Is the customer really always right? How far should a company go to satisfy their clientele or customer base? What is the lost opportunity cost associated with customer churn? Is there a point when satisfying the customer is actually harmful to the enterprise, or back to the original question, is the customer always right? In today’s post I’ll share my opinion as to the validity of this old business axiom, and also offer a few insights on where to draw the line…

I believe all businesses should use great care and concern when determining how their customers and clients are treated. The time, energy, and cost associated with acquiring a customer are substantial, the benefits of retaining customers are considerable, and the costs associated with customer churn are significant. I’m always amazed at how much money will be spent to acquire a new customer, but how little care is given to insuring customer satisfaction after the sale.  There is great truth in the old axiom that states: “if you’re not serving your customer well, someone else will.”

If as an executive you believe customer service is someone else’s problem, you have a much bigger problem than you realize. While I believe most CEOs have a grasp on the concept of lifecycle value, I’m not sure they really understand the true cost of losing a customer. Let’s just assume that the lifetime value of a customer for company X is $2,000 dollars. If company X loses just one customer, the total lifecycle loss could run well into the tens of thousands, if not the hundreds of thousands. If you don’t believe me consider the following 7 points:

1. The Initial Churn: First you have the $2,000 dollar lifetime value loss attributed to churning the account itself.
2. Sunk Acquisition Costs: Don’t forget to add in the cost of acquiring the account to begin with. You spent very real dollars to acquire the account so you need to factor that into the total equation. I’ll let you pick the percentage you want to use and add that into the total number.
3. Replacement Costs: Remember the cost of acquisition number you just calculated above? Well, you need to add it back in again, because now you have to go out and replace the customer you just lost. By the way, you should probably multiply the cost of acquisition number by 5 since it costs about 500% more to acquire a new customer than retain an existing one.
4. Lost Ancillary Revenue: On average, a single account is good for a 30 -40% cross-sell/up-sell revenue increase over time as new products, services, joint ventures etc. are brought on line and offered to existing accounts. This means you can conservatively expect to lose another $600 dollars of upside in our $2000 dollar example.
5. Lost Referral Revenues: Depending on your business, and whether or not you have a solid customer acquisition process in place, a single account should be good for a minimum of 2-3 referrals (direct or indirect) on an annual basis. Over a 10 year period of time, assuming only 2 annual referrals, without any cross-sell or up-sell value being added-in, you just lost another $200,000 dollars.
6. Loss of 2nd & 3rd generation referrals: But wait; it just gets worse….Those lost referrals mentioned above would have also given you 2-3 referrals each year, and if you carry this formula out over 20 years the loss of a single account could easily cost your organization more than a million dollars in lost revenue.
7. Negative Brand Impact: If it isn’t bad enough already, a lost account can easily have a negative impact on future sales due to spreading the news of their bad experience with your company.  The average dissatisfied customer will persuade 10-20 other people from doing business with your firm. If the upset customer takes their dissatisfaction online and amplifies it via social media you could see a much bigger problem. This will not only impact your revenue, but can also taint your brand equity.

The bottom line is that it is very expensive to lose an account. That said, I also believe there is a point where customers can begin to abuse the good will of the merchants and service providers who work so hard to earn their business. So, when does a customer cross over to the dark side and become your worst nightmare? The answer is a fairly simple one – when the squeaky wheel becomes so loud that the brain damage involved in greasing it becomes too high, if an account doesn’t deal in good faith, if they become unprofitable to keep, or when you can replace them with more profitable accounts.

Regrettably, experience has shown me that a small percentage of customers/clients live for the chance to wield their perceived power over their merchants, vendors, suppliers and professional service providers. These customers are the proverbial “squeaky wheels” that demand to be greased. These are the verbally abusive customers who expect special consideration, and whose demands can far exceed the boundaries of reason. There is in fact a point where “bad customers” can erode margins, negatively affect morale, or even tarnish a brand. These customers not only are not right, they deserved to be fired…

The following tips will help you minimize the amount of bad customers served by your enterprise and will show you what to do once a customer crosses over to the dark side:

1. Align Expectations: Where possible, and especially if your business has the luxury of choosing your customers, make sure that mutual expectations are both defined and aligned at the outset of the relationship. Ensure your client understands what types of customer behaviors will be accepted and what types of behavior will not be tolerated.
2. Develop Customer Scorecards: You should actually profile your clientele such that you understand the difference between good accounts and bad accounts. Much like you have performance reviews for your employees, you should also conduct an analysis of how your customers are performing. Not all accounts are accretive, and more accounts than you think may in fact be dilutive.
3. Turnover Bad Accounts: When a client is identified as being a bad account either not capable of being saved nor worthy of salvaging, you should strongly consider firing the client. Evaluate the bottom tier of your clientele each year, and look to upgrade your clientele either by improving account performance or by releasing the client and replacing that business with a better quality account.

Those of you who have worked with me know that I state very clearly at the outset of any new relationship that I reserve the right to terminate an engagement if said engagement turns out to be less than a fruitful endeavor. While I feel privileged to serve my clients, and am thankful for the opportunity to earn their business, I also believe that the relationships should be reciprocal in nature. Business as they say is after all a two-way street…

Thoughts?

What better time to discuss opportunity than the start of a new year? Opportunity and timing are inexorably linked. So much so, that if you don’t think timing is everything - think again. Anyone paying attention to current events has recently witnessed that it doesn’t really matter whether you’re a politician, investment banker, CEO, or just an average citizen, when it comes to making a simple decision, managing a crisis, or attempting to exploit an opportunity, timing is everything. I’ve often heard people quip that they would rather be lucky than smart. While intelligence and good fortune are certainly both valuable traits to possess, neither of these traits holds a candle to having a great sense of timing…Luck is a hit or miss proposition, and we’ve all known many a brilliant underachiever. However it has been my observation you’ll rarely come across someone who possesses a great sense of timing that is anything other than successful. In today’s post I’ll take a look at opportunity as key success metric…

As the verse from the old Kenny Rogers song goes “you have to know when to hold em and know when to fold em.” There are a few times in the life of every professional where staggering opportunities will present themselves. The question is not whether these opportunities exist, but rather what will you do with them when they cross your path. I believe one of the key differences between excellence and mediocrity is the ability to not only recognize opportunities, but to also possess an understanding and willingness to exploit said opportunities. Exploiting opportunities requires that you not only possess vision, but also a corresponding bias to action (and a bit of courage as well).

Rarely will you come across a static opportunity in the sense that it will stand idle and wait for you to act. Significant opportunities are not only scarce, but they typically operate on the principal of diminishing returns. Put simply, opportunities are time sensitive. The longer you wait to seize the opportunity the smaller the return typically is. In fact, more likely is the case that the opportunity will completely evaporate if you wait too long to seize it. Keep this thought in mind; when opportunity knocks – answer the door.

I can’t even begin to count the number of times I watched people miss great opportunities due to a poor sense of timing. Not too surprisingly, people who possess a poor sense of timing usually don’t even understand timing is an issue. How many times have you witnessed someone holding-out for a higher price, better valuation, evolving markets, technology advances, or any number of other circumstances that either never transpire, or by the time they do, the opportunistic advantage had disappeared? I’ve observed the risk adverse take due diligence one step too far, the greedy negotiate too long, the impulsive jump the gun, and the plodders move to slow. As the saying goes “timing is everything.” The following list contains 5 suggestions for how to spot and evaluate opportunity:

1. Alignment: The opportunity should be in alignment with the overall vision and mission of the enterprise. Any new opportunity being evaluated should preferably add value to the core, but if not, it should show a significant enough return on investment to justify the dilutive effect of not keeping the main thing the main thing. The core should be used to align, but not necessarily to exclude.
2. Advantage: No advantage equals no opportunity. If the opportunity doesn’t provide a unique competitive advantage it should at least fill a void bringing you closer to an even playing field. Be careful however not to fall into the trap of “me too” innovation – copying isn’t innovating. Instead of leveling the field, think about tilting the field to your advantage, and where possible, the creation of a new field altogether.
3. Assessment: Is the opportunity affordable, feasible, adoptable, and most importantly, is it actionable? An opportunity which cannot be implemented isn’t really an opportunity – it will likely be just another very costly distraction. Conduct your diligence before you pull the trigger, not afterwards. A ready – fire – aim approach to opportunity management usually fails to hit the target.
4. Accountability:  Keep in mind great ideas are not always the same thing as great opportunities. Ideas don’t always have a corresponding vision, nor do they always contain a framework of accountability which helps to ensure a certainty of execution. For opportunities to become reality they must be viewed through the lenses of organizational awareness and personal responsibility. Any new opportunity being considered should contain accountability provisions. Every task should be assigned and managed according to a plan and in the light of day. Any opportunity being adopted must be measurable. Deliverables, benchmarks, deadlines, and success metrics must be incorporated into the plan. The opportunity must be detailed and deliverable on a schedule – it needs to have a beginning, middle and end. Any opportunity not subjected to sound principles of leadership will likely fail.
5. Achievement: Opportunities are great, but achievements are better. If any of the four items above are missing the outcome will be unrealized opportunity, or opportunity squandered and lost. The smart game is not played for what could have been, or should have been, but for what was achieved.

The proverbial window closes on every opportunity at some point in time. As you approach each day I would challenge you to consistently evaluate the landscape and seize the opportunities that come your way. Better to be the one who catches the fish than the one who tells the story of the big one who got away…

Thoughts?

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Bonus or no bonus? That is the question. This is the time of year where expectations are high, and so is the volume of chatter around the water cooler in anticipation of that great corporate tradition…The year-end bonus. So what’s it going to be this year…a turkey, an extra paid day off, a cash bonus, stock/options/warrants, something creative or nothing at all? Complicating matters further for CEOs, Boards, and Comp Committees attempting to determine what to do about bonuses is all the recent media attention and public outrage in regard to what is perceived by many to be excessive, frivolous compensation. In today’s post I’ll take a look at the well intentioned but often misguided practice of year-end bonuses…

Here’s a question – do bonuses work? There is a tremendous amount of conflicting data as to whether or not incentive compensation in any form is an effective motivation tool. Perhaps the best summary for this position is the short video by Daniel Pink. There are those who passionately argue for and against the merits of year-end bonuses. My experience is that bonuses are absolutely effective given this caveat: they must be structured and implemented properly.

In order for bonuses to be truly effective they must be relevant, meaningful, in alignment with cultural values, and tied to the right set of metrics. It is not the bonus that is right or wrong, but the manner in which it is rolled-out. I have witnessed company bonuses work marvelously well, and I have seen them create great animosity and discord. I have witnessed bonuses motivate the correct behaviors and I’ve watched them motivate abhorrent behavior. The validity of a bonus should not be at issue, but the wisdom, motives and expertise of the bonus program architects should come under great scrutiny. Keep this in mind – the best bonus plan in the world won’t retain top talent if the qualities mentioned in Dan’s video above are not present as well.

I can’t even begin to communicate the number of times I’ve heard employees complain about the size of their year-end bonus…It was if they felt entitled to significant rewards solely based upon the fact that they happen to be employed. Is a year-end bonus a right of entitlement or a privilege to be earned? I believe that it can actually be both, but that decision lies solely with the employer, and is not really up to the employee no matter how much they might feel it is.

Some employers believe in providing a little something extra to all employees during the Holiday Season as an expression of gratitude for their loyalty and contributions during the year without regard to performance. While showing gratitude for work well done is in alignment with the proper spirit behind a bonus, regrettably it is in this type of culture where I believe employee expectations can easily confuse the difference between a gift and a reward…Let’s say that in the previous year the company provided what was considered by most to be a fairly generous bonus, but in this calendar year, the company struggled while also needing to make heavy expenditures in Q1 of the upcoming year so it opted to distribute no year-end bonus. How do the employees feel about this? One would hope that the employees would understand and put the needs of the enterprise ahead of their expectation that this year’s bonus should eclipse that of the previous year, but would they? I’m certain not distributing a bonus would only spawn a sense of resentment among many, and the gossip at the water cooler would shift to criticizing the CEOs car, or how much vacation time he/she took that year…

As contrasted with the environment discussed above, some cultures distribute annual bonuses based on a formulaic approach calculated on metrics designed to reward individual, team or company performance according to the goals of the specific entity. While many tend to favor this structure, it is far from perfect as well. It is very typical that in this type of environment that the controversy shifts from company vs. employees, to employee vs. employee. As an example, the marketing assistant who receives a comparatively small bonus when contrasted to that of a sales person feels that his/her contribution is minimized and feels treated unfairly. Imagine working at Goldman Sachs where bonuses in any given year are expected to range from secretaries receiving $10,000, analysts garnering close to $100,000, junior executives seeing as much as $2-4 million and top income producers receiving upwards of $40 million dollars in bonus money…You don’t think there’s a bit of green-eyed bonus envy at Goldman Sachs each year?

Regardless of whether your firm embraces a meritocracy, a tenure based system, a highly sophisticated compensatory system, or some form of a benevolent dictatorship, bonuses are always an issue. Should bonuses come off the top-line, bottom-line, be based on contribution margin, be subjectively or objectively distributed, be paid in cash, stock, options, profit sharing, perks, or some other mechanism? The structures of corporate bonuses are as varied as there are numbers of entities.

At the end of the day, employers should hire well, bonus generously, and provide public thanks where merited. Employees on the other hand should be thankful for the privilege of having gainful employment and be grateful for any bonus compensation received. Whatever the bonus, I hope it works for the grantor as well as for the grantees. For those on the receiving end, I hope you enjoy it and will perhaps consider giving some of your bonus to those less fortunate this season…

I’d be interested in hearing your thoughts about incentive compensation. Please leave a comment and let me know whether or not you think bonuses are effective, describe creative bonus structures you’ve observed, or share what you’re thinking about doing this year, if anything.

All leaders measure things – the question is are they measuring the right things, for the right reasons, and at the right times? Complicating matters further is the reality that each industry, sector, vertical, and micro-vertical all have unique business drivers. Moreover, depending on how a business is positioned, where it is in its maturation lifecycle, or what its current financial condition looks like, will dictate which factors may be most important to measure. Here’s the thing – metrics are at best useless, and quite possibly harmful, if the wrong things are being measured. In today’s post I will attempt to provide some general guidelines that will be useful to any business attempting to create and analyze a valid set of success metrics.

While there are virtually endless amounts of financial and non-financial metrics that can be assessed, I believe that most measurements can be broken down into the following 5 categories:

1. Static Historical Measurements;
2. Quantitative Return Measurements;
3. Qualitative Return Measurements;
4. Quantitative Performance Measurements, and;
5. Qualitative Performance Measurements.

It has been my experience that most businesses at least attempt to measure items 1 and 4, but often times fail to measure the other 3 categories, which also happen to be the most meaningful measurements. The best managed companies measure all 5 categories (as well as various subsets) with their focus being on items 3 and 5.

Let’s begin by stating what should be the obvious – all businesses need to monitor the basic static financial measurements of revenue, expenses, break-even, earnings and cash flow. While analyzing these drivers will give you some basic operating information, they are also somewhat myopic. The reason I say this is while historical analysis is important, it is taking the next step of using these historical measurements as baselines to calculate forward looking return drivers that will help you fine tune your business. While the following overview is not by any means exhaustive, it provides a great jumping-off point to fuel productive thought and conversation.

Quantitative Return Drivers:
Metrics such as Return on Assets (ROA), Return on Equity (ROE), Return on Investment (ROI), Return on Cash (cash-on-cash), and Return on Human Capital (ROHC) will give you more useful information than the static calculations mentioned above. The great thing about return analysis is that each area can be broken down into several more refined qualitative return calculations.

Qualitative Return Drivers:
A great example of qualitative return analysis would be contribution margin (CM), which is a qualitative measure of individual performance on profit. Another example would be Return on Innovation which would be the qualitative measure of the impact on new initiatives (see “Measuring Innovation“). These types of qualitative return drivers allow you to make forward looking investment decisions that can have immediate impact to the business.

Quantitative Performance Drivers:
Measurements in this category would be items like revenue hurdles, billable time, utilization, production hurdles and service levels. These are the metrics of how an organization performs against its benchmarks.

Qualitative Performance Drivers:
Measurements in this category are where an organization truly becomes productive with analytics. These sets of metrics focus on the measurements surrounding things that develop talent, create engagement, build teams, manage the customer experience, improve customer satisfaction and increase brand equity. Getting to the qualitative level of performance measurement is difficult in that it is often necessary to overcome a set of traditional leadership behaviors and beliefs.

Ask yourself this question…do you measure the metrics that are critically important, or just the ones that are obvious and easy to measure? If company leadership can make the attitudinal adjustments necessary to create accountability and focus on qualitative performance metrics, they will find it’s these measurements that help to catalyze growth, enable execution and create dynamic organizations.

Thoughts? I’d also be interested in hearing from you with regard to any measurements/metrics which have been particularly beneficial to you.

“But my business is different!” Well actually, no it’s not. I cannot even begin to count the number of times I’ve had a CEO tell me that certain immutable business principles just don’t apply to his/her business because, “this business is different.” I don’t dispute that all businesses have certain unique characteristics or contextual differences - I don’t even dispute that recognizing and leveraging said differences are important. What I do vehemently dispute is the assertion a particular nuance is reasonable justification for flawed business logic to prevail. In today’s post I’ll share why most businesses have far more in common than most executives and entrepreneurs care to admit…

Marketing, Branding, Leadership, Sales, PR, Advertising, Business Development, Operations, Administration, Finance, Accounting, Information Technology, Human Resources, Innovation and the list goes on…These functional areas are representative of things that all businesses must pay attention to. All business (for profit or not) provide goods, services, or intellectual property/capital to a market (or markets) for some form of consideration. All businesses have competition, serve stakeholders and other various constituencies, and must do certain things to avoid failure while on the path to creating a sustainable endeavor.

Let me give you a great example; It is not at all uncommon for an executive to tell me that his/her business doesn’t really have any competition. If you tell me that your business doesn’t have any competition, I don’t buy it. All businesses have competition at some level. If you don’t have direct competition, you’ll surely have indirect competition. You will also be competing to retain talented employees that other companies would like to lure away. What about competing against the innovation of others that could cause the obsolescence of your product or service? What about competing to maintain key business relationships with vendors, suppliers, partners and the like? How about competing for the attention of your existing and  potential clients? I could go with this line of thinking, but I’ll assume that the point has been sufficiently made.

Moving on…Believe it or not, CEO is not always synonymous with all knowing business guru. Even the most savvy CEO may have blind spots in his or her skill sets, core competencies, or voids in the org chart which can also distort perspective. Even in this day and age, I still run into CEOs that don’t understand the value of leveraging technology, utilizing outsourcing to lower costs and improve efficiencies, the tremendous power that comes from embracing the Internet, the benefits of creating multiple distribution channels, the value of building brand equity, or any number of different issues.

Bottom line…Just because a business has a particular advantage doesn’t mean that it can disregard sound business logic. Moreover, just because a business has embraced a certain methodology or practice doesn’t mean that it cannot be improved upon, or perhaps that said business practice or methodology should even be disregarded in totality. Great businesses are in constant search of improvement, innovation, change, disruption, knowledge and other strategic leverage points that lead to a competitive advantage or operational enhancement.

Don’t fall into the rut of allowing your business to be trapped in a perpetual state of static thinking. Great businesses are dynamic, fluid, vibrant and ever changing. Get outside of your old thought patterns and seek out people, technology, collaborative relationships, process enhancements, and any other solutions that can improve your business. Your business isn’t really different, but it can become better…

Thoughts?

To restructure or not to restructure? That is the question many a business is forced to ask at some point during their life cycle. The mere discussion of corporate reengineering can cause fear, anxiety, and in some cases even panic. This is so much the case that some CEOs will avoid restructuring initiatives at all costs. There are even some business theorists that warn against undertaking complex restructurings because of the great risks involved. My question is this; since when have fear and avoidance become prerequisites for success as a CEO? Give me real leaders who possess courage, vision, and a bias toward action, and spare me the timidity of mediocre managers posing as leaders. In today’s post I’ll examine the benefits of, and the need for corporate reengineering…

In an earlier post entitled Leadership Is About Breaking Things, I stressed the need to shatter anything that embraces the status quo. Anybody could be a CEO if business were a static proposition. If change and innovation weren’t key contributors to sustainable success, and the enterprise could just run on auto-pilot, you could replace the CEO with a General Manager. The fact is business is not a static endeavor. Quite to the contrary; there are few things that require as much fluidity as effectively growing revenue, increasing profit and driving brand equity. In fact, I would go so far as to say that CEOs who are not consistently reengineering elements of their business fall into one of the following two camps; 1) They have a perfect business, or; 2) They are an ineffective CEO.

What do great CEOs do when the business model, the strategic plan, and the revenue hurdles don’t seem to be in alignment? They make changes. They don’t sit idly by and watch the business lose market share, suffer margin erosion, see their competitive value propositions vaporize, or watch their brand go into decline. Great CEOs are willing to make the tough decisions…that’s what they’re paid for. Facing reality, and being able to make what are often times very painful organizational/structural decisions are the hallmarks of great CEOs. With less than 60 days before we enter 2012, I want you to do a gut-check: who and what are not going to be part of your business next year? And who and what need to be added to your business next year?

In an attempt to avoid confusion as to what I’m speaking about, I put together the following definition of corporate reengineering: “Corporate Reengineering is leadership recognizing, taking ownership over, and acting to correct strategic or tactical business flaws, and/or to realign elements of the enterprise with current or anticipated changes in market conditions consistent with the corporate vision.” This isn’t rocket science, rather it’s just plain-old, good leadership. It is actually the fiduciary obligation of a CEO to make the needed changes to protect shareholder value.

So why is it that so many CEOs shirk their responsibility, stick their heads in the sand, and avoid making necessary changes? It is my experience they either lack the personal skill sets, or haven’t built the right executive team to lead change, they just don’t recognize the need for change, or they just don’t care. The good news is there is a cure for all four of the preceding problems: Items one through three can be solved with an emphasis on leadership development and talent management, and item four can be solved by holding the board of directors accountable for CEO performance and firing an apathetic CEO. Following are six representative tips that will help you recognize the need for a reengineering initiative:

1. Unusual declines in revenue, margin, market-share, customer loyalty, or brand equity.
2. Even if the above areas are not yet in decline, but you are witnessing unusually slow growth or zero growth you still have a problem.
3. The inability to recruit or retain tier-one talent.
4. Current or anticipated changes in market conditions that will adversely impact your business model.
5. Obsolescence of intellectual property, products, services, solutions, or competitive value propositions.
6. Perhaps the greatest reason to reengineer is to exploit an opportunity. Windows of great opportunity are not static, and won’t stay open in perpetuity. If you’re not organized properly to exploit the right opportunity it will pass you by.

The bottom line is this…Bleeding is not a healthy thing. Whether you’re experiencing a slow bleed or you’re hemorrhaging, both instances can be fatal without treatment. If your company is in products, services, or businesses that you wouldn’t enter into if you weren’t in that particular arena today – GET OUT! Stop the bleeding, and reinvest your financial and non-financial resources into more profitable endeavors. I don’t believe corporate reengineering to be evil, but even if it is, it is a necessary evil…Thoughts?

When it comes to leadership, I can share the issues of creating and delivering on expectations are no small matter. In fact, understanding how to come out on the right-side of the expectation curve can often be the difference between being viewed as an average leader and one held in high regard. Let me make this as simple as I can; managing expectations is gamesmanship – aligning them is leadership. Moving the goal posts by arbitrarily raising and lowering expectations creates confusion, and is often an intellectually dishonest exercise. Aligning expectations doesn’t need to be difficult – set them, align them, stick to them, and execute on them.

Conflicts, disagreements, disputes, and litigation are often born out of expectation gaps. The thing leaders need to keep in mind is expectations cut both ways. Keeping what you perceive as being your end of the bargain is only half of the equation, as what you think only matters if it’s in alignment with the understanding of the other party. We have all found ourselves in the unenviable position of assigning work product only to end-up with the deliverable falling far short of expectations, while having the producer of said work product thinking they exceeded all expectations. I’ve often said, those leaders who fail to clearly communicate their expectations have no right to them.

Nothing engenders confidence and creates a trust bond like delivering on promises made, and likewise, few things erode confidence and credibility like commitments not kept. Leaders who deliver on promises quickly rise to the top, and those that fail to develop this skill won’t survive long.  The best leaders make a practice of saying what they mean, meaning what they say, and doing what they say they’ll do.

The science of aligning expectations is about systematically connecting what is said with what is done. The art of aligning expectations is about closing, or better yet, eliminating the expectation gap. Blend the art and science together and you have the framework for what is becoming the differentiating factor in performance based decisioning. Several years ago I created the Venn diagram depicted below to explain the confluence of factors that need to occur in order to close the expectation gap:

Expectations exist throughout the entire value chain, with every stakeholder needing and deserving to have their expectations understood and met (hopefully exceeded). Whether it is addressing customer expectations, shareholder or analyst expectations, or the inverse situation of employees having to deal with the expectations of executives, it is the ability to excel at decisioning based upon setting, aligning and executing expectations that creates high performance organizations.

Promises made and consistently kept based upon solid reasoning and underlying business logic, will help to create a solid brand attracting loyal customers and talented employees. The following three practices will help create an organization that delivers on its commitments:

1. Collaborate early and often: Decisioning in a vacuum, or without all the facts, will place you in a deficit from the beginning. It is at best extremely difficult to align expectations and deliver on commitments made if you don’t have clear visibility as to what is wanted or needed. Before making promises or commitments collaborate with all concerned parties to ensure that expectations are understood.
2. Resist making verbal commitments: Most misunderstandings occur as a result of improper interpretation of oral communications. Most broken commitments result from impulsive verbal promises made before all the details were sorted out. Once you have gained clarity as to the perceived need to be fulfilled, place your understanding of the deliverables in writing by outlining key business points and circulate the document for review and comments. Where possible resist formalizing agreements, proposals, or other commitments until you have alignment on key expectations and deliverables.
3. Treat promises like projects: Build a culture that breaks down all commitments into deliverables, benchmarks and deadlines. Allocate resources, budget and staff while delivering the commitment within a framework of measured accountability. Treating all commitments and promises as formal projects will help manage performance risk and will also create continuity of process and delivery.

Performance focused decisioning based upon principles of expectation alignment will lead to a certainty of execution that should translate into one of your company’s greatest competitive advantages. Top CEOs recognize that they can promise and deliver, under-promise and over-deliver, or even over-promise and deliver…they just don’t dare over-promise and under-deliver. Thoughts?

As much as some don’t want to hear this, there is an “I” in team - there is simply no getting around the fact that teams are comprised of individuals. If you crush the individual character and spirit of those who form your team, how can your team operate at its best? It cannot. The strongest teams don’t weed out or neutralize individual tendencies, they capitalize on them. The goal of a leader is not to clone him/herself, but to harness individual strengths for the greater good of the team, and for the overall benefit of the organization. This is best accomplished by leveraging individual talents; not stifling them.

The simple fact is that no team can maximize their potential by ignoring or minimizing the strengths of  individual members. While smart leaders seek to align expectations and to create unity in vision, they understand this has nothing to do with demanding conformity in thought, or perspective. In fact, savvy leaders do everything possible to inspire non-conformity in approach. It’s only by stretching the boundaries of “normal” that organizations can fuel change and innovation.

If unique perspectives, philosophical differences, and dissenting opinions are viewed as an opportunity as opposed to a set-back, growth and development are certain to follow. What I like to refer as “positional gaps” are best closed by listening to all sides, finding common ground and then letting the principle of doing the right thing guide the process. When a leader develops the skill to transform negative conflict into creative tension, they have found the secret sauce for developing high performance teams. Mature leaders see individual differences as fuel for development, not as barriers to success.

It is absolutely possible to build very productive relationships with even the most adversarial of individuals. Regardless of a person’s original intent, opinion or position, the key to closing a positional gap is simply a matter of finding common ground in order to establish rapport. Moreover, building rapport is easily achieved assuming your motivations for doing so are sincere. I have always found that rapport is quickly developed when you listen, care, and attempt to help people succeed. By way of contrast, it is difficult to build rapport if you are driven by an agenda the other party sees as being a threat to their success or security.

While building and maintaining rapport with people with whom you disagree is certainly more challenging, many of the same rules expressed in my comments above still apply. I have found that often times dealing with difficult people simply just requires more intense focus on understanding the needs, wants and desires of the other party. If opposing views are worth the time and energy to debate, then they are worth a legitimate effort to gain alignment on perspective, and resolution on position. However this will rarely happen if lines of communication do not remain open. Candid, effective communication is best maintained through a mutual respect and rapport.

In an attempting to resolve conflicts, misunderstandings, or positional and/or philosophical gaps, the first step is to identify and isolate the specific areas of difference causing the difficulty. The sad fact is that many people in leadership positions are absolutists in that they only see things in terms of rights and wrongs. Thinking in terms of “my way” is right and therefore “other ways” are wrong is the basis for polarizing any relationship, which quickly results in converting discussions into power struggles. However when a situation can be seen through the lens of difference, and a position is simply a matter of opinion not a totalitarian statement of fact, then collaboration is not only possible, it’s probable. Identifying and understanding differences allows people (regardless of title) to evolve their thinking through rational and reasoned dialog. The following perspectives if kept top of mind will help in identifying and bridging positional gaps:

• Listening leads to understanding.
• Respect allows differences to evolve thought and create new behaviors.
• Accepting a person where they are, creates an bond of trust.
• Trust, leads to a willingness to be open to:
  • new opportunities;
  • new collaborations;
  • new strategies;
  • new ideas, and;
  • new attitudes.

The key to maximizing the individual talents within a team is to focus on the shared vision rather than individual differences. By adhering to the following principles, most individual points of departure can be used as a springboard for growth and innovation rather than barrier:

1. Be Consistent: If your desire is to minimize misunderstandings, then I would suggest you stop confusing people. Say what you mean, mean what you say, and follow-through on your commitments. Most people don’t have to agree with you 100% of the time, but they do need to trust you 100% of the time. Trust cannot exist where leaders are fickle, inconsistent, indecisive, or display a lack of character. Never be swayed by consensus that calls you to compromise your values, rather be guided by doing the right thing. Finally, know that no person is universally right or universally liked, and become at peace with that.
2. The Importance Factor: Not every difference needs to be resolved. In fact, most differences don’t require intervention as they actually contribute to a dynamic, creative, innovative culture. Remember that it’s not important be right, and more importantly, that you don’t have to be right for the right things to be accomplished. Pick your battles and avoid conflict for the sake of conflict. However if the issue is important enough to create a conflict then it is surely important enough to resolve. If the issue, circumstance, or situation is important enough, and there is enough at stake, people will do what is necessary to open lines of communication and close positional gaps.
3. Make Respect a Priority: Disagreement and disrespect are two different things, or at least they should be. Regardless of whether or not perspectives and opinions differ, a position of respect should be adhered to and maintained. Respect is at the core of building meaningful relationships. It is the foundation that supports high performance teams, partnerships, superior and subordinate relationships, and peer-to-peer relationships. Respecting the right to differ while being productive is a concept that all successful executives and entrepreneurs master.
4. Define Acceptable Behavior: You know what they say about assuming…Just having a definition for what constitutes acceptable behavior is a positive step in avoiding unnecessary conflict. Creating a framework for decisioning, using a published delegation of authority statement, encouraging sound business practices in collaboration, team building, leadership development, and talent management will all help avoid conflicts.
5. Hit Conflict Head-on: You can only resolve problems by proactively seeking to do so. While you can’t always prevent conflicts, it has been my experience that the secret to conflict resolution is in fact conflict prevention where possible. By actually seeking out areas of potential conflict and proactively intervening in a well reasoned and decisive fashion you will likely prevent certain conflicts from ever arising. If a conflict does flair up, you will likely minimize its severity by dealing with it quickly.
6. Understanding the WIIFM Factor: Understanding the other person’s WIIFM (What’s In It For Me) position is critical. It is absolutely essential to understand other’s motivations prior to weighing in. The way to avoid conflict is to help those around you achieve their objectives. If you approach conflict from the perspective of taking the action that will help others best achieve their goals you will find few obstacles will stand in your way with regard to resolving conflict.
7. View Conflict as Opportunity: Hidden within virtually every conflict is the potential for a tremendous teaching/learning opportunity. Where there is disagreement there is an inherent potential for growth and development. If you’re a CEO who doesn’t leverage conflict for team building and leadership development purposes you’re missing a great opportunity.
8. Clarity of Purpose: Everyone who works for me knows that I care about them as an individual. They are important to me. They know that I’ll go to great lengths to work with them so long as one thing remains the focus point – the good of the organization. So long as the issues being worked on are leading us toward our vision, they know they’ll have my attention regardless of positional gaps or personal differences. Likewise, if things degenerate into placing pride or ego ahead of other team members or the organization as a whole, they know I’ll have no tolerance whatsoever.

The bottom line is that people matter, and but for people, organizations don’t exist. It’s important to remember that a manager exists when the company says so, but that said manager only really becomes a leader when their team says so. As a leader you have only two choices when it comes to your people –  serve them and care for them. Sometimes this means working through challenging scenarios and situations. If as a leader you’re not up to this task, then you should rethink your decision to lead.

Please share your thoughts and observations in the comments section below.

Visioning for CEOs is a topic that I often address on this blog. I don’t do so in an attempt to torture you with redundant thought, but rather because I believe it is a message that is often taken far too lightly by chief executives. A CEO’s ability to perform effectively is so closely tied to their ability to form a clearly articulated vision, evangelize the vision and then to execute on their vision, that no real discussion on executive leadership should take place without an emphasis on vision. Put simply, I believe that leadership absent vision is a train-wreck waiting to happen. In fact, I’d go so far as to say that you simply cannot decouple the two without causing an organizational implosion. In today’s post I’m going to share a few brief thoughts on visioning for CEOs, as well as providing you with the thoughts of others on the importance of vision…

Examine any list of great leaders and you’ll find that to the one, they have a clarity and purpose of vision. The good news is that CEOs without vision will take care of themselves in short order, as they simply won’t survive for long. However worse than the CEO with no vision, is a CEO with the wrong vision. These CEOs can often go undiscovered for great lengths of time before their poorly constructed vision bubbles-up to the surface, by which time it is often too late to repair the damage. Many a good enterprise has been blown to pieces by a CEO with either no vision or the wrong vision.

It’s important to understand that vision statements are design oriented.  The vision is bigger picture and future oriented – it is the vision that defines the end game. Vision statements, as implied in the construction of the phraseology itself, put forth a statement of envisioned future. This vision, if successful, must be underpinned by core ideology (values) and then expressed with clarity and conviction. A non-existent, ambiguous, or ideologically weak corporate vision is nothing short of a recipe for disaster…It would be akin to the proverbial ship without a rudder adrift without any direction or control. A well articulated corporate vision should be capable of being easily understood and distributed throughout the value chain.

As magically vibrant and illustrative as a vision can be, a vision isn’t really about what can be imagined – it’s about what can be delivered. A leader’s vision must be distributed, adopted, and deeply embedded into the daily fabric of the organizational culture. A leader who doesn’t possess clarity of vision cannot expect those they lead to have clarity in thought or deed. A shared vision based on common values is the gold standard of corporate alignment.

It should be clear by now that I believe your vision or lack thereof will shape your destiny as a CEO. But hey…you hear that from me on a fairly consistent basis. So in today’s post I thought I’d share the thoughts of others on this topic so you can see that I’m not alone in placing great emphasis on the correlation between great vision and success as a leader…

“The empires of the future are empires of the mind.”
- Winston Churchill

“Destiny is not a matter of chance, but of choice. Not something to wish for, but to attain.”
- William Jennings Bryan

“To grasp and hold a vision, that is the very essence of successful leadership.”
- Ronald Reagan

“Dissatisfaction and discouragement are not caused by the absence of things but the absence of vision.”
- Anonymous

“The future belongs to those who see the possibilities before they become obvious.”
- John Scully

I can teach anybody how to get what they want out of life. The problem is that I can’t find anybody who can tell me what they want.”
- Mark Twain

“If one advances confidently in the direction of his dreams, and endeavors to live the life which he has imagined, he will meet with success unexpected in common hours.”
- Henry David Thoreau

“After character, the ability to create, articulate, evangelize, and execute on your vision is what will make or break you as a leader.”
- Mike Myatt (couldn’t resist slipping one in)

“Create your future from your future, not your past.”
- Werner Erhard

“No matter how dark things seem to be or actually are, raise your sights and see the possibilities – always see them, or they’re always there.”
- Norman Vincent Peale

“Where there is no vision the people perish.”
- Proverbs 29:18

“The greatest danger for most of us is not that our aim is too high and we miss it,but that it is too low and we reach it.”
- Michelangelo

I hope these thoughts will inspire you to take stock of your vision, and focus on its attainment as a top priority in the execution of your duties as a leader. I would love to hear your thoughts and observations in the comments section below. Don’t be shy – jump right in…

The best leaders always have a back-up plan, so my question to you is: what’s your Plan B? My experience with most executives & entrepreneurs is they are totally committed to and focused on success. As a result, many of them tend to have a major blind-spot (translation: weakness) when it comes to the anticipation of set-backs.  While this is understandable, it is nonetheless naive, and it constitutes a major flaw in the business logic of most strategic plans. This is so much the case that the most often overlooked aspect of strategic planning is adequately addressing contingencies as part of the planning process. In the text that follows, I’ll take a closer look at the value of contingency planning…

The reality surrounding the success of any implementation is found by understanding that no matter how smart you are, things rarely go as planned. Those that plan in advance for changes in circumstances can adroitly address issues when they occur, while those who must deal with “unforeseen” circumstances don’t tend to fare as well. Smart leaders view obstacles as a constant rather than a variable, and incorporate that thinking into their planning.  Any well crafted strategy anticipates obstacles and factors in multiple “what if” scenarios.  Leaders that wait until a problem occurs to deal with it place themselves and their organization at a huge strategic disadvantage.

The three most common outcomes created by a lack of contingency planning are:

1. Watching things grind to a halt as you scramble to evaluate options;
2. Having fewer options to assess based upon the new found time constraint, and;
3. Carrying flawed initiatives forward. Leaders without a Plan B can sometimes refuse to acknowledge the reality of a failed initiative.

One of the exercises I like to take clients through to help identify areas of risk is a premortem – the hypothetical opposite of a postmortem. If you anticipate what might kill a plan before you embark upon the plan, you’re much more likely to succeed in refining and executing the plan. Speed is your friend and should be leveraged to your advantage. Speed is aided by anticipation and slowed by a lack thereof. Smart leaders will do everything in their power to keep a decrease in velocity from becoming a self imposed adversary due to a lack of contingency planning.

It is important to remember that contingency planning is a key to avoiding costly mistakes. In most cases your wins won’t put you out of business, but your losses most certainly can. The three most critical items to focus on when conducting your planning are:

1. Insure that personal accountability is present on any major benchmark, milestone or deliverable.
2. Make sure that someone has identified the 5 worst things that could happen with any initiative, what steps can be taken to prevent their occurrence, and what measures will be taken to overcome them if they happen?
3. Make sure that advance warning signs for potential failures are identified and understood so that you have plenty of runway in front of you to implement your contingency plans.

My final suggestion is that you take the time to review all mission critical plans to ensure that the proper contingency plans have been put into place. If you find an initiative that is flawed or failed don’t let your pride or ego keep you from doing the right thing. Smart Leaders know when to cut their losses and make the needed or necessary changes.

Sidebar: This post was inspired by a conversation I had with Mark Oakes (@MarkOOakes) about the historical origin of the term” Plan B.” As told by Mark, the story goes like this: Baron Von Bismark was tasked with unifying the axis powers in WW1. He had his aids work for months preparing the perfect unification plan. Upon completion they wanted to immediately put it into action. Bismark said “NO…prepare a second plan in the event the first doesn’t work.” It became knows as ‘Plan B’ (B)ismark Plan = Plan ‘B’