Monday, December 7, 2009

MONEY MUST START TO FLOW BEFORE THE JOBS WILL GROW

Jobs, that is what this economy needs. So how do we create jobs? Well, we need to get the money flowing and businesses investing before there will be any meaningful jobs growth.

I read the first positive and thoughtful article on this subject recently. Corporate America's Huge Pile of Cash is an interesting read.

While, in my opinion, it leaves out a key risk factor which is the amount of uncertainty. Corporate executives will remain cautious with their cash if they continue to be concerned and uncertain of the outcome regarding taxes, health care costs, and inflation. However, at some point, these same executives will conclude that they can wait no longer. I am hopeful they will reach that conclusion soon. If they begin to spend the piles of cash they have accumulated, jobs will be created and we can begin a growth curve. Clearly, this will be more moderate and steady growth than in past recoveries. But growth is better than flat or decline.

To growth and job creation!
Until Next Time,
Gail

Friday, November 27, 2009

A FRAUD WITH AN EXIT STRATEGY

Go figure, according to the NY Times, a key figure in the Swiss banking tax evasion matter has been sentenced to 4 years in a prison. He is also applying (suing?) for a whistleblower's award of billions of dollars based on the IRS collection of taxes based on the information he gave.

He is apparently trying to sneak through a small loophole. His attorney appears to be very pleased with himself and is looking forward to arguing the matter. Should the attorney really be proud of himself for championing this effort? Go figure.

Cheers, Mike

Wednesday, November 25, 2009

SOMETIMES, THE BEST ACQUISITION IS THE ONE YOU DON'T MAKE


In the troubled company advisory world, failed mergers and acquisitions provide a steady stream of work. Many spreadsheets are used to support acquiring a company rather than growing organically. After all, do you know how long it takes to grow organically? Way too long in this digital age.

So it is somewhat refreshing to see a management team decide that a planned acquisition just may be more than they can handle. The Koenigsegg Group in Sweden had originally planned to acquire the struggling SAAB franchise from GM. The definition of 'struggling'? SAAB has not been profitable in any year that it has been owned by GM.

Koenigsegg is a niche high end, low volume auto manufacturer. They looked at this acquisition, with the help of the Swedish government, as a way to step up in size. Fortunately for them, the pieces were slow to fall into place and finally someone there must have said, "can we really handle this?" The answer to this question apparently was 'no'. So, Koenigsegg has backed out of the purchase.

So, now what happens to SAAB? As the WSJ article says, SAAB accounts for only 1% of the sales of GM and it requires billions to be competitive. Will they make the right decision? Let's see how their new board of directors handle this one.

Cheers, Mike

Monday, November 23, 2009

VILLANOVA'S EXECUTIVE MBA PROGRAM

On Friday and Saturday, Mike and I were the instructors for a leadership session at Villanova's Executive MBA program. Similar to the session i wrote about on October 16 that we did at the US Military Academy at West Point, we get as much or more from the session as we give to the attendees.
This was a great group in this class. I was struck by their desire to learn, to consider, to ponder, to challenge, and to grow. My favorite part of the class was when we asked a question and then facilitated debate and discussion among the attendees. Try it yourself. Instead of immediately providing your answer or solution, what if you asked more questions? What if you facilitated productive debate and discussion? What if you could then synthesize the ideas? I think you would get a better solution than your original answer. Just a thought.
It was a great two days. I was in the company of leaders striving to become even better leaders. That is invigorating! As these and other leaders continue to progress in their careers, I know our future is bright. It is easy to focus on our failed leaders since they garner the headlines. Our regular readers know that I believe we do have a leadership deficit in many organizations. But great leaders and future leaders are out there. We need their leaders to unleash their talent!
Thanks again to Villanova's EMBA program for inviting us and thanks to the class for a great weekend.
Until Next Time,
Gail

Wednesday, November 18, 2009

AMERICA'S BEST LEADERS 2009

US News and World Report has named America's Best Leaders 2009 which is worth reading. The definition of leadership that they used was- someone who motivates people to work collectively to accomplish great things. The criteria they assessed in order to select the list were: sets direction; achieves results; and cultivates a culture of growth.
There is also a commentary written by David Gergen The National Deficit- Of Leadership in which he discusses the need for good followers as well as good leaders. I would argue that we have a global deficit of strong leaders.

Many of our readers are great leaders. The global economy is in a mess. But the opportunity in this crisis, is that you could step up and speak and act as the leader that you are inside. Others will follow. Good luck!

Monday, November 16, 2009

THE PATRIOTS & RISK AND REWARD


Every leader is faced with decisions that require her/him to weigh the risks and rewards of key decisions. Usually a leader first looks at the risk. What is the level of the risk? If it is a high risk, the leader must carefully weigh the risks, the rewards and less risky options to arrive at the correct course of action.

Last night I watched incredulously as at the 2 minute mark of the New England Patriots / Indianapolis Colts game, the Patriots' leader chose the extremely high risk move of going for a first down on fourth and two at the Patriots' 28 yard line.

The risk was that if the Patriots failed to get the first down, the Colts would only have to go 28 yards for a game winning touchdown. Such a failure would leave the Colts with a very high probability to score a touchdown. The reward was probably a win for the Patriots. But the risk was probably a loss.

This is the point in time when the leader must weigh all the options. Yes, the Patriots offense is superior to its defense this year. And yes, they have made first downs on fourth and short in their own territory other times this year. But, if they punt the ball and gain a net forty yards, the Colts have to go 70 yards for a touchdown, not 28. The odds of a touchdown by the Colts, while entirely possible with their star quarterback Peyton Manning, are much lower than from the 28.

A failure at the 28 yard line would be catastrophic disaster. It was basically a bet the ranch bet that only teams losing at that point in time would make. Unprecedented for a winning team to make such a bet and unlikely for another team to try.

So was it the leader's supreme confidence in his offense? His lack of confidence in his defense? (And his lack of a vote of confidence that they couldn't prevent a touchdown at the end of the game from 70 yards.) Or was it the unbridled arrogance of the leader?

Cheers, Mike

Tuesday, November 3, 2009

CIT, BACK TO REAL BANKRUPTCIES


It is good to see that troubled companies are back to following the rules. CIT has actually filed for bankruptcy and the matter is following the time honored rules of Chapter 11 and not the Treasury dictated rules of auto bankruptcies past.

In the absence of a government bailout, the various stakeholders are acting in their own best interests and trying to maximize the value of the company. How novel. The appropriate debtholders and third-party lenders extended more loans on commercially reasonable terms.

CIT essentially filed a pre-packaged plan of reorganization. This means that over 50% of the number of claimants representing over 67% of the dollars in each class already agreed to the plan of reorganization. These are the required levels of support for a plan to pass in bankruptcy. The bankruptcy was necessary because CIT couldn't get 100% of the debtholders to agree to the plan.

By the way, business bankruptcies increased in October from September. Look for more filings to occur in commercial real estate and retail. As banks continue to increase profits by getting funding for free, they will be less inclined to extend and pretend such loans are good.

Cheers, Mike

Monday, November 2, 2009

A WOMAN'S NATION

This month a new book was released The Shriver Report: A Woman's Nation Changes Everything and the Time Magazine cover story is The State of the American Woman. The impetus for the press coverage about women is that it is expected that by the end of the year, for the first time in history, the majority of American workers will be women. Now this is being driven by advances of women in the workplace but unfortunately also largely by the economic downturn which has hit men harder than it hit women.

I have not yet read the Shriver Report so I will let you know my thoughts after I read it. But I have heard her in various interviews about the book. I have read the various articles and polls within Time Magazine. As you would expect there are several interesting statistics on the progress made over the last 40 years. In 1972, only 7% of students playing high school sports were girls; now the number is six times as high. Close to half of all law and medical degrees go to women, up from fewer than 10% in 1970. But there are also statistics on challenges that remain. Women are only about 10% of civil engineers and a third of physicians and surgeons. We have previously discussed on this blog that boardrooms and corner offices are still filled mainly by men. The detail in the magazine on the polls and the different answers based on demographics is worth reading. The overall conclusion is clear, the roles of men and women have changed dramatically in the last 40 years.

To me, the most interesting part of all of this has been that men and women agree on a major remaining challenge. They agree that government and businesses have failed to adjust enough to the changes in the family. Has your company changed enough? The statistics would suggest a dramatic shift in reality happened slowly over the last 40 years. Should we stop and re-evaluate top to bottom what needs to change in business to address the new reality? Last week's post was on Corporate Cultures, do they reflect the new reality of the American workforce?

Until Next Time,
Gail

Wednesday, October 28, 2009

NURTURE CORPORATE CULTURE

Mike's post on October 20 Oh, The Culture, combined with the questions we get at many of our leadership session including the one we recently did at West Point, have caused me to spend a significant amount of time thinking about corporate culture. Mike ended his post with the following two sentences. "In a crisis, you reap what you sow from your culture. Address the culture now so it will serve you well in the crisis." As usual, I completely agree.

This post is about the need to nurture the culture and reinforce the values or risk an erosion of the company's culture that can eventually cause the crisis. Let me share some of my research and thoughts on this topic. We should probably start with a definition of corporate culture.

The easiest way I have found to describe corporate culture is how your employees act and the decisions they make when no one is watching. I found two articles with more in depth definitions. Corporate Culture Definition is quite good in describing the various layers within culture. Another article Definition of Corporate Culture is also good and uses an analogy of culture as the invisible energy field or electricity that runs throughout a company and either enables or restricts its ability to achieve strategic objectives. I would submit that the invisible energy source known as culture needs to be constantly reinforced and nurtured or you run the risk of erosion particularly in the area of values and ethics. Another interesting article is about corporate culture and brand entitled Corporate Culture is Brand, and Brand is Corporate Culture which highlights that how your employees act is much more the brand than any logo or advertisement. Lastly, my research uncovered some articles on measuring corporate culture, although I did not find anything that provided REAL measures. The two articles I liked were Human Resources: Measuring Corporate Culture which differentiates artifacts, espoused values, and basic underlying assumptions. This article refers to corporate culture as the Other Bottom Line. In my experience, the erosion happens within the basic underlying assumptions that can change over time. It is fine if it is an intentional change but lax risk management and not reinforcing the values will erode the culture even if not intentional. The other article Corporate Culture covers small businesses and culture definitions. The reason I included it here with measurement is that there were a few questions that are very helpful to assess what the culture is and could over time help you to measure any changes. The five questions are:
  • What 10 words best describe your company?
  • What is really important around here?
  • Who gets promoted here and why?
  • What behaviors get rewarded here?
  • What type of people are the "in" crowd and the "not in" crowd?

During my 30 years in the consulting industry, I learned that I needed to understand two things at each of my clients in order to be successful- what was their corporate culture and how they compensated their executive team. If I knew these two things I would know what they would and would not buy, how to handle myself in meetings, and what problems I could and could not recover from with them and how to do it. In addition to observing the cultures at each of my clients that enabled or restricted performance, I watched a strong culture at Arthur Andersen that truly was the other bottom line (it may have even been the cause of the true bottom line) erode over time and cause the crisis that destroyed the firm. Hindsight has allowed me to see now the signs that were there before the crisis. At Bearingpoint I saw a culture that destroyed value. I know first hand what can and does happen if you do not nurture the right corporate culture. BTW, does anyone know of any good measurement tools for corporate culture?

This is NOT soft stuff. Companies need strong, healthy cultures and CEO's need to focus on nurturing it or the culture will erode and so will profitability and corporate sustainability.

Until Next Time,

Gail

Tuesday, October 20, 2009

OH, THE CULTURE!

Every company has a culture. Usually culture is a by-product of how the company is run by the current CEO or how it was run by the last CEO. It is rare in my experience for the CEO to say, "I don't like the culture and we are going to change it." Or to say, "What culture do I want at my company?" Yes, there are the rare CEO's that actually focus on the culture. But for the most part, it is about running a profitable business as if culture isn't that important.

And yet, a company's culture is an invisible force that runs throughout the company and affects everything that is done. Fortune has an article that point to the culture of Bear Stearns and that a few of its alumni may have been inflicted with the dark side of that culture.

Whether that is true or not or whether one can't paint with such a broad brush is neither here nor there. The real questions for today's leaders are the following:

What is your company's culture? Is it the culture you want? How are you going to get the culture you want?

Gail often says that she and her team at Andersen's Business Consulting Group were able to keep the group together because of the culture. In a crisis, you reap what you sow from your culture. Address the culture now so it will serve you well in a crisis.

Cheers, Mike

Monday, October 19, 2009

GALLEON, HEDGE FUND IN CRISIS?


On Friday, the founder of Galleon was arrested and charged with insider trading. Put aside whether he is guilty or innocent. The remaining managers of the fund have to deal with the resultant crisis.

In a crisis such as this, the remaining managers must decide what individual or small group of individual should be in charge of the fund in the interim. They must realize that the fund is a separate and distinct entity from its founder. Each party will have their own legal issues to address.

Next the management must get the right team on board. This will include at least, special counsel, a crisis public relations firm and a financial crisis expert. One part of the management team should be dedicated to dealing with the crisis and one part of the management team needs to address the day-to-day operations of the fund.

All of the stakeholders have to be identified and addressed. The stakeholders will include, investors, employees, lenders, companies invested in by the fund, SEC, state regulatory agencies including the attorney general, and other parties.

The communications from the firm must be carefully managed and critically previewed with counsel. All the stakeholders will have questions, some of which can be answered and some of which cannot be answered at this time. All employees need to be briefed with a list of questions and answers and instructed to send parties to a central communication point. If this does not occur, misinformation will cause additional problems that will have to be addressed.

The interim fund management may also have to decide whether it must pursue its own internal investigation. This will be a very sticky wicket which will require constant legal advice every step of the way.

It is not what the innocent managers bought into. But it doesn't matter that they don't like it, they have to deal with it. Such is the challenge of dealing with a crisis.

Cheers, Mike

Friday, October 16, 2009

US Military Academy at West Point

Yesterday, Mike and I were invited to be guest speakers at the US Military Academy's Eisenhower Program on Cross Cultural Leadership. It was an honor to be asked to speak by the department head and a friend of ours, Col. Tom Kolditz. This was a group of over 20 participants, mainly Army Captains that have all had some form of command responsibility and have served all over the world.

As always, Mike and I had fun and were happy to share our experiences and lessons learned. But as always, I received more than I gave at the session. It was inspiring to be there. Lately, I find myself disappointed with the lack of leadership demonstrated by many business "leaders" and by many politicians. But this visit was inspiring and a source of renewal. I was in the presence of leaders striving to be even better leaders in the future.

It reminded me that there are many great leaders doing great things every day. And, the Dow stayed above 10,000. A great day!

Until Next Time,
Gail

Friday, October 9, 2009

LEADERSHIP COURAGE

There is an article in the WSJ entitled Are Most CEO's "Wusses"? The author explains that being a "wuss" has nothing to do with being willing to fire people for poor performance. Instead, it is not b eing willing to hold employees accountable for their behavior before the poor results register.

To me this is about being a leader and having the courage of your convictions. If all a person does is wait for the poor performance results to show up in the numbers before they take action on an employee (especially an executive), I would argue that by definition they did not lead but rather followed the numbers. Anyone can take action after the fact. A leader is someone who is looking at the quality of the person and the quality of the numbers. We have certainly learned from this recession that very good numbers can precede very bad numbers. This is particularly true if the individual is sacrificing long term value for short term results or taking unusually high risks without the correct risk mitigation steps. This brings us to the courage part of the discussion. It is difficult when an employee is driving strong financial performance, to fire them for bad behavior. It is human nature to not want to risk your own srong financial performance. But that is exactly what a good leader must do.

Holding people accountable for financial results AND proper behavior is a leader's job and key to long term value creation. If an individual is driving strong financial performance but has questionable business ethics the risk is too high that long term they will destroy value. Also, I am a strong believer in the concept of the shadow of the leader. If you say something but do not follow through with action, the bad behavior can spread like a virus through the organization. The opposite is also true. If the leader demonstrates by their actions that their ethics and corporate values are not just empty words, the entire employee base will follow that lead. So you get a bigger benefit than the one employee for which you took action.

If all leadership required was looking at the historical financial performance to determine action, companies could be led by computer spreadsheets. Leadership requires judgement and courage but most of all action. I have heard too many times someone say that they know someone is not exhibiting the right behavior BUT their numbers are great and so no significant action is taken.

Be the courageous leader. Don't be a "wuss".
Until Next Time,
Gail

Monday, October 5, 2009

THE MANAGEMENT BANKRUPTCY BONUSES

I have always found it quite interesting that for the past 20 years, top management for larger bankrupt companies require handsome retention and success bonuses for getting a company through a bankruptcy.

Here is an article from the NY Times setting the stage for the Chicago Tribune bonuses. The Tribune is in bankruptcy as the newspaper industry fights going the way of the slide rule and the typewriter. The theory of these bonuses is that people have to work very hard and they should be rewarded. And if they don't get a bonus, the good people will leave.

While some bonus may be appropriate to retain people, the total situation should always be considered. For example, yes, the people have to work hard. I am unaware of many jobs where you don't have to work hard. And yes, they need to rewarded for their efforts. Yet many people have had their wages frozen or reduced due to the lack of profitability afflicted thousands of companies.

And, yes, the good people will leave. Although, who is hiring in the newspaper industry? My experience is that the really good people may leave anyway. For them the issue is not the golden handcuff known as a retention bonus. For them the issue is the certainty of having a job. Put aside whether anyone has employment certainty anywhere these days.

So, retention bonuses for large groups of managers who were at the helm when the ship was grounded? You could bring in an outside firm to run the company or augment the team. But then, that may or may not be the best bargain either.

Cheers, Mike

Monday, September 28, 2009

STAYING CONNECTED

Today's post is about staying connected to people and to new ideas. Over the past two weeks, I have had conversations with several successful people about the challenge of maintaining their network of friends and colleagues. They all know the value of staying connected but the challenge is finding the available time.

Over the years, I have come to the conclusion that the most valuable assets we have in life is the relationships we develop with people and the experiences and knowledge we gain throughout our lives. These assets are ours for life. They are not dependant on the job we have, or more frequently in today's world, the job we do not have at the time. However, we have more and more demands made on our time so we have less and less available time. But remember, that our days still consist of 24 hours. We do not have less time, we just have less available time. So how do we make time for staying connected not only to people but to new, fresh, and different ideas?

Well, in my opinion the first step is to reevaluate your priorities. Are you spending your time on the things you value most? Mike does a great discussion in our workshops about treating your family as your number one client. That technique is really about aligning your priorities with your allocation of time. But after you have done that, it is also about find effective and efficient ways to use your time.

Let's start with staying connected to people. In the discussions I have had recently, I mentioned that just sending a quick email that states you were thinking about the person and hope they are doing well. To each person that I suggested this their response was, "I do not want to send such a trite email to anyone." My response, "So you think it is better to not contact them at all? How will they even know you are thinking of them?" A quick email or quick call is better then no contact at all. Remember, they are just as busy and pressed for time as you are, so quick is good. The second thing I would mention is that people remember the smallest kindness. Be nice and caring to everyone and it will come back to you when you least expect it.

Now let's talk about staying connected to ideas and creative thinking. There are so many ways to stay connected to world and business events today that I could not list them all. The trick though is to see out ideas and thoughts that are different than yours. Instead of selecting a news channel or newspaper columnist because you usually agree with them, choose one because you usually disagree with them. One of two things will happen. You may find that you agree with them on more than you originally thought or even if it confirms your suspicion that you will disagree, you will understand the oppositions point of view better and can better prepare yourself to successfully debate the issue. Your brain can handle an infinite amount of information. Allow yourself access to dissenting views, expand your horizons and make your own decisions. You will be wiser and a more interesting individual, which will assist with the first point of connecting with people.

Relationships are not only fun but are vital to your career success. Invest in yourself and make the effort to stay connected to people and to new ideas. Share with us your ideas on how to use your time efficiently and effectively to stay connected.

Until Next Time,
Gail

Wednesday, September 16, 2009

PREPARE A FLIGHT RISK PLAN

Leaders are sometimes faced with a difficult situation where one of their direct reports behaves in a manner inconsistent with the culture and values of the company. For example, in a consulting firm, a key producer could might treat the employees who work for him/her poorly. The treatment may be inconsistent with the values of the company but, the key producer is important to the firm. There is a price to keep the key producer, but heretofore the price has not been considered too high.

But then the key producer starts to get arrogant about his/her behavior and the behavior causes more issues. The leader is now faced with a problem that must be addressed or will it? Remember, the key to leverage is being willing to accept any outcome. If the leader cannot accept losing the key producer, the leader will be relatively powerless to change that person's behavior. When push comes to shove, the leader can't accept losing this employee.

When we had our own firm, we used to identify our key flight risks. We would consider which of our top people might leave or might have to go away. We then put together a plan if that person had to leave immediately. This plan gave us the comfort to know that we could handle the departure of a key employee.

It also gave us the ultimate leverage in any negotiation with our people. We could handle the result of their departure. It wouldn't be our preferred result, but we could handle it. A leader must be able to handle the departure of key employees in order to effectively lead and maintain the values of the company.

Cheers, Mike

Tuesday, September 15, 2009

CHRYSLER IS LOOKING AT FALLING FALL SALES


This is what happens when you have 30 day bankruptcy. The WSJ reports that all is not going smoothly in Chrysler land. The management often spend its time trying to get out of bankruptcy not fixing the core business issues to ensure the company's viability.

The WSJ also reports that Chrysler's issues may be more difficult than the FIAT management may have understood. They must have noticed the issues that Daimler Chrysler and Cerberus had running Chrysler previously. This movie has just started and the outcome is in doubt. Just sit back, have some popcorn and watch. It should be interesting.

Cheers, Mike

Monday, September 14, 2009

NEGOTIATING LEVERAGE

One of our followers is selling his BMW convertible. This reminds me of a story about negotiating leverage. Twenty-five years ago I owned a Triumph Spitfire. For those of you who are not familiar with the Spitfire, it spent more time with the hood up then it did on the road. The time had finally come for the Spitfire to go away.

I put the car out with a 'for sale' sign. I was a reluctant seller of the car. I was asking $1800 and after a couple of days I had two parties who were interested in the car. So I scheduled them both for a fall Saturday. The car looked great and the hood was down. A college guy and his brother were scheduled first.

We took the car for a test drive and they decided they wanted the car. The older brother said, "Put our your hand." I put my hand out and he put 17 hundred dollar bills in my hand. "How does it feel?" I replied, "It feels one light." He said smugly, "It is $1700."

I replied, "I have someone coming this afternoon who wants the car." He said, "$1700 in hand is better than $1800 in the bush. And it is only $100 short." I decided to speed up the negotiations. "Actually it is $200 hundred short. I just raised the price to $1900."

The older brother looked surprised and said, "You can't do that!" "Of course I can, and I just did. If I were you, I would hurry. I am a heartbeat away from raising the price to $2,000." He pleaded, "Would you take the $1800?" "Well, I just raised it to $1900. But you seem like nice guys, I will give it to you for $1800." They gave me five twenties and I gave them the keys.

They were negotiating with no leverage. They really wanted the car. Ultimate leverage comes from being able to accept either outcome. I was truly indifferent whether I sold the car or not. They never had a chance.

Cheers, Mike

Friday, September 11, 2009

YOU LOST 30% AND THE REST IS ILLIQUID??

Really stellar job done by the much touted endowment investment groups of Harvard and Yale. For years the two schools have blown their own horns as to their investment acumen. David Swenson, Yale's investment office head, even wrote an investment book that was a big hit with the endowment and foundation crowd.

But Yale's and Harvard's 30% losses over the past year is even worse. First of all the year ended June 30. Many investors have recovered somewhat in the rebound since March. But not Yale and Harvard. Both institutions have a very low percentage of their portfolios in public equities and apparently a high percentage in illiquid investments. Investments which haven't rebounded and if they are in commercial real estate, still may go down. The Brown University story is also telling.

Clearly the endowments were entirely too illiquid. This wouldn't be so bad, but these universities used their endowments to fund significant portions of their operating budgets. So perversely, these schools, which still have multi-billion dollar budgets, have to resort to cost containment actions such as wage freezes, hiring freezes, cost and service cuts and capital expenditure deferments.

The losses are understandable given what has transpired over the past year, but the lack of liquidity given how much their annual operating budgets depended on the endowments is a little perplexing.

Cheers, Mike

Thursday, September 10, 2009

FOLLOW THE RULES


My wife has been seriously bitten by the golf bug. The other night she came home and had a rules question. I answered the question but she said the other players thought it was the wrong answer. So I went online to the USGA.org and found the answer which backed me up. Thank you USGA, I knew I had to be right once this year.

On the way to the golf course today, I decided to pick up a copy of the rule book for my wife (I am such a big spender). I stopped by Golf Galaxy, seemed like a likely candidate to sell me a copy of the rules. I waited at the front desk to ask for a copy. While I waited, I saw that they sold lip balm, Advil (breakfast of champions), little bag watches, various faux climbing caribiners to hang stuff on a golf bag and other relatively useless items. Finally it was my turn, "Yes, I would like to buy a USGA rule book." I was met with the following reply, "We don't have any rulebooks." I chuckled to myself, you have all this crap (technical term) but you have no rulebooks. I said, "thank you, have a good day."

I live in Shopping Center USA, so I drove a par 5 away to Golfsmith. I went in and asked for a copy of the USGA rules. The salesperson said, "We may have some in the back." While I waited, I looked at the now usual lip balm, Advil, Heathcliff bars, Gatorade bars, some gizmo to put a line on golf balls and all sorts of other odd items. The salesperson came out and said, "We don't have rule books." I said, "Thank you, have a good day."

I then went to the club, hoping against hope for a rule book. I went into the pro shop and looked around. Hmmmm, no rule books hanging around. So I asked the young lady at the counter for a rule book. "Sorry, we don't have any rule books." Wow, is this for real or is this Candid Camera. But then the assistant pro cheerfully spoke up, "I have a rule book, you can have mine." I replied, "I don't want to take your rule book." He said, "I have another home, please take mine." And so I thankfully did.

It is really hard to follow the rules if you can't get a copy.

Cheers, Mike

Tuesday, September 8, 2009

WOMEN IN POLITICS

Women now drive the global economy controlling $20 trillion in annual consumer spending is the conclusion in an article in this month's Harvard Business Review entitled The Female Economy.

That global economic power should also mean increased opportunities for women in business and politics when we begin to come out of this global recession. There is a survey being conducted by The Boston Consulting Group on what women want and early results of the survey can be viewed at http://womenspeakworldwide.com/.

Specifically, given the amount of government influence today and in the future around the world, women will need to hold a larger percentage of elected positions in order to have their voice and views influence legislation. In the USA, there is a group focused on helping women prepare for political office. Check out this website http://thewhitehouseproject.org/.

Finally, check out this Forbes article You Want To Run For Office. Now What? The article is the story of a woman with no previous interest in politics that made the decision to run and won a seat in her state assembly.

Do you agree that more women need to run for public office?

Great to be back at the blog the day after Labor Day! Until Next Time,
Gail

HOW OPEN SHOULD A LEADER BE?

Rich Karlgaard has an interesting commentary in Forbes on a leader's openness. He writes about how open a leader should be or not? My style was to be generally open. There were times though where as soon as I said something to our employees, I new I was too open. People don't need to know all the details of why a leader thinks, acts or speaks in a certain manner.

It is one thing to show you are human and totally another thing to leave people doubting you because you told them all your imperfections and fears. Everyone has to find what works for them. Here is hoping you think of what you want to share before you share it.

Cheers, Mike

Monday, September 7, 2009

THE BIG THREE NOW


Good to see that Ford was the lone US car manufacturer to benefit from the Cash for Clunkers Program. It is also clear that just because Chrylser and GM are out of bankruptcy, doesn't mean the companies are not still broken (technical term). According to Forbes in this article, GM and Chrysler's sales actually went down!

Yes, they have new balance sheets that make them potentially viable. But have the operations really been changed in a meaningful way to ensure their viability? Are they making cars that people actually want to buy? Well maybe GM has some cars in the oven that Americans will buy. But Chrysler? I can't see the FIAT cinquecento taking off in any meaningfull way. The Smart Car sized car will likely have limited appeal. I am a big fan of the recent styling of the Alfa Romeo, but really, how many of these will be sold?

Watch closely to see how GM and Chrysler do going forward. It should be interesting.

Cheers, Mike

Saturday, September 5, 2009

MADOFF, REN TEC AND WHAT YOU READ


So, little Bernie is a page one topic again. This time however, the prime suspect is the SEC. The SEC's Inspector General issued a report that casts the SEC in a very poor light. This report can be viewed in its entirety at this link.

How could he do this volume of options?While this report will be covered in detail by the financial press, I want to focus on a hedge fund, Renaissance Technologies, that decided to exit the Madoff funds several years ago because, they didn't like the answers they were getting and the answers they couldn't get. How was Bernie making such consistent returns? How could Bernie always be in cash just when he needed to be? The WSJ today has a good article on their decision. But is it the complete story on Ren Tech?

Check out this Zerohedge piece today which reads further into the SEC Inspector General's report and discovers that Ren Tech didn't take everything out of the Madoff funds and didn't disclose its suspicions to the SEC.

Many of the matters I worked on were covered by the financial press. One of our interns once said to me, "It was great working the summer on a matter that was in the business section every week. But I was very surprised how much was incomplete or wrong."

Good to bear this in mind when reading various financial pieces, including this blog!

Cheers, Mike

COMING BACK AFTER VACATION

As Gail announced and I didn't, we are now back from our vacations. Why do two retired people need a vacation? Hmmm, hard to answer.

Starting today, we are back blogging on Leadership during times of financial crisis Monday thru Friday with bonus posts on the weekends.

Cheers

Tuesday, August 11, 2009

LOAN TO OWN? OR WHAT CHOICE DO WE HAVE?


There is an A1 WSJ article this morning, Distressed Takeovers Soar. The main points of the article are that M&A deals are largely occurring in bankruptcy court these days and that many investors are buying the debt to take over financially troubled companies.

I agree that M&A bankers are now spending most of their time on bankrupt M&A deals. This is not because it is a novel way to do a transaction or because it is efficient. No one would ever accuse a bankruptcy M&A process of being efficient. Expensive yes, efficient no. It is simply because in these economic times, corporations are playing it close to the vest and not on acquisition sprees. It is sometimes easier to let a competitor go out of business than to aquire the competitor.

The other main point is that investors are using debt to acquire bankrupt companies. This is the so-called loan to own approach. There are several examples of this technique and the article implies this is now happening everywhere. Au contraire!

Most of these so-called 'loan to own' situations are really as follows. Banks, hedge funds and others make loans to less than stellar companies. The lenders believe they have priced the deal and collateralized it to protect their reasonable downside. The company then underperforms and the debt starts trading down. Some of the banks and mutual funds sell their loans to hedge funds and other distressed investors. These investments are still made with the thought of getting a large enough return to justify the purchase. The investment thesis is not generally, 'hey, let's buy more of the debt at a discount and then we can bid our debt and buy the company'.

The way it often works is that the funds now have one or two rounds of debts purchases at a discount and then the company underperforms again! Now the investors realize that a sale of the company is not imminent at a sufficient price (see Delphi). The next great thought? Hey let's own the company! We can buy it with out debt. Just great, now they are bidding in their debt to own a company which the buyers are not set up to own.

Loan to own works much better when a buyer decides to buy an underperforming company whose debt is trading at a discount. The buyer starts buying the debt at a price under which it will bid for the company. This effectively lowers the buyer's price and protects the buyer against losing the purchase in a bankruptcy. If the buyer is outbid by another buyer, then by definition it will have made a profit on its efforts.

Loan to own, not as a black and white surgical process as you might be led to believe.

Cheers, Mike

HURON CONSULTING & AN ACCOUNTING PROBLEM


What happened to Huron Consulting? Zerohedge reported, amongst others, that Huron's CEO and CFO had resigned due to an accounting scandal. Another article set forth some more info.

Apparently someone at Huron, it is not clear who, became aware that the accounting for one of the companies acquired by Huron a few years ago was not correct. Basically, Huron acquired a company and the selling shareholders decided to give some of the proceeds to non-selling employees.

Huron booked the acquisition as if all of the price paid to the selling shareholders was for the equity and therefore largely set up as goodwill on Huron's balance sheet. However, if some of the sales price actually went to non-shareholder employees, then GAAP requires that the portion paid to non-shareholder employees be expensed as compensation. The proper treatment increases expenses and reduces net income. Further, upon review by an outside firm, there were three other acquisitions that were not accounted for properly.

Huron has stated that its prior three years of financial statements have to be restated for a pretty material reduction in earnings. The NY Times has an interesting Q&A on the Huron situation. What is doesn't ask or answer who knew what, when? I suspect that since three very senior management members resigned, someone may have knew something previously. Finally, The Chicago Tribune has a piece on the hometown company.

It is always unfortunate when something like this happens. It is unfortunate for the employees, especially the support staffs, who are dedicated to the firm. Hopefully Huron will be able to survive this.

Cheers, Mike

Monday, August 10, 2009

CONFRONTING REALITY

Recently in Forbes Magazine, there was a series of interviews with several CEO's on leadership. One of the items was Confront Reality covered by Ingersoll Rand CEO Herbert Henkel. He says "always question whether the 'halo effect' of a business or business situation is blinding you to what lies on the horizon."

His point is that in the past year some business leaders ignored or wished away the negative signs of a slowdown in their businesses. Others quickly started to put their contingency plans into effect just in case the downturn was significant.

There are two points that Gail and I stress in our sessions. The first is "Confront the Brutal Facts" on page 67 of our book. Essentially, leaders must accept the facts no matter whether they are acceptable or desirable or not. It is what it is. Pretending the facts are not valid or wishing them away is not acceptable behavior for a leader.

The second point is to protect the downside. Many business people get themselves into trouble by focusing to heavily on the upside and spending much less time on the potential downside. It should be almost the opposite. Leaders protect the downside first and then look to the upside. Often times if one protects the downside, the upside almost takes care of itself.

Cheers, Mike

Monday, August 3, 2009

SEE YOU IN SEPTEMBER!

Hello everyone. I hope you are all having a great summer. Mine has been so good that I have not been keeping up on the blog. So, I have concluded that I should quote great old song line....See you in September! When I am back in September, I plan to write a series of articles about women running for public office. Enjoy the summer!
Until Next Time,
Gail

Tuesday, July 28, 2009

DIP LENDERS TAKE OVER DELPHI

A few weeks ago bankruptcy judge Robert Drain derailed a government sponsored plan for Platinum Equity and GM to take over Delphi and have it emerge from bankruptcy. Delphi is a former GM subsidiary that filed for bankruptcy several years ago. It had been languishing in Chapter 11 limbo unable to put together a confirmable plan of reorganization. The government sponsored plan offered to pay the DIP lenders only 20 cents on the dollar. DIP loans are generally assumed to be money good and there are very few instances over the past 20 years where DIP loans were not paid in full.

Judge Drain ordered an auction to take place for the company. The auction was won by the DIP lenders who bid in their debt. They had $3.4 billion of loans due from Delphi. For another party to win the auction, they would have had to bid more than the face value of the lenders' loans. According to the WSJ, there will be a hearing to approve the sale on Wednesday. It may be interesting to follow since this case has had many twists and turns.

Should the DIP lenders have the sale approved, the fun will only just begin. They will immediately have to work with management to make sure they have a leadership team in place that can ensure that Delphi will be viable for the foreseeable future. These turbulent automotive times require the best leadership available in management and at the board level.

Cheers (back from Scotland), Mike

Tuesday, July 21, 2009

HOW ABOUT A BANKRUPTCY?


Ah, Chapter 11 bankruptcy, it came into existence in its present form (with some amendments) in 1979. At first it was used largely by retailers and then by the wave of the late 1980's broken LBO's (leveraged buyouts). By the early 1990's, Chapter 11 began to be used to obtain financing (Debtor-in-Possession financing) when financing was otherwise not available.

In 2009, Chapter 11 bankruptcy has been used in ways no one could have anticipated 30 years ago. Al Lewis has an entertaining article on how Chapter 11 is being used. In the Madoff matter, it used to find and recover funds. The Government used it to ram through sales of the assets of Chrysler and General Motors (whatever happened to a plan of reorganization?). Sam Zell, aka "The Grave Dancer", may use it to sell the Chicago Cubs. In the Phoenix Coyotes filing, creditors are using Chapter 11 to get a look at Wayne Gretzky's tax returns.

It has been a crazy year for Chapter 11's. Look for it to continue with all the crazy precedents that have been set for better or worse (mostly worse).

Cheers from Scotland,

Mike

Monday, July 20, 2009

CIT SHOULD HAVE MADE CAR LOANS


CIT is a large financial institution that lends to small and middle market businesses. By today's definition however, CIT's $75 billion of assets makes it not a large financial institution. And apparently way too small to be too big to fail. And finally, CIT must not have a big portfolio of car loans like GMAC. So, the Government has left it to CIT's existing creditors to assist in giving CIT more time to right the ship. Gee, this approach is so last century.

I guess the Government has made its point because the press is pointing to a multi-billion dollar loan being done with CIT's major bondholders to keep it out of bankruptcy. The next couple of days should provide more details as to how such a deal, if completed, will allow CIT to successfully restructure.

According to this article in last week's WSJ, the company has some work to do. CIT made some management changes around 2001 that resulting in Vice-Chairman Joe Pollicino and other experience credit people leaving the firm. The new management ultimately led CIT down the subprime mortgage and student loan roads. And we all know where those roads led.

We should expect that management changes amongst strategy changes to be coming down another road very soon. Maybe the bondholders will call Joe....well, maybe not.

A number of years ago I used to attend a CIT golf outing every year at Fenway Golf Club. Fenway is a great track originally designed by 1920's noted architect, A. W. Tillinghast and recently worked on by a well respected architect, Gil Hanse. But I digress. One year one of the people checking in golfers for the outing asked if I was related to Joe Pollicino the Vice-Chairman. I, of course, replied, "Yes, he is my uncle." For a few years I received the royal treatment at the outings. One year however, Joe came up to me and said I had to stop saying he was my uncle. To which I replied, "Ok unc."

NY TIMES ON DIMON

The NY Times followed up my post from last week on Jamie Dimon, CEO of JP Morgan, with an article in the Sunday edition. Nice of them to pull their weight on this item.

Cheers from Scotland,

Mike

Friday, July 17, 2009

BUT, THEY SHOULD BE ABLE TO .....

I was speaking with a young CEO a few weeks ago. He was complaining that an important member of his team should be able to perform certain tasks, but the member couldn't perform those tasks. He went on to complain that he didn't have the time to do the task.

I made a couple of observations. First, you can't keep acting as if the member can do what they should be able to do. They can't do it. It is like a football coach who has a quarterback who cannot roll to his left and throw an accurate pass. The coach can keep calling the rollout to the left because the quarterback should be able to throw an accurate pass or he can call rollouts to the right where the quarterback can throw an accurate pass. So, don't expect someone to be able to do what they should be able to do if they can't do it. Plan accordingly.

Second, managers get more frustrated with a team member when they are pressed for time (isn't that always?) or when they can't do the task either. The managers say "they should be able to do their job!" Leaders however, acknowledge the truth of the situation. Leaders evaluate how to support the person can't do what they should be able to do. Sometimes more training and education is required. Sometimes additional support is required. And sometimes, the task needs to be done by someone else.

When I had my own firm, we had a former Big 8 accounting firm partner working with us. He had great instincts (probably still does) and did great work. However, he could not commit his work to writing. He literally couldn't get a report out. After speaking with him a few times, it became clear to me that he was not able to put it on paper. Instead of complaining about it, I found a young staff person who was progressing rapidly. The staff person wrote great reports. So I 'velcroed' the staff person to the senior person and he became the report writer. The staff person benefitted greatly from the constant exposure to the senior person.

In closing, work with "what is" not "what should be".

Cheers, Mike

WELCH: "NO SUCH THING AS WORK-LIFE BALANCE

Once again, Jack Welch proves to be an expert at the blunt sound bite. He was a speaker at the Society for Human Resource Management and told them that women climbing the corporate ladder need to choose between taking time off to raise their children and reaching the corner office.

Read the article and of course there are those who agree and disagree with him. Unfortunately, there is not a transcript of his exact words. Some people interviewed agreed with him and others said that companies need to change to accommodate a diverse workforce.

Welch is quoted in the article as saying their are work-life choices and they have consequences. This is a true statement and men and women both make these choices all day long, every day. We all deal with these challenges differently and some do a better job than others. I have worked with men that worked crazy hours but whenever they were not out of town, they went home to have dinner and tuck the kids into bed, then they worked late into the night to make up the time. I have worked with others who came in after taking the kids to school. I do not have children, so I would work till I dropped during the week but look to get the weekends off. We all do it differently and we may not do it great.

It is important though to remember why we are doing "it" at all. Whatever your career goals, which may or may not be the corner office, remember that we work to live not live to work. Therefore, we all need to find the balance that works for us. I remember reading an interview that Jack Welch gave when he first retired. In the interview, he said that he was completely unprepared to stop working and it was very hard on him. Sounds like he had not found balance.

But let's get back to women and specifically having children. For the most part, I think companies and women have figured this all out and women are very successful even after taking maternity leaves. However, time off does have a price. In my experience, I have seen women achieve great positions but slower then they would have without extended periods of time off.

But, I do think the corner office is different. I believe that what Jack Welch said is often true when boards are selecting CEO candidates. I think women should be proactively educating boards and CEO search firms that select CEO candidates and look at career timelines. Timelines are meaningless. Results are what matters.

What are your thoughts and experinces? How do you achieve work-life balance?
Until Next Time,
Gail

Thursday, July 16, 2009

LEADERSHIP: GETTING THINGS DONE BY PEOPLE

Leadership is about getting things done by people. Therefore, the "people issues" are a key element of leadership and why corporate cultures really matter. Mike posted on July 14 I Should Have Nurtured a Unified Culture which fits in nicely with this post.

I read an article in the WSJ How Buck Knives Decided to Move HQ. Interesting and quick read that highlights how easy it is to take the people and the culture for granted particularly if someone else built the business. Many acquisitions and reorganizations go wrong because there was not enough thought and effort put into the people issues and the culture they operate within.

But cultures also need to be maintained to stay healthy and vibrant. Hiring decisions, training programs, promotions, raises and internal processes all need to fit the culture you want to build and maintain in your organization.

Until Next Time,

Gail

Wednesday, July 15, 2009

JAMIE DIMON, A LEADER TO BANK ON


According to the WSJ, Jamie Dimon, CEO of JPMorgan, is chomping at the bit to take the leadership position for the US banking industry. Last fall, Jamie agreed (like Paulson gave him a choice) for JPM to accept TARP funds for the good of the country. There was never any real evidence that JPM needed any support. Jamie did the right thing. He was none too happy though, when the new Administration showed up and put strings on the TARP funds that JPM already received. He was also none too pleased that JPM was being painted with the same brush as other banking institutions that really needed the TARP funds. Then, he had to fight to pay the funds back.

Well, now that JPM has paid back the TARP funds, get ready for Jamie to be a vocal leader on what is right for the banking industry! There is no other large bank that is in the position for its leader to take a leadership position. They all have to worry about a government/regulator backlash.

Real leaders do the right thing. They also have to sometimes tell the world what the right thing is! Sign up on google reader and other feeds to follow what Jamie has to say on banking and the economy. I guarantee that it will be thought provoking and educational to say the least.

There is a book on Jamie Dimon. I haven't read it but if you want to know more, pick it up.

Cheers, Mike

Tuesday, July 14, 2009

I SHOULD HAVE NUTURED A UNIFIED CULTURE


Napoleon Barrigan, the owner of Dial-A-Matress watched his company file for chapter 11. According to this WSJ article he largely blamed bringing in a cadre of professional managers who brought with them cultures that were different than the one that existed. The existing culture was marked by a collaborative inclusive style that included everyone in making the business better. The new management additions had an exclusive, we know better style that wound up accelerating the demise of the company.

Napoleon admits that there were other errors. The company opened retail outlets when its profits were mainly derived from phone and internet sales. Some of the retail outlets were in poor locations which were selected because of low rents. Further, the company expanded too quickly and couldn't profitably manage the growth.

The importance of a company's culture is often ignored by the heads of businesses. For them, culture doesn't count. Maybe it is because it can't be put on a spread sheet. In the end, these managers feel the pain of their company's underperformance.

This reminds me of a story. I once was hired by a private equity shop owned by a former Presidential economic adivsor. He had purchased two companies in the paper industry with the plan to merge the two companies. His theory was "one plus one would equal three". He had leveraged the combined companies pretty highly since he believed the results together would be much better.

The results were not better. In fact, it turned out the "one plus one equaled one"!! We went out to visit the company and within two days found the main reason for the underperformance. The two companies had two very different cultures and there was friction everywhere. Virtually every aspect of the business was underperforming.

When I disclosed this to the private equity owner, he didn't believe me. He said it couldn't be a culture issue and things were not as bad as I said. In fact, he said I was exaggerating the situation to make more work for us. I laughed and told him, more work was the last thing we needed. We left for a week. He called me back and said, it was as bad as I said it was. It took two years to straighten things out.

Don't ever ignore the culture.

Cheers, Mike

Monday, July 13, 2009

LEADING VS. MANAGING

The WSJ has a good short series on Leadership. It has articles and short videos. Today we are going to spend a couple of minutes on their short article on Leading vs Managing. All leaders must manage in addition to leading. But certainly, what differentiates a manager from a leader is that they manage, but they don't lead. Many people think managers are leaders; this is not true.

Take a look a some of the items in the article.

1. A manager's job is to plan, organize and execute. A leader's job is inspire and motivate.
2. The manager focuses on systems and structure. The leader focuses on people.
3. The manager requires control, the leader inspires trust.
4. The manager maintains, the leader develops.
5. The manager always has the eyes on the bottom line, the leader has the eyes on the horizon.

All companies needs great manager and great leaders. Look at the list and see where you fit. You may pick up on that leaders focus on people, doing the right thing and the direction of the company. How much do you focus on your people? Or are you totally focused on getting the job done? They are not mutually exclusive.

Cheers, Mike

Friday, July 10, 2009

UBS vs. THE IRS AND THE SWISS GOVT


In February, UBS admitted that it had sent Swiss bankers to the US to assist high net worth individuals to set up secret Swiss accounts to evade US income taxes. UBS paid a fine of over $700 million and turned over 250 names.

Now the IRS wants UBS to disclose the other 50,000 plus names. Enter stage left, the Swiss government which has told UBS it is against Swiss secrecy laws to disclose the names. Check out this short video of how UBS is between a rock and a hard place. You can get some details and color from this Reuters article.

So, the Swiss government make prevent UBS from disclosing the names and the US government could actually prevent UBS from doing business in the US. How did UBS get into this situation? UBS put making money as a higher priority than doing the right thing. Leaders always put doing the right thing first. When you put money ahead of doing the right thing, very bad results occur and sometimes these results are devastating. See Arthur Andersen.

Cheers, Mike

Thursday, July 9, 2009

BRYAN MARSAL ON LEHMAN BROTHERS, ETC.

I played golf yesterday out on Long Island with one of the Alvarez & Marsal guys. A&M is one of the two leading international crisis management firms which has now expanded into other areas. My guest asked if I had seen Bryan Marsal's spot on CNBC's Squawk Box on Monday. I told him I had not seen it and he said that I should.

So, when I returned home, I immediately went online to retrieve the video clip. (OK, I didn't exactly drop everything to run to the computer.) But when I finally got to view the clip, I found that Bryan did an excellent job explaining the status of the Lehman situation and answering questions some of which addressed much broader issues.

He was asked if Lehman was the most complicated assignment he has ever worked. He immediately answered, "No, Lehman is a complex liquidation. But bringing a failing company back to life is much more difficult and complicated."

He was asked about the various government entities that he has to deal with on a frequent basis. Here he used the "leadership" word. He strongly commented that the various government agencies lack leadership. He said the various entities, the SEC, the Federal Reserve, FDIC, et al are poorly coordinated, have different rules, have different agendas, have turf issues and communicate unclearly.

He went on to say that if the government agencies were run as a business, there would be one person, a leader that would sit on top of all the agencies like the CEO of a business. We can all imagine that the lack of a leader of these agencies is like the lack of a CEO. Different parts of the business doing whatever they want to do. So imagine each agency doing what it wants to do without regard to what the other agencies are doing. Just lovely.

Listen the video, it is worth the time.

Cheers, Mike

Wednesday, July 8, 2009

FAIR AND UNBIASED RECRUITING AND PROMOTIONS

Every organization is striving to hire, promote and retain the best talent. You need to make sure that you achieve that goal in a fair and unbiased manner. There is an article in today's Wall Street Journal about a Supreme Court ruling regarding a landmark discrimination ruling on a lawsuit originating in the fire department in New Haven, Conn.


The author asserts that the job-test ruling will inspire some companies to consider broader use of exams but that others believe there is still too much uncertainty. The issue in this lawsuit was that when you use job testing you must make sure that the test itself is not biased. In this case the test was certified as not biased yet when only white firefighters passed the test the city concluded it must be biased and wanted to administer a test. The firefighters that passed the test sued and after many years the ruling was issued this week. The ruling was that the tests can not be biased or discriminate but if the test is not biased you can not tinker with the results to favor any one group over another group.


Promotion tests are much more common in the public-sector. However, many private- sector companies use a variety of tests and are now considering using promotion tests.


I feel strongly that leaders in the private-sector need to be careful using any test or metric exclusively to make decisions. Leadership judgement is an important element. If judgement were not necessary, excel spreadsheets could run businesses. Hmmm, maybe they would do a better job. Metrics and tests can be critical tools and often help to eliminate un-intentional bias. Leaders are human and therefore fallible. When we like or dislike someone, even when we are not intending to have a bias, we can give more slack to the employee we relate with better. Tests and metrics can help balance our own biases.


Overall, this case was very interesting and thought provoking. You may also like to read another article in the Wall Street Journal that provides more of the background.

Until Next Time,
Gail

Tuesday, July 7, 2009

IF WE WANT FUTURE WOMEN LEADERS, LET'S TEACH OUR DAUGHTERS MATH

There is an interesting article in Forbes Women How to Raise a Rich Daughter. The article covers the fact that women hold 43% of the investable wealth in America, only 10% of Asset Managers are women. There are many other statistics of how quickly females drop out of interest in math at the various education levels. Even if a woman does not become an asset manager, she will need math and some accounting knowledge to succeed in running a business.

So let's get our daughters, nieces, mentees and proteges focused on math! Maybe there is a business opportunity for someone here. The article highlights that most computer games with math as a basis are the "shoot em up" variety that appeals more to boys than girls. Maybe one of our readers will create a computer game based in math that appeals to girls.

Until Next Time,
Gail

Monday, July 6, 2009

TIME IS MONEY, BUT CASH BUYS TIME


I was paging through the Financial Times at breakfast this morning in London. There is an article about all the actions that the current CEO, Fritz Henderson, is taking at GM. Some are saying how much more action-oriented Fritz is than Rick Wagonner, the former CEO. Al Koch of Alix Partners, the chief restructuring officer of GM, says the changes that GM has made in the past 100 days usually takes a year.

That may be true, but it is the lack of cash that drives quicker and deeper actions in a financially troubled companies. For years GM, and Chrysler for that matter, avoided taking the really hard actions because there was enough cash to delay the painful actions. Why the delay? Hope springs eternal at troubled companies. Top management hopes (sometimes believes) that next quarter, next season, next product introduction will provide the underpinnings of a substantial turnaround. And wouldn't it be terrible to make the hard, deep cuts now and then have the business turnaround.

I have seen this happen over and over again for the past 25 years. Unfortunately, many CEO's take the really hard actions only when the company is running out of cash. Why? Because only then does the CEO accept that time is running out. At that point, there is no choice. It is either the hard actions or death of the company.

My co-author worked at a company once that needed to take hard actions. She said 'the CEO should be doing this and that.' I told her she was right but that it would probably not happen until it was too late. I told her that the company had too much cash and financing available to it. As a result, the CEO had the luxury of time for the business to ride an industry turnaround when it showed up. I further pointed out that when the cash finally ran out, it would be too late to implement a turnaround. Three years after I told her that, the company filed for bankruptcy and had no choice but to sell itself in pieces.

So, I am glad to hear Fritz is action-oriented. But is it him? Or is it because the GM is out of cash and management has no choice?

Cheers, Mike

Friday, July 3, 2009

LEADERS STEER CLEAR OF THE ERRORS OF GROWTH


In the troubled company world, we often speak of the errors of growth. We have seen them all around and usually they are more obvious to the casual observer than the analyst. For example, look at Starbucks. Who hadn't remarked that there was a Starbucks seemingly on every corner. While that was an overstatement, in some cities it seemed like fact. It was obvious that each new Starbucks at some point, was taking market share from an existing Starbucks.

Since I am in England today, it seems appropriate to comment on an error of growth in London. It has occurred to none other than Gordon Ramsey. By his own admission, he grew too much too quickly. He has closed restaurants, let staff go, borrowed more money (4 million pounds this year alone), put some of his own money into the company, put some of his father-in-law's money into the company, and he even had to sell his Ferrari.

Leaders grow their companies in a measured secure manner. They make sure their capital structure provides them with the ability to withstand downturns and competitive pressures. They don't stretch themselves to the max.

Leaders take care of the downside. They know the upside takes care of itself.

Cheers, Mike

Thursday, July 2, 2009

THINK, SPEAK & ACT AS A LEADER

In our workshops, we drive home many leadership points. One of the overall points is that people who want to be leaders should think, speak and act as a leader in everything they do. If we hold ourselves to this standard, our performance will improve and our presence in the workplace will improve.

Before we speak or act, we should put our thoughts through the Leader Filter. Is this what a leader would say? Is this how a leader would say it? Would a leader do this? Would a leader do it this way?

If we think, speak and act as a leader and use the Leader Filter, we will soon eliminate unproductive complaining about petty items at work. We will stop having certain types of conversations with co-workers that leave us unhappy. We will actually enjoy work more because we will complain less and produce more.

If you are a leader, use think, speak and act as a leader with the people you lead. Individually ask your people if they want to be a leader or to be a better leader? After they answer yes, inform them that in order to achieve their leadership goals, one of the steps they must take is to think, speak and act as a leader.

Don't get into a discussion as what a leader is or is not. Tell your people to use their own definition of a leader. After they agree to think, speak and act as a leader, ask them to commit to do this going forward. Tell them to use the Leader Filter. Finally, to help support them in their efforts, hold them to their commitment.

This is a great non-confrontational way to get your people to raise their performance and to reduce unproductive complaining when you are not around. Whenever your direct reports don't think, speak or act as a leader, ask them the following. Would a leader really say or do what you just said or did? Hold them to their own definition of a leader. Make it about them, not you. This technique will empower your people and you may be surprised how the efforts of the people around you starts to improve.

Cheers, Mike

MAKING A LIVING WITH MAGGIE

Mike and I were guests on Making a Living with Maggie on Martha Stewart Living Radio Sirius 112 and XM 157, yesterday. It was a great experience! Maggie Mistal hosts the show and she made it very natural and conversational. We discussed our book, Excuse Me, Aren't You in Charge? and our views on leadership. We gave some examples from the book and highlighted a few key points such as always thinking, speaking, and acting like a leader in everything you do; leaders walk through the fear to get things done; and leadership is not about the leader but about motivating and inspiring others to achieve more then they thought possible; and much more.

We would like to thank Maggie for the opportunity to talk about the book, given that all net proceeds from the book go to our two charities.

Maggie Mistal hosts the show and is a certified career coach with the training, tools, and resources to help people find or create their ideal career. In addition to hosting Making a Living with Maggie, she also appears on Living Today and Morning Living and has appeared several times on CNN. To learn more, go to maggiemistal.com.

If any of you were able to catch the show, feel free to share your thoughts.
Until Next Time,
Gail

Wednesday, July 1, 2009

TODAY'S RADIO INTERVIEW CALL IN NUMBER

Some of you have asked for a number to call and ask questions during our interview today at 4pm. If you would to ask a question, please call 866-675-6675. If the question is difficult, please email us the answer ahead of time.

Cheers

TUESDAY'S POTPOURRI

CHRYSLER LOWERS CASH BURN

The CEO of Chrysler announced in Europe this morning that Chrysler's cash burn is lower. He said he can't disclose the amount until he speaks with the US government on what he can disclose. So much for Obama's call for transparency.


THE RECESSION IS OVER! THE RECESSION IS OVER!

Dennis Kneale of CNBC recently called "The Recession is over!" He was immediately taken to task by a number of bloggers. Dennis then chose to take the bloggers to task. There have been a number of replies. But this one is really good. Read this reply by The Market Ticker.

The Market Ticker puts recessions are put into two categories, inventory driven and credit driven. Our current recession is credit driven. It lays out in English why the recession isn't over and why you should still be worried. Further, it lays out what the current increase in consumer savings really is - the pay down of debt not the increase in savings and yes there is a difference. You can spend your savings in the future, you won't be able to borrow more to spend.


LONDON LEADERSHIP WORKSHOPS

Gail and I will be in London over the Fourth to conduct a few leadership workshops. I once visited the British War Museum and looked at the exhibit of the American Revolution. Only they called it "The American Civil War". I guess it was from their prospective. Probably won't be any fireworks.


TEN MORE TO BE INDICTED TODAY ON MADOFF SCANDAL

It should be interesting to see how many fit into the following three buckets. 1. Last name Madoff, 2. Individuals who feed investors to slaughter, 3. Firms that made millions giving investors money to Madoff.

The over/under on Madoff's is 2 according to Las Vegas bookies.

FINALLY, Google's Blogger spellcheck doesn't recognize the word 'blogger'. How do things like this happen?


Cheers, Mike

Tuesday, June 30, 2009

TOMORROW'S RADIO INTERVIEW of GAIL & MIKE

Tomorrow, Gail and I will be interviewed at 4pm by Maggie Mistal on her radio show, "Making a Living with Maggie". It can be found on SIRIUS 112 and XM 157. For those of you who don't have SIRIUS, you can sign up for a free 3 day trial at www.maggiemistal.com/radio.htm.

Maggie interviews notables from Martha Stewart to Sally Field to Deepak Chopra. Apparently due to the holiday week, no notables are available, so Gail and I will be on the show. We only have 20 minutes. If Gail speaks first, I fear there will be no time left for me. The listeners will probably be relieved.

Cheers, Mike

PORSCHE LEADERS, COULDN'T YOU STICK TO MAKING CARS?


The BBC reported today that the state-controlled bank, KfW, rejected Porsche's loan application. To follow the bouncing ball, Porsche's leaders decided last year to borrow billions to take control of VW. Why did they need to take over VW? Arrogance and greed, the usual culprits.

Last year the Porsche management was feeling pretty smug. Through an option strategy that would make a hedge fund proud, they caused a short squeeze in VW's stock. This means that investors, including a number of hedge funds, that bet that VW's stock price would fall, had to buy VW stock to stop losing money as the stock price rose 400% in one day!

Why did it go up in one day? Well Porsche management which owned 50% of VW disclosed it had effectively acquired options for 25% more of the stock. Therefore, the people who shorted the stock had to go in the open market to acquire the stock. There were numerous complaints but the management smugly said they had outsmarted the market.

Well now they are paying the price. Porsche has $9 billion of debt it borrowed to takeover VW that it can no longer service. The Porsche leaders thought once they owned the much larger VW, they could refinance the debt. In a storybook turnaround, Porsche had to borrow from VW to make its debt service payments.

Now, VW is looking to takeover Porsche by calling its loan which Porsche can't pay. Porsche asked the state-controlled bank to help. The bank refused. Porsche is hanging in the wind looking to Qatar for an immediate and large investment. A little color is added by Zerohedge.

One other thing, if you google the Porsche VW situation, you will find out that the two companies are led by cousins. I am sure that has nothing to do with the arrogance and greed. Couldn't they just stick to making cars?

Cheers, Mike