Small Businesses Might Not Be the Key to Economic Recovery

“Small businesses vital to economic recovery go bankrupt” blares a new headlines from USA Today. Ok, so small businesses are going bankrupt.   But why insert the “vital to economic recovery” assumption?  It’s been constantly repeated as fact from pundits and politicians over the last few months that small businesses hold the key to the future.  Even the Vatican has joined the choir, pushing for more credit for small businesses. Small businesses create 80 percent of all new jobs and drive “innovation in virtually every field,” according to a recent release from the US House Committee on Small Business.

But is all this actually true?

First of all, when many of us think of a “small business,” we think of our local bakery or bookstore.  But according to the Small Business Administration, a “small business” in America has less than 500 employees. Now, where I come from, a 500 person company may not be the biggest business, but it sure isn’t a small one either. So many of the small business figures we keep hearing about may be based on a population set that isn’t quite valid.

Secondly, it makes sense to assume that we might see evidence of an economic rebound from smaller businesses first.  If consumer spending inches up, restaurants may add a few more shifts before corporations start adding salaried positions to their payrolls.  There may be plenty of indications of recovery from the small business sector.  But the jury is still out as to whether small businesses actually cause economic growth.

Whether implicitly or explicitly stated, the “vital to economic recovery” argument really rests on the idea that entrepreneurs will save the day.  We have all fallen for the romantic idea that today’s laid-off worker is really tomorrow’s Steve Jobs or Bill Gates, tinkering with the next billion dollar idea in their basements.  Unfortunately, entrepreneurship may not be the economic silver bullet after all.

Here are a few of the reasons why, according to Scott Shane, a professor on entrepreneurship at Case Western Reserve University:

• To get more economic growth by having more start-ups, new companies would need to be more productive than existing companies. But they’re not.
  
• Far from being job creators, as a whole, new firms have net job destruction after their first year.
  
• On average, jobs in new firms pay less, offer fewer fringe benefits, and provide less job security than jobs in existing firms.
  

Shane concludes that the only small start-ups that actually create lasting, well-paying jobs and economic growth are the few hundred each year that receive substantial venture capital.  In Shane’s view, government programs that encourage almost anyone to start a business are flawed because “they stimulate more people to start new companies disproportionately in competitive industries with lower barriers to entry and high rates of failure.”

Put Your Summer Interns to Work on Social Media Projects

The Takeaway: Memorial Day has come and gone, which means it’s the official start of the summer internship season. Rather than assigning menial tasks to pass the time, why not put those young, tech-savvy minds to work on your company’s social media projects?

You probably don’t want to an intern blogging on behalf of your company.  But an intern can tackle much of the social media grunt work, and probably have a valuable learning experience while doing so.  Here are ten ways your summer intern can deliver more than fresh coffee to the communications team:

1. Social Media Overviews: Instruct each intern to create a 30 minute presentation on the social media platform of his/her choice that includes an overview, how its used and how your business might participate.

2. Competitive Analysis: Ask an intern to build a full social media profile analysis of a competitor or client. This might include what platforms they use, how they participate and some metrics do determine how they are successful.

3. Account creation/customization: Allow them to create and populate some of your executive’s social media accounts. Then, set up some time for the intern to teach the executive about the platform. (NOTE: the intern should not participate on behalf of the executive).

4. (Social) Media Research: Which social media platforms are your main media contacts using? Are they blogging? Using Twitter? Do they want to be contacted through any of these by your company?

5. Template creation: If your intern knows Photoshop or another design program, it might be fun to have him/her create customized templates for your firm’s Twitter pages or a logo/avatar for your company’s employees.

6. RSS building: If you’ve never taken the time to set up an RSS reader to monitor social media activity around your brand, your client or your industry, this is an awesome task for an intern. Once it’s set up, though, you have to use it!

7. Blog monitoring: There are hundreds of millions of blogs, and probably hundreds that reference your brand or industry. Your intern can conduct research and report back about the most important blogs in your niche.

8. Blogging: Have interns post about their experiences on your internal or external blog. Not only will it showcase another side to your company, namely that you’re empowering your interns, but it also provides your team with important feedback about the internship.

9. Web Analysis: When it comes to e-commerce, usability and design, most web savvy college age students have seen their fair share of websites. Invite your intern to provide an in-depth analysis of your corporate site. A fresh set of eyes from your target demographic might be useful.

10. Video: Editing images and video are important new media skills.  Your interns could record a few interviews with executives. Even if they’re not perfect, the point of an internship is to learn, and these are already proven skills that will benefit both the intern and the company.

The Death of the Virtual Office

In a global economy, workers can’t be tethered to their desks. Organizations must be designed to provide staffers with maximum freedom to work where they are most productive. And telecommuting must be encouraged to promote family balance and a healthier environment.

Yes, the virtual office seemed very much a hot trend this decade. But maybe no more.

Tom Davenport sees signs that companies are heading back to consolidating employees, especially top officers, at central headquarters. He points to Eclypsis, an Atlanta software developer, that recently dismissed its Silicon Valley-based CEO after he refused to move to Georgia.

Co-location makes sense in certain situations, writes Davenport on Harvard Business Publishing:

“Senior managers, in particular, are a group that benefits from high-bandwidth interpersonal contact. Henry Mintzberg and other researchers have shown that their jobs typically consist of a variety of short, and frequently unplanned, interactions. It’s much easier to accomplish these when you are all in the same vicinity.”

Are remote workers becoming more rare in your organization? Is “face time” a more valuable commodity as the recession rolls along? Take our poll.

Small Steps Lead to Big Disasters

Take a disaster and deconstruct it step-by-step. You’ll often find a series of small, seemingly innocuous actions that eventually boiled over into chaos — like the butterfly’s flapping wings that created atmospheric changes causing a hurricane.

The economic crisis may be the result of such a cascade of chaos, and thus serves as a great lesson for managers who need to understand how their projects can go awry.

New York Times writer Charles Duhigg, writing in the HBS Alumni Bulletin, says that too many decisions leading up to and around the economic crisis were made based on unquestioned assumptions such as, “It’s a good idea for everyone to own a home.” Worse, key decisions such as the government’s plan to invest in banks rather than remove their toxic assets were made quickly and with little debate.

“I’ve spent a lot of time asking people why some of the most important decisions received such little discussion. Here’s the most convincing answer, repeated by politicians from both parties and players all over Wall Street: When a crisis like this one first appears, it’s obvious only to a handful of people. And the steps required to snuff it out are onerous, painful, and radically unpopular among the masses, who don’t realize how bad things are about to become. So, in the words of one very senior policymaker, ‘we must wait for a widespread panic to solve the political obstacles that are preventing us from acting.’”

Question Authority

This spiraling of unintended consequences is an important lesson for managers to learn. You may be sowing the seeds of project failure even in your very first kick-off meeting if the project is based on unchallenged assumptions. Keep asking questions. Will IT really be able to commit the resources in July that they pledge? Does Marketing really have the necessary understanding of the new consumer segment we are targeting?

I think back a dozen years ago when a new computer company was developing a user interface built on voice recognition. The technology worked brilliantly. But the engineers behind the plan should have challenged one of their basic assumptions that they could sell this product to corporations. Many people think the Star Trek notion of commanding hardware by voice is great stuff — until you realize that, in an office environment, a whole bunch of people talking to their computers is terribly distracting.

Do you have examples of small steps cascading to big problems? Of products killed because they were built on the wrong assumptions?

Insane Hours? How to Ask for a Schedule Change

Dear Stanley,

I started a writing job at a recently launched news website about 3 months ago. I work with a decent group of people, my job is interesting but not too difficult, and the pay is above standard. I should be singing, right? There’s just one problem: the hours. I START my day at 5 a.m., which means my alarm clock is usually ringing by a quarter after 3. The good part is that I’m usually done by 1 p.m. and have the whole afternoon ahead of me. Which would be nice if most of those afternoons weren’t spent snoring and drooling on my pillow. I am constantly fatigued and not eating well. I feel like I’m out of phase with the rest of the world, like I’ve had jet lag since mid-January. People have been putting up with this kind of shift work for years, and with the economy the way it is, I’m happy to have a job at all. Should I just suck it up and resign myself to a few more years of zombie life, or am I justified in my self-indulgent whining?

Bob Zombie

Dear Bob,

Both, really. You are certainly justified in your self-indulgent whining. I couldn’t work those hours. At the same time, you will probably have to suck it up for a while. But a few more years? I don’t think so. This is sort of like getting a promotion or a raise. The same operational principles apply.

First, you have to let your supervisors know that you’re not a crazy person and that you really don’t like these hours. They won’t be surprised. Nobody wants to work your hours except maybe hosts of morning television shows, and I’m guessing they make a lot more money than you do. By “letting them know” I’m not talking about threats or the muttering of vague imprecations. I’m talking about a straight-up, no-BS chat with whoever you report to. “Just an FYI, Mort,” you might say. “I’m certainly happy here, and love the work and all that good stuff. But I do want you to know that if a day shift with more human hours comes along, I’d like to be considered for it.” That’s all.

After a while, do it again.

And then again, after another few months.

If a year goes by and you’re still in zombieland? Start looking for a new gig. You’re no longer the new guy who has to work the worst hours. You’re a schmuck willing to be exploited so others don’t have to suffer. There’s a difference.

In the meantime, there are ways to deal with the disruption to your circadean rhythms.  Here are a few tips:

1. Don’t get up at 3:15 to be at the office at 5. Get up later, unless you live so far away that it takes you an hour to get to work. If that’s the case, move. Or pick a way you can get to work while you snooze, like a train.
   
2. At the end of your business day — 1 p.m. — have a little bite to eat and then go home, take a shower, and allow yourself a 20 minute nap. No more. You’ll be a little screwed up for a while, but the fact is, a 20-minute nap is all a healthy person needs to keep going for the rest of the day.
   
3. After your nap, get up and go outside. Do some things that are good for yourself. Run in the park or, if you live in the Bay Area, throw a Frisbee to a dog.
   
4. Eat dinner at a reasonable hour, but by no means before 6 p.m. Go to bed at the same hour every night. Me, I would say 10 p.m. Do not drink too heavily, or you’ll wake up in the middle of the night still drunk and have to go to work. That’s a real bummer.
   
5. Do everything you possibly can to see friends, hang with people. Don’t allow your screwy hours to cut you off from the rest of the human race.
   

When I was in high school, I had a friend named Frank Harrison (although that is not his real name). In his junior year, Frank worked out the Frank Harrison Sleep Plan. We were on split session then. Frank would go to school between 6:30 a.m. and noon. At noon, he would go home, have dinner, and go to sleep for the “night.” He would set his alarm and wake at approximately 9:00 p.m. and have breakfast. He would then do his homework when all the world was getting set to go to sleep. In the dead of night, about 2:00 , he would have lunch and then work some more. Then he would go to school and it would start all over again.

Frank got straight A’s that year. He also went completely insane. Nobody ever saw him. We missed him. But he was on the Frank Harrison Sleep Plan. He dropped it the next year. His grades were a little bit worse, but at least he was back on the planet.

In the end, it’s all about living your life. Work is a part of life. When it becomes all of it, or destroys the rest of your existence, something’s gotta give, eventually.

Network Your Way to a Job You Love

This time of year is ripe with both relief and anxiety for recent MBA graduates. While the pressure of final projects and exams has passed, grads who haven’t landed a job yet might be feeling the weight of those loan payments about to kick in.

I recently spoke with Sara Gaviser Leslie, a Columbia Business School MBA who is currently a case writer at Stanford University Graduate School of Business, about the importance of networking when searching for your first post MBA job. She graduated in 2002, and, like members of this year’s graduating class, found jobs somewhat hard to come by. But she was hired in July of that year, and has successfully networked her way to many fulfilling jobs since then. Here are some of her tips for getting the most out of your networking efforts.

• 1. Put your research skills to use: Gaviser Leslie started her post MBA job search by making a list detailing the kind of job she wanted, then searched databases to find people who did similar jobs at places she wanted to work.  She followed up twice, then dropped it if she didn’t hear back. While predictably there were many people she didn’t hear back from, the takeaway is that several contacted her.
  
• 2. Ask for informational interviews: People will be more apt to meet with you if you express interest in finding out more about their job, rather than asking them if they can get you a position in their company. When Gaviser Leslie went on these informational interviews, she tried to be as specific as possible about what she wanted to do in her career, which made it easier for people to suggest others she should get in touch with. “I also made it a goal to leave these meetings with the name of at least one other person I could talk to,” she says.
  
• 3. Extend your network: Cold emailing company directories isn’t the only way to network with potential employers. Gaviser Leslie recommends extending your network by asking your peers what their parents or siblings are doing and asking for an introduction if it seems like they could help.
  
• 4. Be organized: Gaviser Leslie kept a detailed spreadsheet of everyone she spoke with, which was not only a valuable resource for her, but for friends who were later looking for jobs. Also, “when you’re methodical you feel like you’re getting something done,” says Gaviser Leslie. This in itself can be a valuable morale booster when you’re in the midst of the job search process.
  

Next week I’ll share more networking tips from Gaviser Leslie. Until then, good luck job hunting to MBA grads and anyone else who is on the search!

MBA Students Take Oath of Conduct for Managers

Almost a third of Harvard Business School’s graduating MBA class have so far signed an oath pledging them to conduct their business dealings with integrity, lawfullness and to serve society as a whole.

The pledge, crafted by several HBS students and now spreading across other business schools, attempts to mirror oaths taken in other professions such as the Hippocratic Oath in the field of medicine. It is a partial answer to what many see as unethical, unlawful and just plain greedy decisions by business leaders that contributed to the economic crisis.

The pledge starts with a preamble:

As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can create alone. Therefore I will seek a course that enhances the value my enterprise can create for society over the long term. I recognize my decisions can have far-reaching consequences that affect the well-being of individuals inside and outside my enterprise, today and in the future. As I reconcile the interests of different constituencies, I will face choices that are not easy for me and others.

Make Cost Cutting Invisible to the Customer

In late May, when my wife and I returned for the fourth year in a row to stay at the Princesa Sofia Hotel in Barcelona, the signs of the recession were everywhere: no bellman at the front door for the bags, no Herald Tribune delivered to the room, more difficulty raising a hotel operator on the phone, and diminished food and drink options on the Club Floor. Of course the room and the hotel’s location were the same. Our reaction to the experience got me thinking about the importance of the small things in life.

About two decades ago, Jan Carlzon, then CEO of Scandinavian Airlines System, wrote Moments of Truth, a book about building a customer-service focused culture and the great business results that followed. His fundamental insight was that customers had many small initial interactions with a company, and if those went well, the customer developed a good first impression, which then carried over. By contrast, if these first contacts went poorly (e.g., no one to collect the bags or answer the phone), a bad impression was made and would persist. The lesson from Carlzon’s wisdom, and our own experience at the Princesa Sofia: If you are going to cut expenses in a recession, do so in the ways that are the least visible and help ensure that the fundamental customer experience is unchanged to the greatest extent possible.

I checked in with travel agent Helen Land of Casto Travel to see if she concurred with this idea and ask what she had seen companies doing to cope with diminished demand. She agreed that the best hotels, restaurants, and airlines were doing things to maintain the highest levels of visible service, even as they cut costs in other places. So, some restaurants cut hours or closed on some nights but did not shut down completely. Some hotels had cut back the housekeeping staff and reduced personnel in other, less obvious places like management and the back office. “[You want to] keep the tonier parts of the property going strong,” Land said, “with great staff and maybe even ’specials’ or ‘happy hours’ to further provide the guest with what feels like great service and great value.”  She noted that Virgin Atlantic Airways had not laid off as many staff (proportionately) as competitors in order to retain their top service levels and maintain the airline’s reputation — so it could come out of the crisis with its customer brand image intact.

The lesson: Not all cuts are the same. Management, which is invisible to the customer, seldom cuts itself, because no one thinks they’re redundant. Meanwhile, small but visible expenditures such as newspapers, food, and customer-facing staff get reduced. The companies that will do the best are those that recognize their own particular “moments of truth” — the small but crucial experiences that matter most to their clientele — and figure out ways to reduce costs that don’t adversely affect these small but psychologically important customer interactions.

Six Ways to Boost Creativity

• The Find: One of the world’s leading design agencies offers six tips to get you thinking more creatively and help unstick you when you feel fresh out of new ideas.
  
• The Source: It’s not a usual source of management insight, but these tips come from O, Oprah Winfrey’s magazine.
  

The Takeaway: The innovations of design firm IDEO are legendary and include the first laptop computer and the Apple mouse, and just to give you a sense of the breadth of their work, the Bank of America
“keep the change” program. But just how do the companies bright minds come up with such ground-breaking ideas? O magazine offers these six creativity boosting ideas from IDEO’s general manager Tom Kelley:

1. Forget Making a List: Lists often come from the organized, analytical left side of your brain, and to solve an intractable problem, you want to engage the right, the creative side. Make a mind map instead.
   
2. Hire a Coach: A coach can bring out talents that you haven’t fully developed — or ones that you might not even admit to yourself that you have.
   
3. Keep a Journal, But Not Just Any Journal: Ask yourself “When during the day did I feel bored; when did I feel engaged?” When you start paying attention to when you’re at your best (it can take a while to find a pattern), the results can open up unexpected new territory.
   
4. Blow Open Your Curiosity: Focus on what you love, but don’t limit yourself to only things that you love. Subscribe to new magazines, download podcasts on a topic that has nothing to do with your current life…. If you’ve been banging your head against an obstacle, this kind of cross-pollination can get you over it.
   
5. Let No Idea Escape: ideas are precious and fragile and tend to show up when we’re in the shower, in bed, or stuck in traffic. So we forget them. Try to capture 100 percent of your ideas—on your BlackBerry, in a notebook, on the back of receipts or boarding passes. Go for quantity. Defer judgment until later.
   
6. Find a Reverse Mentor: the world is changing at such a rapid rate that most people over 40 and certainly 50 find it impossible to stay on top of developments… A reverse mentor—someone younger and more plugged in—can get you up to speed on new trends, pop culture, starting a social network account, or more substantial things.
   

GM Now Belongs to the People — Let’s Change the Name!

By many accounts American taxpayers will own about 70 percent of General Motors in just a few days. Congratulations everyone! What should we do with it?

I say the first thing we need to do is change the name. Not much brand equity anymore in GM. And what’s with “General Motors” anyway?  Was “Specific Motors” not available?

So we’re all agreed, then. Our car company needs a new name and we’re opening the Suggestion Box. A few restrictions:

• It has to be short enough to fit on the front and rear of the car. BMW is much better than Bavarian Motor Works.
  
• I think it should reflect an American theme: rugged, individualistic, inclusive. Our company can’t carry some namby-pamby moniker like Xeon or Life Dunk. Nope, has to be something like Let Freedom Ring Motor Co., Stars and Stripes Automobile Manufacturing Co. or Declare Your Independence Motors.
  
• No People Names. Too many automakers and models are named after names: Ford, DeSoto,  Edsel, Aston Martin, DeLorean. But maybe a historically important figure would be OK. How does Lady Liberty Autoworks sound to you?
  
• Forget American Motors. Tried it — didn’t work out so well.
  

So what’s your suggestion for a new name for GM?