Business travel in the winter

Yes, I am currently staffed on the East Coast in February.  #$^@#$ it’s #$%#$^ cold. A few words of wisdom for the newbie consultants traveling to into the cold:

Staying warm

  • Buy some 180s.  They are ear warmers that don’t mess up your great hair
  • Win major points with your team by bringing the car up front and warming it up
  • Wear your heaviest clothes on the plane, find a good place to tuck it away
  • Travel with a Contigo thermos; bring K cups if the client has a Keurig
  • Dress in layers- it is easy to “overheat” in the car or coming in from the cold (LS)

Safety

  • Get a larger rental car and load it up with consultants; less sliding on snow
  • Park with your windshield wipers up when it snows; they will get stuck to your car
  • Leave your rollerbag in the garage; don’t drag that dirty thing in your house
  • Carpool – no reason to have 3 rental cars on the road, if you can prevent it
  • Leave the client site while it is still light out; finish up the work at the hotel

Getting home

  • Book the 2nd to last flight home on Thursday.  The last flight is your back-up
  • Check your flight status often; expect delays
  • Be willing to pay the penalty and change flights, don’t get snowed in
  • Stick to airline & hub combinations (e.g., Delta, ATL)
  • Most airlines let you use wifi free to watch movies; Delta Studio here

Looking sharpsnow

  • Mix and match clothes; it won’t all fit in your bag. Re-wear.
  • Bring some portable shoe polish, and leave it at the client
  • Dust the crappy salty snow off your black pants
  • For longer projects, leave some clothes in a hanging bag with the hotel; they don’t mind
  • Use scarves to brighten up
  • Don’t be afraid to go with the “old man” vest look.
  • Wear those partner/principal jackets and turtleneck

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Difference between balance sheet and income statement

For 80% of you, this is so basic that you just “rolled your eyes”.  Completely understand. If one of my team asked me this, I would not be happy.  I would be scared.

In a quick survey from my last post, looks like 1/3 of us don’t feel that confident with our accounting literacy.  That’s okay, but let’s not make this an excuse.  You gotta know and understand this stuff.  It’s basic. . like knowing the difference between a strike and a foul ball in baseball.  All business concepts are built on this foundation.  Without a crystal clear sense of this, everything business thing you say has the potential to be shallow, unstructured, or wrong.

The income statement is about profits.  Fundamentally, it helps you answer the question of “Did the company make money during this quarter?”  It starts with revenue, then takes out costs, taxes, and other things to get you to net income (net profit).

Digging a little bit deeper, here are the steps when reading an income statement:

  1. Revenues are at the top (volume x price)
  2. Take out cost of goods sold (COGS); this is the cost of the actual stuff used to make the product or service (e.g., for a car, this would be the steel, tires, lights)
  3. Take out the sales and general administration (SG&A) operating expenses which includes marketing, R&D, call centers, rent, utilities, insurance, CEO’s salary etc. .
  4. Take out taxes, interest, and depreciation
  5. Net income is what is left at the bottom

Memorize this.   This simple picture sets you up for more cogent discussions with clients on their business model, namely, how they convert revenues into profits.

Income statement waterfall

The balance sheet is about financial strength.  It is largely divided into three sections and represented by this formula: assets = liabilities + equity.  Remember this beer.

Balance Sheet A L E

Assets: What the company owns and could liquidate to cash including investments, inventory, account receivables, land, building, equipment etc. . .

Liabilities: What the company owes to creditors (notes), government (taxes), suppliers (accounts payables), employees (pension), and customers (frequent flyer miles)

Equity: What the company is worth (assets-liabilities).  It is also called “book value” or owner’s equity.  When all the debts have been paid off, this is what is left.

The simplest analogy is a house.  The house (asset) might be worth $300,000, but there is a $210,000 mortgage (liability to the bank).  So the equity is $90,000.

Practice reading financial statements.  I know that sounds boring, and well. . . it is. That said, its like eating your vegetables, it is good for you.  Here are Chipotle’s income statement here and the balance sheet here.  Can you tell the difference now?

Accounting literate?

Consultants are not accountants.  Yes, there are a lot of consultants who work at the big 4 (Deloitte, E&Y, KPMG, PWC), but they are not accountants.  If you ask them to balance credits and debits on a ledger, they will look at you like a confused dog.  Yes, we took financial accounting.  Yes, we can read income statements and balance sheets.  No, we are not accountants.  Trust me on that one.

Consultants are not investment bankers.  For the uninitiated, this a common mistake.  Just because we graduate from MBA, work with executives, wear ties, and ride a lot of planes. . . we are not all the same.  One of the clearest differences is that consultant often do income statement work, while bankers work on the balance sheet:

  • New market-entry strategy (volume = income statement)
  • Online customer segmentation (volume = income statement)
  • Trade discount analysis (price = income statement)
  • Strategic sourcing for lower cost on critical parts (expense = income statement)
  • Tax-aligned supply chain (tax = income statement)

Varying levels of fluency / illiteracy.  You cannot be good at everything, and accounting literacy is no different.  Clearly, if you consult financial services industries (banks, asset managers, insurance companies) or work with the financial types in companies (Corporate Finance, Treasury, FP&A), you better know your accounting.

Short of that, there is a minimum requirement for all consultants who interact with executives.  Can you explain the flow of funds between the financial statements?  Does the equation A=L+E mean something to you?  Can you delineate gross and net profit? Where do you come down on the argument of labor as COGS vs. SG&A?

Confession: During the first few years of my career, I did not understand financial statements.  Yes, I studied them in school and passed my series 7 stockbroker license, but in reality I could not succinctly explain the difference between COGS and SG&A expenses. Not good.  I still remember walking into the CFO’s office asking for his help sorting out above/below the line expenses for an executive summary I was putting together.  Cringe-worthy.  Don’t fake it. Do the work.

If this is making you a bit uneasy, good.  Consultants are only as good as their last project.  Time to get smart.  Enroll in this free online Coursera accounting class here. Introduction to Financial Accounting, starts May 4th, 4 weeks, based on the Wharton first year MBA class.  Great value, only cost is your time.  Sign up.

Coursera Wharton Accounting

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Consultant, do you have 10,000 hours?

Malcolm Gladwell argues in Outliers here that you really don’t start to excel at something until you put in the requisite blood, sweat and tears . . . or 10,000 hours of focused energy. Yes, the Beatles were brilliant, but they also toiled at their craft in hundreds of small German bars in the early 1960s.  Without sacrifice, it’s imitation. . . not excellence.

I completely agree, and not just because I am in my forties.  Proficiency is not excellence. With the internet-speed of everything, it is too easy to know something about something.  Given a half-day with a talented analyst, I can drum up some seriously smart things to say on most any topic.  Yet, you and I know that watching a youtube video does not make you a master who can charge $300/hour.

Do the work.  This is a ridiculously obvious point for anyone in professional services, but is a particularly relevant criticism for young consultants.  As management consultants, we pride ourselves on our ability to get smart on a topic quickly, and logically structuring the problem to a few recommendations.  True, it’s a skill and a craft.

The problem is that some consultants start believing their own marketing (read: bullshit). They repackage “best practices” or simply muddle their way through the “consulting process” as if this were the 1970’s when clients first saw SWOT analyses. For good or bad, our clients are more savvy than ever.  Your “smooth move” 5 years ago, is frankly, just not as smooth as it used to be.

10000 hours

When you are not staffed, stop pretending you’re busy. You are not.  “Let me check my calendar and prioritize” is not the right answer.  The CFO looks at you with this break-even analysis in mind: your salary = billing revenue x net margin

When a partner/principal gives you a task, embrace the ambiguity and start doing the work. Of course you need to understand the basics (purpose, scope, and timeline), but don’t fall in the trap of over-planning.  In reality, you will figure some of that as you go.

Seek out work.  This helps you develop an internal network, learn new skills, get staffed, and gives you sales practice.  If you can build rapport and win work from a grumpy partner, winning work from a paying client will be that much easier.

If you feel like you are coasting. .  you are.  You know it, and scary. . . others do too.

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If offered a seat on a rocket ship, don’t ask which seat. Just get on.

Team dynamics. Some people over-manage their careers – thinking too much about the role they play, how they will position themselves for promotion, and what they deserve to be doing on the team.  My wife rightly says I don’t think about this enough, but honestly, some people think about it way too much.

Do good work.   If you are new to your firm, your group, your school, your church, your team, check yourself.  Have you done good work?  Have you earned equity?  Have you earned the right to demand anything?  What are you entitled to?

When you are in groups of people more educated, more informed, more successful, and more networked. . .why are you talking so much?  You don’t have to be a Confucian to understand group harmony, hierarchy, and organizational flow.

Don’t be an idiot. People talk a lot about themselves – what they have done, what they deserve, what is important for their career.  Let’s not forget we are in the professional services business.  It’s all about the client, and yet, have you mentioned what’s good for the client at any time in the last 3 hours?  If you are busy comparing yourselves to others on your team, well, you are a loser.

Simon Sinek has a great interview here, explaining why organizations built on fear are insular and weak.  If you have team mates who are jockeying for position, comparing themselves to their peers, saving emails as “evidence”, the culture is dying or dead.

Don’t ask which seat.  When staffing a project, listen to the partner and principal.  Yes, you can give you opinion, but don’t be the high-maintenance millennial.  Great HBS speech by Sheryl Sandberg (COO of Facebook) in 2012 here.  She tells a great story about some advice Eric Schmidt gave her when she was applying for a job at Google. See excerpt:

So I sat down with Eric Schmidt, who had just become the CEO, and I showed him the spread sheet and I said, this job meets none of my criteria. He put his hand on my spreadsheet and he looked at me and said, Don’t be an idiot. 

Excellent career advice. And then he said, Get on a rocket ship. When companies are growing quickly and they are having a lot of impact, careers take care of themselves. And when companies aren’t growing quickly or their missions don’t matter as much, that’s when stagnation and politics come in. If you’re offered a seat on a rocket ship, don’t ask what seat. Just get on.

If offered a seat on a rocket ship, don’t ask which seat.  Just get on.

dont pick your seat

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Can you delight your customer like this street artist?

I was at a team dinner and an artist drew this.  Listen to this story . . .

  • As my buddy and I were talking, we noticed someone was watching us
  • The artist was standing outside the restaurant in 30 degree weather
  • He kept sketching something, and we soon realized it was a picture a few of us
  • Impressed, we waved for him to come inside and draw the rest of the team
  • He sat in the corner and drew this cartoon of 20+ of us in less than 30 minutes

Team CartoonAmazing, right?  Here were my consulting takeaways:

  • Confident in his own skills - started drawing without prompting.  No guarantee of a pay-off.  Just doing good work. Shipping art.
  • Knows this target market.  He was not randomly painting people on the street, instead targeting big corporate dinners at upscale restaurants.
  • Pricing to value.  When asked how much, he said $0-40, whatever you “wanted to pay”.  We loved it.  We paid $60
  • Creates mystery.  He drew this remotely, not interfering with event, sitting as far as 30 feet (10 meters) from the people farthest away.  Some of the attendees did not even know this happened, until I showed it on PowerPoint the next day
  • Delighting us.  When we asked him to put our company name on the bottom of the picture (redacted here), he asked, “which font do you want it in?”  Whoa!
  • Strong brand.  All the servers knew this guy.  He’s been doing this for a while.

Clear writing – explain it to me as if I were a kid

Frankly, many people are bad writers.  They come in all shapes and sizes.  Most of it takes years and years of reading and writing to correct.

  • If you don’t know the elements of composition, or just misuse grammar, it will be a tough road to writing for you
  • If you don’t read, you don’t have pattern-recognition of what clear writing looks like
  • If you don’t write a lot, it’s just a difficult exercise
  • If your readers (customers, suppliers, boss) are not discerning, you will gravitate to the lowest writing common denominator.  Remember my ex-CPA who attached an invoice without even writing hello?

However, there are four poor writing habits (which many consultants have) which can be corrected with some conscious (new years resolution-type) effort.

Don’t use jargon.  Don’t do this more than necessary.  It is not clever, or sophisticated. Everyone knows what these pseudo-intellectual words mean and it’s trite.

Don’t ramble. Edit yourself.  After you have written the 500 word email, cut it in half. Put things in bullet points. Organize it so that people can skim the email, if they want. Show some respect for people’s time.

I’m sorry I wrote you such a long letter;

I didn’t have time to write a short one.  – Blaise Pascal

Think more deeply before you write.  Jot down the key points on paper first, or just give yourself an extra 15 minutes walking to the Coke machine to think about it.  Let it stew in your brain more before you put it on paper.

Explain it as if you were speaking to a kid.  This is the most common piece of advice I give to junior consultants who make PowerPoint slides.  Explain this 1 page as if you were explaining it to your nephew, cousin or husband.  What are you trying to say (in simple words, and simple sentences).

Too often, consultants can verbally explain it to you clearly in 90 seconds, but oddly, none of those wonderfully clear, basic words are on the page.  As a result, I tell them to blow up the PowerPoint slide, and re-do it with the words they just told me verbally.

Good night.  I commit all of the above writing sins, daily.

 

New Darden dean is ex-McKinsey

UVA Darden is a strong business school known for its case study method. Like Harvard, UVA uses this method to teach everything from finance to ethics.  Over the course of 2 years, the students have more than 600 cases.  Yes, it’s rigorous.

Darden is known for consulting. Of course, the case method parallels a lot of consulting.  Lots of data and facts which need to be synthesized into hypotheses and potential solutions.  No surprise that 28% of its graduates got into consulting.

Scott Beardsley will be the new Dean of the school after 26 years in management consulting.  Definitely has pedigree – MBA from MIT, editor of the Sloan review, responsible for learning and leadership development at McKinsey. Not shabby.

Great speaker series.  Excellent speakers CEOs and heads of consulting firms.  Some of these are dated, but strong management and leadership is timeless.  The corporate titles were current at the time of the talk. . .they may have different roles now.

  • Co-founder of Coursera, Daphne Koller, 2013 here
  • ScottMadden Consulting, CEO, Brad Kitchens, 2011 here
  • Accentuer, Global Managing Director, Walt Shill, 2010 here
  • Booz & Co, CEO, Shumeet Banerji, 2009 here
  • Chik-Fil-A, CFO, James McCabe, 2008 here

UVA Darden

UVA Darden was always known for consulting.  Now with the new dean, even more so.

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Madman, architect, carpenter, judge

Ever have writer’s block?  Try using this simple process to breakdown your writing into the right process steps. It’s called madman, architect, carpenter, and judge.

Madman Architect Carpenter Judge

The idea is simple, but instructive. There are 4 different writing personas tugging at you when you write.  The madman is coming up with great ideas all the time which might not be related to anything. The architect is providing structure to the writing; moving paragraphs around and looking at the story-line.  The carpenter is crafting the sentences, phrases, and word choice.  The judge is deleting unnecessary parts.

Know where you are.  Each action is valid and valuable, but it’s important to know where in the writing process you are at the moment.  If you have 3 days to put together a client proposal, you want to make sure you meet your deadlines.  Get through the madman brainstorming. Agree on the architecture of the proposal including scope, structure, format, and tone. After all, you don’t want to get 3/4 the way through the writing and have people bring in new (last minute, unrelated) ideas.

Proposal in 3 days

By getting those 2 stages out of the way, you give yourself more time to do the carpentry of writing.  Putting together succinct, impactful, and clear thinking on paper. Naturally, you also want to leave enough time for judging by other partners, subject-matter experts and other in the approval chain (e.g., legal, finance).

HBR podcast with Bryan Garner here, author of HBR’s Guide to Better Business Writing and he describes these writing steps.  Start audio at the 5 min 30 seconds remaining, if you don’t want to listen to the whole thing.

You can apply this to your PowerPoint:

Madman

  • What is your point of view?  Are you just going to bore the client with the same recycled marketing brochure-ware? How will you “wow” the client?
  • How can you incorporate your previous work, graphics, and insights?

Architect

  • Bucket your thoughts into logical groupings; don’t jump around from topic to topic
  • Ask yourself, could someone understand each slide without a voiceover?
  • Use impactful titles. It’s the most valuable part of the page
  • Each page should make 1 point (no more than 2 points)

Carpenter

  • Put your most important point first
  • Use parallel structure (e.g., all bullets start with verbs)
  • Graphics and words should support each other
  • Use graphics when possible, not text
  • Use parallel structure between slides to keep the flow of the powerpoint
  • Do not use clip art or photos.  Seriously, don’t.

Judge

  • Repetitive words should be eliminated
  • If it’s not obvious what the point of the graph is, call it out with a text box
  • Leave whitespace on the page; don’t feel compelled to clutter the page
  • If you can combine pages, do it.

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