“Were you popular in school Dad?”, my daughter asked me recently.   

“Not really”, I told her.  “I had a group of friends I hung out with and that was good enough for me.” 

My oldest is getting to the age where things like being popular are starting to be topics of conversation amongst her friends.  One of the things I continually impress upon her is to make sure she chooses a friend based on that person’s inherent qualities rather than how many people seem to like that person.   

It’s a common trap that we fall into as humans.  We follow the herd, we do what others are doing, we want to be seen as being “with it.”

Sadly, it’s a phenomenon that carries into the corporate world as well.   

Goldman Sachs.  The firm many hopeful MBAs strive to work for.  The crème de la crème of the financial world.  In other words, the most popular girl on Wall St.   

According to Greg Smith, a recently resigned Executive Director at Goldman Sachs, the firm apparently has the same feelings toward its clients that the popular girls at school have toward the less popular.   

In Mr. Smith’s New York Times Editorial titled, “Why I am leaving Goldman Sachs” he has this to say: 

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. 

Muppets?  A fitting name for the clients that provide your revenue?  Not to mention the part about ripping them off.   

Sadly my friends I am not shocked.   

“Not shocked by one of the biggest and best known institutions referring to their customers as muppets and apparently not putting their interests first!  You sir, have no shame.”, charges the peanut gallery.   

No we are not shocked at all.  It’s actually a very common occurrence amongst organizations that succumb to the complacency of their own success.   

Let’s be candid, to advance in money and power within a large organization requires a person to fulfill various internal requirements.   

This phenomenon is sometimes called “Face to the CEO/Partner and backside to the client.”  Some large organizations often make the mistake of judging their people by such metrics as billable hours, professional certifications acquired, etc. that have little to do with helping the client/customer.   

If this behavior is allowed to continue it usually results in the outright derision towards clients that Mr. Smith describes above.  Those that have experienced the indifference of these misguided organizations are familiar with the answers to the following simple questions: 

• Can you really say that you, as the client, are the firm’s number one priority?
• When working with the senior manager or junior partner are you, the client, “his reason for being” or does he have other priorities and incentives he is concerned with?
• If he had to choose between submitting a better metric to the senior partner or making your business better, which would he choose?
• When they go back to the office are they discussing how they can better serve you or are they bragging about how they just bagged another sale or another slew of billable hours from the “muppet?” 

We all know the answers here.  All too often, the client is simply a tool to advance the career of the firm’s employees.  

Its comical that business school students study and observe the fact that time and time again, smaller firms are much more dynamic, attentive, responsive and much more honest with their clients.   

Quite simply, you the client, ARE their reason for being.  There are few internal metrics to track, no detached senior partner demanding adherence to internal targets and everyone in the firm has a personal stake in your success.   

But back to the travails of pre middle school.   

“So Dad, basically what you are saying is that it’s better to have someone as a friend  that really knows and cares about me?” 

“If you can find someone like that..hold onto them”, I replied softly.  

Have a great week,  

Michael Bechara, CPA

Managing Director

Granite Consulting Group Inc.

www.consultgranite.com

mbechara@consultgranite.com

3.  Worshiping the false idol of Information Technology  

Technology has improved our lives in many ways.  When taken to an extreme this important cost benefit advantages not only disappears but comes back to bite us.  Web apps, VPN connections and virtual machines all can make our lives easier and more connected for sure, it’s when every problem has to have a technical solution become the problem.    

If your IT department is investing months to automate a manual process that takes 10 minutes a week… If after 45 minutes on the phone with the helpdesk they tell you to reboot…..you might be a zombie.   

4.  Risk Management as process without a point  

At its core business is about risk.  Any hardnosed businessman is always analyzing the upside and the downside of any course of action.  Modern management techniques and fads have unfortunately led to Risk Management as a process without a point.   

Mindless zombies are cataloging, tabulating and scoring risks without a decision point in sight.  When asked what they are doing they may frantically stammer, “I’m …I’m…saving the company!” 

Humans understand what the objectives they need to achieve, what’s threatening the objectives and how to overcome the obstacles.   

5.  Politics takes over the company   

All organizations have internal politics.  It’s simply unavoidable.  At its heart politics is about the organization’s decision making process.  Who makes the decisions, who ignores them and how they are carried out.  Some internal jockeying can be positive as it can ensure that ideas are vetted and not blindly implemented.   

Human companies keep a lid on internal politics and do not let them get out of control.  A zombie company’s management perpetually schemes on how to do one another in, a terrible quarter at a key business unit is cause for celebration at the other units and company parties are occasions to goad the competing managers into making fools of themselves.   

The business is but a secondary concern.   

I stopped playing football after my freshman year, maybe it was not for me or perhaps it was tiring to watch Harry’s sickly smile as he ran up the middle repeatedly.  Come to think of it..Harry would have made a great zombie CEO……

Have a great week,

Michael Bechara, CPA

Managing Director
Granite Consulting Group Inc.

mbechara@consultgranite.com

www.consultgranite.com

I was never star athlete or anything but I did play my share of school sports.  A long time ago I was on the freshman football team in high school.  Truth be told I was a little too skinny but I could run fast so they started me at the split end position.   

As we practiced our plays during the week I remember this one kid that had some sort of logic blocking enzyme or something in his system.  I can’t remember his name for the life of me so let’s just call him Harry.  Harry was the Running Back.   

To tell the story properly a little vignette would help: 

“Right Eye 9 sweep on 2″ called the Quarterback as we all stood freezing in the huddle.  It was a simple play that called for the Running Back to receive the handoff and run around the defense on the right side of the field.    

Lining up next to the Offensive Tackle, he and I both shook our heads knowing what was to come.  The Center snapped the ball and Harry took the handoff from the Quarterback and ran straight up the middle of the field, unprotected, right into the crushing defense.   

He got mauled.   

For whatever reason, whichever play was called, Harry would run the ball straight up the middle…and get creamed.   

When questioned by the coach the conversation would go something like this: 

Coach:          Did you understand the play?

Harry:           Yea

Coach:          Do you know that you are making us lose?

Harry:           Yea

Coach:          And you realize you are getting crushed by running the ball up the middle when the play doesn’t call for it?

Harry:           Yea

Coach:          Then why do you keep doing it?!

Harry:           I like it 

Simply put….Harry was a zombie.   

Zombies have taken over pop culture.  There are websites that have pretty much gone mainstream that detail how to protect yourself against zombie attacks and others that describe how zombies could scientifically be created and continue to exist.   

The supernatural aside there is also another definition for the word zombie.  It refers to the mindless devotion to failed ideas, apathy to world around us and a general state of “non thinking.” 

In our work, we run into zombies from time to time.  These are otherwise good people, that for whatever reason, fall into Harry’s way of thinking.   

Here are 5 ways to identify if you might be a Corporate Zombie: 

1.  If your business process does not produce the product, service or information you require yet you doggedly enforce compliance with it.   

Albert Einstein once said doing the same thing over and over and expecting a different result is the definition of insanity.  The delicate chemistry of people, processes and systems has to continually be reformulated to attain high performance results.   

A zombie insists on dogmatic adherence to a process that worked 10 years ago, the human says, “Umm..maybe we should improve things?” 

2.  If your Human Resources function continually demotivates people.   

HR has the heavy responsibility for creating compensation structures, work environments and many corporate policies.  In fact I’ve heard it said more than once that HR manages the “assets” of a corporation i.e. its people.   

Making the right business decisions should drive the compensation structure and corporate policies not the other way around.  If you’re passing up business opportunities because your employees are not incented to take advantage of them you…If you assign employees to be on “workplace improvement” committees that add 45% to their workload….you might be a zombie. 

We could go on and on..but join us next week for the completion of our discussion of the corporate supernatural!

Have a great week,

Michael Bechara, CPA

Managing Director

Granite Consulting Group Inc.

mbechara@consultgranite.com

www.consultgranite.com

“They invited us, hurry and pack up and lets go..the game is on soon.” 

“Alright, alright”, I replied to my boss putting all of the paperwork away.    

It was an autumn day, years ago in Cleveland and a young 22 year old staff auditor named Mike Bechara stopped his grunt work at the command of his “Senior.” 

My boss (a very “seasoned” senior auditor…all of 25 years old) just informed me that we got invited to the Senior Financial Analyst’s house to watch Monday night football.   

My boss drove and followed the other guys from the office in their beat up car.  We wound our way through the streets of Cleveland until we arrived at their place.   

“Wow”, I said getting out of the car, “This is….the ghetto.” 

“I’m sure you have a fine career in real estate appraisal ahead of you…now can we go?” replied my boss with considerable annoyance.   

We followed the other guys into a large house that they were renting.  When we got inside I was struck right away by the grandeur of the place.  There were wide solid wood moldings around the windows and the ceiling was adorned with heavy crown moldings as well.  On top of it all, in the hallway on the way to the kitchen there was a stained glass window.   

“You couldn’t build a house like this now”, I thought, “It would cost a fortune.” 

I asked one of the guys, a native Clevelander, and he said that up until the late 60s, maybe early 70s, the neighborhood was quite affluent and house was representative of that era.  Now?…well now they rent them to recent grads like us that can’t afford to live in a good area.  

When taking risks, one thing you have to watch out for is the tail end of an era.   

“This Bechara is nauseating, he makes one visit to a poor neighbor years ago and he talks about risks like some tough guy”, retort my friends from the peanut gallery.   

Alas, the end of an era usually fools everyone whether the era in question is war, peace, inflation, deflation, or population patterns.   

Examples abound: 

• Interest rate cycles last 25 years on average.  In the eyes of people born 30 years ago or less, interest rates have always been low and will always be low.  They can’t imagine another world. 
• When a period of war lasts a long time, people forget that wars suddenly end.  Lebanon was a bad Hollywood joke in the eighties as the civil war dragged on for 15 years.  Very few people positioned themselves for the post war boom in the early nineties when the civil war suddenly came to an end. 
• Just-In-Time inventory and off shoring of production have been business school gospels for the past 20 years.  Savvy business executives are questioning whether in today’s world of heightened political risk, energy volatility and dirt cheap money, it makes sense to have a very low investment in salable goods and have them shipped from 12,000 miles away to boot.   

Then there is the granddaddy of them all.   

Perhaps the biggest example we can point to is the 50 year trend of middle class Americans living in the suburbs.   

Wait…could this really come to an end?  I mean, can anyone imagine middle class people living in Poughkeepsie, much less Cleveland?

Stranger things have happened my friends.  That old house in Cleveland was inhabited by some very well to do people at one point.  In fact, if you look at mid sized cities across the country from Albany, Danbury, Scranton, to Baltimore, they all have these grand old houses where the middle and upper middle classes once lived.   

It was as recent as the late 60s when the middle classes decamped for the suburbs in droves.  Cheap energy, cheap credit and cheap automobiles made this all possible.  But is there something happening now that could change all that?  

During the recent housing bubble we overbuilt…way overbuilt, our housing stock.  We have decades worth of housing inventory in the form of 3,000 square foot McMansions in exurbs 40 miles from job centers. Millions of pounds of stainless steel, miles of granite countertops and thousands of acres of hardwood floors…that no one will buy.   

Economists call this mal-investment.   

This article in the Atlantic describes suburban neighborhoods in California that are succumbing to abandoned housing and the crime, vandalism and economic malaise that follows.   

http://www.theatlantic.com/magazine/archive/2008/03/the-next-slum/6653/ 

Don’t be surprised if those lovely suburban McMansions with their Belgian block driveways, cedar clapboard sidings and bay windows are cut up into apartments in an attempt to make them economically viable.   

It may be the end of the trend of suburban housing and there are certainly risks to those who do not recognize the ground shifting.  But there is also opportunity for the quick witted and strong of heart, for with change comes new prospects.   

So we ended up watching Monday night football in the Cleveland ghetto.  Late in third quarter I noticed they had run low on beer.  Being a good guest, I offered to run out to the store and grab some more.   

“You can’t go out now”, one of my hosts said pointing at the sofa, “Sit down and watch the rest of the game.” 

Thinking he was just being polite, I reiterated my intention to go out and get more beer.  The three guys that were renting the place looked deadly serious at me for a moment.  One of them finally said slowly while shaking his head, “Dude, for-get the be-er.” 

Have a great week, 

Michael Bechara, CPA

Managing Director

Granite Consulting Group Inc.

mbechara@consultgranite.com

www.consultgranite.com

“Deal with people according to their intelligence” – imparted circa 1979 and repeated often since then

So we were on our way for a little “between-the-holidays” trip. As the minivan plied the interstate across the Connecticut countryside north of Hartford, the nagging started.

The kids had brought a handheld video game system with them for the ride. My son apparently was on a tear playing some action game, and did not want to let his sister have her turn.

As the arguing reached a crescendo, I looked in the rearview mirror and tried to mediate.

“Why don’t you just share the video game with your sister?” I asked my son.

“Well how much should I share it?” he asked.

“Half the time,” my wife and I responded together.

“Oh so I have to give her half of everything I have? Fine when I get home I’ll give her half my clothes, half my toys and… ok great ..she’ll even take half my room! …..

Really, Dad? Don’t you think that’s unfair? You’re always talking about people taking half your money!”

My wife looked like she was about to make a move into the backseat.

“Nice strawman,” I calmly replied.

“What?” the boy replied quizzically.

So I explained to the him the debate tactic of the strawman, where a debater attacks an argument that is easy to refute but which is also an argument that was not made by the other side.

Unfortunately, these tactics are not limited to children arguing. In the recent Presidential debates they have been on full display for all to see. Amongst the deceptive debate tactics used by almost all the candidates are:

1. Name calling – Since I can’t make a cogent argument, then you Sir are an idiot!
2. Changing the subject: On the subject of energy independence I just want to say that I faithfully served my country for 25 years…..
3. False premise: Now everyone knows this policy is just and fair so if you oppose it you are against justice and fairness!
4. Sloganeering: Everything changed after 9/11
5. Cult of personality: Ok so my opponents policy would actually solve something but I’m better looking than him! Don’t you see my expensive hairstyle with the perfectly placed touch of gray….
6. Vagueness: We will be free and energy independent by 2013!
7. Scapegoating: If it wasn’t for people like Mr. X, we wouldn’t be in this mess!

So what does this mean? Do we expect politicians to be honest and straightforward and make logical, cogent arguments about weighty policy issues?

Actually… yes.

In another vein, the media members asking the questions encourage the degrading of the atmosphere into some smarmy gossip show. A sampling…..”Mr. X, I have an important question to ask…Blackberry or iPhone?”

Seriously?

The question we should be asking ourselves is, “Who are the idiots in this debate…. them….or us?”

A long time ago, a wise old man advised me to deal with people according to their level of intelligence. The presidential candidates must hold an exceedingly low opinion of their audience. How else does one explain the simplistic diversions, made up arguments and lame personal attacks that permeate the so called debates?

They are tailoring their message for the perceived level of intelligence of the audience. Which begs the biggest question of all….are they right?

We hope not…but back to our little holiday trip…..

As I talked the kids into sharing the video game amongst themselves. My wife and I began chatting about what just happened.

“I don’t like the way he comes up with these excuses,” she commented. “I’m going to speak to him about being more straightforward.”

Not being able to resist, I smiled, put my hand on top if hers and smoothly said, “Relax, he could be President someday.”

It was a real quiet ride after that.

Have a great week,

Michael Bechara, CPA
Managing Director
Granite Consulting Group Inc.
mbechara@consultgranite.com
www.consultgranite.com