5 Keys to Inspiring Leadership, No Matter Your Style

Forget the stereotypical leadership image of a buttoned-up person in a gray suit hauling around a hefty briefcase. Today, standout leaders come in all shapes and sizes. She could be a blue jeans-clad marketing student, running a major ecommerce company out of her dorm room. He might be the next salt-and-pepper-haired, barefoot Steve Jobs, presenting a groundbreaking new device at a major industry conference.

"Our research indicates that what really matters is that leaders are able to create enthusiasm, empower their people, instill confidence and be inspiring to the people around them," says Peter Handal, chief executive of New York City-based Dale Carnegie Training, a leadership-training company.

That's a tall order. However, as different as leaders are today, there are some things great leaders do every day. Here, Handal shares his five keys for effective leadership: 

1. Face challenges.

Great leaders are brave enough to face up to challenging situations and deal with them honestly. Whether it's steering through a business downturn or getting struggling employees back on track, effective leaders meet these challenges openly. Regular communications with your staff, informing them of both good news and how the company is reacting to challenges will go a long way toward making employees feel like you trust them and that they're unlikely to be hit with unpleasant surprises.

"The gossip at the coffee machine is usually 10 times worse than reality," Handal says. "Employees need to see their leaders out there, confronting that reality head-on." 

2. Win trust.

Employees are more loyal and enthusiastic when they work in an environment run by people they trust. Building that trust can be done in many ways. The first is to show employees that you care about them, Handal says. Take an interest in your employees beyond the workplace. Don't pry, he advises, but ask about an employee's child's baseball game or college graduation. Let your employees know that you're interested in their success and discuss their career paths with them regularly.

When employees, vendors or others make mistakes, don't reprimand or correct them in anger. Instead, calmly explain the situation and why their behavior or actions weren't correct, as well as what you expect in the future. When people know that you aren't going to berate them and that you have their best interests at heart, they're going to trust you, Handal says. 

3. Be authentic.

If you're not a suit, don't try to be one. Employees and others dealing with your company will be able to tell if you're just pretending to be someone you're not, Handal says. That could make them question what else about you might be inauthentic. Have a passion for funky shoes? Wear them. Are you an enthusiastic and hilarious presenter? Get them laughing. Use your strengths and personality traits to develop your personal leadership style, Handal says. 

4. Earn respect.

When you conduct yourself in an ethical way and model the traits you want to see in others, you earn the respect of those around you. Leaders who are perceived as not "walking their talk" typically don't get very far, Handal says. This contributes to employees and other stakeholders having pride in the company, which is an essential part of engagement, Handal says. Also, customers are less likely to do business with a company if they don't respect its values or leadership. 

5. Stay curious.

Good leaders remain intellectually curious and committed to learning. They're inquisitive and always looking for new ideas, insights and information. Handal says the best leaders understand that innovation and new approaches can come from many places and are always on the lookout for knowledge or people who might inform them and give them an advantage.

"The most successful leaders I know are truly very curious people. They're interested in the things around them and that contributes to their vision," Handal says.

Gwen Moran

Gwen Moran is a freelance writer and co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010).

How The Most Successful People Think Differently To Solve Their Biggest Challenges

Paul B. Brown, Contributor

Invariably, when presenting a new approach to solving problems, authors, pundits and commentators go to great lengths to “prove” why everything that existed before they presented their argument has been a waste of time.

That’s just silly. 

You know why people attack everything that has come before. We live in a hyper-competitive environment when it comes to getting someone’s attention and so if you have something new, you may feel compelled to come up with a gimmick such as “everything you know is wrong” in order to get people’s attention.

We understand why they do this, because it would have been extremely tempting to go down this road ourselves.

We have developed a proven approach to dealing with uncertainty in all forms, i.e. what you should do when you don’t know what to do. 

We know it works because it is the same approach that the people who are masters at dealing with uncertainty—successful serial entrepreneurs—use. (There is nothing more uncertain than starting a business, and serial entrepreneurs are masters at it.)

The clichéd image of entrepreneurs coming up with an idea, laboring feverishly to perfect it, and delivering their creation to the market fully-formed is not what usually happens. The much more typical path is that they come up with an idea. They take a small step toward implementation to see if anyone is interested, and if it looks like some people are, they take another step forward. If they don’t get the reaction they want, they regroup and then take another step in a different direction.

In other words, they:

• Act.
• Learn (from that action)
• Build (off that learning)
• Repeat, i.e. they act again.

That cycle continues repeats until the entrepreneur succeeds, knows she is not going to, or decides there is another, more appealing opportunity to pursue. As we said, the approach serial entrepreneurs use when faced with the unknown (starting a business) will work for you when you face the unknown of any kind.

So, does this mean you should scrap your traditional ways of problem solving?
 
Absolutely not.

You shouldn’t use this approach exclusively. The way we all were taught to solve problems that are predictable—how do we introduce our existing product into an adjacent market; how many refrigerators will we sell during a recession—works just fine. You have historical precedents and data to draw on.

When you do, predict away.

When you don’t, try what we are advocating. It gives you an additional tool. It does not replace the ones you have.

We concede presenting a new idea this way is far less dramatic then screaming “EVERYTHING YOU KNOW IS WRONG.”

But it is honest, the process has been proven, and it should be helpful.

Paul B. Brown is the co-author (along with Leonard A. Schlesinger and Charles F. Kiefer) of Just Start: Take Action; Embrace Uncertainty and Create the Future recently published by Harvard Business Review Press.

How The Most Successful People Think Differently To Solve Their Biggest Challenges

Paul B. Brown, Contributor

Invariably, when presenting a new approach to solving problems, authors, pundits and commentators go to great lengths to “prove” why everything that existed before they presented their argument has been a waste of time.

That’s just silly. 

You know why people attack everything that has come before. We live in a hyper-competitive environment when it comes to getting someone’s attention and so if you have something new, you may feel compelled to come up with a gimmick such as “everything you know is wrong” in order to get people’s attention.

We understand why they do this, because it would have been extremely tempting to go down this road ourselves.

We have developed a proven approach to dealing with uncertainty in all forms, i.e. what you should do when you don’t know what to do. 

We know it works because it is the same approach that the people who are masters at dealing with uncertainty—successful serial entrepreneurs—use. (There is nothing more uncertain than starting a business, and serial entrepreneurs are masters at it.) 


The clichéd image of entrepreneurs coming up with an idea, laboring feverishly to perfect it, and delivering their creation to the market fully-formed is not what usually happens. The much more typical path is that they come up with an idea. They take a small step toward implementation to see if anyone is interested, and if it looks like some people are, they take another step forward. If they don’t get the reaction they want, they regroup and then take another step in a different direction.

In other words, they:

• Act.
• Learn (from that action)
• Build (off that learning)
• Repeat, i.e. they act again.

That cycle continues repeats until the entrepreneur succeeds, knows she is not going to, or decides there is another, more appealing opportunity to pursue. As we said, the approach serial entrepreneurs use when faced with the unknown (starting a business) will work for you when you face the unknown of any kind.

So, does this mean you should scrap your traditional ways of problem solving?
 
Absolutely not.

You shouldn’t use this approach exclusively. The way we all were taught to solve problems that are predictable—how do we introduce our existing product into an adjacent market; how many refrigerators will we sell during a recession—works just fine. You have historical precedents and data to draw on.

When you do, predict away.

When you don’t, try what we are advocating. It gives you an additional tool. It does not replace the ones you have.

We concede presenting a new idea this way is far less dramatic then screaming “EVERYTHING YOU KNOW IS WRONG.”

But it is honest, the process has been proven, and it should be helpful.

Paul B. Brown is the co-author (along with Leonard A. Schlesinger and Charles F. Kiefer) of Just Start: Take Action; Embrace Uncertainty and Create the Future recently published by Harvard Business Review Press.

Traits of a Motivated Leader

If there is one trait that virtually all effective leaders have, it is motivation – a variety of self-management whereby we mobilize our positive emotions to drive us toward our goals. Motivated leaders are driven to achieve beyond expectations – their own and everyone else’s. The key word here is achieve.

Plenty of people are motivated by external factors, such as a big salary or the status that comes from having an impressive title or being part of a prestigious company. By contrast, those with leadership potential are motivated by a deeply embedded desire to achieve for the sake of achievement.

If you are looking for leaders, how can you identify people who are motivated by the drive to achieve rather than by external rewards?

The first sign is a passion for the work itself. Such people seek out creative challenges, love to learn, and take great pride in a job well done. They also display an unflagging energy to do things better. People with such energy often seem restless with the status quo.

They are also eager to explore new approaches to their work. A cosmetics company manager, for example, was frustrated that he had to wait two weeks to get sales results from people in the field. He finally tracked down an automated phone system that would remind each of his salespeople at 5 pm every day to punch in their number to show how many calls and sales they had made. The system shortened the feedback time on sales results from weeks to hours.

That story illustrates two other common traits of people who are driven to achieve: they are forever raising the performance bar, and they like to keep score.

Take the performance bar first. During performance reviews, people with high levels of motivation might ask to be “stretched” or challenged by their superiors. Of course, an employee who combines self-awareness with internal motivation will recognize her limits, but she won’t settle for objectives that seem too easy to fulfill. And it follows naturally that people who are driven to do better also want a way of tracking progress – their own, their team’s, and their company’s.

Whereas people with low achievement motivation are often fuzzy about results, those with high achievement motivation often keep score by tracking such hard measures as profitability or market share. Interestingly, people with high motivation remain optimistic even when the score is against them. In such cases, self-regulation combines with achievement motivation to overcome the frustration and depression that come after a setback or failure.

Daniel GolemanInfluencer

Executives’ Biggest Productivity Challenges, Solved

Robert Pozen knows a little something about thriving at the top — he’s the former chairman of MFS Investment Management, a senior lecturer at Harvard Business School, and the author of the book Extreme Productivity. I recently asked him about how demands on executives — and CEOs in particular — have changed over the years, and how today’s leaders can best navigate their busy days. An edited version of our conversation is below. 

What are the most pressing productivity issues executives are facing today, and how can they tackle them?

For executives who aren’t part of the C-suite, I think the two most pressing issues are meetings and email. They consume a ridiculous amount of people’s time, and a lot of it isn’t well spent. But they’re both solvable problems.

On email, my suggestions are pretty simple. First, don’t look at it every minute; look at it every hour or two. Second, try to discipline yourself to read only the subject matter in order to discard 50% to 80% of your emails right away. We all get so much spam. Third, practice what I call “OHIO” — Only Handle It Once, immediately deciding what to do with each email. Concentrate on the emails that are important and answer them right away. And don’t put them into some sort of storage system, because by the time you’re ready to finally tackle them, you’ll spend another half an hour trying to find them.
As to meetings, I’ve really been clear in my book about what makes a good meeting. First, you ought to have the materials and agenda sent out in advance. Second, the person who’s presenting the issues should speak for a short amount of time, 10 or 15 minutes, and not consume the whole meeting.

 Third, you need to have a real discussion and debate. Fourth, you should end the meeting with clear to-do’s — what are the next steps, who’s going to follow through on them, what are the time frames?

And fifth, you should end the meeting at the very latest in 90 minutes, and try for 60 minutes.

But there are slightly different issues CEOs and the C-suite are facing, right?

A lot of the critical issues that I see from advising CEOs, and being one myself, stem from how to allocate your time.

There are two classic errors CEOs make. One, they often schedule their whole day up, every hour and every day. I believe you need to leave time — an hour in the morning and an hour in the afternoon — for thinking, and for things that come up, for emergencies.

And the other error, which is much more fundamental, is that many CEOs are asking themselves the wrong question: since four main functions need to be done, who’s the best at doing them? Many top executives often come up with the same answer in all four areas: Me, me, me, and me. Which leaves them with a lot to do.

But the better question is, what can I and only I as a CEO do? That’s a very different question.

For instance, CEOs might have come from the advertising or marketing side of the company, so they may be very well the best person to put together a new ad campaign, in terms of skill set. But that’s not a good use of their time, because it’s a very delegable task. On the other hand, if a company executive has to meet with a top regulator, the CEO may be the only person that has the clout to get the meeting. Or if someone needs to deal with the board, the CEO may be the only one who can do this effectively.

It is imperative that CEOs make the best use of their time — their scarcest resource. But many CEOs wind up spending huge amounts of time doing things that are really delegable and not enough time on the things that are really critical to being the CEO.

You’ve been analyzing this topic for a long time, both as an academic and as an executive. What big changes have you seen over time?

A lot of the same issues continue to be there; the crucial difference is technology. And technology is both a big positive and a big negative. It’s a big positive in the sense that now you can, as a CEO, use your time very efficiently. That is, you can speak to people by phone from almost anywhere. You can get information instantaneously — CEOs can accomplish a huge amount from the back of the car.

On the other hand, because it’s so easy for people to reach you, it’s hard to have thinking time. And if you let yourself be a person who is giving detailed directions all the time, your reports are going to ask you for directions all the time.

So it’s about setting up boundaries.

Yes. Before a lot of this technology, you could be a little sheltered. Now there aren’t any constraints on the amount of information you can be sent or the number of people who contact you, or where you can go quickly. That’s the negative part of technology. The potential is there for you to go everywhere, try to read everything, and be totally overwhelmed.

What are other coming challenges you see, aside from technology?

Almost all companies have gone global. In the large companies, many derive 50% of the revenues from abroad. And even in smaller companies, they have to export. Doing business globally requires a very different skill set than distributing domestically.

But there are many executives who are very U.S.-centric. They really haven’t spent much time overseas. Being a leader today requires that you have lived overseas, or have spent a lot of time overseas.

So how do you handle the demands of international business travel?

You as the CEO actually have to show up at your high value-added offices around the world. And that takes a lot of time and effort. When I was running Fidelity’s investment arm, we had offices in London, Tokyo, and Hong Kong. We also had distribution offices all over the place.

I tried to visit, at least once a quarter, those investment offices because they housed our prized contributors: portfolio managers and analysts. They needed to meet me regularly and have a chance to talk through issues. When you run a global operation, it’s hard to maintain a global esprit and an integrated approach. And the CEO has an important role in leading those.

And what about the relationship with their board?

The nature of corporate boards has changed significantly over the last 20 years. When I joined my first board over a decade ago, a friend called me up and said, “We need an American on our board, would you consider it?”

I said “sure.” He sent me some material on the company and told me that the CEO was coming to town in a few weeks and asked if I would have dinner with them. So this director and the CEO and I had dinner. At the end of the dinner, the CEO asked, “OK, are you ready to join the board?”

By contrast, when I joined the Medtronic board, the lead independent director came to my office and interviewed me first. Next I had to meet with a number of the independent directors on the governance committee, and then, at the end, I saw the CEO. It is probably true that if the CEO really hated me, the board might not have gone forward, but I was 90% on board before seeing the CEO.

Now CEOs have shorter tenures than they used to, and the notion of the imperial CEO is no longer accepted by most directors. They want a much higher level of accountability and a much higher level of transparency. And the CEO who doesn’t realize that has probably made a bad career decision.

With these shorter tenures, how can CEOs deal with the inherent pressures that go along with them?

I believe that being a CEO is a lonely existence, so I think CEOs need personal coaches — preferably somebody who’s been a CEO — to help with overall strategic thinking and also somebody just to talk with about company matters.  A CEO really can’t talk openly to anybody else in the company.

If being a CEO is increasingly lonely, how should CEOs sort of seek and maintain connections with family and friends, especially when they’re so busy?

Families are very important, so CEOs should carefully protect their family time. It’s easy to say, “Oh, I cannot possibly get home on most business days until 10 p.m.” The demands on the time of most CEOs are so great that they easily do that. But I insisted on getting home to eat dinner with my wife and children at 7:00 p.m. and to share two or three hours of quality time.

Family time is critical. If 10 years later your kids are grown up and you haven’t really spent much time with them, there is no way to recapture those years. Moreover, family dinners were healthy mental breaks for me. There were many times when I was struggling with a difficult problem, stopped thinking about it for three hours at dinner, and then suddenly the answer would hit me.

So what should — and shouldn’t — executives do when they get home?

You don’t want to come in the door, and then immediately receive phone calls or answer your email. Before I walk in the door, I will literally sit in my car and finish all my emails and all my phone calls; I won’t walk in the door until I’m out of work mode.

If you come home for dinner, and immediately get a phone call or start checking your email, then you really undermine the notion of “quality family time.” In the end, you will retire from your business, but your family is forever.

Gretchen Gavett

Gretchen Gavett is an associate editor at the Harvard Business Review.

What It Takes to Lead

Challenges for the New Private Equity CEO

Eric Leventhal 

Division presidents of large, multinational companies almost unanimously aspire to CEO roles. These executives often see private equity as a compelling career path, complete with autonomy, the opportunity to prove their leadership and a chance to create significant value and wealth. Private equity firms are attracted to the leadership, training and track record of these executives, but typically view untested CEOs with skepticism. How, then, do we match up the “supply” with the “demand” for this talent, and more specifically, how can the “readiness” of portfolio company CEO candidates be determined? 

 

To further explore the concept of first-time CEO readiness in a private equity environment, we spoke with experienced portfolio company CEOs and private equity partners about the key success factors. While firms have different strategies and philosophies about what works and what doesn’t, we found common ground on several broad themes: 

• Doing more with less
• Investing in the right team — early
• Working with the board
• Finding the right CFO 

Doing more with less

Executives with leadership experience at large companies can be attractive candidates for private equity because of the depth of their industry and customer knowledge, leadership training and understanding of core business and branding principles, all of which are transferable to a portfolio company CEO role. Despite these apparent strengths, excelling as the president of a $2 billion division of a public company does not automatically prepare an executive for the range of financial, business and talent issues inherent in running a $250 million portfolio company.

“The CEO has to be the visionary, the one who has the vision for how to expand the business, and is the primary business developer for the company, capabilities not all division leaders have had to develop,” said David Moross, chairman and CEO of Falconhead Capital. In addition to driving the strategic plans for the business, the CEO must motivate the organization to achieve short-term results. The CEO needs to wear bifocals, striking the right balance between disciplined cash management to meet today’s goals and making progress on the priorities that will build long-term value for the business, said Bill Toler, former CEO of AdvancePierre Foods. “You have to make Friday’s payroll while you’re reinventing the future.”

Executives from a corporate background also have to adjust to a different pace and set of expectations than they may have been used to in previous leadership roles. The division head who had to focus on achieving 2 percent or 3 percent growth while managing costs in his last role suddenly faces the expectation that he will double the size of the business in three to five years. Achieving those objectives requires a sense of urgency and entrepreneurship and the ability to simultaneously juggle a diverse set of priorities.

“There are four or five important initiatives in play at once. It’s not only a question of making the budget; it’s making a key acquisition happen, making strategic decisions to change the trajectory of the business, hiring key people in critical new development areas, and rebuilding the organization and the culture to be more effective. It is a very different rhythm of life than making sure you deliver the numbers to the CEO’s office of a big public company,” said Tim Palmer, managing director of Charlesbank Capital Partners.

Given the risks of hiring a first-time portfolio company CEO and the urgency in getting the company quickly on track, what gives investors confidence that a candidate can make the transition?

In addition to an impressive track record of driving growth, private equity partners say they look for tolerance for change, especially experience moving from a “big” environment to a “small” environment, where results had to be achieved without extensive resources.

Autonomy in previous business settings, including broad functional responsibility, as well as a willingness to take risks throughout his or her career also are indicators of the ability to transition.

Another valued trait is the confidence to run the business as if it is his or her own company, said Keith Miller, a partner with Goode Partners. “The CEO needs to understand that he’s here to run the business as though it’s his own. We’re here as guardrails. We have no interest in running the company, but want to provide the necessary resources where they may be lacking, even if that means helping to identify deficiencies.”  

Investing in the right team — early 
Success in private equity requires a small, talented and highly focused team supporting the CEO, and building the right team early in the investment lifecycle is a lesson many experienced private equity CEOs said they learned after under-hiring for a fast-growth company.

“The depth and quality of people, processes and systems is always different when you move to a smaller private equity company from a bigger corporate environment.

Understanding that and making the changes necessary to elevate talent and processes is critical to long-term success,” said Toler. AdvancePierre, for example, was formed through a roll-up of several smaller companies; legacy executives who might thrive in a stand-alone business may not have the skills to manage it as it grows rapidly by acquisition. “The processes, people and skills that made each of these small companies very successful aren’t the ones that will enable a $2 billion company to operate effectively.”

Paul Nardone, an operating partner with Sherbrooke Capital who successfully scaled and sold three private equity portfolio companies to strategic buyers, said he learned from experience to prioritize hiring executives sophisticated enough to manage a rapidly growing business. “I initially thought too frugally and too narrowly about the kinds of people that I recruited for my management team; I was thinking like a boot-strap entrepreneur, trying to stretch directors into VPs, and I learned a lesson. Some just couldn’t keep pace with the business, and some didn’t meet the requirements of our private equity investor,” he said.

“You certainly have to think big and think aggressively when a private equity group is involved in your business, because that’s what they want you to do, and you need people who can be successful in each stage of the business.” 

Be aggressive in stepping up the quality of talent in advance of growth, and be willing to over-hire for critical roles based on the intended end game for the investment, experienced CEOs recommend. “We have a strategic and tactical plan for every one of our portfolio companies that gets developed while we’re going through the due diligence process. We have an operating-centric approach at the partner level, so the plan is developed by the actual partners who will work directly with the entrepreneur or family in whose business we are investing. That plan is critical for determining whether the company has the people necessary to tactically carry out the strategy,” said Keith Miller. 

Like the CEO, executives in a portfolio company have to be willing to be “doers” and not just leaders. “When you have limited resources, you have to make sure you’re hiring complementary and supplementary skills to the team; not duplicative,” said Jane Miller, CEO of Charter Baking. “You need people to actually roll up their sleeves and do the work.”  

Working with the board 
How to work with and leverage the board of directors was the most universal (and emphatic) theme discussed among CEOs and private equity partners. While they may have interacted with boards in prior roles, reporting to and, more specifically, working with a private equity board requires the development of an entirely new set of “muscles” for most first-time CEOs.

The most obvious new dynamic is that a private equity company’s board typically consists of financial sponsors (i.e., owners), and one to three additional outside directors with relevant operating experience in the best case scenario. The observation made by several financial sponsors is that, either through lack of confidence or over-confidence, first-time CEOs felt the need to bring fully developed plans and presentations to the board — rather than engaging directors on key strategic and operational issues.

The best CEOs are comfortable with a give-and-take with the board and investors, and treat them as partners in the business. 

“They want to hear about things early, and they want to hear about them often. That was the key to success with all of my investors. People really appreciate when they think you’re getting out way ahead of something and giving them an opportunity to weigh in,” said Nardone. “Too many people approach working with private equity investors as managing information and want to release information in a polished board environment. I approached it that way myself the first time and approached it very differently the next two times. I just concluded that this is a true partnership and I’m going to leverage these folks to make all of our jobs a little bit easier. That has proven to be much more successful.” 

A clearly articulated strategic plan helps build and maintain alignment between the CEO and the investors. This plan, alternatively referred to as a strategic roadmap or value creation plan, was universally discussed across all of our interviews, and was described as helping to provide a “True North” for where the CEO and board want to take the business. Nardone talked about working with his board to think ahead and figure out what, specifically, they want to be able to say in their presentation to strategic buyers at the end of the investment horizon—and, with that end in mind, develop a roadmap to get to that desired outcome.

The cadence and content of communication between a CEO and board varied, but generally speaking in addition to standard weekly calls and quarterly reporting and meetings, several CEOs reported having near-daily conversations with the lead sponsor on topics ranging from M&A, cash flow, business performance and longer-term capital expenditures. 

“It requires more confidence rather than less to be that open with the board. You want to engage the board in strategy, that’s really where the board wants engagement. You want to engage them in organization and people. Acquisitions are important for most of them. My advice is to be transparent, be early and have an informed point of view about the action plan,” said Bob Caulk, operating partner and former CEO of Spectrum Brands.

Investors expect the CEO to map out a calendar of topics to be reviewed at board meetings, well in advance. These topics should match the cycles of the business — strategic planning, operating planning, budget-setting; be mindful of deadlines and anticipate what the board will want to talk about. 

Experienced portfolio company CEOs say first-time CEOs benefit from having a formal or informal mentor on the board, especially for the first year or two. The mentor can be the operating partner or another director with whom the CEO has some chemistry, but ideally the individual is someone who has a broad point of view on the investor side as well as operating knowledge and skills. 

Five things CEOs wished they knew before their first portfolio company role 

Understand how private equity works. The fundamentals of how a fund raises money, its inner workings and hierarchy, and its politics all can affect how the firm interacts with your business. Are the partners distracted by other deal activity? Is there another portfolio company in trouble that might change the way the firm works with your business? Also, understand the deal structure and the implications of the structure. How much has the firm already invested in the business? How much capital is left for acquisitions or other capital spending? What’s the approval process for gaining access to those funds?

Understand how the private equity sponsor will interact with the business. Experienced CEOs said working with private equity is much easier when you know the players in the firm and how they interact with the company: who does the work inside the firm, who’s paying attention on conference calls, who to call in advance of a board meeting and who to follow up with after the meeting. 

The depth and quality of people is almost always different. Recognize and address gaps in capabilities and processes early on, based on the strategy and exit plan for the business.

Manage expectations. Don’t be overly optimistic about the time frame for turning around the business. Expect that not everything will go as planned. As one CEO cautioned, “If you say it’s going to take three to five years to turn around the business, and it gets done in three-and-a-half years, you’re a hero. If you say it’s going to take two or three years, and you get it done in three-and-a-half, you’re in trouble.”

It’s OK to say you don’t have all the answers. Most first-time portfolio company CEOs are reluctant to admit that they don’t have the solution to every problem, but CEOs who have been through the process say they learned to engage the board on the toughest challenges. Seeking advice and ideas from the board when challenges arise often can result in surprising and successful solutions.  

Finding the right CFO 

The portfolio company CFO has an important and multifaceted role, serving as a partner to and proxy for the CEO and a bridge from the business to the private equity firm. The CFO has to speak the language of the investors and be aligned completely with the CEO. While the specific capabilities a company needs in its CFO will vary depending on the strengths, weaknesses, size and complexity of the business, a portfolio company CFO has to have exceptional technical finance skills, a willingness to dive into the details and strong communication skills.

“You want someone with high intellectual capacity. You want the kind of CFO who is able to articulate better than anybody, including possibly the CEO, the drivers of the business and how the business is doing,” said Palmer. “You want a strategic business partner who understands the business at an instinctive level; that’s very valuable for a CEO.” 

Caulk, who has been on both the management and sponsor sides of private equity investments, agreed. “The CFO is probably the most important position other than the CEO. The CFO has to have the CEO’s back because there is a lot that happens that the CEO may not see, feel or touch, both inside the company and with the private equity investors.

The CEO needs a CFO who is completely open and transparent with him or her and who not only understands the numbers but can be part of the strategic brain trust.” 

Financial sponsors look to the CFO of portfolio companies to be the key conduit of information to the private equity firm. Analysts at the firm talk to the CFO all the time; they have to know the numbers inside and out. Sometimes public bonds are used to finance the company, so CFOs also have to know how to deal with public investors. In short, the CFO has to have the confidence of the CEO and the private equity firm.

However strong the CFO, most private equity firms expect the CEO to have a firm grasp on all of the financial matters of the business as well; and it can be a red flag for investors if the CEO appears to be relying too heavily on the CFO for the financial details. 

Five things PE investors look for in CEOs 

> Imagination and vision
   But also the ability to balance vision with short-term results 
> Self-confidence and conviction
   But also humility 
> Ability to think and plan
   But also a bias toward calculated risk 
> Work ethic; flexibility
   Multitasking; dealing with ambiguity 
> Self-starter
   Highly autonomous operating experiences (as proxy for CEO role) 

Conclusion 

First-time portfolio company CEOs, particularly those who have spent their careers in the corporate world, can potentially get a slower start with their first private equity assignment if they are not aware of and focused on important differences in leadership and communication requirements. Managing in a high-intensity environment with fewer human and financial resources than they are used to requires “muscles” that are not necessarily developed in a corporate setting. First-time CEOs also must get comfortable with the financial sponsor as a partner in the business. Firms that understand the potential pitfalls and provide the necessary support will be in a better position to help first-timers through these challenges.

Don Yaeger: How Little Details Can Solve Big Challenges

 

Try to dissect why a great team wins a championship and you’ll quickly see it’s all about the moving parts. Can the offense use speed and timing to score frequently? Can the defense make the necessary adjustments to get the job done? Can every player on the team remember their own responsibilities and execute their tasks when needed? It’s fascinating to see how independent assignments can influence the collective success or failure of the team.

This month, a lot of national attention was placed on a plaque inside the football locker room at the University of Notre Dame that insinuated an easy return trip to college football’s BCS National Championship game. But I will tell you there’s another sign in the Fighting Irish locker room worth examining.

There is a poster that instructs players specifically how to keep their respective areas. It includes a detailed description of where the cleats should be placed, how the knee and ankle braces should be hung, and even where the practice jersey should drape within the locker. Each player is required to consistently arrange his locker as diagramed on the poster.

For me, the significance of this poster is an absolute of how great teams and successful businesses are able to take the step from good to great; they simply pay attention to the little details.


By establishing such a thorough locker room protocol, the Notre Dame players have taken a few minor decisions off the board. The time wasted trying to find equipment needed for success can now be used for bigger tasks and making decisions that could prove pivotal in achieving greatness.

By instilling such a simple yet detail-oriented procedure, Notre Dame head coach Brian Kelly was able to make it easier for his players to do what’s expected of them. He was able to unlock more time for his team to focus on being better players. He was able to build a structure that showcased unity, discipline and an attention to detail.

What if an assembly line at an automobile plant didn’t have a well-devised procedure? What if the nuts & bolts worker wasn’t as efficient at following protocol as the wheels and tires guy? The overall product is still viewed as faulty, regardless of which moving part actually failed during the assembly.

Every successful business has moving parts. The Great ones understand that their final product relies heavily on the attention to detail at the beginning stages. By creating a simplified procedure, great leaders emphasize that the little things are just as important to the overall success as the bigger items. Once that becomes part of the culture, it makes working on the bigger tasks much more effective.

What routine do you follow consistently that adds value to your own productivity? What little detail can you tackle today that could make your bigger challenges run more smoothly?

5 Keys to Inspiring Leadership, No Matter Your Style

Forget the stereotypical leadership image of a buttoned-up person in a gray suit hauling around a hefty briefcase. Today, standout leaders come in all shapes and sizes. She could be a blue jeans-clad marketing student, running a major ecommerce company out of her dorm room. He might be the next salt-and-pepper-haired, barefoot Steve Jobs, presenting a groundbreaking new device at a major industry conference.

"Our research indicates that what really matters is that leaders are able to create enthusiasm, empower their people, instill confidence and be inspiring to the people around them," says Peter Handal, chief executive of New York City-based Dale Carnegie Training, a leadership-training company.

That's a tall order. However, as different as leaders are today, there are some things great leaders do every day. Here, Handal shares his five keys for effective leadership: 

1. Face challenges.

Great leaders are brave enough to face up to challenging situations and deal with them honestly. Whether it's steering through a business downturn or getting struggling employees back on track, effective leaders meet these challenges openly. Regular communications with your staff, informing them of both good news and how the company is reacting to challenges will go a long way toward making employees feel like you trust them and that they're unlikely to be hit with unpleasant surprises.

"The gossip at the coffee machine is usually 10 times worse than reality," Handal says. "Employees need to see their leaders out there, confronting that reality head-on." 

2. Win trust.

Employees are more loyal and enthusiastic when they work in an environment run by people they trust. Building that trust can be done in many ways. The first is to show employees that you care about them, Handal says. Take an interest in your employees beyond the workplace. Don't pry, he advises, but ask about an employee's child's baseball game or college graduation. Let your employees know that you're interested in their success and discuss their career paths with them regularly.

When employees, vendors or others make mistakes, don't reprimand or correct them in anger. Instead, calmly explain the situation and why their behavior or actions weren't correct, as well as what you expect in the future. When people know that you aren't going to berate them and that you have their best interests at heart, they're going to trust you, Handal says. 

3. Be authentic.

If you're not a suit, don't try to be one. Employees and others dealing with your company will be able to tell if you're just pretending to be someone you're not, Handal says. That could make them question what else about you might be inauthentic. Have a passion for funky shoes? Wear them. Are you an enthusiastic and hilarious presenter? Get them laughing. Use your strengths and personality traits to develop your personal leadership style, Handal says. 

4. Earn respect.

When you conduct yourself in an ethical way and model the traits you want to see in others, you earn the respect of those around you. Leaders who are perceived as not "walking their talk" typically don't get very far, Handal says. This contributes to employees and other stakeholders having pride in the company, which is an essential part of engagement, Handal says. Also, customers are less likely to do business with a company if they don't respect its values or leadership. 

5. Stay curious.

Good leaders remain intellectually curious and committed to learning. They're inquisitive and always looking for new ideas, insights and information. Handal says the best leaders understand that innovation and new approaches can come from many places and are always on the lookout for knowledge or people who might inform them and give them an advantage.

"The most successful leaders I know are truly very curious people. They're interested in the things around them and that contributes to their vision," Handal says.

Gwen Moran

Gwen Moran is a freelance writer and co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010).

Your Optimism Might Be Stifling Your Team

By: Liz Wiseman

I admit that I'm prone to an optimistic outlook, a belief that most problems can be tackled with hard work and the right mindset. I've read the research that indicates that positive thinkers tend to do better in school, work and life. Perhaps I even assumed that optimism was infectious and that people wanted to work with a confident, hopeful leader. In the true spirit of optimism, how could this possibly go wrong?

Then I found out from a colleague that he didn't find my optimism nearly as reassuring as I did. We were in the middle of a high-stakes research project with a small window of opportunity to write an article for a prominent academic publication. To pull this off, we needed to complete a complex analysis, do a round of additional research, and actually write the article, all while working on several other projects and operating on a thin budget. 

To me, this seemed like a feasible, interesting challenge, and I enthusiastically dove in. Then at one critical meeting, a more junior colleague turned to me and said, "Liz, I need you to stop saying that!" 

"Saying what?" I asked. 

"Saying that thing you always say — 'How hard can it be?'" I looked puzzled. He explained, "You say that all the time. 'How hard can it be? We can do this. After all, how hard can it be?'"
I recognized what he was saying and began to explain my logic: While I was working for Oracle Corporation, a small but rapidly growing company, I had been thrown into management at the tender age of 24 and was told that I was now in charge of training for the entire company and was tasked with building Oracle University and making it work in globally. I learned to say to myself, "We can do this. After all, how hard can it really be?" Now, I explained how this growth mindset had worked beautifully for me and many of my colleagues over the years. Yet steadfast, my colleague reiterated, "Yes, but that is what I need you to stop saying." 

"But why?" I probed. 

He paused and said, "Because what we are doing is actually really hard, and I need you to acknowledge that."

He wasn't opposed to the idea that our enormous task was doable; he simply wanted me to acknowledge the reality of the challenge and recognize his struggle. He didn't want me glossing over the challenge with my coat of optimism. So I did admit, "Yes, what we are doing is hard. It is really, really difficult." I then assured him that I would do my best to stop saying that thing.

Meanwhile, in the back of my mind I told myself "Sure, I can stop saying that. After all, how hard can it be?" 

Is it possible that a can-do attitude that worked so well for you as an individual contributor may actually work against you as a leader? When you play the role of the optimist, you may undervalue the struggle the team is experiencing or their hard-fought learning and work (or give the impression that you do). Your staff may wonder if you have lost your tether to reality. And, when a leader seldom focuses on the problems, it leaves more junior managers to worry about those risks. In fact, by being too optimistic, you may actually be putting your employees in the role of having to play the "sensible pessimist." Or worse, you might be sending a message that mistakes and failure are not an option because, after all, "How hard can it be?" And yet wise managers know that mistakes are inevitable, and that failure is just the price of creativity. 

Having coached many executives, I know that senior leadership ranks are filled with glass-half-full types (in fact, one might need to be an optimist to cope with the inherent pressure of these positions). Consider how Nike, Inc.'s chief of global design, John Hoke, sparked a transformation in his organization once he realized the restrictive impact his and his management team's optimism was generating. John gathered his senior leaders for a week-long offsite to explore new thinking in design and how leaders can multiply the talent inside their organization, which I helped facilitate. As I described the profile of the optimistic, creative, energetic leader, John and his team quickly recognized their own reflection and were curious how they might be inadvertently diminishing capability and ingenuity in others. John asked that we pause our agenda to better understand how his own hopeful style of leadership might actually be causing some angst. His team explained the extraordinary pressure they felt to deliver flawless design, every time. With the London Olympics around the corner and a brand promise to sustain, the group insisted that there simply was no room to fail. 

With John's encouragement, we decided to define a space for experimentation. We rapidly laid out their various work scenarios into two buckets: One where failure was OK and the other where success had to be assured. The group debated each until they agreed on every scenario. Within an hour, they had created a playground — a safe space for their teams to struggle and potentially fail without harming their stakeholders or their business. This thinking rippled across Nike's design community and sparked leaders like Angela Snow, VP of creative operations and Casey Lehner, senior director of global design operations, to introduce the "risk and iterate" performance goal that encouraged each team member to identify something they would take a risk with and then iterate solutions throughout the year. This effort legitimized the possibility of failure and created safety for designers to tackle the scary problems. 

John Hoke and his management team didn't lower their aspirations or become less optimistic about the capabilities of their team. But, by acknowledging the downside and recognizing the messy, iterative path of innovation, they liberated their team to go bigger and reach further. 

Go ahead and be optimistic. But first, be sure to acknowledge the downside so your team is free to explore the upside.

Liz Wiseman

Liz Wiseman is president of The Wiseman Group, a management research and development center in Silicon Valley and author of Multipliers: How the Best Leaders Make Everyone Smarter. 

The 15 Most Important Minutes Of The Work Week

Feedback is a powerful management tool. But it's often misused. Here 15Five CEO David Hassell discusses why every employee should spend 15 minutes per week answering four short questions. Could the end of the annual review be near? 

By: Lydia Dishman 

How often do you and your boss have a real conversation about your work?
For many of us, it’s likely a once-a-year-sit-down to parse your list of accomplishments and areas that need improvement, otherwise known as the annual performance review. Yes, the dreaded annual review. Dreaded because managers acknowledge that they don’t maintain an ongoing dialogue with individual team members and it's tough to give and get good feedback when you’re only meeting once a year. Despite this, only 3% of companies report that they stopped using annual reviews as a way to grade employees.

He may not be looking to completely eradicate the annual review, but David Hassell, CEO of 15Five, believes there is room to improve (or in some cases begin) dialogues between supervisors and staff. To do so, his firm has built conversation-starting software that it now sells to some 400 companies across industries.

The way he sees it, “Companies don’t have an effective communication structure in place to let employees have an outlet and a voice.” Even though he acknowledges that it does tend to be costly to hold weekly one-on-one meetings, Hassell’s a believer in the power of regularly giving and gathering feedback to boost engagement. And regular Fast Company readers recognize that one of the secrets to having a happy company is to encourage a hive of engagement.

So how to manage such a meritocracy? Ask the right questions. Often. Hassell took a page from Patagonia’s playbook, invoking one of CEO Yvon Chouinard’s philosophies that a regularly scheduled quick sweep of staff achievements and challenges could keep him in the loop and also motivate his workforce to maintain a competitive edge. The basic premise is held in Hassell’s company name: Every week employees takes 15 minutes to fill out progress reports. Then a manager spends no more than five minutes to read it.

Hassell says thanks to 15Five’s cloud-based software, the feedback loop can become “organizational habit on a lightweight basis” by providing managers a 360-degree view of the company from the employees’ perspective based on their answers to four basic questions. (For examples of the questions, see the sidebar.) 

Want to Improve Employee Feedback? Ask the Right Questions 

15Five has standard questions built into its software program but some companies create their own customized template. Here are some compelling questions they ask: 

What did I do this week to help another member of my local team? 

On a scale of 0 to 10, how happy were you at work this week? 

Did you learn anything new or awesome this week that you'd like to try or share with the team? 

What aspect of our company do you worry about the most?

Rather than trying to tease out what’s bothering disgruntled employees or to hit the sweet spot between praise and criticism (hint: it’s nearly six positive comments for each negative one), 80% of 15Five’s current roster of 400+ customers simply use the software’s default questions such as: What’s going well? What are your challenges? What help do you need to improve?” Veterans of the annual review process (like me) are probably stifling an involuntary shudder at the memory of being put on the spot when trying to spin a challenge into a positive.

By culling the feedback regularly, Hassell contends his staff is more likely to share the need for support as well as the success. “We are big believers that when people are really open and authentic you can build real trust and a solid powerful organization,” he says. Hassell does realize that openness can be a “pretty scary” concept for many organizations, but says 15Five’s implementation has already surprised him. For companies with a culture that leans toward open communication like Warby Parker, 15Five surveys even helped with innovation.

The eyewear company that upended the expensive retail model for prescription glasses spawned a slew of imitators. To stay ahead of the pack, Warby Parker tasks its entire team to produce ideas for innovation each week under the belief that great ideas can come from anyone in the company.

Kaki Read, editorial assistant and PR coordinator at Warby Parker, says that the company’s eschewed the basic questions in favor of custom queries. One is: "Please list one idea to improve your individual productivity, the team's productivity, our customers' experience or the well-being of one of our communities."

“The idea, which we call our weekly ‘innovation idea’ can be small (like adding additional break-out tables for meetings) or big (like an idea for a new product line or non-profit partnership),” she explains. “More often than not, the best ideas come from those closest to the problem.”

As a tool for providing managers with a quick, intuitive method for gathering and escalating team feedback, Read says the results were immediate. “We also ask employees to report their overall happiness score for the week. This brings concerns immediately to the forefront and increases overall productivity,” she adds.

Warby Parker also uses feedback to improve accountability. Read notes that employees list tasks achieved during the week as well as top goals for the upcoming week. The tool also helps senior managers keep a pulse on what's going on throughout the organization. “Managers are able to easily identify common threads amongst their team members and prioritize concerns that come up most frequently,” she says.

Hassell, like Oren Teich at Heroku, believes that to truly be happy and engaged, people have to feel like their work matters, that they're part of something bigger and that they're valued for their contribution. “The difference between showing up and doing the minimum for a paycheck versus giving their all comes down to whether they care about the company and their work,” Hassell argues. There's no simpler way or more clear statement a company can make than simply giving their employees a voice--asking them for feedback on a regular basis and engaging in an open and authentic dialogue about their successes, challenges, ideas, and morale.


 

Lydia Dishman is a business journalist covering innovation, entrepreneurship and style. She is a regular contributor to Fast Company and has written for CBS Moneywatch, Entrepreneur, and the New York Times, among others.

How The Most Successful People Think Differently To Solve Their Biggest Challenges

Paul B. Brown, Contributor

Invariably, when presenting a new approach to solving problems, authors, pundits and commentators go to great lengths to “prove” why everything that existed before they presented their argument has been a waste of time.

That’s just silly. 

You know why people attack everything that has come before. We live in a hyper-competitive environment when it comes to getting someone’s attention and so if you have something new, you may feel compelled to come up with a gimmick such as “everything you know is wrong” in order to get people’s attention.

We understand why they do this, because it would have been extremely tempting to go down this road ourselves.

We have developed a proven approach to dealing with uncertainty in all forms, i.e. what you should do when you don’t know what to do. 

We know it works because it is the same approach that the people who are masters at dealing with uncertainty—successful serial entrepreneurs—use. (There is nothing more uncertain than starting a business, and serial entrepreneurs are masters at it.) 

 

The clichéd image of entrepreneurs coming up with an idea, laboring feverishly to perfect it, and delivering their creation to the market fully-formed is not what usually happens. The much more typical path is that they come up with an idea. They take a small step toward implementation to see if anyone is interested, and if it looks like some people are, they take another step forward. If they don’t get the reaction they want, they regroup and then take another step in a different direction.

In other words, they:

• Act.
• Learn (from that action)
• Build (off that learning)
• Repeat, i.e. they act again.

 

That cycle continues repeats until the entrepreneur succeeds, knows she is not going to, or decides there is another, more appealing opportunity to pursue. As we said, the approach serial entrepreneurs use when faced with the unknown (starting a business) will work for you when you face the unknown of any kind.

So, does this mean you should scrap your traditional ways of problem solving?
 
Absolutely not.

You shouldn’t use this approach exclusively. The way we all were taught to solve problems that are predictable—how do we introduce our existing product into an adjacent market; how many refrigerators will we sell during a recession—works just fine. You have historical precedents and data to draw on.

When you do, predict away.

When you don’t, try what we are advocating. It gives you an additional tool. It does not replace the ones you have.

We concede presenting a new idea this way is far less dramatic then screaming “EVERYTHING YOU KNOW IS WRONG.”

But it is honest, the process has been proven, and it should be helpful.

Paul B. Brown is the co-author (along with Leonard A. Schlesinger and Charles F. Kiefer) of Just Start: Take Action; Embrace Uncertainty and Create the Future recently published by Harvard Business Review Press.