Wealth Management

Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen My Amazon Authors' page Twitter:@ jacolineloewen Linkedin: Jacoline Loewen Profile

June 6, 2011

5 Questions you need to answer if you go on BNN "The Pitch"

This Wednesday, I am on BNN, The Pitch with realSociable and BuyandBrag.
Many entrepreneurs ask me about going on the show and I would encourage it strongly. Think of it as marketing and what an audience to reach for free.
THE PITCH – SHOW DETAILS
BNN asks each potential entrepreneur to create a well-organized, one or two-page handout that includes your business name, your name, position, contact info, summary of your business plan and a brief bio.
We also ask that you answer the following questions:
  1. The ask - how much $ do you need and what will it be used for?
  2. Who are your competitors and why are you going to be a market leader?
  3. What is the overall market potential for your business/product?
  4. What is your bench strength (i.e. mgmt)?
  5. What is your cost structure / technology advantage?

The 3 Planes of Managing

Basically, managing is about influencing action. 
Managing is about helping organizations and units to get things done, which means action. Sometimes managers manage actions directly. They fight fires. They manage projects. They negotiate contracts. 
One step removed, they manage people. Managers deal with people who take the action, so they motivate them and they build teams and they enhance the culture and train them and do things to get people to take more effective actions.
And two steps removed from that, managers manage information to drive people to take
action—through budgets and objectives and delegating tasks and designing organization
structure and all those sorts of things.
Today I think we have much too much managing through information. Henry Mintzberg calls this "deeming." In other words, people sit in their offices and think they're very clever because they deem that you will increase sales by 10%, or out the door you go. Mintzberg says:
Well, I can do that. My granddaughter could do that; she's four. It doesn't take genius to say: Increase sales or out you go. That's the worst of managing through information.

June 3, 2011

Why Canadian family owned businesses should check out Private Equity - Monica Gutschi, Dow Jones Newswires

Bringing in a private-equity partner can be an excellent exit strategy for a small-business owner, but it does hold risks.
   "You want to make sure that you're going in with the right private-equity fund," says Jacoline Loewen of corporate finance firm Loewen & Partners. A air-tight contract drawn up by a top-notch lawyer is also key.
   The ability to access private equity is relatively new for Canadian entrepreneurs. A decade ago, private equity wouldn't have looked at a company with less than C$100 million in annual revenue, Loewen said.
   Now, however, the huge flows of money that have gone into private equity are looking for a home, and companies with  C$20 million in yearly revenue can attract a private-equity partner, she says. The benefits can be substantial, especially for business owners who are planning to sell or pass on their businesses in about five years.
   Most private-equity investments in such small and mid-sized businesses are for a five-year term and give the investor a 30% stake, Loewen says. The principals behind private-equity funds are usually entrepreneurs themselves, who have walked the same road as the business owners, she says. They can take that experience to cut costs, implement a benchmarking strategy, and set a timetable for milestones.
   That can greatly boost the value of the business, putting the owner in a much better position when he or she decides to move on.
     Take the example of Hamilton, Ont.-based Bermingham Foundation Solutions, a family business run by the founder's grandson. Loewen matched Bermingham with a private-equity investor that put C$14 million into the company, money the owner then took to build out his international capabilities. The deal also included a cash payout, which was invested in a retirement fund for the owner's spouse. A few years later, Loewen says, Bermingham's enterprise value has grown fivefold, the owner has an established export business, and he has bought out his private-equity partners.
   "It's still a family business," Loewen says, but it is worth substantially more, and the owner continues to have options for his eventual exit: pass the business on to his children, place the business in a trust, sell the business but retain some shares as a portfolio investment.
   The appeal of private equity appears to be growing. A recent survey into Canadian family-owned businesses by PricewaterhouseCoopers found that fewer than half the owners plan to pass the business on to the next generation, a drop from 70% in 2007. Meanwhile, of those who do anticipate a change of ownership, 33% plan to sell to a private-equity investor, up from 14% in 2007. By comparison, 22% plan to sell to a management team, PwC found.
   There are risks in joining up with private equity. The process can be rather frightening for the owners, Loewen acknowledges. That's what makes it important to choose the right partner. "Once they get in they may do the things you don't want them to do," Loewen says. Indeed, she notes, a recent study by global consulting firm McKinsey showsthat business owners' fears about a deal going wrong is well-founded, as only 20% of private-equity funds are actually posting gains. But with a well-written contract that provides the most flexibility to the business owner, if a deal goes sour, "you get a divorce," she says.
    But in a well-structured deal such as the Bermingham case, the influx of funds and corporate expertise marks a turning point for the business.
   Most Canadian family-owned businesses "could do with more measurement," Loewen notes. Once the new investors "know the drivers that make company grow, these tiny little levers turn the ship."
   With private-equity investments, the business owners continue to run the business but obtain the professional advice of an independent board of directors. As well, she says, many owners of family businesses know a great deal about their products, but perhaps not so much about the financial and operating aspects of the business.
   -By Monica Gutschi, Dow Jones Newswires; 416-306-2017; monica.gutschi@dowjones.com
    TALK BACK: We invite readers to send us comments on this or other financial news topics. Please email us at TalkbackAmericas@dowjones.com. Readers should include their full names, work or home addresses and telephone numbers for verification purposes. We reserve the right to edit and publish your comments along with your name; we reserve the right not to publish reader comments.
 Dow Jones Newswires

June 2, 2011

The great myth is the manager as orchestra conductor.

Peter Drucker said the manager is both composer and conductor. It's very grand and
glorious, but Henry Mintzberg thinks it's a myth. It's this idea of standing on a pedestal and you wave your baton and accounting comes in, and you wave it somewhere else and marketing chimes in with accounting, and they all sound very glorious. But management is more like orchestra conducting during rehearsals, when everything is going wrong. Mintzberg researched the manager in his latest book and says:
Then there are all these lists of the qualities of the effective manager. So I said, well, for the sake of a better world, here's a comprehensive list of the qualities of an effective manager, combined from all the lists—and there are 50 or so items on it! Put kryptonite on the list, and even Superman wouldn't succeed as a manager.
So I talk about what I call "the inevitably flawed manager." We're all flawed, but basically, effective managers are people whose flaws are not fatal under the circumstances. 
Maybe the best managers are simply ordinary, healthy people who aren't too screwed up.

June 1, 2011

Doesn't anybody deserve a government that works?

What if TV political pundits decided to be positive rather than their favourite way - mocking and mean. Oprah took a different path to her talk show competitors who were going for the mean and nasty shows. Before you roll your eyes over Oprah, she a is a billionaire. Taking the positive path to push better management has always been Henry Mintzberg's strength. Here he gives his take on the nasty attitude to government in the US. I did not know the military leadership story. See what you think - here's Henry:
"Doesn't anybody deserve a government that works?" Lou Dobbs asked this over and over again in an advertisement on CNN. The answer is yes, Mr. Dobbs, for anybody who respects government and is not so quick to put it down. We get the government we deserve. 
If we vote for empty promises, we should expect empty actions. If we vote out of anger, we will find ourselves with angry politicians who are mean. If we expect little from government, in the belief that it is rotten, then they should not be surprised to get rotten government that does little. And vice versa.
Americans don't much believe in government. Many think it incapable of doing most everything. (Ronald Reagan, as U.S. President, claimed that "The ten most dangerous words in the English language are 'Hi, I'm from the government, and I'm here to help!'" He, of course, was there to help.) As a consequence, many capable people hesitate to work for government, while some who do function under a cloud of inadequacy. Hence there is a lot of inept government in America, which of course only makes people even more suspicious of government. If ever there was a self-fulfilling prophecy, this is it. And that, of course, plays into the hands of corporate executives and others that don't want to be bothered by government.
I was at a dinner party in Virginia recently, where people were railing against government. I got nowhere trying to make the case that they need government, let alone better government, so I asked: "How about the military? Do you respect that?" Sure, came the reply. "But is that not government?" ("here to help," I might have added) Hm... they never thought about that. In the great condemnation of American government, the military is somehow exempt. It is perceived as highly competent; in fact, it is revered by many Americans. Two of the most vociferous people at that party were retired from the military, which means that their salaries before and their pensions since have come straight from the government -- from the taxpayers. Surprise! 
Now if so much in American government is so bad, then the public service has to be marginalized: its top ranks, several layers into each department, have to be reserved for political appointees, ostensibly to keep those civil servants in their place. For example, FEMA, the Federal Emergency Management Agency, was headed in the George W. Bush administration by a good Republican who had previously been supervising the judges of horse shows. He presided over the debacle in New Orleans. (Contrast this with the recent effort in Chile to save those miners: it was orchestrated by government.) Bush's Secretary of the Army was a businessman who announced on arrival that he was going to bring in "sound business practice." He came from Enron.
In the military, however, political appointments are taboo. The generals -- one, two, three, and four stars -- are not removed en mass every time there's a new government. But why not? Shouldn't they too be replaced by people who ran horse shows and failing companies?
"We can't do that," came the reply at the party. After all, the military is so important, the experience of the generals so critical. Unlike education? Health care? Emergency relief?
In Canada, we believe in government. As soon as a serious problem arises, most of us expect the government to deal with it. One consequence of this is that we too get the government we deserve, at least at the civil service level: competent. Not faultless, but is business faultless? Over the years, I have been struck time and again by how thoughtful, concerned, and capable are so many of the senior civil servants I have met in Ottawa.
We barely have political appointments in Canada. The "deputy ministers," who report directly to the ministers and advise them as well as run the departments, are usually career civil servants, or else people appointed for their competencies, not their connections. And so too are the people who report to them.

To appreciate how Canadians feel about government, consider this. In 2004, CBC television (itself government owned, with a radio network that has to be one of the best in the world) held a contest to elect "the greatest Canadian". And the winner: Tommy Douglas. If you are an American who has never heard of Tommy Douglas, don't worry: he is hardly a household name in America. If CBS ran such a contest, with Abraham Lincoln or Thomas Jefferson the likely winner, believe me, we would know those names in Canada. We could have picked Wayne Gretsky or Pierre Elliott Trudeau -- you probably heard of them. But we picked Tommy Douglas. Who is he?
Tommy Douglas's highest post in life was the leadership of a marginal opposition party in the Canadian parliament, and before that, the premiership of the province of Saskatchewan (population at the time: less than a million). He was obviously chosen for another reason: Tommy Douglas was the father of Medicare, Canada's system of health care that covers all medical and hospital costs for every Canadian, with the money coming straight out of general taxation.
Douglas brought Medicare to Saskatchewan in 1961, against the fierce opposition of the American Medical Association, which saw it as a foothold for socialized health care in North America. And then in federal politics in 1966, he led his party to vote with the minority Liberal government to pass Medicare for the entire country.
When Americans debate changes in their system of health care, as they do regularly, the opponents point to Canadian Medicare as a disaster. So why do Canadians think so highly of Tommy Douglas? Because Canadian Medicare is not a disaster at all: health care in Canada costs much less than it does in the United States while its outcomes are consistently better. (The two countries had comparable costs before Medicare came to Canada.)
Of course, we never stop complaining about our health care services in Canada. But neither do people in every country I have ever visited. A few years ago, after listening to some Italians in this field go on and on about their health care, I asked "So how did Italy come out in the last WHO rankings?" Their reply: "Oh, second best in the world." Apparently second best is not good enough.
In fact, anything to do with health care is never good enough. At a party in Montreal, a young physician was going on and on about the dire state of health care in Quebec. Finally I interrupted her and asked: "You did your residency in the U.S. What about that?" She threw her hands in the air and blurted out: "Don't get me started on the American system!" Paraphrasing Churchill, I guess Canada has the worst health care system in North America -- except for all the alternatives.
There are, however, bright spots in American health care. One is the Veterans Administration. There you go again -- government. Michael Porter, Harvard Business School's strategy star, has co-authored a popular article and book about redefining health care in America. On government-controlled regulations, the book states that it is "never a real solution" (2006: 382); on the unsatisfactory performance of American health care over many years, it claims that "while this may be expected in a state-controlled sector, it is nearly unimaginable in a competitive market" (2004: 21). How about the opposite, Professor Porter -- a few facts? There was not a mention at this place in the book about the Veterans Administration (although a search in its index revealed three brief references to it elsewhere, two of them favorable, the third neutral).
Most Canadians revere Medicare as a pillar of the country's collective democracy, much as Americans revere business as a pillar of the country's individualistic democracy. But in a world that requires a decent if not dominant public sector, it is the Americans who get the government they deserve, not the one they need.
Henry Mintzberg is Cleghorn Professor of Management Studies in the Desautels Faculty of Management at McGill University