Leadership |

Interview With Greg Crabtree: Author, Consultant & Small Business Expert

Posted on December 1, 2015December 1, 2015 by Mike Goldman

Greg Crabtree is a speaker, author, entrepreneur and financial expert. Crabtree has used his entrepreneurial skills to develop Crabtree, Rowe & Berger, PC, a CPA firm focused solely on the needs of entrepreneurs, helping them build the economic engine of their businesses. I invite you to read my interview with Greg as he shares his beliefs on small business ownership and entrepreneurial management.

Mike Goldman: You mention in your book that it’s important for a business owner to take a market-based wage vs. just drawing money out of profits. Why is this important?

Greg Crabtree: We have found that when the owner confuses “you get paid a salary for what you do and a return on what you own”, you lose clarity on how the business is truly performing. This is the biggest distortion in privately held companies. No matter if it is being done for tax purposes, ego or ignorance, it is the first thing we have to address in getting to true business performance.

We strongly recommend that owners stop playing games with their compensation going forward so that they do not have to do Mental Olympics to figure out true business performance. We have many success stories of getting owners to buy in on this idea and the business taking off in profitability because of the clarity created. The increased performance of the business made the supposed “tax savings” insignificant to the new level of profitability.

It is also essential in multi owner businesses where the owners pay themselves equally instead of by role. No two people are worth the same amount of pay every year so if you pay the owners the same amount, somebody is getting the short end of the deal.

MG: You provide consulting services to help entrepreneurs manage their finances. What is the biggest roadblock small business owners face when it comes to money matters in the early stages of a company?

GC: An entrepreneur’s lack of truthful data to manage by has been the biggest issue causing money problems. Except for the 5% or less of entrepreneurs who have a good grasp of finance, the rest are swimming in a pool of data that makes no sense to them.

Our process helps all entrepreneurs attack this problem with 4 steps to get truthful data you can manage by:

Eliminate distortions caused by owner compensation and owner occupied real estate.
Set profit targets using the Simple Numbers profit model
Use Labor productivity concepts to drive profitability with the business you have before you try to grow
Understand the impact of the 4 Forces of Cash Flow (Taxes, Debt, Core Capital and Dividends) You can only discuss Cash Flow AFTER you are profitable.

MG: In your book, Simple Numbers, Straight Talk, Big Profits!, you say that paying more taxes is a good thing and you encourage business owners to focus on increasing profit rather than lowering taxes. Can you explain a little what you mean by this and why this is beneficial in the long run?

GC: Most entrepreneurs incorrectly task their accountants about taxes. If you tell me that you do not want to pay taxes, the easiest approach to accomplish this is to have you spend (i.e. waste) your profits. The problem with that concept is that is leaves you forever under capitalized and you never build any wealth with your business.

The number #1 Key Performance Indicator of true wealth creation is “how big of a check did you write to the IRS last year?” If you did not write a big check to the IRS, there are only two possibilities, you either made no profit or you cheated. Both are bad!

Most accountants and tax advisors tell you they “saved” you taxes when all they did was move it to another year at potentially a higher rate of tax.

MG: The idea of using a Labor Efficiency Ratio (LER) to better manage and project staffing levels is fascinating to me. Can determining the ideal labor spend really be that scientific? What challenges have you seen when companies attempt to implement the LER?

GC: The Labor Efficiency Ratio (LER) has been a huge discovery in our analysis of profit models. The further refinement of LER to distinguish Direct LER from Management LER has given entrepreneurs an ability to put both hands on the wheel of their business. My original book only looked at a single LER but I contributed a chapter to Verne Harnish’s book Scaling Up (Chapter 13) where I show a case study of how to use LER to management business.

When it comes to Direct LER (Gross Margin per Direct Labor $), each industry and even each business has their own signature rate depending of the game plan of how they use their labor. As a general rule, Direct LER will be higher when you have to spend considerable active management time for that group ($3.50 and up). You can also get a high Direct LER when you use proprietary technology to enhance labor output ($5 and up). As labor rates go up and the employees are more self managed, Direct LER goes down. Professional service industries are generally close to $2.

For Management LER (Contribution Margin per Management Labor $), we have actually seen a tight correlation to 10% or better profit needing $3.5 to $4. We think this is because the way our Simple Numbers Profit Model isolates the business engine from the business chassis (i.e. structure) that runs the engine. The marketplace will only give you so much labor to manage the output (salary cap) and be profitable.

MG: I’ve seen many situations where the CFO is the only member of the leadership team that really understands the financials (and sometimes not even them!). How important is it for all members of the leadership to be literate in reading the financial statements?

GC: We are huge fans of Open Book management. Our Simple Numbers Model makes it much easier to at least share the business engine section of the P&L (Revenue, Gross Margin, Contribution Margin). As I often say “a man who aims at nothing hits it with amazing accuracy!”.

With the Simple Numbers Model, your Critical Number becomes Contribution Margin. It is the highest value number on the P&L since it has no distortion or discretion in determining it. If you can forecast Contribution Margin dollars, I can predict every other number in the P&L. As long as you keep Management Labor Efficiency at the right rate, you can almost guarantee profitability.

Direct LER is a great way to discuss compensation with your team. We are fans of paying market based wages. But if I give someone a raise, there is a definitive amount of productivity that has to occur to adjust for the wage increase. It also helps you discuss with your team when you are “paying ahead” for future performance instead of paying them for where they are.

To learn more about Greg, visit SimpleNumbers.com.

Interview With Bob Burg: Speaker & Author

Posted on November 17, 2015November 17, 2015 by Mike Goldman

Bob Burg is an author, speaker and expert on how to succeed in today’s business world. By sharing his knowledge with Fortune 500 Companies, franchises and direct sales organizations, Bob has become a prominent resource for many business leaders. I invite you to read my interview with Bob as he shares his beliefs on leadership and the ever changing world of business.

Mike Goldman: We seem to both be members of the very small pool of business parable writers. What inspired you to write The Go Giver and It’s Not About You as stories instead of standard non-fiction books?

Bob Burg: My first few books had been “how-to” nonfiction, including my biggest seller up to that point, Endless Referrals. However, I’d always enjoyed reading business parables and felt they were a great way to connect with a reader in such a way that the message could be received while in an entertaining, easy-to-read and absorb format. For a while, I’d carried around the idea of taking the basic premise of Endless Referrals, which was that, “All things being equal, people will do business with, and refer business to, those people they know, like, and trust” and putting it in a parable format. Fortunately, I was able to team up with the brilliant writer/storyteller, John David Mann and collaborate on what eventually became The Go-Giver. It’s Not About You was our second parable together which just seemed like a good follow-up to the original.

MG: I’m a big fan of your “Five Laws of Stratospheric Success.” For readers who might not be familiar, these are:

The Law of Value
The Law of Compensation
The Law of Influence
The Law of Receptivity
The Law of Authenticity

MG: For someone who really wants to succeed, is one of these laws more important than the others? How can they start to apply it to their own life?

BB: Thank you for your kind words, Mike. In answer to your question, while Law #1 is the foundational law, none of them are any more important or less important than the others. Without applying all five one can never reach their full success potential. After all, no matter who you are or what business you are in (assuming it’s a free-market environment where no one is forced to do business with you) you must always give more in “use value” than you take in payment, or cash-value (Law #1). Otherwise the customer will not buy from you. Of course, this doesn’t mean you don’t make a profit. Typically, go-givers make an excellent profit and tend to sell at the higher end of the price spectrum. The reason is that they are selling on high-value rather than low price. And, a person will only buy when they feel they are receiving more in use value than what they are paying. Of course, since price and value are two different things (price is finite while value is the relative worth or desirability of something to the end user), the seller can give significantly more in value than what they take in payment and make a very substantial profit.

After that, you must also impact the lives of many people with the exceptional value you provide (Law #2). You must place the interests of your customers first (Law #3). Again, they are buying from for their reasons, not your reasons. You must be authentic (Law #4) or people will not trust you. And, you must also be willing to receive abundantly (Law #5). So, all the laws work together wholistically.

Regarding how one can start to apply these laws into their own lives and businesses, you simply begin by beginning. Taking action is the key. You don’t have to do it perfectly but you do need to begin. And, of course, the how-to aspect of each of these laws can be learned and perfected with both study and action.

MG: You’ve talked about the importance of building a network of “Personal Walking Ambassadors”, what is a “Personal Walking Ambassador”? How can you build a network of them?

BB: A Personal Walking Ambassador is a person who not only “knows, likes and trusts you”…they are a person who believes in you and wants to see you succeed. They will go to bat for you. They have your back. And, it isn’t one way. They know you feel the same way about them and are there for them, as well. Develop this kind of network and you become that center of influence; that go-to person with a fantastic reputation. You’ll also be the recipient of a very large and profitable referral-based business.

You build a network of them individual relationship by individual relationship; by always looking for ways to bring value to those whose lives you touch. As one of the mentors in the story, Sam, told the protégé, Joe… “by making your win about the other person’s win.”

MG: In my own work and in my book, Performance Breakthrough, I focus on the importance of passionate teams to overall business success. You presented a number of lessons for leaders in your book It’s Not About You: A Little Story About What Matters Most in Business. What do you think is the most important lesson to be learned for a leader who wants his team to excel?

BB: You’re doing such important work by having that as a focus. I think that it always goes back to the leader understanding that it isn’t about themselves but rather about those people whose lives they are trying to impact. And, there’s nothing Pollyanna about that. If you note the greatest leaders and top influencers, this is simply how they conduct their businesses. It’s how they lead.

With that in mind, it’s important to understand what moves your team members as individuals. A team is made up of individuals. An effective team is made up of individuals who understand that by putting the good of the team before themselves toward their common goal they are actually creating a win for themselves, as well.

I always loved what Dale Carnegie said in his classic, How to Win Friends and Influence People – “Ultimately, people do things for their reasons, not our reasons.” So, the effective leader asks themselves questions such as, “How does what I’m asking this person to do align with their goals; their needs, their wants, their desires?” And, to the degree you ask yourselves these questions and are willing to ask them and listen to their answers and make the connections between that and what you want the team to accomplish, your chances of leading a successful team increase dramatically.

MG: I agree with you that the creation of real value has to come first for both business and individual success. Why do you think that so many people have a hard time with this idea?

BB: If they have a hard time with the idea itself it’s because they haven’t been exposed to that as a way of successful doing business and living life. What I find, more often than not, is that even when people do intuitively understand that the value must come first (or even if it’s something they have learned) they have difficulty applying it.

One big reason for this is that, as human beings, we see the world from our own unique viewpoint, what I call our Belief System. Based on a combination of upbringing, environment, schooling, news media, popular entertainment, etc. it’s simply how we see the world. Interestingly, our personal belief system is pretty much set in stone by the time we are little more than toddlers and everything after that simply adds to the basic foundational premise.

So we grow up and live our lives driven by our personal belief systems that we’re not even consciously aware are driving us (our unconscious operating system). And, as human beings, we tend to believe that everyone else sees the world pretty much the same way.

The result? What we see as being of value is what we assume our prospective customer understands to be of value, as well. And, that is not necessarily the case.

The key is to understand that “Value is always in the eyes of the beholder.” It’s what they find to be of value, not what we find to be valuable. So, we must be able to match the benefits of our product or service with THEIR needs, wants, and desires.

As we like to say, “Money is simply an echo of value. It’s the thunder to value’s lightning.” So, the value must come first, and the money you receive is simply a very natural result of the value you’ve provided. And, your focus must be on discovering what they find to be of value.

And, this holds true for all aspects of our lives, not just business.

To learn more about Bob, visit. Burg.com.

Interview With John Spence: Business Thought Leader & Leadership Development Expert

Posted on November 12, 2015November 12, 2015 by Mike Goldman

John Spence is recognized as one of the Top 100 Business Thought Leaders in America, one of the Top 100 Small Business Influencers in America, and one of the Top 500 Leadership Development Experts in the World. In my interview with John, we explore his thoughts on company culture.

Mike Goldman: Company culture is so extremely important, as you know. What are a few ways managers can establish and develop strong office cultures to keep employees motivated and engaged?

John Spence: There are a number of ways to foster a strong and motivating company culture. The very first step is to make sure that you create a sharply focused and extremely well-communicated description of the desired culture. Something that is easy to understand and is reiterated often via every communication channel in the organization. Another key to a strong culture is modeling of the desired attitudes, behaviors and actions by the senior management team. The key leaders must be a living example of the culture they want to create. Another important step is to reward people who do a wonderful job living the culture and deal decisively with anyone who actively disrupts the desired culture. In the end though, culture cannot be dictated and in large part it is controlled by the employees, so constant focus on and support of the culture is essential.

MG: In your book, Awesomely Simple, you write that the best organizations clearly communicate their Vision, Mission and Values. What tips can you give a new leader who doesn’t have experience communicating at this level?

JS: The key to clearly communicating the vision, mission and values is simply to over-communicate them. Using different, but very similar terms, these items should be communicated via email, at all-hands meetings, at one-on-one meetings, in the company newsletter or blog, on the website… consistently sharing a clear and easy to understand vision for where the company is going, why that mission is so important and what core values will guide that journey for the organization.

MG: You’ve said that “You become what you focus on, and like the people you spend time with.” That seems like a true and powerful principle in life and business. How do you see that idea play out in high-performing business cultures?

JS: What you spend your time thinking about…what you fill your brain with – and who you choose to spend your time with will in large part determine what your future looks like a decade from now. This idea is just as true in an organization as it is for an individual. From a business standpoint this means getting the absolute best people you can get on your team and then focusing them on the vision, mission, values and core strategies of the organization. Great people focused on the core elements of the business and living the values of the organization is a fundamental factor for long-term success.

MG: You’re an author, and you also read and analyze a staggering number of business books every year. Are there any business ideas that you see repeated that you think everyone should take to heart? Do you see any books repeating ideas that you think should go extinct?

JS: Your question actually gets to the heart of one of the most important things I’ve learned in studying so many different business books, one of the key elements of expertise and strategic thinking is: pattern recognition. People who know a subject at a deep level have the ability to see patterns and understand trends before others recognize them, which gives them a distinct competitive advantage.

One idea that I have seen lately is the idea of simplicity. Obviously this is a topic that is important to me, since I built my career on making complex things very simple, but I now see many other authors and lots of organizations embracing the idea of simplification.

An idea I read about often which I would like to see go extinct is the idea of a leader being some sort of unique, visionary, charismatic Superman (and yes, most business books still infer that the vast majority of leaders are men). I have met many quiet and humble leaders who were exceptional. I’ve met incredible leaders who were female, gay, from other countries, with different skin colors… that were each superb in leading their organization successfully. Leadership is not about a certain type of person or personality, it’s about being a living example of what you hope your followers will one day become.

To learn more about John Spence, visit JohnSpence.com

How to Focus on Your Employees’ Strengths

Posted on June 2, 2015July 2, 2018 by Mike Goldman

Would you rather have a well-rounded employee or a world-class employee?

When making hiring decisions, most leaders look for well-rounded individuals and create a list of skills and experiences they would like a job candidate to possess. Unfortunately, very few leaders have knowledge of the talents required for the job. Talents are habits and tendencies wired into our brains from an early age—things like leadership, flexibility, love of learning, or empathy. On the other hand, knowledge and skills are learned and mastered through experience. Continue reading “How to Focus on Your Employees’ Strengths” →

Five Ways to Celebrate Victories and Improve Your Bottom Line

Posted on May 19, 2015 by Mike Goldman

In today’s fast-paced, goals driven business world, many business leaders think that celebrating or rewarding their employees requires too much time and money. In other words, they believe they don’t have time to celebrate employee accomplishments or have fun because they have pending work and deadlines that take priority, or they think celebrating always means spending money. Other leaders are of the mindset that their employees should just be thankful to have jobs, and there’s no reason to celebrate what they get paid to do. These leaders are missing out on the many advantages that rewarding employees offers.

Celebrating is not just about making people feel good and having fun. It’s also about generating positive energy, which improves both top line and bottom line results. Additionally, celebrating your employees leads to passionate, engaged employees, and that is a requirement to achieve consistent top and bottom line growth in any organization. Grumpy, disengaged employees alienate good customers, kill productivity, and send “A” players running to the competition.

To improve a company’s top and bottom line, it is important for leaders to change their mindset about celebrating their employees and having fun at work. They need to understand that when employees are engaged, they work harder, smarter and longer, are more creative, and refer other “A” players to the company. Also, realize that it is important to celebrate activity, not just results. By the time activity leads to results, people might be burnt out.

Therefore, if you want to have a motivated team that achieves the company’s goals, you need to find ways to measure and reward positive outcomes. Compliment and celebrate your team’s accomplishments, both big and small. Reward activity, not just financial performance. Below are a few specific ideas to help you identify productive ways to celebrate.

1. Quarterly Themes or Contests

The key to helping people remember what is most important in any given time period is to make it memorable and fun. The theme or contest can focus on revenue goals, customer service levels, safety statistics, or any key performance indicator deemed critical for the organization. The theme or contest should include the following:

Theme name
Theme scoreboard or image (visual)
Reward for achieving the theme goal (a reward is typically a tangible item—money, gift, etc.)
Theme celebration (a celebration is typically a special experience or event for achieving the theme—like a party).

2. Above and Beyond the Call of Duty (ABCD) Award

Reward people for doing something outside of the scope of their job in order to help a client, coworker, or supplier. Nominations for this award can be made by anyone (supervisor, coworker, or subordinate). Hold an “all hands” meeting each month where the stories behind each of the nominations are told.

3. Employee Dollars

Give out fake money when an employee is caught doing something great. This money can only be redeemed for work-related privileges or gifts (time off, gift to their favorite charity, etc.).

4. Include the Family

Reward an employee by taking that person and his or her family out to lunch, dinner, or a show. Including the family adds a nice personal touch, which is greatly appreciated.

5. Thank You Notes

Show your appreciation by sending a thank you note immediately following a job well done. We spend half our waking lives at work. Shouldn’t we figure out how to make it fun and rewarding?

The Four Secrets of Passionate Leaders

Posted on May 13, 2015June 9, 2015 by Mike Goldman

One of the biggest challenges today’s business leaders face when striving to take their organization to the next level is finding ways to inject more passion into their teams while maintaining a consistent level of passion themselves. Injecting passion into an organization is difficult and fleeting at the best of times, but in the midst of the frustrations and disappointments that come with striving to grow your business, it is even more challenging.

As a leader, a decrease in your level of passion can start a vicious cycle, especially when faced with sluggish organizational growth. Few business leaders have the recipe for successfully inspiring a team’s passion, much less maintaining it. Some may even be missing the key ingredients. As a result, their efforts fall short. To take your organization to the next level, you need the right people, strategies and execution habits to achieve record-breaking business growth that boosts the bottom line.

To be a passionate leader, embrace these four secrets:

1. Surround yourself with the right people.

Discover your organization’s core values – Core values are a non-negotiable handful of rules your organization lives by every day. These values become your organization’s attitude and should drive your organization’s behavior, who you hire, and who you promote.
Hire “A” players – Kip Tindell of The Container Store believes one “A” player is as productive as three mediocre players. Use a proven hiring process like Topgrading to ensure you are hiring a high percentage of “A” players.
Take action on your “C” players – There are only two options for “C” players. Take advantage of their strengths by moving them somewhere else within your organization where they can be “A” players, or move them out of your organization.
Build your external team – It’s important to have people outside of your organization who can be a sounding board for ideas, pat you on the back, or kick you in the ass. Your external team should include a mastermind group, advisory board, and a coach.

2. Keep your eye on your purpose and vision.

Discover your purpose – If you are a successful leader, you are probably very goal focused. Balance the scale by defining a life’s purpose that focuses on service to others. While goals won’t be achieved every day, you can live your purpose every day. Read The Rhythm of Life by Matthew Kelly for more information on creating your life’s purpose.
Create a personal vision – Another way to take your focus off the day-to-day struggles is to create a three-year vision for your life. Write it as if you are already there and thankful for all that has happened. Dividing them into the following sections helps keep the focus: Finance, Career, Family, Social, Physical, Mental and Spiritual.
Create an organizational vision – Create three to five year goals and a ten to fifteen year BHAG (big, hairy, audacious goal). Read Collins and Porras, Built to Last: Successful Habits of Visionary Companies.

3. Implement a consistent execution process.

Identify a small number of priorities – If everything is a priority, nothing is a priority. Create three to five priorities for your organization for the quarter and the year. Review the priorities weekly and update them quarterly.
Keep score – Use sports as a model and know the score. At the end of every day, your team members should be able to answer the question, “How did you do today?” with one or more key metrics.
Create a meeting rhythm – Keep your organization cohesive and aligned through consistent communication. It will also speed decision-making. For great meeting rhythm models, read Mastering the Rockefeller Habits by Verne Harnish or Death By Meeting by Patrick Lencioni.

4. Work on your attitude every day.

Look down – Though having a long-term vision is critical, it is also important to focus on your short-term progress and goals. It is like pedaling a bicycle up a big hill. If you keep your eye on the top of the hill, you may get discouraged before you reach the top. If you keep your eye on the road and see the progress you are making, it will encourage you to keep going.
Tell yourself a positive story – When things are uncertain—as they very often are for business leaders—it’s easy to tell yourself a negative story, such as, “That prospect isn’t calling back because they lost interest in our services.” These negative stories can spiral out of control and have a major impact on your level of passion. Make a habit of telling yourself a positive, productive story instead. This doesn’t mean being blind to things that may be going wrong. This brings focus on the productive actions you can take instead of on the frustration and paralysis.

Have an empowering attitude “recipe” – We all have a healthy recipe for feeling good. It might be a specific piece of music, a long walk, meditation, talking to a friend, exercise, or a positive book. For me, a long walk and AC/DC’s Back in Black does it every time!

A Better Way to Measure Employee Happiness

Posted on January 20, 2014 by Mike Goldman

By Verne Harnish & Mike Goldman

Successful leaders know they need to balance the needs of employees, customers, and shareholders to build a thriving company. Many firms excel at tracking key performance indicators (KPIs) like profits, as well as customer feedback on a weekly or daily basis, but they fall flat when it comes to monitoring employees’ morale—and it shows. New research by Gallup found that 52% of American workers are not engaged in their work, while another 18% are “actively disengaged.”

Many CEOs think that they can keep an eye on morale with annual employee survey, but that is like driving your car by only looking in the rearview mirror. By the time you get the results, most of the “accidents” have already happened: Grumpy employees have alienated good customers, incompetent managers have killed productivity, and the best talent has left for the competition. You need to measure employee happiness daily or weekly.

NEW ANALYTICS TOOLS

There are some cutting edge tools to help. Apple and Rackspace use the employee Net Promoter System (eNPS), a metric that is picking up traction, as Fred Reichheld, the intellectual father of NPS, mentions in his book The Ultimate Question 2.0. He has launched a new software-as-a-service (SaaS) tool that will make it possible for team leaders to drive weekly conversations about progress toward goals, constraints and priorities for keeping customers happy. It is now in beta testing. Stay tuned.

While the well-known NPS tracks customer loyalty, the eNPS measures employees’ happiness, asking them in a confidential survey: “On a scale of 0 to 10, how likely is it that you would recommend your workplace to a friend or family member?” Employees have room to comment, providing qualitative data, too.

Be prepared: The scores you get from your team are likely to be lower than you get from your customers on the traditional NPS. Employees tend to be tough critics—but if you’re willing to listen, they will tell you what you need to hear. At the same time, don’t obsess about your scores. The qualitative data is important, too.

Atlassian, an Australian software company, created an internal app called MoodApp (I love the name!) for iPads and scattered them throughout their headquarters, including one to the side of the elevator. On their way out, employees answer questions like “How are you feeling today?” and “Do you think Atlassian is a fun place to work?” A question about how much feedback people get from their managers uncovered deficits and triggered leadership development training to improve the situation.

Choosing a tool that will allow you to measure morale on your team daily, weekly or at other frequent intervals will help you keep levels of engagement high. TINYPulse, a cloud-based tool that sends out weekly survey emails, captures anonymous feedback from employees and offers tools to help management to visualize and analyze the data. When answering a “question of the week,” employees have space to add comments and suggestions.

One handy feature of TINYPulse is the ability to customize the questions you ask. One company I know lets employees come up with the weekly question–a technique that is worth considering.

TINYPulse also allows you to comment directly on suggestions and initiate a private, forum-like dialogue with the employee. Just make sure that you use the system in a way that does not violate employees’ anonymity, or they won’t want to use it anymore.

TALK WITH EMPLOYEES WEEKLY

New technologies are no substitute for meaningful conversations with your team. Senior leaders should formally visit with one employee each week and ask three simple questions: “What do we need to start doing, stop doing and keep doing?”

Then take a few minutes at the weekly management meeting to share what you’ve learned. This qualitative data, collected weekly, will give the senior team a real sense of what’s working and not working among the employees as patterns emerge over weeks and months of conversations.

Add to this feedback by looking at some KPIs such as absenteeism, attrition or tenure with the company, knowledge-sharing activities, training hours, or the number of kudos people give each other.

RESPOND TO FEEDBACK QUICKLY

Make sure that you have the management bandwidth to quickly respond to feedback. Gathering data is useless if you don’t act on it. Nothing is more frustrating than being asked your opinion and then seeing it ignored.

People, your most valuable asset, are intangible in accounting terms. Measuring their happiness is a way of making them tangible. It will be some time until this type of metric will appear on a balance sheet, but that doesn’t mean you should not pay attention to these measures. They’re some of the best leading indicators of a company´s overall health and value.

Why Do Leaders Deceive Themselves?

Posted on August 1, 2012August 16, 2013 by admin

The secret of rulership is to combine a belief in one’s own infallibility with the power to learn from past mistakes. ~ George Orwell

As much as we’d like to believe that we’re rational human beings, we can all too easily mislead ourselves. Self-deception is a process that encourages us to justify our false and invalid beliefs.

Individuals, organizations and communities experience self-deception — the root of most problems, according to the Arbinger Institute, a Utah-based consulting firm. It’s human nature to blame others, externalize causes and deny our role in organizational struggles. This tendency is so pervasive that few of us escape its reach, and self-deception intrudes into every aspect of our lives. Nowhere is it more destructive than at the top of the leadership food chain.

You’ll find that self-deception:

Obscures the truth about yourself
Corrupts your view of others and your circumstances
Destroys your credibility and the trust others have in you
Inhibits your ability to persuade others
Thwarts wise decision-making

Fortunately, recognizing this leadership trap can inoculate you against its consequences. If, however, you believe that guarding yourself against wishful thinking will prevent self-deception, you may be in for a bumpy ride. Ongoing vigilance is required to preserve immunity, note Arbinger’s experts in Leadership and Self-Deception. Awareness will:

Sharpen your vision
Reduce feelings of conflict
Enliven the desire for teamwork
Redouble accountability
Enhance your ability to achieve results
Boost job satisfaction and overall happiness

Are You “In” or “Out” of the Box?

Leadership and Self-Deception features an entertaining story about an executive who is facing challenges at work and home. His exploits expose the psychological processes that conceal our true motivations and intentions from us and trap us in a “box” of endless self-justification. Most importantly, the book shows us the way out.

When you’re “in the box,” you are speaking with your interests and goals in mind. Through the lens of self-justification, you’ll find external factors and other people to blame. You’ll deny responsibility for problems and fail to identify your part in perpetuating them. In your interactions, you’ll try to change other people and convince them to do what you would do.

When you’re “out of the box,” there’s room for openness, authenticity, and interest in and empathy for other people. You’ll seek the true basis for problems, including your own participation. You’ll be less interested in assigning blame or judgment, or being locked into unproductive battles.

Confidence Games

One of the most documented findings in psychology is the average person’s ability to believe extremely flattering things about himself. We generally think that we possess a host of socially desirable traits and that we’re free of the most unattractive ones.

Most people deem themselves to be:

More intelligent than others
More fair-minded
Less prejudiced
Better drivers

While confidence and a fair view of one’s capabilities and strengths are essential, overconfidence and an elevated sense of worth lead to fragile relationships. When we focus on proving ourselves, we spend far too much time on defending and justifying our behavior. We cut ourselves off from opportunities to understand our colleagues. Our ego prevents us from communicating an interest in others. In other words, we lack empathy.

The vast majority of people attribute their successes to themselves and their failures to external circumstances. This self-serving bias is a feeble attempt to positively reinforce our sense of worthiness and self-esteem.

Our preferred perceptions lead us to test hypotheses that are slanted toward our chosen direction. By consulting the “right” people, we increase our chances of hearing what we want to hear.

We’re not consciously distorting information, but we have considerable opportunities to jiggle various criteria and arrive at conclusions that favor our biases.

Managerial Self-Deception

Try telling a colleague or subordinate that he has a problem, and the depth of his self-deception will become clear.

Helping others see what they’re unwilling to recognize is a widespread leadership challenge. It’s especially tricky when we observe it in others, yet are unable to acknowledge it in ourselves.

In business psychology, the prevailing wisdom has assumed that a high degree of self-confidence leads to promotions and leadership success. New studies, however, prove otherwise, writes business psychologist Tomas Chamorro-Premuzic in Less-Confident People Are More Successful (Harvard Business Review blog, July 2012).

A moderately low level of self-confidence is more likely to make you successful, Dr. Chamorro-Premuzic asserts. Don’t confuse this with a very low degree of self-confidence. Excessive fear, anxiety and stress will inhibit performance, impede decision-making and undermine interpersonal relationships.

But low-enough self-confidence can work in your favor because it:

Makes you pay attention to negative feedback and be self-critical. This means you’re open to learning and improving. Most of us tend to listen to feedback and ignore the negative in favor of the positive. If you want to overcome deficits, you must listen to both positive and negative comments.
Motivates you to work harder and prepare more effectively. If you really want to achieve leadership success, you will do whatever it takes to bridge the gap between the status quo and your professional goals.
Reduces your chances of coming across as arrogant or delusional. People with lower levels of self-confidence are more likely to admit their mistakes instead of blaming others — and they rarely take credit for others’ accomplishments.

If you’re serious about becoming a strong leader, lower self-confidence can serve as a strong ally, inspiring you to work hard, conquer limitations and, put simply, avoid being a jerk.

Inspired Leadership

When you’re courageous enough to question your own behavior and motives, you model the behaviors you wish to see in others.

Help yourself and your staff by:

Reading Arbinger’s Leadership and Self-Deception.
Working with an executive coach to pinpoint areas of self-deception.
Asking yourself, “What’s my part in any given problem?”
Identifying ways to set aside your ego and achieve optimum results.

A Dashboard For Managing Complexity

Posted on January 19, 2012August 16, 2013 by admin

Businesses are becoming more complex. It’s harder to predict outcomes because intricate systems interact in unexpected ways.

Staying on track is much easier with a guide or checklist. Michael Useem, a professor at The Wharton School of the University of Pennsylvania and bestselling author of The Leadership Moment, has published The Leader’s Checklist to create a clear roadmap for navigating any situation. It is presented here in condensed form, with sample questions accompanying each principle:

Articulate a Vision: Formulate a clear and persuasive vision, and communicate why it’s important to all members of the enterprise.
- Do my direct reports see the forest, as well as the trees?
- Does everyone in the firm know not only where we are going, but, most importantly, why?
- Is the destination compelling and appealing?
Think and Act Strategically: Make a practical plan for achieving this vision, including both short- and long-term strategies. Anticipate reactions and resistance before they happen by considering all stakeholders’ perspectives.
- Do we have a realistic plan for creating short-term results, as well as mapping out the future?
- Have we considered all stakeholders and anticipated objections?
- Has everyone bought into, and does everyone understand, the firm’s competitive strategy and value drivers? Can they explain it to others?
Express Confidence: Provide frequent feedback to express appreciation for the support of those who work with and for you.
- Do the people you work with know you respect and value their talents and efforts?
- Have you made it clear that their upward guidance is welcomed and sought?
- Is there a sense of engagement on the frontlines, with a minimum of “us” vs. “them” mentality?
Take Charge and Act Decisively: Embrace a bias for action by taking responsibility, even if it isn’t formally delegated. Make good and timely decisions, and ensure they are executed.
- Are you prepared to take charge, even when you are not in charge?
- If so, do you have the capacity and position to embrace responsibility?
- For technical decisions, are you ready to delegate, but not abdicate?
- Are most of your decisions both good and timely?
- Do you convey your strategic intent and then let others reach their own decisions?
Communicate Persuasively: Communicate in ways that people will not forget, through use of personal stories and examples that back up ideas. Simplicity and clarity are critical.
- Are messages about vision, strategy and character crystal-clear and indelible?
- Have you mobilized all communication channels, from purely personal to social media?
- Can you deliver a compelling speech before the elevator passes the 10th floor?
Motivate the Troops, and Honor the Front Lines: Appreciate the distinctive intentions that people bring to their work; build on diversity to bring out the best in people. Delegate authority except for strategic decisions. Stay close to those who are most directly engaged with the enterprise’s work.
- Have you identified each person’s “hot button” and focused on it?
- Do you work personal pride and shared purpose into most communications?
- Are you keeping some ammunition dry for those urgent moments when you need it?
- Have you made your intent clear and empowered those around you to act?
- Do you regularly meet with those in direct contact with customers?
- Can your people communicate their ideas and concerns to you?
Build Leadership in Others, and Plan for Succession: Develop leadership throughout the organization, giving people opportunities to make decisions, manage others and obtain coaching.
- Are all managers expected to build leadership among their subordinates?
- Does the company culture foster the effective exercise of leadership?
- Are leadership development opportunities available to most, if not all, managers?
Manage Relations, and Identify Personal Implications: Build enduring personal ties with those who work with you, and engage the feelings and passions of the workplace. Help people appreciate the impact that the vision and strategy are likely to have on their own work and the firm’s future.
- Is the hierarchy reduced to a minimum, and does bad news travel up?
- Are managers self-aware and empathetic?
- Are autocratic, egocentric and irritable behaviors censured?
- Do employees appreciate how the firm’s vision and strategy affect them individually?
- What private sacrifices will be necessary for achieving the common cause?
- How will the plan affect people’s personal livelihood and the quality of their work lives?
Convey Your Character: Through storytelling, gestures and genuine sharing, ensure that others appreciate that you are a person of integrity.
- Have you communicated your commitment to performance with integrity?
- Do others know you as a person? Do they know your aspirations and hopes?
Dampen Over-Optimism: To balance the hubris of success, focus attention on latent threats and unresolved problems. Protect against managers’ tendency to engage in unwarranted risk.
- Have you prepared the organization for unlikely, but extremely consequential, events?
- Do you celebrate success, but also guard against the byproduct of excess confidence?
- Have you paved the way not only for quarterly results, but for long-term performance?
Build a Diverse Top Team: Although leaders take final responsibility, leadership is most effective when there is a team of capable people who can collectively work together to resolve key challenges. Diversity of thinking ensures better decisions.
- Have you drawn quality performers into your inner circle?
- Are they diverse in expertise, but united in purpose?
- Are they as engaged and energized as you?
Place Common Interest First: In setting strategy, communicating vision and reaching decisions, common purpose comes first and personal self-interest last.
- In all decisions, have you placed shared purpose ahead of private gain?
- Do the firm’s vision and strategy embody the organization’s mission?
- Are you thinking like a president or chief executive, even if you are not one?

Not all of these questions are applicable to every situation, but it is the questioning that counts.

Whether you are facing a typical day at the office or walking into a crisis, ask yourself and others these questions to inspire correct actions. Only then can you make sense of the complexities you encounter.

The Art of Bouncing Back

Posted on December 15, 2011August 16, 2013 by admin

“Some of the most important and insightful learning is far more likely to come from failures than from success.” ~ Former Procter & Gamble CEO A.G. Lafley, interviewed in Harvard Business Review (April 2011)

How we respond to failures and bounce back from our mistakes can make or break our careers. The wisdom of learning from failure is undeniable, yet individuals and organizations rarely seize opportunities to embrace these hard-earned lessons.

Harvard business professor Rosabeth Moss Kanter is unequivocal: “One difference between winners and losers is how they handle losing.” Even for the best companies and most accomplished professionals, long track records of success are inevitably marred by slips and fumbles.

Our response to failure is often counterproductive: Behaviors become bad habits that set the stage for continued losses. Just as success creates positive momentum, failure can feed on itself. Add uncertainty and rapidly fluctuating economics to the mix, and one’s ability to find the right course is sorely tested.

Long-term winners and losers face the same ubiquitous problems, but they respond differently. Attitudes help determine whether problem-ridden businesses will ultimately recover.

Luckily, most of us can learn to become more resilient with training and coaching.

The Best of Times, the Worst of Times

Take the example of two typical MBA graduates who were laid off from their positions during the recession. Both were distraught. Being fired provoked feelings of sadness, listlessness, indecisiveness and anxiety about the future.

For one, the mood was transient. Within two weeks he was telling himself, “It’s not my fault; it’s the economy. I’m good at what I do, and there’s a market for my skills.” He updated his resume and, after several failed attempts, finally landed a position.

The other spiraled further into hopelessness. “I got fired because I can’t perform well under pressure,” he lamented. “I’m not cut out for finance; the economy will take years to recover.” Even after the market improved, he was reluctant to apply for positions and feared rejection.

How these individuals handled failure illustrates opposite ends of the spectrum. Some people bounce back after a brief period of malaise and grow from their experiences. Others go from sadness to depression to crippling fear of failure—and in business, inertia and fear of risk invite collapse.

Optimism and Resilience

Research clearly demonstrates that people who are naturally resilient have an optimistic explanatory style—that is, they explain adversity in optimistic terms to avoid falling into helplessness.

Those who refuse to give up routinely interpret setbacks as temporary, local and changeable:

“The problem will resolve quickly…”
“It’s just this one situation…”
“I can do something about it…”

In contrast, individuals who have a pessimistic explanatory style respond to failure differently. They habitually think setbacks are permanent, universal and immutable:

“Things are never going to be any different…”
“This always happens to me…”
“I can’t change things, no matter what…”

University of Pennsylvania psychology professor Martin P. Seligman believes most people can be immunized against the negative thinking habits that may tempt them to give up after failure. In fact, 30 years of research suggests that we can learn to be optimistic and resilient—often by changing our explanatory style.

Seligman is currently testing this premise with the U.S. Army’s Comprehensive Soldier Fitness program, a large-scale effort to make soldiers as psychologically fit as they are physically fit. One key component is the Master Resilience Training course for drill sergeants and other leaders, which emphasizes positive psychology, mental toughness, use of existing strengths and building strong relationships.

This military program will no doubt provide insights for civilians who wish to become more effective within their workplaces and organizations.

Learning from Mistakes

“That which does not kill us makes us stronger.” ~ Friedrich Nietzsche

Failure is one of life’s most common traumas, yet people’s responses to it vary widely. Many managers have learned to reframe personal and departmental setbacks by stating: “There are no mistakes, only learning opportunities”—and it’s a great sentiment. In practice, however, their companies often continue to view failures in the most negative light.

Part of the problem lies in our natural tendency to blame. We perceive and react to failure inappropriately. How can we learn anything if our energy is tied up in either assigning or avoiding blame? Still others overreact with self-criticism, which leads to stagnation and fears of taking future risks.

In the 1930s, psychologist Saul Rosenzweig proposed three broad personality categories for how we experience anger and frustration:

Extrapunitive: Prone to unfairly blame others
Impunitive: Denies that failure has occurred or one’s own role in it
Intropunitive: Judges self too harshly and imagines failures where none exist

Extrapunitive responses are common in the business world. Because of socialization and other gender influences, women are more likely to be intropunitive.

Fortunately, managers at all organizational levels can repair their flawed responses to failure. Business consultants Ben Dattner and Robert Hogan suggest three highly effective steps in “Can You Handle Failure?” (Harvard Business Review, April 2011):

1. Cultivate Self-Awareness.
First, identify which of the three blaming styles you use. (Note: They occur automatically and immediately, so they are unconscious emotional responses.) Do you look to blame others? Deny blame? Blame yourself?

It’s hard for us to see our personalities clearly, let alone our flaws. It’s harder still to learn from our mistakes if we’re caught up in the blame game.

Next, take at least one self-assessment test to help broaden your view of your interaction style. Two popular assessments are the Myers-Briggs Type Indicator and the Big Five Personality Test. (You can take a free version online at personal.psu.edu/j5j/IPIP/ipipneo120.htm.)

Finally, work with a coach or mentor to improve your level of self-awareness. While it takes some time to shine a light on our attitudes with respect to failure and blame, each of us can benefit from such reflection and discussion.

For example, think about challenging events or jobs in your career, and consider how you handled them. What could you have done better? Ask trusted colleagues, mentors or coaches to evaluate your reactions to, and explanations for, failures.

Pay close attention to the subtleties of how people respond to you in common workplace situations. Ask for informal feedback. If you’re in a managerial position, you may underestimate how what you say may be perceived as criticism, due to the hierarchical nature of your job.

2. Cultivate Political Awareness.

Whereas self-awareness helps you understand the messages you’re sending, political awareness helps you understand the messages others are receiving. It requires you to know how your organization defines, explains and assigns responsibility for failure, as well as how the system allows for remedial attempts.

Political awareness involves finding the right way to approach mistakes within your specific organization, department and role.

3. Develop New Strategies.

Once you’ve become more aware of your failure response style (and your bad habits), you can move toward more open and adaptive behaviors.

Practice these strategies the next time mistakes and failures present challenges:

Listen and communicate. Most of us forget to gather enough feedback and information before reacting, especially when it comes to bad news. Never assume you know what others are thinking or that you understand them until you ask good questions.

Reflect on both the situation and the people. We’re good at picking up patterns and making assumptions. Remember, however, that each situation is unique and has context.

Think before you act. You don’t have to respond immediately or impulsively. You can always make things worse by overreacting in a highly charged situation.

Search for a lesson. Look for nuance and context. Sometimes a colleague or a group is at fault, sometimes you are, and sometimes no one is to blame. Create and test hypotheses about why the failure occurred to prevent it from happening again.
Blameworthy or Praiseworthy?

Admittedly, some mistakes are more blameworthy than others. As a manager, how do you make it safe for people to report and admit to mistakes?

Harvard management professor Amy Edmondson delineates a “spectrum of reasons for failure” in “Strategies for Learning from Failure” (Harvard Business Review, April 2011), as summarized here:

Deviance: An individual chooses to violate a prescribed process or practice.
Inattention: An individual inadvertently deviates from specifications.
Lack of Ability: An individual doesn’t have the skills, conditions or training to execute a job.
Process Inadequacy: A competent individual adheres to a prescribed, but faulty or incomplete, process.
Task Challenge: An individual faces a task too difficult to be executed reliably every time.
Process Complexity: A process composed of many elements breaks down when it encounters novel interactions.
Uncertainty: A lack of clarity about future events causes people to take seemingly reasonable actions that produce undesired results.
Hypothesis Testing: An experiment conducted to prove that an idea or a design will succeed actually fails.
Exploratory Testing: An experiment conducted to expand knowledge and investigate a possibility leads to undesired results.

Notice how this spectrum progresses from mistakes that are blameworthy to those that could be considered praiseworthy.

How many of the failures in your business are truly blameworthy? Compare this to how many are treated as blameworthy, and you’ll have a better understanding of why so many failures go unreported.

You cannot learn from your mistakes when the emphasis is on blaming. You cannot learn to become more resilient when your energy is tied up in assigning or avoiding blame.

Perhaps Procter & Gamble’s Lafley said it best in his Harvard Business Review interview: “I think I learned more from my failures than from my successes in all my years as a CEO. I think of my failures as a gift. Unless you view them that way, you won’t learn from failure, you won’t get better—and the company won’t get better.”

We Turn Potential Into Performance

Category: Leadership