The Coach's Corner

Archive for 2019

The Corruption of Capitalism in America

November 18th, 2019 // Tom Doescher // 0 Comments

Tom Doescher - Doescher Advisors

is the subtitle of David Stockman’s book, The Great Deformation. Some of you more seasoned readers may recall the young Grand Rapids congressman who served as President Reagan’s budget director. I remember it clearly because we lost a very senior Plante Moran staff member, who joined Stockman’s staff. Those of you who know me well have often heard me say that I’m a fan of the free market. Well, in this 700-plus-page book, Stockman rocked my world. It continued a theme in my life where I’m realizing that much of what I’ve believed to be factual may not be. Again, my seasoned readers probably get it.

Here are a few of my thoughts:

  1. First of all, this could be a college-level economics textbook; it pushed me to the limits of my personal knowledge.
  2. Stockman has an enormous vocabulary or a Ph.D.-level thesaurus.
  3. Best I can tell, he isn’t aligned with either the Democratic or Republican party.
  4. The interconnections between the big banks and investment banks and our government are spooky. Just one example: How did Hank Paulson, former Goldman Sachs CEO, happen to be available to serve as the Secretary of the Treasury just as the Great Recession began? Patriotism?

Learnings from Stockman:

  1. He provides a fairly detailed history of 20th and 21st century U.S. economics, with relevant details about countries like China and Japan.
  2. He explains and provides details about the Keynesian monetary theory and application, and gives his views about its negative impact over the past 50 years.
  3. As a capitalist, he is opposed to deficit spending and would say that Presidents Reagan and George W. Bush significantly increased the federal deficits to an alarming level.
  4. He reminds us that President Eisenhower warned the nation that we must guard against the influence of the military-industrial complex.
  5. President Eisenhower reduced the defense budget and did not reduce taxes against his party’s wishes.
  6. Based on their actions and policies, both political parties support Big Government.
  7. According to Stockman, who was in the Reagan White House, the trickle-down theory of economics, or the Laffer curve, did not and does not work.
  8. He provides some very interesting, detailed insights regarding the causes for and the remedies of the Great Recession.
  9. He is a true capitalist and his criticisms in the book are of crony capitalism, where the government intercedes in the free market on behalf of a special group, like bailing out Wall Street or the auto industry. He believes the Republican Party has really drifted away from true free market capitalism, and his book provides many solid examples to support his view.

As I’ve already stated, over the years I’ve made assumptions that later turned out to be myths. Throughout this book, I once again felt that way. If you consider yourself a capitalist/free market person, I would highly recommend you take the time to read it. Unfortunately, politics have twisted some truths to fit positions or platforms.

Closing comment: For any automotive suppliers who are reading this blog, yes, this is the same guy who created, founded, presided over as CEO, and took Collins & Aikman bankrupt, and he also covers that in the book. Honestly, I was a little disappointed with his lack of remorse for his failure.

Another Employee Retention Idea

November 4th, 2019 // Tom Doescher // 0 Comments

Tom Doescher - Doescher Advisors

In the August 27, 2019, issue of Inc. magazine, Bill Gates is quoted as saying the most important perk companies can give their employees is “flexible work arrangements” (FWA). The article goes on to report on a new Harvard Business School study that says companies that let their employees “work from anywhere” and work “whenever they want” wind up with employees who are more loyal, more productive, and cost less.

How Companies Benefit When Employees Work Remotely

I can feel the cynical pushback from some of you, but bear with me. The starting point for any policy would have to be to include guidelines for “who” and “when” employees would qualify for FWA. Examples of exclusions that I can think of would be: office receptionists, those whose work is performed at the clients’/customers’ place of business, and those who are on teams that continually collaborate, to name a few.

Probably one of the challenges of adopting an FWA would be allowing some employees to have this perk, while denying it to others. Obviously, whatever you do has to be a win-win. I know a young market research professional who started at her employer’s Detroit headquarters, but after a year asked if she could work remotely from Colorado. Today, she works remotely from the East Coast.

At my former firm, Tailored Work Arrangements (TWA) have been ragingly successful for years — and the firm has been able to retain very talented professionals. My all-time favorite TWA is an amazing story. A young tax partner and her husband had adopted an infant daughter and, as time went by, she asked if she could reduce her work hours to spend more time with her daughter. The firm gladly agreed. Then she asked if she could work part-time, and the firm gladly agreed. She was a very valuable professional in a highly specialized area of tax. Sadly for us, she eventually decided to resign from the partnership and stay home full-time. A couple of firm partners continued to stay in touch with her, and even had her perform some contract work in her unique specialty area. As her daughter grew up and went to college, she was excited to rejoin the firm as a non-partner. After several years, she was asked if she would like to become a partner again, and she said yes. She went through the partner selection process, and once again was offered a partnership. As a matter of fact, she’s the only person, in the 90-year history of the firm, to have been promoted to partner twice.

In this competitive world, I happen to agree with Bill Gates; I believe companies that figure out ways to accommodate employees’  special needs will be the winners in the long run.

The Business Roundtable Joins Owner-Operated Businesses

October 21st, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

The August 20, 2019, Wall Street Journal reported that the Business Roundtable, consisting of 188 of the largest corporations in the U.S. including GM and Ford, and led by JPMorgan Chase CEO Jamie Dimon, has changed its statement of purpose. For decades, the Business Roundtable adopted the position Milton Friedman took in his 1970 article entitled “The Social Responsibility of Business is to Increase its Profits” — or, simply stated, The Social Responsibility of Business is to Yield Higher Profits for Shareholders.

Of the Business Roundtable’s 188 members — Mary Barra and Jim Hackett are part of the group — 181 CEOs endorsed the new proposal, which includes the following statements concerning the responsibilities of businesses:

  1. To deliver value to customers.
  2. To invest in our employees.
  3. To deal fairly and ethically with our suppliers.
  4. To support the communities in which we work.
  5. To generate long-term value for shareholders.

I believe these 181 large global corporations are catching up to the owner-operated companies I’ve worked with for the past five decades. I could provide so many examples of where they’ve already embraced these principles for years; here are just a few:

  1. I had a $10 million auto supplier client who solved a critical air bag problem for a Ford Motor Co. vehicle, avoiding an expensive delayed launch.
  2. There are many stories where owners have helped team members and their families. Recently, I experienced an owner who went above and beyond to console an associate whose young wife died in a tragic auto accident.
  3. Many owner-operated businesses are really good with their suppliers. Some pay them very timely — and, as a result, they  often receive priority treatment.
  4. With regard to community involvement, I retrieved excerpts from comments I made at a 2001 Plante Moran Manufacturing Practice presentation to our team:

“Who are our clients? They are men and women who risk their wealth every day to make stuff. Most of them work quietly behind the scenes, providing jobs and career opportunities for millions. They serve on not-for-profit and school boards, and on city councils. They seem to be the ones driving many charitable fundraisers in our communities.”

So, what’s my point? Simply stated, owner-operated companies have been holistic in their approach to business forever. I’m delighted that Jamie Dimon and the Business Roundtable have joined them.

Jobs, Jobs, Jobs

October 7th, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

Part of our mission statement says: “Doescher Advisors was founded to help businesses increase profits and jobs …”

After enjoying a very rewarding career at Plante Moran and having the privilege of leading more than 30 global mission teams (and achieving Delta Airlines’ Diamond status by logging over 150,000 Frequent Flyer miles annually), I decided to spend my “next season” advising local business owners. As a free market advocate, I believed the best way to help the world was to help business owners create “great jobs,” especially for the less-skilled workforce. I know you’re thinking “That sounds pretty corny,” but it’s the truth — and, eight years later, I could tell you some great stories.

When I recently read The Coming Jobs War by Jim Clifton, CEO of Gallup, I was encouraged and motivated to continue in this line of work. As you probably know, Gallup is a 75-plus-year-old, highly regarded global polling organization. Clifton’s book supports my decision to combine my business and philanthropic activities into Doescher Advisors.

The following are some fascinating excerpts from his book, with a few editorial comments:

  1. “If you were to ask me, from all the world polling Gallup has done for more than 75 years, what would fix the world … I would say the immediate appearance of 1.8 billion jobs.” (Editorial comment: I know you’re reading this at a time when the U.S. unemployment rate is at a 50-year low, but think about what he didn’t suggest — like peace, democracy, or the alleviation of world hunger.)
  2. Gallup also looks at underemployment, which is at nearly 20 percent. (Editorial comment: We also know that many people have dropped out of the workforce, resulting in a labor participation rate that’s 63 percent down from its peak at 67 percent.)
  3. Very few Americans are aware that small- and medium-sized businesses are responsible for most of the jobs in America.
  4. Don’t allow your local constituencies to look to Washington for support. Free money eventually makes you more dependent. (Editorial comment: I’ve observed this phenomenon all over the world.)
  5. All prosperous cities have a self-organized, unelected group of talented people influencing and guiding them — call them local tribal leaders. These leaders are loyal, highly successful, usually wealthy, respected, well-known people. (Editorial comment: In Detroit, I think of Dan Gilbert, and in Flint, Phil Hagerman.)
  6. Innovation itself doesn’t create sales. Entrepreneurship is the driving phenomenon within the city supercollider. (Editorial comment: In other words, sometimes the innovator can successfully commercialize their idea, but other times, the inventor needs help from someone who can build a business — Clifton calls this person an entrepreneur — around the idea. It takes both.)
  7. Entrepreneurs are the most valuable people in the world, at least as far as the pursuit of economic development, GDP growth, and job-creation.
  8. Approximately 20 percent of workers in the U.S. are actively disengaged. (Editorial comment: I find this statistic very sad, and I actively work with my clients to reduce this phenomenon.)
  9. According to Gallup economic estimates, nearly one in five U.S. managers are dangerously lousy. (Editorial comment: This is another area in which Doescher Advisors spends time assisting our clients.)

Because I work with so many businesses, I’m aware that many of you are struggling to fill openings due to the lack of qualified candidates. Please don’t give up. Hang in there; it’s important that you continue to grow. There are many initiatives to work on this problem, but I’ll save that for another blog.

For those of you who have trusted Doescher Advisors to partner with you, thank you. I promise we’ll continue to do our best!

The Impact of Private Equity Groups

September 23rd, 2019 // Tom Doescher //

Tom Doescher - Doescher Advisors

As I reflect back on my 50 years in the workforce, I can’t think of anything that has affected and impacted businesses, especially middle market businesses, more than private equity groups (PEGs). Most of you know this, but for those who may not, in its simplest form the sponsors of a PEG raise investment monies from pension funds, insurance companies, wealthy individuals, and others. The money is pooled and then invested in the purchase of companies, many owned by their founders. If you own a business, this has created a great avenue for liquidating your investment in your business. Some PEGs will do partial purchases, and a few will even invest without gaining voting control (under 50 percent ownership). For private company owners, it provides another type of buyer in addition to individuals, companies, or going public, which has its pitfalls.

In this blog, I would like to point out one change in commerce that’s a direct result of PEGs: the concept of subscriptions (customer commitments to regular monthly payments, often automatically renewed annually). Obviously, subscriptions existed before PEGs, but if you look at different business sectors, there are many new versions of “subscriptions” that exist today. Some are obvious, others are not.

  1. Many IT product companies have transitioned from selling you their product for $1 million to effectively leasing their product for $20k per month forever.
  2. My partner’s dentist sold out to a dental roll-up group owned by a PEG, and they now offer an annual fee that includes basic cleaning, X-rays, etc., which is automatically charged to a patient’s credit card.
  3. There are a number of businesses that already had an annual, multiyear, or automatic renewal provision — so they already had a subscription. For example, I work with a security firm that provides home and business security alarms and cameras that are in this category.
  4. There are businesses that are attempting to transform what I might call a service into a product that can be sold as a subscription with a monthly fee.
  5. One of my personal favorites has to do with my lifelong passion for alpine skiing. Two companies have created a partnership through the outright purchase of multiple ski resorts or some other “arrangement.” They offer “season lift passes” that allow you to ski at many different major ski resorts throughout North America. The price point is such that with only two trips, it’s worth the investment. So, me being me, I’m trying to figure out what’s going on. They’ve taken a weather-dependent business, snow skiing, and solidified and made the revenue stream less variable and more predictable. Skiers need to purchase the season pass before Thanksgiving. (How’s that for cash management?) In addition, they’ve substantially increased the price of daily lift passes, which makes the season pass even more valuable, or they get premium prices from those who opt for daily passes. Brilliant!!!

Why are the PEGs so focused on subscriptions? The simple answer is that they’re reducing variability in revenues and increasing profit predictability for the purpose of reselling their investment as quickly as possible for as much as possible.

Maybe you should take this concept and apply it to your business. If you do, I’m confident your company will be more valuable.

The Advisor’s Corner

Tom DoescherYou’ll find stories from the trenches, business lessons, and pertinent questions to help you find inspiration, professional growth, and leadership savvy.

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