating enterprise. (This includes taxing of inter-state services.)
• Dollars not used for taxes can be used for R&D, new product development, seeking new customers, increasing manufacturing capability ... and hiring new workers!
• Tax individuals ... not the job-creating entity.

3. Re-institute Accelerated Depreciation, which will incent capital expenditures funding expansion, increasing capacity and thus driving down prices. The Institute for Policy Innovation estimates every $1 of depreciation deductions generates $9 of output growth.

4. Insure a supply of trained workers ... by providing grants for hiring/training/re-training, or funding technical schools to do that training/re-training.

5. Invest in NEW Infrastructure ... infrastructure that is key to tomorrow’s competitiveness (broadband, etc.).

6. Reduce the costs of Regulation.
• Regulation is important ... it assures minimum standards. Regulation should be cost-justified against the benefits.
• Example: Eliminate multi-state duplication of licenses.

7. Corollary: Reduce/Don’t Increase the administrative and tax costs of having an employee.
• This is why it’s important to control rises in Health Insurance, Social Security, Medicare, and other societal benefits.

8. Corollary: Increase/Don’t Reduce the incentive to work.
• Insure it’s not more beneficial to collect Unemployment Compensation than to work for available wages. Keep a large differential between them.

9. Don’t play favorites. Keep the playing field level.
• Examples: Davis-Bacon, Employee “Free Choice” Act, etc.

10. Provide grants to incent basic research which might lead to development of patentable, commercializable ideas.

11. Stop creating uncertainty around interest rates, availability of capital, and costs of employing workers. This uncertainty results in postponed expansion efforts.
• Control interest rates at low levels and without volatility to reduce barriers to capital investment borrowing.

12. Foster globalization. Don’t impede it.
• All economics is about Comparative Advantage. Let everyone do what they do best, and let the buyer/user judge whether to buy/use or not.
• Many of America’s jobs depend on export business.

Moynihan on Culture/Society

"The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself."
-- Daniel Patrick Moynihan, U.S. Senator (D., NY) and intellectual, 1927-2003

How many bones do you have?

An adult has fewer bones than a baby. We start off life with 350 bones, but because bones fuse together during growth, we end up with only 206 as adults.
Taking care of your bones takes more than calcium. You need to perform weight-bearing exercises (not just elliptical or cycling) and an alkaline-rich diet full of vegetables and fruits. Avoid sodas and sugars, which rob your bones of calcium. You've only got 206, so take care of them.

Packers Leaders Discuss Strategy Process

Current Packer CEO Mark Murphy got introduced to goals and planning when he was a cornerback for the Washington Redskins.
“Joe Gibbs came in as our coach, and all of a sudden we had strategic goals for every function, metrics updated on a weekly basis, and they were posted everywhere. We had them for the entire team, for each team segment, and for the operating departments. The goals and metrics were on the walls for everyone to see.
“They showed where we wanted to be, and where we were at that moment. It all worked. I soon found out that we were all better as a result, and we were focused on the right stuff, and ultimately the same stuff. I think this approach is why Joe has been so successful not only as an NFL coach, but as a NASCAR owner.”

He made these remarks at a recent St. Norbert College Breakfast & Strategy presentation.

He came to the Packers after stints running the athletic programs at Colgate and Northwestern universities. “I knew when I came here that I, as the CEO, set the tone ... and for the Packers, especially, planning and accomplishing had to be a given. Betsy had already created a great culture that embraced strategic planning, which made my job easier.” Betsy is Betsy Mitchell, the Packers’ VP of Organizational/Staff Development.
“As a small market team, we’re especially vulnerable. We have to be very professional as an organization, making sure we uncover every profitable revenue stream we can. We have to innovate. We have to be focused on business development. We have to be good at extending our current initiatives.”
Today, the Packers have clearly stated and posted Values, Mission and Vision ... and five core objectives from which everyone takes direction. They’ve also defined what they call their True North, although it’s somewhat general at continually striving “for championships while being guided by our values in all endeavors with constant attention to protecting, enhancing, and maximizing the Green Bay Packers’ assets.”
“If you get the entire organization focused on a few goals, it makes getting to success easier. Day-to-day, week-to-week metrics give guidance. It helps get buy-in from employees, which is everything.
“We operate like any good business. We have a corporate board and an executive committee which oversee and approve what we’re doing, and with them we worry about out long-term viability.”

Mitchell is the driver of the planning process. “Earlier, we had departmental planning, but not full integration. Then, two years ago, we took two days of our top 14 people ... and figured out what we had to get to as an organization. That discussion took us to our True North definition, as well as the Core Values, Strategies and Initiatives to get there. We set our current five objectives, and post them all over the building.
“Everyone is linked by job, objective and purpose to one or more of the five. We do the Plan/Do/Check/React constantly.”
“We have forced people to have discussions about the broad objectives ... and the specific organizational initiatives. Then, we dissolved into teams and discuss how the team can contribute to each ... and then by individual.
“This year we’ve tied individual incentives to achieving the broad initiatives with emphasis on cooperation between functions.
“It’s key that Mark as CEO continually talks about them. What’s important is to keep them front and center.”

Thoughts On the ObamaCare Plan Problems

Why does Congress think that the solution to the health care dilemma lies in insurance pressures.
It is not the responsibility nor mission of a sickness insurance company to provide for the U.S. population. As private enterprises, their job is to carefully judge the next year's risk profile (likelihood of needing care, and for how much cost) of a prospective customer ... and to put a price on it based on the going rates in that community. The prospect can accept or reject. If many people have high risk profiles, as many of us increasingly do, and the going rate/cost is more than we can afford, then they go without. Don't blame the insurance companies.

Right now, we have too many people with high risk profiles (30%-40% of us are obese, for instance, with all that brings along with it ... asthma, diabetes, cancer, joint repair and replacement, etc.) and a too high "going rate" ... driving the premium costs very, very high. (Of interest, our Healthy Lifestyles Co-op just went through our three-year re-ratings of members, and the new premiums came in very, very high; indeed, we know of at least five companies who will now go without insurance.)

So, how do we "provide" for those who can't afford private insurance? Not what Congress is doing.

Here's what Congress is trying to do: Effectively, give everyone access to sick care ... with service coverage for what they can't afford provided by the "larger entity" ... the "larger entity" being an insurance company if they can afford it, or if they can't afford it, a "public option" that will be funded by the American people or Medicare funded by the American people. (Note: There is no Congressional requirement that any of us pursue a lifestyle that will do much to keep us away from needing the system, and as many of us know, when something that we want is free, we use lots of it. Why not? Think open bars.)

Congress would theoretically force cost savings by cutting the Medicare reimbursements to providers (even for prescriptions?). Right now, the provider system isn't efficient or effective enough to operate at current Medicare reimbursement levels ... and cutting them further just might force some cathartic reorganization of how sick care is delivered (we're still ignoring incenting people to healthier lifestyles). (And Congress doesn't have a great track record of rebelling against lobbyists and actually cutting the income levels of a huge industry. Where are the unions?) Actually, that cathartic reorganization might probably happen, which might be very good.

In the meantime, we will have what other countries have: We will have more people trying to access the same number of doctors/providers, so waiting times will go up. We will probably have fewer people wanting to be doctors given the cost of education/skill development and lesser income levels, exacerbating the access challenge. We will need to think about funding grants for health care professional education. Under Medicare cash controls, the ROI for developing new medicines and diagnostic equipment will be lower, reducing the incentive and investment levels for medical advances. You've read about other implications as well.

As we know, when government tries to keep up with advances so as to adjust its regulations and other controls, it's always behind the times as well as being conflicted when change is happening at a high rate.

All of the above is to explain in a different way, perhaps, why government control won't work ... why the current effort should be defeated and why Congress should immediately think through what the ideal system would look like, and enable it. What will work is for Congress to determine what the best structure of the key elements would be, and then to enable them with regulations, incentives and penalties.

Changing Role of Health Insurance Agents

Traditionally, the role of the insurance agent for most smaller companies has been to scour the marketplace annually or every other year for a cheaper deal, including plan changes that lower the cost. For this, the agent is paid a commission ...ranging from 1%-3% for larger companies, to about 5% for smaller companies ... and sometimes significantly higher than that the first year.
However, there is a likelihood that the agent's role will increasingly morph to being a consultant on a wider range of programs that can mitigate insurance costs ... and to get paid a fee for providing that consulting. Right now, companies want advice on how to cost effectively approach the Wellness/Fitness programs that can create better health and productivity. Much of what companies currently do is sold to them by the providers, and is cost in-effective or at least not cost-justified. They need an expert who can sort the productive from the non. Agents will have to figure out how to price this additional role.
Another influence will be federal/public pressure to continue to reduce the product distribution costs inherent in an insurance company's administrative costs. Currently, the biggest element is that 5% commission charge. There will be pressure to reduce it.

Ideas from the Feb. 4 Champs Meeting:

• Find a long blank wall, and for each person, put "footprints" for each day the person achieves the 5,000 step level. When 75 are completed by Sept. 30, the wall is full. It will show who's doing it and who isn't ... social pressure!
• Post the Challenge of the Day on the bulletin board.
• Provide fruit all day at 25 cents per apple or banana.
• Meet individually with each employee to discuss the program, objectives, and personal problems in achieving it. Will create comfort and better interactions in the future around program challenges.
• Bring in Jane Birr for a program every two weeks on the Monday.
• Use the Bellin nurse program for a Healthy Loser weight loss contest. Small rewards for winners.