Tom Gegax's Big Blog of Small Business

Grading the Boss

2009-09-14T14:23:00.000-05:00

It's great armchair sport, grading the president's first 200 days or 300 days—or in the case of President Obama his first major political gamble, health care reform. Grades land all over the board depending on one's ideology or access to facts. Although objective observation generates the most accurate grades. All this got me to wondering how small business leaders could objectively observe and grade ourselves—our pluses, our developmental needs. It's important to know those grades.

When is the last time you evaluated your own performance? How did it look? What did you do about it? It sure ain't easy to get good evaluations. We beat up on ourselves too much or ignore faults altogether because that's less painful. Denial and rationalization can rush in when we turn inward.

Here's a quick primer on self-evaluation. I found many angles on this when I was Head Coach (aka, CEO) of Tires Plus, the 150-store retail chain I cofounded and sold to Bridgestone. I did an annual performance review of myself and added that to feedback from people who reported to me, submitted anonymously to our HR director.

I still chuckle about the reaction this got from people a few years ago at the American Management Association's CEO Conference in Quebec. When I mentioned feedback I got from an employee review other CEO's were appalled that I had allowed my employees to talk about me like that. Ignorance is not bliss, I told them. I'd rather know what employees are thinking and saying and make corrections based on valid criticism. That's how you avoid the Emperor-has-no-clothes syndrome.

Another evaluation tool I've always used is coaching myself on the run. "Nice job, Tom, on your helpful interaction with and advice to Charles," I'd say to myself. Or: ‘‘Uh-oh, Tom. You got defensive again when John gave you feedback." It's healthy to talk yourself via objective self-observation.

You can also fix on how you're doing by candidly asking people around you, "What do you like about what I'm doing? How can I improve?" Sure, at first they'll hesitate to tell "the boss" what she's doing wrong. But if you lead with the pluses, and keep repeating, you’ll pan some gold.

Indeed, it's fine to grade presidents and employees but not to the exclusion of grading yourself. No one knows you better.

Crazy CEO Pay Kills the Goose that Lays the Golden Egg

2009-06-12T11:04:00.010-05:00

Now we have a "Compensation Czar."

Yesterday President Obama named Washington attorney Kenneth Feinberg "special master for compensation." How did we get to a point where the federal czar pool included somebody who has to watch Corporate America's cookie jar?

Amid the chatter about poorly rated subprime mortgage bonds, financial weapons of mass destruction and loony corporate and consumer leverage, CEO and senior management pay hasn't come in for an appropriate amount of blame for our Great Recession.

It’s sad that it has come to this. But maybe it’s the lesser of two evils. I'm hardly playing fast and loose with the word crazy to characterize the recent history of CEO pay. The ratio of CEO pay (salary, bonus, stock grants) to average worker pay was 24-to-1 in 1965, according to a 2005 Wall Street Journal report. In 2005, it had reached 262-to-1. (My pay was 8-to-1 when I was CEO of a $200 million per year retailer.)

You may ask, So what if these ratios are stratospheric? (You may also ask why I didn't pay myself more, a subject for a later post.) Companies have various stakeholders: CEO and senior management, line employees, customers, shareholders, the community in which they operate. If the CEO and senior management take a large stake, it has to shrink the stakes of the other stakeholders.

It's hard to take the stakes away from the customer since management competes every day with its rivals on price and quality. That leaves employees, shareholders and the community getting shafted. Employees, especially the lowest paid, are the most vulnerable. Before the crash, CEO’s engineered huge pay increases as they vigorously fought increases in the minimum-wage that hadn't budged for a decade (see Barbara Ehrenreich's "Nickel and Dimed"). The irony that must be lost on CEO's and boards is that the declining real wages eviscerate their customer base.

Golden Goose, meet Death.

Meantime, the official memo from the corner office says that capitalism is so darn fair. Indeed, capitalism is fair ... unless the egos and greed of CEO’s and senior management go unchecked. Then we have feudalism masked as capitalism; serfs working for overlords.

Shareholders feel the sting as well. For those who have made enough lately to pay expenses and taxes AND make investments, crazy executive pay has hurt their 401(k)'s and mutual funds. Anyone who invested in an index fund tied to, say, the S&P 500, has lost 27 percent over the last ten years.

Massive bonuses and stock grants without claw-backs encouraged reckless investing that led to 2008's crash.

Finally, communities lose when executive pay eats into the share of profits that they often earn from their “pillars of the community.”

The good news? Thanks in part to Warren Buffet's crusade more and more boards feel shareholder and community pressure to make sure that CEO’s and senior management don’t win at the expense of everyone else. One day, maybe CEO's will learn that, as my dad always used to say, pigs get fat and hogs get slaughtered.

[NEXT BLOG: How to terminate in an age of downsizing.]

Cut Costs (Not Your Own Throat)

2009-04-16T11:02:00.013-05:00

Cost cutting is as common as spring showers when the economy goes south or your company starts missing plan. It's smart to get out in front—aggressively—in tight times. That said, you gotta know what to cut and what leave alone. What to cut?

Absolute waste. It's stuff like note paper and things like extra, unused phone minutes. Ask employees for their cost-cutting ideas. They know where the waste is buried better than you do.

Overly expensive purchases. Try to get three bids on practically everything you buy, especially large expenses—and even on small, ongoing expenses.

Employees. Grade your employees' performance and potential on a scale from A to F. Then book a candid talk with whomever you graded below a B, or with whomever isn't trending in that direction. Sensitively and firmly free up their futures. Consider salting their duties into other positions before opening the positions to hire.

The P&L statement. Go down your expenses line by line for other ideas. Utilities? Can you crank down the thermostat 5 degrees for savings?

But beware of cutting into bone. By that I mean, triple-check that cuts don't accidentally lower revenue or simply shift costs. Seriously ponder before cutting the following.

Marketing. The advertising and P.R. expense lines are favorite whipping boys when business is hurting. The problem is that down times are when you need your name out there more than ever. Otherwise revenue will fall further. Certainly, stay within industry guidelines (generally 4 to 5 percent of sales) and measure which efforts are effective (the web makes this easier than ever). Hard times also open up opportunities to negotiate harder since you have leverage over desperate media outlets.

Education. This is the lifeblood of your company, essentially no different from R&D. Less of this means more ineffective and uninspired employees. Do. Not. Cut.

Technology. Yep, hold these expenses to a specific ROI but be very careful with cuts. Reductions here generally mean you'll wind up needing more humans doing what the technology would've done. Further, you'll lose valuable reporting tools, essential for strategic thinking.

Bottom line: Cut, yes. But cut with care and understanding. That will help profits and get you pointed north again.

Social Capitalism: The New Market Philosophy?

2008-12-08T14:28:00.010-06:00

Suddenly it dawned on me in the midst of a recent meeting of Deepak Chopra's Evolutionary Leaders: What we're missing is a market philosophy called social capitalism. People are hammering capitalism and socialism a lot these days. Yet when I think of socialism's root word, I think of sociability or something good for society. Webster defines socially-minded as "actively interested in the well-being of society as a whole."

I like that. But I don't like the definition of socialism: "an economic or political theory advocating government ownership and administration of the means of production and distribution of goods." That's not in the best interest of society.

Nor do I want feudalistic capitalism or feudalism masked as capitalism. But that's where the last 40 years have taken us. The wealth gap between the workers and the bosses is one of the most reliable metrics of healthy capitalism. The exact ratio is CEO pay-to-average worker pay, a ratio that 38 short years ago was 28-to-1.

Great by me if a CEO makes 28 times the average wage of his employees. Responsibility deserves rewards. At the company I founded, Tires Plus Stores, my pay was 10 times what my average employee made. Fast forward to 2005's ratio, a whopping 465-to-1.

Remember, capitalism is a system of wealth distribution that's both determined by private citizens and affected by worker productivity. Recall the old line, the harder we work the more we get paid? Despite ballooning productivity the last 40 years, non-executive workers' real wages are down 5 percent during the same period CEO pay has exploded from 28-to-1 to 465-to-1.

Corner office fat cats are coining a new expression of greed: pigs get fat and the middle class gets slaughtered. Falling wages, loose credit, high interest rates and predatory advertising (among other things) eviscerated the middle class. Through this lens the recent consumer collapse feels like karma. In a nice little bit of symmetry, a consumer pullback causes retailers to cut back on distributors and manufacturers run by -- you guessed it -- those selfsame fat cats.

Yet here's the rub. When you and I get into trouble we're reminded that Bill Clinton ended welfare as we know it. Pitty the needy. But when business falls off and big corporations get into trouble we taxpayers bail them out, whether or not we like it. Sounds like socialism for the rich and capitalism for the rest to me.

Bottom line: I'm a capitalist so long as corporate leaders are actively interested in the well being of society as a whole. Neither feudal capitalism nor corporate socialism is in society's best interest. Which brings me back to my epiphany. Maybe social capitalism is the way to organize our society.

To Regulate, or Not to Regulate. That is the Question.

2008-10-07T11:51:00.005-05:00

Whither regulation? Lots of debate on this. With firms crumbling left and right, especially in banking, the most unlikely characters are jumping into the regulation bed together. Imagine Ayn Rand and Karl Marx canoodling in a corner at Smith & Wollensky's.

On the right, many in the government-is-the-problem crowd suddenly want the feds to step in and support the free-falling markets. On the left, many in the government-is-the-answer crowd are loath to bail out a bunch of Wall Street fat cats.

The history of regulation shows it swings back and forth like the pendulum of a grandfather clock. Typically, regulation is light until stability grows into instability as excesses grow and consequences settle in. It's all invisible until suddenly one morning the consequences crash through our kitchen windows. (Note: Adam Smith's "invisible hand," made famous in his 1776 "Wealth of Nations," referred not to federal intervention in the markets but to the societal benefits of people behaving in their own interests.)

Next: Government flies from sleep into overreaction: "We must regulate!" As time goes by and we feel the benefits of some regulation, "the regulated" begin crying that they're so manifestly pure in interest and intent that they no longer deserve the chains of regulation. It isn't in their interest to acknowledge that regulation helped stabilize things to begin with, and they count on the short collective memory of the citizenry to forget it.

Soon the people have allowed their representatives to water down regulation. After a short-lived honeymoon of good behavior, history shows that too many swashbuckling CEO's sidestep former laws that had become rules that were now, really, simple recommendations (weren't they?).

Always, we fail to understand the mind of the business leader. Most honed their competitive mettle in sports—much of it healthy, like doing their best, learning to lose gracefully, good sportsmanship. But many competitive people take one particularly bad principle from the lockerroom to the boardroom: The tendency to stay just a shade within the rules and when nobody's looking, Katie bar the door.

When basketball refs aren't calling fouls the competitive player will foul more to stop his opponent. When the refs don’t call the fouls, you don't exactly hear the culprit yelling, “Hey, ref, you missed that last foul! I really hacked him good!” Not gonna happen.

In the business world, leaders ignore boundaries if there's no regulator around and they're pressed to gain every edge to beat quarterly expectations. Guidelines fade fast when they feel pressure to perform (with kid’s expensive schools, hefty house payments). The rationalization defense mechanism kicks in: Those aren’t really rules.

Ironically, regulation is good for business. It's good medicine, whether preventing or curing disease. While they don’t like the taste, without it business can’t help itself from wallowing in the mud, forgetting the old line about pigs getting fat and hogs getting slaughtered.

Recent abuse is so bad that the medicine needs to be industrial strength yet sensible enough to restore confidence in our institutions and rebuild their balance sheets. We got through much the same mess with the mortgage-inspired S&L crisis of the '80s. Let’s hope our memories are a little longer this time around.

Betting On (or Against) the Future—Your Choice

2008-06-23T10:46:00.006-05:00

Remember back about a decade ago when Xerox was stumbling toward the cliff of bankruptcy? They regained their footing by going on a cost-cutting rampage. Fortunately for Xerox, they kept one cost center sacrosanct: Research and development. The corporation has since recovered and pulled in a billion dollars a year. Chalk up the lion's share of earnings to products developed by their comfortably budgeted R&D team.

This should send a clear message to our small-business community. Your products and services need constant improvement—hard-earned customers demand it. Whether technological, procedural or educational tweaks, you gotta do it. Otherwise you're betting against your future.

There's an interesting broader context here. In recent years, our country's leaders have been betting against our collective future. Just look at our stunted growth in science and medicine. Why is this? U.S. university science grads now rank 17th in the world. That's just the start.

To make matters worse, many of our best graduates are immigrants who, for a variety of reasons, go back to their countries of origin to develop new technologies and fuel employment and innovation outside the U.S. In a global economy, that spells disaster for America.

Why has the U.S. fallen backward and how do we right ourselves? We need to coordinate our political, educational, and business communities to promote opportunity. (Microsoft's Bill Gates rightly lobbies all the time to improve our schools and liberalize our immigration policy.) That takes financial support, expanded curricula and more quality teachers.

You can do your part. As a small businessperson, don't take your eye off innovation. Consider getting involved in your local community to increase focus on science and technology. Your community and business's future depends on it.

Strategic Alliance is for Small Business Too

2008-06-03T11:27:00.004-05:00

Sunday I settled into The New York Times business section and found a surprisingly delightful Page 1 story about Disney’s 2006 purchase of Pixar Pictures and the combination’s success. Here’s an instant where small-business people could tear a page from Corporate America’s playbook.

Sure, strategic alliance is something of an overused phrase. But it’s an important part of your small-business arsenal. Alliances can land access to otherwise unavailable technologies, employees, customers or financing. “Strategic alliance” is a catch-all for everything from special vendor relationships, mergers of equals, sales or acquisitions. Yet all of them contain potentially treacherous curves.

Consider these five points prior to, during and after a strategic pairing:

1. Team only with companies whose values and philosophies match your own healthy culture.

2. When finalizing details of the combination, define in writing:
a) What each player brings to the field
b) Each player’s needs and desires
c) Authorities and responsibilities
d) Directions for dissolution—how would the combo unwind? Assume nothing and imply nothing. Murphy’s Law is even more present in strategic alliances.

3. Insure the two companies have seamless borders. Firewalls create miscommunication and inefficiency. Personnel from the combining companies should talk directly to one another rather than send smoke signals up and down the corporate hierarchy. This isn’t as simple as it sounds. Each party needs to introduce people by telephone, videoconference or in person and define the communication channels.

4. Leaders should hold team sessions to explain the reason for the combination and its benefits.

5. Also hold regular conferences to discuss how each side’s pre-agreed needs are being met, what’s going well and what needs attention.

For the small businessperson, a well-considered and executed strategic alliance can mean 1 + 1 = 4.

Donkey-Chickens Roosting

2008-05-02T10:22:00.005-05:00

Who knew the Democratic primaries would be like a book of small-business lessons? The latest: Business leaders do well to treat employees with respect, during and even after their tenure, the better to avoid chickens coming home to roost. At Tires Plus we worked hard to build a culture that honored our "teammates." When they left, we called them alumnae; they often came back to visit and were always in our thoughts and prayers.

The roosting-chickens lesson came up this week via the state of Indiana, where I grew up. In what has to feel like water-torture to Camp Clinton, superdelegates have been consistently dripping from Sen. Clinton's side into Sen. Obama's side. A few days ago when superdelegate and Indiana native Joe Andrew switched his vote from Clinton to Obama, it had to feel like getting dumped on by a cold bucket of water for Sen. Clinton.

The problem for Sen. Clinton is that Joe, a former head of the Democratic National Committee, appointed by Bill Clinton, wasn't the first Clintonista to jump ship. Others include New Mexico Gov. Bill "Judas" Richardson; former Clinton labor secretary Bob Reich; and attorney Greg Craig, defender of Bill Clinton during impeachment. According to Clinton super-surrogates Paul Begala, James Carville and Lanny Davis, the problem is that Joe and the rest didn't duly genuflect in appreciation for what Bill Clinton did for them. Ergo, they're traitors.

According to this logic, leaders should think that our employees are lucky to have jobs with us. I feel just the opposite. A leader should actually feel fortunate that people give themselves over to the pursuit of his company's mission and vision. You'd think that would be especially true of government. I saw Richardson, then energy secretary, in Minnesota the day he faced unmerciful heckling as the Clinton Administration bombed Iraq during Ramadan (and during the Lewinsky scandal). It's so easy for leaders to underestimate the challenges their people face day after day. Generally they don’t merchandise it to us. They just get the job done.

Which brings us back to Joe Andrew and the office he occupied. DNC chair is a thankless job, somewhat like a referee (ask Howard Dean). Notice comes only when there's a problem. Yet Clinton enforcer Terry McAuliffe unceremoniously dumped Joe. No thank you, no party.

Ironically, I happened to have an appointment with Joe the day McAuliffe canned him. Joe still took the meeting and didn't complain, didn't blame. Lawyer, entrepreneur, author, Joe didn’t hold anything against the Clintons and even endorsed Sen. Clinton for president. Then he watched this dreadful campaign deteriorate. Evidently there weren’t enough warm feelings left to overcome the pandering of gun-toting, shot-pounding, gas-tax holiday-supporting Sen. Clinton.

That's the constant drip-drip message for the Clinton camp (and small business) during this campaign: Treat your people well, now and once they move on. Otherwise, watch out for those darn chickens.

Know How to Play Political Spin

2008-04-18T15:21:00.007-05:00

I can't be the only one who follows every beat and machination of this year’s presidential campaign. Mostly it's fun to watch both Dems and Republicans spin the words of their rivals — or their rivals' supporters — to their own advantage. What's this got to do with small business? Generally it has no effect. But in the last week, a couple of spin shots could affect small business.

Let me explain. First, Obama supporter Oprah Winfrey has come under heavy fire from some Evangelicals who've put out a popular viral video denouncing "the church of Oprah." (It's been viewed more than 4 million times on youtube.)

The two primary complaints about Oprah are:
1) She supports Obama
2) She has said that she believes there are many paths to eternal life, Christianity being one among many (Jews, Hindus, Buddhists and Muslims also have a shot)

To many, this is heresy.

Again, what does any of this have to do with business? There's a connection. First, an ever-increasing percentage of small- and medium-size businesses compete globally. Since Christianity is one-third of the world population, it's probably not be a good idea to believe, even subconsciously, let alone broadcast, that two-thirds of your market is headed in the wrong direction (down) eternally speaking.

Second, it's a pretty exclusive, anti-client/customer frame of mind to feel more spiritually enlightened than people who think differently than you. There's a lot of people out there in the global village who feel that our Judeo-Christian texts shouldn't trump their founders' teachings.

If you're still with me ... the second political issue on my mind relates to how we eat. "And what does this have to do with small business, or politics?" New York Times columnist Maureen Dowd recently ridiculed Obama for quizzing chocolate workers about why they might enjoy the sugary items they make and for talking about Whole Foods markets in Iowa.

One might reasonably conclude that Dowd doesn't get the connection between disease and what we put into our bodies and rising health-care costs. Rather than knocking a candidate who emphasizes doing your part to stay healthy (last month Obama also implored a mostly African-American audience to quit feeding junk to their kids), people who say what they think about health should be applauded. Cracks like Dowd's cause us to take our eyes off the health-care ball, for ourselves, our families and our employees. Costs associated with all three are nothing to ridicule.

So, whether religion, food or myriad other issues, follow the campaign but don’t let others interpret what is happening for you. You know what's best.

Business and Battle

2008-04-07T13:12:00.005-05:00

War planning is like a business initiative writ large (really, really large). Poorly done, the consequences of inferior planning can be disastrous. As in business, war demands leaders who listen to a variety of opinions, dig down, manage from afar, and, when times demand, dive in and go to the source.

Moreover, good leaders do not underestimate costs, time and the difficulty of the goal. They lay out missions that are clear and serve the greater good.

This came to mind as I was reading a review of a new documentary film called "Body of War," co-directed by Phil Donahue. According to "Variety," the human and political tragedy comes home in a way that nobody has captured in a film about the Iraq war. I thought the timing was good since concern about the war seems to be waning a bit as war fatigue sets in.

I'm afraid most people are losing touch with the basic facts of the war. We just passed the 4,000 mark for U.S. service members killed in Iraq. But that's just the iceberg’s tip: 50,000 have been wounded, 30,000 severely, and credible estimates of dead Iraqis range up to a half million. This film will reconnect people with the defining event of a generation. Check out the trailer, and tell your friends in the following cities where the film is showing: April 9, IFC Center in New York City; April 18 at the Shattuck theater in Berkeley; May 9 at the KEN Theatre in San Diego; and May 16 at the Lagoon theater in Minneapolis. Films like these with small budgets need grassroots help. Thanks.

A Little Common Sense on Health Care

2008-04-02T12:20:00.006-06:00

I'm sure you've heard all the health-care talk coming from the presidential candidates. It's no wonder. Health care is eating up more and more of everyone's money. Corporations pay more to provide employee benefits. Private people like us are hit with higher copays and payments into our company plans. We're all paying more taxes to support Medicare.

Senators Clinton and Obama generally focus their health-care rhetoric on who their plans cover (and don't cover), care-giver choices, who should pay for what, and how. Both candidates have some great proposals that will help in important ways. But enlightened small business owners know that these issues only touch the surface of a deep-rooted problem.

Fortunately, a few people are digging down. Best known, if not a little controversial, is Michael Moore, director of "Sicko." The most impressive common sense I've heard on the subject came from a pretty reliable source: Denis Cortese, head of the renowned Mayo Clinic. Mr. Cortese recently made his case at the National Press Club in Washington D.C., and in an interview with the Star Tribune in Minneapolis.

The first big problem Mr. Cortese outlined is that efficient health care is an oxymoron. It doesn't have to be that way. In the five years I've been in Mayo’s Annual Executive Health Physical Program I've seen efficiency and effectiveness of the highest order, from their technology to their minimization of the number of "touches" a patient goes through before seeing a doctor. Reminds me of a few years back, when I took my partner Mary to another hospital’s emergency room and counted 14 touches before the doctor showed up. Not at Mayo. I'd guess the average number of touches before I see a doctor is two or three.

The second big problem, Mr. Cortese points out, is that the health insurance companies show little interest in disease prevention. You'd think they only focus on treating disease, which they hope you don’t get till you're 65 years old when they get to pass you off their books and onto Medicare. The dirty little secret is that health insurers have no incentive to pay for wellness and prevention programs because they know that more than likely they won't get to reap the benefits.

To some degree I can’t fault the insurers any more than I can your employees who don’t spend money on preventative measures because they aren’t covered. Most people know that if they abuse themselves (eat poorly, exercise rarely) their diseases will still be covered by the pool of the insured, albeit under a burden of ever-escalating premiums. This spells out a fundamental problem: Mixing private and public health care systems.

Obviously, health care is a complex issue. But if we are going to find answers—for the nation and for our businesses—we may have to scrap the whole health care system and start over. Tweaks here and there are probably just Band-Aids that will fall off soon enough. We need to make sure that whether the changes are big or small we avoid the old folly of rewarding A while hoping for B. If we do that, we’ll reduce stress on our economy, on our own bodies and on our businesses.

Openness: Lessons From My Swiss Great-Grandmother

2008-03-06T10:36:00.006-06:00

Did you read Daisy Nguyen’s fascinating Associated Press article on McDonald’s incorporating ancient Chinese feng shui principles into their restaurants? It’s exciting to see a U.S. corporation open itself to ideas that weren’t necessarily invented on these shores and that aren't exactly Mayberry mainstream.

Some 12 years ago my company Tires Plus incorporated feng shui elements into the design of our stores and our new Team Support Center in suburban Minneapolis. It was funny. The design shop we had hired, Dayton’s Home Interiors, was offended when I told them that before we could go forward with their layouts and furnishings we needed approval from my feng shui consultant. After some teeth-gnashing, they complied. A few years later they teamed up with my consultant and began incorporating feng shui into designs they sold to clients.

Lesson: Openness to unfamiliar ideas outside our way of thinking is critical for entrepreneurs. My father’s Swiss grandmother who raised him liked to tell him when he got a little too big for his britches, "Bill, it’s what you learn after you know it all that really counts." Call it a beginner’s mind, or whatever you prefer. It allows you to differentiate from others. I applaud McDonald’s for their openness. I also hope their new frame of mind carries over to their menu. They could take on the likes of Whole Foods, the fastest growing U.S. grocer, by including healthier fare like grains, beans, fruits and vegetables while cutting back on offerings filled with fat, sugar and trans fat. Less super-size, more super-openness.

Wobbling Wall Street and your business

2008-02-06T11:53:00.000-06:00

Wall Street has been playing yo-yo with the financial markets the past few months. It certainly plays on my nerves, and I doubt it's gone unnoticed by many of you. It calls to mind a very personal take on the simple theory of The Hedge.

For entrepreneurs like us, redoubling our efforts to build value in our own businesses serves as the single biggest hedge against our securities holdings that we can control. It's our way to thrust out our hand and stabilize the vicissitudes of everything from our retirement accounts to bond holdings.

Make your security blanket out of sound business principles. What does that mean? It means carving out a mission, or purpose, along with a vision of where you’re going. It means recognizing your operating values, the set of behaviors that you value and that your team understands and reaps inspiration from. I means being warm-hearted and tough-minded—sensitive and nurturing while holding people accountable.

These are the soft skills of leadership, yet they're the hard skills to build on top of disciplined system. There is no single magic bullet. But there are a lot of magic bullets, and you can get your hands on them. Do that and you'll build your business on sound financial footing that can weather the kind of yo-yo times we're seeing on Wall Street.

Iowa's Message for Business Leaders

2008-01-04T09:49:00.000-06:00

Whatever happens in the rest of the presidential primary states, Mike Huckabee and Barack Obama's Iowa caucus wins, unfathomable a few months ago, draw lessons in leadership for businesspeople who want to move their flock. Regardless your politics, the message out of Iowa for leaders is:

* authenticity, even the perception of authenticity, trumps safe, scripted rhetoric
* a message of hope smothers negativism
* speaking to the heart tops speaking to the head

Look at yourself. How are you perceived inside your organization? It matters. You need to know, even though it's difficult and often painful to accept the light others see you in. It's especially true when it comes to seeing how you're perceived by those who report to you. Yet it's absolutely necessary to understand their perceptions. Try to understand what breaks through and where the connections are severed. That's how you lead the charge to surprise victories, whether one-on-one or speaking to an entire team, whether politician, pastor or entrepreneur.

To be sure, your communication and leadership benefit immensely if your message dovetails with the zeitgeist, or the spirit of the times. Obama, for instance, is in part lucky and smart enough to catch lightening in a bottle. Americans, a critical mass of which think the country's headed in the wrong direction, want change.

Even though the Clintons are old experienced hands known for comebacks, they also represent yesterday whereas Obama represents the hopes of tomorrow. A slumbering youth vote that was a no-show for baby-boomer John Kerry has awakened to the dreams of Obama, 46, a multicultural, charismatic candidate that inspired them to show up big in Iowa. Know your audience and tap into their passions and you too will surprise a few people.

Running on Empty

2007-11-14T10:17:00.000-06:00

Georgia is running out of water. So is southern California. Cities all across the bottom half of the U.S. are clamping down on sprinkling lawns and running fountains due to drought. More alarming, in the country's breadbasket, the Ogallala Aquifer, also known as the High Plains Aquifer and the world’s largest underground water source, is draining at an unsustainable rate. Experts estimate it will run dry sometime in the latter half of the century. You know supply shortages are nigh when brilliant investors like T. Boone Pickens, Jr., are plunging into water.

What's this mean? I don't need to remind anyone that our need for water is as critical as the need for air. Nothing is more foundational on Maslow’s hierarchy of needs. Yet how does that square with the fact that nothing is as frequently squandered or as poorly allocated as water? If we managed corporate resources like this we'd be watching one giant revolving door of bankruptcy.

Message to public officials: Keep track of this resource. Take inventory, track usage, estimate replenishment, publish figures. It's a lot easier than monitoring planetary warming (a related issue that also needs attention).

If we discover that we're mortgaging our grandchildren's future, communicate that. We also need to hear proactive solutions and how they will help. Whether it’s with employees or citizens, when leaders communicate truthfully and suggest solutions, everyone pulls together for the common cause. (Did you know, you could say, that it takes 5,000 gallons of water to produce one pound of beef?) The point is that today we need clear, strong leadership to solve water issues, to say nothing of other problems facing the world. It takes all of us, everyday leaders.

High Noon in Detroit

2007-10-05T10:48:00.000-05:00

Always interesting, sometimes scary, always avoidable: That's the dynamic whenever labor and management square off. Once negotiators fail, workers stop working, and management watches productivity grind to halt. It doesn't have to be.

The General Motors-United Auto Workers strike is the latest in this showdown of wills. It's no secret that union membership has ridden a long road downhill, no more than it's a secret that GM's profits and market share is pointed in the same direction. So what will happen? Still hard to say.

What should happen? First, each party should do something stunningly obvious but apparently humanly impossible: Look at how they can help each other to become more successful. If neither win, GM, in a tenuous position anyway, would double its troubles. Likewise, workers don't always connect the dots: If their employer is saddled with expenses that it's competition lacks, the company has a hard time competing, will shrink and, inevitably, will die.

The old-fashioned demands of Big Labor for job protection ties management's hands. Shackles make it hard to react to competitive pressure. Work rules that stand in the way of efficiencies need amending -- and in return Big Labor's constituents need to share in productivity and profit increases. Align the interests of both sides and exciting things start to happen.

Let's hope this graying icon of Corporate America has management that is equitable. Let's also hope the UAW's members realize the same thing. Finally, let's hope that Washington will recognize that a broken health care system is among the troubles and will work to help both workers and management.

Diplomacy for Dummies at Columbia U.

2007-09-27T09:58:00.000-05:00

University presidents used to be among our nation's brightest leaders. Today, they seem to be puppets of boards or regents and alumni groups. The latest example: Columbia University President Lee Bollinger. A few days ago he violated so many rules of management in his introduction of Iranian president Mahmoud Ahmadinejad that it should become a part of coursework for years to come.

First, it's important to note that Bollinger was correct to back his faculty who initially proposed inviting Ahmadinejad to campus. That said, you don't have to be a diplomacy school graduate to know that when you invite a controversial figure to speak to your organization, you don't cave in to your critics so thoroughly that you overcompensate and nuke your guest in the introduction. It's impossible to make Ahmadinejad, through-and-through an anti-Semetic tyrant, a sympathetic figure. But Bollinger came disturbingly close. That was a disservice to the causes Bollinger on some level was trying to promote.

Leaders speaking in public need to know the room, to know their organization. Bollinger knew a Q&A session would follow Ahmadinejad's address. Did Bollinger actually think his students and faculty were going to serve up softballs? He should not have been so bluntly offensive with his questions to Ahmadinejad, anymore than he should have been gracious and solicitous. Simply hand Ahmadinejad over to the audience (rhetorically speaking). All the points that Bollinger made in his ambush would have come out.

Bollinger also committed one of the worst leadership sins by attempting to save his own neck without consideration for how it would effect his university, his country and the world. It appeared to me that Bollinger was more concerned with finding a way back into the good graces of his detractors on the Wall Street Journal Op-Ed page who were aghast that he would allow Ahmadinejad to set foot on campus. Now, in some respects, Bollinger looks as out-of-touch and as Ahmadinejad announcing that Iran is a homosexual-free zone. We can only hope the episode doesn't have a lasting effect on diplomacy at home or abroad.

Of Bridges and Proactivity

2007-08-03T23:28:00.000-05:00

Which is better? Correcting a problem after you've experienced it? Or, watching the dashboard for warning signs and taking corrective actions to avoid the problem in the first place? Obviously, the latter is better: Proactivity saves more time, money and, in some cases, lives, than reactivity. I grade the business world a "C" on being proactive. Government? Regretfully, it gets an "F."

Which brings us to the matter of the I35W bridge failure in Minneapolis, my hometown. Indeed, hindsight has all kinds of advantages that foresight lacks, and the catastrophe's cause will take a long time to determine. But the human and engineering disaster looks like a perfect example of reactivity trumping proactivity. A few years ago, inspectors judged the bridge "structurally deficient." They graded it on two scales: On a scale of 1 to 9, it earned a 4; and its structural integrity marks were 50 point out of a possible 120. In every school and class I've ever attended, those are failing grades.

The failure of this bridge, which I had used a few times every week for the past three decades, has provoked a lot of tortured semantic arguments about the meaning of structural deficiency. Yet this tragedy, as tragedies often do, is provoking a gross bulge of reactive actions by government and its custodial politicians. Think about it. How do you, in your business, or the representative that you elect to make large community decisions, operate? Poised to pounce when things go horribly wrong? Or, snooping for symptoms, digging below the surface to root causes and acting before a full-blown crisis explodes?

If transportation was your business and you read a report on a 40-year-old bridge, built to carry 40,000 cars daily and now carrying 140,000 cars each day, that graded it structurally deficient with a rating below 50-percent of where it should be, would that cause you to take action? Or, would you delay another few budget cycles? The answer is as obvious as it should have been when President Bush was handed a daily brief entitled "Bin Ladin Determined to Strike in US" one month before 9/11.

Here's the lesson we all need to keep learning: Throughout your day, be aware of symptoms, not just their negative results. It will save a lot of heartache in the long run. Whether government or business, whether it's bridges, airplanes or widgets, let proactive snooping to discover root causes ring across the land.

Avoiding the Vacation Blues

2007-07-24T12:38:00.000-05:00

Ah, yes. We are in the midst of that special time: Summer vacation. It carries great expectations and many fears. How hard do I have to work to get ready to go? What calamity could strike while I'm gone? When I'm back, how hard will I have to work to catch up and fix everyone's mistakes? Here's six tips to help enjoy your expectations and reduce the chance of your fears becoming reality.

1. Set your email and v-mail with a message that says you're gone. Add how callers can get things resolved while you're gone.

2. Before you permanently slip into flipflops and shades, meet with colleagues who're in the best position to cover for you. A few things to tell them: a) describe what you'd like their help on; b) let them know what could go wrong and how to handle it it does; c) set the bar for a legitimate reason to make that "emergency" phone call. On the last point, also consider the degree to which you want to unplug—completely or partially—on vacation.

3. Set meeting dates for shortly after you return from vacation with whomever you hand things off to. That way they know you will following up on whatever you've agreed to. That increases the chance things will get done while you're gone.

4. Enjoy your time away from the office. Be present. The more you're thinking of business, the less you're with those you care about during precious vacation time.

5. Immediately upon return, set some "shut-in" time. This is do-not-disturb time to catch up on emails, vmails, paperwork and other communication so you hit the ground running with current data.

6. Have that meeting with whomever you handed things off to. Follow on what was done and what's still undone so you can schedule your time accordingly.

Follow these tips and you'll enjoy vacation more, and your business will have a better chance of not missing a beat without you.

'Entitled' Executives and Entrepreneurs

2007-07-10T22:26:00.000-05:00

I've always enjoyed Frank Deford, the sportswriter who constantly hits that perfect balance of thoughtful and funny, especially during his weekly radio commentary on National Public Radio. Deford's new book, "The Entitled," is a fictional account about how baseball players, fawned over their entire lives, from a very early age, believe their every whim should be catered to with a smile. They should get what they want, when they want it, if not gratis then at a steeply discounted price. Period.

You know the types, either personally or through the media. It occurred to me that the notion of "The Entitled" doesn't necessarily cover just pro athletes or celebrities. Unfortunately, it also covers business people, from corporate CEOs to Wall Street moguls—even some entrepreneurs.

It's easy to understand how this develops. We get used to employees telling us what we want to hear, laughing at our dumb jokes and doing our grim bidding. It's intoxicating, habit-forming. But we also need to understand that we're building a false reality; one that almost always leads to a big fall. Kahlil Gibran has a great line about this: "The lust for comfort murders the passion of the soul."

How to avoid this trap? Learn to listen for the truth. First, open yourself to it. Try the Rule of Three: When you ask your people what they think, remember that they'll lie the first two times you ask, and generally they'll tell the truth the third time. Then, when they give their opinion and it isn't what you want to hear, don't kill the messenger. Take it in, live in it. As my dad's Swiss grandmother always told him when he was a misbehaving little boy: "Billy, it's what you learn after you know it all that really counts." That's good medicine. Habit-forming, even.

Where Yellow Cabs Make More Green by Going Green

2007-06-27T17:51:00.000-05:00

I just returned to Minneapolis from a board meeting in Vancouver, B.C., where a Toyota Prius taxi drove me and Mary from the airport to our hotel and back. Taxis, I don't need to tell you, are a huge source of toxic emissions, greenhouse gases and a constant consumer of fossil fuels. It only makes sense that the most heavily used transportation in a region should walk lightly on its surroundings.

I asked our driver if customers liked the Prius. He said they were such a hit that Yellow Cab was ordering a lot more. I checked with Yellow Cab, British Columbia's largest taxi company, and they confirmed that they had added 40 hybrids to its 210-car fleet and were in the process of converting as many as 30 more cars to hybrids in the next year.

I love this story. Green is good business because so many of us want to find ways to help, even in small ways. We want to reduce the threat to our climate, so businesses, recognizing where public opinion is going, are more and more keen on finding creative ways to green up. There's an ever-widening base that will support it. Green makes more green, which is good for our wallets. But I like when people do it for the benefit of peace and health and see the big dollars as a fortunate by-product.

Kellogg's Proves it Cares for Kids

2007-06-22T22:01:00.000-05:00

The people at Kellogg's announced last week that it will adopt stricter nutrition standards for the foods that it advertises to young children. The Center for Science in the Public Interest's Campaign for a Commercial- Free Childhood (CCFC), and two Massachusetts parents, will not proceed with lawsuits against Kellogg's (Disclosure: I am a CSPI board member).

CSPI Executive Director Mike Jacobson made the great point that Kellogg, by committing to these nutritional standards and marketing reforms, is vaulting over the rest of the industry. He also hoped that a rising tide will lift all ships—that Kellogg's will influence many other companies that cater to kids. I second that, and it's badly needed.

Health care costs continue to out-pace the consumer price index. More and more links between diet and health are discovered every week. Diet-influenced diseases like diabetes are rising at a staggering rate (heart disease and cancer cause death in 1 of every 2 people and 1 in 3, respectively). Corporate leadership, in companies small and large, is badly needed. Kellogg's may have faced a little external inspiration, but that doesn't minimize their move. Kudos to Kellogg, and tidings to Tony.

Jerks Need Not Apply

2007-06-14T10:20:00.000-05:00

"Lars Dalgaard is CEO and cofounder of SuccessFactors, one of the world’s fastest-growing software companies ... All the employees (he) hires agree in writing to 14 'rules of engagement.' Rule 14 starts out, 'I will be a good person to work with—not territorial, not be a jerk.' One of Dalgaard’s founding principles is that 'our organization will consist only of people who absolutely love what we do, with a white-hot passion. We will have utmost respect for the individual in a collaborative, egalitarian, and meritocratic environment—no blind copying, no politics, no parochialism, no silos, no games—just being good!'" — Robert Sutton, The McKinsey Quarterly, 2007 Number 2

Mr. Dalgaard is onto something. The advantages to his no-jerk policy are enormous. Bulls in the office are as dangerous as they are in china shops. Yet owners rarely deal with it. The consequences are staggering, both in terms of the emotional toll on brittle employees and in cold, hard cash.

Mind-body research performed in the past decade has proven conclusively that, without intervention, emotional or psychological turmoil can weaken the body's immune system and lead to physical illness. The upshot? More absenteeism, a productivity plunge, rising health insurance costs and high turnover. One employee's personal problems can set off a chain of events that could threaten a small company. As the old proverb goes, "For want of a nail, the kingdom was lost."

Cheat Vacation at Your Peril

2007-06-06T21:53:00.000-05:00

Ah, summer, time to get down to ... work? That's what an important new study says my small-business friends have to look forward to. Fewer and fewer entrepreneurs expect to take a summer vacation of a week or longer—59 percent now versus 67 percent four years ago, according to OPEN, the small-business arm of American Express. I can only guess that most of these owners feel they'll get more done and thus put more food on their family tables, a laudable goal.

I wish that were so, but I don't think so. Without vacation breaks, what the owner picks up in quantity of hours worked she loses in the quality of that extra time. All work and no play kills her skills, whether it's planning and organizing, interacting with employees or decision-making. They're the same deleterious effects that are also caused by getting little sleep, eating poorly and exercising rarely.

Early in my entrepreneurial years, I tried cheating the clock in all of those ways and more. Turns out they actually cost me time when I factored in my overall quality of work. So think again when you try to increase your company's profits by skipping that vacation or pulling into the fast-food lane. It ain't gonna happen—you can't cheat on time off any more than you can cheat sleep or the taxman.

A Tough-Minded, Warm-Hearted Leader?

2007-06-02T12:57:00.000-05:00

I still don't know who I'm going to vote for come presidential primary season. But I do know that I'm looking for a courageous candidate who's warm-hearted and tough-minded. Democrat Barack Obama showed me that a few weeks ago when he criticized Detroit automakers ... in Detroit. I still can't stop thinking of the guts that took. It reminds me of 1992 when candidate Bill Clinton criticized Sister Souljah ... in front of an African-American audience. Obama told the executives that they needed to be more responsive to customer's needs (fuel-efficient cars) as well as the country’s needs (reducing dependence on foreign oil). Obama's temerity is a rare commodity for political leaders of either party, where standard operating procedure for stumping to locals is telling them what they want to hear. Obama also mixed caring into the talk as he proposed to help car companies who've committed to raising gas-mileage standards. Being a great leader—whether in business, a not-for-profit or politics—involves mixing a warm hearted with tough minded, in an authentic and courageous manner. Obama nailed that in Detroit last month.

When CEO's Go Bad

2007-05-11T15:01:00.000-05:00

I'm still picking my jaw off the ground. Did you see what Northwest Airlines CEO Doug Steenland has decided to award himself? A $26.6 million bonus. It would be one thing if Northwest was on course to fantastic profits. Ah, no, hardly. Mr. Steenland's airline is trying to break out of bankruptcy. What's wrong with this picture? He's taking this massive payday at a time when he has asked his employees to take a 40 percent pay cut over five years to get his books into the black. Mr. Steenland's stock-option gain also stiffs Northwest's investors and creditors. It's simply unconscionable to profit from everyone else's pain like that.

This is a textbook example of what it is for a business leader to NOT be caring or spirit filled, two of the six traits I believe build a strong, honorable company. Back when I had my own business, my bonus plan was no different than management's plan. Mr. Steenland could learn a thing or two from Brad Anderson, the Best Buy CEO who in 2002 actually gave his annual option grants to his Best Buy colleagues. Mr. Anderson has been doing it every year since. There you go, opposite ends of the corporate responsibility spectrum: From Anderson to Steenland.

"$350 Liquor? Just Spreading the Wealth"

2007-05-11T10:49:00.000-05:00

Floyd Norris's column (behind the pay wall) in today's New York Times biz section, about high-end hi-balls in Manhattan, made me think about the flip side to the massive growth in incomes and wealth in the U.S. There's a lot of entrepreneurial opportunity here. All this green tells me that suddenly there's a lot more room at the high end of the price-quality-service continuum. Big business, with their steamrolling marketing budgets and capital muscle, is adept at exploiting these niches. But in the age of low-startup costs, thanks to widespread digitization, the little guys and gals can also step in.

Where are the opportunities? High-end personal training? Upscale medical practice? Garbage disposal that's as discreet, bonded and private as a white-glove home cleaning service? Use your imagination.