What if your company sprung a huge leak?

Not in the oil business?  The leak I am talking about is not from the earths crust.  I am talking about your sensitive data, intellectual property and customer information.

Customer data, intellectual property and trade secrets all hide behind your tenuous firewall maintained by very bright people who are expected to multitask as security experts, data miners, programmers and general IT support for the enterprise.

These same bright people are no doubt monitoring the network and providing regular reports to management regarding the security of the network, the number of attacks, the breeches, viruses, and worms that have penetrated the firewall.  They are probably even expected to provide a disaster recovery plan outlining exactly what to do if things go wrong. This is Good.

As the saying goes:

Prior Proper Planning Prevents Poor Performance

But we’re not just talking about performance here are we?  We are talking about survival.  Unlike the slow migration of oil to the continental shores, if the data drillers on the Internet penetrate your firewall, your leak will hit foreign shores at the speed of light.

Just so you know how fast that is, at the speed of light your unrecoverable data would circle the globe 7 times in one second.

BP Oil had plans too.   Unfortunately, their plans were not nearly so robust to deal with disaster that befell them.

How robust are your plans?

So what are the lessons learned?

• Every firewall is penetrable, even the earths’ crust 5 miles deep in the ocean
• The more valuable resource, the greater the damage
• Unlike, the relatively small number of people or companies are capable of getting at the deep ocean oil reserves, there are
• thousands of very qualified data hackers just looking for the next deep well of data.
• There is no way to get the oil or your valuable data back into the hole from which it leaked
• All of BP’s vast resources have been insufficient to stop the leak

If you are relying entirely on your internal IT resources to plan and manage security, you could find your company woefully unprepared to prevent or respond to a significant breech of your firewall. But there is good news, you don’t have to go it alone.

Don’t go it alone

You are probably aware of the swarms of IT people who are out of work that suddenly hung up a shingle declaring themselves as the answer to all your network security issues.  Many of them are probably quite good at what they do, but when you think about it, they have less resources than you do.

If you are on an extreme budget, you may want to thoroughly review some of these individuals credentials and hire them so your IT staff has a little back up.

On the other hand, if your data is really valuable or if you don’t think you could afford the legal issues and law suits associated with a loss of private customer data or credit card information, you will want to research and select a top notch Managed Service Provider (MSP) that specializes in network security.  A good MSP will have staff resources in the hundreds or thousands with all the latest software and hardware dedicated to protecting your network 24/7/365.

Remember, your IT staff, as efficient as they are,  is but one department fending off thousands of daily attacks.  They too, are probably using  excellent hardware and software to assist them, but unless you stop multitasking them and assign them exclusively to network security, your network is a golden invitation to the data drillers looking for a new well.

Remember the lessons learned from the terrible Gulf disaster.  Your networks are vulnerable, and all the disaster recovery plans in the world pale in comparison to the potential damage that lurks beyond your firewall.

The shores of the Gulf are a mess and the leak has yet to be plugged.  Don’t let your most valuable resource gush out of your network and flood the shores of the Internet.  Take real preventative action, expand your team of engineers, experts and IT professionals so you can rest at night knowing you actually have a what it takes to stop any leak.

David S Hayden is a freelance writer with degrees in Business, Computer Information Systems and Technology Management.

When business experience a slow down, the employees slow down. Not necessarily on purpose, it just happens. For the employee as things get slow, the remaining work fills the vacuum. There is something very psychologically uncomfortable about seeing work come to an end and I think we all experience some time distortion. What once was easy to accomplish in an hour can easily fill 2, 3, 4 or more hours and we convince ourselves how busy we are.

In a production company, it is often said, there is cost, delivery and quality . . . Pick two. In other words, you can have it fast and cheap but quality will suffer. Or you can have quality and delivery, but it is going to cost.

Fulfillment and delivery is a cornerstone of a production environment. So when employees slow down for fear of running out of work, delivery suffers and customer satisfaction falls. This can be a death nail for any company that has competitors.

To Survive in a Slow Economy, You MUST Deliver Better than Expected Quality, On-time
With the additional pressure on delivery, how do you keep employees focused on getting the job done quickly? Here are some things that have seen work in the past.

1. Focus on Productivity not Hours
   In one shop where I was the CNC Programmer / Dept Supervisor, the owner held brief meetings every day to keep us informed. In essence he said, “regardless of when work runs out, you will be paid until the end of the week. If however you are not productive, you will be laid off.” Our job was to get quality product out the door as on or before schedule. If we ran out of work on Wednesday, we would still be paid through Friday. And Ed always found us something to do. Clean the machines, repaint the safety lines on the floor or whatever.Interestingly, somehow work always trickled in and I think it was due in large part to our ability to deliver on time.
    
2. It is NOT Busy Work if it is Important
   Too often, with good intentions, managers and supervisors assign busy work to employees with out making the work important. People need to feel that their work is important and contributing. When just handed a broom, they are often offended, see it as stupid, do the task with low quality, and go home frustrated.Find ways to communicate how important the busy work is. Cleaning, painting, etc make the work environment more enjoyable, and more safe. Ideally, if you see a slow down coming in the future, start people on the alternate activities while still busy, stress the importance of it. Then when the slow down hits, put more people on tasks all the while “thanking” the slow down as an opportunity to complete these important tasks.
    
3. Don’t Let Quality Suffer
   One bad side effect of a slow down is quality often suffers, when by all accounts it should improve. Here is an example from my own experience.I worked my way through my first few years of college working at pizza places. And, if you have ever worked in a restaurant, you know you have peak and slow periods almost every day. In my experience as an employee and as a customer, food and service quality typically suffer during the slow periods.Well one very slow night at the Western Drive In in Denver, someone came in and ordered an 18″ anchovy pizza. I hopped right on it and then got distracted talking to my coworkers who were standing around. I burned the Pizza and had to remake it. Then I made the same stupid mistake and burned the second pizza. Finally the 3rd pizza was successfully prepared, but it was so late we gave it to the customer for free and the delivery boy, my best friend, did not receive a tip.

   That was my first experience of the high cost of slow business.

4. Invest in Training for the People you Hope to Retain
   Don’t get me wrong. When things are slow, cash flow and profitibility suffer. So sending star employees around the country to train may be out of reach. But the best employees are typically the ones with the greatest understanding of the entire operations. Here are some things you can do that give employees better overall understanding of your company, gives them some great training and gives them a real sense of value:
   • Bring them into the office an train them on the front office operations, filing, billing, accounting, etc.
   • Train them in the basic business that are important to your success. Teach them about Cash Flow, Break Even, Contribution Margins, Operating cost, etc.
   • Bring them into the office and involve them in a SWOT analysis. Find out how they perceive the company, you will learn a lot, if you are open minded.
   • Take employees on sales calls, show them how hard it is to get new business and help them realize the importance of cost, delivery, and quality.
   • Give them responsibility and accountability for their “busy work’ tasks. For example, If you bring customers through, introduce them to the employee and say “This is Joe he is responsible for” . . . shop cleanliness, painting or whatever.
      
5. Remember, it is an end result you are paying for, not hours.
   This is hard for a lot of business owners and managers, but you are not buying hours. You want X amount of quality widgets, a Y response to marketing efforts, audit proof bookkeeping or whatever. Why get hung up on the perceived hourly wage if you get the results you need at a fair price? If your people improve, get more efficient and get the tasks done faster and better, don’t punish them. Encourage them for their great work and help them find other interesting things to do in the company that utilize their talents.

Even Though Profits May Be Small or Non-Existent
Depending on the nature of your operations you must keep in mind contribution margin. If you have a large capital expense or fixed cost, you have to do everything you can to cover that cost. I have seen companies turn down jobs because they could not make a profit or the price does not cover their “burden rate”. That is understandable, but consider this.

Suppose you have fixed costs of $10,000 per month. Doesn’t it make sense to accept a job that covers variable cost plus some % of gross margin? Every dollar earned in excess of variable expense contributes towards paying fixed costs. That can mean keeping key employees productive and the doors open.

Economic slowdowns are painful enough with out losing control of motivation, production and quality. And slowdown happen, smart managers anticipate an plan for them and turn them into opportunities for business improvement. When business is slow for an industry, competition gets fierce, your survival will depend upon keeping customers happy with outstanding delivery, exceptional quality and competitive pricing . . .customers will demand all three, not just two.

We even begin to believe in our own business acumen. So we expand, take unusual risks, borrow money for expansion, relax our credit terms and so on. Whatever it takes to grow, we do because, after all it’s grow or die. . . right?

Then there is what I call the Hamlet effect. To quote Hamlet “When sorrows come, they come not single spies, But in battalions:” – William Shakespere, Hamlet Prince of Denmark (Claudius, King of Denmark at IV, V)

Well now careless optimism has come home to roost. What was once a stroke of marketing genius may be starting to look more like reckless gambling. And rest assured, the carpet baggers have shined their shoes, put on a new face and now stand outside the door offering their help.

Since the turn in the economy, has your phone been ringing off the wall or your email filled up with “free advice” to help you succeed? At every turn is there someone telling you that if only you did better SEO, made a video, had a website make over, bought this marketing plan, or whatever, you will will over your competition?

Stop. Take a breath, slow down and think for a minute. If you had the money, and time, to take advantage of everyone of these offers, would the added success even cover the cost of the services? Somethings obviously will improve your business more than others and some are probably just a waste of money.

No amount of marketing, SEO or website improvements are going to save a company that is not running on sound business principles. We had a joke at one company that seemed to engage in endless price wars. The joke was; “who cares if we sell at a loss, we will make it up on volume.”

Here are some solid strategies that you must implement if you are going to survive:

1. Get your Cash Flow In Order. Bill Douglas, CEO of EssentiaLink, has a saying “Cash Flow is Oxygen” and boy truer words were never spoken. Bill’s careful and incessant attention to cash flow has helped EssentiaLink survive and grow.
    
2. You have to understand and adhere to basic financial principles. For example, a $1000 expense is far more than a $1000 burden on your company. If your margins are 10%, you have to boost sales by $10,000 just to recover the $1000 spent and who wants to just break even. Not to mention an extra $10,000 in additional sales also puts an extra burden on cash flow. And when that happens, the cost of money comes into play. Things can get very expensive.
    
3. Not all customers are worth keeping. Some customers just don’t quite fit into the niche of what you are offering. Maybe you can never quite keep them happy, or maybe they never embrace all that you can do for them. These customers can bring down your business and image and they often consume far more of your resources than they are worth. Do some research, find a company that can serve them better and bring the two together. Your reputation will rise as a result.
    
4. Stop stepping over dollars to save dimes. In light of point 2 this might seem counter intuitive, but it’s not. If you are the main mover and shaker in your company and you are wasting time fiddling with IT, or spending 15 minutes to save a few bucks on a box of paper, the little you save can never make up for your lost time. The same is true if you are paying for a purchasing staff. If they are wasting time pricing pencils when they should be tracking down better prices on raw materials, you are losing money.
    
5. Technology is a tool to use, not the object of the game. If your technology is getting the job done and not incurring excessive maintenance cost, let it ride. remember, every dollar you spend on technology will cost you $1 / margin rate.
    
6. Focus on your core competencies. If you are an Engineering or Legal firm for example, your efforts should be to increase billable hours. So if billable people are working on IT problems, marketing, buying office supplies, consider outsourcing the non-core tasks and put people back to work on core projects. Having them do busy work while waiting for business to come in is draining your cash flow and hurting your business. Notably, sometimes this leads to a tough decision.
    
7. Get close to your customers. Before you spend a fortune on SEO or website overhauls, make sure you are speaking to your customer’s current needs. The reason they signed up a year ago, may not be the reason they are staying with you or would sign up with you today. Marketing is like fishing, if you use the wrong bait, you will get the wrong fish or nothing at all.
    
8. A million hits means nothing if you are not converting. Wouldn’t 500 highly motiveted buyers be better than 1,000,000 drive bys? Focus on revenue per hit, not hits per day.
    
9. Running a business is like writing good documentation. You want exactly enough to cover the topic, and not a word more.
    
10. Document, document, document. If you do not document your processes and business, you can suffer from the effects of vanishing technology. What do you do when your star worker leaves for another opportunity? You have a great sales proces that works, but does it stop working when you go on vacation? Document everything, so you can remain successful even when good people leave or you go on vacation. Try selling a business for what it is worth if it is not documented.

At the end of the day, good busienss practices go a long way towards securing your survival. And yes, you must market and sell. But if your house is not in order, throwing a lot of money an time at marketing will do little to help you survive in the long run.

One of the most pressing and important issues you face as an independent service provider is how to price your services.

While the following will not tell you what to charge for your services, it will give you a number of things to consider. But, before we go into the nuts and bolts of calculating, let’s review some basic marketing principles.

First you have to think about how you want to position yourself in your market place.

• Do you want to be the low cost leader?
• Do you want to be the high-end expert?
• Are you introducing unique new services?
• Are jumping into a mature market full of established competitors?

Obviously, how you want to position yourself affects your message? It is very difficult to try to position yourself as the leading expert when you are trying to compete on price. Sadly, your chances of being perceived as the leading expert when you price your services too low are very slim. You may be thought of very good for the price, but you will never be perceived as the top dog.

Here are a couple of examples to drive home the power of perceived value.

Imagine your friend’s son or daughter is soon to be married and you are shopping for a $50-$75 wedding gift. You know the bride loves crystal. So as you are shopping you find a beautiful crystal bowl. So beautiful in fact, you are afraid you won’t be able to afford it. You almost walk away, but decide to flip the bowl over and see the price.

Tentatively as your allow your eyes to focus on the price tag, you see two things.
#1 it is a brand you do not recognize. And,
#2 the bowl is only $17.49

Instantly, fear sets in. You can’t possibly show up at the wedding with an $18 dollar gift, no matter how beautiful it is. So you put the bowl down and go in search of a more appropriate gift.

That my friends, is perceived value. The value you placed on the bowl is greatly diminished just because the price was low.

Here is another example. When EssentiaLink first started out, the message got confused. As we wowed our potential clients with the huge array of products we provide, the conversation always turned to price. Something in our presentation lead our prospective customers to think all of our products would be lower priced than the other guys.

It was not until we approached companies above the purchasing level and started speaking with C-Level managers that our message made sense. We were not selling low cost products, we were offering a simple procurement solution that typically lowered the TOTAL cost of procurement for non-strategic consumable supplies by 25% or more.

In both of these examples, the issue of price obfuscates true value.

Think about this with respect to the service you are offering. Are your prices high enough to establish value? Think of it this way, if your price is too low, it diminishes the perception of value, no matter how much you contribute.

Don’t think so?

Have you or someone you have known ever had to change jobs to finally earn a salary commensurate with their abilities and contribution?

A very common problem in companies is that when they hire someone at say $40k per year they always think of them as a $40k per year employee. Even if the employee takes advantage of all the company educational benefits and completes 2 degrees, they still see him/her as a $40k per year employee. Consequently, they only move them up the pay scale based on small annual % increases. So this highly educated and trained individual has no other choice but to seek financially rewarding employment elsewhere.

And the company that hires our hypothetical employee for $70K will always perceive him/her as being a $70k employee and so the cycle starts again.

Are you inclined to price your services low so you can get a foot in the door?

Think about it, will your services ever be valued for the benefit they provide?

Also, imagine a group of CEO’s are having social lunch. What do you think will capture their imagination more, the fact that one of them hired a functionary for a nominal fee or the fact that another just committed a bundle of money to an expert to come in and shake things up? If you are the high priced expert that gets results in that crowd, you are going to open far more doors than the perceived functionary.

So here are some things you must consider when pricing your services.

• What is your true cost of providing your services?
  Obviously you have the cost of travel, printing, office supplies, phone, Internet and so on but there are a lot of hidden costs that get over looked. For Example:
  • The cost of business licenses
  • 7.65% FICA and self employment tax
  • Your health insurance
  • Additional Car insurance to cover liability of using vehicle for business
  • Banking and Phone services are higher for businesses and many banks will not allow you to cash checks as DBA
  • The cost of incorporation and/or maintaining O & E insurance to limit exposure to liability.
• You need to charge for marketing time.
  As an employee everything is taken care of, but when self employed you need to plan to spend at least 25% of your time on marketing efforts. Even if you have the perfect gig, it is going to end and if you do not maintain marketing efforts, you may have extended periods of $0 income.
• You deserve to have benefits too.
  As an employee you probably had a number of benefits that comprised your compensation package. For Example:
  • 7-10 Paid holidays
  • 7-28 Paid vacation days
  • 0-14 Paid days of medical or personal leave
  • Continuation education benefits

  Benefits vary greatly from company to company, but regardless of the level of benefit you are used to, there is an associated cost that must be taken into consideration.

• Do you have children?
  Typically, unless you have found a way to make the 4-Hour Work Week work for you, your home business will place more demands on your time than the old 9-5 did. With that in mind, you may expect an increase in child care costs.

Ok, let’s wrap this up with a nice little formula to give you a way to think about how to price your services:

Let’s define the terms of the equation.

• S = The desired salary or effective salary you need to replace.
• AC = The expected annual cost to be in business including licenses, phone, banking, insurances etc.
• B1 = The annual cost of your health Insurance benefits
• B2 = The annualized cost of other benefits you want to replace (i.e. $2,000 / year for certification / continuing ed)
• OE = Other expenses such as child care you may need to take into consideration
• PTO = Paid Time Off hours (i.e. 8 hrs. per day for each paid day off you want to replace
• CHR = The calculated hourly rate you need to charge to net your desired salary (S)

The Formula
CHR = (S+AC+B1+B2+OE) / (2048 – PTO) * .75

An Example

• S= $100,000
• AC = $1,000
• B1 = $12,000
• B2 = $2,800
• OE = $900
• PTO = 160 (2 wks vacation, 5 holidays, 5 paid days off)

CHR = ($100,000 + $1,000 +$12,000 + $2,800 + $900) / (2,048 -160) * .75
CHR = ($116,700) / (1,888) * .75
CHR = $116,700) / (1,416)
CHR = $82.41

Notes and Conclusions

Given the above example, your would want to start by pricing your services at $82.41 per hour. But this is just a starting point. You also need to consider what the market will bear. That does not mean your are limited by current market prices. But if you are too high, you must build exceptional value into your offering. By the same token, if your prices are too low, you may need to raise them to the appropriate level to garner the respect and reputation you want.

Also not taken into consideration in the calculation is your current business tax structure. If you are an LLC, you have more deductions than you would have as a sole proprietorship. If you are a C type corporation and work the system properly you can deduct a lot more, but risk double taxation if the corporation makes a profit. These are all topics you should discuss with your Tax Adviser.

If your down time between jobs or time required for marketing efforts is greater than 25%, then adjust the formula from .75 to whatever number represents your situation.

Finally, the 2048 is based on a 40 hour work week. Chances are you will will be working a lot more than that. So you may want to adjust to rate up to reflect overtime. Or not. It is just something to keep in mind.

So, when you run the numbers, are you charging enough?

Keep in mind. Value is a balance of money and perceived benefit. Go back to step 1. What business are you in? There in lie the building blocks for establishing meaningful value.

Whether it is a novel written by Snoopy or real life occurance, unexpected things happen. The impact of the unexpected (read highly improbable) is the subject of a very interesting book titled The Black Swan, by Nassim Nicholas Taleb.

In a previous article I discussed how we use distortions, deletions and generalizations to make functional maps of the world. Black Swans are the events that don’t fit our neat little maps and throw us for a loop.

As entrepreneurs we plan for ups and downs, we insure for liability, we aim high; we monitor and adjust as reality imposes itself on our dream. Then, seemingly out of nowhere, the unexpected happens. It can be anything; an identity theft, car accident, our 5 year old sticking our laptop in the dishwasher.

Black Swans happen. Imagine being the CEO of a major record label or publishing house and your black swan is the Internet. Where once star making power was in the hands of the few, it is now in the hands of the individual. Anyone with access to a computer, microphone, or video camera can become a rising star in a niche market. There are fortunes to be made in niche markets.

This brings me to a second of three books I am reading concurrently. The Long Tail by Chris Anderson is an analysis of unexpected success. Anderson provides a compelling series of anecdotes outlining the disassembly of huge markets into wealth making niche markets.

Within the pages of these two books lies a formula for how to succeed in today’s economy. Sure the markets are unstable, unemployment is on the rise, and inflation may soon be out of control. But that is all a distraction.

Because we are no longer self-sufficient cave dwellers or hunter gatherers, we depend on others to survive. At the end of the day, people still need stuff, companies to provide the stuff, and services to support the commerce.

The beauty of black swans and long tails is that, when we open our minds to look beyond the distortions, deletions and generalizations we can see opportunity where none seemed to exist. The important thing about black swans is that, while improbable, they are not invisible. As I mentioned in the previous article, Ken Olsen of Digital Equipment Company, was not unaware of personal computers, he simply did not believe anyone would want one in their home. To Mr. Olsen, personal computing was a black swan. To Gates, Balmer, Wozniak, and Jobs, personal computing was an outstanding opportunity.

We are all familiar with the Pareto Principle or 80/20 rule. 80% of any given result comes from 20% of the effort. 80% of revenue comes from the top 20% best sellers. Brace yourself; the 80/20 paradigm has busted wide open. Consider this. A typical book store carries the top 100,000 books. Amazon.com by comparison, carries close to 4 Million books. About ¼ of Amazon’s sales are in the niche and fringe books that would never make into a typical book store.

Similarly, Wal-Mart carries 55,000 audio tracks in the form of CDs. Rhapsody, carries over 1.5 million tracks online and the number is constantly growing. Anderson points out that a whopping 40% of Rhapsody’s sales come from tracks that will never see the inside of a Wal-Mart.

Imagine being Kodak. Their black swan was the digital camera.

On the other hand, imagine being a paper manufacturer when the whole world was thinking computers would lead to a paperless society. Would you have folded up or beefed up production realizing that paper products would be consumed at a higher rate than ever?

The Internet gives us the tools to find, reach out to, and communicate with these “long tail” niche markets. And if we communicate effectively, there is substantial income to be made out on the fringe.

So how do we turn this understanding of black swans and long tails into strategies that improve our ability to function in this economy? Here are my thoughts on the subject.

• As the Aussies would say, think outside of the box. Open up your mind to think about fringe markets you hadn’t thought about before. Maybe one niche market won’t support your lifestyle, so how can you organize your business to efficiently support numerous niches that may ultimately provide income well beyond expectations.
    
• Redefine yourself or your company. Stop thinking about what you do and for whom you do it as the defining elements of your business. Take a very close look at the true and tangible benefits your customers enjoy by doing business with you. Ask yourself what markets have you avoided that in fact could benefit from your products or services.
    
• Put away the shotgun and pick up a rifle. Now is not the time to pursue broad markets with general appeal marketing. Pick a sub or vertical market, study them, find their pain points and market specifically to their issues.
    
• If your market is crumbling around you, understand why. Then realize there is some side effect of your market shrinking. Within that side effect may be additional opportunity.
       
  For example, EssentiaLink responded to the decline in demand of Office, IT and MRO supplies by beefing up Managed IT services. Realizing that, even though companies are cutting back, they still need IT security, email, secure backup and so on. Interestingly, as companies come on board with the IT services, they soon realize the benefits of streamlining their purchasing as well. The niche markets coexist nicely and enhance each other.
    
• Observe the biggest players in your market space. What are they missing? How does their large size keep them out of niche markets? Which niche markets in particular are not being served by the big players?
    
• Study who is playing in you niche? What are their limitations? Geographic? Expertise? Price Point? Reputation? Can you slide into a sub-niche and expand out?
       
• Survey your die hard, loyal customers. Find out specifically why they are loyal? Use that information to research other markets that may have similar needs that are not being met.
    
  Perhaps you sell products. Everyone sells products, so you know it is unlikely the products are the source of your customer loyalty. Whatever it is that is keeping your customers loyal is what you should be marketing, not the obvious service or product.
    
• To not fall victim to your own black swans, do a thorough SWOT analysis. Particularly pay attention to your Weaknesses and threats. But remember the black swan will come as an attack on your core strength. Ask yourself, “if I had to compete against our strength, how would I do it?” If you are too close to what you do to see weakness in your strengths. Go to a high school and work with a teacher to create a class project to find chinks in your armor. Chances are, high school students are more aware of the latest technology or paradigm shifts than you are.
    
  Put your best ideas on a blog and declare this is so good, no one can find flaws in this plan or service. Chances are, there will be plenty of people ready to tell you your flaws.

I don’t know what you will do to find success in this economy. I do know if you keep doing what you are doing, you are likely to find disappointment. I am reminded of my time back in Southwestern Pennsylvania. Even in the 90’s people were sitting on bar stools complaining about the decline in the steel industry and waiting for things to return to “normal” so they would be rehired. All the while what they really needed was to open their mind seek other opportunities.

I have been a lifelong student of self improvement. To me the singular most important concept is that quality of life is not a measure of what happens in life nearly so much as what we do about it. For the time being we are dodging black swans. What we do about it is in the long tail.

But have you ever heard of them? 

Did you even know they exist?

Three Key Brain Functions

Our brains do many things consciously and unconsciously.  With respect to day to day operations and guidance, our brains rely on three key functions:

1. Distortions
2. Deletions
3. Generalizations

The rest of this article will discuss each or these functions.   You will learn why they are important and how they influence your actions.  And you will learn how to use this understanding to improve your communication skills.

Deletions

Imagine you are late for work, fighting your way through traffic and rehearsing your presentation for the quarterly marketing meeting.   You probably don’t even notice a little bit of dust on the dashboard.  Your eyes see it; your brain notices it and quickly filters it out as being irrelevant.  That bit of dust simply is not important.

Depending on what is going on at any given point in our lives, our brain seeks relevance, and filters out that which is not.

Suppose, you are driving  the CEO to the airport . . . suddenly, that dust becomes relevant.

Our state of mind determines our perceptual filters.  Circumstances change our filters.  

We all have perceptual filters. 

Think about the last time you bought a new car, dress, or electronic gadget.  Didn’t you suddenly become aware of every car, dress or gadget that is similar to yours? 

If you really need a customer to sign a contract but are convinced they won’t, it is likely you’ll filter out buying signals and only hear the rejection.

For example, your prospect may ask questions about price but yours are high. 

• Do you immediately assume defeat? 
• Or, do you see the questions as a signal that they want you to build more value into your proposition?  

Effective communicators take responsibility for their filters.  Here is one way:

• Stop, relax and take a breath before assuming anything or responding.
• Ask yourself
  o What am I missing here?
  o Do I have all the facts?
  o What more do I need to know?
  o What if I am wrong?
  o What else could this mean?
  o Is this really important with respect to my larger goal?
• If you are missing key pieces of information, ask the other party more questions.
• Realize you may not have a complete picture and be open to new information.

Distortions

Our daily pressures and desires distort the way we perceive what is going on around us.  These distortions affect the way we respond.   Here is an early example from my childhood.

The last day of 6th grade I was walking with my girl friend and best friend Rich. 

As we were walking, I kicked a rock. 

Rich playfully shoved me exclaiming “you kicked my rock.” 

In my 13 year old insecure and distorted view of the world, Rich was making me look bad in front of my girl friend.   So, I did the only thing that made sense, I took a poke at him.  

Here is what my distortions kept me from seeing:

• My girl friend could have cared less. 
• Rich was just having fun.  
• Rich was an aspiring Golden Gloves boxer, I was a geek.

How do you think that distortion ended? 

Imagine a young boy flying backwards over the hood of a 1957 Ford Fairlane. 

Distortions can be a problem.

How many times has a customer told you “maybe, let me get back with you on that?”  And you waited.  You assumed “I think it is going to work out.” 

And you wait.  You make projections based on pure non-sense.  And you wait. 

How much time, money and opportunity is wasted when distortions lead down the wrong path?

We can’t avoid distortion.  When we take millions of bits of data from our senses, mix them with our fears, hopes and desires and sprinkle in massive amounts of deletion, things get distorted. 

Knowing our distorted map of the world is not reality gives us opportunities to improve our communication.  We can evaluate circumstances and decide which parts of the map are appropriate, need updated or changed and where crucial information is missing.

To develop more useful maps try the following:

• Realize you are responding to your interpretation of reality and interpretations may or may not be correct.
• Question the fundamental assumptions of the map.  For example:
  • Is this about me? 
  • How did I think this was going to work out?  
  • What did I miss or ignore that led me to think this would be different?
  • How was I predisposed to think about this before I started? 
    • Did I think this would go well?
    • Did expect to fail?
  • At the end of the day, does this really matter?
  • Where is my focus?  
    • On myself?  
    • On My Client? 
    • On the “big picture?”
    • On the minutia?
• Am I too close or too emotionally invested in this?  Why?  How does that affect my perspective?

Generalizations

When something happens we notice.  When something similar happens, we begin to “see” a pattern.  As this goes on we make generalizations about meaning, cause and effect. 

A door is a perfect example.  We generalize about how doors,  knobs and locks work.   This saves us time.  If we had to relearn the concept of doors every time we encountered one, we would still be living in caves, if we survived at all.

Generalizations can also be detrimental to our success.   Have you ever assumed “those people would never need my product?” 

Probably the most famous example of a business defeating assumption was made by Ken Olsen of Digital Equipment.   Mr. Olsen said, “There is no reason for any individual to have a computer in his home.”

Consider the following statements and ask yourself which one is true.

He loved his job.  He murdered everyone in his building.

He loved working at the post office.  He murdered everyone in the building.

If you are like most people, the second statement seems true.  Our preconceived notions and generalizations about “going postal” define our map.     Now step away from your map and you will see the serious flaw in logic.

The first sentence encompasses far more.  It could include any “he” in any occupation in any building. 

The second statement refers to a very small subset “he” working the post offices.

There are many more chances for the first statement to be true than the latter.  Our first blush however was naturally to generalize about the perceived stress of being a postal worker.

Here are some questions you can ask yourself to keep your generalizations in check:

• What were my assumptions before I ever got into this situation?
• What evidence is there to support my assumptions?  
• How does this situation differ from my preconceptions?
• How effective was I last time I was in this situation?
• Do I need a new strategy?
• How much did it have to delete or distort to make this “just like before?”

The key to effective communication is understanding the structure of communication.   What gets communicated is always a bi-product of the Deletions, Distortions and Generalizations.

Award winning entrepreneur, Bill Douglas helps his customers uncover high opportunity cost that typically get missed. He put it this way. “I see it every day.  C-Level managers get so focused on external drivers and cost cutting; they often overlook the high opportunity cost of a seemingly simple cost reduction.”

Mr. Douglas identified these very expensive cost cutting mistakes:

• Assigning routine computer/network maintenance tasks to professionals that should be working on billable projects.
• Overstaffing of highly paid IT employees for general maintenance and security tasks that their competitors have learned to outsource at reduced cost.
• Tying up working capital in computer hardware and software purchases when they could leverage the assets of a managed services provider and have scalable hardware and software to meet current demand.
• Directing highly paid purchasing staff to waste time trying to save a few bucks on non-strategic consumable items when they should be putting all their energy into reducing the cost of production supplies.

Bill Douglas is the founder and CEO of EssentiaLink and specializes in delivering managed IT and procurement BPO services to Small and Medium Businesses.  EssentiaLink has earned 13 growth awards for providing exceptional services and support.

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As you look around you, think about your friends, family and colleagues, are you seeing the enthusiasm and leadership it is going to take to thrive in this economy?

When things go bump in the economy, do you pull the covers over your head or grab the flashlight and seek answers?

I don’t know about you, but never in my life did improvement come from lack of action.  This economy, our personal economies, will not improve if we don’t act.

Just before writing this article, I happened to view Susan Boyle’s performance on Britian’s Got Talent http://www.youtube.com/watch?v=9lp0IWv8QZY  I highly recommend you take a few minutes to view this video.

Wow, here is an unemployed, 47 something, British woman that took action.  I have little doubt; her actions have changed her life forever.  Whether or not she becomes a “rock star,” so to speak, remains to be seen.  But having taken a huge risk and putting herself out there for all to see and judge, has got to be a game changer.

So what are you doing to break away from the pack of naysayers that are convinced that breadlines are in your future?

When things are going well, the problem is often keeping focus, staying on track and delivering on promises.  When things are tough, it is even more imperative keep focused.  I have found it very useful to fall back on my early NLP training; in particular developing a well-formed outcome.

Clearly it is not enough to simply want or wish for something.  In the case of Susan Boyle, you know she did not hide in a closet wishing and hoping someone would find her and drag her onto that stage.  She had a plan, took steps, probably ran into challenges along the way, modified her plan, kept her eye on the prize and the rest is history.

So how do you develop an outcome that is well-formed and will energize you to take action?  Read on.

A key aspect of a well-formed outcome is that it is stated in the positive.  As cybernetic tools, our brains are drawn towards the object of their attention.  Race car drivers are hyperaware of this aspect of human reaction.  If they want to avoid hitting a wall or another vehicle, they concentrate on where they want to go, not the wall or car in front of them. 

If a goal is about avoidance, for example “I don’t want to fail”, etc. the brain must first make a representation of failure and then somehow negate the thought.   Since the original representation is of failure, the end result is the cybernetic brain is drawn towards failure.  Hence, an outcome like “I will succeed” gives the brain an opportunity to focus on and direct itself towards success.

Obviously, “I will succeed” is not a useful outcome.  It lacks meaning.  Succeed at what?  How specifically? 

The second key aspect of a well-formed outcome is that it, in NLP jargon, is sensory specific.  Sensory specific means that the outcome is defined and measured in terms of your physical senses.  A well defined goal will fully describe how you will know if you achieved your goal.  You will know what it looks like, sounds like, feels like and etc. to achieve your goal. 

I can imagine Ms. Boyle could imagine in great detail the crowd responding to her performance, the sights and sounds.  She could probably imagine how she would feel after completing her performance and hearing the roar of the crowd.

• So what is your goal for surviving this economy? 
• Who will your customers be?
• What exact steps will you take to attract customers?
• How will you know you have reached them? 
• How much will they spend with your company?
• What products or services will they buy? 
• What will your profit margins be?
• What will your bank statements look like when you achieve your goal?
• How many customers will there be? 
• What will people say to you when they realize how successful? 
• For you, what will success taste like?

Sound a bit like creating your business plan doesn’t it.

With respect to achieving personal goals, it is important that the outcome you choose is initiated and controlled by self.  In other words, “I will make the world love me” is not a useful outcome.  You simply cannot control the actions and feelings of others.  But what you can control your actions.

More useful would be “I will do ‘X’ daily until I achieve my goal or find a more useful ‘X’.”  Just as important as the actions you take is your ability to recognize when those actions are not effective.   If your actions are not taking you towards your goal, you must tweak them until they do. 

When a ship travels across the ocean, the captain can’t just point the rudder and forget it.  99% of the trip is process of self-correction.  As the currents and eddies of life play havoc with your plans, like the captain, you must make corrections.

The caveat here is to not be erratic or over-react.  It is often said that good leaders make decisions quickly and change them slowly.  Poor leaders make decisions slowly and change them quickly. 

A useful planning technique is to imagine having already achieved your goal.  Then map your way back in time and actions to your current situation.  What was the action you took just before achieving the outcome?  What was the significant action you took just before that?  How did you recognize problems and what actions did you take to overcome them?

Once an outcome has been mapped back from successful achievement back to the starting point, you have an outline of how to proceed.  But just as important, you have broken the outcome down into manageable sized chunks.

The fourth critical aspect of a well-formed outcome is that it is appropriately sized.  If you have very few financial resources, buying a successful company, may be out of reach.  But, if you set your intermediate goals to attracting investors looking for an investment opportunity, you are far more likely to succeed.

Finally, a well-formed outcome will be ecological.  In NLP speak, ecological does not mean ecological in the current context of the “green” movement or saving the planet. 

An ecological outcome is one that is a) worth having once you achieve it, and b) worth the effort it takes to achieve it.  For example, if the outcome requires that you put your children up for adoption so you can have the time and money to achieve your goal; that would not be ecological.

Similarly, if you follow Bernie Madoff’s example, that would not be ecological.

While this has been brief, the elements for creating well-formed outcomes have been outlined.  In review, the keys to setting an achievable goal or outcome are:

1. State the goal in the positive.
2. Imagine and describe the outcome in sensory specific terminology.
3. Make sure the outcome is initiated and managed by self.
4. Make sure the goal is of an appropriate size for the resources you have, if not break the outcome down into sub-goals that are of an appropriate size.
5. Review and evaluate the end goal and what it takes to get there and decide if the goal is ecological.  If not, what needs changed or how can you make so that it is?

It takes a little time to map out goals and outcomes, but how much time are you really saving if you avoid the process?  Can you imagine the time wasted if you are in a huge unfamiliar city but just don’t want to take the time to look at a map?