Stop managers from gaming the system

Business unit managers are under lots of pressure to perform, and occasionally are tempted to step over the line finding ways to look better than reality reflects.  Of course, this has never happened to you, and you have never done this in your past.  So we are speaking of a theoretical manager here.  Of course.

Here’s a way to prevent such behavior and create a tool for organization – and transparency at the same time.  Create a “balanced scorecard” or single place to review a Gaming_systemmanager’s performance and / or that of the department.  Use the four most important measures of success as the basis.

Financial perspective:  financial statement showing key indicators such as revenue, expense, net income or other measures important to success.

Customer perspective: Ratings of customer satisfaction, statistics of customer retention, market share and even brand strength.

Internal process perspective: Measures of cycle time, response time, waste, purchasing effectiveness, and improvements and innovations.

Learning / growth perspective:  Measures of employee satisfaction, employee turnover, employee education and skill advancement.

[Email readers, continue here…]  Having this information and sharing it with the manager(s) empowers everyone to come up with solutions to problems, emphasizes common focus upon strengths and weaknesses, and eliminates surprises when formally reviewing performance.

You’d probably be doing many of these processes anyway, just not aimed at assembly into a single file or report for review by all.  And this might be the prod you need to increase the quality and perhaps the quantity of customer and employee surveys.  A real win for all.

Posted in Depending upon others, Protecting the business | Leave a comment

Hire for talent. Rent for experience.

Want the best way to create your core competency quickly and inexpensively?   Think like a startup, with little resources, a limited window of time, and few dollars to spend on expensive experts.

This insight comes from a fellow CEO who explains that he leverages his financial resources for growth by dividing his hiring decision into these two boxes.  He interviews hire-for-talentfor adaptability, creativity, intelligence, drive, and a cultural fit.  He believes that he or his managers can teach processes, taking advantage of the new hire’s fresh look and open mind.  He believes that the core of his company is the creative process, and therefore that must be his focus.

Then he turns to contracted outsourcing for his routine processes, those that require no creativity and are repetitive in nature.

[Email readers, continue here…] He cites the example of computer programmers.  He hires for creative ability, people who can be the architects as opposed to the simple coders of routines.  If properly supervised and quality controlled, he finds that it is easier and cheaper to parcel out projects to programmers or programming groups to perform the actual coding of projects pre–defined by his insiders.  He divides the tasks so that no subcontractor has all of the core knowledge in house as a protection against theft of intellectual property.

And he concentrates on the management of creativity, the core of his business.

There are obvious advantages to this.  Costs are variable and can be curtailed easily in tough times.  Management time is focused upon the creative aspects of the business.  On the other hand, depending upon the length of a project, an inside employee may be cheaper in the long run, and quality control easier to manage.

Business management is a series of trade–offs. Here is one to consider carefully as you leverage resources including cash to grow the business.

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A riddle: Why explain why?

In my early journalism classes, I was taught the five “W’s” of good news stories, and that most should be in the first paragraph at that.  Who, what, when, where and why are the five, with sometimes a “how” thrown in for those followers of the macabre.

But of the five, “why” is by far the most important for business leaders to consider and whycommunicate.  Employees, contractors, even investors want to know why they are asked to make use of their valuable resource to support your effort.

Failure to explain why will scare away potential investors – other than closest friends and family.  The same failure will disenfranchise your workforce to a degree that most will give less effort to a project, and certainly with less enthusiasm.

[Email readers, continue here…]  Especially if a company is in trouble, perhaps with an urgent need to make a deadline, or facing a cash crisis caused by something your employees can help control, explaining the importance of the action required empowers all to work smarter and harder to achieve the stated goal.

I’ve recently experienced an example of this. One of my companies where I have an investment and am on the advisory board was in the midst of a sprint to close its acquisition by a larger company before the cash ran out and enterprise value plummeted.  Do you tell the employees about the pending acquisition early in order to focus them on increased performance to increase cash flow, or just keep the secret and hope that all would turn out OK and the acquisition proceed to an orderly closing on time?

We chose to tell the employees, with the obvious risk that some would be scared into looking for another job right in the middle of the acquisition process.  The effort worked, and all did come together to make it happen. No–one jumped, and the buyer closed the deal without a question.

When in doubt, don’t be shy.  Tell them why.  Your people will rise to the occasion.

Posted in Depending upon others, Surrounding yourself with talent | 3 Comments

Are you the leader if no one follows?

Here is a variation of the “tree falls in the forest” question.  In past insights, we’ve looked at leadership skills, ways to enhance effectiveness, and how to develop creative ideas that motivate and propel your organization to greatness.  Here is the ultimate question for a leader…

You’ve heard the old saying that you can lead by fear or lead because people want to follow.  And you can lead by example as well.  Which works best in the long run?

outlierinnovatorsI know from observational and personal experience that in normal situations, a leader is a consensus–builder, sure that everyone understands the mission and goal, and knows which duties each must assume to make it happen.  There are times when this obviously isn’t appropriate, such as in an emergency, financial or physical.  Then your associates will expect strong, firm leadership as reassurance.

[Email readers, continue here…] Even in the military, the best leaders, no matter what the rank, lead by consensus and by example – except perhaps in battle. Those in any enterprise who lead by fear find that they may be effective in the short run and completely the opposite over time.  Yes, there have been military dictators rising on occasion who did lead by fear.  Most all lost their positions, their following, and some even their lives.

The object is to have people follow, willingly.  Sometimes we call this “servant leadership,” the skill of subordinating yourself to the greater good, serving those who serve your customers or constituents.

Here’s a simple test.  Do your people come up to you as you walk among them, or lower their heads, turn away, or find a way to look extra busy?  Even if you think otherwise, if your constituents do any of these things other than look up or approach, you should identify this as an indication that you are a leader using fear.

It is never too late to change, even if it will take many interactions for your people to believe the impossible may have happened.  And if you are the charismatic leader that people follow willingly, keep on doing what you are doing.

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What can you buy for an extra $1 million?

Dave’s note:  Here comes my favorite “tell-it-like-it-is” CEO, Kim Shepherd, with another of her “crazy” (meaning excellent) ideas to pry innovative ideas from associates.  Does the headline grab your attention?  Read on…

By Kim Shepherd

What can your department or company buy if it had an extra million dollars? The quick answer is: a whole slew of great ideas. And, surprisingly, those ideas might not cost much at all – in real dollars. Here’s how I came to this insight.

100000 dollar billAs you now have read, our company is a 100% virtual firm, so our annual all–staff meeting is hugely important. At a recent one we organized into tiger teams, small cross–functional groups of people who brainstorm intensively around a specific topic. Each group had the same topic: if you had $1 million to spend on improving the company, how would you spend it?

We certainly don’t have a million bucks lying around, but the tiger teams went into high gear and filled a dozen flip–chart pages with some great ideas. Once the leadership team consolidated all those ideas, we realized that 80% of them could be implemented without spending a penny. The ideas included process changes, time management tips, performance motivators, and more. And no team spent the entire $1 million.

[Email readers, continue here…]  Removing the limitations and confinements of the brainstorm opened the idea floodgates. Raising moneyThink about it: imagine you went into a tiger team meeting and said, “We have $3000 to invest in improving the company. How should we spend it?” Before the creative juices even start flowing, you’ve put a box around everyone’s mind. They’re focusing on cost rather than ideas. Even if you encourage them to think outside the box, you’ve already got a box.

Granted, with $1 million, you still have a box. But for most of us, a million–dollar box is so big that just about anything is possible. If you are an $80 billion global corporation, you might need to use $1 billion for this exercise, and lucky you. One way or the other, the goal is to eliminate any boundaries or restrictions.

A couple of extra value–adds: this approach makes the exercise fun, as no idea is too crazy – and we heard some crazy ones. In addition, brainstorming is a team–builder. Not only do people feed off of one another’s energy and become more and more engaged, but they also gain a glimpse of each other’s thinking and values.

So you could say that spending $1 million could be free. The ideas you get, however, might be priceless.

Posted in Growth!, Surrounding yourself with talent | 2 Comments

Don’t go on a phishing trip!

Dave’s note: Our guest author this week is Kevin McDonald, Executive Vice President and Chief Information Security Officer at Alvaka Networks, a network services and security firm in Irvine, California. He is a trusted technology and security consultant and public policy advisory to some of America’s most influential people and organizations. 

By Kevin McDonald

Phishing, a play on the word “fishing,” is a dangerous form of executive or CEO email fraud, and is negatively impacting individuals and companies worldwide. You certainly have seen some form of this social engineering – where criminals pretend to be an organization or individual such as the IRS, a creditor, partner, CEO/CFO or other key executive.

The goal is to “phish” a person into taking actions they shouldn’t. An attack may involve a phishingcall demanding payment to the phisher for past due invoices from a legitimate supplier, or verification of credit card data to create facilitate the fraudulent transaction. Phishing can hook you through infected emails – or links to a fake website containing malware – or information capturing forms you are asked to complete.

Many websites are compromised and have been hacked with or set up with embedded nefarious software.  A successful attack can lead to you or one of your associates providing highly sensitive personal details of self, customers or employees – including social security numbers, usernames, passwords, and/or banking information. Phishing victims have been known to transfer large sums of money as a result of appeals, threats, or claims.

[Email readers, continue here…]  Some attacks are rudimentary, but watch it! Sophisticated attacks fool highly astute users. “Spear phishing” is directed at specific individuals or groups and is especially effective.  From IT staff to controllers, many comply with a phisher who has done homework. Attackers use social media and professional pages to understand their targets. Being rushed to respond and clear a task, aiming to please when seemingly appropriate, or fearing threats to leadership or the entity under attack can easily lead to mistakes.

So what does phishing look like? You may recognize some obvious attempts yourself. For example, you receive a PayPal email revoking your credit, but the email contains obvious grammar and spelling errors, and you don’t have a PayPal account. You may have received a notice of default for some critical service you do or don’t have – along with a request to transfer money outside of the normal payment channel.

Attacks have resulted in losses from a few dollars to hundreds of millions. Anthem Blue Cross for example could be a phishing loser. It reportedly suffered a phishing attack that exposed an estimated eighty million patient records. The attack is believed to have started with custom malware sent to Anthem IT staff. Unfortunately, patients were further victimized when they were then targeted with fake Anthem emails offering credit protection.  According to a recent lawsuit filed by a New York U.S. Attorney, another unnamed company was phished for nearly $100 million and luckily, so far recovered much of that. FireEye has reported Apple phishing campaigns using fake Apple domains to lure victims into providing Apple Store IDs and passwords.  The list goes on and becoming a victim is not difficult.

So, what can you do?

  • Slow down and pay attention with skepticism when something seems “not just right.”
  • Use email clients or services with pre-delivery scanning.
  • Don’t open emails from unknown sources.
  • Never use an administrator account to surf the web or open email.
  • Read URLs very carefully to be sure they are legitimate ( is not
  • Read email addresses carefully and verify ( is not
  • Look for improper grammar and language patterns that appear to be foreign or don’t fit the person or organization represented.
  • Avoid account verification, updates or other requests for you to click a link, log into a website or provide information.
  • Never enter data into a pop-up.
  • Never open an unsolicited attachment or link.
  • Use secondary authentication and two party authentication (code to your cell phone after entering your name and password) for financial transactions.

With all of these precautions, you’ll be unlikely to go on an unwanted and dangerous phishing trip.

Posted in Protecting the business | 3 Comments

The lion and the ant: A managerial lesson

This story has been making the rounds lately, and I confess that our research cannot find the source.  So, with thanks to whomever created this great little parable, here it is:

“Every day, a small Ant arrived at work early and started work immediately, she produced a lot and she was happy. The boss, a lion, was surprised to see that the ant was Antworking without supervision. He thought if the ant can produce so much without supervision, wouldn’t she produce more if she had a supervisor!

So the lion recruited a cockroach who had extensive experience as a supervisor and who was famous for writing excellent reports. The cockroach’s first decision was to set up a clocking in attendance system. He also needed a secretary to help him write and type his reports. He recruited a spider who managed the archives and monitored all phone calls.

[Email readers, continue here…]  The Lion was delighted with the cockroach’s report and asked him to produce graphs to describe production rates and analyze trends so that he could use them for presentations at board meetings, so the cockroach had to buy a new computer and a laser printer and recruit a fly to manage the IT department. The Ant, who had been once so productive and relaxed, hated this new plethora of paperwork and meetings which used up most of her time.

The lion came to the conclusion that it was high time to nominate a person in charge of the department where the ant worked. The position was given to the Cicada whose first decision was to buy a carpet and an ergonomic chair for his office. The new person in charge, the cicada, also needed a computer and a personal assistant, who he had brought from his previous department, to help him prepare a work and budget control strategic optimization plan.

The department where the ant works is now a sad place, where nobody laughs anymore and everybody has become upset.  It was at that time the cicada convinced the boss, The Lion to start a climatic study of the environment. Having reviewed the charges of running the ant’s department, the lion found out that the production was much less than before – so he recruited the Owl, a prestigious and renowned consultant, to carry out an audit and suggest solutions. The owl spent 3 months in the department and came out with an enormous report, in several volumes, that concluded that “The Department is overstaffed.”

Guess who the lion fired first?

The Ant of course “Because she showed lack of motivation and had a negative attitude.”

So the lesson is obvious.  And we see examples every day.  We build our companies with layers of management in the natural course of growth, often quoting that a manager should have no more than six direct reports, or that managers should be freed to do the important, high value work.

We often ignore the ants in our work lives, thinking – perhaps subconsciously – that value equates to salary level, or lowest level workers can be replaced. Or best of all, management generates creative output and pushes that creativity down to the worker ants in the organization whose job is to work, not think.

So in this story, was the lion guilty of just that form of managerial thinking?  Why not see the obvious?  Just add more ants, hopefully as resourceful as the first?  Or is it more complex?  We learn from our experience and education that growth comes from “top–grading” at all levels of the organization. And that the bottom ten percent of the workforce must be replaced, as we hire “A” players.

The story is meant to illustrate one folly of common management.  I’d take it as a beautiful warning to all of us that some things are obvious in business, and that we should focus on what works and reinforce that whenever we see it working.

Be a better lion. Watch for what’s great in each and every ant.

Posted in Depending upon others | 8 Comments

The power of NO!

Over the years I have counseled entrepreneurs to think of a “no” response in terms of “yes, but…”  There is always another way to say “no” that leaves the door open for creative thinking.

Well, almost always.

Power_of_noSometimes, you just have to suck it up and say “NO” with strong conviction.  It usually happens after several attempts to find a “yes, but” solution to a problem or issue that just can’t be resolved.

Assuming that you have the “yes, but” tool on your belt, then an occasional “NO” will resonate through the halls and be much more effective than if used often as a leadership tool.

Now that we have that out of the way, how can you capitalize on the use of “yes, but?”   There should always be an alternate solution that responds to the needs of both parties, even if not completely so.  How about: “May I take five weeks of vacation this year?”  Especially for a person badly needed within the organization, this is a conundrum for management.  “Could you take them in two week increments if you have that many weeks coming?”  “Is there a way to take less this year and spread this over two years?” “Policy says ‘no,’ but if you’ll tell me some good arguments and accept unpaid time off for the extra unearned vacation, let’s see what we can do.”

“No!  You don’t have that much coming. Go back to work. Please.”

Which of these leaves the direct report more satisfied, even if the later answer is “Can’t do it because…?”  Leadership often means leading with compromise, not just by the book.  “Yes but” is almost always the best way to respond to a request.  Try it…

Posted in Surrounding yourself with talent | 2 Comments

Micro–train; macro–manage

Dave’s note:  The week, we again welcome Kim Shepherd as our guest author, with her blunt, on-the-target style.  As always, you should enjoy her insights for management…

By Kim Shepherd

You have enough on your plate without having to hold your employees’ hands or peer over their shoulders. In fact, the ideal scenario is to follow Lee Iacocca’s strategy: “I hire people brighter than me and then I get out of their way.”

Of course, in practice it’s not that easy. My own version is “Hire smart and hire right, and you’ll be a mentor rather than a boss.”

Here are some tactics and strategies for making this work.

Invest in training, and save on managing. Let’s assume you’re bringing on board people who already have expertise in their functional area (entry–level training is a whole micro-managerdifferent beast). You still need to make sure they are proficient in your systems and processes. Even more importantly, they need to understand and embrace your company’s values and ethics. That knowledge will serve as a compass as they continue to learn and grow in the organization. It sets them up to make decisions independently. Instead of spending a lot of time managing them, invest a little quality time in coaching them.

[Email readers, continue here…] In addition, take advantage of the trend in the training and development space toward self–directed learning. Provide access to your robust internal “university,” or to vendor–provided training.

Shut Your CEO Hole. When an employee –– let’s call her Maria –– comes to you for guidance, it’s tempting to blurt out a solution. Instead, hold your advice until Maria asks, “What do you think?” Just describing the problem may help Maria figure out the solution. You can provide a point of view to add an extra dimension, but avoid simply solving the problem.

Be consistent. It takes a little longer, but every time Maria (or anyone else) asks for help, push her to come up with her own solution. It may not be the one you had in mind, but from the leader’s point of view, the process of getting to a solution is more important than the solution itself. Pretty soon your people will be coming to you with solutions rather than problems.

Then and now. An addendum to the “hire smart, hire right” axiom is that you also won’t need a lot of infrastructure. The workplace is changing. In the 1960s you had to pay the salary of someone who would decide whether or not an employee could take time off in order to take her son to the dentist. Your people should be able to make that decision for themselves.

If fact, in a virtual environment like we have at our company, any employee can work any hours.  As long as the work is getting done, we don’t care. But you can only do that if you have established yourself as not being a micro–manager. To get there, you have to be secure in your vision and your own leadership skills. Then you need to hire right, and establish processes that promote independence.

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Hire “Jacks” (and “Jills”)

Sometimes you need to hire a specialist already trained in a single narrow task.  But for most of us, we’d do far better hiring someone who has proven from past experience to be a “jack of all trades” able to fill many positions, do many tasks, learn and perform in many situations.

You’d be going against the grain of advice by many who state that trained, experienced new hires will benefit the organization, raise the level of enterprise expertise, and fit in and contribute immediately.

On the other hand, many breakthroughs in business and science have come from the intellectually curious, the critical thinker who can ask questions that may be unexpected but lead to new solutions.  And many business leaders have expressed their opinions that JackOfAllTradestheir best hires have been the ones that are most-able to expand the enterprise’s ways of thinking and performing – using creativity rather than rote memory and specific academic education as the driver of innovation.

[Email readers, continue here…]  This leads to a discussion of new hire cost and of sources for new employees.  In the academic world, three new hires on the tenure track can be made for each two retiring with tenure.  That same ratio is close to reality in business.  In each case, the enterprise is able to reassess its needs in relation to its strategic goals, as the natural order is refreshed over time as people leave a business for any reason.

As to sources of new, young employees:  there are two very different types of educations.  Research universities often send their students through a rigorous program of education tilted toward specific specialties, with domain knowledge emphasized over critical thinking and creativity.  Liberal arts colleges, on the other hand, usually allow specializing in broad career tracks while emphasizing the elements of critical thinking, creativity and leadership skills.

For your needs, which young graduate would you select?  The title of this insight tips my hand, as I lean toward hiring those with those extra traits, and training them in the specific skills of their discipline.  The benefit:  a boost in corporate creativity and new blood at the bottom perhaps capable of future executive leadership.

Posted in Surrounding yourself with talent | 2 Comments