Better Team Management: Would running teams like Professional Sports franchises work?

In professional sports, the primary role of the team manager (or coach) is to get the highest level of production out of their team. They provide leadership and they set the tactical team strategy. They do not set or negotiate the salaries of their players; that is left to the role of a GM.

Would this structure lead to higher performing teams within companies?

What if team managers didn’t manage salaries for their direct reports? This HBR article on “How to Discuss Pay with your Employees” states it correctly: “The salary conversation is just awkward for everyone”. As a manager, you have to lead and inspire an individual to achieve peak performance and I believe this can be done much more effectively if you didn’t have direct control of the purse strings.

In the sports world, the manager would talk the player up as much as possible to motivate the individual and can be a total advocate for that player. If the manager is the GM him/herself as well, then there is a conflict of interest.

In most companies, the only way to significantly increase your earnings is to move up the corporate ladder: Individual Contributor >> Team Leader >> Manager >> Director > VP >> CxO. Companies will add prefixes like Sr, Principal, Executive, or other to add more pay levels to the ladder.

Because of this, I believe that “Star” players are rushed up to ladder without sufficient training and experience. Individual contributors can make a significant impact to the company, especially in smaller organizations. Some individual contributors are just exceptionally good at their jobs and it is to the benefit of the company to keep them there. Some people actually prefer this role and would be happy to stay there if the compensation was according with their contribution to the company.

This is a key point: The Manager isn’t automatically the highest paid person on the team roster. This is the GM’s decision.

Also, not all players equate to good managers. It’s a different skill set. In sports, you see it, so often the case, that the star players don’t equate to the best coaches. Often the best coaches are those that were mediocre players, if players at all (they could’ve been analysts). Point is that they understand the game and strategy and they have the management skills to motivate and work with people.

I think structure would also ease the idea of bringing in management from the outside. If folks understand that salaries aren’t necessarily dictated by title, then I think you get people to remain in their best positions for longer periods leading to higher productivity.

In a software development team, a SW Manager could manage X number of developers, engineers, and project managers. The GM is a Director who manages Y number of Managers. The Director’s GM is a VP who manages Z number of Directors.

Further up the chain, the CEO is the manager of the C-level staff, but the Board acts as the GM. Essentially, I think the GM should be the skip level manager or perhaps someone from HR or Finance in a smaller organization.

When it comes to salary negotiation, the GM is setting the team budget and handling all the negotiation with the player. Obviously, the manager’s input is important; however, the manager is removed from the discussion. It’s out of their hands. All the manager focuses on is doing the best with the team they’re provided.

Better managers. Better players. Optimal performance.

But don’t forget about team chemistry. 🙂

Equifax gets Hacked and Wins?

The Equifax hack is a gross tragedy. The consumer is a big-time loser in this event. If Equifax doesn’t drown in lawsuits, they’ll surely come out of this stronger. And this is a growth catalyst to Experian and Transunion. When an industry causes consumers to lose and that industry benefits from it, that industry is ripe for disruption.

The credit bureau triad of Equifax, Experian, and Transunion have a stranglehold on us. The worst part is that we, as consumers, have no choice in the matter. I’ve never given my information to Equifax. I’ve never chosen to engage with them. Yet, they have this omniscient power over me. Their opinion of me plays a hugely significant role in the quality of my life because we live in a credit-based economy.

“Never let a crisis go to waste”, Rahm Emanuel

The hackers now have all the information they need to steal the identity of almost half of all Americans. And you know this information will be sold on the dark web for years to come.

So everybody is now talking about and thinking about how to protect themselves. We’re all at a much higher risk now. Everyone has to be thinking about adopting a credit monitoring service. From a marketing perspective, this is a dream come true – at least for Experian and Transunion and the smaller credit monitoring services.

Both my wife and I “may have been impacted”. Ugh!

I’ve never purchased a credit monitoring service. Now, I am seriously contemplating if I need to keep a much closer watch on this. I’ve moved from being a cold lead to a warm lead.

I’ve heard horror stories about identity theft. It can takes several years to clean the books. The credit bureaus don’t make it easy on the victims.

Equifax is offering their TrustedID Premier service free for 1-year. BUT, apparently, if you enroll, then you are waiving your right to sue or participate in any class-action lawsuit. Hmmm.

This is how Equifax can come out winners here. If many people take the easy route and sign up for the free year of service, they give up the right to partake in any class action suit that may arise; thereby, protecting Equifax on that front. Equifax also enrolls ALL of those new clients. And everyone knows, it’s much easier (and cheaper) to retain a client than to attract a new one.

Most credit monitoring systems seem to run about $30/mth. This is like an extra $360/yr tax to me. The hackers and their clients have all of our information for life. I now have to watch my credit for life.

This industry is broken. I have to imagine that someone way smarter than me can fix it and make a lot of money. Please do.

Understand Your Edge

I’ve been reading a lot about copywriting, persuasion, and sales strategies recently (I need to be writing about that more). It is a fascinating topic. And when I say copy, this incorporates (verbal) sales messaging. It makes me wish I had taken more philosophy and psychology classes in school.

In business and in any realm where there is competition you need to beat, it’s crucial to understand your edge. Why should the buyer select your product or your service? We live in the information age and it is almost certain that the buyer can/will research the competition (although, in simplistic transactional sales, this can be countered by techniques like limited time offers).

The copy needs to reflect this edge. Does your edge solve a pain point and/or deliver a pleasure? Your copy needs to amplify the pain and pleasure points and it needs to specifically do so around your edge.

One edge that a small company can have over a big corporation is speed. I really like John Boyd’s OODA loop. John Boyd was a F-86 Pilot and Commander in the US Airforce.

Boyd believed that when at a disadvantage, a competent pilot could still overcome that disadvantage by “Attacking the Mind” of his opponent. The OODA loop is a process that defines how we react to stimulus.

“In order to win, we should operate at a faster tempo or rhythm than our adversaries—or, better yet, get inside [the] adversary’s Observation-Orientation-Decision-Action time cycle or loop … Such activity will make us appear ambiguous (unpredictable) thereby generate confusion and disorder among our adversaries—since our adversaries will be unable to generate mental images or pictures that agree with the menacing, as well as faster transient rhythm or patterns, they are competing against.”

Colonel Boyd trained his pilots based upon his observations of Human reaction time and as a result his pilots had a 10 to 1 kill ratio over the superior Mig-15’s.

“The key is to obscure your intentions and make them unpredictable to your opponent while you simultaneously clarify his intentions. That is, operate at a faster tempo to generate rapidly changing conditions that inhibit your opponent from adapting or reacting to those changes and that suppress or destroy his awareness. Thus, a hodgepodge of confusion and disorder occur to cause him to over- or under-react to conditions or activities that appear to be uncertain, ambiguous, or incomprehensible.”

The OODA loop has become an important concept in many areas outside of air-to-air combat (dog fighting).

 

 

 

Silicon Valley is Losing her Luster

According to The Kaufman Foundation 2017 Startup Activity report, SF & San Jose slipped several spots. Cities such as Miami, Austin, and Los Angeles are moving up. St. Louis, Cincinnati and San Antonio are cities that jumped up the most.

Silicon Valley will always be Silicon Valley. It is la creme de la creme. But it makes perfect sense, and is good overall, for entrepreneurship to extend beyond the valley.

The greatest concentration of engineers is in the valley. The greatest concentration of venture money is in the valley. But if I’m starting a new company, I wouldn’t start it in SF; it’s just too darn expensive.

We used to live up in SF area and we have a strong network still there. But, even if we wanted to move back, it would be extremely difficult to do (while maintaining the same lifestyle). The bang for the buck is so much better outside of the valley. As a company, I think you could attract the talent with a pretty good salary (but much less than a SV rate) and better cost-of-living. A $200K salary in the bay area is perhaps $100-120K outside, but that person can get a 3-Bdrm, 2-Bath house for $250K Vs $2M.

We’ve thought about moving out of California as well because the state taxes are ridiculous. This makes Texas and Florida very appealing (we do enjoy the sun). But alas, California weather is the best. Where else can you Snowboard and Surf on the same day?

I do like the start-up activity moving south. Los Angeles is nice, but the traffic is terrible. I’d love to see more companies moving down to Irvine. It will happen, I’m certain, the appeal is too great (think SF to San Jose). If a company is really good, the talent and money will come to it.

If We Don’t Send Bankers to Jail, They Will Not Stop Cheating

Crime pays, if you’re a banker.

How many stories of fraud do we hear from the banking industry? NY Post reported that the DOJ probing Goldman Sachs for allegedly rigging Treasury auctions. This is a $14 trillion dollar market. Apparently, Goldman Sachs won almost all auctions for US Treasury bonds from 2007 to 2011.

Supposedly, there are safeguards in place to make the bidding competitive. But using emails/chats, Goldman bankers colluded with other banks and somehow managed to submit a bid “just above” the offer at the last minute.

I can’t pretend to understand all the intricacies of this, but one has to wonder how much kick back the colluders at the other banks were getting.

The main point, anyway, is that this is more of the same. Bankers will lie, cheat, and steal their way to immediate riches because nothing happens when they’re caught. The bank makes billions, they pay millions in fines. The guilty bankers don’t go to jail, don’t get their licenses revoked, don’t get clawbacks. There is no real disincentive to cheat. Frankly, it’s a good investment to continue to break the laws.

 

Tech Merger Monday: Jive Acquired; AngiesList Acquired

Jive was acquired by private equity firm Aurea for ~$462M. I don’t know that Jive ever turned a profit. They went out with a bang ~5 yrs ago. They had a market cap of over $2B at one point.

I’m sure the founders and venture money did quite well. As well as the executive staff that took them public, who have long been gone since.

I almost went to work for Jive in 2011. I wonder if I would’ve cashed out at the right time and if I’d still be there had I taken the role…

Angie’s List was also acquired by IAC, who apparently had been pursuing them for a couple of years. Angie’s List will be merged with Home Advisors. The deal was valued at over $500M.

We were Angie’s List subscribers for a few years before ending our subscription last year or so. It’s not a bad service, but Yelp/Facebook/Google basically covers what it does for free.

What Will Retail Look Like in 10 Years?

It’s quite obvious that traditional retail, at least in terms of the brick and mortar, is dying. Credit Suisse is projecting over 8k stores will close in 2017, projecting from Q1 numbers.

I went to the mall a couple days ago. That was the first time in (I can’t remember). I went to the Apple store because I had to ask the Geniuses a question.

I don’t like the mall experience. But more so, I feel like mall prices are grossly inflated. I’d say that 95% of my shopping is split between Amazon, Costco, and other local grocery stores. Factor out food and Amazon probably gets ~70-80% of my non-essential purchases. I believe that Jeff Bezos will overtake Bill Gates as the world’s richest person at some point.

Many things are still nicer to touch and feel before purchasing. Even so, how many folks go to a store because to check out a product, only to make the purchase on Amazon? A retailer is paying to be the showroom for Amazon!

A couple big advantages that retailers (brick and mortar) have with their physical presence is the last minute or immediate need, as well as the return/exchange process. Certain categories have higher returns/exchanges, like clothing, for example.

Returning items via an e-commerce purchase is a terrible experience, even if shipping is free. It’s awful. If there is any decent chance for return (doesn’t fit as expected), I am likely not to buy it online.

BUSINESS IDEA: Partner with brands and e-commerce vendors and create a brick and mortar presence to handle returns. This essentially makes it a logistics arbitrage company. It would increase my confidence in purchasing certain things online; that’s good for the brands/vendors. It makes returns cheaper for consumer (not many e-commerce sites pay for return shipping).

At the end of the day, retail isn’t dying, People will always buy things. But brick and mortar needs to evolve. This article, The Death of Retail is Greatly Exaggerated, is right.