One of the most egregious lies put forward by negotiators and politicians is the analogy of a piece of pie when referring to the economy or to economics.  In teaching the class “Power and Negotiation,” I remind students to be wary of anyone who uses this analogy because they are lying, deceitful or ignorant.

The pie analogy fails on its face because it assumes that the pie is only so big.  The promoters of the pie lie do not want to recognize that a pie can be made larger.    For example, in 200 years the United States has grown from an agrarian society with little personal wealth to a large technological society with vast wealth.  Another illustration is when a business is started by an entrepreneur and the enterprise grows over time and becomes worth far more than its initial capitalization.  It is true that wealth can be lost, and the pie made smaller, particularly when the pie liars attempt to redistribute the slices.

Another piece of the lie is that all pieces of pie must be triangular and precisely equal.  Says who?  Can one not bake a pie in a square pan? Why is it not acceptable to cut a pie diagonally?  The reason is that there are those who are envious of anyone who appears to have more than they do, regardless of what they have put into life.  When envy turns into action to take some of the pie away from those who made the pie, it is called socialism or theft.

No one seems to ask the question:  “What did you contribute to make the pie?”  “Did you provide the apples, sugar, cinnamon, butter, flour or any other ingredient or did you just smell the pie cooking and decide that because you can smell that you deserve a piece of the pie?”

The third part of the lie is that if someone has a larger piece than anyone else, he stole it and should be made to share it with those who have less pie.  No where does the liar suggest that the pie be given back to whoever it was stolen from because to do so is impossible (because it is not true) and would preclude it being given to those who had not contributed to making the pie.

When confronted with the lie, the nefarious promoters will often respond by trying to make the pie makers feel guilty by saying:  “Don’t you think that you should give something back to the community?”  “And, oh, by the way we should be the one to tell you who in the community should be the recipient.”  If a bit of forceful persuasion does not work, then the threat of confiscation or other punishment usually follows.

If the pie makers have their pie forcibly taken from them, they have several possible courses of action:

Quit making pie and fire the bakers.

Tell no one that they are making pie.

Make pie in another place (country?) where they can keep the pie.

Probably the best way to defeat the pie lie is to call it what it is:  A lie told by a liar who is insulting our intelligence while planning theft through intimidation and extortion.

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Mr. Korkmas is a mediator and arbitrator with Commercial Dispute Resolution Associates.  He also is a business consultant to numerous mid size businesses on a number of subjects including real estate, product development, taxes and energy.  An adjunct professor at Houston Baptist University, he teaches classes on negotiation, human resources and international business.

How often are we bored with the TV or radio news reporting the same information repeatedly?  The news may be important, but we have already heard it and want to move on to another thought.  This is particularly true of disasters and perhaps more so if we are not impacted by the disaster.  The public is tired of hearing about disaster, except for the immediate curiosity of looking at other people’s misfortune and being glad it does not happen to them.

Not only are people bored with hearing about disasters such as tropical storms and Hurricanes Katrina, Rita and Ike, floods in St. Louis and Grand Rapids, they are bored with having to address the aftermath.  We are a people of 15 second sound bites and one hour TV shows.  Over the years we have become mentally detached from the reality of disaster, and this is particularly evident in those areas further from the ocean or from large bodies of water.  The occasional tornado in Kansas or Oklahoma is usually insignificant in magnitude when compared to a category 4 hurricane, except for those whose homes, property and lives have been destroyed.

In attending recent Ike recovery meetings of SBA, FEMA and Homeland Security, a recurrent comment is heard that the mistakes of the past are being remedied.  FEMA is no longer giving away trailers, prepaid credit cards, and years of subsidized rent.   The public will no longer tolerate waste, fraud and the cost of restoring the loss to people who want to live in high risk locations.

Public comments reported by the media indicate that the national population is wearied with donating funds or providing tax dollars for relief.  Recent comments can be summed up as, “If they want to live on the beach or near the water then they can take care of their own losses.  Why should we have to pay taxes to rebuild their homes every few years?”  Statewide homeowner’s insurance costs are rising dramatically because of storm claims, and people 300 miles from the coast will pay more for insurance.

With 50% of the population living with 50 miles of the US coastline, and that number increasing each year, we can expect greater and greater monetary losses from hurricanes and flooding.  It is becoming evident that the states and individuals will have to become far more cognizant of risks and proactively engage in risk avoidance or mitigation.  Risk avoidance means not building on unprotected beaches and risk mitigation means building to storm resistant standards and behind seawalls or bulkheads.  Open beach laws will have to be re-written to allow for beach retention and restoration of protective dunes.

Hurricane Ike illustrated what can be done by competent local/federal government cooperation to restore those areas a few miles from the coast in a short period of time.  Every community in the United States should prepare itself in the same manner, and individuals should prepare themselves for the next disaster.  Disaster fatigue could create an eventuality where only ice, ready to eat food and emergency medical services are available.  We can no longer rely on an overly generous national response.  The prospect of multiple national disasters is not unthinkable, but is very probable.  It is therefore essential that every community begin to assess more vigorously how they can not only respond to a disaster but how they can avoid major loss.

Individuals must realize that future federal government responses may be far less generous and even non existent in certain scenarios.  It is the responsibility of each person to look after his or her own family and their neighbors.  There is an ancient biblical statement that applies to this situation: “in a time of plenty, prepare for a time of need.” 

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Mr. Korkmas is a mediator and arbitrator with Commercial Dispute Resolution Associates.  He also is a business consultant to numerous mid size businesses on a number of subjects including real estate, product development, taxes and energy.  An adjunct professor at Houston Baptist University, he teaches classes on negotiation, human resources and international business.

Simon and Garfunkel in their song, “The Boxer,” had a line “… and the man hears what he wants to hear and disregards the rest…”  This excerpt in many ways exemplifies the irrational optimism that we observe today in business.   Having learned that they have made a serious mistake, executives use the mantra, “we made the best decisions with the information we had at the time.”  Nonsense!  Many business executives and owners have a tendency to selective listening and learning.   In their defense, we must note that they are selected and trained to be irrational optimists.

Read any advertisement for employment opportunities or a job description and one thing we almost never see is a request for someone who looks at all opportunities with a critical eye.  There is never a request for someone who can evaluate the risk and reward of potential opportunities.  All ads seem to want an optimistic, self starting and aggressive person, a good team player who will acquiesce to consensus, follow orders and not ask questions.

Many of these ads should read:  “Wanted: Irrational optimist who will always say “Yes”, never question anything he is instructed to do, and be content in all circumstances.”   These attributes are the unsaid but true requirements.   Job seekers often sublimate their personalities and submit to the true job description.  In fairness to this group, many of them have a mortgage, child support from a prior marriage, two children in private school and car payments.  Most do not have the financial independence to say no, only to say yes.

Many major corporate errors could be avoided if, instead of looking for the irrational optimist, the company searched for a person with a critical eye who could ask the right questions to evaluate opportunity and risk.  This person or persons must not be punished for recognizing facts and asking hard questions.  The fact-seeking person is too often labeled as a naysayer, cynic, pessimist or doomsayer.  Even worse, he is accused of “not being a team player.”   Major mistakes are too often made because someone has already made up his mind that an action should be taken, and anything to the contrary is a threat to his judgment.  I recall one company that I worked for where we were constantly told in regard to a senior executive, “Mr.—— never makes mistakes.”  After such indoctrination, it takes an exceptional person to disagree with Mr.——  and explain why his judgment might not be correct.

The most logical person to perform this task is someone outside the company who knows how to diplomatically ask the right questions.  The consultant you should seek is someone that has the knowledge, the proper evaluative tools, and the strength of character to strongly advise against taking a course of action that is basically unsound.  Likewise, good ideas should be encouraged.

The consultant uses proven methods of evaluation such as Porter’s Five Factors as listed in Michael E. Porter’s book, Competitive Strategy:  Techniques for Analyzing Industries and Competitors.  As a corporate consultant, I have found that Porter’s techniques and analytical tools are invaluable and timely methods for decision making.

An example of what happens when analytical tools are not used is the spark plug company that was offered for sale in the 1980s.  A number of companies in similar or related business evaluated the company.  Several companies, utilizing internal and external experts, learned that spark plugs did not have to be changed every six to ten thousand miles because of the newly-introduced unleaded gasoline.  The switch to unleaded gas meant that many cars would only need one to two changes of spark plugs instead of ten to twenty during their economic life.  These potential buyers declined to bid for the company.

Looking only at past performance, and without the knowledge of declining future requirements for spark plugs, an automotive parts company purchased the spark plug manufacturer.  Soon after the acquisition, the mistake was learned and a number of executives were fired because of the failure to do proper due diligence.

Several years ago another large company decided to acquire a similar but smaller company, and there were the usual number of meetings and discussions prior to the merger.  During these due-diligence meetings, numerous internal and external experts advised that the product line needed major improvement.  The asset value of the company had also been reduced through the sale and leaseback of a number of facilities.  Additionally, there were significant environmental liabilities and under-funded pension obligations.   The chairman and board, ignoring the negatives, proceeded with the merger.  Within two years the acquiring company sustained major losses.  During and shortly after the losses were fully known, all of those who had advised against the transaction were “pursuing other opportunities” because their presence was a constant reminder of advice not taken.

Optimism is no substitute for due diligence and dispassionate analysis. The employees and officers of a corporation, being fiduciaries of the stockholders, have an obligation to act with honesty, truthfulness and introspection.  Ignoring advice or punishing employees and consultants who point out defects is not consistent with fiduciary obligation.  We need only look at Enron as an example of what happens when management ignores the ancient admonition of Solomon, “Do not be wise in your own eyes…”.  Enron seemed to have the philosophy that “to enthusiastically agree is to be rewarded, to dissent is to be punished.”

Real and rational optimism is contagious and inspires the American willingness to take risk and innovate.  Success, however, depends on our being able to face reality, be willing to admit mistakes, and to continuously change as necessary.   Look favorably on those who disagree with you!  Solomon, in Proverbs 11:14, observed that, “For lack of guidance a nation falls, but many advisors make victory sure.”   Are we wiser than Solomon?

Hurricanes Katrina and Rita should have been a wake-up call for all business. By the end of June, 2005, 26.5% of all businesses in southeast Louisiana had failed, due to those two disasters. Houston seems to be recovering much better after Hurricane Ike because of good government leadership. The obligation of government is to society in general, not the individual or business. The survival of a business is dependent on the leadership shown by the business owners and their employees.

For most businesses, communications and power are the critical elements essential to resumption of business after a disaster. Hurricane Ike was a communications wake-up call. Businesses that had purchased the latest and greatest gizmos to communicate in every way possible felt confident about their ability to reach their clients and employees without much interruption. Then the hurricane happened and most businesses found themselves in big trouble. Cell phones, wireless cards, and plain old telephones did not function for most of the population for days after the storm. One-way communication from authorities was our only way of knowing what was happening and did little to help us with emergency needs and how we make a living. The old battery radio became the only source of information many people had that worked.

I have been writing disaster planning and business recovery plans for a number of years, and it has been gratifying to observe the success of a plan that was made over seven years ago for such a catastrophic event. The initial plan has been constantly updated at least annually to assure that it reflects technological changes. The client, a major call center operation with over 350 employees, never had any down time during Ike because of constantly updated recovery plans made with the phone system provider and line carriers to have emergency power and a huge generator in their parking lot. Preparation does pay off, and the investment made seven years ago paid for itself in less than a day. This call center will survive Ike; many other businesses will fail for lack of planning. Some will return with the resumption of power, but find themselves without employees or clients because it took too long to get back in operation.

I had come to doubt the necessity of the dial-up account until this past week when the only functioning connection we had after the storm was an ordinary telephone line and the dial-up internet account. Dial-up communication is slow, but it was all that worked!

We learned that a DSL system will not operate even in phone-only form if the DSL feature is not working. Our wireless card and DSL also seemed to be directly related, and if DSL will not work, then our wireless card will not work in that area either. Friends who received their internet communications over cable were without internet connectivity until their power came back on and cable connections were repaired.

We strongly recommend that everyone own a generator suitable for their business and home office because, as we have just personally experienced, when disaster strikes, you are on your own (including power). Do not just own a generator, but start it frequently to make sure it functions properly and that its magneto magnets have not grown weak from not being used. Many people had generators that turned out to be useless because their engines would not start, run smoothly, or the magnets needed “field flashing” and put out far less power than originally designed. Also familiarize yourself with the safety features and dangers of using generators to make sure you don’t have a second disaster.

A good first step in planning for the next disaster is to prepare a journal to document the failures that you experienced during the days and weeks after the storm, and then take quick action to remedy the problem over the next weeks. We may have another hurricane before the season is over. And remember, hurricanes are not the only disasters that can occur. Fire, flood, tornado, terrorism, and theft occur somewhere every day, and a good disaster recovery plan made well in advance may determine whether your business survives or fails.

Every business needs a well written disaster recovery plan that reflects the uniqueness and requirements of a particular business. Even if a plan is written internally, it should be reviewed and examined by an outside consultant who will ask pertinent questions and spot deficiencies that may not be apparent to the persons writing the plan. I would be happy to help your company write or review a plan to fit its needs.

Larry Korkmas is a business consultant, mediator, broker and adjunct professor at the College of Business and Economics at Houston Baptist University.

Recovering from a dispute can be very traumatic and costly.  Unlike a dispute that often develops over time, a disaster may come upon you quickly.  It is irrelevant whether a disaster is predictable, reasonably planned for or totally avoidable at the time of disaster.  A fire is one of the best examples and could be caused by nature or someone with no association with your business.  Regardless, you have to deal with this reality and respond.  Confusion and lack of coordination can be avoided with prior planning and preparation.

At the time of this writing we on the Gulf Coast are in the hurricane season and have already had one landfall in Brownsville, TX.  One thing that we can be certain is that some businesses will be destroyed, others damaged and others fail at a later date because of the storm.  In less than a year after Hurricane Katrina hit southwest Louisiana, over 7,350 businesses were lost due to these factors.  Some were inevitable but many were preventable, with preparation and planning in advance.

Recovering from a disaster has at least two factors, preparation and recovery.  Preparation occurs prior to the disaster and recovery is the set of post disaster actions undertaken to get the business back in operation in the least time possible.

It is absolutely critical that your business reopen quickly because your customers needing products and services will go elsewhere.  Once the customer is lost it is most difficult to recover them because you are perceived as an unreliable supplier - you were not there or available when they needed you!

So what do you need to recover and what should be done beforehand?  Different businesses have different needs but two items that every business and homeowner should own are:

1.  A telephone that does not require 110v AC power (wall outlet current)

2.  A device called a power inverter.

Most telephones sold today require that a transformer be plugged into a wall outlet otherwise they will not work.  Since certain disasters may cause power outages, a simple phone that does not require AC power will allow you to make calls, albeit without the bells and whistles.  What if you have ignored this advice and find yourself with a phone requiring AC or you did not buy the inverter?  Try plugging the phone into the UPS battery backup for your computer.

The power inverter allows the use of the battery in an auto to power AC devices by turning 12v DC into 110v AC.  These devices can cost anywhere from $35. - $100. if you buy one now.  Depending on the inverter size, it will power a credit card scanner, laptop computer, printer and fax and also recharge cell phones and laptops although not all at the same time.  Large models will even allow the use of power tools, vacuums and small appliances.  Remember though, you are using your automobile as a generator and the battery must stay charged.

The two attached slides are from our presentation on Disaster Preparedness and Recovery.  Take a look and do these first steps.  Know what you own and owe.

Remember, there is always someone else who will serve your customers if you cannot.

Click here to download a powerpoint to further undersetand Business Recovery.

Part of the dispute resolution series.

We have all been told that it is necessary to forgive your enemies and those who have wronged you. We have been told that “vengeance belongs to the Lord,” and a core concept of Judeo-Christian belief is that we must forgive in order to be forgiven. It is easy to say “forgive and forget,” but the person saying those words is usually not the wronged person.

The willingness to forgive is very much conditional on the type, degree and circumstances surrounding the transgression. Cultural influences also affect a person’s willingness to forgive. Some cultures believe in vengeance, others in holding grudges, and others seem to expect good and bad things to happen, and accept fate. The American culture, a mixture of all of these, provides a challenge to those of us who work at resolving disputes.

As a mediator, I observe that a man injured because someone rear-ended him while stopped at a traffic signal is more inclined to forgiveness because the party who rear-ended him most likely did not intend to have the accident. A completely different attitude is expressed by a business owner when a bookkeeper embezzles so much money (to fund a gambling habit) that the business fails. The businessman has to forgive himself for failure to supervise because sending the bookkeeper to jail in no way compensates him for his loss. A female employee who has been fired by her boss because she rejected his unwanted sexual advances will express righteous indignation and seek restitution and punishment.

My first challenge in mediation is getting the injured party past the idea of getting even and meting out punishment with interest. In private caucus an aggrieved person often says that he wants to “hurt”, or punish, the other party to teach him a lesson. The desire to punish is in addition to any restitution that may be offered by the other party, and is often a great roadblock to settlement. My job is to get the aggrieved party to focus on what is in his best interest rather than dwell on his feelings. Vengeance is unproductive and destructive. The frequent demand for an apology is sometimes part of an attempt to punish by challenging the offender’s ego because he does not want to admit wrong.

In dispute resolution, we have learned that it is very important for all parties to be able to express their feelings, or “vent.” Most mediators ask the parties to abide by a rule whereby no one interrupts a party while he or she is speaking. This is necessary because the person alleged to have wronged the aggrieved party has no desire to hear this expression of anger and disappointment, and often responds by interrupting with argumentative comments when hearing how the other person feels.

While conducting an employment mediation, I heard one party relate that her boss never listened to her, especially when she was trying to relate critical information that might negatively reflect on previous decisions. The boss interrupted the employee three times before the employee finished her opening statement, and I had to remind the boss that he had agreed to the “no interruption” rule. As the mediation continued, he had to be repeatedly reminded of the rule so often that the boss eventually realized that he indeed did not listen, especially if he considered information to be negative or challenging to decisions that he had personally made. His recognition of his own negative behavior, coupled with an apology, was essential to the resolution of the dispute.

A wronged person will not likely “forget” a grievous offense, and even the suggestion might be perceived as an attempt to trivialize the offense. A person who has lost a limb, eye or child due to someone else’s actions will not forget. Any “forgetting” is secondary to, and conditional upon, our acceptance of the concept of forgiveness, and we do not forgive others for their benefit. Most habitually offensive or offending people do not care about what others think, or they would not behave as they do. Prudence requires that we remember this person’s character traits and weaknesses in order to avoid allowing ourselves to again be a victim. Remain aware of them, yes; carry a grudge no. This person could be a neighbor, supplier or someone with whom a relationship will continue to exist, such as an ex-spouse.

The reason to forgive is to free ourselves from the destructive effects of anger, resentment, depression, hypertension and a host of other mental and physical diseases. It has been wisely observed that “the past lives in us, but we do not have to live in the past.”

At its core, forgiveness is the rejection of vengeance and the acceptance of reality. In the book of Deuteronomy 32:35 God states: “It is mine to avenge; I will repay…” The justice we would like may not be available to us in this life, but we do not have “permission” to avenge wrongs.

Forgiveness allows us to move forward and not live in the past, even though the past will still live in us. We have heard that “time heals all wounds,” but not if we keep tearing off the scab. Happiness, peace and contentment come when we forgive others and ourselves. Is forgiveness too high a price to pay for this freedom?

In the practice of mediation we often hear from an aggrieved party that one of the important things that they want is an “apology”.  Most of the time, if they get an apology at all, it is a conditional statement lacking genuine sincerity or remorse.  The insincere apology often becomes an impediment to settlement because it does not convey trustworthiness.

A valid apology contains four essential components:

1.  Acceptance of responsibility

2.  Genuine regret

3.  Showing or demonstrating understanding of the problem, and

4.  Willingness to do better.

A sincere apology should be devoid of excuses, ifs, buts, or a demand for forgiveness.   The validity of the apology is suspect if, in any way, there is inference that the problem is the fault of the other party.

Several years ago a well known speaker bought a new projector and presentation mouse for a very important meeting and, about one third of the way through the presentation, the screen went blank and nothing worked.   The speaker complained about the ruined presentation, and the manufacturer responded thus:

“We regret that our product failed at a time when it was critical that it operate properly.  I understand that it made you look unprofessional and ruined your presentation to important people.  We are looking into the problem to make changes so that this does not happen again to you or anyone else.  Please return the products for a full refund or replacement.  If you choose to accept our offer of replacement, we will send someone to be with you at your next presentation to make sure the product works properly…”

Unfortunately, what we have learned to expect to hear is:  “Did you have the cables on tight?  Did you read the instruction manual?  It seems to be working all right now.  It could be a problem with your computer.  What version of Power Point do you have?”  These are all valid questions, but do not address the problem of the ruined presentation.

An apology is not a sign of weakness; it is an indication of trustworthiness.

Our next installment on apology will explore this further.

Part of the dispute resolution series

Some twenty years ago many states instituted mediation as a form of dispute resolution, and recognized that confidentiality would be an essential and necessary part of getting people to speak openly and discuss the issues in order to reach settlement.  The reason for confidentiality was that attorneys would not allow their clients to speak at mediation if the discussions in mediation were later brought into the discovery process or into court.  All discussions in mediation, and any resolution, are protected by statute from disclosure unless the parties agree otherwise.  (Please check your state’s statutes to ascertain what is protected by confidentiality.)

It would seem that everyone would recognize that confidentiality is a better path to reaching resolution, but darker motivations such as pride, image, “face” and embarrassment sometimes interfere with the process.  It is incumbent on the mediator and the attorneys, if involved, to encourage the parties to participate in the process.

The downside of confidentiality is that the public may not be informed about dangerous products.  While this concern has some validity, it is usually recognized that settlements with plaintiffs are specific to the injuries incurred and should be confidential while risk should be disclosed. Several years ago design defects in the Ford Explorer and the Firestone tires installed at the factory were found to be at fault in the deaths and injuries of numerous people.  Most of the settlements regarding death and injury were settled confidentially while the public was made aware of the tire defects, and the tires were replaced without charge.

Confidentiality of settlement can be addressed in the settlement agreement by stipulation that so many dollars are paid now and the balance at a future date.  If the injured party should disclose details of the settlement within a certain period of time, then the future date payment is forfeited.  This is usually enough incentive to honor the agreement of confidentiality.

Confidentiality is the antithesis of gossip, and that comparison alone is enough to consider its use in more than dispute resolution.