Is your business ready to move on without you?

You could ask business owners a million questions about their succession plans.
Most of them are keenly aware of the importance of this one: “What happens to the business, and to your family, if you are no longer able to lead an active role in the company?”

But succession planning often takes a back seat to daily operations, to the detriment of the company and its owner. Obtaining the best succession outcome not only comes from having a strong, well-managed company, it comes from planning for the future, so you don’t get caught flat-footed when life throws a curve ball.

I recently met with the CFO of a family business. If you need to determine an owner’s level of commitment to transitioning the business, he said, ask the following three questions:

1. Have you sat down as a family unit for a discussion?
People don’t have “money talks,” and “family talks” can be even more awkward. Many owners have plans in mind that never make it to paper, and they are certainly not shared at the dinnertable. Research by Financial Executives International (FEI) shows that only 26 per cent of owners have sat down with their families to discuss their businesses and their futures.

2. What steps are you taking to get ready?
The plan could be to pass the business to a family member. Or to leave it to a group of family members and outsiders. Or to sell the business entirely and try to craft a deal that would keep family members employed to run the business. All are potentially sound plans, but the reality may not match expectations.

The trouble is that sometimes when an owner leaves, there is no longer a business. For example, if the owner has invested years in growing the business and in developing deep personal relationships while serving its clients, there can be a lot of loyalty to the person instead of the brand. When the owner leaves, the customers are often not far behind.
Another problem arises when owners carry too many of important details in their heads. It can limit the development of formal systems and professional processes, leaving a big gap if owners get taken out of the equation.

When the CFO I met with asks about the state of readiness to put a succession plan on paper, it implies there’s a quick fix if a business is not ready. Putting formal procedures and policies in place can take a lot of time and effort, especially if it’s going to be part of the organization’s culture. This sort of “professionalism” does not happen by snapping your fingers – it takes time, resources, and thoughtful forward planning.

3. What do you do in the winter?
The big succession question is how long the owner can step away from the business. If she goes down to Florida and stays for a week, but she’s on the phone checking orders and other details, there is no business to sell. If the owner says “I go to Florida and stay for a month” – or three – you know it can run without her and there may be an attractive company for sale.

Jacoline Loewen is a director at Crosbie, which focuses on succession advice for family businesses and closely held small to medium-sized enterprises. Crosbie develops customized strategies, particularly in relation to M&A, financing and corporate strategy matters. Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business.

When It’s Time for the CEO to Go

At a directors’ meeting of a specialty appliance firm I was advising a few years ago, the agenda featured the selection committee’s report presented by Stefan, chairman and CEO. The board members had expected to get a list of the candidates to succeed Stefan, who was past retirement age. However, Stefan informed the board that, despite an extensive search, the selection committee had determined that no candidate was yet qualified: the three insiders needed at least four to six years’ seasoning, while the outsiders (in spite of their outstanding track records) lacked the kind of expertise that would fit the future needs of the company.

After a short discussion, the board agreed that Stefan should postpone his retirement for another four years. Yet several directors remained troubled. Something wasn’t quite right. Were there really no competent external candidates out there? And why did no one in the company qualify? What had happened to the leadership development pipeline all these years? As the company seemed to be on a holding pattern for the past two years, wasn’t it time to bring in somebody new? But was it also possible that the members of the selection committee, knowing Stefan’s attachment to his job, were in reluctant to confront him about succession?

How long should a CEO stay in his job?   The most common response I usually have from CEOs is seven years, plus or minus two. It’s a reasonable number: seven years is probably the period of maximum effectiveness for most people in what can be a very stressful job.   I think also that the nature and challenges of the job evolve over time, going through three distinct phases:

• Entry: This is the “honeymoon period”, the one time that a CEO has an open playing field. Most likely, it’s the period when he or she is most willing to learn, experiment, and innovate. It is also the point at which a CEO is prepared to take risks and make major changes, particularly if brought in as an outsider.  During this time the CEO is unlikely to perform at full potential. This is to be expected: many new things have to be assimilated: she has to gain control over a new environment, get to know her various constituencies, and select key lieutenants, the people who will help make it happen. She may also have to “kill” wounded princes, executives who had hoped to get her job.
• Consolidation: After a new CEO has established what his or her leadership is all about, in terms of direction, strategy and style, the second phase, the period of consolidation sets in.  If everything has gone well, he will start to see the fruits of all his work in the honeymoon phase. He has alliances with key stakeholders and top executives are committed to the course he has chosen. He has a good working relationship with the board. He delivers good results and is secure in his role.   The traps here, of course, are complacency and rigidity; as they approach the end of this phase, some CEOs start to resist even minor changes.
• Decline:  You know that a CEO has reached this stage in the cycle when the company has few or no new products planned for the near future and there are no initiatives to find new markets. Furthermore, there is no new blood coming into the top ranks of organization. Everyone sings to the CEO’s same old tune. The company is probably accumulating a lot of cash because top executives are running out of ideas about how to use it.  It’s during this phase that a CEO starts having problems. He may have stopped listening to other people’s ideas.   The job has become routine.  Performance is slipping.  In a fast paced industry, the problems tend to become apparent quickly; declining CEOs in a relatively stable environment can get away with it for longer.

So what is to be done when a CEO starts to decline?  The best scenario, of course, is if that the CEO himself realizes what is happening, acknowledges his increasing ineffectiveness, and looks for new horizons when the going is still good.  Ideally, that is at the point when they are at that sweet spot of being at the peak of their performance, just before the decline.
But many CEOs find it very hard to admit that the time has come to pass on the baton.

 Paradoxically, this reluctance doesn’t mean they stay closely involved; many actually distance themselves from day-to-day operations.   The reason is that because the day-to-day job has become routine, they look elsewhere for mental stimulation.

As long as they stick to safe pursuits (social, environmental or artistic causes, say), this is OK, maybe even reinvigorating.  The danger is that they may instead look for stimulation by involving the company in risky new ventures — typically a big acquisition. This offers a quick and emotionally gratifying solution to the company’s operational inertia (that they’re often aware of) as well as their own sense of inner unrest, anxiety, and boredom.  Deals are exciting, they impress the CEO’s peers, and they allow the CEO to pretend that he’s addressing the company’s growing problems.

It’s precisely at this stage that the board needs to step up.   If the CEO was an exceptional performer during the honeymoon and consolidation stage, this is unlikely to happen; human instinct is to trust the track record.  Over time, the CEO may even have filled the board with people indebted to him or her, who do not really take their review function very seriously. The result is that the board takes action only when things become really catastrophic — by which time it is often too late.

Leadership programs can also provide a form of stock taking. Through reflection — studying  “the leader within” — the CEO can increase his self-awareness and by working in a group he can exchange ideas with peers in similar situations.   Quite often, leaders who engage in this discover that they do in fact want to step down and find another job in a new environment.   Other CEOs take on a role as mentor or leadership coach to younger executives, which is a highly effective way of maintaining continuity in the organization and also helps to reduce the CEO’s anxiety about leaving.

In Stefan’s case, his reluctance and the board’s to contemplate change meant that it was eventually forced on them.  A well-known activist shareholder bought a sizable stake in the company and laid out the case for major change in the financial press. It didn’t take long before he was given a seat on the board.  With the help of fellow shareholders, he pressured the directors to push Stefan aside and appoint a new CEO.

Manfred F. R. Kets de Vries

Manfred F.R. Kets de Vries is the Distinguished Professor of Leadership Development and Organizational Change at INSEAD in France, Singapore, and Abu Dhabi. His most recent book is The Hedgehog Effect: The Secrets of Building High Performance Teams (Wiley, 2011).

The Irresistible Power of Storytelling as a Strategic Business Tool

It’s not often that you hear Budweiser and Shakespeare mentioned in the same breath. But according to new research from Johns Hopkins University, the Bard’s deft application of storytelling techniques featured prominently in the beer company’s Super Bowl commercial.

In “Puppy Love,” a perfectly adorable yellow lab becomes inseparable friends with a Clydesdale. Sneaking out of his pen, the pup and the horse “talk” in the stables and cavort on an idyllic farm –until someone comes to adopt the dog. The distressed puppy whines and places his paws against the window of the car set to take him to his new home. All seems lost until the Clydesdale rallies the other horses to stop the vehicle from leaving. Reunited, the two commence frolicking in the horse pasture and, we assume, live happily ever after.

Forget the fact that Anheuser-Busch’s 60-second spot (which cost north of $4 million) aired close to the end of a lopsided championship game that was over before halftime. The Budweiser ad scored top honors in USA Today’s Ad Meter and Hulu’s Ad Zone for being the most popular among viewers. How did it not get lost amid the tantalizing displays of shiny vehicles, CGI tricks, and David Beckham’s six pack?

The irresistible power of classic storytelling.

If Keith Quesenberry were a betting man, he would have cleaned up. The researcher at Johns Hopkins predicted that the Budweiser spot would be a winner after conducting a two-year analysis of 108 Super Bowl commercials. In a paper that will be published in the Fall 2014 issue of The Journal of Marketing Theory and Practice, Quesenberry and research partner Michael Coolsen focused on brands’ use of specific strategies to sell products, such as featuring cute animals or sexy celebrities. But they also coded the commercials for plot development.

They found that, regardless of the content of the ad, the structure of that content predicted its success. “People are attracted to stories,” Quesenberry tells me, “because we’re social creatures and we relate to other people.”

It’s no surprise. We humans have been communicating through stories for upwards of 20,000 years, back when our flat screens were cave walls.

“Especially in the Super Bowl, those 30-second ads are almost like mini movies,” he says. Quesenberry found that the ads that told a more complete story using Freytag’s Pyramid — http://en.wikipedia.org/wiki/Dramatic_structure a dramatic structure that can be traced back to Aristotle — were the most popular.



Shakespeare had mastered this structure, arranging his plays in five acts to include an exposition, rising action, climax, falling action, and a dénouement—or final outcome. The “Best Buds” story also uses these elements to great effect. The more of the acts each version of the ad had, the better it performed.

Storytelling evokes a strong neurological response. Neuroeconomist Paul Zak’s research indicates that our brains produce the stress hormone cortisol during the tense moments in a story, which allows us to focus, while the cute factor of the animals releases oxytocin, the feel-good chemical that promotes connection and empathy. Other neurological research tells us that a happy ending to a story triggers the limbic system, our brain’s reward center, to release dopamine which makes us feel more hopeful and optimistic.

In one experiment after participants watched an emotionally charged movie about a father and son, Zak asked study participants to donate money to a stranger. With both oxytocin and cortisol in play, those who had the higher amounts of oxytocin were much more likely to give money to someone they’d never met.

The implications for advertisers, who’d also like to part people from their money, are clear. But advertisers aren’t the only ones tapping into the trust-inducing power of storytelling.

Strategic storytelling has also been enlisted to change attitudes and behaviors. Two studies from the health care industry show its power: Penn State College of Medicine researchers found that medical students ’ attitudes about dementia patients, who are perceived as difficult to treat, improved substantially after students participated in storytelling exercises that made them more sympathetic to their patients’ conditions. And a University of Massachusetts Medical School study found that a storytelling approach has also been effective in convincing populations at risk for hypertension to change their behavior and reduce their blood pressure.

The most successful storytellers often focus listeners’ minds on a single important idea and they take no longer than a 30-second Superbowl spot to forge an emotional connection.
Widely recognized as the leading trial lawyer of his time, Moe Levine often used the “whole man” theory to successfully influence juries to empathize with his clients.

Seeking compensation for a client who had lost both arms in an accident, Levine surprised the court and jury, who were accustomed to long closing arguments, by painting a brief and emotionally devastating picture instead:

As you know, about an hour ago we broke for lunch. I saw the bailiff come and take you all as a group to have lunch in the jury room. Then I saw the defense attorney, Mr. Horowitz. He and his client decided to go to lunch together. The judge and court clerk went to lunch. So, I turned to my client, Harold, and said “Why don’t you and I go to lunch together?” We went across the street to that little restaurant and had lunch. (Significant pause.) Ladies and gentlemen, I just had lunch with my client. He has no arms. He has to eat like a dog. Thank you very much.

Levine reportedly won one of the largest settlements in the history of the state of New York.

Storytelling may seem like an old-fashioned tool, today — and it is. That’s exactly what makes it so powerful. Life happens in the narratives we tell one another. A story can go where quantitative analysis is denied admission: our hearts. Data can persuade people, but it doesn’t inspire them to act; to do that, you need to wrap your vision in a story that fires the imagination and stirs the soul.

Harrison Monarth

Harrison Monarth is an executive coach, and the New York Times bestselling author of The Confident Speaker and the international bestseller Executive Presence. Harrison works with leaders and organizations on positive behavior change, authentic leadership and effective communication. His latest book is Breakthrough Communication. Connect with him on Twitter @HarrisonMonarth

The Most Overlooked Leadership Skill

 Even before I released the disc, I knew it was a long shot. And, unfortunately, it was a clumsy one too.

 

We were playing Ultimate Frisbee, a game similar to U.S. football, and we were tied 14-14 with a time cap. The next point would win the game.

I watched the disc fly over the heads of both teams. Everyone but me ran down the field. I cringed, helplessly, as the disc wobbled and listed left. Still, I had hope it could go our way.

Sam was on my team.

Sam broke free from the other runners and bolted to the end zone. But the disc was too far ahead of him. He would never make it.

At the very last moment, he leapt. Completely horizontal, Sam moved through the air, his arms outstretched. Time slowed as he closed in on the disc.

The field was silent as he slid across the end zone, shrouded in a cloud of dust. A second later he rose, Frisbee in hand. Our team erupted in cheer.

Sam’s catch won us the tournament.

It also taught me a great lesson: Never underestimate the value of a talented receiver.
I was reminded of Sam’s catch recently after broaching a sensitive topic with Alba*, a client. The conversation was about some concerns I had about an upcoming meeting she was leading as well as my own insecurity about how I could help.

Before I spoke with her, I was hesitant and worried. Was I overstepping my bounds? Was I exposing myself? Would she reject my thoughts? Would she reject me?

I entered the conversation awkwardly, apologizing, and offering too much context. Even once I broached the issue, I felt tentative, unclear. I cringed as I felt my words hang in the air.

Thankfully, though, Alba turned out to be a Sam-level receiver.

Alba listened without a trace of annoyance. She asked questions — not to defend herself or refute my thoughts — but to understand my perspective more clearly. She was gracious, skilled, and accepting.

Her ability to receive me, and my opinions, led to a deep and valuable conversation about her performance, my role, and the needs of her team. A few weeks later, she showed up powerfully and led a remarkable meeting.

Typically, we choose our leaders for their skill at conveying messages clearly and powerfully. But, in my experience, it’s their ability to receive messages that distinguishes the best leaders from the rest.

That’s because the better you are at receiving, the more likely people will talk to you. And that’s precisely what every one of us needs: to be surrounded by people who are willing to speak the unspoken.

So how do you become a great receiver?

1. Be courageous. We often attribute courage to the speaker, but what about the receiver? 
I may have been scared broaching topics with Alba, but I had the advantage of time and preparation. I could control what I said and how I said it. I was able to think about it beforehand, write down a few notes, and test my thoughts with someone else. 
The receiver has no such advantage. Like Sam, he has to receive my throw, however, whenever, and wherever it lands. He has to be willing to listen to something that might make him feel afraid or insecure or defensive. And if he is a great receiver, he will take in the information or message thoughtfully, even if the delivery is awkward or the message jarring. That takes tremendous courage.


2. Don’t judge. Receiving is as much about what you don’t do as it is about what you do. 

Resist the temptation — blatantly or subtly — to be critical of the speaker or what the speaker is saying. Don’t argue with her, poke fun at her, shame her, act aggressively, turn on her, become defensive, or act cold toward her.


3. Be open. In order to receive a pass in any sport — and at work and in life — you need to be free, open, and unguarded. 
Yet we often guard ourselves. Powerful feelings like fear, anger, sadness, and insecurity do their best to block our ability to receive a pass. If you want to be a talented receiver, your task is to feel your feelings without letting them block or control you or your response. Breathe. Acknowledge what you’re feeling to yourself — maybe even to the other person — without dwelling on it. 

Reiterate what you’re hearing, ask questions, be curious. Not curious in an “I-will-find-out-enough-information-so-I-can-prove-you-wrong” way. Curious to understand what the person is saying and to understand what’s underneath what they’re saying.

If you can be courageous, avoid judging, and stay open — even if the toss is awkward and the message unsettling — then, like Sam, like Alba, you’ll be able to catch pretty much anything.

And when you’re skilled at that, you’ll be a most valuable player of any team you’re on.

Peter Bregman

Peter Bregman helps CEOs and their leadership teams tackle their most important priorities together. His next Leadership Week is in October, 2014. His latest book is 18 Minutes: Find Your Focus, Master Distraction, and Get the Right Things Done.

Asking Whether Leaders Are Born or Made Is the Wrong Question

 

Are leaders born or made?  When I pose this question to executives or HR professionals, the vast majority say that leaders are made; that is, leadership is something one can learn. Yet researchers have found traits, such as extraversion and intelligence, which differentiate leaders from others.  This seems to imply that we can identify future leaders by looking at their traits – but we must be cautious when drawing such conclusions.

 

By failing to differentiate between leadership effectiveness (performance as a leader) and leadership emergence (being tapped for a leadership role), this research is often misunderstood and misused.  In fact, inborn traits are more strongly associated with leadership emergence. That is, within a group of peers, those who are more extraverted or more intelligent tend to have more influence on the group. Does this mean that these same people perform better than others when placed in a formal position of leadership? Not necessarily.

Let’s look at the relationship between extraversion and leadership effectiveness.  Some studies have found a relationship, but it is so weak that it is difficult to draw conclusions from it.  A much stronger relationship has been found when looking only at particular types of jobs: extraversion predicts performance in jobs with a competitive social component; for example, sales.  And if we look at extraversion in more depth, it can also predict other less desirable outcomes such as absenteeism.

What about intelligence and leadership effectiveness?  Again, the relationship is surprisingly weak and can be disrupted easily.  For example, if the leader is under stress, then it is no longer possible to predict the leader’s performance by looking at his/her intelligence.  It seems that stress makes people behave in unpredictable – and perhaps less intelligent – ways.  Interestingly, there is a far stronger relationship between leaders’ perceived intelligence (how intelligent they look to others) and how likely they are to be chosen as a leader than there is between actual intelligence and leadership.  Apparently, when it comes to leadership, appearances are everything.

So are leaders born or made?  What is this question really asking?  If it is asking whether someone will emerge as a leader among a group of peers, then those types of leaders are born.  But if it is asking whether someone will perform effectively in a leadership position, then that is dependent on the context, the type of job, and the person’s ability to develop leadership skills. This cannot be predicted by their traits.

Unfortunately, we often choose our leaders based on traits such as extraversion, charisma, and intelligence (or perceived intelligence). And then we wonder why their performance does not live up to our expectations.

Connson Chou Locke

Connson Chou Locke, Ph.D. is a leadership researcher, teacher, consultant and coach, specializing in leadership development, culture, and change. She is Assistant Professor of Management at the London School of Economics and Political Science (LSE). Dr. Locke is available for speaking and workshops.

Leadership Is Not A Title....

Employee Engagement: "It's Not in My Job Description"

For me, the sentence, "It's not in my job description", is a huge red flag.

It's a sure sign someone is not a team player.  It's a sign someone is a taker, not a giver. It's a sign someone is self-centered, putting their importance ahead of others.

I think I've said before how influential summer jobs can be, and today I'd like to share with you why I feel so strongly about the phrase in the title of this post.

Between my second and third years in university, I worked in the drill squad of the world famous Fort Henry Guard, based in Kingston, Ontario.

One of the unofficial mottoes of the Guard was "Remain Flexible".  The meaning of this was that, at any time, you could be asked to be a sentry, on gun drill, tour guide or cleaning up. Duties for sentry duty or gun drills were assigned each day, but sometimes we had more visitors than expected, which meant you had to be prepared to take on some new assignments.

While this may have been just a summer job, I think these principles hold true in any well-run organization.

In larger organizations, we tend to be slotted into narrowly defined roles and responsibilities that make it hard to be as flexible as we were at Old Fort Henry.  In smaller organizations, the ability to be functional in job roles outside your core responsibilities is vital.

At one company, our purchasing manager lost both parents within weeks of each other.  She was overwhelmed not only with the loss, but also the responsibilities of attending to both their estates.  As a result, she found it difficult to keep up with her job responsibilities, and purchasing was an area in which we were extremely thin on manpower.

While this was happening, we were also having quality issues with a company that supplied a critical laminated material for one of our products.  They were unable to identify for us whether the issues was the result of a fault in the lamination process or a defective batch of material. We knew we needed to find an alternate supplier for this lamination, and the process for finding one was normally managed by purchasing.

Because of the quality issue, we were prevented from manufacturing a product for one of our key customers, who were anxious to know when we would be able to re-commence supply.  They needed answers, not excuses.

I offered to take the lead on finding alternative suppliers because, in the end, it was a customer-driven issue: we had a customer who could not market their product because we were unable to supply a critical component.  So, while my job role was sales, handling a purchasing issue was also a way of solving a supply chain issue for a customer.

The more I researched companies who made one of the materials in the lamination we purchased, the more I came to realize there were literally only a handful of companies in the world who had the capabilities of making the material used, let alone being able to meet our specifications.  (Our customer thought there would be hundreds of companies who made this material and changing suppliers could be done in a couple of weeks). We were fortunate that two of those suppliers were located within a half-day's drive of our plant, so I visited them both to get a better understanding of the challenges in making the material we needed.

One of these suppliers analyzed samples of the lamination we used - both past and current - and determined that the incumbent had, despite protests otherwise, switched recipes and companies they purchased their materials from.  We now had scientific evidence to support our allegations there had been material substitutions.

A few weeks later, when our purchasing manager returned from bereavement leave, I took her to meet the company we felt represented the best opportunity to supply the lamination we needed.  This gave her a chance to see the plant as well as meet the executive team and allowed me an opportunity to transition the supplier search back to her so she could begin qualification trials.

Taking on a task normally done by purchasing gave me some insights into the challenge purchasing people face in searching for and selecting suppliers.  Given the circumstances, it helped forge a stronger relationship between sales and purchasing While helping the company respond to a customer in need.

When I left this company, the purchasing manager was the first person to come into my office and give me a hug and tell me how much they'd miss me.  I was really touched by this and it is a moment I will never forget.

I hope you can see that, in this situation, the roles of sales and purchasing were very strongly interdependent. Had we stuck to our job roles, we might still have solved the supply chain issue for our customer, but at the cost of several weeks being unable to supply them. Blurring the lines between sales and purchasing in this case demonstrated that our company really required a team effort to survive - and thrive.

Posted by Ronald Jamieson