Employees Behaving Badly

We have written on the subject of employees behaving badly and now we have another chance to do so. Recently, we all have witnessed another scenario in which highly paid employees are behaving rather poorly. Known as Deflategate, the New England Patriots are accused of using balls that were underinflated by 2 pounds per square inch in their win over the Indianapolis Colts for the NFL’s AFC championship football game. According to ABC news, the Indianapolis Colts had raised this issue earlier about underinflated balls supplied by the New England Patriots following its regular-season game on November 16. Apparently, Colts safety Mike Adams twice intercepted quarterback Tom Brady and gave the balls to the Colts equipment manager to save. Both times there were concerns about the balls being underinflated. For the recent AFC Championship game, 11 out of the 12 balls supplied by the New England Patriots were underinflated. It’s not as if one or two of them were underinflated. Nope. Nearly the entire lot of balls supplied by the Patriots were underinflated.

Well, now.

The Patriots head coach, Bill Belichick contended that it was the weather conditions that cause the balls to become underinflated. Brady said he knew nothing about it. Period. But if this is the case, then why were the Indianapolis Colts balls not underinflated? It seems no one in the Patriot organization has an answer to this question.  Could it be malfunctioning equipment?  Perhaps.  But no one in the Patriots organization is putting this theory forward either.  They are silent and evasive.

It seems that the coach and his multi-million-dollar quarterback are behaving badly, not having an ounce of curiosity about how a long-standing and well-known league rule could be violated that would presumably help them win a key game. It’s not as if this happened during a pre-season, meaningless game. Their complete lack of interest in owning up to what happened under their watch is remarkable. Perhaps they didn’t know about the deflated balls until after the game, but if this is true, then should they not be the least bit curious as to how it happened and make sure it never happens again?

Om the Patriots defense, it is surprising that the officials who handle the footballs from both teams throughout the game didn’t notice that the patriot footballs were underinflated. By rule, the ball is to be inflated with 12.5 to 13.5 pounds of air per square inch and weigh 14 to 15 ounces. A slightly underinflated football makes it easier to grasp, especially if it is raining or snowing. The ability to grip the ball is a big benefit of a slightly underinflated football. It’s easier to throw. It’s easier to catch. One would have thought the officials would have noticed, but they didn’t.

Whether the slightly deflated balls give the New England Patriots a substantive edge over the Indianapolis Colts is a topic under debate. We believe it did not. The Patriots didn’t need to cheat in order to beat the Colts. It’s obvious that they were the better team. They won 45 to 7. But if they tried to purposefully cheat by underinflating the footballs, then this shows just how far they will go in order to win a football game. It reveals their character, not their talent.

This isn’t the first brush with controversy the Patriots have encountered under Belichick’s leadership. Recall Spygate, in which the Patriots were docked a first-round draft pick and fined $250,000 while Belichick was fined $500,000 after it was found they were illegally taping the New York Jets defensive signals during a September game in 2007.

Robert Kraft, the owner of the Patriots, has a problem on his hands. As wildly successful as the Patriots have been under Belichick’s leadership with Tom Brady as quarterback, they seem to keep pushing the envelope on the rules established by the NFL: rules that have been crafted, in part, with the input of Robert Kraft himself.

Like any business owner, even when your top talent gets out of line, disciplinary action must be taken. In both Deflategate and Spygate, there doesn’t appear to be any discipline on the part of Robert Kraft towards Mr. Belichick. Now perhaps Mr. Kraft handles his discipline quietly, behind closed doors. But given Mr. Belichick’s public roles, we think it would behoove Mr. Kraft to make public the outcomes of his disciplinary actions with Mr. Belicheck.  It might restore some public credibility in his organization.

When employees behave badly, especially when it is within the confines of your business, you, as a Christian business owner, cannot stand by and watch it happen without enforcing discipline. As unpleasant as it might be, you simply must take action and discipline those who need it, irrespective of their position or the value that they bring to your organization. In some instances, discipline will lead to the employee’s termination or may lead to their voluntary resignation. But the value that discipline brings to the organization is immense: culture always trumps strategy and always trumps individual performance.  Incidentally, this is why you keep building your bench.

The next time you have a badly behaving employee in your organization, you will need to take decisive and immediate action. You may pay the price in the short run, but your organization will reap the benefits in the long run. What are those benefits? It’s simple: a better culture, a renewed awareness that your word actually means something, respect for you as a leader, and easier enforcement of the rules for those who remain in your business.

Don’t ever underestimate the value of decisive discipline when your employees are behaving badly.

Bill English
Founder, Bible and Business
CEO, Elevate

The Value of “Paying it Forward”

I just got off the phone talking with a representative of an industry research group whose research I’m interested in. This was a scheduled, introductory call in which I was asking questions about their organization and how I might use their research in my new business, Elevate. Our conversation went well for the first 15 minutes. Then I inquired about their cost because I was interested in joining. Their lowest price point is way beyond what I can afford right now. When I mentioned that I wouldn’t be able to afford that right now, there was some silence on the other end. So I asked her a couple more questions about purchasing individual products direct and about, perhaps, looking at their certification programs. She responded by saying that she would email me some information and thanked me for my time.

It was clear, once she realized I couldn’t purchase a membership right now, that she was done talking with me. She asked if I needed anything else and I knew the right answer to her question was “No”, so that was what I said. We ended the phone call and while she doesn’t know it, probably ended our professional relationship. I doubt I’ll ever pay for their services.

Every once in a while, I bump into vendors who are all about “the dollar” – at least that’s how I put it. If they realize there is no sale there, they bail as soon as possible. I infer they don’t want to waste their precious time with me, so they quickly move onto another lead or another customer or perhaps, to a cup of coffee. They lack any realization that “paying it forward” will help them in the long run even though it takes some time and energy in the here and now.

Paying it forward is a phrase I hear other business people us (and I use it too) to say “I’m going to be helpful and add value before I ask for your business”. In my Elevate business, I offer free consultations – not just short phone calls, but a real consultation in which I try to offer real value. This way, a potential customer can “get a feel” for how I’ll work with them and the value that I offer. And even if they don’t purchase from me, they’ll remember that I was helpful and perhaps, will send a referral to me someday or even call back to inquire about purchasing my services.

Paying it forward has a number of positives. It shows respect for the customer – especially if they can’t afford to purchase your services. Some of the small customers you have today will “make it big” and you’ll be glad you built and maintained that relationship when they were first starting out. In addition, it gives you a chance to minister to them, which aligns with our stewardship of giving. Finally, you create a new relationship when you Pay it Forward and you never know how God will use that relationship in the future.

Paying it Forward. If we did more of this, perhaps more people would patronize our businesses and perhaps, we would have greater Kingdom impact in the marketplace.

Bill English, CEO
Elevate

The Vanishing Male: a Christian Viewpoint

Two recent articles from the New York Times discuss the role of unemployment in the lives of men. The articles (here and here). In summary, the articles point out that men between the ages of 25 and 54 (termed prime-aged men) are vanishing from the workforce. In the late 1960’s, the percent unemployed was 5%. Today, that has tripled to 16%. A subset of these men are eager to find work. Some are using the time to go to school. Some apply for permanent disability and once approved, live off the insurance proceeds as well as their savings and the generosity of our government. Still others choose to retire early, which means they permanently leave the workforce. But as many as 44% are choosing not to work instead of taking low-paying jobs. They choose to remain on welfare when they could work a lower paying job.

Some find it hard to “shrink” into a job that is beneath their station in life. And with our current welfare benefit structures, they are able to make a real decision between working and not working. If the job pays similar to what their benefits pay, one does lack incentive to take the lower paying job.

Having been unemployed myself, I’m highly sympathetic to a man’s plight who isn’t working. Lack of employment saps a man’s dignity and purpose. Our sense of manhood is often damaged through extended unemployment. But staying on unemployment benefits when one could work seems to us to be sin.

Work is a gift from God. Work gives us purpose, dignity and a means of providing for ourselves and those around us. Work enables us to express our God-given creativities and talents. To turn down work when it is available has several deleterious effects:

  • Studies show that the longer one goes without work, the harder it is to find employment
  • The longer one does not work, the more public assistance and services are required to support that individual
  • The idea of fairness – helping a guy when he’s down – is assaulted when the guy could take work but chooses not to
  • God’s provision through work is traded for provision through the government
  • The loss of dignity and purpose is compounded by the turning down of work

We understand the emotional drain and associated problems with taking a low-paying job. But as Christians, we should never be below taking honest work for honest pay when it is the only option that will take us off government dependence.

This is where Christian business owners can fulfill their call to philanthropy. Perhaps there are some who could hire men (or women) who are only qualified for low-paying jobs and give them such jobs, but pay a rate a notch above market. Offer to train this person for future work that would require a higher salary. And help give the individual the opportunity to come back to the work force, be productive, find dignity and worth again through their own labor and help relieve society of this person’s support.

While most MBA programs would tell you to not do this – don’t pay more than what you must to retain the talent you need in your business – I think God calls us to look beyond the American ways of running a business sometimes. Surely, can we not support our brother and invest in him for the future? In the end, is not God’s pleasure with us for more valuable than any amount of money we would ever earn or have?

We think so. We hope you do too.

Bill English
CEO and Founder, Bible and Business.

In the News: Millennial Entrepreneurship in Decline

Several recent articles, such as this one from the Center for America Progress, discuss the decline of entrepreneurship among Millennials (here, here, and here also). These articles parrot similar themes: Millennials want to start businesses, but the obstacles (or barriers of entry) are higher for them than for any previous generation, leading to lower entrepreneurship. The Aspen Group (via p21.org) goes a bit further, saying that Millennials need a “mindset” of entrepreneurship and that we need education about entrepreneurship in our high schools and colleges.  With this, we agree.)

Quoting from the American Progress article:

“Young Americans want to start their own businesses, but the weak economy, high student-debt levels, and a complicated legal and regulatory framework—as well as traditional views about who can be an entrepreneur and what constitutes entrepreneurship—are holding them back. More than half of Millennials today express a desire to start a business, but fewer of them are creating new businesses than previous generations did at a similar age. As a result, our economy will grow at a slower pace and experience lower levels of both productivity and innovation in the future. Moreover, Millennials, who are already suffering some of the worst consequences of the economic downturn, will miss out on the opportunities provided by entrepreneurship, including creating wealth, improving their quality of life, and making important contributions to the economy.”

In essence, young people are saddled with high student debt, which restricts their ability to attract investment capital and/or invest their own savings into a new business. They also look at a lack-luster economy and think twice about whether or not they can successfully create a profit. So they hold off.

This summary article from the Financial Times illustrates how student debt has deleterious effects, even if a cause-and-effect relationship cannot be established. From 2004 to 2012, the average debt per student increased from $15,000 to $25,000. During a similar period – from 2002 to 2012, inflation-adjusted college costs rose by 41% in four-year public institutions, 9% in private institutions and fell by 7% in two-year public institutions. Student debt makes student less likely to choose lower-paying careers and for each $10,000 in additional student debt, there is a decrease in the student’s long-term probably of marriage by 7%. One 2010 poll found that 85% of college graduates were planning to move back home after graduation.

Students shouldn’t be coming out of school with debt, yet as a father who has a 17 year old son heading off to college soon, it’s difficult to find *anyone* within the college system who agrees with this notion. Even at the most Evangelical schools – where the Biblical teaching on debt should be the most prominent – there is an assumption that students will graduate with an average of $25,000 – $32,000 of student loan debt. It seems that Biblical teaching on debt is jettisoned even by Evangelical institutions when it negative affects their own salaries and institutions.

These colleges are just hurting themselves in the long run. If we have less entrepreneurship, we’ll have less donors to colleges in the long run. And this means that colleges will have to charge more since less donations will be available to off-set overhead costs. Students will incur greater debt, leading to less entrepreneurship. It appears to be a self-feeding cycle.

The way to break this cycle is to get rid of the notion that our students should graduate in 4 years at these four year institutions. And perhaps we should be more accepting of having our students do their general education classes at the local community college (which is far cheaper) than the more expensive four year institutions. But what we would like to see are colleges and churches working together to help college students start and incubate new businesses that could not only pay for the student’s tuition, but would also enable both institutions (church and college) to invest in the spiritual growth of future business leaders.

Incubating business with and for college students. Now that’s a solution we like!

Kano Model and Christian Business Ownership

The Kano model is a theory of product development and customer satisfaction developed in the 1980s by Professor Noriaki Kano, which classifies customer preferences into several categories. The core idea is that customers come to a purchase decision with certain expectations about the mix of price, feature and quality. Depending on what they find, they might become delighted, discouraged or have a neutral, “ho-hum” experience.

Fundamental (green line)

These attributes are taken for granted when fulfilled but result in dissatisfaction when not fulfilled. An example of this would be a new flat-screen TV that doesn’t contain a remote. When I was growing up, a remote was a big deal – it was an innovation that customers found exciting and new. Today, it is an expected part of the TV package. Lack of a remote will result in dissatisfaction.

Linear (light blue line)

These attributes result in satisfaction when fulfilled and dissatisfaction when not fulfilled. In the TV example, this means enjoying the latest in pixilation for High Definition. You’ll enjoy it when it’s there, but will be dissatisfied if it’s not what you expected.

Exciter (red line)

These attributes provide satisfaction when achieved fully, but do not cause dissatisfaction when not fulfilled. In the TV example, perhaps it has additional inputs that you weren’t expecting or the remote also has the feature of running your other media devices. Generally speaking, you would not have been dissatisfied if these features were not present, but you’re additionally happy if they are.

Christian Business Ownership and the Kano Model

When it comes to a customer’s perception of your business, we would suggest that when the business fulfills God’s four purposes for business (Products, Passions, Profits and Philanthrophy), that your customers will find themselves rating your business on the Delighter line rather than the other two lines. In addition, we would suggest that this “delightful innovation” would not be something that diminishes over time. Instead, their delight will remain constant because, at our base, we’re always attracted to that which God has created us for, even if we don’t know it. People will naturally be attracted to a company that balances and fulfills these four purposes because we’re always looking for that which achieves at a high level and yet doesn’t fade or spoil.

As a Christian business owner, you won’t achieve a Delighted customer base with high loyalty only through persistent innovation, as important as this is. You see, product innovation is the fulfillment of only one of the four principles. Instead, you’ll need to be succeeding on the other three as well and doing it with authenticity and transparency. Once your there, those on the outside will want to align with your company, either as customers or partners and over time, you’ll develop a strong base of Delighted supporters who are, sometimes, also customers.

Capitalizing Your Small Business

Small business needs money. It’s needed to do things like buy equipment, fund growth and provide reserves for the inevitable rainy day.

 

As the CEO of your small business, it’s your job to make sure you have enough capital to fulfill the requirements of your business. Most small businesses are service-oriented businesses, which means they don’t need much capital to get started. Many start by offering a service and then use the cash from their business to pay their salary. If you intended on being a lone ranger, such as a small insurance agent, then this model will work well for you.

 

But if you intend on growing your business such that you have employees, plant and/or equipment, then read on – you’ll need to consider what you’re doing.

The Three Kinds Of Capital

There are three kinds of capital:

  • Investment Capital: This is money that you or someone else puts into the business. It’s like buying stock in a publicly traded firm, except for one thing: When you make an investment in a small, closely held corporation, there is no after-market for your shares. Therefore, you typically won’t get your invested capital out until you sell the company.
  • Retained Earnings: This is the profit your company has made that you left in the business beyond your salary or other compensation items. This is the best kind of capital, because your business got it the old fashioned way — it earned it. Your banker will like seeing retained earnings on your balance sheet, perhaps even more than investment capital, because it says two things: 1) Your company had the ability to produce retained earnings by operating profitably; 2) As the owner, you had the discipline to leave this capital in the company instead of distributing it.
  • Borrowed Funds: This is what you think it is: debt. Debt is not only an excellent way to capitalize your company, it is also the worst way to capitalize it if you borrow too much or improperly manage it. Debt can be a wonderful bridge between periods of high cash, but it is a killer for businesses with weak incomes.

Determine How Much Capital You’ll Need

A good cash flow projection will help you determine how much money you’ll need and when. Simply enter when cash is going in and when it’s going out on a weekly basis. (We have a cash flow spreadsheet tool that you can download). When you have negative numbers at the bottom of the column in a given week, this is the amount of capital you’ll need to run your business.

Spend your capital on that which will result in more income. With interest rates so low, you should borrow money for hard, large investments and do as much as you can to keep your fixed overhead as inexpensive as possible. Don’t sign contracts or rent office space or anything else like this until you’re forced to do so. Spend your scarce resources on revenue-generating activities.

If you need large sums of capital, be prepared to give away most of your ownership – at least for a period of time in exchange for the loss of ownership.

A Biblical View of Capital

While the Bible doesn’t speak to capital directly, there are two observations that can be gleaned from Scripture and applied to the use of capital. First, God always funds that which He calls us to, so if God has called you to business, you can be sure that whatever risks He is asking you to assume are also shouldered by Him. But it is prudent to keep those risks as small as possible, so, this leads to my second observation: Be very reluctant to use debt to cash flow your business. The more debt you have, the more you are a servant to the lender, not to God. So staying out of debt for your business is essential to having a good chance at succeeding in the long run.

In addition, I would advise you to tithe a portion of your profits out of your business, even if you business only earns $1000/year and you give away $100. It is a practice that will keep your heart in the right place and will honor God in what you’re doing.

Bill English, CEO
Elevate

The Key Employee Problem

I’ve experienced this problem myself in the past: a key employee I couldn’t do without. An employee whose technical knowledge was singular to him and we couldn’t do without. When he pressed me for an over-the-top salary, I was stuck and had to give it to him. I felt he took advantage of me, in part, because at the time, we were in a downsizing mode and he knew the financial stress our company was under. But he cared only for himself and got what he wanted in the short-run.

I know of another business owner who had a key employee who was going out on a new, strategic consulting job with a new customer. They employee flew to the customer’s city on Sunday and then called the owner Sunday night and demanded a salary increase or he wasn’t going to show up to the customer’s site on Monday morning. My friend fired him on the spot but lost the customer because he didn’t have anyone with a similar skill set and experience base to replace him.

In both of these scenarios, we have key employees thinking they are worth more than they are and in both cases, they try to take advantage of the owner to get the compensation they feel they deserve. Both of us owners were unprepared for this eventuality. No organization should be dependent on one person. Key employees shouldn’t be so “key” as to be irreplaceable or indispensable.

Looking back, what I should have done was denied him the salary increase. Then – anticipating his voluntary departure – I should have found two contractors who could do what he did at reasonable rates. Instead, I paid him and he performed well. But in keeping with my notion of inverse cause/effect with salaries, I found he grew increasingly discontented in his role, even though he was being paid above market. I’ve seen it several times before – pay people too much and they actually get cranky, selfish, demotivated and discontented. Paying an “A” level salary for “B” level performance ends up getting you a “C” level person who leaves anyways for greener pastures.

So – what should I have been doing to avoid this problem in the first place? Two things: Process Documentation and Cross Train and Building my Bench.

Process Documentation and Cross Train

When it comes to process documentation, there are three things you can do, as an owner, to ensure you’re not caught over the barrel if your key employee has “inside” process and task knowledge that no one else has:

  1. Make a list of the tasks that each employee does within your organization
  2. Document the steps that must be performed
  3. Make this information available to others and cross-train so that you have two people who can perform the steps within any given process

Process-based organizations can do this more easily because of their culture of being processed focused. For example, making a list of regular tasks that each employee does can be visualized as follows (this example is for a Payroll Supervisor):

Then, the specific tasks for each regular task can and should be documented in a simple process diagram. For example, here are the steps for entering the weekly payroll:

 

 

Building My Bench

For highly technical skills that are difficult to document, I’d advise Building a Bench of potential contractors and employees before you need them. Having a contractor available who has the knowledge and skills of your highly technical employee is a great card to play at the right time. At least with a contractor, you’ll have choices if your employee asks for a higher-than-market rate for his or her salary.

But building your bench is something you should be doing on a regular basis anyways. As the business owner, I would advise you to have at least one “networking” appointment each week with someone who could be a potential employee or contractor down the road. You invite him/her to lunch and you frame it up this way: “Look, I don’t have an open position and you’re not looking for new work, but that doesn’t mean we won’t do business together in the future, so let me buy you lunch”. 99% will take you up on this and when life happens at their job, they may just ping you and say – “Hey, such an such just happened, want to talk?” Or, they may have a friend whose life is in turmoil and is looking for something new to do in the next X number of months. This is something that you, as the owner, can and should be doing. Building your bench before you need them is just plain smart and it helps reduce the key-ness of your key employees.

So, the next time that key employee feels he is underpaid, you can look him in the eye and, with confidence, say ” I understand you want to earn more money – so help me understand what additional value you’re going to bring to the table.” And if they balk, you can remind them that you have X number of people with their skill set you can call today who would be candidates to replace him. Hardball? Yep. You bet. But sometimes, playing hardball with your key employees is what’s needed.

Bill English, CEO and Founder
Elevate

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