Author: stevehoberg

Land of the Dragon: Druk Air the national airline, Druk beer (as stated on the bottle “1100 super strong”) the national beer. Druk means “thunder dragon” in Bhutanese.
Bhutan is changing quickly. Until the 1950’s there was no formal education offered outside of monasteries and no electricity in the country. Now, that is changing under a new democratic government and a benevolent (as well as revered) monarchy. On a break from the big city of Bangalore, India, I was lucky enough to have a couple of weeks to explore this wonderful place. It is like no other country that I have visited.
Bhutan is first and foremost a religious country. They have their own brand of Buddhism that is closely allied with that of Tibet. While western ways are seeping in, the traditions are still very strong in all segments of the population. Because of this dedication, the country is trying very hard to keep their culture and traditions intact.
Before arriving in Bhutan (you must fly in on Druk Air, the national airline) you also must have a guide and a visa arranged ahead of time. Bhutan has a minimum cost per tourist of about $250 per day. This fee includes a guide, basic hotel accommodations, as well as meals. If you choose to upgrade your hotel or to join a trek that requires more support, the cost per day will go up. This tourism concept by the government is unique. The idea is to encourage the high value, low impact tourism that comes from wealthier and more educated foreigners. They feel that these tourists will be less likely to have a negative cultural impact that the backpackers that crowd into the nearby areas of Sikkim, Nepal, and Tibet. In addition, by requiring a guide to accompany each group they not only provide jobs to local people but the guide acts as a cultural ambassador who not only explains the Bhutanese culture but who makes sure that tourists are respectful of the culture. The hope is that the culture and environment will better preserved for the future.

I got a chance join a fantastic 7 day trek  that went close to the base of Mt.. Cholmolhari an unclimbed 24,000 ft peak. Our trek with a great group of people and a great guide, experienced warm sunny days, rain, snow, and a few pretty chilly nights. We reached an altitude high point of 16,050 and  came close to the maximum endurance of my legs and lungs.
Bhutan has incredible forests, beautiful rice fields, Temple, forts, monasteries, mountains over 24,000 feet as well as jungles. Wolves, snow lepards, tigers, and elephants but it is not a paradise. The per capita GDP is about the same as Bolivia and only a little higher than India but it seems MUCH wealthier. After scratching my head for two weeks about why that is, my conclusion also explains the contentment of the citizens. I think that Bhutan has almost no corruption. While people assured me that there is corruption in Bhutan, I stand by my conclusion. Bhutan has very few of the typical earmarks of the wealthy like big fancy cars and houses, there are some, but you get a strong sense of community there that does not exist in other countries where the balance of affluence and power is askew. Corruption in developing countries is the biggest and the most ignored hurdle that LDC’s face.
Most of us have heard about Bhutan and its focus on “gross national happiness”(GNH). Before going there, I thought of it as more of a slogan aimed at creating interest for tourists. I know now though that the country and its leadership are very serious about this concept. In 2006 the king felt that the people would be happier under a democracy and he abdicated his position clearing the way for a new constitution and the first elections that were held in 2008. It seems that the GNH focus forms a lot of the policies that are falling in place in the country from strict environmental policies governing natural resources, a national ban on the sale of tobacco, and even a national pedestrian day where city and town centers are closed to auto traffic across the country every Tuesday. Cell phones have only been in place since 2003 and Bhutan was the last country in the world to have a TV network.
In other parts of the world, a lot of us would chafe at these policies because we see them as impacting personal freedom. But in Bhutan it seems that the government is trying very hard to allow the maximum amount of freedom but placing even a higher value on culture and community. It will be very interesting to see how these policies play out in the future. Yes it is expensive and hard to get to but if you have the chance, go to this wonderful place before it changes!

Your work/business will take your soul, if you let it.  Whether you are an employer or an employee, there are a lot of parallels in our work to our personal relationships. We all know that for relationships, one of the keys to success is making your partner feel appreciated. The pat on the back, the warm fuzzy feeling, the hug, ……on some days that is the only thing that keeps us going.  And so it is in a startup business where financial rewards are far off and the light at the end of the tunnel is a distant glimmer.

What is the best way to structure incentives in business? What is important? What works and what does not? The answer of course, is …it depends.

The best incentives should be sincere, in other words not something given grudgingly but given as something that has been earned. They should be specific, that is the person being rewarded needs to understand what it is they did right  An incentive doesn’t have to be given immediately but the closer it is given to when it was earned the stronger it will motivate. (An annual Christmas bonus doesn’t get us going too much in January, try quarterly instead) and finally a good incentive needs to be personal.  Something that motivates one person may de motivate another. A Thanksgiving turkey to a vegetarian?  A trip to a conference to someone who hates to travel? As an employer I always thought that money was the universal incentive and it IS important but sometimes it’s not the best (or the cheapest either)

I separate incentives into two categories, those that make employees feel good about where they work and those designed to get employees to do certain specific things. The “feel good” incentives are general things like buying lunch for the office, having a Christmas party, or giving a baby gift. Those are from the heart. The real incentives though, need to be tied to performance.

For an incentive to work for employees it should be based on something quantifiable, there needs to be transparency in how it is arrived at and there needs to be certainty about it. Incentives should be for behaviors and goals that are tangible and measurable. You don’t make an incentive for something like work attitude, that type of behavior will be rewarded (or not) at the employee’s annual review but you could make an incentive for something like customer compliments or another attribute that might reflect on attitude

A vague promise of “if you do this project well, I’ll reward you” may work once or twice but most of the time incentives like this will eventually fail because the expectations on both sides have no definition. Incentives like this only work when the level of trust is very high and the goals of the employee and the employer are in total alignment.

Something that I think a lot of employers do wrong with incentives is to never change them or examine the validity of the data. How many times have you been somewhere where the employee asks you to check a box on some form that he did a “good job”   or we are asked to fill out a survey and hand it to the person who just helped us?  This is not collecting performance data, it’s just begging for compliments.  Many managers think they don’t have to pay attention to incentive systems once they are set up. Not so. Managers need to realize that any incentive system is there to help them manage but the system needs to be managed as well. Every incentive system gets manipulated after a period of time, that’s why it needs to be constantly monitored and occasionally adjusted. Not only does this attention to incentives help to avoid unintended consequences (like sacrificing quality for productivity) but it also keeps them fresh and engaging for employees.  Measuring and capturing the performance data that underlies the incentive systems is often the biggest benefit to management.  The keys to improvement are often clearly visible in the data and measurement gives employees security in knowing how they are being evaluated.

For startups, incentives are essential and as the boss sometimes you need to give them to yourself as much as to your employees. During a startup the company becomes all absorbing. It consumes all the energy you are willing and able to put into and you don’t get much back initially. In a social enterprise startup it’s even more important as there are social benefits that are at risk, not just your own livelihood.  It makes me think about the warning you get at the beginning of every airline flight:  “In the case of a sudden drop in cabin air pressure please give yourself an oxygen mask before helping others”  It’s the same thing in a startup. You have to take care of yourself or the whole ship goes down.  Startups are hard work, and they should be….but know your limits and be aware of the personal costs of what is being accomplished. Set goals and when you realize them, reward yourself.

Work is something you do in exchange for something else. Even if you love what you do you are still looking for your job/company to support you financially as well to give you professional fulfillment. If you are the boss, don’t forget to give yourself incentives and rewards too……. A weekend on the beach, a day of hooky on the ski slopes, a shopping spree.  Don’t think twice.

Competition, sometimes it helps us to improve our businesses and sometimes it paralyzes us.
What got me to thinking about competition was my drive back to Bangalore from Mysore this weekend. In the space of 5 minutes on the highway I counted billboard size advertisements on the sides of buildings for 10 different cement companies, WTF?! Coromandel King; JSW …eco friendly; ultra-tech… the engineers choice; Jaypee….solid; ACC; JSW; Karthic; Ramco…supergrade; Dalmia; Zuari; And all this in an area of only moderate construction. Wait a minute, cement is a commodity and even if there are differences in quality, the users are contractors and builders not the average guy who sees the billboard. So why is all of India plastered with advertising for cement companies? Why do these companies spend thousands and thousands of dollars on generic, poorly targeted advertising? I think it’s simply because their competitors do it.
On the same trip we came through the small town of Channapatna known for producing wooden toys. In the front of many roadside stores there were rows upon rows of small wooden rocking horses and other figures. The same products in each store, displayed in the same way, side by side down the highway and all with no customers in sight. Why? I think they are keeping their eye on the competition instead of on the customer and the product.
In business sometimes we get paralyzed by our competition, we are so focused on competing we forget to innovate…… think BlockBuster video. Or sometimes we think we have no competition and we get flattened by an innovator …… think the Yellow Pages vs Google.
At Glass Rite, the window manufacturing business my brother and I built over the past 25 years, we constantly look for ways to innovate. We changed window designs to enhance energy efficiency, increase aesthetics, reduce water penetration, we improved installation methods, added security, etc. etc. These innovations and improvements were often the most exciting times and most satisfying accomplishments. The fact that it helped us dominate our competition was icing on the cake. So why do businesses go flat in the face of competition? Is it the same reason why people “retire on the job” while they are still working, and why relationships go stale?
Peter Robertson,  an organizational ecologist, specializing in leadership and transformational issues and who is affiliated with the Monterey Institute of International Studies, sent me a link to a fascinating article he recently published. (A Performative-Extended Mind and a Law of Optimal Emergence) Any summary I make would not do his paper justice but Peter talks about how the intangibles like values and innovation diminish as the growth curve (S curve) of organizations and individuals matures. One way of dodging diminished values is to start another growth curve, or (in my words) to re-invent yourself and/or your organization. Most of us know from our own experience that change and growth are good and invigorating but we need to think of it as a necessity, not just something that might be a good idea. Stagnation is dangerous. It brings with it corrupted values, rigidity, and an end to our dreams.
Different is not always better but better is ALWAYS different

Drummers on CMH Road Bangalore, India

I have had a few interesting conversations in the past week about business models.  For Profit vs Not For Profit models. I have been involved in both over my career and I think with some notable exceptions that some of the cliches about both models have some truth. Nonprofits do seem to have a tendency to operate at a little slower pace (Village Capital excepted) and without the hunger that you see in the for profit businesses.  Nonprofits seem to see themselves as a little more esteemed, a little purer than their for profit counterparts and sometimes that translates into complacency in action.  On the other hand, for profit businesses do seem to have a tendency to cut ethical and social corners sometimes while seeking to maximize profits.

The idea that businesses can shift between the two models is intriguing to me.   In a social enterprise start up, particularly when there are substantial barriers to enter the market, it makes sense to get funding from grants. Take a look at Embrace Global, a Bangalore, India based business that has developed a low cost baby warmer. It is a fraction ($200) of the cost of the $20,000 versions you see in US hospitals and is just as effective. In addition it does not need a continual electrical connection, an adaptation that is important in the developing world. This helps solve a problem across the world in places with limited resources and medical infrastructure.  It takes a lot of resources, clinical trials, and engineering studies to get a product like this off the ground and when you have high upfront costs grant funding is often the easiest path to getting startup capital.

The problem then becomes scalability. Once the product design is completed how do you attract capital to scale the business?  Nonprofits are not going to attract venture capital,  so what Embrace has apparently done successfully is spin off a For Profit business that sells the items designed by the original Nonprofit.  Embrace innovations, the for profit spin off, now sells the baby warmers at enough of a profit to allow them to attract investors and begin expansion.

A hybrid model like this has a lot of utility in the social enterprise space. After all social enterprise in itself is a hybrid business model combining financial returns with social.

Kim and I have been in Bangalore now for just short of one month and have really enjoyed it. Bangalore is a big city though and if there is something that is difficult for us to adjust to it is being in the middle of a city of 10 million people. We have a trip planned to Coorg this weekend in the foothills of the Western Ghats, a mountain range that runs along much of the West coast of India and has a tremendous amount of bio diversity.  Right now there is a controversy in India about the impact of tourism on the national parks that have populations of tigers. The parks that have tiger reserves are now closed to the public until some new guidelines can be set up dealing with how to allow tourism without negative impacts on the wildlife. Also,  and probably most importantly, they are trying to figure out how to get more money out of the tourists that visit the park, in particular, the foreigners.  All of this means we won’t be able to get to Nagarhole Park this weekend….we are still determined to see a tiger while in India though and just being out of the city will be great!

Follow the ideas. That seems to be my task here…..and it is an interesting one!

Just completing my second week at Kinara Capital, an Indian NBFC (non-bank financial company) and beginning the process of finding some promising entrepreneurs here in Bangalore.  I am lucky to be working with a really great team here.  Hardika, Thiru, Rogin, as well as Brendan Koch here from the Unitas fund in Salt Lake City have not only all been great to get to know, it’s also amazing what they have accomplished here!   We are now working hard on developing some good banking relationships and I should begin serious discussions with bankers soon.  I like to get to know a business from the ground up and was immediately interested in getting out to the field and meeting some of the people that Kinara is helping with small business loans. Interesting to me, it’s not that simple. In many developing countries and maybe India in particular, markets have become distorted by well-intentioned philanthropy.  When borrowers see westerners associated with any type of microfinance company they expect interest rates to be subsidized. Kinara’s business model is to offer loans to businesses that have no access to reasonably priced capital. However we need to make a profit in order to scale the business. I am still looking forward to getting to out to the field, but we’ll need to find the right venue.

The process of frontier market scouting for promising entrepreneurs is going to be really interesting.  Kim is definitely my most valuable resource and has connected me with several people she met through the Overseas Women’s Club here.  Scouting is a great way to meet people and it is surprising here how many people have ideas and an entrepreneurial spirit. I feel pretty sure that we will be able to identify enough solid ideas that Village Capital will be able to run a program here in 2013 and fund one of them.

The transition to India has been eye opening for Kim and I. What has exceeded my expectation are the people! People here are wonderful. Everyone has been friendly and helpful (except the rickshaw drivers).  The most daunting thing here is undoubtedly the traffic. Wow! It took me almost 10 minutes to cross the street on my way to work today and when I finally (and barely) got to the other side, I felt like I should go to church (or have a drink). The key to walking safely in India is: 1) trust no driver , when it gets backed up motorcycles take to the sidewalks.  Signals and traffic cops are often ignored  2) use vehicles going the same direction as you are as a blockade against the cross traffic.

We have now moved three times since arriving in Bangalore and have finally found a wonderful spot in a quiet neighborhood at a reasonable price. (See the photo above) It is difficult to find anywhere here that does not require a 12 month lease and we were very fortunate to find this one. We have a small rooftop apartment ( 3^rd floor) and best of all a large outside area where you can see the sky and birds……important to us who are used to the wide open spaces of New Mexico!

We have all seen the definitions of social enterprise, they are all basically variants of “an enterprise that creates social benefit” could be for profit or it could be a non profit.   After that general definition, though the clarity stops. It can be argued that almost any business, run ethically, creates social benefit and customers and investors alike are starting to look more closely at businesses and what societal benefits they create.The problem is each business touts the good things it does, but that does not tell the whole story. We have seen what has happened to “greenwashing” in the environmental area.  Now there are “green” oil companies….maybe that just means greener than the others.  Now the term “green” is virtually meaningless.

The key is the that the social impact part of the business must be integrated into its business model in a way that can’t be changed. That way the social impact is not an option it becomes a goal. We must not dilute the benefit that true social enterprises are accomplishing by allowing greenwashing to happen  in the social entrepreneurship field. Just because a company is involved in philanthropy  does not mean it’s a social enterprise.

Growing up in the Chicago area I received  my B. S.  in Applied Plant Science from Northern Arizona University  in 1976 and then my M.B.A. at the University of Arizona  in 1979.  I went on to work for 8 years at Georgia Power Company doing financial planning and internal management consulting. Leaving in 1987, My brother and I went on to found Glass Rite, In Albuquerque NM.   Glass Rite manufactures and installs high efficiency windows throughout Northern New Mexico and Arizona . After almost 25 years, Bill took over the company and I began the next phase of my career. I now live in Bangalore India and Albuquerque New Mexico with my wife, Kim.  We have three grown children and one grandchild. Personal interests are travel, mountain biking, Skiing, and whitewater canoeing.