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As 2009 comes to a close, Bud Baker, the former Chairman of Wachovia speaks about how CEOs should prepare for succession….
Imagine, if you can, a corporate chief who takes the top four company managers and invites them to do each others jobs. Is the risk of this too breathtaking? Is the payoff meaningful? Would any Board question the chief’s sanity?
It is difficult to think of a major corporation today lacking a strong Governance Committee and management succession plan. Less sure is that Chief Executives themselves take seriously the opportunity to influence and lead the succession process. At the heart of the matter, is the constant need for an unvarnished assessment of available talent and timely exposure of leadership candidates to critical experience.
In truth, brave CEO’s must offer the best candidates to the Board and give aspirant’s fresh leadership experience. This may be inconvenient. It may mean taking a time-tested technology chief and putting him or her into sales. It could mean redefining jobs to make them more relevant in a radically changing world. In this turbulent world, we don’t need a marketing officer, we need someone who discerns and interprets customer desires. We don’t need an economist, we need a visionary to evaluate business lines and take the company out of things we shouldn’t be doing. Perhaps we should take our best sales person and send him or her to critical, but often neglected, Shareholder Relations.
Should we move people to allow them to absorb provocative new experiences – even if the timing is inconvenient? Does anyone on our team have a fresh and practical view of strategic thinking? Are we willing to take risk to bolster high performance aspirations?
At the end of the day, it is easy to criticize leaders for failing to recognize the need for change. At the end of the day, too few of us have been brave enough to do so.
The sessions continue to be informative and vibrant. As some of the brightest minds from around the planet ponder the future of India and her role in the new world order, it is impossible not to be impressed by the optimism radiating out from this conference. This is in stark contrast to what I’ve been hearing in the western world for the past eighteen months. Some of the comments I’ve heard either in conversation or from their speeches:
C.K. Prahalad from University of Michigan’s Ross School of Business and ranked by Fortune magazine as one of “the world’s best minds” had this forecast for India in fifteen years – “India will have 500 million skilled workers and become one of the major knowledge bases for the entire world. She will be home to 30% of the Fortune 500 and 10 Nobel prizes will have been awarded to Indians.” Impressive and if proven true, astounding.
Predictably, a lot of conversation has ensued about the aggressive GDP growth projections. Ashok Jha, Chairman of MCX-SX said that disinvestment in the profitable public sector enterprises will help reduce the fiscal deficit substantially from the current 6.8%.
Tejpreet Singh Chopra, CEO of GE, India expressed concern for the 300 million people that are expected to join the workforce over the next few years. The service sector growth has flattened a bit and there is only so many jobs that the agricultural sector can add. Therefore quick investments are required in manufacturing, infrastructure and power to provide meaningful employment to this massive new workforce.
Kapil Sibal, the Union Minister for Human Resource development in India added another perspective. He said, “sixty three percent of those who pass high school go to college in the US. That number is fifty percent in Europe. In India it is an abysmal 12.5%. We have to increase this quickly to sustain the 9% GDP growth we all talk about.”
Raghuram Rajan, Professor of Finance at the University of Chicago’s Graduate school of business had a different kind of prescription. He used the example of the iPod to illustrate it. “The iPod costs around $200. Of this amount, $50 goes to China for manufacturing. The remaining $150 rewards innovation, design, advertising, financing, etc. India should focus on these services that envelope the core cost since the ROI is greater and more sustainable.”
The leaders were not shy about speaking about obstacles. Kamal Nath, the minister of roads & highways said, “We are not only the world’s largest democracy. We are also the rowdiest.” Although the government has a publicly stated goal of laying 20 km of new road per day, he said that they have only achieved 10% of that but the streamlining of processes and the cutting of red tape has significantly increased that pace and he was confident that they will achieve the stated rate by the middle of next year. “I no longer measure my life in hours and minutes. I measure it in kilometers”, he joked.
The 2009 WEF was inaugurated this morning in New Delhi by the Prime Minister of India, Dr. Manmohan Singh. Dr. Singh, the primary architect of the new Indian economy was very upbeat about the prospects of the Indian economy in 2010 and beyond. He felt that India responded to the economic crisis better than most other countries. If there is a normal monsoon next year (the Indian economy has a direct correlation to these seasonal rains), he expects GDP to grow by 7% next year. His medium term objective continues to be 8% to 9% growth per annum. Since the domestic savings rate is an astonishing 35% of GDP, he believes that this is a feasible target. “India looks to the future with confidence and hope. We are better placed than any other time in the recent past to push reform forward. I hope to see India as one of the leading economies of the world”.
In “The India Competitiveness Review 2009″ released especially for the WEF, N Ramesh Rajan and Jairaj Purandare of PWC India report that “Indian CEOs’ optimism extends to the country’s broader economy as well, with nearly two-thirds expecting recovery, defined as stable and steady growth, by the middle of 2010. Indeed, more than one-third of CEOs believe their industry and the country’s economy have already recovered or will have by the end of this year.
“Indian chief executives expect their greatest international competition in global markets during the recovery to come from China (34%) and the EU (15%)…. And the US, headquarters for 140 of the Fortune Global 500, was only named by 6% of Indian CEOs as their greatest international competitor”.
Over the next couple of days I plan to spend my time with these CEOs to ratify these statements.
Ben Verwaayen’s (CEO of Alcatel-Lucent) take on diversity – Umesh Ramakrishnan.
I spent last week in Europe meeting various CEOs on the continent. As always, I found the conversations to be stimulating and thought provoking. One particular meeting sticks out in my mind. I met with Ben in his office in Paris. He was talking about the various ways he was meeting the many challenges of leading a global behemoth like Alcatel-Lucent. One particular topic was diversity. He felt that enough lip service had been paid to this issue. He wanted to have an impact on the leadership of his company. So, he assembled eighteen of his top leaders in a conference room and told them that there were to be no questions or comments in the meeting. He then proceeded to show them eighteen slides. Each slide had a picture of an attendee of this meeting and the number of years they had worked for Alcatel-Lucent. Click, click, click. He went through all eighteen slides and thanked them for attending. Nothing else was said. Later he sent them all a message saying he’d like to meet with each one of them in a couple of months and go through a similar presentation about each one of their direct reports. Just a photograph, name and number of years with the company. Ben believes that he left a lasting impression on his leadership team. He believes that they will take swift action to improve the diversity of their teams. The idea is not just to inject people of different backgrounds into the company but to ensure that they were drawing from the largest pool of available resources world-wide. He said, “Talent has no passport, color or background.” Powerful stuff. Sure left an impact on me. I’d bet it will leave one on the organization too.
Pete Gibson, former Chief Technology Officer of Wyndham Worldwide on how the hospitality industry should view IT as it comes out of the recession.
With the economic downturn, many organizations have focused on efficiency and cost reduction to survive instead of a growth model. The capital for growth and available fiscal resources to undertake new endeavors has not been available since September 2008 and thus CEOs and CFOs with the support of their CIOs have focused on expense reduction to make their numbers. This is especially true in the hospitality industry where occupancy and daily rates have significantly declined thus eliminating growth opportunities. Plans have been pushed out to post recovery or have been scrapped or are just being completed at a slower pace. Organizations are tactically focused on filling available inventory to survive and unfortunately many hotels may not make it through the economic downturn.
While the current economy will force a “shake out” of the hospitality industry and has challenged many operations, post recovery, there will be a much stronger and efficient hospitality industry that will be competing for every reservation. The industry will be poised to return to comfortable operating margins then push for growth. With the improved efficiency some organizations will lag behind in the recovery while others excel. A major factor will be the revenue generating technology solutions and decision support systems.
Over the past two decades computing has significantly contributed to the US GDP yet most business leaders look at technology systems as a “cost of business” instead of a strategic imperative. The fact is early technology adopters and innovators remain competitive longer while less technologically advanced organizations will lag. The early adopters have advanced their thoughts from a “system” to a system of systems (or highly integrated systems) and are now evolving to date centric organizations that can compress decision making from days to hours and improve the quality of the decision.
In the hospitality industry, many leaders focus on the central transactional system. However, the industry leaders look at their technology platform as a distribution system where they can provide room availability and property information to numerous channels from traditional voice and travel agent to Web 2.0 and unstructured group business. The true leaders will focus on improving revenue management and business intelligence systems that can dynamically price each room so the entire property is more profitable instead of focusing on selling to the last room. They will then focus on real time distribution of business information and transactions to the thousands of properties. Thus it is not one piece or a system but the entire data centric distribution and decision-making systems that will improve revenue generation and give a hospitality company a competitive advantage in the post down turn economy.
Compared to other business areas like HR, operations, sales and finance, Information Technology is still relatively young and immature. Most business leaders started using a personal computer the second half of their career. They purchased their first system a little over 15 years ago and now have several computers at home, they have one in the car and they even wear a computer that has more capacity than the first computer they owned. Technology is quickly changing and is poised to dramatically change over the next five years with cloud computing, improved wireless capacity and software as a service. For the leaders in the hotel industry, the future is not about the installed technology which most consider a commodity product but it is about data and services for improved business decisions and customer experiences that will deliver improved revenue in the future.
Arun Chandra, the past CEO of SumTotal Systems speaks about the multi-faceted role of a CEO.
The role of any senior leader, particularly the CEO, is multi-faceted and therefore requires many different attributes to be successful. The environment today requires the CEO to be strong in most if not all aspects. However, the emphasis does vary based on the nature of the opportunities and challenges facing a company. This is not to minimize in any way the importance of having the right team and talent working with the CEO as success is determined by the overall team and not any one individual.
In my most recent role balance, focus and communication became some of the key areas of emphasis while taking the company through a successful private equity transaction. Fortunately, the outcome was good for the shareholders in getting a sizable premium and liquidity in a tough economic environment.
Balance can come in many different forms. In this example of a public auction between competing suitors it was particularly important to keep a balance between running the business and unlocking value through the transaction. It was also important to keep a balance between the current shareholders, the future owners, the Board, customers, and employees. It was not an either-or situation but as with most key business challenges it required a balance between competing priorities.
Focus is always important but this situation required a relentless approach in keeping the team singularly focused on serving customers and delivering quarterly results. During any transaction it is very easy for the attention to drift away from the external world and shift towards internal issues including speculation on the future. It becomes very important for the senior leaders to lead by example by focusing on the market, customers, and competitors to keep the business running smoothly. On a related note, one may argue that leadership by example is perhaps the only form of leadership regardless of the situation and environment.
Communication with key constituents is a key success factor in any situation. However, when there is uncertainty about future ownership of the company the need for clear, concise, and frequent communication becomes paramount. Both the practical aspects such as customers’ concerns and the emotional aspects of the people involved require a much richer level of communication than otherwise. Strong communication enables proper expectation setting which is fundamental for successful execution.
The role of the CEO is unique in many ways but perhaps the one that stands out in this context is the versatility required to adjust to the circumstances and bring to bear the skills that are most required at that time.
Tom Fleming, the CEO of Dealogic speaks about building a successful organization through innovation.
The fundamental challenge for every company, and therefore for every senior executive, is to drive profitable growth through innovation. Innovation produces growth in revenue and profits but also increases the productivity and happiness of staff by providing challenging work in an atmosphere of collaboration with high-quality colleagues, upward mobility, and the prospect of higher earnings. Simply put, it is innovation that over the long term drives the success or failure of an enterprise and its people.
Executives capable of driving innovation are the ones shareholders value most and who tend to move up the ranks of an organization fastest and retain their senior level posts the longest. The process of successful innovation is challenging because it requires an executive to execute across the core business disciplines of management, technology, production, finance and marketing. The ability to manage a constant process of innovation is a critical capability of a high performer because it forces the executive to define the strategy for the enterprise, to develop action plans and then get the organization actively engaged working on forward looking opportunities.
Driving successful innovation in a company that already has established products and an established client base is one of a senior managers greatest challenges. Within the organization it requires harmonizing the efforts of numerous individuals from different parts of an organization and in certain cases gaining acceptance from staff who are being tasked with cannibalizing an existing successful offering which can appear disruptive to their existing job and to the company’s clients.
External to the organization it requires the ability to tightly manage the process of establishing a precise understanding of what the target customer needs the product to do. And finally it requires delivering the solution to the market in a manner that achieves the revenue and profit potential which provides the economic and psychic rewards that propel the enterprise forward.
My partners Kathryn Yap and Daniel Soh introduced me to Seah Moon Ming, President, ST Electronics Limited in Singapore last week. These are some of his thoughts on Leadership:
My perspective from trying to reconcile theories and experience is that, leadership style and philosophy evolve with one’s experience and are very often shaped by events. That is to say, while you may find leadership theories agreeable sometimes it is common-sense practical leadership that is far more fascinating.
As leaders, you face challenges on a daily basis, be it strategy, competition, crises or even seemingly minor problems brought to you by customers, partners and employees. Information you have will never be complete or perfect; you always have to juggle conflicting demands and there will always be obstacles, both natural and manmade. In other words, you are tested all the time. So if you are really doing your job as a leader, there will never be a dull moment, twenty-four by seven for 365 days.
Then how does one cope in practice? General Colin Powell once said, “Leadership is the art of achieving more than what management science says is possible.” I think he is right. It is sometimes an art of making things happen.
So, at the risk of over simplifying things, let me share three key aspects of leadership in practice.
Taking Charge
A leader must lead. This is opposed to managers who are supposed to manage. As a leader, you must have the guts to make difficult decision and take charge. Taking charge is more than management. Usually, a leader surrounds himself or herself with good and competent managers who then get all the tasks done. But the leader constantly clarifies the purpose of the enterprise, shows the direction for the business, and shapes its character.
A common misconception is that once you are appointed as a leader, you have the ultimate power and therefore can do anything you want. Well, life is a little more complicated than that because you are dealing with human beings. You need to care about your people more than yourself.
In fact, an article in the Harvard Business Review has summarized it very well. These include:
- Leadership is not about authority, but interdependency, in other words, 360-degree, multilateral relationship;
- Formal position and hierarchy is not the source of power, but through influence, a leader earns the respect, trust and commitment of others, in other words, not through control and compliance, but through empowerment;
- Leadership is about leading the team, not managing one-on-one, partly because you just cannot please everyone;
- A leader makes changes that will make the team perform better, not merely keeping the operations in working order, in other word, leaders go for breakthroughs, not just keeping things smooth.
Network
Next, I would like to discuss networking as a critical duty for leaders.
A leader or a business does not and cannot operate alone, but relies on a network. It has been said that very often know-who matters more that know-how. So networking is a powerful social and human capital.
My basic training was in communication engineering. And communication engineers like to tell you that the power or utility of a network is proportional to the square of the number of nodes. So as the number of node increases, the power of the network increases exponentially.
What I want to stress is that sometimes, you may never know in advance when and how certain connections or contacts you have will be useful. But when it is indeed needed, it is so vital and you will be glad you have it. And in my experience, the value of your network could come to you at the most unexpected time, in very unexpected ways.
The next thing I want to stress is that leaders not only need to connect in a connection, we need also connect the connections and in the process share and spread the network. In business, network of business leaders, network of operational people, network of networks, as a community of resources, can be a powerful force multiplier. So my Mexican friends today are working with my Malaysian friends, my Korean friends, and my China friends, in an amazing global business network.
I therefore see it as a critical duty of a leader to network, because networks serve as a strategic means to extend the company’s reach that can at times mean a make-or-break difference.
Courage and Integrity
The third aspect I want to talk about is courage and integrity as they go hand in hand. In practice and in layman term, courage means guts – guts to do the right things at the right time, guts to take risks, guts to be yourself. With integrity, a leader can be purposeful yet genuine and truthful. From there, the leader can then be bold in his goal and vision, decisive in judgement, sharp in seizing opportunities, daring in innovation, passionate in execution, fearless in facing adversity. Leaders never say die, because when guided by principles, setbacks only make them more determined.
To me, integrity is the most important virtue a person can possess. I believe that in business, your name and your integrity will be valued above all else. People need to believe that you will be able to keep your word and deliver what you promise. This is the foundation of business partnerships and personal trust and commitments.
With integrity, I believe in being daring. Dare to be different, dare to stick out your neck, dare to try new things and most of all, dare to be the best that you can be. If I feel that a project is worth trying for, I am willing to put my bets on the table and commit to making a project a success. While I must admit that this may not always yield 100% success, I have always learned valuable lessons along the way and more importantly, I have the satisfaction of knowing that I have dared to try. Sadly, I think this spirit of daring is lacking today as our nature may prompt us to tread a more secured and certain path. To fully commit to a career or to something important to you in your life, a leader needs to be willing to face failures and learn from them, while pursuing success.
Conclusion
You probably know by now that I am a strong believer in leadership. I think it was Peter Drucker who said, “Leadership is of utmost importance, there is no substitute for it.” I cannot agree more.
Jason Tafler speaks to Marc Gasperino, Partner on Process Improvement in a Creative Environment: The Perfect Storm for Failure?
When I left the shirt-and-tie world of investment banking and first came to work at PointRoll back in 2005, the leading provider of digital rich media advertising solutions, I was amazed by the abundance of tattoos, earrings and flipflops that confronted me at every turn. As a rapidly-growing company (from 50 to 350 employees over the past three years) focused on “enabling creativity” for Fortune 500 brand marketers and their ad agencies through a combination of innovative technology solutions and full-service operations, I had a feeling implementing the process and structure needed to scale the business might be a difficult undertaking. For art directors and designers, process can be viewed as evil. And PointRoll was not only staffed with mostly creative types, but the company had several other elements that drove variation and that would make any process improvement expert shiver with fear: creative freedom, demanding customers, fast turnaround times, numerous stakeholders, high levels of complexity and customization, and poor quality of inputs. PointRoll dominated the rich media ad market, but after growing at a 75% CAGR for five years, the company’s stellar service showed signs of weakness, which resulted in more and more disappointed customers and declining market share.
Isn’t Six Sigma for manufacturing?
I knew that in order to extend the company’s lead on the competition and to truly delight customers on a consistent basis, we had to get introspective and take a long, hard look at our customers’ needs and our internal processes. Two years later, after a significant investment in LEAN Six Sigma (which initially most people laughed off as something only manufacturers or governments use… “this could never work in a creative environment” was a popular response) and a deep evaluation of our processes, we had redesigned our 130-person Operations service division from an inefficient, disjointed functional organization into a scalable, client-focused, cross-functional pod structure with significantly improved service quality and customer satisfaction. The new organization included an enhanced regional management structure with better accountability, standard communication and operating mechanisms across the department, standardized work processes, increased automation, improved career pathing and development, and a new method of “root cause” problem solving when things went wrong.
What have we learned?
Throughout this journey, PointRoll’s team learned a lot about how to scale a creative, service-oriented business while keeping an intense focus on solving customers’ problems and delighting them with great service on a consistent basis. Here are a few of the key lessons we learned for anyone in a similar environment wondering how they can mesh process with creativity:
• Involve people in the process as early as possible through training, lunch & learns, and project participation. Show them that LEAN Six Sigma is really all about focusing on the customer, being creative with improvement ideas, and making employees lives easier.
• Instill creativity into process improvement initiatives through regular open-ended brainstorming and idea/solution generation.
• Fully standardize key tasks, communication & operating mechanisms to reduce variation. Because many tasks are manual vs. automated in a service environment, standardized work & associated training are crucial to consistent quality across the broader organization.
• Focus on quality and accountability at the source.
• Remember to always start process/problem discussions with the customer and try to integrate as deeply as possible with your customers’ own processes to drive stickiness and loyalty.
• Finally, we learned that growth in an entrepreneurial company can hit several ceilings and that one must continually evolve to break through barriers and stay ahead of the competition.
In my opinion, the lessons we learned are even more relevant in a difficult economy, as the best companies will take this opportunity to figure out what is really most important to their customers, to take a hard, honest look at their own performance (as scary as that can be), and to redesign their processes and structures with a focus on quality, continuous improvement and scalability.
So the next time you’re confronted by a creative type with a nose-ring and a full “sleeve” tattoo on his arm, telling you that it is impossible to improve a process in a creative environment, smile at him, pull out some markers and start drawing him a (colorful) process map… and let the creative juices flow.
