In the tumult surrounding the 3D maelstrom (Debt Ceiling, Downgrading and Deficit) of several weeks ago, you may have missed another chilling corporate finance update on the relentless pursuit of performance metrics that extol the sunshine while you’re in the heart of darkness. Yes, there may be some economic value for certain of these metrics, but they’re dangerous barometers of realizable value and highly misleading as to future achievements of tangible operating profits and free cash flow.

Another Sign of the Apocalypse?

Most of us recall the “eyeball counting” that preceded the Dot-Com-Bomb and those certain “Signs of the Apocalypse”, as when your cab driver is telling you what stocks you should buy.

So, in case you missed the New York Times article describing the latest incarnation of these prayerful metrics, “ACSOI” is one the latest inventions. Pronounced as either “ack-soy” or “ask-saw” depending on the source, it stands for “adjusted consolidated segment operating income.”

It may be one of those metrics that falls into the bucket that Lynn E. Turner, a former chief accountant for the Securities and Exchange Commission, once called E.B.B.S., or “earnings before bad stuff.” Sweet, huh?

Let’s leave out some of them stinkin’ marketing expenses

ACSOI is one of three yardsticks that Groupon invites investors to consider and refers to operating profit minus the company’s large online marketing and acquisition expenses. Groupon wants to emphasize that it’s important to segregate the extraordinary cost of obtaining new subscribers vs. the cost of sustaining existing subscribers, which are much less expensive. Interesting information … but similar to a reporting strategy used by Pets.com before they hit the wall at Mach 10 during the dot.com bust.

Does Internet content have a 5 year life?

With similar objectives, the article reports that Demand Media stretches its payments to content contributors over 5 years to emphasize the long life of the content on their site. While Google searches might turn up some of these older articles, there is so much new content that the old adage about “today’s newspaper is tomorrow’s fish wrap” may likewise apply to digital content. (As a result of this treatment, Demand Media turned net income from a -$5M number to a +$5M number. Hmmm ….)

Pay attention, kids. Momma ain’t no pushover.

So, heads-up investors. It may be a different world than the dot.bomb era, and there may be more substance to some of the new technology ventures, but if you’re going to drink the Koolaid … remember that drinking it too fast will make you lose your cookies!

Caveat Emptor!

Does this bother you? Am I making a mountain out of a mole hill? What do you think?

Follow us on Facebook and share your comments there.

Business Finance | Pick a card … any card …. is a post from: Sword Tips – the Exkalibur blog

As we’ve all learned, most of life’s lessons don’t travel in a neat formation accompanied by bugles and cavalry. They arrive filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.

Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader  … implementing NOW the changes necessary to adopt the proven strategies of successful leaders. You might start by building on the communication matrix and making sure you’re defending the castle to get done what only you can do. Make some time so you’re thinking past today.

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Leadership Lessons | Are Incentives the Cornerstone of Life? is a post from: Sword Tips – the Exkalibur blog

“Financial Adrenaline” is a term we love around here because it reflects our commitment to help you turbocharge your business with practical tips and techniques to improve free cash flow, the lifeblood of business. As a further extension of our Financial Adrenaline program, we’re going to share a new Business Finance Tidbit every Wednesday specifically for those business executives who don’t have a finance background.

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Depreciation = Cash? Why do we care?

We’ve kinda been on a Warren Buffett tear lately, and last week I encouraged you to read his recent 2010 Annual Report to Berkshire Hathaway shareholders.

I want to plant another seed this week about an often misunderstood concept: DEPRECIATIONIn accounting, an expense recorded to allocate a tangible asset's cost over its useful life. Because depreciation is a non-cash expense, it increases free cash flow while decreasing reported earning. It is used in accounting to try to match the expense of an asset to the income that the asset helps the company earn. For example, if a company buys a piece of equipment for $1 million and expects it to have a useful life of 10 years, it will be depreciated over 10 years. Every accounting year, the company will expense $100,000 (assuming straight-line depreciation), which will be matched with the money that the equipment helps to make each year.. (You can see the definition by placing your cursor over the term.)

How is Depreciation Relevant to EBITDA?

Today, let’s just think about it in terms of EBITDA. In Does EBITDA Bury Its Own Dead?, I wrote about the perils of treating EBITDA as a placeholder for cash flow, and Buffett couldn’t agree more.

In his Annual Letter to Shareholders, 2002, Buffet describes how depreciation is viewed by those devoted EBITDA followers … as a non-cash item that is unimportant to cash flow as part of the EBITDA cash flow legend

In future columns, we’ll address the way the depreciation is viewed, the conflicting signals it sends and the issues it conceals. In the meantime, Buffett goes on in his 2002 letter to further attack the concept that depreciation isn’t a real expense, which he calls “nonsense”.

Consider this Analogy … Depreciate Your People?

Buffett offers an interesting analogy that I hadn’t considered, but it’s a poignant way of looking at depreciation as a most deceiving member of this EBITDA tribe:

“In truth, depreciation is a particularly unattractive expense because the cash outlay it represents is paid up front, before the asset acquired has delivered any benefits to the business. Imagine, if you will, that at the beginning of this year a company paid all of its employees for the next ten years of their service (in the way they would lay out cash for a fixed asset to be useful for ten years). In the following nine years, compensation would be a “non-cash” expense – a reduction of a prepaid compensation asset established this year. Would anyone care to argue that the recording of the expense in years two through ten would be simply a bookkeeping formality?”

What do you think? Are you staring at your EBITDA numbers every month? Can we help you understand it better?

Business Finance | Warren Buffett | Should We Depreciate Our People? is a post from: Sword Tips – the Exkalibur blog

~  Chinese Proverb

What Does It Take to be a Great Leader?

As we’ve all learned, most of life’s lessons don’t travel in a neat formation accompanied by bugles and cavalry. They arrive filthy and unkempt, prominent in the mess we’ve made around our foxhole. These lessons are typically the offspring of hubris, naivete and ignorance … or from overlooking the land mines hidden beneath our feet.

Every Tuesday, we’ll share valuable and practical leadership tips and tools to help you BE a better leader so you can BECOME a better leader. Remember … you won’t BECOME a better leader until you start BEING a better leader  … implementing NOW the changes necessary to adopt the proven strategies of successful leaders.

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Do People REALLY understand what you do?

Does your company have a Vision/Mission Statement that you clearly understand … and everyone knows who it belongs to?

Last week, we talked about the proposition that Leadership = Communication and I shared a communication matrix with you to help you start on a Communication Action Plan.

There’s no doubt that communication stands tall in the pantheon of business leadership, and we all probably think we’re pretty good at it. We can walk, talk, dictate, speak and even string together a few intelligible sentences. We chat with our troops, talk to our customers and vendors, share information with colleagues and shareholders. We hold meetings, BBQ’s and off-sites to talk about what’s going on. We’re all pretty good at communication . . . or are we?

What is Communication … Really?

The inimitable Mr. Webster focuses on the transmission of thoughts and ideas, as if the means of communicating, or the act itself, constitutes “communication”. Yet, when you peruse a thesaurus for synonyms, you get words like, “communion”, “connection”, “conversation” and “interchange”, as well as “transmission” and “advisement”. When you think of “advisement” and “transmission”, it’s more about talking than conversing, while with “connection” and “conversation”, you expect a collaborative, two-way exchange.

The Great Communicator

President Reagan was known as the “Great Communicator” precisely because he could capture the essence of the point he wanted to make in clean, simple language that connected with people on an emotional level. His delivery was smooth and practiced and Americans always thought they knew where he stood. In President Reagan’s farewell address to the nation, he acknowledged the mantle of the “Great Communicator” but said “I never thought it was my style or the words I used that made a difference: it was the content. I wasn’t a great communicator but I communicated great things . . . . “ Take a look at Warren’ Buffett’s 2010 letter to Berkshire Hathaway shareholders as another example of straightforward communication.

Start by Looking at Your Mission Statement

In thinking about “communicating great things”, you’ve probably heard many times that your company should have a Vision and/or Mission statement.

Here are two examples of Mission statements from well-known companies.

“Outstanding service and solutions through dedication and excellence.”

“Guided by relentless focus on our five imperatives, we will constantly strive to implement the critical initiatives required to achieve our vision. In doing this, we will deliver operational excellence in every corner of the Company and meet or exceed our commitments to the many constituencies we serve. All of our long-term strategies and short-term actions will be molded by a set of core values that are shared by each and every associate.”

Got Any Idea of What These Companies Actually Do?

There’s nary a clue about the identity of these companies, is there? These are not very good examples of communication because they are either too “Mom and apple pie”, or dance between pomposity and verbosity, as in the second example. They’re innocuous and impersonal, and while they may sound righteous, they stand for nothing.

Where Do These Statements Come From?

Most Vision and Mission statements are generally derived in a conversation about the “purpose” of your company. Why are we here? What are we trying to accomplish? How will people remember us when we’re gone? Will they? It’s about you, digging deep to focus on why you’re coming to work each day and busting it from dawn until dusk.

Like Indiana Jones chasing the Holy Grail, some business consultants are obsessed with Vision and Mission Statements. While they can serve as cornerstones of the company’s “Strategery”, their value is in direct proportion to the breadth and depth of the strategic conversation about what’s really important and what differentiates their view of the world.

Vision vs. Mission … What’s the Difference?

In simple terms, a Vision Statement seeks to “communicate” the core values and purpose of an organization, and looks to the future, to “what is possible” rather than “what is”. It’s more about inspiration than perspiration.

The Mission Statement says exactly what you do – now – and like a good “elevator speech”, can be recited in the time it takes you to get from the 1st to the 10th floor. It should use clear, muscular language to tell people succinctly “who you are” and “what you do”. It’s what the perspiration is all about.

How about these examples?

“We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments.

“People love our clothes and trust our company. We will market the most appealing and widely worn casual clothing in the world. We will clothe the world.

These make a lot more sense, don’t they? And, it’s not too hard to see the mission of Harley-Davidson or Levi Strauss in these words. Contrarily, did you guess correctly about Hughes Supply and Albertson’s in the earlier two examples?

Make It Good – and Hang It High!

Conclusion? You can stop revising your Vision and Mission statements when you can post them on the walls throughout the company and be as proud of them tomorrow as you are today.

No one snickers when they read them; everyone in the company understands them, can recite them and embraces them as the embodiment of what they’re doing. Customers, vendors and shareholders will clearly understand what you do … why you’re here … and see the mission consistently throughout your organization.

That’s communication!

Leadership Tip | Spitshine Your Mission so it’s Crystal Clear is a post from: Sword Tips – the Exkalibur blog

“Financial Adrenaline” is a term we love around here because it reflects our commitment to help you turbocharge your business with practical tips and techniques to improve free cash flow, the lifeblood of business. As a further extension of our Financial Adrenaline program, we’re going to share a new Business Finance Tip every Wednesday specifically for those business executives who don’t have a finance background.

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Read Warren Buffett’s Letter to Berkshire Hathaway Shareholders

In most fields of endeavor, the more we learn, the more we realize how much we have to learn. It’s certainly no different in the world of business finance, so for non-finance executives, it’s never easy to know where to start.

So, why not  jump into the deep end right now by reading Warren Buffett’s Letter to Berkshire Hathaway shareholders for 2010. The publication of Berkshire Hathaway’s annual report is closely watched in the national media, as well as in homes and offices across the country … and for good reason.

Business Finance is about much more than finance

I’ve said before that leaders don’t have the luxury of confining their interests to just a few things. Building a Business is not just about strategy, finance and leadership. It’s about much more … and nothing brought that home more clearly than choosing the categories and tags for this article … because it’s about so much more than business finance … and yet, it’s related directly to business finance.

A great example of the Art of Communication

Warren Buffett’s letter is a great example in the art of communication … about complex financial issues as well as organizational development, culture, recruitment, succession planning, ethics, stewardship … it’s a long list that will satiate any appetite for those of you interested in understanding how all of it fits together. On the subject of communication, you may find the Communication Action Plan a valuable tool to jumpstart your own communication plan, which we just published as part of our Nothing but Leadership series.

What do you think?

In his annual letter, Buffett discusses the many financial challenges within the companies and industries under Berkshire Hathaway’s broad umbrella. What’s so engaging is not just his avuncular style but the rich tapestry of issues and challenges that come together in the assessment of business performance.

Is there a particular issue that you’re curious about? Growth? Liquidity? Metrics? Leverage? Valuation? Productivity? It’s all there … with Buffett’s personal interpretations, his issues with analysts, his challenges to accepted valuation and financial metrics standards.

How does Buffett’s letter serve as a communication device for shareholders? Too much information? Not enough? Where should we start to help you with your business finance education?

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How our Weekly Business Finance series will help you

Most non-finance executives have picked up a few tidbits … from a class, from a financial colleague or friend, a banker, an accountant … and have assimilated a variety of random fragments that are probably more like a messy collage than a well-drawn portrait. Is it enough to get by? Maybe … but if you’ll take ownership of your own financial education, we’ll help you. Dig in, challenge what you read, add your comments or questions and we’ll answer them right here … every time … and we’ll get this conversation started. Are you with me?

Business Finance | Why you should read Warren Buffett’s Letter is a post from: Sword Tips – the Exkalibur blog

Use Leverage to Turbocharge your resources

Carjack. Nail clippers. Teeter-totter. Tweezers. Nutcracker. Scissors.

What do these devices all have in common? They create leverage, a simple but extraordinary tool that increases the force, or power, of everything to which it is applied. Engineers use a more complicated definition, but you and I know that we need at least three things to create leverage: a 1] fulcrum, or pivot point; 2] a load being moved; and 3] a force that’s moving it.

Leverage has never been more important

Leverage is even more invaluable following the 30-month economic drought. Most of us have fewer resources to solve the problems we face every day … so we need as much leverage as we can muster to turbocharge the resources at our command. Financial leverage may be one the first things that come to mind, but I want to talk about at least five pivot points that can drive your business to greater success.

1. Delegate

Are you doing everything possible to leverage your time? It not only empowers others to learn and grow, but it increases the chance that the most important things won’t get overlooked.

You already know that you can leverage your time by delegating responsibilities to others in your organization. But have you really concentrated on that option lately? Even if it involves multiple people taking up the slack in a variety of tasks, it all adds up and will open up some time for you to do the things most important to your organization.

I’ve written and spoken often about the importance of personal productivity, discipline and focus to help business leaders accomplish those things that only THEY can do. It is critical that you look for resources within your organization to make sure you’re doing the things that ONLY YOU can do.

(A personal footnote. Empowered by the reach and accessibility of the personal computer, executives have worked over the last 20 years with dramatically reduced secretarial and administrative support, in part believing that they could now do much of that work themselves. While this approach has achieved cost reduction benefits, it has hurt executive performance and productivity more than ever expected.)

2.  Outsourcing

Outsourcing can leverage your investment capability while expanding your resources. Hiring contract manufacturers to build your products, public warehouses to distribute them, independent reps to sell them … are just some of the ways that you can expand your resources on a “pay as you go” basis rather than by direct investment.

I’m a strong advocate of these approaches, for not only their ability to leverage scarce investment resources, but their flexibility when plans change. You can switch to another contract manufacturer if your customer base shifts; it’s not so easy to move a plant you wish had been built in a different place.

3. Create New Partnerships

Creating a partnership may be a “kissing cousin” of outsourcing, but it’s a contractual relationship of a higher order. It usually denotes a greater commitment of resources as a well as a greater responsibility for the outcome. Engaging with a partner leverages your financial and human resources and gives you the opportunity to do more than you could on your own. Yes, there are risks to “sharing with a partner”, but the rewards from that kind of leverage can also be striking.

4. Team up with other business executives

4.  You can leverage your intellectual resources by establishing a board of advisors, or by expanding your board of directors to include outside professionals from different industries and viewpoints. You can also join a peer group like the Exkalibur Leadership Forum, or other leadership groups, that offer timely and regular access to diverse experiences, insights and opinions. “Two heads are better than one,” still works.

5. Social Media

Social media has gained phenomenal traction in the last several years and it’s really only beginning. There are many tools … Twitter, Facebook, LinkedIn, YouTube to name a few of the more prominent platforms … that enable all of us to reach a wider network among colleagues, employees, vendors and customers. As we leverage the opportunity to build broader and deeper relationships across the globe, we can make a dramatic difference in our outreach to those communities. Our products become more visible, we strengthen the relationship with our customers, and we communicate more easily with employers and employees to respond to new challenges and threats.

What can you do to leverage your resources?

What are some of the ways in which you have leveraged your resources … financial, human, intellectual and time? Where are you going to focus now? Let me know what’s working for you.

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Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

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The North Bay Business Journal, a publication of the New York Times, is a weekly business newspaper which I have served as a regular columnist for over three years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties.

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Article published as Vol. 83 on February 28, 2010: The electronic version of this article, as published by the North Bay Business Journal, may be found here. ******************************

Any related materials or articles referenced in the published column, or otherwise applicable, are referenced in this digital version of the article.

Business Leaders | 5 Levers to Turbocharge Your Resources is a post from: Sword Tips – the Exkalibur blog

Every Thursday, I’m sharing a new Personal Productivity Tip to help you get more done. Each Productivity Tip is a remarkably simple tool or concept that can be quickly implemented to make a real difference in your personal productivity. When you apply many of them together, they’ll make a big difference in improving productivity, achieving accountability and staying focused on the things that matter the most in your life.

You may want to check out some of the posts in this Productivity series, including the the value of checklists; the importance of getting rid of the crappy stuff;  the nightmare of the cluttered mind; and the 4 Do-or-Die Principles to Drive your Personal Productivity System.

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Last week, we dusted off the S.M.A.R.T acronym as a reminder that we need to create Specific, Measurable, Agreed Upon, Realistic and Trackable objectives if we want to create a business culture with accountability as its centerpiece. There is simply no shortcut or substitute for the genuine productivity that results when we SET CLEAR EXPECTATIONS.

Today, we’re going to dust off another “oldie but goodie” but one that many of you may have never encountered. I learned it from some old consulting hands and while it’s often used in a formal chart of “who’s supposed to be doing what,” it’s a valuable accountability tool to evaluate the roles and responsibilities of individuals involved in any kind of team effort or project.

What is an ARCI chart?

In short, it qualifies team members based on their expected level of contribution to a project. Different parties play different roles to get things done, and this tool provides a simple, effective and consistent way to achieve project accountability by evaluating who’s doing what.

By spending just a little time to establish these roles, you will once again, SET CLEAR EXPECTATIONS. It will also help your team members understand their roles and what’s expected of them in a particular project. Read on to learn about each of these four roles.

Accountable

In short, the buck stops here. This team member has ultimate accountability for accomplishing the objective. Since “if you have two bosses, you have none”, this approach ensures that there is a single individual ultimately accountable for the project or task. You’ll note that this is the only category where there can be only one person with that designation.

Users of this construct will often use shorthand … ”you have the A” … to signify that you’re accountable for getting something done. Be sure, too, that Ms. Accountability also has the authority to drive the project to conclusion.

Responsible

This one is a little trickier, since there can be more than one person who is responsible for the project’s success. The “R” category includes all of those who are responsible to get the work done.

In the example on the right, you’ll see one way to define the roles and responsibilities within a team. In an open book environment, you will share this simple chart with everyone on your team. If you spend time to clearly identify the roles and responsibilities of each team member, the ARCI chart becomes the very able partner of the S.M.A.R.T. approach to accountability. Together, they provide a clean, crisp and powerful approach to project management.

BTW, you could also identify departments or other teams in the columns instead of specific individuals.

Consulted

This category represents someone that needs to be consulted as the project goes forward. It could be a thought leader in another department who has no direct involvement but who has a lot of knowledge to contribute to your project. It might also be someone who owns many of the resources you’ll need to implement the plan. It might also be someone who’s too busy to be responsible for a particular project, but whose expertise and experience are essential to a successful outcome.

Informed

This is a person who needs to be kept “in the loop” about the progress of the project but doesn’t have direct involvement in it. This could be a department head, even the CEO, who wants to be kept informed throughout the project’s life. You’ll note that they are informed AFTER the fact, often after milestones are achieved along the timeline. They have no other role.

Examine the assignments for each person

If you’ve prepared a chart similar to the one I’ve shown here, start by taking a vertical look to see if any individuals (or team or other entities) have too many A’s or R’s. If so, they’ve probably been assigned too much to reasonably get done. Contrarily, if you see someone without any A’s or R’s, they’re just a bystander and could probably do more. Look for empty spaces, too, to make sure everyone is carrying their share of the work.

Examine each task or project

Likewise, when you look horizontally across the chart, look for a project with too many R’s … if too many people are responsible, probably no one’s responsible. If there lots of C’s, make sure that all of those people really need to be consulted for the project to move forward. Too many I’s can also mean there’s too much communication after the fact, which also tends to slow things down. You might want to minimize the C’s and I’s to make sure you’ve got a clear road ahead. Also, make sure that authority and accountability are available in the same measure.

Do you use any tools like this to help define roles and responsibilities in a team effort? What has worked for you in the past? Does this help?

Productivity Tip: Still struggling with Accountability? Who’s on first? is a post from: Sword Tips – the Exkalibur blog

Over 7 Wednesdays in January and February, we’ve described 7 remarkably simple components of R.E.S.P.E.C.T. that you can apply to your everyday conduct. The ability to earn R.E.S.P.E.C.T. is a critical Leadership requirement … and we have absolute control over the actions we take to earn it. It’s also the “centerpiece of accountability“, a concept that vexes even the most astute business leaders. Since it’s impossible to be an effective leader without gaining respect, let’s devote some time and energy to learn how to give it … to get it. Are you with me?

So far in our R.E.S.P.E.C.T. series, we’ve discussed the “R”: Right on Time, Every Time, the “E“: Every call returned in 24 hours and “S“:say something nice like Mom taught us. We’ve also covered “P” = Praise more and blame less, and “E” = Easy work with. Last week we discussed “C” = Compassion. This week concludes our R.E.S.P.E.C.T. series.

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Are you sharing or hoarding information?

When I began my business career in the 1970s, the word “transparency” was not in the business lexicon. You knew what you were told … and you were told what someone thought you needed to know … but it was unlikely that you’d hear much about where the company was going or your role in it. Prior to starting my own company in the early 1980′s, I can’t recall a single company-wide meeting at any of the companies where I worked … or any general discussion of the company’s performance or strategy.

Is there any doubt about the Power of Transparency?

What exactly is Transparency, the last letter … “T” = Transparency … in our 7 part R.E.S.P.E.C.T. series?

It doesn’t necessarily mean opening the kimono or letting everyone ramble around backstage. It doesn’t mean sharing every financial tidbit with everyone all the time. In fact, it’s as much an attitude as a policy because it’s rooted in collaboration and an open-book environment. In How to Lead during a recession, I mentioned a Business Week column by Jack Welch, former GE CEO about Keeping Morale Up in a Downturn. In that column, Jack was pretty clear about the value of transparency as well as the tendency by executives to hold the cards much closer to the vest during difficult times.

“Now, we realize we don’t need to tell anyone why transparency makes sense. Most managers know from experience that employees get more pumped when they understand where the company is going, why, and what role they play in getting there. But an awful thing tends to happen to information-transfer in a downturn. Managers choke: It’s as if they can’t bring themselves to deliver hard news without leaving out pieces and fuzzing the lines.”

Why is Transparency Important?

Ironically, transparency is the glue that holds strong companies together. It means that there are no hidden agendas or secret cabals or schemes being concocted behind the curtain. Rather, problems and challenges are shared, input is encouraged, and everyone locks arms in a crisis to stand together. In many ways, it is the ultimate collaborative environment where the bad and the ugly get delivered with the good. Everyone shares the goals and objectives of the organization and has access to timely performance metrics. Everyone is important to the organization’s success.

There are some tricky parts to Transparency

Are there some tricky parts to transparency? Yes there are, including deliberations about employee performance or discussions about the possible sale of the company, for example. At the same time, leaders of transparent organization are committed to their people, and want their people to be able to make plans for their lives by helping them understand as much as possible about what the future may hold.

Yes, there’s some risk in this process, but what’s risk-free these days anyways? While there is the risk of leaks or damaging whispers, they’re offset by the unassailable value of building a collaborative environment of committed teammates fighting for a common cause. You may lose a few skirmishes but you’ll win the war.

What are you doing to create a Transparent Organization? Is it worth it? Would you do it differently?

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R.E.S.P.E.C.T. Is Earned … then received

Respect is something we have to earn. It can’t be bought or stolen. Our parents preached it, Aretha Franklin’s timeless rock ‘n roll anthem preached about it … and Rodney Dangerfield’s Grammy award-winning comedy album, No Respect, explains why we can’t get any. (BTW, this clip is hilarious!)

Remember that the general precepts of our R.E.S.P.E.C.T – How To Get It by Earning It series, are at the core of one of the most tormenting challenges faced by business leaders … how promote and achieve accountability throughout the organization. I have spoken extensively on this subject, including at a national webinar sponsored by Success Factors last year, and it may be one of the most exasperating issues that CEOs face because it’s also central to creating a responsible culture, without which, not much gets done. You’ll find other resources about the Cornerstone of Accountability in the Speaking section under Leadership Challenges and Solutions.

Transparent Leadership | Are you sharing or hoarding? | R.E.S.P.E.C.T is a post from: Sword Tips – the Exkalibur blog

Every Thursday, I’m sharing a new Personal Productivity Tip to help you get more done. There are some remarkably simple tools and concepts that can be quickly implemented to make a real difference in your personal productivity. In combination, they can really help you stay focused on the things that matter the most in your life.

You may want to check out some of the posts in this Productivity series, including the the value of checklists; the importance of getting rid of the crappy stuff;  the nightmare of the cluttered mind; and the 4 Do-or-Die Principles to Drive your Personal Productivity System.

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Set Clear Expectations using S.M.A.R.T. guidelines

When I talk to executives every day, there’s hardly a conversation that doesn’t include the same 2 things: “Why aren’t I getting more done?” … and “Why aren’t my people getting more done”?

There are several simple and proven leadership tools that can save your bacon many times over. This one is kind of an “oldie but goody” so you’ve probably seen it around. If you’re saying, “that old thing again”, I’ll give you 5-1 if you can come up with something better for setting goals and objectives.

The question is … have you really used it?

Why aren’t our people getting more done?

As with the common cold, there’s probably no cure … but there are some things we can do to manage the symptoms. One tool that will alleviate many of the symptoms is very simple : SET CLEAR EXPECTATIONS. When I hear the daily complaints about the lack of accountability within the organization … and ask if clear expectations have been set so that there is no misunderstanding about what needs to get done … I usually get the thousand yard stare.

I really don’t have the time to do all of this

What do you think you’d find if you compared the time it takes to SET CLEAR EXPECTATIONS … to the time you spend chasing people down who aren’t doing what they’re being asked because you’re not on the same page about what they’re supposed to do?

When this comes up, I often see someone tap their forehead and say, “I know exactly what they’re supposed to do and they know it, too. I’ve told them a dozen times.” For others, a goal is simply a mirage, as with phrases like, “It’s just a goal“, which tells the listener they really don’t have to pay much attention to it.

When I say, “Shall we go and see if it’s as clear in their head as it seems to be in yours?”, our conversation turns to whether any of this has been written down so there is a clear and indisputable reference point. “As soon as I get a chance I will write it down ….” is often the response, but it speaks volumes about why people aren’t getting done what you expect.

Let’s be a little S.M.A.R.T.er about what each of these words mean

Each of these 5 letters is important to signify a special attribute … but in this case, the whole is certainly greater than the sum of its parts. I can promise you that if you set goals and objectives for your organization and the individuals in it, using the simple S.MA.R.T. acronym, you’ll be farther ahead than most.

SPECIFIC

What is the SPECIFIC goal to be achieved? Avoid being too general. The more precise the target, the greater the commitment to follow through. It isn’t enough to say “we need more sales in your territory”. Say something like, “You need to increase sales in your territory by a minimum of 6.5%.”

MEASURABLE

The goal or objective must be measured in terms of cost, quality, quantity, and timeliness, something that can actually be measured. Once again, it isn’t enough to say “you need to spend more time in the field networking in the industry.” Be more specific, something like “find three opportunities to speak to industry groups and three other industry conferences and meetings to attend, at least one of which will allow us to set up a booth or table to meet prospective customers.” You can measure that.

AGREED UPON

Goals should be jointly established rather than imposed. When clear expectations aren’t agreed to in advance, you’ll learn why that’s important during the very first performance review. It won’t take long for that conversation to turn to confusion and misunderstanding about what the goals and objectives were in the first place. If they’re agreed to, written down and regularly refreshed, it’s pretty hard for one of the parties to say they didn’t understand the objectives.

REALISTIC

The goal needs to be “realistic” so it can actually be achieved. Using our earlier examples, it’s probably unrealistic to say “raise sales in your territory by 75%” or “speak at 15 industry events” this year (unless that’s someone’s primary job). Set realistic goals that provide a challenge and stretch the employee, but make sure they’re attainable. If they’re not, no one will pay much attention and you’ll venture into the quicksand of “It’s just a goal”.

TRACKABLE

A well-defined deadline for when the project must be accomplished adds a sense of urgency … but it’s often more valuable to set a “TIMELINE” rather than a deadline. This allows you to follow up BEFORE the deadline to make sure things are on track and if not, to re-negotiate the deadline so everyone can succeed. If you’re only tracking deadlines, you’re likely to catch up to it too late to help.

If this is all too much trouble … the climb will be steep!

When it comes to achieving Accountability within your organization, there is no substitute for SETTING CLEAR EXPECTATIONS. If you do this, you’ll will take THE most important step in leading and managing your people … because there will be no doubt about what’s expected. When that is firmly set, it’s much easier to get more done … for everyone.

How does Accountability work in your organization? Is this what’s missing? Is there anything you’ve found that works better?

Productivity Tip | Want Accountability? Get S.M.A.R.T. is a post from: Sword Tips – the Exkalibur blog

‘Always ask why.  Dig deeper.  Get the facts.’ Avoid crowd mentality

“Ask Why” was their motto. “Wheel Out,” “Fat Boy” “Death Star” and “Get Shorty” were some of the nicknames applied to their strategies. Confirmation letters of successful trades were addressed to names like “Mr. M. Yass and “Mr. M. Smart” … and I think you can parse the underlying contempt. “Rank & Yank” described their people performance system, “Pump and Dump” their trading strategy. About $70 billion of market value was destroyed, more than 20,000 employees lost their jobs and pension funds worth $3.2 billion were destroyed, more than two thirds of which belonged to retirees with little chance to rebuild.

I had always intended to watch “The Smartest Guys in the Room,” the 2005 movie based on a book by the same name from co-authors Peter Elking and Bethany McLean, but it got lost in the shuffle until last week. It chronicles the Enron cataclysm, whose meteoric ascent was violently terminated with its bankruptcy on Dec. 3, 2001.

“Be like Enron” is still an ignominious curse

It’s hard to believe this happened almost 10 years ago since to be “like Enron” still reverberates as an ignominious curse. It’s really more like a viral infection, though, because so many of the forces that drove its destruction have cleaved similar fissures in scandals from the Ponzi schemes of Bernie Madoff to the financial meltdown that brought our economy to its knees in 2008.

We won’t recount the history of Enron’s demise except as it relates to the flaws that still besmirch corners of our financial system. In summary, Enron took 16 years to grow from $10 billion to $65 billion in assets and only 24 days to become what was then the largest bankruptcy in American history. It rose to a $70 billion valuation before its stock tanked at 40¢ a share. California lost $30 billion playing in its energy casino, and Gov. Schwarzenegger rode into office as a result.

Enron is instructive on so many levels that it’s too much for one column. The lessons are both fundamental and monumental, and like most scandals, born of the character flaws and human failings that have been chronicled from Homer to Shakespeare. Businesses remain susceptible to some of these insidious “Smartest Guy” forces, so heed these warning signs to keep these varmints from burrowing into your organization.

Due diligence may be boring … but skip it at your peril

In What’s the Difference between a Lightning Bolt and a Bright Idea, we explored the bedrock value of doing your due diligence. It’s pretty clear from the Enron debacle that banks and regulators, as well as law and accounting firms … and analysts and journalists … were sucking on the Enron popsicles and ended up as facilitators instead of independent parties.

Fortune magazine listed Enron for six years running as one of the Most Admired companies in the country. According to the authors, Enron was spending $1 million/week with Arthur Andersen, and nearly as much with their law firm, extraordinary largesse that frequently spawns conflicts of interest. In Watchdogs … Or Lapdogs, I referred to the unusual arrangement that allows companies to hire their own “independent auditors.” It’s not much different for the security ratings agencies, either, which became apparent in the Wall Street meltdown I described in Is Anyone Really Independent. Were these organizations, as the movie described them, what Lenin meant by the term “useful idiots”?

In short? Always ask why. Dig deeper. Get the facts. Do your due diligence with even greater fervor when you’re offered the last seat on the bandwagon.

Get a full set of financial statements EVERY TIME

I’m constantly reminding clients to make sure they get a full set of financial statements every month, including an income, balance sheet and cash flow statement. Without all of them, the information presented is misleading and open to errors of omission as well as commission. More importantly, you can’t understand cash flow, the lifeblood of business, without all of them.

For inexplicable reasons, Enron was the only financial institution that only published an income statement. They didn’t provide a balance sheet or cash flow statement … to shareholders or analysts … and got away with it until the end.

Need I say more?

There’s no room for extreme personalities

Mr. Skilling was known as someone who liked “men on bikes” and burnished the company’s affection for extreme personalities. The trading desks, in particular, favored these leadership styles and as they began to dominate the company’s business, their extreme personalities convulsed into brilliant gamblers run amuck.

One of the division presidents was infamous for his love of “money and strippers.” He later left the company, sold his stock before the fall for over $250 million to settle his divorce … and then ran away with his stripper girlfriend who was carrying his child.

His division showed losses in excess of $1 billion.

Extreme personalities rarely excel in an organization whose leadership style emphasizes a collaborative environment. If you’ve got any, make sure you’re enforcing adequate safeguards … or better yet, get rid of them.

Hubris is the root of most evil

Hubris is defined as excessive arrogance, and has a nefarious classical history. It was considered a crime in classical Athens and thought to be the greatest crime of the ancient Greek world. According to Wikipedia, the ancient Greek Word, Atë, describes the action leading to the protagonist’s downfall as “ruin, folly or delusion”, a matched set that nicely covers the misconduct of many Enron executives.

When hubris is inflamed by greed, any spark can start a conflagration. Enron may be a distant memory … until we think Madoff, Lehman Brothers, AIG … and then these inglorious strains of humanity are resurrected like characters in a Shakespeare tragedy.

In many ways, it comes down to the simplest of propositions. If it’s too good to be true, it probably is.

•••

Lary Kirchenbauer is the president of Exkalibur Advisors, providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses in the wine and other industries, and hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit Exkalibur.com for a library of valuable resources, articles and insights or connect on Twitter, LinkedIN or the Exkalibur fan page on Facebook.

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The North Bay Business Journal, a publication of the New York Times, is a weekly business newspaper which I have served as a regular columnist for over three years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties.

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Article published as Vol. 82 on February 14, 2010: The electronic version of this article, as published by the North Bay Business Journal, may be found here. ******************************

Any related materials or articles referenced in the published column, or otherwise applicable, are referenced in this digital version of the article.

Leadership Styles: The Smartest Guys in the Room can kill you! is a post from: Sword Tips – the Exkalibur blog

Over 7 Wednesdays in January and February, I’ll describe 7 remarkably simple components of R.E.S.P.E.C.T. that you can apply to your everyday conduct. The ability to earn R.E.S.P.E.C.T. is a critical Leadership requirement … and we have absolute control over the actions we take to earn it. It’s also the “centerpiece of accountability“, a concept that vexes the most astute business leaders. Since it’s impossible to be an effective leader without gaining respect, let’s devote some time and energy to learn how to give it to get it. Are you with me?

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A few weeks ago, we kicked off our 7 part series, R.E.S.P.E.C.T – How To Get It by Earning It, and talked about one way to earn instant respect starting with the “R” in Respect … be Right on Time, Every Time. Last week, we introduced The 24 Hour Rule about the “E” in Respect … Every Time. On Time … returning calls and customer contact right away.

Say something nice … or nothing at all!

Isn’t that what our Moms taught us … about the time we began to point out the shortcomings of the folks spinning into our universe? In our R.E.S.P.E.C.T series, it’s the “S” … Say something nice … or don’t say anything at all.

At first, I thought this was just too simple to bother mentioning. Who needs to be told this? Haven’t we heard it ad nauseum, like I said, since Mom first heard an unkind utterance slip off our tongue? For those of us with a sarcastic or cynical bent … are you looking at me? … it probably gets in our way more than it helps. We know we’re supposed to be nice, but when we’re with a few knucklehead colleagues and friends, we can lay on a little sarcasm, can’t we? Tease? Nudge?

What does “saying something nice” look like?

What Mom was really talking about, though, is not the “nice” that comes out of our mouths, but the “nice” born of humility and compassion. Each of us probably knows someone who never has an unkind word to say about anyone. They’re either better than us at keeping it to themselves … or they’re genuinely compassionate and know that they’re seeing only one side of any issue … and since we know there’s always 2 sides to every story … they’re giving the other person the benefit of the doubt.

I kept trudging on with this seemingly simple maxim because I know, first-hand, what this looks like from the other side. If we’re always bad-mouthing someone and can only offer a cutting remark when their name comes up, we know that Mom would not approve. What we’ve learned is that to be nice is not so easy after all.

I’d be nicer if they were nice ….

People hurt us with their remarks as well as their behavior, and we’re all too eager to return the favor. We would have been nice if they were, but since they started it … or, “the way they treat me other people doesn’t deserve my respect” … or “why should I be nice? They’ve never done anything nice for/to me?” Of course, these remarks are usually made under our breath and casual observers may not even notice. But we notice, and we know that our hearts are NOT in the right place no matter what comes out of our mouths.

Mom didn’t mean “act nice” … she meant “be nice”. Quite a difference when you think about it. The first one is staged, play-acting, for demonstration purposes only … but the second one is real, born of humility and nurtured with the understanding that we’re all on a similar mission … to fight back the demons and find our way through the brambles.

Nice is nice … but being nice is the offspring of Humility

My Dad passed away just over 8 years ago, but I know I’ve never met a more humble person. It’s downright painful to consider my shortcomings when I consider his deep faith and conviction about the value of every individual. It’s in a more hallowed place than false modesty or good manners. It’s as hard to emulate as it is easy to observe, since the genuinely humble person ignores the differences between the downtrodden and the affluent. In my Dad’s case, I honestly don’t think he even saw the differences because in this mind, there weren’t any. You’ll admit this is a pretty high standard.

As we know, life’s a journey so it’s okay if we stumble along the way and are slow to appreciate the qualities that we later embrace. But if you want to be nice … like Mom said, and in my case, my Dad lived, we really need to dig deep to find out why our reservoir of compassion and understanding is shallow. On our way there, the reality of “S” … Say something nice … or don’t say anything at all will be readily apparent.

R.E.S.P.E.C.T is at the core of Accountability

Remember that the general precepts of our R.E.S.P.E.C.T – How To Get It by Earning It series, are at the core of one of the most tormenting challenges faced by business leaders … how promote and achieve accountability throughout the organization. I have spoken extensively on this subject, including at a national webinar sponsored by Success Factors last year, and it may be one of the most exasperating issues that CEOs face because it’s also central to creating a responsible culture, without which, not much gets done. You’ll find other resources about the Cornerstone of Accountability in the Speaking section under Leadership Challenges and Solutions.

So, go ahead, differentiate yourself from the competition. This is another easy one you can hit out of the park. That’s what our strategy should be about in the first place, isn’t it? How much easier can we make it?

So be nice to me, will ya’? I’ll be nice to you ….

One crazy easy way to earn respect | Accountability | What would Mom say? is a post from: Sword Tips – the Exkalibur blog

That’s why we’re inaugurating a new podcast series to help middle market companies achieve “excellence at the intersection of strategy, finance and leadership“. Our Building a Business podcast series is organized to give you short but powerful bursts … about 5 minutes each … of practical strategies that you can immediately put to work.

The introductory podcast explains this series and what we’re trying to do to help middle market business executives become better leaders and managers. We’ll cover a broad range of issues, from leadership skills and techniques … to corporate governance, communication, innovation, planning, pricing, the works.

As always, I welcome your feedback. Let us know if this series is helpful and what more you’d like to hear. Don’t hesitate to offer your comments. We welcome a vigorous dialogue … so, with a wink and a term borrowed from my talk radio days … “we fully respect your right to be dead wrong”. So, fire away and let’s keep the conversation going!

What do you say?

Building a Business: A new podcast series for YOU! is a post from: Sword Tips – the Exkalibur blog

Thaler recounts how overconfidence in forecasting is a common thread that weaves a nefarious tapestry in corporate America. He reports on a study by three financial economists that found that CFOs of major corporations are not too good at forecasting … rather, they were terrible at it. CEOs, in turns out, aren’t much better … and studies as far back as 1986 … imagine that … found that hubris … overconfidence with a capital H … is to blame for the bloated premiums paid to acquisition candidates. As I’ve reported earlier, Pride is considered the mother of all sins … and Hubris is its evil twin.

He closes his article with one of my favorite Mark Twain quotes: “It ain’t what you know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Can I get an Amen?

General Pride? Dr. Hubris? Welcome to our Strategic Finance lesson is a post from: Sword Tips – the Exkalibur blog

I haven’t written about this enough, I realize, as I read the M&A Losers in $10 Trillion Deal Binge …. providing yet one more example of the failed mergers that incite shareholder rebellions. We know the road to hell is paved with good intentions, so that doesn’t count for much. We expect CEOs and their directors to exercise their fiduciary responsibility to US by making sound decisions that are not scuttled by some array of the 7 Deadly Sins.

Studies have shown time and again that deals usually don’t pay off for acquirers. Here are three more troubling findings from Bloomberg’s ranking group relating to the $10 trillion merger boom that began at the end of 2007:

1. Deals executed during a financial boom tend to turn out worse than those done in a slump.
2. The stocks of 53 companies that made the biggest purchases from 2005 to 2008 lagged behind industry peers two years later.
3. The average stock price of all the top acquirers trailed benchmark indexes by an average of about 3 percentage points.

P.S. McClatchy Co., the Sacramento newspaper ranked the worst of the 100 on Bloomberg’s list.

Pride is usually considered the mother of all sins, and misplaced pride and envy have scuttled many a merger that shouldn’t have been made in the first place. The Sinful Excesses of Greed & Gluttony also contribute to these failed marriages.

When you rummage around in the dumpster of failed deals, it won’t be easy to find one whose failures aren’t rooted in the garden of the 7 Deadly Sins.

Strategic Finance? 7 Deadly Sins infect merger boom! is a post from: Sword Tips – the Exkalibur blog

In my earlier post, Powerful After Action Reviews, you can learn more about this concept, built and nurtured by the US Army. For Pixar, Davenport reminds us how movie makers use “dailies” to review their work in progress, showing movies to other filmmakers every few month to solicit critical insights that often make the movies better. Nothing we couldn’t accomplish with a Daily Huddle, right?

Ed Catmull, President of Pixar, believes these “post-mortems”, which he describes as “like taking cod liver oil”, are a critical ingredient of Pixar’s success. One of their techniques during these reviews is to ask each member of the film team to come up with five things they’d do again … and five things they wouldn’t do again. What a great way to denude potential dissension on the team so that everyone thinks about alternative ideas and shares criticism openly.

Pixar uses a lot of techniques to build a vital creative process but their After Action Reviews are critical part of it and offer great lessons for every organization seeking to improve their execution.

After Action Reviews = Successful Execution is a post from: Sword Tips – the Exkalibur blog

Integrity, vulnerability and humility: keys to an apology

“Pride is concerned with who is right. Humility is concerned with what is right.”  — Ezra Taft Benson

I was ready to return to our series on strategic finance after my last column about the integrity of umpire Jim Joyce and the accountability of BP… until I read a comment in the Washington Post by Jeffrey Pfeffer, a professor of organizational behavior at Stanford University. Citing Henry Ford’s infamous quote, “Never complain, never explain,” as the preferred way for business leaders to deal with disasters like the Gulf oil spill took me by surprise.

BP is the poster child for a failed apology

In appearing to criticize BP’s CEO Tony Hayward for apologizing for BP’s actions, Mr. Pfeffer extols the value of being on the “winning side,” that people respect strength and diffidence does not convey winning or power. Research in social psychology, he continues, “shows that acting embarrassed or remorseful conveys less power and results in less favorable impressions than acting angry.”

In the context of BP’s PR debacle, those comments seem wildly misplaced. Does Mr. Pfeffer think BP would have won our hearts and minds by taking no responsibility, “never explaining,” and that he should have acted like he was angry that people blamed BP for this unexpected accident? I can’t imagine worse advice than if I recommended that you chase down every meal with a quart of engine oil.

Where BP failed is not in its abject attempt at an apology. It failed to gain even a modicum of public support because its admissions reflected no sense of either authenticity or sensitivity. Even allowing for his aristocratic British accent, Tony Hayward’s apologies didn’t seem genuine but rather canned, trite and rehearsed. He didn’t seem to realize he was standing in the “spotlight of leadership.” The defensiveness that usually accompanies this lack of humility is what has doomed the ignominious BP public relations gambit.

Authenticity = Vulnerability = Believability

Patrick Lencioni recently wrote that the most important ingredient that differentiates top leaders is vulnerability. “What set the best ones apart,” he believes, “is their ability to know their limitations … and perhaps most important of all, freely and openly admit to others that they are aware of and comfortable with their shortcomings.” The word vulnerability is traditionally defined in terms of our susceptibility to attack, criticism or temptation, but in this context, it’s about admitting our weaknesses and openly acknowledging our shortcomings.

Humility is a kissing cousin of vulnerability, and as I wrote in a previous column in this space about the Seven Deadly Sins, it is usually seen as the opposite of pride, as a modest opinion of our own importance. When both humility and vulnerability are missing, pride and arrogance take over and serve as nursemaids to the kind of havoc that besieges BP.

So, what is the right way to approach a crisis, disaster or for that matter any challenging, controversial or emotionally charged issue that comes before us? I think there are three critical elements that must be present.

Integrity is the cornerstone of an apology

Integrity is the bedrock of any plan, and when it isn’t present, any approach is ultimately doomed. Honesty can certainly be taught to children, but I doubt that integrity can be taught to adults. You either have it or you don’t. Without it, you’ll be ripping out tree trunks trying to find humility or vulnerability anywhere nearby, so your ability to manage a crisis is already in grave jeopardy.

Humility is easy to recognize. It admits of error, that we’re not omniscient and are open and accepting of criticism and correction. It only comes when you believe that everyone is equally entitled to share the same air, and while each of us has different talents, some with extraordinary doses, none of us is better or more valuable than the next person. Like integrity, this conviction lives at the deepest core of our humanity, and while it’s not easily taught, it is often learned when the “slings and arrows of outrageous fortune” fill the air around our lives.

Vulnerability might be seen as the magic elixir that empowers integrity and reflects humility. To be vulnerable is to openly acknowledge mistakes and shortcomings, genuinely and with sensitivity, without being defensive. It’s withdrawing our defenses and allowing our humanity to be seen in all its naked power. In short, humility opens the door and vulnerability pours the drinks at the table of integrity.

If BP had followed umpire Jim Joyce’s example, leading with integrity leavened with humility and vulnerability, we’d be rooting them on, standing arm in arm to fight this terrible environmental disaster. As it is, we’re willing to carry on the fight … but BP hardly seems like an ally.

KBO.

•••

Lary Kirchenbauer is the president of Exkalibur Advisors, Inc., providing practical business strategies for family and other privately owned businesses in the middle market. Exkalibur works closely with senior executives and their businesses at the intersection of leadership and business strategy and uses the Business Ferret™ framework to help companies use strategic finance to drive improved business performance. Lary also hosts the Exkalibur Leadership Forum for leaders of middle market companies in the North Bay. Please visit www.Exkalibur.com for a library of valuable resources, articles and insights or join the Exkalibur fan page on Facebook.

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The North Bay Business Journal, a publication of the New York Times, is a weekly business newspaper which I have served as a regular columnist for more than two years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties.

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Article published – July 5, 2010: The electronic version of this article, as published by the North Bay Business Journal, is identical to this post and may be found here.

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Any related materials or articles referenced in the published column, or otherwise applicable, are referenced in this digital version of the article.

Vol. 68: The Keys to an Apology is a post from: Sword Tips – the Exkalibur blog

Who should decide how much to pay whom for oil spill claims?

What I wonder is whether BP … in most cases, any corporation … shouldn’t have some rights and control over the claims paid from funds ultimately belonging to their shareholders? Take special note that in BPs case, a powerful example of the global economy in which we live, 18 million British citizens own stock in BP, many of them retirees.

Emotions are running high and many people would prefer to see BP hanging from the nearest rafter. At the same time, shouldn’t a company be allowed to settle claims in a fair and reasonable manner? There are plenty of ways in which individuals and organizations can seek redress if they disagree on the results, either through appeal or in claims or civil courts if a reasonable settlement cannot be made.

What paperwork?

Many examples have already been reported … and I’m certain there will be thousands more … of Gulf businesses claiming unsubstantiated damages … with limited or poor accounting records, and little proven evidence of the earnings they seek to recover based on the  years prior to the oil spill. It’s no surprise that many fisherman and other small businesses don’t keep great accounting records, and in cash businesses, may have “forgotten” to record some of their transactions? But now that they have to demonstrate the level of earnings that have been lost … and I think we’d agree that it’s a fair expectation that they be able to demonstrate that history … it seems reasonable that BP should have some rights to adjudicate those claims like most US corporations do in disputed matters.

What do you think? Would you think differently if you were a shareholder, like so many Britons, with a stock so critical to their retirement? If it was your company, would you insist on certain rights to protect your shareholders?

Let’s talk about it.

Do we need a Federal Escrow Fund? is a post from: Sword Tips – the Exkalibur blog

Jeff Bussgang, an entrepreneur and now VC partner, provides in a recent Business Week article, a good reminder of the value of having a “Truth Teller” on your Board of Directors.

If you’re running a family business, do you have any outside board members? If so, are you glad you do? If not, why not?

Have a Truth Teller onBoard? is a post from: Sword Tips – the Exkalibur blog

I’m happy to see that Warren Buffett agrees as he told his rapt audience in his comments at Berkshire Hathaway’s recent annual shareholder’s meeting. Of one firm, ABN Amro, Mr. Buffett said: “It’s hard for me to get terribly sympathetic when a bank makes a dumb credit bet.”

A New York Times editorial also excoriates the organizations that bear a lot of the blame for the financial mess – and have escaped any consequential investigation so far – which are the ratings agencies. In the US, neither plaintiffs nor defendants pay the judge and jury for their “independence”. Likewise, I have expressed for years that we must bear the same skepticism when companies pay the rating agencies for their so-called “independent imprimatur” for the very securities that the company is issuing. While the public accounting industry has tried hard to maintain its independent stance, but it’s equally susceptible to conflict charges since the companies hire the auditors that provide the independent opinions.

Independence is a relative term. Don’t forget that when you’re ready to accept that opinion to form your own.

Is anyone really independent? is a post from: Sword Tips – the Exkalibur blog

After Action Reviews are for Learning NOT Blame

One day, he asked me if I’d like to go to work with him on Saturday. He’d show me around, we’d have lunch, hang out. He couldn’t leave for lunch, but he would bring along some homemade sandwiches, bologna with lots of ketchup, he said, and I could sit in his pathology lab as he performed an autopsy … and while he was cutting and sawing, we would enjoy our lunch together. It was when he started laughing that I realized why my vision of an overloaded bologna sandwich, dripping with ketchup alongside an autopsy table, was kicking up a firestorm in my gut.

I think that’s how many business executives view an After Action Review (AAR) — a gruesome business designed to relive the pain of failed projects. 

After Action Reviews are great Accountability Tools

The AAR is, contrarily, an undernourished sibling of accountability that is a highly effective tool to help us learn from our past performance and create a state of continuous improvement.

The U.S. Army is one organization that’s committed to After Action Reports, which may be described as seizing the opportunity to learn. From a modest introduction in the mid-1970s, the AAR and has become a vital part of military culture. In many ways, it resembles the Chalk Talks that many of us have experienced in sports, an opportunity to diagnose what happened and learn from it to improve future performance. During the NFL season, professional football teams generate real-time images from elevated cameras and send them to printers behind the player’s bench to allow quarterbacks and others to immediately diagnose formations and play results so they can make adjustments on the very next set of downs.

How do you implement an After Action Review process?

The AAR is another way to reinforce accountability across the organization, and can be easily implemented:

What was your intention?

1. What was your intention? This step is vital to ensure that everyone is clear about the expectations that were set and the standards of success to be applied. The U.S. Army thinks of it in three separate components:

a. What are the tasks to be performed?

b. What are the conditions under which they’re likely to be performed?

c. What are the acceptable standards of success and how are they measured?

What really happened?

2. What really happened? This is not as easy as it seems, as different individuals will have varying recollections or experiences based on their vantage point. For widely distributed organizations, it’s exponentially more difficult to synthesize variant viewpoints and consolidate the intelligence scattered throughout the organization. Input from every level of the organization, coupled with objective and measured results, is essential to an accurate finding of what happened.

Facilitation skills are essential here. Army doctrine suggests spending 25 percent of the AAR time on these first two questions. While it’s tempting to jump to the diagnosis, the military has learned that clarity about the intentions as well as the expected results is fundamental to an informed and dispositive discussion of how it can be improved.

Why did it happen?

3. Why did it happen? This diagnostic stage begins the unvarnished evaluation of why the results differed from plan expectations. If you’re not willing to be honest and forthcoming as a leader, this phase will quickly unravel. To encourage the best diagnosis, it is vital to promote a no-penalty environment in which people at all levels will honestly report their findings and observations.

How would we do it differently next time?

4. How would we do it differently next time? This final step is really inseparable from the diagnosis and gets 50 percent of the AAR time in the Army protocol. In this phase, focus on the things you can control and don’t be distracted by uncontrollable forces. Be sure to also identify what worked well, and what efforts and activities should be sustained. While it’s more difficult to tease apart those steps that worked well, it’s equally important to sustain those activities that lead to success.

Feedback is the Breakfast of Champions!

Prompt feedback, often immediately after the action itself, e.g., the NFL football example, is also critical to the success of an AAR process. The quicker you gather feedback, the quicker improvements can be implemented, so regular and frequent sessions are essential. Use these sessions as a learning tool to encourage candid feedback, greater accountability and continuous improvement.

The AAR is a powerful and compelling tool, inexpensive to implement and simple to apply with not much more than keen observation and a systematic process. Successful organizations embed this into their culture to gain agility and improve performance. You should start today.

KBO.

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“Thankfully, perseverance is a good substitute for talent..”– Steve Martin

The North Bay Business Journal, a publication of the New York Times, is a weekly business newspaper which I have served as a regular columnist for the last two years. The Business Journal covers the North Bay area of San Francisco – from the Golden Gate bridge north, including the Wine Country of Sonoma and Napa counties.

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Article published – February 8, 2010: The electronic version of this article, as published by the North Bay Business Journal, is identical to this post and may be found here.

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Any related materials or articles referenced in the published column, or otherwise applicable, are referenced in this digital version of the article.

Accountability | Powerful After Action Reviews is a post from: Sword Tips – the Exkalibur blog