Tag Archive for: Value Creation

Where The Money Is Made…

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Do you reward those who make the money or those who posture for it?

 

Operation Red Wings was a not-so-obscure military operation in the mountains of Afghanistan.  It started on June 27th, 2005 with the insertion of a SEAL reconnaissance team onto the side of a mountain near the suspected location of an Afghan insurgent leader. After circumstances that were made famous in a book and by Hollywood, 3 of the 4 SEALs were killed, along with 8 SEALs and 8 Special Operations aviation team members who were sent to rescue the original SEAL team when their helicopter was shot down. Marcus Luttrell became the famous Lone Survivor of the original 4 SEALs in this episode, as documented in his book and in the subsequent movie.

And yet…

In late June and early July 2005, I was completing a particularly challenging consulting engagement and then taking two weeks off to enjoy some paternity leave surrounding the birth of our second child.  I bet I complained about the long hours and the hardships I had to endure with a newborn in the house while I padded around in sock feet and drank the coffee of my choice while enjoying my air-conditioned house in Dallas, TX and my paid leave from a challenging but all-in-all cushy job as a consultant at a global firm.

Anybody see the irony, yet?

Somewhere, there is a fight going on.  You might be in the middle of it, and you might not.  It’s being carried out on your behalf, and you might not even know it.

In a recent conversation with a finance lead of a very strong business I work with, we came to an agreement on something.  The money isn’t made by the spreadsheet jockeys or the executives: It’s made by the gang who’s making product on the shop floor and the salespeople who are making sure the customer is happy and buying.

In other words, there’s a fight going on.  Somebody is out there sacrificing their own time and talent on behalf of the company, just like you, except if they don’t do their work today, there is no tomorrow. Perhaps we ought to acknowledge that.

What’s the implication here?  It’s nothing new really, but it is important. For all of us who live our lives off of the derivatives and commissions of real value, it’s important to stop and ask whether we are enabling value creation or hindering it.

I can hear it now:  “Oh, silly consultant… how could I as an executive be hindering value creation?  Look how much they pay me!”

Well maybe, just maybe, you are being paid for what you positioned for, not what you’re worth; it happens.  Usually it happens to other people, not to you (that is, I’ve never met someone who would admit they are overpaid–only a few people who admit their jobs were easy).

Yet there are innumerable vain corporate initiatives that create ungodly productivity taxes for organizations without really creating any value. I’m looking at you, activity-based accountants and demanders of the 90-page board report that nobody reads; they are everywhere.  Often, they are directed by people who enjoy plenty of time in their sock feet drinking the coffee of their choice while those who are in the fight struggle a world away. Except that a world away in instances like this could be just on the other side of the wall on the shop floor, or around the corner in the sales office.

I recognize that it’s a little bit strained to compare people who are struggling to get product off the dock or to make the next sale to Navy SEALs fighting in Afghanistan, but the imperative is the same.  Whether we’re talking about citizenship in a free society or our own work as executives, managers, and analysts, somebody out there is fighting on your behalf, and you’ll be a better pro if you recognize it.

So, do you reward those who make the money or those who posture for it?

 

 

The Pain Of Mourning Alone…

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It’s the death you mourn alone that hurts the most.

 

I have to warn you up front: this one is going to read more like a philosophy statement and less like a statement on leadership or strategy than my usual posts. I hope you’ll understand.

A year or so ago, I had a conversation with a crusty, tough, absolutely stoic executive. He had completed countless restructurings, fired and hired multitudes of people, and extracted value from untold situations that others might not have been able to find. He had been through many tough times as an individual and as a professional, and I had never seen him respond with any emotion, much less sadness.

And then he told me about the death of his dog, and he crumbled. He told me what a mess he was at the death of his longtime companion, how he had been reduced to tears at even the thought of losing his pup. It was enough to make me go home and contemplate…

Without resorting to psychoanalysis of this particular case, let me just put it this way: It’s plausible to say that the most acute pain one can feel is the pain of mourning alone, the pain of not having others to share grief with. It’s the pain that nobody else can understand, because they never experienced the subjective joy that has been lost.

But why write about this on the blog of a strategy consulting firm? Good question. I’ll give you two examples of why this lonesome mourning is relevant to top-level strategists and executives. First though, let me let you in on a secret:  Senior executives have to deal with many lonely circumstances.  Understanding that executives mourn completely alone on some topics is tantamount to understanding their role in the world; to those below, the CEO looks like he has it all, but you may not know what he’s dealing with behind the scenes.

What?  No way.  You’d take a half-mil a year to be lonely any time, am I right? Well, sure.

Maybe.

But suppose that behind the scenes, your board or your CEO is actively working toward removing you from your position in the firm; while you’re conducting your day-to-day duties both pleasant and not, you know there’s a target on your back, and no one else does. Maybe some of you would be perfectly comfortable with having to glad-hand and present to the crowd of employees while knowing that your board or CEO is in the process of seeking your silent ouster, but some of you would not.  Either way, the emotional work required to maintain “state” duties while being silently attacked is an example of the emotional work of mourning in solitude.  That is, it’s a pain unlike any other, and part of it is that you’re experiencing that pain alone. The more you as the executive like your role and your team, the harder it will be for you to go through this alone.

In addition, the (solitary) pain for you increases the more ham-handed your board or CEO is in seeking your exit.  Having witnessed about a half-dozen botched senior executive firings from various points of view, I can tell you that there are both dignified and undignified ways to achieve a desired departure.

Which brings me to my second point.

Strategy involves big decisions including big resource moves, and sometimes, these kinds of decisions do involve putting people on islands and forcing them to deal with their plights alone.  It may be the sales leader who’s losing a territory, the executive who faces reassignment or termination, or the machine operator who now has to go from running a beloved machine to managing inventory.

All of these persons could–not necessarily will but could–have to go through their own personal mourning periods, alone, and you as a leader can recognize their losses and respect their dignity or dismiss them with no concern. Choose dignity. You never know when your executive decision has just murdered the pet of some otherwise stoic and crusty-tough player on your team, so it might be best for us to think about that when we foist change on our organizations.

This is not to say, “Don’t change.”  It’s to say, “Don’t be a jerk about it,” because you don’t know what others are going through, and—for you yourself as well as for anyone affected by your decisions—it’s the death you mourn alone that hurts the most.

 

 

What Makes a Great Company?

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Enduring companies share some common traits.  How’s yours doing?

 

When do companies become great? When do they become bigger than the person who leads them, bigger than their stated purpose or their value to their customers?

When do organizations become enduring?

It’s a question I ponder quite a bit. After all, our firm, WGP, is explicitly focused on “enduring” performance for our clients, and that sounds all well and good, but how does it happen?

Enduring organizations come in many shapes and sizes, but the truly enduring organizations I have been around or have been a part of have a few things in common. I think endurance comes from a number of things, so my list is incomplete, but it has to be.

The first aspect is vision. Proverbs 29:18 says “Where there is no vision, the people perish…”  Think about that for a second: Thousands of years ago, a lack of vision was attached squarely to death. The same is true in modern institutions: when there is no binding vision, fragmentation occurs; people find their own vision, and institutions suffer. Vision is about a state of arrival, except you may never arrive.

The second aspect is an overt lack of self-centered leadership. These leaders are harder to find these days, but it’s not impossible.  By lack of self-centeredness, I do not mean lack of self-interest; I don’t know that a leader who is not truly self-interested can thrive in modern institutions; a commercial mindset depends on an understanding of value and trade, which involves self-interest at some level.

What I mean by self-centeredness, or rather, the lack of it, is that there’s a stage when really effective leaders realize they have “enough” power, influence, money, or responsibility, and they become sharers: They are no longer focused only on their individual goals.

An iconic story on this note for me came from the primary builder of McKinsey & Company, Marvin Bower. I never met Marvin, but I came into McKinsey when people still knew him. The story is that when Marvin Bower turned 60, he sold the shares he owned–a substantial number–back to the firm at book value.  He could have easily sold his shares for market value, but that would have forced the firm into debt.  This truly massive gesture was one of a leader who had moved on from self-centered to merely self-interested; he worried about self-centeredness and what it could do to the firm he built. In his words to that firm:

“Have we begun to think too
much about money because
we’ve got so much coming in?”
he asked. “People who make a
lot of money get to thinking
about having four homes to keep
up, or maybe they want a yacht.
If an individual consultant has
to make a professional decision
on the spot and he has too many
obligations, I worry that he is
likely to make a decision to attract
a client who shouldn’t be
attracted.”

Check the last few words there:  Marvin Bower worried that self-centeredness could allow a consultant to attract a client who shouldn’t be attracted.  Money is a powerful motivator, but it isn’t the only healthy focus of a business. When seeking to build, find leaders who are primed to maintain a healthy self-interest, not those that are self-centered.

The third aspect is a healthy engine for developing leaders who think critically. It is fantastically hard for institutions that have grown as personality cults or follower farms to endure. Why? Because they create workforces that are devoid, nay, avoidant of critical thinkers. And, they create “leaders” who learn to spend their time in court politics and scapegoating versus actually solving problems and capturing opportunities.

One large company I had the privilege to get to know well was built by an iconic and temperamental leader. Everyone deferred to him on every detail. The rub?  He wanted to have great leaders around him; he actually wanted the engine to develop leaders, so he invested in human resources and performance management nirvana. But he wasn’t comfortable with his people thinking on their own, so he was unable to get out of his own way. This chairman, CEO, and absolute monarch built a company that was exceptional and generally well-respected but that struggled to develop leaders under his reign.

Ironically, the business itself had exceptional leadership disciples. People were motivated, smart, and able, but they just didn’t take much initiative in true leadership instances because that was the head guy’s job.  The company, a multi-billion dollar firm in the construction services industry, was filled with leadership ability and completely devoid of leaders, which happens if you have no engine for developing leaders who think and act critically.

The fourth aspect is a deep sense of “who we are.”  The greatness of a company is backed by a culture of alignment around greatness and by great defenders of the faith in that culture. Southwest Airlines has this culture: Everyone in the company knows that quality of customer service, on-time performance, and other aspects of great are expected of them every day.

But what gets missed is that Southwest had amazingly effective spiritual leaders in Herb Kelleher and Colleen Barrett for many years. Never lacking in willingness to tell others what she thought, Colleen would very explicitly ensure that the boundaries of Southwest’s culture were clear and attended to; she defended the faith for years and years.  Enduring companies tend to have people like this–people who, without demeaning others or making it a big deal, rule with an iron fist on culture, values, and boundaries.

The fifth aspect of endurance is a healthy focus on performance. Enduring organizations understand what feeds them, and they reward it well. Yes, they even do this in the short term, and they do it well.  For instance, aggressiveness in meeting short-term financial goals can be purposeful, for, e.g., freeing enough cash to invest in new projects or to restructure to ensure new capabilities or meet new markets. Enduring organizations have strategic rationales for short-term performance that, once thresholds for survival and fair returns are met, go to more than simply meeting metrics on a scoreboard.

Which brings up a sixth and final musing on what makes enduring organizations enduring. For this, I use an old Greek proverb:

Society grows great when old men plant trees whose shade they will never see.

That is to say, great institutions become great when the oldest among the population act on behalf of people who they may never meet. They place investments that pay off over decades; they take a flyer here and there. Honda has its first corporate jet in the market today: It was marketed first in 2015, but the project started in the 1980s!  What kind of journey must that have been?

Separately, I had the privilege of working at a private manufacturing firm, Milliken & Company, for a while. Milliken’s corporate headquarters is situated in the midst of a beautiful arboretum, which serves as a very cool metaphor for endurance. Over the course of decades, the company’s iconic leader, Roger Milliken, played out his passion of planting trees: He planted trees whose shade he knew he would never enjoy. Such “noble” trees are a fantastic metaphor for building an enduring company.

Enduring organizations have such planters in their midst, and that’s likely what makes them great.  If you’re in a company where the old men have decided to focus their endurance on merely surviving to retirement, consider what that means: If your old men only worry about getting to their own finish line, your organization’s culture and leadership have failed.

These are only reflections from my own experience. Enduring organizations arise for many reasons, and even if just one of these aspects is not enough, a few may be. One thing is sure, however: endurance is threatened when these aspects are not there.

What do you think makes the difference?

The Most Important Distinction A CEO Makes

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As CEO, be explicit about the state of conflict you face, and only go to war when it’s fully warranted.

 

“The board looks at us like we are the Navy Seals,” the executive told me. “We agree on a number and go get it—year in and year out—and we need someone on the team to soften that view.”

The exec was looking for a “softener” in the form of a person who could put a strategic wrapper around what amounted to a reputation for being single-minded financial performers. The Navy Seals comparison might have even been a little strong since the half-dozen or so Navy Seals I know would say that frogmen rarely just “follow orders.”  That’s what the Marines do, and they do it well, but it’s not as sexy to compare yourself to leathernecks.

But I digress. The gist is that the “person” the executive was looking for would be sorely misplaced. Let me tell you why.

Wartime vs. Peacetime

When it comes to C-level executives, there really are two different leadership mindsets: wartime and peacetime. This is covered very well by author, venture capitalist, and former CEO Ben Horowitz on his blog, here. I’m going to take a slightly different angle than Ben and say that a great executive can dial up both mindsets, but he or she has to be explicit about it. Specifically, in wartime, there is no tomorrow, and in peacetime, it’s all about tomorrow.

I write a lot about respect and healthy strategic outlooks for high-performing organizations, but I don’t spend a lot of time on financial and value-based performance. Why?  Because it’s a prerequisite; If you don’t create value or enable it as an executive, you’re probably not going to cut it. As I wrote nearly a year ago: Performance is the prerequisite. The latest management article on how mindfulness unlocks your team’s performance is all nice, but financial performance is where the median CEO is going to be evaluated. So, balancing performance needs and organizational “health” is, fundamentally, what value-based strategy is all about. In the purest sense, and in the short term, performance and health can be highly conflicting, and that is why executives—really leaders of any stripe—need to manage the balance, which is where the wartime/peacetime mindset conflict comes into play.

A wartime mindset means that decisions get made, by me, every day. It means I don’t have time for debate and discussion, that emotion and, yes, intensity are a part of the puzzle. In wartime, there is no comfort in comfort—it’s win or else. You fight through injury.  You forego pleasantries. Wartime mindsets are most appropriate in business during times of economic crisis, customer crisis, or product transition/launch/retirement, during deals, and, most importantly, during times of competitive attack. As Horowitz puts it, during times of existential threat.

In wartime, a leader makes an objective or else. Take that hill!  Hold that beach!  Cut 50 FTE!  Close that deal!  They are all the same. Mind if I curse? Was I rude? Oh, you didn’t like that I threw that document on the table? It bothers you to have to work past 7?  Comes with the territory. It takes a strong stomach. Suck it up. It’s wartime.

A peacetime mindset is one of building. It means that studies can be done. It means that I might defer a decision for a year (or more in some companies) because…bluntly…I don’t have to make it. It’s where investment and improvement come into play. It’s the mindset that focuses on people’s careers, the future of the company, and the weaknesses that need to be addressed (but not until the next employee conference). As Horowitz puts it, it’s the time to “focus on expanding the market and reinforcing the company’s strengths.”

It is a mistake to think of wartime as better than peacetime. They are different, and executives must understand the difference. Some will be much better leaders in peacetime than in wartime, although that’s beside the point.

What’s important is that great companies are built  with a peacetime mindset and sustained with a wartime mindset.

And so, the most important distinction

Executives, especially CEOs, must be explicit about the state of war a company is in; that distinction drives all others. Why must the CEO be explicit?  Because it’s not always obvious to others in the organization. To use the U.S. military’s old DEFense CONdition ratings:  When the CEO is at DEFCON 1 (signaling nuclear war) and the organization is at DEFCON 5 (signaling peacetime), things get discombobulated.

A CEO might be at war based on things the CEO and only the CEO knows, while the rest of the organization might be at peace because, well, things seem to be going well. This is a recipe for disaster as the CEO continually churns through people, disregards ideas,  and thinks short term without real rhyme or reason. If you operate as if it’s wartime and everyone thinks it’s peacetime, you will demoralize your people. CEOs who have overweening focus on the short term (layoffs, cost cutting, and general pressure) while extolling their company’s strong financial performance year in and year out run into this problem. They create cognitive dissonance in the organization.

A CEO might be at peace in an organization that knows it’s at war, and then the opposite thing happens: the CEO is fiddling with transformation or branding while the customer base is burning. If you operate as a peacetime CEO and everyone thinks it’s wartime, you will lose credibility quickly. There’s a reason we still talk about Nero: a CEO who fails to acknowledge that there are existential threats will lose his or her organization.

That is why leaders, CEOs and others, need to be clear on how they view their worlds. They need to be clear that DEFCON 1 behavior (slashing product lines and replacing people) is only warranted by DEFCON 1 threats, so they need to get people on the same page. Everyone also needs to be clear when DEFCON 5 behavior (delaying decision on a project viewed as critical by others or by a faction within the company) is warranted as well.

This is the most important distinction a CEO will make in the day-to-day operation of a company:  Wartime or peacetime.

A cautionary note on “artificial” wartime

Yeah, but we want a team of warriors, you say. So you continually keep the pressure on through artificial means—even lying to people about the true state of things to make them seem more dire—in order to ensure that people keep an edge or a warrior mindset.

I get it. It’s sexy, like saying you’re a Navy Seal. But it’s also dangerous.

From analyses on the topic of combat fatigue, it’s a known fact that normal people cannot sustain a wartime mindset for an extended period of time. Those who are in active, continuous combat for more than a month generally start to lose effectiveness. Those who are in active continuous combat for more than a couple of months typically become psychiatric casualties. This is true in actual combat, and I’d propose that it’s true in figurative combat.

Dave Grossman, a researcher on the science of combat and killing, outlines from an earlier study that after the beaches of Normandy in World War II, 98% of soldiers who survived constant combat for 60 days had become psychiatric casualties. The other 2%?  They were characterized as “aggressive psychopathic personalities.”

Let that sink in for a second.

The negatives of manufacturing a wartime mindset for your organization are legion. Not only do you (1) place focus on survival vs. building as outlined above, you (2) create an environment in which normal people struggle to thrive for any extended period of time and (3) facilitate the rise of psychopathic personalities who actually can handle the sustained pressure.

It makes no difference whether the artificial pressure is placed by the CEO herself or by some proxy, another C-Level executive or consultant tasked with “cracking the whip” so that the CEO can be the good cop.

So, be explicit about the DEFCON you face, and only go to war when it’s fully warranted. Again, this is the most important distinction you will make as CEO.

While executives (like the one in my opening story) may recognize that their boards see them as mercenaries who propagate a state of war because they act like it, they can’t solve that by adding peaceniks to the team; the peaceniks won’t be heard if the entire organization is charged for combat or thinks the C-level executives only expect combat mentalities. Culture, as I’ve written before here, will crush even the best change agents. The executives have to acknowledge—themselves—a credible state of war or peace within the organization and actually live it out.

And if they can’t change?  Well…

As Yahoo’s Case Shows…Somebody is Always Watching

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Somebody, somewhere is doing the analysis…

 

Yahoo made a big splash by hiring Marissa Mayer as its CEO.  The bloom has come off the rose a bit.  As is sometimes the case with CEOs who are celebrities or otherwise insulated from common criticism, Mayer has been defended heartily for a few years for her decisions and record.

But the criticisms are accelerating.  More and more people are calling out the transparency of the empress’ clothing.  To wit, fund manager Eric Jackson, in a scathing 99 slide document released recently, outlined all the reasons that Yahoo’s supposed turnaround is no such thing.  He goes from comparable analysis to comparable analysis, then to a breakdown of the business, itself, then to a breakdown of other shareholders’ proposed plans…

…and then to an excoriation of the Mayer “strategy” overall, from the hire to the actual execution of change within Mayer’s tenure.  And, it’s a bloodbath.

This slide says it all:

What shareholders got instead…

When a “transformative” CEO’s tenure can be summed up as diametrically opposed to the “story” that got her hired, you know one thing:  The CEO hasn’t delivered.

Now, the Mayer story is getting a lot of play because of the potential severance package she stands to receive if Yahoo’s board actually fires her (valued at up to $110 million by some estimates).  That’s all fine…A deal is a deal.  But what is interesting here is that Yahoo has gone years with Mayer as its CEO, running a play that is clearly not what was advertised.  Just look at the slide above.

So, what’s the point?

The point in this case is less about Yahoo and more about the perils of “story” sales from executives.  Yahoo, in fact, is one tough turnaround situation.  As Jackson outlines, remove the Alibaba stock holding and what you’ve got is a very, very sick business.

What about “story” sales?  Well, no matter how good the story, somebody is watching the results.  Your CEO may “say” that new products are going to drive the company to new heights, but at some point that check has to be cashed.  Did they deliver on new product sales?  Did the video match the audio?

Have you been sold a bill of goods?

It’s an important question for shareholders everywhere. But, more importantly, it’s an important vignette for executives everywhere.

When it comes to highly visible executive roles, a story can only go so far.  At some point, the numbers will tell.  At some point, the power of personality and persuasion will cross the threshold of shareholders’ own financial interests.  Lincoln said it:  You can’t fool all the people, all the time.

At some point it becomes clear that somebody is watching.  And when that is clear, you no longer own the “story,” dear CEO.

The Yahoo case shows this in spades.

 

Good Governance Depends on Whom You Ask…

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Want good governance?  Ask around.

“The greatest trick the devil ever pulled was to convince the world he didn’t exist.”

Roger “Verbal” Kint – The Usual Suspects

Do you sit in a position of power?  Do you, also, sit in a position of isolation?

Oddly, the two things can coalesce into one if you fail to remain vigilant.  One of the hallmarks of bad governance everywhere–from Teapot Dome to Barings Bank to Enron to, I’m sure, Volkswagen–is the existence of good people in powerful positions who have allowed themselves to become isolated from the facts on the ground.

Consider the case of Volkswagen…

VW has now lost upwards of 40% of its market capitalization since the emergence of the news that engineers and managers in the company conspired to cheat on international emissions standards in the company’s small diesel engines.  I won’t belabor the point, but I can assure you that there are powerful people in high places in the company…its board and senior management (possibly up to and including its now-resigned CEO) who would not have consented to such egregious white collar crime had they known the existence of it.

I won’t speak for all the executives or board members at VW, because I simply don’t know them; but I will speak for the consistently present minority (or even majority) in such situations who were elevated to high places and subsequently isolated from the reality of ethical and legal behavior on the ground.  They allowed themselves to be convinced that things were being done right.

But what’s the deal? 

It happens in most every situation of moral, ethical, or legal lapse within corporations: Good people at the board or senior management level–usually due to great performance of the organization they are called to lead or govern–stop asking questions.  They take the word of people whom they “have no reason not to trust.”

They, essentially, fall asleep at the switch.  And, to give some examples, the fallout looks rough.  Namely:

Unethical behavior surreptitiously drives performance (such as in the Teapot Dome bribery scandal of the early 20th century).

Low control of rogue elements destroys entire institutions (such as in the Barings Bank collapse of the 1990s).

Entire financial fictions are erected by complicit management and advisors (such as in the Enron case of the early 2000s).

And, in some cases, good companies are systematically disabled and functionally dismantled by management with incentives very different from boards and shareholders (which occurs in far too many companies worldwide).

None of the bad actors in the named scandals above gave outward reason to doubt their trustworthiness in the times leading up to the scandals; and in some cases they would have recoiled or lashed out with righteous indignation at their higher ups if they were, in fact, questioned.

That’s the refuge of ne’er do wells everywhere–righteous indignation.

Watch for it.

But what to do?

In every case, people in positions of fiduciary and ethical responsibility have the obligation to ask.  But, they have the obligation to ask those who actually can convey reality, not those who are charged with packaging reality for consumption by boards and senior management.

In his book Why Zebras Don’t Get Ulcers, Stanford University professor and author Robert Sapolsky coined a proverb that is quite powerful for people in positions of assurance everywhere… It goes like this:

“If you want to know if the elephant at the zoo has a stomachache, don’t ask the veterinarian, ask the cage cleaner.”

You get it? If you really want to know if something just isn’t right, don’t ask the so-called experts…they rarely have the task of cleaning up the mess.  Ask the people who witness and clean up messes.  Ask people lower down the ladder, whose credibility might not naturally be so high, but whose incentives might also not lead them to unnecessary spin or outright dishonesty.

In other words, ask around.  If you sit on a board or in senior management and find your interactions with rank and file people to be overly stage-managed, then ask some more.

You know why?

Because–with apologies to Verbal Kint–the greatest trick that bad actors pull is convincing the world that they aren’t bad actors.

Reality depends on whom you ask. So, ask around.

I welcome your questions and comments.

90 Percent of Everything Is Crap

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Learning this one adage can release you to focus on what matters.

What’s the difference between a performance culture that focuses on the positive and one that focuses on the negative?

It’s okay to focus on the negative—the misses and the missteps—in defining performance, but success doesn’t live in the negative.

Here’s a funny observation: When we are down on people and processes and investments and strategies, we focus on what’s not performing.  We find the flaws.

You’ve probably seen it in play.  You read the performance review of a person who’s out of favor, and it’s rife with articulation of the negatives. “Fails to do this, avoids this, lacks this, shirks that.”  We become so quick to criticize based on flaws that we don’t realize something critical: Doing so is a losing strategy.  Why?  Because 90 percent of everything is crap.  This phrase, commonly known as Sturgeon’s Law, implores us to evaluate things based on their strengths, not their shortcomings.

Even the best of performers have a flaw, or ten.  If you focus on the negative aspects of people, strategies, and performance, you will inevitably find them, no matter where you search. So the most honest appraisal of anything is to look at the peak of its performance.  It’s to look at the 10 percent of a person’s work that reflects their best effort—what reflects their best performance—and then to compare and act.

I’ve witnessed talent processes that have clearly focused on strengths, and I’ve witnessed others that focused on flaws, but one thing stands out:  Talent systems that focus on flaws reject more good talent than those that focus on strengths.

Why? Because when their talent ecosystem focuses on flaws, business leaders who take on the hardest assignments run the highest risk of being fired, regardless of their intrinsic talent. When the same leader is in a talent ecosystem that focuses on strengths, their tough assignments become opportunities to show strengths that are not evident in other circumstances.  At worst, a very strong manager in a tough situation gets reassigned, not resigned to the dustbin.

The same can be said for strategy.  A strategy that racks up a few losses early can be thrown out when flaws are the focus, but long-term success depends on defining strengths, not avoiding weaknesses.

So, 90 percent of everything is crap.  Knowing that, focus on the strengths in the people and concepts around you.

The Pornographication of Motivation and Values

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Distilling motivation to dollars, penalties, or positive thinking may leave something out…

A day or so ago, I came across a post via my LinkedIn feed.  It has now disappeared, probably to protect someone’s sense of career risk.  But…

The post, entitled “Stop Living Your Life Like a Motivational Poster,”  is about how the whole motivational poster and quote industry is dangerous because it leaves out essence and authenticity while peddling positivity and motivation.  The author states:

I truly believe that to keep ignoring every emotion that does not fall into the positive category is at best unhealthy , and at worse can lead to feelings of inadequacy- that your [sic] somehow strange, not good enough, not strong and self controlled enough to ‘think yourself positive’

The post touched off a minor candle fire of discussion on LinkedIn.  And, there’s something hiding in that post for those of us working to perfect (if “perfect” is a possibility) strategic leadership.

Namely, that something is about how the insidious drive to simplify, distill, and extract the essence of motivation can leave out critical context to the detriment of individuals and organizations.

That context might just be how challenging the circumstances were for a leader whose wisdom gets distilled into a motivational witticism.   Mohandas Gandhi’s “Be the change you wish to see in the world” quote is used incessantly by folks who probably don’t understand the massive hardship Gandhi went through to have the credibility to deliver it.

Perhaps more importantly, however, the context can be the values and constructive intent that get left to the side of a motivational incentive.

But, why the link to pornography? 

So, I roped you in with a reference to porn, and now I need to make the link.  To do so, I’ll use a quotation (irony, yes, I know) from Pope John Paul II. He said:

There is no dignity when the human dimension is eliminated from the person. In short, the problem with pornography is not that it shows too much of the person, but that it shows far too little.

Did you get that?  The problem isn’t that pornography reveals too much of the context, but that it reveals too little. Removing the context removes the dignity.

That’s what you and I as strategic thinkers and leaders need to reflect on when it comes to motivating others.  Are we distilling motivational text, structures, and systems down to quotes, numbers, and dollar amounts that remove the context (and the dignity)?

In short, are we making fundamental values a transactional thing that can be priced away?

Three areas where this may matter to you and me:

While the habit of distilling away contextual values in pursuit of efficiency and impact is something to watch out for in all parts of life, I’ll reflect on three areas here that matter.

1.  Motivating your organization:

There’s a very large market for organizational motivation diagnostics and techniques.

This market will only grow as Millennials become more and more disconnected from the values and realities of the older generations who (in many cases) manage them.  If men and women are from Mars and Venus, Millenials and Baby Boomers are from different galaxies.

Practitioners refer to this area of organizational practice as “engagement,” but reality is that this is all about motivation toward the goals of the organization as a whole. Like the article I linked in the opening of this post, “engagement” techniques and programs all too often fall into the trap of trying to distill a multi-faceted, highly personalized issue down to a few pithy drivers.

This is a noble act, to be sure; because engagement does matter.  Still, these programs turn on the distiller and invariably come up with programs that get at only one or two of the fundamental things that people think about when they think about engagement.

In your organization, one person is most engaged when thinking about building the value of the organization he works within.

The next thinks primarily about impact on the customer.

Another thinks it’s all about himself.

The next thinks its about doing good for society.

Still another thinks its about her working team.

Research shows that people split evenly on these 5 factors when selecting the one that motivates them.

When you look to engage your organization, or even your immediate team; you have to factor in this diversity of drivers.  Distilling down to a focus on team building activities or greater community involvement or quotes about whether it’s “good for the customer” will only touch the tip of the iceberg.

2.  Financial incentive structures 

There has been a decades long move toward greater tying of daily activity to monetary incentives.

This trend has slowed somewhat in recent years as so-called “pay for performance” or “penalty for performance” has time and again created unintended consequences and malicious gaming from the shop floor to the c-suite.

When we distill mission critical and values-driven activities like safety or quality monitoring down to financial incentives for attainment of certain standards, we introduce a very challenging set of defining moments for our people.

By defining moments, I mean a choice between two highly conflicting fundamental values.  Do I report that safety incident and take the hit on my bonus, or do I conceal it and get paid?  Do I report the customer complaint when my customer satisfaction rating is at the threshold of my bonus payment, or do I just forget I heard it?

These are fundamental contextual issues that get lost in the distillation of motivation to a single- or even multi-point-formula.

A great and commonly cited study that gets at this particular point involves a set of day care centers in Israel.  The study found that when there were no financial penalties (and therefore no economic incentives) for leaving children beyond the day care centers’ 4pm pickup time, parents rarely were significantly late.

However, once a financial penalty for late pickup was introduced, parents were late much more frequently.

The study shows the types of unintended consequences that can happen when a financial incentive is put in that allows people to replace a moral or ethical one.

People see the price of their ethical lapses, and can judge accordingly.

If I’m a parent operating under a social contract that says 4pm is the pickup time and leaving my child any later means a teacher has to work overtime because of my lateness, I take the moral impact into account.

If the social contract is changed to a financial one, then the price I pay for my lateness is clearly outlined and transactional. The day care center makes it easy for me to forget about ethics and just pay the fine.

This is all kind of cute when it comes to a day care center.  But, imagine what happens when you place a price on values driven behavior in a safety program, or customer service, or (shudder) healthcare programs.

Price is a clear motivator.  I’m a huge fan of price–except for when the cost of inaction is priceless.

3.  The continuing emergence of aggressive short-termism

The place where distillation of context is perhaps most dangerous is in the boardroom and c-suite.  The emergence of aggressive short-termism as a de facto course of management comes directly from the pornographication of motivation.

Boards, being limited in what they can measure when it comes to the health of an organization (though less limited than most boards realize), resort to distilled measures of current profitability and cash flow.  These measures, while absolutely critical to performance, are devoid of the context necessary for the long term stewardship of capital resources.

They are indicators of current vitality (just as a patient’s pulse rate is); but they leave out important contextual risk factors (like whether the patient is a smoker, obese or anorexic, and/or exercising regularly).

Once again, price matters.  When a senior executive can look at the price of his or her action in the short term and see the financial payoff, there becomes a transactional aspect of stewardship that boards must be vigilant about.  This is particularly key when vesting structures align such that executives’ short term actions are monetized at a much greater rate than actions that affect the long term.

So what? 

I co-opted the pseudo-term “Pornographication” because, first, I think it’s a pretty amusing term; and second, because I think it says something about what can happen to an activity (whether that be sex, love, or motivation) when essential contexts are removed and only a most basic “basis of arousal” is left for consumption.

As strategic leaders, board members, and managers; we must be careful to think through the contextual consequences of distilled incentives.  The value of an enterprise depends on considered choices about some things (like safety programs or long term investment) that can only by measured by conjecture.

Watch out for the oversimplification of complex motivational issues.

Context matters.

What To Do When You Can’t Save Everyone

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In times of strategic tension, change, and stress; be sure to use the strengths you have to create the value you can.

This post was inspired by some commentary on a prior post regarding strategic cost reduction efforts.  In the course of thinking through the comments I received, I realized that there is a real gap in knowledge on some of the pitfalls that come with good, honest, and necessary restructuring activities.

If you read no further, read this:  In times of really hard choices about cost reduction, leaders, particularly mid-level leaders, can become so fatigued that they stop managing for value and start managing solely to the numbers.  It’s incumbent upon all of us as executives, advisors, and leaders to watch out for these attitudes of fatigued resignation.

The Insight: 

In the lives of nearly all business leaders comes a time when hard personnel choices have to be made.  Very few leaders escape it.  Even well known, visionary growth titans like Steve Jobs (who chopped Apple to a fraction of its workforce in the 1990s) have to experience these times.

But what happens when leaders having to make such choices to preserve value instead start making them out of a sense of resignation and duty?

They stop focusing on the value remaining, and start focusing on themselves…getting their job done.

And, then you start to hear a familiar refrain used by exhausted, resigned leaders facing tough choices.

“Well, we can’t save everyone…”

In the business environment, we often use such thinking to cope with making the hardest personnel decisions.

Constraints are real, and we all face them at some point.

However, you and I have to be careful not to let a truism about not being able to save everyone mean that we harden and decide not to save anyone.  Such a tragic false dichotomy has, in my experience, reared its head far too often in organizations making hard choices; and it results in the demoralization that people associate all too often with cost cuts.

Leaders harden.

They stop coaching.

They stop caring.

They “do what they are told.” And, often, nothing more.

They stop, in other words, leading.

I have witnessed, firsthand, fantastic people leaders turn into cold, distant souls following years of having to make challenging cuts.  The stress and pressure along with the cognitive dissonance of removing livelihoods to save corporate life build until each further action comes with that lament…

“You can’t save everyone.”

Yes.  But you can try to create a valuable solution that saves someone.

Think about how to redeploy, re-think, and, above all, sell!  Be willing to stand up and look for value.

An Applicable Parable:

One of my favorite apocryphal  parables touches on this topic. It is referred to as The Boy and the Starfish.

It goes like this:

While walking along a beach, an elderly gentleman saw someone in the distance leaning down, picking something up and throwing it into the ocean.

As he got closer, he noticed that the figure was that of a young man, picking up starfish one by one and tossing each one gently back into the water.

He came closer still and called out, “Good morning! May I ask what it is that you are doing?”

The young man paused, looked up, and replied “Throwing starfish into the ocean.”

The old man smiled, and said, “I must ask, then, why are you throwing starfish into the ocean?”

To this, the young man replied, “The sun is up and the tide is going out. If I don’t throw them in, they’ll die.”

Upon hearing this, the elderly observer commented, “But, young man, do you not realise that there are miles and miles of beach and there are starfish all along every mile? You can’t possibly make a difference!”

The young man listened politely. Then he bent down, picked up another starfish, threw it into the back into the ocean past the breaking waves and said, “It made a difference for that one.”

The boy in the story took a bit of energy to save a few starfish from certain death.

Others thought he was doing fruitless work.

He knew he was making a difference.

So What?

Times of crisis or stress or pressure are the times we must think about how to create value the most, even in our own small corner of the world.

Other leaders may look at you and say “why bother? You can’t save everyone…”

When you face them, know that you can’t save everyone; but don’t use that as an excuse to keep from saving anyone.

I’d enjoy your thoughts and comments.

When “Strategic” Cost Reduction is Really Just Whacking…

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Cost reduction is easy…Doing it right is hard.  

Any strong, financially based view of productivity must address the cost side of the equation.  So, we are faced with the need to assess, restructure, and consequently reduce costs.

Cost reduction and restructuring exercises are underway at companies around the world at any given point in time.  Just ask the likes of IBM, which recently found itself mired in a bit of bad PR around the scope and magnitude of cost cuts coming in 2015.

Any leader who has been through one of these exercises can tell you how harrowing it can be.

It’s not harrowing because of the topic itself…After all, any Neanderthal can lop costs. Just tell him how much to go get, and he will get it.

It’s harrowing because cost reduction exercises are tough to get right.

Cost reduction exercises start with either a burning desire to improve a strong company, or a burning platform under a struggling one.  But, what separates a true “strategic cost reduction” mindset from our friendly Neanderthal whacking away is a considered approach to performance and risk (notice I didn’t say cost) that centers on effective allocation of burden and costs.

Unfortunately, whacking can become the norm.

Let me tell you why.

The corruption of strategic cost reduction

Usually, a strategic cost reduction exercise begins with a provocative question.  It’s the sort of question that gets any organizational or budget leader into a sincere case of the willies quickly.

“How would you do what you need to do with 40% fewer resources?”

It’s a scary question, but one that is a great stretch exercise for any organization at any time.

Applying a strategic cost mindset, such a question is intended to invoke the necessity of invention that more incremental approaches can never get to.

Just look at the structure of the question:

“How would you do what you need to do…” – This piece of the question implies creativity on the output side.  Are you doing too much?  Are there things better left to others?  Could you justify the first and last outputs that you and your organization are creating? Are you covering your key risks?

“…with 40% fewer resources?” – This piece of the question gets at the input side…In this case, justify the resources in light of the outputs.

Done well, strategic cost exercises that root themselves in the question above result in leaner, more effective organizations with better clarity and stronger culture.

However…

…Executives who use this sort of thought process to reduce costs have a pernicious tendency to fall out of a strategic cost mindset and into a whacking mindset.

They ask their people “How can you reduce costs by 40%?”

What’s the nuance?  It’s in the implied calculus around inputs, outputs, risks, and justification.  In the first (and best) case, the question posed is a creativity inducer.  In the second case, it’s simply an order couched as a question.

That is the realm of legendary whackers like “Chainsaw” Al Dunlap.

Many, many executives and consultants have taken this sort of 40% question–intended as a thought starter and creativity driver–and turned it into a fait accompli.  

So, what’s the right thing to do?

All situations are different. But, the right thing to do is ensure a structured approach to evaluation, action, and strategic alignment.

In one client I served, a transportation provider facing significant financial stresses following 9/11, the strategic cost exercise was about the solvency of the company. Its leadership team faced an existential threat and had to act fast.  But, rather than just issuing an order to “cut costs” by a given percentage (the whacker’s favorite approach), the company’s leadership took a highly structured, thoughtful, but blisteringly fast-paced approach.

In another client situation, this time in packaging, longer term structural changes in the industry led to a need for rethinking the company’s organizational and operating footprint.  The two things went together.  With a measured approach, the company found more than 20% improvement in cost structure through organization and footprint alone.

And, get this, neither of these companies killed morale.

Wait! What?  Neither, you say?  Come on! These exercises are murderous to morale…Right? 

Not really.

And I’ll tell you why:  The ones who get this sort of exercise right start with strategy and mission, and end with a better organization at a lower cost aligned with the strategy and mission.

The ones who get it wrong start with a number, usually a percent or hard dollar number, and end with a number.

The right thing to do is to measure, then cut.  It sounds simple; but it isn’t.  Any time a significant cost reduction effort is undertaken, it is about redesigning the operating model of the company.

Whacking isn’t the way to do such a thing.

One warning:  Depending on point of view, it can be both…

One thing to be very careful about:  Some of these exercises can be strategic and driven very carefully from the top; but because of breaks in communication or agency problems they can at the same time be viewed by the organization as arbitrary whacking.

Senior leadership sees itself as implementing a strategic cost framework.

Senior leadership’s agents–perhaps aggressive middle managers or consultants under pressure to deliver budgetary numbers–resort to the whacking model.

People on the ground see job cuts coming like artillery barrages.  Sure, there’s some rhyme to it (perhaps the stanza repeats every budget cycle), but the reason isn’t there.

All action obtains meaning, regardless of whether meaning is communicated.

A structured, thoughtful, strategically aligned, and well-communicated approach to productivity improvement is the foundation of a modern performance ethic.

I’d be interested in your thoughts and experiences in this area.