Saturday, September 1, 2012

Audacity and Arrogance in Leadership by guest blogger Mike Ferguson

The career of George Armstrong Custer is book-ended by two rivers, The Chickahominy and The Little Bighorn, and by two attitudes, audacity and arrogance.

On the Fresh Ground Consulting website, we tell a short version of a story about Union commander, George McClellan, and the Chickahominy river. President Lincoln had trouble getting General McClellan to take action, to move the Union Army forward, or even chase the enemy. He said McClellan had a case of the “slows,” and observed that, “He is an admirable engineer, but he seems to have a special talent for a stationary engine.”

One version of the Chickahominy river story goes that McClellan and his staff were sitting on horseback at the edge of the river, wondering among themselves how deep it was. They had been discussing the possible depth of the river for some time when, suddenly, a young captain named Custer rode his horse out to the middle of the river, turned and shouted, "That's how deep it is, General!"

I love this story. I especially like it when set in contrast to the following observation: History does not record whether or not, fourteen years later, near the Little Bighorn river, someone on Custer's staff asked, "How many Indians do you think are over that ridge?"

Two of our principles at FGC are to demonstrate audacity without arrogance, and action with accountability. Custer certainly demonstrated audacity, no doubt peppered with impatience, in front of McClellan at the Chickahominy River, under circumstances that cried out for action. By the time he reached The Little Bighorn, he was ruled by arrogance under circumstances that demanded the very highest level of accountability.

In my experience, the line between audacity and arrogance is not always brightly painted. Audacity, fearless daring or heedlessness of restraint, requires some self-assurance, to be sure. Arrogance is marked by overbearing self-importance and an assumption of superiority that can lead someone to take seemingly audacious risks.

The fundamental difference in my mind, especially when it comes to leadership, is an ability and willingness to receive input and listen to others. Truly audacious moves are usually possible because they are supported by informed preparation, planning, experience.

Custer’s dash into the Chickahominy River may seem impetuous on its face, but he had spent the war to that point carrying messages from Army Headquarters to generals in the field, and exploring the countryside as a topographical engineer, creating maps. He was said to have an uncanny knack for locating practical routes. If Custer had not already been across the Chickahominy, he certainly had developed an eye for water that could be easily crossed.

On June 22, 1876, Custer led a divided force of 655 men against an Indian encampment of undetermined size without conducting proper reconnaissance. As it turns out, he was outnumbered ten to one against what may have been the largest group of Indian warriors ever gathered on the North American continent.

I have met leaders and managers who are known for succeeding by “going with their gut,” only to discover that they are actually keen observers and active listeners who are intensely curious. Maybe you have noticed that successful business people who have a reputation as being risk takers and innovators are often surrounded by a very talented team.

Whenever I meet a leader who equates “impulsive” with “inspired,” rarely asks more than one question, and tells people he hasn’t listened to that they should trust his instincts, I feel compelled to duck and cover.

Mike Ferguson is the Business Development Director for Batdorf & Bronson Coffee Roasters in Atlanta, and the co-owner of Fresh Ground Consulting. He also serves as the President of the board of directors for Coffee Kids, an international organization dedicated to working with coffee-farming families to improve their lives and livelihoods. Mike has a Master’s of Fine Arts in creative writing from Saint Mary’s College in Moraga, CA. For 9 years, Mike worked for the Specialty Coffee Association of America as the Marketing Communications Director, Chief Communications Officer, and finally Chief of Staff, and served as the spokesperson for the specialty coffee industry.

Friday, July 13, 2012

Cuppa Transparency

I first learned the term transparency in business practice in 1999, while working for the Specialty Coffee Association of America. A gentleman by the name David Griswold, President of Sustainable Harvest Specialty Coffee Importers, had created a business model within the industry called “Relationship Coffee”. This business model had many things in common with the supply chain management system used by Toyota for decades, which was built on relationships and building capacity among suppliers. While the traditional method of coffee importing was performed in an anonymous fashion, the Relationship Coffee model was built on the foundation of transparency of transactions between the farmer, the broker and the buyers. For many years people in the coffee industry had complained about the “fat brokers”, but when Mr. Griswold introduced the transparent business model, through an industry trade article, it caused quite a stir among the large players. Over the years Sustainable Harvest has continued to grow an equitable business around the framework of Relationship Coffee, including traceability, trade credit, quality control training and profit investments into the supply side in order to help growers build sustainable businesses in countries of origin. (2008. Sustainable Harvest).

In terms of volume, coffee is one of the five most traded commodities in the world and, except for Hawaii, is grown in third world countries around the globe. This means that businesses in consuming countries, like the United States, make varied profits on a product that poor and hungry people are laboring to harvest, process and bring to market. The farmers and laborers are not getting rich, however, and many are abandoning farms in order to find a livelihood in industries elsewhere. Unfortunately, some countries have no other options, but to continue to trudge forth in coffee because there are no other available opportunities. This gives businesses in consuming countries the upper hand in negotiation, meaning that the farmer is forced to take what is offered despite the intensive work needed for production, despite labor and maintenance costs and despite the value of the product itself.

In the years immediately following World War II, the United States had a substantial increase in demand for coffee and the supply chain was inadequate, causing coffee prices to rise. This in turn caused coffee growers to increase crops in order to fulfill future demands. Also, at that time, most American consumers cared little about quality, as was the emerging age of convenience. It was during this era that instant coffee became viable on the market, further increasing demand. Instant coffee is made from low quality, low maintenance-produced beans, which means less labor-intensity in production. The United States, in particular flourished in low-quality coffee. (Pendergrast, 1999, p. 241).

Even worse than bad tasting coffee, was the diminishing conditions of the coffee farms; natural shade trees and plants were cleared to make room for planting more coffee trees and new pesticides were used to prevent interruption of coffee growth. Eventually, the growers’ efforts to meet demand backfired in several ways: They had a gross over-supply of coffee which caused prices to fall, they were bringing low quality coffee to markets other than the United States, and they were on the verge of ruining the farms. This state of imbalance in the system within an industry already vulnerable to weather, wreaked havoc on those countries whose economies were dependent primarily on coffee exports; furthermore, the growers were suffering in the ups and downs of the price fluctuations – this would go on for approximately twenty years before governments of consuming countries and countries of origin would form an initiative in attempt to stabilize the market. The first official International Coffee Agreement in 1962 was negotiated in order to implement a quota system, which would help control the price of coffee, protecting especially from over-supply on the market. The Agreements also allowed opportunities for all coffee growing countries to participate in trading. This was a step in the right direction.

An important facet in the coffee price puzzle is the New York Board of Trade Coffee Exchange, the mysterious entity that puts a price on coffee futures. The Coffee Exchange was created after a disastrous market crash in the late 1800’s to ensure both buyers and sellers an agreed upon price to be paid on future coffee imports. It is a system of speculation that sets a foundation upon which contracts are made between producer and importer. They contract for a certain number of bags of coffee at a certain price to be delivered and paid for at a future date. The speculated market price gives them a basis on where to start; however, there are many things that can cause the rise and fall of price, as discussed previously. The main factor being weather, for instance, an importer and producer agree on a price, whether over, or under the market price. If there is a frost in Brazil and this drives the price of Brazilian coffee up, then the grower is bound to sell the agreed upon number of bags at the agreed upon price despite the current price. The scenario could be reversed as well; the price could drop considerably and the buyer would be bound to the agreed upon price. (2006. Coffee Research Institute). The problem with this system is that the people speculating on coffee futures are not coffee experts who are directly involved in the coffee industry, they do not travel to origin to inspect the farms, nor do they taste the coffee. Also, coffee quality varies from harvest to harvest, farm to farm, country to country and with processing methodologies. It is much like an interior designer directing a pancreatic surgery, it does not quite work; unfortunately, it is the system.

Many coffee buyers (usually roasters) do travel to countries of origin, in order to inspect farms and cup the coffee for purchase, then work with the importer to obtain the coffees selected. Pricing is traditionally negotiated privately between importer and producer, then privately again between importer and buyer. Many quality-driven roasters expect to pay a premium for specialty grade coffee; however this is the point where the deal usually goes hazy. Somehow, the premium does not trickle down to the grower, even though the buyer has paid well above the market price set by the New York Coffee Exchange. The roaster will still make a profit from the coffee; however the grower is left with nothing to show for the labor. The profit made by the importer is claimed to be high as the importer takes the greatest risks in coffee futures; however, there is no point in paying a premium for specialty grade coffee, if the grower does not reap the benefit. Also, the chances of maintaining a superior coffee are nearly impossible if growers cannot cover overhead, production and labor costs.

In recent years, many programs have been established within coffee growing countries in order to help migratory workers with health services, provide schools for children, and assistance to help growers in obtaining small business loans. There are also sustainability programs, which are designed to replenish coffee farms, land and soil. These include bird-friendly/ shade-grown coffees and organic certified coffees. The fair-trade certification program has been hugely successful in exposing the deep pockets of the importers and has certainly built a successful marketing campaign within several consuming countries, promoting awareness and sparking interest in social responsibility among coffee buyers large and small. Unfortunately, the Fair Trade movement in coffee fell short in execution, at least in the beginning. The movement brought the issues to light, but failed to present any long term solutions that were good for everyone involved; roasters wanted a mechanism in place to ensure quality in exchange for premium prices.

Transparency is a business practice which provides disclosure of information to all stakeholders. While there are challenges to transparency in business, it promotes a more proactive environment for stakeholders. In the case of Sustainable Harvest Coffee Importers, David Griswold built a successful business around transparency with buyers and growers and has furthermore developed long lasting relationships within both branches of business. When information between buyers, growers and importer was opened up, the focus became quality of coffee. This communication led to growing needs and costs of production and labor. It became obvious that if the buyers and importers wanted to continue to purchase a certain coffee, then those needs would have to be met. The importers and buyers became investors in the farms, not just financial investors, but they invested in educating the farmers and laborers in order for the growers to build sustainable, healthy businesses. The buyers, Green Mountain Coffee Roasters, the roasters of Newman’s Own coffee brand, along with Sustainable Harvest Coffee Importers, put together a team of trainers and began teaching the growers about the coffee that they grew and harvested. Sustainable Harvest called the program “Let’s Talk Coffee” and added it to his services as an importer. This guarantees Green Mountain high quality coffee at a price that is fair and they know where the money is going, so a paid premium over the Coffee Exchange market price is truly that and Green Mountain can rest assured that money is well spent.

Another coffee roaster, who works with Sustainable Harvest for import, made an interesting exchange for fine, specialty coffee; when the team from Dillanos Coffee Roasters was introduced to a coffee cooperative in Rio Azul, Guatemala, they fell in love with the coffee, and because they were dealing directly with the growers, they soon found out what the immediate needs of the workers are, healthcare costs. In return for high quality coffee, Dillanos was able to pay the growers directly and pay $10,000 in healthcare costs, which they consider a direct business investment. (Sustainable Harvest, 2008).

Some guidelines in achieving transparency in business for long term success come directly from the above examples of three successful companies within the coffee industry (more if you include the growers): First, make a commitment to integrity. Second, involve all stakeholders and encourage participation in the decision-making process. Third, be open about company performance and finances. Fourth, provide traceability for all transactions. Fifth, learn everything possible stakeholders positions in order to better understands common goals. Sixth, work for a common good with stakeholders.

According to David Lapin of Carlson School of Management “Employees who experience their company's purpose as making a valued contribution (with profits as the outcome) rather than merely generating shareholder wealth, commit to their work with greater passion. This leads to a partnership between employees and corporate leadership that boosts innovation and uplifts performance. Ethics play a vital role in the preservation of this priceless partnership, which can thrive only in an atmosphere of trust and integrity.” (Lapin, 2003). This can also be true for business owners, as well; meaningful work is a very important part of life and gives a business an added advantage for success.

Understanding common goals of stakeholders provides the opportunity to benefit everyone involved. Transparency in business, along with organic certifications and Fair Trade certification programs are imperative to sustainability in the coffee industry. Organic programs to take care of the farms, land and soil, Fair Trade programs to provide a realistic basis on which to start negotiation and transparency in practice to ensure that everyone involved is fairly compensated, creating long term, successful business relationships and high quality products for consumers. Also, there is an added benefit of marketing socially responsible products and practices. Even though this is sometimes frowned upon as an exploitive act, it actually provides the opportunity to raise awareness in consuming countries world-wide.

References:
Coffee Research Institute. (2006). Coffee Trade: New York Coffee Exchange: http://www.coffeeresearch.org/market/coffeemarket.htm
International Coffee Organization (2007). History – International Coffee Agreements: http://www.ico.org/history.asp
Lapin, D. (2003). More Imagination Ethics Conference. Strategic Business Ethics, Inc.: http://www.sbe.us/paper6.htm
Pendergrast, M. (1999). Uncommon grounds – The history of coffee and how it transformed our world.New York: Basic Books.
Sustainable Harvest (2008). Relationship Coffee Model: http://www.sustainableharvest.com/
(Also mentioned in this article were Dillanos Coffee Roasters: http://www.dillanos.com and Green Mountain Coffee Roasters: http://www.greenmountaincoffee.com )

Relationship Marketing - What It Is and Is Not.

In the past couple of weeks, I have read at least 3 articles on Relationship Marketing/Sales/Business Development in which the transparency aspect is never mentioned. These were articles posted on reputable sites, written by people who each claim to be an authority in sales & marketing in some way or another. Now, I certainly do not consider myself an authority on Relationship Marketing, but I have done some research over the years and I know a few things.

One of these articles left me feeling particularly irritated. Basically, the article talked about all the warm fuzzies of building a relationship and then turning that “friend” into a sale. OK, so there were a few good points on relationship building, but this was NOT an article about Relationship Marketing. This was clearly an article about manipulative sales techniques. It talked about people wanting to do business with someone that they know and trust, and the sales person getting from there to the “transaction”. Then? *crickets* - nothing about a long term business relationship, nothing about customer service, and nothing about transparency. Not only is this article delivering a misconception about Relationship Marketing, but it is also sending out bad advice about sales to the readers. Sales practices should never be taught or applied in the mindset of moving down a one way street.

As much as I would like to rant on, I have decided to briefly say just a few things about what Relationship Marketing is. If you are interested in reading a more detailed explanation of Relationship Marketing, then I hope you will also read my blog post Cuppa Transparency. This article gives an example about how Toyota's original Relationship Marketing model is changing the specialty coffee industry, and features 3 specialty coffee companies who embraced the idea to create Relationship Coffee.

Relationship Marketing is about businesses working together for the benefit of all stakeholders. It’s about transparency and inclusive negotiations. And it is about building long term, sustainable and healthy business relationships, whether business to business, or business to consumer. Of course, there are many creative ways a business may choose to implement these practices, but in the end it is about a long, strong two way street.

Saturday, February 11, 2012

The Worst Salesperson EVER

I have been in sales long enough to know how to turn a negative situation into a positive learning experience – or at least, a comical story. Admittedly, I still get frustrated when I have a dry spell and I even get sad when I get a “NO” from someone I really want to work with. Every now and then, I come across an odd ball circumstance that truly surprises me (and not in a good way).

I recently gave a presentation that quickly turned into an uncomfortable situation. I cannot go into details about it here, but it reminded me of another experience I had years ago in sales, which I can share with you:

During the launch of a new consumer magazine, I was working as a consultant, doing contract ad sales with high-end beverage companies. I was primarily working with boutique to mid-sized companies and creating a buzz with the larger companies and media planners in order to get on the radar as they moved into their forward planning proceedings. As consumer publications come and go, most media planners have a common policy not to buy into a publication until it has been established for at least one year. On the flip side, it is a terrific opportunity for the boutique and mid-sized companies to jump in and secure affordable pricing for the future, so that is where we focused our energy.

One morning, I received a call from a gentleman who was a media planner, interested in advertising with us and we hit it off immediately, personality-wise. We had a long, fun-filled conversation and I finally asked who his client was. He answered me and then there was a long silence between us. Without mentioning the company name, I will say that the company is one of the largest beverage companies in the world. My silence came from a combination of sheer surprise that he knew about us, excitement, and finally, a real concern about the quality of the products he was representing.

The gentleman asked me if there was something wrong and I just didn’t know how to answer him, so I said “I don’t know if we can work with your client.” He admitted that they were not actually his client, but the company was his employer and they had their own media planning team. Of course he was shocked, too, and asked me what the problem was. I explained that the magazine had a mission of featuring very high quality beverages and I just wasn’t sure that his company was a good fit.

The publisher and I discussed the situation into the ground and half way to China and finally decided to move forward with the company, pending approval of the ad itself. I called the very patient gentleman and gave him the news, to which he replied “You are the worst salesperson EVER!” and we both roared with laughter. It was the best insult I’ve ever gotten! And as it all turned out, the ad was a promotion of a movement of quality within the industry. Perfect fit!

Another interesting situation happened even further back in the time/space continuum, when I took a job selling office coffee. Within my third month at the company I had moved into the top sales position, which was exciting, but in my gut I knew I wasn’t going to last there. The company had a great service and maintenance team, great customer service, and the sales spiel was educational and persuasive- I even liked my sales director.

Unfortunately, the 8 thousand year old owner of the company was mean & nasty and too often let loose on the sales staff. I could have dealt with him, but that feeling in my gut wasn’t about him, it was about the quality of the coffee I was selling. The company claimed to be selling specialty grade coffee and after tasting it time and time again, I knew it wasn’t. Also, they were not using, or providing the customers with, the correct recipe for specialty coffee, which further ruined the coffee. In the end, I realized that I was pitching specialty coffee, but providing an expensive brown and bitter cup of hot water. It was a lie.

The day I received my 90 day review, I sat and listened to my sales director go over my strengths, weaknesses and accomplishments and he officially welcomed me to the company. After I thanked him for his review, I told him that I also had a 90 day review of the company. He looked so surprised and thought I was kidding until I actually began my review. When I finished, I stood up and told him that it had been a pleasure working with him, but I could not stay with the company.

Having mentioned these stories, I refer back to my very recent experience and I have to smile. I do not mind being the worst sales person ever. As a sales person and as a consumer, I only want to align myself with honest, reliable and trustworthy businesses. I decided a long time ago that I will only sell a product, or service that I love and believe in, something that I respect and believe can help my customers. On the same note, I will only sell to customers who I can proudly associate myself and my company with in a professional manner. Needless to say, I will not be doing business with this person now, nor will I in the future.