You are currently browsing the yearly archive for 2008.
Tim Costello, Chairman & Chief Executive, Builder Homesite Inc. talks about Servant Leadership as a model for sustainable business growth. He will continue to expand on this theory in future posts.
Having spent over 25 years in a broad range of industries, I have heard the term partnership used in many bilateral business discussions. It is usually presented in an effort to mitigate a company’s fear that the proposed relationship is asymmetrical. While the idea of partnership sounds appealing, it seldom manifests into the mutually beneficial and equally balanced relationship it implies. The problem stems from the fundamental motivation of both parties. As independent companies, driven to maximize their own shareholder’s value and as individuals, motivated to maximize their personal income, the concept of true partnership is handicapped from the outset of the relationship. The incentive structure for both companies and individuals drives them to attempt to gain advantage in partnership, forgoing the potential long term benefits of a true partnership. Think how different negotiations would go if all revenues were to be pooled and shared equally as well as all compensation. This may sound more like a merger than a partnership, but isn’t the intent of a partnership to align two companies completely while keeping them separate entities? Without such alignment the relationship will really be one of negotiation for advantage with the desired appearance of equality.
So, is the fundamental concept of business partnerships flawed? Is the idea that two organizations can exist to form a truly symbiotic relationship where both parties achieve more together than apart merely conceptual? Is it impossible for two companies to really align their interests and act so selflessly? I don’t think so. The problem is not a lack of potential benefit, or structural options. The problem seems to revolve around how we measure success, who we believe we serve and the definition of the system in which we operate. Unfortunately, these are pretty big issues and decades of management training has ingrained a certain uniform set of rules into the consciousness of the world’s industrial leadership. Compounding the situation is the fact that capital markets do not seem to effectively value long term relationships, strategy or the effectiveness and efficiency of the entire value stream.
To remedy this situation, we must engage in systems thinking and adopt the management philosophy of servant leadership. By exploring our role in the value stream through this lens we open ourselves up to a completely new paradigm of how we measure success, how we treat our customers and how economic rents are distributed throughout the value stream. The most important question has always been…..Who is your customer?
Monica Woo, Executive Vice President, Ecommerce & Chief Marketing Officer, Nutrisystem spoke to us on what leaders should be doing today:
All business leaders are navigating through turbulent economic times, not only in their local markets, but also, on a geo-political basis. I don’t profess to have all the right answers, but would like to share some pragmatic tips that have worked.
1) Don’t Play The Blame Game
It is very easy to blame the economic downturn as the sole reason for disappointing business performance, but neglect to assess weak links in the business’s value chain, and continuously optimize the drivers of sales and profit.
Now more than ever, business leaders need to rigorously assess the fundamental drivers of sales and profit growth, and continuously optimize those drivers.
2) Steer With A Steady Hand
During traumatic times, it is tempting to over-react and hastily make sweeping changes in strategies or organization structure, without the benefit of analyses or testing. The goals and strategies designed for survival and prosperity in the long-term continue to be important. One may need to reprioritize the initiatives required to achieve a goal, or implement a strategy with less time and money, but one should not over-react and abandon a sound strategic course. Pendulum swings not only cause confusion, but also, undermine the rank and file’s confidence in their leader.
3) Stabilize the Here and Now, while Investing for the Recovery
Leaders must invest in high-return longer-term strategies, such as product or service innovations that require long lead time, in order to prepare for future economic upturn. We need to be able to conduct a moving train, while simultaneously building a new station and train track.
4) Necessity Is the Mother of Invention
I would like to share a story as child growing up in Hong Kong. One day, I bought a frozen pizza from a posh Western-style supermarket. Mind you, I did not know what a pizza was, or how to cook a pizza. When my mother and I read the instructions that the pizza must be baked in an oven, we faced “a moment of truth”. As a low-income Chinese family, we did not have an oven! So, what did my mother do? She proceeded to stir fry our pizza in a wok! My first pizza -stir fried—was, by far, the most delicious pizza!
I told this story because necessity is the mother of invention, and invention is a critical currency in a recessionary economy. We need to challenge our team to leverage existing manufacturing asset, distribution capabilities, or media properties, to create incremental profit streams or solve business problems, without additional CAPEX or Operating Expenses.
5) Pursue Coalition to Deliver More With Less
I am a big believer in partnerships and strategic alliances in good times, and even more so, in tough times. Pursue marketing, sales, or innovation partnership with third-party brands to accelerate expansion into new geographies, new customer segments, or new channels, without the significant investments needed to create new businesses from the grounds out. Furthermore, join forces with non-competitive brands in “bartering” assets (e.g., “pay” for display ads on a partner’s site with incorporation of the partner in one’s TV ads), or secure better media rates by consolidating buying between two partner brands.
6) Communicate and Celebrate
During challenging economic times, leaders must frequently communicate up, down and across the organization, from weekly updates of performance, to progress on key business initiatives.
Also, we must make every effort to celebrate successes, whether small (e.g., leads have expanded by 10%) or big (e.g., launch of a redesigned website). Communication and celebration are especially important to the Millennials – those born between 1980 and 2000, and are inspired by inclusive communication, collective goal achievement and positive attitude. Communication and celebrations cost almost nothing, but can generate substantial return.
As readers of this blog know, postings on this site are usually by CEOs & leaders of corporations around the world. Today is an exception. The book, “There’s No Elevator To the Top“, published by Portfolio/Penguin, hits bookstores & online stores today. As part of the national launch, we are posting a podcast interview with the author of the book, Umesh Ramakrishnan. We will return to our regular leadership posts next week.
To listen to the podcast, please click on this:
Dave Wangler, the CEO of TMW Systems shares his thoughts:
Most successful software companies rely upon a constant flow of new customers who are willing to dedicate their time and treasure towards achieving business improvement through the application of their technology. Finding customers to grow a business in normal times is challenging enough, managing in financial times like these where every headline drives a new level of volatility may require a different type of thinking.
Here are 3 things to think about – (1) Getting through the here and now, (2) Getting through the downturn, (3) Being prepared for the recovery.
Let’s start with the here and now. Whether you are an established player with margins that are the envy of the industry or a venture backed start-up striving to make it to cash flow positive, you need to begin by challenging every assumption about your current health. Start with your receivables – if you haven’t been trending your performance in this area, it’s time to start. Finding out that you’re in for a surprise when your average aging exceeds 90 days, is about 45 days too late. Cash and available credit line – treat every dollar like it’s your own and resist the tendency to draw down on your line of credit.
Sales pipeline and forecast – if your path to the corner office went through the sales ranks you may want to enlist the help of some of your management team to help you scrub the forecast challenging deals you normally would take for granted. After all, it’s not just software CEOs reading the Wall Street Journal, you have to assume that executives in every single prospect account are seeing the same economic news that you are and are battening down the hatches. The old simplistic sales management questions of “Why will they buy it?”, “Why will the buy it now?”, and “Why will they buy it from us?” will help you screen out deals that in normal times would be pulled in by your ace closer, particularly if you add one new one – “How can they buy it now?”.
Getting through the downturn starts with building a realistic top line plan. Unlike past downturns, conventional wisdom may not apply in terms of the depth or duration of this event, so you may find yourself adjusting the plan as you go forward. With a realistic top line plan constructed, you need to create a profitability target and set a plan to manage to it. Setting the target to be greater than or equal to your current performance might be difficult, but it will provide you with a measure of safety that you may come to recognize was the single decision that allowed you to survive. Managing to this profitability level will mean different things for different businesses but expense control should trump everything else. This doesn’t mean that customers should take a back seat – on the contrary providing sufficient value to your customers so that they maintain their level of investment with you is key. What it does mean is reviewing everything including your sacred cows e.g. marketing spend, partner programs, your third off shore development experiment, or perhaps that new international bet you thought might provide shelter from the bad “domestic” environment. It also means making some very difficult decisions about how to manage your largest single expense – the team you’ve worked so hard to build. There are certainly no easy answers and no single model, but the calculus of the CEO in crisis needs to be both broad and deep – the introductory course won’t cut it. In the event you chose to do a restructuring be sure to consider what the organization will look like after an action. A former colleague of mine once inherited a development team consisting of 10 directors, 8 of whom couldn’t code and one programmer. Choose wisely.
Being prepared for the recovery. Make no mistake, being a winner in the recovery will require more than just survival, although survival is a fairly obvious pre-requisite. For most management teams this will be a time where you will be much more “hands-on”. More hands-on with customers, more hands-on with your products and even more hands-on with those creaky systems you’ve put off updating. The key here is that if you planned to manage your profitability correctly you’ll have created a pool of investment dollars that you can “add back” into the business.
So rather than shipping your 40′ x 60′ booth that makes its own weather to the three big trade shows, which by the way will only be attended by vendors doing the resume swap two-step, consider sending a coupe of executives to network and invest the money in developers to push your product down its roadmap.
In conclusion here’s a quote from my old flight instructor – “All that runway behind us isn’t doing you much good, chop the power and get this thing on the ground, now!” In other words, take an objective view of the situation and act quickly to preserve your dry powder – those lights at the end of the runway are sitting atop a concrete barrier.
Jim Donald, one of the country’s leading experts on the Retail Sector, and a leader who has successfully led various world renowned retail companies has this to say about navigating through this tough economy:
The easy answer would be to go to There’s No Elevator To The Top and read pages 185-190..this is a perfect time for “my seven steps”…
However, in the same vein, I will summarize what the 7 steps can do.
We are in a very traumatic and turbulent time right now…much like a company is in when a new Chief Executive Officer is put in charge. So, why not take a page from the handbook of a new CEO who is taking over a company that is obviously in trouble. Let me explain.
Every CEO, on his/her first day, has a 100 day plan. This was done (at least in my case) to achieve the following objectives:
• To see as much of your company as you can
• Create a sense of urgency around the current set of opportunities or in this case the environment, and
• Be as visible to as many people as you can, communicating to all you can, the state of the company, your objectives, etc…
Never, in my history of retailing, have I seen the need to “act like you are brand new”. You have to dust off your 100 day plan, and communicate on a daily basis about what it is going to take to get through these tough times. After you complete your 100 day plan, you might have to do it again.
You can also read my speeches on these relevant topics at Leading Authorities. Two specific speeches, I believe are relevant to this economy
- Sailing Into The Wind and
- Leading from the Front Line
Michael Izza, the CEO of The Chartered Institute of Accountants in England and Wales (ICAEW), spoke with Martin Noakes on leadership in the context of the credit crunch who asked him the following questions:
Michael, the ICAEW’s mantra is “inspiring confidence in business” so I know you will have some interesting views on the subject.
Will the CEO’s job change after the dust has settled?
Michael: The first thing to say is that the crisis is not fixed just because Governments around the world have stepped in. When the dust does settle the long-term impact of the current economic situation will be wide reaching and long lasting.
In particular I think CEOs across the financial services sector will need to rethink their attitude towards risk as something that needs to be gripped strategically rather than just managed as part of the governance process. A major concern for me is that the bail out, necessary though is has been, sends a message to the market that certain Institutions are just too big and interdependent to be allowed to fail. What CEO under these conditions would not take a risk knowing that the tax payer will ultimately bail them out?
Ethics
I think we are going to see a tectonic shift in the way an organization is viewed by its stakeholders. Trust has been damaged and the popular media are baying for blood. The CEO of tomorrow will need to infuse a culture of absolute probity and deep rooted accountability. In my mind a stronger link will need to be fostered between executive remuneration and long-term shareholder return. New metrics such as ‘externalities’ will also become standard (e.g. the effect on the environment, CSR and extended stakeholder confidence – do my customers and suppliers really want to keep doing business with me?)
Confidence
It sounds obvious but when I talk to Government ministers, policy makers as well as wider market participants there are real concerns about leadership and the ability of the CEO to communicate and inspire. For sure, there is going to be a regulatory response to the crisis but building trust, especially across international boarders is going to be just as important as working within new governance frameworks. Leadership will be tested in the current climate in far more exacting ways than when the market is booming – this period will show us just who the great leaders really are (and they probably won’t be the obvious ones).
Fundamentals
Leadership is also about not being swayed in choppier waters. Let’s not forget the things that were important just a few days and weeks ago. Global warming, clean tech, as well as how best to remain competitive and be true to our vision and corporate goals. These issues are still as important and need our constant attention as part of the long term ‘survive and prosper’ strategy. This is certainly a defining moment however and some of the fundamental principles of running big business may be challenged. Take the system of ‘fair value’ for a business or an asset for example. Could this be replaced with a ‘management judgment’ philosophy? Perhaps so, provided that there is confidence in the personal ethics and integrity of the CEO – we should not forget the lessons of Enron
Good leaders will always be available to industry and commerce – its just that the game is changing!
As we continue to speak to executives from all industries about how one should lead during these troubled times, Cory Eaves shared his views with Marc Gasperino. Here’s what he had to say:
As Chief Technology Officer, what impact does this have on Misys? How should we respond in the short-term and long term? My view is that Misys needs to:
1. Focus on customers. In these times of crisis, it’s easy to get caught up in the internal challenges of meeting budgets, reorganizing teams, and analyzing markets. It is exactly the wrong place to focus. Instead, focus on helping customers respond to their quickly changing priorities. As our customers merge, acquire, or restructure, they need our systems, our expertise, and our world-wide network of partners even more. They need us to be responsive, flexible, and understanding. It may be hard to think beyond the crisis at hand today, but when things stabilize again, customers will remember the companies that helped them through it.
2. Reprioritize. As markets change quickly, we need to reprioritize and implement quickly. We have set up focused, short-term teams to look at our product roadmaps over the six to twelve months to bring forward the specific features and projects our customers need. For example, providing improved risk analysis and management products have suddenly become much more important than some of the architectural changes we were developing. Being agile and bringing these specific products to market will have a real impact helping our customers through this difficult time.
3. Think long-term. While it may sound a bit at odds with my prior point, I think it is also important to not lose sight of the long term. Even as we reprioritize, and possibly delay some long-term investments we are making in our products, we should not forget that this will eventually pass. When it does, the global trends driving technology, such as open source, software as a service, and service-oriented architectures, will still be the same macro trends driving innovation in the software industry. Customers will expect progress on all these fronts, so investment in these areas is still important, even through these difficult times.
These are uncertain times in the both the healthcare and financial markets we serve. I believe these ideas will help us grow our business, stay close to customers, and retain our key employees as we weather the storm.
As the financial markets collapsed, TD Ameritrade’s Chris Armstrong spoke to Robert Voth about How to lead during a meltdown. Here is what he had to say:
It was a tumultuous week for the financial markets ; the impact of the mortgage meltdown snowballed; giant names folded or were merged away; money market funds “broke the buck”; regulators changed the rules overnight; and markets reacted violently-up and down. The “independent spirits” – clients that own TD AMERITRADE’s (TD AMERITRADE, Inc. is a member of FINRA and SIPC) seven million accounts – wanted information and the ability to trade on that information, either to protect their portfolios or to take advantage of opportunities to make money. Calls to our client contact people and the transactions we processed were at near record levels. Our people and our systems were stretched beyond anything we had seen. In any financial services business model the most important element is our clients’ trust. So, how do you lead in a crisis like this to protect that trust?
It is important to point out that real leadership doesn’t start at the time of crisis. Real leaders spend lots of time and energy making sure that folks from top to bottom and side to side know the values and principles by which the organization is run. And leaders make sure everyone knows how “playing their position” is vital to the mission and the accomplishment of our objectives.
All of that said, there are three things that I believe are essential in time of crisis:
- 1. Maintain constant flow of information and context.
People want all of the information they can get at times like these. Clients want it and the folks that serve them want it. But information without context is meaningless. Be careful that everything you communicate comes with the “why”. Is it important for clients? Is it important for the mission? If you don’t add context to the information flow your folks will try to create their own and that can lead to chaos.
- 2. Be empathetic but stay on mission.
Your people will be tired. Your clients will be frightened and angry. Emotions will run high and tempers will fray. Leaders learn how to recognize it and honor it but not let it detract from the mission. And staying on mission means reviewing each option to “do something”. There is always a rush to “do something…anything”. Most times, that’s a mistake. If you cannot tie it back to your fundamental mission—don’t do it.
- 3. Be constantly present and visible to drive the troops.
This is the time that your presence is most needed. Staying locked away in the war room or in negotiations doesn’t help your folks nearly as much as your active involvement in the crush of activity. Conference calls; video conferences; blast emails and voice mails; do whatever it takes toshow the troops that you are there and part of the “action”. This presence and these opportunities to keep the organization “on mission” will help get you through to the other side.
John Miclot is currently the President and CEO of Respironics, Inc. He also sits on their Board of Directors. Two years into his role as CEO, John was prompted by his Board to seek an external Board seat. John joined Wright Medical’s Board. “I think as I actually became a member of another Board it clearly enhanced not only how I was viewed by Board but also how I interacted and worked with them”.
In choosing to join Wright’s Board John weighed his talents and skills against those of the other Board members. What could he bring that would be a key differentiator? Did his attributes bring some diversity to the Board? John believed he could make a difference with his experience in strategy marketing and a desire to expand into international growth.
John also talked to Buster Houchins about when one should leave a board. How do you know when it’s time to move on? As a CEO John understands that succession planning is critical and this planning also applies to a Board. The need for vital, refreshing, thought leaders on a Board is important and he has evaluated his own Board member’s contributions and indeed, his own. “I think that is true of almost any job that you do at some point you become an individual that has been in the organization or on the Board for a period of time where suddenly the value you bring isn’t that fresh and isn’t that new and I can tell you that when I came to refresh my own Board many of the things individuals would say had become predictable. You know I use time as a basis. I think anytime that you’ve done anything you know for six or seven years it’s probably time to examine those things and ask people to honest and upfront…”. So, if you have been a board member for more than seven years, you should be asking yourself this question, “am I still a contributor to the growth and vitality of this company?’. If you are not, its time to move on. Many other boards can do with your expertise. Your contribution will be fresh and needed.
Charles J. Robel currently serves as the Chairman of the Board of Directors of McAfee, director and Chairman of the Audit Committee of Autodesk, director and member of the Audit Committee of Informatica Corporation, and a director and Chairman of the Audit Committee of DemandTec, Inc. He spoke to Jamie Carter about how a first time member can quickly integrate themselves with the rest of the board.
Based upon your relevant domain experience, you have just been nominated to your first board of director’s position. So how do you effectively transfer that experience and immediately start adding value? Chuck states that the first item a new board member should concentrate establishing is trust. Whether the issues are strategic or the typical ‘block and tackling’ filings, creating an environment of trust inside the board room is critical to launching balanced and transparent discussions.
Before the first board meeting, find a simple way to informally meet with fellow members. Ask them for their perspectives and knowledge of the company (i.e. what is working well, what is not working well, what does the company need in the next 2-3 years?) Meet with the CEO and simply ask what would help him or her.
Some of the best boards will already have a good “new member overview” of the company prepared for you which includes much better internal information than can be gleaned from the 10K and 10Q. If this is not available, ask for as much information as possible and be sure to do your homework. And of course, read all the available material before the meeting.
Once in the meeting, Chuck has observed that management presentations tend to be optimized by simply starting with, “rather than take me through the slides, assume I have read and understand all of the materials and now just walk me through the three important topics….” Given the limited amount of time provided for each meeting, Chuck has seen this quickly surface the issues that matter.
One mistake Chuck has seen in first time board members is their desire to be too tactical and forgetting to let go of the steering wheel. Although your intent is only to help, you were elected to the board to add strategic help and bring specific knowledge to an area the board was lacking. You were not nominated to run the company!
Communication in-between formal committee or board meetings is crucial. If you are not spending time talking between meetings on at least a monthly basis, you probably aren’t able to provide the value you were nominated for. Most boards in today’s dynamic operating environment encourage it’s directors to meet directly with management. So take advantage of the open door policy and meet with functional management. Not only will you be able to gain additional color and candid perspectives on important topics, but you will also be able to assess the company’s bench strength.
Lastly, don’t make the board meeting about yourself. This may sound obvious, but nothing can be more irritating inside the board room (well, perhaps other than listening to a Blackberry chiming) than listening to a 10 minute speech about how you climbed Mt. Everest with your entire management team on your back. Although you may still be recovering from setting the world record, the board may be less than impressed.
