The Financial Crisis…Connecting the Dots.

By Mike Myatt, Chief Strategy Officer, N2growth

For those of you who still wonder how our nation finds itself entangled in this current financial crisis, I want to share the following video which I believe very accurately connects the dots. I would encourage you to watch this video in its entirety, and then forward it on to others. The most important Presidential election in recent history is right around the corner, and your vote matters. I would ask you not to fall prey to the political rhetoric and gamesmanship, not succumb to panic, not to listen to media bias, and not to acquiesce to pressure from the politically correct. This country cannot afford more of Nancy Pelosi, Harry Reid, and Barney Frank. This country can not afford one day of Barrack Obama in the White House. This country needs the real leadership of John McCain.   

Bailout Plan Rejected

By Mike Myatt, Chief Strategy Officer, N2growth

Hold on tightly...I wasn’t sure Congress had the intestinal fortitude to do it, but the House did step-up and reject the proposed Bailout plan today…Much to the chagrin of Nancy Pelosi, Harry Reid, and Barney Frank, the majority of Republicans and 95 Democrats actually listened to the American people and said no to the Bailout. My hope in our elected representatives (at least some of them) has been temporarily restored. The Republicans have an alternate plan that will be put forth later this week that will more closely represent the “workout” I’ve described in previous posts than the Bailout that was killed earlier today.  With your continued phone calls and e-mails to your representatives inside the Beltway we can avoid a disastrous Bailout and actually force Wall St. to pay for their own mistakes. Don’t give up the battle…For those who are fearful about the markets reaction today, I’ve outlined a few thoughts on the following page for your consideration…

There is no doubt that the market fell sharply today on negative reaction to the rejection of the Bailout. The market fell 777 points today, and in the early hours of foreign trading it is not looking too good. While it is highly probable the market will fall further in the days ahead, we did not even come close to the implosion the so called “experts” were stating as a foregone conclusion.

As I’ve said before, markets have to correct themselves when they become out of balance, and sometimes sharply so. While market declines may be painful in the near-term, taking the time to pass the right piece of legislation is so critically important to the financial future of our nation that it will be well worth the short-term hits we may take. Our country has weathered far worse than what we’re currently facing, and we’ll survive this as well. My hope is that we don’t just cave-in and make our lives worse in a rush to pass a flawed piece of legislation.

We’re Being Duped…Again.

By Mike Myatt, Chief Strategy Officer, N2growth

We’re being duped again…This rush to pass the Bailout plan is nothing short of self-serving fear mongering on the part of the people who caused this problem in the first place. Don’t you find it interesting that Congress convened at 7:30am this morning hoping to rush the vote on the Bailout plan before the American people could weigh-in? If the Democrats believe so strongly in this plan, then why don’t they just pass the bill? The Democrats have enough votes to carry this, they simply won’t do it without support from the Republicans. The Democrats want to be able to say this Bailout was a bipartisan act, and are looking for some Republican cover. Shame on the Republicans if they do this. This Bailout is bad for America, and stands for everything that’s wrong with big government politics.   

While I’ve spent a great deal of time lately discussing various topics surrounding the current financial crisis and Presidential politics, I feel that I’d be remiss if I failed to do so. Not only do both of the aforementioned topics have a direct impact on business, but the spin and rhetoric is so far out of control that I fear it is becoming more and more difficult for the average Americans to distinguish fact from fiction. The simple truth is that sound-bites, opinions, and theory rarely reflects the history and facts underpinning our current debacle. In today’s post I’ll share more of my thoughts on the subject at hand, as well as providing some great video footage in support of my positions.

If you think Nancy Pelosi, Harry Reid, Chris Dodd, and Barney Frank care about anything other than covering their own backsides, then you haven’t really thought this through. Let’s say for a moment that you don’t buy-in to what I’m espousing in this post, do you really trust these four individuals to solve the crisis they were responsible for creating, and do it all in just a matter of days? 

I hope the Republicans will show the backbone and character necessary to stand-up and kill this bill, but sadly, this probably won’t happen. What I can urge you to do is to call and e-mail your Representatives and Senators and let them know that you will most certainly not re-elect anyone who supports this madness.   

Bailout or Train Wreck?

By Mike Myatt, Chief Strategy Officer, N2growth

Beware the Bailout...Will today’s meetings in Congress produce a Bailout, or will the end result be just another cobbled together train wreck in the making? Is the Bailout a prudent step forward for our nation, or is it just another band-aid solution forestalling the inevitable? So, will Congress agree to a deal today? If so, will it be the right deal? Will it work? If not, what will be the market ramifications? In today’s post I’ll provide you with my thoughts on the aforementioned questions, as well as put forth some economic observations and alternatives for your consideration…

Call me a die-hard free market capitalist, but I’m not in favor of a bailout. From my perspective nationalizing Wall St. simply rewards the wrong behavior, provides no assurance of an acceptable outcome, and unilaterally transfers all the financial risk to the taxpayers.  The following thoughts and observations will provide you with the underlying reasoning behind my thoughts:

  • Will Congress agree to a deal in the near term? I think so; and if not today, likely by the time the Asian markets open on Monday. There is tremendous pressure for Congress to make a move to stabilize the markets, and I believe they will do so in the near term. Even though the current polls show that only 25% of American’s are in favor of the bailout, I believe most Americans anxiously await some form of swift resolution. Since we all know that polls are a key driver of decisioning in Washington, it is likely that some spin will enter the equation with the bailout being sold as something that it is not. The truth is that most of the really bright financial minds that I talk with see the bailout as a bad move. There is still a possibility that Republicans will dig in their heels in opposition, but this will likely only result in short-term delays rather than killing the bailout.
  • What will happen if Congress doesn’t agree to a bailout in the near term? The market thinks the bailout is a done deal and has already factored in a price gain reflecting this. As mentioned above, I think the odds of Congress not stepping-in are unlikely. That being said, if they don’t, the capital and credit markets will have a severe negative reaction, and a bit of main street panic will ensue. There is a strong likelihood that a recession or worse could follow.  However, this is where I differ from the politicians…my contention is that the aforementioned scenario is not necessarily a bad thing. Markets need to correct themselves in order to purge themselves of corruption, bleed out inefficiencies, regain their balance, and move forward in a healthy fashion again. Would there be pain and suffering that follows letting the markets correct themselves? Absolutely, but this is the natural order of things. Markets and economies ebb and flow. They do not just run in an upward direction in perpetuity. To think that they should is fantasy. To think that the government should step-in and bail them out when they don’t is socialism. Both positions constitute flawed thinking.   
  • What will the bailout look like? I don’t think it will differ greatly from the original plan submitted. While the plan will most likely call for a $700 Billion dollar bailout, it is highly probable that it will mushroom up to $1.5 Trillion dollars with near term adjustments that will most certainly follow the initial adoption. Sizing aside, there simply isn’t time to get consensus on sweeping changes and still meet the markets expected timing for a resolution. It will likely contain a few watered down oversight provisions, and a few points of clarification, which will in turn give Congress a few sound bites to leverage about how they’re looking out for taxpayer interests. However, from a meaningful perspective, it will still be woefully inadequate in terms of managing the risk associated with a bailout. 
  • Will a bailout work? There is an argument to be made that previous bailouts (i.e. Roosevelt’s New Deal, the 1979 bailout of Chrysler, and the Resolution Trust Corporation) have had prior success. This gives hope that the bailout being currently contemplated may work as well. While this sounds good in theory, times have changed, and the stakes are much higher in our current situation. While I think the proposed bailout may provide some temporary market relief, at the end of the day, my belief is that all we will have done is to compound the problem and forestall the inevitable. The Government is framing this as an investment with upside, but it is actually a mandate with tremendous downside risk. There are absolutely no assurances this will work. I believe that assumption that capital and credit markets will ease post bailout is a flawed assumption. I think lenders and investors will still remain on the sidelines, more banks will fail, the stock market will remain highly volatile, and the collapse we’re trying so hard to avoid will still occur. We’re just buying time…
  • Are there better alternatives? I think so…In principle, I’m much more of a believer in workouts than I am bailouts. The difference between the two are substantial. In a workout, the parties directly involved solve their own problems…some successfully, and others not successfully. In a bailout, third parties (that’s you) step in and underwrite the mistakes of others. Bailouts transfer risk, and workouts mitigate risk. The other point of distinction is that the end game isn’t simply to implement a bailout. What is truly needed is a comprehensive economic reform. The systems, regulations, and oversight (or lack thereof) that allowed this to happen must be reformed. In the absence of true economic reform, I again submit that we are just forestalling the inevitable. 
  • Do you have any examples of other alternative solutions to the bailout that would make a real difference? Here a just two examples of alternate mechanisms that would more than sufficiently increase liquidity without taxpayer involvement: Impose a small percentage fee to be levied against the exchanges on all securities trades. This would raise hundreds of billions of dollars in the near term. This solution has been successfully implemented in a number of other exchanges around the world. It would allow Wall St. to pay for their own mistakes. My second suggestion is to eliminate the capital gains tax. If we coupled the implementation of exchange fees with the elimination capital gains taxes we would generate more liquidity into the system than the bailout, all without transferring risk to the taxpayer. If the bailout were to move forward, and the taxpayers become a conscripted class of investors, I would at least like to see a tighter bailout plan that actually treats us like investors. What is the exit plan, and how will the capital be returned? What type of return on ivestment will we receive, and over what period of time? Surely we should expect some form of return to augment the risk we are assuming.

All the pontificating aside, batten down the hatches. Things are going to get worse before they get better. More banks will fail, more business will fold, more mortgages will be foreclosed on, and more bankruptcies will be filed. The good news is that this too shall pass. The economic problems will eventually correct themselves and we will regain our course. In the meantime, while others are panicking, failing, and making the wrong decisions, you don’t have to. Cut out waste, hire good talent (there is more of it wandering around these days), keep investing in your marketing and sales initiatives, and don’t allow yourself to get caught-up in the chaos.

Rogue CEOs & Board Accountability

By Mike Myatt, Chief Strategy Officer, N2growth

Accountability should be more than fine print...Rogue CEOs…given the recent failure of banks and financial institutions previously thought to be untouchable, there has been a tremendous amount of justifiable venom being spewed at the CEOs of these firms. Their ignorance, and in some cases their arrogance, allowed these rogue CEOs to operate outside of normal business rules, conduct self-serving agendas, and partake in self-dealing transactions all while receiving outrageous compensation. Before I go any further, let me state that I believe we should understand that the overwhelming majority of CEOs operate within the bounds of reason and ethics consistently placing stakeholder interests ahead of their own. The real question we should be asking is where were the boards of directors during this period of mismanagement? You see it is the board who is responsible for holding the chief executive accountable. Even where you have a CEO who is inclined to misbehave, an actively engaged board of directors simply won’t allow it to happen. In todays post I’ll examine the role of the board of directors in keeping CEOs accountable… 

Before I proceed further, and for contextual purposes, I believe it’s important to actually define the role of the board of directors. While there are certainly a variety of opinions as to the roles and obligations of a company’s board of directors, from my perspective they can all be boiled down into four simple responsibilities:

  1. Shareholder Accountability: A board member’s primary responsibility is to act in good faith as a fiduciary in representing the long-term best interests of shareholders. A board’s actions and decisions must be able to pass the litmus test of public scrutiny (legally, morally, and ethically), rise above personal agendas, and always place shareholder interests above all else;
  2. Corporate Governance: A board must insure that the corporation’s charter and by-laws are adhered to. Moreover a board must use its best efforts to hold executives accountable for insuring that corporate actions fall within other legal, financial, regulatory, and compliance boundaries. Ignorance and apathy are not the traits of a good board. Great board members are proactive, involved, supportive, consultative, experienced, and savvy. They know the rules, play between the lines, and do the right things. 
  3. CEO Oversight: It is the board’s job to select the CEO, provide the CEO with support and guidance, and to hold the CEO accountable. Good boards exercise great care and prudence in profiling CEO candidates, recruiting the right CEO for the job, providing the CEO with a clear job description, successfully onboarding the CEO, and holding the CEO accountable for meeting a set of clearly defined expectations. Good boards do not attempt to micro-manage a CEO, rather they understand their highest value in being a value added resource for the CEO focused on helping the CEO become successful. 
  4. External Visibility: A key responsibility of the board is to serve as an external champion of the corporate brand. Board members should have a clear understanding of the corporate vision and mission, and where prudent, evangelize the message for the benefit of the corporation. Whether this requires providing networking assistance, investor relations support, or engaging the media, a highly regarded and active board can add substantial value to the enterprise.

In the text that follows I’ll offer several points that will help a board evaluate whether or not they have the right CEO for the job:

  • Tenure: In a previous post entitled “CEO Term Limits” (a must read for board members) I stated that there is no such thing as a standard shelf-life for a CEO. No rules of thumb apply when evaluating whether a CEO has outworn his/her usefulness purely from a chronological perspective. I’ve witnessed CEO’s where the company has outgrown their skill sets, and/or abilities within a year of hire (a bad hire…), and I’ve also observed many instances of CEOs that have successfully guided companies for 20 years. The question is not how long a CEO serves, but rather what he or she does while serving. Whether age 32, or age 72, a board must ask themselves, is our CEO doing the job, and perhaps the better question is, are they the best CEO for the job?
  • Performance: The topic of performance is a multi-faceted issue. A CEO’s performance should be benchmarked against a variety of key performance indicators which are clearly spelled out in the chief executive’s employment agreement. When evaluating performance, a board must evaluate whether a lack of performance exists across all areas or in a single area, whether the lack of performance is a short-term aberration vs. the likelihood of it being a burgeoning problem, and whether the CEO can be coached through the performance gap, or whether the lack of performance is an irreconcilable issue.
  • Ethics Violations: The character of the CEO is often synonymous with the brand of the enterprise. Once a chief executive has violated the public trust, or made a gross or negligent error in judgment which could taint the corporate brand, a board should move swiftly to restore the integrity of the corporation. Many things can be spun, justified, rationalized, or managed, but a lack of ethical behavior on the part of the chief executive is not one of them. Let me also be clear that a good employment contract will make null and void any favorable severance packages where malfeasance, misfeasance, gross negligence, or fraud on the part of the CEO is present.
  • Loss of Confidence: Once the board, the employees, the capital markets, the press, or other key constituencies have lost confidence in the CEO, the board must replace the CEO. A CEO cannot lead, motivate, or inspire without the trust and confidence of those they serve.
  • Lack of Development: The corporate enterprise and the business world in general, are dynamic, fluid, and evolving environments. Therefore great chief executives cannot be static in their personal or professional development, or in their strategic and tactical approach to doing business. A CEO that does not exhibit the ability to change, innovate, and grow with the world around them is someone who will likely need to be replaced.

In the final analysis, the board’s decision as to whether a CEO should be replaced is a decision that should be made within the framework of managing risk and opportunity. The board must weigh the transitioning a CEO against the financial costs, the impact of the business disruption and lack of continuity that can come with replacing the CEO, the market reaction to a change in leadership, and whether the decision is ultimately motivated by right thinking. Lastly, and perhaps most importantly, the title of “Director” should not be synonymous with “Crony.”  Any board member not willing to uphold the aforementioned duties and responsibilities should be replaced in a New York second.

CEO Profile – Bill McDermott

By Mike Myatt, Chief Strategy Officer, N2growth

Bill McDermott is a CEO who understands leadership. As a CEO Coach I have had the benefit of hearing many a chief executive describe what “leadership” means to them, but rarely have I heard a CEO describe executive leadership as articulately as Bill does in the following interview. Bill’s life story is both an inspiration and a testimony to the benefits of a sound work ethic. As a teenager already holding down three jobs, he took on a fourth job working at a Deli (which he later purchased from the owner while still in his teens), worked his way through college, and got his start in sales at Xerox. Before he left Xeorx he had climbed to the position of Division President and was a corporate officer. After leaving Xerox, he did a stint as the President of Gartner, and served as an EVP with Siebel Systems…all of this before his 42nd Birthday. I invite you to listen to what Bill McDermott has to say about leadership…

Don’t Panic…Plan.

By Mike Myatt, Chief Strategy Officer, N2growth

Don't Panic...Just Make Good Decisions.I have been flooded by e-mails today asking for my thoughts on yesterday’s financial news. Lehman goes BK, Merrill Lynch is bought by Bank of America, the Dow closes down more than 500 points, AIG is on the brink of failure, so what’s next? My message is this; don’t panic…plan. Those of you who are frequent readers of this blog know that I predicted these financial events all the way back in 2006, provided subsequent updates and warnings in 2007, and have offered cautionary remarks this year as well. By way of background I invite you to read: “A Capital Markets Overview” (November 2006), “Financial Market Update” (July 2007), and a piece that it explains why we are where we are, “Secondary Markets 101” (March 2008). Because I’m asking you to re-read three previous posts, today’s piece will be extremely short…

I’ll cut right to the chase…Yes, we are in trouble. Yes, there are very real casualties (just ask the plethora of former Lehman employees who now find themselves out of work), and regrettably there will be even more casualties in the months ahead. Ever the optimist, there is a bright side to everything. Free market economies must correct themselves when they are out of balance. This is the only way they can move forward in a healthy fashion. What I’m trying to say is that as bad as things get, the tough times are the pre-cursor of a recovery. While we may see volatile markets ahead, it is only through cleansing our financial system of bad debt that our markets can regain integrity, and the economy will begin to recover. There are no band-aid solutions, and we will see thousands of additional bank failures, a continued tightening in credit and capital markets, and higher unemployment rates before we see the brighter days ahead.

Remember that there is always a price to be paid when greed takes precedence over logic and prudence. This is true on both business and personal levels. My advice is this…Don’t panic, simply plan your way through these tough times by making solid decisions and choices in both your personal and professional life.   

CEO Job Searches

By Mike Myatt, Chief Strategy Officer, N2growth

CEO jobs are competitve...plan now and finish the race firstCEO job searches are extremely competitive in today’s market. Other than running for political office, there is no interview process that will subject you to such a rigorous vetting process. I was recently interviewed for the September issue of “CareerSmart Advisor” in which I was asked to articulate what it takes to successfully secure a CEO position. In the text that follows I have provided a copy of the questions I was asked, as well as my answers, in hope that this information will assist you in preparing for your next job search…

As a CEO Coach I spend a great deal of time in career planning and management for my clients. While most of my activity centers around maximizing opportunities in their current role, I’m also frequently engaged in CEO succession and transition engagements. The following Q&A was part of a recent interview in which I provided some insight on CEO job searches: 

CareerSmart: What is the first thing a CEO should do when he/she loses a job? Is this truly a time for self-reflection and a re-assessment of the career?

Mike Myatt: Since the average CEO tenure has fallen to an all-time low (currently averaging less than 4 years), for most CEOs it is not a question of if they will be terminated, but rather a question of when. I advise my clients to frame their career strategy upon meeting certain key objectives, and to either work to extend engagements, or transition engagements prior to being released by the board. The time for self-reflection and self-assessment is prior to being released by the board.

CareerSmart: How long should a CEO take to collect his/her thoughts after being released before beginning the job search?

Mike Myatt: If a CEO is managing their personal brand properly, and meeting/exceeding performance expectations in their current role, it is likely they won’t have to conduct a job search. The next position will come to them. Good CEOs with strong personal brands consistently receive solicitations for new opportunities. If you’re a CEO who isn’t being consistently wooed by other suitors, then your personal brand needs work, and your career isn’t being properly managed.

CareerSmart: How should a CEO get his marketing materials in order? What should be done with his/her resume? Should the CEO enlist the help of outside sources to update such documents, or can a CEO typically do this on their own?

Mike Myatt: CEOs need more than a resume. CEOs should have a current press kit (both traditional and online versions) which includes a professional bio, resume, copies of articles, press releases, key accomplishments, etc. The press kit should be in play long before the CEO leaves or is terminated from their current position. Even CEOs who possess the skill sets to prepare a press kit realize it is typically not the highest and best use of their time, and most will turn to personal branding experts to accomplish these sorts of tasks.

CareerSmart: What are some steps executives need to take to build their brand, and bring that brand to the marketplace? Does this go beyond just creating a new resume?

Mike Myatt: This goes far beyond just producing a resume…Today’s CEOs need to proactively manage their reputation and personal brand such that they are extremely visible both inside and outside their industry. They need to work the media, speak, author, show up prominently in the search engines, take advantage of social media, etc.

CareerSmart: When CEOs lose their jobs, they are sometimes hesitant to broadcast that fact; even when the separation from their job was not their fault. Why is it so important for them to instead let people know that they are looking for a new opportunity? What are some effective networking techniques they should utilize? Are there particular groups they should join?

Mike Myatt: As mentioned above, if they wait until the inevitable happens to secure their next opportunity, then shame on them…CEOs should never use job boards and employment sites as this will taint the value of their personal brand. That being said, CEOs should leverage a top CEO coach who can help guide them to the next position in a well managed and confidential fashion. It has been said that “an attorney who represents him/herself has a fool for a client” and the same thing is true for a CEO who tries to engineer his or her own soft landing.

CareerSmart: What kind of research should a CEO do when considering a new position? How important is it to conduct research to get a better sense of trends within industries and companies?

Mike Myatt: CEOs should always be abreast of current industry and employment trends. This is best handled by having an ongoing career management strategy in place, a component of which is business and market intelligence.

CareerSmart: What should CEOs do to freshen-up their interviewing skills? What is important for a CEO to know about this process, especially if he/she hasn’t interviewed for a position in many years? What has changed? What hasn’t changed? What should his preparation include?

Mike Myatt: Interviews shouldn’t be considered as anything other than a chance to communicate the CEOs unique value propositions in a manner that conveys value alignment, as well as how the CEO will add credibility, influence, leverage, leadership, and impact to the new opportunity. CEOs with strong personal brands are very adept at communicating their unique value propositions across constituencies and mediums.

CareerSmart: If the job search begins to take longer than a CEO expects, what can he/she do to keep their focus and motivation?

Mike Myatt: Again, where possible, the CEO should never have the appearance of being unemployed. They should position themselves in a positive light by taking a sabbatical, taking an interim consulting assignment, taking a position as an entrepreneur in residence, getting involved in a high profile “cause”, increasing their board work, etc. Never appear that you need a position…

CareerSmart: What other advice would you offer CEOs who are suddenly faced with a job loss? What do they need to know that will help them best manage their circumstances?

Mike Myatt: In all sincerity, the best thing a CEO can do is to retain a top CEO coach. A CEO not having a coach is akin to a professional athlete not having an agent. Only mismanaged athletes find themselves put on waivers…well managed athletes engineer trades prior to being released.

Bottom line…While congratulations may be in order if you’ve made it to the C-suite, don’t just rest on your laurels as it is likely that you’ll find yourself in play at some point in the future. Prepare for your eventual departure and next engagement so that you won’t unexpectedly find yourself on the outside looking in.

How Not To Advertise…

By Mike Myatt, Chief Strategy Officer, N2growth

While I’ve seen some great TV spots over the years, Microsoft has created the perfect case study in how not to advertise with its latest commercial. If you think a large advertising budget coupled with a celebrity endorsement will move mountains, then I suggest you watch this video by Microsoft. This ad is one of the worst I’ve seen, and is the perfect reason to fire an ad agency…

While much could be said about this ad, the following check list sums-up my evaluation:

  • Cool – no
  • Funny – gong
  • Value Proposition – absent
  • Emotional Appeal – zero
  • Relevant – not
  • Memorable – only in a bad way
  • Creative – hardly
  • Brand Promise – invisible
  • Message – awful
  • Engaging – nope
  • Positioning – indiscernible
  • Target Audience – not a clue
  • Intent – confusing
  • Call to Action – none 

Even Jerry Seinfeld and a $300 million dollar ad budget can’t rescue Microsoft from this inept effort. They only feelings I’m left with when I watch this are regret for the marketing executive that approved the ad, and hope that the agency who produced the ad will be fired. Bottom line…celebrity endorsements and big budgets are no substitutes for a well crafted ad.