CEO Corner

Uncertainty Of Budget Battle Has A Big Impact On Business

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As Congress continues negotiations on approving the federal budget with the threat of a government shutdown looming, CEOs following the saga are dealing with the one thing they dislike most—uncertainty. And things aren’t likely to get better anytime soon.

“A shutdown does have a direct negative effect on the economy that gets worse as time goes on,” Stan Collender, adjunct professor at the McCourt School of Public Policy at Georgetown University and author of “The Guide To The Federal Budget” told Chief Executive. “A typical CEO may not care that much about a typical two-day, three-day, one-week shutdown, but its effects multiply over time, directly. People get laid off, any work with the government basically stops, you can’t get your invoices paid, so there are a series of direct effects.”

The longer-lasting impact of the budget back-and-forth is more emotional and psychological, according to Collender, because it puts the disfunction of the federal government in the spotlight and leaves the public wondering if officials will ever be able to work together effectively.

“For a lot of people, a shutdown is a positive political event.” – Stan Collender

“If Congress and the President can’t agree on some basic, nuts-and-bolts housekeeping activities like passing appropriations to keep the government open, what happens when you’re asking them to make a major policy change?” Collender says.

With issues such as the Deferred Action for Childhood Arrivals (DACA) immigration program, military funding and the Children’s Health Insurance Program (CHIP) acting as pawns in the budget battle, business leaders have largely been left as observers to a broken process, which now appears to be almost entirely politically-driven.

But is there any end in sight for this game of political brinksmanship?

“This is the new normal,” Collender says. “Even if there’s a Democratic wave come November, it’s going to be a Democratic majority in one or both houses dealing with a Republican president at a time when compromise is considered collaborating with the enemy.”

And it should be noted that a government shutdown will almost certainly be leveraged by politicians on all sides and used as a political tool.

“For a lot of people, a shutdown is a positive political event,” Collender says. “If the government shuts down, everyone is going to blame everyone else and go back to their constituents and say, ‘see what I was willing to do for you?’ So, it’s not necessarily a negative, at least immediately. It will be a positive immediately and a negative long-term.”

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Companies Can Attract Talent With Employee Testimonials

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There’s no one better able to tell the story of an organization than its employees. They can talk about their career path at the company, explain what they do in their role and how they contribute to a project, the industry or the greater good. But one of the best things  these videos can do is turn abstract corporate mission statements and organizational values into personal stories.

Video testimonials from employees talking about their work experience has become an employer branding best practice for many reasons: It’s more engaging and authentic than written narratives and offers a valuable, if limited, preview for job seekers.

“Employee stories are the most important recruiting content you can create,” said Lori Sylvia, founder and CEO of Rally Recruitment Marketing, an online community forum focused on the emerging discipline of using marketing techniques to attract talent. “By featuring employee stories on your career site, you can educate potential candidates about your employer value proposition (EVP) before you present them with your open requisitions. If you lead with promoting jobs instead, you may get applicants who aren’t aligned with your culture, which can lead to attrition and put you back at the beginning.”

“Employee stories are the most important recruiting content you can create.”

“Videos make hiring tangible,” explained Abby Cheesman, co-founder of Skill Scout, a recruitment services company that uses video and other media to enhance the hiring process. “Candidates crave a window into what the experience working in a company is actually like, and a video helps them get closer than ever to experiencing it themselves.”

Lauryn Sargent, a former recruiter and co-founder of Stories Incorporated, a recruitment marketing content producer, recently presented a powerful example of this at an event held in Bethesda, Md., by RecruitDC, a networking group for talent acquisition professionals in the Washington, D.C., metropolitan area.

Sargent worked with financial services company Kasasa, headquartered in Austin, Texas. Love is one of Kasasa’s core values. That’s nice, but what does that actually mean?

In a video produced by Stories, Rae Williams, a technical support engineer supervisor at Kasasa, begins speaking. Back in 2012, she was about to undergo major surgery and was obviously stressed and anxious. She was separated from her family, who lived in North Carolina. The company gave a colleague the day off to stay with her in the hospital, but he could only make it the day after the surgery. She speaks about feeling panicked and scared about being alone on the day of her operation. When she woke up from the procedure, her manager was sitting in her room. When she woke up again later in the day, another team member was there. As she gets emotional remembering it, she explains that seeing those familiar faces lessened her fear during a time of vulnerability. The video, which runs about one minute, gives “love” a meaning.

Copyright 2017 SHRM. This article is excerpted from https://www.shrm.org with permission from SHRM. All rights reserved. The original article was written by Roy Maurer. The full article can be found here.

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Google CEO Sundar Pichai: ‘Focus On Code Has Left a Potentially Bigger Opportunity Unexplored’

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Everyone knows that Google is home to some of the smartest coders on the planet, who do everything from programming cars to drive themselves, to mapping the world to shrinking it with massive data centers and undersea fiber-optic cables. Along the way, they’ve also built a darn good search engine, too, becoming the gatekeeper for the bulk of the world’s information.

But in an op-ed on NBCnews.com, CEO Sundar Pichai said a focus on coding and computer science will not be enough to bridge the skills gap and insure the nation’s workforce thrives in the years ahead. He called for an expansion of ongoing technology training at all levels of employment—and said Google would help make it happen.

“The focus on code has left a potentially bigger opportunity largely unexplored,” he writes in the piece. “In the past, people were educated and learned job skills, and that was enough for a lifetime. Now, with technology changing rapidly and new job areas emerging and transforming constantly, that’s no longer the case. We need to focus on making lightweight, continuous education widely available. This is just as crucial to making sure that everyone can find opportunities in the future workplace.”

“We have a deep sense of responsibility to give back to our country and the people who make our success possible.”

It’s just the latest outreach to working America from the F.A.N.G.s of the Valley lately. In the wake of the GOP-led tax cut, this week Apple CEO Tim Cook trumpeted a “$350 billion contribution to the U.S. economy over the next five years,” including 20,000 new jobs and a $5 billion fund to invest in advanced U.S. manufacturing (“We have a deep sense of responsibility to give back to our country and the people who make our success possible,” Cook said with the announcement.)

Amazon, meanwhile, announced that it was looking at hot non-costal cities like Indianapolis, Columbus, Ohio, Nashville and Pittsburgh for its HQ2. Earlier this year, Facebook CEO Mark Zuckerberg went on a highly-publicized listening tour to understand the lives of average Americans.

PR or not, Pichai’s essay certainly rings true and echoes what Chief Executive has been hearing from CEOs in nearly every industry and every region of the country lately: There’s a shortage of tech-savvy talent right now, at exactly the moment when most companies, from manufacturers to professional service firms, are struggling with the process of digital transformation to keep pace with rivals.

And as we all know, most of these jobs hardly require computer science skills—but they do require, at the very least, the ability to interface fluidly with computers, and even that is in short supply. He highlights a recent Brookings report that the number of jobs requiring more than just a bit of digital skill has grown from 40% of jobs in 2002 to 48% of jobs in 2016.

To help, he announced expansion of a Google program to train IT professionals, giving free access to the course and connecting graduates with potential employers, naming Bank of America, Walmart, Sprint and others and said Google has “invested $1 billion over five years to help find new approaches to connect people to opportunities at work and help small and medium businesses everywhere grow in the digital economy.”

It’s certainly a nice gesture, to be sure. But maybe they could just let us know how to game that algorithm a bit?

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Why The AmazonHQ2 List Is Great News For Every CEO

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When Amazon announced the 20 finalists in their Hunger Games-style runoff for a second HQ and the 50,000 six-figure jobs that come along with it, they did more than get the salivary glands of econ-dev teams across the country flowing. They also highlighted the rise of one of the most optimistic and interesting stories in the contemporary American economy: The rise of new tech boomtowns in areas once relegated to flyover status in the minds of many technology CEOs.

The fact that Amazon is considering places like Columbus, Indianapolis, Nashville, Denver and Pittsburgh provides still more evidence that the country is filled with places where you can find the best and brightest and build a world-class business without breaking the bank.

That’s particularly important a time where the nation’s business leaders are increasingly concerned with the availability of talent, especially technology talent in Silicon Valley or the hyper-expensive Boston-New York-DC corridor.

“the fact that Amazon is considering places like Columbus, Indianapolis, Nashville, Denver and Pittsburgh should be welcome news to everyone trying to grow their business in America.”

None of which is likely breaking news to most CEO reading this. But as Joel Kotkin, the presidential fellow in urban futures at Chapman University and executive director of the Center for Opportunity Urbanism wrote in a recent essay for Chief Executive on America’s New Boomtowns, there’s a growing democratization of talent across the country. It’s gaining steam as more and more of the nation’s best and brightest decide that they’d like to seek opportunity in a place where they can do interesting work for a top-notch employer—and own a house. No matter what your TV tells you, not every ambitious young executive wants to live with four roommates in a Bushwick basement.

“The fastest growth in educated millennials today is taking place not in New York, Washington or San Francis
co, but in opportunity cities like Nashville, Denver, Charlotte, Raleigh and Orlando,” writes Kotkin. “Growth in tech and professional services in these areas suggest a new trend. At a time when tech growth has slowed in the Bay Area—down by 80 percent over the past two years…it has been surging in many of these cities. The fastest growth in tech jobs has taken place not in San Francisco, but in Charlotte. Nashville, Raleigh, Indianapolis, Phoenix, Denver and Salt Lake City all grew their tech ranks faster than such superstars as New York, Los Angeles and Chicago.

Kotkin continues:

“Demographic trends could drive this further as millennials and young families struggle with ultra-high costs. In New York City, millennial incomes (ages 18–29) have dropped in real terms compared with the same age cohort in 2000—despite considerably higher education levels—while rents increased 75 percent. New York, Los Angeles and San Francisco have three of the nation’s four lowest homeownership rates for young people and among the lowest birthrates.

“According to Zillow, for workers between 22 and 34, rent costs claim up to 45 percent of income in the Los Angeles, San Francisco, New York and Miami metropolitan areas, compared with closer to 30 percent of income in metros like Dallas-Fort Worth and Hous- ton. Even more stark is the difference in home prices. In Dallas-Fort Worth (the nation’s fastest-growing housing market) as well as Houston, San Antonio and Charlotte, prices can be just one-third of those in the superstar cities.”

Of course, the list is chockablock with traditional HQ cities, including New York, Boston, Atlanta, Chicago, LA, Dallas, Philadelphia and Miami. And by including Montgomery Country, Northern Virginia and Washington DC, Amazon has really only produced a list of 17, not 20, locations.

But whether they win or not, the fact that Amazon is considering places like Columbus, Indianapolis, Nashville, Denver and Pittsburgh should be welcome news to everyone trying to grow their business in America.

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Whoever Takes Credit, Apple’s Moves Will Boost U.S. Economy

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Apple’s decision to pay a huge repatriation tax, to pay employees a $2,500 stock bonus, and to invest $30 billion in capital spending in the United States in the next five years should be a clear win for the company, its employees and for the American economy. Not as certain is who might get credit for any victories.

No friend of President Donald Trump and his immigration bans, Apple CEO Tim Cook nevertheless gave due credit to Republicans’ tax-cut bill as he explained the reasons behind Apple’s blockbuster announcement this week.

“Let me be clear,” he told ABC News when asked about whether Apple’s announcements were directly related to the tax plan. “There are large parts of this that are a result of the tax reform, and there’s large parts of this we would have done in any situation.”

Trump quickly took credit in any event. “I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States,” the president tweeted on Wednesday. “Great to see Apple follow through as a result of TAX CUTS. Huge win for American workers and the USA!”

“The move by Apple is great for our country and great for job creation.”

Apple was a frequent target of attacks by Trump during the 2016 presidential campaign for not making staple products such its iPhones and Macs in the United States.

But Cook also made a point to credit other motivations for Apple’s move to contribute $350 billion to the U.S. economy through paying a one-time tax of $38 billion as it brings back the vast majority of overseas cash holdings that are estimated as high as $250 billion; investing $30 billion more in capital spending in the U.S.; building a new domestic campus; creating 20,000 jobs; and paying the stock bonus.

“We have a deep sense of responsibility to give back to our country and the people who make our success possible,” Cook said with the announcement.

Credit-taking aside, business leaders hailed Apple’s moves – the latest in a flurry of business-investment announcements by major companies since signing of the tax-cut bill – as an important boon for America’s economic prospects.

“The move by Apple is great for our country and great for job creation,” Mark Hogan, a member of Toyota Motor Corp.’s board of directors, told Chief Executive. Toyota has been one of the biggest corporate investors in American resources in recent years, including a new North American headquarters building in Plano, Texas, and a just-announced plant that Toyota will build a new car-assembly plant with Mazda in Alabama.

Larry Gigerich, managing director of Ginovus, an economic-development advisory firm headquartered in Fishers, Ind., told Chief Executive that “the overall potential impact” from Apple’s decision “is another positive sign and statement. With tax reform and the ability for Apple, in particular – with one of the largest amounts of money stashed overseas – could be significant.”

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Why Gracious Leadership Is A Strategic Imperative

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On August 26, 2016, New York Times Op-Ed Columnist David Brooks shared an article entitled “The Art of Gracious Leadership.” While his article was primarily directed towards presidential candidates, his observations regarding some of the most revered leaders in history provided a strategic opportunity for CEOs in all settings to reflect upon how they lead.

According to Brooks, “If you treat the world as a friendly and hopeful place, as a web of relationships, you’ll look for the good news in people and not the bad. You’ll be willing to relinquish control, and in surrender you’ll actually gain more strength as people trust in your candor and come alongside. Gracious leaders create a more gracious environment by greeting the world openly and so end up maximizing their influence and effectiveness…. Such people have a gentle strength. They are aggressive and kind, free of sharp elbows, comfortable revealing and being abashed by their transgressions.”

At the time it seemed ironic to hear this particular call to action for Gracious Leadership as I had held deep convictions for many years regarding the imperative to lead with grace. In fact, earlier in 2016 I had made presentations about Gracious Leadership at the request of leadership development organizations.

“I believe that teams of all types, within any industry, can reap great rewards by displaying respectful behaviors as they seek to reach greater heights.”

As a veteran C-Suite leader within the healthcare and financial services industries, I learned early on from blue chip mentors the importance of displaying confidence and humility. I learned that in order to hold my teams accountable, the buck started and stopped with me as I was responsible for being crystal clear with my staff in advance about performance expectations. I learned that accountability and compassion were not mutually exclusive, and I also learned that employees were starving for feedback because they wanted to understand the true impact of their work. In fact, I saw employees’ eyes “light up” when I thanked them for a job well done and how they listened in earnest as I shared direct, yet kind candor regarding how they could be more effective.

As the chief executive of my organization with almost 2,000 employees, I had to own leading the way by consistently role modeling the attributes of fully respectful, peak performance leadership. I also had to ensure a positive, ripple effect throughout the organization as my leaders were expected, not only to emulate gracious, accountable behaviors, but they were also to teach the same principles within their respective spans of control.

Early in my tenure as a hospital president, I encountered resistance from cynics who believed Gracious Leadership was “soft stuff.” Quite frankly, they were wrong! Through practicing the grace and tough love that are integral to Gracious Leadership, we transformed a struggling, community hospital into an award-winning, high performance regional medical center ranked within the top 5% of hospitals nationally. We had highly engaged employees, physicians who happily collaborated to achieve excellence, very satisfied patients, outstanding quality and great financial results. Gracious Leadership is not soft stuff. Indeed, it’s strategic!

The application of fully respectful leadership has also served other corporations well. As an example, the turnaround several years ago at Campbell’s Soup was grounded in then CEO Douglas Conant’s conviction that “To win in the marketplace, you must first win in the workplace.” Conversely, organizations such as American Apparel and Uber have suffered costly reputational damage and value deterioration because the toxic behaviors of their CEOs were permitted. And seemingly on a daily basis, we are bombarded with stories of high profile, toxic leaders. Sometimes it makes me wonder that if, without intervention, we could be approaching a crisis of leadership.

I believe that teams of all types, within any industry, can reap great rewards by displaying respectful behaviors as they seek to reach greater heights. This holds true at home, on the basketball court, in the C-suite, or in the boardroom.

Please take a few minutes to reflect upon your own leadership style. Ask yourself, “As CEO of my company, is the ripple effect of how I lead creating the right results for my organization?”

My hope is you will be inspired to become more purposeful about being a fully respectful, peak performance leader and lead like you’ve never led before… starting today!

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Repatriating Profits A Key Part Of Apple’s Contribution Announcement

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Apple CEO Tim Cook.

Apple announced it will contribute $350 billion to the U.S. economy over the next five years, thanks in part to new tax regulations, and will bring almost all of the $250 billion in profits it has stashed overseas back to the U.S.

But just how Apple plans to spend those dollars could be very telling—particularly if the company starts investing in infrastructure initiatives, according to Jeff Cunningham, professor of global leadership at Arizona State University’s Thunderbird School of Global Management.

Apple says that $75 billion of its contribution will go toward planned capital expenditures in the U.S., investments in American manufacturing and $38 billion in tax payments on repatriation of overseas cash. The company also expects to build a new corporate campus and create 20,000 jobs in the next five years.

“Politically, the emphasis on repatriating to the American economy is well known but is not the only factor. What the news media has missed is that the relationship between repatriating overseas profits and going local,” Cunningham told Chief Executive. “Apple and other high-tech companies are anxious to participate in the infrastructure build. Everyone assumes will happen once the government gets its spending act under control, particularly with the 2018 Congressional elections within shouting distance. This will provide multiple opportunities to Apple, whether it is self-driving cars or running entire grid systems in cities on AI.”

In the short-term, Apple plans on focusing its contribution on areas such as job creation.

“We believe deeply in the power of American ingenuity, and we are focusing our investments in areas where we can have a direct impact on job creation and job preparedness,” Apple CEO Tim Cook said in a statement. “We have a deep sense of responsibility to give back to our country and the people who help make our success possible.”

Apple said it expects to invest more than $30 billion in capital expenditures over the next five years and creating more than 20,000 new jobs through hiring at existing campuses and opening a new one. The company currently employs 84,000 workers.

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Weathering Crises in a Young Company

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This is part 2 of a 2-part series. Read part 1 here.

If you’re the chief executive of a young company, you will at some point almost certainly face an existential crisis that threatens to take your business under. I know I did during my time as the CEO of iSuppli, an electronics market information company I founded in 1999. Over the ensuing four years, a series of crises brought the company to the brink of extinction—crises that typify the threats young companies often face. How our company weathered those storms provide some useful lessons in company preservation, including these three.

Listen to early customers until it hurts. Your first crisis is likely to come when you’re trying out your company’s offering with potential customers early on. iSuppli was intended to make the electronics industry more efficient by giving companies improved tools and visibility into end-customer demand and the status of all the various supply chains on which their operations relied. But as often happens when you’re selling a business-to-business concept, the bosses at your potential client company may understand your idea, but the people who will have to implement it feel threatened.

With a savvy executive VP at our potential first client, we had reached a handshake deal to implement our ideas for one year on an experimental basis. But at every implementation meeting we were peppered with objections, showered with alternative interpretations of facts, and treated to many emotional outbursts from the client’s implementation team. And there were some real technical issues. Even the EVP began to lose patience.

In response, I dedicated several full-time people to act as ombudsmen for the customer. My investors and key executives protested. They thought we were going backward—in effect, reinventing the solution. “If that’s our new business model,” said one investor, “we’ll go out of business fast.” Thinking that it was better to go out of business fast rather than immediately, I proposed the plan to the EVP. He was delighted. He understood that our experiment and our dedicated personnel were basically subsidizing his business. Things then went smoothly and at the end of the one-year experiment we were able to withdraw the extra people. Admittedly, we didn’t make any money from that customer for a couple of years, but we managed to stay in business and we refined our offering and prepared ourselves to respond to future customers.

“Because Plan ‘A’ rarely works as expected, young companies should have plan ‘B’ at the ready—and EVEN plans ‘C’ and ‘D’.”

Don’t let anyone bigfoot you. About a year later a potential customer—one of the biggest and most respected electronics companies in the world—liked our proposed solution so much that they decided to go into the business themselves. Worse, we soon heard that the CEO had personally called several of our potential clients and offered them joint venture partnerships, potentially giving her company a huge lead in creating a more efficient global supply chain. It was as if a bomb had gone off at iSuppli. We felt dazed, injured and afraid. Several of our investors said game over.

Giving up might have seemed the logical thing to do. But my previous experience as CEO of International Rectifier dealing with industry behemoths told me that they could neither analyze situations nor implement solutions as fast as a nimble specialist outfit like iSuppli. The threat just made us even more determined to build out our capabilities rapidly and outflank Bigfoot.

Be prepared to refocus the business—radically, if necessary. Fast forward another year. iSuppli was starting to find its groove. We had 175 employees and a couple of demonstration engagements going with a handful of clients in locations around the world. We were moving millions of electronic parts a week. We were a 24/7 global operation. And our sophisticated supply chain management and information gathering processes, which we had exclusively developed, were reducing the volatility of the supply chains we managed.

Then we became a victim of our own success. Our largest, most sophisticated, and highest-profile client declared they were ready to commit to our platform globally if we would commit to investing in a global build out. But this was right after the dot-com bubble had burst and the $15 million dollars we needed to meet the client’s request was scarce. Our investors said they would somehow get the money we needed if the client would give us a multi-year contract with a minimum guaranteed payment that would at least cover our extra costs. But the client refused to even consider guarantees. They decided to go with our less sophisticated but better financed competitors. Unable to raise the money for a global build-out and with the defection of our highest-profile customer, we found our other supply chain management customers abandoning us.

Because Plan A rarely works out as expected, young companies should have plan B at the ready—and plan C, plan D, and so on, for that matter. My plan B was to focus on all the ways we helped our clients improve their supply chains that did not require deploying major global infrastructure. We had created world-class data collection and information analysis teams who had in turn created unique and valuable data subscription services that our clients did not want to see go away. It was exactly the information I had wanted at International Rectifier, information that nobody could yet provide about inventories, capacities and how many products of which type were being used by which customer. Such information, when combined with iSuppli’s supply chain management software and processes, helped us manage supply chains better than any customer could. Up and down the supply chain everyone wanted this information. We had already started selling our data and information independently of our supply chain services while we proved out the other aspects of our business model. Those data and information services represented about one-third of the revenue we were earning at the time of this calamity.

So when I couldn’t find funding, I decided to shift iSuppli into being a “market intelligence provider” to the electronics world. But it required laying off three-quarters of iSuppli’s employees. I had been up front with all employees throughout the crisis, providing weekly updates on the search for funding and talking candidly with employees who came by my office seeking the latest news. When all was said and done, nobody was surprised by the layoffs. More importantly, not a single person critical to maintaining our data collection and information business lost confidence in iSuppli and left the company.

There were other crises to come—including one where I was compelled to forgo my salary, take a second mortgage on my house, loan the company money from my savings to tide it over, and eventually come up with a complex loan participation plan with investors to keep iSuppli afloat. We continued to grow quickly and we used the loans to finish building out several valuable new data services that further accelerated our growth. The loan package not only saved the company, but worked out well for everyone—investors, employees with generous stock options, and me when iSuppli was sold a few years later for $100 million. The overarching lesson: Don’t retreat, don’t surrender.

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How Dynamic Coaching Increases Your Company’s Bottom Line

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Are strategic coaching and employee development prioritized at your company? If not, your best employees may become stagnant without your managers even noticing.

It’s easy for businesses to focus on training new team members to ensure they’re up to speed, but often, the more experienced employees lack the long-term coaching needed to fully flourish in their roles—resulting in plateaued skills and worse, a lack of motivation and resolve.

Your longstanding employees want to be invested in so that they can grow to their fullest potential. With effective coaching, underperforming members gain confidence through structured practice and consistent feedback, and high-performing members are inspired to reach even higher—ultimately bringing in more ROI for your business. Are you allotting the resources necessary for them to thrive?

Here are 5 ways to utilize coaching in your company’s daily practices.

#1: Move your coaching online. Coaching no longer needs whiteboards, tedious books or messy stacks of papers—online software opens up a new world of possibilities for impactful, streamlined, organized and more engaged coaching. Find a platform with an easy interface, digital collaboration capabilities for knowledge sharing, and the ability for members to easily submit work to managers for review—increasing team engagement and enabling quick, digital feedback on-the-go.

“often, the more experienced employees lack the long-term coaching needed to fully flourish in their roles—resulting in plateaued skills and worse, a lack of motivation and resolve.”

Is your workforce largely millennial? Get on their level with modern, cloud-based software, and they’ll be much more motivated to use it.

#2: Avoid one-size-fits-all methods. Say goodbye to universal systems with no customizability: since each of your employees learns differently, their coaching should adapt to their unique learning style. Since your managers don’t have the time to manually coach each person in their preferred method, use an online platform that does it for them—find an adaptive software that caters to each person’s unique strengths, weaknesses, specific roles and goals. This allows you to focus on the most critical topics, save time wasted from irrelevant content, and customize coaching material for maximum impact.

#3: Let your employees watch (and send) videos. While this may sound initially counterproductive, the use of interactive video content does wonders for employee engagement. Would you rather read a long, intimidating slab of tiny text, or watch a dynamic two-minute video with the same information? Videos enhance the traditional learning process, resulting in quicker comprehension, higher engagement and more enjoyment.

Not only is video integration more interactive, but it’s also a powerful internal communication and collaboration tool. Instant video messaging allows employees to answer each other’s questions, dive deeper into pressing topics and enhance team building.

#4 Let the content “drip”. Did you know that employees learn best with small amounts of information at a time? Spare an information overload by using a software featuring the “drip” video method—releasing small bits of content at a time. The results? Quicker retention, better long-term comprehension and no unnecessary overwhelm.

#5 Let your team go home. Mobile, cloud-based coaching platforms enable access from anywhere at anytime, meaning your employees don’t even have to be in the office to keep learning—an especially vital feature for your company’s remote employees. Give your team the flexibility to pursue coaching when they feel the most motivated—whether it’s at their desk, in the train, or on their sofa. Bonus points if the platform is easily accessible via a mobile app.

Mobile video integration also benefits your busiest managers with ever-conflicting schedules and frequent out-of-office appointments—they can connect with employees from anywhere via face-to-face mobile video chat, increasing both convenience and efficiency.

Effective coaching gives your employees a chance to achieve more than just the bare minimum. The interactivity, customizability and flexibility of online coaching software makes it an obvious choice for businesses looking to grow their employees to peak potential. If you take the time to invest in your employees, the reward not only is a more competent, happy and high-achieving team, but a higher bottom line—and that’s something everyone can celebrate.

 

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Startups as a CEO Second Act

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This is part 1 of a 2-part series. Read part 2 here.

Long-time CEOs looking for a second act in their business lives often tell me that they are toying with the idea of entrepreneurship but hesitate to make the leap. They worry that they’re too much the organization man or woman, not the rugged individualist of startup lore. They fear failure, which they have rarely experienced in their careers. Or they doubt their ability to keep up with the twenty-somethings they read about in breathless accounts of startup success.

If you find yourself similarly stuck on the fence, I would tell you what I tell them: As an experienced CEO, you have so many advantages that already put you so far ahead of the game that it seems almost unfair for everyone else. I know I did when I left a successful and profitable operation to start a company from scratch.

At the time, I was CEO of International Rectifier (the global semiconductor company listed on the NYSE at the time and now a part of Infineon Technologies, a spin-off of Siemens). I had more than 4,000 people working for me in nine countries around the world. We were a profitable global leader in our technological niche; I was highly paid and, I believe, well respected. But I wanted more, and it wasn’t money. I wanted to prove that I could create lots of value on my own, my way, so I started a company called iSuppli. The enormous advantages I enjoyed then are the same great advantages that any sitting or former CEO embarking on entrepreneurship enjoys today. They include:

Knowing firsthand the problem you want to solve. Entrepreneurship isn’t necessarily about dazzling breakthroughs, and innovation isn’t about doing something completely new. It’s about doing something that solves a customer’s problem. Since almost all established businesses do things that frustrate some or all of their customers, there is room for improvement and innovation in every industry, including the one in which you have already risen to the top as a leader.

“As an experienced CEO, you have so many advantages that put you so far ahead of the game it seems almost unfair for everyone else.”

I wanted to help electronics companies, International Rectifier included, better control their manufacturing and inventories by giving them improved tools and visibility into end-customer demand and the status of all the various supply chains on which their operations rely. As CEO, I had constantly asked why things couldn’t be more efficient and why we didn’t have all the information we needed to make expensive investment decisions.

What I wanted to do was complicated, even relative to the highly technical world of the electronics industry. But companies in this complex industry needed complex solutions to manage the billions of electronic parts that moved around the world every day, and I had some clear ideas about how the industry could save billions of dollars in inventory and distribution costs. The problem was real, my ideas were based on high-level experience, and I thought I had a credible solution.

Having broad experience in all the mechanics of a business. I had run operations, sales, marketing, R&D projects and supply chains at one time or another. I had led a large company and I had started divisions from scratch, both close to home and in far-flung places around the world. But even if you worked your way up to the corner office through a single function like finance or operations, your time as chief executive has given you a breadth of general management experience that few people can match.

Knowing people—and people knowing you. If you have a reputation for being ethical, practical and smart, then important people—potential customers and potential employees alike—will be willing to listen to what you have to say. Of course, not everyone simply signed up for iSuppli’s services on my word alone. What I was proposing was expensive and complex. But the ability to get a hearing was still a huge advantage. It also helped me assemble a who’s-who board of directors and board of advisors. And within weeks I was able to recruit an incredibly capable team of individuals widely respected in their areas of expertise.

Having access to capital and knowing how to use it. No issue bedevils entrepreneurs more than the question of funding—or leads them to make more costly mistakes. Of all your many advantages, perhaps none is greater than your savvy about capital: where to find it, whether to raise it through equity or debt, and how to allocate it. Most unfair of all, you are likely to be very well off financially—allowing you to fund the enterprise yourself and maintain control, unlike many entrepreneurs who (sometimes unwisely) take on partners when pursuing their own agendas.

When I started iSuppli, I didn’t need to work another day in my life if I didn’t want to, so I was able to launch iSuppli with my own money. Nevertheless, I did ask some venture capitalists to invest in my company, reasoning that my funds would allow me to retain majority ownership and that I needed to use “other people’s money” to grow faster than any potential competitor who might copy my ideas. We were solving a big, costly problem and it was the middle of the dot-com bubble, when there was ample money available to fund the many other smart, credible people attempting similar solutions. But unless your venture similarly depends on rapid scale-up, you will have the luxury of your own ready cash to invest. And being knowledgeable about capital structure and ownership structure, you will know when it’s time to adjust them to accommodate the evolving needs of your enterprise.

None of these advantages guarantee success. But they will definitely tip the scales far in your favor.

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BlackRock Focuses On Corporate Social Responsibility, Diversity

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BlackRock CEO Larry Fink.

Companies that are looking to receive support from investment giant BlackRock are going to have to put a priority on social responsibility, board diversity and long-term strategy moving forward—a move that highlights the importance of how successful businesses are giving back to society.

In a letter to CEOs this week, BlackRock chairman and CEO Larry Fink wrote that financial success is only one piece of the puzzle for prosperous companies, and that businesses must make a positive contribution to society while benefiting shareholders, employees, customers and their communities.

“Society is demanding that companies, both public and private, serve a social purpose. To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society,” Fink said. “Companies must benefit all of their stakeholders, including shareholders, employees, customers and the communities in which they operate.”

“ I wouldn’t ignore what’s being said about ESG and diversity. I think that institutional investors are willing to back that up, when their investments allow.” – TK KERSTETTER

The statement from such a big player in the investment space shows that these matters will play an important role in how companies operate moving forward.

“We’ve seen [environmental, social and governance issues] start to be emphasized by more than just BlackRock, and that’s why boards need to pay attention,” TK Kerstetter, CEO of Board Resources LLC, and editor at large for Chief Executive’s sister publication Corporate Board Member says. “While there might be the thought that [boards] don’t need to focus on everything being thrown their way by institutional investors today, I wouldn’t ignore what’s being said about ESG and diversity. I think that institutional investors are willing to back that up, when their investments allow.”

Yale School of Management senior associate dean for leadership studies Jeffrey Sonnenfeld says the statement is a bold move that should be applauded.

“Larry Fink and BlackRock are to be congratulated on this call to recognize a wide slice of constituents which includes but is not limited to immediate investor returns,” Sonnenfeld told Chief Executive. “Only some state pension funds such as Calpers or targeted social responsibility funds such as Calvert or Domini have had such investment criteria. No large institutional investor has applied such criteria across their portfolios despite such sensitivity at Vanguard and TIAA over the years.”

Sonnenfeld cited PepsiCo’s successful “Performance with Purpose” sustainability initiative launched by CEO Indra Nooyi in 2006 as an example of a company handling corporate social responsibility the right way.

“[Nooyi] believes that doing good is not antithetical to doing well,” Sonnenfeld says. “Thus with unsurpassed investor returns in the food business, PepsiCo has exceeded its published soaring goals for 2025 to cut sugar, salt and saturated fats in most of its foods while reducing water use and waste production and promoting safe work conditions and global human rights.”

There is a bit of a challenge for CEOs and boards when it comes to articulating their long-term strategy, as they need to be clear and detailed enough to satisfy investors without tipping their hand to competitors.

“It’s a fine line, but BlackRock is making it clear that it’s something board members had better be able to talk about, because if not, it goes into the column that this board isn’t staying on top of strategy at the level that this investor wants,” Kerstetter says. “BlackRock has made it painfully clear that, right now, they’re not walking that line well enough as far as disclosure or engagement goes.”

The matter of board diversity also is important to BlackRock and will have an impact on which companies the investment firm chooses to support.

“Boards with a diverse mix of genders, ethnicities, career experiences and ways of thinking have, as a result, a more diverse and aware mindset,” Fink wrote. “They are less likely to succumb to groupthink or miss new threats to a company’s business model. And they are better able to identify opportunities that promote long-term growth.”

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Allstate CEO Thomas Wilson

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Thomas Wilson’s multi-year transformation of Allstate was not only about doing the right things, such as investing in cutting-edge innovation, improving efficiency and productivity, and shedding non-core assets, but also about doing them in the right way—optimizing the pace of change, restructuring for the long-term rather than short-term, honoring commitments to employees, agency owners, customers and communities, and investing in the people of Allstate.

Allstate Corp., under Wilson’s leadership, gives consumers a choice in how they want to buy insurance—on their own or with the assistance of an agent, choosing either “brand-neutral” or “brand-sensitive” products and services.

Consumers can choose to work with a local Allstate agent who offers consultation on the carrier’s auto, home, life and retirement products, or they can be self-directed using Esurance’s online platform of proprietary product lines. Independent agencies provide the carrier’s Encompass brand auto, home and umbrella insurance products, and Answer Financial serves self-directed, brand-neutral consumers who want a choice between insurance carriers.

The Northbrook, Ill.-based firm also continues to develop innovative products, including Drive Wise, a telematics offering that gives customers discounts based on their actual driving behaviors; Good Hands Roadside, the first pay-as-you-use roadside service; and the new Claim Satisfaction Guarantee for auto insurance.

Wilson’s strategy is about keeping up with shifting consumer perceptions and expectations of corporations, Wilson told the U.S. Chamber of Commerce in June after he was elected chairman of the group.

“Fifty years ago, the focus was on shareholders, and that was a good thing because it forced accountability,” Wilson says. “When we got better at that, the focus shifted to consumers and we saw tremendous improvements in innovation and the customer experience. And now the focus is shifting to communities.”

In addition to the efforts of the Allstate Foundation and community volunteer programs, Wilson has led the company to invest hundreds of millions of dollars in socially responsible causes ranging from safe driving for teens to domestic violence prevention to youth empowerment. Allstate also has built catastrophe response vehicles that deliver water, food, and even teddy bears in the wake of natural disasters.

Under Wilson, Allstate also has raised the company’s minimum wage to $15 an hour, and tripled spending on corporate social responsibility.

“Companies must do more than just make money,” Wilson says. “Our role is to create prosperity for society—and the best way to create prosperity is through purpose.”

Wilson has held a number of senior executive positions at Allstate since 1995, and has been CEO since 2007 and chairman since 2008. In late February, he will re-assume the role of president after Matt Winter retires. Wilson previously served as president from 2005 to 2015.

Thomas Wilson II is No. 78 on Chief Executive and RHR International’s CEO1000 Tracker, a ranking of the top 1,000 public/private companies.

Thomas Wilson II

Headquarters: Northbrook, IL

# of Employees: 43,050

Additional Titles: Chairman

Age: 59

Company Start Date: 1995

CEO start date: 2007

CEO Tenure: 10 years

First Position at Allstate: CFO

Undergraduate Degree: BSBA, University of Michigan

Graduate Degree: Northwestern University

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5 Practices For Treating Others With Dignity And Respect

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Apple founder and CEO Steve Jobs is the poster boy of arrogance and rudeness. Corporate lore is filled with stories about how effective Jobs was despite being a self-absorbed, overbearing jerk. There is just enough truth in the legend to give credence to leaders who believe their stellar performance unfetters them from treating their followers with basic decency.

But when you dig into the trajectory of Jobs’ career, it becomes clear that the Apple founder paid dearly for his initial arrogance. His storied success with the iPod, iPhone and iPad came only after he changed his bullying ways and embraced a more inclusive leadership style. It should be remembered that Jobs was unceremoniously ejected from Apple in 1985. Jobs then spent a decade in the wilderness experiencing setback after setback at NeXT, the high-end computer company he founded. By the time he landed at Pixar, his management style had changed.

Jobs’ biographer Walter Issacson makes it clear that in the course of his ups and (mostly) downs at NeXT, Jobs accepted that his perfectionism and desire to work with the best could coexist with a more empathic leadership style. Issacson observes that Jobs’ legendary success emerged only after he repudiated the excesses of his bullying and impatient treatment of subordinates that plagued his early years. The biography demonstrates that at Pixar, Jobs transformed himself into a better listener, a more patient and inclusive team player, and most of all a peer in the creative process. This is the Jobs that stewarded his amazing track record once he rejoined Apple.

The takeaway, suggests Stanford professor Bob Sutton, is that the best leaders figure out how to fix their teams and organizations by fixing themselves. Sutton is an expert on jerk bosses. To write his latest book, “The Asshole Survival Guide: How to Deal with People Who Treat You Like Dirt,” Sutton studied hundreds of bullying bosses across C-Suites and boardrooms and their targets. Sutton’s five-point action plan for board members who strive to treat others with dignity and respect starts with the admonition to look in the mirror.

1. Beware of contagion. Organizational researchers have demonstrated that rudeness spreads like a virus. Research subjects who encountered even one rude partner in simulated negotiations were prone to become carriers and to be rude during their next negotiation, even with a different partner. If you are modeling impatience and casual arrogance, you can be assured that others on the board will start behaving like that, too. And since tone is set from the top, the executives will start emulating such behavior.

2. Check your privilege. Wielding power over others increases the risk you’ll start treating others like a means to an end. “Regardless of how kindly, cooperatively and empathetically you’ve acted in the past, power can cause you to have less empathy, to exploit others more, to focus on your own needs, to be rude and disrespectful, and to act like the rules don’t apply to you,” Sutton says. One response is to practice humility, for example by letting others take the credit. Consider dismantling some of the barriers between you and less powerful people in the organization.

3. Understand the risks of overload. The unrelenting rush of business can turn even civilized leaders into jerks. The imperatives of managing a 24/7 global business can sometimes be used as an argument for why civility and decency to colleagues and partners are luxuries that can be dispensed with. A board member’s workload can be daunting, especially if they serve on multiple boards. But the answer can’t be cutting corners on basic decency. Nor does the answer lie in multitasking during meetings to answer emails and texts. Some boards now require members to relinquish smartphones for “safekeeping” during meetings.

4. When you are called a jerk, believe it. It takes a lot of guts for someone to confront a powerful person. While it’s easier to dismiss such accusations, it is imperative that leaders listen closely to the information. The worst thing to do is to blame the messenger. Better, cultivate the truth-tellers on the team who have the courage to speak up. Ideally, you will get some insights into how your behavior and choice of words are being perceived by the team. This is the time to introduce yourself to the leader your colleagues experience.

5. Then apologize and change. Teams don’t expect you to be perfect; they expect you to be accountable. When you do something wrong, a well-crafted apology can repair the relationship and sometimes even make the relationship stronger than it was before. But only if the apology is offered without a hint of defensiveness or excuse. That means taking unalloyed responsibility for your behavior, a clear use of the phrase “I apologize” or “I am sorry,” and a commitment to learn from the experience and change. This is not a chore you can delegate.

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Indiana Rising

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Indiana is on a roll in economic development. It ranked as the No. 5 Best State for Business by Chief Executive for 2017 and fares increasingly well in other state-to-state comparisons. Indiana already has become what former Gov. Mitch Daniels, now president of Purdue University, called the “best sandbox for businesses to play in.”

Now, Indiana’s goal under Gov. Eric Holcomb is to create America’s best climate for doing business, bar none, and to harness the robust economic and job growth that will result. Global competitors, including Eli Lilly, Cummins and Cook Medical, are spreading their wings from longtime bases in Indiana, while others, including Salesforce, Subaru and Infosys, have been digging in and spreading roots. Meanwhile, home-grown startups, such as Angie’s List, Beck’s Hybrids and Aerotronic, are validating their decisions to grow in Indiana.

“Indiana is the best-kept secret in the country,” says Bob Stutz, CEO of Salesforce Marketing Cloud, which became a primary employer in Indianapolis after acquiring ExactTarget in 2013. “There’s a lot of talent to pick from. There’s a great work environment for our people and a great quality of life.”

The state’s “reputation as a low-tax, company-friendly environment makes it a good place to do business, to place new investment and to secure future jobs and work,” agrees Phil Burkholder, president of Rolls-Royce Defense North America, which has been making aircraft propulsion systems in Indiana for decades.

“there’s a lot of talent to pick from, a great work environment for our people and a great quality of life.”

Business leaders like Indiana for a number of reasons:

Low taxes, reasonable regulations. Indiana’s corporate income tax rate is just 5.75 percent for 2018, and is on its way down to a scheduled 4.9 percent by 2021. Indiana’s property-tax rate is fixed, and the state is ranked No. 4 in the 2018 Tax Foundation property tax index. And at 3.23 percent, Indiana’s flat individual income tax rate is by far the lowest among all states contiguous to it.

Indiana’s regulatory environment was ranked No. 4 by Forbes for 2017. What’s more, state and local officials are acutely responsive to the concerns of individual businesses.

Global-caliber talent. Indiana uniquely blends the most highly concentrated and experienced manufacturing workforce in America with a growing stream of new,
technologically savvy graduates of top-flight colleges and universities in the state. CEOs are impressed with the numbers and level of talent coming out of Indiana University, Purdue University, Notre Dame, Butler, the Rose-Hulman Institute of Technology and other schools, including two-year vocational colleges.

Growing workforce. If anything, Indiana needs even more qualified workers to fill the thousands of new jobs being created. “People are moving into the state, which is helping us address that concern,” Secretary of Commerce Jim Schellinger says.

Workforce development is also under way. The state has launched a Next Level Jobs program that includes two major new initiatives—Workforce Ready and Employer Training grants—to help Indiana companies find and keep qualified employees. Gov. Holcomb also recently created a new cabinet post, Secretary of Career Connections and Talent, to underscore its importance.

Affordable costs. CNBC ranked Indiana No. 2 among states for the cost of doing business. Land across the state is readily available and relatively inexpensive. Businesses wanting to locate or expand physically in the state have plenty of reasonably priced sites to choose from. And employees enjoy access to affordable housing and reasonable commutes.

Endemic entrepreneurship. Innovation and entrepreneurship are native to Indiana, and continue to flourish there. Steve Case, co-founder of America Online and now an investment banker, made Indianapolis one of only a half-dozen stops on his 2017 “Rise of the Rest” tour that invests in and highlights the digital potential in Flyover Country.

Gov. Holcomb wants to make the entire state a digital “hub.” In 2016, Indiana launched $100 million in initiatives for each of the next 10 years, aimed innovation and entrepreneurship programs from the grade-school level to the arena of growing businesses.

Unbeatable logistics. Logistics are a huge lure for business. Indiana literally is the nation’s crossroads, within a 12-hour drive of two-thirds of the U.S. population. And Gov. Holcomb has committed to spending an additional $500 million a year on roads for each of the next 12 years.

The Indianapolis International Airport, ranked the No. 1 U.S. domestic airport again this year by Condé Nast, is adding transatlantic flights in 2018. Indiana even has four state-of-the-art ports that support transoceanic trade on Lake Michigan and the Ohio River.

International orientation. The state first made a strong commitment to recruiting companies from abroad under Gov. Robert Orr in the 1980s, when Indiana opened
economic development offices in Japan and other countries. Today, more than 200 Japanese-affiliated plants dot Indiana.

The Holcomb administration has continued this emphasis. Infosys, an Indian IT company, plans to open its first U.S. technical center in Indianapolis. And in November, Holcomb, Schellinger and others trekked to India to discuss investing in the Internet of Things and other technologies with companies there.

Consistent, responsible governance. Indiana is ranked No. 1 in the US News & World Report “Best States for Government for 2017”. The state has a budget surplus of more than $1.8 billion and is one of only eight currently in the black. Among other things, this means there’s virtually no threat to Indiana businesses that their state taxes will rise.

Furthermore, administrations, beginning with Daniels, continuing with former Gov. Mike Pence (now U.S. vice president) and extending on through to Gov. Holcomb have followed a continuous vision and consistent strategy. “It’s so important because we’ve never stopped; we’ve never let up,” says Schellinger, a Democrat appointed by the last two governors.

Crucial intangibles. Other, less quantifiable factors play a role as well. There’s the famed Indiana work ethic, along with a Midwestern “niceness” that CEOs who do business in the state praise. “People are very genuine and authentic,” says Larry Gigerich, managing director of Fishers, Indiana-based Ginovus, an economic development consulting firm. “You know where you stand. And people work hard, because they want to do a good job. You don’t find that in all areas of the country.”

There’s a matching determination by state government to help businesses leverage all these positives. “Every unit of state government has an eye on making sure we’re a business-friendly state,” Schellinger says. “It’s all about economic development and turning over every stone.”

Consider Indiana exposed. “For a long time, Indiana was one of those well-kept secrets in terms of our business environment and climate,” says Gerry Dick, host of television’s “Inside Indiana Business.” “I think the secret is out now.”

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Boeing CEO Dennis Muilenberg’s Moonshot

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Dennis Muilenberg speaks at Chief Executive’s 5th annual Smart Manufacturing Summit, May 2017, co-hosted by Boeing.

If anyone thinks U.S. manufacturing is in decline, have them talk to Dennis Muilenburg. After serving as Boeing’s COO, the Iowa native and aerospace engineer took over the top job from Jim McNerney in 2015, and he has been on a tear ever since, driving the nation’s leading aerospace and defense company—and America’s biggest exporter—to find another gear to compete in an increasingly complex, global and interconnected world.

The reason is simple: Opportunity. The growth in commercial airplanes has been paced by worldwide passenger growth of 5 percent to 6 percent a year. But in places like China and India traffic growth runs as much as 15 percent a year. Every year in Asia, 100 million people fly for the first time on an airplane, and estimates are that barely 20 percent of the world’s population has ever flown in a commercial airplane. This is a big, high-scale growing manufacturing sector that companies like Boeing need to fuel for the future. It’s about a $7.5 trillion marketplace over the next 10 years.

“To compete in this environment,” says Muilenburg, “we cannot continue to just improve incrementally. Incremental productivity improvements of 1 percent to 4 percent a year will not allow us to compete in the future. We are focused on step-function improvements that are measured in 20 percent, 50 percent, 70 percent to 90 percent increments in some of our key value chains inside of our factories.”

Getting there won’t be easy. Boeing’s scale is almost unimaginable. From its headquarters in Chicago, the $94.6 billion juggernaut employs more than 140,000 people across the U.S. and in more than 65 countries. In the U.S. alone, Boeing employs 50,000 factory workers and 45,000 engineers.

Muilenburg’s ambitions obviously have big implications for the rest of American manufacturing as well. While the prevailing narrative is that nothing can be done to stop the continuing decline of U.S. industry at the hands of cheap global labor and disruptive technology, Muilenburg is staking his company’s future on technology unlocking productivity gains and on finding growth in new parts of the value chain.

It’s a playbook worth reviewing as manufacturers across the U.S. seek to find and hone advantages to win in an ever-more competitive world. According to recent analysis of current industry trends and performance, the McKinsey Global Institute finds that the U.S. could boost annual manufacturing value-added by up to $530 billion (20 percent) over current trends by 2025.

Four Keys to Transformation
The key, of course, is productivity, and Muilenburg has been pushing this hard using a variety of tools: 3D printing, digital throughputs, selective automation. For example, production speed has been rising steadily in its Renton, Washington, facility, where the company builds its 737s—among the most widely used passenger aircrafts in the world today. In 2016, it was building 737s at a rate of 42 a month in the same space that was originally created to build 17 a month.

At the end of 2016, it ramped up that line to 47 a month and is on track to begin producing 52 a month this year, then 57 a month in 2019. Soon the facility will be building roughly two 737s each day—the highest production rate the company has ever had in commercial airplanes.

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3 Lessons Of Exceptional CEOs

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Not all CEOs can be exceptional. Yet emerging research on the highest-performing CEOs yields lessons to guide every executive, especially those stewarding companies in transition. In a study of CEOs published in McKinsey Quarterly, researchers Michael Birshan, Thomas Meakin, and Kurt Strovink (all McKinsey partners) surveyed the early initiatives of CEOs with the most outstanding track records. Three key lessons emerged from scrutiny of these elite CEOs.

Lesson 1. CEOs hired externally perform better. The highest performing CEOs tend to be hired from outside the organization. The research shows that exceptional CEOs are twice as likely to have been hired from outside the enterprise as the average CEO in the data set and roughly 1.5 times as likely to be been external hires as the other top-quintile CEOs. Adopting an outsider’s perspective tends to yield unbiased insights needed for executing breakthrough moves.

The researchers speculate that CEOs recruited from the outside are more questioning, act more aggressively, and make more changes than their counterparts from the inside. An outsider’s point of view can be harnessed to challenge the status quo with greater objectivity and overcome the organizational inertia that sometimes limits an insider’s span of action.

Lesson 2. CEOs with exceptional track records are more likely to conduct a strategic review earlier. The study offered insights on how top-performing CEOs have a clear-eyed bias for action. Investing in a robust strategic review often provides a candid perspective for setting a strategic direction. Exceptional CEOs who led struggling companies were about 60 percent more likely to conduct a strategic review in their first two years on the job versus the average CEO in the sample. CEOs joining low-performing companies derived the biggest benefits from conducting a strategic review.

“An outsider’s point of view can be harnessed to challenge the status quo with greater objectivity and overcome the organizational inertia that sometimes limits an insider’s span of action.”

Exceptional CEOs surpassed the average in the average number of strategic moves they made in their first year. Changing strategic direction typically requires freeing up resources, often in part by cutting costs in lower-priority parts of the company. While cost-reduction programs are a no-regrets move for all CEOs, the exceptional CEOs were significantly more likely to launch such initiatives than the average CEO, thereby building strategic momentum.

Lesson 3. Beware organizational balance and management reshuffles. Conventional wisdom suggests that new CEOs taking charge of lower-performing companies should consider management reshuffles and organizational redesign. This study of CEOs, however, showed that the average CEO was less likely to undertake organizational redesign or management-team changes in the first two years in office. This result, the researchers suggest, could be a function of the strategic game the CEOs were playing: they may have inherited high-performing companies (which can be hurt by reshuffles) or prioritizing change management, given that there are only so many changes organizations can absorb in a given period.

The McKinsey partners’ hypothesis is that since the group of exceptional CEOs included an above-average proportion of outsider CEOs launching fundamental strategic rethinks, the data may reflect a sequencing of initiatives, with structural change following strategic shifts.

Research Methodology
The researcher’s conclusions were based on a study of 600 CEOs at S&P companies between 2004 and 2014. The focus was on the top 5 percent of the CEOs in the dataset. These CEOs led companies whose shareholder returns had increased by more than 500 percent over the CEO’s tenure. The study compared this elite group with the full sample as well as with a subset of CEOs whose companies achieved top-quintile performance during their tenure as compared with their peers.

Some of the CEOs studied faced crises. Some were guiding a company through bankruptcy proceedings and then returning it successfully to the public markets. Others were able to deliver the highest returns through strategic repositioning and operational discipline within more normal industry and economic conditions. Overall, the exceptional CEOs were neither more nor less likely to be found in particular industries, to lead companies whose size differed from the mix in the broader S&P 500, or to join particularly high- or low-performing companies.

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Biggest Mistake: No Employee Non-Compete Clause, Says BlackLine CEO Therese Tucker

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Therese Tucker is the rare woman in technology to have founded a successful technology company and brought it public. The CEO of BlackLine, a provider of automated finance and accounting software now worth in excess of $1.5 billion, is esteemed for her enlightened entrepreneurship, software programming savvy, and nurturing leadership qualities.

Broad-minded and compassionate, Tucker sports pastel-pink hair and a mile-wide smile that makes her Los Angeles-based employees feel their CEO actually cares about them. She does. “Business should not be purely business,” Tucker opines. “Companies have a social obligation to care about the lives of people in the communities we serve with our products and services.”

Not surprisingly, Tucker created Blackline’s account reconciliation software to make the lives of accountants less dreary and burdensome. She also undertook an initiative over the recent holidays to clothe more than 50,000 homeless people in the city. But it’s her business chops that really set her apart: She single-handedly programmed BlackLine’s initial products and guided its revolutionary concept of continuous accounting that nearly does away with the dreaded financial close.

“The mistake we made was not having specific clauses in our employment contracts regarding confidentiality and reusability.”

Still, she’s as human as the rest of us. “I learned a really valuable lesson about the critical importance of legally sound contracts with employees, one that I will never forget,” says Tucker, shaking her signature pink hair.

The lesson was this: BlackLine gave birth to a competitor. “In California, you’re not allowed to ask an employee to sign a non-compete contract, which are banned,” Tucker explains. “The mistake we made was not having specific clauses in our employment contracts regarding confidentiality and reusability. Regrettably, an employee in our sales group had access to our source code in her laptop. She outsourced the code to India, created a competing product, and sold it.”

BlackLine had little recourse to do anything about the situation, other than take it in stride and double down on making innovative finance and accounting software products to best the competition. The company also retained sharp legal minds to devise crystal clear and enforceable employment contracts on a state-by-state basis.

The tactics worked, helping BlackLine maintain and even enlarge its market lead. The company is one of four technology companies and the only one in its space to be listed as a leader in Gartner’s Cloud Financial Corporate Performance “Magic Quadrant.” “Having good legal counsel and solid contracts with customers and employees pays dividends down the road,” says Tucker.

Once burned, twice shy.

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The Growth of CEO Peer Networks: More and More CEOs are Turning to Each Other for Insight

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According to Chief Executive’s new Guide to CEO Peer Networks 2018, the leading peer networks—Young Presidents Organization (YPO), Vistage, Chief Executive Network (CEN) and G100—all reported strong growth in their membership sizes over the past few years. There are a variety of reasons for this, including: the increasing complexity of many businesses, a recognition by many CEOs after the great recession that they needed to look outside their organizations and experience bases for new ways to improve their businesses, and a realization by many CEOs that there is tremendous value to be learned from peers who have dealt with similar issues.

It’s Lonely at the Top
According to Bob Grabill, Chairman of Chief Executive Network, “there’s some truth to the old adage that it can be lonely at the top,” but it doesn’t have to be that way, he says. “Many CEOs, especially those who are committed to continuous improvement for their organizations and themselves, find tremendous value in getting away from the day-to-day whirlwind and working “on” vs. “in” their business for a few days a year with peers who are not competitors and have dealt with the same issues and are willing to share their successes and failures in a confidential, safe environment.”

“It makes sense that more successful CEOs would be more open to and seek out best practices and ideas from peers and are committed to continuous improvement, including their own personal development.”

CEOs in Peer Networks Outperform Their Industry Averages
Studies commissioned by Vistage and Chief Executive Network show that their members, on average, have considerably higher growth rates and profit margins than their industry averages. It makes sense that more successful CEOs would be more open to and seek out best practices and ideas from peers and are committed to continuous improvement, including their own personal development.

Differences Among Peer Networks
Each of the leading CEO Peer Networks has unique features and appeals to different types of CEOs. For example, G100 focuses on serving CEOs of only the largest companies (over $10 billion in revenues), while most of the members of Entrepreneurs Organization (EO) are small companies with under $2 million in revenues. Young President’s Organization (YPO) tends to have a lot of young presidents of family-owned businesses in the $12 million to $50 million range, while Vistage has many lower middle-market members ($5 million to $25 million) who value frequent meetings with their peers and a coach. Chief Executive Network (CEN) tends to focus on mid-market CEOs ($10 to $1 Billion in revenues) and has industry-specific networks for CEOs in manufacturing, distribution, wholesale, software, architecture, engineering and construction, so CEOs can be grouped with non-competing peers who understand their businesses.

For more information about CEO peer networks and the differences among them, you can download Chief Executive’s free Guide to CEO Peer Networks 2018 by clicking here.

The post The Growth of CEO Peer Networks: More and More CEOs are Turning to Each Other for Insight appeared first on ChiefExecutive.net.

CEOs, Are You Vulnerable To Weakness And Lack Of Authenticity?

Chief Executive Magazine -

The power of a team is directly related to the authenticity of the team. The only person whose authentic engagement you have full control over is you.

Even good leaders get stuck from time to time. Sometimes a period of growth is followed by unfamiliar peaks and valleys. The integration of a promising acquisition stalls for no obvious set of reasons. Whatever the cause there’s often an old-school belief that leaders are people who have all the answers. When these answers don’t seem to work, organizational performance can drift sideways.

Drawing on decades of experience as entrepreneurs and advisors to scores of companies, Barry Kaplan and Jeffrey Manchester contend that if vulnerability and authenticity are not in evidence, senior team members and employees often will feel disconnected. The real secret to unleashing power for leaders, teams and organizations lies in vulnerability, they argue. The more that leaders open their hearts, reveal their fears and show their authentic selves, the deeper the connections among team members will be, and the more the team will achieve.

Vulnerable and powerful? From a traditional set of management beliefs, this is an oxymoron and cannot be possible. But as Kaplan and Manchester maintain in their book, “The Power of Vulnerability,” there is a limit to how far one’s power as a leader can take one when he or she leads solely from the strength of one’s authority and intellect.

Employees and senior team managers who operate in this environment just go through the motions, and while they cooperate with others as necessary, their objective is simply to complete the task. They hold back from contributing their true potential. “The remedy for complacency lies in leaders being willing to step back, move over and invite others to lead by “stepping into their power.” Leaders must give permission to each team member to bring to life the highest and best use of his or her time and talent. The leader’s focus can then shift from being the person with all the answers to ensuring that everyone’s voice is in the discussion.”

Don Gulbrandsen, founder and chairman of Gulbrandsen Co., a maker and distributor of chemicals and intermediates for the chemical industry, wanted to break through the performance plateau he felt was holding his company back. “To access my full power,” he informed Barry Kaplan, his coach, I need to look inside my heart to discover where I can connect my message to my people.”

He developed a program of off-site meetings that included external thought leaders where his senior team could brainstorm ideas. He decided to step back and allow participants to explore solutions. He remained the ultimate decision maker, but encouraged others to assert control of selected initiatives. He discovered that the team’s performance compared to its potential is directly related to the depth of connection among its members. An outcome was that the company’s growth soon moved into double digits.

Barry Connors, who ran a Florida-based auction business that bought and sold vehicles, was similarly stymied. In 2009, his company hit a wall during the Great Recession where he was advised either to close the company or lay off most of its workforce to survive. Instead of doing either, he held a town meeting where he laid bare the difficulty he faced as a leader and asked for everyone’s help and ideas to get through the challenges. By asking the team to step into his role, he was able to tap into people’s ideas for saving money and streamlining the operation in ways that allowed the firm to get through the worst period in the young company’s history.

Another example of a little vulnerability going a long way is a mid-size manufacturer whose private equity parent hired a new CEO to replace its founder. The new CEO was a seasoned business technologist with a track record of leading growth in relatively short time frames. The founder was a passionate entrepreneur who had treated his team like family. The new CEO presented his plan for growth in his usual directive style that worked so well for him in the past. A quarter into his first term the lead partner in the private equity parent firm called Kaplan complaining that the performance metrics were off and that the new CEO wasn’t connecting to the senior management team. Kaplan and Manchester spoke with the new CEO. He was a talented electrical engineer who score low on empathy in his 360 surveys, the polar opposite of his predecessor. In the past he had received coaching to help him connect with team members, but this deficit did not hamper his success record. He was self-aware of this shortcoming, but found it difficult to change his default of being a lone ranger.

At an off-site meeting the CEO and team members were each asked to describe his or her self-limiting beliefs about their ability to achieve their responsibility. What ensued startled the group. The CEO began by saying that he struggled with confidence issues, and was always second-guessing whether or not he was worthy of the CEO role. Because of these worries he often stayed on the road to try to create new strategic partnerships and networks that could help the company rather than micro-manage in a way that might screw things up. People’s jaws dropped. Compassion in the room rose as his raw honesty became transparent. The CFO and VP of HR spoke to their fears that they lacked the experience necessary to give the team what it needed. Similarly the COO and VP of Sales & Marketing shared their internal fears. All of this openness led to a discussion about how the team could interact and support one another differently to help each overcome their self-limiting beliefs. A small step in sharing honest feelings in a vulnerable way opened the door to accepting the CEO as a regular guy. The head of technology later took a CEO’s aide into a private space to let him know that the experience had shifted his perspective of the CEO. He said, “I am now rooting for him to succeed, I actually like him more.”

A leader may determine that the risk is too great to share openly with one’s entire team at first, so you may start by sharing your thoughts with individuals you trust on the team as a sounding board. This can help to get feedback and input on how to approach the team in a way that can give one more confidence in taking the risk.

The post CEOs, Are You Vulnerable To Weakness And Lack Of Authenticity? appeared first on ChiefExecutive.net.

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