The One About Performance

Performance is the prerequisite for any professional or organization.  It is the heartbeat of the body.

In December I posted an article on the lights of leadership. In the midst of a lot of feedback I receive on the writing I’ve done, one bit of feedback stood out on that particular piece.

It came from a gentleman who has been both a corporate leader and entrepreneur. In referring to the ways I listed to “light the lights of leadership” he said simply: “I’m glad you started with performance.”

It’s not clear to me that performance “sells” on LinkedIn or your average blog quite like a list of 5 things that will bring you wild success.

But, people who know, know.

I’ve had the privilege to write about a broad set of topics. I enjoy thinking through and sharing on strategy, leadership, entrepreneurship, innovation, and ethics. I view those topics as worthwhile to anyone looking to advance their careers and organizations.

However, there’s a point of fact that sometimes gets muddied up in all the organizational development, touchy/feely, and “strategic” thinking.

Performance is the prerequisite.

No matter what the collective business and organizational intelligentsia write and speak on, it all must relate back to performance–short term and/or long term.

That’s not to say that it does.

That’s to say that it should.

A leader with the best ideas on and reputation for people leadership, organizational development, and customer care but without a track record of performance might as well change careers.

To borrow a turn of phrase from the apostle Paul: If I have leadership ability that can move mountains, but do not have performance, I am nothing.

That may sound harsh and cold, but that’s reality.

It’s true whether you are a concert pianist or an investment banker. It’s true for athletes, doctors, and police officers.

It’s true whether you are trying to carry a football across a goal line, or seeking 20 basis points of alpha.

How often we forget this simple reality.

Performance is the currency of our careers and the building block of our professional names.

But, performance itself may be insufficient

If you look at the body of any leader’s work, the heartbeat is performance.  Results delivered by that person matter that much!

But, even a comatose patient has a heartbeat, so there’s much more to leading a than simply meeting objectives. The heartbeat is a critical necessity, though it may not be sufficient for a thriving, vibrant organization.

In my experience only very rare business cultures can hang their hats on performance alone. They look like professional sports teams and trading desks. I’ve been a part of both; and I’ve been around dozens of other corporate and organizational cultures.  I’ll just assert this:  It’s unlikely that your organization can rise (or fall) to this level of Darwinian objectivity.

Thus, we discuss results and leadership and vision and integrity all within the realm of the performance ethic.

The Performance Ethic

Show me a person who has a strong performance ethic, and I’ll show you someone who will likely contribute every day.

Show me someone with a strong performance ethic layered over with people skills and “other-oriented” values, and I’ll predict career success.

Performance ethic.

That is a concept that his highly distinct from work ethic.

Lots of people work hard and don’t perform.

It’s also highly distinct from smarts, intelligence, savvy, and the like.

Perhaps shockingly, it’s also highly distinct from a desire to “win.”

Winning matters, but it’s the definition of the contest that matters more.

As anyone who has participated in high stakes negotiations can tell you: Some of the best “win-preventers” are people who focus on winning the minutiae and lose sight of directional victory.

In American football, a lot of 15-yard penalties come from guys trying to win the little things (like that fight with the guy across from them) while losing sight of the bigger things.

The same thing happens in professional life.

A short win is just as easily part of a long defeat as a long victory. Ask any endurance athlete what constitutes effective performance, and the answer is most certainly not going to be “run every moment as fast as your body will go.” It just isn’t possible. You run the race so that you will win; but that does NOT mean winning every lap, stage, or heat.

None of us wants to be a part of a long defeat.

So what?

Let me outline a few ideas for what constitutes a performance ethic for leaders. This list will be incomplete. Trust me. Please help me round it out if you like.

  • A strong concept of performance: In short: What is the race? Is it quarterly financial performance or an enterprise positioned for success 3 years from now? How do you manage some of the tensions inherent to the two? What’s true north and do executives, rank, and file align on it?
  • A superior understanding of others’ concepts of performance: Do you understand what “winning” is to those around you and those who are instrumental to the race? One person’s concept of “performance” is earning the highest bonus possible. Another’s is building for the future. Yet a third person’s concept is simply staying employed or protecting position. Another wants only to advance her career. A person with a solid performance ethic assesses these things and determines whether he or she can “win” with the team they have or are a part of.
  • Daily delivery and ownership: Strong delivery today against the vision for tomorrow is a hallmark of a person with a performance ethic. Performers know that daily improvement underpins performance. Procrastination doesn’t.
  • An expansive view: Making performance an expansive thing shared by more vs. a contractive thing shared by fewer is an indication of a strong performance ethic. People who know business performance know that the pie grows with performance. The stereotypical bureaucrat only looks to divide the pie as it exists today.
  • Ability to attract others to a performance vision: The more senior you are, the more you must inspire others. Being able to attract talented people, inspire them, and have them deliver on a performance vision aligned with your own is certainly an aspect of performance ethic.
  • Transparent performance contracts: Allow others to get on or off the boat with real informed consent and high integrity risk sharing. An underlying theme to “Enlightened Strategic Leadership” in my practice is that social contracts within a firm should be transparent, particularly when they are in conflict. If you have a policy, follow it. Most (not all) organizations start this with their employee handbook.

Let’s talk performance.

Without performance, all the focus we see on LinkedIn about people, personalities, and career is just noise.

Performance is the prerequisite.

Author’s note:  Just as in most things, there is more than one way to “success.”  I hold out performance as the prerequisite. Many, many people hang their hat on patronage and politics for “success.”  I suggest we peer through those things and look at performance. 

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?

How to Punch Through Adversity

A renewed focus on individual and organizational entrepreneurship provides a “puncher’s chance” when dealing with ambiguity and adversity.

On November 5, 1994, an object lesson in responding to adversity occurred.

On that date, 45-year old boxer George Foreman–known as much at that time for being the spokesmodel for his eponymous grill as for his boxing–knocked out Michael Moorer, who was up to that point the undefeated reigning World Heavyweight Boxing Champion…and 19 years Foreman’s junior.

Moorer outboxed Foreman for nine rounds, turning Foreman’s face into a fleshy swollen mess. During those nine rounds, Foreman struggled to throw punches and certainly didn’t evade many thrown at him.

And then, in the tenth round… Boom.

Foreman, well known for his punching power, slipped in a short right hand that crushed Moorer’s chin, knocked him to the canvas, and won Foreman the championship for the second time after a 20 year hiatus.

Here’s that classic 10th round on video:

Note the comment from Foreman’s corner man at the beginning of the video:

We gotta put this guy down…we’re behind, baby!

They knew they were losing. Foreman had eaten a steady meal of Michael Moorer’s right jab.  He was way behind and beaten badly.

Foreman was old, heavy, slow, and beaten up going into that 10th round. Moorer was young, fast, strong, fit, and ahead in the bout.

But, Foreman had a chance. His chance was embodied in his wrecking ball of a right hand.

That “chance” put Moorer’s lights out at 2:12 of the video.

The Lesson…

There’s this thing in boxing. It’s called the “puncher’s chance.” It means that a boxer with a strong punch–a go-to skill that can turn a bout on a dime–always has a chance to win. The puncher’s chance applies to those who have it even when they are the lowliest underdogs facing the most superior of opponents.

It doesn’t guarantee a win, but it offers the light of hope to those who have it, even in the midst of a beating. It is literally a means of punching through adversity.

So What?

We all should aspire–individually and in the teams and organizations we lead–to have a foundational capability that helps us punch our way out of adversity. In the most dire of circumstances, having a core capability to call on can mean the difference between having a chance and having none.

We should aspire, in other words, to cultivate a puncher’s chance.

In simple terms, the puncher’s chance in a business environment is a valued capability that, regardless of environment, allows an individual or an enterprise to endure, grow, and prosper.

Be careful, though: For every true cultivated go-to capability, there’s an mountain of pablum about “competitive advantage” and “core competencies” to wade through.

There’s also that catch about “valued” capability–be careful not to claim the ability to spin and confabulate as constituting a valued capability. It isn’t. It’s a delaying tactic just waiting to be exposed.

So, what gives you a puncher’s chance?

What foundational capability gives you your best chance to overcome adversity, individually or as the leader of an entire enterprise?

Is it superior operations? Sales? Marketing? Product development and innovation? Design? Supply chain expertise? Executive talent? Cost control? Effort and work ethic?

In reality, that’s for you to answer. It might be different for you.

In my estimation, the best analogy to the puncher’s chance in business is a deep seated appreciation for and cultivation of


It’s the crushing right hand just looking for a chin to demolish. It’s the single latent capability that can save an organization time and time again, regardless of market context.

Unfortunately, it’s also the capability that gets quashed most quickly by risk-averse and resilience-starved corporate hierarchies.

Still, in the most staid corporate contexts you’ll encounter, where cost control and small thinking rules the day, it is on the shoulders of a few enterprising individuals and teams that success tends to ride. Those individuals drive activities like:

  • Development of profitable new products and markets that nobody in the corporate hierarchy wanted.
  • Development of new customer accounts that others viewed as too hard, too distant, or too far off strategy.
  • Growth of key leaders who renew the organization in tough times
  • Response to muted customer inquiries that turn into significant opportunities
  • Establishment of entire new businesses that feed off the capabilities of the organization in entirely new ways.
  • Constant focus on competitive activity and required responses, acting as the few sentinels for the health of the organization.

In the process, the individuals and teams who do these things create possibilities where none existed…

…and that, my friends, is what the puncher’s chance is all about–a very real something from an apparent nothing.

But, how do you cultivate it?

On some level, it’s fair to debate whether entrepreneurship as a capability is a nature or nurture proposition. I’d argue that entrepreneurial capability can not only be taught, but that it is also contagious.

The flip side is that it is also easily extinguished.

In any event, if you are looking to cultivate this particular punch, here are 5 ways to start:

  • Establish clarity on boundariesEnsure that you achieve clarity on what values apply (i.e., what you won’t do) and what boundaries exist (i.e., where you won’t do it). This applies to you and to your organization.
  • Relentlessly encourage resourcefulness The most ossified of organizations fall into the trap of top down management. People in the organization become so used to being second guessed that they never even bother with the first guess and therefore lose whatever entrepreneurial spirit they had. Encouraging resourcefulness means asking for, listening to, and developing novel perspectives on markets and solutions to pressing issues vs. telling the answer. It also means holding yourself to a standard of generating options vs. finding problems.
  • Generate risk awareness Ensure that leaders in the organization have a sense of ownership and understanding of the price of risk. This can be done through incentives, but also through mere transparency around how capital of all sorts is allocated within the enterprise. Such transparency shows smart people the types of risks a company is willing to underwrite and reward. For you individually, establish thresholds for risks you are willing to take with your career, your income, and your wealth.
  • Role model resilienceIn an odd and ironic point of fact, senior executives in large organizations tend not to be all that tolerant of ambiguity or error. That reality is a driver of the great divide between the mindset of an entrepreneur and the mindset of a solid corporate manager or executive. Corporate managers look at a project and see all the risks, the reasons not to do it, and how to effectively hedge the budget. Entrepreneurs tend to look at a project and wonder why it can’t be done faster and better; all the while disregarding any need for hedging because “you win some and lose some.” Execs need to role model a resilient mindset more often.
  • Reward entrepreneurship asymmetrically – Though such an assertion flies in the face of the world of compensation hierarchies, benchmarks, job classes and bands, and workplace equity; find ways to recognize and compensate intelligent risk takers asymmetrically. Too often, the perceived cost of entrepreneurship exceeds the potential recognition or upside. It tends to look more like executives and shareholders providing a “heads I win, tails you lose” proposition when viewed from the lower end of the hierarchy. Share the wealth…Loudly.

No matter how beaten up your organization is in its markets, how many product launch failures you’ve endured, how much market share you’ve seen erode; the ability to constantly redefine and attack markets and problems with an entrepreneurial edge gives you and your organization a puncher’s chance.

These tips work for enterprises large and small, and certainly work for individual professionals. History is rife with examples. Apple Computer emerged from being a PC maker to being a dominant player in mobile and media markets. Texas Instruments was once an oil and gas exploration services company. GE was Thomas Edison’s hobby shop. IBM made mainframes.

But, watch out!

Perspective matters. Many of you reading this think you know your core ability…”I have it, it’s my competitive advantage and it’s X” (fill in the X with your known strength). Keep in mind that while you might be the fit, strong champ in control of the bout, the other guy just might have a stone cold right fist to throw your way.

The other guy might have a puncher’s chance. Watch out for it.

Today, executives believe that 46% of global strategies fail to deliver. So many companies are trying to develop agility top-down in order to respond to a rapidly changing environment.

We simply can’t rely on top-down thinking driven by corporate savants to save the day.

So, cultivate a tight focus on entrepreneurial mindsets alongside loose control over skilled people.

Do it to drive wins, even while choking on the modern world’s heavy dose of volatility, uncertainty, complexity, and ambiguity.

Cultivate your own puncher’s chance.

Find a way to win.

Strategic Implications of Clark Griswold’s Turkey

Clark Griswold’s turkey was an object of art on the outside, and a hollow mess on the inside. So are some strategic plans. Have the courage to call them what they are.

‘Tis the season. So, I figure…why not take advantage of it?

Remember that finely-crafted 1989 cinematic masterpiece, National Lampoon’s Christmas Vacation?

It provided us with such insightful and penetrating quotations as Clark Griswold’s “Hallelujah! Holy S#*@! Where’s the Tylenol?” It also gave us that indelible image of Randy Quaid as cousin Eddie poolside with his t-shirt tucked into a leopard print Speedo.

And, who can forget Eddie, the RV, and the storm sewer?

On a more serious note, the movie has a couple of meaningful lessons for leaders.

Yes, there’s the “Jelly of the Month Club” fiasco and the classic (and useful) quote by Clark’s boss about how things sometimes “look good on paper, but lose their luster when you see how it affects real folks.”

That’s a good one for all of us to ponder as we tweak our spreadsheets this Christmas season. But…

…I’m taking on the turkey.

Remember the turkey? It was beautiful…stunning even. Ask anyone who has labored near an oven, basting a roast turkey for hours on end, and they can tell you how difficult it is to achieve the golden brown visual perfection that is the Griswold’s turkey. See for yourself:

But then, the test.

Clark puts the knife and fork to it. And, well, click here if you don’t know the story.

It’s the letdown of letdowns–a finely tuned visual feast followed by the disgust of a dry, empty, cracked, steaming hole of a broken promise.

What are the leadership implications?

For those of us who are the cooks–the ones charged with compiling and crafting strategies, plans, visions, and ideas–the siren song of great visuals with no substance constantly beckons. We have the tools to create a symphony of perfectly prepared sights, sounds, and steam. We also have the pressure to perform and incentives to placate those we answer to, whether they are managers, executives, boards, or shareholders.

For those of us who are the carvers–those charged with reviewing such plans and possibly eating the cooking–such placating visuals can be blinding, especially if they confirm our desires.

In working with more than 30 large organizations and countless small ones as employee, consultant, investor, and executive, I have had the opportunity to witness and test countless executives’ abilities to cook up a plan, if you will.

A majority of the time, the cooking survives the knife and fork. It is grounded in facts, shaped to the reality of markets and constituencies, and staged thoughtfully. It is represented by people who know what they believe and can articulate it carefully.

But, every now and then, I’ve run across Griswold’s turkey. And, it’s not always obvious. Careful use of numbers, mindful (or at least artful) omission of realities, and tight stage management of the presentation all combine to create a golden brown shell of a vision or plan that anyone would want, supported by a scaffold of…nothing.

In those cases, two things became apparent (but, again, not always obvious..keep that in mind):

First, for the executives who knew that the plan was a, well, turkey; the immense focus of their time was on parrying the knife and fork. They delay, obfuscate, rotate the turkey five different ways, or just keep saying “it’s still in the oven.” They waste time. They aren’t all bad people, but they do tend to lack the courage to call it what it is. In some cases which one could consider unethical, they avoid examination of the underlying realities because they are playing a timing game due to misaligned incentives.

Second, for those who had to eat the cooking (that is, live with the choices of the first group)–the shareholders, boards, and true fiduciaries–the surprise of the broken promise leads to needs for hard decisions. They finally put their knife into the plan to carve it and eat it; and it turns into a dry, cracked shell. When the carvers finally do take action, people are fired and in the worst of cases investigated. Boards are turned over. Divisions or entire companies are sold or shut down. Shareholders, employees, communities, vendors and customers all lose.

I’m not necessarily talking about fraud, mind you, I’m talking about window dressing on a brick wall. For example: Griswold’s turkey could be the metaphor for the vast majority of companies founded and funded during the dot com era. They had beautiful plans with no reasonable path to profit. These were not (typically) fraudulent. They were, however, absolutely built on the back of willful blindness to reality peppered with really difficult incentive issues related to agency and timing.

What are we to do?

Step 1: Admit when you are looking at Griswold’s turkey. If the plan looks nice on the outside, but is a steaming mess of emptiness on the inside, be willing to call it out no matter where you sit. Have courage.

Step 2: Go to the knife and fork every now and then. For those of us who review strategic plans and are charged with poking around, be willing to poke with more than a finger. Ask the penetrating questions about the numbers, the dynamics, and the actions underlying the shiny shell of the plan. Learn to spot the obfuscation or honest ignorance that comes with Griswold’s turkey. Really think about the responses you get to your questions.

Step 3: Be careful as an executive or board member not to inadvertently provide incentive for others to bring you Griswold’s turkey by being soft, lazy, or simply too busy to inquire. Management claims to pursue a local market strategy but can’t name the markets, segments, or tailored approaches? Hmmmm… Maybe you’ve been too easy to fool or too comfortable with current performance.

Step 4: Be willing to slow down, start over or exit. So many instances of the Griswold’s turkey come from the need to show progress or a plan in the face of intense time pressure and expectations. It’s easier to polish up a PowerPoint and parry every question with “I’ll come back to you on that” than it is to know what you believe. If you are on the team, be willing to say when a plan isn’t ready. If you are reviewing the team, be willing to order them to go back to the clean sheet. If you are making strategic decisions, be willing to know when it’s time to stop cooking–to change leadership or exit.

These steps represent a critical aspect of leadership and a key learned skill: Calling a golden brown shell surrounding a hollow hot mess exactly what it is.

These particular turkeys are, as mentioned earlier, the letdown of letdowns. They are a visual tease. They lead to the disgust of a broken promise.

Learn to spot them, have the courage to avoid them, and role model the discipline to prevent them.

Hallelujah! Holy S#*@! Where’s the Tylenol?

Merry Christmas!

What’s Your White Whale?

The types of goals we set, and the manner in which we pursue them, have consequences for us and for the people around us.

“…to the last I grapple with thee; from hell’s heart I stab at thee; for hate’s sake I spit my last breath at thee…”

– Captain Ahab, in Moby Dick by Herman Melville

And like that, a captain lost his life, a ship, and all men aboard save one left to tell the tale.

Call him Ishmael.

Focus, intensity, and drive are all fantastic things. Identifying a goal and driving toward it can differentiate a professional in the earliest stages of their career. Such drive and focus is valuable for teams, organizations, and yes, families.

But it is in how we define our goals that we establish our course and set sail.

Sometimes…sometimes we choose goals that–when played out–are destructive to us and to those around us. They are outwardly worthy, and inwardly virulent.

The more senior we are, the more influence we have, the more damage we can do.

Ahab did this when he let a blinding, to-the-marrow hatred of a monstrous white whale cause him to lead his men to the edge of the earth and ultimately to death. He took his ship off its profitable whaling mission to pursue an obsession, a blood vendetta against a big mammal that took his leg.

Of course, you or I would never do that, right? Ahab is fiction.

Well, not really.

The way we define our goals–or help execute the goals others define for us–defines us; and the more driven we are in achieving misguided goals, the more destructive we can be. We might not kill our crew, but we could very well kill an organization, a partnership, or a marriage.

Take a moment and think: Do you harbor a goal like Ahab’s lust for killing the white whale?

Worse yet, have you, as a board member, senior executive, or manager, provided people with incentives to pursue a white whale goal?

A white whale goal is one of two things: In its first and simplest guise it’s an obsession. It is a goal that is so deeply held and so exclusively pursued that its pursuit alone is destructive to relationships, damaging to professionalism, and ultimately distracting from real performance. A foolish, simpleminded pursuit of money, power, position, prestige, image, “winning,” or–wait for it–the moral or intellectual high ground are all examples.

Yes, that last one is a doozy that we too often forget or forgive. Self-righteousness blows up as many relationships as most any other thing listed.

In its second guise, a white whale goal can be a misguided goal propagated by proxy, where boards and senior leaders provide a framework of thinking (for example “grow profits”) without guidance on and transparency in boundaries, value, or values; or with specious accounting and accountability.

This second version of the white whale can lead both to brutal decisions by middle managers “just doing their jobs” and to baffling decisions in the ranks where people struggle for clarity. All the while the board and senior managers maintain the real innocence of propagating “good” goals. Or, at least, they maintain plausible deniability.

The epitome of these two types of white whales playing out–an obsession that leads to a vicious goal by proxy–is the assassination of St. Thomas Beckett of Canterbury.

King Henry II, obsessed with the church as an interference, is reported to have said “will no one rid me of this turbulent priest?”

After which, of course, somebody did; to the ignorance of the historical significance of the act.

But, the King didn’t order the martyrdom of a future saint…Did he?

You as a senior executive didn’t really order the curtailing of investment in pursuit of current earnings…Did you?

You didn’t handicap the sales team by introducing turgid administrative tasks in the name of greater openness and transparency…Did you?

You didn’t order leaders to take unacceptable safety and fire risk by curtailing costly planned outages and maintenance…Did you?

Surely, there are honest-to-goodness unintended consequences; and then there are white whales.  Sometimes they are hard to tell apart. Foolish or obsessive pursuit and propagation is the sin qua non of the white whale.

Remember Enron?

Consider the Enron scandal. The tragedy of Enron was equal parts a criminal lack of professionalism (which has been well publicized and rises to the level of obsession for some people involved) and a broad based propagation of and adherence to financial frameworks and incentives that many people in the ranks knew made no sense–misguided goals.

This second part gets missed and dismissed, especially as the Enron case recedes into memory as a quaint blip preceding the global financial crisis of 2007-’08.

The second aspect–the misguided goal set–is actually the most important aspect of the Enron case for professionals to consider these days.

A good example of the incentive issue was where “mark to market” thinking led leaders to be paid handsomely on the modeled Net Present Value of development projects, but not on the actual fulfillment of the projects themselves. Baffling? Yes. Still, senior management–operating within a framework endorsed by auditors, consultants, and board members–defined the goals. Those goals played a big part in destroying the company.

Sure, a few Enron employees went to jail and many professionals were sullied forever; but the true “crime” that gets missed is how top down incentives drove otherwise professional people toward behaviors that they wouldn’t have even paid themselves for.  They were white whale goals acted on by proxy.

That is perhaps the best test of a white whale by proxy. Would you pay yourself to fulfill the incentive set you have?

White whale goals by proxy are usually present when you hear people lament that they are “just doing their job,” or “doing what they are told,” or “doing what they get paid to do,” or in the worst of the worst cases “protecting the company.”

Massive autocracies and ignominious genocides stand on the shoulders of white whale goals by proxy, particularly when they are proxy to an obsessed leader. Let’s not participate in or propagate them.

What do some simpler ones look like?

To keep this closer to home, here are a few modern goals that can become white whales in our professional lives, and a brief explanation of why:

1. A superlative image and “personal brand” – The phony focus on image in the mold of “fake it ’til you make it.” If pursued as an end in itself, vs. an outcome of a life of substance, then…well, it’s a deleterious focus on a goal that is ultimately not merely self interested, but selfish in a harmful sense.

2. Great pains for small wins – The dominance of the clean desk, starched shirts, pursuit of dominance on every point in the negotiation. Basically, this is idealizing stuff that doesn’t matter. In WWII U.S. Army slang, foolish adherence to critical standards on things that didn’t matter to the mission was known as chickenshit. I’m not sure what it is called now, but whatever it is it’s damaging to the mission and morale.

3. Rent-seeking – Seeking wealth without the creation of wealth. Placing defense of title, position, and income ahead of principle and value. Jerry Pournelle’s Iron Law of Bureaucracy puts in pithy words this white whale; and provides an explanation for countless managers’ sometimes oddball behaviors: They defend the bureaucracy at the expense of the mission. It’s a classic white whale. Similarly, acting purely on incentives without regard to the value they create (or destroy) can be a white whale goal as outlined in the Enron case. This is often the case when incentives are based on individual drivers (like revenue growth or headcount or output) in isolation that systemically create no value.

4. Temporal goal misalignment – Addressing the “now” without a focus on the “later” or vice versa. How often do we see short term decisions made that have a readily measurable, net negative long term impact; but that are characterized and lauded as magnificent wins. So, you closed the deal and got paid. Was it a good deal for shareholders and employees–the people who live with the longer term decisions? Interestingly, the opposite is the case as well: Many bankrupt companies lie foundered on the rocks of “long term investment.” How often do we see 5-year plans that lack a 1 or 2-year plan component?  The white whale lies in the lack of explicit balance.

5. Vengeance – I’m just going to go ahead and list it because, well, I started with Captain Ahab; and this was his issue. Pursuing personal vendettas, particularly those that drag your organization, family, or friends along with you; is the ultimate in white whale thinking. 9 times out of 10, the bitter pursuit of revenge against other people or other organizations only serves to take your eye off the ball. To be clear, this doesn’t mean simply the pursuit of crushing vengeance a la Ahab. It can also be as simple as an overweening need for one-upmanship or the constant need to be seen as ahead of the object of your bitterness. All this is wasted motion when it comes to life and performance.

So what?

Knowing whether you are pursuing a white whale is tough. Generally, the white whale looks like a worthy goal to the person obsessed with it.People who are genuinely obsessed can’t generally be reasoned with. But, they can be removed from their position…and, that’s worth pondering.

The best way to spot a white whale is to lay out the “True North” that everyone agrees to–what winning really looks like from a fiduciary, professional, and values standpoint; and then to identify how far off that azimuth your immediate goals are.

White whales pop out easily at that point as twisted and torqued visions of winning. They link to True North via paragraphs of logical backflips instead of a sentence fragment of concise clarity.

Like any other blind spot, these goals require reflection on your own part to spot. They also require willingness to tolerate a person or two in your midst who will challenge your view, your goals, your passions, and your obsessions. That person might be a trusted friend, a mentor, a pastor, or–if you are lucky–a spouse. In a really functional team, it can also be a subordinate or a peer.

In any event, you have to listen to them.

The gist of Melville’s story about Ahab and his hatred of the whale was that Ahab destroyed everything and everyone around him in pursuit of a definitively odd goal: Revenge against the single whale that took his leg.

There were many other whales in the ocean.

But, the white whale did him and his crew in. No–strike that–Ahab’s obsession with a white whale goal did it.

Don’t let a white whale–yours or somebody else’s–do you in.

What are some examples of white whales from your own professional, political, or personal lives?

Bill Gross: Debt Binge Worthy of Future Scorn

Bill Gross says future generations will view the global debt run-up of the past 6 years like we now view smoking on airplanes…misguided or just plain stupid.

Janus’ Bill Gross released an investment outlook today that is a painfully good read.

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His thesis:  That future generations are going to look at this one and say “How could they do that?” when it comes to running up debts the way we have in the past several years.

For those scoring at home, the U.S. National Debt stands above $18 Trillion as of today.  That, of course, looks trifling in the face of the U.S.’s $115 Trillion in unfunded liabilities.  Regardless of what you call them, they are promises to pay; and they are big ones.

An always interesting link is the U.S. Debt Clock.  Try it out; but keep a bucket handy.

The U.S., of course, isn’t alone; and that is what makes Gross’ read so interesting.  There may be no place left to hide soon.

In his outlook, Gross lodges multiple protests.  He states that while debt fueled recoveries from debt caused recessions are possible, they must have three preconditions to be so…

1. A non-fatal structural starting point (that is, countries can’t be insolvent at the start…)

2. Alignment of monetary and fiscal policies (especially that fiscal policy should take advantage of loose money to invest in accretive infrastructure)

3. Willing participation by private investors (they have to stay in the market even as yields are driven down and asset prices up beyond any realistic point of further appreciation).

It’s clear that all preconditions are/were not present in all countries pursuing the “borrow or monetize your way to freedom” strategy.  At the end of the day, fiscal, monetary, and investment indicators have to point toward kickstarting consumption and investment in the real economy.  It’s not clear to Gross (or me) that this has happened. If anything, Gross points to massive inconsistencies in political and market sentiments.

This is a fantastic read.  One that is well worth your time.

The implication?  Well, I posted last week about lower energy prices being a wake up call for business leaders to re-set scenarios for the future.  In this case, Gross is essentially saying that financial investors might do well to get out of markets sooner rather than later.  His quote:

Markets are reaching the point of low return and diminishing liquidity. Investors may want to begin to take some chips off the table: raise asset quality, reduce duration, and prepare for at least a halt of asset appreciation engineered upon a false central bank premise of artificial yields, QE and the trickling down of faux wealth to the working class.

Ouch.  That’s the implication.  Bursting of high valuations by investors fleeing to quality and going short could very much signal a period of deflation; then who knows what…?

Photo credit: Lendingmemo

Activist Investors and How to Handle Them

Activist investors may become more active–spurring management to focus and accelerate.


Fortune’s Paul Hodgson filed this article yesterday about how activist investors are becoming even more active.

It’s a good read that summarizes the influence of activist hedge funds and the like; and how that influence is growing into the Fortune 500-sized company space.

Hodgson’s point of view is that we should look for more activism because, well, it works.  Success breeds success.

His defining quote is at the end of the article:

Boards are crumbling in front of the [activists] because the value released by changes they are forcing through is making it more likely that other shareholders will support them.

It really is that simple. If an activist like Carl Icahn can campaign for eBay to sell PayPal, and subsequently “unlock” trapped value, then so be it.

Recently, there has been a spate of debate and discussion about how activists can create incentive misalignment.  In a letter to the editor of the Wall Street Journal yesterday, reader Jonathan Kaufelt laments the lack of incentive alignment in the Dow Chemical Board of Directors case.  You may recall that there has been an ongoing discussion of whether activist investor Daniel Loeb’s scheme to pay his director nominees for near term stock appreciation is conducive to good governance.

A reasonable person could say that such incentive structures are problematic more for their mis-allocation (not all directors hold the incentives) than for their mis-alignment. There might be a temporal conflict with fiduciary duty, but it’s not clear that the conflict is one that other shareholders would mind (which would be the point of Hodgson’s Fortune article).

In other words, the activists may be amplifying existing incentives to boost near term stock performance; but might not be an issue to those who own the company.  This gets into a more existential view of value creation and “long term” investing where the question is whether a shareholder’s objective ought to be to maximize value of holdings today (the “activist” vision) or to create an investment vehicle for all time (the “investor” vision).

On those things, reasonable people can disagree.  In the case of a public company, it’s reasonable to say that all shareholders ought to be ready to vote with their feet–or sell orders as the case may be.

Another view–my view–is that activists, by stirring the pot, actually serve a purpose that should normally be served by right functioning boards in the first place:  They sharpen management’s focus on value creation vs. sleepy backslapping boondoggles.

For CEOs and boards, the best prevention program for the pains of activism is–wait for it–to act like an activist.  Ironically, activists often create the pressure of scrutiny where it should have already been.

I welcome your thoughts…