Hope

• “F” bombing governor looking for payoffs
• Shoe throwing reporters
• Wal-Mart employee crushed to death at a door buster event
• Large corporations guilty of mismanagement (at least) seeking government assistance to prevent a more drastic economic disaster while
• Many honest hard working people find themselves out of work with no “bail out” option
  
  If ever the words of the Christmas Carol “O Come O Come Emanuel” made any sense they certainly do today.
  
  So why should we be hopeful? The principal that makes it clear that prosperity will not last forever also makes it clear that economic crises will not last forever.
  
  How can we be hopeful? Let’s start moving toward solutions to this situation. I don’t mean waiting for the government to do something. It will be impossible for it to design something effective for every community. Think of what you can do locally to solve this. Can you spare some time with a local job club helping with networking or resume review or job interview practice? Can you give time to a food pantry or shelter? What about your next door neighbor? See if you can do something without expecting a return for your effort.
  
  I bet you will be surprised at how hopeful you become.

The Challenge of Corporate Social Responsibility

CSR Challenges
I have been reading up on Corporate Social Responsibility and found the most practical commentary in the following article. It is worth the time to read the entire thing but I thought I would offer the following summary.

Strategy & Society: The Link Between Competitive Advantage and Corporate Social Responsibility. By: Porter, Michael E., Kramer, Mark R., Harvard Business Review, 00178012, Dec2006, Vol. 84, Issue 12

The challenges of balancing a company’s obligation to its owners, customers, employees, the environment and the community in which it operates makes this question an understandably difficult. In order to keep this initiative from becoming a complete waist of time or worse a public relations disaster inside and outside the company it is important to start with some basic considerations:
Why are you doing it?
This is the most important question to ask first, because unless you have a compelling reason, it will be impossible to get anyone inside the company to pay attention to it. Everyone has more than enough to do without being saddled with another initiative that lacks the clarity and company benefit of every other activity the company is working on.

What makes the most sense to do?
There are so many activities that can be considered ‘Corporate Responsibility Initiatives’ that you could spend years determining what to do. Begin by focusing on what the biggest challenges in your business are from a cost perspective. Process improvements in this area are likely to make your company more efficient, generate less waist and therefore less cost. This contributes to one of the largest contributions a business makes to society: JOBS! These process improvements will end up reducing waist in almost every area from energy consumption, solid waist generation, to labor costs. An efficient business is stable and contributes work opportunities, tax revenue for the community in which it operates and provides products or services that meet genuine needs of individuals, businesses and communities.
It does not make sense to work on something that is not related to your business. Studies have found that companies that attempt this are not always successful making cost improvements and do not even get a public relations benefit. For instance, carbon emissions are something that all companies might be concerned with, but some are more able to affect it than others. A global consulting company that has employees flying weekly to and from client work sites has a much bigger opportunity to impact this environmental concern than a web based business. Here it is critical for the employees to set the priority. They are the most able to determine where the biggest opportunities are and how they can best be achieved. Stakeholders outside the company are important to listen to as well but they will never be able to understand the company’s abilities and opportunities as well as those engaged in running the company on a daily basis. Nevertheless, it will be important to keep employees focused on a set of achievable and measurable goals in this regard.

Can you measure it?
If you want this effort to generate any results you will need to help keep the effort focused. It is here that you can employ all of the things you learned in the TQM craze of the 80s. Not only must there be a way to measure progress, there must also be some time boundaries. Measuring the effort will need to be objective and have realistic timeframes if you hope to get any stakeholder to see the value. So every effort should be SMART: Specific, Measurable, Attainable, Relevant, and Time bound. If the pendulum swings too far and you have a host of committees working on social initiative at the expense of the company’s core activities then clearly there is a problem. Such a loss of focus will end up putting the entire company at risk. The social impact of a failed business to the employees and the larger community are far greater than the social initiatives that it might undertake.

In the Log Term
Initiating such an effort should not be a fad as it will end up making the company look insincere, and there are plenty of cases where that has backfired. Studies have shown that the CSR efforts require a long term commitment to be effective. As employees and customers become more attuned to these issues the company will need to be able to balance this concern with the responsibility to make a profit for its owners. It is possible to do all of this if there is a reasoned thoughtful approach that focuses on a shared value. If companies choose initiatives they know a great deal about they stand to make a much bigger and long term beneficial impact than a charity, or government could do.

Are you really helping?

One of the traps that is easy for a consultant or a mentor to fall into is of letting our expertise on a subject make us forget our role. We are hired or consulted to help. Kierkegaard made a very astute observation that is easy to overlook in these situations. He said a helper is a servant not a sovereign. Whether you are asked to lead or suport it is important that the client is ultimately the one deciding your role in the process.

If we are honest about our own experience we seldom want someone to tell us exactly what to do. We want someone to listen and help root out things that might have been overlooked.

It is presumptuous of us to assume we can know more about a particular situation and its intricacies as the newest resource at the table. Better to listen and ask questions than to prescribe a formula or process before you understand the situation and its challenges.

Is your business leaking revenue?

No matter what stage your business is in there is always a risk that revenue is leaking. If you are a startup, the pressures to acquire and retain customers may lead you to engage in business practices that greatly increase your overall risk. If you are past the startup stage your business may have outgrown the basic processes you established to get it up and running. If you are a long established business you may have been lulled into business practices that are just not efficient and therefore are costing you money you should not have to spend. Or, (scarier) you may have employees or vendors that are taking advantage or outright stealing from you. It is always a good idea to take time to evaluate what you are doing and how it is being done to be sure that you are not leaking revenue.

Purchasing:
Are you really getting the best deal on the recurring expenses that are necessary to run your business? Have you analyzed the cost of supplies, mail, phone services over time? Do you know what it would cost you to move an office should the rent rise too much? Does your bank provide the services you need at a price that is competitive? Are you paying too much for credit card services?

Processes:
Are there processes that are too centralized giving one person a lot of control with little oversight? Is there someone who never seems to be able to take time off and who never shares the processes they do with others? Some assume it is a way to promote job security, but it is also a warning sign of potential fraud. Have you taken time to talk to the people who actually do the tasks within a given process? Chances are they have a lot of ideas on how to do it more efficiently. What kind of reporting do you do? Can you measure any of the processes you do?

These are just a few basic things you can do to get a sense of your revenue risk. I would be delighted to learn more about your business and the challenges that may make these things hard to do. Send me a note!

Freakonomics

I picked up "Freakonomics" this week and was surprised to see so many fraud related items in the first few chapters of the book. The story on cheating teachers was not news. Anyone with kids in school knows that there is a great temptation on the part of teachers to "teach to the test". It is the classic warning about taking care to pick what you measure carefully because it will drive behavior (sometimes the wrong behavior).

The story that I thought was most interesting was the one about the guy who quit his job to sell bagels to offices. Their assertion in the book is that there is no meaninful data on white collar crime(I am not sure that is true). The authors use the bagel man as a way to analyze this problem. Since he did business on the honor system and kept incredibly detailed records he was able to track company honesty. Some of the interetsting things he learned:

1. Weather: The worse the weather the more people cheat the bagel man.
2. Holidays: The Christmas holiday produces a 2% drop in payments.
3. Morale:The healthier the work environment the more honest they are.
4. Power:The higher up in the organization the person is the more likely they are to cheat.

I am interested in feedback:

1. Are you more inclined to cheat at work(through cutting out early or other slacker behavior) when your boss is a jerk?
2. What specific issues make it hardest to be honest at work?

Eliot Spitzer

If you have ever wondered about the value of internal controls, then take a look at the case against Eliot Spitzer. As a former prosecuter he is quite familiar with the Office of the Controller of the Currency's requirement that banks submit Suspicious Activity Reports for transactions that look suspicious and are over $5,000 or any transaction over $25,000. It appears that this requirement is what ended up exposing the crime.

He is likely to be charged under a statute called "structuring" where a person initiates a series of financial transactions designed to obscure the purpose of payments.

He was caught in the very net he used to catch others as a prosecuter. The FBI suspected that he was taking bribes and was surprised to discover the prostitution ring.

Processes designed to uncover fraud work even when people who know how they work try to work around them.

The mother of the problem

If you were required to read Beowulf in school you may recall how he was contracted by the king of a neighboring village to come and kill a monster who had been praying on the community. Beowulf does this, but quickly realizes that if he is to solve the problem completely he has to kill the mother of the monster. Killing the mother proves to be much harder, but necessary for the safety of the village.

A recent Linkedin question had me thinking about this. The question had to do with how to get an organization to adopt an internal control program. It would be easy to simply impose the program on the organization , but clearly its effectiveness would be questionable. In this instance the "mother of the beast" is the organization's cultural state. If the larger and more fundamental issues of common purpose, and morale are not dealt with effectively (and which might be driving the organization's resistance) the internal control program might reduce some of the risk, but it risks creating an environment more susceptible to fraud, and creating an even bigger more difficult problem to solve.

Internal controls are effective in managing risk in a business no matter how bad the environment, but they are much more effective if they are executed inside of a healthy organization.

Corporate Social Responsibility

In the January 17th issue of the Economist they tackle the issue of Corporate Social Responsibility (link below). For some this sounds like the same old cynical public relations campaign dressed in environmentally friendly and low carbon footprint clothing. It is true that there is a PR aspect to the idea of jumping on the "green" band wagon. However, there are a growing number of companies taking it seriously.

The emerging work force has a more sensative social conscience and is making career choices based on a company's social responsibility track record. Companies are also discovering that making volunteer opportunities available to employees adds to their job satisfaction.

Practically speaking, happy employees are more productive and less likely to steal from their employers. Companies that behave ethically do enjoy a reputation that aids their growth.


http://www.economist.com/opinion/displaystory.cfm?story_id=10491077

Identity Fraud 45.3B in America

Identity fraud is declining, (claims are down 11% from last year) in America but it is still staggering.

Most Common Victims:
Age: 24-34
Race: African American
Income: $100,000.00 plus

Tips:

1. Put a fraud alert on your credit report. This prevents anyone from opening a credit account without first contacting you.
2. Keep your information private: especially on-line and over the phone.

Average cost to repair Credit: $691.00

See the article by Jonathan Stempel below for the complete story.
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN1161861220080211

Its that time again

Every year at this time I have to find a time to get a physical exam. It is not my favorite activity on earth but as I age it is just prudent and proactive to do so. If everything ends up being OK then it is worth the time. If something comes up, it is even more worth it since I know that my regular exams reduce the likelyhood of an issue being too big to solve.

It is a good idea to do the same thing in your business. It is not as unpleasant as a physical and can end up improving your bottom line. If it turns out your business is operating as efficiently as possible then you have the satisfaction of knowing that. If not, it gives you the opportunity to make the changes early so you have the remainder of the year to reap the benefits.