"During the Depression I saw a man throw a loaf of bread off the back of a truck," says Don Draper at the beginning of this week's episode of Mad Men. "It was more dignified" than a client meeting that Draper just sat in on at Sterling Cooper, his ad agency. The meeting in question involves Horace Cook Jr., an heir to a shipping fortune who intends to spend $3 million on marketing a new jai alai league in America. He is young and full of enthusiasm and has a lavish promotional scheme in mind. Some thoughts:

1. Are you responsible for managing a spendthrift client's behavior? From the beginning, Don is uncomfortable taking Horace Jr.'s money; he scowls when a gleeful Pete Campbell refers to the client as the "fatted calf" and "dressed for the oven." (Having no such qualms, Lane Pryce, the agency's new financial officer, rewards Pete with a "Nicely done my boy.")

Later, however, Draper and Pryce and Bertram Cooper meet with Horace Cook Sr., who admits that he doubts the viability of Junior's vanity project. "My son grew up in a cloud of success," the shipping magnate mutters. "But it was my success." Still, he won't stand in his son's way and gives Sterling Cooper his consent to go after the business. At lunch, Don makes one last stab at convincing Horace Jr. to think twice about jai alai, but the young client remains unmoved. Horace Jr. adds, petulantly, that if the league fails, it will be Sterling Cooper's fault.

The sequence raises interesting questions about entrepreneurial parenting. It also raises questions about clients: Are you responsible for making sure they spend wisely? Don feels instinctively that the big splashy jai alai launch that Horace Jr. wants is ill-advised. Though Sterling Cooper stands to benefit from separating the scion from a healthy chunk of his inheritance, Don seems to think it might be in the agency's best interests to guide Horace Jr. to a more realistic business opportunity.

It's honorable, but is it necessary? Is a business responsible for trimming a client's sails? Some would argue that Don has a responsibility to his staff and to the agency's shareholders to maximize revenue. On the other hand, a campaign that results in financial success for the agency and utter failure for the client could do much to damage Sterling Cooper's reputation. Do you think Don did the right thing?

2. Always have a backup. Another Sterling Cooper client, a diet soft drink named Patio, has hired the agency to create an introductory TV commercial. The ad plays off an Ann-Margret number from Bye Bye Birdie. At the last minute, the director drops out and there's a panic. No backup can be found, so Don taps Sal Romano, the agency's art director, to handle it. But he asks his deputies an important question in passing: What were you going to do if the original director had to be fired? The message: You should always maintain a list of people you can recruit or promote in the event a key member of your team needs to be replaced,

3. Good managers tolerate failure. So the Birdie shoot goes off without a hitch and Sal delivers exactly what the clients said they wanted. And yet they are unhappy. Something's not right, and they deem the commercial unusable. Some bloggers have suggested that the spot was rejected for being too overtly gay. Roger thinks the problem is, simply, "It's not Ann-Margret." (Bonus: Here's a real commercial that Ann-Margret did for Canada Dry in the late '60s. Trippy.)

Dejected, Sal goes to see Don, who surprises him by saying that "the only good thing" to come out of the botched commercial was that Sal proved himself as a commercial director. This thrills Sal, because he has lately been worrying about his future. "No one wants illustrations any more," he tells his wife Kitty. "It's all about photography now." That Don endorses Sal's work despite the client's rejection shows that he is not rattled by failure--although he can't help himself from taking a dig at Sal's failure with the Patio assignment, saying "I hope that never happens to me."

4. When naming a company, avoid a silent consonant. Having won Horace Jr.'s business, the team at Sterling Cooper plays with some jai alai equipment supplied by the nascent "National Jai Alai Association" or NJAA. Horace Jr. has no idea how confusing "that J" will be for the American public, Don notes dryly. Then he breaks a glass ant farm with an errant ball and says, "Bill it to the kid."

Would your employees argue that your organizational hierarchy produces its haves and its have-nots? That's the question posed in the third episode of Mad Men (Season 3). It's a warm, end-of-summer weekend, and Roger Sterling and his fiancée Jane (who is Don's former secretary) are hosting a party at their club. The guest list causes a stir among Sterling Cooper's middle management. The two new heads of accounts, Pete Campbell and Ken Cosgrove, make the cut, as does Harry Crane, the head of the agency's TV division. But the creative staff (with the exception of creative director Don Draper) are not included and they grumble about it—a phenomenon my colleague Leigh Buchanan surveyed in this column. Adding insult to injury, the copywriters are asked to work all weekend on a pitch for the rum company Bacardi.

Among the management lessons that made their way into the teleplay this week:

1. Nobody actually enjoys forced work socializing. Even as the creative staff sulks back at the office in midtown, the lucky few invited to the club are a tense and nervous lot. Betty and Don can't conceal the fact that they would rather be somewhere else, even though they feel perfectly comfortable at Roger's table. Pete and his wife Trudy do a nice job of blending into the WASP-y habitat (though perhaps they are a little too comfortable), but Pete's efforts to butter up Don and Roger are mostly fruitless, and he is dejected. Harry, meanwhile, is paralyzed by the fear that he will somehow embarrass himself; his wife Jennifer is more confident if not especially socially adroit.

Point being, people are not really having fun.

Of course, that may not have been Roger's objective in the first place. But bosses would do well to remember this little tip: inviting members of your management team to a party all but ensures that it will be a really terrible party.

2. If you slight a worker, he will inevitably act out. Rebuffed by Roger, copywriters Peggy, Smitty, and Paul halfheartedly attempt to work on the Bacardi campaign. As morning turns to afternoon, creative block becomes procrastination, which becomes screwing around. Egged on by Smitty, Paul calls Miles, a college singing buddy who is now a pot dealer, and they all smoke up in the office to the dismay of Peggy's new secretary Olive.

3. Collaboration is great, but one worker alone in her office can often be more productive than three in a conference room. The Bacardi project is a mess and the more the group talks it over, the further they seem to get from coming up with a usable idea. Similarly, when a chunk of the staff gathers to cast a woman to appear in a commercial for Patio, a new diet cola, the meeting becomes chaotic.
The only real progress on the Bacardi deadline is made at the very end of the episode when a starry-eyed Peggy dismisses the guys and heads into her office with a Dicta Phone and a germ of an idea.

4. If you're the boss, take note: Everyone is watching you. When Don and Betty arrive at Roger's party, it becomes clear that all of the middle managers and their wives are eager to curry favor. It also becomes clear that Pete and Trudy and Ken and Harry and Jennifer know and think a lot more about Betty than she thinks about them. They're up on her pregnancy and what she and Don do in their spare time.

Similarly, Olive seems to be very watchful over her new boss, Peggy. (Peggy soon realizes that this is because the older woman wants her to succeed, and worries she's putting her advancement at risk.)

This theme of staff scrutiny reminded me of a story that Eric Kriss, a cofounder of Bain Capital, once told me. He was running a company and, at the time, he drove an old, beat-up car. One day, he came to work, and a top programmer pulled him aside.

Just how badly were the company's finances? the programmer asked.

Kriss was surprised by the question—the company was doing fine, he said.

Nobody would drive that car unless their company was on the verge of failure, the programmer replied.

The lesson? Even when you don't think you're sending any signals, your employees are looking for clues that reveal your mood and, by extension, the health of the company and, by extension, how secure their jobs are. Whether you like it or not, performance is part of any leader's job description.

The second episode of Mad Men (Season 3) focused primarily on the private lives of some of the main characters. Betty's dad is not well, leading to tension between her and her brother; Peggy struggles to reconcile her ambition and her feminine identity; and Don juggles domestic responsibility with his earthier (make that grassier?) impulses.

Then there's a storyline about a controversial new client for the agency: the developers who want to demolish the old Penn Station in New York, and replace it with Madison Square Garden. In Mad Men's parallel universe, Sterling Cooper is in the running to be retained by the developers of the Garden to quell public criticism of the project. Viewers, of course, know the outcome. The terminal was indeed razed in 1963 and it is sorely missed.

The initial client meeting doesn't go so well. The liberal copywriter Paul Kinsey gets worked up about the evils of unchecked development, prompting the MSG team to walk out before Pete Campbell can restore order. When Pete threatens to report the incident to his boss, Paul weakly suggests that it was all an act to demonstrate independence so that the client will "trust" him more when he works on the account.

Later, at a make-amends lunch with Don and Roger Sterling, the arena developer is won over by Don's clever pitch (inspired by his Palm Springs sojourn from last season, no less.) But the client makes it clear he doesn't want Paul Kinsey working on the account. "I'll handle your account personally," Don promises. In a meeting back at Sterling Cooper, however, it's clear that Paul is very much going to be working on the account, though Don notes that he'll have to keep a low profile.

All of this got me thinking about clients, and the lies people tell them, and whether they should have any say over who works on their account.

On the one hand, MSG is paying for an outcome--good advertising--as much as anything. The developer may know that Paul Kinsey is a jerk, but he doesn't know whether or not he's the best copywriter available to work on the account. Don presumably does know his staffer's strengths and weaknesses and assigns him to this particular campaign because he's confident Paul will suspend his sense of moral outrage long enough to write some snappy copy.

On the other hand, Sterling Cooper's clients, MSG included, presumably hold out hope for more than snappy copy. It's not too much to expect that your agency understands your objectives, looks out for your interests and, yes, shares your values. In theory, a copywriter who doesn't care for a particular client can still ably serve the account. But in practice, it's hard to imagine that Paul will do his most inspired work for MSG.

Any sensible person understands that, for all the talk of partnerships and relationship management, the doctrine of caveat emptor is as true for business services as it is for used cars or condo timeshares. The work you get rarely lives up to the original sales pitch. But when it comes to establishing a business relationship with another firm, I have to think that concealing disdain for a client is actually more perfidious than being the client with the mercenary business objectives.

Mad Men's Garden developers know what kind of business they want to build, and they don't mince words. For the team at Sterling Cooper, the same cannot be said.

The third season of Mad Men, the critically-acclaimed television series set during the golden age of advertising in the 1960s, debuted on Sunday night. I'm a big fan of the show for a number of reasons, not the least of which is that the show's writers scatter interesting observations about business and corporate culture among the stubbed-out cigarettes and empty bottles of scotch. Here are a few takeaways from the premiere episode:

1. Most acquisitions don't pan out as planned. From the start, this season's action seems to revolve around the consequences of the decision of partners Roger Sterling, Bertram Cooper, and Don Draper to sell their agency, Sterling Cooper, to a larger British firm, Putnam, Powell and Lowe. The agency's new chief financial officer, Lane Pryce*, has spent the show's hiatus laying off staff, and morale is low. New staffers from London are butting heads with their New York counterparts, including Joan Holloway, the agency's office manager, who is as perspicacious and mischievous as she is curvaceous. Elsewhere, the head of accounts, a firm veteran, is let go. He takes the news poorly. In a nice touch, the writers have an ebullient Roger stumble in on the termination meeting. While the cashed-out entrepreneur is buying antiques and traveling, some of the key employees who helped him build the agency are getting shown the door. It's clear he doesn't feel particularly badly about his good fortune, or his employee's loss of work. In his mind, why should he? It's not enlightened management, but it's an honest portrayal of something that all entrepreneurs who intend to sell their business some day have to reckon with. When you sell out, employees will have to live with the consequences of that decision, and it isn't always or even often pretty. Don't kid yourself that it will be any other way.

2. Everyone responds differently to the co-management model. After the head of accounts storms out, Pete Campbell and Ken Cosgrove are promoted to replace him, with each being awarded responsibility for half of the agency's accounts. For a day, Pryce lets each man think that the job is his and his alone; once he has disabused them of that notion, the CFO darkly observes that the arrangement could be changed if "one man distinguishes himself." Splitting a team between two managers and encouraging competition between them is a time-honored management gimmick embraced by many investment banks and other dog-eat-dog workplaces. The model has some strengths: It creates ethical and financial checks and balances. If one manager leaves, there is no gap in continuity. And co-managers can bring different skills to a team. On Mad Men, Ken Cosgrove seems to be satisfied with the arrangement, and suggests that he and Pete Campbell avoid one-upping each other. But a sulky Campbell feels that he deserves the top job all on his own. I'm of two minds about this. On the one hand, two heads are generally better than one, and an employee who doesn't have a peer to push--and to be pushed by--tends to be less motivated than one who does. On the other hand, an agency with a culture of trench warfare tends not to be commercially successful. What do you think? Is the co-management model effective, even in a situation where it's clear that internecine conflict will ensue?

3. Building a brand: To focus or not to focus? That is the question. Creative Director Draper and Art Director Salvatore Romano travel to Baltimore to visit a key client, London Fog, the raincoat company. The business is going through a generational transition, as an aging president hands over the reins to his younger son. The family-run company dominates its niche, but is now contemplating adding new product lines such as hats and umbrellas. Draper counsels caution ("You stand for one thing"), but the London Fog folks worry that they need to expand or else they'll be overtaken by competitors. "Everyone who is going to buy a raincoat from us already has," the owner frets. My vote: Add new products.

4. A capable junior employee may struggle when promoted to a higher level. Poor Peggy! She was a rock star assistant who was able to make unexpected creative contributions and guard Don's schedule with zeal. Now she's been promoted to copywriter, and she has to manage her own assistant, who would rather flirt than help her boss place a phone call. Peggy is learning the hard way that not everyone is as dedicated as she is. Will she allow the secretary to disobey her, or will she whip her into shape?

5. You learn more about what makes your staff tick on the road than you ever could in the office. Poor Sal! He was inadvertently outed in Baltimore when the hotel's fire alarm went off and Draper discovered Sal canoodling with a frisky bellhop. Today, of course, (a.) Sal would be flaming; (b.) he would not be invited on a client visit, in any case; and (c.) nobody would budge from their room when the hotel's fire alarm went off in the middle of the night.

What other themes from this week's episode struck you as relevant to today's entrepreneurs?

* In my original post, I incorrectly referred to the character Lane Pryce as Saint John Powell; Powell is Pryce's boss back in London.

Today is a big day at Inc.com, as we unveil the next phase of a site-wide redesign that began in December. Our regular visitors will notice that the template for articles pages has been spruced up. We've selected new fonts and bumped up the point size to make pages easier to read. We've adopted a new commenting interface developed by Disqus, a Y Combinator company, which will make it easier for you to weigh in on articles you've just read. We've created new places on each page to show off our original photography--and please be sure to click on the photos themselves to get the full effect.

While Inc.com's design director Haewon Kye was busy overseeing these changes to the site's aesthetics, senior developer Jason Tagg was hard at work creating a new PHP-based content management system for Inc.com. In the weeks to come, we'll roll out new navigational elements based on his work, which will make the site easier to browse. I'd also like to thank Inc.com's publisher, Whelan Mahoney; chief technology officer, Paul Maiorana; vice president of operations, Nicole Lind; director of business development, David Grossman; design coordinator, Erika Schneider; and developer, Rob Loach; for their significant contributions to the redesign--as well as Inc. magazine's creative director, Blake Taylor.

Our objective, each day and overall, is to present a site that is interesting, informative, clean, well-organized, and easy to navigate. Please let me know what you think of our progress so far, by e-mailing me at mhofman [at] inc.com, or by posting a note below.

In a letter to employees, Zappos CEO Tony Hsieh announced today that his board of directors had agreed to sell the online shoe retailer to Amazon.com. Sort of. In his note, Hsieh stressed that Zappos would continue to be run autonomously, and that referring to the transaction as an acquisition would be only "technically correct." If the deal goes through, Zappos shareholders will exchange their equity in the private company for shares of Amazon stock.

"We plan to continue to run Zappos the way we have always run Zappos -- continuing to do what we believe is best for our brand, our culture, and our business," Hsieh writes in his letter. "From a practical point of view, it will be as if we are switching out our current shareholders and board of directors for a new one, even though the technical legal structure may be different."

This is the second high-profile sale for the founder. In 1998, Hsieh sold his first business, LinkExchange, to Microsoft for $265 million. At the time, he was just 24 years old.

For more on Zappos, read Inc.'s May cover story.

Here at Inc.com, we're constantly using the tools at our disposal--including web analytics, interactions with readers via social media, and private conversations with smart CEOs--to gain a better sense of who our typical reader is, and how we can better serve him or her. To supplement these efforts, our advertising team has put together a brief online survey. If you have a few minutes today, I'd appreciate it if you filled out this survey. Here's the link. It's short, I promise.

Survey or no survey, we're always open to feedback, so please feel free to post a comment below with your idea for how we can make Inc.com more useful and a better read.

Thanks.

How much information is too much on the Web? What kind of information sharing is smart? And what is unprofessional? A month ago, I sat on a panel at Inc.'s Grow Your Company conference in Orlando, along with T3 founder Gay Gaddis, who puts together digital-marketing campaigns for large companies, and Dr. Christos Cotsakos, founder of Pennington Ventures and the former CEO of E-Trade. Both Cotsakos and Gaddis agreed that business owners should encourage their employees to go online and interact, on behalf of the overall enterprise, with colleagues, partners, and even customers. But Gaddis also offered a cautionary tale. Not long ago, Gaddis told the audience, one of her employees came to her and said, "I've been friended on Facebook by one of our clients. What should I do?"

Continue reading "What's Professional When It Comes to Social Media?"

"Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 6.1 percent in the first quarter of 2009," according to a press release from the Bureau of
Economic Analysis. A 6.3 percent drop was recorded in the final quarter of 2008.

"It was the third straight quarter of declines and capped the worst six months of economic activity since the late 1950’s," the New York Times reports.

http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm

Gather a bunch of smart small business owners in a hotel ballroom and you are bound to emerge with a list of clever management ideas to try back at your office. And so it was at Inc.’s 2009 Growing Your Company Conference (affectionately referred to as GrowCo in these parts), held in Orlando, Florida, on March 18, 19, and 20. Among the best practices I learned:

• Hiring advice, Part 1. Fred Kessler of Sales Partnerships Inc. in Westminster, Colorado, has a rigorous screening process for new hires and prefers headhunting rather than screening resumes that come in unsolicited. Still, Kessler encourages his staff to follow-up with every applicant, and here’s why: he likes to see whom his applicants will list as references. Then, Sales Partnerships goes after those people. The idea is that the average job seeker may or may not be good, but the people they choose to provide as a reference are very likely to be articulate, dependable, and knowledgeable. In effect, job seekers themselves become pre-screeners for headhunting targets.

• Hiring advice, Part 2. Apple’s Steve Jobs actually looks for job candidates who have strong drawing skills. So says Tom Wujec, a speaker and author who argues that the ability to express information and ideas through sketches and doodles is fundamental to the process of innovation.

• Hiring advice, Part 3. Lots of bosses give small presents to retiring employees. Jack Mitchell gives small presents—flowers, a nice note—to people he has just hired, no matter how junior they are. Mitchell, the CEO of a retail company that owns three stores including the flagship Mitchell’s of Westport, Connecticut, says that the loyalty you engender when you warmly welcome a new employee into your company is well worth the nominal expense.

• Sign every check that goes out the door. Jack Mitchell also recommended this practice, as a way for an entrepreneur to keep in close contact with overhead costs and discretionary spending. (Mitchell’s homespun wisdom led one attendee to exclaim, “Some people believe in God. I believe in Jack Mitchell!”)

• How to fire workers. Terminating an employee is an aspect of being the boss that most entrepreneurs struggle with. Jeff Davis of Legal Art Works in Jacksonville, Florida, has come up with a mental trick to help him through the act of firing a worker. He pictures his kids. Davis figures that the stress he incurs in managing a poor-performing worker has to have a deleterious effect on his health and, over time, the stress level would shorten his lifespan. Since he wants to live as long as possible to spend as much time with his kids as possible, Davis believes that firing a worker who causes him stress is actually a gift he’s giving his kids. “I've shared that bit of advice with other CEOs that I know and they have come back to me saying that it really helped them reduce a ton of anxiety over making a decision,” Davis said. ”It prevented them from stretching it out over more time and causing more of their hair to turn grey.”

• Why now is a great time to kill products or services. Doug Tatum, the founder of Tatum CFO Partners in Atlanta says that now is the perfect time to look around your business and identify a few low-margin activities—products, value-added services, etc.—to discontinue. Customers understand that businesses are streamlining operations in an effort to shore up their balance sheets, so they will be more understanding of changes. And if you can switch them to some sort of lower-cost offering, they may even be grateful that you are changing the terms of your deal with them. Meanwhile, you can use this time to make strategic choices with less pushback from your customers than you might otherwise experience.

• Check your bank’s CAMELS rating. Every bank is judged on 6 factors (capital adequacy, asset quality, management, earnings, liquidity, and sensitivity to market risk) and assigned a rating of 1 through 5, with 1 being a strong rating and 5 suggesting weakness. Jack Stack of SRC Holding Co. suggested that entrepreneurs find out their bank’s CAMELS rating and only look to work with banks that have a 1 or 2 rating. The top banks, in his experience, tend to give their customers the fairest terms.

• The hidden value of social media. As more companies dabble with marketing on sites such as Facebook, MySpace, and Twitter, the question arises: Is this useful activity or a waste of time? Dr. Christos Cotsakos, the former chairman of E*Trade and the founder of Pennington Ventures, believes it’s essential—and actually has a hidden productivity-boosting component. He argues that employees don’t work 100 percent of the time they are in the office to begin with. But once they become addicted to social media, they will often check websites during their off-hours to see how online projects are progressing. Cotsakos said that, by tapping into what he calls an employee’s “discretionary productivity,” a company can get more bang for its marketing buck.

• Abide by the 48-hour rule. As GrowCo emcee Norm Brodsky put it, once you hear a good idea, you have to make a change within your company within 48 hours… otherwise, the idea is likely to fall through the cracks. The clock is officially ticking.