Building Business Value | Corporate Management Strategies

Listening to your customers builds business value

I visited my friendly neighborhood US Post Office recently to officially mail in my tax returns.  One envelope was for the Feds and one envelope was for the State.  An elderly women in front of me had a package to mail.  It was a rectangular package, about two feet long and about eight inches wide.  Sort of a long shoe box.

As she made her way to the counter, the postal employee asked her how she’d liked it mailed.  The answer?  “Cheapest way.”  Then the next question.

“Would you like it delivered Express Mail?”   
“Is that the cheapest?”
“No … would like you like Priority Mail … delivered in 2-3 days?”
“Is that the cheapest?”
“No …  would you like First-Class Mail”?

By now the patron was getting a feel for the routine.

“No thanks”, she said.
“Would you like insurance?”
“Does it cost more?”
“Yes”
“No thanks”
“Would you like Delivery Confirmation?”
“No, just the cheapest way”

“Confirmation of delivery?”      “No”
“Signature Confirmation?”        “No”

“That will be $4.55”

On my drive back to the office, I made a mental list of my clients and wondered if my ear was a tin as this postal worker’s ear.  Your customer base is a key driver for building business value.  How well are you listening to your customers?

Your Calendar Screams Your Business Priorities - What are yours?

Every business is under a certain amount of stress these days.  As a result, most CEO’s are conflicted on where to place their energies.  Should you focus on revenue generation?  Should you focus on cost reduction?  Should you introduce a new product or cut your current product line?  How do you build business value in the enterprise when you are constantly putting out fires.

Before you answer those questions, make a quick check on your current list of priorities.  Start by looking at your calendar to get an accurate look at what you currently view as pressing.  Is your calendar dotted with mini-meetings scheduled twenty minutes or two hours before they are to start.  Worse yet, are you so busy, the meetings never even get on the calendar?

Now, compare the time you’ve been spending on fires with the list of transformational initiatives you created three months ago in your planning session.  Initiatives you thought long and hard about and were convinced could add value to your company.  If there is a mismatch, you have to ask yourself if you’ve gone off track.

At the recent G-20 conference in London, Treasury Secretary Tim Geithner told CNN’s Anderson Cooper that “the most important thing, again, is to get the leaders of the world -- these countries represent 85 percent of global output -- to stand together and say, we're going to act together to do what's necessary to bring this recovery back on track.”  That was Geithner’s top priority and we are all depending on him to stay focused on that top task.

The same can be said for you stakeholders.  They are depending upon your ability as a leader to stay focused on your top priorities.  You must find ways to put out the fires while you are still working on your strategic initiatives.

What's a box of cereal got to do with building business value?

I normally start my days very early and one of my simple pleasures is the 7:30am walk to the bus stop.  Of course this is for the grade school kids, the older kids are much to cool to have their parents at the bus stop,

This morning I had a great conversation on just what to invest in during this recession.  Not what stocks to buy, but rather, how should your business use it's precious capital.  (I’m fortunate to have a diverse bus stop.)

James Surowiecki’s Financial Page article in The New Yorker, “Hanging Tough” was the basis for the discussion.  Surowiecki’s recall the positions taken by Kellogg and Post during the Great Depression.  Post pulled back on advertising and reigned in expenses.  Conversely, Kellogg doubled its ad budget and actually rolled out Snap, Crackle and Pop.  Kellogg’s profits rose thirty percent.

So what should you do with your capital in this tight market?  Midmarket companies strapped for cash might find it hard to invest in anything these days, but there are opportunities.  Opportunities to give customers what they need, not just what they want.  Listening becomes your biggest asset.  If you have historically thrown your product or service over the fence and hoped someone bought it, you are in trouble. Listen closely to your customers' needs. Now is the time to really know the value drivers for your company and what drives value for your customers.

Vulnerable Leadership - Admit Your Own Mistakes

In Peter Bregman’s Harvard Business Publishing blog “I Want You To Apologize”, he speaks on the power of an apology.  Those of us in business leadership roles sometimes find it hard to apologize …  especially if the corporate culture discourages such behavior.

Many years ago while playing rugby, I happened to be on the wrong end of a very dirty play.  I was in a vulnerable position and one of my competitors took a real shot at hurting me.  After the play moved on, I found myself sprinting toward the guilty party and as I got closer, I realized my options were limited.  He was bigger, looked menacing and seemed to be itching for a fight.  Without thinking, I ran up to him, put my hand out to shake his hand and said to him "you’re too good of a player to resort to do what you just did."  He was stunned.  He was actually ready to fight.  Nothing else was said on the pitch, but when we met after the match for a pint, he apologized, I accepted and we moved on.

I've used a similar technique in business leadership roles ever since.  It has changed a bit as it morphed in the sandbox of leading people and I've renamed it "vulnerable leadership."   Leaders can often feel let down by the performance of their staff.  They have the urge to run down the hall and really “give it to” that incompetent wretch!  Well this approach may make you feel better … for 30 seconds …. but it always has a long term negative impact.

Many leaders talk about empowerment, encourage their staff to ask for help, ask colleagues to bring mistakes and errors to light, but if the leader is viewed as flawless, it is very difficult to approach them with a whopping mistake.

The basic concept of “vulnerable leadership” is that leaders need to admit their own mistakes.  Show you are vulnerable.  Use examples.  Show you are a real person and you'll be amazed how a culture can change from one that holds everything in and hides mistakes to one an open culture where mistakes are looked upon as tuition.  People will begin to ask for help before they bury themselves and the organization.

Thanks for the reminder, Peter.  All businesses would work better if the culture encouraged a simple apology.

My bad!

Using Advisory Boards for Free Advice

In the April, 2009 issue of Fortune Smalll Business, Justin Martin wrote a great article on how advisory boards can give you firm a leg up.  The really good midmarket companies leverage their resources, including their boards of directors and boards of advisors. They use these business-savvy individuals as sources of wisdom and as sources of new business.

John McBeth, a serial entrepreneur and CEO of Next Century, has a passion for what he calls a “worthy purpose.” He keeps himself accountable by leaning on a top-notch board of advisors who aren’t afraid to set him straight. In contrast to this, too many small and midmarket companies tend toward boards of directors that consist of friends and family. Perhaps Uncle Joe loaned the company $100,000 ten years ago, so he still wants to run the show. But friends and family who may have been able to pony up necessary start-up funds back in the day are not capable of  providing the outside accountability that experienced business leaders offer. Many middle-market companies struggle with governance.  Entrepreneurs and C-level executives need someone to challenge them and offer the guidance and direction necessary for growth.  Uncle Joe may have great fishing stories to share at the board meetings, but he cannot mentor the leadership team when tough, challenging business decisions must be made.

There are other ways to fail to take maximum advantage of your board of directors. A company might have board members with personal agendas that lack transparency. Or a board member might try to buy the company outside the stated strategy of the executive team and the other members of the board. Leaders might isolate and disregard board members whose points of view differ from their own. That’s why board diversity is extremely useful. Boards not only provide insight, advice, and support to the CEO, their members should have strong industry and financial backgrounds to add real value to CEO decisions. Board members not aligned with the direction of the company are harmful; those with axes to grind or agendas to meet must be culled. Outside directors give business leaders the opportunity to close the books every quarter, position their companies for the future, talk about plans and leadership development, and generally guide the company with the help of other experienced leaders.

Acres of Diamonds - A Leadership Strategy

Midmarket companies often struggle when they begin to consider expansion or organization changes that require a change in the leadership structure.  One leadership strategy to consider is to scour the market to find just the right person. But before you pay a headhunter the 25% fee of a new hires’ salary, consider a hard look inside your company, as illustrated in a story told by the nineteenth century Baptist minister Russell Conwell.

He dreamt of establishing Temple University although he didn’t have any money.  He didn’t let his financial reality dictate his situation, encouraging himself and others with a motivational speech about a man who desired wealth so badly that he sold all his property, left his family, and set out on a lifelong, futile journey to find diamonds. He spent the rest of his years searching for something he never found because, as Conwell tells us, he didn’t know where to look.

Just after the man sold his farm, the new owner led his camel to water in the small river at the edge of the property. As the camel drank from the stream, the new owner noticed a flash of light coming from the bottom of the river. He knelt down and picked up what turned out to be a large diamond. After digging further, he discovered a whole mine.

The man who left his family, home, and everything behind to look elsewhere for diamonds would have found them in his backyard if only he had stopped to look.  You may be able find the diamonds in your company too.

Shovel Ready Plans for Building Business Value

In the late 90’s, I became the CEO of a $6M IT services company and after a couple years of organically building the business to revenues of $20M, we decided we would attempt to take the company to the next stage. 

The two founders owned the majority of the company and both were active members of the board of directors.  The founders were looking to exit the business and since we had a strong, but young leadership team, we charted a leveraged management buy-out as their exit strategy and our strategic plan.  From Chicago to Washington to New York, we went in search of financing. Since this was before 9-11 and a large part of our business was with the federal government, valuations at that time were in the 3-4 times earnings ballpark.

 

Our plan painted a strong picture of the future. We had identified two additional companies to buy, we were going to jettison an unprofitable piece of the business and we lined up two additional senior leaders poised to join the company. We knew our current customer base, knew our competencies and how to package them and we felt like we knew what the market was going to buy.

We planned and practiced, practiced and planned and met with a number of private equity, venture groups, and mezzanine financing firms.  There was one particular group in New York that I was eager to work with. The name of the firms was Fox Paine.  They had a good reputation in the leveraged buy-out world, had only been in the private equity business at that time for a few years and their portfolio was strong, diverse and we felt we could leverage those companies with our customer base. 

So my CFO and I made the trip to NY to meet with SaulFox.  We met in a professionally decorated conference room and I gave, if you don’t mind me saying so, a “10” presentation.  I hit every high note and made every point I had planned to make.  I was just waiting for Mr. Fox to ask me for our bank account so the money could be transferred! 

Instead he waited for a moment and asked me “Marty, what would you say are the 4 or 5 pieces of your business that will really drive enterprise value?”   I did an average job at answering that but I also noticed during my answer, that one of the factors I mentioned was not even in my presentation.  Then he asked “What are your plans for moving the needle on each of those value drivers?” Again, I did an adequate job at answering his questions, but there were still more disconnects between my original presentation and my answers.

We talked more and instead of leaving with a check, I left with the gift of a lifetime.  Saul Fox didn’t give me any money; he gave me a better way to think about my company.  A gift that has changed how I view managing companies in the middle market.

CEO’s in the middle market should always know the four or five most significant value drivers for their business and be prepared to answer those two great questions.

What are the four or five most important value drivers in your business? 

What are your shovel ready plans for moving the needle on each of those value drivers?

Thanks Mr. Fox. 

 

I'm so Proud of my Humility - Servant Leadership

Father James Martin, publisher of the Jesuit magazine America and author of My Life with theSaints (2006) describes an ah-hah moment in his calling when it dawned on him that his literary talents were meant to be of service to others and not for his further aggrandizement.

Robert K.Greenleaf coined the phrase “Servant Leadership”  in an essay he first published in 1970.  Greenleaf said, "The servant-leader is servant first… It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. That person is sharply different from one who is leader first, perhaps because of the need to assuage an unusual power drive or to acquire material possessions … The leader-first and the servant-first are two extreme types. Between them there are shadings and blends that are part of the infinite variety of human nature."

Around 1730, while in his late 20s, Benjamin Franklin listed thirteen virtues that he felt were an important guide for living. These virtues consisted of temperance, silence, order, resolution, frugality, industry, sincerity, justice, moderation, cleanliness, tranquility, chastity, and humility. Franklin didn't try to work on them all at once.  Instead, he would work on one and only one each week "leaving all others to their ordinary chance".  He found humility particularly difficult to master.

Pride, humility and servant leadership.  Three loaded terms representing more than enough material to fill books, but lets take a quick look and then I’ll leave you with a thought to ponder.

During the last 18 months while working on a book project, I had the wonderful opportunity of interviewing more than 30 CEO’s of midmarket companies.  The CEOs backgrounds and experiences ranged from the young entrepreneur to the seasoned veteran of both bear and bull markets.  I also interviewed another fifteen executives of large organizations.  Some were CEOs of publicly traded companies, others were senior executives responsible for large pieces of business.  Suffice to say that all of these folks were big hitters.  Many of these executives talked about a leadership "ah-hah" moment that centered around putting their company and employees first.

When Father Martin had his "ah-hah" moment, he was suffering from a hand and wrist malady that made it difficult and very painful to write or type. He excelled at writing and took pride in his abilities. Even during his painful hand issues, he found himself being proud of his stoic approach to his condition. In other words, he was proud of his humility!

When Greenleaf coined the“servant leadership” term, he was recapping a long career with AT&T that served as a basis for suggesting a leadership model he felt was both natural and productive for corporate America.

So the question I pose for all of the leaders among us; are you proud of your humility?  Do you feel like it’s important to take credit for all the good things happening in your organization?  Are you open to the suggestions and opinions of others? Do all the good ideas come from you?  Are you comfortable sharing success?  Is it instinctive to serve others in your organization?  Are you caught up in the trappings of your position?

The reason I ask these questions is certainly not to preach. I have been guilty of most of these during my career as a business operator. What I have found from my experiences, research, interviews and consulting gigs is that when you are humble, when you become comfortable with serving and when your approach is to seek knowledge and grow, you’ll find your organization emulating your behavior and reaching new levels of superior business results.

In case you want to explore the topic of humility a bit further, here are a few Google starters.

“Humility is the solid foundation of all the virtues.” – Confucius“Humility, “like darkness reveals the heavenly lights.” – Thoreau“Exhibit humility in all you do.  Model Jesus an Socrates” –FranklinAre you proud of your humility ?