How Hard Times Affect a CEO’s Career and Management Style

Virgil Carter

Interested in becoming a CEO?

Authors Antoinette Schoar and Luo Zuo, from the MIT Sloan School of Management, write about the impact of challenging economic times on CEO career paths and management styles.  Published in a recent S+B newsletter, the authors write that “the economic conditions at the beginning of a manager’s career…have lasting effects on the career path and the ultimate outcome as a CEO”.

Starting a career in a recession “also affects a CEO’s approach to management”, the researchers say.  Such CEOs tend to “run thins in a more conservative way, investing less in capital expenditures and in research and development, for example”.  Those who begin in harder times, and thus can be seen as more recession-minded, reach the top more quickly, and are more likely to rise through the ranks at a single firm than to move across companies and industries.

The researchers also note their findings that these same CEOs “tend to lead smaller firms and receive lower compensation than their peers who started during brighter economic times”.  The findings point to the uncomfortable reality that the careers of recession-minded CEOs are not as successful as CEOs who begin in boom times.

The challenges between leading a company during extended periods of pronounced growth and turning around a distressed company may be quite different.  Yet, according to the researchers, “recession-minded CEOs do not perform differently during down times or booms”, the authors argue that their managerial styles, once formed, are relatively fixed over time.  For the full article, go here:  http://www.strategy-business.com/article/re00171?pg=all

This may be a great time to become a CEO!

Seven Habits of Spectacularly Unsuccessful Executives

Virgil Carter

Forbes Magazine recently published an article by Sidney Finkelstein, the Roth Professor of Management at the Tuck School of Business at Dartmouth College.  The article, “Why Smart Executives Fail” summarized some of his research on why over 50 former successful industries, including Enron, Tyco and Schwinn, had become complete failures.  It turns out the senior executives at the companies all had seven habits in common.  Here are the habits:

Executives see themselves and their companies as dominating their environment:  Finkelstein notes this first habit may be the most insidious, since it appears to be highly desirable.  The challenge is that failed leaders with this habit fail to realize they are at the mercy of changing circumstances.  They vastly overestimate their ability to control events and underestimate the role of chance and circumstance in their success.

There is no clear boundary between executive’s personal interests and their corporation’s interests:  Like the first habit, this seems innocuous, even beneficial.  The issue is that these executive often use their companies to carry out personal ambitions.  The most slippery slope of all for these executives in their tendency to use corporate funds for personal reasons.

They think they have all the answers:  The image of executive competence we have been taught to admire is one of a dynamic leader making dozens of decisions a minute.  The problem is that leaders who are invariably crisp and decisive tend to settle issues too quickly with no grasp of the ramifications.  Worse, these leaders feel they have all the answers, so they aren’t open to learning any new ones.

Elimination of anyone not completely behind the executives:  Many CEOs think their job is to instill belief in their vision and to get everyone to buy into the vision.  It’s get with the plan or leave.  By eliminating all dissenting and contrasting points of view, destructive CEOs cut themselves off from their best chance to seeing and correcting problems as they arise.

They are consummate spokespersons, obsessed with the company image:  The challenge is that amid all the media frenzy and accolades, these leaders’ management efforts may become shallow and ineffective.  Instead of actually accomplishing things, they often settle for the appearance of accomplishing things.  When CEOs are obsessed with their image, they have little time for operational details.

They underestimate obstacles:  When CEOs becomes so enamored of their vision, they often overlook or underestimate the difficulty of actually getting there.  Some CEOs feel an enormous need to be right in every important decision they make, because if they admit to being fallible, their position as CEO might seem precarious.

They stubbornly rely on what worked for them in the past:  Many CEOs on their way to becoming spectacularly unsuccessful accelerate their company’s decline by reverting to their own careers and do the things that made them successful in the past—no matter how unrealistic or inapplicable it may be.

Bottom line:  If you have several of these traits, now is the time to eliminate them from your repertoire.  If your boss or several senior executives at your company exhibit several of these traits, now may be the time to polish your resume and find a new job!

Making the Most of Uncertainty

Virgil R. Carter

Organizational leaders are faced with how best to lead their organizations during times of uncertainty.  For example, is it better for a non-profit organization to energetically research and invest in the outcome of crucial and currently uncertain elements of the organization’s operations and industry or discipline?  Or is the wiser course to adopt defensible positions within the organization’s existing structure and then to move to recognize and capture new opportunities when the economy changes?

A recently republished article by Hugh Courtney, published by the McKinsey Quarterly, “Making the Most of Uncertainty” addresses this issue.

“As globalization, digitization, and unfettered capital markets raise levels of uncertainty and rewrite definitions of opportunities and risks, this basic strategic choice has morphed into a more complex and high-stakes dilemma”, according to the article. “The right strategic bets can return far higher payoffs, far more quickly; the wrong ones carry a much higher risk of systemic failure. Betting big today may fundamentally reshape a market on a global scale to the advantage of a company or quickly produce losses that can throw it into bankruptcy. A company may avoid foolhardy mistakes by waiting for uncertainty to diminish, or it may squander the chance to lay claim to first-mover advantages.”  The parallels for non-profit organizations are obvious.

“The truth is that no dominant solution exists”, is the reassuring conclusion!

 Pursuing the question of how to address uncertainty, the author states, “An essential starting point is understanding your alternatives. Shaping and adapting strategies may take many different forms. Shapers generally attempt to get ahead of uncertainty by driving industry change their way.  Adapters, by contrast, take the existing and future industry structure and conduct as given. When a market is stable, adapters try to define defensible positions within the industry’s existing structure. When high uncertainty prevails, they attempt to win through speed and agility in recognizing and capturing new opportunities as the market changes.”

“Whether a company should attempt to shape or adapt depends largely on the level and nature of the uncertainty it faces. To put things simply, when it faces very high levels of uncertainty about variables it can influence, shaping makes most sense. Adapting is preferable when key sources of value creation are relatively stable or outside the company’s control.”

As executives make shape-or-adapt choices, uncertainty, perceived first-mover advantages, and the organization’s capabilities and aspirations play important roles. No algorithm exists to weigh each factor, nor can a one-size-fits-all answer suit all organizations in all situations. One thing, however, is certain: executives “who develop a thorough understanding of the level and nature of the residual uncertainty their organization faces can develop a richer set of feasible alternatives and make better-informed choices to shape or adapt.”

For a full copy of the article, go here:  https://www.mckinseyquarterly.com/Strategy/Strategic_Thinking/Making_the_most_of_uncertainty_1128

Five New Management Metrics You Need To Know

In a Forbes Magazine article, author James Slavet of Greylock Partners writes that he has watched some of the best startup CEOs in the world and found that “the most important metrics are often ones you never read about on the income statement or in the financial press”.  Here’s five metrics that great CEOs and management teams practice:

Flow State Percentage:  Jobs that require a lot of brainpower—software programming for instance—also demand deep concentration.  “Flow state” is a term coined by psychologist Mihaly Csikszentmihalyi, meaning “you’re in the zone” when working on something; you’re cranking!  Unfortunately, most of us are constantly interrupted during the day with meetings, emails, tests, or colleagues who want to talk.  These interruptions that move us out of “flow state” increase the time to be productive and increase costs dramatically.  To get more “flow state”, brainstorm ways that you and your team can reduce interruptions and increase your flow!

The Anxiety-Boredom Continuum:  This continuum, when applied to managing people, means striving to achieve the work rhythm fast enough so that people are challenged, but not so difficult that people can’t cope.  If people have low energy, or are showing up late and leaving early, they may be bored.  If they’re responding to small setback with anger or frustration, or setting sick a lot, they may be pushing too hard.

Meeting Promoter Score:  Meetings are a pain—and they’re expensive.  In the last minute of a meeting, ask your team to rate how effective their meeting was, with one suggestion for making the meeting better. 

Compound Weekly Learning Rate:  The ability to learn is like the compounding interest on an investment:  after two or three years, a relentless learner stands head and shoulders above his/her peers.  Try asking your management team:  how did you get 1% better this week?  Did you learn something valuable from our customers, or make a change to our product that drove better results?  1% per week adds up.

Positive Feedback Ratio:  John Gottman, a psychologist and author of “Why Marriages Succeed or Fail”, found in his research that marriages that succeed tend to have five times as many positive interactions as negative marriages.  When a couple falls below that ratio, their relationship suffers.  The same is true at the office, where you are often connected for years in relationships with people who can either become wary of your criticisms or eager to give you their best effort.  Never miss a chance to say something constructive.  Then when feedback on improvements is needed, chances are your team will listen.

Will these metrics work for you and your team?

The Importance of Growth and Celebration

By Mark Rubin, Executive Director

Society of Petroleum Engineers (SPE)

My organization, the Society of Petroleum Engineers (SPE), reached an important milestone this past November by reaching 100,000 members.  The final membership figure for 2012 was 104,762, including 75,395 professionals and 29,367 students.  While the growth in overall membership is important, we are especially proud of growing our professional membership by an average of 4.7% each year for the past decade.

Reaching this milestone provided an opportunity to think about what had driven our growth.   Part of the reason was the relatively good health of the industry that we serve and the critical need for technology to find and produce oil and natural gas.  The petroleum industry is vital to the world economy, with oil and natural gas providing 54% of the energy used globally.   While this positive industry climate provided the opportunity, there were a number of things that we did to take advantage of this opportunity.  Our staff leadership team identified several key factors for our growth over the past decade:

·        Emphasis on globalization.  Our international expansion, begun in the 1970s, continued over the past decade by establishing new offices in Dubai, Calgary and Moscow, in addition to our existing offices in the Dallas, Houston, London and Kuala Lumpur.  These offices have given us global reach, and have allowed us to expand and adapt our programs and services around the world.

·        Creativity and flexibility in meeting the needs of members.  We have recognized that a one-size-fits-all approach does not work for a global organization.  This has lead to a number of changes including improvements in our dues collection system, emphasis on young professionals programs, and emphasis on addressing the needs of geographic and technical niche groups within our membership.

·        Devotion to quality and integrity in all of our products and services.  Maintaining our reputation for quality has had a significant impact on membership growth and participation in all of our programs.

·        Expansion of our global meetings program.  We conduct more than three times as many meetings each year compared to a decade ago.  Our meetings meet member needs and enhance our reputation in our industry, helping us attract new members.

·        Investments in technology.  The internet has provided opportunities to enable members to access SPE resources from anywhere around the world quickly and easily.  We have made significant investments to expand the online resources offered. 

·        Enhancing support for local Sections and Student Chapters.  Local participation is the most valued part of membership for a large share of our members.  We have made significant investments in supporting these groups and have seen significant growth in the number of both Sections and Student Chapters globally.

·       Fostering a progressive staff culture.  We strive to foster a staff culture of people who care - who like and want to help our members, and who take pride in what they do.  We continue to make significant investments in training and supporting our growing staff organization.

We have used achievement of the 100,000 member milestone as an opportunity to celebrate our success.  I am especially pleased that while we have achieved much as an organization, there are still many more opportunities for future growth for our organization.

Think PYRAMID When Fundraising

By

Todd Wurschmidt, PhD, CAE, CFRE

Senior Advisor, Plexus Consulting Group, LLC

Washington, DC

Just recently I heard (once again), “All we need to do is get our 100,000 Members to each give $1.00.”  Ah, if fundraising were only that simple!  It’s NOT.

If you take away one message from this Plexus Blog it would be:

“Forget equal-share-giving; Think PYRAMID.”

Do you recall who Vilfredo Pareto was?  Ever heard of the 80-20 Rule?  The 80-20 Rule was derived from the work and writings of Vilfredo Pareto, an Italian man of many trades – engineer; sociologist; political scientist; economist; and philosopher.  Pareto observed that 80% of the land in Italy (circa early 1900s) was owned by 20% of the population.  Similarly:

-          80% of effects are largely derived from 20% of causes

-          80% of sales come largely from 20% of one’s clients

-          80% of sales are derived from the efforts of 20% of one’s sales staff

-          80% of the space in a company’s warehouse is taken up by 20% of the inventory’s products

-          80% of problems one encounters are largely derived from 20% of the range of defects identified

We could go on……. You get the sense.  And, yes, reality may sometimes have the percentage splits as 70-30 or 83-17 or whatever.  Pareto’s Principle still holds merit.  And, we could use Pareto’s mathematical formula to calculate these relationships, but that is less important for our purposes than applying this important “Pareto Principle” to your Association’s fundraising efforts…..large or small.

It is probably the most frequent and instinctive solution for someone on our Board, Committee, or Task Force to assert, “If we just get everyone to give $1.00 (or $5.00 or $100.00 each), we will meet our goal.”  I can only assume this flawed assertion comes from that fact that it is easy to conceive of this approach as “a strategy driving toward a solution.”  Equally, it’s easy to do the necessary math (#’s times $’s = Total $ Goal).  But, resist you must.  It doesn’t work.  Think PYRAMID.

In fundraising, 20% of your Donors give 80% of your Campaign Goal….. There it is, that pesky, insightful “Pareto Principle – The 80-20 Rule.”  And, thankfully, these top 20% of Donors have the capacity and wherewithal to give MORE per donation (i.e., larger gift amounts).  Thus, early-on in our planning process, we need to devise Gift Categories.  But first:

Spend your initial energies Identifying and Clarifying your Need(s).

Your first step does NOT involve money.  Your first step involves identifying and clarifying your Need(s).  Why are you thinking about raising money?  What do you want to accomplish?  Your Program and/or Service Objectives are paramount to framing the foundation from which you will springboard to achieving fundraising success.  If you don’t have a “Good to Great” cause, you aren’t likely to be successful.

1^st)  Identify and Clarify your Association’s Need(s)

2^nd) Calculate the Total Amount of Money you need to raise

3^rd)  Derive some four or five Gift Categories that are based on your Total Fundraising Campaign Goal, and based upon your Donors’ ability and interest to give

4^th) Construct a Gift Pyramid Chart w/ your Gift Categories set alongside the Number of Gifts/Donations you will need per each Gift Category in order to achieve your Fundraising Goals.

Below is a sample PYRAMID Gift Chart.  This sample PYRAMID Gift Chart has a variety of instructional pieces of information.  Please note:

1)      Five Gift Ranges listed in the First Column on the left-hand side

2)      The color PYRAMID w/ the Number of Gifts needed for each of the five Gift Ranges

3)      Third column which combines the first two columns to calculate the Sub-Goals and thus, the Total Campaign Goal

4)      Columns Four to Eight presents five years of historical data for this sample Fundraising Campaign for comparative analysis

5)      The box on the bottom gives insight into the number of Campaign Volunteers needed

Lastly, you MUST identify PROSPECTIVE DONORS that you believe your research shows might be able to donate at one of the five Gift Categories.  For this sample Campaign and this PYRAMID Gift Chart, we show our need to solicit 80 Total Gifts.  In order to successfully solicit 80 Gifts, we would need to make perhaps 200 to 500 “ASKS” (depending on this being our first Campaign or our having a collection of past (and hopefully Repeat) Donors.

As you can easily see, this is not “Equal-Share-Giving.”  This involves constructing a Pyramidal Gift Chart w/ multiple levels of Gift Giving.  This requires our spending more time Planning and then Implementing, but the planning time will be well worth your efforts.

How Hard Times Affect a CEO’s Career and Management Style

By Virgil Carter

Interested in becoming a CEO?

Authors Antoinette Schoar and Luo Zuo, from the MIT Sloan School of Management, write about the impact of challenging economic times on CEO career paths and management styles.  Published in a recent S+B newsletter, the authors write that “the economic conditions at the beginning of a manager’s career…have lasting effects on the career path and the ultimate outcome as a CEO”.

Starting a career in a recession “also affects a CEO’s approach to management”, the researchers say.  Such CEOs tend to “run thins in a more conservative way, investing less in capital expenditures and in research and development, for example”.  Those who begin in harder times, and thus can be seen as more recession-minded, reach the top more quickly, and are more likely to rise through the ranks at a single firm than to move across companies and industries.

The researchers also note their findings that these same CEOs “tend to lead smaller firms and receive lower compensation than their peers who started during brighter economic times”.  The findings point to the uncomfortable reality that the careers of recession-minded CEOs are not as successful as CEOs who begin in boom times.

The challenges between leading a company during extended periods of pronounced growth and turning around a distressed company may be quite different.  Yet, according to the researchers, “recession-minded CEOs do not perform differently during down times or booms”, the authors argue that their managerial styles, once formed, are relatively fixed over time.  For the full article, go here:  http://www.strategy-business.com/article/re00171?pg=all

This may be a great time to become a CEO!

Three Processes to Align Mission & Money

By Virgil R. Carter

Beginning a new calendar year often means a new fiscal year for non-profit organizations.  Whenever a new fiscal year is imminent means a new annual budget cycle.  Does your organization have an annual process to align mission and money?  Is your annual budgeting cycle tied to your mission?  Can one look at your annual budget and see clear priorities for accomplishing the organizational mission for the budget year?  To link mission and money there are at least three interconnected processes that may be helpful.  Here’s a brief look at each.

1.       Innovation:  An annual budgeted innovation program, with staff and budget, is a good approach for encouraging and rewarding ideas for new programs, products and services that support the organization’s mission and are based on emerging customer needs.  One approach is to organize the process as an on-going annual grants program, where written proposals are reviewed and approved, if deemed worthy.  Caution:  care must be taken to carefully spell out innovation program objectives so that it’s clear the program is for new ideas, and not to perpetuate the status quo.  Review of proposals must also be carefully based on the innovation program objectives, so as not to simply fund continuation of existing activities.

2.      Existing Program Annual Review:  Most non-profit organizations allocate all of their available resources (financial and human) in support of annual operations. Thus, without the reduction and/or “sunset” of some annual programs, products and services, there may be no capability to add new activities through innovation or any other means.  One approach for annual program review is to implement a customer satisfaction review process, using the “voice of the customer” as a basis for gathering and evaluating data as to which programs, products and services are valued by your customers.  Goods and services not highly valued by customers each year are prime candidates for reduction and /or replacement. 

3.      Annual Program Planning/Budgeting:  Finally, with information from the previous two activities, an organization may conduct a rational annual process for the planning and budgeting of activities for the following 1, 2 or 3 year periods.  Instead of the annual budgeting cycle leading the process, it logically is the final phase of review and planning for the future.  This also helps to reduce status-quo program competition by incumbents for a larger and larger share of the financial pie every year. 

Aligning mission and money is important for a number of reasons.  Here are two:

• Non-profit organizations need to keep pace with their critical changing markets;
• In most cases, there are never enough resources for everything, and thus some priorities have to be established.

Thus the old adage is true for many non-profits, “If something new is to be added to the wagon, then something old must be removed.”  Are your mission and money aligned?