The New York Times today has a story, “A New Capital of Call Centers,” which focuses on the fact that many  companies with US customers are moving their call centers to the Phillipines or back to the U.S. because personnel in the new locations speak better English than, say, their counterparts in India.

Evidently, these companies believe that customers’ primary concern is the quality of the language used by the call center agents.  My primary concern, however, is whether or not the call center agent is actually able to answer my questions, solve my problem, and/or take my order accurately.  Overall,  I’ve had much better luck with the hard-to-understand foreign agents who seem to know what they are talking about than with US-based agents who are poorly trained and/or work in call centers in which no system is in place to help callers actually get their questions answered.

In brief, I wish companies would pay more attention to this Renee’s Rule™: Make my life easy.

What do you wish?

During the annual conference of the Turnaround Management Association (TMA) which was held the last week in October, I attended two sessions about “turnarounds” and was truly taken aback by what I heard.

An underlying theme, articulated by panelists in both sessions was, “We’ve been focusing on fixing the balance sheet.  Now we need to learn how to fix the income statement.”  Really?  What have these people been doing?  And does this explain why TMA sessions and publications in recent years have focused on “restructuring” instead of “turnarounds?”  (My article which was attached to my last blog post explores this topic.)

Fixing the balance sheet is relatively easy:  collecting receivables, reducing inventory, selling unneeded assets, renegotiating debt.  Fixing operations is generally more difficult and, in many respects, requires a different skill set.  For companies to survive over the longer term,  they need to have carefully conceived plans, the right people in place, and effective management control systems.  In addition, they must deliver their products and services in ways that are both cost-effective and customer-centric.   To me, ensuring that those pieces are in place is a vital role of the turnaround expert.  Evidently, not everyone agrees with my view.

To me, the word “turnaround” means fixing the balance sheet AND fixing operations.  What does it mean to you?

In July, I was invited to write an article for the conference issue of The Journal of Corporate Renewal, the publication of the Turnaround Management Association (TMA). The topic I selected was “Ethical Issues in Turnaround Engagements.”

Although TMA  declined to print the article in the conference issue because they found it to be too controversial, Jack Butler, an internationally recognized partner at Skadden’s corporate restructuring and governance practice,  invited me to participate in the Advance Education Panel he is moderating at the TMA Conference in San Diego next week  and to include the article in the materials distributed to session attendees.  The title for the panel is “Ethical Challenges in Large, Mid and Small Companies.”

I intended the article to be a call to action by TMA, and it will be interesting to see how it plays out.  It is my understanding that the article will be shared with TMA’s Strategic Planning Committee as well as the Certification Oversight Committee for the Certified Turnaround Professional program.  I have been invited to submit it again for the March issue, which will be devoted to ethical issues, but I certainly hope that the content will be out-of-date by then!

Although I have made some revisions to the original (suggestions for refinements made by several people I interviewed), all of the basic points remain unchanged.  Here is a link to the article:  Deconstructing the Code.

Re:  Harry and David– Wish I knew what is actually going on inside….will be interesting to see how their efforts play out……

Podcast from NPR broadcast link–1 minute. 081211CL_harrydavid

It’s no wonder Sears is in trouble.  Their personnel training and software systems need help.

The situation:  A repair person came to perform annual preventive maintenance on my Kenmore washer and dryer.  When I showed the person that I could not get the lint screen clean, he offered to send me a new one because a clogged screen slows down the drying process and uses more electricity.

He ordered a replacement screen.  Sears sent the wrong screen.   It would not fit into the slot.

I called Sears to order a replacement for the replacement and carefully explained what had happened, including that the problem was  that the screen, itself, had lint that could not be removed by the repair person or by me.

Again, Sears sent the wrong part–but a different wrong part.  In the photo below, the original part is on the top; the second replacement part, on the bottom.  As you can see, there is no “screen” on the second part.

Original and Replacement "Screen"

Here’s the worst part:  After getting the second wrong part, I tried cleaning the screen with a soft-scrubbing sponge–guess what?  It worked!  If the repair person had only been properly trained……

Sears’ cost:  Time for the repair person and the operators who took both the first and second orders + shipping for two parts + an unhappy customer.

A professional friend recently pointed out to me that in my two  most recent posts, I was actually addressing the fact that www.thefoundary.com did not have a search function.   It still doesn’t have one.

On the other hand,  www.foundary.com, does have a search function but is likely just a site set up by a domain squatter to capture ad revenue from visitors who do what I did:   type in the wrong URL.

Or..is it?  Perhaps the people behind thefoundary.com are also using the name “foundary” in order to increase their revenue at a very low cost….

In my last post, I questioned the wisdom of  Foundary.com’s lack of a search function.  In fact, I had actually sent an email to  them about this topic.

Here is a part of their reply: “Because we have a very limited, specialized, selection and each sale only lasts a few days there is no search feature.”

There is hope, however.  When  I visited their site today, there was a “Search” field…It doesn’t work for items on their site–it takes visitors to other websites–but I am hoping this means they listened and will develop an effective search function in the not-to-distant future.  If they do, I may shop there.

Zulily.com and Foundary.com are websites that offer products of interest to me, HOWEVER, I don’t shop at either one because those sites have no effective search function.  There is no field that says, “Search.”

What are they thinking?  I assume they think people will buy a larger number of items if they have to navigate through lots of different pages to find something of interest because they’ll see multiple items they’d like to buy.

This may be a great strategy for shoppers who either live to shop or have plenty of time on their hands, but it may prevent busy people from doing any shopping at all on those sites.

Here is the question:  Are the total  sales to people with time to shop likely to be larger than total sales WOULD be if it were easy to search for specific items on these websites?  My gut feel is that if these websites had first-rate search functionality, they would land sales not only from people who have time to shop but also from those who are pressed for time.

Perhaps I live in a warped reality–but most of the people I know (all age groups) would prefer EASY and TIME-SAVING to CUMBERSOME and TIME-CONSUMING.

If you follow my blog, you know I see a strong need for smaller stores with limited products.  Bitten by the economy, retailers are buying into this approach.

Best Buy is reducing its footprint.  Also mentioned in the story?  Jo-Ann Fabric and PetSmart.

Still, it sounds like these size reductions are cost-cutting moves rather than a realization that many consumers seek and prefer a faster, easier, less stressful shopping experience.

The greatest danger to the future of our democracy is that too many people are unable to differentiate between what is fact and what is fiction and too few care.

Although I certainly agree that academic achievement needs to be improved in our country, no job in our educational system  is more important than ensuring that our citizens can  evaluate critically the information they receive.

Perhaps you have followed the Kyl/Colbert saga which prompted this post. Senator Jon Kyl declared in a speech in the US Senate that 90% of Planned Parenthood’s budget goes to abortions. He was more than slightly off the mark:  the percentage is only 3%, and his office said that  his comment was “not intended to be a factual statement.”   The comedian Stephen Colbert responded with a twitter campaign that mocked Kyl’s behavior and drew attention to the lack of fact-based discussion which has become all too common.

Regardless of how we may feel about the abortion issue, it is scary to see that our elected officials (and too many others) simply don’t care about basing their arguments on facts.  We will never all agree on all topics, but let’s base our disagreements on FACT rather than on FICTION.  If we do not, we risk domination by demagoguery.

If you read my January post  “Size DOES matter: The Pop-up Principle,” you know I’ve been saying that smaller stores that offer a narrower selection may prove more profitable for retailers because smaller stores accomplish two important things:  Done effectively, they both reduce  retailers’ costs AND provide a faster, less stressful shopping experience for customers.

Now, Walmart appears to be taking my advice.  See article in the Huffington Post today.

In the case of Walmart, smaller stores will not only offer the advantages I’ve listed above but will also make Walmart’s merchandise  and low-prices accessible to new customers who currently don’t want to or can’t travel to their super-sized stores.

I just responded to  someone writing a research paper on turnarounds who asked, among other questions, “What are the key ingredients for a successful turnaround?”  Here is my answer:

1.      Management willing to make needed changes

2.      Market for the company’s goods and services

3.      Enough cash to get through the crisis

4.      Turnaround team with a skill set that is a match for the issues facing the company

As a child, growing up in Omaha, Nebraska, I became a science fiction nut, and my interest in the future and what technology can achieve has endured.

In 1985, when I was in my MBA program, I took a course about “The Future.”  It was taught by Harold Linstone.   As a part of that course, each student wrote a scenario of what he/she thought the world would be like in 2000.  I have saved my copy (It was composed on my Apple IIe.   My sons were quite enthralled with it at the time, so it is preserved for all posterity in my safe deposit box.)

Among other things, I predicted that  by the year 2000, there would be “terrorist attacks on our shores.”  Am I prescient?  Not really–To prepare for the assignment, I  simply did a great deal of reading about trends at the time.

Some of my predictions were right; some were wrong.  Some were right, but I had NO  idea what they meant.  (e.g., I predicted that we would be communicating via electronic mail, but I had NO idea that we would call it “email” and that it would dramatically change our lives.)

So..for what it’s worth, I am going to start a series of blog posts containing my predictions about what will occur over the next ten years.  Some will be right; some will be wrong.. In any event I’ll be on-the-record, and it will be interesting to see the extent to which my predictions are accurate.

I have recently been asked by reporters, “What would you do at Harry and David?”

I responded with a description of the turnaround steps described below.  Those steps are always the same, but the specifics vary from project to project.  (When I spoke with reporters, I also discussed some of the situation-specific actions I would initiate.)

My S.O.P. (Standard operating procedure)

1. Get total control of cash
2. Prepare short-term cash forecast
3. Select Turnaround Team from key, existing management team members
4. Convene the team; go through financial statements line by line–first, looking for ways to improve short-term cash situation, second, identifying ways to increase revenues (and/or margins) and decrease costs — (note: understanding the financial statements inside and out is critical!)
5. The result is a written plan that includes a list of who is responsible for achieving what results by which dates and financial projections, which are the numeric representation of the plan.
6. Then, it’s time for the team to implement!
7. Design and begin  implementation of a sound management control system if one does not exist
8. In the meantime, there are generally crises to contend with and negotiations with a wide range of stakeholders.

In addition to the above, I also send a web-based confidential survey to all employees.  The employees know what’s wrong, what needs to be fixed, and often see things that people at “corporate” miss.  Surveys to vendors and customers can be equally enlightening.

The above steps make it sound like the turnaround process is an orderly one, but it’s not.  Leading a turnaround is like being a general on the battlefield.  It’s messy and fraught with peril.   You have a plan, but unexpected crises are constantly arising.  I always tell prospective clients that it will feel like the opening scene from Saving Private Ryan.  One of my favorite owner/clients used to stop by my office occasionally and say, “I’m having a ‘Saving Private Ryan’ day.”

After I published the post below, it occurred to me that you might be interested in a prior post about what leadership qualities are required in turnaround  situations.  Here is a link.

It’s easy to blame e-readers and associated technological changes for Borders’ predicament, but they are merely the symptoms and not the disease.

When companies face the double whammy of game-changing technology and a sagging economy, they simply must have a sound strategy and consistent, capable, visionary leadership. Since 2005, however, Borders has had 4 different CEO’s.  How could the company possibly develop or effectively execute a company-saving strategy while there was a revolving door at the entrance to the executive suite?

This morning, I was a guest on Bill  Meyer’s radio talk show.  The topic?  Harry and David and the problems facing the company.  You can download the podcast here.

Bill asked some interesting questions, some of which I’ll be addressing in future posts; e.g., why would a distressed company prefer to avoid bankruptcy when in bankruptcy they can shed leases and have other protection? How can you have higher profits with lower revenues?

In the meantime:  During the show, I promised to post some key financial  statistics for Harry and David from 2006 through 2010.  (Their fiscal year-end is approximately the end of June.)  Here they are:

You may be interested in what I had to say about Harry and David in these articles from the Portland Business Journal and the Medford, Oregon-based Mail Tribune over the last two days.

I’ll have more to say on this topic later….but from feedback I’ve been getting, it appears that the problems I saw were only the tip of the iceberg.

Many people believe that the CEO should have the “vision thing.”  I believe that our presidents (plural!) and other elected officials  should have the the “vision thing,” that it is their responsibility to set the priorities and anticipate problems before they occur.

It appears to me that these officials too often don’t even think about anticipating problems before they occur, let alone initiate preventive actions.

For example:  On February 2nd,  the Washington Post ran a story, Why does Fresno have thousands of job openings- and high unemployment? The answer, of course is that there is a mismatch between job openings and the skill sets of job applicants.  Duh!

We seem to be discovering this nation-wide mismatch only recently, when it has, in fact, been on its way for at least 25 years.

For example, when I was in my MBA program (1984-5), I wrote a paper, “What to do about the coming structural unemployment.”  In the paper  (lost to posterity because I created it on a floppy disk using my Apple IIe), I addressed the unemployment/change in employment opportunities that would result from the two obvious trends:  globalization and greater use of robotics.

If the trends and their impacts were obvious to me, surely they were obvious to countless others.

So here is the question:  Why didn’t we, as a country, pay more attention to this problem earlier?

My answer is two-fold:

1. Elected officials are really fire-fighters who are so busy putting out the the current fires, they don’t have time to attend to the likely future ones.

2. We get the government we deserve.

On the business (as opposed to the political) front:  Is the phenomenon described above any different from the leadership of  Blockbuster and Borders being late to the technological revolution?

Why do some people “see” while others do not?

What I learned at the TMA conference is not what you expected.

I met with a private equity partner who told me he had actually visited my blog and read some of my posts.  Not long ago, someone on the east coast contacted me to tell me he agreed with my comments about turnarounds.  Then, I received an email from a long-time friend who had just learned about and visited my blog.  Today,  someone else  left a comment about one of my posts……

This has serious implications:  All this time, I’ve been having a grand time blissfully writing about whatever happens to enter my mind–what better forum for a person who has strong convictions and loves to talk about them?

Now, however, I’ll have to write my posts  as if someone might actually READ them!

Wednesday, I am leaving for the Distressed Investing Conference of the Turnaround Management Association and am eager to see whether presenters spend much time discussing  leadership considerations.

Many investments in distressed companies  fail because the investors (most of them private equity firms) pay too little attention to selecting and managing company leadership, but the last time I attended this conference, 2009, there was only one session (really, it was only one panelist) who highlighted this very important issue.

Mike Heisley discussed the fact that distressed companies require a leader with traits that are very different from those required to lead  a “healthy” company.  He was exactly right.  Click here to view my post from that event.

As you may recall, last Spring, I held a contest, “Are you smarter than an economist?” My two winners, who received $1,000 each for their on-target predictions, were “ordinary” people–well, definitely not economists.

Now, according to mashable.com, financial bloggers did better than professional analysts in predicting Apple’s revenue, earnings, gross margins, and unit sales for Q1 2011.

Hmmmm…what does this say about professional economists and stock analysts?

The results are in!  The checks, $1,000 each, are in the mail.  The two winners of my contest, “Are you smarter than an economist?” are Gary Ritner, a Bellevue, Washington-based investment banker and co-founder of the Puget Sound Venture Club and Jeff Smith, a Project Manager for Caterpillar in Peoria, Illinois.

As you may recall, winners needed to predict correctly when GDP would improve at least 2% from the prior quarter and when unemployment would be the same or better than the same month in the prior year.  http://www.theturnaroundblogger.com/are-you-smarter-than-an-economist-contest/

Jeff predicted 3rd quarter ’09 and June ’10, for GDP and unemployment, respectively; Gary, 4th quarter ’09 and June ’10.

You may well be asking yourself:  If they had two different GDP predictions, how could both of them be winners?  The answer?  After the contest started, the Bureau of Economic Analysis apparently changed the formula for calculating GDP.  As of 3/26/10, the BEA website reported GDP improvement in Q3 ‘09 in chained dollars was 2.2%; as of 8/27/10, however, the website showed only 1.6% for Q3, but improvement of 5.0% in Q4.

So…that’s that—except I think the press should be asking Jeff and Gary what they predict for the future of the economy!  They were smarter than many economists!

In the 9/20-9/26 edition of Bloomberg BusinessWeek, Matthew Lynn (and the photo that accompanied the article) implied that Stephen Elop, who became CEO of Nokia on 9/21, is not the best person to lead the turnaround because Elop is not a “phone expert.”

I do not know a great deal about Elop except that he was recently “the Canadian head of Microsoft’s business unit” and that he has software experience and a reputation for “shaking up” businesses, but I do know that Lynn’s apparent assumption—that “industry experience” is central to a turnaround—is just plain flawed.

One needs to look no further than Alex Mandel’s leadership of Teligent in the late ‘90’s to see that “industry experience” does not guarantee success. Mandel had been president and COO of AT&T, but Teligent failed spectacularly under his leadership. Although the failure was blamed on “the downturn and overcapacity,” the underlying issue was that on the ground and in the trenches, Teligent was simply unable to provide the reliable wireless services it promised. The lesson: The leadership skills required to launch a technology start-up with no existing infrastructure are very different from those required to lead a long-established company.

In a turnaround, where time truly is “of the essence,” the most valuable commodity is effective leadership, not industry expertise. I’ve had 34 clients. Of those, 3 were in one industry; 2 were in another; the rest were all “one-off.” Based on that experience, it is clear to me that industry experience is not, by any means, the determining factor.

The most important skills needed in leading a turnaround are

· The “power of the glance;” i.e., the ability to see quickly what needs to be done
· Common sense
· Ability to establish the right priorities
· Clarity of vision and the ability to convey that vision
· Decisiveness
· Ability to mobilize the troops to provide ideas and support the effort

Is having industry expertise a plus? Yes. But it is no substitute for having the right leadership skills. No matter what the industry, it is relatively easy to find someone with industry expertise. It is much more difficult to find someone who has the right leadership skills.

I’m rooting for Stephen Elop and hope he proves Mr. Lynn wrong!

Recently, I had to place a call to American Express’ customer service. First, my problem was solved right away. Second, almost immediately thereafter, I received a customer survey. Guess what the first survey question was? “Do you remember this call?” (paraphrased)

I almost fell out of my chair. Someone had finally THOUGHT about a customer survey and what it was trying to accomplish!

Customer satisfaction surveys are conducted, presumably, to get feedback about the customer’s “experience.” These surveys could be powerful tools for gaining and retaining customers and for reducing costs, but too often they are not. I call them the “Silly Surveys.” (Actually, some additional “S words” spring to mind…)

How many surveys have you received and wondered, “Which call and what person is this survey asking about?” If you are like me, too often, either I’ve had to talk with more than one support person, or the survey arrives long enough after the incident that I am not sure which incident, contact, or person the survey is asking about.

In addition, too many surveys fail to ask a critical question: Should this call have been necessary in the first place? Instead, it asks: Was the support person knowledgeable, clear, polite? Was the problem solved? The answer is often, “Yes, to all of the above,” but too often, the underlying problem is that the company has a poorly constructed website that makes it difficult to accomplish simple tasks–tasks that are easy to accomplish at other sites. I had to waste my time placing a call that should have been unnecessary.

In the case of the above example, the support person will get kudos (or, at least, won’t get into trouble), but I, the customer, having made too many similar calls to this company, am likely to be considering changing vendors, and the company is missing an opportunity to reduce its tech support costs. If customers could easily accomplish simple tasks at the website, fewer tech support people would be needed.

Renee’s Rule™: Put yourself in your customer’s shoes.

I recently read an article that said bloggers aren’t keeping up with their blogs. Clearly, I am guilty as charged but am going to try to do better! (Still, when I am in the midst of a turnaround engagement, there simply isn’t time to blog….)

Please stay tuned……

Last week, Randy Myers wrote a great story for MSN Money featuring my feedback to him about signs of corporate distress.

If you’d like to read it, please click here.

Can’t help it–I am fascinated with Gregory Meyer’s challenge to the Blockbuster board. For all I know, Meyer is a total flake, but why would anyone have confidence in the CURRENT board of directors who, by the way, are strongly fighting Meyer’s bid?

Click here for details from my earlier post.

For latest news: Click here.

The board meeting is June 24th… am eager to see whether Meyer gets elected.

One of the great things about having a blog is that I get to choose my topics, and today, I choose David Pogue–far and away my favorite technology writer–whose columns I follow in the New York Times. There is a link to his website on my blogroll in the bottom right-hand corner of my blog.

I am an unabashed fan and read David’s columns because I love them. Clearly, David is bright, articulate, practical and, above all, conveys a contagious exuberance in his writing. His columns are a delight, and I am guessing that he, personally, is a delight.

He also has a background in theater and is musically gifted. His intellect and exuberance are on display in that arena, as well. (See this youtube post, an impromptu production recorded in Times Square–be sure you watch the whole thing.)

The next conference of the World Future Society will be held in Boston from July 8-10th.  I can’t wait!

Every couple of years, I attend the conference because these gatherings  invariably have stimulating sessions that give one a peek into what’s on the horizon–or what might be on the horizon.  It is helpful to me professionally because knowing what might happen can be useful, but on a personal level, it is just plain fascinating!  The conference is my treat to myself!

A couple of years ago, in addition to attending the regular conference sessions, I was introduced to the concept of transhumanism during a pre-conference session led by Jose Cordeiro–and attended a first-rate session about the future of nanotechnology.

This year, Ray  Kurzweil, one of the futurists whose work I studied during my MBA program, is a keynote speaker. If you are not familiar with the concept of “the singularity,” you should be. It is only a matter of time until the concept becomes reality.

I am posting this in case you are interested in attending the conference. If you do go, please let me know so we can compare notes about the sessions we attend.

Recently, I read an article in The New York Times, “OMG! It’s Steve Jobs!” which reports that Jobs is creating worldwide “buzz” by responding personally to emails.

Whether he is actually responding personally or is having someone else respond for him, he is being really smart.  First, he will learn things and get ideas he would otherwise not have. Second, the “free” PR is worth its weight in gold.

Email can be a powerful management tool.  When I start a new project, and there are more employees than I can possibly ever meet/talk with in person, I circulate a confidential employee survey (not generated from the client’s server) and give employees a personal email address to which they can send me confidential information.

These surveys and emails have become a powerful way for me to find out about problems and to develop solutions incredibly more quickly than I would otherwise be able to do—problems that some people at “corporate” may not know about, may want to hide, or may be afraid to share.

More about corporate politics and their impact on turnaround efforts in a later post.

The internet is a wonderful thing!

Sam Thacker, the Finance Expert at AllBusiness.com (He helps companies find financing),  someone I have never met who lives in another part of the country, posted an announcement on Sunday about my “Are you smarter than an economist?” contest.

Although Sam and I live in different parts of the country and have never met, it is clear from reading each other’s posts that we both do our best to provide sound advice on our blogs, advice that businesses can really use.

Here is the link to his blog about my blog.  While  you are there, take a few minutes to read some of his posts and/or listen to his podcasts.  They are packed with great info!