Category: Management

The Employee, Self-Employed, Business Owner and Investor

Cashflow Quadrant: Rich Dad's Guide to Financial Freedom Who do you want to be? An employee, self-employed, a business owner or an investor?

Each is a significantly different way of viewing oneself. It is possible to be in more than one role too. Robert Kiyosaki describes these roles in Cashflow Quadrant: Rich Dad’s Guide to Financial Freedom as:

Employee

A person who earns money by holding a job and working for someone else or a company.

The majority of a population has an employee mindset. They wake up, work hard, get a paycheck, and go to sleep. There’s nothing wrong with that; it’s a very honorable lifestyle. Unfortunately, it often leaves them financially insecure or, if they’re smart about saving up and investing appropriately, financially secure. While this role used to carry little risk, nowadays, layoffs have removed the guarantees this role used to afford.

Self-Employed

A person who earns money working for him/herself.

Some people decide to strike out on their own, to start their own business. They become self-employed entrepreneurs. Maybe they work alone as a freelance designer, business consultant, or financial accountant. Maybe they hire some employees and operate a cafe, a furniture store, or an ecommerce business. Whatever the case, they are now their own boss. Their lifestyle is characterized by lots of hard work and specialization in their chosen field. For their effort, the financial benefits can be greater than that of an employee; financial comfort is a more realistic goal. The risks are higher too. Self-employed entrepreneurs often leverage most or all of their personal savings to launch their business. If it fails, they risk bankruptcy.

Business Owner

A person who owns a business that generates money.

Few others decide to become business owners. This is more than just being a self-employed entrepreneur. The business owner entrepreneur has less control than the self-employed entrepreneur, because it involves sharing & delegating responsibilities & ownership with others. In some cases, business owners don’t even work on a day-to-day basis and have a manager run the operation. Although they don’t have to work very hard anymore, business owners need to be intelligent about how they structure their business. Fortunately, this extra free time allows them to strengthen their business acumen, which is where they apply their knowledge, as opposed to specializing in their chosen field. The financial rewards are high – financial comfort and financial wealth are in their grasp. The risks can be high too, though intelligent business owners learn how to shelter themselves appropriately. It is not easy to become a business owner. You have to work smart, not hard, to get here.

Investor

A person who earns money from their various investments – in other words, money that generates more money.

Even fewer others become full-time investors, such as angel investors and venture capitalists. The investor role, however, isn’t just about doing it full-time. Anyone can be an investor. It is not just about buying stocks. If you have money in a mutual fund or 401k plan, you are already an investor. This role is characterized by being able to assess a company’s or industry’s projected perceived performance. The financial rewards vary greatly; very few can make a living just being an investor. Those who do oftentimes got here because they were self-employed, owned a business, or were an employee of a young company that offered significant equity and later became wildly successful (which is extremely rare).

Personally, I’m shooting for the business owner role. I’m currently in the self-employed role in order to get my business off the ground. But that’s a temporary place to be, not a mindset I have.

Kiyosaki argues that being a business owner and investor is the way to financial security, comfort, and wealth. I totally agree.

It is not about working hard, it is about working smart. If you can structure your business intelligently such that it can operate without needing you everyday (by hiring and delegating appropriately), you will have extra time to think strategically and carry your business further. Or even have extra time for your family.

And that’s who I want to be. What about you?

Yahoo Layoffs

Today are more layoffs at Yahoo. 1,500 to potentially 2,000, some say.

Days like this make me wonder what I would do if my business had to lay off employees. I tell myself, “I wouldn’t lay anyone off. I would hire slowly and grow only as fast as we’re capable of, so we don’t end up with a glut of resources.” I know that’s not always easy, but growing too fast can be disastrous for some companies.

Then, if finances were still really tight and I’ve made other budget cuts already, I’d cut my own pay first. If we still needed more, I’d cut bonuses. Then I’d ask the leadership team if they’d be willing to take a pay cut. Finally, I’d ask everyone else if they’d be willing to take a pay cut. I would explain that we value everyone and want to keep everyone, so rather than eliminate jobs, we’d rather decrease salaries temporarily. The key point is temporary – as soon as revenues are back up, salaries will return to their previous levels. Or maybe even higher.

Is that realistic? Some companies have done this with apparent success. But there will be a few employees who will inevitably leave because of personal financial concerns, such as mortgages and bills. They live paycheck-to-paycheck and any decrease in pay is a serious economic issue.

To try to reduce that, I would explore the possibility of finding contract work for them. Basically, I’d turn my company into a consultancy and hire my employees out, if they’re willing and able to. I would need to keep a percentage of that revenue for overhead expenses, but the vast bulk would go into their pockets. There may be some tax and legal implications though, which I’d have to work out with my attorney and CPA.

The end goal, though, is to keep everyone with the company. No lay offs, no loss of jobs.

Realistic? I think so, though it’s probably difficult to execute. This is just me thinking out loud. I haven’t had the ill fortune of making such a decision, so I don’t know what I’d really do.

In any case, here’s my virtual “pour one out for my hommies.” Good luck, guys.

Good, Fast and Cheap: Pick Two

Life is about trade-offs. One more bite of that delicious ice cream means more calories. Buying that expensive suit means a regular dry cleaning bill. Spending more time at work means less time with family & friends.

The same is true of building products. Which is why we have the project triangle.

It basically says that if you are building a product, you can build it good and fast, or good and cheap, or fast and cheap – but not good, fast, and cheap. In other words – Good, Fast, and Cheap: pick two.

Why can’t you have all three? Typically because of resource, time, and cost constraints. If you had an unlimited supply of each, then, well, send me and email and let’s be friends! hehe.

Another way to describe this project management concept is to think of it this way:

  • If you build it good and cheap, meaning of high quality and within a tight budget, then it will take a long time (it will not be fast).
  • If you build it good and fast, meaning of high quality and very quickly, then it will be fairly expensive (it will not be cheap).
  • If you build it fast and cheap, meaning very quickly and within a tight budget, then it will not be of high quality (it will not be good).

This is a typical problem for any entrepreneur. You want all three, but know you can’t. So which trade-off is the right one to make?

I believe it depends on the stage of your business. Let’s take a web start-up, for example.

  1. In the ideation stage, where you are still forming your idea and doing research into its viability, it may be important to build a proof of concept to test it with potential users. At this stage, quality isn’t very important; you’ll have time to build it right later. For now, you just to make sure a market actually exists for your product. Also, you don’t have much money yet because you’re just starting out. Therefore, you want it fast and cheap.

  2. The next stage is building the first version (or beta) of your product. Just as with before, it is crucial to get your product out the door and into the hands of consumers quickly. But you also want enough features & quality to be a good product. If your first version is weak, consumers will ignore you and competitors will surpass you. Start-ups used to go for good and fast at this stage, with lots of VC-based money. Personally, I think the sweet spot is fast, fairly cheap, and pretty good (listed in priority order). Picture the dot floating somewhere in the middle of the triangle, though a bit closer to fast and cheap.

  3. The next stage is the next version of your product. This would involve iterative cycles of consumer feedback, new feature development, and bug fixes. Where the prior stage targeted innovators, this stage is aimed at early adopters, as defined by Crossing the Chasm. There is much debate over what the trade-offs should be in this stage, but I tend to favor cheap, fairly good, and pretty fast (listed in priority order). Most companies probably aren’t rolling in the dough by version two or three yet, unless you’re Microsoft (MSFT) or Apple (AAPL). So cheap is always a highly-prioritized constraint. Speed is still important, but not as much as quality now. The dot is still floating in the middle of the triangle, but now closer to good and cheap.

  4. When the product and industry mature enough to begin enticing the early & late majority, then it’s time to focus on quality. This crowd isn’t as tech-savvy or tolerant of bugs & difficult-to-use products. So now it’s important to provide them with a high quality solution. Hopefully, you’ll have enough income to be able to hire more resources now. Depending on your industry, you can be good and cheap or – especially if you’re in the high-tech world – good and fast.

Quick disclaimer: I realize that sometimes it’s important to denote a fourth constraint too: scope. Many project managers do this and I think that’s a great tactic as well.

What do you think? How would you make these trade-offs?

The Haiku Out-Of-Office Email

Yahoo Cube Tchotchkes Now for some Friday fun.

Back at Yahoo! (YHOO), there was an unofficial rule of being able to telecommute one day a week. It was known as WFH, or Work From Home. Along with that was another acronym, OOO, or Out Of Office.

Whenever someone would WFH, or be OOO, they’d send an email to their entire team. Sometimes it would include a reason. Other times, simply a “WFH” as the email subject and nothing else.

Isaac Schlueter of Foo Hack recently wrote about an awesome tradition in his team at Yahoo! – writing haiku emails. Whenever someone is going to be WFH or OOO, they’d send it in the form of haiku.

Some examples:

Sick on an airplane.
Second carry-on: virus.
Infect passengers.

Nothing in iCal:
Must take advantage of this.
Work in pajamas.

Sneezing mightily
Wish not to infect colleagues
Thus working from home

How awesome an idea is that? Wish I had thought of it!

The next time you’re going to be out of the office or telecommuting (if your company allows it), consider communicating it in haiku.

Coworkers boring?
Office drab and tiring?
Why not make work fun!

Even a little
Can go a long way sometimes
Start a trend haiku

Kent Brewster’s Clarion Method for Code Reviews

Have a code review coming up? Need to give your peers a thorough review of their code, but are dreading the drudgery of the process? Don’t find the peer review process particularly effective?

There are volumes and volumes written about code review processes, including debates with paired programming and other Agile practices.

Here’s a simple yet powerful alternative. It comes from a former colleague and uber developer: Kent Brewster. As a published author, he’s used the Clarion Method as a process for “critiquing short stories submitted over the course of an intensive six-week ‘boot camp’ for new writers.”

During a team meeting one day, as we hunkered down for a traditional code review, he suggested this alternative. In a nutshell:

Roles

  • Moderator
  • Code Reviewee
  • Code Reviewers (two or more)

Process

  1. Code Reviewee brings printed copies of the code to be reviewed (preferably with a maximum of 10 pages or so). Each participant gets a copy. Each line of code should be numbered.

  2. Code Reviewee provides a high-level summary of the code. This can include the code’s purpose, known bugs, and a brief rationale behind its structure.

  3. Each Code Reviewer reads the code for 5-10 minutes in silence. They can make notes on the copies as necessary. The Moderator keeps track of the time.

  4. Each Code Reviewer takes a 3 minute turn delivering their review. No more than 3 minutes should be spent, as each turn is meant to be quick. If someone else mentions an issue you wanted to raise, just say “ditto on xxx” instead of repeating it.

  5. While the Code Reviewers speak, the Code Reviewee must remain silent. No rebuttals, no explanations, no excuses. Just shut up and sit there. There will be a chance to speak up later.

  6. After the reviews, the Code Reviewee now has a chance to speak. This opportunity should be used to ask questions and clarify what issues the Reviewers saw. Both sides can converse and debate freely now.

Exceptions

  • If the code requires execution to be properly reviewed, each participant can bring a laptop along. The Code Reviewee should provide a location where the code can be seen an executed.
  • If the code is very lengthy, select just one section to be reviewed. Other sections can be reviewed at future sessions.
  • If a Code Reviewer offers incorrect advice, raise it at the end so the Reviewer can learn from this session as well.

Kent has a more detailed explanation of this process on his site.

If done well, this process allows everyone to have a chance to voice their opinions about the code, regardless of their skill level. Code Reviewees and Reviewers alike can learn a lot from these sessions. I’ve even found that developers from across multiple teams can join in without requiring a lot of background information.

Even more telling is that many developers really look forward to their code reviews. This process forms such a supportive, non-threatening, and educational environment that developers know they’ll always learn something new from a code review. That, to me, is a mark of a truly effective process.

Dreading Monday Morning

Sunrise Here’s something I used to tell my team:

If you ever go to sleep on Sunday night, dreading to wake up Monday morning to go to work, then something is very wrong with your job. You need to see me right away so we can sort it out.

I realize this is a luxury few in the working world have. The majority of employees out there probably dread every day except Friday and Saturday. In the dot-com industry, where our jobs are our hobbies, we get free coffee & snacks (and sometimes more) at the office, and there are perks galore, I find that most employees really love their jobs. Or at least don’t despise them.

However, if you do despise your job, and dread waking up Monday morning to go to work, maybe you should talk to your manager. Or quit.

Management as Parenthood

Do parents make better managers? I sure think so. There are lots of similar responsibilities in both roles. Each trains you and prepares you for the other in a cyclical manner.

And apparently, according to a Forbes.com article, researchers from Clark University and the Center for Creative Leadership in Greensboro, NC, agree:

According to new research, parents–at least those committed to family life–actually perform better in the office. …

Those who were committed to family life achieved significantly better reviews. The reason: Parents learn to multitask, handle stress and negotiate, says Marian N. Ruderman, research director at the Center for Creative Leadership, and one of the study’s authors.

“In parenting roles you get a chance to do a lot of the same things you do as a manager,” Ruderman says. “You get to hone your interpersonal skills. You learn how to develop other people. It’s another opportunity to learn from experience.”

Ah! Exactly what I said!

There are some caveats, though. “After all, employees are not toddlers,” says the Forbes.com article. (No, not toddlers. Maybe more like teens. Ever try to settle a petty dispute between coworkers?)

There isn’t direct evidence of causality between being a good manager and a good parent, however. But someone who’s a good manager typically is a good parent, and vice versa. Tammy Allen, a psychology professor at the University of South Florida, adds: “the best employees are probably those who are engaged in all life roles,” whether it be as a manager or a parent, employee or spouse. “It’s just indicative of someone who’s an active, engaged individual.”

In another study by Ajilon Office, an executive administrative professional staffing firm, says that “77% of American women believe that being a parent helps prepare one for being a more effective manager.”

Although the study focuses more on women’s perceptions of how being a good parent means being a manager, the results raise some salient points:

  • “The top parenting skill that helps out the most at work is communication according to 50% of women.”
  • “Whether it’s being constantly on the go with children’s extra curricular activities or working on three different projects at once, women rank the ability to multi-task as the second most important parenting skill that helps at the office.”
  • “More than a third of women decided that learning to be flexible as new projects arise and priorities shift is the workplace skill that’s refined most at home while parenting.”
  • “Another 23% of women believe that the ability to handle workplace conflicts, whether it’s between co-workers or with clients, is the top managerial skill that comes from raising children.”

See? Mommy’s not just a manager at work; Mommy’s a manager at home too.