March 2008 Archives

The Fallacy of Leading by Example

By
Lanny Goodman
on March 14, 2008 10:56 PM | | Comments (0)
Ask a room full of CEOs if they believe in the principle of "leading by example" and almost every hand will go up.

This is a terrible way to lead.

Let me explain.  Leading by example would be great if the CEO's job was the same as everyone else's.  But it's not.

To illustrate the point, in my speeches to CEOs, I commonly pose the following question: "Let's say you were to write down everything you do at work hour by hour over a two week period. At the end of that period were you to go through that list applying the following two criteria,
  • I am the only person in the company for whom it is legally, morally, or ethically appropriate to do this task
  • I am the only person in the company who is qualified to do this task,
what percentage of the items on the list would meet these criteria."

The responses average out to about 10%.

Think for a moment about the implications of this number.  First, it means there is a potential 900% increase in your production capacity as CEO doing the work that only the CEO can do sitting on the table.  This is huge.  It's almost an order of magnitude.  If you were to apply even half that capacity to moving your business forward strategically, would it transform you business?  If you were to apply the other half to your family and personal pursuits would it transform your life?

I doesn't take a rocket scientist to see that the answer to both questions is a resounding "yes".  

But no, most CEOs are too busy doing things that other people could and should be doing to transform either.  Why?  Among other things, the legacy of lead by example.  

We are taught as we come up in business that if we aren't being busy, busy, busy, our employees will get the message that it's OK to slack off.  Actually, like most myths, there is some truth to this.  Leaders live in a fishbowl.  However, there are a number of assumptions embedded in this belief system which need to be scrutinized on order to validate it's truthfulness.  

The most important assumption is the unstated "Absent any other systems of feedback, compensation, communication, and organization designed to align employee self-interest and organizational interests..." then lead by example is about all you have left.  Let's say, for a moment that you did have some of those things.  Let's say you have open books, a robust profit sharing plan, an internal customer feedback system, and active process improvement program in place.  If you did, employees wouldn't need a CEO shooting around like an unguided missile in order to feel like they needed to stay busy and productive.  In fact, all the above are far more effective aligners of employee interest than making them feel like they have to keep up the pace set by the CEO.

This brings us back to the point that the CEOs job is different than everyone else's.  I've often posed the question to CEOs, "When was the last time you walked into your office, put your feet up on your desk and spent two hours with your nose in a good business book?"  The usual answer is a blank look like I'm speaking in tongues.  

The traditional model of leading by example not only robs the leader of time to enrich his/her life and family relationships, robs the business of the strategic momentum the leader could and should be bringing, but it stunts the growth of every employee who should be doing the tasks the CEO is doing.  This robs the organization of leverage now, and the experience the employee does not gain will cost the organization lost dividends and opportunities for all time. 

Max Depree, former chairman of Herman Miller, wrote a wonderful little book called, Leadership is an Art.  He starts his story by saying "The first responsibility of a leader is to define reality.  The last is to say thank you." 

Who else but the CEO is empowered to define reality?  Is the assistant mail room clerk going to come into your office with a detailed strategic vision for the company for the next ten years?  Is this something you can slap together between a staff meeting with marketing, returning six phone calls, answering 32 emails and your meeting with the bank in ten minutes?

No.  Defining reality takes time, it takes thought.  It takes a steady stream of information about how the world is changing around you.  What are the implications of social media on your business?  Myspace gets more daily traffic now than Google.  There are online multiplayer games with 110 million members worldwide.  This may be relevant to your business or it may not, but it is data you can't ignore if you expect to have a handle on the business landscape.  Do you understand where technology is headed, do you have a feel for what's happing in education and training, do you understand how marketing and advertising are being transformed by Web 2.0?  These are just a few of the broadest examples of fundamental sea changes that are happening in the business ecosystem as we speak.  It's virtually a given there are equivalent changes afoot in your industry and marketplace.  If that isn't enough, the very fundamentals of leadership and management as we have known it are undergoing profound change.    

The CEO's job is to be the over-the-horizon radar for the company, to be looking for strategic opportunities, making sure your people, organization and resource base are ready to adapt quickly to changes in the economy, the marketplace, your industry.  The great English banker Baron Rothschild once said, "The time to invest is when blood is running in the streets."  When the world is changing as fast as ours, it is running in the streets somewhere.  Those streets may be yours.  Right now, entire new industries are hatching, others are on the downslope to oblivion.  If you are staying busy, busy, busy doing things that other people could and should be doing, your corner of the forest may be on fire and you may not even realize it, buried in the trees as you likely are.

If you have built an effective organization, your employees will want you to be reading, meeting with industry experts, going to conferences, gazing into your crystal ball, getting educated, exploring new technologies.  Their ability to make their house payments depends on it.  It will take some time to bring your people up to speed so you can offload your non-essential responsibilities on to them.  It will take some communication with and explanation to help your employees understand this shift in your behavior.  Once they understand, the odds are excellent that they will be enthusiastically supportive, particularly if you keep them informed about what you are seeing and learning.  You'll have lots of material for your blog on your company intranet.  Don't have an intranet yet?  Don't have a blog yet?  

I rest my case.

The End of Business Travel

By
Lanny Goodman
on March 9, 2008 7:00 AM | | Comments (0)
Why is it that every day, hundreds of thousands of business people strip down, pile all their belongings into gray plastic trays, trudge through airport security, climb on to absurdly cramped aircraft (with questionable maintenance as we read in the news this week), have their biological clocks confused, expose themselves to God only knows what kinds of infectious diseases and deep vein thrombosis (which American Airlines thoughtfully explains in the back of their inflight magazine), spend increasingly astonishing amounts of money to stay in the uninspiring surroundings of chain hotels, rent unfamiliar cars, turn around and do it all again, finally crawling into their own beds at some ungodly hour after three hour flight delays and missed connections when they could have walked a few feet down to the videoconference center and conducted their meeting electronically in about a tenth of the time and at virtually zero cost?

I've been around long enough to remember when air travel was a big deal.  People dressed up for the occasion.  The airlines actually tried to serve decent food.  It was a bit exotic, romantic, an adventure.

Today, between the airlines' conviction that unless the passengers suffer broken legs they haven't found the limit of the number of passengers they can cram into a plane, the TSA who strips us down and x-rays everything we own to convince us that flying is actually safe (in spite of failing to catch 75% of the government's tests simulating smuggling contraband onto airplanes) bad or no food at all, air travel is about as appealing as riding Greyhound.  And at Greyhound you don't have to deal with the TSA.

I took my stepdaughter and granddaughter and wife to New York last fall to visit my oldest daughter Jenessa and her new baby.  I've been going to New York since I was a child.  The hotels that I normally stayed were now at least $450 a night.  The Marriott Marquise on Times Square where I've stayed many times...$750.  We're talking Marriott here, not the Four Seasons.  I was astonished.

I have literally millions of air miles under my belt.  It is generally a misery.  

Not very many years ago, videoconferencing was very exotic technology.  Then, it became more affordable, but still required ISDN lines to work properly.  An ISDN line is basically two POTS (plain old telephone service) lines multiplexed together.  To get 30 frame per second, full motion video, you need three ISDNs (384K of bandwidth).  They are relatively expensive, tend to be fussy to get installed right and maintain, and when you are using them, you are making the equivalent of six concurrent long distance phone calls.  

You couldn't use internet protocol (IP) because the IP isn't a real time process.  Half your data packets could be getting routed through Oshkosh and the other half through Stockholm. When they all train up and run down to your email box, the difference in timing doesn't matter.  For video and audio, the latency or timing is critical.  A few years ago, however, the internet backbone adopted QOS (quality of service), a technology that flags and prioritizes traffic.  Video gets top priority, voice second and data third.  This has made IP videoconferencing viable.  Now, you have only the cost of your broadband service (which you are paying for anyway) and the cost of the equipment.  

Cisco Systems is using the term telepresence now to describe the systems they are selling (http://cisco.com/en/US/products/ps7060/index.html).  Life size, high definition is pretty amazing, but still relatively expensive.  However, high def is increasingly coming into the cost range that almost any business can afford.  Take a look at www.lifesize.com.  The Cisco setups cost about $375,000 per station and need a T-3 circuit to handle the bandwidth.  A bit out of reach for most.  Polycom is the market leader in videoconferencing (www.polycom.com) and you can put in a station for about $6,000, and much less if you want to use your computer monitor.  

By the way, when I talk about videoconferencing, I'm not talking about a Logictec web cam clamped onto your monitor and a two inch square jerky picture on your screen.  A good video conference setup allows you to control the camera at both ends.  You should be able to pan and zoom, preset shots if you are covering a large meeting room at the other end, and set the camera to follow voices if you want.  

I can tell you this. I put videoconferencing in six or seven years ago and spent six hours in my first video meeting with a client in California.  When the meeting was over, I sat there stunned realizing that I didn't have to dash to the airport, turn in the rental car, wait for an hour plus (assuming the flight was on time) suffer the indignities of security and get home at one in the morning.  I walked over to my desk and got almost an additional full day's work done.

So why isn't everyone doing this?  An excellent question the answer to which eludes me.  It won't work for every type of business meeting.  It's not the same as being there.  It's about 85% though and I believe it would eliminate about 75% of business travel.  Let's face it, air travel is bad for the environment, it's hard on the people, it's incredibly expensive especially when you factor in the lost productivity and physical wear and tear.

I remember when fax machines were exotic.  When I was meeting with a client in Manhattan and they suggested we fax our lunch order down to the deli around the corner, I knew the fax revolution had arrived.  Once it hit critical mass, it just exploded.  Everybody had one.  Sooner or later the same has got to happen with video.  The economics are there.

If I ran a company with an outside sales force with national accounts, I would offer to give  my clients a videoconferencing setup if they would use it to meet with my reps (and whoever else they wanted to talk to).  It would pay for itself in a few months.

There is every reason to make videoconferencing as ubiquitous as fax, email or telephone.  It is technology whose time has come.  Make your people happy.  Keep them at home where they can eat home-cooked meals, drive their own cars, sleep in the own beds with their partners, and get more work done with less effort and sleep deprivation.  Bite the bullet.  Put a system in and experiment with it.  If you have two locations, it's a no-brainer.  If you don't, talk to a customer you travel to regularly and see if they would be willing to run the experiment with you.  When enough people realize the benefits, we'll get to critical mass.  

Then, mercifully, our trips to the airport will be fewer and farther between.  By the way, my video address is 63.253.185.66.  Give me a call.

Performance Review Madness

By
Lanny Goodman
on March 8, 2008 12:00 PM | | Comments (0)
Most people look forward to performance reviews about as much as they look forward to a root canal.

As leaders/managers that should make all our alarms go off.

There are so many things wrong with how traditional performance reviews get done that it's difficult to know where to start, but let me drop one idea in the bucket.  We'll revisit this subject many times I expect.

Here's the key question: Each employee engages in many transactions daily with other employees.  What percentage of those transactions are between the employee and his/her boss?

A relatively small percentage.  In many cases, less than 10%.transactions.jpg
This should raise the obvious next question:  If the boss has among the fewest interactions with the employee, why is the boss doing the performance review?  He/she probably knows less about the employee's performance than almost anyone in the company.

This may appear to be an overstatement, but if we look at the the internal relationships in the company as internal customers and vendors, then it becomes apparent that while the boss is certainly a customer of the employee, he/she is only one of many customers the employee serves.  This raises a third obvious question: since the quality disciplines tell us that customers get to define quality, why are the internal customers not conducting the employee's performance review?

For more thoughts on this subject, you'll find some interesting articles on one of my websites, www.fiveminutemba.com.

Climbing the Food Chain for Fun & Profit

By
Lanny Goodman
on March 5, 2008 7:28 PM | | Comments (0)
Entrepreneurs often fail to grasp the importance of moving up the food chain with their customers.  This concept is crucial to the smaller company that will always struggle to survive competing with the commodity level pricing set by the big players in any mature market.

Let's look at what I mean by the food chain.

At the bottom of the food chain in your customer organization are purchasing agents.  I'm sure that as human beings go, purchasing agents follow a normal distribution from saints at one end of the spectrum to jerks at the other with the majority being somewhere in the middle.  That's not the problem with purchasing agents.  The problem is they are genetically engineered to spend as little of their company's money as humanly possible.  If they are successful at all in their careers it's because they are very good at minimizing costs.  The are compensated and rewarded for cutting costs.  They are not value oriented.  By in large companies don't want their purchasing people concerned with value.  Their job is to focus on reducing cost of materials, labor, subcontracts, inventory, office supplies, computers and everything else the company buys.  That includes whatever you have to sell.

These are not people you want to be doing business with if you can possibly help it. 

The reason is that the 800 and 600 pound gorillas in your market have the economies of scale to compete on price.  If you are a smaller company, you don't.  Your ticket to prosperity is selling value, becoming important to your customer, finding ways to make his/her pain go away, to take work off their desks and make them look like heros and heroines to their bosses.  That's the real business you are in.

The interesting phenomenon is that as you move up the organization ladder, you will find the people you are dealing with are decreasingly focused on costs and increasingly focused on value.  They define value as anything that helps them accomplish their strategic objectives and frees up bandwidth for them.

Most business people love their own products and services and assume their customers do as well.  

They don't.

They will however if you can broaden the context of what you do.  If you run a janitorial service, you are a necessary evil to your customer.  If you sell office supplies, you are a necessary evil to your customer.  If you sell computers, you are a necessary evil to your customer.  If you manufacture subassemblies, you are a necessary evil to your customer.

Supposing however, as CEO of your janitorial company, you approached the CEO of your customer and offered to take over all facilities management.  You would set up an online trouble ticket system.  You would have inspectors walk the facilities every week looking for paint that needed touching up, furniture that needed reupholstering, light fixtures with burned out bulbs.  You would inspect all the HVAC equipment once a quarter, the roof once a year.  You would provide monthly reports.  You would establish a budget into which all routine maintenance (clearly defined) would fall.  Anything in excess or that required bringing in a licensed electrician or mechanical contractor would be extra and billed on a cost plus basis.  Would it take some work to retool your janitorial business to move up the food chain like this?  Sure, but not very much and the rewards make the effort exceedingly worthwhile.  

So what have we accomplished with such a proposal?

We have gotten out of our own reality framework and gotten into our customer's reality framework.  Facilities management is a headache for every business person.  Take that chore off my plate and the bandwidth you free up means I and my people can do more of what we get paid for (and make money doing) and spend less time doing stuff that has no intrinsic benefit.  As your customer, I'm happy to pay you well for taking this off my plate because you are helping me make more money.

The key questions to ask are:

  1. Where does my product or service fit into the systems and processes of my customer?
  2. Instead of providing just a component product or service, how can I provide the whole system of which my product or service is a part?
I met a fellow once who built a very successful office supply company by putting a cabinet full of office supplies at no cost in the offices of hundreds of companies.  Every week he sent a rep around with a truckload of the most commonly used supplies and restocked the cabinet and sent the company a bill for what they had used.

Tracking and ordering and restocking office supplies is a necessary evil.  No consumer of office supplies makes money doing this.  It takes money away from them.  Take that chore off someone's plate and they won't care if you're 10% more expensive than Office Depot.  You are freeing up resources that can be put to use helping them take care of their customers.

Will everyone buy this kind of value added service?  Of course not.  But if you subscribe to the Pareto Principle (20% of your customers provide 80% of your profit), all you have to do is sell those 20% and your business will leap to a whole new level of profitability and professionalism.  As you add more of those kinds of customers, you can start firing those customers who only want your commodity service.  You can do much better redeploying those resources where you are getting your premium margins.

One point to consider.

Going back to our example of the janitorial service moving up the food chain, if you approach a company's facilities manager with such a proposal, you will fail.  He or she is very likely to see you as a threat to his or her job, rather than someone who can free up their bandwidth so they can become more important to their company and advance their careers.  (Employees don't always get the food chain thing either.)  Better to go to the person who manages the person who manages the system or process you want to take over.  Better yet, go right to the top.

Also, do not be intimidated by taking on work that you haven't done before.  You can partner with someone who does know how to do it until you have learned how.  To quote 19th century Prime Minister of Great Britain Benjamin Disraeli, "Audacity is the foundation of all great achievement."
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