75 Years Ago: A Day That Will Live in Infamy   

December 6th, 2016

On December 7, 1941, Japan attacked Pearl Harbor.  My grandfather, child of the depression and the son of immigrants, served in the war.  Fortunately, he was a prolific writer and kept a journal for most of his life.  If he had the platforms available today to share his wisdom, he would have actually made money writing instead of writing for the purpose of trying to covertly sell more labels!  He did author several books and articles related to his military service (Pacific Theater on a B-29 bomber) and work after the war (insurance).

Recently, I got some of his personal journals.  I am compiling them to share with my family.  I recently came across a passage he wrote on February 23, 1989.  President George H.W. Bush, himself a World War II veteran, attended Hirohito’s funeral on that date.  I remember talking to my grandfather about Bush’s decision back then.  I don’t think it’s a coincidence that I read his journal the week before the 75th anniversary of Pearl Harbor.

My grandfather’s opening and closing paragraphs from his entry about Hirohito’s funeral.  In between, he wrote about his internal struggles with Bush’s decision.  He served in the Army Air Corp on bombers in the Pacific.  He was shot at and shot at the enemy.

Please read his words closely and compare to the world today where it seems like every citizen and company is asking the government for help.  As the news reports almost daily on violence related to seemingly minor incidents (for example, traffic issues causing road rage), it also seems like our ability to forgive has been lost as well.  While my grandfather and many great men and women from his generation have left this world, my hope is we can honor their legacy by being more like them.

Hirohito’s Funeral – February 23, 1989 – Thursday 

When Japan attacked Pearl Harbor on December 7, 1941, I was one of millions of young Americans who felt a duty to enter the war.  A few months too young for military service, I waited with a strong burning desire until I could enlist…the draft was not necessary as far as I was concerned.  As a matter of fact, as a trained machinist from East Tech High School and with an important function as such at a defense plant, Ohio Crankshaft, it was at least as important to remain in that post as it was to join the Army Air Corps.  However, I chose the latter.

I cannot completely forget, as yet, any part in the war, and perhaps, never really will.  But I do forgive Japanese people for their actions and hope others will as well.  Hirohito will have to answer to Someone much higher and infinitely wiser.  I gently bow to that authority.  

Make Year End Useful  

November 29th, 2016

We’re coming up on year end.  Performance reviews, budgets, and other year-end activities.  Oh what a fun time of year it is!  After a few decades of performing the year end fire drill, it often becomes a perfunctory exercise.  That’s the problem: it should be an opportunity for growth and looking forward, not just looking backward and checking boxes so HR and your finance folks leave you alone.

If I (you) have done my (your) job as a manager, reviews should be a forward looking exercise.  People should know where they stand, what they’ve done well and what they have yet to accomplish; that feedback should have been provided throughout the year.  The “review” conversation should focus on what is ahead for the year, for the individual, his team, and the company.                                                                    

Regarding the budgeting process, zero based budgeting is coming back into style.  (A nice summary https://en.wikipedia.org/wiki/Zero-based_budgeting) In a nutshell, everything starts at zero, rather than looking at what was spent last year and adding or subtracting.  This forces managers to really question what they need. While we haven’t implemented it completely at I.D. Images, we are experimenting with it in specific areas.  It is an eye opening exercise to question every expense and the structure of every department. 

 If you’ve got to do something, you might as well make it useful.  Take the opportunity to grow at year end. 

Be Grateful and Heed the Advice of 2nd Graders

November 22nd, 2016

I volunteer at the Julie Billiart School (www.juliebilliartschool.org ), a very special place that helps kids with learning needs.  A highlight of my holiday season is receiving the cookbook the school’s 2nd graders create called, “How to Cook a Turkey.” Every year, each 2nd grader writes a recipe for cooking a turkey.  Their teachers compile them into a recipe book.  Their innocence and creativity always make me smile.  Last year, I picked out a recipe that I shared in this space.  This year, I’m pulling out some of my favorite comments.

  1. First, you’ll need to catch a turkey. (Jeffrey)
  2. Be sure to wear an apron, chef hat, and super hero cape when you cook your turkey!  (Ricky)
  3. When you’re done eating, put everything in the sink.  Mom will clean up the kitchen but you better not have made much of a mess. (Sian)
  4. The guys should just watch football and the kids can play board games. (Matthew)
  5. Eat Grandma’s brownies…she makes the best!!! (Anthony)

Every “recipe” had something that made me smile.  I’m thankful to receive their card and get a reminder from them what life is really about.  Reading their recipes reminded me that we have a tendency to complicate things, even Thanksgiving.  Yet kids just love the fun of it.  Shouldn’t we?

As you enjoy the Thanksgiving holiday, I hope you have the opportunity to think like a 2nd grader.  I hope time slows down for you. I hope you get to play.  I hope you don’t forget your super hero cape!

 

What’s Next?   

November 15th, 2016

As the experts predicted, Hillary Clinton was elected our 45th president last week.  Oh wait.  Oops.  They kinda missed that one.  The media’s missteps might be the lasting impact of this election.  I had two post-election conversations that stood out to me about the fallout of what happened.  One individual voted for Clinton; the other, as he put it “jumped on the Trump grenade and I pray it doesn’t explode.”  The Clinton voter said, “You know, I can’t stand Trump, but I found myself rooting for him because the media looked so stunned.”  The Trump “supporter” was more excited about the media’s struggles than Trump winning.  He gushed, “I thought Chuck Todd was going to cry!  I loved it!”  It might behoove the media to decamp from the coasts and actually spend a little time in the rest of the country.  Maybe they’ll discover we’re not a bunch of bigoted, misogynistic, backwards people after all.

I’m sure the Donald’s presidency will provide numerous blogging topics and Saturday Night Live skits  over the next couple of years.  I’m most concerned about the impacts on business Trump’s presidency will have.  The major impact I see is inflationary pressure.  Regular readers know I’m a broken record on inflation.  Like a broken clock, I’ll eventually be right.  The government keeps telling us it’s low; talk to any business owner about operating costs and he’ll disagree.  Trump clearly believes inflation is good.  If you’re a debtor (as real estate investors often are), inflation is good: you pay back your debt in dollars that are worth less than when you borrowed because of inflation.  All of Trump’s commentary indicate an indifference or even encouragement of inflation.  One way to make people feel better off is more money in their paychecks.  It’s hard to see that money trickling right back out in the form of higher costs.  As I’ve written in the past, the only politically acceptable way out of our fiscal mess is inflation.  (Our big fiscal issue is entitlements.  Were they even talked about in the campaign?  Did I miss that discussion?)

It’s going to be a wild ride.  I give Trump credit thus far.  An old management axiom states, “If you’re not making decisions that upset people, you’re not making decisions.”  Thus far, some of his decisions have upset his supporters; some have upset his non-supporters.  Leadership requires making decisions people don’t like.  I hope our president (and Congress) have the courage to make those decisions.

 

The Sun Will Rise After The Election     

November 8th, 2016

The Cubs won the World Series after a 108 year drought.  My beloved Indians lost to a better team.  The Indians’ drought is now the longest in professional sports at 69 years.  Maybe Joe Buck will root for the Tribe next year.  Despite the Cubs’ victory, the sun continues to rise.  I’m pretty sure hell didn’t freeze over either.  I’m pretty confident that no matter whom gets elected, the sun will rise after all the votes are counted.  It is somewhat sad that our presidential choices are who they are.  Or is it?

I recently saw “Hamilton,” the multiple Tony award winning musical.  If you haven’t already, read Ron Chernow’s book on Hamilton.  If you have the opportunity, go see the musical.  I’ve thought a lot about why it’s so popular.  Certainly, it is incredibly entertaining and very well done.  Lin-Manuel Miranda, the musical’s author, certainly took a challenging and often boring subject and addressed it in a creative way.  Its look into the politics of our founding fathers is timely given the political environment today.  Those factors all contribute to “Hamilton’s” commercial success.  But I think there are a couple of bigger reasons for the musical’s immense popularity.  First, Alexander Hamilton is a flawed character and portrayed as such.  Miranda exposes all his warts.  But by the end of the musical, the audience has developed sympathy for Hamilton.  He’s portrayed as a human being, with real feelings and real problems.  Many of us, including me, often have a vision of our founding fathers as perfect people.  Hamilton’s story reminded me that they had to put their pants (knickers) on one leg at a time and had their life struggles just like all of us.

Second, and probably more timely, is the musical is a wonderful reminder that democracy can be messy!  Heck, Hamilton died in a duel.  Think of how much money could be raised if our two major candidates held a duel.  We could pay off the national debt!  We’ve certainly witnessed some messiness with this presidential election cycle.  While we might be more exposed to it because of technology, the era of Hamilton/Jefferson/Adams/Burr/Madison was filled with personal attacks as well.

I’ve certainly lamented that I’m disappointed the two major presidential candidates are the best we have to offer as a country.  They are who they are.  It goes without saying that they’re not perfect.  “Hamilton” is a reminder that our system is stronger than any individual ever will be.  Our founders knew humans have flaws.  As long as we allow their phenomenal system to work, we’ll be OK no matter who wins.

 

 

The Little Things Really Matter

November 1st, 2016

I was hoping today’s blog would incorporate a celebration of a World Series title for my Cleveland Indians.  As it now stands, the Indians lead the series 3 games to 2.  One more win at home and one more item off my bucket list!  (I did get to go to a game with my wife and son, a memory I’ll cherish forever.)

Going into the series, the vaunted Chicago Cubs were favorites to win.  They have a powerful lineup and a deeper starting pitching staff.  Yet the Indians took a 3 games to 1 game lead.  Why?  It was the little things that led to Indians’ victories.  In the games each team has won, they moved runners along.  They hit the right cutoff man.  They didn’t commit errors.  In sum, they played solid fundamental baseball.  They also played to their strengths, with the Indians using their strong bullpen to take the series’ lead.  Not surprisingly, the Cubs’ wins also came from doing the little things right.  In their 2 wins, they didn’t bludgeon the Indians to death like Joe Buck thought they would.  (There are plenty of Joe Buck favoritism articles out there.  This one links to the Joe Buck-Kyle Schwarber wedding registry:  https://www.yahoo.com/tv/world-series-fox-sports-joe-003452330.html.  If you’re a baseball fan, enjoy!)

In the game of business, the little things matter.  We all obsess over the big order or the big account, just like baseball fans like to see a grand slam.  They’re great and they’re important but the little things we do every day lead to sustained success.  Return a phone call in a timely fashion.  Dot the I’s and cross the T’s on shipping instructions.  Do things right the first time.  If you do all the little things right, you’ll be prepared when the big opportunities come along.  Go Tribe!

MacTac Sold: The Case for Private (Equity) Ownership   

October 25th, 2016

The long awaited sale of MacTac was announced on October 24th.  Lintec, a Japanese adhesive firm, is acquiring MacTac from Platinum Equity for $375MM.  A little history: Bemis sold MacTac to Platinum in November 2014 for $170MM.  Platinum sold MacTac Europe to Avery Dennison for $240MM earlier this year.  Add in the $375MM and Platinum got approximately $515MM for its $175MM in investment in less than 2 years!  This doesn’t include any dividends or investments Platinum made; I’m sure they did a little of both.  Not bad for 2 years of work!

According to the press release, MacTac’s adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) grew 40% from 2014 to 2015.  EBITDA is a metric that businesses use to adjust earnings for management’s chosen capitalization structure (debt and equity used to finance a business) as well as non-cash adjustments (depreciation and amortization) to earnings.  In other words, it’s a proxy for cash generated by the business.  EBITDA certainly isn’t a perfect metric for cashflow for many reasons but it’s fairly simple to calculate and understand.  I can sum up half of what I learned in a University of Chicago Booth School of Business MBA in a phrase the great Professor Steven Kaplan emphasized: CIMITYM, Cashflow Is More Important Than Your Mother.  (Sorry, Mom, but it’s true.  Still love you.)  The other half of what I learned is options (meaning choices) are valuable and if you can value your options, you’re way ahead of most people. There, reading this blog saved you well into 6 figures!

So why can private equity/private ownership do what many public companies can’t do?  Bemis is a large public company with competent management and a competent board.  They’re very successful at what they do.  Yet Platinum realized almost 3x its initial investment in 2 years.  Why?

Private Equity (PE) firms obsess with growing EBITDA.  Good PE Firms (like Platinum) leave no stone unturned in improving the cashflow of the business.  They don’t focus on quarterly earnings at the expense of growing cashflow over a longer period of time.  They’re willing to make difficult decisions to cut costs which often involve restructurings.  They look a little more dispassionately at the business than a management team who needs a paycheck might look at the same business.  Management of PE firms as well as management of PE owned companies are  typically rewarded for growing cashflow.  They typically use a lot of debt in the capital structures of the companies they own, forcing discipline upon the management team.  They  need to generate cash to make debt payments.  Banks and bondholders don’t like it when they don’t get their interest and/or principal payments.  PE firms also do well with corporate “orphans.”  Bemis had tried to sell MacTac years ago.  Platinum saw value in MacTac and executed to unlock that value.  It should be noted that the value was unlocked with essentially the same management team that ran MacTac prior to Platinum’s ownership, supporting my thesis that competent management is generally in place in large (and most small) companies.

We can all take some business lessons from the MacTac example.  Never overpay for an asset.  A business is an asset that it is worth the cash it generates.  Focus on the current and future state, not the legacy of what your business was and currently is.  Confront the brutal reality as Jim Collins puts it.  If your costs are too high, fix it.  Finally, and most importantly two rules:  Rule #1: never forget CIMITYM.  Rule #2: Never forget Rule #1!

A Positive Way to Inspire Change

October 16th, 2016

At their best, sports provide invaluable life lessons.  This story demonstrates the power of sports to have a positive impact in our world.

The Cleveland Indians are a feel good story right now.  Despite substantial injuries, they’ve kept winning and as I write, are two wins away from a very unexpected World Series appearance.  I’m a big Indians fan.  I’m an even bigger fan of their manager, Terry Francona.  “Tito” as he is called (in reference to his father), has demonstrated that leadership matters from the time he put on an Indians’ uniform.  His honesty towards and compassion for his players is easy to see.

All of the coverage that I’ve seen about athletes advocating for social changes has centered around kneeling for our national anthem.  I haven’t seen the national medial pick up the Indians’ story.  A link to local coverage is below and I encourage you to read it and share it with as many people as you can.  A synopsis: The Indians were in Chicago when the kneeling story broke.  Francona talked to some off duty Chicago policemen working the game.  He “ruminated” and thought he had to do something.  He approached the African American players on the Indians’ team.  They were on board with him.  The team and staff raised $500,000.  Ownership matched.  The Cleveland Indians are donating $1MM to create the Larry Doby Youth Fund which will work with youth-focused community organizations to provide educational assistance and resources to help curb youth violence that is all too prevalent.  (Larry Doby was the first African American player in the American League and played for the Indians.)  Importantly, every member of the team, the coaching staff, administrative staff, and ownership contributed to this fund.  This all came about because of one special man, Terry Francona.  If this isn’t a case study in leadership, I don’t know what is.

Character matters.  Leadership matters.  Tito, you demonstrate both.  Thank you.  The wins are great but an action like this is what makes you and this team special.  If only the national media would pick up on a positive story, maybe we’d have a more productive dialogue about the challenges we face in our country.

http://www.cleveland.com/tribe/index.ssf/2016/10/cleveland_indians_manager_terr_34.html

Creative, Crazy, or a Sign of the Times?

October 11th, 2016

I was on planes a lot last week.  It is my habit to take several trade magazines with me, pretend that I read them on the plane, and recycle them at the airport I land at.  I was perusing one such trade rag last week.  I came to the last page and an advertisement caught my eye.  A certain manufacturer would like to “thank you for your business by presenting you with world-class ammunition perfect for Home Defense, Conceal Carry, and Long Range shooting.”  That is direct text from the ad.  I did a double take.  I showed the ad to someone else on the plane to make sure I wasn’t hallucinating.  Sure enough, if you order a minimum of $2,500 worth of print products, said manufacturer will send you 6 boxes of ammo!  But wait, there’s more: you can mix and match all calibers!  Hand guns included!

I am still trying to figure out what ammunition has to do with print.  If someone knows, please enlighten me.  I guess the ad is successful because I shared it with our sales and marketing team and I’m writing about it now.  We’re certainly talking about it.  Isn’t that one of the goals of marketing?  There must be a target audience that orders print that free ammunition appeals to.  Shame on us for never targeting (pun intended) that group!

We’re all looking for creative ways to reach our customers and potential customers.  It is quite common to confuse getting attention with marketing.  The ad certainly got my attention.  Marketing is defined as the act of promoting products and services for the purpose of making a sale.  I don’t quite get how this ad promoted any products and services offered by the manufacturer, other than they like to buy and give away bullets.  Marketing is certainly harder than getting attention.  The narcissistic guy running for president is good at getting attention.  He’s not that good at marketing.  Unfortunately, we live in a time where getting attention seems to have become an end in and of itself.  Think of all the people that are famous simply because they’re famous.  (Did Kim Kardashian ever accomplish anything?  Ever?)  That attention getting mindset is now infiltrating our businesses.  Don’t succumb to the temptation.  Creativity is sustainable; someone can always come up with something crazier than you.  Stay on message, promote what you stand for, and you will be successful.  Remember, the goal of marketing is getting a sale, not getting attention.

If You Invest in Technology, Use It!

October 3rd, 2016

I left for a business trip last Thursday.  I got to the airport and discovered I didn’t have one of my credit cards with me.  I checked at home, no card.  I checked at work, no card.  Great, I lost it.  I called my credit card company to cancel it.  After 7 minutes and 23 seconds of verifying my identity and if the last 5 charges were mine (they were), I got connected to a representative.  She proceeded to ask me the exact same questions.  Fortunately, I was in a good mood so instead of being flippant, I inquired as to why she asked me those questions after their computer system asked me the exact same questions.  Jackie (I’m quite confident that’s not her real name based on the accent.), told me, “Mr. Brian, we are going through a system upgrade and right now our systems are not integrated.  I apologize for the inconvenience.  We ask these questions for your protection.”  Of course, I had to ask when the system upgrade would be done.  She replied, “Approximately 2 weeks.”  I know 2 weeks is IT code for never.  IT folks know executives will forget about the 2 week promise and ask about the project again in 2 weeks at which time they’ll give the same 2 weeks answer to when the project will be done.  If you’re IT department tells you 2 weeks, you’re in trouble.  As long as I deal with this credit card company, I will continually have to input data to get to a representative.  The representative will ask me for the same data the computer system asks me for.  Thankfully, I only lose my card once every couple of years.

If a company is going to spend money on technology, it should use it.  Make me use your automated system.  Let me talk to a person if I want to.  Don’t make me do both.  I couldn’t bypass their system without answering all of their questions.  Maybe I could have if I knew how.  Make it easier!  I was flustered – I didn’t know where my credit card was and I was about to get on a plane.  Technology isn’t easy.  Technology isn’t cheap.  (I had a conversation about this subject with a friend this morning.  Has anyone seen margin increases because of technology?  Or is our money just deployed in different ways?  That’s a PhD paper subject, not a blog!)  After I got off the phone with my credit card company, I had the lyrics to the old Stealers Wheel song in my head, “Clowns to the left of me, jokers to the right.  Here I am, stuck in the middle with you.”  The middle is not a good place to be; you get attacked from all sides.  It’s tough to keep all of your customers happy but driving down the middle of the road will get you killed.  One competitor will out service you; the other will out technology you.

Oh and that credit card?  It fell out in my car.   I’ve spent several hours changing all of my automatic payments.  Oops.