Archives for posts with tag: Leadership

On my Apple calendar, I was told that October 8 is Indigenous People Day. Although the day is still called Columbus Day, the new term is meant to honor those people who were in North America long before our European ancestors.

In fact, historians now believe that there were several million native people here which were part of up to a thousand separate nations that ranged from Alaska, throughout the U.S. and into Mexico.

I became interested in this at a series of museums we visited in Canada and Alaska. I came to both appreciate and admire these First People. So, as I tend to do, I have now read parts of five books on the subject.

These nations or tribes often had diverse lifestyles based on the land area they occupied and their unique history and cultures. Yet all these native people, regardless of where they lived, had similar stories about the world’s creation, natural phenomena and good versus evil. Some very geographically separated groups, like our Southwest Apaches, even have a similar language to the Alaskan Athabaskan tribes.

And all these Indigenous or First People had issues establishing and transferring leadership and maintaining and spreading their culture. Just like our organizations do today. Only this was way before computers and even the written word.

Because of this, I am using stories about the First Peoples to help me illustrate points in my second book. It only seems fitting to reach back over the past millennia to seek guidance and explanations from those who came before us.

So here is a sample of how I will tie this all in. This provides a lead story in the chapter on Mentoring.

Honor Your Elders who Show the Way

In the far north of Alaska is the Inupiat nation. In the winter, there is no light for 67 days. In the summer, there are 84 days of only daylight. If you lived to become an Elder, you earned it and thus should be honored. The First People all over North America shared that same belief. The young were trained or mentored by the old. And the wisest elders were usually elected the leaders of their tribes.

The Iroquois Council, at its peak, consisted of six tribes, that working together, controlled our entire Northeast and part of the Midwest. The Council had devised a unique set of rules to govern both their overall territory and their individual tribes. Their system of government was studied by Benjamin Franklin and became the general framework for our emerging nation. And, although the Council Elders were all men, they were chosen, and could be removed, by the women of each tribe.

Fascinating and true. But I could not help but notice that old Ben did not include the part about the women in each tribe have the final power!

So think about our nation’s real First People as we honor them with a long overdue holiday in their name.

As recently reported in the Wall Street Journal, Warren Buffett just announced a new management structure for Berkshire Hathaway. This occurred, in part, to prepare for succession once Mr. Buffett is gone. When discussing one of the new leaders, Ajit Jain,  Mr. Buffett stated that if he, his longtime partner Charley Munger and Mr. Jain were stuck in a sinking boat, the most important person to save would be Mr. Jain!

This is not the first time I have heard of the Life Boat Theory of management.

Gene, my old boss and mentor from USG Corp., had a theory and a story about everything. And most of these contained valuable lessons about leadership.

After my company, Donn, was acquired by USG, they combined us with their similar businesses to form USG Interiors. Nothing about this merger or combination was going smoothly especially the people part. So, USG’s Chairman decided to move Gene in as Interior’s CEO which made him my direct boss.

The Donn business and its managers were still headquartered in Ohio at the time.

Gene decides to fly to Ohio for a day to meet Donn’s key people and see our operation. As the CFO of the former Donn and now Interiors, I am asked to organize this important trip. No problem.

I create a detailed agenda. I will pick Gene up at the airport and spend a little time. Gene will then meet, in half hour intervals, the other key Donn people and tour our facilities. By late afternoon back to the airport.

Except Gene decided to spend the entire morning with me which forced the whole agenda to compress.

Although I knew many of the senior USG people from their purchase of Donn, I had never meet Gene. Apparently, he had heard a lot about me! During the couple of hours that we were alone, we had a very frank conversation about everything that was going good and mostly not good with this new Interiors business.

By the time we rode back to the airport, Gene and I had gone from relative strangers to sharing mutual respect and even trust. Gene then ask us to move to Chicago where I could best handle the Interior’s CFO role. We made the move and never regretted it.

But what about the Life Boat Theory?

After we moved to Chicago,  Gene and I were working very well together.  One day I ask him why he spent all that time with me that first day in Ohio.

Gene smiled and said it all goes back to his training as an officer in the Navy. If your ship is sinking, each officer is assigned to be in charge of a certain life boat. Whatever roles the crew played in normal times are now dramatically changed. And as the officer in charge of a life boat, you need to decide not only who you want on your boat but also which order you will try to save them from drowning. And again, the skills one had on the main ship may mean very little in this new crisis.

So,  that first day that Gene and I spent time in Ohio, he was trying to figure out if I should be the first one he wanted in the Interiors life boat with him.

I was always grateful that I passed that test.

And, as with many things I learned from Gene, I used this several times in my career.

It does not just apply to a management crisis but to any major transition that occurs.  A major financial restructuring or downsizing could cause you to re-evaluate your priorities and your team. In USG’s financial crisis, a whole new group of senior business and financial managers were chosen. Starting a new job at a new firm can also lead you to quickly evaluate and rank the team you inherited. When I was hired as the CFO at IMC Global, I had to orchestrate a major bank and bond financing without a Treasurer in-place.

Just like in Gene’s Navy life boat story, at times in business and life, you need to quickly choose the best team for the situation that can help save you and your firm!

Gene never met Warren Buffett, but they would have gotten along very well!

One of the business blogs I follow is the Leadership Freak by Dan Rockwell. Dan had a post about the importance for Leaders and Managers to learn to say No. He cites the fact that saying Yes is much more popular in corporate America, as it tends to please people, while showing a willingness to try new things, etc. But No can be equally powerful.

So this got me to thinking about my own career and the power of Yes and No.

When I was a young, senior financial person at the private firm, Donn, I worked  with many older, operating people and the firm’s owner and his family. I found myself almost always saying Yes to try to please or impress these important peers or superiors. Of this group, one of the most famous and demanding was Branco, Donn’s European President. In my book, The Business Zoo, I tell a story about how skilled and smooth Branco was at getting his way. That story illustrates that Branco was a Grand Master at wining and dining, which was his preferred way to get things done.

After a while, Branco and I became friends and although he was always insistent on getting his own way, at times he gave me some advice. One day he told me that my problem is I cannot say No to anyone! An ironic comment from him, but very true.

I started to look at the world in a much healthier and useful light. I learned that there were times that, for the company or my own mental or moral well-being, I had to say No. But most importantly I learned how to say No without getting people upset, perhaps by suggesting an acceptable (to me) alternative approach. That made me a much better manager and leader. The Yes and No’s need to be in a balance that works for you.

And Branco? Sadly, after he retired he asked me for something and I said No. After that he quit talking to me. Branco will return in a story or two in my second book. Stay tuned!

The Wall Street Journal had an article called “AT&T to Keep Time Warner’s Culture.” This refers to the proposed acquisition of the media firm by the  telecommunications firm. The deal is currently being challenged by the Justice Department. The article goes on to quote the CEO of AT&T saying he is “not a media tycoon” and he does not want to “screw it (Time Warner’s culture) up” by bringing them “a telephone company culture”.

Then the Journal had an interview with Amazon’s second in command, Jeff Wilke. In talking about their recent acquisition of Whole Foods, he said that Amazon “works hard to respect cultures that have been successful,” but that perhaps they can “help” Whole Foods with “resources, ideas and maybe IT services that Amazon has.”

This all sounds very smart and maybe even noble, but sadly, it will probably not play out this way for one or both companies. The larger, acquiring firm almost always screws up the leadership and culture of the smaller firm they spent a lot of money to buy. AT&T has offered $85 billion for Time Warner; Whole Foods cost Amazon $14 billion.

In most acquisitions, within three years two-thirds of the senior management of the acquired firm are gone. The Chairmen/CEOs go first, sometimes immediately with a huge payout for their stock and retention bonus (often equal to three years total pay.)   Sometimes they hang around a couple years to collect an additional bonus. But Chairmen/CEOs go fast followed by their key reports. With these people goes some of the knowledge and value that the acquiring firm paid for. And after the senior leaders are gone, the culture of the company starts to fade away as well. Leadership and Culture are, after all, the flip side of each other.

Why do smart companies willingly or sometimes subconsciously change the successful culture and leadership of the firms they spend a fortune to buy?

First, the acquiring firm, by definition, is the winner in the deal. Thus, they believe that their systems, procedures, people and business strategies are far superior to the firm they just acquired. When the accounting firm PricewaterhouseCoopers took over the legendary consulting firm Booz, the PWC people felt they were in charge, regardless of the rich 100 year history of Booz.

Second, the acquiring firms have lots of staff that are dying to “help” the firm they just took over. From Information Technology to accounting to Human Resources to legal, etc. etc., there are plenty of people who just want to “help.” The building material firm, USG Corporation, acquired my old Donn Corporation which was one tenth its size. USG setup 24 committees to “help” integrate Donn into USG. Donn was a loosely structured, oral culture company with few charts and procedures. USG was much the opposite. A few years later only three of the top dozen Donn leaders remained.

Third, strategies and circumstances change rapidly in business. An old friend said that large firms can change core businesses and strategies faster than people change their underwear. Honeywell just announced that they will spin off two large business groups with $7 billion of sales, so that they can focus more on their core businesses, the remaining $30 billion. Ironically, the original Honeywell business, thermostats, will be spun off with a number of businesses that were acquired in more recent years.

In closing, having been both an acquirer and one who was acquired, I would like to wish the Time Warner and Whole Foods leaders and their culture the best of luck! Things will never really be the same. It will help if you keep in mind that your firm sold and those other guys bought. There are winners and losers in deals just like in everything.

 

Not many firms have had the continued bad press as Uber has over the past couple years. Sued on their business and employment practices and then on their self-driving car technology. Employees filing numerous sexual harassment and discrimination suits. Now the private Board throws out the Founder and CEO, Travis Kalanick. Mr. Kalanick is a self-described bad boy who admitted before his firing that he needed help managing the company. He is also the person most people believe created and encouraged the firm’s toxic culture.

Uber has fired some twenty managers and brought a couple female executives on board. But all of these measures may be too little and too late.  So what is Uber to do?

Leadership and Culture are the flip side of each other. What Uber needs is not only a new CEO but a new senior management team. Uber should also replace most of the Board, especially the long time Directors.  Mr. Kalanick is no longer CEO but he was allowed to remain on the Board, which is another mistake. Why? Because it will take a new CEO, senior team and Board to create a new corporate culture. This is not an easy or a quick thing to do. Leadership starts at the top and that is the Board. If the existing Board could not figure out the many legal problems and ethical missteps that Mr. Kalanick and his team were subjecting the firm to, they need to be replaced. Actions speak much louder than words. And major cultural change, in this and most cases, must start at the top. The Board is who everyone in a company look to for guidance.

Uber is often cited as an example of industry disruption as taxi cabs are disappearing. But Uber has other capable competitors like Lyft. These competitors may find a way to gain an advantage while Uber tries to rebuild both its Leadership and Culture. We will see if Uber can truly change and survive.

Two recent articles in the Wall Street Journal raised some new thoughts about Boards of Directors. This, often little understood group, technically manage the biggest public companies. I have written before on the lack of attention and professionalism of some corporate directors and I keep hoping this governance area will improve! Here are a couple ideas that might help.

One article dealt with the growing trend of large investors, like hedge or private equity funds, who buy a block of a firm’s stock and then trying to force the company to elect a number of their nominees as directors. On the surface the concept sounds good and a way to shake up underperforming  firms. But here is the catch. The people nominated by the outside investor are not subject to any review or disclosure of their positions on critical matters that might impact the target firm. They are just listed as part of the slate of directors that the investor wants. So the shareholders who are asked to vote for the new directors do so with very little useful information. The Journal article suggests that these nominated directors appear at public forums with independent moderators or even some of the current directors to debate views. To make this work the very large institutional equity owners like Fidelity or the California Pension funds would have to insist on this additional step before voting. I really like this idea!

The second article rethought the current trend of having only one corporate officer like the CEO on the Board with all outside independent directors. The concerns here are twofold.  First, in large and diverse businesses the entire board might benefit from more internal knowledge especially during a crisis or new initiative. For example if the firm is about to launch a huge capital or technology project, another corporate officer on the Board might add a lot.  Second, if the Board has only one insider and something happens to that person-health or an unexpected dismissal- the other outside directors may be at a loss as to name their replacement. So the thought is on a board of 10-12 directors having 2 or 3 inside officers might be best. Again this seems like a worthwhile idea.

So as I have said before, the buck stops with the Board of Directors. All the officers report to them and the Board represents the mass of shareholders. The more knowledge shareholders have about directors the better and the more directors know and are comfortable with the senior officer group the better as well.

Linkedin just had an article about the best places to work today. The usual suspects are listed: Google,  Facebook and Amazon and some newer, and surprising  ones to me,  Uber (lots of bad press and legal issues)  and Tesla (who makes no profits and may run out of money, not gas.)

But was really struck me was how few of the top companies even existed 25 let alone 10 years ago! The ones that remain have changed a lot: Time Warner (magazines to cable), JPMorgan (a dozen mergers later started as Chemical Bank) and Disney which looks like it may be around forever and never age like Mickey Mouse!

Fortune magazine had an article that stated that 88% of their 500 largest firms from the 1950’s are gone and predicted that 40% of today’s largest firms will be gone in 10 years.

Since I constantly advise graduates and young people where to work, this got me thinking. People used to get a job right out of college and then retire there 40 years later with a good pension. None of this is true today for millennials.

In my book, I stressed that as one moves up in their careers, they needed to study beforehand the leadership and culture of the next company they wanted to work for to try to gauge their personal fit and thus improve the chance to succeed. Now I believe that even graduates and young working people need to do this plus reading all they can about their targeted potential employer. What is their overall strategy, how sophisticated are they on technology and social media, are they well financed? And is their own business model sustainable or will they be the next industry subject to what we increasingly call disruptive innovation, like Uber to taxicabs?

Even though young graduates may work for a half dozen or more organizations in their career, they need to try to look down the road to try to figure out if their next employer will even be around! I believe this new group of millennials are better equipped and more comfortable, than my generation ever was, to research and analyze all the available, on-line information that now.  After all it is their future world. This may also be one of those few areas where most well meaning parents are just not able to help. Looking for your first job or your next job has always been difficult and in this rapidly changing world it just got harder!

A new movie is coming about the life of McDonald’s Founder, Ray Kroc who created late in life not only a major company but a whole new type of business.

The consulting firm Bain & Company has a study and a new book called The Founder’s Mentality. In their study, Bain points out that founder-led companies delivered three time higher returns to shareholders than other large public firms.

Bain cites three main traits that they believe help founder-led firms to perform so well. In a Wall Street Journal article they relate their work to McDonalds and Ray Kroc. Having worked in my formative years for Donn Corporations’s founder, Don Brown, I wanted to add some thoughts to this important topic.

The three traits that Bain describe that distinguish founder-led firms are:

1. Insurgency where the firm declares war on its industry. For McDonald’s that involved  a whole new way of delivering food with their fast service. At Donn, we had a sense of urgency in everything we did and a disregard for traditional corporate hierarchy or functions like Human Resources.

2. Obsession with how customers are treated. At McDonalds this occurred with watching every detail from the size of the burgers to what potatoes were used for their fries. At Donn we were the first to create customer incentive trips for our customers plus unlimited expense accounts to entertain them including a yacht and condo in the Bahamas!  I would add here that I think the best founder-led firms also treat their own employees in special ways as well. For a small firm, Donn had annual employee outings, turkeys at Thanksgiving and Christmas gifts for our employee children in every world-wide location.

3. Companies are steeped in the owner’s mindset. For Ray Kroc this meant setting up a next generation of founders in his unique franchise system. For Donn Corporation, Don Brown’s vision and values formed its culture and leadership style that caused the company to grew rapidly and prosper. Much of the culture was based on respect, trust and faith in each other. Thirty years after Donn was sold to USG Corporation over 125 former employees signed up for a potential reunion.

In my book, The Business Zoo, on Amazon the ending chapter is on Leadership and Culture. Ray Kroc built that at McDonalds as did Donn’s founder, Don Brown.

I wish all my readers of this blog or my book a wonderful Holiday Season and great 2017!

The Wall Street Journal just had an article about a new staffing trend some companies are using, Blind Hiring. The idea is to remove key information from resumes, like schools, past employers and even prospects’ names. The hope is this will reduce built-in bias that many managers have to favor people from their alma mater, or from a trendy tech firm, or to not chose equally qualified women versus men. These firms, like parts of IBM, are sometimes inserting a mock project into their process to try to focus on people’s real talents not words on a resume.

As many of you know, I have strong feelings about how, in many firms, Human Resource people have taken on too much power and hiring is a good example. So what are some thoughts I have on how to hire people?

  1. The hiring manager should research the job market themselves and write the job description or ad. When this happens the manager knows more about the role, skills required and pay than any HR person would ever know.
  2. My old boss and successful business owner, Don Brown, had some very unique things he would do when hiring people. And since he hated to read, resumes were not a part of his process.
    1. He would sit and talk to someone face to face and alone to get to know them. When I was “interviewed” for a senior financial role we talked about my son joining Indian Guides, Shetland Sheep dogs and family. No technical stuff at all. He was interested in me, as a person, not as a young CPA.
    2. For a critical senior job that I helped on, Don Brown met the prospect 5 times in the office, once over lunch and once with the person’s spouse for dinner. It resulted in a great hire.
    3. When he could, he would watch the job prospect walking back to the parking lot. Did they still seem to have energy and pride in their walk or were they just acting that way in the interview.
    4. Don Brown tried to hire quality people which he knew meant they would probably be quality employees. If you spend the time to get to know someone, the odds of a good fit increase!
  3. When I have followed most of these steps, I ended up with excellent, loyal and long-time employees. It is all about spending time to get the know the person, not being impressed with what is on a resume.

 

Reminder: my book, The Business Zoo by Brad James is now available on Amazon.com as both a paperback and an e book.

The Wall Street Journal recently ran an article about the engine emission crisis at Volkswagon (VW). Senior executives of VW acknowledged that their firm had a “culture of tolerance for rule breaking” that lead to this “chain of mistakes”. Although the article did not name exactly who ordered their engineers to install the software to fool the tests, the article did state that it found no evidence that “VW executive or supervisory Boards were involved in the fraud”.

Yeh. Heard that one before. After British Petroleum (BP) had the disastrous oil spill in the Gulf, a top writer from Fortune magazine stated that BP’s long time focus on cost cutting versus safety goes back directly to the Board of Directors. The Gulf spill was proceeded by several major safety events including a huge explosion in Texas that killed a dozen workers. All organizations look for guidance or direction from the top and a Board is the ultimate top. It appears that maximizing profits through cost cutting was a top priority over safety for BP and its Board.

At my old firm, USG Corporation, every meeting, even the Board meetings, started with a review of safety. This goes back to when USG started as a gypsum mining firm. Major accidents, especially deaths, are reviewed in often grisly details. Senior people, including myself, would attend safety dinners when a plant reached an accident free milestone. Safety was a core value at USG Corporation.

Sadly in most of these disasters like BP and VW often a few, token senior people are fired but with huge severance packages. But a lot of staff or line engineers at these firms lose their job and often their livelihoods because of their presumed role.

At VW, the Board and the senior executives looked the other way or showed a tolerance for rule breaking or it would not have occurred. And  German car companies are known for their excellence in their engineering and engines. That makes this all the more unbelievable to me.

In my view, senior executives and Board members must be held to higher standards than they are and at times, they need to bear the blame and responsibility for not focusing on what is right.  Read the rest of this entry »