Wednesday, April 22, 2009

The need for EXTREME Leadership

We are witnessing extreme times. I never thought I could write that sentence with a straight face. But it is true. The level of complexity and gut-wrenching pressure that corporate leaders are dealing with today is unprecedented. The latest public evidence of our times is the suicide of Freddie Mac CFO, David Kellerman. It may be presumptous to link the tragedy directly to the pressures at Freddie, but to say that his worklife had no role to play in the event will be disingenuous.

Most of us are not, thankfully, being grilled by the SEC everyday. But we are living through uncertainty, negativity, heightened interpersonal dissonance, and no sense of direction on a daily basis. If you are not, feel free to stop reading the rest of this post.

How does a leader navigate through these times? Especially when one feels more like a victim of the waves than the captain of the ship? How does one get to work every morning, ignore one's own personal travails, rally the troops, chart the course ... all the good stuff that leadership gurus tell us we must be doing?

A good point to start is to make a list. This will sound a little cute for some, but I have tried to distill out 7 things that define our challange today ... using the anagram EXTREME (ok, so sue me :-))

1. Energy: Called upon to implement tough, unpopular measures, we are finding it difficult to renew and refresh ourselves and bring our personal energy to inspire others

2. X-factor : Jeff Immelt has characterized the downturn as ‘a reset, not a cycle’. The future will have no precedence. Uncertainty will remain high, calling for constant change in direction.

3. Trust : Trust and confidence in leaders is at an all-time low – reducing the traction that we need to get things done through others. Harvard published a report last week noting that 80% of Americans do not trust corporate leaders, 50% of managers don't trust their bosses. Wow.

4. Retention: Dis-engaged and de-motivated talent is keen to move on … waiting for the market to turn. If you think I am crazy, look at the growth in linkedin membership - you will be amazed.

5. Expectations : Leaders will be challenged to continuously achieve significantly more …. with significantly less … now. The more we squeeze, the more we will be expected to squeeze in the future.

6. Motivation: The overwhelming anxiety of losing one’s job is a negative motive force for employees - making it difficult for leaders to positively engage their teams. If you try to cheer people up with optimism you will sound insincere. And, by the way, HR just took out your entire budget for rewarding strong performers.

7. Experience : Managers have little to no experience of leading through similar periods of prolonged downturns - leaders (45 years) today, were in school (18 years) in the early 80’s. In ex-Japan Asia, leaders, even at the top, have not experienced long recessions in their worklives ... ever.

Once you have this list, get cracking on a plan. For each item, think of the following.

- Is this challenge germain to my situation? Should I tackle this now, or leave it for later?
- What ideas can I generate that can work in my environment?
- Who should I talk to, to get more ideas and perspectives on this issue?
- How can I get my team to discuss this, openly, and come up with tactics to address the challenge on the ground?

I have built mine. I realized quickly that, for me, energy, x-factor and experience are the top 3 biggies for the first 100 days. I have a list of about 30 people that I want to talk to about these 3 things. I also have a list of attack-ideas that may or may not work - I'll find out pretty soon.

Try it. At least it will give you a break from staring at the spreadsheet that tells you that your business just had a terrible quarter.

Sunday, April 19, 2009

On a personal note ...

3 weeks ago I took a decision to leave my company where I have spent most of my career. The decision itself was easy. It was a rational decision based on opportunity, risk and the ability to follow my dreams. What happened after that took me by surprise.

People build their worlds around what they think is real. I am no different. My own reality centered around "what I did". My own achievements, my relationships and my personal challenges constituted the reality that I owned and nurtured. What I have realized over the last 3 weeks is that when you lead, you create a reality for those who choose to follow you. And when you decide to change your reality, it affects others deeply, in often un-intended ways.

I have spent the last few days dealing with the reality of others. It has been an amazing experience. I have come to notice that my impact on others was greater than I could ever imagine possible. The more I under-estiamte this impact, the less effective I become as a leader. By that order, I realized that I have not been very effective after all.

To all my colleagues who feel the impact of my decision ... I am sorry. Not for the decision itself, but for not taking the time to work with you in managing the impact. For being too focused on my reality and ignoring yours.

As I take on my new challenge, I am making a quiet promise to myself.

I will be aware of my impact ... at all times.

Tomorrow's leaders must vow to rid the world of the hubris, greed and self-interest of yesterday's boardrooms. As I embark on a journey to build tomorrow's leaders, I know that I will need to 'walk the talk'. Might as well make a start.

To everybody who has made the last 11 years of my life worth every minute ...

... Thank you.


Sunday, February 1, 2009

What to do while you wait for buyers to buy again ...

... honestly, it may take a while.

As I walked into a doctor's clinic in Singapore and joined the long queue of patients waiting outside, I glanced up at a tacky poster on the wall with the words PATIENCE printed in bold over a grim picture of man waiting, alone, at a deserted train station. Below it was some really sage advice .... "The key to patience is doing something else in the meantime".

As I meet clients around the world, I can't help but notice the increasing sense of restlessness and frustration building up in companies and individuals. A frustration born out of waiting ... for the buyer. Retailers are waiting for consumers to arrive, investment firms for deals to be made, and service firms for the phone to ring. And the wait keeps getting longer and harder each day.

The problem is, its going to be a really, really long wait. So, first things first, we need to stop holding our breath. Once we start breathing again and reset our expectations of a "quick return to normalcy", we will find ourselves empowered to act. I am advising clients to split their 'to do lists' into 2 parts - one for the 'DIP' and another for the 'RECOVERY'. That way you avoid confusing between short term belt tightening actions and longer term renewal actions.

Steve Balmer recently said (and I paraphrase) - "every time the economy tanks like this, we are not going to see the same reality bounce back at us, we are simply going to reset to a new reality". This is true whether you are running a corner shop or a billion dollar business. We will see a new reality emerge in 4-6 quarters from now.

Till then, we will all have to go through the 'DIP'. Depending on your company's view on how long your 'DIP' is going to last, you need a to-do list for this period. I call it the 'DIP' agenda. A typical 'DIP' agenda could look like this:

- Maintain a cash balance of 3-4 months' cash flow on our balance sheet at all times
- Reduce capacity by 10% over the next 100 days. Review capacity levels every month
- Pull out all stops to secure loyalty of top 50 customers. Meet them every week.
- Craft and launch 2-3 new revenue streams utilizing existing capabilities in this period
- Talk to employees every Monday and appraise them of actions we are taking
- Enroll top 50 managers into the DIP plan and re-align their incentives to DIP plan outcomes
- Train and develop top 15 leaders to communicate, motivate and lead through the DIP
- Retrain and redeploy key staff to short term revenue generating challenges
- Identify load-bearing walls in the cash equation (inventory, pricing, overhead expenses, etc.)
- Plan for and assign champions to each load-bearing wall
- Reduce investments in new initiatives to only the top 3 critical ones for the future. Review all new investments with a clear 'house view' on criteria to evaluate and fund for the future.

Once you have the DIP agenda in place, you might want to gather the 'best team' you can pull together to execute this agenda over the DIP period. Make sure the team understands the criticality of this period and is competent to execute. If you need to hire specific capabilities for the short-term, try options like interim experts and free lance consultants / experts.

While it is critical to know what to do during the DIP, make sure the RECOVERY agenda is available as well. You may not execute this agenda for the next couple of quarters, but you team needs to know how you plan to win in the new world. A typical RECOVERY agenda can look like this.

- Form a collective view (top 15 leaders) of the new landscape - customer, regulation, competition, funding and talent (among other factors)
- Enroll key customers in building the new proposition (products, pricing, positioning etc.)
- Re-orient the entire product portfolio to the new proposition
- Redefine the business model for future growth. Ensure new assumptions on margins, asset turnover and leverage (among other indicators).
- Craft a new incentive program to shift mindset of managers from DIP to RECOVERY
- Fuel innovation before the market hits bottom. Insert gates into the innovation and innovation funding process that open / close based on market demand conditions
- Review and change the decision making framework for managers - while one needs to centralize all decision making in the DIP, one also needs to let go before the RECOVERY
- Craft a separate agenda for opportunistic actions (acquisitions, team hiring, spin offs, etc.) to take advantage of emerging opportunities during the RECOVERY
- Set in motion an aggressive 'renovation' plan to build the key capabilities required for RECOVERY. Include staff training, brand building, organization sustainability etc. in the plan.

These are just a couple of examples of clients actually using the downtime to re-shape their destiny as an organization. Without these 2 lists and a strong leadership commitment to working hard on the agenda, our only strategy is to hope and pray for lady luck to arrive.

And, as Tiger Woods says, the harder you work at something, the luckier you'll get.

Tuesday, January 13, 2009

Bringing Risky Back ...

... why would anyone want to take risks in the new world

No matter how the current downturn unfolds over the next few quarters, one thing is certain. We have to re-learn the art of taking risks in a highly de-leveraged world.

What does this mean for the average CEO? Look at it this way. Imagine that from today all your credit cards are taken away from you and you are forced to live life the old fashioned way - on cash. How would this change your behaviors and, most importantly, your view of risk?

For those readers who are as old as I am, you might remember a time before the proliferation of credit cards. We used to wait for the monthly pay-check, make a list of purchases we must make (consumables, mostly) and then make a separate list of 'discretionary spend' - stuff we've always wanted to buy, but couldn't afford. We would then painstakingly prioritize the second one and arrive at a very short list of items we felt we could 'afford' that month. Say, we decide that a sound system makes the cut. We would then go about studying the various options in the market, talk to friends at length about the pros and cons of each and then go out and make the purchase - in cash. As we handed out the money to the store keeper, we would feel a serious level of anxiety and dissonance (called post purchase dissonance by marketing people in those days).

Then came the age of credit and we forgot most of the steps and jumped straight from urge to splurge. The same holds true for the corporate world - investing on credit was never quite the same as investing in cash.

Well, looks like things have changed a fair bit around here. Leverage has suddenly become a four letter word and investors are returning to value today as opposed to growth tomorrow. How on earth do you make a risky move in these markets.

Here's my list of 4 things that we need to do to embrace risk in the new world
Understand the difference between good and bad risk. Good risk is the risk you take after you make lists, prioritize heavily, do the due dilligence, talk to people and seek out best value. Without good risk, you will simply not be successful in business or in life.

Don't indulge in anything that you don't understand. Even Warren Buffet owns up to the fact that he would not put money in a deal that wasn't crystal clear to him. So, trust only yourself, not the smart-talking financial advisor. Your own limited intelligence is a wonderful filter - use it.

Feel the dissonance, its good for you. The dissonance you feel when you have to pay for things in cash is a natural and powerful force that makes you build your own sixth sense about value. Running away from post purchase dissonance is a step towards the lala land of avoidance. So, whether you're buying a BMW for yourself or an asset for your business, embrace PPD.

Learn from your mum. Mothers have an amazing ability to scope out value. Over generations, mums have done the little things that constitute the art of 'buying into value'. That huge bottle of shampoo that you needed both hands to lift is an important lesson from your mum. If you are getting cheaper assets today at bargain prices that you can consume well into the future, have the sense to invest now. Conversely, conserve cash if you believe that the swanky jacket you saw in Saks (or Saks itself) will go into sale in a couple of months.

Hopefully, if we all do our bit to bring risky back ... we'll end up saving the world that's a risk worth taking.


Sunday, January 11, 2009

Time to be positive again ...

... why leaders need to find a way to change before the market does

In my work with clients I have often observed this phenomenon I call the "mood lag" in business. I would define "mood lag" as the amount of time that a leader takes to adjust his / her mood to reflect the mood of the market.

Look around you. The real global downturn started around March 2007. For CEOs around the world to take off their rose tinted glasses and stop saying things like "this will pass quickly and we'll be alright next quarter" ... it has taken about 7 months.

The mood lag in Asia is even more pronounced. Asian CEOs are still in denial and will probably take another 2 months to change their own personal mood about the future. What this translates into is irrational decisions about investments, costs and restructuring. It puts people and companies in danger and makes recessions deeper and more painful for everyone.

Here's the clincher. The mood lag works both ways. Once business leaders actually switch to the doom and gloom mood that they should have activated 7 months ago, they continue to cruise in negativity well into the first couple of quarters of recovery.

Unfortuantely, by then, the best seats in the new world have been taken by competitors. Leaders struggle to work on their own positivity, and more importantly, struggle and fail to get their people to think positively about the future.

In fact, the best leaders operate in "mood lead" not "mood lag". By sensing what the future holds round the corner, the best in the world are able to bring to bear a personal conviction that pre-empts changes in the marketplace by 1 or 2 quarters. Using this, they are able to move their organizations towards stronger market positions by acting before everyone else.

As markets hit a series of 'bottoms' around the world, there is an increasing sense that a second half (of 2009) global stabilization is on the cards. Ideally, if you are leading a business, your mood should be moving from negative to positive just about now. That way you will have 2 quarters to rally the troops, think recovery strategies and invest in new growth pathways when the recovery gets underway in 6 months time.

The challenge for leaders is that their mood needs to change at a time when the night is darkest.

If you are not turning positive now, watch out ... you are possibly heading for another bout of "mood lag".

Friday, January 9, 2009

When will we ever learn?

Ever since I was a kid, I have been told (repeatedly) that leadership is about heroism. I was taught in school about the great heroic leaders in history, in college about the heroic leaders in science and technology and, finally, in B-school, about the fearless CEO!

Yet, over my career I have noticed a peculiar fact. Every time I turned to worship the heroic CEO, I was told "oops, sorry ... that one is a fraud, and the other one there that you thought was god... sorry, he is on his way to jail too!"

Ramalinga Raju was one such hero. Worshipped in India, and, increasingly, around the world, he built the aura of invincibility around him that says ... "I am a hero ... I can do no wrong". The world bestowed on him award after award, calling him (and I quote) - "an extraordinary entrepreneur", "a global example", "a tough leader with a heart of gold" ... the list is endless. And yet ...

Nothing is more sad than watching angels fall. People like Raju made me want to believe in the "Great Indian Dream". Where Indian companies (and their leaders) will one day become the gold standard of the business world - leading not only in stellar performance and shareholder value, but pioneering an understated, unassuming and balanced style of leadership that makes our American counterparts look callow in comparison.

You can argue that Satyam is a one-off incident and the ascendancy of the Indian business leader is going to continue. I am willing to buy half that argument. I don't think that Satyam is one-off. I am convinced that there are others that will emerge as the high tide recedes and (to paraphrase Warren) we suddenly realize that some of us were swimming butt naked. At the same time, I do believe that the new generation of Indian businesses will continue to thrive over the next few decades.

But I'd like to see one thing change.

I'd like for us to see leaders not as heroes but as stewards. I'd like for us to see success in business as a team sport, not a spark of individual genius. I'd like for us to put our heroes to bed ... and build institutions instead. I'd like to see us look beyond Ratan Tata and Narayan Murthy ... to the institutions of that will hopefully outlast their grandchildren.

The CEO and the cult of hero worship is not an Asian thing. It was imported from the US over the years and has slowly taken over our love for institutions and belief in collective success in India. It has created an entire generation that has grown up wanting "to become like Bilgay!"

Hopefully, Satyam will be our wake up call. Hopefully, the patriots in us will not reach for the snooze button.

Tuesday, December 30, 2008

Followership in a post-crisis world

Who will you follow in tomorrow's world?

- Bernie Maddoff, once held up as a role model of old-fashioned values on Wall Street, turns out to be the biggest scamster in history.

- Ramalinga Raju (Asia Business Leader Award 2002), the revered and celebrated CEO of India's software superstar Satyam, brings his career and his company to shame and disgrace.

- 2 of the most respected CEOs on Wall Street - Dick Fuld and Sam O'Neal drive their firms straight into a train smash

I can go on, but you get the drift.

So, who do you trust? If the smartest and cleanest corporate leaders are turning out to be common crooks, who will you choose to follow?

As I watched Jamie Dimon (CEO of JPM) accept the 'Legend in Leadership' award from Yale School of Management, I couldn't help but wonder - is he really ...

We are heading into a severe crisis of trust - in leadership. In 2007, before the current crisis emerged, Harvard University carried out a study to explore the level of trust that people had in their leaders.

On a scale of 1(none at all), 2 (not much), 3(moderate amount) and 4 (great deal), they found the following.

- Only Military (3.15) and Medical (3.02) leaders managed to breach a score of 3.

- The worst sector for leadership was the press (2.26)

- Business leaders were 5th from the bottom at 2.75

Overall, 77% of Americans believed that the country is facing a crisis of leadership.

... and this was before the real crisis even surfaced !!! I shudder to think what results we will see if they were to carry out the same study this year.

Now, almost everything I've said so far is intuitive ... sad, but intuitive. What's not so intuitive, though, is the fountain of hope that drives followership in the world. Its the irrational, downright naive view that otherwise smart people take ... that the world and our leaders will be better in the future.

In the same Harvard study in 2007, when asked the question "Compared to today, do you think that 20 years in the future we will have better leaders or worse leaders?", a whopping 59% of respondents said 'better leaders'.

This is the cool-ade induced view that gives Barrack Obama a 68% confidence rating from the same American people who have just gone through 8 years of the worst president ever. Hope is not audacious, its just the only thing we have.

Something tells me that followership will be alive and well in the post-crisis era as well. We are simply 'eternal suckers' for a smooth voice, a message of hope and optimism, and a nicely tailored suit.