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Category: Business

A Small-Town Mechanic’s Wisdom

 

I was raised in a small city with a population of less than 15,000.   For most of my childhood, it was literally a “one stoplight town” that had eventually graduated to three by the time I left for college.   Growing up in a small town certainly has advantages and disadvantages.   One advantage is that a small town is often populated by unique individuals that you would never meet in the busyness of a large city.   These individuals, through tough times and personal experiences, have developed a common-sense perspective often missing today.

One group of individuals I remember who possessed this common-sense perspective were the owners and mechanics at a local gas station.   It was a Cononco station in an older building consisting of two sets of gas pumps (one full service and one self-serve) and two mechanic’s bays to maintain and repair automobiles.   It was my grandfather and father’s service station of choice because they trusted the mechanics and owners.  I remember as a child sitting in the chairs in the waiting area, which was also the office, cash register, old soda vending machine, and shelves to display oil cans and promotional materials.   While waiting for the oil change or other repair work on our vehicles to be completed, I noticed that it was often a stopping place for old-timers in the town who would purchase gas, a soda from the vending machine, and stay and talk for a while.

The desk in the office/waiting room included the service paperwork and cash register as well as pictures, stickers, and plaques.   Most of these consisted of humorous sayings about fishing, hunting, and cars.   One that I remember to this day was a plaque that simply stated:

Pay me a little right now

Or pay me a lot more later

This not-so-subtle statement was to highlight the importance of preventative maintenance from a car mechanic’s perspective.   They knew that keeping the car up to date on minor service and repairs (e.g., oil changes, tire rotations, filter replacements, etc. . . ) prevented the major car repairs from occurring.    In essence, paying the few dollars on occasion prevented the larger, unexpected, and unmanageable bill from ever occurring.   Through years of experience and multiple examples, the mechanics understood this fundamental truth.

I have often observed business owners not recognizing this fundamental truth.   Businesses and their respective leaders often either ignore and consistently choose not to perform this “preventive maintenance” on their business.   They justify their decision because it is a low priority or to save a little bit on the bottom line.   Rarely, if ever, does this approach benefit the business in the long-run.   Instead this approach eventually leads to events that jeopardize the long-term health and survivability of the company.

I often see this behavior when business leaders choose not to perform basic legal preventative maintenance.   Preventative legal maintenance for businesses includes areas such as, updating pre-existing contracts, modernizing employee policies and manuals, keeping abreast of new laws and regulations, the initial negotiation/development of new agreements, and the review and drafting of new contracts between parties.   In these circumstances, these business leaders/owners place legal maintenance at a low priority.  They assume that the status quo will continue to work, what they have now is sufficient, they can independently draft or negotiate the agreements on their own, and/or the legal work would be expensive.   Unfortunately, it is usually only a matter of time until this lack of proactive maintenance leads to a major legal dispute, complaint, or litigation that has the potential to lead to the ruin of the company.  Once a dispute has reached this stage, the legal costs of correcting the issue or defending the corporation in the dispute is now exponentially more expensive than the preventative legal maintenance costs would have been.

In that way both an attorney and mechanic’s approach is the same.   We do not want to see a business breakdown occur that could cost substantial fees, costs, and expenses to correct.   As an attorney representing clients, I will always prefer and recommend that regular legal maintenance occur.  The costs are substantially less than the alternative and it better protects the client when an unforeseen event occurs.

© 2017 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

 

THE IMPORTANCE OF A COMMON NARRATIVE

 

As a business attorney, I am typically involved in legal issues involving corporations and those who create and own them.    During my several years in practice, I have observed both successes and failures.   A question I have often though is “what is the formula that makes a group/business succeed where others have failed?”   Is there a secret ingredient that runs through individuals, groups, or businesses (large or small) that binds people to work together to achieve a successful end?

What makes some individuals, families, or groups of people effective, resilient, and happy?   Why are certain people or businesses able to overcome obstacles, challenges, and succeed when others have easily failed?  What are the proven counters to the forces that want to tear apart and how does one prevent entropy/apathy that often occurs? 

Researchers and business experts have been studying this question for over 25 years.   They have arrived at a few specific conclusions.  The research has universally arrived at the determination that the single most important element for a family, group, or business to counter the effects of the natural world may be the simplest action of all—the development of a narrative.

What is a narrative?   In basic terms, a narrative is a common history that a family/group shares.   The narrative describes who they are, where they came from, and what is important to them.   The narrative demonstrates what they are made of and highlights that one can navigate extremely difficult obstacles and survive (even succeed) because others before them have faced almost impossible obstacles and still could overcome.    Those with a common narrative are better able see beyond themselves and (because of their ability to do so) develop a core strength.

Researchers have demonstrated in multiple evaluations and interviews that people and groups who have a strong narrative fare better when challenges come because they have an “polar star” to guide them and an “anchor” when confronted by a serious problem or event.   A “polar star” is found in examples of a family or group’s shared history where individuals can see the successes of their predecessors and model their own lives by them.   An anchor is the ability, when difficult challenges arrive, which allows the individual or group to point to challenges that others have faced in the past as examples of how “this too shall pass.”   Therefore, these individuals and corporations are more positive and develop a resiliency to face problems head on.

Some of the early research in this area involved children and was later expanded to larger groups.   The observations made of the children demonstrated that the stronger the child‘s narrative and family history, that he or she had a stronger sense of control over their individual lives.    They develop a “strong inter-generational self” because they realize that they belonged to something larger than themselves.  As a result, they had higher self-esteem and believed that themselves and their family would be able to overcome the problems they faced.   The children became more resilient because they were part of something bigger than themselves.

When September 11th happened, the researchers returned to the children they had observed previously who lived in the area of the tragedy, who had witnessed the events, and many had family members affected by those events.   After this very traumatic incident, the researchers directly observed the ability of the children to cope was a direct result of those who had a narrative and those who did not.

The fundamental conclusion is this:  If you want to have a successful family, group, business environment, or corporation, there must be a clear telling and retelling of a narrative of both positive elements and the ability to bounce back from difficult ones.

How can concept apply in business?   When a group of individuals comes together for a common goal and purpose (such as working for a company), they are usually more effective in good times, adapt when changes occur and are resilient when negative.    A common goal is often described by utilizing a common narrative that everyone can understand and, in most circumstances, relate to.

The history of Harley-Davidson motorcycles is an excellent example of a corporate narrative.   The beginning of Harley-Davidson is a story of middle-America with William Harley and William Davidson developing and manufacturing their first motorcycles in a 10 x 15 wooden backyard shed.   It demonstrates the independent and inventive nature of the company, which most of its riders share.  It also helped in the development of a brand based on customer loyalty. 

The narrative is seen throughout the corporation.   The history is prevalent in their retail stores with displays concerning its founding, pictures of the shed, and classic motorcycles throughout the stores.  The black color, the logo, and font utilized in its early days continue be reflected throughout their products.   The look and style of their motorcycles also point to their past.   They are not just building and selling motorcycles to travel from point A to point B.    Instead they are building a brand that can be recognized and lore that is passed to future generations.

Through its various ownership changes, corporate restructuring, recessions, the Great Depression, and when times seemed bleak for the company, it often fell back on its narrative to keep in business.  In basic terms, the success of the company is based on the success of its narrative.

 I would suggest you take some time and think about your narrative.   What makes you and your business unique?   What can you point to that can become a foundation for success.   Developing a narrative will provide a north star for guidance in times of growth and success and an anchor for stability in times of difficulty.

© 2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Why Not? A Thanksgiving Business Story

 

From my experience representing companies and business owners, I often observe general themes that all successful businesses possess.    It does not matter the type of business, whether is started in a garage or with investors, or the actual business experience the owners hold.   Often a successful origin of a business begins with the question “why not?”   

Successful businesses are usually started as a solution to a specific problem.   Often when individuals see problems or issues that they determine  are insurmountable or unassailable, they give up, move on to something else, or decide to travel an apparently easier path.   Whether the problem is technical, scientific, or more general in nature, this mental barrier prevents progress.

The difference is that a successful businessperson sees a problem and reacts to it differently.   Instead of giving up, they ask “why not?”   “Why can’t the problem be solved?”   “There must be a way to overcome this problem.”   “What if we try this approach instead?”   “What if we think of the problem from a different perspective?”   Many successful businesses have been created out of attempts to answer these basic questions.

In fact, history is filled with examples of successful individuals and businesses with this “why not” outlook.    A quote by Thomas Edison highlights this attitude:

I have not failed 10,000 times.   I have not failed once.   I have succeeded in proving that those 10,000 ways will not work.   When I have eliminated the ways that will not work, I will find the way that will work.

A successful person does not see a barrier.   Instead, they see a problem that can be solved—the solution has just not yet been discovered.   Instead of an obstacle, they see an opportunity.

I am reminded of one example of this approach around Thanksgiving.   It involves a children’s book and an idea based on “why not?”    When I was young, my favorite Thanksgiving book was Cranberry Thanksgiving by Wende and Harry Devlin.   It is story about Thanksgiving dinner at grandma’s house, a handsome and charismatic stranger, and the uninvited and unsavory guest, Mr. Whiskers.   Grandma’s famous and secret cranberry bread recipe is in danger of being stolen, but is saved by an unlikely hero.    I still can picture the book being read to me in school as I made turkeys with the shape of my hand.   It always brings back fun childhood memories and was a favorite of my younger sisters and brother as well.

Years passed and my eldest child was born.   For his first Thanksgiving, I began my search to purchase a copy of this book.   Unfortunately, I quickly discovered that the book was out of print, the Devlins had passed away, and Cranberry Thanksgiving had been out of the market for several years.   In my search for the book, I found used copies of Cranberry Thanksgiving being sold for up to $150-$200 apiece.   These copies were being snatched up by parents, similar to myself, who wanted to share their favorite childhood books with their own children.

Where I saw a barrier to purchasing a cherished childhood book and memory, Jill Morgan saw a business opportunity.   She had a similar experience to mine when she attempted to locate her favorite children’s book to read to her own children.   Instead of moving on, she asked “why can’t these good children’s books be published and find new homes?”   With that question fresh in her mind she founded Purple House Press whose mission it is to locate and publish children’s books that have been out of print and lost to time.   With this purpose in mind, Purple House Press tracked down copyright holders to classic no longer published children’s books, usually by communicating with authors who had long-retired or the spouses and children of the deceased authors and illustrators.   After obtaining the appropriate rights, Purple House Press would republish and sell these books at a fraction of the cost for which the used copies were being sold on auction sites.  

The authors and illustrators (and/or their families) were happy that their books could find a new audience.  Parents were also happy that they could share their favorite books and memories with their own children.   The Purple House Press approach has been a success and attracted positive publicity from major publications and news organizations as lost children’s books are being rediscovered by a new generation of young readers.  As a result, Purple House Press has sold well-over 500,000 books and publishes several rediscovered books a year.  Where others saw a barrier or no solution, someone else saw an opportunity.   Success then followed.

One of the books republished a few years ago by Purple House Press was Cranberry Thanksgiving.   I eagerly purchased multiple copies and presented them to my siblings.   Now this beloved childhood story is being read by the next generation of my family members each Thanksgiving.

cranberrybooks2

This Thanksgiving I propose that you take a problem or issue that has been a barrier to your business.   Then, say to yourself “why not” and view the problem from a different perspective.    You will be surprised with the results. 

© 2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Breaking Up is Hard to Do . . . Business Partnership Issues

 

When I first meet with a group of prospective partners who have an idea and want to create a business, one of the questions I ask that often receives the most unique reaction is “what would you like to have in place if this partnership does not work out.”    Often times, the prospective partners, who are still in the afterglow of their new idea and the thought of a business venture, don’t want to discuss if it does not work between them.    They also do not want to discuss what to do if a personality issue or other conflict impacts the business and their chance to be successful.   However, in reality, it is essential that this discussion occur, and key decisions are made before the business is created.

Why is Preparing for Future Disputes Important?

During this initial discussion, I tell these prospective partners that there are three general categories of circumstance that will cause stress and conflict within a business partnership.   These are:

  • Failure of the business

When the business lags or begins to fail, partners start to look to each other to place the blame.   Rarely does a business partner state “this is all my fault.”  Finger pointing begins in earnest between the individuals.

  • Success of the business

Money and success often bring out the extremes in people’s personalities.  Conflicts escalate when the dollar amount is higher.   Rarely does a business partner state “I give all the credit to my other partner.”  Pride begins to impact the business.

  • The business remains the same

Business, like nature in general, abhors the status quo.   Stagnancy is the precursor to problems with the business.  If you are not moving forward, you are actually moving backward.

After I discuss these three scenarios, which can impact any business, they realize that it does not matter the circumstances or good feelings of the moment, it is best to address the question now and have the proper preparations in place.

Strong Corporate Documents and Legal Framework

One of the keys to avoiding partnership issues and future disputes is to both define the business relationship between the partners, and the procedure that is in place when an issue occurs.   This is accomplished by the operating documents created at the initial corporate organization of the business.   These documents may include, a partnership agreement, an operating agreement, and specific corporate bylaws or policies enacted during the first corporate meetings.  

These operating documents provide the proper framework for the business, outlining authority and who is responsible for certain items.   They also will provide the framework to address issues that arise for the business and how disputes will be addressed.   When a business partnership has defined their expectations and individual responsibilities early, the odds of misunderstandings decrease because everyone knows their responsibility, everyone knows the procedure if there is a question, and everyone knows what they are entitled to if the business dissolves.

Even if there are no issues or disputes between the business partners, a strong corporate and legal framework will assist when unexpected contingencies occur.   For example, these documents will address what procedures are to be taken when there is a medical situation, disability, or death of a partner.   They can also provide the framework when an unexpected economic, nature disaster or other development occurs, which often requires decisive action in order for a business to survive.

Conclusion

Although it may seem counterintuitive to prepare for a partnership disputes before a business has begun, it is actually essential that this type of preparation occurs.   If fact, completing strong corporate documents and a legal framework to address these contingencies, increases the likelihood that these negative effects can be avoided.

© 2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

THE DUNNING-KRUGER EFFECT ON BUSINESS DECISIONS: WHAT YOU DON’T KNOW (OR THINK YOU ACTUALLY KNOW) WILL HURT YOU

 

An issue I often encounter with prospective business clients is that they have made a decision/choice, which appeared to be insignificant from their perspective at the time, but it actually was not.   Instead, this decision or action is the catalyst that led to significant legal issues, loss of business revenue, and disputes with other parties.   What started out from their perspective as a minor matter evolved into their business facing significant financial losses, litigation, legal fees and costs, and even the potential closure of their business.

When I inquire of these individuals concerning the linchpin decision/choice that led to this outcome, they have a difficult time explaining their decision or understanding why it led to the legal issues that occurred.  When faced with the decision/choice, they have often said to themselves words to the effect of “no, I’ve got this . . .” or state “really, how difficult can this be.”   Oftentimes, they have taken self-help steps to answer their question (or confirm their decision), but they actually have located incomplete or incorrect information.   Consequently, problems develop.

“How does a company, its leadership, and ownership not see these landmines and issues before they occur?” has often been a question I have asked.   While researching another issue, I came across a research study that may explain this mental roadblock.   It is called the Dunning-Kruger Effect.

The Dunning-Kruger Effect is named after two psychologists who chose to examine why individuals make obviously bad decisions believing they are correct.   Their initial question originated as a result of a news article of a local man who decided to rob a bank.   Having learned that lemon juice can be used as an invisible ink, the robber smeared his face with the substance believing that it would make his facial features unrecognizable or invisible.   Because of this assumption, he made no effort to disguise his face beyond the lemon juice and was quickly caught by law enforcement.   The robber expressed sincere surprise and a complete lack of understanding as to why his plan did not work.

Dunning-Kruger decided to research why individuals make obviously bad decisions, but are completely unaware that they are doing so.   They concluded that individuals who are unskilled, not fully educated, or ignorant of certain matters often suffer from an illusion of superiority believing that their abilities are much greater than in reality.  In basic terms, a little bit of knowledge can be bad because individuals have the tendency (with a little bit of information) to extrapolate that they have more knowledge than they actually possess and, as a result, make bad decisions of which they are completely unaware with disastrous results.

Dunning-Kruger proposed that, for a certain skill or knowledge set, “incompetent” people will:

  1. Fail to recognize their own lack of knowledge or skill;
  2. Fail to recognize the extent of their inadequacy;
  3. Fail to recognize the genuine knowledge or skill in others;
  4. Only recognize and acknowledge their own lack of knowledge or skill when educated otherwise.

This is often the perspective that business leadership and ownership will display.   Business leaders, corporate owners and entrepreneurs have a sense of independence, which sometimes serves them well.   However, this independent streak can lead to an overconfidence in areas where they lack the appropriate skills or knowledge to make an informed decision.   This overconfidence leads to decisions and directions that should have never been taken.

In addition, this overconfidence and lack of complete or accurate information results in their failure to take the advice of others, such as legal counsel, who would be able to properly inform them of their situation and provide advice to avoid the problem.  Instead, the “I’ve got this” or “why should we pay for an attorney for advice when we already know our answer” attitude occurs.    Unfortunately, these businesses only realize their own lack of knowledge after the fact, when a problem has occurred, damage is already done, and they are embroiled in serious legal issues.

In order to prevent the Dunning-Krueger Effect from taking hold of a company’s decision process, businesspeople need to have a team of trusted individuals in place in order to keep them properly educated and informed.   Finding these key individuals, whose only purpose is to help you succeed, are essential for the long-term success of a business.   From my observations and experience, I would recommend four key individuals to become part of the success of your business.   They are:

  1. A Business Attorney or Law Firm
  2. A Business Accountant
  3. A Financial Planner with Business Clients
  4. An Experienced Mentor or Business Coach

Locating and utilizing these individuals who are able to provide answers, advice, and assistance with knowledge, practical experience, and different perspectives will help avoid bad decisions caused by lack of knowledge and overconfidence.    These are also individuals whose purpose is to help a business succeed and have no ulterior motives to the contrary.

Those who own and lead businesses need to accept that they do not know everything.   A quote by philosopher Bertrand Russell highlights this approach.  “One of the painful things about our time is that those who feel certainty are stupid and those with any imagination and understanding are filled with doubt and indecision.”  Every successful business owner/leader acknowledges that they are not omniscient and that they need to utilize the wisdom of others to supply critical knowledge and advice.   Understanding the areas where a business owner or leader has a genuine lack of knowledge or skill and has in place those who can provide this knowledge and skill with which they lack, can lead to a more successful and sustainable business.

©2016 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.