In introducing “Nalu it” for our October Ho‘ohana, I had written:
“ ” in the perfect cut of beef, there is always a degree of fat marbling. From that fat a steak will cook with the best flavor, and be juicy. Without it, you may as well turn it into smoked jerky, for it will be dry and without the taste it could have promised on its own. Yes, that marbling is fat, but it’s good fat.
The analogy is a good one for many businesses in Hawaii right now. They are still running very, very lean, —they have been ever since the September 11th tragedy gave their owners the excuse to trim all fat out of their operations. It’s fat that has never been put back in, and now many are actually in a position where the economy is booming and they cannot take advantage of it. Business is to be had, and they are turning it away, or taking the very dangerous risk of treating it with such mediocrity they create ill-feelings with their customers and their staff.
They certainly cannot “Nalu it” (i.e. go with the flow) when a business break-through comes their way.”
So what do you think is considered “good fat” in a business?
Most of the managers I know will immediately say “extra labor.” Yet I have to wonder how they would use that labor if they had it. In my experience, the tendency is to simply spread existing functions out thinner, making it easier on everyone, rather than invest that new and fresh energy into increasing overall productivity or new growth. In other words, our tendency is to add to the bad fat versus the good fat.
We need to look at this in a pretty straightforward and logical way:
- Having good fat produces good results.
- Having bad fat produces not-so-good results.
In my curiosity about how to focus this for our everyday work, I looked for some information on how good fat functions in our bodies, and thanks to my good friend Researcher Google, this is what I found: Primarily, good fat
- Adds to Caloric Value. Fats provide a lot of energy in the form of calories. Calories are a measure of the heat produced by the utilization of foods in the body.
- Is a Storehouse of Energy. Body fat provides the most important reservoir of stored energy as adipose tissue, which is absolutely critical from a survival standpoint. In times of famine, a person must live off his/her stored body fat or perish.
- Serves as a Transporter. Fats enable the transportation and use of vitamins A, D, E, K, and for other substances which are fat soluble. Without fat in the diet, those vitamins would not be able to function, causing a multitude of health issues for us.
So think about this in terms of work, and the health of a business.
The good fat in a business should
- Add to the Value of that business by Powering its Strengths.
- Store Reserves which can be quickly retrieved as New Energy when needed.
- Serve to enable the Smooth Functioning of work, i.e. Drive its Vitality.
In my view, the best example of good business fat as Added Value is the opportunity for new tertiary learning, with the expectation that the learning will translate into some new application for that business— into new action that would not have happened without it. It then Powers Strength by fueling growth, both for the learner and for the business itself.
I think of time taken for exceptional follow-up as a form of Stored Reserves. This one in particular is the “Nalu it” connection for me: Good follow-up includes things like having lessons learned culturally inculcated in debrief sessions with the kaizen mentality of continuous improvement.
Rock solid as a Vitality Driver is the Daily 5 Minutes, as good as good fat gets, with “transporting the vitamins” of great communication that workplaces managed with aloha thrive on.
Can you think of some other examples?
Reference Article: The Functions of Dietary Fat: 10 more benefits are listed if you are interested!
Rosa, this is a good issue. So much has been made of cost cutting, and where do they cut first? The most expensive cost, people. If we looked instead at the processes and did some serious zero based budgeting around the business: does it still make sense to do this? does this still add value to the company, to the customers, or to the shareholders? If no, then it should be cut. If yes, then it should continue.
In this manner, we should also allocate some percent of “fat” to the future. Google has gotten some press about their 15% rule. 15% of the time folks can do an exploration in any area, and from these explorations, they have generated new business ideas. Without this 15% effort, they would not be growing the business as well as they have.
Steve I didn’t know about the Google 15% rule! Hoorah for them! Very similar to the model we have in our MWA curriculum, but we go for 5% more— a take on the adage of the “20% that gets you the 80.” More about it is here:
http://www.managingwithaloha.com/2006/07/pala_ole_declut.html
There is usually no disputing that labor is the highest expense in most businesses, and it becomes an easy target. Unfortunately, what is overlooked is that people are the generators of all other possibility ” revenues, service, productivity, AND discovering the smarter cost-cutting efficiencies! —when some good fat remains as Stored Reserves to Add Value, Power Strength, and Drive Vitality. You just can’t tap into what isn’t there.
I think the problem comes with inaccurate measurement too: Cost can be more naturally tangible and countable than can people-generated benefit, and we have to get better at quantifying it. Whether you use the Google 15% rule or the MWA 10/70/20 guideline, there has to be an = somewhere that illustrates what the result is.
I would say the best fat is a “big, fat moat.” I use the word to mean the protections that a business creates to endure in the face of an assault from outside forces.
Trust (from suppliers, customers, associates) can fatten your moat as can a good credit line. The idea is to list the items that protect your enterprise from outside assault and then (when depleted) be sure to refill your moat. I got the idea when I interviewed James Crowe of Level 3 for my book. He credits Warren Buffett.
Great examples Laurence, thank you! The whole-ness of the financial savvy necessary to maintain the overall health of a business cannot be denied or neglected.
What you offer to the discussion reminds me of a similar conversation I had with an executive recently about the need to protect intellectual property today, as a “reality of this thing we call the knowledge economy.” I would definitely count intellectual property as a moat-filler, with the engine which continually creates it as the good fat a business needs.