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Learning and Productivity Compound Over Time

Mathematician and computer scientist Richard Hamming on how learning and productivity compound over time

How are some people more industrious and prolific than others? Are they merely smarter or do they just toil a bit harder than everyone else?

In 1986, mathematician and computer scientist Richard Hamming gave a talk at Bell Communications Research about how people can do great work, “Nobel-Prize type of work.” One of the characteristics he talked about was possessing great drive:

Now for the matter of drive. You observe that most great scientists have tremendous drive. I worked for ten years with John Tukey at Bell Labs. He had tremendous drive. One day about three or four years after I joined, I discovered that John Tukey was slightly younger than I was. John was a genius and I clearly was not. Well I went storming into Bode’s office and said, “How can anybody my age know as much as John Tukey does?” He leaned back in his chair, put his hands behind his head, grinned slightly, and said, “You would be surprised Hamming, how much you would know if you worked as hard as he did that many years.” I simply slunk out of the office!

What Bode was saying was this: “Knowledge and productivity are like compound interest.” Given two people of approximately the same ability and one person who works ten percent more than the other, the latter will more than twice outproduce the former. The more you know, the more you learn; the more you learn, the more you can do; the more you can do, the more the opportunity—it is very much like compound interest. I don’t want to give you a rate, but it is a very high rate. Given two people with exactly the same ability, the one person who manages day in and day out to get in one more hour of thinking will be tremendously more productive over a lifetime.

Thinking of investing your time and energy in terms of this compounding effect can be a very useful way to go about life. Early and rigorous investment in anything you are interested in cultivating—friendships, relationships, wealth, understanding, spirituality, know-how, etc.—often generates exponentially superior results over time than even marginally less effort.

Success begets success, and that counts for small investments, too.

Try to have “more experience” than someone else, but it’s not by itself enough. It’s about how well you can draw the appropriate lessons from the experiences. It’s about how well you can distinguish specific experiences as generalizable versus anomalies.

Knowledge Compounds

Someone once asked Warren Buffett how to become a better investor. He pointed to a pile of company annual reports. “Read 500 pages like this every day … That’s how knowledge works. It builds up, like compound interest. All of you can do it, but I guarantee not many of you will do it.”

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Posted in Education and Career

Welcome to An Era of CEO Activism

Welcome to An Era of CEO Activism

Gone are the days when managers would shrink back from revealing their beliefs and viewpoints on matters that had little to do with their company’s routine endeavors.

Leaders should think carefully before jumping on the closest soapbox. Starbucks’s Founder and CEO Howard Schultz learned that the hard way in 2015 when he started the Race Together campaign in the aftereffects of the killing of Michael Brown in Ferguson, Mo. Schultz inspired Starbucks baristas to converse about race relations with customers whilst serving them their morning coffee. That didn’t come down with easy. In due course, Starbucks dialed back the initiative.

  • Topic: Race relations. Starbucks’ Howard Schultz got into hot water after he launched Starbucks’ Race Together campaign which encouraged baristas to talk about race with customers.
  • Topic: Vaccination. Facebook’s Mark Zuckerberg incurred the wrath of anti-vaccine commenters when he posted a picture of his Infant daughter visiting the doctor for routine vaccinations.
  • Topic: Common Core Education. ExxonMobil’s Rex Tillerson aroused the ire of education advocates when he referred to American students as “products” that companies simply don’t want to buy.
  • Topic: Global Warming. Unilever’s Paul Polman has publicly maintained that businesses and governments should commit to environmentally sustainable practices.
  • Topic: LGBT Rights. CEOs of Salesforce, Apple, Intel, Dow, Bank of America, Facebook, Yahoo! and others have come out against a wave of anti-LGBT legislation in several states.
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Posted in Global Business Leaders and Innovators Management and Leadership

The Best Leaders Model Their Stated Priorities

Leaders Model Stated Priorities

Everyone is a boss-watcher. “Other people take their cue from the leader—not from what the leader says, but what the leader does,” says Colin Powell.

The leader is always in a glass house. People listen to the words, but what really interests them is what the boss does. People carefully track what questions he asks, what reports she asks for and reads, what meeting agenda priorities he sets, what resources she allocates, whom he criticizes, what thrills or angers her, whom he lauds, whom she promotes, whom he assigns to which project, and whom she visits and hangs out with.

People observe these things, and then, regardless of the boss’s words they draw conclusions about what’s really important, what’s truly urgent, what must be the top priorities, and who the leader is. When the leader’s words and deeds match, the leader’s credibility and influence go up in their eyes. When they don’t, credibility and influence are diminished. This is such a powerful and predictable process that leaders have no neutral actions. Each action or decision has great symbolic impact.

Too often, leaders aren’t aware that they’re being observed, and that colleagues have long memories. Some leaders think nothing about promising something and not delivering, or stating a priority and not “living” it. If an executive states that being customer-centric is a priority, but he is not spending more time with customers, then he’s not walking the talk He’s not doing the work of leadership. If she doesn’t personally insure that capital allocation, performance metrics, sourcing, logistics, scheduling, information systems, and compensation reflect a customer-centric priority, she’s not walking the talk She’s not doing the work of leadership. In both cases, it’s not likely that innovative, proactive customer-centric work will be done.

In contrast, effective managers know that their glass house offers enormous leverage in boosting performance, as well as their own credibility and influence—but only if they become the ultimate role model. For example, if a leader talks about honesty, candor, open-door communication, collaboration, or risk-taking, then that leader more than anyone else—must model and support those virtues. The leader must not only be honest and candid, but also ensure that employees who do the same are properly acknowledged, rewarded, and protected. When people see these actions, they know that they can count on their leader, and are more likely to cultivate those virtues themselves. The leader’s power and integrity are enhanced in the process.

Effective managers become the ultimate role model

How powerful is the “glass house effect”? Well, consider how it might be applied to a current vexing national problem. Over the past 24 months the integrity and liquidity of our capital markets have been assailed by a wave of scandals revolving around fraudulent financial reporting, sleight-of-hand accounting, piracy in the executive suites, and incestuous self-serving relationships among accountants, consultants, analysts, and investment bankers. The effect not only extends the economic recession, but it also breeds doubt and cynicism about the market system.

When President Bush spoke about corporate malfeasance, about righting wrongs and putting the bad guys away, few question his sincerity. But to take advantage of the “glass house” effect, he could use the “bully pulpit” of his office to do the following:

  • Talk frankly about honesty, full disclosure and transparency in reporting.
  • Decry phony revenues, bogus earnings, spinning IPO’s, cozy analyst investment banker relationships, and risk-free executive compensation.
  • Cite high-profile examples of greed and deceit, express serious concern, and offer inspirational alternatives.
  • Refer to abuses in governance and underscore the fiduciary responsibility.
  • Discuss accountability for illegal activity, including civil litigation, criminal prosecution, and imprisonment.
  • Tell new SEC head William Donaldson to aggressively pursue corporate corruption and market abuses to avoid conflict-of-interest charges.
  • Tell us that his new team will be packed with people of impeccable independence, integrity, and competence.
  • Raise the SEC’s annual funding as the agency copes with many cases. Leaders define their agenda by the resources they allocate to it.
  • Insist that the agency aggressively pursue corporate corruption.

Great leaders mobilize people to do extraordinary things with simple ideas. During the 20 years that Jack Welch transformed GE, he was only committed to a few strategic priorities: globalization, total quality, boundaryless, de-bureaucratization, and e-commerce. None of these initiatives were new. Many companies had similar objectives. But Welch demonstrated a fanatic obsession with driving each initiative, and held his managers accountable for achieving results. GE people knew where their CEO stood. Welch’s approach was aligned with Powell’s advice: “Figure out what is crucial, and stay focused” When people see that resolve, they “get” what their mindsets and behaviors ought to be.

Great leaders clearly state their principles and goals and follow through. They live the principles, own the goals, and ensure that everyone is aware of it. If you’re a leader, learn to use your visibility to your advantage.

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Posted in Management and Leadership

Saints Augustine and Saint Thomas Aquinas Vilified Women in Their Writings

You can find other disparaging remarks about women throughout the history of philosophy. Consider what seminal Catholic thinkers like Saint Augustine and Saint Thomas Aquinas had to say about women:

  • “Woman is defective and misbegotten, for the active force in the male seed tends to the production of a perfect likeness in the masculine sex; while the production of woman comes from defect in the active force or from some material indisposition…”
    Source: St. Thomas Aquinas, Summa Theologica, q. 92 a. 1
  • “Good order would have been wanting in the human family if some were not governed by others wiser than themselves. So by such a kind of subjection woman is naturally subject to man, because in man the discretion of reason predominates.”
    Source: St. Thomas Aquinas, Summa Theologica, q.92 a.1 reply 2
  • “I don’t see what sort of help woman was created to provide man with, if one excludes the purpose of procreation. If woman was not given to man for help in bearing children, for what help could she be? To till the earth together? If help were needed for that, man would have been a better help for man. The same goes for comfort in solitude. How much more pleasure is it for life and conversation when two friends live together than when a man and a woman cohabitate?”
    Source: St. Augustine, Genesi Ad Litteram, 9, 5-9
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Posted in Faith and Religion

19 Types of Leadership Styles

Types of Leadership Styles Which means we all have the ability to provide leadership in some way: as professionals, as parents, as spouses, and as friends. To find a reason to want to lead we only need remember that when we provide leadership, we create value. And value creation creates happiness. Few things bring as much satisfaction as a job well done. They opposed the centralization of authority in the revolutionary leadership, agitating for moderation and “democracy”, and they enacted a number of important social reforms.

We are re-evaluating leaders, downgrading those who are guided by history, not vision; by what they know, not what they can find out; by what has worked before, not what works now; by a sense of power, not a sense of people. From experience, I draw these 19 types who are less than real leaders:

  1. Manipulator. He believes everyone has a price. He exploits the system and mistrusts people who have no hidden agenda or naked ambition or who appear to be straight arrows. Whatever his self-indulgence, he expects it to be reflected in his people. He is attracted to those who display similar inclinations. Using fear and intimidation, he manipulates people.
  2. Types of Leadership Styles: Frustrated Participant Frustrated Participant. He wants to believe in the system and sees himself as dedicated, loyal, and ambitious. He absorbs inconsistency in policy, flagrant violation of fairness, and blatant duplicity without protest or complaint, feeling he must protect the company’s image. He anticipates his boss’ needs, whether appropriate or not, feeling that it is safer to go along to get along rather than to challenge a boss.
  3. Inside Outsider. He experiences inclusion, but not as a player. Ever the outsider, he is a specialist with skills but never with line authority. He may have impressive credentials, pay his dues, and be initiated into the culture of the elite, but he is never identified by it as “one of us.” Much as he tries to enhance his status, his unique skills only exaggerate the difference, eclipsing his perceived effectiveness. So, he experiences being needed but not wanted. If he can handle this, he will be tolerated. If not, he will lose his influence and his station.
  4. Winning Side Saddler. He is a pyramid climber, pleaser, anticipator, and executer, dispatching issues before they become problems, endearing him to his bosses. He is a chameleon with no coherent point of view, a hunch player who knows every verse of the “CYA” book. He tells you what you want and expect to hear. The more uptight people are, the more prominent his role, as he provides a buffer to the ugly edges of reality. In case of a power shift, he has already saddled the winning horse.
  5. Types of Leadership Styles: Nostalgic Elitist Nostalgic Elitist. He is a vestige of past glory who lives in a black-and-white world of workers and managers, thinkers and doers, educated and the ignorant. He takes cynical delight in the vocabulary of “social change,” as he sees it changing nothing, merely manipulating fads and slogans with smoke and mirrors. He prefers fixed structures and closed systems. He can’t fathom why his authority is challenged, why the less gifted are to be treated as equals, or why his superiority is not self-evident.
  6. Waiter in the Wings. He appreciates both his potential and obstacles to success. While others complain about change, he is husbanding his resources, planning tactics, and developing strategy. he has no plans to tie his future to a sinking ship. Operationally, he makes himself indispensable, balancing stealth with openness, insouciance with results. He is waiting in the wings to make his move. As relaxed as he seems, he is wound as tight as piano wire. He can only wait so long before he moves on.
  7. Happy in Harness. He accepts his role because he loves what he does, never wanting to be anything else. Each promotion is a genuine surprise. By nature, he is appreciative and generous, easy to work with or for, competent without being righteous, confident without being arrogant. He creates a climate for growth. He is trusted and fair, consistent and honest. He would never countermand an executive order or bad-mouth a superior. He takes pride in his position.
  8. Quiet Soldier. He is more comfortable as a follower and identifies with the aspirations and frustrations of his subordinates. By inclination, he is a doer rather than a thinker, an implementer rather than, an innovator. He is a frustration to those in charge. They see him having the talent but not the resolve to accept risk or do more. Moody and taciturn, he is apt to accept untenable situations rather than do something about them. His predilection to wait for orders can derail projects and miss deadlines.
  9. Victim. The victim has a martyr complex. He expects to be trusted without being trustworthy, given cherished assignments without being dependable, and taken at his word without being credible. Call it tunnel vision, myopia, or hindsight, he has it. He delights in the failures of others, but finds no humor when others delight in his. When others fail, they’re incompetent; when he fails, others let him down. He claims other people ban him because of his race, religion, ethnicity, status, education, accent, or origin. If that fails, he is discriminated against because he is too fat, thin, short, tall, old, young, quiet, or loud. He justifies his performance—and he wants blame put on everything and everybody.
  10. Types of Leadership Styles: Unbending Idealist Unbending Idealist. He idealizes life and lives in a dream world. He is a product of film and television and prefers to see the world as it should be and himself as a savior of lost causes and lost souls, explaining away failures and suspect conduct. Consequences are suspended, forgiven, or ignored. The idealist suffers incurably from naivete, failing to see it as compassionate condescension. With every failure he reinvents himself, never seeming to register the folly of his ways. His idealism drops like a stone into cynicism once brutal reality meets unbending idealism.
  11. Adventurer. Consumed with the adventure, he is out to push the envelope. When cornered, he comes out swinging with a “red pencil,” a caustic remark, or an exception to the rule. He can lie with a straight face, looking his accuser in the eye. He has no sense of consequences, as it never occurs to him that he might be caught, humiliated, and terminated. Constantly challenging himself to be more sensational, he cuts corners, fakes results, doctors the books, invents fictitious deeds, and musters the support of legitimate doers by guile, vanity, and flattery.
  12. Spin Doctor. As the public relations conduit, he is the eyes and ears and voice of authority. His concern—to put a good face on a bad situation—requires him to be a good liar. He tends to reduce everything to PR speak with cavalier flamboyance, dismissing the facts, often believing in his own rhetoric or press release. He is apt to be a quick-witted, congenial, backstage performer.
  13. Reluctant Soldier. Neither leader nor follower, he simply is. Everyone knows and tolerates him. No one expects anything from him, and nobody does anything about him. He’s been at the same job at the same level for years and received increased compensation and entitlements for doing less and less. Survival is his sharpest tool.
  14. Types of Leadership Styles: Unforgivable Prodigal Son Unforgivable Prodigal Son. This person once stumbled badly. His faux pas was of such magnitude to embarrass the company but not warrant dismissal. Once he was punished, he returned to his job stigmatized, and became a pariah with his guilt whispered behind his back. New people are told to stay clear of him. He tells new people of his crime before they ask. Gossip and innuendo are his weapons of mass emotional destruction.
  15. Over Achiever. By educating himself beyond his intelligence or by pushing his ambition to the brink, he is exposed to situations beyond his capacity to cope. Action is his call and shooting from the hip is his modus operandi. He has a surface acumen that is engaging and catches the eye of his superiors. His intensity is contagious. He is likeable and agreeable. He has lived so long with his limitations, which he hides in a swirl of activity, that they have become assets. He is better suited to manage things than people.
  16. Messianic Manager. He sees himself as a savior. His approach to modify reality is to create the culture that supports the interests of the organization and fulfills the needs of workers and, voila! Leaders and workers get off the dime, move on to the same page, and work gets done. He thinks that giving workers everything but the kitchen sink will cause them to applaud leadership with high-level performance. This does not happen. Rather, the culture stumbles into a permissive complacency, where workers waffle in terminal adolescence.
  17. Pained Participant. He is able, but the world is organized against him. A tragic figure, he is like a Dante who has lost the keys to his own inferno, caged in the pain of self-pity, seeing his situation as unique and his dilemma untenable. He wrestles with his confusion in dialectic, which he will gladly share with you. Life is against him because he doesn’t have the right parents, proper education, or the breaks. He is in a cage of his making with an invisible ceiling enclosed in invisible walls. Life, the system, the company, circumstances have all wronged him. His anxieties plague operations.
  18. Types of Leadership Styles: Missionary Missionary. He spreads the gospel according to the corporate fathers to the masses. He does this without question or reflection. He is an acolyte, and they are his knowing masters. When this mission is consistent with what is needed, everything works smoothly. When the mission conflicts with need, derailing momentum and causing tension, he takes responsibility. He is on a mission to help people be in sync with policy. He has a strong character but a narrow point of view.
  19. The Professional. The professional’s degree and title are often used to justify his pay grade and benefit package. He is rarely schooled in the discipline of his charges but believes that he can manage anything. He feels ordained to position, power, and perks. He has this romantic notion of being instantly gratified with affluence, prestige, privilege and trust without earning any of it. Lost on him is the import of experience and the benefit of failure in learning. For him, acquiring credentials is a way to avoid struggle and pain. He wants a position, not a job; desires authority without accountability; and expects to be measured in terms of time spent doing rather than results. To him, having presence is more effective than purpose; making an impression more defining than making a difference; having a winning personality more the focus than winning performance. He is programmed to behave in learned helplessness.

Contrast these types of leaderships with someone who genuinely believes themselves to be a capable leader. Such a person can recognize their mistakes without succumbing to paralyzing insecurity. They can counterattack pleas for inappropriate special treatment lacking fair justification because to give in wouldn’t fit with their vision of good leadership and because they can survive being disliked. Others may disagree with their decisions, disapprove of their vision, but seldom question their skills as a leader.

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Posted in Management and Leadership

Core Challenges to Contextual Leadership

Core Challenges to Contextual Leadership

Leadership is a socially constructed phenomenon and that organizational members act to co-create leadership.

Leadership is a vibrant, contextual phenomenon that occurs in a multitude of different organizations or systems. Mostly, we can learn from them that leadership is more multifaceted than standard business contexts imply, and that precious lessons can be gained from the characteristics and foibles of leadership in many contexts.

On the one hand, contextualizing leadership in modern organizations, which are complex systems, is more than conventional approaches can encapsulate. On the other hand, leadership theory and research in nonstandard contexts are too vague and imprecise about their contributions to the general field of leadership.

  • Pressure and competition. Leaders are under high, individualized pressure to be successful, while they can only create empowering conditions for organizational effectiveness
  • High risk. Navigating the boundaries of “life or death” contexts, leaders’ actions have possibly devastating consequences for themselves and others
  • Creativity and innovation. Leaders are challenged with the paradox between basically striving for creativity and innovation, while eventually having to meet specified targets
  • Care and community. Contextual conditions hamper leaders’ attempts and responsibilities to take care of others’ wellbeing
  • Adaptability. Leaders who plot a course through complex contexts need to be flexible in their approach to leadership, tailoring it to the idiosyncrasies of each context
  • Perseverance. Leaders need persistence to surmount drawbacks and failure in order to ultimately grow and succeed. Organizations nurture this process by providing leaders with a supportive environment, while leaving room for personal growth
  • Handling paradox. In complex contexts, paradox may arise in many different forms. Leaders can handle it, perhaps, by using formal and informal structures, and managing internal processes and external views of an organization concurrently
  • Leading with values. For the sake of their own and others’ wellbeing as well as sustained organizational success, leaders need to reflect and act based on their fundamental beliefs and moral values
  • Inventing the future. Leaders nurture creativity through socially determined processes. New approaches such as play enable leaders to envision potentialities of the future
  • Sharing responsibility. The complexities of modern organizations require leadership in the collective, for example, in the form of shared values-based leadership in communities
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Posted in Management and Leadership

Business Analyst Scott Galloway on The Folly of Twitter’s Part-Time CEO Jack Dorsey

Business Analyst Scott Galloway on Folly of Twitter's Part-Time CEO Jack Dorsey

At a keynote address at Amazon Professional Sellers’ Summit NYC 2017, the fast-talking, straight-faced New York University-academic and business analyst Scott Galloway addressed the folly of Twitter’s board of directors and part-time CEO Jack Dorsey:

I think the board of Twitter is negligent and should be removed by shareholders … To say to somebody she is better than you at 25 hours a week than you are at 50 hours a week is negligent … There is no way that cannot create negative morale in a management team and send absolutely the wrong signal at everybody … [Being a CEO] is not a part-time job, especially when thousands of people are relying on you for their livelihood and tens of thousands of people have decided to put their hard-earned money into your stock and you are literally competing in what is probably the highest stakes game in history … and that is who wants custody of the consumer in social media and yet they have a part-time CEO … that is just negligent and outrageous … if someone is talented … if someone is really impressive … and that person happens to be in their 30s and wear a beard and a turtleneck we think “Oh, it’s Jesus Christ risen again” … “It’s Steve Jobs” … we have this idolatry of innovators that is really unhealthy and unrealistic and damaging to basic common business sense and business maturity around shareholder value.

'The Four: The Hidden DNA' by Scott Galloway (ISBN 0735213658) Part of Scott Galloway’s appeal is his deadpan delivery of peppery one-liners.

Legendary investor Bill Miller has criticized Twitter on this topic: “It is insane to have Jack Dorsey be a part-time CEO at a company with the issues that Twitter has. … If a part-time CEO makes sense, then so does a part-time CFO, part-time chief technology officer. That just makes no sense whatsoever.”

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Posted in Management and Leadership

Take Care of Business by Posting Sincere Quarterly Results While Building Long-term Value

Balanced Shareholder Value Technological progress over the last decade—especially in communications—has accelerated the expansion of commerce, the creation of wealth, and the pace of living.

Consider a few statistics. There are now 15,000 communications service providers operating worldwide; just one decade ago, there were less than 1,000. Last year, enough fiber optic cable was laid to encircle the earth some 400 times. Internet traffic is doubling every 100 days. Nearly 350 million people are already online worldwide with 100 million more expected to join them in 2001. Buying and selling on the Internet, or ecommerce, has reached $700 billion worldwide—and is expected to approach $7 trillion in five years.

Technology and Growth

The technology industry has played a central role in contributing to this growth. Technology company is creating the systems and technologies that will make the Internet mobile and able to do things we can only dream of today. With the phenomenal growth of the Internet, the penetration of cable television and the rise of wireless communications, we live in a world where fact-based information, tailored to our individual tastes, is available 24/7 wherever we are. That is the bright side. On the darker side, the same technology is also delivering us rumors, innuendo, and blatant misinformation.

Pressures of Instant Information on Stockholders With our robust economy, expectations for a better life have never been higher. However, in many cases, high expectations give way to instant gratification and outright greed. Overnight wealth is now part of pop culture. The objective of corporations is to create wealth for shareowners by delivering products and services that customers find of value. You cannot do that if employees are in a free-for-all to undermine their colleagues. Creating value is a far different game than scheming to be the last person standing. And it requires far different behavior to succeed.

In any institution, you can find people who are out for personal gain at the expense of the enterprise. However, the lack of integrity catches up with them. It always does. At the same time, the business world does have its problems, real as well as perceived, including events that raise questions about corporate behavior.

Accidents happen. The Exxon Valdez oil spill was an accident. Manufacturing errors happen. That’s why Bridgestone and Ford are in the headlines today. And sabotage happens. How companies respond to these crises determines the size and healing time of the blemish on their reputations. Companies, like Johnson & Johnson, that are proactive and completely open with the public, recover fast.

Corporate reputations always seem to be under scrutiny. Corporations owe something to their workers, the communities in which they operate, shareowners, and other constituencies. Shortly after I joined technology company, the company held its annual Global Days of Caring—a worldwide employee volunteer effort in which tens of thousands of technology company people participate in worthwhile community projects, ranging from cleaning up parks, beaches and playgrounds, to assisting at childcare, senior citizen centers and homeless shelters. Making a difference in communities has become a central part of technology company’s culture.

Pressures of Instant Information on Stockholders

But meeting the needs of shareowners, employees, and the community is increasingly difficult, because companies face new pressures that are created by the combination of instant information and the growing notion of instant gratification by investors.

A few years ago, business could plan and execute for the long term. Sometimes that meant making sacrifices in the short term that retarded bottom-line growth for a quarter or two. But such sacrifices had the potential to create breakthroughs in technology that could change an industry, the way my company did with the invention of the transistor, lasers, and fiber optics—technologies that spawned new industries.

If a company was strong and had a reputation for making successful transitions and delivering value to customers, investors tended to show patience because they understood that efforts were being make for the long-term health of the business.

How to Beat Wall Street Reliably Today, instead of the idea of who will win in the long term, the market is focused on who’s winning this quarter, who’s winning today. Business has become a spectator sport, a high-stakes game that is played out daily by people who watch corporate box scores scroll across their PCs and television sets, by people who place instant online bets that are based on breaking news, rumors, or the body language of a CEO on CNBC’s Squawk Box—all designed to feed into Wall Street, which has become a casino as millions of new players ante up for the next deal.

Business journalists and financial analysts have the power to cut a company’s market value in half with a single negative comment, or instantly drive its value up with a glowing report.

With the constant bombardment of gossip, rumor, and sometimes deliberately misleading information, it has become increasingly difficult to determine what legitimate business news is.

The temptation to manipulate the system is as strong as the opportunity to do so. At Technology company technologies, we have regular contact with many financial analysts. In addition, the people we deal with are trying to do the right things. But they are under severe pressure in a world that’s been sped up and turned upside down. Their reputations have been built on solid analysis of income statements and balance sheets. That’s how value used to be determined. Now Internet upstarts with small revenue streams and losses instead of earnings can have huge market valuations. How do you analyze these companies and make recommendations to investors?

How to Beat the Street Reliably

'Investor Relations For the Emerging Company' by Ralph Rieves (ISBN 0230341969) Compounding the difficulty is the sheer speed of the market rollercoaster. One analyst recently said, “We live 12-week lives,” living quarter to quarter with the companies he is covering. That’s not healthy. That 12-week life involves predicting an earnings number with factors such as a company’s strength, the market’s strength, as well as a company’s own guidance on what it expects to deliver. They sit on the sidelines, watching and waiting. Meanwhile, companies are on the field competing—driving their businesses toward the finish line. They’re under phenomenal pressure to perform well and cross the finish line with increasingly higher results. It’s not enough to deliver what’s expected. The system rewards companies who under-promise and over-deliver. That’s the only way to consistently beat the Street’s expectations.

Not only are there expectations of a specific earnings number, there are expectations of a precision in delivering the number. In effect, the system is demanding perfect execution in every 12-week period. We have arrived at the age of instant analysis and sound bites that can cause major tremors in the market.

This is the reality companies face today as they work to serve their customers and build value for their owners clearly pressures are great to deliver strong quarterly performance—to “beat the Street”—and to do it consistently to keep the stock price rising.

Stock price was always the key measure of a company’s long-term health. But today stocks have become a strategic weapon. Stocks are the new currency for acquisitions of companies, technologies, and employees to bolster a firm’s competitive capabilities. Your stock price puts you in a position to be the parent or the acquired. Also, the value of a stock has a major impact on a company’s ability to attract and retain employees. Upstart Internet companies that are preparing to go public can be a huge temptation. Much is riding on quarterly performance. In striving not to disappoint Wall Street, companies are tempted to make short-term decisions that could be harmful in the long term. Worse, some companies are under such heavy pressure in the competition for investor dollars that they feel compelled to overstate their market performance and exaggerate their potential. So they provide a set of lenses for the fortunetellers. Sometimes it’s a microscope. Sometimes it’s a telescope. And very often it’s a kaleidoscope. Politicians call it “spin doctoring.” And some businesses have honed it into an art form.

'Using Investor Relations to Maximize Equity Valuation' by Thomas Ryan (ISBN 047167852X) If it works, it’s easier to do it a second time and a third time, until it becomes an addictive drug. Many companies have been on drugs. It’s time to get off them and begin managing their businesses, instead of managing their stock price. It’s a lot easier to cling to your values when you’re riding high. But the true test of a company’s character comes when it stumbles.

I believe that it’s the job of senior corporate leaders to step up to this challenge—to change the game by striking the right balance between the long- and short-term decisions that produce lasting health for companies. Business leaders must refuse to be drawn into shortsighted decisions that are driven by the media frenzy. They must resist being dragged to center-stage in the spectator sport that business has become. Business leaders have been entrusted to build strong companies by growing real value through innovating and delivering products that change the way people live and work. Instead of concentrating on what’s needed to make analysts happy, leaders should be focused of what they can do to serve their customers better. In the long-term that could mean facing up to the prospect of short-term pain if it’s necessary to sustain long-term gain.

Creating Balanced Shareholder Value Over the Long Term

Creating Balanced Shareholder Value Over the Long Term The system may be out of control, but the future is not. Value is not created overnight or over a 12-week period. Value comes from creating products and services that meet market needs. That’s not a short-term proposition. Companies experience vicissitudes. The fast pace of today’s marketplace requires constant adjustments and transitions. Often, companies that go through those transitions will pay the price for a quarter or two. But if they perform well, they come back quickly because of the bandwagon mentality of Wall Street’s fortunetellers.

Every year Fortune magazine compiles a list of America’s most admired companies. The criteria for the list range from long-term investment value to social responsibility. They are also viewed as the best places to work. These companies are taking care of business and meeting the needs of their shareowners, their customers, and their employees. And doing so has paid off. The top 10 percent of Fortune‘s list of most admired companies did twice as well in the stock market as the bottom 10 percent. That’s encouraging, because it says that in the end, good companies will always justify their value as long as they do the right things the right way.

Assess how well you balance short-term expediency and long-term growth.

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What Should Not Be Done

What Should Not Be Done

If I have to conform, how can I create? How can I innovate, if I have to play it safe? How can I discover new ideas in what I am doing?

Many frustrated people are seeking more meaningful work. They are bright and motivated to high achievement. Executives must rescue these talented people by finding ways to amplify their intelligence and motivation. Many high performance rewards await executives wise enough to capitalize on the yearning to create and innovate.

Innovative ideas are often found in paths we have yet to explore, and these paths are often revealed to us by people who ask us questions or give us directions. Questions and directions can be given in the form of what should be done or what should not be done. The form can either catalyze or kill creativity and innovation in people.

Consider questions and directions framed with the intent of advocating what should be. They are markers to assure safety—usually financial or physical—conformity to protocols and rules, and pursuit of wants and desires. Directives or questions emanating from this intent come as “this is what should be done or be happening;” or “what is the correct procedure—what should be done here?”

While “safety” and “security” are crucial to organizational well-being, these words are bipolar to words like creativity and innovation. If you have to conform, how can you create? If you are preoccupied with safety, how can you set sail in uncharted waters to innovate? Many executives confound their people by demanding creativity and innovation through questions and directions aimed at what should be. Executives need not abandon the “should be” form of questioning or directing in order to pursue paths to innovation and creativity. Such an action would excise critical markers needed for survival. The advocacy of an executive should be how to balance safety and security with innovation and creativity. This balance is achieved by using an alternate form of giving directions and asking questions.

Now consider questions and directions originating from what should not be. These directives or questions usually assume the form: “This is what should not be done” or “This is what should not happen.” When executives ask me: “Are you suggesting that I use negative questioning or direction giving as a management style?” I respond: “What could be more positive than avoiding that which should not be, and how can you avoid that which should not be if you don’t know what to avoid?”

Making visible what should not be can demand calling into action our own talents for innovation and creativity. For example, suppose I discover that you have a background in natural science when you and I are in Queensland, Australia, on a walkabout. All of a sudden you say to me: “About 15 feet ahead on the side of our path is a Taipan. If you continue walking in your current direction, you will encounter something that should not be.”

By issuing this warning, you gain my deep appreciation, as I am not interested in sustaining the painful bite of a poisonous reptile. You may also see how fast I can run or how high I can jump. If I try to catch and sell it, you may see what kind of an entrepreneur I am. By telling me with truth and fact what should not be, you cause my creative talents to emerge.

By managing your situation with truth and fact in terms of what should not be as opposed to managing on the basis of what should you be, you catalyze the attributes of innovation and creativity. People are then free to find their own best wave, knowing that are guarded from consequences of operating on the basis of what should not be. They also become confident in your role as one who would forewarn them about things that should not be.

Why are many executive directives I (even commandments of Deity) given in the form of “thou shalt not?” I believe the wisdom of the ages is rooted in a preference for freedom of action and an incentive for innovation and creativity.

Foster creativity and innovation

As I have tested this belief in managing projects and people, it has strengthened my resolve to illuminate, with truth and fact, that which should not be as the way to unleash latent creativity and innovation in people.

Any parent of teenagers knows that making visible hazards, obstacles, and things that should not be, will produce an astonishing array of creative ways around these restrictions. The creativity catalyzed by fear of parental consequences, from traveling restricted roads, somehow adds to their “thrill of the chase” and fuels competitive drive. These reactions are what executives seek.

There are other benefits to this approach. We can more readily agree on what we are about. Specificity in what should be is rarely obvious. Most admonitions are closely akin to “motherhood” statements leaving too many “hard to interpret” generalizations or mysteries for implementation.

When the boss specifies what should not be, we will find it easier to correctly interpret the intent. Things that executives should not do are more specifically set than those things that should be.

You must state what should be in order to promote safety and conformity in your pursuits. But, hopefully, you will add admonitions for behaving on the basis of what should not be. If these are entrenched in truth and fact regarding what should not be, you will foster creativity and innovation in your people.

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Engage in a Constructive Leadership Dialogue

Conduct Soul-searching Interviews with Outsiders

Engage in a Constructive Leadership Dialogue If you are a leader, what is your most important job? As stated by John Kotter, leaders groom organizations for transformation and help them manage as they struggle through it. That is their foremost job. However, how do they go about doing it? Jack Welch, former CEO of General Electric, once said: “My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too.”

Evidently, setting a direction for the future is an important aspect of leadership. Telling what the organization should become in the long term and how it should get there becomes the foremost duty. Soon after taking the helm of IBM, Lou Gerstner announced, “The last thing IBM needs right now is a vision.” Some people nailed his hide to the wall for that statement. He explains that reporters dropped the words “right now” from his statement. Gerstner felt that IBM was long on vision statements, but short on getting the job done. Fixing the company was all about execution.

Creating a Culture of Leadership

Execution is nothing but aligning people, motivating them, and creating a culture of leadership. Kotter contrasts execution with equally important but managerial duties such as planning, budgeting, organizing, staffing, controlling, and problem solving. The value of a wonderful strategy is only achieved when it is carried out. And it is the people who make the grand vision a reality. That’s why, as Jack Welch points out, leaders need to make it a priority to plant and nourish talented people at every level.

If you lead a big organization like General Electric, you might have assets at your disposal like the GE John F. Welch Leadership Center at Crotonville, the world’s first major corporate business school. Here everyone from important customers and partners to present and future GE leaders come together to identify opportunities and debate issues. But few organizations have the resources to invest like GE. They can’t operate a dedicated leadership center.

Creating a Culture of Leadership The constraint of a smaller budget is hardly an excuse to not operate key levers that drive superior performance in people. Going back to Welch’s garden analogy, some aspects of cultivation are free, such as sunshine. But how you choose to orient your garden in relationship to the sun makes all the difference. If you place your garden under a large shade tree, you cut it off from necessary nourishment.

While a leader needs to have a strong sense of the direction, cultivating new culture by changing people’s frame of mind and behaviors is the hardest part. In doing so, they can follow the profit-at-any-price model by relying on fear, pressure, and greed, or they can follow a more sensible leadership model based on inspiration, motivation, and enthusiasm.

Four Bad Leadership Models

Even leaders who articulate a convincing vision, inspire followers, and display passion and courage to take on challenges can have wasteful traits that limit them. These tend to manifest themselves in four ways:

  • Know-it-alls: They start believing that they know and do this better than anybody, and believe that they don’t need others as much as others need them. So they tend to treat others as dispensable and tune them out.
  • Micromanagers: They get mired in minutiae and sometimes miss the forest for the trees. By measuring too much, they measure nothing.
  • Perfectionists: They spend too much time doing things right rather than doing the right things, thereby losing focus. They take any constructive feedback as a direct hit and return what they see as not-so-friendly fire.
  • Detached: They become emotionally distant and lose the intimacy and connection to other people. To any push-back, they respond: “Tough! If I can do it, so can you.”

When these behaviors occur, the results follow quickly: Any constructive confrontation within the executive team ends almost immediately. Honest exchange of ideas on options and their pros and cons ceases. What is happening on the ground to the foot soldiers becomes irrelevant. The pressure people feel becomes unbearable. The “guilt trip” that nobody else is pulling their weight becomes harder to take. Any semblance of work-life balance is lost. Conversations become one-way streets, and people feel like glorified order-takers. It seems like they have ceded all authority to the boss.

The leader is quickly surrounded by loyal sycophants in the inner circle who simply want to ride the coattails. Everyone else is in the outer circle-albeit with more self-esteem, yet fearful to say that the emperor has no clothes. Soon people start telling the leader what the leader wants to hear, lest their heads are chopped off. Collaboration comes to a grinding halt, and providing lip service becomes the politically correct thing to do. Everyone looks out for themselves, and any mutually shared goals, if they exist, take a back seat. Any sense of intimacy, camaraderie, and belonging on the team becomes non-existent.

Any concept of a team breaks down. Any sense of empowerment evaporates. The vision of the leader becomes a pipe dream. The strategic plan to get there suddenly has strong disbelievers. The short-term results, obtained through draconian measures, become harder to sustain. As Michael Maccoby notes: “Narcissistic leaders can self-destruct and lead their people astray.” So, there is plenty of leadership, but little followership.

Foster Competencies to Compete in the Future

Foster Competencies to Compete in the Future A key challenge for leaders competing for the future is to foster competencies that provide access to tomorrow’s opportunities. Further, as discussed by Gary Hamel and C. K. Prahalad in Competing for the Future, leaders need to find innovative applications of the current competencies. Leaders must objectively assess and proactively improve the caliber of the executive team and the organization as a whole.

However, before a leader can assess the caliber of the executive team, he must take stock of his own. Surveys—whether leadership or 360 degree—are popular and necessary, but rarely tell the leader the whole story. Objective, confidential, and focused interviews by an outsider with each individual on the executive team can deliver unvarnished truth-rich information about what’s really happening behind closed doors. Is there a true strategic alignment? How is the leadership style perceived? How much constructive confrontation occurs? Do people collaborate or simply provide lip service? Is everyone pulling in the same direction?

There are five prerequisites to getting the most from these interviews:

  1. Right reason. First, conduct the interviews for the right reason: improving leadership by eliminating unproductive behaviors. If the hidden agenda is to vilify non-performers or to find scapegoats, the approach backfires.
  2. Objectivity. You need an objective outsider to hold the mirror. This person must not be afraid to find out the truth and tell it like it is.
  3. Confidentiality. The interviews have to be treated as confidential, and the interviewer can’t make any direct attribution to a specific individual. Despite all the talk about openness, blackballing is still a common practice.
  4. Specificity. While recognizing that everyone’s reality is different, the interviews have to focus on direct observations, experiences, and involvement rather than hearsay.
  5. Commitment. There must be a commitment to develop an action plan at the individual and team level.

If these criteria are met, the insights gained from interviews can help create a high-performance culture. The honest feedback and recommendations can raise the candor and constructive dialogue.

Baseball manager Tommy Lasorda said leading people is like holding a dove in your hand. “If you hold it too tightly, you kill it; but if you hold it too loosely, you lose it.” Finding that delicate balance between providing nourishment and pulling weeds is the key to effective leadership. But it begins with looking in the mirror.

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