Saturday, March 15, 2008

Through the Looking Glass

You all must remember the novel; it is the sequel to Alice in Wonderland. Oddly enough, author Lewis Carroll denied the novel was a sequel but rather a work to stand on its own. Although characterized as literary nonsense, I realized this week that, from an economic perspective, the novel carries tremendous merit.

This week I spent a significant amount of time in conversation with some of the most astute business minds in banking. Here was a group of people who internalized and projected from not only national vital statistics but those of a global economy. At their level, money was quantified by billions and hundreds of billions rather than the units we carry around in our pockets. I was amazed and my thoughts were validated that the US economy is stepping into a recession and more specifically stagflation. However, for these people the results of measuring vital statics were numbers; objective, cold heartless numbers! The barrage of reports and analysis could fairly predict where the economy was going and how, in their capacity, their institution should react.

I have always professed that the economy screams at us, every day, hour and minute what it is doing and what are its intentions. However, like Alice in Through the Looking Glass we don’t see our reflection; we are more enthralled with what is on the other side of the mirror. We aren’t interested in the reality which is being screamed at us, we choose to create our own reality; our illusion of reality, the one on the other side of the mirror. Once we get into our illusion, separating it is based on our ability to deflate our ego and recognize the world around us.

Right about now you should be wondering, how does this relate to AR management in my organization? Surprisingly enough… it is a DIRECT REFLECTION. In our professional practice we often live in this delusional mindset that we, the principle, know all about the environment and the client. When in fact we are looking through Alice’s mirror and failing to see the true reflection of reality. As a principle or partner, I accept a case where I really don’t undertake any due diligence before I establish the client relationship. I believe the engagement is important for my career and that the client will pay the account in full. There is my illusion; for payment of an account is based on a series of compound probabilities. Without a due diligence investigation of that wonderful client, which could be a deadbeat in disguise, the reality of the client not paying, may have a negative impact on my career.

Now when my ego is blended with my illusion of reality, the simple problem gets worse. The work is done and the AR is sitting on the books steeping with each passing day, week and month. Not to mention the cost value of money as that account reaches antique status while sitting on my books. You know the situation all too well, that account is out there for everyone to see, and your sense of reality is faulted. You were looking through the mirror instead of into it. YOU didn’t see the signals. However, it gets worse; you are the partner a well learned person, an authority in your field. How can I be wrong, the client will pay – I guarantee it? What you are doing now is protecting your fragile ego; you must admit that you pushed the card and landed yourself into the fork in the road and now there is no going back! You are left with only two choices, admit your error and write the bill off or seek validation that the client will pay, by leaving the account on the books and maybe even taking on more work in hopes that the client’s cash flow will increase and all accounts will be cleared up. This is your second illusion!

When illusion mixes with ego, it is a recipe for a downward spiral – a train wreck. How can I go back to my partners and my committees and say I was WRONG. How do I resolve the problem, learn from my mistake and most of all spare the firm all of financial losses, and essentially turn back time. The resolution is a two step process, which doesn’t include going back; in the here and now, admit your fault, write the bill off and go on. This also means coming clean with all those who are involved.

The second and most important situational resolution is putting processes in place that prevent you from misreading reality again. Although the client’s ability to pay is important, deflating your ego is probably the most important prevention mechanism. Recognize that you DON’T know everything. You may be the best litigator or possess the best M&A mind, but you do not know everything about credit management. Marcus Buckingham in his book, Now Discover Your Strengths, professes that we should focus and train to increase those attributes for which we have an affinity, and pass onto those the things for which we have no affinity. In his recent speaking engagement at Arizona State University, he spoke how Tiger Woods’ trainers made him practice more at his shots from the tee and not his putt, as he has always been a poor putter. So to emphasis his winning ability is to get the ball closest to the cup.

To put this all into perspective, do what you do best and let others do the rest. Never fall into an illusion of reality. Looking into the mirror is the truth instead of looking through the mirror, and creating your own reality. Finally, as Alice awakens from her experiences of her dreams, she blames her black cat. Like Alice, we often blame others when we look through the mirror and create a train wreck. Maybe it is time to stop the vicious cycle, listen to the numbers, seek the knowledge from those in the know, do what you do best and most of all destroy your ego and admit when you have erred. The costs of illusions are high!

No comments: