Tuesday, October 27, 2009

CEO - The Loneliest Job Around

As we head out of the recession, the loneliest job may be the CEO. After all, they are looked to guide organizations into the future, to make brilliant decisions based on incomplete data, to restart the growth engines that have been stalled for more than a year – and to leap tall buildings in a single bound (perhaps I am confusing them with someone else). All this without a single person they can talk with that doesn’t have a vested interest in the outcome. But you say - they have great management teams, guided by wonderful board of directors, and supported by families that should be in a position to lend a helpful ear. Forgetaboutit!

Imagine you are the CEO and have a very creative idea to move the business forward. You spend some significant cycles to make sure that it will make the right impact on your business. You elect to bring it up to the board and they decide that it will help save the world. Only problem is that you missed one key element that made you back off. Think that anyone on the board will wonder why you did not move this “great” idea forward. Youarerunningonthinice!

What about a potential acquisition that could change the competitive landscape and position the organization to leap into a dominate role. As the CEO, how comfortable would you be discussing this idea with your leadership team? Especially, when the primary reason you want the acquisition is to improve the capability of your organization’s leadership along with the wonderful customers that this target acquisition has. Caughtbetweenarockandahardplace!

What about the need to shift your business into new geographic markets? Not the really glamorous ones like Paris, London, or New York, but exciting places like the Middle East, Amsterdam or Fargo, ND. Think your spouse is going to continue to make those trips with you. Notonyourlife!

Recently, the CEO role has been under fire for being overpaid and asleep at the switch. I beg to differ. I truly believe that this role is the toughest and loneliest job in business. I have the pleasure to work with CEOs everyday and I can honestly tell you that most of them are great people with a passion to make a difference in the world. They care deeply about the quality of life available to their employees. And they look out for the welfare of their families. They can be deeply competitive and driven, but that may be what makes them so important to the success of their businesses. I think that the general population should rethink their positions on the role of the CEO. And thank our lucky stars for their commitment to excellence and loneliness. LonglivetheCEO!

Wednesday, September 16, 2009

Traffic Signs of Growth Back To RED?

I am generally a positive person and tend to see early stage improvements in the economy because I look for them in every nook and cranny. It is kind of like finding the first flower breaking through the snow after a really tough winter – you have to slow down and look very hard. I have been away from blogging for a while as I founded a new business. Very challenging experience, but more on that in future posts. The good news is that I am seeing a lot of flowers breaking through and other signs of an economic springtime.

What are the flowers (leading indicators) telling us?

  • The stock market is attracting money. Institutional and individual investors are putting money back to work as they are fearful that they might miss the upswing in the stock market. More money over a limited stock supply (very few new issues) leads to higher prices – not necessarily more valuable operational companies. But the stock market is up!

  • Many individual investors are looking for companies to invest in directly. They are tired of the “public” company route where they do not really know the people who are looking out for their investments. Many individual investors are looking at private investments (many shifting from “public” to “private” options) to allow a relationship to be developed with the stewards of their money (the private company’s leadership team). I see quite a bit of interest in putting money back to work via individual investors, but it appears that the greatest activity is coming from angel investors that have teamed up to pool their resources and skills.

  • Companies are emerging from the “let’s slash expenses” stage. I am seeing a trend over the last 3 months that many companies are looking to leverage technology better to get everything done. With reduced staffs and new growth objectives from 2009/2010 planning cycles, just cutting costs won’t get them where they need to go. It is nice to see business customers starting to come back to the marketplace with a clear purpose. Only issue I have seen is the procurement cycle has lengthened, partially due to a greater aversion to risk (all their buddies got laid off) and partially due to the fact they are doing more things (also due to their buddies that got laid off).

  • The available talent pool to drive expansion is likely better than it has ever been. Instead of having to pull great talent out of existing organizations with significant incentives, employers are finding great talent immediately available – at very reasonable prices. This is a residual effect of how employee reductions where conducted in this recession. During this cycle, the primary drivers of employee reductions were company failures, division closures, geographic contraction, and selective reduction of experienced employees. This created a large pool of very talented people on which to select from. Unlike in past cycles, the primary drivers were not low performers (although this also occurred). This is a great time to upgrade talent and to put in place new teams to drive growth for those companies that were positioned to take advantage of marketplace changes.

  • Market dynamics changed in almost every industry. The top 10 players in each industry had their ability to compete change almost overnight as access to capital became issues for those over-leveraged and/or in need of expansion capital. Larger companies fell asleep looking inward for cost reductions and forgot about their most important assets – their customers. Companies that stayed focused on the customer experience, helped customers work through their own challenges, and those that had strong balance sheets are coming out of this recession with aggressive customer expansion programs (either via acquisition of failed competitors’ customers or outright purchase of weakened competitors).

What still concerns me about growth?

  • The commercial real estate market is the next wave of financial crisis. With the failure and downsizing of companies all over the US, the occupancy rates have fallen significantly. The lack of recurring lease streams to support property values and the downward pressure on lease rates due to surplus capacity will prove to be too much for those in commercial real estate to handle. It will be a significant issue for those financial institutions that carry large commercial real estate loans. It is becoming increasingly difficult for real estate firms to service their debt, but the real challenge will come when they need to refinance that debt. With the much lower property values and the significantly reduced lease streams (caused by reduction in occupancy levels and rates) along with tighter lending policies, we should see a new wave of company failures and new pressures on the banking system. It is not a question of “if” this will happen, but “when”. This will again put pressure on the banking system and thus limit capital access to other businesses.

  • The health care debate and taxation climate has so many unanswered questions about additional burdens that our growing businesses must overcome. Resolution of these important issues will have a significant effect on whether the US business focus will be on investing in areas that will drive growth (and create jobs) or to be redirected to pay additional burdens for a “greater good”.

The real question that remains is will Punxsutawney Phil come out and see his shadow and drive us back into a cold business climate for several more quarters or will economic flowers continue to bloom. I am betting that we have turned the corner and now is the time to ask “What's next and how do I take advantage of the marketplace changes?” That is certainly what I am doing with my new venture. So I am putting my energy and my money where my mouth is. Also, some of the greatest businesses of all time were created in challenging times just like we are experiencing now. The factors that made this happen were combinations of great ideas, outstanding talent, drive to excel, and new emerging customer needs. All factors that we are seeing today. This rare concurrence of business drivers rarely happens in good times, but is clear to those visionaries that look beyond the current state of affairs and imagine “what could be”. I am looking forward to seeing what this new wave of business leaders create from this opportunity.

Thursday, February 19, 2009

Rules of Business Permanently Changed - It’s Time for a Strategy Tune-up

Today, the worst thing executives can do is cut their way to prosperity. Leaders which believe in aggressive cost management as the primary tool in their company’s strategy are missing the forest for the trees. The side benefit of global economic implosion is the spotlight on excessive spending practices has been brought into focus. But this focus on lack of effective cost controls and the required changes to bring them in line should have been addressed when times were good.

It is amazing how some marquee companies have become bloated. What is really annoying to me is that they have taken advantage of writing off the “one time” costs of these reductions when they believe that Wall Street will give them a “hall pass” on the company’s valuation. Some even had their valuations increase as a result. It’s just nuts. They should have taken the opportunity to shed unnecessary costs when times were good. “Annual” Wells Fargo Executive Planning Meeting in Vegas? – need I say more!

In my conversations over the last week with CEO’s, one of the key takeaways was the business landscape has permanently changed. Changes that will shape the future are:

    - As customers come back to the table, they will be more selective and will request better value from their purchases.
    - Industry competitors and partners are changing position on the “strength chart” or are disappearing all together.
    - Government intervention and control across the globe is increasing.
    - Large pools of experienced talent are readily available.

True visionary leaders will seize this opportunity and take advantage of changing market conditions to revise their strategies adapting to the new business landscape. Others will make selective adjustments (“pruning the trees”) to their business in hope that minor changes will get them through another quarter.

With the true impact of the U.S stimulus package and changes in the tax laws unknown, it is clear that the new business rules are still under development. This uncertainty in rules of engagement is causing individual and small investment funds to hold back from financing start-ups and early funding rounds. This ambiguity will clear as the true impacts of these changes are understood. It could be sooner than most economists think. Perhaps as soon as the 3rd quarter of 2009. People of wealth are fed up with investment returns of less than 5%. They certainly won’t go back to investing in the stock market where they have no say over how their money will be used. That would be just crazy!

The time to set a new course for each business is now while the road is being paved and the sign posts are being installed. These new rules of the road will allow a clear view of the forest without getting distracted by the need to trim every tree along the way. I am convinced this is the right time for each business to take a serious look at their strategic plans. Making any necessary revisions required to leverage the changing business, competitive, and legislative landscapes. This review needs to examine all areas including people, product, and operating model assumptions to create a holistic foundation to move our industries forward – to keep a “forest” view of what is important. Sound strategic vision and plans will lead to a focus on growing our way out of this funk.

If you agree, dust off that strategic plan and take a hard look at where your assumptions need to change. If not, go back to sleep. We will see who comes out of the gate ahead with a clear path on this virgin road when the money to fuel growth starts flowing again. Let me know if you agree with my assessment or have a different viewpoint.

Thursday, February 5, 2009

How the Business Landscape has Changed – In More Ways than You Realize!

I woke up today and realized the business world had changed for the better. You are likely saying to yourself that I am nuts. With unemployment up to record levels and consumer spending still depressed, what must I be thinking? But a newly available talent pool created by this craziness is a good thing for America. Let me tell you why I am so optimistic about the future.

Just eight short months ago, our business landscape looked like a normal bell curve. We had 70% of our enterprises working against their approved business plans. We had 15% of the players that were upping their sights on something more aggressive. Additionally, there was 15% of the business population in trouble. The landscape reflected the chart below with the majority of great talent locked in their existing organizations.

Wow, what a difference a few months made. The companies just “working to plan” has dramatically shrunk to 20%. The number of companies in trouble has tripled to 45%. But the number of companies that are aggressively re-positioning themselves has grown to 35%. That reflects more than a 200% increase in companies that are poised for substantial growth. Why are they well positioned? Strong Balance Sheets! The business landscape today is reflected in the chart below and has several very important silver linings including a wealth of available, motivated, and highly qualified talent.

Two key lessons to learn from this current challenge come from history. One, the majority of new job creation as we climb out of this recession will come from smaller/start-up companies, not large coporations. Two, great new companies are born from economic downturns. And with the shift in talent pools and capital focus, now I understand why.

All the ingredients necessary to form great companies are just starting to come together. Great talent combined with innovative ideas with access to capital can do great things. Let’s take a quick look at why each of these ingredients is becoming available.

    · Great Talent – I have had a chance to spend time with many displaced leaders and employees over the last few months – this is a very talented group and not like “reductions-in-force” in the past where the poor talent was being released. This time entire business units are being shutdown freeing up great talent.

    · Innovative Ideas – We have seen a number of significant game changing ideas in clean energy, bio-technology, environmental management, and communications that are poised to make real differences in the world. These new solutions along with a changing political landscape create a great opportunity to solve new problems with government alignment and sponsorship.

    · Access to Funding – Available funding for start-up companies and expansion round needs for growth companies is just coming back to the market. These companies are not funded by the large venture capital or private equity firms, but gain their funding from small investor groups or individual angel investors. These smaller investors are just returning to the investment game after getting burned last year by their institutional investments. They are ready to move from Cash and Treasury Bonds to something with a better return potential. But that money is not going back to Wall Street. They will be investing a lot more into smaller companies where they can develop personal relationships with the founders and potentially have a greater say about how their investments are leveraged.

I am convinced that the human spirit in this displaced talent pool and those who believe in “what can be” will turn this country around. I just hope that the new administration appreciates the lessons of history and places some of this “bailout” investment money into where real jobs will be created – the small business market. What do you think about my reflection on the current business environment? Are the large markets (New York, Los Angeles, Boston, etc.) significantly different than the middle market cities (Denver, Kansas City, Dallas, Silicon Valley, etc.)? I look forward to your thoughts and comments.

Thursday, January 29, 2009

Cutting Your Way to Success in Today’s Economy – Are You Kidding?

Today, “Unemployment hits new record” is the main headline on the denverpost.com. It appears that the current definition of executive leadership in many companies is defined as “how quickly can we cut 10% of the workforce”. That’s not leadership – it is the lack of imagination to conceive the correct way to grow out of new challenges. The long term impacts on those left behind become hard to measure, but loyalty to help the company live long enough to fight another day is gone. Other incentives may keep the key players together for now, but when the tide shifts – look out!

The truly great companies which survived previous down cycles and have grown successfully during difficult times have always triumphed because of how they treated their talent. A number of large companies that fit this talent-first profile are highlighted in the book “Built to Last” by Jim Collins. There are also some great examples in Colorado that are smaller in size like CH2M Hill and MWH that put their talent first. That talent combined with the right leadership rewarded these organizations with:
    1) the insight to figure out how the competitive landscape had changed
    2) the knowledge to deliver new and redesigned offerings to match customers' new needs
    3) the courage to quickly execute any required channel changes
    4) the skills to develop and acquire new capabilities
All leading to results that drove revenue up in spite of the bad economy.

Why did these organizations succeed? Because everyone cared about the same things and worked together. They felt empowered by the trust and a clear vision that great leaders had established for them. All this success when other companies were cutting investments and expenses until the business just became no longer relevant. What type of organization do you live in? A message to business leaders everywhere - before you cut talent to meet a number, can you lead? Let me know if you agree or am I just short-sighted.