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Best Practices for Onboarding New Employees: Maximizing Success

Benefits of Employee Retention Strategies

Guide to Employee Onboarding Best Practices

Often new hires leave too early for an organization to enjoy a return on its recruiting investment. The relationship between manager and new hire is critical to retention and performance. Managers can unleash the energy of their new hires by engaging them in a series of structured, powerful conversations over the first few weeks. By focusing these conversations on six sources of power, managers can connect early and cultivate more productive, motivated, and committed workers. These are: power from relationships, passion, challenges, focus, balance, and intention.

New hires often come fully charged, excited about their new adventure, and filled with energy and potential. By tapping into that energy, knowledge and wisdom right from the start, you can maximize the new hire’s potential, extend the handshake, and fuel that energy well past the beginning of the employment cycle.

While recruitment continues to be one of the most costly human resource processes, its longer-term effectiveness is being eroded by high attrition. Hiring doesn’t stop with the job offer. Today re-recruiting your best people is as critical as hiring them in the first place.

Often new hires leave too early for an organization to enjoy a return on its recruiting investment. And if they stay, are they productive, engaged, loyal, and committed? Have they simply “checked in” or are they “tuned in” and “turned on” as well?

The relationship between manager and new hire is critical to retention and performance. To increase retention and build loyalty during that critical first year, start by building the relationship between new hires and their managers.

Unleashing the Energy: New Employee Onboarding

Unleashing the Energy: New Employee Onboarding Improving first-year retention, decreasing time-to-productivity, and building loyalty and commitment are directly related to how quickly managers develop quality relationships with new hires.

Managers can unleash the energy of their new hires by engaging them in a series of structured, powerful conversations over the first few weeks. By focusing these conversations on six sources of power, managers can connect early and cultivate more productive, motivated, and committed workers.

  • Power from Relationship. There is no greater predictor of retention and engagement than the quality of the relationship between new hires and their managers and colleagues. The closer these bonds, the more new hires trust management, the more they feel cared for and valued, and the greater their focus, productivity, and satisfaction.
  • Power from Passion. People are more passionate about their work when they use their talents and skills to work on tasks and projects that interest them in environments that are consistent with the ways they prefer to work. Managers need to recognize their new hires’ skills, honor their interests, and leverage their strengths.
  • Power from Challenge. People get excited about their jobs (and stay excited) when they learn and grow in ways that have meaning for them. Managers need to become better talent scouts, and recognize potential when they see it. They need to provide for continued development and challenge.
  • Power from Focus. People are more committed when they know what the organization is trying to achieve, and how they can contribute to those outcomes. Managers must help new hires learn to navigate; understand the purpose, mission, and objectives; and appreciate how their efforts serve those goals.
  • Power from Balance. People’s lives extend well beyond the workplace. They have families, friends, lovers, and children to care for. They have finances to manage and households to maintain. They want to stay vibrant and healthy. They want to play and have time for themselves. Managers must make room for new hires and their whole lives.
  • Power from Intention. Managers and their new hires must follow through to earn the commitment and loyalty they both want: What new skills will they develop the first year, and how? What new areas will they explore, and how? What relationships are important to establish? How will the manager or new hire flex to make the relationship work best? What results will new hires be responsible for? How will they be rewarded? What support will the manager provide? It takes more than talk-new hires need to see tangible progress.

Benefits of Employee Retention Strategies

Best Practices for Onboarding New Employees: Maximizing Success What does the organization get in return? Here are a few bottom-line results:

  • Improved first-year retention rates. Engaging new employees early in shaping their jobs, designing their development, and building relationships can decrease first-year attrition.
  • Decreased time-to-productivity. Encouraging managers to be clear about what exactly is expected, and discuss how well new employees are learning their responsibilities can decrease the time required for new hires to get “up to speed.” They will contribute more, and do so more rapidly.
  • Reduced recruiting costs. Convincing new hires that they made the right choice can result in an increase in recruits referred by recent hires. Some organizations attract 70 percent of their new hires from recent hire referrals, reducing recruiting costs significantly.
  • Increased productivity. Making it possible for people to do what they do best, allowing them to pursue their interests, and building meaningful relationships can lead to higher productivity, increased customer satisfaction, and enhanced profitability.
  • Brand development. The more your become known as a great place to work, as an organization that cares about its employees, the more easily you attract the best and the brightest.
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Leadership Lessons from President Dwight Eisenhower

Leadership Lessons from President Dwight Eisenhower

President Dwight “Ike” Eisenhower, a graduate of the US Military Academy Class of 1915, set the benchmark for “Supreme Command” in coalition operations; the standards he articulated and personified in the 1940s continue to pilot senior military commanders. Even more profound than Eisenhower’s intelligence as a coalition commander was his impression in shaping state-of-the-art leadership principles for officers in militaries of a democracy.

One simple solution for surpassing limiting beliefs and making headway toward significant goals in our lives. Eisenhower knew what it took to lead soldiers and build cohesive units at the tactical level; he was passionate about leadership and leader development. Unity of Command was his simple establishing principle, but he knew that placing a single person in charge was insufficient to ensure unity. Today, leader advancement is the core mission component of the Academy.

Goals are about growing. A good goal causes us to grow and mature. That’s because every goal is about the journey as much as—even more than—the destination. And that’s exactly why setting goals outside the comfort zone is so imperative.

We gathered frequently in the dining room of Quarters 100—the elegant residence for 200 years of the Superintendent of the U.S. Military Academy at West Point—for spirited conversation on history, politics, and leadership. As the Academy Superintendent in the late 90s, we relished this give-and-take. We brought to the Academy some of the best thinkers on leadership; the supper conversation reflected the energy of the participants. A recurrent question was this: “Whom do you regard as West Point’s most distinguished graduate?”

Dwight Eisenhower: History, Politics, and Leadership

The menu of alumni was a rich one: Grant, Lee, MacArthur, Goethals, Groves, Pershing, Bradley, Patton, and Eisenhower, among others. The agreement seemed always to focus on one graduate: Dwight D. Eisenhower, USMA Class of 1915, for his intense command of allied forces in the European theater during WWII. Eisenhower set the standard for “Supreme Command” in coalition campaigns; the principles he expressed and personified in the 1940s continue to channel senior military commanders.

Dwight D Eisenhower: History, Politics, and Leadership Lessons Even more profound than Eisenhower’s brilliance as a coalition commander was his influence in shaping modern leadership principles for officers in armies of a democracy. The strength of a memory is also determined by the emotional state that accompanied the original event. Without question, Eisenhower had no equal in stroking, cajoling, and managing prickly alliance personalities like Churchill, Montgomery, de Gaulle, Admiral Darlan, and Italian Marshall Badoglio—to say nothing of his challenges with George Patton. He was the consummate Supreme Commander.

The eloquent text above is simply for your benefit. It’s not actually part of the template. These beings are kenned by the adepts to be magnetized toward certain quarters of the heavens by something of the same abstruse property which makes the magnetic needle turn toward the north, and convinced plants to comply with the same magnetization. In such a way there is impermanent meaning and true meaning.

Fear usually plays a part in the decisions we make. Probably the biggest fear that you will have to face when making a decision is that of failure. Obviously, the bigger the decision, the greater the downside if it doesn’t pan out. Eisenhower also knew what it took to lead soldiers and build cohesive units at the tactical level; he was passionate about leadership and leader development. As a result of his submissions to Army leaders, Eisenhower influenced not only the formal leadership program of the U.S. Military Academy, but also the leadership ethic for young officers commissioned after 1945. Likewise, feelings, recognitions, volitions and consciousness are empty.

Dwight D Eisenhower: Situational Leadership

Dwight D Eisenhower Situational Leadership

Dwight Eisenhower’s leadership was is often a value judgment that varies from person to person and for one person from situation to situation. We call it situational leadership:

  1. Be mellow in manner, tough in deed: Eisenhower had a paperweight conspicuously exhibited on his desk with a Latin engraving meaning “gently in manner, strong in deed.” These are known as secret or insight activities. This reflected his philosophy and style. He was not full of bluster. He never threatened. This is the way of insight.
  2. Be a guide, not an initiator: Eisenhower once expressed leadership as “the art of getting someone else to do something you want done because he wants to do it.” This is the field of merit of beings. By vigilant organization and a premeditated crafting of words to hit the right note. When practicing, it is sufficient to just keep your mind on the method. He knew the importance of words— specifically those spoken by the person in charge—to motivate and persuade. There is another problem with the first cause argument. He believed in planning. He thought it was dangerous for a leader to shoot from the hip. We should take this to heart.
  3. Don’t talk too much: Even with no infirmities, the life of beings is passing. Some people just can’t help themselves and simply start prattling (luckily this didn’t happen to me). Either they’re nervous about figuring out the right thing to say, or they’re panicky about saying the wrong thing. And this full clarity is beyond inner and outer. But, when you talk too much the anguished person will sometimes begin to feel that they must take care of you.
  4. Know what you don’t know: Eisenhower cherished that his completest resource was not his own brilliance but the talent of his team. It frees a tremendous energy. He once wrote this piece of advice: “Always try to associate yourself with and learn as much as you can from those who know more than you do, who do better than you, who see more clearly than you.” And he understood that autonomy can be defined as the ability to make choices according to one’s own free will. He was a collaborator; and if no such challenge developed in that time, he would presume to be there by right, even though he might not have any life story.
  5. Don’t let success go to your head: Eisenhower never considered himself to be a hero when compared with the men who landed at Normandy and met the enemy on the bloodstained fields of battle. Soon after the war, he called on General Douglas MacArthur, his old boss, in Japan. MacArthur, impelled up about their success, crowed that as vanquishers either one of them could surely be elected president. It was reported that Eisenhower left that meeting red-faced and angry. He loathed the hero label. When years later he did become president, he was repeatedly disapproved for not being personally dynamic or out in front. He was lavish about letting those around him take the recognition for his ideas. This approach paid off in allegiance and execution. And many made great sacrifices to attend, frequently working his way through military.

In both arenas—supreme command and officer leadership—Eisenhower was a revolutionary. Before him, no U.S. commander had been entrusted with coalition command. General Pershing fought to maintain the integrity of U.S. forces as commander of the American Expeditionary Force in WWI, but he was subordinate to the French Commander-in-Chief; Eisenhower led allied forces from fall 1942, and by war’s end, had over four million men from five nations under his command. His approach to combined command complemented a sophisticated coalition leadership model—a model employed to this day.

Dwight Eisenhower: Unity of Command

Unity of Command was his simple organizing principle, but he knew that placing a single person in charge was disappointing to ensure unity. This had to be exercised through “earnest cooperation,” earned through “patience, tolerance, frankness, and honesty.”

Unity of Command: Leadership Lessons from Dwight Eisenhower Commanders in the 1990s, General George Joulwan in Bosnia and General Wesley Clark in Kosovo, achieved coalition success despite intra-alliance arguments by sticking to Eisenhower’s maxims. Similarly, two Central Command combatant commanders, Generals Norman Schwarzkopf and John Abizaid, profited from the trailblazing experiences of Eisenhower. Schwarzkopf exhibited a knowledge of alliance understandings and alliance politics by deftly managing more than 30 combination partners in Desert Storm. He clearly personified unity of command. But he knew this could never be effectively exercised unless he had consent of those he led, particularly his Arab partners, and most visibly, the Saudis. Again, Eisenhower’s coalition leadership principles proved decisive—and enduring. And they are reflected in the leadership exercised in 2005 by the Coalition Commander in Iraq, General John Abizaid, a student of the leadership of Eisenhower. After his discussion, his wish got him thinking about which of the three ways we die is actually best.

That these practices are connected with the proper kinds of beings and times is important. Besides transfiguring the doctrine of collective command at senior levels, Eisenhower was zealous about leadership development for junior officers. What he observed in the behavior of many U.S. officers in the European theater disturbed him greatly. Too many officers never identified with their soldiers; they were too eradicated from the needs of their troops. Further, Eisenhower was appalled by the behavior of officers who substituted screaming, even physical abuse of subordinates, for positive leadership. Eisenhower said, “You don’t lead by hitting people over the head; that’s assault, not leadership.” Life cannot be real if relationships are not real.

West Point Curriculum: Practical and Applied Psychology

Eisenhower felt that the West Point curriculum should include coursework in practical and applied psychology to “awaken the cadets to the necessity of handling human problems on a human basis,” and thereby improve leadership in the Army.

Eisenhower’s suggestion was soon followed by the establishment at the Academy of the Department of Behavioral Psychology and Leadership. For more than 50 years, it has instilled in cadets the principles of small unit leadership.

Instead of ignoring parts of the orchestra, a symphonic life of Dwight Eisenhower consists of five habits that ensure harmony:

  1. Anyone who has the self-control to steep his noetic conceptions in them may be sure that in a shorter or longer time they will lead him to personal vision.
  2. If your culture supports open dialogue and learning from mistakes, public commitments and public results can fire up morale.
  3. Contrary to the popular exhortation, people do judge books by their covers. That’s why it’s important we select the right one for this book.
  4. The moments of break-through where real change happens aren’t typically instant and extraordinary. They usually happen gradually in the ordinary course of our lives.
  5. One of the most obvious things about the future is that we are not there yet. The question for us as we start a small unit leadership is whether to drift or direct our lives where we want them to go.

U.S. Military Academy at West Point Today, leadership development is the core mission component of the Academy. The emphasis is on values, inspiration, and imagination. Eisenhower knew these could not be created in the cerebral equivalent of a strait jacket, with rote, mechanical instruction disconnected from the human problems of the individual soldier. In other words, we need to think about what we want to be true of us when it’s all said and done. Once that picture is in mind, we review the steps that journey requires and live them forward. Then comes the hard part.

The Supreme Commander who associated with his troops shaped the leadership ethic of my generation. Eisenhower took the time to write to parents of his soldiers, to talk to 101st Airborne Division paratroopers prior to their DDay jump, to prescribe leadership doctrine while he commanded millions. He was, in short, encouraging. And he personified the essential bond—trust. His soldiers trusted him because he exuded the values of integrity and respect—values that remain the core of our Army’s leadership principle.

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FedEx’s ZapMail Service: Failure to Foresee

Innovation is Not Without Risk

How Federal Express's Zapmail System Works

One of the defining characteristics of great leaders is their knack for seeing into the future.

Innovation is not without risk. There are plenty examples of failures at companies. However, on the other side of the coin, if you’re too cautious and too late—all you have is a dinosaur business. Navigating that fine line between risk and innovation is very important.

FedEx's Zapmail System Case in Point: ZapMail Service was a system that used fax machines at FedEx offices to transmit documents for clients in different cities. After being introduced in 1983, when FedEx was known as Federal Express, the service was soon eclipsed by the rise of fax machines priced cheaply enough that most offices could purchase their own. In addition, ZapMail was based on satellite technology, which needed the space shuttle to work effectively. However, the space shuttle blew up, dealing a body blow to FedEx’s plans. FedEx folded ZapMail in 1986, taking a costly write-off.

No Innovation Without Experimentation

Commenting about FedEx’s ability to integrating new acquisitions into its fold after its purchase of Paul Orfalea’s Kinko’s franchise, journalist Michael Copeland commented in the Autumn-2006 issue of Booz & Company’s Strategy & Leadership magazine:

As with other acquisitions, Fred Smith saw something in Flying Tigers and American Freightways that others didn’t because his point of focus lay far beyond theirs. Mr. Smith doesn’t always get it right when he looks into the future. His expensive and ultimately failed experiment in ZapMail, a dedicated fax network that couldn’t compete in the early 1980s with the new, inexpensive consumer fax machines, is proof. “A guy like Fred Smith doesn’t build a company like FedEx without taking some risks and making some mistakes,” says Mr. Hatfield, the Morgan Keegan analyst, “but clearly the successes far outweigh the failures.”

Federal Express's Zapmail System There can be no innovation without experimentation, and there can be no experimentation without the risk failure. In addition, taking risk goes against the grain of many companies’ cultures. In the corporate world, there are powerful incentives for people to play it safe. However, leaders must work particularly hard to offset these forces and give their teams the consent to fail and the assurance to make their case and go out on a limb. Leaders must not only promote experimentation, but also encourage people to terminate faster on projects that are not working without fear of reprisal. That is to repeat the cliche “fail, but fail as fast as possible” and take the lessons learned to the next experiment.

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Review of N.R. Narayana Murthy’s Visionary Book, ‘A Better India: A Better World’

A Better India- A Better World is a stimulating book by an important business leader. When an Indian assistant first lent it to me, I wasn’t excited to read it but felt necessitated. I was very much completely astounded. N.R. Narayana Murthy, the founder and chairperson of Infosys organizes a rather comprehensible and positive vision to the world according to himself. If only many more business leaders thought like him, one might even feel tempted by this thing called “compassionate capitalism.” Narayana Murthy has thought much about India, his homeland, and its contradictions.

'Better India: A Better World' by N.R. Narayana Murthy (ISBN 0143068571)

If the eyes of all men were naturally jaundiced, all white objects would appear uniformly yellow. In the introduction to A Better India- A Better World, Narayana Murthy outlines,

The enigma of India is that our progress in higher education and in science and technology has not been sufficient to take 350 million Indians out of illiteracy. It is difficult to imagine that 318 million people in the country do not have access to safe drinking water and 250 million people do not have access to basic medical care. Why should 630 million people not have access to acceptable sanitation facilities even in 2009? When you see world-class supermarkets and food chains in our towns, and when our urban youngsters gloat over the choice of toppings on their pizzas, why should 51 per cent of the children in the country be undernourished? When India is among the largest producers of engineers and scientists in the world, why should 52 per cent of the primary schools have only one teacher for every two classes? When our politicians and bureaucrats live in huge houses in Lutyens’ Delhi and the state capitals, our corporate leaders splurge money on mansions, yachts and planes, and our urban youth revel in their latest sport shoes, why should 300 million Indians live on hardly Rs 545 per month (US$10 at current exchange rate), barely sufficient to manage two meals a day, with little or no money left for schooling, clothes, shelter and medicine?

His starting point is Franklin D. Roosevelt’s “four freedoms”—freedom of speech and expression, freedom of religion, freedom from want, and freedom from fear. He later elaborates on what a “civilized society” entails: “a society where everybody has equal opportunity to better his or her life; where every child has food, shelter, healthcare, and education; a society where duties come before rights; where each generation makes sacrifices to make life better for the next generation.” Obviously, many of these tenets are increasingly not present in today’s USA and, worse; many Americans on the right would dispute these principles as smacking of socialism. In this case, an effect has been given for a cause.

Could we be certain that the admeasurements of these two different meridians were made without error, this would, undoubtedly, be a demonstrative proof of the irregularity of the earth’s figure. Narayana Murthy is a well read and well-travelled, learned man who clearly thinks a lot about societal issues. In the introduction, his acknowledged three books that have influenced him deeply: The Protestant Ethic and the Spirit of Capitalism by Max Weber; My Experiments with Truth by Mahatma Gandhi; and Peau Noire, Masques Blancs by Franz Fanon. This rather eclectic selection shows the breadth of his reading and attests to an open mind. He builds his own philosophy on these disparate strains of thought, emphasizing the importance of values and leadership. He sets out early in the book that, “I do not know of any community—a company, an institution or a nation—that has achieved success without a long journey of aspiration, hard work, commitment, focus, hope, confidence, humility and sacrifice”. This question cannot be resolved exactly, without the author’s help. The first time he was restored, he thought he actually touched whatever he saw; but by degrees his experience corrected his numberless mistakes.

His student years in France in the 1970s were very important in forming his thinking. In the first chapter, a lecture to students, he compares France to India for its civil-mindedness: “In France, everybody acted as if it was their job to discuss, debate and quickly act on improving public facilities. In India, we discuss debate and behave as if the improvement of any public facility is not our task, and consequently, do not act at all.” His deduction: being a developing country is a mindset. Here he breaks clear of the Left, placing the onus on the individual, as well as the society as a whole, to take responsibility for its own destiny. He tells a story of how he lost any compassion for the Left after having been imprisoned by Bulgarian authorities when traveling back from Paris to India in 1974.

The next event that left an indelible mark on me occurred in 1974. The location: Nis, a border town between former Yugoslavia, now Serbia, and Bulgaria. I was hitchhiking from Paris back to Mysore, India, my home town.

By the time a kind driver dropped me at Nis railway station at 9 p.m. on a Saturday night, the restaurant was closed. So was the bank the next morning, and I could not eat because I had no local money. I slept on the railway platform until 8.30 pm in the night when the Sofia Express pulled in.

The only passengers in my compartment were a girl and a boy. I struck a conversation in French with the young girl. She talked about the travails of living in an iron curtain country, until we were roughly interrupted by some policemen who, I later gathered, were summoned by the young man who thought we were criticising the communist government of Bulgaria.

The girl was led away; my backpack and sleeping bag were confiscated. I was dragged along the platform into a small 8×8 foot room with a cold stone floor and a hole in one corner by way of toilet facilities. I was held in that bitterly cold room without food or water for over 72 hours.

I had lost all hope of ever seeing the outside world again, when the door opened. I was again dragged out unceremoniously, locked up in the guard’s compartment on a departing freight train and told that I would be released 20 hours later upon reaching Istanbul. The guard’s final words still ring in my ears — “You are from a friendly country called India and that is why we are letting you go!”

The journey to Istanbul was lonely, and I was starving. This long, lonely, cold journey forced me to deeply rethink my convictions about Communism. Early on a dark Thursday morning, after being hungry for 108 hours, I was purged of any last vestiges of affinity for the Left.

I concluded that entrepreneurship, resulting in large-scale job creation, was the only viable mechanism for eradicating poverty in societies.

Deep in my heart, I always thank the Bulgarian guards for transforming me from a confused Leftist into a determined, compassionate capitalist! Inevitably, this sequence of events led to the eventual founding of Infosys in 1981.

Cofounder and executive chairman N.R. Narayana Murthy came out of retirement in 2013 to help right the Infosys ship. His return resulted in improved financial performance, although it has been marked by numerous high-profile executive resignations. Murthy again stepped down and re-entered retirement to make way for CEO Vishal Sikka in August 2014. Microsoft Founder Bill Gates said, “Narayana Murthy overcame many obstacles and demonstrated that is possible to create a world-class, values-driven company in India. Through his vision and leadership Murthy sparked a wave of innovation and entrepreneurship that changed the way we view ourselves and how the world views India.”

Review of N.R. Narayana Murthy's Visionary Book, 'A Better India- A Better World' This is a collection of 38 essays and speeches given at a variety of fora during the 2000s and selected for the book by the author himself. They are divided into sections:

  • Address to students;
  • Values;
  • Important national issues;
  • Education;
  • Leadership challenges;
  • Corporate and public governance;
  • Corporate social responsibility and philanthropy;
  • Entrepreneurship;
  • Globalization;
  • three short chapters on Infosys.

In such a collection, it is inevitable that there are overlaps between the chapters and many recurrent themes. I’ll pick a few themes that I found interesting here below.

He addresses students in a variety of schools, ranging from prestigious institutions like INSEAD, Indian Institute of Technology, IESE Business School in Barcelona and NYU, to various other universities in India. He exhorts his values: “You must believe in and act according to the principle that putting public interest ahead of private interest in the short term will be better for your private concerns in the long run.” … “Ego, vanity, and contempt for other people have clouded our minds for thousands of years and impeded our progress. Humility is scarce in this country.” … “No county that has shunned merit has succeeded in solving its problems.” … “The reason for the lack of progress in many developing nations is not the paucity of resources but the lack of management talent and professionalism.” The winds of the temperate zone are composed of the eddies of these two united.

Narayana Murthy is a fan of globalization and refers to the “global bazaar” and Thomas Friedman’s “flat world” in several places. In this context, he calls for “an environment of tolerance and respect for multi-culturalism.” He sees global warming and environmental degradation as major threats and sees that the answers must lie in global cooperation: “The solution is not to force developing nations to forgo what the developed world has enjoyed for over a century. It is to come together as one planet and use innovation in technology to produce alternate energy solutions and reduction of carbon emissions.” His thinking reflects the intergenerational equity perspective embedded in the original definition of sustainable development: “After all, this is the only planet we have. Conduct yourself as if you have borrowed it from the next generation. Remember that you will have to give it back to them in good shape.” The time of feeling the pulse is in a morning, some time after getting up, and before reduction of carbon emissions.

A Better India- A Better World is also very critical of laissez-faire capitalism, a theme that resonates throughout the book: “Unfortunately, the greed of several corporate leaders, the meltdown of Wall Street, the increasing differences between the salaries of CEOs and ordinary workers, and the unbelievable severance compensation paid to failed CEOs have called into question whether capitalism is indeed a solution for the benefit of all, or if it is an instrument for a few cunning people to hoodwink a large mass of gullible middle-class and poor people. Never before in the history of capitalism have so few people brought so much misery to so many.” His views of how to manage a company are in line with his broader beliefs: “The only way you can save capitalism and bring it back to its shining glory is by conducting yourselves as decent, honest, fair, diligent, and socially conscious business leaders. In every action of yours, you have to ask how it will make the lowest level worker in your corporation and the poorest person in your society better. You have to learn to put the interest of the community—your corporation, your society, your nation and this planet—before your own interest.” In light of these issues, Infosys has launched a number of initiatives to improve its performance. The company has some way to go before rectifying its position, but a number of signs are promising, with revenue growth, margins, client mining, and employee attrition improving. Again emphasizing the need for sacrifice, he states that, “(T) to succeed in these days of globalization, global warming and laissez-faire capitalism, every worker in your corporation will have to accept tremendous sacrifices in the short term and hope that goodness will, indeed, succeed in the long term and make life better for every one of them.” Certainly not the thinking en vogue on this continent!

Review of N.R. Narayana Murthy's Visionary Book, 'A Better India- A Better World' Narayana Murthy is also rather harsh on India. In a chapter entitled “What Can We Learn from the West,” he chastises his own nation for faulty values: “Indian society has, for over a thousand years, put loyalty to family ahead of loyalty to society.” … “Unfortunately, our attitude towards family life is not reflected in our attitude towards the community. From littering the streets to corruption to violating contractual obligations, we are apathetic to the community good.” … “Apathy in addressing community matters has held us back from making progress which is otherwise within our reach. We see serious problems around us but do not try to solve them. We behave as if the problems do not exist or as if they belong to someone else.” He continues, “Our intellectual arrogance has also not helped our society. I have travelled extensively and, in my experience, have not come across another society where people are as contemptuous of better societies as we are, with as little progress as we have achieved.” He identifies things that India should learn from the West, including accountability, dignity of labor (“everybody in India wants to be a thinker and not a doer”), and professionalism (punctuality, respect for other people’s time, respecting contractual obligations), concluding that “the most important attribute of a progressive society is respect for others who have accomplished more than they themselves have, and the willingness to learn from them.” The conduct of the appetite regulates the health; and this is not enough regarded.

Elaborating on individual responsibilities, he adds one more: discipline. “There are several ingredients for national development—natural resources, human resources, leadership, and finally, discipline.” … “The utter lack of discipline exhibited by our people is rendering these other three powerful factors ineffective for fast-paced economic growth. We see umpteen examples of undisciplined behavior around us every day. What is even sadder is that this behavior has become the norm even among the powerful and the elite.” … “Discipline is about complying with the agreed protocols, norms, desirable practices, regulations and the laws of the land designed to improve the performance of individuals and societies. Discipline is the bedrock of individual development, community development, and national development.” In this category, Narayana Murthy includes aspects, such as lack of discipline in thought, or intellectual dishonesty (objectivity to focus on outcomes and results, rather than politics or focus on caste and religion; corruption). To achieve discipline, India needs role models (honest, accountable, disciplined leaders committed to change), swift and harsh punishment of offenders, transparency, political reform, and an improved bureaucracy. Manmohan Singh, former Prime Minister of India, wrote, “Narayana Murthy is a role model for millions of Indians. An iconic figure in the country, he is widely respected and looked up not only for his business leadership but also for his ethics and personal conduct. He represents the face of the new, resurgent India to the world.”

Review of N.R. Narayana Murthy's Visionary Book, 'A Better India- A Better World' The part focusing on important national issues considers a wide range, including the role of population in economic development in India. Talking about population growth as a strain to development risks being attacked from both the Left and the Right these days, but Narayana Murthy barges right into the issues. He highlights the need for “good human capital” but also warns “a failure to stabilize India’s population will have significant implications for the future of India’s economy” and that “high population densities have also led to overloaded systems and infrastructure in urban areas.” He links the population debate to environment and resources, in particular energy demand, noting how the combined demands from India and China will put pressure on world resources: “The rapid growth in emerging economies cannot be sustained in the face of mounting environmental deterioration and resource depletion.” He sees a clear role for the government, which must “focus on conservation-friendly policies. For example, subsidies on conventional fuel make it difficult for renewable energy sources to compete and should be removed at least for rich and middle-class people.” … “The government can play a key role as a regulator in making Indian industry environmentally responsible.” Would someone please tell that to the politicians in Washington, DC?

The fourth theme is a cornerstone of the Indian spiritual tradition: self-knowledge. Indeed, the highest form of knowledge, it is said, is self-knowledge. I believe this greater awareness and knowledge of oneself is what ultimately helps develop a more grounded belief in oneself, courage, determination, and, above all, humility, all qualities which enable one to wear one’s success with dignity and grace.

So, how to deal with the issue of excessive population growth? Well, there is the need to meet unmet need of contraception and the issue of how Indian states have failed to implement family planning programs. Narayana Murthy recognizes that there’s been a significant decrease in population growth in certain southern states, such as Kerala, Tamil Nadu, Karnataka and Andhra Pradesh, where “state governments here focused on human development, opened up local economies, and improved social services … Rising female literacy in these states contributed to the success of family planning … A focus on women’s and children’s health also contribute to population control.” He concludes, in line with what is also known from empirical literature: “human development goes hand in hand with lower population growth.” What he doesn”t mention is that states like Kerala have for decades been run by parties from the Left.

A Better India- A Better World chapter “Framework for Urban Planning in Modern India” also recognizes the importance of planning but calls for “radical, immediate reform in the planning and management of our cities” that “must adequately address the shortage of low-cost housing.”

Review of N.R. Narayana Murthy's Visionary Book, 'A Better India- A Better World' Moving to corporate governance, he extols the virtues of good corporate governance to enhance corporate performance while ensuring that corporations conform to the interests of investors and society by “creating fairness, transparency, and accountability in business activities among employees, management and the board.” Infosys has many long-standing client relationships, a well-managed global delivery model, and a comprehensive services portfolio. “The abuse of corporate power results from incentives within firms that encourage a culture of corruption. … Clearly, good governance requires a mindset within the corporation which integrates the corporate code of ethics into the day-to-day activities of its managers and workers.” “Corporate leaders have to create a climate of opinion that values respectability in addition to wealth.” To recapitulate all that has been said upon the subject of compassionate capitalism: long continued tones are nothing more than a repetition of the same stroke and tone. Like the two halves of an ellipse, with their ends turned the contrary way.

So what is the “compassionate capitalism” that Narayana Murthy longs for? As said by him, it is about “bringing the power of capitalism to the benefit of large masses. It is about combining the power of mind and heart; the good of capitalism and socialism … The benefits of growth have to be distributed widely.” While this does not exist anyplace, Narayana Murthy does pay some respect to what he calls the “Swedish model.”

Review of N.R. Narayana Murthy's Visionary Book, 'A Better India- A Better World' N.R. Narayana Murthy returns to the leitmotif of the lack of credibility of capitalism today: “Greedy behavior from corporate leaders has strengthened public conviction that free markets are tools for the rich to get richer at the expense of the welfare of the general public.” Lest capitalism is rejected as the most accepted model for growth in developing countries and by the alienated poor, the business leaders have to regain the trust of society and abide the value system of the community where they operate. Touching on a debate that rages in both America and Europe, Narayana Murthy weighs in on executive compensation: “Business leaders should shun excessive managerial compensation. Managerial remuneration should be based on three principles—fairness with respect to the compensation of other employees; transparency with respect to shareholders and employees; and accountability with respect to linking compensation with corporate performance … We have to create a climate of opinion which says respect is more important than wealth.” Certainly. A number of high-profile client-facing executive departures could negatively affect the firm’s standing with legacy clients.

At the end of A Better India- A Better World, this rather prescient and socially aware business leader sees globalization in an virtually absolutely favorable light, concluding that “we need a flat world because is spreads the American beliefs in free trade to the rest of the world; it benefits consumers from all over the globe; it helps create a world with better opportunities for everyone; and, finally, it brings global trade into focus, shunning terrorism and creating a more peaceful world”. Let us for a moment compare this universe to a palace, erected by the divine Architect, and the unphilosophical spectator to a foreigner, who sees but the external part of the building. “Humble and self-effacing, Murthy is known to fly economy class and lives in a modest home in Bangalore—proof, say his fans, that you can combine business success with Gandhian humility.” said Time magazine of Narayana Murthy. Murthy, [says the Time magazine], has not sold his soul for money and success. One of country’s most admired men, he is vigilant about his employees’well-being, granting stock options, building exercise facilities and spreading values as much as wealth.

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100 Best Business Books of All Time

Following years of reading, appraising, and retailing business books, 800-CEO-READ creator Jack Covert, ex-president Todd Sattersten, and present general manager Sally Haldorson have selected and appraised the one hundred greatest business titles of all time—the ones that dispense the biggest payoff for today’s occupied readers. It’s a great list, and in the vein of all lists, bound by argument and long-windedness about what is and isn’t contained in this list. Each book gets a couple of pages of outline handling.

Best Business Books on Improving Your Life

Best Business Books on Leadership

Best Business Books on Strategy

Best Business Books on Sales and Marketing

Best Business Books on Economics and Metrics

Best Business Books on Management

Best Business Biographies

Best Business Books on Entrepreneurship

Best Narratives of Fortune and Failure

Best Business Books on Innovation and Creativity

Best Books on Big Ideas About the Future of Business

Best Business Books on Management and Leadership Lessons

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Customer Satisfaction Begins with Employee Engagement

The quickest ticket to customer satisfaction is through dependable, excellent service. As companies contend for competitive advantage, many find that refining service quality and customer satisfaction can be intangible. The first step to realizing both is to raise employee engagement.

'180 Ways To Build Employee Engagement' by Brian Gareau, Al Lucia (ISBN 193553792X) All organizations benefit from having an engaged workforce. But for those whose success pivots on delivering excellent customer service, a superior kind of employee engagement, customer-focused engagement, has an even tougher effect. Customer- focused engagement occurs when employee work groups are committed to (and passionate about) producing excellent service to their customers.

Employees won’t become engaged with service quality just because you demand them to. It takes time and effort to nurture an environment where engagement can set in and grow. With the right leadership, resources and information, you can shape the environment to engage employees and focus their efforts where it matters most—on customer satisfaction.

Correlation Between Employee Satisfaction and Customer Satisfaction

Evidence for Employee Engagement for Customer Satisfaction

Will an investment in employee engagement pay for itself through increased customer satisfaction?

We gauged satisfaction levels of 50 firms using the American Customer Satisfaction Index (ACSI). To measure customer-focused engagement, we probed employees to rate elements like, “We help customers beyond what is required,” and “The norm here is to help customers.”

'The Employee Engagement Mindset' by Timothy R. Clark (ISBN 0071788298) When we charted the employee survey results for each company against ASCI score for that company, we discovered that the higher the level of customer-focused engagement, the better the score on customer satisfaction. Actually, we see an absolute correlation between employee engagement and customer satisfaction. When you enhance customer-focused engagement, you will increase customer satisfaction.

Companies whose employees are highly engaged with customer service are rated the highest in customer satisfaction. Raising customer-focused employee engagement translates into dollars on the bottom line, possibly a lot of dollars. A mere one-point rise in your ASCI score can boost your ROI by an average of 11.4 percent!

What Gets Measured Gets Attention

Prior to you can increase engagement, you first must gage it. An precise measure of employee engagement requires a special survey—not the employee satisfaction survey. There is a distinction between employee satisfaction and engagement.

  • Satisfied employees feel enjoyable, satisfied, content, and comfortable. And they tend to have low absence, low turnover, and low substance abuse. But they may be neither engaged nor driven to expend extra effort in their work or for customers.
  • In contrast, engaged employees perform in ways that enhance the customer experience. They go the extra mile in the interest of service quality and customer satisfaction. When your customers receive superior service every day, it can have a spectacular impact on your financial health.

Engaged employees (focused on customers) feel fervent about providing excellent service, energized by helping customers, involved in their work, trusting of their manager. They feel safe to make decisions, take risks, or speak up with worries. They are committed to the goal of providing service excellence. They create relationships with customers, not just fill orders; anticipate customer needs; support coworkers so that they can provide service excellence; take initiative to ensure consistent service; and find answers to customer questions.

Creating Employee Engagement for Customer Satisfaction

Creating Employee Engagement for Customer Satisfaction

Engaging employees is not simply a matter of telling them what to do. The way to change someone’s work performance is to first change the way they feel about their jobs. Tailor your programs around six areas:

  1. Job design. When jobs are thought-provoking and allow employees to use all of their talents, they feel involved. Time passes quickly, and effort required to do the work is easy to give. Engagement is high when employees are working to achieve detailed difficult goals—goals they accept as judicious and attainable, but ones that also provide a “stretch.”
  2. Immediate managers. Managers play a big role in how employees feel about their jobs. Impartiality and trust shown to the employees by their managers will create a culture of engagement in the work group, ensuring a collective, organized effort in serving customers.
  3. Service message. Most of the service message employees receive comes from cues from their immediate manager as to what is important. Managers must recognize and strengthen service excellence, ensure that obstacles to excellence are removed, and set goals for service excellence. Without everything employees experience focuses their efforts on service quality and customer satisfaction, customer satisfaction likely won’t emerge.
  4. Resources. When employees feel they have the resources they need to do their jobs well, they are more involved in their customer service.
  5. HR policies. Organizations that ensure their HR management systems promote customer satisfaction—who gets hired, how they are trained, what is measured in performance management—produce customer-focused engagement.
  6. Benchmarking. You need baseline knowledge about employee engagement levels and customer satisfaction before you make changes. Use surveys and other assessment tools to measure employee engagement occasionally to evaluate progress.

Employee engagement has become such a hot theme that great groups of consultants and authors are undeniably banging on your door as we speak, armed with sufficient action plans and PowerPoint presentations to make your head spin. When employees are satisfied and engaged, the outcome is deeper customer connections and an raised customer experience.

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Create Partners, Not Employees or Followers

People want to succeed. The vast majority want to feel good about themselves and their work. Nevertheless, sometimes, it is tremendously difficult to balance day-to-day duties with the emotional needs of your employees.

There are no quick fixes or simple formulas for generating a culture that unleashes the competency of people. It occasionally requires intervention into a number of dimensions of organizational life: challenging management philosophy and practices, communicating and aligning everyone to the business strategy, cultivating processes and systems, providing training in social and business skills, etc.

Whom would you rather have at your side in a tough spot? A partner who shares full responsibility for decisions and their outcomes? Alternatively, a subordinate who does just what you say and shuts up about ideas he has that may be better.

Rationally, you want the former; emotionally, you may choose the latter. Leaders bow to a multitude of short-term pressures: severe demands for quarterly earnings, risk aversion, distress with uncertainty, resistance to change, linear extrapolation from past experience, and reluctance to cannibalize established businesses.

'It's Okay to Be the Boss' by Bruce Tulgan (ISBN 0061121363) Reflect on your career. Have you ever kept quiet when superiors were creating problems? What caused you to withhold your counsel?

I guarantee you they were being “the boss.” Everything about their tone, body language, verbal language, and behavior was indicating you that they were the boss and you were the subordinate. Chances are you learned from them what a boss looks and sounds like. Whether you admired their style or not, some of it rubbed off on you.

When you act as a superior, you will have subordinates. Act as a partner, and you will have partners. Yes, you may be the senior partner, but they are still partners, not underlings, or subordinates.

One key dissimilarity between the behavior of a “boss” and a “partner” is the way you talk. You talk differently to partners. It is not just what you say, but how you say it. To a subordinate, you might say, “This client wants his order fulfilled now. Make it happen.”

What is the message? It is not just “Get the order done now,” but it is also “I’m the boss; this is what I want—and there could be outcomes if I don’t get it.” It does not require a dramatic act to make the point that the receiver is your subordinate. Are you aware of how often and in how many ways you send similar messages?

This is not how you would talk to a partner. You might be just as clear about what you want and when; however, your delivery would create partnership, not subservience. You might ask, “How can we do that?” Alternatively, “Can you make it happen?” You would seek the individual’s knowledge, responsibility, and mutual obligation. When employees are seen as partners, they will understand that their leaders do not simply see them as the means to achieve their own personal targets.

You talk differently to folks below you than to folks across from or above you. So what? The higher you go, the less direct experience you have of customers, stakeholders, and problems. It is harder to get a real feel for what is happening. You become more reliant on on good information and insight from those who are in touch. So, they need to feel invited to tell you the reality they see, especially when it differs from the one you believe is out there.

You likely think that you already extend this encouragement, but you may discourage people from giving you inconvenient information. Unless you make an effort to discover in what ways you do this, you will continue to do so.

Create Partners with Your Subordinates

Create Partners with Your Subordinates

To create partners and have your employees’ best interests in mind, try this exercise:

  • Start every meeting with a question: “Is there anything I’m not getting about this issue that you think I should?”
  • Whatever the answer, respond with interest and ask, “Can you tell me more about that or give an example to help me understand it better?”
  • Ask questions until you have clarity on the points. Do not argue. Do not cross-examine—just clarify.
  • Thank the individual or group making these points.
  • Incorporate what makes sense into the decisions.
  • If no one spoke up, after the meeting ask the individual who is likely to be forthright, “What am I doing that keeps everyone from talking?”
  • If this individual gives you insight into how you dissuade feedback, convey your gratefulness. Find a way to reward the honesty.
  • Invite this truth-teller to sit in on more meetings and after each one gives you feedback on anything you did that made others act as subordinates.

Simple Ways to Build Trust With Your Employees

Build Trust with Your Employees

Trust is established when even the newest rookie, a part-timer, or the lowest paid employee feels important and part of the team. This begins with management not being reserved, as well as getting out and meeting the troops.

'The 27 Challenges Managers Face' by Bruce Tulgan (ISBN 111872559X) By doing this you will have the self-awareness to create partners. You will also have earned their trust. They will give you their best advice and devotedly support decisions that are based on reality.

By creating this environment where your employees are treated as partners working toward a shared purpose, you will foster in your employees a sense of ownership not simply to their job, but to the whole process. This will inspire not only partnership between the company’s divisions/teams, but it will also help nurture innovation as employees are stimulated to look beyond what they usually work on or how they approach their job.

Good partners invest time and energy in making cognizant judgments about who their leaders are and what they espouse. Then they take the appropriate action.

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Use Facilitative Leadership to Transform Your Organization

Facilitative Leadership Style

'The Facilitative Leadership That Makes the Difference' by Priscilla H. Wilson (ISBN 097297640X) Facilitative leadership is not about leading by committee or getting everyone together and asking, “What do you and you think?” Committee can decide not everything. The front lines are not the place to take a straw poll. Even so, there are times when a leader can, and should, get people together to talk about how to improve operations and ask for input. That is facilitative leadership.

For this process to work, leaders must create a culture where people not only feel comfortable contributing ideas and suggestions, but where leaders act on those inputs.

Facilitative Leadership Theory

Acting on input does not mean doing everything the group tells you to do. It means making it clear to the group that their input is valued by defining how that input will be used. Many times a leader gives the impression that if the team members give honest input, they will be punished. This is why the leader must clarify how the input will be used before asking for input.

For instance, let the group know if you are:

  • Just asking for ideas and you, the leader, will make the final decision,
  • Asking for ideas and you, the leader, will discuss options with the group before making the final decision,
  • Requesting input so the final decision will be made together as a team,
  • Requiring input, and the team will make the final decision after reviewing it with you, and,
  • Giving input to the team and the team will tell you what the final decision is.

Facilitative Leadership Style

Facilitative Leadership Style

These are examples of how to explain your intentions when involving direct reports in decision-making. Clarity builds respect, trust, and rapport.

'The Practice of Facilitative Leadership' by Ken Todd Williams (ISBN 1523693908) The role of the leader is changing. Once, the leader stood in the middle of everything and directed the team with one-way communication. The leader would say, “Jump,” and followers would only ask, “How high?” As leaders progress, they allow for two- way communication, but they are still in the middle directing the activities. Then, as leaders continue to progress, they step out of the middle and become a part of the team. The leaders are still responsible, but they do not push their people—they tend to pull, to get people to follow them—not to push and micro-manage them.

As leaders progress even more, they can step away from the day-to-day management. This affords even more communication among the members of the team. Again, you cannot do this until you help the team members interact with each other on a level playing field. You can then be free to work on the strategic elements of your job.

These skills are becoming more critical because the leader’s span at control is expanding!

Now, when you step away, you do not disengage! You cannot expect what you do not inspect. So you must be accessible, continue to coach, and have the courage to hold people accountable and not fold under pressure. Suppose, for example, that you have been coaching a direct report on an important project. The project does not reach its target. Your boss calls you in and asks, “What happened?” You might explain how you have been coaching a member of your team who let you down; but you need the courage to also say, “I am responsible, and I will make sure that it doesn’t happen again.” You are ultimately responsible for your group’s performance!

Now, you will want to talk with that direct report about what happened. Clearly, you need to revisit the miscues. It is the employee’s responsibility to achieve the goals, but you need to ensure your people are on-track.

Characteristics of Facilitative Leaders

Characteristics of Facilitative Leaders

Facilitative leaders listen to multiple points of view, including those they do not agree with. This enables them to make better decisions. Facilitative leaders capture the key kernels of information, build bridges between people, and create an atmosphere where people share information.

When you master these skills, you become a facilitative leader. The need for greater collaboration comes at a time when the diversity of perspectives, talents, and cultures present in the workplace is increasing. Achieving better results by tapping into this mix is a goal that can be accomplished through effective application of facilitative leadership fundamentals.

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Best Practices for Corporate Boards & Governance

Best Practices for Corporate Boards & Governance

In the wake of many business failures, we have criticized every player in the system except the one charged with insuring that these failures do not occur: the board of directors. They are elected by the shareholders as the ultimate governing body and charged with preserving the company and building it long term.

Many boards have abandoned the legal and fiduciary responsibilities. They have become more responsive to the CEO and the management than to the shareholders. In so doing, they abandon their governance role to get the company’s stock price up. They stop asking the hard questions about how the company achieves its numbers, whether it makes adequate investments to build for the long-term and whether its strategies are still valid and effectively implemented.

Our systems of governance must be reformed. This begins with having a “bright line” between governance and management. Boards have ceded their governance responsibilities to the CEO. Now they must reclaim it.

Here is a 10-step program to improve board governance:

  1. Create principles of governance. The independent directors of the board need to establish principles of governance that describe the functions of the board and how the board will conduct itself. The principles should be published for all shareholders to see, and each year the board should report to the shareholders, evaluating the effectiveness of these principles.
  2. Have truly independent directors. This is essential to effective governance. Boards need directors who have had no prior association with the company. To measure their independence, no director should receive any compensation other than standard board fees. Nor should any interlocking directorates be permitted between the CEO and any member.
  3. Select board members more for their values than their titles. Too often we choose directors for the positions they hold, rather than their commitment, availability, and competence as board the many member. Let’s take advantage of executives who have the time and inclination to serve on boards. Let’s also assess the diversity of backgrounds and experience we need on the board to provide sound guidance.
  4. Establish a Governance and Nominating Committee composed solely of outside directors. This committee maintains the principles of governance, nominates people for election to the board, evaluates existing directors, conducts the evaluation of the chairperson and the CEO, and develops a succession plan for the CEO, including the selection of new CEOs. This committee is charged with organizing the board and its committees, identifying independent directors to chair them.
  5. Elect a Lead Director. If one person is both chair and CEO, the independent directors must elect a lead director to organize them, insure their independence, and advise the CEO. I prefer that the lead director be the chair of the governance committee, as these functions are closely aligned.
  6. Corporate Boards oversee governance and management Qualify members of the Audit and Finance Committees to insure the veracity of the financial statements. These committees should meet privately with external auditors, the CFO, and internal auditors. Outside auditors should not receive any additional consulting fees from the company.
  7. Hire an independent compensation consultant. Neither the CEO nor any member of management should be involved in setting the CEO’s compensation, or board fees. My big concern with executive compensation is the grants made by compensation committees to executives who do not perform or who are terminated. These moves destroy the integrity of incentive systems. At the executive level, it should be “pay for performance.” Period.
  8. Meet regularly in executive sessions. This works best if the board meeting begins in executive session with the CEO, and concludes with an executive session without the CEO present. These sessions are much more open and often lead to rich discussions of the most vital issues. Of course, the lead director must convey the essence of the discussion to the CEO.
  9. Seek the right Board chemistry. Board members should respect each other, but not hesitate to challenge each other, the CEO, and members of management. At times, a single director must stand against management and the rest of the board if he or she feels that the company is headed in the wrong direction. Board knowledge and chemistry can be enhanced with off site visits to company locations and one extended meeting per year, preferably off-site, to review the company’s strategies in depth. These longer sessions give independent directors deeper insights into the business, and build relationships that are vital in crises.
  10. Reestablish the bright line between governance and management. Directors must step up to their responsibilities and establish that bright line between governance and management. Will this reduce the power of the CEO to manage the company? No. The best CEOs want to have a strong, independent board, and look to the board for advice and counsel, not just approval, on important matters. Having a clear line between will keep the board from usurping the CEO’s prerogatives just as it will constrain management. This will help restore the balance to decision-making and ensure stability.

To transform our systems of government, businesses, and non-profits, we need courageous, authentic, and visionary leaders and directors, not just people who react to events.

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Starbucks CEO Howard Schultz Calls It a Day

Starbucks COO Kevin Johnson is the right replacement for CEO Howard Schultz

Starbucks CEO Howard Schultz has called it a day, and that’s causing some investors a bit of worry, primarily because the coffee giant struggled the last time Schultz left in 2000.

Starbucks COO Kevin Johnson Replaces CEO Howard Schultz

Kevin Johnson, the current president and chief operating officer of Starbucks, will take over as CEO. Johnson is a 30-year veteran of the tech industry held senior leadership roles for 16 years at Microsoft and a five-year stint CEO of Juniper Networks.

Johnson’s consumer technology background is impressive and is a key asset for Starbucks in expanding the company’s already-leading digital platform across channels and geographies in the years to come.

Former Starbucks COO Troy Alstead Quit in January 2015

When Starbucks’ longtime COO Troy Alstead quit, Schultz wrote, “Looking back on the 23 years we spent together side-by-side as Starbucks colleagues, I can recall so many memorable moments and accomplishments in which Troy can take pride in a job well done. Troy is a beloved Starbucks partner and has played an invaluable role in our growth as an enterprise and in the development of our culture as a performance-driven company balanced with humanity, which is unique for our industry. Troy’s humanity and humility will be missed and we wish him the best.”

Starbucks' Premium Roastery and Reserve Stores

Schultz Focused on Sustaining Revenue

For the last several years, Schultz focused on sustaining revenue growth by moving beyond his coffee house roots. In 2012, he purchased Teavana as another brick in the road, which has encompassed instant coffee, energy drinks, juice, a single-serve brewer and food to sell in its shops and in grocery stores. In 2013, Starbucks and yogurt-maker Danone, declared a plan to cooperatively create an assortment of specialty yogurt products in contributing Starbucks stores in 2014 and in grocery channels in 2015 as part of the coffee chain’s growing Evolution Fresh brand. With cafe-like atmospheres and a brand that evokes a high-quality customer experience, Starbucks appreciates pricing power benefits over nearly all specialty coffee peers. This will be expanded by the development of the Starbucks Reserve sub-brand to deliver exclusive, higher-end coffee blends.

While Schultz’s forethought and attention to customer experience have been significant motives that Starbucks has established one of the widest-moat and most consistent growth stories in the global consumer coverage universe, Starbucks has one of the deepest benches in the consumer sector. While most of the focus is technically on new CEO Johnson and his wide-ranging consumer technology background, Schultz will still be immersed with the development of Starbucks’ Premium Roastery and Reserve stores.

'Onward How Starbucks Fought for Its Life' by Howard Schultz (ISBN 1609613821) Don’t liken Schultz’s switch to that of 2000, when he undertook the chairman role and assigned Jim Donald as CEO. Schultz ultimately returned as CEO in 2008 in the wake of disappointing sales figures and a “watering down of the Starbucks experience”. In his turnaround memoir Onward: How Starbucks Fought for Its Life without Losing Its Soul, Schultz wrote “The merchant’s success depends on his or her ability to tell a story. What people see or hear or smell or do when they enter a space guides their feelings, enticing them to celebrate whatever the seller has to offer. Intuitively I have always understood this. So when, in 2006 and 2007, I walked into more and more Starbucks stores and sensed that we were no longer celebrating coffee, my heart sank. Our customers deserved better.”

How Starbucks Became Successful

How Starbucks Became Successful

Brand, channel, and technology advantages have positioned Starbucks for a long runway for growth:

  • Starbucks coffee is robust, and people get used to the taste, making it difficult for them to be content somewhere else, either to coffee chains such as Dunkin’ Brands, Tim Hortons, or McDonald’s. Joh. A. Benckiser’s amalgamation of Mondelez’s coffee properties (D.E Master Blenders, Peet’s, Caribou, Einstein Noah, and Keurig) are emerging as Starbucks’s noteworthy competitors. Despite the tenacity of the legend, Starbucks doesn’t really burn its beans. Nonetheless it uses two tablespoons of coffee per 6 ounces of water, which is beyond a lot of other places.
  • Decades ago, in many markets, the only place a customer could get a cappuccino was a restaurant, and there indeed weren’t any flavored or distinguished coffees anywhere. Starbucks was the pioneer in bringing those to the masses. There’s countless brand loyalty they’ve built up over the years. As good the coffee beans are a good amount of training goes in the way they make specialized drinks. Wet, dry cappucino, lattes in perfect ratios of coffee, milk and foam.
  • Starbucks has been known for being pretty generous to its employees, together with presenting full benefits to those working as a minimum 20 hours per week. That made customers feel good about buying coffee there.
  • Customers appreciate the consistency of Starbucks products. A customer can go to a Starbucks pretty much anyplace in the world, and know what they’re getting. A grande vanilla latte will be on the menu and taste the same whether in Seattle, New York, London, Istanbul, or Moscow.

The Recipe to Starbucks Success

The Recipe to Starbucks’ Success

Yet same-store sales have been decelerating, however from very high levels, and the company ran into difficulty the last time Schultz stepped back from the CEO role. Regardless of impressive growth plans, and commodity cost and foreign currency volatility, Starbucks can endure a 40%-45% dividend payout ratio over the next decade.

Some analysts and investors aren’t worried about the management change. Wells Fargo’s Bonnie Herzog acknowledged that while Schultz’s departure is “a loss, in our view the show must (and will) go on” and added, “While we acknowledge that Schultz is without question one of the strongest and most visionary leaders in the consumer/retail world, we believe the succession planning put in place several years ago assures the recent exceptional performance will likely continue.”

Starbucks Future Strategy for Invigorated Growth

Starbucks Future Strategy for Invigorated Growth

Speaking of how Starbucks’ invigorated food and beverage menu and store reformats have uplifted the Starbucks customer experience, pierced new markets and times, and enhanced unit-level productivity metrics, Herzog also wrote,

The leadership change announced today has been a long-time in the making, starting nearly 3 years ago with the shuffling of the senior leadership team, and subsequent promotion of Johnson in early 2015 to the role of President/COO. We believe that Johnson is a very capable leader, with strong experience working side-by-side Schultz for the past two years. Importantly Johnson has an exceptionally good relationship with Schultz, which should keep Schultz sufficiently removed to allow Johnson to lead effectively given his trust in Johnson, while also remaining sufficiently nearby to ensure the ship remains on course… We believe Johnson’s technology background positions him well to ensure SBUX’s mobile and digital initiatives—key to SBUX’s long-term success, in our view—will remain a primary focus of the company. Importantly, Schultz will remain focused on his ongoing efforts to premiumize the SBUX brand and experience through Roastery and Reserve stores, which should support accelerated innovation and allow the broader store network led by Johnson to continue to thrive.

Investors are also cheerful about Starbucks’ mobile, digital, and loyalty program collaborations across the various business lines, affiliations with Spotify, New York Times, and Lyft, and new payment technologies. Starbucks’ worldwide opportunities are undisputable–particularly in China, India, Japan, Brazil, and Eastern Europe–and Starbucks will apply its best practices from the U.S. to accelerate its growth aspirations.

Starbucks has organized an investor meeting next week, during which its leaders are expected to release news on current and future initiatives.

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