Measuring Up

Choosing to be great, not big

My business partner gave me a very interesting and unique book the other day called “Small Giants.”The author‘s premise and focus is that growth doesn’t always need to be the most important metric for success. Instead, through telling the story of 14 very special, privately held companies, he shows that success can be viewed through many different lenses in a variety of unique ways.

In fact, each of these 14 companies has consciously decided not to grow their business. Yes, they are all profitable. But, each owner(s) finds gratification in a host of different ways, including: giving back more to the community, having the best product/service available in a smaller business pond, providing the best work environment possible for employees and even innovating to always be better for customers without growing so large that this might not be possible.

One of the fascinating, heart-felt stories focuses on the founder and CEO (Fritz Maytag) of Anchor Brewing, the first micro brewery based in San Francisco. This home grown entrepreneur had started the company making the highest quality beer in the mid 1960s. At that time, micro brewed beer wasn’t known and Anchor had limited demand of about 600 barrels from local restaurants and liquor stores. But, by 1973 demand started to soar because of the products high quality appeal. Anchor was producing 13,000 barrels. Yet, success was a mixed blessing. For the company to keep up with demand, it had to greatly expand by taking on significantly more overhead (new brewery plants), or outsource the actual brewing of the product. The thought of outsourcing his secret formula and taking a chance that quality and taste would be sacrificed created a lot of sleepless nights for Fritz.

Instead, he made the decision not to outsource or expand, but to ration the amount of beer distributed to each customer. Of course, that didn’t make these customers very happy. The loved the beer and instead of receiving more, they now had to deal with half the supply typically sent to them. As time moved on and Fritz saw that demand continued into the 1980s he considered taking the company through an IPO to raise the money needed to grow. That would provide him with his own capital and the business would no doubt be considered a success.  In the end, he followed his heart and backed away from going this route because Fritz believed that growth wasn’t how he viewed success and he never wanted to jeopardize that local, high quality product that created such high demand in the first place. Fritz said, “It occurred to me that you could have a small, prestigious, profitable business, and it would be all right. Like a restaurant. You can stay as you are and have a business that’s rewarding and a source of great pride.”

Anchor’s story is a great one. It made me take a look at Peppercom and ponder whether this philosophy (become great, not big) could work within the public relations and marketing services world. Could it be right for us? There is no doubt that as firms become larger, they tend to lose that higher value touch that clients want and expect. Many also find that it’s much harder for them to maintain that “special sauce” (i.e. innovation, quality, results driven) that made them great in the first place (read the chapter on CitiStorage for more on this topic) as their revenues double and triple in size. These reasons alone should make any agency CEO carefully ponder the risks versus rewards of exponential growth.

In Peppercom’s case, we’ve never been focused on growth for growth’s sake. Our mission has always been to innovate by creating new offerings and new ideas that can help solve our clients’ challenges or take advantage of real opportunities. We believe that if we’re successful in accomplishing that, growth will naturally come with it. That said, I doubt that we could ever become a company that isn’t interested in growth.

Why? Well, employees want to be part of an organization that is dynamic, offering new opportunities for them to grow. And, growth is critical because the reality of our industry is that clients tend to come and go. So, new business efforts need to continually be in motion to replace and add to existing revenues. Yet, there needs to be a greater good beyond becoming a larger entity. Making the workplace environment a real place to learn and excel, giving back to the community and those who need it and trying to create a culture where people do enjoy coming to work are all critical goals at Peppercom.

I highly recommend “Small Giants.” It might not change your thoughts about whether to grow or not. But, it certainly will provide life and business lessons that can make you better.

 

Becoming akin with my Kindle

Last holiday season, my wife bought me Amazon’s highly acclaimed electronic book reader known as the Kindle.

I was highly skeptical at first about this new technology that was supposed to dramatically make my life easier. Ever since I graduated college, I’ve had a passion for reading almost anything. (Funny that it took so long, eh?) But, most of all, I love jumping head first into a big fat book. Makes no difference to me whether it is a historical novel, biography or even a well written and fast moving work of fiction. So, I wondered how an 8 ½ x 11 inch cold plastic tablet could ever take the joy of turning real paper pages in a hard-covered book. Or, having the ability to look back (or even forward) a few chapters to make sure that I truly understood the facts that so nicely set a particular story up.

The truth is that it can’t completely replace those small, yet important bits of fulfillment that avid book readers experience. But, what I have found is something far more gratifying in completely different ways. Of course, it took some flexibility on my part (mostly in my mind) to psychologically become at peace and in tune with the reality that the Kindle should not be viewed as a book replacement, but  instead as a true reading device which can make my life more productive, efficient and yes… even fun.

You see, I use my Kindle as a tool to do something I’ve never really been able to experience before. Much like the way I watch television (which by the way, my wife despises,) the Kindle allows me to read any one of three to four books, daily newspapers (not just a few stories, but the entire paper,) blogs and key magazines interchangeably. So, when I’m on a three hour plane ride, my typical Kindle experience includes reading a few chapters of all of these completely different books, while going back and forth between today’s New York Times, Wall Street Journal, Business Week and a couple of blogs. Since, my wireless function automatically downloads the latest news that I’ve signed up for, it all automatically comes with me on those trips in the sky.

What’s better about it? Well, that’s easy. Think about how bulky my briefcase would be if I had to carry all those books and periodicals. I’m so glad to be rid of that. And, the interesting reality for me is that although I might have brought that many things to read on my past trips, I typically never opened more than one newspaper and one book because it was simply too laborious a task to keep switching back and forth. Here’s where the magic of the Kindle comes to play. This small tablet has it all and allows the Kindle to snuggly fit right into my briefcase

So, now the Kindle 2 has been launched by Jeff Bezos. That’s good. Because there are a few bad features on the original that needed to be fixed. I’d say the most annoying one is that buttons that turn each page go along the entire right hand side of the device (where you actually hold on to the Kindle to read, just like one would do with a book.) This, unfortunately, has led to me accidently turning many pages without actually wanting to. Not that big a deal, (I just turn right back.) But, it’s certainly a function that needed to be fixed. And, from what I hear, it the second incarnation of Kindle does just that and much more.

For those who are wondering whether it makes sense to become a Kindle user, I would say yes.  Just don’t think about it as a book replacement. There will always be times when you want to bring one special book on vacation, or just lay down on a lazy Sunday afternoon to turn many real pages of your favorite novel. But, what one book can’t do is provide an easy to use ability to read many different things as often as you’d like. Some might think I have ADD. Others would just agree with me that it’s fun to be able to consume disparate pieces of knowledge/information constantly. Regardless, the Kindle leverages the newest technologies to make life better. And, that’s just fine for me.

How Much Does $18 Billion Really Cost

Last week’s news that Wall Street parceled out about $18 billion in bonuses more than incensed Americans and their legislators.

There’s no doubt that from a pure public relations standpoint, this collective hand out was really stupid. Do these CEOs have amnesia? It wasn’t 60 days ago when a civil war like- battle erupted pinning “Main Street against Wall Street” as the Treasury Department (lead by then secretary Hank Paulson) pleaded for Congress to write a $700 billion dollar check to bail out many failing financial institutions. To offer up bonuses to many in the rank and file so soon after this near death disaster, makes little sense and has certainly killed any lingering positive (or even neutral) perceptions about Wall Street that could have existed among the American people. No doubt, it will take a long time for trust to be rebuilt and any forthcoming bailout money will be scrutinized by Congress like never before.

But, putting aside this public relations nightmare (for a second), did Wall Street firms actually do anything wrong by letting many take home end of the year bonuses? I’d say that there is no cumulative black and white answer, just a lot of shades of gray.

Let’s talk about the clear negatives first.

-    Bankruptcy versus Bailout – The most iron clad point against Wall Street (in my mind) is that firms like Citi Group, AIG, Wachovia, Merrill Lynch and many other smaller ones were one step removed from going under. The government had to step in to either directly provide financing or help more solvent banks buy up these terminal companies so that they wouldn’t fail. If these companies had gone bankrupt, I can assure you that any bonus pool would have been close to zero. So basically, many of them financed the bonus compensation for their employees with government…uh…make that tax payer money instead of using the full sum to become “healthier.”

That is just deceptive and wrong. The firms/banks that fall into this category should be punished now.

-    Public companies – how can they justify? – The other argument I’d like to make is that many of these bailed out firms are public entities. So, while their stocks have lost 75-90 percent (in most cases), senior management still found a way to reward many through undeserved bonuses. Public companies serve shareholders first (not employees). Employees of public companies share the risk when their organization has a bad (or in this case God awful) year. Even if some departments within a particular area of a bank do well, that really should have little bearing on how compensation is doled out when the organization has made such fatal business decisions, wiping away untold amounts of shareholder equity.

Now, here’s the gray:

-    Many companies aren’t included in this bad lot and shouldn’t be – My bet is that there are a lot of mid-sized and smaller financial services players who didn’t receive bail out money and whose organizations weren’t close to failing (like those mentioned above). I actually know a few of them. Of course, propaganda isn’t pretty and all of Wall Street has been demonized through the president’s well calculated comments last week. If the average Wall Street bonus is about $110,000,  it’s important to keep in mind that the lesser known (and less publicized) firms handed out smaller sums of money that probably fell within acceptable ranges based on the fact that these organizations deserved them.

-    Bonuses are actually part of overall compensation – This is true. In fact, there are a lot of investment bankers who might make approximately $200,000 salary and then another $5 million (or more) in bonus money every year. Now, cry me a river for those bankers…because no one really cares. And again, if their banks are among those that made terrible business decisions and took tax payer money to survive, then they should just be glad that they still even have jobs moving forward.

Where I see gray are those smaller bonuses (like below six figures) handed out to lower rank and file employees from the healthier firms who depend on that money to live very average lives. Without them, their pay may be too low to adequately pay monthly bills while living in or around New York City.

In the end, my brief analysis doesn’t really matter because public perception of Wall Street is as negative as I’ve ever seen it. Ironically, most firms don’t hand out bonuses until February or March (kind of makes you wonder why so many banks snuck them in early this year, eh?). State and federal politicians, prosecutors, the media and consumers-at-large are downright angry. And, many smell blood in the air. I’d say that this collective $18 billion bonus pool is but a fraction of the real cost that this industry will be reeling from for years to come.