Those of you familiar with my work know how much I detest politically correct sound-bites. Even worse is when those sound-bites are used in an attempt to make statements which embolden a corporate position that doesn’t really even exist to begin with. Just because something is written in a vision or mission statement, placed on a website, included in company collateral material, or frequently espoused by corporate leadership as a competitive value proposition doesn’t necessarily mean its true. In today’s post I’ll examine one of the most frequent offenders; “Talent is our biggest asset.”

Rarely do I speak with an executive who hasn’t drunk the talent messaging Kool-Aid. They all speak of the quality of their talent as a key success metric…in fact, many of them will emphatically state that talent is their single biggest competitive advantage. If I only had a nickel for each time a CEO has told me “We have the best talent in the industry.” Reality check…as polished as their rhetoric tends to be, the simple truth of the matter is that their elocution doesn’t match their business practices. They often talk the talk, but rarely do they walk the walk.

In a previous post entitled “How to Win the War for Talent” I address what it really takes to create a talent driven organization. However few companies seem willing to make the requisite investments needed to successfully align their actions with their management speak. It has been my consistent experience that talent is one of the most often discussed, and least effectively actioned issues at executive leadership meetings.

Here’s an observation for your consideration…when an executive leadership meeting is called and there isn’t a dedicated executive level talent resource present, you don’t value talent as much a you think you do. I’m not talking about inviting your HR manager to attend the meeting for a few minutes, but rather having a C-level talent executive with a regular seat at the table. If your company doesn’t have a Chief Talent Officer, or a Chief Human Resources Officer, then you are likely just paying lip service to the value of talent.

If recruiting is being charged to a mid-level manager whose real domain expertise lies in administration and compliance then talent will likely become your largest contingent liability as opposed to your biggest asset. In a previous post entitled “Who Should Do The Hiring” I go into great detail as to why recruiting and hiring should not always be an HR function.

Bottom line…if you have high employee turnover (see “Cutting Employee Churn“), a fractured corporate culture, a lack of leadership development and mentoring programs, regressive compensation programs, and a lack of C-level focus on talent then talent cannot be your biggest asset. Don’t hype…stop complaining…fix the problem.

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The issues surrounding conflict resolution can be best summed-up in three words…”Deal With It“. Conflict Resolution is a skill set necessary for survival in today’s business world. While you can try and avoid conflict (bad idea), you cannot escape conflict…The fact of the matter is that conflict in the workplace is unavoidable. It will find you whether you look for it (good idea) or not. The ability to recognize conflict, understand the nature of conflict and to be able to bring swift and fair resolution to conflict will serve you well as a senior executive or entrepreneur. In today’s blog post I’ll share my perspective on the art and science of conflict resolution.

How many times over the years have you witnessed otherwise savvy professionals self-destruct because they wouldn’t engage out of a fear of conflict? Putting one’s head in the sand and hoping that conflict will pass you by is not the most effective methodology for problem solving. Conflict rarely resolves itself…In fact, conflict normally escalates if not dealt with proactively and properly. It is not at all uncommon to see what might have been a non-event manifest itself into a monumental problem if not resolved early on.

Developing effective conflict resolution skill sets are an essential component of a building a sustainable business model. Unresolved conflict often results in a loss of productivity, stifles creativity, and creates barriers to cooperation. While conflict is a normal part of any social and organizational setting, the challenge of conflict lies in how one chooses to deal with it. Concealed or avoided, conflict will likely fester only to grow into resentment, create withdrawal or cause factional infighting within an organization.

So, what creates conflict in the workplace? Opposing positions, competitive tensions, power struggles, ego, pride, jealousy, performance discrepancies, compensation issues, just someone having a bad day, etc. While the answer to the previous question would appear to lead to the conclusion that just about anything and everything creates conflict, the reality is that the root of most conflict is either born out of poor communication or the inability to control one’s emotions. Let’s examine these 2 major causes of conflict:

Communication: I’ve heard it said that 90% of all problems in business could be avoided with better communication. My personal opinion is the number is closer to 50% (with the remaining 50% being caused by unmanaged emotions). If you reflect back upon conflicts you have encountered over the years you’ll quickly recognize that many of them resulted from a lack of information, poor information, no information, or misinformation. Let’s assume for a moment that you were lucky enough to have received good information but didn’t know what to do with it…That is still a communication problem, which can in turn lead to conflict. Clear, concise, accurate, and timely communication of information will help to ease both the number and severity of conflicts.

Emotions: Another common mistake made in workplace communications that leads to conflict is letting emotions drive decisions. I have observed countless examples of people who jeopardize their future to protect their emotions, when what they should have done was protect their future by exhibiting control over their emotions. I have witnessed otherwise savvy executives place the need for emotional superiority ahead of achieving their mission (not that they always understood this at the time). Case in point…have you ever witnessed an employee throw a fit of rage and resign their position in the heat of the moment? If you have, what you really watched was a person comforting their emotions rather than protecting their future.

The very bane of human existence, which is in fact human nature itself, will always create gaps in thinking and philosophy and no matter how much we all wish it wasn’t so…it is. So the question then becomes how to effectively deal with conflict when it arises.

It is essential for organizational health and performance that conflict be accepted and addressed through effective conflict resolution processes. While having a conflict resolution structure is important, effective utilization of conflict resolution processes is ultimately dependant upon the ability of all parties to understand the benefits of conflict resolution and perhaps more importantly their desire to resolve the matter. The following tips will help to more effective handle conflicts in the workplace:

1. 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 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. Having clearly defined job descriptions so that people know what’s expected of them and a well articulated chain of command to allow for effective communication will also help avoid conflicts.
2. Hit Conflict Head-on: 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 fair and decisive fashion you will likely prevent certain conflicts from ever arising and if a conflict does flair up, you will likely minimize its severity by dealing with it quickly.
3. Understanding the WIIFM Factor: Understanding the other professionals 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.
4. The Importance Factor: 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.

Bottom line…I believe resolution can normally be found with conflicts where there is a sincere desire to do so. Turning the other cheek, compromise, forgiveness, compassion, empathy, finding common ground, being an active listener, service above self and numerous other approaches will always allow one to be successful in building rapport if the underlying desire is strong enough.

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Today’s Myatt on Monday’s question comes from a board member who asks: “Is there a simple test that can be used to quickly determine an executives leadership ability?” The short answer is yes…There are in fact a great number of tests that can quickly assess leadership ability. Something as simple as a 360 Review, or as complex as a deep psychological profile (both with weighted emphasis on leadership aptitude) can point out an individuals leadership capabilities. Our firm (as do many other firms) offers a broad array of skill specific assessments and profiles which can be implemented, but for purposes of answering today’s question I’ll give you six areas to peel back the layers on when evaluating potential leaders…

First of all, it is important to realize that just because someone is in a leadership position doesn’t necessarily mean they should be. Put another way, not all leaders are created equal. Frequent readers of this blog can find a veritable plethora of tips on becoming a better and more effective leader. However in the text that follows I’ll address how to spot ineffective leaders by assessing six critical areas of leadership DNA. While there are certainly more than six areas that can be examined when discussing leadership ability and aptitude, there is no possible way for a person in a leadership role to experience sustainable success as a senior executive if they have issues in the following areas:

1. Poor Character: A leader a lacks character or integrity will not endure the test of time. It doesn’t matter how intelligent, affable, persuasive, or savvy a person is, if they are prone to rationalizing unethical behavior based upon current or future needs they will eventually fall prey to their own undoing…
2. Little or No Track Record: While past performance is not always a certain indicator of future events, a long-term track record of success should not be taken lightly. Someone who has consistently experienced success in leadership roles has a much better chance of success than someone who has not. Bottom line…unproven leaders come with a high risk premium.
3. Poor Communication Skills: Show me a leader with poor communication skills and I’ll show you someone who will be short-lived in their position. Great leaders can communicate effectively across mediums, constituencies, and environments. They are active listeners, fluid thinkers, and know when to press on when to back-off.
4. Self-Serving Nature: If a leader doesn’t understand the concept of “service above self” they will not engender the trust, confidence, and loyalty of those they lead. Any leader is only as good as his or her team’s desire to be led by them. An over abundance of ego, pride, and arrogance are not positive leadership traits. Long story short; if a leader receives a vote of non-confidence from their subordinates…game over.
5. One Size Fits All Leadership Style: Great leaders are fluid and flexible in their approach. They understand the power of, and necessity for contextual leadership. “My way or the highway” leadership styles don’t play well in today’s world and will result in a fractured culture and ultimately a non-productive organization. Only those leaders who can quickly recognize and adapt their methods to the situation at hand will be successful over the long haul.
6. Lack of Focus and Follow-Through: Those leaders who lack the focus and attention to detail needed to apply leverage and resources in an aggressive and committed fashion will perish. Leaders who do not possess a bias toward action, or who cannot deliver on their obligations will not be successful. Leadership is about performance…Intentions must be aligned with results for leaders to be effective.

The moral of this story is leaders need to be honest, have a demonstrated track record of success, be excellent communicators, place an emphasis on serving those they lead, be fluid in approach, and have laser focus and a bias toward action. If these traits are not possessed by your current leadership team you will be in for a rocky road ahead…

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Success vs. Significance…some would say that any discussion along this topic line is nothing more than a semantical debate. However, it is my opinion that those who hold this view truly don’t understand the difference between the two, and are simply attempting to blur lines in order to feel better about themselves. I believe “success” can be a very dangerous thing in a vacuum…You see, success is in the eye of the beholder, whereas significance is a view of you that is held by others. Complicating matters further, I believe few successful people make the transition to significance, but every person of significance is successful. In today’s post I’ll attempt to clearly lay out the differences between success and significance, and where your sites should be set…

I want to frame my thoughts on the topic of significance by beginning with an excerpt from my book “Leadership Matters…The CEO Survival Manual“:

“By the time you reach the CEO level you should be striving to move beyond success and towards significance. You need to use your network, your wealth, your experience and intellect, as well as your passion to create a legacy that transcends your title…If it seems trite to be asking you to ponder if you are in fact leaving things better than you found them, then I would suggest that you reconsider your values and your vision. As a CEO you have the ability to influence positive changes, and to make contributions well beyond those who have not been afforded the same opportunities, and it would be nothing short of tragic for you not to clearly understand this. While it is never too late to begin thinking about finishing well, the simple truth of the matter is that the longer you wait to begin thinking on a significant level, the less significant your legacy will be.”

Let me ask you to spend a few minutes and mull over the following questions:

1. Do you understand the difference between success and significance?
2. Does the attainment of your 2008 goals lead you closer to success or significance?
3. When people describe you do they talk about what you have achieved for yourself or what you’ve accomplished for the benefit of others?

My hope in authoring this post is to have you adjust your thinking when it comes to the definition of success. My clients usually tend to be successful individuals prior to finding me. My goal is to simply help them leverage their success into becoming significant individuals over the course of our dealings. The sad reality is that far too many people either confuse success with significance, or they are so focused on success that they are actually blind to the meaning of significance.

Just take a look around and you’ll see that most people use their knowledge, resources, and experience to acquire things in an attempt to satisfy their personal desires, which in their minds constitutes success. Contrast this with the people that use their knowledge, resources, and experience to serve and benefit others, which by my standards constitutes significance.

Let me use an example which contrasts a politician (often successful and rarely significant) with a statesman (usually both)…it has been said that a politician is concerned with winning the election and a statesman is concerned about future generations. The politician makes promises and is motivated by pride, ego, notoriety and personal success. The statesman keeps commitments, is motivated by service above and beyond self, and by making a lasting difference. The typical politician spews tired rhetoric while lining their pockets, and has little hope for becoming significant. The true statesman is a breath of fresh air whose only pursuit is to make a positive difference in the lives of others. The statesman in pursuit of his/her goal will become both successful and significant.

Sure, for those “who get it” success and significance are one in the same, but for most professionals success begins and ends with the achievement of a certain list of personal goals with little regard to the impact on others. These people confuse success with significance, and regardless of their wealth and professional accomplishments, they won’t accomplish the true greatness that only comes through making significant contributions to something other than one’s self. I don’t care how your resume reads, what your net worth is, or what your W-2 shows…what I care about is your motivation, and what you do with what you have.

Let me be clear that I have nothing against those that have acquired material success, just those that have acquired their success at either the expense of others, or without regard for others. I have little respect for those who live large and give a buck ninety eight to charity at the end of the year just to feel better about themselves. By contrast I am always impressed by those who choose a life of service over personal glory, or those who understand how to leverage their personal success into significance.

Most of my clients have acquired significant material possessions…they just don’t live their lives according to a “he or she who has the most toys wins” philosophy. They don’t give because their accountant told them to, or for estate planning purposes, they give to make a difference. They don’t throw trivial contributions to a variety of charities to see their name appear on donor’s lists, they make substantial contributions (usually with little if any self-promotion). It all boils down to motivation…are you solely seeking to have fun, fame, fortune, and recognition, or are you seeking to serve and benefit others with what you have?

It is my opinion that when you start to define your personal success by the value you add to the lives of others you have arrived as a mature human being who possesses true influence and has become a person of significance. My challenge to you is this…set the chinning bar very high for yourself by reevaluating your goals and objectives to insure that you are on a path towards significance. Don’t allow yourself to become blinded by your success, rather leverage your success in an attempt to make a lasting and significant legacy for which you and your family can be proud.

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Young CEOs are becoming much more commonplace in today’s business world. It used to be that young CEOs were the exception and not the rule. However it is not at all uncommon to see 20 something and 30 something CEOs running very large and successful companies in today’s technology driven, global business environment. Regardless of how bright and talented these young CEOs may be, there are nevertheless certain challenges and obstacles they will face for the first time that more seasoned executives have encountered numerous times over the course of their careers. In today’s post I’ll share some thoughts on how to leverage the strengths of younger CEOs, while mitigating the inherent risks associated with inexperience…

In working with a number of Private Equity and Venture Capital firms who have young CEOs at the helm of their portfolio companies, or boards that have recently hired young CEOs, it is clear to me that most organizations realize the upside of younger talent. That being said, these engagements also serve as evidence that they are looking to hedge their bets by using me to help mitigate the risk associated with young CEOs. While boards and investors like the intelligence, commitment, enthusiasm, and boundless energy that young CEOs bring to the table, it is perhaps their relentless drive to make their mark on the world that can be most attractive.

On the positive side of the equation, young CEOs sometimes accomplish great things because they don’t have the experience to know what they are not supposed to be able to accomplish, and as a result sometimes appear to achieve the impossible. However more often than not, young CEOs operating outside of experiential boundaries are met with frustration, if not failure, by having what appear to be great ideas eventually unwound by unforeseen factors that were only unforeseen to them due to their inexperience or lack of discernment. It doesn’t matter whether a young CEO is college dropout, or whether they possess an Ivy League MBA, or whether they spent a few years as a consultant at a top strategy firm…they are still likely sailing in uncharted territory more often than not.

The simple truth is that everyone, regardless of their age or title, needs sound advice and counsel. However this is particularly true of younger executives. If you were to speak with a 50 year old CEO and ask them how much he or she has learned over the last 20 years of their career, they would most certainly say the experienced gained during that time was invaluable. Let’s use the current state of the economy as an example…20 something and 30 something CEOs have never experienced a sustained period of slow economic growth, much less a recession. They have no experience in growing a business in a declining market. Contrast this with a more seasoned executive who has lived through a few different business cycles and the experience gap becomes very clear…

The purpose of this text is not to discourage investors and board members from placing a young CEO at the helm, but rather to encourage setting them up for success as opposed to failure. A bright and talented CEO is only going to be that much better with someone in their corner charged with helping them navigate the complexities of situations they have yet to encounter. My strongest recommendation is to provide your chief executive with a dedicated resource to develop their professional skills through mentoring and coaching. Not only will you be happy with your decision, but the young CEO will shave years off their learning curve.

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Public vs. Private finance…The question is, which option is better, and why? Entrepreneurs, investors, and advisors have very strong opinions as to whether you’re better-off with private equity or an IPO when seeking to finance, sell, or otherwise seek investment capital for your company. In today’s post I’ll share some recently released information which may help you make the right decision…

If you are successful in your entrepreneurial endeavors, you will someday likely find yourself at a crossroads where you attempt to cut through the ambiguity of public sentiment and conflicting opinions and find the answer to the age-old finance debate of public vs. private equity. The good news is that the results of a recent study by Ernst & Young concluded that businesses who received capital from investment firms substantially outperformed those who companies who received capital from the public markets.

The E&Y report which derived its conclusions from studying the trackrecord of the global buyout industry’s 100 largest exits last year found that the enterprise value of companies funded by private equity was twice that of publicly-held companies. Moreover, the report found that the EBITDA of companies who received private equity investments increased by more than 30% over that of their public company counterparts. Another meaningful difference between companies who received private equity was that the primary driver of value creation came via organic growth initiatives, whereas the public companies most often had an acquisition based model as there primary value creation driver.

In a previous post entitled “Capital vs. Influence” I made the case for seeking value added investment partners. The E&Y report seems to support my conclusions. The simple truth is that private equity investors stay engaged post funding, and add ongoing value to the enterprise. Contrast this with the IPO process which is a long, costly, and heavily regulated endeavor where the value add of your investment banking relationship laregly disappears once your offering has hit the market.

Let me pose one final queston…when determing the future of your company do you really want to hand it over to the regulatory and compliance ridden world of public finance, where your destiny is largely placed in the hands of analysts who assess whether your short-term performance is in alignment with Street expectations? From my perspective I would choose to seek capital from a world that focuses on the creation of long-term value through an engaged and proactive process that adds value beyond just the original investment.

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Attorney-client privilege is an often discussed and mostly misunderstood legal enigma. It has been my experience that many business people don’t have a clear understanding of when this privilege exists and when it doesn’t. This possibility for confusion can sometimes lead to a consumer of legal services thinking that their legal matters are protected when they are not…In fact, I had an interesting conversation with a client last week who asked me if a non-disclosure agreement (NDA) was necessary when dealing with a new law firm. What he was really attempting to ask was whether the attorney had a professional legal obligation to preserve the confidentiality of his information, or if he needed additional protection. In today’s post I’ll explain the rules and restrictions that govern attorney-client privilege…

Attempting to define attorney-client privilege is not a simple task because there are several items that need to be considered in determining whether or not it exists. There are differences between the legal parameters and restrictions governing privilege, and an attorney’s ethical obligations dealing with confidentiality which may be broader in scope. This matter is further complicated by the fact that interpretations of legal privilege may vary based upon legal jurisdictions…an example might be that the New York State Bar Association may interpret privilege differently than the Florida State Bar Association and so on…

In general, the first thing that must occur for attorney-client privilege to exist is the formation of an attorney-client relationship. While this does not automatically happen just because information is shared, or a conversation takes place, in some cases (which can vary by jurisdiction) disclosure which takes place “in anticipation of” a forthcoming legal relationship may qualify.

As mentioned above, privilege and confidentiality are two separate issues. Everything covered by legal privilege is confidential, but confidentiality extends to broader areas beyond just those things covered by legal privilege. Confidentiality refers to an obligation of the lawyer not to voluntarily disclose information to a third party. Privilege refers to a right of the client that allows the attorney to withhold information even under compulsion (discovery, subpoena, etc.) unless statutory exceptions state otherwise.

Another item to keep in mind is that attorney-client privilege normally only covers matters pertaining to the practice of law. In other words, if you disclose a particular business/personal matter to an attorney which has no valid legal ramification, the attorney cannot rely on privilege to protect such a disclosure. This means that you cannot simply dump information and documents on your attorney without valid legal reason and then claim the defensive argument of privilege. Furthermore it should go without saying that you cannot use attorney-client privilege in anticipation of a crime.

The best thing to do when attempting to discern whether or not attorney-client privilege exists is to evidence the existence of a formal attorney-client relationship. This is best accomplished by the execution of an engagement letter with your attorney which defines the scope of the relationship. If you can get your law firm to sign an NDA this will only broaden the scope of your protection with regard to confidentiality. Lastly, when in doubt simply ask your attorney if your impending disclosure can be treated as privileged information.

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Today’s Myatt on Monday’s question was posed by a CEO who asked: “Is strategy still relevant in today’s business world, and if so, what role does strategy play in the overall make-up of a CEO’s role? Let me begin by stating that strategy has never been more relevant than it is today. I guess I understand with all of the current emphasis on tactical execution how a question like this could be posed, but wow, what a sad commentary on the state of executive leadership when a CEO asks whether or not strategy is relevant. In today’s post I’ll examine the role of strategy in business, as well as the CEO’s responsibilities therein…

With today’s emphasis on pleasing investors by meeting short-term financial expectations, it is not at all uncommon for many executives to press for better execution when what they really need is a better strategy. Conversely, other executives change strategic direction when what they should do is demand better execution. The truth of the matter is that a sound strategic plan can be executed with a high probability of success, whereas a flawed strategy is almost impossible to execute profitably.

The emphasis for CEOs needs to be on creating long-term sustainable value for shareholders without sacrificing short-term tactical interests. While in most cases a sound strategy will allow a CEO to have his/her cake and eat it too, if you must sacrifice one over the other, you would be well served to place long-term interests above short-term objectives. History has shown us on many occasions that it is quite possible to win the battle and lose the war. CEOs must learn to fight the battles that need to be won, and not just the ones that are easy to win.

Please read the following statements very carefully…The CEO is often times the chief architect of corporate strategy, and has the ultimate responsibility for assuring the delivery of a strategy, which is consistent with the corporate values and vision. One of the primary duties of the CEO is to communicate, evangelize, and lead the company in the implementation of the corporate strategy. Absent an over abundance of blind luck, a company’s strategic planning process will be critical in the eventual success or failure of the enterprise. CEOs must view themselves as being completely accountable and responsible for the corporate strategy, regardless of whether they were the original architect.

While executives must learn to view strategy and execution as being inextricably linked, they also must come to understand that strategy should always drive tactics. The tendency for some CEOs to let tactics determine the strategy is the classic example of reactive vs. proactive leadership. It also represents a great illustration of letting the tail wag the dog. A lack of strategic focus in dictating tactical initiatives is a ready-fire-aim approach to leadership and will result in higher costs, a perpetual state of chaos, and places a higher emphasis on activity vs. productivity.

There is so much focus on execution these days that it is not uncommon for me to receive a few e-mails each week with headlines that read: “Screw Strategy” or “Tactics before Strategy.” While I’m all for exploiting trends, and I appreciate a good marketing hook as much as the next person, these e-mails from so-called business experts can be both misleading and dangerous to those readers who don’t possess the savvy to understand that they are just being pitched on a product and not being given sound counsel.

As much as some of my direct marketing friends wish it weren’t so, there are certain inevitable truths that do exist in business. Listen, I have no problem with creating velocity and leverage, but as fluid as business is today, most of the “short-cuts to success” being marketed today constitute form over substance. You see business is much like an algebraic formula, in that while there are certainly formulaic short-cuts that can be taken to solve an equation more quickly, the one thing that will provide an incorrect solution 11 times out of 10 is when the order of operation is skewed. I developed the following methodology for helping executives understand the order of operation in business to help clear up the ambiguity surrounding much of the typical and often misunderstood application of business logic:

“Values should underpin Vision, which dictates Mission, which determines Strategy, which surfaces Goals, that frame Objectives, which in turn drives that Tactics that tell an organization what Resources, Infrastructure and Processes are needed to support a certainty of execution.” (Mike Myatt 1988).

Sidebar: If you’re interested in seeing some other “Myattisms” other representative quotes can be read here.

For those of you familiar with my work, you’ll see that I have consistently espoused that a bias toward action and tactical precision are essential to achieving sustainable success. However, I am also clear in my belief that misguided and ill-timed/advised tactics can also create huge problems for any business. The bottom line is that strategy matters, and that as a CEO strategy is your responsibility. The challenges associated with leading corporate strategy initiatives are not easy, but neither is the burden of leadership. If you’re not up to task at hand you don’t deserve the title of CEO…it is harsh but true.

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In some ways the world of corporate M&A is much the same as it was 20 years ago, and in other ways the landscape has changed dramatically. The M&A arena is still somewhat of an inefficient market, which creates opportunity for those that understand how to astutely navigate the complexities of a fluid and often tumultuous market. Over the years I have participated in the M&A process from virtually every angle possible. I have been a principal of a company being acquired as well as a principal of a company conducting acquisitions. I have also served as an executive working on both acquisitions and dispositions teams, and as a professional advisor representing both the buy-side and the sell-side. In today’s post I’ll share my observations as to the single biggest trend influencing how transactions are closed in today’s marketplace…auctions.

We could talk about the evolution of capital structures and financing vehicles, or the growing influence of private equity firms and hedge funds, but the truth is these factors haven’t impacted the M&A world nearly as much auctioning a transaction. I’ve been around long enough to remember the days when proprietary transactions (deals that didn’t get shopped) were the norm. However, in today’s market where there is still too much capital chasing too few quality deals, virtually all deals get shopped (advantage sell-side). The environment today simply reflects a bias toward auctions when looking to sell or finance your firm. The spoils simply go to the highest bidder on a price basis, or the highest bidder on a value add basis, but in either case (preferrably a combination of the two) it usually boils to the most aggressive bid winning the transaction. As an advisor who often represents the sell-side, I am particularly fond of this current trend.

This frenzied world of deal auctions is a function of supply and demand, but it is also a function of fiduciary obligation in maximizing shareholder value. In fact, “Go-Shop” provisions are included in most of today’s agreements with potential suitors. “Stand-Still” provisions are becoming a thing of the past as they set-up the seller for third party allegations that the seller failed to fulfill their fiduciary responsibilities by agreeing to sell the company at a “low-ball’ price, and/or by signing off on measures designed to dissuade competing bidders. The offset for buyers to induce them into agreeing to a go-shop provision is the inclusion of a provision to pay a break-up fee should the seller unwind the deal due to a better competing offer.

Let me point out that savvy sellers know the difference between cattle-calls or shot-gunning a deal vs. inviting a small group of the right buyers to the table in a controlled bid process. The fastest way to taint your deal in the market is to not be discerning or discriminating in selecting who should be invited to participate in your transaction. Sellers that fail to recognize the subtlety of what I’m describing in this paragraph will soon find themselves receiving a very costly education from the buy-side when few if any suitors express an interest in your deal.

As I mentioned above, pricing is only part of the deal. Since I discussed non-financial value adds in a previous post entitled “Capital vs. Influence” I won’t go into a deep discussion here other than to state that sophisticated sellers look for more than just price when selecting their buyer.

The most critical factor in running your transaction is the selection of the right sell-side advisor. Your advisor should be able to guide you in defining your benchmark valuation metrics, understanding your negotiating leverage points, helping you prepare your offering documents, advising you on which buyers to solicit, how to manage the deal auction, and ultimately how to close the deal with the right partner at the right price.

Bottom line…The auction environment, properly managed by the right advisor can be your best friend. Conversely, attempting to auction your company for sale with the wrong advisor will end-up in massive amounts of unnecessary brain damage being incurred. Good Luck and Good Selling….

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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 (see “Rethinking Good To Great“) 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…

Anybody could be a CEO if business were a static proposition. If change and innovation weren’t critical success metrics, and the enterprise could just run on auto-pilot, you could replace the CEO with a General Manager. The fact is that business is not a static endeavor. Quite to the contrary; there are few things that require as much fluidity as effectively increasing profit, growing revenue, and driving brand equity in today’s global marketplace. In fact, I would go so far as to say that if you as a CEO are not consistently reengineering elements of your business in today’s business climate, one of the following two conditions exist; 1) You have a perfect business, or; 2) You 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.

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 simply 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.” 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 that 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 that 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 the CEO who doesn’t care. Following are five representative tips that will help you recognize the need for a reengineering initiative:

1. Unusual declines in revenue, margin, marketshare, 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.

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…

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