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As an advisor, your role is to help clients prepare to exit their business, yet many people resist thinking about the future because it involves so many unknowns, decisions, and choices. And emotions typically complicate matters further, sometimes derailing the process altogether. Here are some questions that can help you establish rapport with your clients, learn more about their concerns, and move the conversation forward. How are you feeling about your work/profession/business these days? Which aspects of work are you still enjoying, and which are you ready to leave behind? Do you envision retiring from work at some point, or are you contemplating an encore career? What part of planning for your future feels most challenging? How do you imagine your life in retirement will be different from how it is now? What process are you using to figure out what you’ll do next after you retire? What would you like to see happen with your business long term? What options have you considered for the transfer of your business? What steps have you taken to make your business more attractive to a potential buyer? What are your concerns about transitioning your firm to new ownership? What would be your ideal scenario for transitioning out of your company? What topic(s) have we touched on today that we should put on our agenda to revisit? So, what happens after you pose a few of these questions and your clients open up about emotional matters? Remember, the most helpful thing you can do is to listen attentively. You’ve created a valuable opportunity for them to talk about things they may not share with other advisors. Here are some tips for managing the conversation when clients raise emotionally loaded topics: Don’t try to “fix things” by immediately offering suggestions. Doing so sends the message that you’re uncomfortable hearing their concern. You can offer suggestions but do so later. Don’t say anything that conveys the message that their feeling or concern is unwarranted. “There’s really no need to feel that way” or “I’m sure it will be just fine” may sound reassuring to you but could be experienced as dismissive by your client. Don’t immediately offer a logical counterpoint to your client’s emotion. Remember, feelings don’t have to make sense; they’re “as is”. Put another way, if feelings made sense, they would be thoughts. People report concerns and characterize their feelings differently from one another, so it’s in your best interest to seek amplification and clarification by inquiring as follows . . . “I want to make sure that I understand exactly what you mean by ___. Can you tell me more?” “People sometimes mean slightly different things when they talk about ___. What does ___ mean for you?” “Before I suggest anything, I’d like to learn more about it from your perspective.” It’s possible that during early conversations your client may hint at mixed feelings about exiting their business. That’s perfectly normal, but you need to bring it out into the open. You want to foster an atmosphere such that your client keeps you apprised about where they’re at. If they keep their ambivalence to themselves, it has greater potential to blindside you and complicate the sale. You can say: “In my experience, it’s normal to have some mixed emotions about selling. Those thoughts may not always be top of mind, but when they do pop up let’s be sure to talk about them. Believe it or not, they can help inform our process and alert us to aspects of the sale that are important to you.” You may also find that your client is overly risk averse. If so, consider saying the following: “Our work together won’t be comprehensive if we only plan for what could go wrong. That’s just half the equation. It’s fine to be conservative and err on the side of caution, but to be truly realistic we should also consider a range of possibilities both good and bad.” Author’s Note: The concepts in this article are derived from Robert Leahy’s book, Overcoming Resistance in Cognitive Therapy. New York: Guilford
For five decades, the southern United States has been an attractive location for automakers to open plants thanks to generous tax breaks and cheaper, non-union labor. However, after decades of failing to unionize automakers in the South, the United Auto Workers dealt a serious blow to that model by winning a landslide union victory at Volkswagen. In an effort to fight back, three southern states have gotten creative: they passed laws barring companies from receiving state grants, loans and tax incentives if the company voluntarily recognizes a union or voluntarily provides unions with employee information. The laws also allow the government to claw back incentive payments after they were made. While these laws are very similar, each law has unique nuances. If you are in an impacted state, you should seek local counsel. In 2023, Tennessee was the first state to pass such a law. This year, Georgia and Alabama followed suit. So why this push? In 2023, the American Legislative Exchange Council (“ALEC”), a nonprofit organization of conservative state legislators and private sector representatives who draft and share model legislation for distribution among state governments, adopted Tennessee’s law as model legislation. In fact, the primary sponsor of Tennessee’s bill was recognized as an ALEC Policy Champion in March 2023. ALEC’s push comes as voluntary recognition of unions gains popularity as an alternative to fighting unions. We recently saw this with the high-profile Ben & Jerry’s voluntary recognition. Will this Southern strategy work to push back against growing union successes? Time will tell. Brody and Associates regularly advises its clients on all labor management issues, including union-related matters, and provides union-free training. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560.
Almost since time began, the nimble small business has been axiomatic. Large corporations are like big ships, the common knowledge goes. They take a long time to change direction.
I once had the thrill of interviewing Jerry West on management. He was “The Logo” for the NBA, although back then they didn’t advertise him as such. Only the Laker followers knew for sure. In 1989 the “Showtime” Lakers were coming off back-to-back championships. Pat Riley was a year away from his first of three Coach of the Year awards.
Can you Offer Too Many SKUs to Your Customers? The short answer is YES! A SKU, or Stock Keeping Unit, defines each different product version that you sell and keep inventory of. There may be different SKUs of the same overall item based on size, color, capacity (think computer or cellphone memory), features, and many other parameters. For build to forecast businesses, that number of variations can quickly explode and become difficult to manage. Your customers are busy and want ordering simplified. Of course, they may need (or want) more than one variation of a product. That is reasonable and a common aspect of business – one size does not fit all! But there is a point where too offering too many SKUs is not value added either for your customer or your business. In his April 30, 2013 article “Successful Retailers Learn That Fewer Choices Trigger More Sales” in Forbes, Carmine Gallo discusses his experience and a study about “choice overload” by other authors. He writes about a retailer that “has discovered that giving a customer more than three choices at one time actually overwhelms customers and makes them frustrated…when the customer is faced with too many choices at once, it leaves the customer confused and less likely to buy from any of the choices!” Choice overload is well-documented in consumer studies but can apply in B2B as well. While customer satisfaction is important, another key concern is the often-hidden costs associated with a business offering and managing a large number of SKUs for a given product type. These costs include holding inventory, S&OP (Sales and Operations Planning) team time, small production runs, and scrapping inventory. Holding inventory takes up space, which may come with a cost or utilize racks that could be used for other products. Scheduled inventory counts take up employee time and may result in blackout periods when the warehouse is not shipping product. The more SKUs there are, including extra SKUS, the greater the potential impact. The Sales team’s forecasting and the Operations team’s purchasing reviews that are part of the S&OP process can occupy more of their valuable time if they need to consider these times. If small orders or forecasts require a new production run, this could be costly and create excess inventory. Whether from this new production or past builds, eventually it will make sense to write off and scrap old inventory, another cost impact to the company. How do you know which SKUs to focus on if you wish to look at reducing your total number of SKUs? Start by examining SKUs that have: Low historic sales over a period of time Small variations between SKUs that customers do not value Older technology or model when newer option SKUs are available This requires a true partnership between Sales and Operations. It starts with educating both teams on the costs involved – neither group may be aware of the money and time impact to the company. Periodic (such as quarterly) reviews of SKUs that meet the above descriptions should become a fixed part of the calendar. A review of the data and other available for sale options should result in the identification of SKUs which may not be needed. At that point, it is helpful to have a customer friendly EOL (End of Life) Notice process by which you inform customers of last time buy requirements for this SKU and alternates available. It is usually best to provide some time for the last time buy in the interest of customer satisfaction, although that may not always be necessary. At a company that designed and sold electronics, a robust SKU rationalization process was implemented to help address these issues. A representative from the Operations team analyzed SKUs that met a version of the above criteria and suggested candidates for the EOL process. Next, a member of the Sales team reviewed them and, where appropriate, issued product change or EOL notices to customers, providing them time for last time buy orders when needed. These steps helped reduce the work involved in maintaining these SKUs while not leading to any customer complaints. A final note – sometimes it makes sense to continue offering low selling SKUs – to support customers buying other items (hopefully in larger quantities). It may be worthwhile to encourage them to keep coming back to you for all of their product needs and this may be a way to accomplish that. But it helps to understand that this is truly the case and not assume that this customer would not be equally happy with another, more popular, SKU. Steven Lustig is founder and CEO of Lustig Global Consulting and an experienced Supply Chain Executive. He is a recognized thought leader in supply chain and risk mitigation, and serves on the Boards of Directors for Loh Medical and Atlanta Technology Angels.
When it comes to careers, business owners are a minority of the population. In conversations this week, I mentioned the statistics several times, and each owner I was discussing it with was surprised that they had so few peers. According to the Small Business Administration (SBA), there are over 33,000,000 businesses in the US. Let’s discount those with zero employees. Many are shell companies or real estate holding entities. Also, those with fewer than 5 employees, true “Mom and Pop” businesses, are hard to distinguish from a job. The North American Industry Classification System (NAICS) Association, lists businesses with 5 to 99 employees at about 3,300,000, and 123,000 have 100 to 500 employees (the SBA’s largest “small business” classification.) Overall, that means about 1% of the country are private employers. Owners are a small minority, a very small minority, of the population. Even if we only count working adults (161,000,000) business owners represent only a little more than 2% of that population. So What? Where am I going with this, and how does it relate to our recent discussions of purpose in business exit planning? It’s an important issue to consider when discussing an owner’s identity after transition. Whether or not individual owners know the statistics of their “rare species” status in society, they instinctively understand that they are different. They are identified with their owner status in every aspect of their business and personal life. At a social event, when asked “What do you do?” they will often respond “I own a business.” It’s an immediate differentiator from describing a job. “I am a carpenter.” or “I work in systems engineering,” describes a function. “I am a business owner” describes a life role. When asked for further information, the owner frequently replies in the Imperial first person plural. “We build multi-family housing,” is never mistaken for a personal role in the company. No one takes that answer to mean that the speaker swings a hammer all day. Owners are a Minority We process much of our information subconsciously. If a man enters a business gathering, for example, and the others in the room are 75% female, he will know instinctively, without consciously counting, that this business meeting or organization is different from others he attends. Similarly, business owners accept their minority status without thinking about it. They expect that the vast majority of the people they meet socially, who attend their church, or who have kids that play sports with theirs, work for someone else. There are places where owners congregate, but otherwise, they don’t expect to meet many other owners in the normal course of daily activity. This can be an issue after they exit the business. You see, telling people “I’m retired” has no distinction. Roughly 98% of the other people who say that never built an organization. They didn’t take the same risks. Others didn’t deal with the same broad variety of issues and challenges. Most didn’t have to personally live with the impact of every daily decision they made, or watch others suffer the consequences of their bad calls. That is why so many former owners suffer from a lack of identity after they leave. Subconsciously, they expect to stand out from the other 98%. “I’m retired” carries no such distinction. This article was originally published by John F. Dini, CBEC, CExP, CEPA on
In a recent research study by The Value Builder System™, they analyzed data from 20,000 business owners who completed a Value Builder assessment of their business and discovered that owners who have businesses dependent on them, known as Hub & Spoke owners are facing a 35% discount on the value of their businesses and part of the problem may be the degree of customization they offer. For the purposes of the study, a Hub & Spoke owner is someone who answered the question “Which of the following best describes your personal relationship with your company’s customers?” with the response, “I know each of my customers by first name and they expect that I personally get involved when they buy from my company.” One reason customers want the owner to personally attend to their project is the degree of customization Hub & Spoke owners offer. In fact, the study shows that Hub & Spoke owners are more than twice as likely to say they offer a complete custom solution for each customer. Since the owner is usually the person with the most subject matter expertise inside their company, it’s not surprising customers want the owner’s full attention on their job. The secret to making a business less reliant on its owner is to stop offering a custom solution for every customer. How Ned MacPherson Built More Value By Doing Less Ned MacPherson is a digital marketing guru, so it’s not surprising that when he first started offering his time, it was in demand. In the early days as a consultant, he offered all sorts of growth hacking services. But when demand outstripped his supply of time, Ned had a decision to make. He could either turn away prospective clients or build a team of consultants underneath him. As a growth guy, the idea of treading water didn’t appeal to Ned, so he opted to build a team. However, to ensure his team could execute without him, Ned decided to focus on one service offering: post-click analysis. Rather than help optimize a website for the entire customer journey, Ned’s company would become one of the world’s leading firms on optimizing a customer’s journey after they opted in to a website. Most digital marketing consultants offer a wide range of services, but Ned knew it would be impossible to remove himself if they offered help in too many areas. By specializing in post-click analysis, Ned and his team were able to streamline their offering. Demand for Ned’s time started to diminish as his employees became some of the world’s leading experts in a narrow slice of the analytics market. Within seven years of starting Endrock Growth & Analytics, Ned had 70 employees, more than $2 million a year in EBITDA, and multiple acquisition offers.
The sale of a business marks a major life event. It’s emotional, stressful, and exciting all at the same time. And unfortunately, it’s often a lot of work. Most business owners will only experience the process of selling a business once in their life. This is both good and bad news. On the bright side, you only need to get through it once. But many business owners aren’t ready for the process and risk leaving money on the table as a result. With many sellers relying on the sale to fund their retirement and lifelong financial goals, getting it right from the start is critical. Here are tips from sell-side business advisors on what to do (and not do) when selling a business. What to do (and not do) when selling a business Start thinking about selling your business early — really early One of the top mistakes sellers make when selling their business is not starting the process early enough. There are many reasons starting last minute can really hurt your bottom line. It’s not uncommon for business owners to assume they’ll never retire at some point during their life. But as often happens, life changes. Perhaps health concerns for you or a spouse make continuing to run your business difficult. Or maybe you eventually lose the excitement when getting up every day and want a change of pace. Sudden sales or immediate retirements Unfortunately, when business owners want to sell with a tight timeline (or fire sale), they may have fewer options to exit. It’s not uncommon for some buyers to want the owner and/or members of the management team to stay on for a period to help with the transition. If there’s an earn-out, it’ll usually require the seller to stick with the company for different milestones (time, financial, or otherwise) to earn the full purchase price. Earn-outs aren’t ideal for sellers, but if you’re unwilling or unable to consider deals with any continuation component, it could impact the sale price, timeline to find a buyer, or both. Make your business more sellable later by getting advice now Business brokers often recommend getting a valuation done years before expecting to sell the company. Sarah Grossman, Principal of BayState Business Brokers in Needham, MA, says this helps sellers “shape their timeline and any financial planning that needs to be completed prior to a sale.” Understanding the fair market value of the company is critical to setting expectations for the seller, but understanding the drivers of the valuation can help increase the sale price over time. Grossman says, “a [business] broker can advise them on things they can do in their business over the next few years to make it more saleable when it does go on the market.” How to maximize your cash at closing Aaron Naisbitt, Managing Director at Dunn Rush & Co, an investment bank focused on sell-side M&A in Boston, MA, emphasizes the importance of going to market and knowing what your business is worth. He says, “the biggest mistake many businesses owners make is not running a competitive process when the business is capable of attracting interest from a broad number of buyers. This mistake most often occurs when the owner has already made the second biggest mistake – not taking the time to educate themselves and prepare adequately for the process.” Not every business will be able to run a competitive process. But those that can, and don’t, “Will leave money and terms on the table if they do not do so” he adds. Getting professional help is key here as trying to negotiate a sale directly with a buyer might be short-sighted. Grossman says it’s not uncommon for sellers to be approached directly by competitors. She cautions sellers considering working with buyers directly as “They could be leaving significant money on the table without a clear understanding of the valuation of their company. Sellers also need to work with a broker and their advisors to understand a typical deal structure so that they can maximize their cash at closing.” The importance of understanding the terms of the deal cannot be overstated. This is where money is made or lost. Naisbitt cautions that sometimes terms can sound really good, but aren’t always common sense. He adds that without an advisor, sellers “Don’t know where to argue.” During negotiations, you have to consider “What is it that’s important to you and what are you willing to give up” he says. Exit planning is not time to DIY — assemble your team of advisors When selling a company, gathering your team of advisors early on is key to getting a successful outcome. Again, odds are you haven’t sold a business before and probably won’t again. We don’t know what we don’t know…and you only have one shot to get this right. Your team of business and personal advisors will be instrumental in getting the deal over the finish line. Your business advisory team may consist of: a business broker or M&A advisor, accounting and tax advisors, and transaction/M&A attorney. On the personal side, your sudden wealth advisor who focuses on helping individuals experiencing a transformative liquidity event. Be sure to involve your wealth advisor in discussions around deal terms too. For example, when considering deal structure, it’s important to ensure alignment with your objectives or financial needs. What are your income needs after the sale or do you have plans for a big purchase? Your advisor can help determine how much cash you need at closing and whether to consider the pros and cons of arrangements like an installment sale. And at closing, a financial advisor can help you determine Section 1202, realizing the gain over time with an installment sale, asset versus stock purchase, or state tax implications such as the charitable goals, legacy objectives for heirs, or estate tax planning strategies. Brokers explain what sellers are most unprepared for during the process Selling a business is a lot of work. In addition to running the company in the usual course of business, sellers also need to comply with a host of due diligence requests from the buyer’s team and the lender financing the transaction. The magnitude of this process is by far the most
In March 2022, Florida enacted the politically charged Individual Freedom Act, informally known as the STOP WOKE (Wrongs to Our Kids and Employees) Act. Less than two years later, the U.S. Court of Appeals of the Eleventh Circuit blocked the enforcement of the Act on the grounds it violates employers’ right to free speech. This decision directly impacts employers in the Eleventh Circuit and will have a ripple effect on employers nationally. How did the Individual Freedom Act (Stop WOKE Act) affect employers? The Act attempted to prevent employers from mandating training or meetings for employees which “promote” a “certain set of beliefs” the state “found offensive” and discriminatory. There are eight prohibited beliefs each relating to race, color, sex, and national origin. According to the Act, employers must not teach the following: Members of one race, color, sex, or national origin are morally superior to members of another race, color, sex, or national origin. An individual, by virtue of his or her race, color, sex, or national origin, is inherently racist, sexist, or oppressive, whether consciously or unconsciously. An individual’s moral character or status as either privileged or oppressed is determined by his or her race, color, sex, or national origin. Members of one race, color, sex, or national origin cannot and should not attempt to treat others without respect due to race, color, sex, or national origin. An individual, based on his or her race, color, sex, or national origin, bears responsibility for, or should be discriminated against or receive adverse treatment because of, actions committed in the past by other members of the same race, color, sex, or national origin. An individual, based on his or her race, color, sex, or national origin, should be discriminated against or receive adverse treatment to achieve diversity, equity, or inclusion. An individual, by virtue of his or her race, color, sex, or national origin, bears personal responsibility for and must feel guilt, anguish, or other forms of psychological distress because of actions, in which the individual played no part, and were committed in the past by other members of the same race, color, sex, or national origin. Such virtues as merit, excellence, hard work, fairness, neutrality, objectivity, and racial colorblindness are racist or sexist, or were created by members of a particular race, color, sex, or national origin to oppress members of another race, color, sex, or national origin. Employers still had the ability to mandate employees attend sessions that either refute these concepts or present them in an “objective manner without endorsement.” This dictates how an employer deals with its employees and is particularly limiting in how employers address discrimination training. Employers who failed to adhere to the law were liable for “serious financial penalties—back pay, compensatory damages, and up to $100,000 in punitive damages, plus attorney’s fees—on top of injunctive relief.” The Ruling – Honeyfund.com Inc. v. Governor [2024] In March 2024, the U.S. Court of Appeals of the Eleventh Circuit served an injunction preventing enforcement of the Act. Despite the state insisting the Act banned conduct rather than speech, the court ruled the Act unlawfully violated the First Amendment’s right of free speech by barring speech based on its content and penalizing certain viewpoints. While certain categories of speech such as “obscenity, fighting words, incitement, and the like” are traditionally unprotected, the court pointed out that “new categories of unprotected speech may not be added to the list by a legislature that concludes certain speech is too harmful to be tolerated.” Florida is keen to appeal against the decision. What does this mean for employers? Regardless of one’s opinions on the matter, this can be viewed positively from an employer’s standpoint. Employers in the private sector can control speech in the workplace, and this ruling confirms their autonomy will continue. Whether or not the rest of the country will follow suit remains to be seen. This case, in tandem with the US Supreme Court’s ruling to ban race based affirmative action, signals today’s intense political climate is likely to continue to impact how employer diversity, equity and inclusion (DEI) initiatives are approached. Employers should continue to review their DEI initiatives, ensuring they are in line with the latest precedents. Brody and Associates regularly advises management on complying with the latest local, state and federal employment laws. If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.454.0560
In the fast-paced world of mergers and acquisitions (M&A), professionals are always on the lookout for ways to improve the businesses they represent. The tools and technologies we use can make a big difference, whether we’re aiming for organic growth or preparing a business for sale. Traditionally, business owners have relied on spreadsheets, off-the-shelf software, or Enterprise Resource Planning (ERP) systems. But today, there’s a powerful alternative that’s gaining traction: low-code and no-code development platforms. So, what is low-code development? Low-code development platforms provide a user-friendly way to build applications. Instead of writing complex code, you can create software through simple graphical interfaces and configuration. If you’ve ever used WordPress to create a website without knowing how to code, you’ll understand the concept. Low-code brings this same simplicity to software development, allowing both business users and developers to create custom applications with minimal coding knowledge. Why are traditional solutions falling short? Spreadsheets: They’re versatile and widely used, but they can become a headache as businesses grow. Spreadsheets are prone to errors, difficult to manage at scale, and lack the robust features needed for complex business processes. Off-the-shelf solutions: While they offer a quick fix for specific needs, these solutions often lack the flexibility to adapt to a business’s unique processes. Customization is limited, and integrating them with other systems can be a challenge. ERP systems: These systems are comprehensive and powerful, but they come with a hefty price tag and lengthy implementation times. Their complexity and cost make them impractical for many small to medium-sized businesses. Here’s why low-code solutions are gaining popularity: Cost-effective: Low-code platforms are generally more affordable than ERP systems, providing robust functionality without the high costs of traditional development and maintenance. Flexibility and customization: Unlike off-the-shelf solutions, low-code platforms let you tailor applications to your specific business needs. This adaptability ensures that the software evolves with your business, supporting growth and changes in processes. Speed of development: Low-code platforms significantly reduce development time. What once took months can now be accomplished in weeks or even days. This speed is crucial for faster adoption and quicker returns on investment. User empowerment: With low-code, business users can actively participate in application development. This reduces reliance on IT departments and accelerates innovation, as those who best understand the business can directly contribute to the development process. Scalability: As businesses grow, their needs change. Low-code platforms are designed to scale, allowing applications to expand and adapt without requiring complete overhauls or replacements. How can businesses use low-code? Process automation: Automating repetitive and manual tasks can save time and reduce errors. Low-code platforms make it easy to automate workflows and processes, improving overall productivity. Custom reporting and analytics: Businesses need actionable insights to make informed decisions. Low-code platforms enable the creation of custom dashboards and reports tailored to your specific requirements. Inventory and supply chain management: For businesses with unique inventory and supply chain needs, low-code platforms can provide customized solutions that enhance visibility and control without the complexity and cost of traditional ERP systems. Let’s look at a real-world example: A mid-sized manufacturing company was looking to optimize its operations before a potential sale. They had been relying on spreadsheets and an outdated off-the-shelf inventory management system. By implementing a low-code platform, they were able to: Streamline inventory management: They built custom applications to track inventory in real-time, reducing stockouts and excess inventory. Improve order processing: Automated workflows sped up order processing, leading to happier customers and fewer errors. Enhance reporting: Tailored dashboards provided management with real-time insights into key performance indicators, supporting better decision-making. The result? A more efficient, agile, and attractive business, ready for growth or acquisition. In conclusion: For M&A professionals, understanding the potential of low-code platforms is a game-changer. These solutions offer a compelling alternative to traditional software options, providing the flexibility, cost-effectiveness, and speed needed to support business growth and transformation. By leveraging low-code, we can help business owners unlock new levels of efficiency and value, ultimately driving better outcomes in the competitive landscape of mergers and acquisitions. As the business world continues to evolve, staying ahead of technological trends is crucial. Low-code platforms represent a transformative opportunity for those willing to embrace their potential. Whether we’re preparing a business for sale or driving operational improvements, low-code is a powerful tool in the modern M&A professional’s toolkit.
Last March, a federal judge ruled The Minority Business Development Agency (MBDA) was discriminating on the basis of race by only offering grants to minority-owned businesses. This ruling is one in a string of recent court decisions that have declared race-based preference systems illegal. As the crusade to gut affirmative action continues, challenges to employers’ DEI initiatives continue to rise. Activist groups, investors, state attorney generals, and employees are all attacking such programs on multiple fronts. As an employer, you must tread carefully. Background In Nuziard v. Minority Business Development Agency, the MBDA was sued by three white business owners (“Plaintiffs”) who sought grants. The Plaintiffs were deemed ineligible for the grants because they were not “socially or economically disadvantaged individual[s].” While this phrase seems race-neutral, the term “socially or economically disadvantaged individual” was defined to mean “an individual who has been subjected to racial or ethnic prejudice or cultural bias.” Certain racial groups were automatically included in the MBDA’s definition, including: (i) Blacks or African Americans; (ii) Hispanics or Latinos; (iii) American Indians or Alaska Natives; (iv) Asians; and (v) Native Hawaiians or other Pacific Islanders. Unlisted racial groups were presumptively ineligible. The judge focused on the presumption that the Plaintiffs were not disadvantaged merely because of their race. This presumption, the judge ruled, was race discrimination and, therefore, illegal. The judge barred the MBDA from continuing its racial classification system. The Ripple On its face, Nuziard has no legal impact on employers. But some players are pushing for affirmative action to be struck down everywhere — including in the workplace. The principal lawyer representing the Plaintiffs, Dan Lennington, said, “We hope this is a precedent to eliminate all [affirmative action] . . .. Automatically labeling a group of people as disadvantaged is ridiculous.” And it seems Mr. Lennington may be on to something. Recently, Jonathan Bresser, a white, male, law student at DePaul University College of Law, filed a complaint against the Chicago Bears. Bresser applied to be the Chicago Bears’ “Legal Diversity Fellow”. Bresser was rejected from the program, which was only open to “people of color and/or female law students.” Bresser’s lawsuit is just an example of the many legal challenges by conservative groups to stop corporate diversity, equity, and inclusion initiatives following last year’s US Supreme Court decision curtailing the use of race as a factor in college admissions. Discrimination is Still Discrimination (but you may need to prove it) While affirmative action is on rocky footing, the law is clear about one thing: discrimination laws prohibit discriminating against “majority” identities, such as white males. In fact, reverse discrimination claims are on the rise. But that’s about all that is clear. Courts across the country are conflicted on how discrimination laws apply to “reverse discrimination” claims. In reverse discrimination claims, some courts apply heightened evidentiary burdens for plaintiffs from majority groups. In 1981, the United States Court of Appeals for the D.C. Circuit became the first court to adopt the “background circumstances” rule. This rule requires plaintiffs from majority groups to show background circumstances that substantiate that the defendant is “that unusual employer who discriminates against the majority.” In total, five Circuits have adopted the “background circumstances” rule. Two other circuits expressly rejected it. The remaining five never addressed the background circumstances rule and treat discrimination claims from majority groups the same as claims from plaintiffs in other groups. Weathering the Chaos As new cases on affirmative action and reverse discrimination muddy the waters, the risk of maintaining DEI programs has increased. Companies should internally assess their risk tolerance, assess their DEI programs, and develop a responsive strategy. Not all DEI programs are made equal. Your DEI program could be protecting your company or exposing it to substantial risk. You should work with skilled counsel to evaluate your situation.
Truth in pricing is a common issue when discussing the sale of a business. The selling price of their company is a point of pride for any owner. When they are willing to share the price they were paid, they usually include everything that was listed in the purchase agreement. While there is nothing inherently dishonest about that, it’s often not exactly the truth either. In our
“Conflicts look bad. I always prepare touchy agenda points with my 2 senior leaders before leadership team meetings. This way senior leadership presents a united front,” recently mentioned the CEO of a 200-people company. Most leadership teams have too few open, healthy conflicts. This makes them less effective, reduces decision quality, and ultimately slows down business growth. How can you step outside of your comfort zone and mine more healthy conflicts? Healthy conflicts help propel your business forward Many CEOs stick to their comfort zone: you avoid some conflicts and embrace other, based on your natural conflict style – not based on what is best for your business. Artificial harmony created by conflict avoidance is treacherous, as this
I wrote earlier about the value a closed loop employee suggestion program can provide. These do provide significant benefits, but there is no need to limit continuous improvement suggestions to those inside the company. Customer and supplier surveys can provide great insights into such opportunities while also enabling the company to collaborate better with key partners. However, like employee initiatives, if they are not managed well, they can leave you worse off than if you never asked your suppliers and customers for their help. Designing the survey is important – this is not the time to ask leading questions or pressure the recipients to provide high numerical scores because somebody’s annual performance review or bonus depends on it. If you want to obtain honest answers, understand what the customer or supplier values, and receive useful responses on what is working well and what is not, objective survey questions are needed. It is great to ask about their level of satisfaction with relationship-specific functions. For a customer survey, this could include asking about responsiveness, on-time delivery, quality, etc. For suppliers, this may involve questions about purchase order and other documentation accuracy, on-time payment and more. You may also wish to ask some higher-level questions, such as: What is one thing that we are doing that we should keep doing the same way? What is one thing that we are doing that we should improve? What is one thing that we are not doing that we should do? What is one thing that we are doing that we should not do at all? The quickest way to turn this into a negative experience is to ask customers (especially) and suppliers to spend time completing these surveys and then nothing is done with the results. They will have an expectation that their time and opinions are being valued. Failure to respond will create frustration – I have seen this firsthand. Similar to the best practice for employee suggestion programs, before you send out surveys to customers or suppliers, it is critical to commit the resources to: reading, evaluating, and consolidating the responses developing and executing improvement initiatives based on those comments promptly responding to the survey respondents on what actions are being taken based on their survey participation Depending on the actual responses, it may be necessary to also diplomatically explain why certain requests are not being acted on – we can easily imagine a customer utilizing the survey answers to ask for unrealistic price decreases or other concessions. Surveys can be periodic (quarterly or annual) independent events or incorporated into Quarterly Business Reviews or other meetings. Some suppliers may be unfamiliar or uncomfortable with customers requesting their honest feedback. Their past experience with other customers (and even with your own company) may be limited to customers telling them what to do better and never asking for their insights. They may be afraid that if they provide honest continuous improvement feedback it will not be well-received and may even be held against them. It may take assurances and several iterations before they trust the process. It is essential that your company receive these suggestions as they would acknowledge ideas from the customer, demonstrate that they appreciate them, and act on them as appropriate. Once that level of trust is established, suppliers can be key partners in improving how you enable them to support you. I have had to work with suppliers to help them get comfortable with what to them was a novel request so don’t accept the response that everything your company is doing is great. I recall one occasion when I was responsible for combining the best New Product Introduction processes between two different divisions of the same firm. Aside from taking the time to understand each group’s steps, I found it valuable to ask the shared external manufacturing partner for their input on which of those differing steps best assist their ability to support our needs. Of course, showing where their advice was used to implement new standard processes or explaining why certain suggestions were not utilized was important to this closed-loop process. Your key customers and suppliers can be some of your strongest allies in your quest for continuous improvement. A robust closed-loop survey process can be an effective tool in this effort while simultaneously creating a stronger, more collaborative relationship with those external partners most critical to your company’s success. Steven Lustig is founder and CEO of Lustig Global Consulting and an experienced Supply Chain Executive. He is a recognized thought leader in supply chain, manufacturing, and risk mitigation, and serves on the Boards of Directors for Loh Medical and Atlanta Technology Angels.
During my first visit to one factory, I quickly noticed on a wall in the lobby a collection of cards with employee suggestions – normally a good sign of a facility’s commitment to continuous improvement and employee engagement. A closer look revealed the opposite – improvement ideas that were months and even quarters old without any response or follow up. While creating that program was a good idea, the lack of follow through likely discourages employees from contributing further suggestions. Unfortunately, that company is not alone. This all-too-common practice is highlighted in the article “Companies Often Solicit Employee Feedback but Seldom Act on It” (in the May-June 2024 issue of Harvard Business Review) which discusses a 2023 Gartner white paper “Employee Engagement: Close the Action Gap to Drive Business Outcomes” by Jen Priem. Employees want to help. In fact, “40% of survey respondents said they would rather have difficult processes fixed than receive more career development opportunities”. That interest is not always matched by a company’s efforts. Aside from the missed opportunities in quality, cost, efficiency, and safety improvements, this also negatively impacts employee engagement: “only 34% said they thought their companies would act on feedback they provide” so why would they take the time and effort to participate? Setting up an effective employee suggestion program is more than placing a box for suggestions or creating an internal software tool. To be successful, the company needs to dedicate management effort and commit to a timely, closed-loop initiative. A cross-functional management level team should be established to review the qualifying ideas. This does not need to be top management but should be leaders high enough such that they can approve and implement many ideas themselves and have ready access to higher level managers to discuss larger improvement suggestions. A coordinator, perhaps someone from the quality department or in an administrative role, can be designated to facilitate the program – helping create the methods for employee suggestions, collecting the inputs, and maybe conducting a first level sort of ideas (the entire review team does not need to spend time on the suggestion to paint the bathroom a different color!) This team should meet frequently (perhaps monthly) to evaluate and prioritize the employee suggestions that were submitted since the last meeting. Plans to implement or investigate the most valuable ideas should be developed. Someone on the team should be designated as a sponsor of each such idea to obtain updates and ensure progress even if the responsibility for investigation or execution is handed over to a functional area leader. Often, a team of employees from the impacted area(s) will be created – this helps make use of their more detailed knowledge and improves buy-in to the solution. Whenever possible, the employee who suggested the improvement should be included on this implementation team. There are different ways to celebrate the improvement ideas that were selected for implementation – monetary and non-monetary awards, inclusion in the employee’s performance review, public recognition, plant competitions, etc. The choice will depend on the company’s and location’s culture. Communication is key to a successful employee suggestion program. Leadership should consistently share its enthusiasm for the improvement idea program and what type of ideas are desired (not that bathroom color suggestion!). Leaders can also show their support by attending events associated with this program. Regardless of whether a valid improvement suggestion was approved for further action or not, it is important that a member of the team (for example, the facilitator) always provides prompt feedback to the employee on the decision and why that was the determination. This closed loop aspect is essential if the firm wants to continue receiving, and benefit from, employee ideas. Are there other sources for great ideas beyond your employees? Stay tuned…. Steven Lustig is founder and CEO of Lustig Global Consulting and an experienced Supply Chain Executive. He is a recognized thought leader in supply chain and risk mitigation, and serves on the Boards of Directors for Loh Medical and Atlanta Technology Angels.
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