How Leaders are Made

It seems incredible, but when it comes to business leadership, we don’t consider the most important pieces of it: Does this person have the know-hows to succeed? Is he or she capable of developing them and driven to continue to hone them? The seeds of personality traits might be born, but know-how is learned, developed through practice, and honed through experience. Leaders who are disciplined, determined, consistent, and persistent in developing these kinds of know-how tend to be successful on a sustained basis. In that sense, leaders are made.

-Ram Charan

Pressures: Responding to Society’s Demands Creatively and Positively

(21808) Ram Charan says:

Great business leaders understand the issues that command public attention and position their enterprises on the right side of each. They understand that business doesn’t exist in a vacuum, and since they plan on being around for the long haul, people with know-how address society’s legitimate concerns.

Listen to Outside Voices

Like it or not, this is the era of total business transparency. That means not only do your stakeholders have a say in how your business is run, but so too do various special interest groups. You simply cannot spend all your time focusing solely on your main job of making money. You also have to keep your business on the right side of all the issues that generate public interest.

As tempting as it may be to ignore special interest groups as distractions from your real work, to do so can be very risky. Instead, you need to identify emerging special interest groups, understand their motivations and concerns, build relationships, respond to legitimate concerns and generally manage this kind of societal pressure. And since many of these battles will take place in the court of public opinion rather than in a more structured legal setting, this is probably more like a game of chess than anything else. You always need to be looking a few moves ahead and positioning yourself rather than responding to the potshots they are taking.

The New Rules of the Game

From a business manager’s perspective, the rules of the game have changed. Nowadays, the new facts of corporate life are:

Nothing is off-limits to special interest groups They will be interested in every aspect of your business model from the natural resources you consume to the amount you pay entry-level workers. If you are out of step with public opinion in any area at all, sooner or later it will get publicized far and wide. Don’t think you can hide embarrassing facts away in a foreign subsidiary or elsewhere, because it will most likely come back to bite you at the worst possible moment.

Transparency is a fact of life, whether you agree to it or not. At one time, the media was reasonably selective about what it covered. Today, anyone anywhere can start a blog dedicated to your corporate shortcomings. You’re far better off avoiding doing anything you would be embarrassed about if it came to the public’s attention.

Laws and the courts are always behind rather than in front of public opinion, so don’t try to justify bad actions by saying they comply with all applicable laws. That’s all well and fine, but people will still expect you to be doing more. Legal technicalities just aren’t going to be much help. You’d better be obeying the spirit of the law and not just its more narrow letter-of-the-law interpretation.

Don’t automatically dismiss government intervention as a negative thing because there will be times and circumstances where the government action will be much more moderate than what special interest groups are suggesting. It still makes sense to build sound federal, state and local government relationships.

Never forget the power of hedge funds and other Wall Street entities who can back up what they want with huge pools of capital and sophisticated analysis. Make sure they understand what you’re doing and why. If you fail to do this, they have the power to force you to do some uncomfortable things.

Distinguish what legitimate issues are just starting to emerge and take a proactive approach rather than avoiding them and hoping they will go away. Develop some internal mechanisms that will bring emerging issues to your attention early on while they are on the fringe so you still have time to think about possible ways to handle the issue. If you wait until the mainstream media gets on the bandwagon, it may be too late. A simple way to do this is by spending a few hours on a regular basis with people who come from a wide variety of backgrounds rather than businesspeople.

Know-How

Priorities: Developing a Workable Road Map for Accomplishing Your Goals

(21807)

Priorities are essential. They tell people what to focus on and what doesn’t really matter. Part of having know-how is the ability to help everyone focus on the right things and ignore everything else.

Start at the Ground Level

Priorities are worthwhile because they keep the truly important things front and center rather than being bustled off the radar screen by day-to-day events and happenings. Good priorities provide clarity and focus and are the basis for how resources are allocated.

A good way to understand the distinction between goals and priorities is to remember that goals are set at a top-down level, as if you were looking at your business from 50,000 feet in the air. Priorities, by contrast, are set at ground level where there are loads and loads of messy details gumming up the scene. Priorities specify what your most important actions are and what the flow-on consequences of your decisions will be.

Take Current Resources into Account

The right priorities can generate a tremendous amount of energy within a corporation. And equally, the wrong priorities can generate an awful lot of confusion, duplication of effort, conflict, waste of resources and demotivation. It is possible to have the right goals but the wrong priorities. You have to generate buy-in for the right priorities for your business to move forward.

Never forget that it is people who breathe life into your priorities, and therefore it’s vital that you communicate with those who will be living by your preferred priorities. Whenever you want to set new priorities, there are a few questions you should be pondering carefully:

Do we have the right people available to carry these priorities out on a day-to-day basis?

Are we choosing our priorities based on what is popular with our staff or on what is good for the business?

Are we backing our priorities by moving the requisite resources into areas that are aligned with those priorities?

Do our budgeting systems tie in with our priorities seamlessly or is there potential for confusion and conflict?

Priority Setting Principles

Getting everyone on the same page when it comes to setting priorities is difficult for any organization. In practical terms, most business projects will fall into one of these four quadrants:

[High Revenue Growth–Low Margin] [High Revenue Growth–High Margin]

[Low Revenue Growth–Low Margin] [Low Revenue Growth–High Margin]

Obviously the ideal is for your organization to be focusing on projects that fall into the top right-hand quadrant. The process of setting priorities is all about decreasing involvement and expenditure in projects that fall into other quadrants and increasing the expenditure and effort that is put into the projects in the upper right quadrant.

Use This Opportunity to Build Consensus

All too frequently, businesses attempt to set priorities in a top-down manner, the same as with the budget process. This is unfortunate because not only is the top-down process potentially impractical but companies should be utilizing this as an opportunity to build rather than dilute consensus between the managers who compete for resources. The more people you have who understand the big picture, the better your organization will be.

Texas Instruments Method

Texas Instruments runs a three-day budgeting and resource allocation session every year where priorities are set and agreed upon by around seventy leaders. This series of meetings follows this kind of structure:

(1) The CEO and senior managers state what they believe the goals and priorities should be for the coming year

(2) Everyone discusses why these goals and priorities have been chosen until there is general agreement

(3) Using common spreadsheets and databases, all participants break the total forecast down into individual components

(4) Changes are made immediately, a new version is produced and discussed until there is a general consensus

(5) Everyone understands what decisions were made, why they were made and what assumptions underlie eachThe real advantage of following an intense, immersive process like this is that by the end of it, people have broken down their silo mentality. They understand that what they do in their silo may have unfavorable consequences elsewhere. It also means that since everyone understands the reasoning behind the decisions made, they will be better prepared to make modifications in the future as external conditions change.

Know-How

Setting Goals: Balancing What Is Achieved with What Could Be Achieved

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Determining the right goals is always a juggling act. There are many different things a business can achieve that are noteworthy and laudable. Someone with know-how cuts through the various options and sets goals that are the right type and magnitude for the organization at this present time. This is often more challenging than it seems.

Goals Must Reflect Future Opportunities

Goals align people’s energy and automatically set the tone for everything that gets done. When goals are linked directly to rewards, they have a powerful and far-reaching impact. Selecting the right set of goals is always a balancing act because there are so many options. The key, however, is balance. Your goals need to reflect the opportunities that are available while at the same time taking into account your organization’s abilities to pursue and achieve those goals.

It’s all too easy to set goals that are either too modest or too aggressive. Great goals achieve the right things within an appropriate time frame, to an acceptable level and in the best possible combination. You can’t set great goals by looking in the rearview mirror and just adding a percentage to what was achieved last year. Nor can you go by what is forecast for your industry or the economy overall. Robust and worthwhile goals reflect the opportunities that lie ahead and what is feasible and desirable for your business moving forward.

When selecting your goals, try to keep these general principles and concepts in mind:

Choose goals that will keep your organization in balance–because it’s all too easy to focus on just one area to the detriment of everything else. What you go after needs to move your organization forward on all fronts that are important. For example, seeking aggressive top line growth at the expense of bottom line profitability is unbalanced and therefore unsustainable.

When selecting a goal, think long and hard about its doability–about whether the people at the front lines will actually be able to follow through. There’s no use becoming the author of the systematic destruction of what is currently a viable going concern. As you set goals, think through what actions and behaviors will be required to achieve them.

Keep an open dialogue with the people you assign responsibility for achieving a goal to–so you can ensure that what you’re doing is motivating rather than discouraging. Ongoing dialogue lets you make sure that the assumptions behind your goals match reality. It also ensures that your goals are reasonable rather than being far too high or much too low.

By all means set stretch goals that will energize–so your people have opportunities and the motivation to grow professionally. Stretch goals based around realistic improvements are good. They can fire up people’s imaginations as long as the goals are still doable and enough resources are available.

Keep your goals in sync with changes in the marketplace–so they are relevant to the current realities rather than set in stone. As you think about your market, your competitors and the general business environment, you’ll realize there are many factors beyond your ability to control. Be willing to adjust your goals when required so you can keep them relevant.

Know-How

Building a Team Takes Blood Sweat and Tears

It takes blood, sweat and tears to build a team, but the return on effort is huge. Many leaders think molding a team isn’t worth the effort, but they’re missing a tremendous opportunity to differentiate themselves and build the business. The more people can see the total anatomy of the business, the intersections of its moving parts, and the broader context in which it operates, the better job they do.

-Ram Charan

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