A Reminder from Iran: It Matters

Feeling cynical about leadership and ethics? Feel like compliance is an annoyance in a world of relativistic morals? Think the Rule of Law can be gamed?

Look at this, a Howard Beale moment but deadly serious, all organized by Twitter… and you will get over your cynical attitude.

[youtube=http://www.youtube.com/watch?v=9WU-cxEEJ-E&feature=player_embedded]

I’m wearing green tomorrow, not because I think it will make a difference in Iran, but because I appreciate the rebuttal to they are providing to those of us comfortably here.

What becomes a CEO most (Part 2)

I promised in an earlier post to revisit a study, publicized by David Brooks, about what characteristics seemed to make for the most successful CEOs.

The study is actually from July 2008, by Kaplan, Klebanov and Sorensen. It set out to compare the relative contribution to CEO success of what the study calls “execution” skills versus “interpersonal” skills.

The study concludes, in part:

[S]uccess and performance are more strongly correlated with execution-related skills than  with interpersonal and team-related skills, conditional on hiring a CEO.  In other words, CEOs with the execution-related skills of a Jack Welch appear more successful than CEOs with the more team-related skills of Jeff Immelt.

So I reviewed the study and tried to put aside how badly Brooks interpreted it. I already did that rant.

The first thing to point out is the authors’ study sample, and their definition of success. The leaders they evaluated were 316 candidates for the CEO job at companies funded through private equity — either VCs or leveraged buy-outs (LBOs); the main measure of their success for purposes of the study was whether they got the job. In that respect the study may tell us more about what private equity firms think matters in a CEO than they do about what actually works and doesn’t work.

(Which off the bat reminds me of a comment I once heard at venture capital event, that VCs were like a Kindergarten soccer game: the ball rolls one way, and all the kids chase after it in that direction; the ball rolls the other way, and all the kids chase after it again. The VCs in the room laughed and nodded. But I digress.)

Even between the LBOs and VCs, there were differences:  “Buyout CEOs score higher on characteristics related to a broader range of managerial and executive functions while VC CEOs appear to score higher only on characteristics related to intelligence and vision.”

To the extent the study measures performance success, it looks only at factors it concedes are “coarse.” Performance success means a good exit or good press; failure means being fired, going bankrupt, or getting bad press. By these measures, the authors conclude “Success tends to be positively related to execution-related skills, particularly for LBO CEOs, and tends to be
unrelated or negatively related to team-related skills, particularly for the VC CEOs.”

But the part of the study I dwelled on, were the distinctions the study makes to categorize skills as either “execution” or “interpersonal” — the key distinction in the study:

[W]e informally refer to characteristics as interpersonal / team-related, neutral, and execution-related.  Based largely on the factor analysis we describe below, we refer to “Develops People,” “Treats People with Respect,” “Calm,” “Flexibility,” “Listening,” “Open to Criticism,” and “Teamwork” as interpersonal or team-related skills.  We view “Removes Underperformers,” “Efficiency,” “Aggressive,” “Moves Fast,” “Persistence,” “Sets High Standards,” “Proactive,” “Work Ethic,” “Holds People Accountable” as execution-related skills.  We classify “Network,” “Hires A Players,” “Follows through on Commitments,” “Organization,” “Brainpower,” “Analytical,” “Strategic,” “Creative,” “Attention to Details,” “Integrity,” “Enthusiasm,” “Writing,” “Oral Communication,” and “Persuasion” as neutral or mixed.

These are some fascinating distinctions. Spend a few seconds picking out a skill and see how the authors categorize it.

And see that the study basically does not measure the contribution to success of CEO skills like organization, analysis, and attention to detail… or like enthusiasm, communication, and persuasion. Those are considered “neutral” skills. (So why did Brooks say the study reported those skills don’t matter? (Oops. I said it again.))

“Follow through” is neutral, not an execution skill.

“Holds people accountable” and “removes underperformers” are scored as execution skills, not an interpersonal skill, like “develops people.” A bias toward firing instead of building?

Finally —  but fundamental for the purposes of this blog — the study also treated “integrity” as a neutral skill. The study just doesn’t evaluate if integrity is good for business, or not.

So if you like to talk up mission and values, you don’t need to feel daunted by this study.

The Tiger Stands Defender

I had the great fun this weekend of attending my college reunions at Princeton. Among the many pleasures there was seeing one of my college friends, a woman known then (and now) for her unflinching social activism. When we were in school, she was the most vocal and active of all students about eliminating the vestiges of sexism and discrimination from campus. She was thought of as a rabblerouser, and by many, a disloyal troublemaker.

Princeton Reunions are annual for every class, and their centerpiece is the P-Rade: each class, led by the 25th Reunion, then oldest to youngest, walks down the lane between all the classes younger than itself, each in our own Orange and Black regalia.

Although Yale has always favored
The violet’s dark blue,
And the many sons of Harvard
To the crimson rose are true,
We will own the lilies slender,
Nor honor shall they lack,
While the Tiger stands defender
Of the Orange and the Black

You gotta see it.

As the years went by, and my friend came to our annual reunions year after year, the crowds’ reactions to her changed from jeers to cheers. For a while, the classes younger than ours welcomed my friend as a conquering hero. More recently, she has simply become accepted, and the younger classes don’t particularly seem to notice her.

And my friend keeps coming back to Reunions, year after year after year, wearing her Orange and Black.

So here’s a nugget from my Reunions for people who run compliance programs and people who run companies. Sometimes, the would-be reformers, the rabble-rousers, even the vocal troublemakers, are the ones who are most loyal to your organization. They have the greatest passion, and they wear it on their sleeve.

When they are on your case, think long-term. Consider: are they out to destroy you, or to improve you. If the latter, they will never be apathetic or back-bite. If you show them the door instead of giving them a seat at the Round Table, you will have lost one of your greatest defenders, and one of the most important allies any leader can have — someone on the inside who will tell you when you are full of it.

Till then with joy our songs we’ll bring,
And while a breath we draw,
We’ll all unite to shout and sing:
Long life to Old Nassau.

What becomes a CEO most?

There is so much about corporate leadership that is, and is not, in David Brooks‘ New York Times column this week, “In Praise of Dullness” (and in the research he cites), that it may take me a few posts to react.

Here is the thesis:

[W]arm, flexible, team-oriented and empathetic people are less likely to thrive as C.E.O.’s. Organized, dogged, anal-retentive and slightly boring people are more likely to thrive.

Brooks cites a study by Steven Kaplan, Mark Klebanov and Morten Sorensen called “Which C.E.O. Characteristics and Abilities Matter?” Brooks says they relied on detailed personality assessments of 316 C.E.O.’s and measured their companies’ performances. According to Brooks, they found that strong people skills, enthusiasm, and strong communications do not correlate with being a good C.E.O. Rather, “The traits that correlated most powerfully with success were attention to detail, persistence, efficiency, analytic thoroughness and the ability to work long hours.”

Agreed, and maybe, obvious. But dissing enthusiasm and communications would seem to run counter with one of my basic premises, that solid and repeated communications from leadership about mission, vision, values and culture can help a business do better in both the ethical and the economic sense.

Well, let me deal with Brooks’ view first, in this post, and later turn to the research itself. I think Brooks – with whom I frequently agree, much to my surprise — gets a little lost in the midst of trying to relate to this research.

Says Brooks:

The market seems to want C.E.O.’s to offer a clear direction for their companies. There’s a tension between being resolute and being flexible. The research suggests it’s more important to be resolute, even at the cost of some flexibility.

OK, number 1, how does the market, much less your employees, know your clear direction if you cannot articulate what that direction is and why it’s worth following. And like any other important message you have to market, you have to sell it like soap — believability and memory go up with repetition. And then believability and memory go up with repetition. Score one for communication skills.

Number 2, did Brooks miss every other business writer since, I dunno, 1980, talk about the need for business leadership to remain nimble in the face of accelerating change. Or what we call, “flexibility.”

So the good business leadership formula here is being resolute and flexible: resolute on your goals, resolute on the vision, AND resolute about getting there ethically — and then be flexible about strategy and tactics.

Says Brooks:

The second thing the market seems to want from leaders is a relentless and somewhat mind-numbing commitment to incremental efficiency gains…. The methodical executives at successful companies just make the same old four-door sedan, but they make it better and better.

Sometimes. But that “incremental improvement” strategy worked out great for GM and Chrysler.  And at the moment, it is also going great guns for the newspaper business. Not.

Says Brooks:

The C.E.O.’s that are most likely to succeed are humble, diffident, relentless and a bit unidimensional. They are often not the most exciting people to be around.

So explain Warren Buffet, Jack Welch, Lee Iacocca (who saved Chrysler’s bacon last bailout), and a lot of dynamic men and women I have known who have led fast growth companies. And BTW, Iacocca’s list of 9 valued leadership traits — which I admit is hindered by his requirement that they all being with the letter “c” — includes “communications” and “charisma.”  (C is also for cookie, and that’s good enough for me.)

In summary, this column points us to some very interesting research, but it’s not one of Brooks’ best efforts.

More to the point, I think we need to conclude that dynamic, communicating, exciting leadership can’t be all bad. Granted, you need to walk the walk as well as talk the talk. And maybe if you have to choose one, choose the walk.

But myself, I think if you want your teams to walk in the same direction as you, you’d better show them the way and invite them along. More than once. Audibly.

Behavioral Econ Part II: Managing like you like it (and like them)

More thoughts on my April 25 post on behavioral economics and behavior change. This gets to the nub of what I want this blog to be (mostly) about.

Randy Cohen‘s anecdote made me think of another that appears in my no-question favorite management book: “It’s Your Ship,” by D. Michael Abrashoff. The story is about the owner of an industrial repair shop who kept his tools in a tool-issue room to avoid theft and losses. He paid the custodian of the tool-issue room $35,000 a year (this was c. 1990), and his workers spent part of their day standing in line to check tools in and out. So the owner did away with the tool issue room. No more lines. And over the next year, he spent only $2,000 to replace tools.

As Abrashoff puts it, a “lack of trust was costing him money.”

Bingo. Beware of the processes that get in the way of compliance. Beware of bureaucracy that takes the name of compliance but really has nothing to do with your company staying on the right side of law and ethics, because that busy-work only makes your team resent your legitimate compliance efforts. And beware of processes that may be contrary to your tone at the top.

There are things you’ve got to button down in tight processes, like, say FCPA compliance. Then there are areas where clearly and repeatedly communicating a vision and mission — and not contradicting them with your actions – goes a long way.  (Balance. An obvious point, right?)

And let me take this moment to give a fan’s rave to Abrashoff’s book. It’s the story of his time as captain of a US Navy destroyer, and how he used simple, commonsense trust and communication — treating his sailors as he would expect to be treated– to lead it to excellence. I’ve lead companies or business teams for more than 20 years of my career, and I’ve read a lot of management books — this is the one that, as I read it, I kept nodding my head. “Yes, that’s right!”, I kept saying. (I got real annoying to my family about it.) And there’s no diluting his approach by saying that a commercial executive can’t enforce the order and discipline that a military leader can; as Abrashoff notes, he was the ultimate middle-manager — with ranks of superiors above him and an immense bureaucracy surrounding him.

This book also carries an interesting history, to me, anyway. It was published in 2002, but demand made it disappear from book store shelves overnight in the fall of 2007, when it was mentioned on Monday Night Football as the inspirational leadership guidance for Bengals QB and Captain Carson Palmer.

“Shareholder Value” and short-term thinking

Can short-term thinking in a business leader be ethical… at least when the survival of the business is not at stake?  Isn’t there something intrinsically wrong about sacrificing the future for the sake of the present?

Valuing the long-term over the short-term is at the heart of a lot of messages that company management gives to employees about ethics.  When we say, “Don’t approve a shipment of peanut paste that you know is tainted,” we are really saying, “We don’t want you to sacrifice the company’s future reputation and sales for the sake of filling this one, immediate order.”

So not being hypocritical about that message in the top-level business decisions we make adds a bit of a challenge in maintaining our “tone at the top,” eh?

And so it seemed ethically obvious when Jack Welch told the Financial Times on March 12, that the “obsession with short-term profits and share price gains that has dominated the corporate world for over 20 years was ‘a dumb idea.’ Welch says now that the concept of “shareholder value” that he championed was never supposed to be a be-all-and-end-all.

According to the Financial Times:

Mr Welch said last week he never meant to suggest that setting, and meeting, profit expectations quarter after quarter in an effort to boost a company’s share price should be the main goal of corporate executives.

On the face of it, shareholder value is the dumbest idea in the world,” he said. “Shareholder value is a result, not a strategy . . . Your main constituencies are your employees, your customers and your products.”

At least, that’s what he says now.