Milwaukee Biz Blog

I attended an economic briefing from the chief economist of a major European bank yesterday. It was fascinating to hear the financial crisis and recession described from the perspective of the Organization for Economic Cooperation and Development (OECD), where the recession has been much worse than in North America.

For example, Germany's GDP fell 6.5 percent from its peak, with its manufacturing down 25 percent and exports down 26 percent. And despite massive European fiscal and monetary stimulus, his expectation for 2010 and 2011 is slow OECD growth, as is mine for the U.S. economy.

His most insightful comment was a quote from a UK central banker: "It's about the level, stupid," an analogy to Bill Clinton's 1990's campaign comment that helped him knock George Bush out of the U.S. presidency.

The gap between actual economic performance and full-capacity economic performance is so great across the industrial world that the excess capacity will drag down income, earnings, job creation and investment spending for at least the next two years.

I am in Oslo, Norway, as I write, here for a week to see my fiancé who runs an Oslo-HQ global biotech business. Walking home from the briefing, I could not help but think about the role beauty plays in Oslo. Exquisite architecture, curved streets, central circles, sculpture everywhere and small shops create an invitation to sit at a coffee shop or outdoor bar (a major pastime here until the sun all but disappears) or visit the shops. One child's clothing store window is so becoming it almost makes me want to be a grandmother (not quite).

Think about the appeal of your favorite magazine's photo-spreads (be you a hunter, globe-trotter, teenage girl or homeowner getting ready to remodel) - the ones that make you want to "be there" or "have that right now." Now imagine that magnetic-like appeal created on city streets. That's Oslo.

Given the slow recovery, every business needs an equivalent level of attraction (in the minds, eyes and emotions of its target customers) to hold share, gain share or move into new markets. Why? Because there are more reasons today to not buy, to buy less or to buy at a lower price than to buy at pre-2008 levels. The cause? Extraordinary economic uncertainty, more than we've had since the mid-1970s out-of-the-blue OPEC oil-price shock.

Overcoming this hesitation to buy becomes job No. 1 for sales, marketing and the operational troops that create the offerings you want to sell. What does this requirement demand of leaders?

First, make sure your organization has a compelling value promise behind all its offerings, one you can reliably deliver upon. If you do not have one, decide on one you could aim towards. A relevant and differentiated value promise is the bull's eye of business model innovation.

Second, build hard-to-copy advantages that allow you to deliver on your value promise. The scope of your products and services, another part of the business model, can sometimes be part of your advantage. But culture and organizational skills are much harder to copy.

If you lack advantages, start creating them. Creating advantage is a far more important aim than cost containment today. Furthermore, once you know your value promise and advantages, cost containment will be a lot easier as you'll finally be able to identify costs that are of no benefit to customers. It's why I always say, "Pursue business model innovation before you spend another dime trying to compete on the same terms and with the same business model as that of your competition."

Finally (I can't believe I am going to say this as I have always thought that substance is more important than style) in today's markets, do not under-spend on the appearance of your product, the way it is presented and who is presenting it. Get the look and the voice right. In today's more challenging markets you need to help your customers overcome resistance to buy.

Apple's I-phone wins on ease, but it's truly exquisite appearance made it a lot easier for people to fork over a $100+ premium. Apple's bottom line shows that appeal has a high ROI.
What's your company's appeal?

Kay Plantes, Ph.D., is an MIT-trained economist, business strategy consultant, columnist and author with expertise in business model innovation, strategic leadership and smart economic policies. She resides in Madison, Wis., and Oslo, Norway. For additional information, visit www.plantescompany.com.

I have never played poker with Harley-Davidson Inc. chief executive officer Keith Wandell. But if I did, and he went "all in" with his chips on a crucial hand, I'd look him in the eyes. And then I'd probably fold.

Wandell is "all in" with Harley. The stakes are high, and he's playing his hand accordingly.
As they say, drastic times call for drastic measures. Harley's core customers - people willing to plop down $40,000 or so for a new motorcycle - have been steadily dwindling. And even if they are willing to fork over that kind of coin, good luck obtaining the financing.

Harley's earnings have fallen for nine consecutive quarters.

Wandell, who built a track record of squeezing efficiencies out of operations in his years as an executive at Johnson Controls Inc., was brought in last year to do the nasty, painful hatcheting at Harley.

So far, he's been up to the task.

Wandell is laying off thousands of people and closing plants. He recently ended the Buell Motorcycle line, which Harley had acquired in August 2008 for $108 million. (If they had known then what they know now … )

Wandell is divesting Harley's MV Agusta venture in Varese, Italy.

He's threatening to close Harley's plant in York, Pa., unless the company receives the right concessions from the employees there and the right incentives from the local governments there. That decision will come in December.

With all of that chaos and all of that carnage, you might think Wall Street would be skeptical about Milwaukee Iron. You would be wrong.

Stock analyst Craig Kennison of Robert W. Baird & Co. Inc., is downright bullish on Harley, raising his outlook for the company to "outperform." Kennison is predicting a "cyclical rebound and turnaround story" for Harley.

"We expect shipments to bottom in 2009 following efforts to slash dealer inventory. Meanwhile, we see a dynamic turnaround story led by a bold CEO driving better performance. We see an opportunity to earn $2.25-$2.50 per share at modest production levels as Harley exits unprofitable brands, renegotiates York, and expands internationally. At 11-12x that expectation, we consider Harley the best value in our recreation space," Kennison wrote.

"Operations meet expectations. Harley reported a noisy quarter, reminiscent of bar-time at a Harley rally. Beyond the noise, however, key operating metrics met our expectations … Focus on post-restructuring earnings power. We see the potential to earn $2.25-$2.50 per share on a modest improvement in shipments (250K bikes) as the restructuring plan unfolds. New CEO Keith Wandell is taking bold action to refocus the business and build around the Harley-Davidson brand," Kennison stated.

Kennison is predicting that much of Harley's new growth will come from overseas, as the company plans to add 100 to 150 international dealers to drive shipments to 40 percent of bikes sold by 2014.

So, Wandell's legacy at the Harley helm awaits him. He could go down as a cruel butcher who cut the life out of one of America's proudest brands. Or he could follow in the footsteps of predecessor Richard Teerlink as a corporate savior and a turnaround genius who pulled Harley out of the scrap heap.

Either way, it will be a painful, bumpy ride.

 

Steve Jagler is executive editor of BizTimes Milwaukee.

Editor's note: Milwaukee County Treasurer Dan Diliberti presented to Elizabeth Coggs, chair of the Milwaukee County Board's Finance and Audit Committee, a budget alternative for consideration for the 2010 Budget.  He stated that Milwaukee County can no longer afford to fund the Transit System with property taxes and detailed his proposal in a letter to the chair as follows:

Our Treasurer's Office and the Finance Committee are faced with different sides of the same coin when it comes to the current recession. My office is facing tax delinquencies and foreclosures for increasing numbers of households that cannot afford to pay property taxes which continue to increase in the midst of a recession. Meanwhile, your committee is faced with decreasing property tax and sales tax revenues amidst a time of increasing demands for services.  As the recession continues, the Finance Committee struggles with more and more difficult service reductions, like the one that took place last night for Paratransit riders.

Because of the continuing impact of the recession - conditions that may last for several more years - this morning I presented to you for your committee's consideration a bold move to both preserve transit and reduce property taxes.

As you well know, Milwaukee County voters approved a ground-breaking referendum to implement a dedicated sales tax for transit funding in 2008. That proposal was passed by the Legislature, but later vetoed by the governor. The governor has now put his own alternative proposal forward, and it is pending before the Legislature.

Meanwhile, the state has imposed a property tax cap in Milwaukee County because the Legislature has determined that property taxes are too high relative to comparable-sized counties in other states.
This puts Milwaukee County in a tremendous bind.

Apparently, some people in state government want to have it both ways. However, the state cannot complain about high local property taxes unless it takes action to remove transit from the property tax roll. That move alone would save Milwaukee County property taxpayers $18 million.
The roots of the recently passed referendum for dedicated transit funding go back to 1975 when, facing inaction by the state, Milwaukee County rescued a bankrupt private transit system by raising annual property taxes to assure that busses would continue to run here.

However, almost 35 years later and further restricted by a state-imposed property tax freeze, Milwaukee County has run out of transit-funding options. Bus fares have been increasing for the last seven years, and are now among the highest in the nation. While the county has reduced transit service 16.7 percent, it has increased fares by 33 percent over this same period. Independent analyses show that if Milwaukee County continued as the transit operator, the bus system would soon face dramatic fare increases, drastic cuts in service, and eventually be bankrupt.

In the short run, if Milwaukee County continued to finance transit while laboring under state tax freeze rules, funding would only come at the expense of drastic cuts to county parks, dangerous cuts in courts and public safety operations, reductions in mental health services and costly deferred maintenance throughout the county.

Milwaukee County is the last major urban area in the country to fund transit with property taxes. Yet, Milwaukee County cannot legally change that funding formula on its own because state statutes prohibit counties from creating a dedicated funding mechanism for transit.

Milwaukee County has done everything possible to remove this burden on Milwaukee County property taxpayers. The county has worked with legislators to devise legislation that was approved by the Legislature. The county has borrowed money to purchase needed replacement busses and equipment. The county has raised user fare levels to the highest in the nation.

Now the county has run out of options and money.

But a solution is at hand. Passage of legislation currently pending before the Legislature would create a Regional Transit Authority (RTA) with a dedicated funding source. Passage of that legislation is critical, because the current recession has put Milwaukee County in a fiscal crisis. Milwaukee County cannot afford to subsidize inaction by the state legislature.

The creation of an RTA is a state – not a county – responsibility, and the state has delayed taking action on this important issue for far too long. The need for an RTA was discussed back in 1975 when the county took over the bankrupt private transit system.

Local civic leader Jack Pelisek championed stalled State legislation back in the mid-90's. However, continued state inaction on this issue is a luxury we can no longer afford.

The state needs to stop passing the buck on this issue and take responsibility for creating an RTA. It is up to them to decide either to do nothing and condemn mass transit to a sure death in this region, or to create and fund an RTA to provide an efficient and effective transit system for this metropolitan area. Only the state – not the county – can do this. Only the State has the authority to create an RTA.

The Public Policy Forum, the Southeast Wisconsin Regional Planning Commission, the Greater Milwaukee Committee, the Metropolitan Milwaukee Association of Commerce, and editorial boards of major media have all supported the creation of an RTA.

That is why I am asking the Finance Committee to consider whether Milwaukee County can responsibly continue to fund local Mass Transit beyond July 1, 2010 - the start of the new state fiscal year?
If the Board were to take action to limit county funding to the first six months of 2010, Milwaukee County would be making a similar statement that the private transit operator did in 1975 - that we have run out of options.  

We have reached a crisis point and no one but the State can save our transit system. If Milwaukee County limited its transit funding to the first half of 2010, it would be a clear message that the state must deal with its responsibility to establish an RTA with a dedicated funding mechanism.

The crisis in funding the Milwaukee County Transit System has reached the point that it is an RTA or bust.  It is time for the state to step up to the plate and take an action that every other state with a large urban county has already done. The State of Wisconsin must take action in order to preserve transit in this region.

I have added my voice to Milwaukee County, civic, business, labor and community groups that have already joined forces to lobby for the state to take action. The state legislature needs to understand that the only viable way to preserve mass transit in this metropolitan area is to create an RTA financed with a dedicated funding source. Absent this action, mass transit will face a rapid decline and certain death in this region.

Public Transit is essential to our economy, but it cannot survive in Milwaukee County without an RTA.
I would like to add one other recommendation.  If an RTA with a dedicated funding source were created, in order to provide real and direct property tax relief, the State Legislature should also include a corresponding reduction in the current Milwaukee County Property Tax Cap. Accordingly, if enacted, the current State imposed Milwaukee County Property Tax Freeze amount would be reduced by the amount (approximately $18 million) of Milwaukee County property taxes currently allocated to the Milwaukee County Transit System.

 

Daniel Diliberti is the treasurer of Milwaukee County.

Editor's note: This is the sequel to a previous Biz Blog written by Gary Billington.

 

Economically speaking, things are beginning to show signs of life. As I attend events around town and engage in conversation with folks it seems the mood has decidedly improved.

The stock market appears to be in the throes of a sustained recovery, the housing market is slowly rebounding ,and financial markets are opening up again.

We obviously have a ways to go, but the direction is encouraging.

I was quietly reflecting the other morning (Sunday morning .... and … I ask, how is it the dog instinctively knows its Sunday?) about what lessons this recession has taught us all.

No doubt, it has affected all of us in many ways … some more than others. My kids have finally realized … times aren't always good. Pretty obvious to us older duffers. I never really stopped to think about it, but truly, they have never really experienced a recession like this … be it a "great" one or not.

Back to my point…

Companies have had to adapt, industries have been forever altered, life's have been changed, both good and bad. The lessons have been painful for many, and we must always remember those who are still hurting in both our hearts and if possible our wallets.

But I keep coming back to the somewhat ideal notion that thru all of this the American spirit survives and even thrives. We as a people are really great at adapting to change, but many times only when it's forced upon us.

Americans are some of the most resilient people on the planet. In tough times, we figure out how to do more with less and most often end up more productive than ever.

The economic swings of our free enterprise system truly teach those lessons well. In large part, isn't that what truly makes our system work while constantly moving us forward to the next level?

During World War II, this country took on unprecedented levels of debt to fight for our system of democracy - I am told in the order of 2.5x our entire GDP each year for almost five years . In relevant terms today, that would be hundreds of trillions of dollars of debt (Maybe that puts our present debt in perspective?) Within a relatively short time, we had paid that sum back. Truly remarkable. It's not the number - it's your ability to pay it back?

When faced with a Cold War threat in space, we put men on the moon in less than 10 years with virtually the computer technology of a tiny hand held calculator. (I just finished reading "Rocketmen" by Craig Nelson .It is a fascinating account of this inspiring feat.)

We survived, and I would suggest thrived after both of these events. Western civilization did not come to an end as many had predicted might happen!

Fear (false evidence appearing real) was truly a motivator. In both cases, believing we could even win/do it was even more powerful, in my opinion.

To repeat my initial blog point, I'm not  trying to minimize the challenges we face today, by any means.

We have a lot of work to do. We will do it and we will survive and thrive, because it's programmed into our DNA. Ameri-CAN.

My point is we need to believe in our ability to solve these issues.

If you think you can, you will. If you think you can't, you won't. Mr. Ford again (I'm also reminded of this every once and awhile with the sports underdog analogy. In my case, this translates to hockey ala the  '09-10 Phoenix Coyotes.)

Back to my point again …

Pretty simple, positive attitude stuff, but in today's negative-reinforced media world … oh so easy to forget.

2010 may be a pleasant surprise or it may not.

The point is, a lot of success is locked up in our heads … and our attitudes. Truly believing that things will be better and truly expecting better results in my opinion creates important psychological stepping stones resulting in better outcomes … regardless if they are in sports, business and most importantly life!

 

Gary Billington is vice president of client relations at Plunkett Raysich Architects LLP in Milwaukee.

 

I oppose the nanny state.

During May 2006, I wrote the following about a bill the governor signed into law that I voted against that forces parents to put their children under the age of eight in booster seats when they ride in motor vehicles.

"With a stroke of his pen, the Governor expanded the nanny state in Wisconsin by creating an enforcement and logistic nightmare. Under previous Wisconsin law, parents could decide whether their children between the ages of four and eight should be placed in booster seats or seat belts. That was plain old common sense. Under the new law there are several changes. How are police supposed to enforce this? Will every officer and squad car now be equipped with a scale and a tape measure to determine whether Mom and Dad or Grandpa and Grandma are breaking the law? How are parents expected to know or remember the requirements? Will they have to keep a copy of the law in their glove compartment or tucked under the visor? What are large families to do? Baby seats and booster seats are rather bulky. Imagine trying to squeeze two, three, or four of them into one of the new smaller size cars or vans."

I added the following in an August 2007 column:
"The many separate requirements by weight and height for each age category are confusing. Burdens are placed upon large families and carpoolers. Booster seats can be expensive and so can the fines for law violators."

As New York Yankee Hall of Famer Yogi Berra once said, "It's déjà vu all over again."

The state Senate has approved Senate Bill 162 (SB 162) that would require children 10 years and younger on boats to wear flotation devices. The bill originally proposed covering children 12 and under. However, an amendment approved by the state Senate lowered the age requirement to 10 and under.

SB 162 stipulates that "a person may not operate a recreational boat that is less than 26 feet in length unless, during the time the boat is under way, every person on the boat who is 10 years old or younger is wearing a personal flotation device (PFD) or is in a cabin space or below the deck."

What does "under way" mean? According to SB 162, "A recreational boat is under way if it is not aground, is not anchored or moored, and is not made fast to a structure or to the shore." In other words, just about any time a youngster is on a boat, a life preserver must be worn.

There is more.

The state Senate approved Senate Amendment 1 to the bill that the Wisconsin Legislative Council writes, "provides a specific penalty for a violation of this PFD requirement by the operator of the specified recreational boat. Any person violating this mandatory PFD provision must be issued a warning notice instead of a violation for the first offense. Any person subsequently violating the mandatory PFD provision must forfeit not more than $50 for the second offense and must forfeit not more $100 upon conviction of a third or subsequent offense."

SB 162 expands current law that simply requires each boat have on it a personal flotation device for each person riding in or on the boat.

Follow along to see if you have heard this song before. The government intervenes, assuming the role of big brother. New rules and regulations are established. Violators are subject to fines.

Do you see a pattern? It’s called booster seats for boats or, the nanny state strikes again.
Everyone supports child safety. However, the state once again takes on the role of thinking for people and the role of decision maker. The state should stay on the sidelines, in this case the shoreline, and allow parents to think for themselves and make common sense decisions about their children’s safety.

State Sen. Mary Lazich (R-New Berlin) represents Wisconsin's 28th Senate District.

The entire Wisconsin banking community is pleased that the banking regulatory system worked as designed last Friday when the Department of Financial Institutions closed Bank of Elmwood, Racine.

Importantly, depositors were protected as there was a seamless transition to Tri City National Bank of Oak Creek. Wisconsin's banking community expresses its support to the affected employees, directors and shareholders of the Bank of Elmwood. 

Until last Friday, only 16 states, including Wisconsin, hadn’t experience a bank closure since Jan. 1, 2008, which tells us two things:  The conservative lending culture of Wisconsin banks has served our state and industry well; but also that economic conditions across Wisconsin are weak and because of that fact, banks will continue to face challenging times.

Banks didn’t cause this recession as so many believe. We also were not bailed out as so many claim. We didn’t make irresponsible subprime loans to people who didn't have the capacity to repay them. We didn’t speculate in investment instruments we didn’t understand, like credit default swaps and other derivatives. And we are doing our best to meet the demand for loans to qualified borrowers.

We understand our vital role as the foundation of economic development and job growth in every corner of Wisconsin and our nation. We want to make prudent loans to businesses in the communities we serve because if those businesses don’t succeed, neither will we.

We know that many people are angry and looking for someone to blame. But targeting that anger at banks is misplaced and counterproductive toward achieving an economic recovery.

Specifically, too many elected officials are leveraging the public's confusion over who caused this crisis to attack banks and push legislative agendas that will make a bad situation worse for our industry and, ultimately for the businesses and consumers we serve.

There is already a lengthy list of obstacles beyond our control impeding our ability to do what we do best; make loans to qualified businesses and consumers. Lawmakers need to consider the consequences of adding more burdens and costs on the very institutions they need to help rebuild our nation’s economy.

Whether we are local, regional or national banks, we rise and fall together. WBA and CBW pledge to redouble our collective efforts against legislation and other regulatory proposals that are only counterproductive to the banking industry’s ability to help with an economic recovery.

This joint statement was written by Wisconsin Bankers Association president and chief executive officer Kurt Bauer and Community Bankers of Wisconsin president and CEO Daryll Lund.

Attention spans have shrunk. Twitter has fundamentally redefined concise communication. However, even a 140-character tweet is too long if information doesn’t interest an audience.

Appropriate length is determined by the relationship between communicator and recipient, and where a company is in its launch lifecycle (awareness, interest, understanding, trial or preference).

As a general rule, less is more. Limit an e-mail to two paragraphs, a commercial to 30 seconds, a news release to one page and a Web video to two minutes.

More is more only with killer creative, copy or execution. For example, Johnnie Walker (famed Scotch whiskey brand) released a six-minute Web commercial. This brilliantly filmed, single-shot video has garnered 184,000 views.

This long commercial moved me from minimal interest in the brand, to greater understanding and probable trial. A successful creative endeavor!

Know your audience. Quench their need for the right information and let the value of your communication determine length.

 

Anna Baxter Kirk, public relations group leader at Bader Rutter & Associates, writes a weekly "Marcom A to Z" post for the company’s blog, Converge.

With the health care debate grabbing most of the headlines, you may not have heard much about the energy war in Congress. A California-Massachusetts team of legislators is pushing expensive regulations on carbon emissions that would be paid for by the industries and consumers of the Midwest.

Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) recently introduced a bill similar to legislation that has passed the House. Like its House counterpart, the bill would result in a steep tax on coal, America's most affordable and plentiful fuel source. Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.) sponsored the House bill. It is no coincidence that they are also a California-Massachusetts duo.

Only 12 states use less coal as a percentage of electricity production than Massachusetts, which gets about 25 percent of its power from coal. Only three states use less coal than California.

Which states use coal? Michigan, Missouri, Minnesota, Iowa, Indiana, Kansas and Ohio use coal to generate more than 50 percent of their electricity. Wisconsin gets more than two-thirds of its electricity from coal.

How much would cap-and-tax cost you? The National Association of Manufacturers projects that nationwide cap-and-tax would cost each household an average of $1,248. But in Wisconsin, NAM found, cap-and-tax would cost each household more than $1,400.

After the Waxman-Markey bill passed the House, the National Mining Association produced a map that showed how cap-and-tax would impact individual states. States with the highest costs were shown in deep red; states with the lowest costs were shown in green. The result was striking. The map showed a deep sea of red, bracketed by a few green states on the West Coast and in the Northeast.

With costs like these for most of America, it is no surprise that a majority of people oppose this scheme. The opposition has led the bill's sponsors to attempt to rebrand their efforts. Instead of cap-and-trade, supporters of the Senate bill are calling their proposal "pollution reduction and investment." I think cap-and-tax is a more accurate and honest description.

A recent poll shows 65 percent of Americans want Congress to work on creating jobs. Cap-and-tax won't create jobs, despite a desperate insistence by the bill's supporters that government spending on so-called green jobs will stop the decline in employment that's miring our economy.

To understand the truth on green jobs, we need look no further than Spain. The Spanish government dumped $1.6 billion into green jobs last year and trumpeted 200,000 new jobs it said the subsidies created. But a study by an economist at Rey Juan Carlos University in Madrid showed that for every job created through green-job subsidies, up to 2.2 jobs were lost in other sectors. And Spanish taxpayers had to pay about $855,000 for each green job, most of which proved to be only temporary construction jobs. Spain's unemployment rate is currently above 18 percent.

Cap-and-tax isn't yet the law of the land, but carbon emissions fell 6% this year. How is this possible? It's a result of the recession. The Senate bill's goal is a 20% emission cut by 2020. As Kerry recently said: "We are effectively saying we need to go another 14 percent."

A bill like the one Kerry is pushing just might get us there. After all, a study of the House bill projected that it would cause 2.4 million job losses by 2030 and up to a 2.4-percent reduction in Gross Domestic Product. A prolonged recession of that magnitude likely would lead to the emissions cuts that Kerry is seeking.

This not-so-secret plan was spelled out in a report from a U.K. think tank. It advocated a "planned recession" to help meet steep carbon emission goals. The cap-and-tax bill that Democrats are pushing would have a similar effect, especially for those of us in the Midwest.

Rep. Jim Sensenbrenner (R-Menomonee Falls) is the ranking Republican on the House Select Committee on Energy Independence and Global Warming.

If you're a planner at heart, you adjusted your business strategy long ago. Now's the time to check how your recession plan is working.

Or maybe, after months of denial, the "Big R" finally whacked you upside the head. It's not too late to employ these tactics in response:

• Assess where you're vulnerable. What if your largest client shuts down or your suppliers increase prices? Develop a real plan for the worst-case scenarios. Where else are you at risk?
• Seize the moment. This might be the time to establish a competitive advantage. Talent is available, acquisitions are rising, pricing on new equipment could be in your favor, and perhaps you could re-negotiate fixed expenses. So you're doing this? What else can you do...now?
• Be flexible. Rather than layoffs or early retirement of key talent, consider voluntary sabbaticals, reductions to part-time and work-from-home arrangements. Will you outsource or bring it back in? Maybe you've tried all of these ...Well, how creative are you?
• Above all, act like a leader. Stay focused. Keep in touch with employees, vendors, customers and your competition. Your business needs you now more than ever.

 

Steve Riege is a business advisor, executive coach and president of Ovation Leadership in Mequon.

A natural reaction for many companies in the Great Recession has been to tighten managerial controls on everything from office supplies and cold-call sales schedules to travel expenses.

To be sure, frugality, accountability and efficiency have their places in the first aid box of successful business strategies - to a point.

It's when micromanagement goes too far, however, that it costs American companies up to $300 billion a year, according to Brian Carney and Isaac Getz, authors of "Freedom, Inc," a new business book subtitled, "Free Your Employees and Let Them Lead Your Business to Higher Productivity, Profits, and Growth."

The authors challenge the mindset of micromanaging "how companies" that establish a strong corporate hierarchy, where creativity and out-of-the-box thinking are discouraged, "where ideas die on the long journey through the corporate committee maze."

Instead, the authors celebrate "why companies" that empower their employees with an understanding of why they're doing what they do and the power to make decisions based on that knowledge.

The book, which is published by The Crown Publishing Group in New York, chronicles the success of "superstar why companies," two of which are based in southeastern Wisconsin.

Sussex-based Quad/Graphics Inc. founders Harry and Tom Quadracci are cited in the book for being years ahead of their time when they created QuadTech, a division to sell the company's innovative equipment, even to the firm's competitors.

The Quadraccis empowered Karl Fritchen to start QuadTech's own local sales and distribution network in Japan, rather than partner with just one Japanese company.

"OK, sounds like a good idea," Harry Quadracci told Fritchen. "I want you to stay in Japan, find office space, hire staff and then when you're all done, come back to the board and explain why we did this."

Fritchen recalled, "He (Harry Quadracci) didn't say, 'Put together a plan, present it to the board, get approval, then go back and do this.' My previous employer was so radically different that I just fell in love with this place immediately when I walked in."

Fritchen went on to become the chief executive officer of the highly profitable QuadTech.

"The feeling you get as an employee to have that happen to you, you want all your employees to have that same type of feeling and commitment to your organization," Fritchen said.

The book also chronicles how former CEO Richard Teerlink transformed Milwaukee-based Harley-Davidson Inc. from being a stodgy, old-line manufacturer into a dynamic, celebrated, publicly traded iconic brand. The throttle of the company's turnaround was accelerated by Teerlink's "liberating" leadership style that created a culture of devotion and ownership among its workforce, according to the book.

Teerlink's successor, Jim Ziemer, who started his career at Harley as a union worker, said he inherited a leadership culture that he grew to understand and appreciate. "It is like a religion, it is spiritual. You've got to believe in it and act like it's a religion … Sometimes, maybe, command and control is great, but … if you don't have the same leader, then it does not sustain itself. If it is a religion, it can sustain itself."

The authors contend, "We are micromanaging our employees to death … Freedom works because we don't know what we do not know, and because some of what we think we know is wrong – or soon will be. If we can harness the additional knowledge of more of our peers, we can move much faster than the bureaucracy. And the only way to harness that knowledge is to allow those who possess it to act on it when necessary, right away – NOW – without waiting for some boss to approve it."

 

Steve Jagler is executive editor of BizTimes Milwaukee.