The primary desire of family business advisors, like myself, is to see family-owned businesses live on for many generations. But some family businesses are beyond saving and want to die peacefully.

Those businesses need hospice.

Hospice is a service and philosophy of care for terminally ill patients. Hospice has four primary goals:

1. Relieve the pain and suffering of the terminally ill;
2. Make possible a “good” death;
3. Help the family; and,
4. Assist in the search for meaning.

While best known for helping a terminally ill person and their family, there’s a growing need to extend hospice to terminal family-owned businesses.

Terminal family businesses can be characterized as having one or more of the following situations:

• The next generation has no interest in continuing the family business. Less than 40% of first to second generation hand-offs are successful. Less than 15% of second to third generation hand-offs survive.
• The siblings of the next generation dislike one another, don’t talk to one another, don’t trust one another, refuse to work together, and/or refuse to define a unity strategy. I recommend Doug Box’s new book Texas Patriarch for an actual, first-hand account of what happens in a wealthy family that can’t get along with one another.
• The business has outdated products and processes, serving a declining market and customer base, with little or no hope of change or improving. I’m not just talking about buggy whips. I’m talking about examples such as Uber grabbing the taxi market.
• The family lacks the will, ability or initiative to turn around their bleedingbusiness and seek to sell the body to someone. Most family business owners have over 75% of their retirement money tied up in the business. They need a way to cash-out.

A hospice story

Certified family business advisors are trained and equipped to provide hospice-type services. Lisë Stewart, founder and president of Galliard Family Advisor Institute, recently shared a hospice-type story.

A third generation family member asked Lisë to go with him to meet with his grandfather and father. She asked “Why?” He replied, “I need your support when I tell them that I have no interest or intention of joining the family business.” That’s an example of family business hospice care.

Is your family business in need of hospice? I’m ready, willing and able.

Most people agree the answer is “the leader”. But most leaders … especially those of companies of less than 200 employees … don’t have a written strategic plan.
Written strategic plans provide numerous benefits. A written plan serves as a GPS for employees to use to arrive at the leader’s intended destination. To use a military term, a written plan communicates “commander’s intent”. And often overlooked by business owners seeking to exit the business, having a written strategic plan increases the sales value of the business in eyes of the buyer.

Why do leaders ignore or refuse to create a strategic plan?

Logical answers would include (a) they don’t see a benefit in creating a written plan; (b) they have a plan but it’s kept in their mind; or, (c) they can’t find time for strategic planning.
All of these are logical answers to the question. But during the past few years while helping family-owned businesses transition leadership, I’ve discovered an illogical reason why leaders have ignored strategic planning. They’re smart.
Founders of successful businesses are most often smart people. Smart business people are intelligent. They demand perfect answers. What is 1 + 1? Perfect answer is 2. 
Strategic plans are not equations that produce perfect answers. Instead, when strategies are formulated the outcome is uncertain and ambiguous.

How can we get smart leaders to create a written strategic plan?

1. KISS … keep it simple. Create a 1-page strategic plan. A 1-page plan is not intimidating. Not only are 1-page plans easier to create but they’re easier to update or change as market conditions react to the strategy. For an example of a 1-page plan CLICK HERE .
2. WHY … Everyone is more productive if they are inspired, including smart leaders. Defining a meaningful, inspiring reason to create a strategic plan goes a long way towards making it happen. Pastor Andy Stanley says “A 13 year-old girl in pursuit of a smartphone exhibits all the characteristics of a meaningful why.” She’s focused, convinced that she not only wants it but needs it and uses all available resources … mom, dad, grandparents, aunts, etc. … to get it. For the smart leader the WHY may be promising the family a European vacation, a $100,000 donation to the local food bank or whatever it might be to inspire.
3. STOP … Smart leaders often do activities others can do and leave undone what only they can do. Smart leaders stop doing other people’s work and start doing what only leaders do … lead. Lead the process of defining a strategy for the future. Leading the strategic planning process does NOT mean the smart leader does all the work. 
I agree with Harvard professor Roger Martin. “Great strategy is aided by diversity of thought and attitude. It needs people who have experienced failure as well as success. It needs people who have a great imagination. It needs people who have built their resilience in the past. And most importantly, it needs people who respect one another for their range of qualities, something that is often going to be most difficult for the proverbial smartest person in the room.” Smart leaders don’t do the strategy. They lead it.

Strategic plans are no good unless you end up somewhere new. Smart leaders can use KISS, WHY & STOP to end up somewhere new, exciting and meaningful. That’s smart!

To purchase the template click here.

The BullsEye 1-Page Strategic Plan is formed by asking questions. Questions open doors. Answers close them.

After you’ve purchased the BullsEye strategic plan template on www.ICMS.net, there are 3-Steps to create your 1-page plan:

Step #1

Define your organization’s WHY.

WHY is the center BullsEye of the plan. Vision + Mission = 7-8 word WHY.

Your WHY must (a) be only 7-8 words; (b) use simple language; (c) be Big & Bold; (d) have an AHA! effect; (e) come from the heart; (f) involve everyone; (g) not be about money; and, (h) be bigger than a goal.

Example WHY’s:

Southwest Airlines: Provide affordable air travel to the average American.

TED Talks: Spread ideas.

Kahn Academy: Provide a free, world-class education to everyone, anywhere.

A great WHY impacts sales growth. It motivates customers, employees and leadership.

Step #2

Ask the ultimate strategic question.

“Based on past experiences, current conditions and future goals, WHAT is the wise thing we should offer customers?”

Then ask “WHO is the customer of that WHAT?”

Then ask “WHERE is that customer?”

Then ask “HOW do we implement the new WHAT?”

And finally ask “What’s a reliable indicator that our strategy is a WIN?”

Ask those questions for each new WHAT you change in your strategy.

Step #3

Implement the new strategy, don’t sit on it.

Enter Step #2 answers into the BullsEye template, print copies and give to employees so they can implement the plan.

You’ve planned the work. Now, work the plan.

To watch a short video on how BullsEye planning works, go to ICMS home page.

To purchase the template click here.

“What did I do officer?”

He replied, “You passed a car illegally.”

“What was illegal about passing a stopped car?” I asked.

“You used the shoulder of the road. That’s illegal,” he replied.

“Officer, I’m from Texas. I didn’t know that using the shoulder was illegal in Mississippi.”

“Sorry sir. But ignorance of the law is no excuse.”

Ignorance is risky business. “Why is there such a thing as risk? Because there is such a thing as ignorance. If there were no ignorance there would be no risk.” (1) Counter to what you may have been told, “What you don’t know can hurt you!”

Businesses function like a set of scales. Large amounts of ignorance are a burden to the business, raising the risk of failure. For example, if you don’t know for sure which products or customers are profitable or unprofitable, you run the risk of selling more and making less. Or if you don’t know the highest cost activity or process in your business, you run the risk of misappropriating limited resources to an activity inconsistent with your organization’s mission or strategy.

Risk takes many forms.

• Being logical is risky business.To be considered logical requires doing what the majority of other people and businesses do. If you look closely, most of those people and business are not successful. As author Vincent Roazzi says, “Success is not logical”. (2) Having thousands of credit card debt is logical. Being debt free is illogical. Being illogical leads to personal financial security and success. Do you and your business need to be more illogical?
• Being tolerant is risky business.Apathy, bending the rules, letting others set the agenda, ignoring commandments lead to demise. In his new book Taking America Back, author Joseph Farah says, “I’m proud to be called intolerant. I’m intolerant of evil. That’s a good thing. Tolerance of evil would be evil.” (3) Is there something you’ve tolerated for too long?
• Ignoring a truth is risky business.Lotteries are called a tax for people with poor math skills. The odds of winning the Texas Lottery… picking 5 numbers out of 44… are 1 in a million. To be precise, 1:1,111,264. For an organization with 100 or more customers and $5 million overhead expense, the odds that overhead is consumed equally by every customers is even higher than the lottery. Managers who ignore a valued tool, like Activity Based Management/Activity Based Costing (ABM/ABC), are risking the financial livelihood of their organization. Are you ignoring proven principles and tools that can improve your business’ results?
• Ignoring retirement planning is risky business.Because of procrastination, ignorance and no financial planning, “By their 65th birthday, 93% of people are either dead or broke.” (4) Regardless of your age, do you have a financial plan? If not, you’ll end up with no time and no money.
• Greed is risky business.As seen in the recent annals of Enron, HealthSouth, WorldCom and other businesses, greed is infectious. According to John Nofsinger and Kenneth Smith’s book Infectious Greed, the greed of Enron’s management team infected auditor Arthur Andersen, law firm Vinson & Elkins and countless other firms. What is infectious in your business?
• Ignoring a faith in God is risky business.Faith is the evidence of things not seen. Lee Strobel was an atheist with a Master of Studies in Law degree from Yale. He decided that it was risky to be wrong. Using historical, scientific and fingerprint evidence coupled with a dozen interviews of doctoral experts from Cambridge, Princeton and Brandeis, Lee wrote his findings in a book titled The Case for Christ. Do you lack faith?
• Ignoring mistakes is risky business. “It is heartening to note that some of the worst mistakes occur in the most successful companies.”(5) How a person or company responds to mistakes is critical to survival and success. I worked for Johnson & Johnson during the 1980 Tylenol poisoning incident. While J&J was not at fault, leaders did not ignore customer’s concern. A 100% recall of all product followed by the introduction of new tamperproof packaging led to the recovery of one of America’s greatest brand name products. Have you made a mistake that needs to be celebrated this year?
• Ignoring experts and hanging out with amateurs is risky business. Amateur bull-rider Richard McHugh asked world champion rider Gary Leffew how to be successful. Step One was not a type of grip or specific type of equipment. Instead, Gary told Richard to quit the amateur rodeo circuit where he had been successful. “As long as you are hanging around amateurs, you will think like an amateur, and you will not improve your skills.”Are you hanging out with amateurs or professionals?
• Ignoring root causes is risky business.Because it’s easier, most people and businesses treat superficial symptoms, not the deep-down root causes of problems. ICMS customer Dupre’ Transport is committed to safety. Dupre’ Transport’s safety department recently showed me research that indicates every 20 near misses by a truck driver leads to at least 1 property damage accident. How does Dupre’ lower the risk of accidents and maintain an excellent safety record for their employees and customers? They don’t hire drivers that exhibit the undesirable behaviors that lead to near misses. What symptom in your business is in need of root cause analysis?
• Ignoring your purpose in life is risky business.If you don’t search out and identify your purpose, you’ll end with no wealth or legacy. The current success of Rick Warren’s book, Purpose Driven Life, is a positive sign that more and more people are searching out their purpose. Do you know your purpose in life?

I learned a life lesson in Mississippi. Ignorance is not a defense. Instead, it leads to defeat. Ignorance is the result of inactivity. Procrastinating… putting off to tomorrow those things that we should do today… is a slippery slope to demise and despair.

Thanks to several wonderful ICMS customers willing to rearrange their ABM project schedules, I was able to be with my mother when she died in hospice care last week. I did not wait until 4:00pm October 7th to tell her how much I loved her, appreciated all she taught me and had done for me. If I had waited to tell her those things and not been there, I would forever carry a burden of regret. Is there something important you’re ignoring? Don’t risk it!

(1) Don’t Waste Your Life, John Piper, Crossway Books, 2003
(2) Getting Rich With Integrity, Vincent M. Roazzi, Brown Books, 2002
(3) Taking America Back, Joseph Farah, WND Books, 2003
(4) 1980 U.S. Department of Labor Statistics and Mortality Tables
(5) Celebrate Your Mistakes, Jon Stamell, Melissa Field & John Holt, Jr., Irwin Publishing, 1996

Based on a July 2003 survey published by the Institute of Management Accountants, senior management of most manufacturing, distribution and service organizations are flying their businesses in a “financial fog” without instrument training.

“Of the more than 2,000 senior level financial executives who participated in a recent survey, 98 percent said they believe that they receive inaccurate cost information at their companies, with distortion factors such as overhead allocations and shared services.”(1)

Why are the vast majority of senior managers willing to put their organizations at risk making critical decisions – such as charting strategy, defining products or services, setting prices, defining budgets – using inaccurate, irrelevant costs? I believe one major cause can be found in the prevailing culture of America.

Current culture contends that there are no absolutes. Anything and everything goes. The summer of 2003 had numerous examples of leaders ignoring absolutes. Leadership of the Episcopal Church ignored the Bible and voted in a homosexual priest. The Ten Commandments were moved out of public view. Alan Dershowitz, Harvard Law School professor said, “I do not know what is right, and you know what? Neither do you.” (2)

Black or white is out. The prevailing color of the 21st century is gray, including the numbers on corporate financial statements. While the shady accounting practices exposed at Enron, WorldCom and others are absolutely irresponsible, knowingly running a business with inaccurate cost information is only marginally better.

What is the impact of having no absolutes? For a business, a person, a family or a pilot, the eventual impact is the same for all … death. Inaccurate cost information leads to poor plans, poor pricing, poor sales and poor profits. The result? The poor house.

Without a firm foundation built on absolutes, people and organizations can fall for anything because they stand for nothing. My absolutes … faith in Jesus Christ, Success is not logical, Manage the work not the worker, Family comprised of a husband and wife are the cornerstone of society … share a common source – the Bible.

What does it feel like to live or manage without absolutes? Go for a day without a wristwatch. While you may enjoy it for a day or two … I admit that I would at times … it would be very frustrating to go without absolutes for a lifetime.

According to the IMA survey, managers – including those at the highest levels of multi-billion dollar corporations – have been influenced into believing that there is no such thing as an absolutely accurate, reliable, informative, useful cost management reporting system. Another summer 2003 survey – Bain & Company’s Global Survey of Management Tools – tells a different story!

“Activity-Based Management (ABM) uses detailed economic analyses of important business activities to improve strategic and operational decisions. Activity-Based Management increases the accuracy of cost information by more precisely linking overhead and other indirect costs to products or customer segments.” (3)

Since their last survey in 2000, Bain & Company reports usage of ABM/ABC has doubled worldwide. Of greater importance, satisfaction with ABM/ABC by the surveyed 6,323 corporate executives remains high. Absolutes do exist, including in the discipline of cost management.

People don’t give much thought to absolutes until they face a crisis or major decision. After a couple of close calls, my brother gave up flying. His son, who became a pilot for US Air, watched one of the jets hit the twin towers. He too has given up flying. My brother and nephew’s absolutes were both exposed during a crisis. The absolutes of America were revealed in the aftermath of September 11, 2001 … faith in God, family, patriotism, respect for the rule of law, compassion for others, commitment to the principles of freedom.

As you prepare for the second anniversary of 9-1-1, clear the cultural “fog” and focus on the absolutes of your life and your business. List them and hold fast. And if you find yourself without a firm foundation, I have great news … absolutes do exist.

(1) www.smartpros.com/x39716..xml
(2) The Absolutes, James Robison, Tyndale House, 2002
(3) www.bain.com/management_tools

That quote caught my eye as I scanned the shelves of my local used bookstore. As I thumbed through the book’s first chapter discussion of the diminishing value of downsizing, I wondered, “Since this is such a relevant topic for 2003, why haven’t I seen this book promoted at Barnes & Noble or in Business Week magazine?” I found the answer to my question in the book jacket … Grow to be Great was published in 1995 … years before the need for growth had arrived!

Advice in Grow to be Great was ignored in 1995, for that was a time of economic expansion. But for a time such as this … the end of an economic recession … Grow to be Great offers three foundations for growth for any business at any time:

• Measure customer value
“Can I take your order?”That’s the predominant question we ask customers during a recession. We forget to ask, “What do you value most about our products and services?”
To grow a new or old business, survey customers. Develop metrics to measure their responses. For example:
If you’re a manufacturer or distributor of industrial parts, you have three customers to measure:
  • the purchasing agent who placed the order … “Did we meet or beat your purchase order requirements?”
  • the maintenance person who installed the part …“Did we ship you the right part at the right time?”
  • the person who operates the machine … “Did our part help you do your job?”
• If you’re a service provider of home healthcare, you have three customers to measure:
  • the patient who received the oxygen tank … “Were you pleased with our delivery person?”
  • the doctor who prescribed the oxygen …“Are you pleased with our service to your patients?”
  • the payer (i.e., Medicare, HMO, Insurance) for the oxygen … “Was our invoice correct?”
• Activity Based Cost (ABC) systems provide metrics that help grow your business. In addition to analyzing their product cost and profitability, a healthcare company recently used ICMS’ software to ABC their FTE’s. They discovered that only 18 of 33 Full-Time Equivalent (FTE) employees performed value-added activities for the customer. To grow the business, the President, VP Operations and their employees changing the order fulfillment process to deliver more value to the customer. Converting non-value activities to customer-defined value results in growth of sales and profits.
• Link your business to a profitable value chain 
If your business links to an unprofitable value chain, growth will be difficult. Unprofitable chains shrink, taking you down with them. According to authors Gertz and Baptista, “the value chain only works if it makes money.”(1)
If your company is shrinking, it’s time to switch and hitch to a profitable, growing value chain. Re-focus your business to serving customers of profitable value chains. For example, hotels are finding it difficult to grow in a declining travel industry. On the other hand, small service industry businesses are growing. A creative hotelier might consider converting a floor of sleeping rooms into small offices. Serving this new value chain of home-based entrepreneurs would eliminate idles rooms and pump up food sales.
What growing value chain can you link your businesses’ people, processes and products? Be creative. To brainstorm ideas and develop action plans, gather your management team for a brainstorming session. To spur new ideas, give them new perspectives on the business from an ABC system. By ABC’ing their FTE’s, the previously mentioned healthcare provider learned that 7.7 FTE employees throughout the company perform activities consumed by an unprofitable product. Redeployment of the 7.7 FTE’s to a growing value chain of sleep apnea and asthma treatments consumed by baby boomers will grow sales and profits in the coming year.
• Align your processes, not departments, to the value chain 
“At the risk of stating the obvious,” authors Gertz and Baptista write, “regardless of the strategy you adopt, your business must be organized in such a way that people have an incentive to do the right thing, that the right people are assigned to the right jobs, and that all of their individual efforts are channeled in the right direction.”(1)
Getting organized requires more than drawing boxes on an org chart. It requires the right activities be mapped into the right processes.
A man seated next to me on a flight was drawing an organizational chart. To make conversation I asked, “What are you designing?”

He replied, “I’ve been promoted to plant manager of a brand new factory. My boss told me to figure out how many people I will need, so I’m drawing up an org chart.”
“No offense,” I replied, “but you’re going about it the old-fashioned way. A functional org chart is fine for defining lines of authority, but little else. If you really want to impress your boss, sketch out your new organization as if it was a series of football plays.”
Our flight ended before he finished listing and linking activities. But I am confident my recommendation provided him a method to define the right number of people, performing the right activities, channeled in the right direction.

Great Abundance 
“Abundance comes from making others better off.” (2)

If shifting focus from cost-cutting to growth is a challenge currently facing your management team, begin by making others better off. Improve customer value. Improve your supply chain relationships. And add value to new value chains. Not only will customers be better off as a result of your efforts, but so will you.

Want to grow? ICMS will help you grow!
Activity Based Cost Management systems provide useful metrics for both cost-cutting and growth. Focus in recent years has been on the former but ICMS does not overlook the latter.

• Grow Sales with ICMS’ Gross Margin Profiling system … this simplified approach to ABC is used by sales and marketing staff to consistently set profitable prices.
• Grow Sales & Profits with ICMS’ 15% Fix … this leveraged approach achieves 85% of cycle time, cost and quality improvement by focusing on the first 15% of your process.For free information on Gross Margin Profiling or The 15% Fix, click here to send an e-mail request to TomPryor@icms.net .

(1) Grow to be Great, Dwight Gertz & Joao P. A. Baptista, The Free Press, 1995
(2) The One Minute Millionaire, Mark Hansen & Robert Allen, Harmony Books, 2002

Have you heard the phrase “New Normal”? If not, chances are good you will be read about it more frequently in coming months. What is “New Normal”? Here are three descriptions:

• “Sometime between January 1, 2002 and January 1, 2003, the world figured out that this downturn isn’t a blip in an otherwise unfettered march to untold prosperity,”says veteran technology investor Roger McNamee. “Forget about the Next Big Thing. The next thing has started. It’s called the New Normal. The New Normal isn’t where you wait for the next boom. It’s about the rest of your life.” (1)
• Tech Sgt. Daniel Kenney of Hanscom Air Force Base says, “New Normal is pretty much the current security posture, FPCON Bravo, with additional random antiterrorism measures. Barring any major changes in our threat, this is the posture Air Force senior leaders see Hanscom remaining in for the foreseeable future.”(2)
• “The fall of the dotcoms. Technology industry turmoil. The upheaval in capital markets. The horrific events of September 11th and their aftermath, including war, restricted mobility, fear and economic disruption. When will things get back to normal? They are. This is the new normal,”says business strategy consultant Don Tapscott.(3)

The economic recovery of 2003 is unlike those of previous years. The economy is growing 1-2%, yet there is no job growth. Despite a 25% drop in the stock market, S&P 500 Price/Earnings ratios are still high (30 in 2003 vs. 15 in 1991). And the U.S. is experiencing deflation instead of normal inflation.

This “New Normal” is unfamiliar waters to sail corporate ships and lead our lives. According to investment advisor John Mauldin in May 2003, “This is an economy which must strive to move forward burdened with the heavy baggage of old problems created in the last century while facing the strong headwinds of new challenges.” (4)

Old problems with roots in the 1990’s … corporate greed, accounting fraud, 25% excess manufacturing capacity, depleted retirement accounts, escalating healthcare costs, 80% of Americans owing more than they own, and global terrorism … require new battle plans. “Like generals who plan for future battles based upon the last war, if you plan for a future which looks like the 80’s and 90’s, you will not be happy with the outcome of your investment battles.” says Mauldin.

How to Handle the New Normal 
Your business can’t change the economy, but you can change the economy of your business. Business owners, leaders, managers and entrepreneurs should use the “Un-Natural” in the “New Normal”.

• Combine competing ideologies 
When Activity Based Costing (ABC) was first introduced in 1986, the most outspoken critic and contrarian was Eli Goldratt, creator of the Theory of Constraints (TOC) process management methodology. Eli shuns the need for accounting. While many articles have been written on how ABC compliments TOC, few organizations have adopted both.
Indalex Aluminum Solutions Group, the largest producer of soft alloy aluminum extrusions in North America, has successfully combined ABC and TOC. The result is improved sales and profits in a low margin marketplace. According to their CFO Mike Alger,“To us, TOC and ABC are both useful, complementary measurement concepts. We call this ‘profit velocity.” (5)
My daughter makes great peanut butter cookies. Valerie’s recipe calls for more than just peanut butter. She combines several ingredients to make great cookies. Business is like a cookie. To have a great business, it is important to mix together the right ingredients. Amazon.com combined Six Sigma and Activity Based Costing in 2002 to significantly improve customer satisfaction and profitability. What do you need to combine in 2003? Look around for ingredients and a recipe to take charge of the New Normal.
• Process Purchase “Offers”
Purchase Orders were common in the 20th century. The 21st century has brought us something new called Purchase Offers. Purchase Orders are a commitment to a specific volume and price. Purchase offers are non-committal solicitations for your lowest price and best service.
One form of Purchase Offers is a reverse auction, made popular by General Electric. Home Depot and many other industries now use reverse auctions to purchase product. Gross Margin Profiling, the simplified approach to Activity Based Costing (ABC) developed in 2002 by ICMS, is a tool manufacturer and distributors are successfully using to respond and win Purchase Offers. ABC and Gross Margin Profiling bid & quote templates are valuable tools to take control in the New Normal. Read a Gross Margin Profiling case study aticms.net/doig_case_study.htm.
• Look for facts, not faults 
Like in a marriage, solely fault finding in business is destructive. Fact finding, however, can be constructive. Especially when those previously closely-held facts are given to everyone.
Instead of finding fault with their shop floor workers, Ondeo Nalco, maker of water-treatment chemicals at 52 sites worldwide, gave them financial facts. Division VP Rick Lijana said in a recent Industry Week magazine interview,“Our operator knew that if you turn to the right, we’d be making $780 per hour. If he had to back off to the left, it would go down to $650 per hour.” (6)In the New Normal, profit visibility on the plant floor and office floor extends a sense of ownership throughout the organization.
• Live horizontally
In the 20th century, a horizontal position was equated with death. In the New Normal, operating horizontally is a requirement for staying alive. Most organizations are structured and operate vertically in functional silos, e.g. Sales Department, Accounting Department, Shipping Department. Space between the silos adds cost, cycle time and leads to dropped handoffs. The New Normal requires a Procurement Process, not a Purchasing Department.
In their new bookStand Out from the Competition, Tom Gale and Bill McCleave, Jr. recommend four “P’s” to differentiate distribution companies:
  • Positionyourself in the market.
  • Pitchyour message.
  • Proveyour value using metrics.
  • Performyour processes with discipline.
• For a free process-based P&L, send an e-mail to TomPryor@icms.net.
• Have great expectations
“Did you know it’s a Biblical principle that you and I most likely will get what we expect in life? Listen to the words of Solomon in Proverbs 11:27, ‘He who seeks good finds goodwill, but evil comes to him who searches for it.’ We can’t expect one thing and get something else. We will get what we go after. That’s why our expectations are so important.”(7)
The New Normal is populated with terror, terror alerts and terrorists. To counter negative attitudes and acts, we must be expectantly optimistic. Stress management specialist Vatche Bartekian says, “That little voice in the back of your mind that whispers, anything is possible instead of it’s just not possible, or what a great day instead of life bites serves as a light that can guide you through the twists and turns of life’s hardships. And this outlook brings great benefits; better health, more energy, creativity, problem-solving abilities, the facility to hang in there, and an overall sense of happiness.” (8)
The cures for jet lag are not unlike those things we’ll need to confront the New Normal … get out of the dark and into the light, change our watch, get up, exercise, take a cleansing bath. You and I may not like this new place we’ve landed called the New Normal. But according to the authors of Stuff Happens and then You Fix It?, “It’s not what happens to you that’s important – it’s how you respond.” (9)

What’s your response to the New Normal going to be?

(1) “The New Normal”, Polly LaBarre, FAST COMPANY, May 2003
(2) FPCON Measures become ‘new normal’, Tech. Sgt. Daniel Kenney, Hansconian, March 8m 2003

(3) Speech titled “Competing in the New Normal”, Don Tapscott, 2002

(4) Investors Insight newsletter, John Mauldin, May 30, 2003
(5) “Customers to Drive Profit”, Mike Alger CPA, Strategic Finance, June 2003, pg. 54-57
(6) “Goosing the Bottom Line”, David Drickhamer, Industry Week, December 12, 2002
(7)“What do you Expect?”, Barry Cameron, Crossroads Christian Church Weekly, May 27, 2003
(8) “How to Be an Optimist”, Vatche Bartekian, AskMen.com
(9) Stuff Happens, John Alston and Lloyd Thaxton, Wiley & Sons, 2003

“Absolutely not.”

“Then why would you ever work for a manager who does not read Peter Drucker?”

“If leaders don’t refer to their instruction manual, I believe any follower has a right to be concerned with their direction”, I responded.

As he did with me, Alan posed these two questions to grab attention and elicit discussion. Interestingly, Alan also uses them to segue Bank of America employees to ABM/ABC training.

Drucker is the father of modern management. Scholars (1) credit Drucker’s pioneering use of transactional analysis during the 1950’s as one of the early building blocks for Activity Based Costing. His books are bibles for business. Bibles, however, are unfortunately forgotten and overlooked until people are confronted with a crisis. The current recession is a crisis for many. Possibly for you and your organization.

Peter Drucker will be 94-years old this year. His wisdom and experience is of particular relevance, for he’s lived through many recessions. He’s been there, done that. WWDD… what would Drucker do? His advice is proactive, not reactive. He approaches recessions like an energetic entrepreneur, not an empty-handed embalmer.

In Peter Drucker: Shaping the Managerial Mind, author John Flaherty says, “Drucker asserted that it was possible to improve performance in the existing business by using the entrepreneurial approach of converting problems into opportunities and thus neutralizing resource misallocation and modifying vulnerabilities. In the long run he (Drucker) thought that the model of activity accounting might be the best approach to entrepreneurial management.”

You may not be an entrepreneur, but it may help to think like one. Drucker recommends three thought-provoking actions to convert business problems into opportunities. Each action uses information created by or available from Activity Based Cost Management:

• Reduce the sales staff.
Drucker is not only innovative, he’s controversial. A pervasive theme in Drucker’s writings is his belief that too much time and money is spent on selling. “Indeed, selling and marketing are antithetical rather than synonymous or even complimentary. There will always, one can assume, be need for some selling. But the aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.”
Drucker contends that most organizations allocate too much resource to the Sales Department and not enough to the Marketing Process. Viewing marketing from a process angle makes it impossible to perceive as an independent function. The Marketing Process, defined and measured in an Activity Based Management system, “is the whole business seen from the point of view of its final result, that is, from the customer’s point of view.” (2)
On which customers should we focus? Like an entrepreneur, Drucker says, “the great reservoir of potential demand lies in the category of noncustomers.”(2) To grow or re-grow a business, align products and processes to the category of non-customers.
Which of these two beliefs does your organization hold?
 Our sales department will sell whatever the business produces; or,
b. Our business will produce whatever the market needs.
• Manage the pieces to improve the whole.
Typical P&L’s report what happened during the recession, not why it happened. Decisions based solely on an aggregate corporate P&L leads to “distorted impressions and misguided conclusions.” (2) To turnaround or improve asset productivity in an existing business, Drucker recommends digging below the P&L aggregate’s surface to analyze the pattern of sales and cost transactions.
Proponents of Lean Manufacturing argue transactional analysis, such as Activity Based Costing, is non-value added work. Drucker and ABC experts, such as Gary Cokins, take an opposite view. Cokins states in Activity-Based Cost Management: An Executive’s Guide, “A major tenet of lean thinking is that as the processes and value streams become more simplified, there is less need for financial accounting, control, and measurement systems. In fact, the reverse is true. The margin for error is getting slimmer, and teams need greater not less proficiency in using financial data.” (3) Even if ABC is used as a one-time project to analyze product and customer profitability, Drucker sees value in the data.
As a case in point, Drucker uses this example: “$1 million in volume produced in one order – or in one product – carries the same cost as $1 million in volume produced by 1 million individual orders or by 50 different production runs.” (4) Drucker considered it intolerable that so many managers were ignorant of how some of the key business segments and products contributed to total revenue results, and were unaware of the cost burdens of those parts of the business that were making little or no contribution to financial results.
Using transactions named activities, output measures and cost drivers, Activity Based Costing (ABC) dissects an aggregate P&L into individual product, service and customer P&L statements. ABC helps managers dissect and act to improve the parts, thereby improving the whole.
Are you managing an aggregate of unknown pieces that don’t add up to what you want?
• Abandon nonproductive activities, products, services, customers, projects and mission statements. 
Give up to go up during a recession. “There is only one way to make innovation attractive to managers; a systematic policy of abandoning whatever is outworn, obsolete, no longer productive, as well as the mistakes, failures, and misdirections of effort.”(5) Abandonment frees up time, talent and resources for working capital.
Drucker uses two methodologies for diagnosis and removal of things that need to be abandoned – the aforementioned ABC transactional analysis and the Bernoulli theorem.
ABC identifies marginally successful products and customers or outright clinkers. Drucker asserts that repeated attempts to revive a marginal product or customer are exercises in futility.
To support his contention, Drucker offered the Bernoulli theorem… in any series of endeavors, the chances of succeeding were reduced 50% with each new effort. If test results don’t match expectations, good scientists don’t redouble initial efforts nor question results. They begin a second diagnosis or abandon the project altogether. If Drucker were a Texan, the Bernoulli theorem of abandonment would be summarized in five words: “When your horse dies, dismount.”
Do you have any candidates to apply the Bernoulli theorem in your organization?

Conclusion
Breaking routine is often necessary to rise to a higher level of performance.

World champion athlete Victor Martinez says, “I used to do all my training by the book – a certain way and schedule. Then I noticed my progress plateaus quickly. When I change out of the routine, my condition changes faster than ever. This is known as the ‘Confusion Principle’ of training, but in actuality it is not ‘confusion’ at all. It is the shock of breaking routine that has allowed me to go past my limitations, and to succeed at ridiculous levels.” (6)

Troubled times may be new to you, but it’s familiar territory to those who have walked through the valley before. Implementing teachings of the Bible and Peter Drucker may initially confuse, confound or confront. But they’re guaranteed to take you on a journey to a higher level. Happy trails!

E-mail your comments on this article to Tom Pryor at TomPryor@icms.net.

(1) Relevance Lost: The Rise and Fall of Management Accounting, Robert Kaplan & H. Thomas Johnson, Harvard Business School Press, 1983.
(2) Peter Drucker: Shaping the Managerial Mind, John E. Flaherty, Jossey-Bass, 1999.
(3) Activity-Based Cost Management, Gary Cokins, Wiley Press, 2002.
(4) “Managing for Business Effectiveness”, Peter Drucker, Harvard Business Review, June 1963, p. 56.
(5) Innovation and Entrepreneurship: Practice and Principles, Peter Drucker, Harper-Collins, 1985, p. 151.
(6) “The Un-Confusion Principles”, www.YourKingdomCome.com, May 2003.

These are the days of two incomes, but more divorces; more kinds of food, but less nutrition; more acquaintances, but fewer friends; more effort, but less success. We spend too recklessly; laugh too little; drive too fast; get too angry quickly; stay up too late; get too tired; read too seldom; watch too much TV and pray too rarely.

We’ve multiplied our possessions, but reduced our values; we sign more contracts only to realize fewer profits; we’ve added years to life, not life to years. It is a time when there is much in the show window and nothing in the stock room. Indeed, these are the times.” (1)

Dr. Bob Moorehead’s commentary is a reminder that a great society can discard good things. In an attempt to become or remain a great company or a great person, it’s easy to overlook the importance of doing good.

Jim Collins’ recent book Good to Great has provided both inspiration and ideas to thousands of leaders.

It is a study of 28 good companies that became great as measured by their outperforming the stock market by at least seven times over a 15-year period. Companies are applying the hedgehog concept and other principles from the book, trying to become great.

What truly defines greatness is the good we do to become great. As author Don Gabor states, “Big things happen when you do the little things right.” (2) Greatness comes from, and is sustained by, doing lots of good things.

Good comes before Great
I assume from the book’s title…Good to Great… that we must first be good before we can achieve greatness. In today’s fast-paced, freewheeling business environment, the inclination is to skip good to get to great. Great big companies… Enron, WorldCom, and most recently HealthSouth… unsuccessfully attempted to skip good accounting practices to satisfy management’s greed.

Great accounting systems fail if there is not good accountability. Great payroll systems can record help’s time but be of little use if time spent helping the help is not good enough. Great accounting departments can close the books in one day. Good accounting departments take whatever time is necessary to develop trust, usefulness and dependability amongst its customers.

There is nothing wrong with striving to be great or being great. But we should not do it in a manner that eliminates the opportunity for doing good. As Bob Buford, author of Half Time, explains, “Many people discover they’ve built their lives around ‘success’ only to find it empty. So they reinvent themselves to build the second half of life around ‘significance’.”(3) Don’t repeat the great mistake of others. Don’t forsake good to be great, especially if you’re an accountant.

Good Accounting
Webster’s defines good as “honorable, as it should be, excellent, better than average, dependable, enjoyable, ample, and morally sound.” David Batsone comments in his new book, Saving the Corporate Soul & Who Knows, Maybe Your Own, “How companies book their sales has never mattered so much to investors. Clearly, the system for financial reporting has broken, yet no one wants to take responsibility for the wonky numbers. Everyone points the finger at someone else.” (4)

Some people and organizations have become great at the expense of doing good. I am deeply saddened by the bad accounting practices performed by members of my profession in recent years. Something as simple and straightforward as recording sales revenue has become a twisted mess. A 20th century joke has become a 21st century reality:

Management’s Question: “How much does it cost?

Accountant’s Answer: “What do you want it to be?”

Great accounting firms and CFO’s of great companies discarded good accounting practices in recent years to satisfy their greed. The results were ruin for some and recession for the rest of us.

To restore trust and confidence in the stock market, great companies must prove themselves good. Management must confirm to all stakeholders that their company follows good accounting principles, supported by good accounting practices, performed by good accountants, monitored with good audit accountability.

What is “good” accounting? Does your company employ good accountants that practice good accounting principles? Here are five traits to look for:

• Good accounting is relational, not circumstantial. 
In his new best seller The Purpose Driven Life, author Rick Warren says, “Relationships, not achievements or the acquisitions of things, are what matters most.”(5)
If you are a customer of accounting, do you have a good relationship with your CFO, finance department or accountant? Can you trust their numbers? Can you rely on your accountant or consultant to tell you what you need to know… non-value added costs, customer profitability, product-line profitability and process changes required… even if its not great news? If not, you don’t have the right relationship.
If you are an accountant, how do customers rate their relationship with you on a 1 to 10 scale? Ask them. If it’s not great, then define jointly with them three good steps to make the relationship a 10 this year.
• Good accounting is about character, not achievement.
I once had a very knowledgeable bookkeeper with an accounting degree. She robbed my business of money and time. I now have a good, trusted, dedicated, hardworking, accurate bookkeeper named Debbi Cardwell who has no college degree. Guess which one I prefer?
• Good accounting meets needs, not wants.
In every great company that Jim Collins researched, he found a humble leader. “Humility is not thinking less of yourself; it is thinking of yourself less.”(5) Good accountants for great companies focus on their internal and external customer’s needs, not the Accounting Department’s wants.
I recently took a call from the owner of a distribution company. Based on his business needs, we mutually determined that Activity Based Costing was the best tool to meet his need for Gross Margin Profiling, pricing, customer profitability analysis and process improvement.
He asked, “What type of person do I need to lead the Gross Margin Profiling project?”
I said, “Someone who is creative, willing to change and knowledgeable of your business.” 
The owner replied, “I’m glad you didn’t say that the project leader has to be an accountant. Every time I ask mine to help, they tell me they don’t have time!” Good accountants, good people and good organizations are servants. They help others before themselves.
• Good accounting is both legal and ethical.
In high school math, I learned “multiplying positive times a negative always has a negative result”. That principle also applies to corporate math. A good tool in the hands of a person of bad intent gets negative results every time. As John Nofsinger and Kenneth Kim state in Infectious Greed, “Enron was certainly pushing the envelope at every chance. The firm used sophisticated and very complicated methods to generate earnings out of thin air. It appears that Enron went over the line and committed fraud.” (6)Activity Based Costing (ABC) has been defined legal by all regulatory agencies (i.e., I.R.S., GAAP, and AICPA). But ABC will be only be good in the hands of an ethical person.
• Good accounting is based on the “Good Book”.
One of my favorite sayings is, “Methods are many, principles are few. Methods may change, but principles rarely do.”A great, yet overlooked resource for good financial principles and practices is the “Good Book” … more commonly called The Bible. There are over 2,000 verses in the Bible regarding money, stewardship, taxes, business, debt, investments and risk taking. Jesus, for example, made the critical observation, “What shall it profit a man to gain the whole world, and forfeit his soul?” (Mark 8:36) Indeed.

As Good as it Gets
One of my favorite movies is As Good as it Gets. Helen Hunt is frustrated by Jack Nicholson. He is kind and generous to her and her sick son, but he is agoraphobic, obsessive-compulsive, and terminally offensive. In desperation, Helen cries to her mother, “I just want a normal boyfriend.”

“Oh”, her mother replies, “Everybody wants one of those. There’s no such thing dear.”

If you’re frustrated like Helen, thinking your current situation is “as good as it gets”, I have encouraging news. It can get better, even great, if you take time to do good things. Good acts lead to great results. Need ideas or help? Give me a call or drop an e-mail. I’m just a good consultant willing to help you be great.

E-mail your comments on this article to Tom Pryor at TomPryor@icms.net.

(1) Words Aptly Spoken, Dr. Bob Moorehead.
(2) Big Things Happen When You Do the Little Things Right, Don Gabor, MJF Books, 1998
(3) Halftime, Bob Buford, Zondervan Publishing House, 1994
(4) Saving the Corporate Soul & Who Knows, Maybe Your Own, David Batstone, Josey Bass, 2003
(5) The Purpose-Driven Life, Rick Warren, Zondervan, 2002
(6) Infectious Greed, John Nofsinger and Kenneth Kim, Financial Times Prentice Hall; January 2003