Sunday, August 31, 2008

Doing Business with China Jonathan Reuvid and Li Yong

Import and Export Financing in China

China's import and export financing system

The major financial players in import and export finance comprise two segments in China: banking institutions and insurance institutions.

Banking institutions
In China, banks can devise various financial vehicles to provide many kinds of trade financing services to firms that meet their qualification standards. The major players in the banking industry comprise many banks with different functions. There are three policy banks, four solely state-owned banks, 10 small and mid-sized shareholding commercial banks, 100 small and mid- sized shareholding city commercial banks, and 191 foreign financial institutions. All of these are under the auspices of the central bank – People's Bank of China. More specifically:
? The Export–Import Bank of China (Eximbank) is the only policy-oriented bank;
? Bank of China, Construction Bank of China and Agriculture Bank of China are solely state-owned;
? Bank of Communication, Everbright Bank, CITIC Enterprise Bank, Huaxia Bank, Minsheng Bank, Merchant Bank, Shenzhen Development Bank, Guangdong Development Bank, Shanghai Pudong Development Bank and Fujian Xingye Bank are shareholding commercial banks.

Insurance institutions
The major Chinese insurance institutions related to foreign trade are Export Credit Insurance Company of China and People's Insurance Company of China.

Financing tools in import and export

Banking services
Among the various foreign trade financing services available, the export credit funded by the government is provided by Eximbank, whereas general commercial loans are provided by commercial banks. Their businesses cover:
? export seller's credit, export buyer's credit, forfeiting, factoring, discounting, project financing, syndicated loans and offshore construction loans;
? issuance, acceptance, negotiation and confirmation of letters of credit, bank guarantees, export lending, packing credit, import lending, delivery guarantee, import credit line service and entrusted collection.

In addition, the Eximbank also offers countermeasures against foreign exchange exposure, which include the forward contracts and other derivatives like currency and rate options, hedging, swapping, etc.

Insurance services
The Export Credit Insurance Company of China and People's Insurance Company of China provide insurance coverage over the following:
? short-term export credit;
? long and mid-term export credit;
? political risk for Chinese overseas investment;
? political risk for foreign investment in China;
? import and export cargo transportation;
? seaborne vessels;
? others.

The major lines of Eximbank
The business lines of Eximbank primarily include: export credit (seller's credit and buyer's credit), overseas guarantees, foreign favourable loans and foreign government concessionary loans.

Export seller's credit is the financial service provided to Chinese exporters which enables exporters to be in a position to accept deferred payment by foreign importers. This includes five different types of arrangement: project loans, short and mid-term credit lines, overseas engineering project loans, offshore contract manufacturing loans and overseas investment loans.

Export buyer's credit refers to the long and mid-term loans in favour of foreign borrowers. Its purpose is to enable foreign importers to be in a position to offer upfront payment to Chinese exporters. This is an option in support of China's exports of goods and technology services.

Overseas guarantees denote the promise to pay offered to overseas creditors or beneficiaries in the form of a letter of guarantee. In the event that the debtor fails to honour its commitment to pay under contract stipulations, the bank will undertake the payment responsibility specified in the letter of guarantee. Such guarantees include such items as borrowing, tendering, contract performance and contract deposit. They cover areas such as the export of mechanical and electronic products, high-tech products and complete sets of equipment, offshore engineering projects, international tenders by domestic financial organizations and foreign government loans.

Foreign favourable loans are long- and mid-term low-interest loans offered to other developing countries by the Chinese government in the nature of foreign aid. Beneficiaries of this type of loan are Chinese and foreign firms who are able to construct production facilities in the designated countries. These facilities must demonstrate the prospect of economic return and the capability to pay back. Such loans can also be granted for the construction of infrastructures and social welfare projects which demonstrate the capability to pay back. Exim- bank is the only bank to underwrite this type of loan.

Foreign government concessionary loans are those favourable loans and mixed loans offered by foreign governments to the Chinese government. Eximbank acts as an agent under the mandate of the Chinese Ministry of Finance to dispense these loans. Mixed loans are a combination of favourable loans offered by foreign governments and commercial loans offered by foreign banks. Eximbank is the primary concessionary bank for the loans offered by foreign governments.

Cultural Differences and Clashes in Communication

Key differences between Chinese and western cultures

Chinese culture
Large power distance
Reverence to rank and power
Strong tendency of risk avoidance
Dominance of group interest and values
Doctrine of the mean and ambiguity
Resistance to change
Lack of original creativity
Pursuit of moral accomplishments
Cultivation of personal virtue
Despise material gains
'Face' is important
Connotation and tolerance

Western culture
Small power distance
Equality among people
Authority of law
Strong tendency of risk taking
Dominance of individualistic interest
Clarity in expression
Acceptance of change
Pursuit of objective being
Knowledge and skill learning
Recognition of material gains
'Face' is unimportant
Candour and rigidity

Sources of cultural clashes in communication
Cross-cultural communication problems:

Complaints from western managers
Marathon negotiations and decision-making
Decisions reached by discussion instead of voting
Indirect expression of opinions
Great importance is given to 'face'
Dependent on Guanxi and personal emotions in business dealings
Submissive and lack creativity
Ambiguity in policies, laws and regulations
Excessive government intervention
Complicated and closely-knit interpersonal relations

Complaints from Chinese managers
Lack of understanding of the unique local environment
Over-rigid in handling business affairs and lack of flexibility
Impersonality and rule-orientation without giving consideration to circumstances
Lack of thrift in the use of corporate money
Disregard local management suggestions
Individualistic and arbitrary in decision-making
Money-making is the top priority
Lack of respect and care for staff/employees
Ignore the interests of Chinese partners
Arrogance and conceit

Managing cross-cultural differences for cross-cultural advantage
A possible solution for cultural differences could come from the following:
? adapting to each other's culture
? building shared values
? adjusting decision making references
? forming a unique management style accommodating both cultures
? establishing effective interpersonal communications that are free from prejudiced assumptions.

For more Information
* Asian Business. Business with China, Europe,India, Arabs, International Business and Cultural Books. *


Friday, August 29, 2008

The Manager as Politician. Political Navigators' Skills

Political Navigators' Skills

This chapter will explore relationship, communication, conflict resolution, partnership, organizational understanding, and political thinking skills.

There are also useful when resolving conflicts, negotiating, and building relationships and partnerships.

Relationship skills allow political navigators to enhance their relationships with other people in the organization. They help you build a positive, comfortable, and nonthreatening communication climate with others—one that encourages people to discuss organizational issues, problems, and other ideas openly and honestly, without fear of reprisal.

Accordingly, the first rule in relationship building with another person is for you to listen, truly hearing what another person is saying, both verbally and nonverbally. This requires listening, observing, and empathizing skills to enable you to really hear what others are saying and to pick up on what is "between the lines" of a message.

Improving relationships requires you to shift your managerial style from authoritarian to participatory. This is done by relinquishing control and dominance over other people and allowing them to participate as equal partners. Thus, recognize and accept that others have a great deal of experience, insight, and expertise that needs to be acknowledged, tapped, and applied. In order to demonstrate the value and importance of others' ideas and thoughts, you become an active participant during political interactions.

Once a participatory managerial style has been established, continue using your interpersonal skills to gather important information from others. Encourage them to share their feelings and provide moments of silence that can help others reflect and reconsider their ideas, thoughts, and positions. These skills serve as road map helping you maneuver and adjust to the ebbs and flows of communication during exchanges with others.

The ultimate outcome of a positive relationship with another person is known as rapport, which is the unconditional positive regard between you and another person. Rapport is more than a superficial relationship; it is a deep concern for the well-being of others. It can be demonstrated when you are as interested in others as you are in the results they produce. Rapport is established through your sincere interest in and acceptance of others.

Rapport is further enhanced when you are emotionally empathetic. This is demonstrated when you are empathically attuned to the emotions and feelings of others. However, successful political navigators understand that most political interactions and engagements are messy, and at times, decidedly emotional, especially for politically unconscious incompetent individuals, who often do not have the same adaptability you do. The emotions of such individuals are normal and inevitable, and therefore cannot be ignored. Practicing emotional empathy raises holistic understanding and engages others, thereby gaining more interpersonal leverage.

Interpersonal Relationship Styles

In the 1960s, Dr. David Merrill identified two clusters of behavior: assertiveness and responsiveness. These two dominions are incredibly helpful in predicting how other people are likely to behave. These key dimensions of behavior combine to form the interpersonal relationship styles model
Interpersonal Relationship Styles Model

Assertiveness. In this model, assertiveness is the degree to which a person is perceived as attempting to influence the thoughts and actions of others. It is helpful to think of a continuum of assertiveness, in which a person's behavior is typically more assertive or less assertive than that of half the population.

Responsiveness. Responsiveness is the other crucial dimension of behavior in this model. Responsiveness is the degree to which a person is perceived as expressing feelings when relating with others. It is helpful to think of a continuum of responsiveness in which a person's behavior is typically more responsive or less responsive than that of half the population.

Four Interpersonal Styles. Each individual's interpersonal style is his or her own unique blend of two dimensions: assertiveness and responsiveness. Nevertheless, most people fall more or less into one or another of the four styles known as analytical, driver, amiable, or expressive. These four styles can be described this way:
? Analytical style is perceived as control-responsive/ask-assertive. Analyticals are task oriented, precise, and thorough. Analyticals like to deal in facts, work methodically, and use standard operating procedures. They are motivated by a need for respect and their specialty is technical.
? Driver style is perceived as control-responsive/tell-assertive. Drivers are goal-oriented, disciplined, determined "bottom-line" thinkers who push for results and accomplishments. Their motivation is power and their specialty is control.
? Amiable style is perceived as emote-responsive/ask-assertive. Amiables are people oriented, friendly, accepting, cooperative, and like to be liked. Amiables are motivated to help others in a team effort. The payoff for them is approval and their specialty is supportive.
? Expressive style is perceived as emote-responsive/tell-assertive. Expressives are idea oriented, vigorous, enthusiastic, and spontaneous. Expressives thrive on recognition. Their specialty is social and they like to initiate relationships and motivate others toward goals.

Improving Interpersonal Relationships with Analyticals. Analyticals value hard work and attention to detail and situations for them must be logical and carefully worked out. When working with analyticals, you can enhance your versatility by:
? sticking to business;
? using action words rather than feeling words;
? providing solid, realistic evidence and support for decision making;
? preparing your "case" in advance;
? approaching them in a straightforward way;
? supporting their principles when possible;
? presenting materials in an organized manner, making certain that you clearly communicate important ideas and facts;
? using a step-by-step timetable, assuring them there won't be surprises when preparing a schedule for implementing action;
? avoiding casual, loud, or informal conversations;
? being precise and organized and not using opinion words (others' or your own) as evidence;
? avoiding guesses and being accurate whenever possible;
? not being disorganized or rushing the decision-making process;
? avoiding leaving things to chance or luck;
? avoiding aggressive behavior, being unrealistic with deadlines, or being vague about what is expected of them and always following through.

Improving Interpersonal Relationships with Drivers. Drivers need information that allows them to make decisions quickly and get tangible results. They also like to know they are in charge. When working with drivers, you can enhance your versatility by:
? being clear, specific, brief, and to the point;
? always dealing with the facts, packaging them for quick decision making;
? using results that support their conclusions and actions;
? sticking to business;
? coming prepared with all requirements, objectives, and support material in a well-organized presentation;
? always presenting the facts logically and planning your presentation efficiently;
? asking specific questions and providing them alternatives and choices for making their own decisions;
? departing graciously after concluding your business;
? avoiding trying to build personal relations and not wasting their time;
? not being inefficient, disorganized, messy, or rambling on;
? avoiding conversations that distract them from the business at hand;
? not asking rhetorical questions;
? not going to a meeting with a ready-made decision;
? never trying to convince them to support an idea through "personal" appeals.

Improving Interpersonal Relationships with Amiables. Amiables want warmth, understanding, friendship, and trust in their communications. Their strength is building personal relationships. When working with amiables, you can enhance your versatility by:
? holding open meetings with a personal comment to break the ice and being casual and nonthreatening;
? providing assurances and guarantees, especially for decision making;
? supporting their relationships and feelings and showing sincere interest in them;
? being candid and open;
? listening carefully to what is being said and being responsive;
? presenting your case softly, in a nonthreatening manner;
? watching carefully for possible areas of early disagreement or dissatisfaction;
? moving casually, informally;
? defining clearly (preferably in writing) individual contributions and assuring them that their actions will diminish risks and benefit them;
? not rushing into the business agenda or forcing them to respond quickly;
? avoiding disagreeable subjects and not sticking coldly or harshly to business;
? avoiding debating facts and figures;
? not being vague (rather, offer them options and probabilities);
? not patronizing or demeaning them by using subtlety;
? not being abrupt or rude.

Improving Interpersonal Relationships with Expressives. Expressives need to know you are with them in spirit and they appreciate information that allows them to move, create, or take action. When working with expressives, you can enhance your versatility by:
? asking for their opinions and ideas and supporting their dreams and intentions;
? always talking about people and their goals;
? giving testimony and incentives for decisions;
? leaving time for relating and socializing;
? asking for their opinions/ideas regarding people;
? allowing plenty of time to be stimulating, fun loving, and active;
? providing testimonials from people they see as important and prominent;
? offering special, immediate, and extra incentives for their willingness to take risks;
? avoiding dealing with too many details or being dogmatic, cold, or tight-lipped;
? never talking down to them, legislating over them, or presenting them with too many facts and figures;
? avoiding being boring;
? not leaving decisions hanging in the air;
? not being too task-oriented or judgmental.


Communication skills are used to help you improve your exchanges with the people directly and indirectly involved in a political interaction or engagement. Using communication skills helps establish rapport with other people, which leads to more successful political interactions and engagements. These skills can play a critical role in relating successfully with others. Communication skills can be clustered into two categories: following skills and understanding skills

i) Following Skills

There are four skills that help you follow others better during one-on-one conversations. They are: active listening, questioning, encouraging, and silence.

a) Active Listening.
Good listening is the foundation of the empathetic behavior previously discussed and is an important bridge to understanding others. Accordingly, a key to effective communications is to become a better listener. In fact, approximately 70 percent of a manager's day is spent in communication and over half of that time involves listening. Feedback is a critical element in effective communication and can be made accurate through good listening.

The difference between inactive and active listening is the difference between just hearing and listening. The act of listening requires energy, effort, and concentration. Listening readily captures content and intended meaning that others are attempting to convey. Further, active listening conveys respect. When people are listened to attentively, they will believe that their point of view is taken more seriously. They will also state their feelings and thinking more clearly. They will provide feedback that demonstrates respect and listen to others more carefully when they speak. Additionally, they will become less quarrelsome and more receptive to different points of view.

In order to develop better listening skills, concentrate all your physical and mental energies on listening, demonstrate interest and alertness, and seek an area of agreement with others. When possible, search for meaning and avoid getting hung up on specific words, avoid interrupting the speaker, and demonstrate patience (people can "listen faster" than others can speak). Provide clear and unambiguous feedback to others, repress the tendency to respond emotionally to what is said, and ask questions when you do not understand something. Finally, withhold evaluation of the message until the other person is finished and you are sure you understand the message.

b) Questioning.
Questions are used to direct the conversation into more constructive and informative channels. Questions may be directed at an entire group or a specific person. Questioning is a powerful tool with which to guide the flow and direction of conversation, facilitate group discussion, and help you obtain specific information. Basically, two types of questions are useful: closed- and open-ended.

Closed-ended questions have specific responses and can be answered in relatively few words. They are important for guiding the conversation and gathering essential information quickly. Examples of a closed-ended question might be, "How long have you been in your current position?" or "Is this a problem you would like to solve?" This type of question is concerned with gathering needed information rather than with the effectiveness of the response or the feelings of others.

In contrast, open-ended questions generally encourage another person to expand the conversation in several different directions and require more than a few words to answer. They also help people to prepare to consider divergent points of view or widen their perceptual field. Open-ended questions open the doors to developing a good rapport and positive relationship. An open-ended question allows people to convey their point of view and is less threatening to others. An example might be, "How do you feel about the effectiveness of the new marketing program?" People answering this type of question may take several different approaches.

c) Encouraging.
Encouraging enables people to continue to elaborate on their thoughts and feeling. Supportive remarks by you such as "I understand," "It's OK to feel that way," "That's interesting, tell me more," or "I hear you" are useful in countering feelings of inadequacy. They also prompt action by encouraging people to continue the discussion. Another effective skill is an "umm-hum" or a nod of the head to let others know you are listening. This serves to strengthen a person's response and his or her efforts to continue speaking.

d) Silence.
The use of silence is a somewhat difficult skill to master but enables the person speaking to provide additional information or explanation, if appropriate or needed, and think through what has transpired. However, even experienced political navigators are initially uncomfortable with silence as a technique. However, with practice, it becomes obvious that intentional silence provides people the opportunity to explore their feelings more deeply and provide them with additional time to think about what they are going to say. Additionally, it may provide the less articulate people with a feeling of worth. Sometimes, silence can be overdone; more than a minute of silence, for example, often causes discomfort. Therefore, avoid extensive periods of silence as they may be misinterpreted and perceived as unresponsiveness. Silence is most beneficial when used in combination with other skills, such as active listening and encouraging.

ii) Understanding Skills

Political navigators use skills that help them interpret the thoughts and ideas of others. To accomplish this, use skills that allow others to elaborate, expand, and provide clarity regarding their thoughts and ideas. Six skills help you better understand others during the one-on-one conversations common during political interactions. They are: interpreting, clarifying, reflecting, summarizing, paraphrasing, and tentative analysis.

a) Interpreting.
Interpreting is used to explain cause-and-effect relationships and clarify implications. This approach generally results in a greater awareness of what is involved and enables people to understand the full ramifications of what another person is saying. Interpreting requires you to draw a conclusion about another person's perception of a situation or event and provides a basis for publicly testing any assumptions made during a conversation. Thus, it allows you the opportunity to verify your own point of view and acknowledge the correctness of your interpretation. Common statements such as "What I hear you saying ..." and "Based upon what you have said..." can be used to introduce your interpretations.

b) Clarifying.
When political navigators ask another person to elaborate on a particular point or statement or provide an example or illustration to make the meaning more clearly understood, they are using the clarifying technique. Additionally, sometimes it is helpful to make clarifying statements in an attempt to place another person's feeling and attitudes in a clear, more recognizable form and thereby identify the cause of his or her problem. Do not use clarifying to interpret another person's feelings but, rather, to "test" understanding. Using this skill involves asking questions such as "Are you angry at not being selected to participate in the restructuring project?"

c) Reflecting.
Reflecting allows you to bring to the surface the substantive content and emotions of another person's words. It is used to illustrate that you understand correctly what others are in experiencing, thinking, or feeling. Reflecting helps you bring out into the open feelings and hidden agendas and to guide the conversation. This is critical because deeply repressed feelings can affect virtually every thought or behavior of other people. Such feelings often negatively affect the political interaction process. Therefore, they need to be brought to the surface to be dealt with effectively, which helps develop open and honest communication. An example of a summarizing statement would be, "So you are looking for a training program to help you develop interpersonal skills to improve your effectiveness as a supervisor?"

d) Summarizing.
Summarizing communicates to others the essence of what has been said throughout a political interaction. To make certain that both sides are understood, you may wish to ask another person to agree or disagree with your summary. An example of a summarizing statement is, "Let me take a moment to summarize our conversation...." This technique is used to summarize several concepts, ideas, and thoughts and help you to identify the most important of them. Alternatively, you may wish to have another person summarize the discussion as a way of checking for accuracy and understanding. Summarizing differs from paraphrasing in that it is used at the end of a discussion with another person.

e) Paraphrasing.
The primary purpose of paraphrasing is to restate, in your own words, another person's basic message. Paraphrasing is used primarily to test your understanding of what has been said. It is used to communicate to another person that you are trying to understand the basic message and, if successful, that you have been following what a person has said. An example of paraphrasing would be: "You seem to be saying that his overbearing personality makes it difficult to accomplish the project."

f) Tentative Analysis.
A tentative analysis is usually stated in the form of a question because it is a "hunch" type of interpretation that is usually narrow in scope. Thus, it is a form of short summarization. Because it generally deals with one thought or concept instead of several, it stops short of being comprehensive. Its principal advantage is that it communicates that you are attempting to test publicly your understanding of another person's message. Doing this one step at a time, you demonstrate respect for another person's viewpoint and patience with them. An example of tentative analysis would be, "I have a feeling you are not very satisfied with the quality of the sales training program."

Questions Helpful in Improving Your Own Communication Effectiveness
To improve your communications effectiveness, use the following questions as a guide when preparing for a political interaction:
? To what degree does my personal history affect this conversation?
? To what degree is my self-concept at risk?
? How threatened do I feel?
? Did I hear the other person correctly?
? Do I really understand what the other person is saying?
? Given my knowledge of the other person, to what degree might that person be distorting the interaction? In what probable direction?
? How threatened might the other person be at this moment?
? How might I reduce defensiveness?
? Have I made any unjustified assumptions about this interaction or its meaning?
? Does my attitude toward the other person distort my perceptions?
? What is the other person's interpersonal style? How does it match with my own?
? What adjustments might I have to make in order to accommodate this person's interpersonal style?


During political interactions and engagements, it is difficult to maintain positive interpersonal relationships because people have different agendas, values, beliefs, and interpersonal communication styles. This can take a great toll on all parties personally and produce significant amounts of stress. Therefore, conflict resolution skills are absolutely critical to your success as a political navigator.

Understanding and Dealing with Political Resistance
When political conflict occurs, people resist alternatives, solutions, and options used to resolve the conflict. However, many managers are shocked when it occurs and wish that it would never happen or would just go away. The only solution for dealing with political resistance is to understand its underlying reasons and learn how to address them.

As a political navigator, you understand that political resistance is a very positive opportunity. It allows you to confirm support for your political solutions, as well as to address peoples' fears and vulnerabilities.

Resistance is simply the fear of losing one's current state. In fact, resistance is predictable, natural, and a necessary part of learning about another person or implementing a political solution. It is a natural response for people to become defensive. They push back when they feel they are being pushed. One solution might be to present only those alternatives that do not cause them to become defensive, but is this realistic? By addressing political resistance and taking advantage of the opportunities it offers, you improve your credibility and influence and enhance your status in the organization.

Regardless of how people express resistance, it is important to identify the many reasons for political resistance. Here are the most common reasons:
? The purpose of a political solution is not made clear.
? Employees affected by a political solution are not involved in the planning.
? An appeal for a political solution is based on personal reasons.
? There is a fear of failure.
? The cost (personal or organizational) is too high or the rewards inadequate.
? These is a perceived lose of control.
? The vested interest of the individual or subunit of the organization is involved.
? There is a lack of respect and trust in the initiator.
? There is satisfaction with the status quo.
? Past experience with political conflict is negative.
? There is an honest difference of opinion.
? There is a lack of management support for a political solution.

Conflict over resources, conflict over recognition and rewards, lack of commitment to a political solution, lack of an agreed-upon solution, differing organizational values, lack of trust and credibility, and differing realities are other circumstances that can produce resistance.

Political Resistance Resolution Method

During a political conflict, the root cause of resistance is fear. People fear losing control, power, status, authority, or position. People also fear becoming vulnerable. However, most people are too proud to admit it. They often rationalize their behavior or blame others for creating the situation. In the face of change, they resist positive political solutions because they fear the outcomes.

When political resistance occurs, you should not take it personally and become defensive. Political resistance is simply the result of differing perspectives and the fear of losing the status quo. Political navigators who maintain an objective viewpoint will be better able to deal with people's resistance to their ideas, alternatives, and suggestions. You can minimize resistance by presenting political solutions in a timely and orderly fashion. Additionally, you will compromise your integrity by endorsing solutions that, however, popular, do not adequately solve the organization's problems.

Political navigators can address these differing perspectives by using the political resistance resolution method. This method can be thought of as a set of skills to govern conflict. It is a constructive process for handling emotion-laden disagreements between you and other people. Its purpose is to bring to the surface underlying fears that cause resistance, so others can understand and accept the proposed solution, change, or alternative being proposed. This method encourages assertive communications and the sharing of feelings but does not permit the typical free-for-all that blocks creative resolution. Quite simply, it is an effective tool for addressing differing perspectives of people. The method consists of four steps: (1) acknowledging political resistance, (2) clarifying political resistance, (3) problem solving, and (4) confirming the answer.

i) Acknowledging Political Resistance.
The political resistance resolution method begins with acknowledging resistance. In other words, identify it. Acknowledging political resistance helps with controlling the emotions associated with differences of opinion, which is critical because arguing and fighting over differences of opinion will accomplish little.

Acknowledging political resistance consists of two activities: listening and sharing. First, you should listen carefully to another person's messages to determine their meaning. Most critical and emotion-laden statements are made to verbalize excess tension or fear. In fact, the very process of listening helps convert tension into words that serve to reduce anxiety, even if the words themselves do not actually reveal the nature of the tension or the reason for it.

The second activity involves sharing of feelings with another person. When you demonstrate your understanding of another person's feelings and are not surprised or upset by negative statements, it illustrates your support, which helps reduce tension. Quite simply, sharing is a form of support. To be successful in this stage, remain calm and neutral, saying and doing nothing that will increase the other person's tensions or fears.

b) Clarifying Political Resistance.
Few people are ready or willing to reveal the reasons for their behavior, even when they understand what they are. They learn to cover up the plausible reasons, justifications, and explanations in an effort to prove that they're acting in a well thought out and logical manner. There is a word that explains this thinking process: rationalization. Therefore, the second step in resolving conflict is to clarify what another person is thinking so they will be prepared to receive new and logical information.

During this phase, the challenge facing you is to make statements lose force without causing people to lose face. Clarifying involves asking non-threatening questions so that people are allowed to express their thoughts more freely, which clarifies their resistance. By encouraging people to give examples and illustrations, you are helping them grasp their own meaning more clearly. This will help you better understand others' negative statements.

c) Problem Solving.
Once you have clarified a negative statement, you are ready to help people identify solutions to their problems. The problem-solving process typically consists of six steps:
1. Problem identification
2. Political solution identification
3. Political solution analysis
4. Political solution selection
5. Political solution implementation
6. Political solution evaluation

Problem identification involves analyzing the situation to identify expectations and determine the current situation. The discrepancy between these two positions is the problem. Therefore, the focus of the problem-solving process is finding the "best" political solution to the problem(s).

Identifying political solutions involves generating as many ideas as possible to identify a solution. This activity is conducted without evaluating or examining the ideas. The goal is to come upon with as many possible solutions as possible.

Analyzing political solutions is the process of critically examining each of the possible solutions. Set up criteria to serve as a standard or benchmark by which to filter each idea. Ideas that meet most of the criteria are grouped together for further analysis. The ideas that do not meet the established criteria are filed for future consideration.

Selecting political solutions involves testing the solutions that meet the criteria to decide their practicality and ease of application. Identify the cost and potential results of each solution, which will help you decide the best possible political solution from a cost/benefit perspective.

Another critical part of this phase is to name possible obstacles or barriers that may prevent applying a political solution. As these barriers are identified, look at them and decide the possible effects they have on various solutions. You should identify actions to overcome obstacles or barriers, examining financial, human, and emotional costs. This information will help you decide the best political solution. The outcome of this phase of the problem-solving process is that you have identified the best alternative(s).

d) Confirming the Answer.
When an acceptable political solution has been identified, all parties must make a commitment—typically some kind of immediate action—that reinforces their willingness to accept the remedy. At this time, feedback is essential in evaluating the continuing viability of the solution and of the relationship in general. Finally, the last two phase of the traditional problem-solving process are applicable during this part of the resistance to political resolution process: solution implementation and solution evaluation.

Implementing political solutions is the process of applying the political solution to determine its results. When doing this, you should choose opportunities or situations where the political solution has the highest degree of success. This strategy allows you to integrate the solution under the best possible conditions before they apply it to the entire department, division, or organization.


Gaining credibility as a political navigator requires demonstrating the knowledge, skills, and abilities that the organization values. It is absolutely prerequisite to solving problems, creating opportunities, capitalizing on strategic opportunities, and leveraging organizational strengths. Partnership skills are essential for you to become proficient in political interactions and engagements. These skills are used to manage political interactions and engagements, deal with political resistance, create interpersonal environments that are conducive to sharing of information, and enlist the support and cooperation of others involved in political interaction and engagements.

Partnership skills are the most eclectic skill sets of a political navigator because they are an integration of the three previously discussed skills (relationship, communication, and conflict resolution). Partnership skills rely on your ability to build and maintain positive synergistic relationships, communicate effectively and clearly, and resolve conflict in a constructive and productive manner. However, you must develop an understanding of partnerships to execute the skills effectively.

By design, a partnership is a long-term, collaborative activity that focuses on achieving results through mutually beneficial relationships used in helping the organization successfully achieve its goals and objectives. These relationships assist you in acquiring a responsive attitude necessary for you to become more people oriented and thereby better understand and anticipate their needs. Partnerships help you decide which political interactions and engagements provide the highest value and have the greatest impact on the organization. They also promote establishment of working relationships based on shared values, aligned purpose and vision, and mutual support. Furthermore, partnerships are based on the business and performance needs of people, not a political navigator's career aspirations or professional success.

Foundations for Partnership Skills
There are two primary elements of partnership skills: purpose and partnering. Purpose brings people together and provides a focus and direction for the partnership, the result of which is clarifying roles and focus. It also embraces underlying assumptions, trust and risk, shared values, and expectations. Purpose defines "why" a partnership is needed. Simply, purpose helps describe what you intend to achieve as a result of a partnership.

Partnering exemplifies the observable dynamics between you and other people engaging in a partnership. It incorporates the common values, beliefs, assumptions, and expectations of all parties in a partnership. Unfortunately, much that is important to partnering often goes unexpressed. Partnering occurs when you and other people pursue a common purpose together. Those who attend to purpose but neglect partnering often fail in their work altogether.


Political navigators rely on their organizational understanding skills when identifying the needs of all key clients (decision makers, stakeholders, influencers, and scouts) in the organization. Additionally, these skills enable you to identify the issues that ultimately contribute to political conflict in the organization.

Organizational understanding skills can be best demonstrated when you reflect on how organizations work. Simply stated, it is essential for you to think like the people you serve. This understanding requires knowledge of how things get done inside an organization as well as how decisions are made there. Business understanding requires you to have knowledge of business fundamentals, systems theory, organizational culture, and politics. By developing business understanding, you will be better able to facilitate political engagements that help in identifying political solutions that improve organizational effectiveness.

Organizational understanding skills require you to ascertain the readiness and commitment of people to political solutions. The following questions can be used as a guide in this process:
? How willing are the members of the organization to implement political solutions?
? Is upper-level management willing to support political engagements?
? What types of information do members of the organization readily accept or resist?
? What are the members' attitudes toward political solutions?
? What are the executives' attitudes toward political solutions?

Organizational understanding skills also require you to intentionally prioritize the contributions, involvement, and loyalty of people above the organizational system. This is known as organizational subordination. Thus, you demonstrate organizational subordination by eliminating policies and procedures and organizational structures that interfere with, prevent, or discourage the implementation of political solutions.

Organizational understanding skills require you to have the ability to be completely committed to identifying appropriate political solutions. Further, you have the ability to ask others in the organization about their perspective of the organization, its financial and competitive position, strengths and weaknesses, management structure, management capacity, technological state, relationship to competitors, reward and compensation systems used to motivate others, performance appraisal and review systems, performance management system, and management's attitude toward human resources within the organization. These critical areas of inquiry help you acquire an understanding of the organization and the nature of its business and demonstrate your understanding of business fundamentals.

Next, your ability to manage projects (political engagements) is critical. Thus, political navigators possess project management skills that enable them to plan and identify objectives and activities that produce a desired result (political solution), organize people to get the job done and direct them by keeping them focused on achieving the results, and measure the project team's progress and give them feedback to keep the project moving ahead, while constantly monitoring progress toward, and deviation from, the project's goals.

The final organizational understanding skill is systems thinking, which involves viewing and understanding an organization as an open system. Such thinking requires you to have detailed knowledge of the inputs, throughputs, and outputs of the organization, as well as the critical connections and disconnections that exist therein. These characteristics form a framework for appraising an organization's internal environment, isolating political problems, and identifying relationships critical to implementing political engagements.

S.W.O.T. analysis is useful in identifying a wealth of information that will guide you throughout the political engagement process.
i) Internal Environment. Examination of the internal environment allows for identification of the organization's strengths and weaknesses. This environment obviously affects execution of its mission. A number of areas must be considered when examining the internal environment. Several questions should be asked to determine the strengths and weaknesses of an organization:
1. What is the financial condition of the organization?
2. What are the aptitudes and abilities of managers and employees?
3. What is the current condition of facilities?
4. What is the current state and quality of technology?
5. What is the quantity and quality of material resources?
6. What is the quantity and quality of human resources?
7. What are the current images of various departments and their visions?
8. How is the organization structured?
9. What is the organization's culture?
10. What is the work climate within the organization?
11. What are the policies and procedures that improve or impede organizational performance and effectiveness?
12. What are the managerial practices within the organization?
13. What is the quality of organizational leadership?
14. What are the strengths and weaknesses of the organizational leaders?
15. What are the strengths and weaknesses of the organizational culture?
16. What is the organization's mission and strategy?
17. Does the organization have a formal learning system?
18. What is the compensation and reward system?
19. What is the quality of the performance appraisal process?
20. Is performance coaching used within the organization?

Once these areas have been examined, describe each relationship in terms of its strengths and weaknesses. It is recommended that several data collection methods be used when conducting such an analysis (e. g., interviews, observations, questionnaires, and focus groups). Combining methodologies is an excellent way of ensuring a more accurate picture of the internal state of the organization.

An analysis of the collected data can be used to help you to make recommendations for the improved allocation of material, financial, and human resources in the execution of an organization's goals, objectives, and mission. In so doing, you demonstrate that you have the expertise to analyze the health of your organization, provide recommendations, and provide leadership and guidance that will improve overall effectiveness and efficiency.

ii) External Environment. The long-term conditions facing the organization can be uncovered through an external environmental analysis. Such an analysis identifies and encompasses several important variables, including: resource availability; current economic condition; social and cultural values; the legal and political environment; the organization's competitive rank; performance and organizational gaps, and image in the marketplace.

In order to remain viable in the marketplace, many organizations maintain aggressive research and development programs. An external environmental analysis helps identify the opportunities and threats facing an organization in a given industry, vis-à-vis the amount, type, and quality of technology needed to remain competitive. With the continued escalation of technology, such an analysis will be extremely important to the long-term competitiveness of most organizations and, ultimately, their long-term success. There are a number of questions that are useful in determining the external environment facing an organization:
1. What are the economic conditions of the nation, region, and local community?
2. What social and cultural values predominate within the industry and its geographic locations?
3. What quantity and quality of technology does the organization employ to achieve its business results?
4. What external financial, material, and human resources are available?
5. What is the organization's image in the marketplace?
6. What is the company's competitive rank within the industry?
7. What performance gaps exist within the organization?
8. What organizational effectiveness gaps exist?

This information reveals the economic health of an organization, its values, political climate, use of technology and resources, competitive rank within its industry, overall image, and areas requiring improvement.


During any political interaction or engagement, your primary job is to consider what possibilities, circumstances, events, and conditions are creating resistance. You have an obligation to determine why certain political solutions are being fought. Obviously, some political solutions are more appropriate than others; however, you must make certain of this before recommending and implementing them. To that end, you take the time to observe others; identify other people's needs, interests, expectations, and opinions; examine historical documents reflect on past political interactions; interview interested parties; solicit input from others; and identify a list of questions to be asked before participating in political interactions and engagements. The ultimate purpose of gathering this type of information is to have meaning and purposeful conversations, garner support, make informed decisions, and provide acceptable recommendations. In short, the solution is to think politically, continually asking others about themselves, their opinions, ideas, suggestions, and recommendations. When this approached is used, political navigators are using political thinking skills.

Political thinking skills can include a number of behaviors:
? thinking before reacting
? listening carefully and selectively to others' requests during political interactions
? filtering suggestions and recommendations through a defined philosophy of interpersonal relationships
? understanding one's role during political interactions and engagements
? possessing the courage to encourage political solutions that are appropriate but not popular
? analyzing all requests as requests rather than as commands
? maintaining consistent guiding principles to ensure credibility

By constantly exploring and asking questions, you are not focusing on the status quo, but are continuously looking for new and improved ways of enhancing your relationships with other people and the effectiveness of the organization. Consequently, political thinking is as much a state of mind as it is a series of techniques and processes. Political navigators who are continually examining the state of others and the organization and comparing it with an ideal vision are constantly in touch with the problems and issues facing the people and the organization.

For more Information
* Political Skill, People Skill, People Management Skills, Communication Skills, *


Monday, August 25, 2008

Secrets of Power Negotiating: Inside Secrets From a Master Negotiator, Second Ediiton

Beginning Negotiating Gambits: Avoid Confrontational Negotiation

Key Points to Remember
1. Don't argue with people in the early stages of the negotiation because it creates confrontation.
2. Use the Feel, Felt, Found formula to turn the hostility around.
3. Having Feel, Felt, Found in the back of your mind gives you time to think when the other side throws some unexpected hostility your way.

Beginning Negotiating Gambits: The Reluctant Seller and the Reluctant Buyer

Key Points to Remember
1. Always play Reluctant Seller.
2. Look out for the Reluctant Buyer.
3. Playing this Gambit is a great way to squeeze the other side's negotiating range before the negotiation even starts.
4. The other person will typically give away half of his or her negotiating range just because you use this.
5. When it's used on you, get the other person to commit, go to higher authority, and close with good guy/bad guy

Beginning Negotiating Gambits: Use the Vise Technique

Key Points to Remember
1. Respond to a proposal or counter-proposal with the Vise Technique: "You'll have to do better than that."
2. If it's used on you, respond with the Counter Gambit, "Exactly how much better than that do I have to do?" This will pin the other person down to a specific.
3. Concentrate on the dollar amount that's being negotiated. Don't be distracted by the gross amount of the sale and start thinking in percentages.
4. A negotiated dollar is a bottom-line dollar. Be aware of what your time is worth on an hourly basis.
5. You will never make money faster than you will when you're Power Negotiating.

Middle Negotiating Gambits: Handling the Person Who Has No Authority to Decide

Key Points to Remember
1. Don't let the other side know you have the authority to make a decision.
2. Your higher authority should be a vague entity and not an individual.
3. Even if you own your company, you can still use this by referring down through your organization.
4. Leave your ego at home when you're negotiating. Don't let the other person trick you into admitting that you have authority.
5. Attempt to get the other person to admit that he could approve your proposal if it meets all of his needs. If that fails, go through the three Counter Gambits: Appeal to his ego, get his commitment that he'll recommend to his higher authority, go to a qualified 'subject-to' close.
6. If they are forcing you to make a decision before you're ready to do so, offer to decide but let them know that the answer will be no, unless they give you time to check with your people, and if they're using escalating authority on you, revert to your opening position at each level, and introduce your own levels of escalating authority.

Middle Negotiating Gambits: The Declining Value of Services

Key Points to Remember
1. The value of a material object may go up, but the value of services always appears to go down.
2. Don't make a concession and trust that the other side will make it up to you later.
3. Negotiate your fee before you do the work.

Middle Negotiating Gambits: Never Offer to Split the Difference

Key Points to Remember
1. Don't fall into the trap of thinking that splitting the difference is the fair thing to do.
2. Splitting the difference doesn't mean down the middle, because you can do it more than once.
3. Never offer to split the difference yourself, instead encourage the other person to offer to split the difference.
4. By getting the other side to offer to split the difference, you put them in a position of suggesting the compromise. Then you can reluctantly agree to their proposal, making them feel that they won.

Middle Negotiating Gambits: Handling Impasses

Key Points to Remember
1. Don't confuse an impasse with a deadlock. True deadlocks are very rare, so you've probably reached only an impasse.
2. Handle an impasse with the Set-Aside Gambit: "Let's just set that aside for a moment and talk about some of the other issues, may we?"
3. Create momentum by resolving minor issues first, but don't narrow the negotiation down to only one issue.

For more Information
* Business Negotiation Skills, Business Skills, Business Collaboration, Personality Type, *


Saturday, August 23, 2008

The Book of Agreement: 10 Essential Elements for Getting the Results You Want

Agreements with Suppliers

Operating Agreement
1. Intent and vision: It is our intention to create a partnership that is seamless. The vision we have is that all forty-seven of our stores will be supplied with milk and other dairy products in a seamless manner, with little attention needed day to day. The vision is that Metcalf Dairies will monitor dairy products daily, replenish products when needed, and keep freshness levels high while limiting spoilage to between 2 and 4 percent of the gross amount of products delivered.

2. Roles: Metcalf will supply the dairy products, and Gengarelli Brothers will supply the store locations. Metcalf will be aware of the times when they need to be out of the supermarket so that inventory can be taken and other products can be delivered.

3. Promises: Metcalf promises to (1) deliver the freshest dairy products available, including milk, low-fat milk, half-and-half, yogurt, cottage cheese, and cheese products of all kinds; (2) check and restock inventory daily; (3) keep all display cases full, clean, and free from microbes per the regulations of each county; (4) send drivers who are neat, pleasant, and courteous; and (5) send bills and proof of stocking every fifteen days.
Gengarelli Brothers promises to (1) make adequate shelf space available to Metcalf, (2) pay invoices within twenty days of the date received, (3) conduct biweekly feedback sessions and provide Metcalf with all feedback received.

4. Time and value: This agreement will stay in effect until 20 days after it has been canceled by either party, with or without cause. As long as each of us is satisfied with the ongoing quality of the service, we acknowledge the economic and convenience value of the agreement.

5. Measurements of satisfaction: The success of our "partnership" will be measured by the following standards:
? Freshness of product: less than 3 precent of milk on shelves at expiration date
? Volume of product sold to be determined on a per-store basis
? Appearance and condition of shelves to be measured by customer surveys
? Compliance with county health regulations
? Less than ten monthly calls for supplemental deliveries

6. Concerns and fears: Metcalf is concerned they we will not get paid in a timely fashion. Gengarelli is concerned that the shelves will not be restocked as promised.

7. Renegotiation: We understand that circumstances change and events will happen that we cannot predict. We agree that if something happens, we will rely on the open communication of our front-line staff first before any management intervention.

8. Consequences: We both recognize the negative consequences of our partnership not working—for Metcalf, the loss of a huge, lucrative account, and for Gengarelli, the need to pay close attention to a department that was essentially self-managed. We also agree that if either one of us breaks a promise, we will donate $100 to the Crossroads Center of Chicago.

9. Conflict resolution: After we have spoken and tried to work out the conflict, the first thing we will do is contact the gentleman who helped us structure this agreement and ask for his help. If that fails, we will bring in a senior management team from both of our organizations. If all else fails, we will use the arbitration services of AAA.

10. Agreement? We are satisfied that we have a clear agreement and the foundation for an ongoing partnership.

Sales Agreements

Standard Auto Sales Agreement Clauses

On the front, in standard type size:
1. AS IS—WITH ALL FAULTS. The only warranties applying to this vehicle are those offered by the Manufacturer and the applicability of any existing Manufacturer's warranty, if any, shall be determined solely by such Manufacturer's warranty. The selling dealer hereby expressly disclaims all warranties, either expressed or implied, including any implied warranties of merchantability or fitness for a particular purpose, and neither assumes nor authorizes any person to assume for it any liability in connection with the sale of this vehicle. Buyer shall not be entitled to recover from the selling dealer for any consequential damages, damages to property, damages for loss of use, loss of time, loss of profits, or income, or any other incidental damages. The Purchaser hereby acknowledges that Seller has made available "Warranty Pre-Sale Information" as disclosed in the Warranty Binders pursuant to the Magnuson-Moss Warranty Act.


On the back, in tiny type:
3. Manufacturer has reserved the right to change the price to Dealer of new motor vehicles without notice. In the event the price to Dealer of new motor vehicles of the series and body type ordered hereunder is changed by Manufacturer prior to delivery of the new motor vehicle ordered hereunder to Buyer, Dealer reserves the right to change the cash delivered price of such motor vehicle to Buyer accordingly. If such cash delivered price is increased by Dealer, Buyer may, if dissatisfied therewith, cancel this Order, in which event if a used motor vehicle has been traded in as part of the consideration for such new motor vehicle, such used motor vehicle shall be returned to Buyer upon payment of a reasonable charge for storage and repairs (if any) or, if such used motor vehicle has been previously sold by dealer, the amount received therefore less a selling commission of 15% and any expense incurred in storing, insuring, conditioning or advertising said used motor vehicle for sale shall be returned to Buyer.

4. Buyer agrees to deliver to Dealer satisfactory evidence of title to any used motor vehicle traded in as part of the consideration for the motor vehicle ordered hereunder at the time of delivery of such used motor vehicle to Dealer. Buyer warrants any such used motor vehicle to be his property, free and clear of all liens and encumbrances except otherwise noted herein. Buyer agrees that any undisclosed existing liens on the vehicle traded in will be the sole responsibility of Buyer and that he will cause to be satisfied such lien or liens within 72 hours of Dealer's notice in writing and that upon your failure to make such lien satisfaction, the dealer shall have the right to repossession of the newly purchased car, without legal action, and this agreement shall become null and void and without effect, except that dealer shall be entitled to any moneys and/or trade in as liquidated damages, the amount thereof not to exceed the sum expended by Dealer in furtherance of the consummation of this transaction (for example, paying off existing acknowledged indebtedness on trade-ins) plus ten percent (10%) of purchase price.

5. When fully executed by both parties, unless this order shall have been canceled by Buyer under and in accordance with the provisions of paragraph 2 or 3 above, Dealer shall have the right, upon failure or refusal of Buyer to accept delivery, within 10 days of the motor vehicle ordered here-under and to comply with the terms of this order, to retain as liquidated damages any partial payment made by Buyer, and in the event a used motor vehicle has been traded in as part of the consideration for the motor vehicle ordered hereunder, to sell such used motor vehicle and reimburse himself out of the proceeds of such sale for the expenses specified in paragraph 2 above and for such other expenses and losses as Dealer may incur or suffer as a result of such failure or refusal by Buyer, including, but not limited to, storage charges of $10 per day.

6. Manufacturer has reserved the right to change the design of any new motor vehicle, chassis, accessories, or parts thereof at any time without notice and without obligation to make the same or any similar change upon any motor vehicle, chassis, accessories, or parts thereof previously purchased or shipped to Dealer or being manufactured or sold in accordance with Dealer's orders. Correspondingly, in the event of any such change by manufacturer, Dealer shall have no obligation to Buyer to make the same or any similar change in any motor vehicle, chassis, or accessories or parts thereof covered by this order either before or subsequent to delivery thereof to Buyer.

11. The Dealer does not warrant or in any way guarantee the mileage indicated on this vehicle's odometer to be accurate, correct, or that it may not have been so changed or adjusted by owners or persons in possession prior to the Dealer.


18. The buyer hereby agrees that if it becomes necessary for Dealer to enforce or defend any of its rights or remedies under this Buyer's Order, Dealer shall be entitled to recover from the Buyer all costs and reasonable attorney's fees, including such costs and fees for any appeals. This agreement shall be construed and interpreted in accordance with the laws of the State of Florida. Buyer waives trial by jury and further consents to venue of any processing or lawsuit being in Broward County, Florida.

We Pledge to You
1. Intent and vision: The intention is for you, the buyer, to have a joyful experience, both driving your new vehicle and working with Diamond Motors to keep you and the vehicle "satisfied" at all times. The vision we have is that all aspects of the sales and service experience will be positive for you: picking up the vehicle, bringing the vehicle in for warranty work, and bringing the vehicle in for repairs.

2. Roles: We will be the expert service provider and caregiver. You will be the satisfied customer.

3. Promises: We will treat you as we would treat a guest in our home. We promise to be pleasant and courteous at all times, to provide a loaner car when the need for service is due to a defect in the car or our service, or because you must have one. We promise to find out what your personal expectations are and satisfy them. We will take care of you and the vehicle. We promise to repair the vehicle within the time and cost estimate promised. You promise to tell us what needs attention and to make payment on time.

4. Time and value: This agreement remains in place for the life of the vehicle. We agree that we are satisfied with our return for the transaction. We want you always to feel the transaction was worthwhile.

5. Measurements of satisfaction: You give us a 4.5 or better on our survey every time your car is in for service.

6. Concerns and fears: You indicated that you fear that once the agreement is signed, you will become just another automobile buyer. We promise to do everything we can to make your fears go away. Our fear is that you expect perfection.

7. Renegotiation: We will negotiate every aspect of our purchase agreement that is not required by law.

8. Consequences: If we lose you as a customer, we lose you for life, and that represents an average revenue stream of $175,000. If our service is not done on time and to your satisfaction, we will not charge you for the repairs.

9. Conflict resolution: We will have our designated customer service representative speak with you. If that does not work, we will use the mediation services of our local Better Business Bureau, and if that fails to produce resolution, we will use the arbitration services of AAA.

10. Agreement? We hope you are satisfied with our agreement.

For more Information
* Bids, Tenders, Proposals, Business Letters, Contractor Agreements, Commercial Contracts, Business Writing, *


Friday, August 22, 2008

The 12 Pillars of Business Success: How to Achieve Extraordinary Results from Ordinary People


The difference between transformational leadership and transactional management.

Planning and budgeting – establishing detailed steps and timetables for achieving needed results, and then allocating the resources necessary to make that happen

Organising and staffing – establishing some structure for accomplishing some structure for accomplishing plan requirements, staffing that structure with individuals, delegating responsibility and authority for carrying out the plan, providing policies and procedures to help guide people, and creating methods or systems to monitor implementation

Controlling and problem solving – monitoring results vs. plan in some detail, identifying deviations, and then planning and organising to solve these problems

Produces a degree of predictability and order, and has the potential of consistently producing key results expected by various stakeholders (eg, for customers, always being on time; for stockholders, being on budget)

Establishing direction – developing a vision of the future, often the distant future, and strategies for producing the changes needed to achieve that vision

Aligning people – communicating the direction by words and deeds to all those whose cooperation may be needed so as to influence the creation of teams and coalitions that understand the vision and strategies, and accept their validity

Motivating and inspiring – energising people to overcome major political, bureaucratic and resource barriers to change by satisfying very basic, but often unfulfilled, human needs

Produces change, often to a dramatic degree, and has the potential of producing extremely useful change (eg, new products that customers want, new approaches to labour relations that help make a firm more competitive)

Excellent management, by its very nature, is somewhat conservative, methodically incremental, and short-term oriented. As a result, the very best management cannot produce major change.

As workers take on more management tasks, managers must take on more leadership tasks – holding a vision for the business, articulating it to workers and customers, and creating an environment that truly empowers workers. Shedding the traditional 'command and control' model for one of 'lead and enable'.

Successful executives will be masters at getting people to work effectively together, managing conflict, and being effective coaches.

In any empowered organisation, what is important is what is measured. Measures must track people's contribution to their team, and the team's contribution to the success [of the organisation].

The more serious question is whether managers can make the transition.
The more important question is whether we – as senior executives – can provide the leadership and support they will need.

Without leadership, firms cannot adapt to a fast-moving world. If organisations are going to live up to their potential, we must find, develop and encourage more people to lead in the service of others.

Excellent leadership from the the top (is) the essential ingredient. This leadership empowers other managers and employees who see the need for change but have been constrained by the old culture. It also helps to win over the hearts and minds of others who have not yet recognised the necessity of major change. In many organisations today, providing this kind of leadership is surely the number one challenge for top executives.

Three key issues: competence, confidence and commitment.

i) Competence
Competence is assessed at four levels: (1) can do the work by referring to the manual: (2) can do the work without referring to the manual: (3) has enough competence to suggest improvements: (4) has the ability to train others.

This is the objective: to develop people so that they can run the business with the minimum of supervision. Companies such as GE and Rover set out to give their people the additional competencies that they need to 'manage' themselves: skills such as decision making, inter-personal skills, including assertiveness, and recruitment.

ii) Confidence
People need to feel confident if they start making decisions on our behalf; they will be praised for getting them right, and coached and encouraged, not ciriticised, when they get them wrong. As Tom Peters has said, we must praise people for making mistakes. It is the only way they will gain both experience and confidence.

iii) Commitment
Finally, we have to gain the commitment of those we wish to lead so that they become independent 'entrepreneurs' on our behalf.

GE leadership values
? Create a clear, simple, reality-based, customer-focused vision and are able to communicate it straightforwardly to all constituencies
? Reach – set aggressive targets … Understand accountability and commitment and are decisive
? Have a passion for excellence … Hate bureaucracy and all the nonsense that comes with it
? Have the self-confidence to empower others and behave in a bound-aryless fashion… Believe in and are committed to 'work out' as a means of empowerment … Are open to ideas from anywhere
? Have, or have the capacity to develop, global brains and global sensitivity, and are comfortable building diverse global teams
? Stimulate and relish change … Are not frightened or paralysed by it … See change as opportunity, not a threat
? Have enormous energy and the ability to energise and invigorate others … Understand speed as a competitive advantage and see the total organisation benefits that can be derived from a focus on speed

Professor Chris Bartlett of Harvard, wrote a brilliant series of three articles for the Harvard Business Review on 'Changing the Role of Top Management'6, in which they stress the need for a new leadership doctrine.
? Changing sources of competitive advantage: from assets and resources to knowledge and creativity
? Changing moral contract with people: from employment security to employability
? Changing corporate philosophy: from organisation man to the individualised corporation
? Changing the role of top management:
from Strategy to Purpose
beyond Structure to Process
beyond Systems to People
from a Constraining Environment to a Liberating Philosophy

To a very real degree, the success of the businesses we run is a reflection of our ability to transform ourselves into effective leaders.
In Japan, senior executives, until now, have ruled their organisations with a 'rod of iron' but– an important but – they have always known when to listen and when to delegate. Listening is a crucial element. For many executives, making the time to listen is the biggest problem.

Built to last

Visionary companies are premier institutions – the crown jewels – in their industries, widely admired by their peers and having a long track record of making a significant impact on the world around them. The key point is that a visionary company is a organisation – an institution.

All individual leaders, no matter how charismatic or visionary, eventually die; and all visionary products and services – all 'great ideas' – eventually become obsolete.

One of the conclusions is that 'A charismatic visionary leader is absolutely NOT required for a visionary company and, in fact, can be detrimental to a company's long-term prospect.'

The key difference, we believe, is one of orientation – key people at formative stages of the visionary company have a stronger organisational orientation than in the comparison companies, regardless of their personal leadership style.

Truly successful Chief Executives of visionary companies know how to 'build a clock': by focusing on building their organisation.
In fact, the theme of The Easier Way is for us to refocus our energies, to transform our approach, to recognise that our priority task is to build a 'visionary organisation'. They use the term 'architect' or 'clock builder'. I prefer to use the term 'conductor'. We have to recognise that to be effective we have to be a conductor orchestrating the efforts of every member of our team, by spending time on the 11 pillars we have yet to discuss.

Strategy Plan of the South Devon College that Dr Terry Keen, its Principal and Chief Executive, was expected to:
Measurably demonstrate that he can:
? Provide employees with opportunities to develop their full potential.
? Bring into being, natural, self-motivated work units/teams wherever possible.
? Create 'customer thinking' throughout the organisation.
? Make systems, methods and procedures work for the benefit of employees, customers and suppliers.
? Obtain feedback on performance and practices and communicate these findings.
? Guide the Corporation on strategic goals and targets and to be involved in short and long-term planning.
? Delegate wherever possible.
? Educate and train in order to create a knowledge-based culture.
? Involve people as never before in order to tap ideas, creativity and innovation.
? Plan for future challenges and opportunities.
? Relate to customer needs.
? Share all information in order to create efficiency and understanding.
? Support staff and practise an holistic approach to human relations.
? Place the College in a premier position, nationally and internationally, by his continuing involvement in national and international developments.

Hewlett Packard: The HP Way

A) Organisational Values
HP's values are a set of deeply held beliefs that govern and guide our behaviour in meeting our objectives and in dealing with each other, our customers, shareholders and others.

? We have trust and respect for individuals. We apprach each situation with the understanding that people want to do a good job and will do so, given the proper tools, and support. We attract highly capable, innovative people and recognise their efforts and contributions to the company. HP people contribute enthusiastically and share in the success that they make possible.

? We focus on a high level of achievement and contribution. Our customers expect HP products and services to be of the highest quality and to provide lasting value. To achieve this, all HP people, but especially managers, must be leaders who generate enthusiasm and respond with extra effort to meet customers needs. Techniques and management practices which are effective today may be outdated in the future. For us to remain at the forefront in all our activities, people should always be looking for new and better ways to do their work.
'The principles of the HP way are still the basis for how we operate.' John Young, 1988

? We conduct our business with uncompromising integrity. We expect HP people to be open and honest in their dealings to earn the trust and loyalty of others. People at every level are expected to adhere to the highest standards of business ethics and must understand that anything less is totally unacceptable. As a practical matter, ethical conduct cannot be assured by written HP policies and codes; it must be an integral part of the organisation, a deeply ingrained tradition that is passed from one generation of employees to another.

? We achieve our common objectives through teamwork. We recognise that it is only through effective co-operation within and among organisations that we can achieve our goals. Our commitment is to work as a world-wide team to fulfil the expectations of our customers, shareholders and others who depend upon us. The benefits and obligations of doing business are shared among all HP people.

? We encourage flexibility and innovation. We create a work environment which supports the diversity of our people and their ideas. We strive for overall objectives which are clearly stated and agreed upon, and allow people flexibility in working toward goals in ways which they help determine are best for the organisation. HP people should personally accept responsibility and be encouraged to upgrade their skills and capabilities through ongoing training and development. This is especially important in a technical business where the rate of progress is rapid and where people are expected to adapt to change.

B) Corporate Objectives
HP's corporate objective are guiding principles for all decision-making by HP people.

Profits To achieve sufficient profit to finance our company growth and to provide the resources we need to achieve our other corporate objectives.

Customers To provide products and services of the highest quality and the greatest possible value to our customers, there by gaining and holding their respect and loyalty.

Fields of Interest To participate in those fields of interest that build upon our technology and customer base, that offer opportunities for continuing growth, and that enables us to make a needed and profitable contribution.

Growth To let our growth be limited only by our profits and our ability to develop and produce innovative products that satisfy real customer needs.

Our People To help HP people share in the company's success which they make possible; to provide employment security based on their performance; to ensure them a safe and pleasant work environment; to recognise their individual achievements; and to help them gain a sense of satisfaction and accomplishment from their work.

Management To foster initiative and creativity by allowing the individual great freedom of action in attaining well-defined objectives.

Citizenship To honour our obligations to society by being an economic, intellectual and social asset to each nation and each community in which we operate.

'Improvement is accomplished by better methods, better techniques, better machinery and equipment and by people continually finding better ways of doing their jobs and to work together as a team. I will never see the day when there is not yet room for improvement.'

C) Strategies and Practices
HP's values and objectives guide us in forming our strategies and practices and in managing a dynamic business in a changing world.

Management by Wandering Around: An informal HP practice which involves keeping up to date with individuals and activities around the entity through informal or structured communication. Trust and respect for individuals are apparent when MBWA is used to recognise employees' contributions and to listen to employees' concerns and ideas.

MBWA Might Look Like: A manager consistently reserving time to walk through the department or to be available for impromptu discussions.
Individuals networking across the organisation.
Coffee talks, communication lunches, hallway conversations.
"The HP way, when you really come down to it, is respecting the integrity of the individual." Bill Hewlett, 1987

Management By Objectives HP's practice of participative management. Individuals at each level contribute to company goals by developing objectives which are integrated with their manager's and those of other parts of HP. Flexibility and innovation in recognising that alternative approaches to meeting objectives provide effective means of meeting customer needs.

MBO is Reflected In: Written plans which can be traced through the organisation.
Co-ordinated and complementary efforts, and cross-organisational intergration.
Shared plans and objectives.

Open Door Policy The assurance that no adverse consequences should result from responsibly raising issues with management or personnel. Trust and integrity are important parts of the Open Door Policy.

Open Door May be Used To share feelings and frustrations in a constructive manner.
Gain clearer understanding of alternatives.
To discuss career options, business conduct, communication breakdowns.

Total Quality Control A management philosophy and operating methodology to improve quality and achieve customer satisfaction. TQC efforts to offer the best possible products and services to our customers are supported by our value of achievement and contribution.

TQC Encourages: Continuous process improvement using scientific methods.
Universal participation in quality and customer satisfaction.
Meeting or exceeding internal and external customer expectations.

For more Information
* Success & Business Skills, Emotional Intelligence, Social Intelligence, Creative Thinking, *


Thursday, August 21, 2008

Leading Your Business to the Next Level: The Six Core Disciplines of Sustained Profitable Growth

Changing the Emphasis from Sales/Revenue to Margin/Profits

Sales/revenue/cash are the primary metrics for entrepreneurial companies. Whether the company is relying on self-generated cash or investments/loans, the creation of critical mass in terms of sales volume and revenue is paramount.
Speed to market, revenue growth, and a sexy product were the major investment criteria.

Profitability requires a lot more than a shift in emphasis.
If the company has stressed revenue, it likely created an expectation in the sales channels of ''sales at any cost.'' Since most sales organizations of entrepreneurial/early growth spurt companies were not compensated on margin, there was little incentive to focus on anything except making the sale ... any sale. Discounts were requested and likely granted. Special promotions became the norm, not the exception. Sales expenses crept up because growing the customer and revenue base was all important.

Efforts at margin management were probably focused on the ''buy side'' of the equation. Purchasing (as purchasing has and will always do) hammered suppliers to obtain the best possible cost of goods. However, little attention was given to the ''sell side'' of the margin equation.

The company attracted any kind of customer, but regrettably, some customers were acquired and retained at a terribly high cost. Some sales channels' costs of acquisition went through the roof: more sales reps were required than anticipated; ''close'' rates on telemarketing calls were below target; there was a requirement to boost agent compensation; nonbudgeted advertising expenses crept in, and so on. The combination of reduced prices demanded by the customers and greater selling effort required to acquire them dwarfed the operating expenses forecast in the budget. To make matters worse, some customers required significantly more support during implementation of the sale. And, once implementation was complete, the ongoing customer service requirements of some customers went far beyond what anyone had anticipated. None of these additional costs were anticipated in the budget.

Revenues are on target, but all of a sudden the company finds itself hit with a triple whamo that's deteriorating profitability:
? Revenues per customer have declined due to aggressive discounting and promotions.
? Sales expenses have gone up; you have to have more customers than anticipated if the projected revenue-per-customer goes down.
? General & Administrative (G&A) expenses go up due to higher than expected costs of implementation and customer support.

With the ''triple whamo,'' the company arrives at some basic conclusions:
? All customers/revenue/sales are not equal.
? All products are not equal.


Larry Selden and Geoffrey Colvin in their book Angel Customers & Demon Customers put forth their ''150–20 rule'':[1]
? 150 percent of companies' profits come from less than 20 percent of their customers.
? The bottom 20 percent may lose money equal to 150 percent of profit.
? The remaining 60 percent of customers make up the difference.

Mitch Rosenbleeth of Booz-Allen & Hamilton recounts a recent experience with a client where 30 percent of a company's customers created 200 percent of its profits. Half of the customers produced little profit, and the remaining 20 percent ''destroyed profits.

Unprofitable customers, similar to churning customers, are another one of those silent killers that can prove fatal if not detected and jettisoned early on.

What Makes for Unprofitable Customers?
A main contributor, in a word, is averaging. Be it gross margin calculations, prorating of overhead expenses, or distribution of sales/marketing expenses, averaging can produce very distorted numbers; this distortion, again, is related to the degree of disparity among the elements being averaged.

Potential ''Problem-Maskers'' Average Gross Margin: Though addressed separately in the next section, disparate product/product line margins have obvious implications on profitability. Different production/purchasing costs and other inherent ''cost-of-goods/services'' elements may drastically distort average margins. And, with different products producing different margins, the profitability of products purchased by a customer will vary greatly.

Average Sales/Marketing Expense: Simply dividing all sales/marketing costs by orders or products sold produces an average that is likely quite unrepresentative of customers who soak up an either unusually high or low share of the sales/marketing costs. This is especially true if multiple channels (direct sales, telemarketing, etc.) are utilized.

Average Purchase: Some customers buy in large quantities, requiring only one order to be processed and only one bill rendered. Others are just the opposite: many small orders and many bills. And collectively, all of the smaller multiple purchases may not equal a fraction of a large user's order.

Average Support Costs: This is perhaps the most difficult element to get a handle on. However, whether by design or otherwise, customers require a disproportionate share of support. Some never call with a complaint or service problem. Others call weekly. Some large customers may demand higher levels of service in return for their business; others don't. Assuming that all customers require the same amount of attention, and thus should share an equal allocation of the costs, is refusing to acknowledge the obvious.

Average Days of Receivables: Everyone measures this. All businesses have their 30/60/90/120-day reports. Though an indicator of a company's general financial health, do you really know, at the individual customer level, who's either not paying you or paying you late? And, do you know what it's costing you in profits?

Beware: Major Accounts
The following is a representation of a company that hailed its major account programs and urgently stressed the desire to add more to its customer list.
? Higher sales commissions were paid to sellers who acquired major accounts.
? A separate sales force was dedicated to acquiring major accounts; this move was necessary in order to provide the resources required to develop complex proposals and respond to bid requests.
? Special sales collateral was developed to assist in acquiring new major accounts.
? A discount pricing schedule was developed especially for major accounts; some discounts offered went beyond the schedule.
? Major accounts, as a group, purchased the least profitable products sold by the company.
? The major accounts demanded and received dedicated service personnel.
? The major accounts consistently requested product delivery intervals shorter than those normally offered by the company.
? Sometimes the smallest breakdown in service delivery by the company resulted in executive-level complaints from the major accounts.
? The major accounts required a special billing format that the company had to customize and support.
? The major accounts were consistently slow to pay and constantly disputed the bills rendered.

What To Do?
a) De-average!
Every organization's analytical and systems capabilities are different, but senior management should force de-averaging of key indicators/results as broadly and as deeply across the organization as possible. We think you will be surprised at what can be accomplished simply by asking for it. You may never get to the level of individual customer profitability, but you can certainly move in that direction.
Think in terms of segments or groups, not the whole. Identify the common characteristics among certain customer or prospect groups. Initially you may have to ''guesstimate'' prorates and loadings; there is a point of diminishing returns for efforts to precisely allocate shared costs. But, a zillion-dollar cost allocation system isn't required to develop a reasonably accurate profitability model for the various segments or groups.

b) Existing Unprofitable Customers
Once you get a handle on which customers are profitable and which aren't, the task then becomes to turn the latter into the former. The options available are obvious ... increase prices, lower costs, or devise some combination of the two. The goal will be to retain the customer, but only if the level of profit contribution achieves a threshold acceptable to the company.

c) New Unprofitable Customers?
Dealing with a group of unprofitable legacy customers isn't pleasant, but it's necessary in order to solve problems originating from prior sins. However, the sinning cannot continue.

What about Products?
Thomas K. Brown writing in Bank Director magazine cites consultants Mercer Oliver Wyman in pointing out the disparity of product line profitability of banks:[3]
? The top 10 percent most profitable products generate 70 percent of overall product profits.
? The bottom 80 percent contribute less than 1 percent of profits.

A midsize service company with which we are familiar had gross margins ranging from 75 percent to minus 30 percent for its various products.

Therefore, if a company has more than one product, the ''averaging'' of product/product line profitability harbors similar potential for ''problem-maskers,'' as does averaging of customer profitability.

Alternative Approaches
The following identifies some rather unorthodox approaches to looking at a company's financials.

A. A Bill of Activity is created that lists all the activity costs directly traceable or consumed by the product, service or customer.
B. Non-traceable business sustaining activities, such as ''Do Monthly Closing,'' are then allocated to the Bill of Activity.
C. Traceable costs þ Non-traceable costs þ Profit = Sales Price.


Sales' job is to sell, to sell the products it has been provided at the prices the company has established.

Marketing: Among other things, it is the keeper of the margin keys. As one of its most important responsibilities, marketing establishes prices and monitors (or should) the all-important ''sell side'' of the gross margin of the business. Coupled with stringent purchasing/production cost management, marketing must bring focus to the sometimes no-fun analysis of profitability emphasis to balance the sexier, more glamorous revenue emphasis.

If the sales organization has historically been the major player in the establishment of pricing and discounting policies, it will be very reluctant to give up those prerogatives. Sales' job has been to sell, and setting competitive prices and offering appealing discounts to the sellers is a sure way to increase sales volume and revenue. And, that goal may well have been paramount in the past. However, at some point the organization will begin to emphasize profitability, and, barring the fairly rare situation where sales compensation is based more on profitability than revenue, leaving pricing and discounting decisions in the hands of the sales organization is, simply, a mistake.

Checks and Balances

Organizations must constantly assess the strategic value of revenue growth and profitability. The two need not necessarily be mutually exclusive, but in most industries the lower the price, the more you sell; the higher the price, the more profit you make.

At different stages of a company's evolution, the strategy may favor one over the other (if you can't have both.) Acquiring market share will favor lower prices. A forecast of hard economic times on the horizon will encourage cash accumulation and higher prices and profits. And, of course, competitors have more than a little impact on your pricing policies.

But, no matter the strategic driver at any given time, advocates of both the low price/high sales volume and higher price/higher profit positions should be provided a forum to debate and substantiate their respective points of view, with facts, figures, and analysis.

Sales can't be sure of the negative or positive impact on volume of a price increase or decrease. Marketing might produce spreadsheets that indicate the impact of a price change, but only if their volume assumptions are accurate. And, what will the competitors do as a result of a price change? It's all a matter of conducting the best analysis possible and applying the aggregate judgment of those involved in making the decision.

However, the point here is that the debate must occur. The analyses must be made. Those who represent ''lower price/revenue growth'' and others in the ''higher price/higher profit'' camps must have equal representation and clout in the debate. The outcome should not be preordained, barring some overwhelming strategic imperative. Each side should be prepared to offer its best case and do so. The absence of any compelling fact or argument, on either side, could lead to a less than optimum decision.

For more Information
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