Tuesday, June 30, 2009


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


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

Monday, June 29, 2009


In my first book which I wrote initially for my son, I had a quick blurb on emails. I essentially warned him that before he sends emails, he should re-read them and assume that the world will read the email. He should then revise the email accordingly. Or maybe not send it at all.

Former Governor Elliot Spitzer had a comment on emails when he was the NY Attorney General. In effect he said, I don't know why people use emails for sensitive items as much as they do. But as long as they do, they will make prosecuters' jobs much easier.

Three years ago the Law Blog of the WSJ had an article on a bankruptcy matter called FiberMark. An Examiner's Report was written by long-time bankruptcy heavyweight, Harvey Miller, then of Greenhill and now back at Weil, Gotshal & Manges. It is a great read. I read the entire report and it is like a novel you can't put down. The Law Blog refers to it as the DaVinci Code of chapter 11's.

Why do I raise this report here? Well, among the central items in the report are emails sent by one of the attorneys in the matter. The emails cast the attorney in a very poor light and were key evidence that Harvey relied on to the detriment of the offending parties. I highly recommend that everyone who uses email in professional or contentious situations read this report. You will enjoy it and the lessons will stay with you forever.

My Mother, who is an artist and formerly designed dresses, used to tell me, "Measure twice, cut once." So my advice for emails, "Reread twice, send once."

Cheers, Mike

Friday, June 26, 2009


Clearly, changes need to be made to executive compensation. I found an interesting article in the Harvard Business Review referring to the fact that it is not necessarily a question of how much ( which really is a question for individual boards to decide) but rather a question of how (the structure). I completely agree that the larger debate should be on the how not the how much.

As it relates to the how or the process, I have a few long held beliefs on this subject. It should be tied to long term value creation or destruction; we should recognize what the person inherited which could be good or bad; and we should remember that no one is as dumb as it seems when things go wrong nor as smart as they seem when things go right since they are operating in a larger market, which is why I have always favored some factoring, but not entirely, of how the company performed relative to its peers. So while I have been clear on this my struggle has been on the how. Particularly the long term value question.

I found this article in the Harvard Business Review linked to the original one that I found thought provoking. The article is entitled How to Tie Equity Pay to Long Term Performance.
I hope you find it thought provoking and if so, let us hear from you on your reaction and your ideas.
Let's start a dialogue!
Until Next Time,

Thursday, June 25, 2009


There is a nice short article in the WSJ entitled Why Business Plans Do Not Deliver. The writer is discussing the types of plans written when you are seeking investors in a business. However, it struck me that the points are relevant for any business proposal. This could be an internal initiative you want to get funded within your company or a proposal to a client. His arguments could even be applied when presenting your annual budget for approval.

He asserts, and I agree, that there are three things needed in a successful plan. Simply state the situation or problem, give the facts and evidence, and then candidly state the risks and how you plan to mitigate the risks. I would add that you should always think first about what is in it for the reader and what will give them the most concern. Most of these plans are written from the perspective of the writer not the reader.

He also summarizes his views on the fatal flaws in many plans. It is a good and quick read. Enjoy.
Until Next Time,

Monday, June 22, 2009


Nortel, the Canadian telcom company, has agreed to be liquidated. The company will be sold off piecemeal. More and more companies are filing for bankruptcy and then being liquidated. The primary reason? There is no financing available to keep these struggling companies alive.

In past downturns, there was plenty of financing available in the US in the form of Debtor-in-Possession financing. But the current credit crisis, yes it is still going on, has made such financing very scarce. Troubled companies continue breathing as long as they have access to cash. In fact, it is amazing how long a financially troubled company can last when it has cash.

On the other hand, if a financially troubled company doesn't have access to cash, it is even more amazing how quickly the company rushes toward liquidation. In 2009, retailer after retailer has been liquidated. And the smaller bankruptcies that many of us never hear of, are being liquidated at an alarming rate.

So next time you hear about green shoots, be aware that companies are being forced into liquidation every day.

Cheers, Mike

Friday, June 19, 2009


We are about to engage in a national debate in the USA on healthcare. The lines are drawn between universal or private healthcare and now the fight will begin. While we all agree on some fundamentals such as the USA has one of the highest quality systems in the world with many of the advances in medicine developed in this country; costs are out of control; insurance companies have too much control over care; and too many people are without insurance coverage and therefore getting sub-optimal care. This is a great start on things to agree upon, instead we focus on the areas of disagreement and just keep arguing while the costs keep going higher.

I am no healthcare expert but I have recently had this argument become personal. I retired two years ago and one of my " benefits" at the company was retiree healthcare. I paid for my benefits but was able to buy them through the company plan. That company has filed for bankruptcy and is selling off the businesses. I recently learned that when the last sale is complete, they will cancel the health plan. The result is that all retirees of this company will be without health insurance. I have begun to check other available plans, including a great group Freelancers Union that offers group insurance to the growing number of independent contractors or self employed individuals (approx. 30% in the USA). The cost is substantially higher than the company plan. The more I learn about this, the more I realize how devastating this could be for lower income people with a family to support.

So why am I writing about this, other than to whine? Why is the title of this post referring to leadership, commitment and conflict resolution?

Let's start with leadership and commitment. When companies hire, promote and reward employees, we refer to the entire compensation and benefits package. Many companies work hard to get employees to evaluate and value the entire package, not just the cash compensation. If that is the case, then they should not be able to walk away from their obligations on some of the benefits. As the baby boomers hit retirement age in even greater numbers, retiree benefits including health benefits will become an even bigger issue for companies.

Now let us address conflict resolution. This issue is too big and affects too many people to fall into the black hole of never ending political grandstanding. We need real solutions. Let's focus on areas that we might be able to resolve. One is clearly expanding benefits to the poor. The other is how do we bridge the gaps of employer provided health care as more people change jobs more frequently and what to do about retiree benefits when the company is struggling financially. There are many ways to solve the problem. An example might be that companies will have to fund these plans the same way they fund retirement plans.

Let's clearly articulate the problems we are trying to resolve; the things we agree on; and the pros and cons of various resolutions to the problems. Then a real dialogue can begin. In a word, we need real leadership to solve these complex problems.

Until Next Time,


At all levels compensation drives behavior. If you want more sales of a certain product group or service line, then increase the commissions on the sales of those products. If you want more hours worked on task A versus task B, then increase the pay rate for hours worked on task A. And so on and so on.

Interestingly compensation continues to drive behavior all the way up the corporate ladder. I have to chuckle that the TARP recipients have started to pay back the TARP funds they received. If I am not wrong, the stampede to pay back the funds began as soon as the Obama Administration began chirping that compensation and bonuses of executives of TARP recipients would be subject to oversight by a pay czar.

What's that? Someone wants to oversee our compensation and cap our bonuses? I don't care what we have to do, borrow at higher rates, sell stock below the current market value, do anything we have to do to pay the Treasury back so we can get our bonuses. By the way, I don't think there should be a Pay Czar, but I am amused by the behavior.

The next group to rush to repay the TARP may be those companies whose CEO's were identified by the WSJ this morning as using corporate planes for personal travel. Getting TARP funds and using the planes for personal reasons??? Hah, the WSJ was all over it. Whatever. I didn't post the link to the article because, well, why?

So, back to the point, compensation drives behavior. And perks are part of compensation.

Cheers, Mike

Thursday, June 18, 2009


In our Leadership Workshops, I do a section titled, "It is the Questions, not the Answers". The point is that a leader can add more value asking questions than providing answers sometimes.

It is through questions that one can add real value. Take the case where you are advising a very experienced person or speaking with your CEO. It is often very hard to out-answer these people. After all, they are very experienced and they have most of the answers. The way to add value is ask focused questions that the experienced person hasn't thought of before. Such a question really catches their attention. They reflect and consider the question and the potential answers. And the beauty of having the questions is that you don't need to have the answer at the same time you ask the question.

So, how do you get these questions? It is easier than you might imagine. You see, in today's information driven world, people run from meeting to meeting checking their emails. They are in a meeting that started late and then they are running into the next meeting. They finally run from that meeting to the next meeting and, yes, they are late for that meeting and it runs over too. Like an airline, once the day's schedule goes off the track there is no way back because there is no time scheduled to catch up.

What the true leader does is stop the current meeting 15 minutes before the next meeting. Then the leader focuses on the next meeting. What are the three biggest issues to be covered? What are the likely answers to the three biggest issues? What are the most significant risks to the issues and likely answers to be covered?

This process forms the basis for asking the questions that others haven't thought of before. Not because others can't think of the questions. It is because others don't spend the time to focus on the issues.

Leaders go through this process before every meeting and soon they don't need 15 minutes. They are good to go after only 5 to 10 minutes because they have trained themselves to work the process.

This process works great with your direct reports also. One of our followers, Brian, was kind enough to send me a HarvardBusiness.org article on asking questions. It is a must read if you are any kind of leader at all. The article focuses on how to ask questions that require your direct reports to rise to the occasion in a way that gets them to learn to solve their problems. It details asking questions in an open-ended manner that encourages discussion.

The author is also quick to warn against leading questions. Leading questions seeking a specific answer pushes the questioner's agenda and exerts pressure for agreement. While this may be expedient for resolving the matter at hand. It will cost more time in the long run.

Finally, the author points out that you are only as successful as the people who report to you.

Cheers, Mike

Wednesday, June 17, 2009


Like many of you, I enjoy all of Mike's posts. But yesterday's post about insight really struck a cord. Mike, thank you for making me and others reflect on the subject. So here are some of my thoughts on the subject.

Openness and active listening are key tools to enable you to become more insightful.

In Mike's example of his own insight while reviewing the financial analysis of the furniture company, I would argue that his openness and lack of prejudice enabled him to see what others had not observed. There is a professor at Yale, Daylian Cain, that teaches courses based on his research on the mind games involved in decision making. He argues that often when we think we are making objective decisions based on analysis, we do not realize that the analysis we requested often skews the information so much that we get the answer we were looking for, even if subconsciously, and therefore it is not objective.

Active listening or listening to understand is also key to enable us to have insights. This is particularly important when you disagree with the person speaking. If you suspend your opinion and judgement and instead carefully listen with the goal of really understanding their point of view, you get much more from the conversation. It may or may not result in you changing your opinion but it will always add to your understanding and may even lead to an insight. The insights might change your point of view or may provide you with an insight into how to get them to understand your point of view. Either way, it is worth the effort.

Just a few more thoughts on this subject. Let's all keep thinking and sharing.
Until Next Time,

Tuesday, June 16, 2009


I have always been intrigued by insights. They sound so obvious when I hear them. But where do they come from? And why are some leaders so good at producing insights?

So I have set out to find out more about insights. Of course I googled 'insights' and narrowed the search down to a few million items. Wikipedia was up near the top and gave the clinical definitions of "Insight - manifests itself in suddenly understanding how to solve a difficult problem" and "Act of or result of apprehending the inner nature of things or seeing intuitively".

Sounds just a little elusive to me. Then there is "Power of acute observation and deduction, penetration, discernment, perception." Well, that clears it up. I just have to squint and look real hard.

Maybe insights come the likes of Yogi Berra who, amongst other things, is credited with the following:

"It was hard to have a conversation with anyone, there were too many people talking." "It gets late early out there." "You can observe a lot by watching." Well, maybe these aren't insights.

Insights zero in on the core of something. Insights provide a simplifying way to look at a situation. Insights appear to be the product of an intuitive and deep understanding and they provide a new or novel way at looking at things. Insights are not a new piece of information but a new way of interpreting existing information. They produce the effect of "I never looked at it that way before."

I was reading about the financial troubles of Iceland and noticed an interesting insight. "Leverage buys you a glimpse of a prosperity you haven't really earned." Hmmm, I never looked at it that way before.

I worked on the first Seaman's Furniture bankruptcy a number of years ago. I looked at the historical financial information and noted that when Seaman's was profitable in the past, virtually all of the profits had come from selling the customer receivables to finance companies. It occurred to me that Seaman's was not a furniture company. It was a finance company that generated consumer paper and sold it. This insight, which was initially scoffed at, became accepted and drove a very different view of the company going forward.

Insightful leaders are acute observers of others and maybe more importantly of themselves. Look for insights as you lead and explore the source of such insights. And, be an acute observer of what goes on around you.

Cheers, Mike

Monday, June 15, 2009


A couple of months ago, I wrote that the treatment of the senior lenders by the Auto Task Force and the Treasury was a bad precedent that would negatively impact bank lending to financially troubled companies in the future. Then the Task Force imposed its deal on the senior lenders in the bankruptcy and the judge in the matter sped the plan through, make that the Section 363 sale, in near record time. How long would it take for another group to try to speed a plan, make that a Section 363 sale, through the court at the expense of some other group of stakeholders?

Well, welcome to the Phoenix Coyote hockey team bankruptcy and the application of the 'Chrysler Precedent'. A lawyer for the team is trying to make the case for a quick sale of the Coyotes to a buyer who wants to move the team to Ontario. The lawyer is evoking the so-called 'Chrysler Precedent' to push for a quick Section 363 sale instead of the normal reorganization process that allows for a full vetting of the alternatives and input from the various parties-in-interest.

The NHL and other parties are protesting that there is no emergency that requires the end run around the normal process. They state that the sale of the Coyotes should go through the normal process. The NHL and others are looking for a local owner.

Let's hope the judge puts a stop to the Section 363 end run around the normal plan of reorganization process in the matter. The Chrysler Precedent was a bad one the cost of which is still to come.

Cheers, Mike

Friday, June 12, 2009


The Financial Times had an interesting article on leadership this week. It told the story of a relatively new CEO, altering his appearance slightly and taking an hourly job at his company's plant. By mingling with the workers on the plant floor, he found out what the employees really thought. He was surprised that the workers either didn't receive the messages being sent out to them or that they didn't understand the messages.

He took away several points that coincidentally, Gail and I drive home in our series of Leadership Workshops. Here are five of the points that the CEO and we cover.

1. Communication is for the audience, communicate on their terms. Gail has a couple of stories that set forth that communication is for the employees to understand, not for the leader just to speak or post.

2. It is not possible to over communicate. Leaders constantly communicate the same messages over and over in as many different ways at possible. One size of communication doesn't fit each member of the audience. Leaders use all the methods of communication available to them.

3. Keep the messages simple. Don't assume that everyone has the same level of understanding that you have or that you thought you had when you were in their position. Leaders don't speak down to others. But they speak in simple, logical and understandable terms.

4. Break down big challenges into manageable pieces. When faced with large problems that seem insurmountable, Leaders break the problems down to a series of smaller parts. Leaders then celebrate the small victories to build momentum to enable the team to solve the larger problem.

5. Show you care. Gail and I are big proponents of being empathetic up and down the organization. Leaders who can put themselves into the shoes of their employees and into the shoes of those they report to, are often the most secure, successful and non-confrontational leaders.

Put these five leadership tools into your repertoire and see your effectiveness improve overnight.

Cheers, Mike


According to this article, Ron Bloom of Obama's Auto Task Force says the US Treasury has a reasonable likelihood of getting its money back. Really?

The Auto Task Force should be compelled to provide the analysis that supports that the Treasury will get its money back. It is a pretty simple analysis which I assume the task force did before driving the Chrysler and GM deals.

The analysis should be based on a cash flow and earnings estimates going out for several years. It should be based on reasonable underlying assumptions which the task force has adequately vetted. The resulting analysis should demonstrate how and when the Treasury will be repaid in each matter.

Presumably the analysis shows that there is a reasonable likelihood of repayment. However, if the analysis shows too much risk to the repayment, the task force and the Treasury should be held accountable for giving the trade credit a free ride (full repayment that is never written about) and for giving the UAW too much on the backs of the taxpayers.

Just saying there is a reasonable likelihood of repayment without the analysis may not carry much weight. If there is any reasonable risk of non-repayment, the trade and UAW should have received less until the Treasury is repaid.

I don't have the information to do the analysis, but my gut says it may not be pretty.

Cheers, Mike

Thursday, June 11, 2009


The business pendulum just keeps swinging back and forth year after year after year. The question remains, will we ever learn? I suspect not.

The concept that companies should focus on their core business and use vendors, that are experts, to provide goods and services that are not a company's core business/skill set is not a new concept. Yet, every few years we realize we once again strayed from that concept and headlines appear touting a company that is now going to focus on their core business. So, it is not surprising given the global economic crisis that core business headlines have started to appear in newspapers.

The Wall Street Journal has two related articles on this topic. Firms Shed India Centers to Cut Costs in Recession and India's Tech Industry Must Reinvent Itself. For many years, the outsourcing business has been growing rapidly with services provided by outsourcing firms, consulting firms and IT services firms. Large service centers have been built in India and China and more recently in several other countries. There were two economic drivers, labor arbitrage and a high volume of transactions on a relatively fixed (albeit very large) cost. While this business has been around for many years, the business model is still evolving and maturing and managing these businesses profitably while providing quality services is hard work.

Now back to the pendulum swinging. Before the ink was dry on many of these contracts which led to headlines of how big companies were going to save money and "focus on their core business", someone in that same company started coveting the profit margin that the outsourcer was making on the contract. In many conference rooms around the world, someone pointed out that if the company built its own center in India they could save even more money if they did not have to pay the outsourcer with a built in profit margin. And so began the insourcing trend. Amazing that no one in that conference room asked if this was their core business (remember that was at least in theory one of the reasons they signed the outsourcing contract initially).

But even more troubling, is that no one asked if anyone in the company knew how to run a service center in India, China or some other country. They all just looked at the spreadsheet with the savings calculations and jumped on the bandwagon. Well, now we are back in that same conference room, maybe with different people, a new spreadsheet is being passed around and this time it shows that they can save 25% if they outsource it AND they can get cash if they sell their center to the outsourcer. The pendulum swings again.

Maybe, it is the words that are being used such as core business, outsource, insource, and many others. Instead, let's go for straight talk. Instead of saying companies should focus on their core business, let's say companies should focus on what they know how to do. They should then be the best in the world at doing it.

Maybe the global financial crisis could have been avoided or at least mitigated. If over the last few years, executives in conference rooms all over the world that were looking at spreadsheets showing that if they invested in derivatives, credit default swaps and added leverage had asked a few more questions the result may have been different. A few questions that might have asked are as follows:
  • What is a credit default swap?
  • How does a credit default swap work?
  • What are the three biggest risks?
  • What is our mitigation plan?
  • Do we have anyone in the company that knows how to do this?
  • Is this our core business?
  • Shouldn't we be spending time in this meeting talking about how to be the best in the world in our core business?
  • Shouldn't we spend time in this meeting talking about new markets for our core skills/products?
  • If we are going into new business areas, do we have or can we hire experts to run it? When we hire them, how will we evaluate their performance if we do not understand that business?

But instead the pendulum just continues to swing. Maybe the pendulum is the real engine for the economy?

Are you focused on your core business? Are you asking these questions when you are in the conference room?

Until Next Time,


Wednesday, June 10, 2009


Thank you for following the series on the 5 C's of Leadership. We received a few posted comments on the blog and several emails sent directly to me. As always, your comments and questions are very helpful.
Just as a reminder the 5 C's of Leadership are as follows:
  • Compelling Vision

  • Competence and Common Sense

  • Communication and Collaboration

  • Creation of Leaders and Teams

  • Character and Integrity

One of the first comments I received was a reader that pointed out that these are interdependent and all 5 must be addressed by a leader. I completely agree. A compelling vision without the competence or people to execute the vision will not change the organization or achieve your goals. Similarly, great communication skills without content is hollow and again will fail. So thanks again to our blog followers.

Several others wrote to me that the 5 C's were simple, clear and right on point. Another wrote that, as always, the devil is in the detail. They pointed out that it was the detail and description within each of the 5 C's that made them useful.

Another reader pointed me to a Harvard Business Review article from January 2009 entitled Women and the Vision Thing. I read the article and recommend it to all of you. If you are an HBR online subscriber you can read the entire article. If not, you can read a recap by going to hbr.harvardbusiness.org and go to back issues under January 2009 and you will find the article. The authors address a study that showed women were judged to be less visionary than men in 360 degree feedback and although it may be a matter of perception, it stops women from getting to the top. Our blog reader asked if I had any thoughts on how women could change this perception. The authors of the article put forth three theories for this perception: 1) women are equally visionary but in a different way; 2) women hesitate to go out on a limb; and 3) women don't put much stock in vision. I would like to put forth a fourth theory. In the article they show graphs of the vision question differences between men and women. The women scored higher on vision from subordinates and slightly lower on vision from their superiors. The big difference was with peers, particularly male peers, which scored women much lower on vision. While I think all three of the theories in the article are important for women leaders to be aware of and careful to overcome and for men to be aware of so they judge on content as well as perception. But what I would like to add is that I think women do not always think of their peers as stakeholders, which is a mistake. ALL stakeholders need to be considered when introducing change. Peers are stakeholders and often enablers (such as support groups) but if not on board can also be serious roadblocks to achieving the goals. Anyone else have any ideas?

In summary, Mike and I are using the 5 C's in our workshops and are glad they were interesting and helpful to you. As always, we welcome your comments and ideas. I would like to leave you with two thoughts. First, remember that we should all be lifelong learners and none of us are perfect. So give yourself a break if you don't meet all 5 C's everyday. But never give up on improving and striving to be the best leader you can become. Second, leadership is a great responsibility. Your actions impact people's lives and livelihood. But leadership is also a great privilege. You can really make a difference. Make it a positive difference.

Until Next Time,


Tuesday, June 9, 2009


One of my friends runs a very successful hedge fun. He also runs it in such a way that virtually all of his employees clamor to spend more one on one time with him. There a number of reasons his people want to spend time with him. He is smart, direct, supportive, occasionally funny (sometimes on purpose) and he is a natural teacher.

But perhaps most important of all, he gives each of them his undivided attention when he meets with them. He accepts no phone calls during his meetings with employees. He has no blackberry sitting in front of him and he isn't reading the Bloomberg while listening to what people have to say.

At the end of each meeting, the person who met with him walks out knowing that he/she received his undivided attention and feels better for it; even if the news was bad. How do you feel when you are meeting with someone who is reviewing the latest email while you are speaking? Don't do that to your employees. Give them your undivided attention.

This reminds me of another story. Gail and I were at a meeting with some advisors for another entity. While I was speaking, two of them were furiously typing on their blackberrys. So, I stopped speaking. They noticed the silence and looked up. The senior advisor looked at me and said, "It is ok. I can type and listen at the same time." I replied, "Good for you. I, however, can't speak and watch you type at the same time. So, we will wait until your done."

Give your undivided attention to those you speak to and demand the undivided attention of those who should be listening.

Cheers, Mike

Monday, June 8, 2009


Leadership is never more critical than when a firm hits a major downturn in its business. There was a lengthy article in Sunday's NY Times on the large global law firm, White & Case. It is a scenario that is playing out across the globe at many law firms and other professional firms.

The Leaders of these firms must now act like crisis managers. This is very difficult for the leaders to do. They generally have spent a couple of decades at the firm. They have strong views of the firm's strengths and weaknesses that may prevent them from taking the right steps. They also have strong relationships and beliefs regarding the partners and staff that may prevent them from taking the necessary steps. Furthermore, the firm's accounting systems may produce information that clouds the true profitability of each department and of each partner.

It is actually critical at this stage for these Leaders to retain the services of an outside troubled company expert to objectively and critically analyze the operations. Professional firms grow on the assumption that they will continue to grow and be profitable. Sometimes the revenue recognition and expense allocation is not a true reflection of profit and loss of a service line or an office. And sometimes there are sacred cows that insiders don't question.

Several years ago, I worked with a global professional services firm that was being sold. The London Office of the firm was entertaining offers from other firms. One week the London Office was in our deal, the next week it was out of the deal. And so it went for several weeks. Finally during one of the weeks that the London Office was out of the deal, I finally analyzed the true profitability of the London Office. It didn't make a profit. In fact, as far as I could tell, it had never made a profit.

I met with the global leader and said, "why do we want the London Office? It has never been profitable." The global leader replied, "We are a global firm, we must have a London Office!"
To which I replied, "Thank God we only have one London Office, if we had more we would be out of business!!"

The global leader finally let the London Office go to another deal. Only an objective party could make a recommendation to let the London Office of a global firm go away if it wasn't profitable.

Now when a professional firm is in a significant downturn, the Leaders should hire a professional restructuring advisor. But like the shoe cobbler whose kids have no shoes, it is almost impossible for a professional services firm to hire a professional restructuring advisor. How ironic.

Cheers, Mike

Friday, June 5, 2009


The 5th of the 5 C's of Leadership is Character & Integrity.

First and most importantly, this is a yes or no issue. You either are a person of character and act with integrity or not. Sometimes I hear people try to make this a question of degrees. Well, they usually act in an appropriate manner but not always. Stop. Can you trust them to do the right thing and can you believe what they tell you? Yes or No?

Now, let's get into more specifics. In our book we have a story, trust is like a bank account. In essence, you have to make deposits in the trust bank so there is something there when you go to make a withdrawal and say to someone "trust me" they will. You also need to have the courage to speak up when you see something you believe is wrong. A leader is not a coward.

Mike wrote a post about a leader being able to say three simple words. The three words are "I was wrong". If the leader is someone with character they will be able to say those three words. My father would use the expression that someone was a "stand up kind of guy". This was the highest compliment he could give anyone. By the way, in this context, the word guy is gender neutral, or so I choose to believe.

Given that there is truth to the concept of the shadow of the leader, I believe that the leader's character will eventually shape the culture of the organization. The culture within an organization is critical and must be maintained. It will erode over time if proper care is not taken and if leaders with different values are brought into the organization.

Finally, we have previously posted about laughter being serious business. We have also posted on authenticity and the need to be yourself. Leadership development is not about becoming someone else. It is about becoming the best version of you that you can become. Be yourself. Be honest. Be a person of integrity and strong character. Be someone others want to be around. Lighten up and enjoy it. Leadership is fun! You can make a difference. Make it a positive difference.

Until Next Time,


Zerohedge is covering the Indiana pension appeals of the Chrysler sale today at 2pm. If you are interested, read this Zerohedge piece and follow the Zerohedge blog for updates.

I agree with Zerohedge that questioning the use of TARP funds to help the auto industry is a non-starter in the current environment. ZH states that the pensions should have presented their own objective liquidation analysis. I think a competing liquidation analysis should have been presented before the Bankruptcy Court ruled on the sale.

But I wonder, what will the Court of Appeals say about the objection based on the assertion that the FIAT sale is in effect a plan of reorganization without going through the plan process? This objection make carry more weight than one might think. It is also perhaps a better issue to bring in front of an appeals court than a competing liquidation analysis. We shall see.

Cheers, Mike

Thursday, June 4, 2009


The Creation of Leaders & Teams is the 4th of the 5 C's of Leadership.

Let's start with the creation of leaders and then move to the creation of teams. In my opinion, one of the key roles of a leader is the development of their people. A great leader creates other leaders. So now let's identify some of the ways in which you can develop leaders:
  • Recognize the responsibility and make sure you allocate time and resources to development
  • Provide practice opportunities for people in internal meetings and on task forces, etc
  • Share your thought process so your team knows how you make decisions and get to the answer. Talking out loud as you think was helpful to me in this area
  • Delegate, don't abdicate- you not only have the responsibility for getting the work done, but you have a responsibility to check-in and see if they need help
  • Give feedback often and honestly - someone can not change or fix something if they are not aware of it. I know we are all busy but this can be in the elevator as you are leaving a meeting- assuming no one else is there.(I did a few posts specifically on feedback)
  • Set the bar high, tell people what the bar is, and be fair in evaluating people against the bar
  • Spend time with your stars and good soldiers. Often, we spend so much time dealing with poor performers that we short change the stars (most often) and the good soldiers of time that could be spent on their development. Check your calendar from time to time to make sure you are spending time with the stars and the good soldiers. Don't be someone that only tells a star, "you are doing a great job, keep it up"
  • As a matter of fact, fire now or pay later, one of the stories in our book is about dealing with the problem performers sooner rather than later, which frees up your time for the better performers

Now, let's talk about developing teams. In most companies, the term leadership team is an oxymoron. It really is just a group of people that happen to report to the same person. There is no effort to create an environment or invest in really creating a team. A team should be given a clear team goal and time frame to achieve the goal. Then tell them the position or role that each member of the team is playing and what are the individual team member goals. They also need to be given opportunities to work as a team so they build trust and confidence in one another. A high performing team can accomplish great things, while a really bad team undermines and attacks one another. In most cases, they are polite and cordial in a group meeting but do not feel any responsibility or loyalty for or to one another and never work as a team but as individuals.

When people know you really care about their development and are willing to invest your own time as well as company resources to them, they will perform better and have increased loyalty to you and the organization. Seeing someone succeed beyond what even they thought possible is not only good business but is very personally rewarding.

Think of the Return on Investment if you are a great leader and you create other great leaders. Very high!!

Until Next Time,


Wednesday, June 3, 2009


As a non-lawyer, I am interested to see the outcome of the Indiana pensions appeal regarding the Bankruptcy Court's approval of the Chrysler/FIAT sale. (See WSJ artictle). The Bankruptcy judge was able to overrule the objections to the sale because it was in the best interest of the estate for the sale to go through. Remember, a bankruptcy court is a court of equity, not a court of law. This gives the Bankruptcy Court a fair amount of leeway. The Appeals Court of the Second District however, is a court of law. I wonder if this will be a meaningful distinction when the Appeals Court hears the oral arguments on Friday.

If the Court temporarily stays the sale to FIAT, FIAT may have the opportunity to walk away. Of course, given the deal that FIAT has received from the US Treasury, why would it ever walk away? As Yogi said, 'It isn't over til it is over.'

Cheers, Mike

Tuesday, June 2, 2009


I read a short piece from Zerohedge that shows a summary cash flow projection for GM that projects it will lose $20 billion of cash over the next nine weeks. There is no detail and no way to test the projection as presented. So for our purposes let's assume it is directionally correct. Here are a few observations and questions. (Thanks to bankruptcylitigationblog for the picture)

You can only lose $20 billion in nine weeks if you have $20 billion to lose. As simple as this sounds, read it again. If the Treasury only gives GM $10 billion for the next nine weeks, it would only lose $10 billion. GM is clearly not cutting enough.

Look in all the press for the treatment the unsecured creditors are getting. You know, all those vendors, suppliers and other unsecured creditors. You don't see it, do you? The silence on the topic can only mean that all these creditors are being paid in full in the ordinary course of business. Can you say, 'thank you U.S. taxpayers?'

Are expenses being cut deep enough and quick enough? Obviously not. The Treasury has already put in $20 billion before the filing. The projection shows another $20 billion in the next nine weeks. That leaves only $10 billion in a rumored $50 billion of Treasury support. I have no other facts, but if the $20 billion in nine weeks is true, another $10 billion is unlikey to provide enough time for GM to turn cash flow positive.

Various stakeholders are getting too much on the backs of the taxpayers. This will become more clear as time passes. Unfortunately, the cash will already be out the door.

Cheers, Mike

Monday, June 1, 2009


Communication & collaboration is the 3rd of the 5 C's of Leadership.

Communication is a key element of strong leadership and must be:
  • Candid
  • Authentic
  • Empathetic
  • Two way
  • Always about the listener/receiver, not about the speaker
Communication is the way in which a leader shares their ideas in order to align the team and motivate followers. But it is also the way in which the leader learns what is going on in the organization which is why it must be a two way communication process. Many leaders do not realize that people do not feel free to challenge them or bring up bold new ideas. It is the leader's responsibility to create an atmosphere in which people know they can and should speak up and share their thoughts. This can only happen if the leader is genuinely interested in their ideas. If the leader is a person that is interested in learning and in other people, this will come naturally. The leader also needs to strive to get diverse points of view so the issues can be fully vetted before decisions are made. Good leaders talk straight and honest with people. Mike and I spend time in our workshops discussing authenticity. We all need to be ourselves. Leadership development is not about becoming someone else but rather about becoming the best version of you that you can become.

But most importantly, communication is about the audience. It is easy to fall in the trap of communicating what you want to say in a manner that means something to you as the leader. More importantly, the leader needs to stand back and ask themselves, what is the current mindset of this audience? What do they care about? What are they worried about? Once you honestly assess the current mindset of the audience, you then need to ask yourself where do you want them to be when you are finished with this communication. At this point, and only, this point, can you address what needs to be communicated and how to get them there. Always remember, it is not about you, it is about them.

Collaboration is another key element. This can be collaboration with the audience, your clients, other stakeholders, other groups in your organization. No group or individual is an island. We get things done well only with and through others.

Leaders need to persuade people to change, to see the possibilities, to work hard to achieve a goal and to achieve what they may have thought was not possible. Therefore communication and collaboration skills are one of the critical 5 C's of Leadership.

Until Next Time,