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--- Begin Message ----Caveat Lector- Gary North's REALITY CHECKIssue 302 December 19, 2003 CHEF PAUL PRUDHOMME AND THE MUNCHKIN: A LESSON Chef Paul Prudhomme is world-famous. Among chefs of what in my book is the world's greatest cooking -- cajun -- he is the most legendary in our day. Chef Paul, like any good CEO of a large business, has decentralized his operation. This means that the munchkins run things. Deep in the bowels of Chef Paul's organization is someone who forgot to check things carefully. Chef Paul has a famous recipe, which you prepare for 20 people. It's part turkey, part duck. It's called Turducken. (Had it been my decision, I would have named it Duckturken, as we shall see.) He gives away his recipe on- line. Go to Chef Paul's site: http://www.chefpaul.com/turducken.html There, you will find the recipe. You will be asked to send this recipe to a friend. If you click File>Send, the name of the recipe pops up automatically in the Subject box of your e-mail letter: Emailing: turducken Because the recipe is long, you are given an option: View Printable Version I clicked this link. The page is much easier to read. I decided to send this page to my son, who is an amateur cajun chef, and my daughter. I clicked File>Send. I was amazed at the identification that popped up automatically in the Subject box. I feel certain that Chef Paul did not suggest this ID, nor did he give his final approval. Try it yourself. Learn from his experience. I thought that I should warn Chef Paul's webmaster. When I went to the website's page, "Contact Us," I found that there is no e-mail address offered. Chef Paul, like so many busy men, can't be bothered with e-mails. But he has made a mistake. He has allowed his webmaster to create an entire site on which there are no "Contact Us" e-mail options at all. This is what every Webmaster wants: immunity from critics. Critics of the site can't complain to the boss. The problem is, the webmaster also gains immunity from warnings. And so, Chef Paul -- a very busy man -- is having his Turducken recipe (printable version) being sent all over the English-speaking world and even the Cajun-speaking world with that most remarkable Subject box ID. He provides a few doses of Christmas cheer, or at least Christmas mirth, with his recipe. Someone may print out this report and mail it to Chef Paul's snail mail address, at which time he will get that ID changed, but by then a lot of fun will have been had at his expense. This leads me to a fundamental organizational principle: MONITOR THE MUNCHKINS Low-level employees are not committed to any organization to the degree that a CEO is. They are not so well paid: in large American corporations, well over 400 times less well paid. Their futures in the organization are not equally secure. So, they do not pay close attention to details. Why should they? It's not their corporation. You get what you pay for, and Munchkins are not paid much. Senior management sets general policy. The munchkins implement policy. There is a lot of "noise" in between policy formation and policy implementation. The signal-to- noise ratio is affected by self-interest at every level. It therefore behooves a CEO to survey systematically the loss of information due to this noise, In any organization that sells by phone, the CEO should spend at least an hour manning the phones every week. He had better get a sense of what the non-buyers are saying, not to mention the buyers. He had also better find out what the munchkins are doing verbally in his name. If things go wrong, the munchkins will depart, and he will be left holding the bag. It may be a bag full of Chef Paul's turducken ID. The most crucial product of any organization is accurate information. Without accurate information flowing up the chain of command, resources flowing downward will be misallocated. Every leader needs alternative sources of information. To the extent that he relies on only one source, he places himself at the mercy of a special interest group within his organization. That group wants him to pursue its goals at his expense and at the expense of the organization. This is what politics is all about: pursuing your goals with someone else's money and influence. This is why the phrase "office politics" is relevant, even though the private sector does not possess the implements of legalized coercion. The state does. When a senior decision-maker makes decisions based on a stream of facts, and especially interpretation, that is filtered by one faction in the organization, he will eventually wind up with a situation like the one Chef Paul has now experienced. Kenneth Lay of Enron now says that he did not know what was going on inside the company. He pleads complete ignorance -- surely not his official positioning prior to Enron's bankruptcy. He has yet to be taken before a jury. He obviously expects this defense -- the Sergeant Schultz defense -- to keep him out of jail. He may even keep his enormous fortune, or at least whatever remains of it after his defense lawyers get through with him. But if his Sergeant Schultz excuse is really true, then he lost his reputation, his company, his income, and his life without huge bills from defense lawyers because the munchkins went about their destructive business while he was giving pep rallies to investors. One of the reasons why the Roman Catholic Church is the longest-surviving large organization in the West is that the Vatican has always kept its sources of information open. The balance of power among major factions has survived for centuries. What the British government attempted to employ -- a balance of power foreign policy -- the Catholic Church has employed internally for centuries. This has led to a factional strategy called "romanita." The late Malachi Martin defined it as follows: "If you can outwait all, you can rule all." (Martin, "The Jesuits" [1987], p. 80.) Problems have occasionally arisen when some monk like Luther grows impatient and goes into print where those outside the chain of command can view the dirty laundry. Nevertheless, on the whole, popes have ruled by not listening exclusively to any special interest group within the Church's chain of command. To offset Cardinal Ratzinger, a pope needs Cardinal Casaroli, and vice versa. I use a church example because it is such a classic example, both for long-term stability and for the speed at which everything can change rapidly when the senior decision-maker of an organization decides not to hold one faction in check. Things can change incredibly fast if that faction is well-organized and can sell its agenda to the hierarchy. According to Martin, this has taken place in the Church since Vatican II (1963-65) --- Advertisement --- Using my secret Precision Guided Investment strategy, you can finally use "big-picture" ideas for massive short-term profits. Our recent track record shows gains of 58%, 84%, 88%, 91%, 112%, and 120%... all coming within a few days. In fact, during the volatile wartime market conditions, we hit 7 winners for every 1 loser. You could soon average 27.1% gains per trade, even in today's tricky market. To learn more about this conservative, super- powerful strategy: http://www.agora-inc.com/reports/STA/MasterGains/ ----------------------- MAKING YOUR CASE Employees in who want to advance their careers must learn how to sell. They must sell their vision to senior decision-makers. They must also sell a strategy consistent with their vision. They must package selected facts -- and facts must always be selected -- and persuade the hierarchy that it is closest to reality among all the packages being offered. If you cannot sell your vision, strategy, and selected facts to those at the top of the organization, you will spend your career cleaning the stables, while the salesmen are out riding the thoroughbreds. This is why the ability to persuade is so important. Some people imagine that salesmanship is suitable for dealing with customers, but is inappropriate inside the organization. These people are the stable-cleaners. Meanwhile, the organizational salesmen get the promotions, the raises, and the perks. Most people don't like to speak in public. They also dislike writing. Because they do not develop these two skills, they do not gain the skills that are required to advance their careers to a degree commensurate with their non-verbal talents. They wonder, "Why do others with less talent keep getting promoted?" The reason may have something to do with their shyness, but this shyness is probably connected with their lack of confidence in their ability to persuade superiors about much of anything. When people ask me how to get ahead in the corporate world, I recommend that they join Toastmasters. This organization trains people in the fine art of public speaking. I know of no group that does this better, and surely not for the money involved. http://www.toastmasters.org When they ask me how they can improve their writing skills, I tell them to keep a diary. That was a familiar practice three or four centuries ago, but it has faded culturally. Keep a business diary. It should include the following: 1. Problems encountered 2. Solutions proposed 3. Solutions applied 4. Results 5. General lessons A diary of successes and failures in your job is useful as a reminder, but also as a means of finding ways to avoid problems in the future. Writing things down is a way to keep operations in perspective. The details get recorded, but the overall patterns become visible, too. You need both to succeed as a top-level decision-maker. If you can teach two potential replacements what you have learned in your job, you are more likely to get promoted. There is less risk in promoting you because of the back-up replacements. I would also recommend that promotion-seekers study books related to selling. It's not that everyone will become a salesman of goods. It's that everyone should become a salesman of ideas. Dale Carnegie is often laughed at, but "How to Win Friends and Influence People" is a useful book for people who keep getting passed up in life. I am also a big fan of Douglas Hyde's little book, "Dedication and Leadership." It's short and to the point. TRUST, BUT VERIFY President Reagan's slogan, applied to the Soviet Union's agreement to reduce the supply of nuclear weapons, applies to every organization. How did that ID on Paul Prudhomme's recipe appear? It's because some munchkin assumed that he knew what he was doing. He assumed that everything was taken care of. Programmers are notorious for this attitude. Or, just possibly, some disgruntled munchkin decided to get even. (Question: Is a happy munchkin a gruntled munchkin?) Prudhomme needed to implement a rule: "No change is made on my website until the change has been approved of, in writing, by the person in charge of the Webmaster. Two copies of the original page must be printed out and initialed by the person in charge. Then the person who approved it must initial two printouts of the revised page: one for his files and one for the Webmaster's files. In other words, Prudhomme needed to put a guardian on his Webmaster. He not only did not put a guardian on him, he let him remove all "Contact Us" options -- every webmaster's dream! This is what attention to detail requires: hierarchy. The boss cannot monitor details at every level, but he must delegate authority in the context of an information- feedback system. He must not let anyone have unilateral authority for making changes. On-the-spot authority must be delegated, but details of decisions made on-the-spot must be immediately transmitted to the boss, and there must be discussion -- and something in writing -- regarding future similar decisions. CONCLUSION First, attention to details is crucial, but none of us possesses this skill in every area. This is why we need the division of labor. Visionaries are rarely detail people. Each group must respect the other's gifts, however annoying the pressures will be on all concerned. Second, if you want to survive and prosper, you had better become skilled at office politics. You had better become skilled at selling. ---------------------- Appendix 67 This is the final Abraham Case Study that has been made available to the public: #305. I got permission from Jay to comment on the ones that were released on CD-ROM only to those 500 people who submitted testimonials. This case study has to do with running a small business: a tanning salon. It's 1,000 square feet, so it's small. One of the first things we did was to create several different packages with which to sell tanning sessions. I learned from you to make it easy for customers to do business with you, so we did. We created tanning packages for every possibility: people that tanned frequently, for those who did consistently but not a lot, and packages for those who tanned occasionally. This is the principle, "one size doesn't fit all." Different clients have different hot buttons. This is especially true in tanning, I guess. The more specific the benefit, the hotter the button. This marketer recognizes that he can generate more business by matching what he has to sell -- access to tanning equipment -- with consumer demand. The flexibility is in price and hours. By first identifying their needs as far as frequency, we were able to direct them toward the perfect tanning package. For us, this meant selling a larger package instead of individual sessions, or less sessions. This is smart selling. The cost of selling is about the same per sale, so sell a larger, more expensive package. The next thing we did was to set up a formalized referral program where members got rewarded for referring their friends. This worked great because anyone with a tan in the winter in New Jersey, obviously goes to a tanning salon. So we simply rewarded our members for recommending us. To ignore referrals is to ignore $100 bills floating down a gutter at your feet. Look down. We immediately started a database keeping records of clients names, addresses and phone numbers... as well as what tanning package they had purchased, and recording their visits so we could observe their frequency. Now when go through our records, if we see someone used all of their sessions and they haven't been back in a while, we send out some coupons for coming back. For those who still have time with us, but haven't been in lately, we simply send a note reminding them they have time and maybe they'd like to get that healthy glow back. To put this in more familiar language, the devil is in the details, but so are angels. We also learned from you about back-ending, so we also sell some weight loss supplements here. You always ask, "What do you know about your customers?" Well we know that ours like to look good based on the fact that they come in to get a tan, so we figured staying lean would be something they might be interested in. It definitely adds to our bottom line. We also sell lotions for before and after tanning, as well as small jewelry items out of a showcase. The idea here is to use space in the facility that can't be used effectively for tanning. The big marketing cost is getting the person into the facility. Once in, the person is ready to buy. Sell. We then have special new member discount coupons distributed at several other businesses to their customers for our salon. We reciprocate in an appropriate fashion. The other business person got a customer through his door. Give him a piece of your initial action to direct his customer through your door. The operating assumption here is that his customer trusts him, so his recommendation is valuable. People cannot check out everything. We expect other people to do some of the checking out. We take their advice because we have a relationship with them. These relationships can spread. These are business alliances. They are especially important for small businesses. Years ago, I used to eat at a local restaurant. No restaurant survived in that building. I tried them all. The facility was well placed. There was a hospital across the street. But every new restaurant in that facility died. I don't know why. It finally became a branch bank. There was a barbecue restaurant in it once. It was the best barbecue I have ever tasted. They sold no desserts. Next door was a donut shop. I suggested to the guy at the counter that they make a deal with the donut shop, which had been there for years, that the shop promote a barbecue special, and the barbecue restaurant send over customers to get a donut for dessert. The guy at the counter, making $5 an hour, said they planned to start selling packaged pies soon, so there was no reason to send people to buy donuts. They did sell pies, briefly. Then they went out of business. If you plan to start a business, think carefully about how you will get clients in the door, what you will sell them, and how you will get them to come back. It's not good enough to have the best product. You have to put some money and a lot of creativity into marketing. Don't sell old pie when you can get the donut shop to send you new customers. When you get serious about running your own business, even if you have run it for 20 years, you should consider buying Jay Abraham's 6,000-page encyclopedia. It sells for under $1 a page -- but not much under. It comes with a money-back guarantee. A business owner whose business spends this much in advertising each month should read Abraham's encyclopedia cover to cover. Why? Because no muchkins can burn through corporate capital faster than an ad agency that has been hired by a trusting CEO who does not know how to monitor the agency. For details, Call Carl Turner at 1 (888) 818-8878 (USA) or 1 (310) 944-9106. ------------- -- Been to the Daily Reckoning Marketplace Yet? -- If not, you ought to see what you've been missing. Want to read more from our regular contributors? This is the place to find it. 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