Bold Exec

Go Deep

CEOs must be broad in their approach: manage every functional area, integrate multifunctional decisions, and cover the waterfront. Even if done reasonably well, it’s insufficient. Relying on someone else’s (your management team) word isn’t good enough. To significantly amplify your impact in many ways, don’t just be horizontal; add a vertical dimension and: Go Deep.

Rubik's cube logic

Congress is considering significantly raising the cap (currently $75M), or completely removing it, for damages caused by oil spills. But some senators are against it saying that smaller oil companies wouldn't be able to compete. Is this a logic rubik's cube?

1. We want all drilling companies to make sure their wells are as safe as can be and that contingency plans are in place to handle mistakes (money doesn't assure attaining those conditions, but lack of money assures they're not). This takes a hunk of cash. Smaller drilling companies don't have a hunk of cash.

2. But we like competition; so let's cap the liability and at a low number, allowing smaller drilling companies to drill (but maybe with not enough cash to fund the highest and most costly safety procedures and capitalized contingency plans).

3. Now even the large well-capitalized companies, doing their economic trade-off calculations, therefore find an incentive to shave a bit on safety and contingency plans.

4. So now we've increased the probability of further environmental/economic disasters, from both small and large drilling companies.

5. And now the resulting more probable and huge resulting environmental/economic costs are borne almost exclusively by  various governments and tax-payers.

If i just spin this logic rubik's cube central plane one more time, surely the colors will all line up.

IT DOESN'T TAKE HINDSIGHT

Here's a short business test. Try it, it's not difficult. Suppose you have an extremely large revenue and profit project:; I mean extremely large. It's success will be of overwhelming importance to your company.  It utilizes really complicated technology in an extremely harsh environment, but others have done it and had no failures. Failure is seen to be of extremely, extremely low probability. However, a failure would be unprecedented in scope, and not only create a problem which threatens your entire company but the lives and fortunes of thousands of others as well. And you have no idea how to cope with such a failure. You face three choices (sorry, you'll have to click through to see those choices):

Unions and Government: Oil and Water

We must decide that organizing government employees is illegal, and that public labor unions must be abolished. Why? Because balance of power, or balance of will, does not exist. In a corporation, if management gives in too often over an extended period and resulting work rules, wages, pensions, and benefits choke the company, there are several potential outcomes to adjust and correct. Management, recognizing the company's financial limits, convinces the union that there have to be changes and an accord is reached to keep all entities alive. Or a bankruptcy court mandates a diminishment of some provisions of the labor contracts, as well as hacking into the rights of secured debt, unsecured debt, and equity holders. Or the company fails and everyone loses.

BK Lite

 GM, Chrysler, Citi, BofA, AIG--each faced three and only three clear choices; bankruptcy Chapter 7 (liquidation of assets--meaning shutting the company), bankruptcy Chapter 11 (reorganization--a laborious legal process in which all constituencies lose something on the prospect that the company can survive), or Government rescue. Most in the public and apparently many in government don't understand the difference between 7 and 11, believing that a company going into bankruptcy is kaput! As a result there was very little governmental will to have allowed an 11 bankruptcy. Instead, the third option, Government rescue, was applied without any regard--it seems--for the meaningful and useful provisions inherent in an 11 bankruptcy. Today i'll describe why BK Lite would have been a breakthrough for the government/auto industry, and next week the same for the government/financial industry.

Calibrate Your managers

By Going Deep (see last week) you’ll learn more about a specific project and make a more informed decision. That’s important: but not as important as using the process to Calibrate your Managers. You will gain invaluable insights on your managers to use in The Personnel Matrix (published in March, and graphically displayed to the left).

As you travel down the decision chain in the organization, you can assess the inputs, observation skills, biases, hidden agendas and conclusions each of your managers employed on this specific project. You will gain firsthand knowledge on what questions were asked, how each processed the inputs, how each analyzed gathered information, and whether their recommendation and decisions processes were valid. Did he provide exacting due diligence? Did she accurately report findings regardless of whether they were negative or positive? Did his biases or desires show up in the analysis? Were the organization’s best interests paramount? You’ll find stuff fairly or significantly different than what was presented. It should be relatively easy to determine whether the variance was (a): simply a varying point of view or a difference caused by new information that developed after the project was presented, (b) sloppy or haphazard analysis from laziness or lack of training, or (c) a conscious decision to make the project come out his or her way potentially in conflict with the organization's best interests. 

Now you can, in a highly informed way, answer these two questions that will feed into, and achieve clarity in the use of, the Personnel Matrix:

• Is the person capable, or not, of doing his/her specific job?
• Is their attitude appropriate, or not?

Bad Decisions No Decisions

In businesses in deep trouble, facing a hard turnaround, the necessity for making bold decisions and taking meaningful actions will be too obvious to ignore. The obvious risk of pending failure overwhelms the decision-risks. However in businesses with soft turnaround situations, although it may not be so obvious, making bold decisions and taking meaningful actions is also the correct course of action. Without doing so, a soft turnaround will one day become a life-or-death crisis.

I have found that in troubled companies, there has been as much or more damage from decisions-not-made (No Decisions) than from Bad Decisions. A backlog grows, inaction prevails, the troops are confused by a lack of direction, and management uses their time going in circles.

Perhaps revenues aren’t shrinking that quickly, or the company has “ridden out the rough patches” before, or the decisions are too difficult; subsequently the crisis never affects management’s attitudes. Decisions go unmade or are watered-down versions of what’s really needed. By definition this sinking organization isn’t used to making or even enabling good decision-making. They’ve practiced sloppy decision making, top-down decision-making that doesn’t require them to think or analyze, or zero decision-making. You’ll need input, observation and analyses generated from your mid-managers, but you’ll rightly be reluctant to rely upon them.  Although the decline or demise of an industry can create unsolvable problems, an organization’s wounds are often self-inflicted, resulting from management neglecting to:

• Determine what decisions are critical and organize a bold attack on each in order of importance.
• Know how to make those decisions in a way that is both wise and effective.
• Enlighten the organization as to why those decisions were made, thus creating a performance-oriented culture  that can achieve the desired outcome.

The result is a cacophony of bad decisions, a backlog of unmade critical decisions, and perhaps even some good decisions poorly implemented.

Many executives are ill-equipped for this task, and such a situation does present a challenge for even the most capable CEO. When you’re new on the scene at a company that has been mismanaged, you’ll inherit a backlog of pending decisions and will need to finalize many in short order. You’ll obviously want a good many of them to be directionally reasonable or even correct. There is only one prescription for this situation: make a list of those decisions that are important, set a timetable, use the most effective decision-making methods you can (see last week’s chapter on Industry Inexperience and next week’s chapter on Going Deep), and get on with it. Don’t worry over each decision, you’ll get some wrong; but going Northwest with vigor and clarity (see prior Chapter “Decisive Action Trumps Perfection”) is, regardless, the winning approach. Following is a story about the approach used for a company tangled in its underwear.

Industry Inexperience

Remember what I said last week. The personal behavioral characteristics of Industry Inexperience, when properly utilized, were for me and can be for you a strong asset. Yes, it’s against everything you’ve read, and yes, it flies in the face of how most corporations operate. I used my industry inexperience (remember in all my CEO stints, never twice in the same industry) it as a basis for encouraging new ideas, fresh attitudes, and organizational adaptations that provided the fuel for rejuvenation. Let’s discuss how to get the best decision making processes possible in place by substituting inexperience attitudes for your industry knowledge or experience-based ego.

Most new CEO’s feel they have to prove something to their new employees: “I know this, I’ve done that, I was successful in this industry by taking this approach, I have an MBA from XYZ with honors”. “Follow me, I know the answers”.  If they have run other companies in the same industry they exude stories of successes. If they haven’t, they present other credentials that let their employees know they’re really smart. It’s human nature; and it is highly counterproductive.

In most companies, individuals in the organization know the right answers, know the areas that need improvement, and have some insight into the good decisions, bad decisions or decisions not made. You need to tap into that knowledge base and there’s only one way to do it. Don’t be arrogant. Ask questions. Be willing to say you don’t know the answers even when you think you do. Be willing to ask what might be considered “dumb questions”. One of my favorites is to ask, “Why would anyone buy our product(s)? What product attributes or benefits do we present that others don’t? You would be amazed at some of the (non)answers. 

You’ll frequently get some meaningful insight. You’ll also get some nonsense inputs of course, but you’re the big guy: filter them out. The insights and respect you will gain from asking people’s opinions strongly outweighs the time it takes to do so. When you take the opposite tack, saying you know the answers, those inputs will dry up. And one other approach that helps gather inputs: choose an office that is on the main corridor, where many employees walk by and can see you at work or even drop in. Those hidden away corner exalted offices may be good for your ego but are not good for your career.

Introduction

Most managers newly arriving into a CEO position have a significant amount of industry, product, and market knowledge. Many who have been CEO’s of several companies have stayed within a certain industry and leveraged their specific industry experience from one company to the next. In either case their arrival may therefore be easily accepted: employees and other relevant constituencies can, at least initially, be impressed by the new CEO’s instant grasp of company and industry issues.

However no two companies in my experience base were in the same industry: in all cases I entered knowing virtually nothing about the specific business, products or markets. Yet every time, the end result was always positive--extremely positive. From this experience evolved three principles of decision making that (a) enabled the results I achieved, and (b) that will set you apart.

#1. The personal behavioral characteristics of Industry Inexperience, when properly utilized, were for me and can be for you a strong asset. Yes, it’s against everything you’ve read, and yes, it flies in the face of how most corporations operate. I used it as a base for new ideas, fresh attitudes, and organizational adaptations that provided the fuel for rejuvenation. Next week’s publication will give guidance on handling yourself in new managerial situations, and how to get the best decision making processes possible in place by substituting inexperience assets for your industry knowledge and experience ego.

#2. While many feel that companies get in trouble from management making Bad Decisions, more often their problems emanate from management not making decisions. A backlog—a large backlog—of unmade, usually difficult, decisions awaits. If an organization is in a situation that requires, say, four significant decisions a month, a poorly managed one will make one or two. Like water behind a dam, twenty or so need to be made immediately to prevent a flood. Setting a pace for decision-making, to enable you to get through the backlog, is the subject of the second entry in Decision Making in the Real World.

#3. Going Deep is imperative; it allows you to tackle the decision-making problem in the short-term with widespread and long-term effects. The benefits of Going Deep are amazing. Although on just the one decision at hand you’ll make a better decision, you will also tune up the organization, gain respect, and be able to assess your managers in a way that otherwise would never happen. Given all these benefits, you can’t afford not to Go Deep!

Tune in to the next three weeks for Industry Inexperience, Bad Decisions No Decisions, and Going Deep.

Decision Making Summary

Decision making is an art and a science. Decisions need not only be mostly correct, but have to be done in a timely fashion, using the best of the organization’s skills in the process, incorporating a buy-in along the way, strengthening the organization in the process, and creating effective results.  The old adage of “making more than 50% correct” is, well, old and a recipe for failure. Topics: Industry In-experience, Bad Decisions, No Decisions; Going Deep; Calibrating Your Managers; Hands-on CEO’s; The CEO’s Guide to Decision Making in the Real World. To be published 3Q07.