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February 2018
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What We Can Learn From Enron’s Disgrace
Anybody who knows me knows that I really enjoy reading. It allows me to constantly seek new ideas and wisdom that I can use to better navigate my life, whether that’s in my business, in my faith, or just in my everyday life. One book I reread recently (the 10th anniversary edition), though, gave me fresh perspective on some of the risks of investing in publicly traded companies. It was a fascinating deep dive into one of the biggest business scandals of our generation. “The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron” by Fortune writers Bethany McLean and Peter Elkind is a captivating look into what happens when greed runs rampant, when egos run amok, and when corporate mission statements are merely marketing propaganda. In my opinion, it is a useful read for all recreational investors or business leaders. Though I’m certainly not an investment guru, I’ve long dabbled in different kinds of investments myself, so I’ve always been interested in books or media about business and investing. One of my favorites is the CNBC show “American Greed,” which highlights high-level Ponzi schemes and corporate dishonesty and thievery of all kinds. But the Enron scandal has always been especially interesting to me, partly because of its once-hallowed status as an institution of my native Houston, and partly because of the sheer magnitude of its deceit.
an organization’s downfall: arrogance, deception, lack of interest in the stewardship of their organization, inattention to the well-being of the people that depended on them, and maybe most of all, unadulterated greed. In the end, their hubris caused everyone — all the rank-and-file employees that had put their 401(k)s into Enron stock, and all the investors who trusted in the top executives to manage the business properly — to lose everything. As a guy who tries to put my faith into practice every day in every aspect of my life, a story of such unmitigated exploitation and greed is engaging, yet frightening. It’s engaging because it really hammers home how challenging it is in business to balance the natural human need for “success” and financial gain with a dedication to effective stewardship, running your company not only for yourself, but for the good of your employees and for the good of your clients that depend on you for your goods and services. It’s frightening because I’m sure Ken Lay and the rest didn’t start out to commit a massive fraud, but day by day, one poor decision after another, they got on a slippery slope that ultimately led to devastation. That’s a lesson I need to ponder. Often.
Ken Lay, the CEO and chairman for the corporation, was a pillar of the Houston
community, tight with former President George H.W. Bush and all kinds of important figures in the Houston area and inWashington D.C. For years, as the Enron stock perpetually climbed higher and higher, he was looked up to from across the business world. But when it came out in 2001 that the company had been involved in a long list of shady accounting practices, such as offloading its operating losses to “special purpose entities” and aggressively manipulating entities like Arthur Anderson that were put in place to keep the company above board, that status came crashing down. The whole thing was revealed to be smoke and mirrors, just a show the executives put on to garner billions of dollars while defrauding investors of their hard-earned money. It’s possible that the company started with well- intentioned business savvy, but the book quickly becomes a cautionary tale. Though Enron was backed by a beautiful, sparkling mission statement and set of values, it was evident that it was all a charade — ethics and conscience rarely, if ever, entered into the equation. And certainly, Ken Lay, Jeff Skilling, and Andy Fastow were highly intelligent people, but just like the title states, their initial success made them so arrogant that they truly believed they were the smartest people in any room they walked into. They exemplify many leadership traits that I believe will lead to
–Brad Johnson
President, Risk Services of AR Specialized Insurance Programs For Specialized Industries. • www.insurica.com • 1
WAYS TO SHOW LOVE TO YOUR EMPLOYEES
What happens when an internet personality complains about your company? If you’re Amazon, you make sure the next time they talk about you, they’re singing your praises. ScreenJunkies News is a popular YouTube channel dedicated to media and pop culture. In early November of 2017, the channel streamed a panel discussion that focused on comments fromAmazon’s CEO, Jeff Bezos, who said he wanted to pursue video content that would appeal to a broader audience. One of the panelists, Dan Murrell, quipped that he’d rather Bezos make sure the DVD racks he ordered fromAmazon arrived on time. This off-the-cuff complaint garnered laughter from the other panelists. They chimed in with their own comments on Amazon’s delivery practices, and one panelist brought up third-party couriers’ inability to find Murrell’s leasing office. When the panel moved on to other topics, Murrell’s Amazon comments were seemingly forgotten — that is, until two days later when ScreenJunkies News streamed another video, during which Murrell shared his experience with a customer service representative who reached out to him. After seeing the first video, the representative said they wanted to rectify the situation. They personally checked that Murrell’s most recent order, a bookshelf, was scheduled to be delivered on time, and they gave Murrell the opportunity to air his grievances about third-party couriers. During the panel discussion, Murrell mentioned that he’d never seen the movie “Lawrence of Arabia,” and the representative told him that Amazon had sent him a Blu-ray copy of the film, free of change. Also, $100 was added to Murrell’s Amazon account. This response may seem over the top for a YouTube joke, but Amazon’s model works. Last year, Jeff Bezos became the richest person in the world, surpassing Bill Gates. The key to Amazon’s success? Don’t wait for complaints. If a package is late, Amazon sends the client a new delivery date. Amazon’s Kindle Fire tablet includes a Mayday Button, which encourages customers to contact around-the- clock support the moment they feel frustrated. And, by reaching out after seeing Murrell’s complaints, Amazon is no longer the company that can’t deliver a DVD rack on time. Now, to Murrell, the other panelists, and the channel’s 1.5 million subscribers, Amazon is the company that makes things right. Who wouldn’t want to do business with a company that takes care of them?
A Little Appreciation Goes a Long Way
Valentine’s Day is all about showing love and appreciation to those around you. You’ve probably already booked a dinner reservation and ordered flowers for your significant other (at least, we hope you have), but don’t forget it’s just as important to show love to your employees. Spreading a little positivity will raise employee morale, and it doesn’t require a grand gesture on your part. Here are some easy, meaningful ways to let your employees know you care. Have a Staff Dinner This one sounds obvious, but too few companies take the time to break bread with their teams. Eating is a fundamentally communal activity, and getting everyone together for a meal will boost spirits. Put a moratorium on any shop talk and use the meal as a chance to learn more about your employees’ lives. If you have a larger staff, it’s better to break into teams. Your staff dinner shouldn’t feel like a work event. The goal should simply be to have a good time. Make Acknowledgement Public Sometimes, a simple high- five and “Job well done!” is enough to remind your employees of your appreciation. But if you want to take giving props to the next level, create a shared space where employees can spread the love around. You can create a wall in the break room where employees can credit each other or you can provide a public forum for verbal encouragement. Either way, receiving wider recognition will mean a lot to your staff. Let Them Take Charge If you see a team member taking the reins on a project, you need to reward their initiative. Employees who feel empowered to bring their own ideas into the fold are often the most productive and satisfied staff members. When you notice somebody going above and beyond, don’t let them toil in silence. A little acknowledgement and confidence will inspire other team members to bring their A-game, as well. Little Tokens That Make a Difference What if every one of your employees walked in on Valentine’s Day to find some candy hearts on their desk? And what if a few randomly selected boxes had a slip for a few hours of paid time off? It costs almost nothing to you, but it shows you’re thinking of them. Little, creative bonuses like this can be a huge pick-me-up. Don’t announce your plans in advance. The surprise will make the gesture all the sweeter.
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SMALL BUSINESSES: Hackers’ No. 1 Target in 2018
are vital, but they’re far from enough. In reality, it comes down to you and your team. Perhaps the most common and destructive tactic cybercriminals use is called phishing. Masquerading as a client or someone within the company, they send emails to members of the team with an urgent message demanding they click a link immediately. But when users click the link, it installs malware that quickly spreads throughout your network, often ransomware that they’ll use to demand thousands and thousands of dollars in return for your data. The key to avoiding these attacks is education. Tell your team to avoid clicking on any email that seems even remotely suspicious, and if they encounter one, they should alert the rest of your organization immediately. It may be worth it to install anti-phishing toolbars that can run checks on links before you click them, letting you know beforehand if they’re malicious or not. Above all, ensure your team is using strong passwords and changing them frequently. It can mean the difference between security and disaster for your business moving forward. Sudoku
2017 was a high-profile year for the hackers of the world. From the Shadow Brokers acquisition and subsequent release of sensitive NSA documents, to Equifax exposing the data of over 143 million users, it seems nearly every week there’s an enormous new data breach to read about. But even in the midst of all these Fortune 500 companies being targeted for cyberattacks, it’s easy to imagine that our small businesses are safe. After all, why would a relatively small operation show up on the radars of malicious cybercriminals, and more importantly, why would they even bother when there’s millions of dollars to pilfer elsewhere? The answer is simple: because it’s easy. Though you probably won’t see these incidents in your local paper, small businesses have become the prime target for cybercrime, with small-scale attacks accounting for 70 percent of all breaches. This trend can largely be chalked up to the false sense of security that exists across the industry, coupled with undereducated employees leaving organizations open to attack. If you’re hoping to protect your organization, it’s important to stay informed. Sure, robust cybersecurity measures like anti-virus and firewalls
Have a Laugh!
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INSIDE This Issue
When Greed Runs Rampant page 1
Your Employees Need Love, Too! What Makes Amazon the King of Customer Service? page 2
Hackers’ No. 1 Target in 2018 Sudoku page 3
Effort Counts Twice page 4
Discovering True ‘Grit’
Perhaps most instructive is Duckworth’s equation (she was a math teacher, after all): Talent x effort = skill. Skill x effort = achievement. “Effort counts twice” could be the battle cry of grit. Gritty people are willing to put in the extra effort to achieve their goals, and that’s what helps them reach their goals if they don’t have innate talent. While this provides a strong case that those born with grit will succeed, grit doesn’t factor luck and opportunity into the equation, something that Duckworth is transparent about in her book. She says those who aren’t born with grit can develop it in four simple steps. First, identify an interest that can blossom into a passion. Second, practice that passion, a lot. Third, develop the belief that your passion has purpose. While it’s not an overnight transformation, these guidelines can at least give us hope, which is the fourth step: Hold on to hope that you can succeed. Our biggest takeaway from “Grit”? Look at failures as milestones on the journey to success. Getting gritty means failing and learning from it. Any of us can get gritty if we’re willing to put in a little elbow grease.
If you’ve ever been told you won’t succeed because you lack talent, bring a copy of “Grit” to your next meeting. While teaching high school math, author Angela Duckworth noticed some of her highest-achieving students weren’t the ones with the highest IQs, while some of her “smartest” students weren’t doing all that well in class. “Why?” she wondered. She followed her curiosity to Penn State’s psychology program. There,
she studied several demographics, including cadets at West Point, young teachers, and sales representatives. After numerous psychological studies, Duckworth discovered that “grit” was the common denominator in successful people. Duckworth defines grit as “passion and perseverance for very long-term goals.” People who display grit don’t start a project and abandon it a month later. They devote themselves to an overarching goal that drives everything they do. She explained that someone who practices grit goes through life like a marathon, not a sprint.
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