Phil Hauck's TEC Blog

Tuesday, November 19, 2013

Jones/West Point on Aghanistan Challenges

     David Jones, a career military officer who now teaches "character development" at West Point, was in Green Bay last week to speak at the annual ethics banquet chaired by the American Foundation of Counseling Services ... and he also spoke to a group at St. Norbert College.
     Recently, he spent a year in Afghanistan working with the officials there who are trying to create that country's version of a military academy.  Previously we did that for Iraq.  His reflections aren't positive:
     •  The country is full of bribery at all levels ... from within families clear up to the highest levels.  Indeed, he couldn't trust the academic transcripts of applicants because they were often changed due to payoffs ... and he could observe cheating on the military academy entrance exams themselves. There were 2700 applying for 400 spots.
     •  We asked our interpreters, "What percent of the national police force do you believe is corrupt?"  The responses ranged from 60% to 80% ... in THE institution which should have NO corruption.  Indeed, Jones said that the military considers that they will obtain the equivalent of 25% of their salary from bribery.
      •  Here's one form they don't consider bribery.  Military officers will stop people on the sidewalks and prevent them from passing.  The expected payoff is the equivalent of $10.  They don't consider it bribery because they didn't ask for it; the payoff just happens when they stop people.
      How do you deal with that?  Somehow, he said, you have to figure out how to teach within their culture and expectations.  Otherwise, they won't accept your messages.

David Luck, ABC Supply, on Core Values ...

        It took me eight years of being a TEC Chair to figure out that the hard stuff is much, much easier to make happen if the soft stuff is in place.
David Luck, who has grown ABC Supply, Beloit, by $3 billion dollars since 2007, confirmed that in spades at a recent St. Norbert CEO Breakfast & Strategy presentation.  ABC Supply at $5 billion is the nation's largest distributor of external construction supplies, and was founded by entrepreneur Ken Hendricks in the early 1980s.  It is now 100% owned by his wife.
In 2007, Hendricks died in a tragic accident at his home.  "Ken never talked business with people.  He always talked about his vision for the company, and how employees and customers need to be treated."
"After he died, I began a lengthy tour of the company's regions and stores to learn how they were looking at Ken's death and our management team.  I would spend each day talking with employees, and then we would have dinner together that evening.  It was those dinner conversations that were the key, when they felt more comfortable talking.  I learned that they were comfortable with the management team, which had been in place since I got there in 1998, and the direction of the company. What they were worried about was whether the company would "feel" the same.  Whether we would "feel" the same kept coming up, dinner after dinner.  Once we recognized that, we knew what we had to do.
"When we got back to Beloit, we called a senior team meeting to download what each of us felt were the "core values" that Ken would espouse and protect.  They hadn't been written down before.  It took us only ten minutes.  Some things were subsets of others.  We didn't create them.  We "discovered" them.
"What we came up with were:
Work Hard --- Have Fun
Entrepreneurial Spirit
Give Back
American Pride
(Today, there is a booklet with a page dedicated to describing what each of these means.)
"Our huge management meeting was coming up, where all the managers were gathered for our five-day session.  We took the first three days of that to do nothing but present and discuss the Core Values … and how they needed to be continued as part and parcel of how we manage.  How they must be who we are.  How they must continue to create our "feel."
"You have to understand the context of the times.  As a nation, we were slipping fast into the Great Recession … and construction had plummeted.  We were in trouble.  But …
"Once we reaffirmed Ken's Core Values … and  everyone knew that the "feel" of the company wouldn't change … we got on a roll.  Over the next five years, we more than doubled the size of our business, adding $3 billion in revenues.  
"That's the power of Core Values."

What Changes, What Doesn't
Luck makes several other important points:
•  Everyone must understand what changes and what doesn't.  What Doesn't Change:  Core Values, Core Purpose and Visionary Goal.  What Does Change: Mission, and Strategic Goals.
•  The Number One reason to LEAD with Core Values:  They are the Catalyst that enables Change!  When people know the "feel" of the company won't change, they are far more willing to experiment with the other types of change that drive success in the specific marketplace … not only go-to-market strategies, but even certain behaviors that constitute Culture that must change.

Other of his points:
•  Cultures of stores in various parts of the country can be different, as long as the driving Core Values are similar.  That's why hiring to the Core Values first is absolutely critical.  You must know that the person already has habits/beliefs consistent with them, or neither the person nor the organization will thrive.  Culture can be shaped as needed, but always with the foundation of the Core Values.
•  Of the Core Values, Respect is the most important.  They are all borne of Ken's frustrations … as a high school dropout who went into the roofing business and felt his suppliers could have treated him better … and in understanding what customers wanted.
•  Managers are charged and evaluated on three things, in this order:  Employee Engagement, Customer Engagement … and then Financial Performance.  We know that if Financial Performance is low, but Employee and Custoemr Engagement scores are high, then Financial Performance is only a matter of time.  When you live and treat people according to our Core Values … and are driven by our Core Purpose … then you'll be in a position where customers will almost throw money at you.
•  Core Purpose is your reason for being other than making money.  It's the Passion that you're also good at.  ABC's is:  "promoting and preserving the American Dream by helping people accomplish the extraordinary - based on our fundamental belief that every person has within themselves (sic) the ability to do great things.:"
•  And Mission:  "ABC's mission is to be the biggest, best, and easiest service company distributing select exterior building products.  We will be recognized as an "employee first" company producing world-class associate engagement, customer engagement, and financial results."

About David Luck
He's an Alabaman with loyalties to Auburn, where three times a year he returns to teach a high level class on strategy.  He feels that today's young people are as sharp as ever, and will do what's necessary to reverse the negatives of the current leadership generation.  Prior to joining ABC Supply in 1998, he was president of the gigantic Firestone Tire retail organization.  "Ken had been recruiting me for a year, and I finally told him that I am a "redneck" at heart, in a good sense … like hunting fishing, balance of life, pickups, core of America.  And he told me 'Heck, is that all?  We have more rednecks in northern Wisconsin than you can shake a stick at!'  So, I feel comfortable here today."

Monday, November 18, 2013

Sick Care Industry Stats

Recently, courtesy of TEC member Mark Herzog of Holy Family Memorial hospital system in Manitowoc, I sat in on a webinar sponsored by the American Hospital Assn., featuring commentary by industry expert Don McDaniel of Sage Growth consultants, Baltimore.  Among his points:
•  Right now, the patient pays about 13 cents of each dollar's cost of caring for him/her.  (In 1980, the patient incurred about 50 cents of each dollar.)  So, 87% is paid by Third Parties.  Very little incentive for the patient to understand and control costs.  With Health Savings Accounts, that is changing ... slowly.
•  Cost of our whole medical system is about $9,500 per every man, woman and baby ... about double the global average.
•  Sharply skewed!  5% of the population incurs 45% of the costs ... mostly in senior years.  But healthy lifestyle behaviors significantly reduce the medical costs incurred in those senior years.  The next 20% incur 35% of the costs ... and the bottom 75% incur only 20%.
•  In the last 20 years, health care productivity (despite all the technology advancements) has actually declined by 0.6%.  Its spending increased 2.3% annually, while employee growth increased even faster at 2.9%.  In contrast, Manufacturing output increased 2.6% on average annually, on an actual decline in manufacturing employment ... suggesting a productivity increase of 4.2%.
•  An un-publicized reason for delaying the Employer mandate a year was the inability to figure out how to account for self-employeds, partnerships and S-Corps, which are all employers but taxed and accounted for as individuals.
•  Massachusetts as a predictor for ObamaCare:  While insurance coverage of the state populace was increased, its cost increases have maintained it as the most expensive state in the nation.  Also, Waiting Time for appointments with Specialists has increased significantly.
•  The federal regulators will have a difficult time going forward building in private sector cost-saving improvements into the ObamaCare regulatory network.

On ObamaCare (just to get your interest!)

Among the fascinating bigger issues here is the one about how and whether we can absorb large-scale, complex legislation ... a la Sarbanes-Oxley, Dodd-Frank and ObamaCare.  They have incredible amounts of "unintended consequences" that are very negative.
Consider these quotes ... and then click on the New York Times column by Ross Douthat of Nov. 16 that also looks at points from Jonathan Rauch's 1999 book (Yes, 1999!), Government's End.

By James Madison, in Fedralist No. 62 (1788):
"It will be of little avail to the people, that the laws are made by men of their own choice, if the laws be so voluminous that they cannot be read, or so incoherent that they cannot be understood ..."

By WSJ columnist Holman Jenkins (3/23/13):
"The argument for limited government is really an argument for not overburdening politicians.  Leave as much as possible to the market, to the law of contracts, to the courts.  Don't pile up on politicians more and more impossible choices they have to make on our behalf."

By NYT columnist Ross Douthat (11/16/13):
See the attached file, including ...
" .. Because our government spends and regulates so much ...
"... influence sprawls into so many walks of life ...
"... so many clients and beneficiaries and interest groups depend on its programs and policies ...
"... structural, not ideological ...
"... grows stronger the longer it's embedded in the federal apparatus, gaining constituents and interest group support ...

On Lily Tomlin and ...

       On a recent Saturday evening, I drove to Manitowoc and experienced 73-year-old Lily Tomlin in her one-woman show.  It was really, really good.  No notes for almost two hours, and she went from informal talk about Manitowoc to all sorts of tidbit quotes that a comedian does, as well as her many skits.  With only one person in her retinue ... the sound guy who absolutely on cue whenever it was programmed would provide his light changes, videos and sounds.
       Some excerpts that I wrote down ... from her 60-minute first act, 35-minute second act, and 15-minutes responding to written questions (about Dolly Parton, Jane Fonda and Christiane Amanpour).

•  During the part on Women's Lib:  "What came first?  Was it the person who founded SHEboygan ... or the one who founded MANitowoc?"  
•  A lot of her "liberal" comments and jokes got good applause, so at one point she asked, "Are we sure I'm not in Madison?"
•  "It's tough to be cynical these days.  You can't keep up!"
•  "Then there's stuff my mother told me that really aren't true.  Like 'Enough is enough'.  And, 'They wouldn't be in Washington if they didn't know what they were doing.'"
•  "The next Chapter in our nation's history is going to be Chapter 11."
•  "There's so much Identity Theft going on these days, that it's hard not to be scammed.  It hasn't happened to me, and I keep wondering 'Aren't I worth it?'"
•  "You know, 'oil' is usually identified by its source.  Like Peanut Oil.  And Olive Oil.  So, what about Baby Oil?"
•  In one of her skits, she portrays a six-year-old.  "Her mother asked, 'Why is the box of Animal Crackers empty?'  So, she explained that what happened was that the Animals all got mad at each other and started eating each other, and that's why they're all gone."  "Sounds simple enough, but after my show, an 8-year-old came backstage to tell me 'If that's so, there should be one left!"

Fascinating stuff:
I get a daily blog called, which has very interesting stuff, like ...
•  We think we think independently, but we really don't.  We are VERY influenced regarding our thinking by the reactions of the people around us.  Illustrative Point:  In a 1984 debate, Pres. Reagan made a funny remark about his challenger, former VP Walter Mondale.  Those who HEARD the audience's favorable applause thought it was very funny, and Reagan won the debate.  Those who had the applause reaction held from them felt that Mondale won the debate.

NEW Manufacturing Alliance conference takeaways ...

Recently, I attended the NEW Manufacturing Alliance conference in Green Bay, and had these takeaways from speakers:

•  The Midwest Manufacturing community's main options over the next few years:
-- Become like Germany:  Cutting edge, aggressive, global, investing ... or ...
-- Become like Scandinavia:  Competent, innovative, welcoming, global.
Which will it be?  Business Leaders will decide this, not politicians.

From Mike Weller, CEO of Miller Electric
•  What's holding us back?  Using the same strategies we used several years ago, and today ... both externally in how we approach the marketplace, and internally in how we engage our people to be proactive and innovative.  We're typically noticing and dealing proactively with the external, but not so well with the changed ways in which the workforce needs to operate, its evolving "culture."
•  Regarding Engagement:  Tell employees WHY you are making a change.  Tell them the Business Case so they understand.  Clear down to the "lowest" level.
•  80/20 Rule:  80% of results come from 20% of the effort.  Not hard to figure out where the 80% is coming from.  Stop serving at least half of the rest!
•  The Challenges are Transaction Activity, Product Variability ... and the resulting Complexity.  Drive Complexity out of what you do, especially as it involves the bottom half of your customer base.  

From Steve Van Remortel, SN Advisors and author of Stop Selling Vanilla Ice Cream
      The most important thing you do is to develop and implement your Core Competencies, what you provide as value.  You already "make your competencies tangible" to your current customers, but you must figure out how to do it with prospective customers.  That's a worthy challenge, because most of us (including your competitors) don't do it!  How can you create a "core competence experience" for prospectives?
      Also, since you've articulated your Core Competencies and the organization knows what they are, do you make them a focal point of all talent development?