Lawrence E. Johnson

I met Larry Johnson in the mid-70's. He was recruited by a small, family owned company as part of a transition to a professional management team. I worked in inside sales at the time. I was part of the home grown talent, which meant I had very little exposure to the tools and ways of a professional manager.

Larry was with Honeywell prior to joining our firm. He was part of their avionics group at the time, yet came to our low tech, high energy firm. Some years later, I asked him why he joined a relatively small company in Milwaukee when he could have gone almost anywhere in the corporate world. He said it felt better to be a "bigger fish in a smaller pond." And, it worked.

Larry and the others he recruited to join the company helped turn a nice little, profitable company into a very attractive, highly profitable company. The company was eventually acquired by Reliance Electric. Reliance was a $1.5 billion publicly traded company headquartered in Cleveland. We had become a really professionally managed organization by then.

After the the Reliance deal, Larry became president of our still relatively small company. I left in 1980 to join a firm involved in mergers and acquisitions. Larry left a few years later to head up another nice little, privately owned firm in Watertown. He helped that firm grow, as well. The firm was eventually sold, at a handsome multiple of EBITDA, I suspect.

Larry then became president of the Kelly Company in Milwaukee. After a period of time, he bought the company, bringing several of his senior managers along for the ride. He sold the company in 1999.

Just before the deal closed, Larry was diagnosed with Parkinson's Disease. A while later, he came up with prostate cancer. My friend, who had made a lot of money for other people, finally had some real money of his own. He knew the quality of his life would never be the same.

I became Larry's brother-in-law when I married Larry's wife's sister. We all travelled together. Played golf. Ate really well. Went fishing. We talked about business. We talked about life.

Larry died on Saturday, October 22nd.

I have been using Larry's "professional management training" throughout my career and, perhaps most importantly, for the past 16 years of my TEC life. My members have heard Larry Johnson speaking to them along the way. His legacy will live well beyond what he might have imagined when he came to Milwaukee from Minneapolis 35 years ago. It lives on in all of us.

Armed & Dangerous

I settled in to prepare for a meeting of TEC 44 last month. I intended to review the issues the group's members wanted to bring to the table and other agenda items that needed to be covered during our meeting.

As I got ready, I noted a flurry of e-mails suggesting the group had taken control of the agenda. Two members sent written copies of their "issues" to the group. One member advised he was ill and unable to attend. Two others sent their "accountabilities" from the prior meeting. Everyone sent their Z-Factor Score. I was left with very little to do.

At the TEC meeting the next day the members of TEC 44 continued to take control of the process. The group introduced a new accountability protocol. The members worked a remarkably difficult issue without much intervention from the chair. They remained after the meeting ended to discuss what they had experienced during the day.

TEC 44 had become "Armed & Dangerous." Armed & Dangerous is a concept developed by TEC Resource Specialist, Don Schmincke. Schmincke segmented TEC groups into three categories of health. The least effective segment, the "Seminar Club," almost totally relied on the leader to create value. An improvement was the "Shared Destiny" group which took a modicum of responsibility for its own performance, but continued to rely on the chair to provide value. According to Schmincke, the Armed & Dangerous group was the highest performing group, taking full responsibility for group health and effectiveness.

In addition to TEC groups, Don Schmincke's concept of group behavior applies to management teams and groups of all forms. If you are interested in an outline from Don Schmincke on how to create teams that are "Armed & Dangerous," please let me know. From a group leader's perspective, it is way less work and way more productive.

This Feeling Ain't Right

Something happened in June. Then, it happened again in July. As the months are closed and the financial statements printed, almost all of my TEC members are reporting that something weird is going on. And, it isn't good.

Some members say orders softened unexpectedly. Some noted a decrease in their backlogs. Some saw raw material costs increase to unforeseen levels, eroding relatively healthy profit margins. Others told me they felt uncomfortable with what was going on "out there." They were suddenly queasy. Even the TEC members who were able to maintain margins said things just didn't feel right. It was hard to explain.

Most of these CEOs began contemplating corrective action. Put a hold on that equipment purchase for a while. Want to hire two people? Get by with one for now. This is also about the time most TEC chairs start asking TEC members about Plan B. That is, a business plan that allows the company to make money with 20% less revenue. After the last recession, numerous TEC members reported that having a Plan B saved them from decision making in crisis. They knew what to cut, who to lay off and what to stop doing...in advance.

The current uncertainty feels somehow different than the financial meltdown of 2008. This uncertainty has led a few members to construct a Plan B1. That is, what do we need to do to take advantage of a 20% premium, above plan, in revenue. Competitors may be paralyzed into non-action. Market share may be there for the taking. The Balance Sheet gets particularly important here.

This is no esoteric exercise. It is a highly desirable time to create Plan B, at least until that ugly feeling goes away. It is also, however, an opportune time to create Plan B1. Others may miss the opportunity created by the uncertainty.

Corporate Retreat

I participated in three TEC meeting retreats with different TEC groups over the past three weeks. Each was an overnight meeting at a very nice resort. The members participating in the retreats knew each other to varying degrees. While the intended purpose of each retreat was similar, the actual outcome varied from group to group.

One group secured the services of a noted outside facilitator. The agenda for this retreat was chocked full of group exercises. Pre-meeting homework was required of the participants. There was little down time. The TEC members in attendance got what they expected. Plenty of action. But not much of a retreat.

I was the facilitator for the second meeting. The agenda was a bit more flexible. To be sure, this TEC group worked for the day and a half we were together. But there was sufficient "white space" during the meeting for unplanned and unstructured member interaction. An optional group activity - trap shooting - at the conclusion of the meeting, added a semi-competitive, fun event for participating members.

Once again, I facilitated the third meeting. This meeting had several new TEC members in attendance. Our group activity - a canoe trip down the Wisconsin River - was planned for the afternoon of the first day of the retreat. It was not optional and created a unique environment to get to know people that dinner at a fine restaurant could simply not allow. Again, members worked during parts of the retreat, but the bonding opportunity was the key to the success of the event.

Members of each group reported different degrees of satisfaction with their group retreats. The first group reported "too much stuff" on the agenda. The evening dinner for this group included a "working dinner" with a facilitated team building exercise. The fun meter was on low for this group. They got what they bargained for, but didn't totally appreciate the result.

Group number two was better. But again, I allowed the agenda to become too crowded and was unable to get to everything that needed to be discussed. A special follow up meeting needed to be scheduled to address a member issue that was omitted from the proceedings.

The third group got it about right. They worked. Had some fun. They got to know each other better on a beautiful sunny afternoon floating down the river. This group reported the highest member satisfaction with the event overall.

Webster's defines a retreat as "a period of group withdrawal for prayer, meditation, study and instruction under a director." The corporate retreat is indeed good for the soul. The lesson learned here is to build in sufficient time for people to get know each other as people.

The Get Along Gang

I am reading Bob Lutz's latest book..."Car Guys vs. Bean Counters: The Battle for the Soul of America." For car guys and business people, the book is a candid assessment of what happened to the once mighty General Motors...from the perspective of a high ranking insider.

Lutz shares his insights about what went wrong with the American automobile industry based on his nearly five decades in leadership positions with GM, Ford and Chrysler. I know some of his comments will resonate with a few of my TEC members who sell products to the auto industry.

For example, Lutz states the operations component of the automobile business has been "thoroughly optimized" and doesn't vary much from one company to the next. He believes all car companies accomplish manufacturing and supply chain management reasonably well, with no significant competitive advantage accruing to the one who can beat the snot out of suppliers more effectively.

Lutz does toss around plenty of blame for the failure of the American automobile industry. Legacy costs. The UAW. Government imposed fuel efficiency standards. Japanese transplants in lower wage, non-union southern states with young, healthy workers. He takes personal credit for significantly improving product development during his return engagement with GM. The Chevrolet Volt is at the top of his personal innovations list. It is his book, after all.

Lutz reserves most of his ire, however, for two main culprits. First, he takes on the really smart MBAs and finance people whose mission it was to maintain orderly processes at all costs and see "how much they could cut before the customer started to complain." Second, he cites a culture of "corporate infallibility and self-worship" that discouraged honest disagreement. The really smart MBAs and finance people had the data. No need to create any unnecessary friction. Go along. Get along.

Lutz blamed the final decision to seek a government bail out and then Chapter 11 bankruptcy protection on their GMAC finance unit and the unforeseen doubling of gas prices in 2008. Oddly, the same screw up that took down the M&I Bank, was largely responsible for GM's eventual demise. GMAC was making so much money through its residential mortgage unit in the sub prime housing market that they just couldn't quit. Then, the really smart MBAs and finance people didn't plan for the run up in gas prices. GM was left with big cars and bigger trucks and a five billion dollar quarterly drain on cash.

All corporations have a culture. The title of Lutz's book implies the Bean Counters caused the demise of the American automobile industry. The dysfunctional culture created over many decades and many CEOs and other insiders certainly contributed mightily to the devastation.

The Entrepreneur Is Dead. Long Live the Entrepreneur

I work with CEOs for a living. For the most part, they maintain a positive mental attitude, even in the face of adversity. Many are visionaries. Most are entrepreneurs. They see opportunities where others see problems.

When I get outside my work with TEC, I sometimes meet a different mindset. I meet people living in a recession that ended two years ago. I meet people complaining about the lack of jobs and opportunity. The entrepreneur is somehow wired to look at the situation through a different lens....a lens of possibility.

Take real estate, for example. We all know that real estate is in a depression. Residential housing prices are at levels not seen since 2002. Commercial real estate is even worse. It has yet to find the bottom, we are told.

It is interesting to note that I have several TEC members who are aggressively investing in real estate - both commercial and residential. The real estate opportunity goes something like this.

The bank gets a piece of real estate back through foreclosure or "jingle mail." The bank doesn't want the real estate and is able to make a deal at a very low purchase price, assuming the buyer can come to the table with "hard money." The hard money buyer gets the property at a price that allows him or her to spend a bit more repairing and remodeling. The low purchase price and reasonable remodeling costs allow the buyer to sell the property at a profit or cash flow a future mortgage out of rental income.

Entrepreneurs see these opportunities and take action on their individual assessment of risk and reward. They reason that real estate deals like these may never come around again. They seize the opportunity where others are afraid. Sometimes they win. Sometimes they don't. But our entrepreneurs will carry the day. The entrepreneurial spirit is alive and well. It is two people looking at the same situation and choosing different interpretation of the opportunity.

Don't be mislead. The entrepreneur is dead. Long live the entrepreneur.

Apples To Apples

When I met with TEC 44 member, Jeremy Cherny, for our regularly scheduled One On One last month, Jeremy was working diligently on an "apples to apples" comparison between his firm and a competitor's offering. Jeremy is president of Tobin Solutions. Tobin Solutions is an IT consulting firm.

Jeremy's apples to apples outline contained the usual laundry list of things that IT consulting firms do. Network support. Remote support. On-site repair. Training. Preservation. Consulting. On and on went the list attempting to prove that even though Tobin Solutions solution appeared to be more expensive than the competitor's proposal, the client would be better off because they would get more IT stuff.

As with most TEC members, Jeremy was open to some feedback. I remembered a newsletter that was produced by the Grunau Company, another TEC member company. Their position was that apples to apples comparisons actually commoditized the work they did, playing into a low bidder industry mentality.

The Grunau Company reasoned that no two apples were actually alike. And, you generally couldn't tell much of a difference until you ate both and tasted the difference. They wanted their people to understand that it is the intangibles that created value for the customer and sustainable differentiation for the company.

In the end, Jeremy reworked his proposal eliminating the apples to apples comparison. Instead, he focused on the intangibles that created value in the mind of his client. Time will tell if Jeremy is successful in securing the new business. We know now, however, that if he wins it won't be because he was the low bidder.

If you would like a copy of The Grunau Company newsletter containing their thoughts on the folly of apples to apples comparisons, please feel free to contact me.