Another lesson from the farm…

“Our relationships will eventually grow stale unless we are diligent about directing and cultivating them”

Todd Henry – International speaker

Having grown up on a rural property in north-western New South Wales, Australia, I have written several blogs about lessons we can learn as managers based on growing up on a farm. There were many things I observed and experienced that can be related to business and life. From resilience, the importance of ongoing maintenance like chipping a weed called the Bathurst Burrs and the lessons of ‘the cow pat’.

Another lesson comes to mind.

The growing of crops. One crop my father grew was wheat. Wheat needs constant cultivation combined with adding fertiliser and weed control to get the best outcome. The ground needs to be ploughed to remove weeds and make the soil friable and ready to accept the planting of seeds. When seeding, fertiliser needs to be added at the same time to improve yield. And you need rain!

The growing of wheat is a great analogy that can be applied to being a successful manager. Spend time cultivating your connections, fertilise your contacts, provide help when needed, keep the weeds under control by not losing contact and maintain your contacts by watering them.

This has worked for me over the long term with amazingly positive outcomes. Thirty years ago, a recruitment consultant placed me in a job. Over the years I kept contact with him and 5 years ago another opportunity came up. He found a logistics consulting project for me, and I’m still involved with the business as a board member.

Another example relates back to when I was a casual university lecturer. I kept in touch with several of my former students. This resulted in one former student giving an important contract to our logistics business. Another was employed by me for one of my clients and this was after over 15 years since graduating.

The example with the most impact was a former work colleague and student. He convinced me to do my master’s degree. Later he told me about a job vacancy with his former employer. Much later he provided the conduit to sell our logistics business to an Asian based freight forwarder.

What are the considerations with networking?

Most importantly when cultivating your network, it needs to be mutually beneficial but with more give than take. No long-term relationship whether personal or business will endure if it is only one way. Managing is not about platitudes, big schemes and projects. It is about constant attention to relationships, continually seeking ways to interact with your network regularly and adding value.

Do you think that the cultivation analogy is a good one for you as a manager or business owner, both personally or professionally?

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Lessons from 55 years ago……

“Before anything else, preparation is the key to success.”

Alexander Graham Bell – inventor of the telephone

Egyptian Airforce destroyed on the ground

As a very young boy at Primary School, I vividly remember the Middle-East Six-Day War in 1967. Our school Principal announced at Assembly that he was deeply concerned about it leading to another World War and we should all pray. As a farm boy, I caught the local school bus, which in those days also delivered the mail, newspapers and bread to local farms. I distinctly remember glancing at the newspaper headlines and viewing the photos over that week of the newspapers that lay stacked at the front of the bus near the driver. Within a week the news vanished. Israel had defeated the Arab armies of Egypt, Jordan and Syria.

Next month it is 55 years since the Six-Day War.

Are there some lessons for managers from this significant historical event?

The war between Israel, Egypt, Jordon and Syria was fought between June 5 and June 10 1967 and resulted in an overwhelming victory to Israel and included the capture of the Sinai Peninsula and Gaza Strip from Egypt, the Golan Heights from Syria, and the West Bank and the Arab section of Jerusalem from Jordan. In summary, the war was a pre-emptive strike by Israel within an environment of mounting tensions with its Arab neighbours, where war unfortunately seemed inevitable. Israel was geographically challenged, lacked strategic depth, was politically and economically isolated and was numerically inferior in population and the size of its military.

So how did Israel succeed so spectacularly against such overwhelming odds?

Israel had been planning for war for many years, and central to this was the use of their air force. This involved a pre-emptive strike to destroy the Arab air forces on the ground. The plan had been worked out and practiced for several years with Israeli pilots flying repeated practice missions against mock Egyptian airfields in the Negev Desert.

At 7:14 a.m. the entire Israeli Air Force (IAF) of nearly 183 planes, with the exception of just 12 fighters assigned to defend Israeli air space, took off, flying under the radar with the goal of bombing 11 Egyptian airfields while the Egyptian pilots were eating breakfast.  Israel needed to destroy the Arab air force on the ground as their bombers could devastate Israeli cities. Amazingly, Israel had no bombers to use in the attack and the raid was carried out entirely by fighter planes. Most of Egypt’s planes never left the ground. By 11:05 a.m., 293 Egyptian planes were destroyed. Israeli fighters then attacked the Syrian and Jordanian air forces. By the end of the first day, most of the Egyptian, half the Syrian and all of the Jordanian air forces had been destroyed on the ground. By the end of the Six-Day War, the Arabs had lost 450 aircraft, compared to 46 for Israel.

So how was success achieved?

Logistics, superior training, planning and better intelligence.

The Israeli ground crews had practiced the rearming and refueling of returning aircraft. They achieved this in less than eight minutes, thereby enabling the strike aircraft of the first wave to fly in the second wave and meant an aircraft could fly five missions per day. By comparison, NATO aircraft could only fly three missions per day.

The IAF pilots were highly skilled and had been training for years. They practiced low level flying which required exceptional skills over the Mediterranean at under 30 metres so as to avoid radar detection. Furthermore, every pilot had photographs of their targets and had been practicing on mock targets in the Negrev Desert.

The IAF, using the “concrete dibber” anti-runway bombs which created huge craters made it impossible for the Egyptian aircraft to take off. This made the aircraft ‘sitting ducks’ and they were later destroyed on the ground.

Dawn was always considered the best time for an air attack from the east as the sun was in the defenders’ eyes. This was when the Egyptian air force was on high alert. However, Israeli intelligence found that 7.45 a.m. was when all the Egyptian air force was on the ground and the pilots were having their breakfast. This is when the IAF first attacked.    

Within six hours after the first IAF aircraft had soared into the morning sky, Israel had laid the foundation to winning the Six-Day War. Although the pre-emptive strike was a gamble, it paid off.

Careful preparation and some luck had been rewarded

What other lessons are there for managers here?

1. Planning – never underestimate how important planning is and doing your homework. The IAF did their homework on their enemies, knowing when they were most vulnerable and where the planes were located. Sound intelligence laid the groundwork for success.

2. Logistics – efficient use of available resources. The IAF was able to increase the utilisation of their aircraft well above what was considered ‘the norm’. Furthermore, as the IAF lacked bombers a new strategy of using bombs to effectively ground the rival air forces made them vulnerable to attack from the air by fighter jets.

3. Practice – leaving very little to chance the IAF practiced and practiced minimising the risk of failure. As the saying goes, practice makes perfect. There is no substitution for practicing to improve performance and increase the chances for success.

What other lessons do you think there are for managers?

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What can an early Australian explorer teach us about leadership?

“Difficulties are just things to overcome.”

Ernest Shackleton – British Antarctic Explorer

McDouall Stuart in central Australia

As a primary school student, I was enthralled by the exploits of the early Australian colonial explorers from Blaxland, Lawson and Wentworth who first crossed the Blue Mountains, to Oxley, Burke and Wills, Kennedy and then Leichardt, who disappeared without trace. One particular explorer stood out, John McDouall Stuart.

In an earlier blog, I wrote about management lessons from the failed and tragic Burke and Wills expedition. The contrast between Stuart who was a dour alcoholic, careful, physically small and a shy Scot to Robert O’Hara Burke who was a moody, impulsive, eccentric and physically intimidating Irishman, could not have been starker.

Leaving from Adelaide, Stuart successfully crossed Australia from south to north through the harsh desert interior and returned, without losing any member of his expedition.

So how did he do it?

Trained as a civil engineer, Stuart accompanied the famous explorer Captain Charles Sturt in 1844 to search for the inland sea in central Australia. This expedition returned to Adelaide, exhausted and suffering from scurvy after discovering two of the harshest deserts in Australia, the Simpson Desert and Sturt’s Stony Desert; but failing to find the island sea. The conditions were so horrendous, the lead fell out of their pencils, and the screws fell out of their wooden equipment boxes as they shrank in the heat. The horses became lame and many died. Sturt became nearly blind and the second in charge, James Poole died of scurvy.    

Over the next nearly 20 years Stuart led five expeditions into the centre of Australia before his final and successful expedition in late 1861. Each subsequent expedition explored further and further into the harsh desert interior, finding the geographic centre of the continent and finally solving the riddle of the inland sea. On his fifth expedition Stuart reached Newcastle Waters north of what is now known as Tennant Creek in the Northern Territory. They were forced back from reaching the northern coastline near Darwin due to the lack of water and inhospitable scrub.

His sixth and final expedition was successful, reaching the north coast on July 1862 and arriving back in Adelaide in December 1862. The crossing did not come easily.  The men were sick with scurvy and malnourished, many of the horses were abandoned as they became too weak to continue, and Stuart himself had to be carried on a stretcher between two horses on the final leg of the return journey. In contrast to Burke, and despite these hardships, no person ever died on any of the expeditions he led.

Returning as a hero, Stuart was awarded a gold medal by the Royal Geographical Society to add to a gold watch he had previously been awarded. The only other person to ever receive both a watch and medal was the missionary and African explorer, Dr David Livingstone such was his prestige. Stuart and his group were given a special welcome in Adelaide as heroes and crowds lined the streets, ironically on the day that Burke and Wills were buried in Melbourne. The government proclaimed a holiday.

Sadly, nearly blind and very sick, he died less than four years later.

What are three lessons for managers we can learn from John McDouall Stuart?

How does this compare this to the infamous and failed Burke and Wills expedition?

1. Planning – there is no substitute for sound planning. In contrast to Burke and Wills, his rivals in crossing Australia, he carefully planned his expeditions using a smaller and more mobile team. Being a qualified surveyor, he used these skills in planning his expeditions, combined with the experience gained from previous exploratory expeditions.

2. Experience – in contrast to Burke and Wills, Stuart was an experienced bushman. He spent nearly 20 years gaining experience in exploring the central Australian desert. Stuart travelled lightly and with small numbers of men on horses. There were no bullock drays and flocks of sheep to slow them down. They could travel far more quickly than all the explorers before them, and they followed the water courses. Stuart did not keep to a predetermined route and he used experience gained from the Aborigines. In the harsh Australian desert, he observed bird and animal movements which he used to discover water. Furthermore, the small party did not need large amounts of water.

3. Persistence – it took Stuart six attempts to cross Australia. Unlike Burke, he did not put his expedition members in danger.  When it became too difficult the expedition returned home. Persistence paid off in the end, although it could be argued to terrible effect on his physical health. Overnight success is very rare – there is no substitute for hard work and staying the distance.

Stuart’s exploits can be summed up in the following quote by T.G.H. Strehlow, an Australian anthologist who specialised in Central Australian Aboriginal culture:

“In Stuart, Australia possessed a man cast in the mould of a hero – a man whose amazing persistence, indomitable courage, and unfailing common sense enabled him to succeed in a mighty task in which most others would have failed”

Do you agree with these lessons?

What other lessons can we learn from the success of John McDouall Stuart?

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What if………..

“what if, but what is”

Gary West coach of Anna Meares – Australian Olympic Gold Medal Cyclist

In mid-2012, I was in England attending a management training program which coincided with the London Olympics. Sadly, I did not attend any events.  However, one night over a cold beer in my hotel room I watched two women cyclists, the 2008 gold medal winner Victoria Pembleton and the 2008 silver medallist Anna Meares, slog it out in the women’s sprint. It was an intense battle of stamina and wills and in the mesmerising trussell Anna Meares eventually triumphed.

So, who is Anna Meares?

Anna was Australia’s first female cycling gold medallist. She was an 11 times world cycling champion and the only Australian athlete to win medals at four consecutive Olympics.

Meares, was a daughter of a coalminer and grew up in Blackwater central Queensland hundreds of kilometres from the nearest bike track.  When her elder sister Kerrie showed promise as a cyclist the family moved to the coastal city of Rockhampton as it had a bike track.

  • Athens 2004 – gold medal in women’s 500-metre time trial, bronze medal in 200m sprint
  • Beijing 2008 – silver medal in women’s sprint
  • London 2012 – gold medal in the women’s in and bronze medal in the women’s team sprint
  • Rio de Janeiro 2016 – bronze medal in the keirin

These results are remarkable but there is something that is exceptional about her Olympic record.  In January 2008 seven months out from the Beijing Olympics, Meares broke her neck after crashing in the World Cup competition, fracturing her C2 vertebra, dislocating her right shoulder and tearing her ligaments and tendons. She went within 2 mm of becoming a paraplegic or worse death. Within 10 days she was back on her bike. With intensive rehabilitation she was able to fight her way back and qualify for the 2008 Beijing Olympics. Not only did she manage to qualify, but she also won a silver medal. From a broken neck to a silver medal in seven months – a truly remarkable performance.

Whilst her dedication and intense training to get fit enough to qualify and win a medal is testament to her intense focus and a clear goal (link here) there is something that is more compelling. It was her attitude. She did not focus on ‘what if’ but ‘what is’. Meares do not dwell on what might have happened if she’d been more seriously injured. Her coach made her appreciate her current situation. She was thankful and became more determined and focussed.

As managers, Anna Meares provides us with a great lesson.

Focus on what you can achieve – what’s in front of you. Don’t dwell on what you can’t control.

Four years later in London, Meares went on to win a gold and a bronze medal in Rio.

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A Winter Olympics story ….doing a Bradbury

Doing a Bradbury…

“I don’t think I’ll take the medal as the minute and a half of the race I actually won. I’ll take it as the last decade of the hard slog I put in”

Steven Bradbury – Gold Medal Winner 2002 Winter Olympics

With the end of the 2022 Winter Olympics comes a great story from the past.

So, who was Steven Bradbury and why did he become famous?

In 2002 Bradbury was the first athlete from Australia, and also the Southern Hemisphere to win a Winter Olympic Gold Medal. He was a former short track speed skater, a four-time Olympian and was also a member of the short track relay team that won Australia’s first Winter Olympic medal, a Bronze Medal in 1994.

So apart from being the first Australian athlete to win a Winter Olympics Gold Medal what was he famous for?

It was in the manner of his win. Bradbury slipped into the 1,000m speed skating final when two of his competitors in the semi-final crashed and another was disqualified. In the final, in the last lap as his competitors jostled for medal positions, Bradbury drifted further and further behind. With just metres from the finish line, a pile-up took out every other skater and avoiding the collision, he glided past to claim the Gold Medal.

His win entered the Australian colloquial vernacular in the phrase “doing a Bradbury” meaning an unexpected or unusual success.

However, there is more to this than chance. Bradbury was from tropical Queensland, not a state conducive to winter sports. He travelled the world, living hand to mouth to complete internationally, and competed in four Winter Olympics. At one stage he needed to borrow $1000 from his parents to repair his car so he could get to training. He supported himself by making skating boots in a home workshop. The years of hard work and training included nearly bleeding to death when a skate blade cut an artery requiring 111 stiches in 1994. Also in 1998, he fractured his vertebrae.

What are the lessons here for business owners and managers?

  • Hard work and sacrifice pay off.

In our logistics business there were times when a key customer left putting the business under pressure. However, with the previous hard work in networking and business development they were quickly replaced. Success can be a matter of luck, but it rarely is.  

  • Having a goal and vision

Bradbury’s goal was to win an Olympic medal on his own. The 2002 Olympics was his last chance. Despite his setbacks he hung in there, even when it looked increasingly unlikely that he would be successful, he succeeded and achieved his goal.

  • Being in the race

Yes, Bradbury’s tactic was to hang in there. This paid off as his rivals slipped, crashed and went spinning wildly across the ice. We had a customer in our logistics business who tendered for a lucrative post office franchise at an Australian airport. He was 5th or 6th in line, and eventually won the tender as his competitors were one by one, disqualified as being unsuitable, for reasons ranging from having a criminal record to no experience.

The Stephen Bradbury saga is a great story that resonates.  

Can you think of some other lessons?

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Eat that frog…

Eat that frog…

‘If it’s your job to eat a frog, it’s best to do it first thing in the morning. And If it’s your job to eat two frogs, it’s best to eat the biggest one first.

Mark Twain – American writer and humourist

When I was growing up in rural Australia, frogs were part of life. Normally they were green tree frogs and could often be found resting inside the overflow of the rainwater tank or in the toilet cistern. As children, we sometimes kept them as pets in a glass tank and fed them insects. However, I was never tempted to eat a green tree frog – although I must admit I have tried frog’s legs in a French restaurant.

How does the metaphor ‘eating a frog’ relate to productivity?

As managers and business owners, we are confronted each day with tasks and the challenge is to prioritise them. We can create a ‘to do list’ and then assign importance to each task:

  • A – most important,
  • B – next most important,
  • C – not important.

Determining what is important is a challenge.

Managerial tasks can be:

  1. Urgent and important – crises, deadline-driven activities, customer issues
  2. Not important and urgent – interruptions such as phone calls and emails, some meetings
  3. Important and not urgent – strategy and planning, building relationships, major projects
  4. Not important and not urgent – activities not beneficial to goals, personal emails, internet browsing.

One of the major problems for me, personally, and when speaking to other business owners, is that we do tasks we like doing rather than the tasks we should be doing. We procrastinate and often avoid the really difficult chores such as dealing with an employee’s performance or visiting a disgruntled customer.

Time is the great equaliser, as you cannot create any more time. Everybody has only 1,440 minutes in a day. The challenge is to manage time to get the best outcomes. The decision-making matrix for time management is a good model to use when determining where your priorities lie and where you should direct your energies to get the best results.

Brian Tracy, in Eat that Frog!, outlines some great ways to stop procrastinating and become more productive. Tracy recommends you tackle the most important task first. Likewise, Kevin Kruse, a best-selling New York Times author, recommends that you identify your most important task (MIT) and tackle it first thing in your working day in 15 Secrets Successful People Know About Time Management. Kevin Kruse says the most productive hours of the day are first two to three hours where your energy and cognitive ability is at its highest. Your mind is clear and uncluttered by the day’s happenings. This tends to be the best time to tackle the task that appears to be the most difficult and insurmountable

By way of comparisons, like Mark Twain, I recommend tackling the hardest task first rather than the most important. That is my frog. While eating your frog may not be the most enjoyable outstanding task, it will energise you to then concentrate on other more important tasks to be completed during the day. These can be prioritised using the 80/20 rule or Pareto Principle.  Having a clear set of goals and a business plan is a good place to start.

For example, I needed to advise a sportswear customer that we would be increasing their rates as they no longer reflected the costs of their new order profile, their contract conditions no longer applied and, because of this, we were losing money. I kept putting off seeing the owner, who was a difficult personality, as I wished to avoid a confrontation – despite this costing the business money. When I finally met the owner, the meeting was less difficult than anticipated and we parted on good terms. Often, when the most difficult task is completed, the rest of the day gets easier and, more importantly, it is not as difficult as first thought. This was certainly the case with the sportswear customer.

How do you manage your time?

Do you have ‘to do’ lists but don’t prioritise your most difficult or important tasks?

What is the best use of your time to achieve your goals and the business’s plans – remembering you only have 1,440 minutes in a day?

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What is the difference between strategy and tactics?

What is the difference between strategy and tactics?

‘Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.’

Sun Tzu

In business we often confuse tactics with strategy. The media refer to some business’ actions as strategies when in fact they are in reality; tactics. For example, with the recent COVID outbreak in Australia, the media referred to hotel quarantine and border closures as strategies when in fact they were tactics in the strategy to stop the spread of the virus.

A tactic is an action or event to achieve a desired outcome.

A strategy is an integrated plan which helps an organisation achieve its objectives.

Tactics are usually designed by middle-level management, whereas top-level management create and implement strategy.

For example, if the strategy of a business is to increase profitable market share (a top-level management action), a tactic could be to increase prices or reduce discounts combined with a marketing campaign (middle level management actions). Tactics often change with the changes in market or economic conditions (the present), whilst strategy remains same for a long period (the future).

If the strategy is wrong, the best tactics in the world will not ensure the strategy is successful. Military conflicts are often good examples where despite sound tactics, a strategy that is wrong will never be achieved. In the Vietnam War, first the French and then the Americans failed due to poor strategy.

A better example is the nasty civil war called ‘the Bush War’ in Rhodesia (now Zimbabwe) from the early 1970s to 1979. In June 1977, Time Magazine reported that “man for man, the Rhodesian army ranks among the world’s finest fighting units“. The Rhodesian military developed a tactic called ‘Fireforce’.

It was a counter-insurgency military tactic using helicopter-borne and parachute infantry to envelop guerillas in the bush before they could flee. The operational assault usually comprised of a first wave of 32 soldiers carried to the scene by three helicopters and a Dakota aircraft, with a command helicopter and a light attack Lynx aircraft in support.  One of the advantages was its flexibility. When contact was made, typically with 6 to 12 insurgents, the 32 soldiers of the Rhodesian Army had immediate superiority on the ground. The tactic quickly yielded an 80–1 kill rate by trapping the guerillas and eliminating them by air and ground fire. However, despite its success measured by the kill ratio, it was not enough to keep the Rhodesians from losing the war, or realising that the war could not be won. KPIs need to measure progress towards an organization, or in this case a government’s strategic goals. Clearly kill ratios, which were also used by the Americans in the Vietnam War were not the right KPIs to meet the strategic goals.

What the Rhodesian Government failed to understand that the ‘bush war’ was political in nature. It was a war for the support of the Rhodesian Africans, not the minority white population. The right-wing government was ill equipped politically to win over the Rhodesian Africans to their side. The government’s budget and efforts were directed to the military side of the war and not the political one. The strategy of stopping majority rule was flawed, politically, morally and geopolitically. Having the best counter insurgency military in the world could not prevent black majority rule.

Also, a minority led white government, not recognised by many countries surrounded by hostile African nation states was never going to prevent guerilla insurgents from entering the country. Furthermore, in the later stages of the war the apartheid government in South Africa withdrew support further isolating the Rhodesian government. There was no plan B until the last year of the war and by then it was too late.

In conclusion, strategy is about choosing the best plan for accomplishing long-term goals of an organisation. Clearly kill ratios, which were also used by the Americans in the Vietnam War were not the right KPIs to meet the strategic goals. Tactics are normally the instant reaction of the organisation, in response to the changing environment whether political or business.

Can you think of examples of where tactics would successful, but the overall strategy failed?

The accompanying table below is a good reference for identifying what is a tactic and what is a strategy.

Basis for ComparisonTacticsStrategy
MeaningA carefully planned action made to achieve a specific objective is Tactics.A long-range blueprint of an organization’s expected image and destination is known as Strategy.
ConceptDetermining how the strategy be executed.An organized set of activities that can lead the company to differentiation.
What is it?ActionAction plan
NaturePreventativeCompetitive
Focus onTaskPurpose
Formulated atMiddle levelTop level
Risk involvedLowHigh
ApproachReactiveProactive
FlexibilityHighNormally less flexible
OrientationPresent circumstancesThe future

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Why do airlines offer cheap seats?

‘I don’t care what you cover the seats with as long as you cover them with assholes’

Eddie Rickenbacker – US aviator

It’s coming up to Christmas and in Australia it’s the summer holiday period. Yes, over the Festive Season unlike our friends in the norther hemisphere, we will enjoy sunshine and summer. Whilst the monthly blog is posted on 21st of the month, in December it is released early. After all, 21st December is very close to Christmas Day.

Summer holidays often means travel and with COVID restrictions lifting, air travel is often ‘front of mind’. Hence the December blog is about air travel

Today, flying as a form of travel is widespread and growing – so we, the general public, are affected by airline pricing. Airline ticket prices are not set and can vary significantly, with some airlines offering flights that seem to be ridiculously cheap.

Why do they do this?

Modern airlines have very sophisticated analytical programs that use yield management or dynamic pricing to maximise the seating capacity of each aircraft, while obtaining the highest price for each seat. As Rickenbacker’s quote implies, seats need to be filled. This is a concept relevant to many businesses, which is little understood. It is called marginal pricing and, if used carefully, can significantly increase a business’s profits.

What is marginal pricing?

Marginal pricing occurs when a business sells a product or service at a price that covers the variable cost of producing it. The marginal cost is the variable cost of producing an additional unit or service. The concept of marginal pricing assumes that the fixed costs and overheads are already covered by earlier sales.

How does marginal pricing work in practice?

With airlines, the marginal costs of getting additional revenue are very low. Once an aircraft takes off, the empty seat is gone forever. It is a perishable commodity and cannot be warehoused or sold on another day. The same can be said for scheduled truck deliveries with spare capacity. The marginal cost of additional passengers is virtually zero. This is why airlines can offer what appears to be drastically discounted fares.

The road industry provides a good example of how this works in practice. For example, the cost of operating a semi-trailer is $1,600 per day including variable costs – fuel, finance, tyres and maintenance, loading and unloading – as well as fixed costs and overheads such as insurance, registration, depot costs and the driver’s salary. This is based on traveling 900km per day and a freight carrying capacity of 22 pallets.

The semi-trailer is loaded with 18 pallets (82% capacity) with initial revenue of $2,160 ($120 per pallet).

•             Fixed costs and overheads: $450 per day

•             Variable costs: $1,050 per day

•             Marginal costs: $5.56 per pallet (loading and unloading a pallet).

With a spare capacity of four pallets, there is an opportunity for the vehicle to fill this capacity by using marginal pricing. The assumption is that no extra variable costs such as fuel and tyres are incurred, and the only additional or marginal cost is the loading and unloading of the additional pallets. According to the concept of marginal pricing, providing the marginal costs of $5.56 per pallet is included, and any additional revenue above this will fall to the bottom line as profit.

This is demonstrated in the following table:

Marginal Pricing of Semi-Trailer Delivery

This example clearly shows that the addition of three pallets loaded onto the vehicle, with revenue of $80.00 per pallet instead of $120.00 per pallet, increases the revenue from $2,160 to $2,400, with profits increasing from $559.92 to $783.24 per day, or 40%.

Within manufacturing, the marginal cost is the variable cost of producing an extra unit of output. Let’s use manufacturing 1,000 wheelbarrows as an example:

•             Variable cost of manufacture is $20.00 per unit

•             Fixed costs are $10.00 per unit

•             Overheads are $5.00 per unit

•             Total cost per unit for a single wheelbarrow is $35.00.

The total cost for 1,000 wheelbarrows is $35,000 (1,000 x $35.00).

However, the cost of manufacturing an additional 500 wheelbarrows is $10,000, as $20.00 per wheelbarrow is the variable cost of production. The manufacturer could sell the additional 500 wheelbarrows at $40.00 each and make a profit of $20.00 per wheelbarrow.

Marginal cost pricing is a valuable tool for businesses, providing an opportunity to increase profits significantly if managed – particularly with unused capacity, such as in a manufacturing plant and in services such as transport.

However, there are dangers in marginal pricing. As a business, you must know and understand your costs – and this includes the cost of the sales staff.

Are there opportunities in your business to increase profits by marginal pricing?

What are the dangers if you decide to implement this strategy?

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Do you have a “Beppo” Schmid in your organisation?

Do you have “Beppo” Schmid in your organisation?

“Never interrupt your enemy when he is making a mistake”

Napoleon Bonaparte

So, who was Joseph “Beppo” Schmid?

In World War II, Schmid was German Luftwaffe Field Marshall Herman Goering’s Intelligence chief and personal friend.  The provision of useful intelligence, particularly during the Battle of Britain in 1940 was of less importance to Schmid than his career. He was shrewd, calculating and ambitious. He removed any staff that could be considered a threat to his ambitions and replaced them with those who would not challenge him. Schmid was intent on ingratiating himself with Goering by only telling him what he wanted to hear.

One of the consequences was poor intelligence. This was a major contributing factor to the defeat of the Luftwaffe in the Battle of Britain, leading to the deaths of thousands of German airmen and the virtual destruction of the Luftwaffe.  In early 1940 Schmid’s team produced the ‘Study Blue’ report. It was based on a book about British industry ordered directly from a London bookshop, as well as British newspaper cuttings, and was supplemented by reconnaissance photographs. The study was used for planning the Luftwaffe’s campaign against Britain. It summary, the report underestimated the capabilities of the RAF in aircraft, pilots, aircraft production and technology, and overestimated the technical capabilities of the German aircraft, probably tempered by arrogance following the success of Blitzkrieg in the invasion of France.  

Throughout the Battle of Britain, Schmid’s intelligence was suspect. In August 1940 another report predicted that Britain would run out of fighter aircraft and that Germany was shooting them down at three times the actual attrition rate. Furthermore, they underestimated the number of RAF fighters by a factor of three. With unsustainable aircraft losses, the German objective to either compel Britain to negotiate a peace settlement or be invaded, failed. By early September 1940 Hitler’s Operation Sealion, the invasion of Britain, was postponed.

As managers, what lessons as managers can we learn from “Beppo” Schmid?

 Here are 3 management lessons…

1. Beware of egos and unbridled ambition

Sadly, throughout my career I witnessed too many examples of egos and blinding ambition endangering a business and, in the process, adversely affected employees’ lives. One of my former business partners refused to acknowledge that a customer he had secured was costing our business thousands of dollars a week because he didn’t want to admit that he had under quoted and didn’t want to face the customer. His ego would not allow him to admit the mistake.    

2. There is no substitute from doing your homework

The results of bombing were consistently exaggerated, probably through inaccurate claims and over-enthusiastic reports. Following the unexpectedly quick fall of France there developed an atmosphere of perceived victory. The Luftwaffe leadership and in particular Goering, became increasingly disconnected from reality. Doing his homework properly, rather than telling Goering what he needed to hear, Schmid could have prevented the massive loss of lives and material which weakened the Luftwaffe. They never fully recovered before Germany’s defeat in 1945.

3. Incompetent leadership severely impacts an organisation

A fish rots from the head first. Goering was an incompetent leader who surrounded himself with people who were afraid to say “no” – afraid to give him bad news and probably feared for their lives. Leadership whether poor or good has a massive impact on an organisation’s success and the lives of its employees. Leadership comes with responsibility and more importantly, accountability. Compare this with the leadership displayed by the RAF.    

What do you think are the lessons are?

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Are you an intelligent boss?

Are you an intelligent boss?

‘In a high-IQ job pool, soft skills like discipline, drive, and empathy mark those who emerge as outstanding.

Daniel Goleman – author of Emotional Intelligence

It is often assumed that good managers are intelligent, and this is what makes them successful. Is this what really occurs in the world of work? This depends on how intelligence is defined.

Do you consider yourself an intelligent manager?

What is IQ?

IQ stands for Intelligence Quotient, a common measurement of human intelligence. The IQ test was originally developed in France by two psychologists, Binet and Simon, in the early 1900s – and their work still provides the basis of the tests used today. IQ tests were further developed throughout the 20th century and have been used in many psychological studies as well as in business, education, the military and government.

What is EQ?

EQ stands for Emotional Intelligence and the concept emerged in 1995 with the publishing of a book called Emotional Intelligence by Daniel Goleman. It sold over five million copies. Goleman claimed that EQ discounted IQ in determining success.

Why is EQ now considered more important than IQ for success in business today?

Have you met or worked with people who are highly intelligent but have a low EQ? They frequently display a lack of empathy and initiative, are arrogant, refuse to listen to other points of view, are insensitive and argumentative, blame others, never hold themselves accountable and are unable to control their emotions.

I certainly have, and there is nothing more demoralising and frustrating than working for such people. Low EQ people often suffer from ‘I’ strain – ‘I did this’, ‘I did that’ and ‘I am very important just listen to me’. One of the main impediments to achieving better outcomes is allowing egos to override common sense. An important aspect of high EQ is being able to manage your ego.

People are considered intelligent if they can reel off facts, retain information or have high technical skills. However, this does not necessarily make them, or the organisation they work for, successful.

While we may, as managers, pride ourselves on our technical skills, industry expertise, and innovation, this does not make us successful managers or leaders. Being the smartest person in the room does not necessarily equate to success.In successfully managing organisations today, we are increasingly dependent on ‘soft skills’ that build relationships inside and outside the organisation. It is essential to be able to negotiate, collaborate and compromise by listening, communicating, being flexible, and being able to work with others. Management by walking around is a good example of using EQ skills. Poor levels of EQ can make or break customer relationships, create and perpetuate poor work environments and reduce constructive communication with managers, colleagues, peers and subordinates. Michael Gerber, in The e-Myth Revisited, .

According to Harvard Business Review, EQ is ‘the key attribute that distinguishes outstanding performers’ and is the leading differentiator between employees whose IQ and technical skills are approximately the same. People with high EQs tend to be happier and have more fulfilling personal lives – as they are more self and socially aware, manage their emotions and tend to be more engaged with other people and events.

The good news is that EQ can be taught. However, it depends on your mental outlook and willingness to change. It can be improved through coaching, training and good mentoring.

Here are three questions that you can ask yourself to gauge your level of EQ:

  1. How would your employees describe your leadership style?

Ask this to gauge self-awareness. Does it sound realistic when you answer this question? Do you mention any shortcomings you are trying to address?

  1. Could you do a SWOT analysis on yourself?

Would your colleagues or subordinates agree with your self-assessment profile?

  1. Do you know the interests and family circumstances of your work colleagues?

This is asked to gauge your level of empathy with others.

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