Thursday, February 24, 2011

Borders: Was Bigger Better?

What happened to Borders? It is a classic American business tale of rags to bankruptcy in little more than a generation. Their classic marketing plan, “Let’s Get Big,” made it happen. Here are some of the key details concerning it US operations.

Brothers Tom and Louis Borders founded their first bookstore in Ann Arbor, Michigan, in 1971. With its book wholesaler sister company, Borders primarily serviced more independent book stores than its own book stores until 1989 when company management decided to expand. It did and it got bought.

Kmart had owned the mall-based book chain Waldenbooks since 1984 when it bought Borders in 1992. But not long after, Kmart faced management and stockholder problems with its acquisition, not to mention fierce competition from rival Barnes & Noble. So Kmart spun off Borders and by 2003 the new Borders Group had grown to 1249 stores using the Borders and Waldenbooks names, worldwide.

In 2004, Borders reached an agreement with Seattle's Best Coffee to operate cafés in its domestic superstores. In 2007, Borders installed digital video monitors in select stores and in 2009, it offered customers a free WiFi network.

Borders went international in 1997 with expansion into Asia and the UK. However, by the end of 2009, all of Borders directly owned overseas locations had been sold or closed. Only the franchise stores in Dubai, Malaysia and Oman remain open.

The company showed its last profit in 2006. On February 16, 2011, Borders announced that it had filed for Chapter 11 bankruptcy protection and that it would be closing up to 275 of its 642 bookstores. All of the stores to be closed would be superstores. Borders listed $1.275 billion in assets and $1.293 billion in debts in its filing. It employs approximately 19,500.

It can be argued that Borders failed to respond correctly as the retail book selling industry has evolved. It is also true that as book sales have been in decline, books and other media have become more available online.

But the real deal is perhaps more like consummate book buyer and college professor June Sullivan told me, outside of the closing Borders in Union City, California, “They began specializing in best sellers, put in easy chairs, and offer coffee and free Internet. So now they’re like a public library where you pay to buy used books.”

A similar fate happened to Circuit City, whose core business included knowledgeable sales people, but its corporate management decided to replace them with wage-and-hour clerks to cut overhead. As the retail electronics industry evolved, the competition, Best Buy, clobbered Circuit City.

From my point of view as a management consultant, Borders’ failure reflects the faulty business plan of “Let’s get big.” One can do that as long as one is true to the core business that made it successful in the first place and resists growth, even though the money looks good. Bigger isn’t always better.

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originally published on Blogcritics as Borders: Was Bigger Better? February 20, 2011

Sunday, February 6, 2011

I Talked to the Spouse

Sometimes we management consultants get caught up in the jargon of our profession – you know, the words that only another person in the same field uses that have special meaning only to them. Some consultants assume that our clients understand us as our peers do, so words like “strategic” or “implementation” and an entire lexicon from Six-Sigma get tossed about loftily, as if our clients are paying us for our vocabulary. Of course the more money we charge, the loftier that vocabulary can become. That is before we get to statistics and graphic analysis, always the life of the party.

Many consultants lose sight of the fact that our clients are looking to us to help them do something they do not know how to do and how to do everything else better. In running their businesses, just about the last thing our clients want is for us to give them large packs of paper to read after their day is done. In addition, there is so much written material available, it is almost too much. The job of a consultant is not to help his client read more stuff.

In preparing to update this website, I conducted an inventory of my clients over the past five years to see what leaped off the page at me. Doing a customer inventory is one of the practices I use with my clients when I am looking for more business. It helps define who I should be looking for so I can save both time and resources. Specifically, I was looking for what the clients with whom I had the most success had in common. What I found was so simple that it surprised me and I can sum it up in five simple words.

I talked to the spouse.

To be sure I talked to family members in addition, but the discovery is certainly consistent with the studies having to do with small businesses in this country. Here is the short version of those party favors having to do with US business. According to statistics reported by the University of Southern Maine's Institute for Family-Owned Business: “Some 35% of Fortune 500 companies are family-controlled. Family businesses account for 50% of U.S. gross domestic product. They generate 60% of the country's employment and 78% of all new job creation.” Unfortunately, “only one in three family businesses succeeds in making it from the first to the second generation.”

There are lots of reasons for that phenomenon, but I am willing to bet that communications – specifically that between the family members from one generation to the next – has something to do with it. But I will save that for another article at another time. I want to stick with my “talked to the spouse” theory. Sometimes, it’s a tough job, but someone has got to do it. Let me share a couple of examples.

One client neglected to tell his wife that he had called me in to help him get his business in shape. The business had grown from a hobby and generated over $2-million a year when I showed up. I tried to get my client to arrange a meeting among him, me, his wife and anyone else who might have a stake in the outcome of the consulting project. The client kept hedging.

“She doesn’t have anything to do with my business [decision],” he insisted. But I insisted harder and the client relented. The next morning I showed up at the business site early, hoping to be there ahead of my client so I could better make my case as to what I thought we should do. My client was waiting for me – not a good sign. Then I noticed the tears in his eyes, definitely not a good sign. As I learned, he had gone home to tell his wife about the meeting the outside consultant wanted to facilitate. She hit the proverbial ceiling and the name calling began. It turned out that she had been paying the bills for the client’s former hobby and had not agreed to have anyone come in to help, especially at the hourly rate I had to charge for it. Harsh words turned for the worse, pushed turned into shoves and at the point of my discovery, my client was on his way to court and a restraining order.

The company I worked for could not understand why I could not get a working agreement [a contract for services] signed.

On another occasion, I started a consulting project’s opening conference one morning with my husband and wife team client, my company’s business analysts and project consultant and I to have the meeting get shaky from the got-go. It was another tear jerker. The clients kept interrupting each other to tell us how their crummy business was tearing their marriage apart and that they thought they just wanted to sell out and that they no longer saw any point in having consultants in to help. Oh, I talked to the spouses, alright.

I stood up abruptly and said, “Knock it off, both of you, right now! Who do you think I am? A marriage counselor?” Actually, in that case, I was. I stuck out my hand to the husband to shake his hand.

“Stand up.” He did. “You are the President of a multi-million dollar, international company that has been in business almost 10 years, right?” He shook my hand and nodded affirmatively. “Then act like it! And you,” I said as I turned to Mrs. Client, “What did you do before you got sucked into this company disaster?” She told me she was a Registered Nurse. “Good. That’s what you are going back to after we are done with this project.”

Sure, it stunned both clients and my company colleagues. You can imagine their faces and, if you can’t, let’s just say there were jaws that bounced off the floor. But, as I say, I talked to the spouses. It turned out that the clients had been victims of embezzlement and Mrs. Client came in to take care of the books because of the trust issues involved. My team and I prevailed, by the way, and so far as I know the clients and company lived more happily after the project concluded.

I have lots of other tales I could tell you that emphasize the importance of consultants talking to spouses, parents and siblings involved in any business, whether they admit to being in the decision making process or not. For one thing, each one is impacted by business decisions one way or another. For another, valuable information can be obtained from sources that are not familiar with the day-to-day activities in a company. Besides those considerations, a consulting project can be killed before it starts if family members are not taken into account from the beginning of an engagement.

Family businesses face a lot of problems, the family itself being a potential one. The reason is that family members all have names, as opposed to position titles, which can be difficult for them to comprehend. Another issue has to do with boundaries. At what point do people cease to be family members and become employees? Is it at home, on their way to the business or at the door? And there are a host of other issues, which I will get to another time.

Let me wrap up here by noting that effective communication is the key to business success, whether the topics of communication are statistical data, like opinion survey results and balance sheets, or they are people issue, like promotion decisions or embezzlement. Large corporations governance looks after the interests of the company’s stock holders just as family businesses operations looks after the interests of the company’s stake holders. Family business owners must expect that for a consulting engagement to be successful, the professional consultant they retain is going to talk to their spouse.

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originally published on