The Modified Dutch Auction

This should be the norm. Really, only good guys like Boston Beer, Google, and Morningstar have done this? At least a venture capitalist like Hambrecht has caught on. Please do read for details.

Strategy Focus

If we take the learnings my recent post about the Strategy Revolution, that is focusing on the customer first and foremost, there is another area of distraction that is fundamental to the business marketplace. It occurs in all sizes, but is acute in the arena of private companies. The problem is relying completely on your accountant to do all the financial work.

Accountants do a fine job at what they generally focus on:

1) Accurately calculating and presenting the numbers produced by the business for tax filing.
2) Devising strategies to lower the company's taxes going forward.

Note that there is nothing in their activities to help you run the business more efficiently or effectively, it's just not in their charter.

What you need to bring to the table, in addition to a focus on the customer, is a focus on making your product or providing your service as efficiently as possible. This is a competitive requirement, otherwise someone else will be the provider. I have worked with clients in all arenas who don't know how to use their numbers to manage effectively. The old saw about good, fast, and cheap is prescient, pick two and knock the heck out of them. That means you can choose which two of three to compete on. The truly best can provide all three to dominate a market, speed, quality, and price.

A Strategic CFO/Treasurer may have an accounting background, but they must be able to look forward to drive the operations to maximum performance though budgeting and incentives. A focus on the bottom line does not need to trump the overarching purpose of customer service, but rather works hand in hand to provide that service so that you provide it at the best value.

Healthcare Costs

A bevy of information linked from The Big Picture, to me the non-surprise was the % of non-farm payrolls in the Education and Health Services (think latter), which is now at 15% vs. a low of just under 4% during WWII. Ever wonder why healthcare costs have risen astronomically, this is a primary factor.

Do your Managers outperform?

A long FT article (linked above from Jan 27) examines the performance of English football teams (think soccer here in the USA). The article makes a good management read. But I will summarize the main points in case you don't have time (it is quite long):

1) 90% of football club performance can be tracked to the players. That is the salary level payed for these "employees", whether it be in Yankee height, or Oakland low, can predict most of the success of the team. Makes sense, more payroll = more talent, and the more you win.

2) That leave 10% for the Manager's (think CEO) effect. Some Managers outperform, while some under-perform, just like in the real economy.

I believe, but will not site, comparable studies exist for competitive business (afterall most pro sports leagues operate in a type of Cartel arrangement). In any event, my conclusions would be:

A) The CEO pays for positions, not individuals. But if your overall pay is average for your industry, you should expect average performance, financially and customer-wise. If you can afford to pay more, then the customer related performance should go up.

B) Then again, a very talented manager can make much more than his/her 10% difference, driving an average crew to outperform it's pay grade by a long shot.

Prescription - Hire good managers, pay-up for staff, or a bit of both. But for success' sake, at least do one of these.