Building Peak-Performance Cultures #34: Unified Leadership – Symptoms of the Abilene Paradox

Building Peak-Performance Cultures #34: Unified Leadership – Symptoms of the Abilene Paradox

 

Written by Rob Andrews, with paraphrased content from The Abilene Paradox by Dr. Jerry Harvey.

In last week’s blog post, we introduced Jerry Harvey’s concept of the Abilene Paradox – those situations where everyone knows they’re headed in the wrong direction, but nobody points it out. Each person assumes, incorrectly, that they are the only one with a desire to change course. Each person, afraid of rocking the boat, gives in to what they think is the majority opinion. This leaves the actual majority opinion unsaid.

According to Jerry, the most prevailing issue in modern organizations is not the inability to manage conflict. Rather, it is what he calls “an inability to manage agreement.” In my opinion, the jury is still out on which problem causes more chaos. But it is undoubtedly true that agreement management is a necessary skill for any unified leadership team. This week, I want to share the symptoms of poor agreement management – the building blocks of every Abilene Paradox – and stress the importance of preventative treatment.

Groups that fail to manage agreement effectively display six specific characteristics:

  1. Organizational members individually agree in private about the nature of the situation or problem facing the organization.
  2. Organizational members individually agree in private about what steps would be required to cope with the situation or problem.
  3. Organizational members fail to accurately communicate their desires, concerns, and/or beliefs to one another. Rather, they do the opposite, thereby leading one another into misperceiving their collective reality.
  4. Operating on invalid and inaccurate data, organizational members make collective decisions that lead them to take actions contrary to what they believe is right, behaving in a manner inconsistent with the organization’s stated purpose.
  5. As a result of taking counterproductive actions, members face frustration, anger, irritation, and dissatisfaction with their organization.
  6. Members form subgroups with trusted individuals and blame other individuals, authority figures, or subgroups for the organization’s dilemma.
  7. Finally, if the members don’t deal with the organization’s inability to manage agreement, the cycle repeats itself with greater intensity.

As an example of how these characteristics show up in real life, I’d like to share the story of National Convenience Stores.

I worked for NCS from 1984 to 1991, when they were the third largest convenience store operator on the planet. For much of that time, I led their largest operating division, 516 stores that stretched between El Paso and West Palm Beach. It was a fantastic job which I thoroughly enjoyed, and I still enjoy many relationships that were forged during that time. We had great locations, great facilities, great executive talent, and a pretty decent strategy. Certainly, we had great potential … more of which would have been realized had it not been for our repeated trips to Abilene

The CEO I worked for was one of only two people to preside over NCS during its 36-year history. He was one of the most capable men I’ve ever known. I will always be grateful to him for the tremendous opportunities he afforded me. He was, however, prone to trips to Abilene for several reasons.

Notably, he didn’t particularly like the C-Store business and didn’t appreciate its fundamentals. Like the leadership of many companies, NCS leadership was comprised of extremely bright, exceptionally talented individuals. But they were not a united team, and they were not skilled at managing agreement. This lack of unity led NCS along on three particularly long and costly trips to Abilene, each of which could have been avoided.

The first long trip to Abilene during my tenure took place between 1984 and 1986. We opened approximately 150 “Hex” stores during that time, many of which were opened on ill-suited properties. Hex stores were large, hexagonally shaped stores with huge gasoline instillations designed and built to attract women and older shoppers. The stores were very successful when built on the right real estate.

The problem was a commitment to open 50 new Hex stores in 1986, when most of the available sites were intended for smaller conventional stores. It has been well documented that no one on the senior leadership team wanted to build these larger stores, which cost twice as much to build and operate as a conventional unit. But the CEO had made a public commitment, and the stores were built, resulting in millions of dollars in losses. By 1988, all senior leaders said they wished they had been more vocal in dissuading their CEO from building Hex stores on conventional store sites.

The second trip was in 1988 when a new Vice President of Marketing conceived a consumer promotion, still lamented 30+ years later as “The Black & Decker Debacle.” The promotion was meant to build customer traffic by issuing a ten-spot punch card. Customers would receive one punch for an eight-gallon fuel purchase, and double punches for purchasing premium gasoline. When customers had saved up ten punches, they received a Black & Decker product with an average cost of $20.

Two senior operators voiced concerns that the margin on fuel purchased on each card could not exceed $8, so the average loss to the company would be $12 per card. The 16-week promotion went forward and was abruptly discontinued after 6 weeks at a cost of $9 million and the loss of substantial customer loyalty. A postmortem revealed that several senior leaders felt uneasy about the promotion, but were reticent to voice their opinions because the enthusiasm levels were so high, and due to their desire to support the new VP of Marketing.

A third and even more costly trip to Abilene took place in 1989 when a new Vice President of Advertising championed a major initiative around “Great Sandwiches,” designed to energize NCS’s Houston customer base, where it operated 500 stores. The playbook called for 430 retrofitted checkout counter sandwich cases, a new $3 million commissary, and a fleet of delivery trucks with “Great Sandwiches – Made Fresh Every Day!” plastered on all sides.

Now the pesky details: The average store sold six sandwiches a day prior to launch, at an average retail of $.99, or a little over $2 in 2020 inflation-adjusted dollars. Breakeven on “Great Sandwiches” was 40 sandwiches a day at $5, or a little over $10 in inflation adjusted dollars. This grand scheme was discontinued after less than a year at a total cost of over $12 million, having been challenged at its inception by few and buoyed by the tacit support of a skeptical – but silent – majority. Those few who voiced concerns still lament this painful trip to Abilene, and wish they had been more vocal in expressing their misgivings.

In the rear-view mirror, these trips are almost comical. In real time, they were unbearable. They had significant negative impact on the organizations’ financial health. In a company that generated $25 million in cash flow during its best year, these three trips to Abilene conservatively cost the company over $30 million.

If this material causes you to think there may be some of the Abilene Paradox at work in your organization, we’d love to help. Give us a call.

 

Warmest Regards,

Rob

Total Performance Leadership Blog Post #33: Unified Leadership-How Avoiding The Abilene Paradox Will Help You Achieve Peak Performance

 

Written by Rob Andrews with paraphrased content from The Abilene Paradox by Dr. Jerry Harvey, published December 6, 2014

Most boards and leadership teams (and married couples, for that matter) are destined to fall far short of their potential. The fault lies in what one of my favorite consultants calls the Abilene Paradox. I first heard Dr. Jerry Harvey in 1996 while attending graduate school at the University of Texas at Austin. I came to know him well through his writings, videos, and one memorable meeting at UT. From this point forward, I’ll refer to him as Jerry. Jerry got his Ph.D. from UT in Psychology, practiced as a management consultant, and taught at George Washington University. He built a consulting model around the Abilene Paradox, a concept that helps explain why most organizations fall short of achieving unified leadership, optimal organizational health, and cultures of peak performance.

In an Abilene Paradox, a group of people collectively decides on a course of action that is counter to the preferences of many or all of the individuals in the group. It involves a common breakdown of group communication in which each member mistakenly believes that their own preferences are counter to the group’s and, therefore, does not raise objections. A common phrase relating to the Abilene paradox is a desire to not “rock the boat”. This differs from groupthink in that the Abilene paradox is characterized by an inability to manage agreement.

The first story I heard Jerry tell was about a hot, miserable June 1961 afternoon in Coleman, Texas when he, his new bride, and his in-laws drove 53 miles to Abilene in an unairconditioned 1958 Buick to have dinner at a subpar cafeteria. Unbeknownst to everyone, no one really wanted to embark upon this inauspicious journey.

The trip only took place because Jerry’s father-in-law, while bored to tears playing dominoes on the front porch, thought he ought to break the silence.  “Let’s get in the car and go to Abilene and have dinner at the cafeteria,” he suggested. His daughter, Jerry’s wife, obligingly replied, “Sounds like a great idea, I’d like to go! How about you Jerry?” Jerry had no interest in going but, fearing his preferences were out of step with the rest, replied by deferring to his mother in law – he was on board, “as long as your mother wants to go.”

You know the rest of the story. Four hours, 106 miles, and a terrible dinner later, everyone was exasperated at Jerry’s father-in-law for suggesting such an unpleasant outing. Jerry’s father-in-law, upset by this placement of blame, replied, “Sheeit, I was only making conversation. I never thought you’d take me up on such a dumb idea. I’d have been just as happy to play another game of dominoes and have leftovers out of the icebox.”

Since our work is all about helping build cultures of peak performance, based on nine principles we observe in peak performing organizations, we often draw on Jerry’s work. As the Abilene Paradox is alive and well in most organizations, I encourage you to read Jerry’s books as we have found them incredibly valuable. The easiest and most entertaining is The Abilene Paradox. The other, which will really make your head explode, is How Come Every Time I Get Stabbed in the Back My Fingerprints are on the Knife? The title alone should cause you to drop what you’re doing and place an order. Since time and space preclude me from sharing all of Jerry’s wisdom, I’ll start by paraphrasing one case study in The Abilene Paradox called “The Boardroom.”

Ozyx Corp. is a small industrial company that is on its way to Abilene. The CEO has hired a consultant as a last result to prevent the company from going broke. The consultant quickly determines morale is at rock bottom and keeps hearing about a research project that Ozyx has publicly committed to completing. The goal of this project is to develop a technology that turns peanut oil into jet fuel.

When the consultant separately asks the President, the Vice President of Research, and the Research Manager, each one says the same thing. The idea looked great on paper, but was ultimately destined for failure because of unavailable technology. Privately, each admits to the consultant that Ozyx’s continued commitment to the project will bankrupt the company. None of them has told the others about their reservations. With both the public and each other, all three maintain an optimistic façade.

The President has not revealed his true feelings because reneging on such a highly publicized commitment would be bad press, causing the Vice President’s ulcer to flare up. He was also afraid the Vice President would quit as she had staked her reputation on the project’s success.

The Vice President hasn’t spoken up because she believes the President is so committed to the project that questioning its value might get her fired for insubordination.

The Research Manager says he can’t disclose his misgivings to the Vice President or president because of their collective enthusiastic and very public support of the project. He admits to writing ambiguous progress reports so the President and Vice President can interpret them as they wish. In fact, he says he slants reports to the positive, given how committed his superiors are to the project.

You can probably guess how this one turned out. The consultant was successful in helping stop the madness, but not before irreversible damage had been done. Eight months had been wasted in a widely publicized and much-ballyhooed commitment to turning peanut oil into jet fuel. The company did survive, but suffered unnecessary damage because of the Abilene Paradox.

The Abilene Paradox stems from the human condition, which causes all of us to behave irrationally when we fear separation from what we value most. Stay tuned for next week when we dig further into the paradox and how to avoid it.

If this material causes you to think there may be some of the paradox at work in your organization, we’d love to help. Give us a call.

Warmest Regards,

Rob

Total Performance Leadership Blog Post #32: Reexamine the Role of Your CHRO

Written by Rob Andrews with paraphrased content from Ariana Huffington’s article in the Harvard Business Review, June 3, 2020

A distinctive feature of the coronavirus pandemic has been to elevate the role of the CHRO. While this is a positive, the role of the CHRO is one of the most underappreciated positions around. It is unfortunate that there are still CEOs who have either never experienced great human resources leadership or have never given their top HR officer a real chance. Hopefully, an important and fundamental shift is underway.

At Verizon, for example, since March 11, CEO Hans Vestberg and CHRO Christy Pambianchi have led a daily all-hands for the company’s 135,000 employees. At Accenture, Chief Leadership and Human Resources Officer Ellyn Shook now meets virtually with company leaders twice a week — instead of in-person once a quarter — to discuss key people and operations issues. At Cisco, Chief People Officer Fran Katsoudas is leading, along with CEO Chuck Robbins, a weekly meeting for all 75,900 employees. This meeting, which used to be monthly, is an example of how “the workplace is becoming the new definition of community. Sometimes employees bring in their families. They hear business updates. They talk about mental health and wellbeing. They laugh a little about seeing each other’s homes, kids, and pets on WebEx.”

More now than ever, CEOs are leaning on their CHROs to ensure their workforces are feeling supported, because they know the future success — and in many cases, the survival — of their businesses depends on it. According to research by State Street, “companies seen as protecting employees and securing their supply chain experienced higher institutional money flows and less negative returns, especially when those practices garnered significant public attention.”

CHROs are helping employers and employees navigate this new era together. The 2020 Edelman Trust Barometer found that employer communications were the most credible source of information. Across 10 countries, “my employer” was trusted by more people than the government, media, or business in general. According to the Qualtrics Remote Work Pulse, 80% of newly remote workers said that communication from their company helps them feel more confident in the actions they can take for themselves during the crisis.

CHROs are stepping up to create agile cultures, not only responding to employee needs but seeing around the corner — giving permission and support, and role modeling empathy, accountability, compassion, and inclusive leadership. Agility is not just about process or infrastructure — it’s helping people adopt resilient mindsets and navigate ambiguity and uncertainty.

Of course, in many companies, CHROs are also at the center of the really difficult cost-cutting conversations that have led to unprecedented job losses. And when the pandemic ends, organizations will face entirely new difficult discussions around inclusion and belonging. Women and minorities will continue to be disproportionately affected. Extroverts forced to work from home and introverts exhausted by the social demands of remote work will struggle to connect with others and with the company’s larger purpose. These challenges and more will directly affect our organizations’ agility, productivity, adaptability — and they will chiefly be the province of CHROs.

When CHROs and other leaders don’t take care of themselves, innovation, creativity, resilience, empathy, decision-making, and team building all suffer, with consequences for the whole organization. That’s why it’s so important for these leaders to be the carriers of the culture they wish to instill. Yet in all my conversations with the CHROs we work with, I have never seen them as burdened as they are now by the huge responsibilities they are shouldering.

Compassion and empathy can no longer be seen as extra, nice-to-have qualities; they are essential. CHROs and HR teams must lead by example, starting every conversation with simple, direct questions, like, “How are you?” “How is your family?” “Are you ok?” We must give people room to share what otherwise might be kept private — and respect when people decide not to share what they’re going through. Before we even begin to talk about business, we need to open the door to these conversations in authentic, compassionate ways, and keep that door open.

This elevation of the CHRO is going to outlast COVID-19 and permanently change the way we do business — for the better. The pandemic is proving what many forward-thinking CHROs knew long ago: Organizational resilience — the ability to adapt, innovate, and succeed — is directly tied to employees’ individual physical, mental, and emotional resilience.

Right now, CHROs have the wind at their back. We have been talking about putting people first and bringing our whole selves to work for a while now, but these talking points are no longer abstractions. CHROs have an immediate opportunity to move these values from the periphery to the center — not just to get their companies through the pandemic, but to ensure they emerge from it with a stronger, more inclusive, compassionate, and resilient culture. This is their moment to help their companies actually become what they have always claimed they wanted to be.

If you’re open to beginning a discussion around the role of your CHRO and a culture of peak performance, give us a call.

 

Warmest Regards,

Rob

Total Performance Leadership Blog Post #31: Why an Organizational Health Index Could Be Your Most Important Move This Year

Staying Healthy Matters

Think about the lengths to which we go to protect our health, and that of the people and pets we love. We get thorough annual physical exams. We get two dental exams a year. We get annual skin and eye exams. We take our pets to the vet for checkups and vaccinations. Consistently, we make conscious decisions and commitments to invest time and money in our health. We eat right, take vitamins, and go to the gym. We value physical health above all else. Why then, are most business leaders reticent to monitor and protect their most important business asset, their organizational health and culture?

Organizational Health Overlooked

Organizational health is often overlooked because of what Jim Collins calls quantitative bias. It’s easier to look for answers around things we’ve measured for decades, and what we’ve studied in business school. Most organizations are full of smart, well-educated, highly accomplished people who know how to do their jobs. Your biggest threat is not incompetence, rather an environment of insidious politics, divided leadership, ambiguity, inadequate measurement systems, and lack of clear purpose. The bad news is these conditions do not appear on any financial statement and can easily go undetected. The good news is that these conditions, if properly diagnosed, can be treated quickly and very effectively.

Our own examination of companies that perform at the very top of their sectors, often delivering shareholder returns near double their peers, reveals nine principles at work, which are the imperatives to building cultures of peak performance. The principles are listed below. The extent to which these principles are at work in your organization can be measured, much the same way we measure blood metrics, BMI, resting heart rate, circulation, sleep patterns, nutrition, exercise, and the like.

Principles for a Culture of Peak Performance

  1. Unified Leadership can be measured. If leadership’s message on the shop floor is consistent with top leadership’s message, your leadership is aligned. It is also extremely rare. Your leadership is aligned if your organization says it is. We’ve found it amazing how accurately we can measure the extent to which your leadership is unified. In every peak performing organization we’ve studied, leadership is in lockstep, from top to bottom. Styles vary widely but the message is absolutely consistent.
  2. Leading with purpose is the great multiplier and is the only way you can hope to fully engage your workforce, particularly millennials. Fewer than 5% of organizations have harnessed the power of purpose and having a clear purpose does not make things easier, just clearer. Operating with a clear sense of purpose, which drives your vision, strategy, tactics, and behaviors, will also be reflected in your bottom line. It can and should be monitored carefully, as an elite athlete monitors his/her physical condition.
  3. Disciplined hiring practices begin day one, and can be measured by the power of your employment brand, the size of your applicant pipeline, the number of applications per position you fill, your workforce turnover, your return on human capital, and your fully loaded employee costs vs. your highest performing peers. Most organizations have woefully inadequate hiring practices that result in cultural misalignment, inadequate performance expectations, organizational ambiguity, and unnecessary turnover.
  4. Measuring what matters is much easier than I imagined. Peak performers we’ve studied do a fine job of managing their financial statements, risk profiles and the like. They also measure employee engagement, customer experience, provider engagement, social impact, leadership effectiveness, purpose impact, hiring effectiveness, cost containment, project health, and constant improvement. In short, they are measuring organizational health and cultural strength by constantly monitoring their performance against the nine principles.
  5. Cost leadership means extracting all costs that do not support the organization’s purpose, strategy, customer, and employee experience. Costs can be like cholesterol, waist size, and BMI. Unless you’re paying close attention, costs get out of whack. Peak performers stay on top of costs; what their peers are doing around cost and what other sectors are doing to minimize extraneous costs. Supermarkets as an example, have the most efficient supply chains in the world, while hospitals traditionally have had the least.
  6. Customer Experience is one of the most misunderstood terms on the planet. Raving fans, in other words, are customers who routinely tell positive stories about you, becoming your most effective and inexpensive form of advertising. Customer experience is all about how the customer feels about themselves while interacting with you. They feel special, valued, and loved. Achieving this level of customer experience requires a commitment from the top and pushing autonomy and authority to keep the customer coming back to the lowest levels in the organization. Rare as it is, measuring customer experience is not difficult.
  7. Stakeholder engagement means not favoring one group over another. Peak performers, without exception, have learned to engage shareholders, management, board members, employees, and providers alike to build cultures of peak performance. The notion of favoring shareholders over other stakeholder groups has proven to be counterproductive and not in the best interest of anyone, shareholders in particular. Like the other principles, stakeholder engagement can and should be monitored.
  8. Clarity in everything is tantamount to keeping your knives sharp. Peak performers measure the degree to which their stakeholders understand what leadership is up to. Leaders consistently communicate so their stakeholders believe what they are saying, know where they are going, and understand there is something in it for them. They are careful to relate to stakeholders, communicate strategy, implications, urgency, hardball issues, and rewards at the end of all the hard work. This is a formulaic communications methodology that ensures clarity and is measurable.
  9. Around the curve means maintaining a state of healthy paranoia. Peak performers understand the world is changing at a dizzying rate. Amazon, now worth over $1 trillion, didn’t exist 27 years ago. Apple, now worth $2 trillion, was on the verge of bankruptcy in 1997. I’ll refrain from rattling off the long list of once famous companies, seemingly bullet proof, that are now extinct. Top performers are constantly looking forward, backward and all around. They consistently examine their playbooks, operating models, and strategies. These amazing organizations take nothing for granted and are always on offense.

It’s important to note that some of the organizations we’ve studied have been on and off our list of peak performance companies. Regular checks on your organization’s cultural health are absolutely critical, both for organizations aspiring to peak performance and for peak performers who want to maintain. Organizational health complacency can be fatal. A peak performance culture, which constitutes the only sustainable competitive advantage of which we are aware, is incredibly perishable. Our study indicates there are nine principles at work in organizations that perform at the very top of their sectors.

Elegant Simplicity

I’ve been studying high-performance organizations for decades, but the elegant simplicity of our present day OHI came squarely in to focus during the summer of 2014, when we began working with the board of one of Houston’s largest and most successful engineering construction consulting firms. Our reputation for conducting successful C-Suite searches caused the acting CEO to want to retain us to conduct four C-Suite level searches concurrently. One was to be a CEO search in which he would be a candidate. The others were for a CFO, CIO and CHRO.

At the time, Allen Austin had no experience in civil engineering, but recognized that the firm, while having a record year in sales and profits, was not prepared for such an undertaking. We suggested instead that we administer an organizational review, which we now call Organizational Health Index.  We suggested that if the board were satisfied with the results of the review, we would move forward with one search, that of the Chief Executive Officer.

At a fraction of the cost the firm was willing to pay, we conducted a six-week review that turned out to be invaluable. To be candid, when we proposed the original review, I knew we could do it, but I didn’t know exactly how. After a bit of reflection, we began with a needs analysis questionnaire which is the basis for our C-level searches. We dusted off an old cultural survey I’d used three decades ago when I was running a 500-store retail division, and we topped it off with one on one interviews from the top of the organization to the front lines. We even included three of the firm’s longest tenured customers.

The output from this first OHI delivered value far beyond our expectations, as this was an organization that had been described as “firing on all cylinders and raining money”.

The report gave us numerical scores for the firm’s cultural health and how effectively they were leveraging each of the nine principles. These scores provided a base line and a method to measure progress toward a culture of peak performance. We expected that. It gave us a very clear notion of the leadership necessary to take the firm to its highest level and we expected that. What we did not expect was the input from the one on one interviews.

Looking back, it appears the order in which we conducted the assessment was important. After the questionnaires and surveys, its seemed as though the stakeholders we interviewed were ready to tell us EVERYTHING about which we hadn’t asked! We discovered things that were previously unknown and likely would have remained so. Many of the impediments to progress were clearly identified as were many of the solutions.

From this report, a go-forward strategy was developed, and we then had the information necessary to conduct the CEO search, and to begin the journey toward a culture of peak performance. The search was extremely complex in that the firm had never hired an outside executive. The firm’s capital structure, which included 23 shareholders was a further complication in that the CEO reported to a board of directors who are also his direct reports.

The search itself took eleven weeks and on January 1, 2015, our new CEO was officially on board. 69 months in, this organization experienced a 78% increase in top line revenues and a 319% increase in EBITDA. These kinds of engagements are the ones of which we are most proud. It’s not about the transaction, it’s about the relationship. It’s not about filling a seat or delivering a leadership product in a vacuum, it’s about helping our clients achieve their boldest vision and most lofty objectives.

If you’re open to beginning a discussion around your organizational health and a culture of peak performance, give us a call.

Warmest Regards,

Rob

Total Performance Leadership Blog Post #30: Disciplined Hiring Practices-How the Principles Can Enhance Your Board Effectiveness

Paraphrased from Mark Wiseman and Dominic Barton’s article in Harvard Business Journal May 2015 with additional commentary from Rob Andrews

Says Mark Wiseman, Boards simply aren’t working. It’s been more than a decade since the first wave of post-Enron regulatory reforms, and despite a host of guidelines from independent watchdogs such as the International Corporate Governance Network, most boards aren’t delivering on their core mission: providing strong oversight and strategic support for management’s efforts to create long-term value. This isn’t just Mark’s opinion. According to McKinsey, directors also believe boards are falling short.

A mere 34% of the 772 directors surveyed by McKinsey in 2013 agreed that the boards on which they served fully comprehended their companies’ strategies. Only 22% said their boards were completely aware of how their firms created value, and just 16% claimed that their boards had a strong understanding of the dynamics of their firms’ industries.

16%: The percentage of directors who say the boards they serve on understand the dynamics of their firms’ industries. 

 Those are shocking results. Clearly, the answer is not to impose yet another round of good-governance box-checking and hoop-jumping. The lack of improvement that approach has produced speaks for itself.

A good first step might be to help everyone firmly grasp what a director’s “fiduciary duty” is. Most legal codes stress two core aspects of it: loyalty (placing the company’s interests ahead of one’s own) and prudence (applying proper care, skill, and diligence to business decisions). Nothing suggests that the role of a loyal and prudent director is to pressure management to maximize short-term shareholder value to the exclusion of any other interest. On the contrary, the logical implication is that he or she should help the company thrive for years into the future.

If directors can keep the totality of their fiduciary duty firmly in mind, big changes in the boardroom would follow. They would spend more time on partnering with management to enable cultures of peak performance. They would spend time discussing disruptive innovations that could lead to new goods, services, markets, and business models; what it takes to capture value-creation opportunities with a big upside over the long term; and shutting or selling operations that no longer fit. And they will spend less time talking about meeting next quarter’s earnings expectations, complying with regulations (although that, of course, must be done), and avoiding lawsuits.

Selecting the Right People

From 2010 to 2013, the number of interventions by activist shareholders increased an astonishing 88%. The whole activist industry exists because public boards are often seen as inadequately equipped to meet shareholder interests.” Consider one more damning data point: Only 14% of 692 directors and C-suite executives surveyed by McKinsey in September 2014 picked “a reputation for independent thinking” as one of the main criteria that public company boards consider when appointing new directors.

In addition, public company boards—unlike general partners in the private equity world or successful family-owned companies—often do not think enough about attracting the right business expertise. Having a diversity of perspectives and proven experience in building relevant businesses, as well as deep functional knowledge, is critical.

That is indeed a problem. Former IBM CEO Lou Gerstner recently observed that the willingness to tackle outmoded orthodoxies decisively is crucial to sustained value creation. “In anything other than a protected industry, longevity is the capacity to change, not to stay with what you’ve got,” he said. Companies that last 100 years are never truly the same company, he noted. “They’ve changed 25 times or 5 times or 4 times over that 100 years.”

Remaking boards in this fashion is standard counsel these days. But if you truly get the importance of thinking and acting long-term, you’ll do whatever it takes to attract these people. Klaus Kleinfeld, the CEO of Alcoa, told us that he deliberately seeks directors who have substantial real-life experience, have worked through difficult times, and also have a strong feel for the kind of long-cycle investment-and-return rhythms that apply to his industry.

22%: The percentage of directors who say their boards know how their firms create value. 

To ensure that it can see around corners, Mars, the privately held food-and-drink powerhouse, has created a five-member advisory group of external experts to complement its three family board members. Each adviser is an expert on a specific driver of company value, from demographic health concerns to food safety regulations, and regularly addresses how trends in these areas may affect the firm’s strategy and priorities with the board and senior executives. For executives serious about creating long-term value, injecting more of these kinds of informed perspectives into the conversation at public company boards is not optional; it’s imperative.

Spending Quality Time on Strategy

Most governance experts would agree that public company directors need to put in more days on the job and devote more time to understanding and shaping strategy. Some recommendations get quite specific. Robert C. Pozen, a senior lecturer at Harvard Business School and the former chairman of MFS Investment Management, says that directors of large, complex firms should spend at least two days a month, or 24 days a year, on board responsibilities, in addition to attending regular board meetings. Others suggest that the appropriate number is as many as 54 days a year, the standard for directors of companies owned by private equity firms, according to a McKinsey study in the United Kingdom. The notion of regular group outings for directors—holding board meetings in, say, retail stores or new R&D facilities, or asking members to tag along on sales calls—is also now in vogue.

Boards also need to do more to develop and communicate non-financial metrics that will help guide strategy, especially when income statements don’t capture the emerging story. The board of Tullow Oil, a multinational oil- and gas exploration company headquartered in the United Kingdom, does this well. To measure the company’s performance, it uses a balanced scorecard of financial and nonfinancial objectives—which include progress in carrying out key development activities; implementing capital spending plans; achieving environmental, health, and safety goals; and maintaining a healthy, well-funded balance sheet.

Strategy is the fundamental challenge of the organization, and it should engage the entire board.” That collective effort is critical to ensuring the right long-term debates and decisions.

Engaging with Long-Term Investors

Boards can and should be far more active in facilitating a dialogue with major long-term shareholders. Certainly, many investors would welcome such engagement. BlackRock, the world’s largest asset manager (with more than $4.5 trillion in holdings), already strives for what CEO Larry Fink calls “robust, ongoing communication” with both management and the board at many companies it holds stakes in. “That doesn’t mean that we want to tell companies what to do,” Fink told us. “We do, however, want to make sure there is a high-quality board and management team in place, and that we have ready access” in order to serve both the long-term interests of the company and “the long-term interests of our clients.”

Happily, this is an idea whose time appears to be coming. Organizations like Shareholder-Director Exchange, a group that includes BlackRock and State Street, have been working to ensure that public companies disclose how their directors interact with shareholders and have been compiling best practices for, among other things, preparing board members for such conversations. That trend underscores long-term investors’ growing interest in learning from and exchanging ideas with smart, engaged directors. Currently, however, too much of this dialogue focuses on investor pressures to have a “say on pay” and similar single-minded governance issues. The more powerful discussions occur when companies strive to communicate their strategies for longer-term growth and their key metrics for it.

If you find this material helpful and would like to know more about developing human capital practices that will allow you to build better boards, give us a call.

Warmest Regards,

Rob

Total Performance Leadership Blog Post #29: Disciplined Hiring Practices-Retained Search Practices

How Great Retained Search Practices Can Greatly Enhance Your Hiring

Retained executive search was born in the late 1900s and grew out of the big management consulting firms. Retained search, in its purest form, was intended by its founders to be a specialized form of management consulting. Done properly, search is one of the most influential and valuable forms of management consulting there is.  CEOs, CHROs, boards, corporate recruiters and talent acquisition departments can add substantial value to their organizations by viewing the world through the eyes of a disciplined retained search professional.

To illustrate, meet fictitious characters Jack and Sam. Jack is a composite of all of the stellar executive search professionals I’ve known, and Sam was his mentor. Jack began his search career in 1989. He loved it from the beginning. Jack learned from Sam, his managing partner, and thirty years his senior, that search consultants have a tremendous responsibility to do everything in their power to facilitate matches that work and last for both client and candidate. He was taught that almost one in every two executive placements fail within two years, and that most are predestined to fail.

Sam made Jack read studies to illustrate. He showed Jack that according to some studies, up to a third of U.S. CEOs last less than two years, with top executive failure rates as high as 75 percent and rarely less than 30 percent. He showed Jack a Harvard Business Review study in which two out of five new CEOs fail in their first 18 months. The article said CEOs and senior executives are routinely hired on the basis of their presence, drive, IQ, and resume. They’re fired for lack of emotional intelligence, poor people decisions, poor cultural fit, poor performance, cluelessness and being totally out of touch with their workforces and customers.

Sam had studied thousands of failed executive placements over decades, and determined that almost half fell into the category of cultural misalignment. Another quarter of placements failed because the new hire did not meet performance expectations. However, neither the company’s culture nor its performance expectations were clearly laid out in the hiring process.

Sam gave Jack a very thorough needs analysis template that Sam required all of his consultants to follow. The document was designed to extract from the client exactly what they were trying to accomplish, and to identify who and what they needed to get there. He taught Jack how to set up a kickoff meeting, establish relevant stakeholders, and gather sufficient data in order to build a comprehensive position specification, which would become a marketing piece and the roadmap for the search. He taught Jack how to resolve disconnects among decision makers and gain agreement on key points.

Jack learned to work closely with his clients to showcase the opportunity his client had to offer, while simultaneously introducing the company itself and the basic requirements of the job at hand. Jack learned not to inflate the attributes desired in the candidate and to drill down on defining the company culture, the behaviors that would be desirable in the new hire, the nature of the existing leadership team, and values and purpose of the organization. In other words, Jack learned to help his clients focus on who their ideal candidate would be and what their ideal candidate would be able to do do, rather than getting distracted by any irrelevant qualifications they expected candidates to have.

He learned how to work effectively with clients as a thought partner in order to determine specific performance expectations that would determine success. Jack became excellent at this solving this part of the puzzle. because Sam convinced him of an important truth: that defining success up front could make the difference between a great placement and a dismal failure.

Jack still recalls how, after his first client approved his spec, Sam made Jack single-handedly map the space to identify all potential candidates who might either be candidates or referral sources. He was not allowed to rely on databases, his own network or LinkedIn. He was taught to use all the technology available to identify candidates who were not on the radar. He was taught to include all influencers in the space, including consultants, suppliers, and customers.

Once the target list was finished, Sam taught Jack how to reach out to candidates and go through a series of steps designed to facilitate effective matches. Jack determined that asking for referrals was a better method than trying to recruit candidates directly, because it put him in a position of facilitator, rather than salesman.

If candidates were interested in an opportunity, Sam would ask them to engage in a rigorous process of self-assessment, 360-degree reference audits and background checks before final interviews were arranged. Jack was skeptical of this approach at first – wouldn’t candidates get bored or frustrated and drop out of the search? But ultimately, Jack found that A candidates – the top players – were eager to do the hard work, providing multiple references and submitting to background investigations, while B and C players opted out.

Much to Jack’s chagrin, Sam made Jack work on search engagements in industries where Jack had no experience or knowledge. Sam insisted that conducting a thorough needs analysis and having a “make no assumptions” mindset was far more important than how much direct experience Jack had in the space. Without a truly curious mindset, Sam claimed, experience can cloud a consultant’s judgement. He can convince himself that he knows things he doesn’t, making dangerous assumptions along the way.

The more Jack bought in to Sam’s methodology, the better he got. He came to see himself as a true consultant and a trusted advisor committed to helping his client achieve their business objectives, rather than simply filling whatever seats happen to be empty. Now committed to facilitating matches that will work and last, Jack uses an arsenal of tools to advise clients on best practices. More importantly, Jack knows that he cannot substitute his own judgement for the client’s. His willingness to ask questions, and his skill at getting to the client’s real answer, is the most valuable “expertise” Jack has to offer.

If you find this material helpful and would like to know more about developing human capital practices that will allow you to improve your hiring effectiveness, give us a call.

Warmest Regards,

Rob

Total Performance Leadership Blog Post #28: Disciplined Hiring Practices-The Job Description

Write a Better Job Description that Attracts the Right Candidate

Paraphrased by Rob Andrews from Whitney Johnson’s article in Harvard Business Review August 08, 2020

Whitney Johnson, CEO and Founder of boutique consultancy firm WLJ Advisors, is one of the leading management thinkers in the world and author of the award-winning Disrupt Yourself (Harvard Business Review Press). When I read Whitney’s article in this month’s HBR, I immediately wanted to sign up as president of her fan club! Below are her thoughts, with a few observations of my own.

Far too many organizations miss golden opportunities to bring and onboard the best possible talent for the tasks at hand — and those of the future. When it’s time to recruit, hire, and onboard, the approach used by the vast majority are routine and rote, prone to misjudgment and error. The process is costly and, in the end, unfruitful.

This failure begins at the very first step: writing the job description. As international talent management expert Dorothy Dalton laments, “Copy-paste recruitment is generally business as usual in most organizations…Even if the post was last filled five years ago, the chance of anyone thinking it might have to be crafted differently are slim. Generally, the only changes I see are to inflate the qualifications.”

Most job descriptions are nothing more than woefully inadequate lists of attributes based on background, experience, and credentials. We’ve been studying failed executive placements for 26 years. We almost never see a failed hire that resulted from a disconnect between job description and resume. Most failed because of cultural misalignment or the candidate’s inability to deliver on expected performance. Ironically, most job descriptions say little about either.

Know what you need now, but also envision the future

When hiring a key player, you often need a sharpshooter with the expertise to solve a pressing problem. You can’t wait for them to grow. The tradeoff is that they will quickly move on, either to another organization or to a new challenge in yours (if one is available for them) and you will need to hire again, hopefully for a longer tenure.

Before writing the job description, think about what will best serve the organization in both the short and long term. In some cases, it may be more appropriate to contract a gig worker to solve the problem and hire an employee for longer-term growth.

When it comes time to make a critical hire, it is vitally important to set the list aside, think from a clean sheet of paper and identify the current and future needs of the job, zeroing in on the critical capabilities that will make or break the hire. The result is not a long laundry list of every trait that the candidate should have, nor is it one single item. It’s a strand of two or three capabilities that are tightly interwoven and absolutely required for the new leader to succeed, taking into account both the market conditions and the current and desired states of the business. This is what should make the decision turn toward one candidate or another. That’s why Ram Charan, the famous Harvard CEO selector, calls it the pivot. Each situation is distinct. And so is each role’s pivot.

It is critical to identify the pivot in very specific terms, and to get it right. Hiring managers who get this right work hard to do so. They talk with customers, insiders, consultants, and analysts to expand their thinking. They go deeper and broader than most hiring managers do. They don’t dismiss complexities or complications; they cut through them and deduce what skills, attributes, and experiences are essential, continually adapting until they’ve arrived at the right combination.     

Understand the hiring context

Evaluate the role in the context of the team in a large organization, or in the whole organization if your workplace is on the smaller side. Filling a job is a growth opportunity for the business, not just for the individual; the best fit is found when it captures growth for both. You can better align your job openings and descriptions with what your business needs by better understanding your current roles.

Every key hire should be viewed as an opportunity to take the team to a new level. Don’t think in terms of replacing a person who just left. Talent acquisition is the responsibility of the entire leadership team. Some teams perform brilliantly while some repeatedly make the same mistakes, which include being influenced by star power, impressive resumes, personal presence and what we refer to as the A’s: attractive, affable, and articulate. Others are inappropriately swayed by relationships, tradition, biases perfectionism, impatience, etc.

According to Ram Charan, great hiring decisions are usually driven by one or two leaders who are particularly adept at talent acquisition. These hiring managers select high performing employees, build powerful cultures, and grow enterprise value and shareholder wealth. They accomplish this by doing four things that others don’t.

 First, they work painstakingly to identify the qualities and attributes necessary to perform well in the job.

Second, they keep an open mind in terms of where the best candidate will come from.

Third, they dive deep to determine which candidate is the best fit.

Fourth, they allow for imperfections in the chosen candidate.

Address culture in specific terms

Over 26 years we have studied nearly 5,000 failed executive placements, some performed by other search firms, and some by in-house hiring departments around the globe. By isolating and cataloging the reasons for failure, we’ve found that almost half of failed assignments fall into the cultural misalignment category. It’s not about good or bad, or right or wrong. It’s purely about fit. The behavior that’s revered in one organization gets you fired in another. A great fit for Wegmans will probably be a terrible fit for Kroger. Be specific about describing the culture of your organization at present and where you’re trying to take it.

Time and again, we see talented people join companies whose values and attitudes are misaligned with their own. When we ignore culture and settle for matching a resume to a woefully inadequate job description, our hires are destined to fail.

Think about meaning

People want to contribute, to feel energized and passionate about what they do. They want to be inspired by ideas that can help solve problems and meet needs. This doesn’t necessarily mean changing the world or addressing cosmically important issues. But it does mean believing that we are making our corner of the world happier, brighter, and safer in some small but significant way.

It is critical that organizations ensure the roles they are hiring for are quality opportunities for meaningful work, personal growth, and impact. This needs to be conveyed through the job description and even into the interviewing process. For example, Chatbooks is a company that helps people create printed scrapbooks from their Instagram photos. Rather than focusing on specific skills, they use words like “high-performance creativity,” “grown up,” and “optimistic” to describe their values and the kind of candidates they are seeking to employ. When you hire an individual whose values align with the purposes of your organization, it’s a win-win. Craft the job description to invite those people to apply.

When you get a job description right, you provide an opportunity for your next employee to assume market risk — to play where others in your organization aren’t, utilizing their distinctive strengths. The odds of success are much higher than if they face competitive risk, battling for turf with entrenched players in your organization. The right fit means that a new hire has room to grow; when your employees grow, so does your organization.

When deciding on your must-haves for any new position, it is vital to know what can and cannot be taught. Of course, any employee faces a learning curve when they join an organization. But while the likelihood that your hires will adapt to a new CRM is quite high, the central values that drive your organization are harder to teach.

A person who is already on board with your purpose, who already finds meaning in the work you do, will learn everything else much more readily than a dispassionate jobholder – even if that dispassionate jobholder looked great on paper. When your job descriptions are clear on the purpose of your organization, you will attract candidates that are genuinely excited about contributing to your growth, and not just about receiving a paycheck.

If you find this material helpful and would like to know more about developing human capital practices that will allow you to build an employment brand that ensures a pipeline of candidates competing for your positions, give us a call.

 

Warmest Regards,

 

Rob

 

 

Total Performance Leadership Blog Post #27: Total Performance Leadership-Organizational Health

Why Checking your Organizational Health is Critical During the Pandemic

Henning Strubel, Senior Partner with The Boston Consulting Group, said in a recent article published in HR Technologist that “organizational complicatedness is the biggest barrier to high performance” and that smart simplicity, stakeholder management and organizational health are critical to peak performance. “Organizational Health is an organization’s ability to function effectively, to cope with change appropriately, and to grow from within which results in high performance.” I agree.

I’ve long been a fan of Patrick Lencioni and have read all eleven of his books. Lencioni says organizational health trumps everything. He notes that a successful organization has to be smart and healthy in order to reach peak performance. He also points out that most leaders “pay too much attention to the former [smarts] and not nearly enough to the latter [health]” According to Lencioni, a smart company is good at strategy, marketing, finance, operations, and technology. Meanwhile, a healthy company has minimal politics and confusion, high morale and productivity, and very low employee turnover. I concur not only with his definition of health, but also with his conviction in its importance.

The reason organizational health is so often overlooked is due to what Jim Collins calls “the quantitative bias”. It’s easier to look for answers around things we’ve measured for decades, what we have studied in college and business school. However, most organizations are full of smart people who know how to do their jobs. The most substantial barriers to their success is not incompetence, but rather a work environment riddled with politics and confusion. In these situations, the biggest opportunity for exponential improvement is to focus on building a culture of peak performance. Volumes have been written on the subject; I agree with most of them.

Agreeing with what countless authors and researchers have written about is one thing and doing something about it is another. Our own study has examined dozens of companies like QuikTrip, Southwest Airlines, Wegmans, Waste Connections, UPS, H-E-B, ONEOK, Nordstrom, Sewell Automotive Group, Sheetz, Pappas Brothers, Home Depot, Darden, Disney, Johnson & Johnson, Panera Bread, 3M, Costco, Harley-Davidson, GSD&M, L.L. Bean, just to name a few.

It’s important to note that some of the organization’s we’ve examined have been on and off our list of peak performance organizations. Peak performance in the past is no guarantee of peak performance in the present. Just like having regular physical examinations, regular checks on your organization’s cultural health are absolutely critical, both for organizations aspiring to reach peak performance and for peak performing organizations who want to maintain their achievements. Just like your physical health, taking your organizational health for granted can be fatal.

One of my best golf buddies came dangerously close to death because he didn’t think he need to get a colonoscopy. My friend’s wife harassed and harangued him until he was well past 50, when he finally acquiesced. When he woke up from the procedure, he found his wife and daughter sobbing hysterically. He had been diagnosed with stage four colon cancer. Two years and many painful chemo treatments later, he now appears to be cancer free and is a poster child for regular colonoscopies. He is lucky.

Now hear this: Your organizational health is every bit as fragile as your physical health. Peak performing culture, which constitutes the only sustainable competitive advantage of which we are aware, is incredibly perishable. Our study indicates there are nine principles at work in organizations that perform at the very top of their sectors. I recommend that you measure your cultural health against those principles. That’s what we do with our Organizational Health Index.

While a full description of our Organizational Health Index is beyond the scope of this paper, try answering these questions with: Strongly Agree, Agree, Neutral, Disagree or Strongly Disagree.

  1. While your competitors struggle to staff their critical positions, your employment brand, culture, purpose and practices ensure a full pipeline of candidates waiting for positions to open in your organization; and all your seats are occupied by A Players who are head-down, happy and just not interested in going anywhere else.
  2. While your competitors bemoan the millennials and their disengaged workforces, you sleep well at night knowing your purpose is clear, and your workforce is engaged, involved, informed, aligned, and working hard to help achieve your organization’s most important objectives, and loving it!
  3. While your competitors struggle with politics, confusion, and dysfunctional leadership, you rest well knowing your senior leadership team engages in healthy debate, owns the issues and makes excellent decisions, and that your leadership is aligned from the very top of your organization to the front lines.
  4. While your competitors whine about price pressures and fickle customers, you swell with pride knowing the experience your customers enjoy and the relationship they value with you, cause them to be intensely loyal and to tell stories raving about and promoting your organization.
  5. While your competitors suffer from confusion and lack of direction, your employees and customers know precisely what you stand for, what your value proposition is, where you’re going, how you’re going to get there, how they fit in, and what’s in it for them.
  6. While your competitors struggle with balancing the needs and desires of their stakeholder groups, your balanced approach to engaging shareholders, management, employees, providers and community is allowing you to experience a level of synergy and collaboration few organizations enjoy.
  7. While your competitors lose enterprise value through quantitative bias and studying financial statements until blind, you’re taking market share and enhancing profits by measuring and making adjustments to everything that counts, including how your organization is doing compared to organizations that are mastering the principles practiced in peak performing cultures.
  8. While your competitors struggle with expenses spiraling out of control, you’re able to concentrate, knowing your systems are removing all costs from your business not needed to deliver great service and experience to your stakeholders.
  9. While your competitors rest on their laurels, your team is constantly aware and practicing the kind of healthy paranoia that leads to new opportunities, constant improvement and an organization that gets better year after year.

I encourage you to examine your answers and ask yourself, “is this a healthy way to work?”

The pandemic has changed us. It has changed our businesses and our lives forever. We’ll never be the same and there is no way around it. The question is not, “when will we go back to how it was before?” Rather, we must ask, “how will my organization emerge from this season of change even stronger than before?”

If you’re open to finding a straightforward suite of diagnostics that will help eliminate confusion and politics in your workplace, give us a call.

 

Warmest Regards,

Rob

 

 

Total Performance Leadership Blog Post #26: Customer Experience-The Pandemic

Build B2B Revenues during the Pandemic

Paraphrased from Jeff Winters’ article in Harvard Business Review July 29, 2020

Covid-19 has changed the world of B2B sales. Even if you started the year with a packed pipeline, few businesses have escaped the economic turmoil. Heidrick & Struggles posted revenues of $145.6 million during the second quarter of 2020, vs. $173.1 million the same quarter in 2019, a 16% drop in revenues. They expect similar results during the 3rd and 4th quarters. Other search firms are reporting similar results. Statista states that global management consulting revenues dropped 18% from 2019 to 2020.

Businesses that have been less hard-hit are redoubling their efforts, deciding not to participate in the temporary downturn. Of course, the pandemic certainly creates new challenges for their teams. However, those that take advantage of the opportunities that are available right now are the most likely to thrive during and after this crisis. Keep in mind, there is no guarantee that these selling conditions won’t persist even after a vaccine is distributed. Consumers are creating new spending habits, which may very well continue into the “new normal.”

Businesses who wait to brainstorm ways to drum up new leads until after the storm has passed will be too late to gain a competitive (or any) advantage; when the pipeline runs out, it will take time to get it flowing again. Don’t stop testing your tactics and tightening your processes. To keep closing deals, try implementing the following steps:

Ramp up your prospecting. Successfully closing a deal during Covid-19 will require most teams to rethink their approach. Face-to-face sellers need to focus on becoming effective selling remotely — in many cases, a lot more effective than they were pre-Coronavirus. This will require a significant increase in prospecting. All sellers, even seasoned prospectors, should dedicate themselves to learning best practices, executing new methods, and finding fresh resources.

Engaging with prospects’ social posts, writing handwritten letters, and giving strategic, genuine gifts within your company’s ethical guidelines are all smart tactics for staying top of mind — but they’re just the tip of the iceberg. Continuing to generate leads and close sales will require continuous experimentation. No tried-and-true tactics exist for selling during a global pandemic. We are all pioneers in this new environment. Trial and error is necessary for adapting to the unique circumstances you face in helping your prospects.

What’s more, the tactics that worked in the past may or may not work now. For instance, standard email open rates decreased overall during Covid-19, but emails acknowledging the pandemic saw a 41% increase in March, according to Worldata. This reality necessitates that all selling organizations foster a testing subculture: making minor adjustments and regularly retesting their approaches to ensure their efficacy.

Think about your prospect’s customer. Your prospect’s customer now holds the key to your success. If your prospect’s customer is doing okay financially, then your prospect is likely more inclined to buy from you. If they’re not, your prospect’s buying behavior will change, too. These changes can range from not buying at all to slowing down the sales cycle a few weeks.

Once you know how the people your prospect are selling to have been affected, you’ll better understand your prospect’s buying urgency (or lack thereof) when going into sales calls. For example, if you’re selling your software to a company that sells to stadiums, you will know immediately that they’re less likely to purchase quickly right now. It has always been useful to practice this kind of awareness; now it is essential.

It is also critical to know how your prospect’s customer is faring as you think about the resources you’ll spend on a deal. If your pool of deals is now down 50% or lower, then you need to focus on the deals you can win. The status of your prospect’s customer can help you determine whether you’re working a deal that can close. If your prospect’s customer is struggling, it’s likely that your sales cycle will take longer. Take this into consideration when you’re forecasting deals to leadership and deciding how to spend your time.

If you’re unsure, don’t be afraid to press in on your prospect. Ask questions like: “Given the new environment, has anything changed with your process?” and “Can you walk me through the approval process for a deal like this?”

Switch to ‘yes’ mode and be empathetic. What does your prospect need in order to get the deal across the finish line? Sales leaders should have a playbook of possibilities that sales reps can deploy in the right situations. Consider offering a temporary discount or deferred payment option to help your prospect get through the pandemic. For instance, some banks and lenders have begun waiving overdraft and late fees. You might also consider throwing in a free feature that would normally cost a premium. SAP, for example, is making its Qualtrics Remote Work Pulse complementary for companies that have been forced to adapt to a new reality of work.

Just remember that you’re doing some good here. You may not be able to sell your product at a premium, and that’s okay. If you can get something you sell into the hands of a prospect who needs it during a difficult time (even at a discount), that’s a win for everyone. They’re receiving what they need, and you’re still selling. The few nickels you sacrificed to land the deal will be worth it for the long-term prospect loyalty you build.

Pitch all deals like you’re pitching to a CFO. In our current climate, all deals are receiving more scrutiny from financial decision makers. This means that more people will be involved. Sellers should assume that everyone is a champion — a person who will share your information internally. Sapper Consulting states that “our experience with sales in recent months has shown us that there are no final decision makers right now.” Even individuals who have unilateral authority are sharing the decision-making process with teams and committees. According to a Young President’s Organization survey, 68% of business leaders are communicating more consistently with employees.

Because people will be scrutinizing buying decisions more, you need to be more intentional, direct, and repetitive about ROI. You have to emphasize to your champions that you have a very clear, demonstrable ROI. “The promise of great value is not cutting it,” Alyssa Merwin, LinkedIn’s Vice President of sales, said during a webinar. “It is a hard-dollar ROI, not soft. As sellers, we are going to have to up our game.” To demonstrate hard ROI, you must highlight the direct connection between the product or service you’re selling and the customer organization’s goals. Hard ROI is usually defined by the money saved in terms of reducing or avoiding a cost. Use the ROI ratio formula to get a percentage representing a net gain on the investment (gain from the investment minus the cost of investment divided by cost).

The pandemic will pass eventually, but that doesn’t mean you can afford to stop selling and wait for better times. These pieces of advice can help you deliver the kind of pitch that snags (and keeps) a prospect’s attention.

Warmest Regards,

 

Rob

Total Performance Leadership Blog Post #25: Stakeholder Engagement-How Gordon Bethune led Continental Airlines our of Crisis

We deliver a leadership communications workshop developed over eighteen years, by my late best friend and business partner, Bob Knowlton, who died of pancreatic cancer on October 20, 2009. What we now call TPL Leadership Dynamics was his life’s work and his pride and joy. The workshop, which we’ve continued to enhance over the last eleven years, delivers the most powerful leadership communications methodology I have ever seen. Bob’s premise in developing this methodology was that effective leadership, which drives positive change and creates breakthroughs, is not about personal presence, degrees, or position title. Effective leadership is critical from the board room to the shop floor and is about connecting with your constituents so they feel you know where you’re going, you believe what you’re saying and there is something in it for them.

The first thing we do when we begin a workshop is to show a twelve-minute video of Gordon Bethune addressing the employees of Continental Airlines shortly after the company released its fiscal 1994 financials. From a production-quality standpoint, this was one of the worst videos of all time. The lighting was poor, there was a cheap piece of art hanging on the wall, Gordon’s address was unrehearsed and a bit awkward, he cussed a few times and fidgeted all the way through it. The production itself was poor but the result was exceptional.

Gordon joined a severely troubled Continental Airlines as COO in 1994 and was promoted to CEO in 1995. When Gordon took the reins, Continental was dead last in every category and had filed for bankruptcy protection in 1983 and again in 1990. The company carried a huge debt load, the fleet was a jumbled mess of junk, workforce, and labor union relations were hostile and they were months away from yet another bankruptcy. The leadership was not unified, there was no strategy, no measurement systems, no clarity, and no stakeholder engagement. Under Bethune, that was to change, change for the better, and change quickly.

In very short order, Continental went from last in every measurable performance category to winning more J.D. Power & Associates awards for customer satisfaction than any other airline in the world. Business Week magazine named Bethune one of the top 25 Global Leaders in 1996 and 1997. Continental’s stock price rose from $2 to over $50 per share between 1996 and 2004. Fortune named Continental among America’s Best Companies to Work for six consecutive years. In Gordon’s last year before retiring, Fortune ranked Continental #1 Most Admired Global Airline, a title it earned again in 2005, 2006, 2007, and 2008.

As you watch the video, you will see that Gordon communicated with his stakeholders in such a way that they absolutely knew where he was going. When stakeholders in an organization don’t know where their leaders are taking them, they tend to play it safe, do the bare minimum and protect their turf. Engaged stakeholders get out of the stands and into the game.

Stakeholders under Bethune quickly became convinced that he believed what he was saying. Companies in which managers pretend to lead, employees pretend to enroll. Stakeholders know and have always known, whether the leader really believes what he or she is saying.

Gordon connected with his stakeholders and their needs and interests. A leader speaks not to an audience, but to groups of constituents, each with their own specific needs and interests. Stakeholders can tell whether the leader really understands and connects with their world. If he or she doesn’t, it’s unlikely they will put their hearts and minds into the game.

Our research and methodology suggest there are eight essential elements of an effective leadership message and Gordon nails every one of them.

Background Connection: Your first task is to make the shift from “you and me” to “we.” Gordon used “we” repeatedly and made it clear he felt a shared connection with his stakeholders. He admitted mistakes, took responsibility, and demonstrated empathy. He spoke of things “you and I need to do” and about what “we’re going to do together.”

Vision: What is the future state? People want to know you have a vision and what it is. What might it look like next year? In five years? How do we want the world to see us? How do we want to feel about the work we do? Gordon spoke of a new vision, as a well-run airline, a customer service leader, and a place people would be proud to work.

Strategy: What will it take to get there? Stakeholders care less about the details of a plan and more about the existence of a plan, and that it is already underway. Gordon described their strategic failures and laid out his four cornerstones to profitability, including fly to win, reducing the size of the fleet, and improving operating performance.

Implications: What does this mean for us? Stakeholders want to understand the impact on them. Where there is a vacuum, employees will fill it by making up their own stories. Gordon spoke candidly of vendors and employees who would not be paid, and other temporary pain points, as necessary, until they could return to profitability.

Urgency: Why the rush? Stakeholders will cling to a flawed, broken system rather than venturing into the unknown. Change requires a credible call for urgency. The airline had a dismal history, yet Gordon implored his employees to quickly improve rankings and laid out the corresponding rewards for better on-time flight performance.

Rewards: What will make this all worthwhile? Will the rewards be shared among those who expended the effort? Leaders need to acknowledge individual and group contributions and design reward systems in which everyone wins. Bethune laid out a plan by which all stakeholders would be made whole once profitability was restored.

Hardball Issues: What issues or concerns stand in our way? Stakeholder groups are different, but each is listening for evidence that you understand the challenges at hand: past failures, inadequate resources, or external circumstances. Gordon acknowledges past failures and asks his stakeholders to unite with him in a new vision.

I hope this information has been helpful and look forward to answering your individual questions around how your organization can leverage this powerful methodology.

Warmest Regards,

Rob