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Hank Moore

The Big Picture of Business: The Business Leader as Community Leader

In eras following downturns and scandals, it is incumbent upon good companies to go the extra distance to be ethical and set good examples. Demonstrating visible caring for communities by company executives is the ultimate form of potlache.

No matter the size of the organization, goodwill must be banked. Every company must make deposits for those inevitable times in which withdrawals will be made.

To say that business and its communities do not affect each other is short-sighted… and will make business the loser every time. Business marries the community that it settles with. The community has to be given a reason to care for the business. Business owes its well-being and livelihood to its communities.

Business leaders have an obligation to serve on community boards and be very visible in the communities in which they do business. If done right, community stewardship builds executives into better leaders, as well as receiving deserved credit for the company. Civic service is the ultimate way to steer heir apparents toward the leadership track.

Communities are clusters of individuals, each with its own agenda. In order to be minimally successful, each company must know the components of its home community intimately. Each company has a business stake for doing its part. Community relations in reality is a function of self-interest, rather than just being a good citizen.

Companies should support off-duty involvement of employees in pro bono capacities but not take unfair credit. Volunteers are essential to community relations. Companies must show tangible evidence of supporting the community by assigning key executives to high-profile community assignments. Create a formal volunteer guild, and allow employees the latitude and creativity to contribute to the common good. Celebrate and reward their efforts.

Publicity and promotions should support effective community relations and not be the substitute or smokescreen for the process. Recognition is as desirable for the community as for the business. Good news shows progress and encourages others to participate.

The well-rounded community relations program embodies all elements: accessibility of company officials to citizens, participation by the company in business and civic activities, public service promotions, special events, plant communications materials and open houses, grassroots constituency building and good citizenry.

No entity can operate without affecting or being affected by its communities. Business must behave like a guest in its communities, never failing to give potlache or return courtesies. Community acceptance for one project does not mean than the job of community relations has been completed. It is not ‘insurance’ that can be bought overnight. It is tied to the bottom line and must be treated accordingly, with the resources and expertise to do it effectively. It is a bond of trust that, if violated, will haunt the business. If steadily built, the trust can be exponentially parlayed into successful long-term business relationships.

Potlache

Potlache is the ultimate catalyst toward Customer Focused Management. It means extra gifts, beyond value-added, visionary mindset and the ultimate achievement of the organization.

The word ‘potlache’ is a native American expression, meaning ‘to give’. For American Indians, the potlache was an immensely important winter ceremony featuring dancing, food and gift giving. Potlache ceremonies were held to observe major life events. The native Americans would exchange gifts and properties to show wealth and status. Instead of the guests bringing gifts to the family, the family gave gifts to the guests.

Colonists settled and started doing things their own way, without first investigating local customs. They alienated many of the natives. Thus, the cultural differences widened. The more diverse we become, the more we really need to learn from and about others. The practice of doing so creates an understanding that spawns better loyalty.

When one gives ceremonial gifts, one gets extra value because of the spirit of the action. The more you give, the more you ultimately get back in return. Reciprocation becomes an esteemed social ceremony. It elevates the givers to higher levels of esteem in the eyes of the recipients.

Potlache is a higher level of understanding of the business that breeds loyalty and longer-term support. It leads to increased quality, better resource management, higher employee productivity, reduced operating costs, improved cash management, better management overall and enhanced customer loyalty and retention.

Community Relations

The well-rounded community relations program embodies all elements: accessibility of company officials to citizens, participation by the company in business and civic activities, public service promotions, special events, plant communications materials and open houses, grassroots constituency building and good citizenry.

Never stop evaluating. Facts, values, circumstances and community composition are forever changing. The same community relations posture will not last forever. Use research and follow-up techniques to reassess the position, assure continuity and move in a forward motion.

Companies need community relations at all times:

  • Prior to coming into locales.
  • Every year in which they do business there…in good and bad economic times.
  • When they are leaving an area.
  • Even after they have ceased operation in certain communities.

In today’s economy, no business can operate without affecting or being affected by its communities. Business must behave like a guest in its communities… never failing to show or return courtesies.
Community acceptance for one project does not mean than the job of community relations has completed. Programs always shift into other gears… breaking new ground.

Community relations are not ‘insurance’ that can be bought overnight. It is tied to the bottom line and must be treated accordingly… with resources and expertise to do it effectively. It is a bond of trust that, if violated, will haunt the business. If steadily built, the trust can be exponentially parlayed into successful long-term business relationships.


About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.

StrategyDriven Podcast Episode 41 – The Big Picture of Business: When the Next Recession is Coming

StrategyDriven Podcasts focus on the tools and techniques executives and managers can use to improve their organization’s alignment and accountability to ultimately achieve superior results. These podcasts elaborate on the best practice and warning flag articles on the StrategyDriven website.

Episode 41 – The Big Picture of Business: When the Next Recession is Coming explores the marketplace markers that signal a recession’s start and the timing of the next American recession. During our discussion, Hank Moore, Corporate Strategist and author of The Business Tree: Growth Strategies and Tactics for Surviving and Thriving, shares with us his insights and illustrative examples regarding:

  • the cyclic nature of economic recessions
  • markers indicating a recession is forthcoming
  • when the next recession is likely to occur
  • where to look for business improvement opportunities learned during a recession
  • how to be prepared for business opportunities the next recession will present

Additional Information

In addition to the outstanding insights Hank shares in The Business Tree and this edition of the StrategyDriven Podcast are the resources accessible from his website, www.HankMoore.com.   Hank’s book, The Business Tree, can be purchased by clicking here.

Final Request…

The strength of our community grows with the additional insights brought by our expanding member base. Please consider rating us on iTunes by clicking here. Rating the StrategyDriven Podcast and providing your comments online improves our ranking and helps us attract new listeners which, in turn, helps us grow our community.

Thank you again for listening to the StrategyDriven Podcast!


About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.

StrategyDriven Podcast Episode 40 – The Big Picture of Business: Learning from the Recession and Moving Forward

StrategyDriven Podcasts focus on the tools and techniques executives and managers can use to improve their organization’s alignment and accountability to ultimately achieve superior results. These podcasts elaborate on the best practice and warning flag articles on the StrategyDriven website.

Episode 40 – The Big Picture of Business: Learning from the Recession and Moving Forward explores the actions business leaders can take in order to position their organizations to achieve marketplace success during economic downturns. During our discussion, Hank Moore, Corporate Strategist and author of The Business Tree: Growth Strategies and Tactics for Surviving and Thriving, shares with us his insights and illustrative examples regarding:

  • the underlying causes of ‘The Great Recession
  • why so many organizations are retaining cash
  • actions business leaders should take now to maximize their success in the current market environment
  • the impact the Dodd-Frank Wall Street Reform and Consumer Protection Act is having on businesses
  • how business leaders can prepare their organizations to more effectively deal with future economic downturns

Additional Information

In addition to the outstanding insights Hank shares in The Business Tree and this edition of the StrategyDriven Podcast are the resources accessible from his website, www.HankMoore.com.   Hank’s book, The Business Tree, can be purchased by clicking here.

Final Request…

The strength of our community grows with the additional insights brought by our expanding member base. Please consider rating us on iTunes by clicking here. Rating the StrategyDriven Podcast and providing your comments online improves our ranking and helps us attract new listeners which, in turn, helps us grow our community.

Thank you again for listening to the StrategyDriven Podcast!


About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.

Hank Moore

The Big Picture of Business – Situations Causing the Downtown and Corporate Scandals: Barriers to Progress and Business Growth

Every business, company or organization goes through cycles in its evolution. At any point, each program or business unit is in a different phase from the others. Every astute organization assesses the status of each branch on its Business TreeTM and orients its management and team members to meet constant changes and fluctuations.

It’s not that some organizations ‘click’ and others do not. Multiple factors cause momentum, or the lack thereof. As companies operate, all make honest and predictable mistakes. Those with a willingness to learn from the mistakes and pursue growth will be successful. Others will remain stuck in frames of mind that set themselves up for the next round of defeat or, at best, partial-success.

The saddest fact is that businesses do not always know that they’re doing anything wrong. They do not realize that a Big Picture must exist or what it could look like. They have not been taught or challenged on how to craft a Big Picture. Managers, by default, see ‘band-aid surgery’ as the only remedy for problems… but only when problems are so evident as to require action.

Is it any wonder that organizations stray off course? Perhaps no course was ever charted. Perhaps the order of business was to put out fires as they arose, rather than practicing preventive safety on the kindling organization. That’s how Business Trees in the forest burn.

This article studies obsolete management styles and corporate cultures that exist in the minds of out-of-touch management. Reliance upon many of these management tenets subsequently brought Enron and many others down.

This includes the characteristics of addictive organizations, their processes, promises and forms. It reviews the Addictive System, the company way and the organization as an addict. This chapter studies communications, thinking processes, management processes, self-inflicted crises and structural components of companies that go bad, or maybe never do what it takes to be good. Topics discussed include the society that produced business scandals, accountants and auditors, pedestals upon which CEOs are placed, spin doctoring, compensations and accountability issues with managers.

Companies are collections of individuals who possess fatal flaws of thinking. They come from different backgrounds and are products of a pop culture that puts its priorities and glories in the wrong places…a society that worships flash-and-sizzle over substance.

Characteristics of Corporate Arrogance

  • Support others who are like-minded to themselves
  • Scapegoat people who are the messengers of change
  • Blame others who cannot or will not defend themselves
  • Find public and vocal ways of placing blame upon others
  • Shame those people who make them accountable
  • Neither attends to details nor to pursue a Big Picture
  • Perpetuate co-dependencies
  • Selectively forgets the good that occurs
  • Find three wrongs for every right
  • Do little or nothing
  • At all costs, fight change… in every shape, form or concept
  • Making the wrong choices
  • Inability to listen. Refusal to hear what is said
  • Stubbornness
  • Listening to the wrong people
  • Failure to change. Fear of change
  • Comfort level with institutional mediocrity
  • Setting one’s self up for failure
  • Pride
  • Avoidance of responsibilities
  • Blaming and scapegoating others
  • People who filter out the truths
  • Non-risk-taking mode
  • Inaccessibility to independent thinkers
  • Calling something a tradition, when it really means refusal to change
  • Pretense
  • Worshiping false idols, employing artificial solutions
  • Preoccupation with deals, rather than running an ongoing business
  • Arrogant attitudes
  • Ignorance of modern management styles and societal concerns
  • Failure to benchmark results and accomplishments

Incorrect Assumptions that People Make

  • That wealth and success cure all ills
  • That business runs on data. That data projects the future
  • That data infrastructure hardware will navigate the business destiny and success
  • That all athletes are role models. That all well-paid athletes are national heroes
  • That the CEO can make or break the company single-handedly
  • That doctors don’t have to be accountable to their customers
  • That education stops after the last college degree received
  • That TV newscasters are celebrities and community leaders
  • That having an E-mail address or a website makes one an expert on technology
  • That the Internet is primarily an educational resource
  • That technology is the most important driving force in business and society
  • That buying the latest software program will cure all social ills and create success
  • That community stewardship applies to other people and does not require our own investment of time
  • That white-collar crime pays and that highly paid executives will avoid jail time
  • That senior corporate managers have all the answers and do not need to seek counsel
  • That return on shareholder investment is the only true measure of a company’s worth
  • That all people who grew up in the south are racist
  • That government bureaucrats are qualified to make decisions about taxpayer money
  • That activists for one cause are equally open-minded about other issues
  • That corporate mid-managers with expense accounts are community leaders
  • That deregulation is always desirable and in the public’s best interest
  • That home-based businesses are more wealth-producing than holding a job
  • That professionals can get by without developing public speaking and writing skills

Fatal Quotations Voiced to Justify Fatal Thinking

  • “Might makes right. Take no prisoners. Wear the other side down.”
  • “Everyone knows who we are and what we do.”
  • “Our accountants will catch it and take care of it.”
  • “It’s none of their business. The public be damned.”
  • “We’re not paying people to think…just to do. Make them understand.”
  • “We don’t need outsiders coming in and hogging the credit.”
  • “If you don’t cooperate with me, I’ll bring you down.”
  • “We cannot do that right now. Once this crisis is past, we can think about the future.”
  • “How does this contribute to our bottom line?”
  • “If it does not contribute directly to the bottom line, we’re not interested.”
  • “We have more business than we can handle.”
  • “Too much competition destroys free enterprise. We need to eliminate competition.”

Addictive Organizations

Addictive organizations are predicated upon maintaining a closed system. Alternately, they are marked by such traits as confusion, dishonesty and perfectionism. They are scarcity models, based upon quantity and the illusion of control. Only the high performers get the gold because there are not enough bonuses to go around. Addictive organizations show frozen feelings and ethical deterioration.

Addictive organizations dangle ‘the promise’ to employees, customers, stockholders and others affected. People are lured into doing things that enable the addictive management’s pseudopodic ego.

All that is different is either absorbed or purged. The addictive organization fabricates personality conflicts in order to keep people on the edge all the time. There exists a dualism of identifying the rightness of the choice and a co-dependence upon the rewards of the promise.

In such companies, the key person is an addict. The CEO and his chosen lieutenants have taken addictions with them from other organizations. The organization itself is an addictive substance, as well as being an addict to others. They numb people down and addict them to workaholism.

The addictive system views everything as ‘the company way.’ The entity is outwardly one big happy family. It is big and grandiose. The emphasis is upon the latest slogans of mission but does not look closely at how its systems operate. The term “mission” is a buffer, excuse, putdown and roadblock.

Rather than embrace the kinds of Big Picture strategies advocated in this book, the addictive system seeks artificial fixes to organizational problems, such as bonuses, benefits, slogans and promotions of like-minded executives.

Communications are always indirect, vague, written and confusing. People are purposefully left out of touch or are summarily put down for not co-depending. Secrets, gossip and triangulation persist, as a result. The addictive organization does communicate directly with the news media and often adopts a ‘no comment’ policy. Company officers (who should be accessible to media) are cloistered and unavailable. The addictive organization does not recognize that professional corporate communications are among the best resources in their potential arsenal.

The addictive system does not encourage managers to develop thinking and reasoning processes. The system portrays forgetfulness, selective memory and distorted facts into sweeping generalizations. We are expected to take them at their word, without requesting or demanding facts to justify.

In the addictive organization, those who challenge, blow whistles or suggest that things might be better handled are neither wanted nor tolerated. Addictive managers project externally originated criticism back onto internal scapegoats. There is always a strategy of people to blame and sins to be attributed to them.

Management processes tend to exemplify denial, dishonesty, isolation, self-centeredness, judgmentalism and a false sense of perfectionism. Intelligent people know that perfectionism does not exist and the quest for quality and excellence is the real game of life and business. Addictive organizations do not use terms like ‘quality’ and ‘excellence’ because such terms must be measured, periodically reexamined and communicated… the organization does not want any of that to occur.

There persists a crisis orientation, meaning that everything is down to the wire on deadlines (not to be confused with just-in-time delivery, which is a good concept). Things are kept perennially in turmoil, in order to keep people guessing or confused. Management seduces employees into setting up competing sides in bogus feuds and manipulating consumers.

Structural components include preserving the status quo, fostering political games, taking false measurements and pursuing activities that are incongruent with the organization’s announced mission.

7 Layers of Organizational Addictiveness – Companies That Go Bad… Self-Inflicted Crises

  1. Self Destructive Intelligence. There exists a logic override. Since the company does not believe itself to be smart enough to do the right things, then it creates a web of rationalism. Since the mind often plays tricks on itself, management capitalizes upon that phenomenon with people who may question or criticize.
  2. Hubris. This quality destroys those who possess it. Such executives exhibit stubborn pride, believing their own spin doctoring and surrounding themselves with people who spin quite well on their behalf. They adopt a ‘nobody does it as well as we can’ mentality. Such companies scorn connections, collaborations and partnering with other organizations.
  3. Arrogance. Omnipotent fantasies cause management to go too far. The feeling is that nothing is beyond their capacity to succeed (defined in their minds as crushing all other competition).
  4. Narcissism. Company executives possess excessive conceit. They are disconnected from outside forces, self-centered and show a cruel indifference to others. The view is that the world must gratify them.
  5. Unconscious Need to Fail. These companies try too hard to keep on winning. With victory as the only possible end game, all others must be defeated along the way. In reality, these people and, thus, their organizations, possess low self-esteem. Inevitably, they get beaten at their own games.
  6. Feeling of Entitlement. Walls and filters have been established which insulate top management from criticism (which is viewed as harming the chain of armor, rather than as potentially constructive). Anger stimulates many of their decisions. The feeling is that they deserve it all. Power satisfies appetites. These executives have poor human relations skills. They believe that excesses are always justified.
  7. Collective Dumbness. Such organizations have totally reshaped reality to their own viewpoints. The emperor really has no clothes, but everyone overlooks the obvious and avoids addressing it forthrightly. The organization dumbs down the overall intelligence level, so that people are in the dark and cannot readily make judgment calls. Cults of expertise function in vacuums within the company. Neurotic departmental units do not interface often with others. Employees are slaves of the system. There exists total justification for what is done and an ostrich effect toward calls for accountability.

About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.

Hank Moore

The Big Picture of Business – What Business Must Learn: Putting the economic downtown and recent events into perspective

The public does not react to any crisis until it is big enough and far-reaching to affect their daily lives. When business news gets on Page 1 of every day’s newspaper and every evening TV newscast, then the public notices and cares.

Business and organizational stories do not hit the public consciousness until there is a crisis. People decry the scandals and rest assured that such doings are not happening in their companies. Often, it is assumed that some protector or regulator will adequately address the issues. When the outcomes are of high magnitude, the outcry becomes larger. As people see the events as having a direct effect on the economy and their livelihood, they take notice and follow the stories more thoroughly.

The recent years succeeded in exploding a great many myths and presumptions about business. Formerly sainted icons went down in disgrace. Tactics deemed as ‘standard operating procedure’ for some companies were exposed and ridiculed by others. A few whistle blowers were lauded in the efforts, though others were attacked as the perpetrators of the chaos shuffled aside.

One must ask many simple and pertinent questions about a seemingly unsettling business future:

  • How did business get this far?
  • Why did the scandals and corporate disrepute occur?
  • What are the implications of Enron and other corporate scandals upon business?
  • Where are the next trends and opportunities?
  • How do we cope in the new environment?
  • What beacons of opportunity do we look for?
  • What will it now take to succeed and fail?
  • How do we react to and benefit from changes, rather than become victims of them?
  • Do we still take band-aid approaches (such as buying enterprise software)? Or, do we now see the need and importance to embrace longer-term approaches?
  • How far will we go to excel?
  • How creative must we become in the New Order of Business?
  • How far-reaching are business practices?
  • How much further should we extend ethics?
  • Where will the pendulum swing next?

Business in the 21st Century is real and dangerous. People suddenly feel lost. They are no longer in a safe port. They don’t know how to cope. Yesterday’s strategies simply do not work anymore.

Many of the old assumptions which business previously held have proven untrue and unworkable. We really must examine what we assumed before and what we can assume now. Business is at a juncture and needs new focus.

The victims’ fear and the public’s apathy enabled the crises to occur. This is the perfect climate for unethical people to have gotten away with murder. Sadly, many of the perpetrators did not see lapses in ethics… it was legal and just business to them.

It takes tragedies occurring in order for the system to stand back, take focus and fix what is wrong. It’s a whole new world. This chapter talks candidly about recent trends. Other chapters will discuss the need for and exciting opportunities for adaptability. By maintaining an awareness of further changing environments, there are further opportunities to be successful, ethical and move ahead of the competition.

The term CEO has recently been held in disfavor. We decry CEOs for the same reasons that we formerly sainted and canonized them. People are envious of the power, status and wealth of company heads. Yet, most CEOs were never trained on how to be CEOs, with all the responsibility, people skills, leadership and ethical management that must go along with the job.

The game of duping and fooling shareholders, customers and employees has ended… as well it should. We cannot ignore or compartmentalize board members, stockholders, employees and stakeholders anymore. We cannot fool them. We must listen to them and respect them.

Every organization in the world must reexamine how we will keep score in the New Order of Business. Continuing to justify blind spots will blur accountability. Having maintained too much of a myopic focus is what got so many companies in trouble already.

Thinking that we dodged the bullet while others got caught is a mentality that will still bring many other companies down in value and defeat. The scandals are not all aired in public yet. Up to 25% of our businesses are in peril and must take corrective actions, lest they be brought down in disgrace too.

Most of the downfalls, stumbles, false starts and incorrect handling of situations stemmed from business’ lack of focus on the macro… and over-emphasis upon certain micros, to the exclusion of other dynamics.

This chapter puts business events of the last two years into perspective… covering a broader scope of subjects than has been reported and discussed. This book states the case for more of a macro-focused approach to management. An analysis of business encompasses much more than accounting fraud and stated values of stocks.

What we do with fear and uncertainty determines who we are. It is time for fresh thinking, heightened ethical behavior and a shift to a macro focus. Rules and responsibilities within each sector of companies are changing. Each of us must ask what we can contribute and our roles in adapting to the crises.

High Costs, Learning Curves.

Corporate scandals of each of the last 10 years cost the U.S. economy more than $200 billion in lost investment savings, jobs, pension losses and tax revenue. The scandals resulted in one million job cuts. 401(k) plans dropped $13 billion as a result of these events alone. Recent corporate scandals have cost good businesses in reputation, credibility and support, by virtue of being lumped with some bad apples. Thus, consumer confidence dipped, and it will take years to fortify the trust in business.

Losses from 401(k) investment accounts alone totaled $175 billion, making them worth 30% less than they were two years ago. Public pension funds nationwide lost at least $6.4 billion as the stock market plummeted, amid a crisis of investor confidence. More than a million workers lost their jobs at the affected companies, while company executives cashed out billions of dollars of their stock.

This demonstrates the impact of accounting failures at high-profile companies. There has been $13 billion in lost federal tax revenue from companies with questionable accounting practices under-reporting their profits to the IRS. Twenty-three companies under investigation have laid off 162,000 workers.

We have been subjected to the second longest bear market in history, the longest being that of the Great Depression. The stock market is down 25%. We are now $7 trillion poorer than we used to be, thanks to Wall Street over-valuing of companies. Sweeping reforms by Wall Street and the Securities & Exchange Commission (SEC) are needed, forcing firms to separate their investment banking business from their stock advisory business.

There are 25 million small businesses in America… all affected in some way by corporate scandals. The healthcare industry is the primary business sector that is most expanding right now.

Steroid scandals periodically rock the sports world. The public decries the use of steroids but secretly supports the results that they yield (athletic records being set). The steroids usage norm in some team sports has the effect of institutionalizing breaking the rules, even though the health of some is seriously endangered. Temptations to break the rules for the hope of future financial gain are at the heart of corporate arrogance, greed, deceptions and double-dealings, as well as in the minds of some sports promoters.

Operational Statistics.

One out of every 12 businesses fails. 90% of all e-businesses will fail. 99% of all internet websites do not make a profit.

Retailers make 70% of their earnings in the fourth quarter of each year. That is why holiday sales are vital to their bottom line and, thus, the economy.

There have been 53 peacekeeping missions from 1948-2000, 40 of those from 1988-2000. Spending on peacekeeping peaked in 1994 at $3.2 billion, and is estimated at $2.2 billion for 2000. Successful peacekeeping missions include El Salvador, Namibia, and East Timor. Less successful include Somalia and Bosnia where there was less local support for their presence. A major report to the United Nations Millennium Summit calls for changes in the way in which peacekeeping operations are organized and financed. It also recommends they do not remain neutral when one side initiates aggression.

Airport screeners fail to detect fake bombs and guns 24 percent of the time.

52% of all high school students know someone who brought a weapon to school. 61% of those students did nothing about it. 52% of all high school students know someone who made a weapon-oriented threat. 56% of those students did nothing about it.

The Pentagon says that it cannot account for 25% of what it spends.

Shoplifting costs American business $10 billion per year.

Airlines say that delays caused by air traffic controllers cost them a combined $4 billion per year. For every 1-cent reduction in the cost of jet fuel, the airlines save $170 million.

Cargo theft costs the U.S. economy $6 billion per year. The victimized companies pass their recoveries from losses along to the customers. For example, $125 of the cost of each new personal computer goes to reimburse companies for previous thefts.

Consumers are cheated at gas pumps of self-serve marts each year in excess of $1 million because of faulty computer chips.

On any given day in the United States, over 100 convenience stores are robbed. Every day in the U.S., people steal $20,000 from coin-operated machines.

The average bank teller loses about $250 every year.

One third of our nation’s Gross National Product is spent in cleaning up mistakes. Yet, only 5.1% is spent on education, which is the key to avoiding mistakes on the front end.

Fires cost more than $150 billion per year in damage. Most fires are caused by carelessness: overloading electrical sockets, smoking in bed, failure to turn off kitchen burners, malfunctions with space heaters, allowing trash to accumulate, failure to repair electrical wiring and electrical breaker explosions. Electricity-related incidents account for half of all fires.

Learning the Lessons and Moving Forward.

The U.S. Congress enacted the Sarbanes-Oxley Act, corporate reform legislation, in 2002. The bill delineated new regulations, in response to the accounting scandals at WorldCom, Enron, Tyco and other large companies which left thousands of employees without retirement savings and investors with worthless stock shares.

The bill was intended to prevent malfeasance, restore investor confidence and crack down on corporate cheaters. It set up new regulations for corporate auditing practices and creates strict penalties for executives who hide debt in accounting tricks. It was the largest reform since changes were made to halt the Depression-era slide into bankruptcy.

Sarbanes-Oxley instituted extensive corporate governance reforms, including standards for advisors representing public companies and their nonpublic subsidiaries. Under it, business leaders are expected to embrace both the letter and spirit of the bill and other existing laws, designed to protect investors, employees and other stakeholders.

Unfortunately, the material covered by Sarbanes-Oxley represents only two percent of Corporate Responsibility and Ethics. As one who has conducted ethics audits and put programs into practice, I know that the reform did not go far enough. Thus, the economic downtown of the past two years. A more holistic approach to ethics would have averted many of the crises.

In moving forward, one must review those junctures where leaders and their companies recognize when a business is in trouble. These are the high costs of neglect, non-actions and wrong actions, per categories on The Business TreeTM:

  1. Product, Core Business. The product’s former innovation and dominance has somehow missed the mark in today’s business climate. The company does not have the marketplace demand that it once had. Others have streamlined their concepts, with greater success. Something newer has edged your company right out of first place.
  2. Processes, Running the Company. Operations have become static, predictable and inefficient. Too much band-aid surgery has been applied, but the bleeding has still not been stopped. Other symptoms of trouble have continued to appear… often and without warning.
  3. Financial Position. Dips in the cash flow have produced knee-jerk reactions to making changes. Cost cutting and downsizing were seemingly ready answers, though they took tolls on the rest of the company. The overt focus on profit and bean counter mentality has crippled the organizational effectiveness.
  4. Employee Morale and Output. Those who produce the product-service and assure its quality, consistency and deliverability have not been given sufficient training, empowerment and recognition. They have not really been in the decision making and leadership processes, as they should have been. Team members still have to fight the system and each other to get their voices heard, rather than function as a team.
  5. Customer Service. Customers come and go… at great costs that are not tallied, noticed or heeded. After the percentages drop dramatically, management asks “What happened?” Each link in the chain hasn’t yet committed toward the building of long-term customer relationships. Thus, marketplace standing wavers.
  6. Company Management. There was no definable style in place, backed by Vision, strategies, corporate sensitivities, goals and beliefs. Whims, egos and momentary needs most often guided company direction. Young and mid-executives never were adequately groomed for lasting leadership.
  7. Corporate Standing. Things have happened for inexplicable reasons. Company vision never existed or ceased to spread. The organization is on a downslide… standing still and doing things as they always were done constitutes moving backward.

These situations are day-to-day realities for troubled companies. Yes, they brought many of the troubles upon themselves. Yes, they compounded problems by failing to take swift actions. And, yes, they further magnify the costs of “band-aid surgery” by failing to address the root causes of problems.

Each year, one-third of the U.S. Gross National Product goes toward cleaning up problems, damages and otherwise high costs of failing to take proper action. On the average, it costs six times the investment of preventive strategies to correct business problems). This concept was addressed in another of my books, The High Cost of Doing NothingTM.

There are seven costly categories of doing nothing, doing far too little or doing the wrong things in business:

  1. Waste, spoilage, poor controls, lack of employee motivation.
  2. Rework, product recalls, make-good for inferior work, excess overhead.
  3. Poor controls on quality, under-capitalization, under-utilization of resources.
  4. Damage control, crisis management mode.
  5. Recovery, restoration, repairing wrong actions, turnover, damaged company reputation.
  6. Retooling, restarting, inertia, anti-change philosophy, expenses caused by quick fixes.
  7. Opportunity costs, diversifying beyond company expertise, lack of an articulated vision.

About the Author

Hank MooreHank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.