Your Customer Has a Voice. Are You Listening?

Why hanging out with customers should be on everyone’s job spec

 

When was the last time you visited a customer?  If you’re in sales, it doesn’t count; that goes with the territory. I mean visited them purely to find out what’s on their mind. When running workshops, I often ask this question, and you’d be amazed how few people can honestly say they have looked a customer in the eye in the last 12 months. Taking time to learn about your customers first hand, face to face is a small investment that can yield big benefits.

Let me explain. It doesn’t matter how much you spend on market research—nothing can replace the real experience. It’s like the difference between reading a traveler’s guide to a country and actually visiting that country. I am by no means suggesting that market research doesn’t play a role because it does, but being able to visualize customers when you are making decisions that affect them can be very powerful.

In addition, seeing the environment in which your product or service is being used can identify issues or opportunities that might otherwise be missed. You may see that your customer has “MacGyvered” your product for a different purpose, or that the casing on your product has become so worn, the branding has disappeared. Issues like these may not be picked up in traditional market research.

Including a diverse mix of employees in customer visits is also important. Functional expertise, for example, can lead to different perspectives on the same situation. R&D, finance, HR, and even legal can all bring valuable insights from customer interactions.

Customers are usually more than happy to participate. Who doesn’t like to talk about themselves?  It’s like free therapy.

So what’s stopping you?

The Cage of Our Own Logic

Logical simplicity is a cage that holds the strategist captive.

 

So many of us want to “optimize” ourselves, our companies, our careers, our families.  We want to find the thing that will allow our success (that one degree, that one tool…) and build on it.  Or, we want to find the thing that holds us back (a particular bias, a person in our organization) and eliminate it.

We want to optimize, but we want it to be simple.  As a matter of fact, the more senior we get in business, the more “simple” we tend to want things.  We want to ensure we can boil things down to a root cause and fix it, but we also want to be able to take really complex ideas like “how to transform a company” or “how to engage a workforce” and turn them into pithy phrases, like “be the change you wish to see in the world.”

In other words, and unfortunately, the more senior we get, we choose to avoid getting into the weeds of issues, and decide to skim the tops of them. In the process, we start to accept “simple.” Simple is, in almost any strategic context, insufficient.  In the big leagues of business strategy, the simple ideas played out years ago.

Simple is some other guy’s luxury. When we start to accept simple, we lose the fortitude to push to simple’s sophisticated cousin:  Synthesized.

Now, wait a minute, you might say. Synthesized vs. simple?  are we splitting hairs?

No.  Let me show you why.

Imagine your strategic issue as a birdcage constructed of wire. Your goal is to ensure a sound birdcage…to keep birds in. So, what do you do?  You examine the wire, right?

Wrong.  You examine the cage.  The unit of analysis was never the wire.

But, far, far too often, strategic analyses within complex organizations take the shape of examining the wire.  They focus in on a single tool or system (like an HR system or a Six Sigma curriculum) as the salvation, and fail to acknowledge (or in the best cases pay only lip service to) the integrity of the system overall.

Simplicity (we’re going to fix our HR system) takes the place of synthesis (we must have an easy organization to work with).

So, why the rant on this topic?  Easy:  We have to stop looking at the simple answers as though they are easy, and the systematic answers as though they are hard.  Many hundreds of millions of dollars have been wasted on consultants, advisers, and project teams installing the latest ERP system because doing so was the “simple/easy” answer.  Simple/easy is pretty darn hard when it’s un-tethered from overall strategy.

The answer to strategy that involves examining the wire vs. the birdcage will always be easier; and is often quite logical in a vacuum.  Go install tool.  Go look at market.  Go make an acquisition.  All are perfectly logical.  All make good, simple sense.  All are destined to fail if pursued alone.

It’s not the logic of the wire itself that makes a birdcage sound.  It’s the soundness of the alignment of the many wires that comprise the cage.  We must, in other words, not let the logical focus on a single, simple “solution” take our eyes away from the broad strategic intent we are implementing.  Many, many smart people fall into this trap.

A sound strategist can’t mistake logical simplicity for strategic synthesis.  In doing so, the logical simplicity becomes a cage, but it’s a cage that holds the strategist captive.

 

Is Your Executive Team On Tilt?

Avoid going “on tilt,” and it will be ok.

 

It was a card room in downtown Stockholm, Sweden.

I did a bad thing–playing poker with only a finite amount of time available. I had a little time on my hands and wanted to play some hands, so I was “loose,” as they call it, firing out bets at a healthy clip just for a little entertainment. It’s a good way to lose money, but it can also be fun. Except then I suffered a bad beat–I think it was betting hard into a full house with a modest pair in my hand in a mid-level limit hold’em game.

I stayed with it and was crushed by a guy with a higher pair, and then I did something that is all too common. I took the aggravation of that hand and bet hard into the next hand with it; I had nothing in my hole cards, but I raised a couple times, and I was soundly blown out by the Swede sitting to my left. And under his breath, this guy who had spoken not a word of English for an hour or more said:

“Tiiiilt”

And despite wanting to jump up and take a swing at the guy, I took a second and realized he was right. I was “on tilt,” which is to say I was making stupid bets after losing a bad hand. Emotion got the best of me.

But you know what? The term applies in business as well: Managers and executives frequently go on tilt; they suffer a minor loss and then seek more risk to offset it.

We are not good at maintaining an even keel during times of rapid changes in risk; if we suffer a loss, we have a pernicious tendency to double down the next time around to make up the loss, and this leads to much stupid.

Case in point: a management team misses out on a highly strategic M&A transaction by bidding too low. They make a perfectly rational bid, but they lose. So the next time a deal comes along, the same management team goes on tilt, shading their bid not just to their economic disadvantage but often to the point of irrationality. They may win, but they suffer the winners’ curse: they pay a value that no rational actor, even one with a big strategic premium, would pay.

Another manager, in the midst of negotiating a deal, ignores rational advice that the deal is off the rails; he has to get a deal done, so he caves in to his counterpart’s demands after the counterpart walks away. He gets “played” in the negotiation because he perceives the walk-away not as a tactic but as a loss.

Another manager, on losing a highly talented potential new hire to a different offer, spends millions on upper-tier consulting support on the topic the new hire would have been expert on.

All of these are examples of being on tilt. The managers above have all made irrationality out of rationality.

How do you avoid it?

The first and best way is to avoid artificial constraints. In an uncertain world, constraints that have no bearing on value are dangerous. My artificial time limit at poker, the need to “make” quarterly or annual metrics, or the need to please management are all technically reasonable, but they don’t relate to value: You may get a deal done within the constraints, but chances are low that it will be a good deal.

Second is to seek advice.

Third is to understand your culture and the culture you are dealing with. How risk balanced are you? Rookies go on tilt far more often than pros, and so do insecure executives vs. seasoned ones.

Finally, know when irrationality is a possibility–and know what it costs.  You, like me in my poker game above, may be able to absorb some losses due to taking a flyer here and there, but you also might not.

All this is to say that you are likely to encounter circumstances in which you, your manager, or the executive team whose board you sit on is on tilt. They may be irrational to the extreme due to losses or perceived losses they’ve suffered, and this is especially true when it comes to good governance.  Management teams who have not made their numbers or moved the stock price in a while will have a tendency to up their risky behavior.

So watch out for examples of this type of behavior. Avoid going on tilt, and it will be ok.

 

The Art of the Self Scout

You have to know your tendencies to improve yourself, so learn the art of the self scout.

 

How often do you really stop and look in the mirror?

No, I don’t mean literally.  I mean figuratively.  How often do you look at your performance, your style, your language, your approach to life and assess it?

Such an assessment isn’t easy.  Most of us would rather watch the latest rerun of Modern Family than have a moment of self reflection.

But…You know what?  It’s the only way to get better.

In sports, the art of the self scout is practically sacrosanct. In most major sports, teams at higher levels of competition spend a lot of time scouting their own approaches to playing the game.  They treat themselves just as their competitors would. They break down their tendencies, their tells, their strengths, and their weaknesses.  They have to, because their competition will.

Might as well find the problems first.

At the most elite levels of American football–the sport I have the most intimate experience within–self scouting goes all the way to the individual level, and then even to the situational level.  So, players not only evaluate themselves on how they play; but also how they play while facing 3rd and long against Tampa 2 press coverage.

Professionals go deep into how they play the game.  They watch film of themselves, seek guidance from coaches (who in the elite ranks are as much counselors and performance monitors as they are true coaches), and they adjust.

Did you get that?  They adjust.  They fix their tendencies and gaps.  Either that, or they get exposed by competitors who find the gaps.

Deliberate self reflection–self scouting–is a useful mindset for professionals of all sorts.

Go ahead, fire yourself…

One of the best examples of self scouting leading to action comes from the earlier days of Intel Corporation.  Mired in a price war with non-U.S. memory chip makers, Intel leaders Andy Grove and Gordon Moore engaged in an interesting conversation.  As recounted by Andy Grove, it went like this:

I looked out the window at the Ferris wheel of the Great America amusement park revolving in the distance, then I turned back to Gordon and I asked, “If we got kicked out and the board brought in a new CEO, what do you think he would do?” Gordon answered without hesitation, “He would get us out of memories.” I stared at him, numb, then said, “Why shouldn’t you and I walk out the door, come back and do it ourselves?

They had the presence of mind and just enough ability to subvert their egos to step outside themselves and evaluate what they were doing…And change it.

How you do it

There are many ways to self scout.  You can ask for feedback from others on behaviors and performance.  You can look back at your body of work and critique it as if it were the other guy’s.  You can engage in the Andy Grove experiment and simply fire yourself.  Walk into your job one day as if you were new to it, and think about what you need to shake up first.

That last point might be the most powerful.  In my practice, when we talk about helping new executives get up to speed or digesting an acquisition, we use the tried and true (and maybe a bit trite) concept of the 100 day plan.  A 100 day plan is a way of galvanizing action against a vision of what needs to happen to quickly re-form and re-direct a role or company under new leadership.

The question I’ll ask you is this:  Why does it take turnover for a person to form a 100 day plan?  Why do you have to wait until the other guy has your role before you acknowledge the gaps in performance?

Why not self scout and close the gaps yourself?

Try it… Starting today, try forming your 100 day agenda as if you were new to your job.  I’m betting you’ll find something of value.

 

 

Don’t Waste Your Life: Overcome The Endowment Effect

Never, ever let your current situation adversely define your future situation.

Here’s a quick hit in the spirit of Saturday and “Coffee and a Do Not.”

How often do you “stick” where you are not because it’s the best place, but because it’s “your” place?

You keep a crappy job, or a good job within a crappy culture.

You keep a car that constantly breaks down.

You own stocks that have been perennial losers.

Perhaps you are business owner that keeps holding onto an underperforming management team, or a set of underperforming businesses.

In really nasty situations, you stay close to bullies, abusers, cheats, and other ugly people because they are the ones you’ve grown up with.

It happens to all of us.

The explanation

In social psychology is a cognitive bias known as The Endowment Effect.   In short and simple words, this effect means that, as humans, we have a tendency to value things we currently own more than we would value them if they were somebody else’s.

A bird in the hand is worth more than a bird in the bush.  But worse, even when faced with a better bird right in front of us we keep the bird in the hand.

That car you have that constantly breaks down?  You’d never buy it from someone else, because better ones are on the market right now.

That crappy job you’ve stayed in for years?  You’d never take it again if you knew what you know now because, again, better ones are on the market right now.

That loyalty you feel to that clearly unethical leader?  You’d criticize anyone else who did that because you know better.

But, these are yours, and so you ascribe higher value to them–in many cases defending them irrationally–than you otherwise would.

The impact

The result of the endowment effect isn’t all bad.  It allows us to have some comfort in difficult times.  How many times have you heard people justify their current awful situation as a “blessing” when pretty much anyone else would say it was a curse?  That is, at least partly, the endowment effect in action.  Loyalty has some roots in this effect, and loyalty can be good…to a degree.

But, on the downside, the endowment effect has a highly insidious effect on your career, finances, relationships, etc.

It causes you to let your current situation define more of your future situation than it should. 

That’s right, you “stick” in bad situations, investments, relationships, and jobs longer than a “smart” person would, because your brain is wired to make it so.

Why else do people look back on years working for a particular leader and say “what was I thinking?”

The truth is, they weren’t thinking.  They valued where they were, irrationally so.

How to guard against it

I’m not one who believes that absolute objectivity is either possible or really a good thing.  We have emotional and irrational ties to everything; and in general they help us to function.

But…

Because this particular bias can cause you to waste valuable years of your career (or, even valuable time repairing a crappy car), you and I need to watch out for its effects.

The best way to guard against the endowment effect is to think.   Yeah, that’s right, just think.   Stop for a minute and ask yourself if you are valuing the abuse you take, or the ethical stretches you have been ordered to execute, more than a sane person on the outside would.

Stop for a minute and ask yourself whether you’d be better off making a trade.  That works whether we are talking investments, jobs, subordinates, superiors, or that priceless artwork you own.

You guard against the endowment effect by considering a trade.

A parting, and partly personal anecdote

One of the very interesting people I had the opportunity to work with and then know for years was the famous “genius” of American football, Bill Walsh.

Bill was famously effective as a general manager in the NFL–that is, he was great at making personnel decisions.  In fact, he made a lot of very high profile athletes very angry by trading them to other teams while they were still “good” players. Bill wanted to trade players a year before their production fell off.  This facet of Bill Walsh’s approach was chronicled nicely in the recent NFL Network documentary Bill Walsh a Football Life.

A famous aspect of Bill’s objectivity was that he asked his staff what they thought Joe Montana’s trade value was…during Joe Montana’s prime.  Joe Montana, for those who do no know, was and is one of the greatest quarterbacks in the history of the NFL.  Bill was willing to test the market for his quarterback–the lynchpin of his offensive gameplan–while his quarterback was still building a hall of fame resume.

Bill didn’t suffer from the endowment effect, at least in his player personnel decisions.

I guess I should call it a privilege to be a guy who was recruited by, hired by, and cut by Bill.  You knew where you stood.

As brutal as that seems, and I’ll write on the brutality of NFL talent management at some point in the future, sometimes we need to adopt a little bit of that mindset to protect ourselves.

Where does the endowment effect show itself in your life and experience?  Please share…

One Habit to Create Action From Every Meeting

By focusing on three simple post-meeting reflections, anyone in a professional environment can drive for better action orientation…

I wish this post was based on a blindingly original insight about how to be action-oriented.

It isn’t.

Instead, it’s based on a blindingly effective one.

The situation

I have walked the halls at dozens of companies over the years.  I’ve observed that one of the most pernicious yet obvious problems of strategic management at organizations large and small is the inability to drive action from meetings.

Some organizations I have been around have highly structured, up front requirements for meetings…They include things like lists of “desired outcomes” or “purpose and process” or “meeting objectives” written into the meeting agenda.

Those things can help.

Still, even those companies with strong meeting discipline struggle to avoid the “meeting to meet” habit that can come up.

Over the years of working on relatively ambiguous strategy and operational issues, I’ve found one leadership habit that has allowed me and a lot of my teams to go beyond objectives and process and toward a more action oriented approach to work.

It works in concert with good meeting planning; and leads to even better meeting planning for the next day, week, and beyond.

The habit

The habit I’m talking about is a 5 minute post-meeting reflection on most every professional interaction.  It focuses on three elements of action.  They are:

1. The insights gained in the interaction.  You just met for an hour.  What did you learn?  Those insights may be about facts presented and discussed, motivations of different parties in the interaction, or interpersonal dynamic in the room (or, sometimes, not in the room when unhealthy things like backbiting come into focus).  The focus on insights is a focus on what I learned.

2.  The implications of the insights and of the meeting overall.  It’s not enough to know what you learned.  You have to know what it means in the context of your organizations or team’s macro-level agenda, the path of work that you may be following, and the objectives of the given meetings.  Often, studying the implications of a meeting brings you to drastically alter course on objectives, agenda, and problem-solving approach.  The focus on implications is a focus on meaning.

3.  The next steps implied by the insights and next steps. What actions will we take based on the things we learned and the meaning that they bring to the problem solving approach? The brief reflection on next steps in light of the insights and implications drives action orientation. It drives it–more importantly–based on the facts on the ground.  Many professionals are great at putting the next steps they think are going to come out of a meeting into the meeting agenda.  I’m saying that the next steps should be written on reflection, not strictly based on the agenda.

That’s it:  Insights…Implications…Next Steps.

Those three reflections, done personally or in team format for maximum of 5 minutes after a meeting, can drive toward more effective action in most any environment.

The more ambiguous the environment (factual, interpersonal, strategic, etc.), the more useful these reflections.

Parting thought

I received a part of this habit many years ago through good coaching from a manager early in my career.

I don’t see it as some groundbreaking insight.

I do see it as a way to increase speed and effectiveness in most any professional environment.

It is fundamentally action oriented…

But…

It requires a leadership approach that is grounded in vision and a hypothesis about direction and context.

If you have that, then Insights, Implications, and Next Steps will allow you to gain more from every interaction you have.

Try it out.

RAND Corp’s 12 Instability Factors and Your Organization

Earlier today, I came across this tweet by RAND Corporation.

It got me thinking about how organizations are, in a lot of ways, a lot like countries.

When we think and talk about change leadership within organizations, we are typically dealing with scaled down versions of political environments; and some of the lessons related to counter-insurgency and political change can and do apply directly.

RAND’s 12 factors that “generate and sustain unstable environments” are actually quite applicable for large organizations thinking about undertaking transformational change (or, to be honest, merely looking to stabilize performance).

Let’s do a little bit of mental ju jitsu, and replace “violent extremists” with “change resisters” and then see how this idea stacks up.  Let’s take them in turn and I’ll comment on how the factor translates to corporate change programs…

Factor 1. The level of external support for violent extremist groups…OR, The level of external support for change resister groups.

Doubtless, the level of external justification for individuals to be resistant to a given change agenda is a key indicator of how likely change is to happen.  This is the reason that role modeling by executives and peers to a given group undergoing a change is a critical input to the change leadership puzzle. Whenever a person in an organization (for the sake of argument let’s say it’s the finance function of your company) can go and get “mentorship” from outside of his or her group from other influential people who disdain or downplay the change…that person will be much more likely to resist.  It’s academic.

Factor 2. The extent to which the government is considered illegitimate or ineffective by the population

Another highly applicable factor is how legitimate leadership, particularly senior leaders and direct change leaders, is believed to be by the rank and file.  The “population trust” factor can’t be ruled out when thinking about how to lead change.

Factor 3.  The presence of tribal or ethnic indigenous populations with a history of resisting state rule

At first glance, this sounds like an anthropological factor that really is best left to the tribes of Afghanistan; but when you think about it, this might be the most relevant factor.  If you have ever tried to penetrate a corporate fiefdom ruled by a real tribal leader, you know this analogy is real.  If your organizational culture revolves around cults, fiefdoms, empires, and turf; you will undoubtedly encounter much more change resistance.

Factor 4. The levels of poverty and inequality

Change is hard.  It’s a lot harder when the senior executives live like kings and the rank and file live like doormats.  People notice.  A high level of inequality OR a high level of senior management secrecy about inequality will severely handicap efforts to change or stabilize a company.

Factor 5.  The extent to which local government is fragmented, weak, or vulnerable

This one goes to the tribal points outlined on point 3, but is actually the opposite.  If your organization has exceptionally weak local or frontline leadership; then people don’t get the word.  They are left to their own devices.  That’s a recipe for slow change at best.

Factor 6. The existence of ungoverned space

This is an interesting one when it comes to organizational analogies. In an organization undergoing significant change; my mantra is “everybody plays.”  Why?  Because when some organizational space is left out of the mix, people can either (1) reference it as a reason to resist as a matter of fairness or (2) flock to it.  

Factor 7. The presence of multiple violent, nonstate groups competing for power…OR let’s call them competing initiatives or agendas for change

Interestingly enough this one plays out in many organizations every day (not the violence…the competing agendas).  If your organization has an entrepreneurial leadership culture, this can be a frustrating downside of it.  Individual leaders’ competing agendas get in the way of the macro change and stabilization agenda; and you fail as a result.

Factor 8. The level of government restriction on political or ideological dissent

So, clamps on free thinking can be a bad thing.  Interestingly, factor 7 is the yang to this yin.  The government is overly restrictive, so people resist change.  This is a matter of trust.  When Dear Leader tells you what to do or else but you don’t trust Dear Leader; you go looking for a way to sabotage Dear Leader’s agenda.

Factor 9. The level of consistency and/or agreement between a violent extremist group’s goals and the ideology of target populations

This one seems sort of simple:  If people agree that resistance is the best answer, and they do so in great numbers, then your change program is sunk.

Factor 10. The extent to which population and extremist groups perceive faltering government commitment to a counterinsurgency campaign

In corporate-speak, this one reads “the extent to which your senior executives fail to follow through on change commitments.”  Might seem easy, but it’s a failure mode found every day in every organization.  Senior leaders find something more interesting to do than to drive change day to day, week to week, and month to month.  People see the lack of attention and become resisters.

Factor 11. The capacity, resources, and expertise of violent extremist groups

This one is a bit tricky to draw as an analogy to corporate change and stabilization programs.  Certainly change resisters have to have the capacity to resist; but a lot of times it’s just about clout; and that’s why factor 12 is the kicker…

Factor 12.  The pervasiveness of social networks

Absolutely. If the social influencers in your organization aren’t the same people as the change leaders, then you probably have a problem.  It’s very important not only to co-opt the hierarchy of an organization, but also the social networks by getting to the thought leaders first.

In many organizations, the people who make change go aren’t the 35 year old MBAs but rather the 55 year old shop foremen.  Social networks matter.  What RAND is likely getting at is the ability for information and protection to flow below the government radar in unstable countries.   I’m saying the same thing matters in unstable companies.

So What? 

I write this because the language and approaches to counter-insurgency as they have developed over the past 15 years are both directly applicable to leading change in a given organization.  Each of these factors, perhaps with the exception of factor 11 which I had to squint at to really see a link, relates directly to your own probability of leading successful change in your organization.

Keep this in mind next time you think change is easy!

 

Leadership That’s Always Winter, Never Christmas

Icy children’s stories from today and yesterday contain leadership lessons for us all.

I’m sitting here this morning in the aftermath of one of the nastier ice “storms” that we’ve had here in the upstate of South Carolina during my residence in this fantastic region. I use scare quotes around “storm” because I have to admit, I’ve never quite understood the term “ice storm” after living for years in Dallas, Texas and now Spartanburg, SC.

Ice doesn’t really “storm,” it just kind of builds up over time.

Which is actually a pretty cool real world analogy for the topic of this post, so…enjoy.

The benefit of being near joy and wonder…

One of the benefits of having 4 young children is that I get to relive childhood (constantly, some would say) with a grown-up eye on childish things. I get to experience joy, fear, and wonder through the eyes of four developing youngsters.

I also get to see, firsthand, the impact that storytelling has on our psyches, both good and bad.

I’m convinced that the power of storytelling never really goes away. A strong narrative delivered with integrity is just as powerful in helping adults understand and change behavior as it is for children.

it’s just an underused (and sometimes misused) tool.

Sometimes, referencing childish narratives with grown up eyes brings to light some pretty interesting and serious insights that apply to our adult lives.

If you’ve been with me for a while as I’ve dabbled in these posts, you’ve possibly seen my stab at a list of non-business books that business people should read. It’s here.

Number 2 on that rather eclectic and certainly incomplete list was the book Animal Farm by George Orwell.

Orwell was certainly onto something when he built his little allegory of a communist gangster takeover of an idyllic farm. It’s worth another look for anyone looking at social and hierarchical power dynamics in the organizations of today, particularly where there is extreme stress on words like “collaboration” and “teamwork.”

That digression aside, the reality is that narratives, even and perhaps especially those meant for children, have lessons.

I’m struck recently by the leadership narratives brought on by three icebound stories that have permeated popular culture. That they all deal with ice is only the more convenient this morning as I write this…

Three Profiles in Icy Leadership

The three children’s stories that have leadership narratives with icy “teeth,” which I’ll place in ascending “destructive” order, are:

1. Disney’s Frozen

The “leadership” plot: Poor Elsa, afflicted with fantastic powers to create ice and snow at her whim, freezes her entire kingdom. Through the travails of many friends and the schemes of a few enemies, Elsa learns to control her powers and balance them for the good of the kingdom (and herself). The kicker: True love.

The leadership lesson: Frozen is a story of unconscious incompetence writ large. You’ve probably experienced a fantastically talented leader who inadvertently freezes everything around him or her. You may have been one!

This leader creates an atmosphere of fear and mistrust that drives out all action and vibrance. But, this leader is actually coachable in the end.

In my experience, this is the profile of many, many young, smart, driven leaders who step into leadership situations that are challenging. They take control, dictate, panic, and ultimately freeze all the people around them because it’s all they have known over time. Maybe you have personally been here…

How to solve it: The key to the “Elsa” leader is to turn unconscious leadership incompetence (essentially a lack of self awareness around others who don’t have his or her powers) into conscious competence through coaching, feedback, and repetition.

Most organizations have a few Elsas in their midst. They need to be nurtured and coached, or else they progress toward our next to profiles.

2. Hans Christian Andersen’s The Snow Queen

The “leadership” plot: The Snow Queen, a story from 1845, was a very distant feed-in to the plot line for Frozen. “Very distant” meaning that the stories lack resemblance to one another.

Interestingly, the Snow Queen’ leadership foibles fall somewhere in the middle of the three vignettes here. The Snow Queen is a necessary and fantastically talented leader, being the leader of the hive of bees that bring snow to the world.

She, however, chooses to enslave a young boy who has been accidentally afflicted with splinters of glass from a magical mirror that freeze his heart and pollute his eyes–causing him to have affinity for the cold queen, to see the flaws in all that is beautiful, and to see all that is awful in an amplified way.

The Snow Queen takes the boy, whose heart is already cold, and freezes him further. The boy, blinded by his affliction, is pleased with her. The Snow Queen maintains her grip on the boy by telling him he can have his freedom once he completes a relatively simple task (spelling “Eternity” with shards of ice) that he just…can’t…figure…out.

Eventually the boy is freed by the love of his best friend, who warms his heart, washes away the splinters of glass, and lets him see the world, and the Snow Queen’s leadership, as it is.

The leadership lesson: The Snow Queen is a purposeful leader who has chosen to entrap a young soul for her amusement or benefit. You may have encountered this type in your experience.

The leadership lesson in this one is that individuals should be asked to serve to their highest ability, not to the whim of the leader. The Snow Queen leader doesn’t get this, and instead wants his or her followers to think they are in the best position they could possibly be in while he or she dictates their career.

How to solve it: Because these three vignettes are a progression from least bad to worst, this one is a bit tougher than the first. Most importantly, followers need to be willing to test whether their leaders are creating win-win career situations, or merely playing people into roles that are advantageous to the leader. On the leader side, having a few strong sounding boards outside of his or her organization can prevent the tunnel vision that results in pigeon holing people and getting less out of an organization than is possible.

All of this, of course, pales in comparison to the next profile…

3. C.S. Lewis’ The Lion, the Witch, and the Wardrobe

The “leadership” plot: Because the book is a Christian allegory (and quite a good one), most of the leadership focus in analysis of The Lion, the Witch, and the Wardrobe is on the Christ figure, Aslan the Lion. Since none of us is going to have the power that Aslan had, I’d propose the real leadership lesson comes from the reign of Jadis, the White Witch.

The White Witch presides over a Narnian kingdom where she has commanded it to be endlessly winter, while at the same time purposefully preventing Christmas from ever coming.

Thus, in the kingdom, it is “always winter, but never Christmas.” In the precise brilliance that is C.S. Lewis’ writing, this phrase sums up so many leadership regimes in so many companies and institutions.

The White Witch is a terror. She is evil. She is enabled by an entourage of characters who have her back. She puts a bounty on any human who enters Narnia, effectively enlisting the entire population not against threats to the Kingdom, but threats to her own reign. Her most terrifying capability is that she can turn her enemies to stone…She has decorated her castle with statues formed of people who chose to dissent or disobey.

The leadership lesson: The White Witch is a leader with a conscious focus on self aggrandizement through a reign of terror. Leaders who fall into this category tend to be those who were not coached or apprenticed in their early years and who happened to be surrounded by and benefit from people that the leader was able to influence unduly as they rose to power. In short, I’m not sure there is a lesson, other than to intervene before the White Witch becomes the White Witch.

How to solve it: Leadership change tends to be the only way to overcome a charming but consciously vindictive and well protected leader. Usually, like in the story of The Lion, the Witch, and the Wardrobe, it requires outside intervention (sometimes, ironically, resulting in the “demise” of the intervener). Bosses, boards, and peers have to identify the leader by virtue of his or her cultivation of a menagerie of henchmen and a garden of noble stone statues.

I hope you never encounter the corporate equivalent of the White Witch.

What’s the big deal?

So, why take an hour and a half of my day to write this? Well, first, the ice storm allowed it. That’s a picture of the deck outside my home office you see at the start of this article.

It turns out that having an open moment on the calendar is a fun thing when one of your hobbies is trying to push to a higher level of strategic and business leadership understanding and discourse (yes, I’d enjoy your comments).

Second, I think the lesson I’m writing on this morning is that the intersection of power and responsibility is real.

All of these leaders were fantastically powerful and talented in a raw sense.

The first type, the Elsa leader, has no idea that her power can freeze the world around her if she is not careful; and she has to learn.

The second kind, the Snow Queen leader, can only break out of icy habits by understanding that the people she leads should have an informed say in the matter.

The third kind, the White Witch leader, is in most cases a lost cause, polluted by power and ossified by suspicion and paranoia. She needs a re-set.

Though they are all powerful, these leaders’ senses of responsibility move steadily from outside themselves to inside themselves. There’s a point to reflect on in that reality.

Our children get to experience stories of wonder and consequence. Sometimes, it’s good that we revisit them as adults to understand that the authors of these stories–in most cases adults–were inspired by real, grown up problems.

As I mentioned at the beginning of this post: Ice doesn’t really “storm,” it just builds up. Such is the case with leadership profiles outlined here…Hopefully, with a little foresight, we can get good at guiding the budding leaders in our midst away from these particular end points.

May your iciest experiences be preludes to the celebration of Christmas (or the holiday of your choice), and not the harbinger of an eternal blizzard…

Are You Well if Oil is Not Well?

 

Where to from here?

 

The jolly crew of optimists at ZeroHedge, quoting some of their stable of doomsayers, are predicting that the oil crisis is just beginning… And I find it worth reading.

http://www.zerohedge.com/news/2015-02-16/why-price-oil-more-likely-fall-20-rather-rise-80

To follow on to some of the earlier questions posed by this blog:

What does your business look like in the age of an extremely strong dollar, a Euro depreciating against all other global currencies due to EQE, and oil at $20 a barrel?

Tough question, eh?  Well, I’m not one to call the price of oil…If I were I’d be in a different line of business; but I am one to encourage clients and executives to look at the world through multiple lenses.

The lens that is most interesting right now is the one that includes a dramatic re-set of oil production both domestically and abroad, along with a healthy heaping helping of the knock-on effects that will impact consumer and B2B markets geared to this phenomenon.

Remember, you don’t have to sell into oil exploration and production to feel this wrath…you only need to be near people and companies who do.

Their risk is your risk.   Stay ahead of it.

Stay tuned.  Your comments are welcome.

Where strategy gets real

A company’s budget shows what its strategy really is.

Geoff Wilson

Imagine a world where you have full view of all budgets and resource allocations in every organization you could possibly want. You could read any company’s press releases, strategic statements, and marketing collateral—and then immediately assess whether that company is doing anything special with its resource allocations to reflect its “special-ness.” What do you think you’d find?

Let’s take a topic like share buybacks. What if a company told you its strategy was to accelerate share buybacks when prices are high, and to slow them when prices are low? Would you call that company crazy? Of course. Nobody says that. Yet FactSet publishes this:

Here’s the CliffsNotes version of this chart: S&P 500 executives and boards execute vastly more share buybacks (blue bars) when share prices are high (purple line) than when they’re low. Though there are many explanations for this seemingly nonsensical reality (most importantly the timing of capital availability in the cycle), the fact remains that corporate leaders exhibit the exact same pro-cyclical bias that any investor on the street does. It turns out that manias for tulips, dot-com stocks, real estate, and share buybacks have this in common.

Now, suppose an honest CFO were to slip up and say “We’re going to budget to buy back shares when everybody is really excited about our stock because that’s when we are excited about it, too!” Would you be impressed with the company’s strategic acumen? No. You’d just have the truth.

The practical insight

Because executives, managers, and employees would be crazy to admit their biases and lack of certainty publicly, a deft analyst or owner has to find other ways to unveil strategic intent. Here’s one to live by:

An organization’s budget is the honest expression of its strategy.

It’s Occam’s razor for discerning strategic intent. More than words. More than magnificent manifestations of PowerPoint prowess. More than organization charts and stated goals. The budget is the message. It’s the narrative applied. Follow the money.

Corporate finance practitioners are reading to this point, nodding vigorously, and probably wondering why such a concept merits a full article. Here’s why: The vast majority of stakeholders in and around an organization place a lot of weight on the words and fancy marketing messages that come with strategy. All the statements of intent to “be the best at” this and “compete the hardest on” that accompanying a typical organization’s vision get delivered liberally.

Those minor messages are extremely important to align and encourage the organization. They are the audio of the strategy. However, the video of a strategy is an organization’s resource allocation. And any stakeholder—employees, board members, executives, owners, and sometimes investors—needs to discern strategy from it as a sort of check on the words. Just like the old Russian proverb: Trust, but verify.

A side note on results

Note that I don’t confuse an organization’s budget or resource allocation with its “results.” A company’s prospective budget or resource allocation is the expression of strategy. Results, on the other hand, come from the confluence of position, potential, competitive actions, regulatory changes, customer idiosyncrasies, fluctuations in weather and commodity prices, luck, happenstance, and any number of noisy and ambiguous factors.

Results are measures of performance, but not of a healthy (or even discernible) strategy. They can be spun into a hindsight strategy, but aren’t necessarily the results of a prospective strategy. In other words, organizations with bad or nonexistent strategies can deliver good results, but not for long. The key is to find executives who recognize when they’re lucky.

Results are real and provide for the present. They are a must have. Strategy, however, aligns resources for the future. It’s a must have, too.

Unpacking the insight

On one level, a budget is simply numbers. It’s not strategy. Saying that you’re going to grow earnings or tamp down costs or grow the revenue line through a budget does exactly that. It shows those things mathematically. It doesn’t establish how you intend to use the resources.

More importantly, a budget shows what you expect to achieve, but it doesn’t show the opportunity cost of that achievement. Strategy is about choices. A budget isn’t a choice. It’s math. It’s the scoreboard, not the game, and certainly not the playbook. Math isn’t strategy. But on the other hand, the math is the simplest view of an organization’s aims. In this basic view, budget is, in fact, strategy.

Let me rephrase that: A budget, and the actions it enables, is the most honest expression of strategy. Show me a company’s three-year plan and budget, and I’ll be able to articulate the company’s strategy to an 80/20 approximation—though it may not match what’s printed on the marquee.

The really interesting part is when you put the strategy and the budget together. Your strategy says you want to grow. OK, what’s your investment in growth? The budget shows that. Your strategy says you expect to be a superior marketer. OK, what’s your allocation to marketing spend? The budget shows that.

A leader who truly expects growth but cuts productive growth spend is suffering from cognitive dissonance. He’s living two lives, but only one can survive. One side of the argument will win.

And these days, with incentive structures being what they are, what wins? It’s often the spreadsheet. It’s the budget—the accounting—that wins.

How to apply this knowledge

All of this is easy if you see the resource allocation and statements of strategic intent and can make the comparisons. If you’re on the outside looking in, it can be tougher. Here are a few practical points.

To test strategy and budget alignment, consider the following hot spots:

  • Capital allocation: How is the company allocating its capital investment? Is the company in a mature market yet overspending on growth capital? Is the company pursuing a cost-driven strategy but starving assets of even minimal maintenance capital in order to drive earnings? These things can be discerned in most cases through even the highest-level financial reviews.
  • Overhead allocation: Does the company allocate overhead to the right places within its strategy? Is overhead allocated to administrative and risk management activities more than growth and renewal of the franchise? Is that what is supposed to happen?
  • Capability building/initiative spending: Can you find strong evidence of investment in capability building or renewal toward the stated strategic intent of an organization? If the organization is pursuing cost leadership, do you see evidence of investment in cost-leadership capabilities? Ditto for growth and innovation. Do you see it? Do they walk the talk?

Often, strategic discussions focus on the words of a strategy. Financial discussions frequently center on the math—forecast amounts of spend and investment vs. types.

In order to understand strategy applied, seek out the allocation of resources in the companies you own, serve, or work for.

Executives should use this sort of check on the strategies and budgets of their organizations. Avoid fooling others with and being fooled by clever narratives overlaying misaligned operations. Shoot for integrity.

Employees can use this as a test of whether the direction their organization is taking is actually the direction stated. That’s an important inkling when deciding where to ply one’s trade. They can vote with their feet. (Side note: Candidates can use this notion effectively as well. Does the company you’re interviewing with understand its resource allocations toward its aims vis-à-vis the competition? Does the audio match the video?)

Owners, board members, and investors simply need to ask the question and look for a satisfactory answer: What are the ways and means being applied to meet the ends being stated. They can also vote with their feet or, of course, with the stage hook.

The budget is an honest interpretation of strategy. It’s not the strategy, but it’s close. It’s Occam’s razor—the most direct path to strategic intent.

Follow the money.

What do you think?