Everybody lives on a budget. Well almost everybody. It seems the US congress hasn’t needed a budget for the last few years so they haven’t bothered to create one. I guess that comes from the fact that if they need more money they can just trot down to the treasury and print some more. They also have the added benefit that if they spend more than they actually have no one seems to mind.  Aside from that one glaring exception we all must live within our means, and that means we have a budget.

The same principle should apply to business. Organizations should have goals, and for the most part these goals need to be quantitative. In case you are missing the link here, goals and budgets should be closely related.

Budgets are great management tools in that they provide goals, but they are goals that have a certain amount of variability based on business levels and directions. They provide both statistical as well as real number targets for leaders to manage to. This enables the business leader to have some leeway and variability of the budget goals based on the overall business performance. It allows them to make business decisions and to manage.

Warren Buffet, who is widely thought of as one of the wisest and most capable business men around, has also come out in favor of budgets, specifically with respect to the aforementioned members of congress. His approach to having congress set and operate within budget, and like the rest of us live within it was simple. He said:

“…pass a law that says that anytime there is a deficit of more than 3% of GDP all sitting members of congress are ineligible for reelection.”

He was saying that the US government budget would be linked to the GDP measurement and must be within three percent of it. I like the sentiment, but the only problem with this solution is that those that would be measured and or limited by the budget, are also those that would have to “pass a law” requiring it. Past experience does not indicate there is a willingness within the congress for this type of behavior.

Regardless of that, the budget approach is correct. If there is a good economy and GDP rises, then there is more money for congress to spend. If there is a poor economy and GDP stays flat or worse, falls, then there is not as much money to spend. And just like a business that sees its revenues fall, cuts in its spending must occur.

Lets again look at what has become one of my favorite discussion topics in business: travel. I have traveled a lot for business in the past, and don’t particularly relish the thought of future business travel, but I absolutely agree that some travel is required for successful business to be conducted. There is no substitute for face to face contact, either with customers or with other members of the business unit. I also understand that travel costs money and there is a finite amount of cost that any business can bear and still be both viable and profitable.

All business groups or functions should have a travel budget. It should be expressed both in real dollar terms, and as a percentage of revenue terms. If times are good and the business is growing it should be expected that revenue will be growing and there will be more customers to visit and that the actual amount spent on travel may be more that the real dollar target, but it can still be in line with (but hopefully less than) the statistical percentage of revenue. The idea here is that you don’t want to limit your revenue growth because you decided to limit your travel to a fixed dollar level.

Just as in tougher business times you would not want your travel expense to meet the dollar level set in the budget when revenues fell short of their projected levels. This would cause travel to increase as a proportion of revenue to a statistically unacceptable level of revenue. This would adversely affect the business’ profitability. If the overall business levels are reasonably accurate, then both the fixed level and statistical level targets can be used as measurements.

Rewards can be provided for achieving budget goals and penalties or reduced rewards assessed for not achieving them. This logic can then be applied across the entire business against almost all cost categories as well as most revenue structures. If the business has time sensitive aspects then the amount of time that is budgeted per project or event can be used in the same manner. If the business is service oriented as opposed to product oriented then the number of labor hours, or the number of employees associated with conducting the desired level of business can be budgeted.

Good leaders will understand the various trade-offs that will come into play with the various goals and budgets that they have to attain and work with. Leaders that consistently work within their overall budget constraints, either real dollar, statistical or both depending on prevailing business conditions and the accuracy of the initial conditions, should be rewarded both monetarily as well as with increased responsibilities over time as they have demonstrated good stewardship of the business. Those that don’t demonstrate these traits should not expect these types of rewards.

I stated “over time” as a criteria as there will always be a stochastic or unpredictable aspect associated with business. That means that sometimes you can and will do everything right regarding your budgets and objective, but there will be unexpected events outside of your control such as disruptions in supply chains, natural disasters, changes to commerce laws, etc. that will preclude you from being successful.

It happens.

It doesn’t happen all the time though. Many of the issues can be predicted and de-risked. Those leaders that can predict and prepare for these unforeseen events will minimize their affects, continue to be able to perform, and progress. Those that can’t handle these types of events will need to learn the requisite skills if they wish to continue to advance.

Senior management cannot and should not try to both set objectives and then dictate how the business leaders are to achieve these goals or operate within these budgets. It usually neither works nor enables the next generation of senior leaders to grow into their future roles. One size does not fit all and differing leaders will have differing approaches to solving their specific problems.

Setting both goals and budgets enables leaders to understand what is expected both on an overall basis as well as on an individual or specific budget basis. It also enables those leaders to make decisions regarding tradeoffs within the specific budget structures as to enable the attainment of the overall organization’s goal. A rigorous reward structure with BOTH positive reinforcements and negative consequences needs to be in place regarding both goals and budgets to support this approach. It also requires a senior leadership team that understands that some leaders will succeed and be rewarded, and others may not be rewarded and will need to gain more experience, but that the overall business will benefit.


There are many types of communication in the modern organization. This of course would be in addition to the ubiquitous use of personal and social media such as texting, tweeting and facebooking. Some forms of organizational communication seem to be falling out of favor, such as actually phoning someone and talking to them, and some seem to be on the rise, such as Instant Messaging. However, for formal business communications there are basically two methods, the written memo as generated by some desktop based word processing program, and the presentation chart as generated by some desktop commercial presentation program. I am going to talk about the presentation method of communication. Not the creation of it. The presenting of it.

I have written in the past about charts. I have written about the increasing complexity of charts. When commercial presentation programs first came out they contained little more than the ability to draw some rudimentary objects such as geometric figures and arrows, and the ability to “draw” some text on the chart. It was great. You could now put some images with some words.

I have written about the increasing number of charts in presentations. When commercial presentation programs first came out overhead foils were relatively expensive and had to be generated specifically for overhead presentations. This limited both the complexity and number of charts that were in any given presentation. Ah for the good old days when presentations were short, simple and sweet.

Regardless of how long current business presentations have grown; regardless of how complex current business presentation slides have become; someday, somewhere you are going to be asked to actually present your presentation to a live executive audience, in person. With the increased cost of business travel, the proliferation of networked presentation sharing programs, and with the quality of desktop screens, the in person presentation is becoming a rarer and rarer internal to the organizational event, but it still does occur. Presentations to customers are still a mainstay of the sales function. If you want to be able to deliver a successful presentation, either internally to the organization or to customers, you need to know a few rules about presenting.

Even though I’ll be addressing the in person presentation scenario, much of what I’ll talk about is equally applicable to the on-line presentation as well, only on-line will be easier, since almost everyone will be multi-tasking anyway and won’t be giving you their full attention as they would if you were there in person. Besides, everyone knows how to talk on the telephone. We have all been doing that since the first time we picked up a phone and said “Hi grandma!” when we were two years old.

Presenting in person is something of an art. There are those that can do it without much thought or effort, and seem to be able to hold an audience absolutely spellbound, regardless of the information they are presenting. There are those who despite studied preparation and flawless slide content succeed only in convincing everyone present, once they regain consciousness from being bored almost to the comatose level that some people should never again be allowed to present anything.

There are a few presentation rules to abide by in order to avoid being considered the presentation making equivalent to the much sought after cure for insomnia. They are:

Be dynamic. Don’t stand in one place. Don’t hide behind the dais or the lectern. Move around the presentation area. You don’t need to run in circles or do jumping jacks, but you do need to have a little mobility in order to force the audience to periodically shift their attention point. This will help to keep them from staring at one spot and starting to “zone out”. As strange as it may seem I have found that even moving around my office if I am presenting on the phone helps as with this as well. Perhaps this method is good for both the presenter and the audience.

Make eye contact. Not just with the most senior member of the audience, or the person that the presentation is for, but with each individual in the room. You need to make a connection and acknowledge their presence if you want them to acknowledge yours. You are not giving an acceptance speech where you need to list everyone by name, but looking each them in the eye at various times in the presentation will help them feel that you are talking to them and not talking at them.

Don’t read your slides. Don’t read your slide notes. Don’t read anything. There is a really good chance that everyone in the business audience will know how to read. They will be able to read your slides without your help. Trust me on this. If you are just going to read your slides to people, they will very quickly realize that you are not much value add to the presentation. Be familiar enough with the topic and content that you don’t have to read it.

We are in the short attention span, multi-tasking world. You need to learn how to get your point across on each slide in forty seconds to one minute. If you can’t boil down the slide information into that kind of time frame you will rapidly start to lose audience attention. The pace that you move the presentation along will be a key to maintaining audience attention.

Ask yourself questions. What is the primary piece of information you are trying to convey with each slide? Why is it important? What do you want the audience to do with it, if anything? Meandering and unfocused presentations are a painful audience experience. Too many presenters try to demonstrate how smart they are by trying to provide too much and too detailed information. Trust me. You’re presenting to executives.  There is no doubt who the smartest person in the room is. If they were the smart ones, they would be presenting to you. Your job is to communicate what they need to know, not everything that you know.

Stop and answer the questions when they are asked. Don’t tell people to hold their questions till the end. If you make people hold their questions till the end, they will forget them, not be able to ask them, and they will feel strangely unfulfilled at the end of you presentation. Answer the questions succinctly. A question is not an invitation for another dissertation. If you don’t know the answer, tell them:

“That is a good question. I don’t have the answer to it, but I will find the answer and get back to you with it”

And move on. Don’t dwell on it and don’t try to bluff through it. People will be able to tell, and you want to maintain and retain your credibility.

Presenting is easy. Presenting well is much more difficult. It takes effort, preparation and knowledge of both the topic and the audience. A friend once told me early in my career that when you present you need to be brilliant and to be brief. He then looked at me and smiled and said in my case he would settle for me just being brief. I think wiser words I have never heard.


Empowerment seems to be a catch phrase for just about every organization these days. The idea seems to be to push down the authority to make substantive decisions into the organization where it is presumed that both the expertise and need reside. Instead of bubbling up every decision to a few decision makers who may be somewhat disconnected from the details of the issue, it is thought to be desirable to empower the manager directly dealing with the issue to make the decision. In theory this is a pretty good model. The idea seems to run into trouble when there is not appropriate responsibility and consequence associated with that increased decision authority.

Every action should have a consequence. Consequence is a word with a seemingly negative connotation, but it should not necessarily be that way. Maybe it stems from the old television show “Truth or Consequences” where if you failed to perform in some sort of an unpleasant challenge you had to face some sort of a potentially more undesirable or embarrassing second challenge or consequence. Maybe I am really dating myself by even admitting I am aware of that show. Growing up in New Mexico, where they have a city that actually renamed itself Truth or Consequences in honor of that show, it is difficult to not be aware of it. In any event consequences can be and should be both positive and negative in their behavioral reinforcement.

That means that people who make good decisions should be positively reinforced, or rewarded, and people who make bad decisions should be negatively reinforced. Without this fundamental reward – risk structure, empowerment ideas will start to run into issues, and that will lead to seriously mixed messages for the organization, and ultimately poor business performance. Good leaders don’t allow mixed messages to be sent. Mixed messages demoralize and confuse the entire organization. It doesn’t take many mixed messages to achieve that undesirable goal.

Let me give a couple of examples of how a lack of consequence associated with empowerment can and will affect an organizations morale and performance. I am going to pick on an easy topic, travel, since we are all familiar it. I will draw on some past experiences to illustrate how empowerment, responsibility and consequence need to go hand in hand in business. Some of this may sound familiar as well.

Some groups in organizations travel more than other groups. Invariably the groups that travel actually want to travel less because it is not nearly as elegant an activity as people perceive, and those that do not travel frequently want to travel more because it breaks up the regular grind of being in the office. In times of financial stress one of the first things to be cut is discretionary spending. One of the first discretionary spending topics to be addressed is travel. When times are tough we have all been caught in the travel freeze.

Now in the empowered organization, people would be given the opportunity to travel based on their own or their manager’s decision of whether they needed to or not. They would also be responsible for the consequences of deciding to travel in the midst of a travel freeze. This would seem logical to me. If you decide to travel and get called about it, you had better have a very good reason for traveling when everyone has been told not to travel. However, I think many of us have seen the inevitably ensuing announcement where senior management issues the edict that even in the midst of the travel freeze, and with all the empowerment within the organization, all requests for travel will need to be signed by some member of senior management before they are approved.

How is that again? A guideline has been issued. Those that adhere to the guideline should be positively reinforced and those that don’t should be negatively impacted. Those are the consequences. Why would a second, empowerment contradicting edict be issued? Obviously it has been issued because the first edict, the travel freeze, has not been effective at reducing travel. Those that have reduced travel have not been rewarded for their behavior, and those that continued travel have not been punished. There were no positive or negative consequences provided as a result of the empowerment. Since there were no consequences, the empowerment will have to be taken away in order to achieve the travel reduction, and hence the second edict.

If you can’t successfully empower the organization to decide something as simple as when it should and should not travel, even within the confines of a “travel freeze” how can it be empowered to make other more complex business decisions. The answer is until there are consequences, both rewards and punishments associated with empowerment, it can’t.

There are other variants of this empowerment issue and travel that can be used to illustrate the issue. There is also the “no travel unless visiting a customer” senior management edict. Again this action is focused on attempting to reduce costs and expenses be reducing discretionary travel. This is usually proclaimed by an executive at their regional, or worse, global staff review where they and the other senior managers from around the world have all flown in from different locations to discuss how to limit travel. The edict is then proliferated by other executives at their regional staff meetings where the same travel affect has occurred. I am not normally aware of many customers attending internal staff meetings, but I am aware, and usually so are many others, of a significant amount of travel by executives to attend these internal meetings, even when there is a no travel except to customers freeze on.

This brings up a second important aspect associated with successful empowerment. If you want to empower employees to make what have previously been executive decisions, the executives will need to lead by example. If executives either do not or have not been adhering to the same rules that they want the organization to abide by, why are they surprised when the empowered organization behaves in the same way that the executives have been behaving? If the travel freeze means nothing to the senior management, it will also mean nothing to the empowered organization.

Successful empowerment requires leadership that leads by example and lives by the same rules as the rest of the organization. It also requires that consistent consequences, both good and bad be implemented. If there is no benefit for good conduct and no negative reinforcement for bad, then empowerment will not align goals and behavior in the desired best interest of the organization. The result will be the forced fallback position of senior management trying to dictate policies that they themselves do not adhere to, and an overall reduced level of performance and morale in the organization.

Secret Sauce

Do you know what your business’ “secret sauce” is? Secret sauce is the differentiator that makes your organization better at something than another organization. It can be your people, your products, and the way you do things or a combination of all three. I really don’t know where the idea of secret sauce came from. Possibly it came from the old McDonalds commercial where they are literally singing the praises of the Big Mac hamburger and they mention “…special sauce, lettuce, cheese…”. Regardless of where it came from, the idea of, and the phrase secret sauce seems to be gaining traction in the business world.

Many organizations might say that their secret sauce is their technology. This may be true for brand new or green-field type products, but for most cases I don’t think that this holds true in the longer run. Let’s look at Apple for instance. They are an acknowledged leader in several product categories, but is their “technology” really better, or so different from any other company’s? I don’t think so.

I remember seeing a rare clip of an interview of both Steve Jobs and Bill Gates, where they were both on the same stage answering questions. Bill Gates was asked what he envied about Apple and Steve Jobs. His answer was very telling. He said he envied Steve Jobs “taste”. He said that Steve Jobs had a way of looking at things and creating an elegance about his products that set them apart.

I think he nailed what Apple’s secret sauce was in that one discussion. There are many MP3 players out there in the market, but none really as cool as the iPod. The same goes for the smart phone market and the iPhone. iPads and MacBooks have also been lauded for their designs, capabilities and functionalities. It is interesting that Apple had problems after Jobs left the first time then recovered and became the most valuable company in the world after he returned. Now that Jobs is gone there is a question about what is next at Apple, and what is next from Apple. It seems the start of the recent thirty five percent decline from the all time high price of Apple stock coincides pretty closely with the loss of the keeper of their secret sauce.

Understanding what your particular organization’s secret sauce is takes some significant and sometimes difficult self analysis. The question is not just what do you do well. It is also why you do it well and how you do it well.

By staying in the computing market we can see another example of this set of questions with Dell. Dell was one of the pioneers of supply chain management and mass customization production. They didn’t just build personal computers; they built you your personal computer. They did it as quickly and as cost effectively as the other PC manufacturers built their standard products. This capability was widely regarded as Dell’s secret sauce.

Unfortunately, it really wasn’t such a secret. Many companies are now using many of the ideas and principles that Dell initially pioneered and employed. There is now a question if Dell has grown too large to efficiently employ the same concepts and precepts that enabled their growth and success in the first place. There is a concern that many of Dell’s competitors are now better at the Dell model and process than Dell is. It seems that this sentiment is also reflected in Dells current stock price which is only half of its five year high price, and about twenty five percent of its all time high price.

Now Michael Dell has led a leveraged buyout of the company bearing his name, and is taking it back as a private company. It appears that he may believe that he too was a keeper of the secret sauce at Dell, like Jobs at Apple, and will now be able to rework his magic. I guess we will all see if that is indeed the case.

Instead of staying at the market – macro level, high technology type of secret sauce examples, I’ll relate one of my own. I was once involved in an organization that manufactured metal enclosures and integrated technology components into those enclosures. We didn’t make the technology components, just what was in essence the metal box that we put someone else’s components in. I’ll simplify what we did greatly by saying we bent and welded metal and turned screw drivers.

Initially the organization thought that they bent and welded metal and turned screwdrivers better than anyone else. They were sure that these types of production capabilities were their secret sauce and that they were their competitive advantage.

When we really looked at what our secret sauce was, it became apparent that we were not better at the physical production of the enclosure or the component integration. We had an enclosure design team that was able to design enclosures that did not require as much material or welding for their production that made us more cost efficient. The enclosures were designed to enable faster integration and more dense packing of the enclosed technology components. This meant it took fewer of our lower cost units to deliver the customers desired functionality than it took the competition. The design team also created superior heat exchange and dissipation capabilities that enabled the cooling of the smaller more densely packed enclosures.

It wasn’t our production capabilities that were our secret sauce as was widely thought. It was our design capabilities that were the secret sauce that enabled our production team to create a competitively advantaged product. Knowing our secret sauce enabled us to change the focus of our business. We no longer tried to out produce the competition. We focused on out designing them.

We changed our business approach from pursuing large volume opportunities where we would try and provide products based on an existing enclosure specification, to pursuing opportunities where we could generate and use our own competitively advantaged enclosure designs. It worked great. We were very successful.

I think it is pretty safe to say that most businesses like most hamburgers have the basics that are required to be successful. It is the looking for and understanding of their respective special sauces that will make them different. Understanding, protecting and leveraging each business’s secret sauce is what enables them to differentiate from the competition and be successful. The Big Mac still has its special sauce and it is still a successful product, but now other hamburgers now have their own special sauces as well, so its competitive advantage has been somewhat diminished. The same progression seems to occur with each business’s secret sauce. That would mean that new secret sauces, like new products need to be developed all the time to maintain an advantage.

It also means that regardless of how hard some businesses try, and despite what they want to believe, ketchup is not a secret sauce.

International Organizations

Not everybody gets to work for a foreign based multinational company. Many in the US may actually go through their entire business career without having every worked for one. I have had the opportunity to actually work for three different foreign based multinationals. I think it has provided a perspective on both the similarities and the differences associated with international and domestic business processes and practices. With the continued globalization of business and organizations, that may be a healthy concept for all leaders to be familiar with. While things are obviously done differently in North America, we need to understand the perspective that it is the North American business environment that is different from the rest of the world, not the rest of the world that is different from North America.

I will attempt to generalize at least some of the differences I have encountered between the foreign based and US domestic based organizations that I have had experience with. This is always a dangerous thing to do. Generalizations are opinions that are applied to greater sample sets, based on limited sample sets. Having worked for three foreign based nationals means I have some experience with three specific instances of foreign based multi-nationals. It doesn’t mean I should generalize across all of them, but that sort of perceived limitation has never stopped me from rendering an opinion or article before.

Mark Twain is a favorite author of mine. I have quoted him in the past, and will probably do so again in the future. I am envious of his way of expressing things, and while I may not be able to write a good line, I know a good line when I steal it. Twain said:

         “All generalizations are false, including this one.”

Undaunted by that fact, I will move forward with my comments regarding foreign based multinational organizations, and how and why leaders in North America need to understand them.

There is always the push-pull, love-hate, cats-dogs sort of relationship between the corporate offices and the field offices. In domestic based organizations one of the most feared phrases to ever be heard in the field is:

         “I am from headquarters, and I’m here to help.”

I think we have all either experienced or participated in the horror stories that have ensued after hearing this phrase. It can make your blood run cold.

It’s even worse when you think you may have just heard the phrase but you cannot be sure because your brain is still trying to unscramble and translate what you think you may have heard because it was stated in such a heavy foreign accent as to make it almost unrecognizable. Be afraid. Be very afraid.

Also remember that this is a person who is trying to communicate in English, which may be something other than their native language. That means that they have a working knowledge of at least two languages.  It sometimes open to interpretation whether some people who were born, live and work in the US have a full working knowledge of the native tongue.

With domestic organizations there is at least a consistency of culture, value set and approach that can be a basis for working together. In North America we know how fellow North Americans usually tend to think, or not think as the case may be. European and Asian cultures and value sets, believe it or not, are different from North American ones. I have not had the opportunity to work for an African or Australian based multinational, but I suspect there will be differences to a lesser or greater extent there as well.

What I have found is that despite North America being one of the largest markets for just about every type of product in the world, it is also the unique market in the world. What I mean by that is that I believe there are reasonable and rational similarities between the European and Asian markets in the way they conduct their business and the way they treat their employees. It is North America that is different.

A good example could be seen in the various approaches to contractual relationships. In Asia and Europe it seems that a contractual relationship is the beginning or starting point for an ongoing business relationship. Once the contract is in place both buyer and seller seem to understand that some changes will occur and will work together to adapt and modify the arrangement in a mutually satisfactory manner. In North America it seems that a contractual relationship is the end point or culmination of a business relationship. Once the contract is signed it seems to be the arbiter of all potential differences of opinion that can arise, and it is hoped that every possible contingency has been covered.

It has been my experience that in North America customers want to see working products before they buy them. This means that all potential vendors must create a competitive product and the buyer will select the one that they feel best meets their needs at the most favorable price. Admittedly this is not the method for all purchases, but since I have already discussed generalizations and the pitfalls associated with that, I will continue to go with it. Even the US Air Force wants to see a working model of the next generation aircraft from each of its potential suppliers before it decides which one it will buy. I always wondered how it could be next generation if there was already one built.

It has also been my experience to witness in Asia and Europe that customers seem to be much more willing to contract to buy a product based on a specification, with no actual working models. In Europe, several countries got together to pool resources and jointly design and build their next generation Joint Strike Fighter with nothing but a set of desired specifications to work from. They didn’t require that a working prototype be built as was required in the US. Again this is based on a small experience set, but it runs so contrary to what for the most part is accepted practice in North America I had to bring it up.

Despite these and many other business, organizational and cultural differences that can and will provide the grist for future articles, I strongly suggest and recommend that leaders spend some time in a foreign based organization. It will provide an entirely new perspective on how organizational structures, communications and cultures affect the business. In today’s increasingly global business environment, understanding business environments outside of what is considered the North American norm, and hence comfort zone, will help leaders deal with the complex problems associated with multinational business opportunities. It will enable them to understand and deal with the increasing number of non-domestic competitors that have entered or are now entering the domestic market.

 It may also help better prepare them for how to better understand, and deal with someone the next time they walk up and say:

“Ah yem fwoam haid-kwahtaihz, awn ah yem eah tew hehp yew.”