As a sound bite example of the Upside of the Downturn, Geoff Colvin suggested that death rates go down in a recession.  Regardless of the accuracy of the claim, it’s worth remembering that the recession provides new opportunities for companies willing to take risks.  To emphasize this point, Colvin subtitled his book “Ten Management Strategies to Prevail in the Recession and Thrive in the Aftermath.”

For those who don’t have time to read the book, here are the ten strategies interspersed with my thoughts:

1. Reset Priorities
   Despite the name of the chapter, Colvin is not really suggesting that companies change priorities but rather that they adjust their strategy.  Changing priorities chooses which initiatives take precedence while changing strategy might eliminate or fundamentally change objectives. Regardless, I agree that strategy shouldn’t be static.
2. Protect Your Most Valuable Asset
   While I don’t like comparing people to assets, Colvin’s point is that layoffs are often the wrong way to cut costs and that great companies hire star performers from competitors during downturns.  Toyota uses the lull to give employees extra training so that, when the economy turns up, their employees are better prepared than the competition.
3. Engage the Outside World
   Companies must forge even tighter business relationships with their suppliers, distributors, partners and customers.  Consider the advice of Business Network Transformation.
4. Reexamine Your Strategy and Business Model
   I struggled a bit with this chapter as it used lots of examples but provided little insight into how to change a business model.  Should companies expand from their core or chase a blue ocean strategy?
5. Manage for Value
   Although Colvin doesn’t use the words, this chapter encourages companies to focus on the outcomes that have the most impact rather than the activities that produce the most output.  As a financial example, we points out that in 2008 Time Warner and Apple both had total enterprise values of ~$100B.  However investors had put $5B of capital into Apple and $142B into Time Warner. 
6. Create New Solutions for Customers’ New Problems
   Be creative and address the downturn explicitly.  Unlike other carmakers that slashed prices, Hyundai allowed consumers to return cars – without a penalty – if they lost their job. Hyundai’s sales rose by double digits.
7. Price with Courage
   Speaking of prices, most companies assume that they must cut prices in a downturn but studies have shown that the long-term damage can outweigh the short-term benefits.  This is because people have asymmetrical risk responses; winning $1,000 makes us feel good, but losing $1,000 makes us feel really, really bad.  Lower prices either becomes the new normal or cause disappointment when price levels return, even though they are no higher than they were originally.
8. Get Fitter Faster
   Call it the return of operational excellence with a focus on cash flow.  American Express identified customers with high balances and low spending activity and offered them a $300 gift card if they paid off their balance. With rising credit card delinquencies that were difficult to forecast, Amex decided it was better to pay people to close their account than to risk those debts going bad which would cost Amex much more later.
9. Understand All Your Risks
   Unfortunately, as I’ve previously mentioned, many companies have no enterprise-wide risk management process in place and have no plans to implement one.
10. Don’t Forget to Grow Yourself
    Downturn or no downturn, this is good advice.  Take time for yourself and remember that every downturn is inevitable followed by an upturn.

A few weeks ago I got a chance to listen to Geoff Colvin talk about his new book, The Upside of the Downturn.  Geoff, a long-time editor and columnist for Fortune Magazine, is an engaging speaker and he peppered his opening comments with headlines from that morning’s newspapers. He also made the intriguing claim that death rates go down in a recession and offered up as evidence that profits were down at the U.S.’s largest maker of caskets.

Several of us discussed this claim afterwards and found it hard to believe. With lower income, we expected that people would eat cheaper, less nutritious food. Unhealthy habits like smoking and alcohol seem recession-proof and might even increase. We assumed that death rates were more likely to increase during a recession.

For fun, we tried to come up with theories that would prove the claim. Perhaps high gas prices might be the cause of lower death rates. Since people drive less, they’re in fewer fatal auto accidents. Those that have to bike to work lose weight and become healthier. Alternately, perhaps fewer people can afford to eat out and make meals from scratch. These home-made meals have less saturated fat and salt which in turn improve health.

These are amusing theories but miss the point that apparently the claim is true. Christopher J. Ruhm, an economist at the University of North Carolina at Greensboro, observed the correlation in a 2003 paper, “Healthy Living in Hard Times.”  Ruhm found that the death rate decreases by 0.5% for every 1% increase in the unemployment rate.

In a Fortune article, Colvin explained that the primary reason is that people without jobs have more time to exercise. Losing weight correlates with less smoking, both of which improve your health. Out of work people also have more time to sleep which in turn improves health.

The recession leads to better health and longer lives. That is the upside of the downturn.

After I poked fun at Marketing earlier this year, several people forwarded me this classic joke about the communication issues between Marketing and Engineering:

A man is flying in a hot air balloon and realizes he is lost. He reduces his altitude and spots a man down below. He lowers the balloon further and shouts, “Excuse me. Can you help me? I promised my friend I would meet him half an hour ago, but I don’t know where I am.”

The man below says, “Yes. You are in a hot air balloon, hovering approximately 30 feet above this field. You are between 40 & 42 degrees north latitude, and between 58 & 60 degrees west longitude.”

“You must be an engineer” says the balloonist.

“I am” replies the man. “How did you know?”

“Well,” says the balloonist, “everything you have told me is technically correct, but I have no idea what to make of the information, and the fact is that I am still lost.”

The man below says, “You must be in marketing.”

“I am” replies the balloonist. “But how did you know?”

“Well,” says the man below, “you don’t know where you are, or where you are going. You have made a promise which you have no idea how to keep, and you expect me to solve your problem. The fact is that you are exactly in the same position you were in before we met, but now it is somehow my fault.”

Halloween statistics can be scary.  According to a survey of 8,526 people conducted by BIGresearch for the National Retail Federation (NRF), consumers spent an average of $56.31 on Halloween in 2009, down 15% from $66.54 last year.  The survey blames the economy, citing that nearly a third of consumers said the economy negatively impacted their Halloween plans. 

It sounds like a reasonable conclusion except that, according to the previous year’s survey, Halloween spending in 2008 increased as compared to 2007.  Since Halloween 2008 came only 6 weeks after the economic melt down, I would have expected it to have been impacted. Last year,  the same survey described Halloween as a way for consumers to escape from the uncertainties of daily life and to let loose during an otherwise tense period.  Why the different interpretation this year?

As usual, summary statistics can mask some interesting underlying trends.   Hidden in the details is one potential clue to this phenomena.  18-24 year-olds disproportionately impact Halloween results, traditionally spending 30% more than the yearly average.    In 2008, they spent $86.59 on average, continuing this tradition.  However, 18-24 year-olds averaged $68.56 in 2009, about 25% less than the previous year.  Apparently, it took an extra year for the economy to impact Halloweenn spending for young adults.

Too many of us dress up our metrics in costumes that disguise the underlying trends.   Like Halloween candy, it may taste good but isn’t good for you.

After last week’s post, Scrum By Walking Around, a reader emailed me to ask if I knew the the origins of the phrase management by walking around (MBWA).   Rather than replying based on what I believed, I decided to do extensive Web research but the results were inconclusive.  Like me, most sources seem to credit the Hewlett-Packard culture for creating an active management style that ecouraged managers to spend most of their days visiting employees, customers, and suppliers.  As I wrote in the inaugural post of this blog:

They believed that only through these two-way dialogues would line workers understand how they could impact strategic objectives and senior management recognize required changes to corporate strategy that might be otherwise invisible from their lofty perches.  For Hewlett and Packard, managing by walking around was a way to get everyone on the same page; what they believed was the secret to their success.  As Packard wrote in The HP Way, “It is necessary that people work together in unison toward common objectives and avoid working at cross purposes at all levels if the ultimate in efficiency and achievement is to be obtained.”

While HP may have created management by walking around, the concept was popularized by management consultant Tom Peters in his best-selling books In Search of Excellence and A Passion for Excellence.  

American companies and consultants aren’t the only ones to practice MBWA.  A central tenet of the Toyota Way is called genchi genbutsu which loosely translated means “go and see for yourself”.  Rather than relying on others, managers are encouraged to “go to the source to see the facts to make correct decisions, build consensus and achieve goals at our best speed.”

In fact, management by walking around is so popular that it has countless spin-offs.  There’s Training By Walking Around, Search By Walking Around, Retailing By Walking Around, and even Marketing By Walking Around.   One of these days I’ll finally mobile-enable my site and support blogging by walking around.

If you’re not in software development, you may not be familiar with an agile software development framework called scrum.  Scrum is an alternative to the traditional waterfall approach and attempts to simplify complex projects by structuring them in short cycles of work called sprints.  Each sprint is based on prioritized customer requirements such that the highest value features are developed first.  When done correctly, each sprint could be delivered to customers, dramatically shortening the time that customers consume innovation.

Like performance management methodologies, software development techniques can be overhyped and sometimes ignore the fact that people are often more important than processes.  As a result, I was really glad to see Matthew Laudato apply MBWA techniques to agile development and coin the term Scrum By Walking Around.  In his words:

As you visit each engineer, ask them how they feel the new methodology is going, and take lots of mental notes. Then spend a minute reinforcing the key goals of scrum: accountability to commitments, visible progress measures, and short term rigidity combined with long term flexibility. Later, after the scrum is over but before everyone leaves the room, share the concerns that you’ve gathered privately from your walkaround, and get everyone to agree on a plan of action to address the issues. Chances are that there are a few common concerns that everyone has. By getting these out in the open, it signals to the team that you’re responsive to them, and not just another pointy-haired paper-pushing process wonk.

While Matthew is talking about agile software development, this is performance management at its best.  Set clear goals with outcome measures.  Ensure understanding and accountability to the outcomes.  Provide visibility to key initiatives required.  And focus on the people, not just the process.

Scrum strives for simplicity.  Scrum is customer focused.  Scrum supports performance management.  Maybe I could try a marketing scrum?

On my most recent transcontinental flight, I found myself writing the phrase “less is more” in response to a 60 page PowerPoint that I had been sent.   Unlike other irritating phrases, I believe that we could all benefit from following that advice.  Although the origins appear to be in doubt, “less is more” is often associated with the architect and furniture designer Ludwig Mies Van Der Rohe, one of the founders of modern architecture and a proponent of simplicity.  In essence, it suggests that we should strive for clarity of purpose and simplicity of design.

While it’s hard to argue with this premise, there are very few software products that support this lean mantra.  OpenOffice and Google Docs are good examples as they’ve avoided many of the sophisticated features of Microsoft Word that very few of us use.  And both alternatives are free.  Software-as-a-service (SaaS) vendors once promised a streamlined version of their on-premise competitors but I’ve noticed a recent tendency towards SaaS bloatware.  (Note to my readers: Can you come up with any good examples of lean software?)

Simplicity of design seems to be more popular for computer hardware.   Historically, Moore’s law allowed vendors to cram even more features into computers while keeping the price steady. However, over the last few years, more machines function at about the same level as the previous generation but cost significantly less.    The punny titled Economist article “Less is Moore” points to an IDC study that suggests ~$250 netbooks are the fastest growing computer category, from less than 200K units in 2007 to a projected 21M in 2009.

While I’ve previously preached that people should be simple and clear in their communications, recently I’ve been thinking about how to apply simplicity of design to organizations.  In doing so, I stumbled up Michael Hyatt’s blog post with the following four tips on eliminating organizational complexity:

1. Periodically review regularly-scheduled meetings to determine if they are still needed.  Meetings can be like weeds; unless you pull them out regularly, they will take over your lawn.
2. Carefully consider the number of people required to make a decision.  It’s good to solicit opinions but the ultimate decision should be made by a smaller group.
3. Treat processes like you treat most medicine.  Use them to improve organizational health but be careful you don’t overdose.
4.  Use acronyms sparingly and avoid uncommon initialisms. 

The first three are very sound advice for reducing complexity that I should put into practice in my own organization.  The last one is just a good idea.  L8r.

In research conducted by Accountemps, 150 senior executives from the nation’s 1000 largest companies were asked, “What is the most annoying or overused phrase or buzzword in the workplace today?”  Their responses included the following:

• Leverage
• Reach out
• It is what it is
• Viral
• Game changer
• Disconnect
• Value-add
• Circle back
• Socialize
• Interface
• Cutting edge

While these words are annoying, I’m surprised that none of them seem new - the research could easily have been done in 1999 as in 2009.  I expected more words that reflected the global downturn such as staycation and bailout or words related to environmental issues such as green or carbon footprint.  In performance management lingo, these are definitely trending up.

In fact, if we’re going for the classics, I think I prefer the list compiled by Oxford researchers which appeared in Damp Squid: The English Language Laid Bare by Jeremy Butterfield.  Their top ten was:

• At the end of the day
• Fairly unique
• I personally
• At this moment in time
• With all due respect
• Absolutely
• It’s a nightmare
• Shouldn’t of
• 24/7
• It’s not rocket science

However, even this list doesn’t include my all-time personal most-hated phrase: I could care less.  I’ve long since given up telling people that it should be “I couldn’t care less”.  While I’m venting, I might as well mention that my least favorite made-up word is “anywho”.

In the last few weeks I’ve noticed a new phrase people at work have been using: “and all that kind of stuff”.    I have no idea where it came from but it’s a complete nightmare.  I personally am trying to break myself of the habit at this moment in time. It shouldn’t be too hard to stop because it’s not rocket science.

So what words or phrases do you hate?

It is an immutable law in business that words are words, explanations are explanations, promises are promises—but only performance is reality.
Harold S. Geneen, 1910-1997, communications executive

The man who starts out going nowhere, generally gets there.
Dale Carnegie, 1888-1955, author and pioneer in self-improvement and interpersonal skills

Talent hits a target no one else can hit; Genius hits a target no one else can see.
Arthur Schopenhauer, 1788-1860, German philosopher

There’s nothing so useless than executing a task efficiently when it actually never should have been executed at all.
Peter Drucker, 1909-, American management guru

Treat people the way they are and they will stay that way. Treat people the way they can become and they will become that way.
Johann Wolfgang von Goethe, 1749-1832, German writer and author of Faust

The value of achievement lies in the achieving.
Albert Einstein 1879-1955, German-born American theoretical physicist

An economist is someone who knows all the answers to last years’ questions.
Robert Orben, 1927-, American magician and professional comedy writer

Management is efficiency in climbing the ladder of success; leadership determines whether the ladder is leaning against the right wall.
Stephen Covey, 1932-, Author of The Seven Habits of Highly Effective People

What’s your favorite performance management quote?

Throwing down the blogging gauntlet, Michael asks a simple – but provocative – question:

How would […] you define Performance Management and what does it mean when it is successfully implemented?

My initial reaction was to borrow a phrase from Justice Potter Stewart: I’m not sure I can define performance management, but I know it when I see it. This may well be true but it’s hardly useful for our collective readers.

The term performance management seems to have become even more popular than when I ran my informal experiment three years ago.  A Yahoo! search for performance management now returns more than 45 million results.  While this tripling may not mean much due to changes in the underlying algorithm, it is enlightening to realize that performance management is now almost double the 25 million search results for customer relationship management.  Clearly, 200% growth for performance management compared to 50% for customer relationship management suggests that the former is a hotter market.

Unfortunately, checking the sponsored ads for the search confirms that the term performance management still is being used in many different ways.   As before, the most popular use appears to be workforce performance management (aka human capital management), followed by financial, operational and IT performance management.  To help reduce confusion between these terms, I’ve previously tried to disambiguate the different subcategories.

As for a definition, from my point of view not much has changed since 2005 when I tried to demystify performance management and provided the following explanation:

Performance management’s focus is on creating methodical and predictable ways to improve business results, or performance, across organizations. Simply put, performance management helps organizations achieve their strategic goals.

This isn’t a formal definition but perhaps it can serve as a starting point for the three of us to come up with a shared view.  Gary, what do you think?