Business stories aren’t just stories. They’re the underpinnings of company culture and policy; powerful, and possibly dangerous.

Consider this: If customer service representatives get together for morning coffee and swap stories about annoying customers, the level of customer service will go down. It’s unavoidable. If the people behind the counter at the coffee shop share annoying customer stories behind the scenes, they smile less. They like the customers less.

No, I don’t have the research to prove it. But it’s true.

The owners and managers of a business need to realize their stories set tones and themes for the business.

My wife said my extreme customer service post here Monday encourages anti-customer stories. She has a good point.

This is easy to explain in parent mode, and from there it’s an easy hop to business mode.

• Let’s assume that when you were a teenage driver your dad insisted he’d always been a careful driver. All dads do. But you drove too fast as a teenager, despite your dad’s warning.
• What if your dad just winked and said “don’t worry about it, I drove like a maniac as a kid. I got lots of speeding tickets.” You would have driven even faster, right? It’s OK because dad did it.

The same thing happens with your business. Don’t swap stories about the annoying customers. Talk about the good ones.

Seems like negotiation week for me. I published this post about Seth Godin’s take on business development, and then another on how win-win is the only win in business negotiations. That leaves me thinking about negotiations I’ve been involved in, things that have worked, and things that haven’t worked. And I end up wanting to post the three rules here, because it seems like they always work.

Disclosure: I’ve never taken a negotiation course; not the ones they advertise in magazines, and not one in business school either. These rules are things I learned the hard way.

1. How does it feel to be them?

Call it empathy. “Walk a mile in their shoes” is a good old-fashioned saying. I know a lady who would say “see it through my eyes.” There’s no substitute for understanding the other side of the negotiation. What are they thinking? And, by far the most important, what do they want?

2. Find the win-win

There are no zero-sum games in long-term business deals. You have two winners or two losers, never just one winner and one loser. Sure, you might be able to get that kind of a victory (we win, you lose) in a negotiation sometimes, if you make that a goal … but that won’t last. Businesses wise up. Relationships that aren’t good for both sides don’t last.

So look for that in every negotiation. How can they get what they want, and you get what you want? Maybe both sides get slightly less, but both win. That’s the goal.

3. Negotiate before the contract, not with the contract

The most common mistake in negotiation is dealing with the legal contract. First, you have to realize that only a tiny minority of legal contracts ever determine anything. You have to sue for breach of contract to make a contract really matter, and if it comes to that, you already have a disaster. The vast majority of disputes are dealt with by discussion, revision, and, for the really hard ones,  mediation.

I’m not an attorney, so don’t take this as legal advice. In practical experience, though, what I’ve seen that works is that you get all your terms straight first in simple memos (yes, definitely, written; just not legalese) and then do the contract. The contract is the last step.

(Photo credit: Dmitriy Shironosov/Shutterstock)

I really like this video (8 minutes), not just for what it says, but also for what it doesn’t say.

As Jeff Bezos stands comfortably in front of the YouTube camera, in a garden, with a flip chart, I’m reminded of the “it’s good to be king” refrain in Mel Brooks’ classic History of the World Part 2. There are experts all over the place — the Web, blogs, Twitter, et al., generate experts more than anything else — but Bezos is someone who’s 15 years down the path now and looking back on it with engaging and seemingly genuine good humor and good intentions. There’s no urgency here, and no embarrassment about giving advice. It’s delightfully simple understatement.

As he talks about Amazon.com’s history and the recent purchase of Zappos.com, he uses the simple motif of the flip chart, hand written, to punctuate his points as well as anybody ever has with PowerPoint or Keynote. You’ll see what I mean if you watch.

He boils it down to four simple points:

1. Obsess over customers. Not competitors, not anything else, but customers. “Start there and work backwards.”
2. Invent. “Any time we have a problem, we never accept either-or thinking.  We try to figure out a solution. You can invent your way out of any box. Invent on behalf of customers. It’s not just the big things, like Kindle, EC2, the cloud, but an inventive culture. It’s so many small things.
3. Think long term. This is really critical. Most initiatives take 5-7 years before paying dividends for the company. The ability to think in five-year and seven-year timeframes is rare. It requires and allows a willingness to be misunderstood. Many inventions are misunderstood in the early innings.
4. It’s always day one. There’s always more invention in the future. And new ways to obsess about customers.

The occasion is the acquisition of Zappos.com, which generates a lot of positive comments near the end.

Note: if you can’t see the video on this site, you can click here to go to the source on YouTube.

I posted here yesterday about what makes a good manager. I asked whether you are a good manager, and how you would know if you aren’t.

One thing I’ve thought of since is one way to tell you aren’t a good manager. Sometimes the negatives are easier. And although I can’t imagine all the different ways you could be a bad manager, I’m at least quite sure that one way is to pretend to delegate without actually delegating. What is that? Here’s how, step by step:

1. Tell somebody they’re in charge of something.
2. Wait.
3. When it’s done, tell them what you would have done instead.

I can pretty much guarantee the result of this kind of management: your victims will stop making decisions on their own. Over time, you’ll end up frustrated that nobody thinks for themselves anymore. Everybody has to ask you everything. You’ll ask: “what’s wrong with them all?” And the answer will be: you.

And yes, I know what you’re thinking: there’s something wrong with my number 3, because you have to tell people what went wrong. You have to analyze results, right? Isn’t that management? Or do you just shut up? The answer is you analyze results without suggesting you would have made different choices if you’d done it yourself. Learn this line: “good decisions sometimes have bad results.”

What makes a good manager? Is it something you’re born with, or something you learn? Is there management instinct? I don’t know for sure. I’ve been in business for more than 30 years now, and I still don’t know.

A few years ago I was trapped on a plane with nothing to read but The One-Minute Manager, by Kenneth Blanchard and Spencer Johnson. It was written in 1982, and still sells very well today, according to Amazon.com ranking, even 26 years later. It’s in the top 2,000 books.

It was a short plane trip, and an easy book to read. It seemed about like this:

Make expectations specific. Tell people what’s expected. Follow up. Track results. Tell people afterwards how they did.

Several things struck me about that:

1. Completely obvious, but
2. still very valuable.
3. Some things that seem completely obvious, once said (or written) still needed to be said (or written).
4. Authors deserve special credit for keeping a simple book short. This one was easy to read in a one-hour flight.

I’ve never been much of a manager myself. That’s no big deal, of course; lots of people aren’t managers. In my case, though, people expected me to be, because I’ve had a lifetime of successful entrepreneurship. But entrepreneurship and management are different things.

I don’t think I’m alone. I’ve just been browsing the Amazon.com site. Small and simple books like that one sell lots of copies to lots of people. Who Moved My Cheese?, another that fits that description, sells phenomenally well. It’s in the top 300 at Amazon.com

What makes a good manager? Is it confidence, relative certainty, good communications skills, comfort with authority? I just read How to Be a Great Boss on a blog ironically named “Dumb Little Man.” And it’s a good list, too, but not surprising. Standard stuff: listen, communicate, say “Thank You.” And this one: bring food and arrange treats. What is this, kids’ soccer?

Thinking about it, I want to ask the experts some questions back: what makes a good manager?

1. Is it getting things done?
2. Getting other people to get things done?
3. Is it doing the company’s bidding?
4. Being well liked?
5. Advancing your own career?
6. Inspiring people, or leading them?
7. Coordinating a team?
8. Is a good manager able to do the work instead?
9. Do you have to know how to code to manage programmers?

And some really fundamental questions: is a good manager liked, hated, respected, feared, or all or none of these? Is it possible to lead people to higher productivity and the greater good of the business while being disliked? Is it possible to do that while being universally liked? Does a good manager have friends, allies, enemies, bosses, underlings, followers, or minions?

Is it about carrots and sticks, or both?

On the bad days, in off moments,  it seems like my two years in business school were mostly about learning the definitions of a few key buzz words to use in meetings.

1. ROI

Stands for return on investment, as in profits divided by total investment. For fun in boring meetings, think of it as “run out of interest.” So you say: “What’s our ROI on that?” That sounds like you know what you’re talking about and care about the discussion. But what you mean is “how long before we totally run out of interest on this topic?”

Another fun ROI trick is to make the R and I impossible to calculate. That’s trendy these days. Blow up the analysis by including status or branding or improved productivity or socio-economic gains as part of the return, or time and effort or creativity as part of the investment.

Variations: return on assets (ROA) is another good detour for a group; just redefine assets to mean anything you want that’s good for the company.

2. Matrix

Take a whiteboard or a piece of paper and divide it into rows and columns. Look at the picture here. I know, it’s no big deal, basically something like tic-tac-toe. But it works. Divide whatever it is (competitors, markets, problems, people) into groups that you can cut into boxes on a matrix.

The cool thing with the matrix is that it can make the most obvious classifications and categories look deeply analytical.

Extra credit: the plural of matrix is matrices.  Points off: if the word matrix reminds you of  the movie.

And, for a really good time, ask Google to define:matrix.

3. Diminishing returns

That’s when you get less bang for the buck as you put in more bucks. You can also apply the same phrase to a meeting, as in “I think we’re at the point of diminishing returns for this meeting,” supposedly suggesting that we got a lot out of it in the beginning but now the value is waning. It’s like less value per minute when you put in more minutes.

This one sounds really good, doesn’t it? Look at the Wikipedia definition:

In economics, diminishing returns (also called diminishing marginal returns) refers to how the marginal production of a factor of production, in contrast to the increase that would otherwise be normally expected, actually starts to progressively decrease the more of the factor are added. According to this relationship, in a production system with fixed and variable inputs (say factory size and labor), beyond some point, each additional unit of the variable input (IE man*hours) yields smaller and smaller increases in outputs, also reducing the mean productivity of each worker. Conversely, producing one more unit of output, costs more and more (due to the major amount of variable inputs being used,to little effect)

—

(Meeting image by Steve Weaver, cc license on Flickr. Matrix image is my own drawing.)

I was lucky. As Palo Alto Software grew up it found some good people along the way. Some of them stuck with us, and some were related to me, a second generation. We had a sense of community that seems, now that it’s grown, vital to that growth.

But I’ve never really understood about managing employees. When I was in business school, oh, so many years ago, what they taught was organizational theory, which we called “touchy feely,” and it didn’t relate well to what happened to us as we built a company.

You work shoulder to shoulder with people and you care about them. It’s hard to give good feedback on both sides (negative as well as positive) of the performance. It’s hard to stay at arm’s length, even though that’s what all the texts and literature and common sense suggest.

So here is some of what I take out of 25 years of building a company, points related to being an employer and having employees:

1. Choosing people to fill jobs is really hard. People are unpredictable. Resumes don’t work very well, and job interviews don’t work very well either. And the legal advice all companies get from good attorneys, like all the questions you can’t or shouldn’t ask, make that even harder.
2. “Fit” as in employee fit, is vital but also overrated, and too often used as a rationalization. You want people unlike you, not people like you. But you like people like you.
3. People change. Long-term loyal and trusted employees grow in and out of the job, sometimes. Sometimes people find themselves and grow and get better and need more. Sometimes they get tired and stop caring as much.
4. Sometimes you hire the right person for the wrong job. If so, you’re lucky. You find the right job and that problem is solved. Sometimes you hire somebody just for who they are, not how they fill the job description.
5. When family business works, it’s great. When it doesn’t, I’m told, and we all know the stories, it’s hell. But it’s worked for me and Palo Alto Software. As the company grew up some family members grew up as well, finished college, worked in the industry, and came back to be a second generation of management. When that happens and you have a smart, loyal, trustworthy second generation, its great. How sad that some people assume there’s something wrong with that. Why?
6. English doesn’t have formal and informal like Spanish and German and French. One of my mentors would never use the informal you. “Because I might have to fire you tomorrow,” he would say. There’s wisdom in that, I think, but then one day he jumped out of a high hotel window to his death.
7. You can change the job, or move the person to a different job, but you can’t change the person. The people change on their own.
8. Suspicion, hearsay, jumping to conclusions is dangerous. You don’t get to act on the smoke. Wait for the fire.
9. Firing people is the hardest thing you do. And the hardest firing is the loyal and honest and hard-working employee who just doesn’t get the job done, or keeps making the wrong decision, and doesn’t fit another job. You were supposed to stay arms-length, remember? I still don’t know how people do that.
10. It’s easier to fire five people in a single day than just one person ever, except when that person’s had a bad attitude.

It was back in our startup days, in all the excitement of our first getting into channels, which was followed by an onslaught of competition. We were beginning to see financial daylight, but we were behind in payments, and our channels were slow to pay. I was worried.

“But what’s to worry about?” Cahill (Cal) Brown asked. He was a packaging designer and marketing consultant. “For an entrepreneur, you’re very fearful.”

“I think I’m supposed to be fearful,” I answered. “That’s part of my job. I’m supposed to worry.”

I know: fear and worry, not good words, not entrepreneurial, it’s all “you can do it” and “don’t let the bastards get you down” and “nothing to fear but fear itself” in entrepreneur world.

But I say fear, in the right measure, is good for management. It’s related to having the antenna up, watching for danger.

Do you ever do SWOT? Strengths, weaknesses, opportunities, and threats. Threats are one fourth of SWOT.

That’s not paralyzing deer-in-the-headlights fear. It’s fear like the deer in the forest standing very still, ears perked up, listening for danger. Alertness. Thinking ahead.

If you’re interested in this, I had a good talk with Jim Blasingame about this last week, on his daily Small Business Advocate radio show. It was about at this point in the discussion that Jim added the idea of fear as motivator, not fear as immobilizer.

To hear the archived radio interview click here.

Which also reminds me, Jim and his team are archiving everything these days, meaning that the Small Business Advocate site has an amazing array of 20-minute interviews on every topic in business. He’s a natural interviewer, and his guest list is enormous. He’s been doing this three hours a day,  five days a week for almost 12 years.

I saw this on Twitter yesterday, posted by Meghan Biro:

Remember that the six most expensive words in business are: “We’ve always done it that way.”–Catherine DeVrye

She makes a good point. In my 30+ years in business I’ve seen way too much of “we’ve always done it that way” and I’d like to think (maybe I’m kidding myself) I’ve hated that phrase since the very first time (in 1971) that I encountered it. In accounting and bookkeeping, marketing, product development, it’s widespread. That’s no reason to do anything.

And there’s also an important corollary: just because something didn’t work three years ago is no reason to not try it again.  

Always is almost always a suspect word. Things change.

You know who you are. You hate selling, but here you are, making your way as entrepreneur, having to sell or sink.

Me? I’m a terrible salesperson. I’m also bad at networking, cocktail parties, and small talk with people I don’t know. Do I seem stuck up, aloof? Not really, just awkward.

I’m probably still scarred from my miserable failure at selling encyclopedias when I was in high school. I spent all summer, never made a sale, never managed to convince even a single person that I was really conducting an educational survey, and not selling encyclopedias. That miserable summer might have been what led me to hippiedom, way back when … but that’s a separate story.

And yet, hating to sell or not, I sold myself to business clients well enough to support a big family on my business plan consulting for 15 or so years, while simultaneously starting to build Palo Alto Software as a product business.

And I’ve had the privilege of working with and watching some greats in this category. I watched, and I learned. It comes down to 5 points:

1. Really listen

Really. Shut up for a bit and listen to the other person. No, don’t half listen while your mind races ahead to the next point. Really listen, and absorb what they’re saying. I like this quote in a Time magazine interview with Larry King:

I never learned anything while talking.

2. Empathize

There’s no way to avoid it: you have to actually feel what this other person is feeling. Jump into their skin, or into their head, and look out from inside their head at the rest of the world. My mother used to call it putting yourself into the other person’s shoes. My sister-in-law used to say “borrow my eyes and see through them for a while.” See if you can imagine how he or she feels and he or she sees it. What experiences have they had which led to that point of view?

There’s no substitute for empathy. It’s the most important quality in business.

3. Always tell the truth

Lies come out, in the short term or long. Even plausible lies are time bombs.

When asked questions you shouldn’t answer — it happens; in the software business, for example, some questions about platforms and programming code and such — just tell the truth, and say you don’t feel comfortable answering that question. Explain why not.

When asked questions about weak points or flaws, answer them. You’ll gain some credibility and avoid the long-term loss you risk if you lie and your customer finds out later.

Your credibility, which is inseparable from your integrity, is the key to long-term relationships.

4. Solve the other person’s problem

One of my favorite things when I used to take sales calls, from back when my company was just starting up to just a few years ago (even as president, I used to grab the sales phone on random calls a few times a month), was to recommend a competitor’s product instead of our own. It went something like this:

“If you want a business plan just because you need a stack of papers on a banker’s desk in two days, and nobody’s really going to read it, then you don’t want our product. Ours likes you to think. You want __________.” Ours doesn’t write any text for you, it’s not fill in the blanks …

And I would end up giving them the toll-free number of a competitor. There was great satisfaction in that. And, in the long term, it’s good for the business. People see that you realize what your product is good at, and that other products might be better at different things.

I’ve seen our best salespeople do it over and over: they listen, empathize, and solve the other person’s problem either with our own product or by suggesting something else, that isn’t ours, that will solve the problem. We’re dealing with humans here; not everybody is a potential sale. Some of those people whose problems we can’t solve now will come back to us later, when they have a problem we can solve.

5. Grow thick skin

The first person who ever worked for Palo Alto Software as a full-time salesperson was amazingly persistent. He would leave voice messages for key gatekeeper people once a day for months, without ever getting a returned phone call. And, at least in several key accounts, those months of unanswered phone calls eventually got him — and our product — in the door.

Yes, I know, it’s somewhat contradictory to include empathy and thick skin in the same post. If you really empathized with the people who ignore messages, you might not persist in calling back. But business and life is full of paradox. I can’t resolve this one.