Good Decision Making Requires Good Data

Over the years, I have become a “data hound” looking for every morsel of wisdom I can ge to help me make smarter decisions. The good news here: accurate data is king. You can’t effectively manage your business without accurate data. Getting it is not always easy but without it you risk making the wrong business decisions -- hurting your business when you thought you were helping it. Allow me to explain.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.

[VIDEO] George Deeb Discusses Market Research and Business Planning on ASBN

I was recently interviewed by the Atlanta Small Business Network (ASBN), an online "television network" serving the small business community, about business coaches and mentors, and how they can help your business.  I thought this video turned out great, and I wanted to share it all with you, to help you with your market research and business planning needs.  I hope you like!!

The embedded video player didn't give me the option to change the size of this video.  But, if you want to see a bigger version, simply click the expand size button in the player above, or feel free to watch it on the ASBN website.

Thanks again to Jim Fitzpatrick and the ASBN team for having me on the show.  I look forward to our next interview together.

For future posts, please follow me on Twitter at: @georgedeeb.

Why We Turned Down a Chance to Double Sales

Back in 2018, we acquired Restaurant Furniture Plus, a B2B ecommerce business that sells food service furniture to restaurants and other hospitality companies.  We recently received a request for proposal from one of the most recognized restaurant brands in the world. If secured, the project would have doubled our sales overnight. We walked away from the opportunity, which may sound silly to you. But, here’s why.

Read the rest of this post in Entrepreneur, which I guest authored this week.

For future posts, please follow me on Twitter: @georgedeeb.

Lesson #311: It’s Time to Rethink the Pyramid Shaped Org Chart

I have long thought movie stars and sports heroes were drastically overpaid in comparison to their contributions to society.  For example, teachers are teaching future generations of kids, and get paid pennies in comparison.  And, even well paid doctors saving lives, are paid a small fraction of what a basketball star gets paid to simply play the game of basketball.  In the last decade, these inequalities are starting to be seen in corporate workplace, as well, with rising CEO pay and a mid-level jobs under siege due to outsourcing and technology automation.  I think we need to rethink the traditional pyramid shaped organizational structure to “right size” the work completed vs. compensation paid equations.  Allow me to explain further.

WHAT IS A PYRAMID SHAPED ORGANIZATION?

In most hierarchical organizations, it could look something like the following.  One CEO manages five EVPs who collectively manage 25 SVPs, who collectively manage 125 VPs, who collectively manage 625 directors, who collectively manage 3,125 managers.  As you can see, a very wide base and a very narrow top results in a pyramid design as you move up the organization.

And, as you move up the organization, the compensation dramatically grows with each level, where a manager can make $37.5K, a director can make $75K, a VP can make $150K, an SVP can make $300K, an EVP can make $600K and a CEO can make $1.2MM+.  And, depending on the size of the company, the Fortune 500 CEOs can make $25MM a year, which have dramatically increased to that level in the last decade or two.

PROBLEMS WITH THE PYRAMID DESIGN

The first problem with the pyramid design is compensation disparity from the top of the organization to the bottom of the organization.  In the example above, do we really think the CEO is worth 32x the managers at the bottom layer of the organization?  Or, in the case of a Fortune 500 company, what could be 1,000x the entry level workers?  Probably not, as often times the people in the trenches are doing the hardest work.

The second problem is the caps it creates in upward mobility.  At every level of the organization, there are 5x as many candidates that can be promoted into the tier above them, as illustrated in our example.  Presumably, the 125 VPs are all roughly equal in terms of doing a good job, but only 25 of them will have a chance to get promoted to the next level.  That is like a 20% chance of winning the lottery from one level to the next.  Or, if you go from the bottom level to the top, you have a 32 in 100,000 chance to go from entry level to CEO.  Sorry to the 99,968, you are just out of luck—no lottery ticket for you.

The third problem is the impact that has on the U.S. economy.  The wealth gets concentrated in the top 1% of people and the 99% in the middle class are getting squeezed right out of existence, as inflation-based raises are not keeping up with the rapidly growing cost of living and rising consumer debt levels.  This country was built by the middle class, and with growing levels of outsourcing and disintermediation by technology, the American dream is really becoming a real potential for a very few people that are able to make it all the way to the top.  The old adage is, you need to have money to make money; and right now, there are very few that have it, to give them a realistic chance of making it.

HOW TO FIX THE PYRAMID—BUILD A CYLINDER

Firstly, in my example above, there were six levels of workers, from managers all the way up to CEO.  But, instead of having 80% of workers in the bottom tier, what if each tier was evenly distributed with 16.7% of the workers in each tier, closer in shape to to a cylinder than a pyramid.  But, that creates some interesting management hurdles, along the way.  As an example, you can’t have 651 people acting as CEO or managing the company by committee.  But, you could empower more people to make more strategic senior decisions, with fewer levels of bureaucracy.  Maybe break the business into pieces, in terms of how it is managed by department, by region, by customer, by channel or whatever.  This would require a lot more thought on how best to divide up key decision making roles, to empower more people to take leadership positions.  But, if we can elect our Presidents by democratic vote, maybe there is a way to run our businesses the same way?

Secondly, in my example above, there was a total payroll of around $194,512,500.  If all 3,906 employees we treated the same, the average would be around $50,000 a person, which would be like a 33% raise to the 80% of employees in the bottom tier, and would materially improve their lifestyles.  Now, I am not saying there shouldn’t be a step up on compensation with each tier.  But, maybe it is a 25% bump instead of a 100% bump in my example, to help make more room for the folks in the lower tiers.  And, don’t forget, in the cylinder model, we moved 80% of workers up into higher tiers within the cylinder, so the raises will end up being much higher when combining the salary per tier with the more people in higher tier advantages.  For example, taking a quarter of the bottom tier up to $62,500 (up 67%), another quarter to $78,000 (up 108%), and a third quarter up to $94K (up 151%), as examples, as they were reshuffled upward within the organization.

The natural pushback here will be there are not enough quality candidates for each tier.  To that point I would say: (i) we simply need to make education or training of those people more affordable and more accessible; and (ii) we have a ton of “underemployed” people on the sidelines waiting to get back into the game in a much more material way.  Of course, the current people at the top, won’t like this model, as it means materially scaling back on their compensation, but that is the price of helping to rebuild our middle class.  Instead of having one billionaire Jeff Bezos at the top, I sure he will live just fine on multi-millions of dollars a year, as an example.

CONCLUDING THOUGHTS

So, the points here are: (i) why should the vast majority of the corporate compensation spoils go to elite few, when a business is built on the shoulders of many; (ii) how do we get skyrocketing executive salaries in check; and (iii) how do we save our middle class which is under siege.  I am just trying to think out of the box on how best to reinvent organizational design for a modern 21st century business.  If you have any ideas here, please add them to the comments box on this page.  Together, we may just figure out a way for the anonymous John Doe to get paid the same as Tim Cook, Lebron James or Tom Cruise.

For future posts, please follow me on Twitter at: @georgedeeb.

Lesson #310: Want Startup Success? Keep It Simple Stupid!

Building successful startups is not easy.  That is why only one in ten startups actually succeed.  But, if you are going to have any chance of success, you need to K.I.S.S.—Keep It Simple Stupid.  You have to boil your idea down to one specific thing, and stay religiously focused on that end goal.  Which means not getting distracted by the various “flavors of the month” that can lead you down rabbit holes and stress out your organization in the process.  Allow me to explain.

A Case Study of What Not to Do

The other day, Red Rocket had a call from a startup seeking to raise capital.  When I asked him to explain his business model, it went something like this.  We are a human services company, and an artificial intelligence company, and an ad sales network, and a consumer marketing brand, and an ecommerce business (in one of the hardest industries to break into).  I kid you not, that was the pitch, trying to be all things to all people in their industry.  And, the problem was: the entrepreneur had no clue there was anything wrong with that strategy.

First, from a business model perspective: the tactics required for successfully running a B2B business is completely different from the tactics required for successfully running a B2C business.  The former is more sales driven and the latter is more marketing driven, as an example.  So, strike one.  Then, drilling down even further, running a B2B services business is completely different from running a B2B technology company.  The former is human driven and the latter is software coding driven, as an example.  So, strike two.  And, drilling down even further, running an artificial intelligence company is materially more complex than building a simple piece of B2B software, with hardcore data science and machine learning required.  Strike three, you’re out!  And, I didn’t even get to drill down on the various B2C complexities here.

When I told the entrepreneur, of the FIVE different business strategies discussed, they needed to pick only ONE, whichever one would be the easiest, most-lucrative one to pursue, I was met with a blank stare on his face, with him not exactly knowing which one was the best, or why he couldn’t reasonably be doing all five strategies at the same time.  I told him, Keep It Simple Stupid; pick one which will be your core competency that you will do better than everyone else, and outsource and partner for the other pieces of the puzzle if you feel they are important.

A Case Study of What to Do

As you may know, we recently acquired Restaurant Furniture Plus.  When the entrepreneur was pitching their business to us, their communicated mission was very clear:  we are the leading ecommerce seller of furniture to restaurants.  And, they differentiated themselves with a “free furniture sourcing service”, to take work off the plate of busy restaurant owners that didn’t have the time to research furniture themselves.

Why did that pitch resonate?  First, the restaurant industry was large, at approximately $800BN a year, so a big business could be built.  Second, all the competitors lead with products and prices, and this company lead with service, as a clear differentiator.  Third, given the heavy B2B services nature to the business, it would be more defensible versus the big ecommerce-only players in the industry, like Amazon, that are not deep in services.  And, the company’s clear focus showed in their financial metrics.  The business was growing very quickly, with a very high conversion rate and many happy repeat customers, both data points which spoke to the high quality of the service and its appeal to customers.  All in all, it was very simple in its design and execution.  And, guess what?  We bought the company!

K.I.S.S. Applies to All Areas of the Business

The above case studies were speaking to high level business strategies.  But, simplicity applies in all other areas of the business.  Is your product offering streamlined?  Are your operational processes simple?  Are your sales and marketing efforts laser-focused on the most profitable tactics?  Is your company culture clearly communicated for all others to follow?  Are your monthly financial statements reporting the most important key performance indicators, so you can best manage them?  Etc. Etc.  So, critically look at all areas of your business to streamline and better focus the business.

Concluding Thoughts

So, my pitch to all of you entrepreneurs out there: stop what you are doing, take a breath and re-assess everything you are doing today.  Is everything as simple and laser-focused as it can be?  If not, you have some fixing to do.  And, oftentimes, entrepreneurs are simply too close to their own business to clearly focus.  So, maybe you need a non-biased outsider to come in with a fresh set of eyes, to help you “navigate the forest through the trees”.  If you K.I.S.S. your business, good things will surely follow.


For future posts, please follow me on Twitter at: @georgedeeb.

Avoid Internally Shuffling Staff Into Wrong Roles

The old adage, a “bird in hand is worth two in the bush” may work in some instances in business, but slotting people into employee roles is definitely not one of them.  I can’t tell you how many times I see early stage entrepreneurs slot a person into a role, simply because it is convenient, with them already known and on the team operating in an entirely different role.  Stop this madness!!  Do you want the quickest solution to your hiring needs, or the best solution?  Allow me to further explain.

Read the rest of this post in Forbes, which I guest authored this week.

For future posts, please follow me on Twitter at: @georgedeeb.