A Store Closing That Hurts

Mountain Gear in Spokane is closing.  If you needed technical gear, that was THE place to go.  Now it's gone.  Roskelley and I have had disagreements over a few things, notably the Oregon Episcopal School disaster on Mt. Hood, but we are of one mind here:  The world is about to be a lesser place.

Another HR How-Not-To Lesson

I've been focusing largely on real estate lately, so it's time to do a business management entry.  I was called in to provide some advice on this mess just last week.  The company in question has a pool of employees it brings in as needed for a certain type of work.  One employee hadn't been called in for awhile, so he called the company and was told he needed to come in to meet with them.  It then took the two bosses two weeks to get around to meeting with this guy.  At this meeting they took issue with his having missed one of the training days.  They took issue with his level of communication with them.  And they took issue with his actual work product.  Turns out, though, there were some issues with these issues.  I'll lay them out below as lessons.

Lesson One: If you are going to accuse someone of not communicating, you had better have looked at their communications.  The employee had emailed the bosses he would not be available for that training day.  The company's response was that he had responded to the wrong email, so they did not know what he meant by "I am not available the following days."

Lesson Two: If you are going to accuse someone of not asking questions to get clarification, you had better have asked some questions yourself.  The email in Lesson One was actually pretty clear.  The company never followed up on it to ask what the employee meant.  The employee was apparently supposed to figure out on his own that the company was confused.

Lesson Three: Do not treat informal communications away from the office as if they were formal communications made in the office.  The employee and one of the bosses ran into each other at the grocery store.  The employee mentioned in passing that he was going to miss one of the training days.  The boss claimed he told the employee to call the other boss about it.  The employee claimed he never heard any such thing.  The boss never followed up with an email to this effect, either to the employee or to the other boss.

Lesson Four: If you are going to accuse someone of violating a policy, there had better be a policy.  The company claimed the employee had not followed policy concerning communication.  There was no evidence such a policy existed.

Lesson Five: If you are going to accuse someone of shoddy work, you had better not have already signed off on it.  The company claimed some portion of his work was unsatisfactory.  There were in fact some items that had been returned to him for revision (I won't go into the inadequacies of the bosses' notes seeking revisions, but trust me, they weren't good.).  Those revisions had been made, and the company had accepted them.  Now the company wanted to renege on the acceptance as part of disciplining the employee.

So to recap: 1) The company was told the employee would miss the training day, but the company's communications are so pigeonholed that a clear statement sent to the RIGHT PEOPLE will be ignored and not considered to be communication; 2) the company tried to cover its lack of communication by having a boss tell the employee in a grocery store aisle that the employee needed to call, a communication the employee denies receiving and the company has no follow-up verification of having made; 3) there was no policy violation because there is no policy; and 4) work that had been acceptable was retroactively deemed unacceptable to support the current discipline.

And now the killer.

Lesson Six: If you have a problem with an employee's performance, do NOT wait for the employee to contact you to straighten it out (and do not stall for an additional two weeks after that).  Even if everything the company said were true (which it obviously was not), the employee should not have had to sit around wondering what was going on and finally call in on his own.  That is called Passive-Aggressive Management.  If it's your management style, you shouldn't be a manager, and you probably won't be for long.  If you're an owner and pulling these stunts, I guarantee you're driving away all the best people.  Soon your competition will have all the good ones (Maybe that's why Passive-Aggressive Managers congregate in government: no competitors.), and you'll be left with what's left.  And I shouldn't need to tell you where that leads.

If Small Business is the Backbone of the Economy...

...the economy is an invertebrate.  I know, I know, small business owners are the scrappy folks who keep it all going.  And most of my clients are small businesses.  And I'm a small business.  But....

Too many small businesses have no clue how things work (as I've noted several times, such as here and here).  And they also tend to be clueless on just how badly the deck is stacked against them (such as our glorious, bad check statute, which I discussed here).  But I am now witnessing Transatlantic delusion.

First, the UK is in the throes of Brexit.  A recent study of small businesses indicates that a plurality exporters and a majority of importers believe Brexit will have no effect on them.  Wow.  Just wow.  Pulling out of a free trade zone and putting a large hole in your financial industry isn't going to leave a dent.  That isn't optimism, that's insanity.  Meanwhile on this side of the pond, small businesses are expecting Trump to stabilize things for them.  Yeah.  Uh, no.  Trump is stirring the pot into a hurricane, and he's doing it for the greater glory of the big boys.  That includes ACA repeal, which frankly was a big win for small businesses.  If that goes, good look offering your employees a benefit package of any kind, let alone one that can match the bigs.  And if you can't attract talent, where are you?  Going dark, that's where.

So keep ignoring reality, small business owners.  It is sort of a requirement for club membership.  Just don't be shocked and whiny if reality doesn't ignore you and bites you in the backside.

It's the Middle Class, Stupid

Or rather the lack of same.  The financial pundits on both sides of the Atlantic are beginning to admit that most people aren't recovering a thing in this recovery.  Given that there no longer is a recognizable economy that can support a middle class, this comes as a surprise only to those who don't actually have to work for a living.  The rest of us see jobs disappearing, businesses going dark, and concerted attacks on the few remaining things that make survival possible (The DC Circuit's recent ruling on the Affordable Care Act is nothing short of criminal, the only way to save affordable healthcare is single-payer, and we need to start removing judges, starting with the Fascist Five on the SCOTUS.), and every time we turn around, those of us in business are expected to work for free (I'm not talking about paying taxes.  I'm talking about doing free work for "marketing" or for "social responsibility."  When our wonderful Bar Association expects me to do pro bono work to help the "image of lawyers," I have to laugh.  I do pro bono constantly, along with a lot of reduced rate work, as well as holding up my end re professional image.  I'd tell them to go talk to the Big Firm people, but since those are the folks who own and operate the Bar....).  No, there's no recovery going on; quite the contrary.

But what are the pundits worried about?  That Democrats and Labour are making noise other than Austro-Chicago orthodoxy (Horrors!).  Janan Ganesh recently took issue with Ed Milliband in the Financial Times because the Labour leader is behaving, well, like a Labour leader instead of Tory Lite.  Ganesh thinks Millibrand should be proposing new ideas, which would be nice, but Ganesh defines "new ideas" as the same old free market fraud his club has been pounding since Maggie installed her throne at No. 10.  Earth to Janan: Your neoliberal dreack has gotten us into this mess, with a growing pool of hopelessness and no security for anyone other than the 1%.

Speaking of Tory Lite, Tony Blair keeps trying to absolve himself of the current mess in the Middle East.  He continues to claim that removing Saddam Hussein did not create the current crisis.  Facially that statement is true, but not in the way Blair tries to claim.  What caused the crisis was putting Saddam (and all the other tin pot, self-medaled dictators around the world) in power in the first place.  We made modernization look like a tool of Western control.  It's no wonder the fundamentalists attracted an entire generation that was fed up to the gills with our meddling.

What else is worrying the pundits?  How about the end of the USD as the world's reserve currency as a result of a conspiracy led by Russia and China and including France?  Please.  While it would be bad if the Yankee dollah were no longer the world's currency, news of its demise is way premature.  There simply isn't anyone in a position to step up and take over.  Not China, not Russia, not the Eurozone.  This is just another pseudo-crisis intended to distract us from the reality of our inequitable, unproductive global economy.

Any other "crises" to distract the masses while they're being led to slaughter?  Is a pig's backside pork?  According to Martin Wolf, Europe will be without gas and oil unless we all march straight in the Ukraine and push Putin back to Moscow.  Martin has apparently never heard the bit of wisdom about never fighting a land war in Asia, especially against the Russians on Russian soil.  He might want to look into how much success others have had with that.

What other lunacy is flying about?  One need look no farther than the ever-reliable Robin Harding, who has never met a Randian delusion he didn't try to have a long-term, intimate relationship with.  His latest shovel-full is that house prices are artificially high because of, wait for it, zoning laws.  I realize that conservatives believe that, in the words of their Blessed St. Ronnie, "Facts are stupid things, " but let us nevertheless put facts before a candid world.  First, housing prices are not artificially high; they're pretty depressed here in the US, albeit over-encumbered by toxic mortgages that the likes of Harding once touted as the next great bit of free market brilliance, and while prices have risen recently in the UK, that was a product of loose money that will soon be going away, so expect a correction on that front soon.  Second, housing zoning these days is focused on affordability: multi-family, townhouses, in-fill.  This shift became necessary if for no other reason than that the old model created an infrastructure that was unsupportable.  Suburban sprawl created too much street, too many miles of utility lines, too much area for fire and police to cover, etc.  That Harding believes zoning still promotes acres of lawns and miles of picket fence has more to do with where he and his friends live than with reality.  Finally, Harding, true to his creed, ignores the 409-kilo gorilla in the room: People can't buy houses regardless of the price because 1%ers he is so stridently defending have created a system in which very few of the 99% have sufficient economic security to enter into a mortgage.

It's the middle class, stupid.  People who work for a living can no longer even hope for stable enough incomes for a house, a new car, and college educations for the kids.  They may be making it this month, but it could all be gone next.  This is what the 1% has pushed us into.  This isn't a recipe for independent, economic actors; it's a recipe for serfdom.

Financing Small Business

Went to a presentation recently where funding sources made presentations to small business owners on how to seek capital.  A couple of things struck me.  First, few if any of the owners had any knowledge of cross collateralization (where your collateral on one loan also becomes collateral on another loan with the same lender) and cash collateralization (where your bank accounts and receivables are collateral for a loan).  In the first instance, you can pay off the first loan and find your assets are still encumbered because they have been cross collateralized on another loan.  In the second case, your lender for all practical purposes owns your revenue stream.  One of the main sources of quick cash a small business has is factoring its accounts receivable, i.e. selling or borrowing against its outstanding accounts.  Both cross and cash collateralization, which are quite common in small business equipment loans and lines of credit, block a business's ability to factor its accounts.

Second, I noticed that most of the owners had been approached about SBA loans, but none had heard about what a nasty collection outfit the SBA is.  You know all those protections you think you have.  You don't have them against the SBA.  I have a client right now whose monthly Social Security check is garnished because she cosigned an SBA loan with her husband.  She didn't understand a bit of it at the time and understands no more of it now.  I could get her out of it with a bankruptcy, but she's been told that's immoral (Yeah, right, as opposed to having a 75-year-old stroke victim cosign a loan.  Some set of values we have these days.  But I digress.).

The moral of the story is, yes, there is money available for your business, but it will cost you, and if you don't read the fine print (or have somebody like me read it for you), it will cost you far more than you can handle.

So, Is Utah a Developing Nation?

Not an idle question.  The latest McKinsey Quarterly links to one of their old papers on the "informal" economy, i.e. business that's run under the table.  They note that the proliferation of an informal economy can be detrimental to the economy as a whole for a variety of reasons, lost tax revenues, disrespect for laws, irregular wage payments, avoidance of licensing and regulatory compliance, illegal employment practices, worker safety, product defects, and undercutting legitimate businesses being among them.


They also note a number of indications of an "informal" business: underreporting of employment, avoidance of taxes, ignoring product quality and safety regulations, IP infringement, failing to register as a legal entity, etc.  How many of these are an every-day occurrence here?  All of them.  How many people do I get in my office who are "behind on their taxes" because their bosses list them as "1099 employees?"  There's no such thing.  Either you're actually an independent contractor, or your boss is a cheap sleaze who's shifting his tax burdens to you.  And then there are the businesses that send me brochures, and when I ask them where they got the photos and text, they tell me they just pulled them off the Internet.  Oh yes, that's a plan, commercially using other peoples' property without their permission.  And when I ask for a license, they hand me something in some other business's name.  So what's your relationship to this business?  "Oh, he just lets me use his license."  Uh, wrong answer, and it's a crime.  Not surprising, though, given that they typically haven't met any of the requirements for doing business, right down to registering the DBA they're operating under.

Every time I take the bench in small claims court, I end up having to admonish at least one small business owner that he/she is in fact in business and needs to get the paperwork straight, including licenses and contracts.  Happened again last night.  Folks, if you're in business, you're self-employed, and being self-employed is fundamentally different from being employed.  It means you're ultimately responsible for the paperwork, and if you don't keep it straight, sooner or later you'll wake up wondering what fell on you.  And when that happens, and you come to me to straighten it all out, don't start whining about how unfair everything is.  My kids know better than that.

Small Business Is In Great Shape

Just ask the Wall Street Journal and the Chamber of Commerce. According to an article this week in the Journal, business bankruptcies are down, so things must be improving for small businesses. The Chamber of Commerce chimes in with this line, with the C of C VP for small business offering the usual pap about small businesses being better positioned to recover than the big boys because they are more nimble.

First, let me say that anyone who uses the word "nimble" in a business context should be punched in the face, preferably by someone wearing a chain mail glove. It is a noxious, marketing buzzword from Dot Com Daze, when investors deliberately checked their brains at the door so they could avoid noticing the hucksters were making their sales pitch with a shovel. I was there, I remember. There was a poster that consisted of a picture of a blow dryer, an arrow pointing at the ON switch, and the caption, "Press here for marketing presentation." Unless you're talking about cutting horses and herding dogs, there is no place for "nimble."

The Journal and the C of C can allege all they want that the bankruptcy drop shows a small business recovery. I would submit it shows something else: Small businesses are finding some financing. Oh, not enough to make a difference. Not enough to restructure, right the ship, and set a new course. No, money like that is reserved for the big boys. The C of C conveniently ignores that, if you own the game, you don't need "nimble." If a small business owner tries to raise meaningful capital, he inevitably violates a securities law, and the federal and state regulators swoop down, shut him down, take everything, and still make him do the perp walk. That's what they spend 99% of their time doing. Meanwhile, the big boys can raise billions through outright fraud, squander it through more outright fraud, and get no more than a slap on the wrist (I'll blog about the Friday night dismissal of all charges against Angelo Mozilo later.). So no, folks, I do not believe prosperity is just around the corner in small business world. Quite the contrary.

What I do see is small businesses getting just enough financing or payment deferrals to play kick-the-can. The business owners who are coming to me are no longer talking about recovering, turning things around, or riding out the downturn. They're talking about "surviving until." Until the last kid graduates next year so they can permanently downsize. Until they qualify for Medicare and Social Security in two or three years. Until the paperwork on their visas goes through and they can dump what's left of their lives and move away (Yes, it's gotten to that point.). They're at the ends of their tethers, and they're hoping to kick that can far enough down the road to salvage something, for their kids if not for themselves.

They know bankruptcy can't help them. Another inconvenient truth the C of C isn't letting on is that Lloyd Blankfein doesn't have to personally guarantee GoldSacks' loans; small business owners have to personally guarantee everything. It doesn't do any good to put the business in bankruptcy; the creditors will go after them personally. If they file personally, the business is cooked anyway, and it's over. It's hard to be "nimble" when the bank has sunk your feet in a tub of concrete.

So they try to stretch it out. Until. That's the state of the American Dream.