Tuesday, December 30, 2008

Detaching From Results

11 years ago, violating every law of dating, I was foolish enough to give a great woman a book as a gift on our first date, and she married me anyway! The book was Deepak Chopra’s Seven Spiritual Laws of Success. The thing that impressed me most about the book was a sequence of two laws: The Law of Intention and Desire, followed immediately by the Law of Detachment from Results. I read that second chapter with some disbelief: This is America! You can’t detach from results! Then I read the chapter again, and over some time, it began to sink in. We can only do that which is aligned with our intentions and desires, then let go, and whatever the results will be, will be.

In my 20’s, I had an ulcer. The MD told me to make a 3 x 5 card with 3 words, and pin it over the light switch on my office door. The three words: WHAT IS, IS.

As a child, I learned the serenity prayer from a small plaque on the wall at our home: Grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

In 2009, I expect to use ALL these pieces of learning! Best wishes to all of you.

Thursday, December 18, 2008

Safety Inspection …. Of Your Management Team

Many people “winterize” their car for the cold weather. We may be in for a year-long winter in business. Smart CEOs will ensure that the vehicle (company) they’re driving will be safe during the rough roads ahead.

The big question is: Do you have the “A” players it will take to survive 2009 safely – with no loss in revenue or profitability? Next year’s “pie” is smaller – will your share be big enough?

Here’s a list of five key things to include in a “Safety Inspection” (mini-assessment) of your management team to ensure you can safely get through 2009.

  1. Alignment – Are your key managers aligned when it comes to critical goals, and are they moving toward them?
  2. Mileage – Do you have SMART goals established for each key leader, to get the most from them?
  3. Acceleration – Can your people accelerate your market share, getting a bigger piece of the smaller pie next year?
  4. Collision Impact Resistance: When you go head to head with your competitors can you beat them by being unique, special, better, faster, etc.?
  5. Resale Value: Can you maintain the value of your company by holding on to EBITDA, positioning, etc.?

Tuesday, December 9, 2008

LA Schools Chief Leaves – No Performance Objectives?!

David Brewer, Los Angeles Schools Superintendent, will be leaving his $300,000 / year job (plus $45K expenses plus $36K housing allowance) with a $500,000 severance package. Hired as a retired Navy Vice Admiral with virtually no experience in the education sector, Brewer has been under fire for most of his two years in this role, with the School Board and other political leaders largely unhappy with his performance.

Perhaps the most shocking aspect of this story is the statement made by one of Brewer’s advocates on the School Board, Marguerite Poindexter LaMotte, who said it was unfair to fire Brewer without having established clear, specific goals and giving him an opportunity to live up to them.

No goals, after two years on the job? After $700,000 in compensation and expenses were paid, and on the threshold of paying out another $500,000? All when the LA Schools have shown minimal progress?

I advise my clients to set clear, specific goals before the executive is hired. The time to ask this question is NOT two years into the game, when the person is about to leave under fire!

Tuesday, December 2, 2008

TOP 10 Things Your Managers Aren't Telling You

Here's a list of things that CEO's almost never hear directly from members of their management team, although it would be useful if they could!

  • "Here's how to improve your company or product."
    They fear your judgment, or your telling them why it won't work, and they won't take risks with you.
  • When the project will really be done.
    Do you give them the room to tell the truth about deadlines?
  • Who, how, or why they don't get along with another key manager.
    No one can NOT look like a team player to you.
  • That they have made a critical mistake.
    They can't bring you bad news without paying a personal price.
  • That a customer is unhappy.
    If you've created a "win" all the time atmosphere and you punish the messenger of bad news.
  • That they remember every negative thing you say, and every positive thing.
    It takes 5-10 positives to counter every negative.
  • That they can do more for you.
    If you will explore their capabilities thoroughly with them.
  • Why they do or don't want to work for you. Resulting in over-paying satisfied people, and losing unsatisfied people.
  • That they want more clarity.
    To really want to know what is going on - the good, the bad, and the ugly - because it helps them understand the relevancy of their own work.
  • That they are looking for another job.
    We call them the "mentally unemployed".

Monday, December 1, 2008

Why Your Company Value Equals Your People Value

Why are the people of West Point, GA, looking forward to KIA’s new plant, where wages will be $14/hour, when the average UAW employee in Detroit makes double that? What is a dollar of EBITDA worth in value to your company? Let’s see how these questions tie together.

Taking the second question first: historically, small private businesses can expect a value of 3 -10x EBITDA; larger public companies 10 - 20x. The stock market has tolerated 15 -20x for most of the past 15 years (although now around 12x). For every dollar you fail to earn in profit, you reduce your value by the multiple that applies to your company. In an up market, company shareholders don’t care so much if you grow 8% or 10% - especially if the profitability is high. But in today’s economy, size (of growth or decline) matters. Let’s say a company did $50 mil. in revenue in 2007, with $3 mil. EBITDA. One could argue that if that company continued to grow steadily, it could be worth $25 to $30 mil., or much more if producing a technical product. But suppose that same company only does $45 mil. next year, and profit drops to $500K. And suppose it takes 3 years for that company to bounce back from this recession. What is the value then? Perhaps as little as $10 mil, or even worse.

What is the single biggest factor in a down economy, that can impact, revenue, EBITDA and value? People. In a crisis management mode, some companies become short-sighted, worrying more about current income and expense, and much less about ultimate value. If you aren’t worried, consider this op-ed quote from last week’s New York Times: “The combined equity valuations of Chrysler, Ford and G.M. total less than $6 billion, which is not even a fifth the valuation of Honda and only about a twentieth that of Toyota.” Honda, Toyota and KIA now have 50,000 workers in the US (counting their sub-system vendors), all making half what US automakers pay, and they produce a better product! We’ve all heard of the Toyota Production System (TPS). But did you know that TPS is derived from Toyota’s early studies of the US automakers!? Now, many US companies have copied TPS to great success. Time for the Big 3 to do the same. Employees that are part of this understand their individual roles and buy in to the process. The team atmosphere is palpable. Two of the main principles of the Toyota Way are:

  1. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.

  2. Develop exceptional people and teams who follow your company's philosophy.

The people in West Point, GA anticipate success. They know that the new KIA factory will help their entire community. Over 40,000 people have applied for 2500 jobs there. If your team is not capable of protecting your value, there probably isn’t a congressional committee (like what the Big 3 faced) waiting to rake them over the coals. You need to do it. Don’t let the value of your company erode due to inadequate but overpaid managers who can’t keep up, don’t get it, aren’t on your side, and can’t generate enough EBITDA. Get some stars who can do the job, and provide them with solid leadership, and you’ll be on your way to protecting and building your value. When your people value your company, your value will increase.

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