It Was the Best of Times, It Was the Worst of Times

“It was the best of times, it was the worst of times.”  The first sentence from Charles Dickens’ famous novel A Tale of Two Cities captures well the state of the hardwood lumber industry over the last five years.  For most hardwood lumber producers, the last six months have been among the best times that they’ve ever experienced.  And yet, the pain of much of the previous five years remains seared in our memories.  So how do we handle these two radically different images at war in our minds?  As I’ve thought about this, I’ve come up with some advice for myself.  Maybe some of this will work for you.

 

  • There’s an old stockbroker’s saying that goes something like this:  “Don’t confuse brains with a bull market.”  So, in our context, enjoy the good times while they last, but don’t let them convince you that you’re suddenly a lot smarter than you were a year or two ago.  The current runaway market will end sooner or later, and it isn’t our smarts that has created it.  We need to enjoy it while we can, but be ready for it to return to normal.
  • Don’t let rising prices and increasing margins cover up sloppy operations and sales practices.  It’s easy to be lulled to sleep by increasing sales and margins, and not look hard enough at what’s “underneath the covers.”  We need to keep pushing just as hard for the half percent efficiency increase, or the 1% gross margin increase, as we did in the depths of the recession.  It’s just as important now in good times as it was in poor times.
  • Keep investing.  When business is good, there’s a temptation to think that it’s not as important for us to keep investing in our business.  I’m not just talking about equipment, but also about investments in IT and other areas that make our businesses more efficient and cost effective.  Continuing to invest will give us a cost advantage when things turn back to normal.
  • Work harder than ever at getting close to our customers.  The temptation in times like these can be to think “we’re in the drivers’ seat.”  At all cost, don’t give into this temptation.  Suppliers and customers need each other and the pendulum swings back and forth.  Don’t be afraid or embarrassed to raise prices, but travel and work hard to keep strong personal connections and relationships, and don’t present a “take it or leave it” attitude.
  • Proactively look for talent that we can add to our team, whether it’s in production, operations, sales or support functions.  Don’t wait until someone leaves to try to fill a spot.  With our business growing again, we will need more and better talented people.  Try to get ahead of the curve in hiring these people in advance, even if we don’t have a position open for them right now.

 

These are a few thoughts that I remind myself of these days.  Hopefully one or two of them will help you.

Give and Take

At the end of last year I read the book Give and Take by Adam Grant.  Quite simply, it was the best book I’ve read in the last year.  Adam is an interesting guy.  He’s the youngest tenured professor at the University of Pennsylvania Wharton School of Business, and has done research on some really interesting aspects of business.

The book identifies three different kinds of people: Givers, Takers and Matchers.  The definition of each of these groups is what you might expect.  Givers naturally give more than they get, and instinctively act in the interest of others.  Takers like to get more than they give.  And Matchers strive to preserve an equal balance between giving and getting.

The fundamental premise of Grant’s book is that while it takes some time for Givers to build up goodwill and trust, eventually they establish a reputation and relationships that enhance their success.  In fact, research shows that people who help and regularly give their time to their colleagues actually earn more and get more promotions than Takers or Matchers in the long run.  Studies also show that the most productive people are people who give often.

In the middle of the book, things get really interesting.  Grant makes a distinction between “Selfless Givers” and “Otherish Givers”.  He says that when you really analyze Givers you find that they tend to fall at both the top and the bottom of the success ladder, while Takers and Matchers tend to land more in the middle.  So, what’s the difference between Givers who succeed and Givers don’t?  According to Grant, it’s whether or not they can look out for themselves at the same time as they give.

“Selfless Givers” don’t think enough about themselves.  They think only of others, and are prone to end up as doormats.  People take advantage of them.  On the other hand, “Otherish Givers” are both others-oriented and self-oriented.  For me, the most fascinating point Grant makes is that self-interest and others-interest are completely independent motivations; a person can have both at the same time.  These two characteristics are not opposites such that you need to choose one or the other.  In fact, they can complement one another.  Successful Givers care about benefitting others, but they also have ambitious goals for advancing their own interests.  Givers who do both of these things end up being more successful than Takers or Matchers.

Grant’s ideas were very helpful to me personally.  Our stated purpose in our hardwood lumber business at Baillie is “To Help Others Succeed.”  We occasionally get into discussions about whether or not one can take this too far.  In other words, is it possible to be so exclusively focused on others that it hurts your performance?  Grant’s idea that focusing on helping others and advancing your own self-interest are not opposite things, but are actually separate motivations that can both be present at the same time and can actually complement each other, really helped me as I think about our purpose.

If you are able, read this book.  I’m interested in your opinion of Grant’s ideas.

Talent Not Skills

Imagine you are about to interview a candidate for an important role in your organization.  The first order of business is to check out the candidate’s experience, knowledge and skills, right?  Not so fast, according to Marcus Buckingham in his book First, Break All the Rules!.  The key to successful hiring, argues Buckingham, is to focus on talent.  What talent does the candidate have, and what talent does the job require?  Talent is the key to hiring, as well as the key to driving performance.

So what is talent and how do you find it?  Buckingham describes talent as “4 lane highways in your mind that carve your recurrent patterns of thought, feeling and behavior.”  Talents are what you do easily and naturally.  They’re what you’re “wired” to do.  Each person has a unique “mental filter”, and your mental filter is the source of your talent.  When you’re using a talent, you feel smack in the middle of your wheel house.  Clues to a person’s talents are “rapid learning” (what roles does he learn quickly) and “satisfaction” (what situations give her the greatest satisfaction).  Buckingham contends that your talents are set by your mid-teens, and there’s not much chance of changing them.  “People don’t change that much.  Don’t waste time trying to put in what was left out.  Try to draw out what was left in.  That is hard enough.”  In other words, you can’t teach talent.

So what does all this mean?  When you’re interviewing, or thinking about changing an employee’s role, spend most of your time trying to figure out a person’s talents.  Don’t worry so much about her experience or her skills.  You can provide the experience and train for the skills, but good luck trying to develop a person in an area where he has little or no talent.  A person has a “mental wasteland” in an area where he’s not talented, and that won’t change no matter how much experience or training you give him.

Instead, focus ruthlessly on whether a person is a “talent match” for the job, not on whether they are due for a promotion.  Find roles for people that help them play to their talent.  Be willing to pay someone more than their boss if their talent in that role makes them very valuable.  The last thing you want to do is promote them out of a role that is in their talent “sweet spot.”

We’ve tried to follow this path in our hardwood lumber business at Baillie.  We hire our sales people for sales talent, not for lumber experience.  And we move people into new roles based on the best talent match.  But we have a long way to go.  Buckingham’s book has challenged me to start all my “people thinking” with an eye toward talent.  It certainly requires a leader or manager to know his people better.  But done right, it leads to happier people and an organization that performs.

Wait!

The best leaders act quickly and decisively!  Right?  Well, not always, according to Frank Partnoy, author of Wait – the Art and Science of Delay.  In the introduction to this book, Partnoy makes the statement “Given the fast pace of modern life, most of us tend to react too quickly.”  This caught my attention, and made me want to keep reading.

World class athletes have one decisive advantage:  they have faster reaction time.  This allows them to wait until the last possible moment before making a decision.  Take the example of a baseball batter.  From the time the ball leaves the pitcher’s hand until the time the batter hits the ball is typically a second or less.  The faster the batter’s reaction time, the more of this second he can wait and use to make his swing decision.  Waiting that extra fraction of a second makes all the difference in the world.  That extra fraction of a second gives the batter the opportunity to make the best decision about whether to swing, and if he does swing, how to swing.  The same is true of a tennis player returning a serve.  The faster his reaction time, the longer he can wait before he starts the physical motion of his return.  Bottom line, according to Partnoy, is the longer an athlete can delay his decision the better.

So let’s shift into the realm of business leadership.  Imagine a leader in a hardwood lumber company is faced with an issue that requires a decision.  This leader has read and heard about the need for leaders to be decisive, to take charge, to make a decision quickly so that his people will have clarity and certainty.  I think it’s fair to say that these are the cultural norms surrounding a strong business leader.

According to Partnoy, it makes us feel good to make a quick decision, but it typically will not lead to the best decision. Obviously waiting too long to make a decision is also a problem, but Partnoy argues that the most successful leaders do two things.  First, they understand how long they have to make a decision.  This part is critical.  Second, they wait as long as possible to make that decision.  Just as the batter or tennis player gathers more information about the path of the ball the longer he waits, the business leader gathers more information relevant to his decision every hour he waits.  New information emerges, the problem may change, or, in some cases, the problem may even go away.  The urge to act decisively cuts off these opportunities.  Warren Buffet echoes this thought when he says one key to his success as an investor has been delaying decisions.

This book made me think about the business leader I respect the most:  my father.  He is famous for (and gets teased for!) wanting to keep his options open in family situations.  It can be humorous at times.  But in business it’s exactly the same principle that Partnoy is advocating:  wait till the last minute to make your decision.  It keeps your options open the longest, and sometimes even expands your options.

So don’t get me wrong.  Procrastination, or not making a decision that needs to be made, is probably the worst mistake a leader can make.  However, figuring out how much time we have to make a decision, and then using all of it to make the decision, will almost certainly make you a more effective leader.

The Power of Presence

Recently I read an interview with Ursula Burns, CEO of Xerox.  Ursula is an African-American woman, so some of the article dealt with the unique issues she faces in that regard.  However, for me, the most intriguing part of the interview revolved around her comments on the issue of “presence.”

 

In the interview, Ms. Burns talks about going to one of Xerox’s business service centers in Oregon, making a little speech, walking around the office, and just meeting people.  No big deal, right?  Well, about that experience she writes “It’s amazing.  It’s like I am Oprah or somebody really famous.  And they want pictures, and ‘Can you sign this?’  Even to this day, I minimize how much impact presence has.  Right?  Because I take myself for fairly normal.  But when you go someplace, it actually validates for them their importance and their belonging in the company.”

 

Just a month ago I traveled to China and spent a week traveling with our sales people meeting customers.  Although I’m certainly not Ursula Burns, I came away with many of the same feelings that she expressed about presence.  At Baillie, we think of ourselves as a highly entrepreneurial, individualistic hardwood lumber company.  In many ways, each sales person has his or her own business, his or her own customers and mills.  We typically don’t pay much attention to having senior people travel with sales people visiting customers.  I suppose this is good in one sense, in that sales people grow up quickly and have a heightened sense of responsibility and ownership.

 

However, I think the piece of the puzzle that I was missing is what Ursula Burns describes as “the power of presence.”  When I was in China, I was amazed at how meaningful me simply “being there” was for both our sales people and customers.  I’m not trying to show false humility, but like Ursula, I think of myself as fairly normal and can’t really imagine why it would be a big deal for people to spend time with me.  However, in my role as CEO at Baillie, the reality is that it is a big deal, and I need to be more intentional about simply being out there and spending time with sales people and customers.  It really doesn’t make that much difference what I say or do; simply being present is very meaningful, even motivating, to them.

 

I think this principle applies regardless of your position in your organization.  It may apply a little more easily if you’re the CEO or a senior manager, but if you think hard enough I’m sure you can see how it applies regardless of your role in your organization.  If you’re in sales, simply being present with the production or administrative people can make a difference.  It’s not what you say, it’s just validating their importance with your presence.  If you’re a plant manager or middle manager (who tend to be some of the busiest people on the planet), taking a few moments out of your schedule each day to just be present and talk with people about whatever interests them has a huge impact.  If you’re a support person, or even a line worker, the same principle applies.

 

It took me a long time to learn this lesson (probably decades), but traveling to China last month and reading the interview with Ursula Burns recently produced a real “aha” moment for me.  There’s no canned formula or recipe for how you do this; it will take a little thought on your part.  However, I have no doubt that you will improve the morale and the performance in your organization if you spend some time thinking about what the “power of your presence” can mean in your organization.

Where to Play and How to Win

I recently read a book named “Playing to Win” by A. G. Lafley and Roger Martin.  As you may know, A. G. Lafley was the extremely successful CEO of Proctor and Gamble for over a decade.  The book basically describes what strategy is, and how it can work for all different types of companies.  I’ve read several books on strategy, but this one captured my attention like a few others.

Over the last couple years at Baillie, we’ve worked at developing a strategy for our business that looks out at least a year.  Like many organizations, we have a tendency to just go day to day and week to week, reacting to the opportunities and challenges as they emerge.  This isn’t a bad way to live, and can actually lead to some reasonably good results.  However, over the last couple years, we’ve found focusing intentionally on developing a well thought through strategy to be quite helpful.

 

Nearly two years ago we started working with author / consultant Keith McFarland on strategic issues.  We meet four times a year with Keith.  In early November, we have a two day intensive “deep dive” strategy session, followed by one day “strategy resets” every 90 days.  This allows us to develop a strategy each year, but then to review and adjust it every three months.  The process has been great.  We have a strategy, but it doesn’t get stale and we’re able to adjust as needed.

 

As I was thinking about where we’re headed for the rest of this year and into next year, Lafley’s book became very helpful.  He starts the book with a relatively formal definition of strategy:  “An integrated set of choices that uniquely positions the firm in its industry so as to create sustainable advantage and superior value relative to the competition.”  Not very inspiring, and at first I thought this was just another consultant mumbo jumbo definition of strategy.  However, the next thing he said really caught my attention.  In its essence, he said, strategy is simply an answer to the questions of “where to play and how to win.”  In other words, strategy is about making choices, yes and no, and not just drifting.  Where do you want to play?  The answer can’t be everywhere.  Where do you want to focus geographically?  Within your industry, what type of products or services do you want to provide?  Do you want to focus on selling them directly or through distribution?  Do you want to move upstream or downstream within the supply channel in your industry?  For example, in the last year at Baillie we’ve made a strategic decision to get more involved in the hardwood sawmill business.  We’ve been in the sawmill business for a while, but this was a strategic choice to focus more heavily one step upstream (the sawmill side) from our traditional concentration yard business.

 

Lafley then asks the question “How to win?”  Again, you can’t do everything.  You have to decide “what will enable you to create unique value and sustainably deliver that value to customers in a way that’s distinct from your competitors.”  Again, sounds a little like consultant gobbledygook.  However, when you cut through it, he’s basically just challenging each of us to ask the question “What will make us different from the 3 or 4 other top players in our field?”  Are we going to do exactly the same thing and just compete on price?  Or are we going to do something a little bit different so customers have a good reason to do business with us.  We’ve wrestled with these questions over the last couple years and find that answering them isn’t easy.  But we’re trying and having some success.

 

The hardwood lumber industry is one where we typically react to what the market presents to us each day and each week.  That’s not bad, but I challenge you to think about developing a longer term strategy that answers the two simple questions of “Where do we want to play?” and “How do we plan to win?”  I’m confident that answering these questions, and then being open to adjusting your answers every few months, will help your business flourish.

Let the Good Times Roll?

I’m surely not letting any trade secrets slip by noting that times are good in the hardwood lumber business.  It’s been a while, and it’s a nice feeling.  The strong U.S. domestic market, coupled with continued good demand in Asia, has created shortages of supply.  This, of course, has translated into higher prices.

 

All good.  But also potentially dangerous.  Here are some things that keep me up at night, that I hope don’t catch us by surprise at Baillie.  Maybe some of them will resonate with you.

  1. Don’t let better margins lull you to sleep.  For the last 5 years, poor markets and margin pressure have forced us to get lean and mean, to keep expenses down, and to operate as efficiently as possible.  Better margins make it easier to get sloppy, to ignore the soft spots in your business that needs fixing.  Enjoy the better margins, but stay ruthless on the expense and operations side.
  2. Don’t overestimate how long the supply shortage will last.  So often when we get a little leverage, a little pricing power, we tend to think a strong hardwood lumber market will last forever.  It won’t.  In the last two months, we’ve reopened two facilities that we shut down five years ago.  Others are doing the same.  Supply and demand will balance out.  So use this time to build customer relations, not risk tearing them down just because we’re temporarily in the driver’s seat.
  3. Don’t remain cautious in your hiring.  Now is the time to hire that person you’ll need for the future.  The labor markets will get nothing but tighter over the next year.  And when you hire, don’t just hire people you need now.  Hire the person you think you’ll need 18-24 months out.  As hockey star Wayne Gretsky said, “Don’t skate to where the puck is; skate to where the puck will be.”  Over the last few years, it’s been easy to think no further ahead than next month.  Now is the time to anticipate your personnel needs two years out.  Think about where the puck will be in two years.
  4. Don’t keep your purse strings too tight.  It’s been easy, and probably wise, to be conservative when considering investments over the last few years.  But now it’s time to spend some money, if you are able.  Put in a new kiln.  Upgrade a piece of equipment in your sawmill.  Get that new truck.  Only by investing now will you be able to weather the next down turn.

 

So enjoy the better business we’re experiencing.  But don’t let it lull you to sleep.

Warren Buffett Wrong?

Last week the Wall Street Journal published an article about Berkshire Hathaway’s annual meeting titled “Lesson From Buffett: Doubt Your Self.”  As many of you know, Warren Buffett is the primary owner and CEO of Berkshire Hathaway, and in that role one of the most successful business investors of our generation.  So the headline caught my attention.  Why would Warren Buffett doubt himself?  Aren’t CEO’s supposed to show nothing but confidence?  And after all, who has made more good business calls in the last 25 years than Warren Buffett?

To “spice up” the Berkshire Hathaway annual meeting, Mr. Buffett included a short seller (in other words, a critic, or a person who bet against Berkshire Hathaway stock) on a panel of analysts posing questions to Mr. Buffett.  In an age when CEO’s tightly control everything that happens at their annual meetings, Mr. Buffett’s action was unprecedented.  Why would a legendary investment like Mr. Buffett deliberately put a critic in a position to question his strategy and tactics?  Especially when he has one of the best business track records of the last half century.  Well, as counterintuitive as it may seem, the author of the article argues that “a deliberate life long effort to find people to tell him why he might be wrong is one of the keys to Mr. Buffet’s success.”

None of us are Warren Buffet, but the principle of searching for, even welcoming, criticism and contrary points of view applies to each of us.  At Baillie Lumber, as we evaluate our performance and plan what’s next in our hardwood lumber business, it sure makes for more pleasant, cordial meetings when everyone smiles, nods their head and agrees with each other.  However, even though it can be painful, we make the most progress when we invite the “contrarian”, the pain in the neck critic, to the meeting and listen to him or her snarl about why what we’re doing, is all wrong.  It makes for less pleasant meetings, and maybe even some raised voices and verbal fisticuffs, but it keeps us from living in a bubble and traveling down the wrong road with a smile on our face.

Accepting criticism is difficult.  One of the hardest things for me is to listen to someone criticize me (or criticize our organization) when I know that what they are saying is wrong.  It’s so easy to just dismiss them.  Especially if the criticisms include some personal attacks.  However, I’ve developed a simple rule to follow when facing criticism.  No matter how unfair, biased or just plain wrong the criticism is, listen for the 10% that’s true.  By listening for the 10% that’s true, the 10% that’s right, I’ve gotten some extremely helpful feedback and insights about myself and our company, even when that 10% is surrounded by a bunch of stuff I know is wrong. Tough on the ego, but important for improvement.

So next time I’m reluctant to let a critic in the room, I plan to remember Mr. Buffett’s example.  If Mr. Buffett can publicly open himself to criticism in search of better answers, it’s probably safe to say that you and I can do the same.

Samsung not Apple

Last weekend I read an article in Business Week about Samsung Electronics.  Early in my career, I used to read about successful companies, and then try to implement exactly what they did in our company.  Over the years I’ve learned to be more cautious. As it turns out, not every successful business strategy from another industry works equally well in our hardwood lumber business.

 

The article about Samsung reminded me of this lesson.  I was fascinated that Samsung has taken a completely different approach to the smart phone market than Apple.  And yet both companies are wildly successful.  Quoting from the article, “Apple’s approach is fewer models, each of them exquisitely designed.  Samsung’s is try everything, and fast.”  Later in the article, one analyst comments “Samsung has taken differentiation to a new art.  If I want something in between an iPad and an iPad Mini, I can’t get that from Apple.”  Samsung, on the other hand, is quick to create multiple variations on the products they offer.

 

The lesson here?  One formula doesn’t work for all businesses, all organizations, or even all people.  One could look at Apple, see their success and assume that emulating them is the best path.  Who wouldn’t want to be like them?  However, their biggest competitor, who appears to be gaining ground on them, is taking exactly the opposite approach.

 

So how do I apply this to our hardwood lumber business?  We’re essentially in a commodity business.  For us, trying many different things, being willing to fail, and not being afraid to end up with a variety of products tailored to different customers, seems like the better strategy.  This entails being able to create products quickly, and letting them die if they don’t work.  We’re not there yet, but we’re getting better.  Reading about Samsung inspired me.

 

So, the ultimate take away for me is that the best leaders are not those who go out and try to copy other successful companies.  Rather, success more often comes from searching for organizations that best fit your marketplace and way of doing business, and then tailoring and tweaking their approach to fit your culture and situation.  You may be doing something exactly the opposite of some of the most successful companies in the world, but that’s OK.  I hate to vote against Apple, but for us the Samsung approach seems better.  For someone else, the opposite may be true.

Slow Down!

“The good news is I move fast.  The bad news is I often move alone.”  This quote from a woman named Lisa Thorne burned into my brain as I read it in John Maxwell’s recent book Everyone Communicates Few Connect.

Last month I talked about John Maxwell’s CD on diversity, and how it added a new dimension to my thinking on leadership.  This month I’d like to stay on the leadership wagon with Maxwell (next month I promise to move onto something new!) and talk about the leadership principle embedded in Ms. Thorne’s quote.

Leaders tend to move quickly, to multi-task, to move from one thing to the next rapidly.  Before we became leaders, we were individual achievers, and this ability was largely what made us successful.  We moved faster than the next guy, shifted gears more quickly than the guy right behind us.  Early in my career I was all about this.  I was faster and better than most, and it lead to individual success.

But all that changes when you move into a leadership role.  The heart of effective leadership, according to Maxwell, is connecting with people.  Only by connecting with people at a personal, emotional level can you really lead them.  And to connect with people, you need to slow down and go at their pace.  That takes patience.  It also takes energy.  It’s also counter intuitive for those of us wired to always go faster.

As a strong individual achiever, that’s been hard for me.  I can think of several times when my leadership in our hardwood lumber business suffered because I was going at my pace, not the pace of the person with whom I needed to connect.  I was all about getting there faster and more efficiently.  And often I did.  But at the end of the day, I was there alone, without the team I needed to accomplish the task.  I didn’t slow down enough to develop the connections necessary for people to want to come along with me.  This remains a challenge for me, but at least one of which I’m now aware.

Henry David Thoreau captured this “slow down” principle well when he said “The man who goes alone can start the day.  But he who travels with another must wait until the other is ready.”  Think about where you may need to slow down in order to connect better with those around you.  You may be surprised at the results!