Coaching Tip: The Leadership Blog

CEOs in Transition

No one knows how many out-of-work CEOs are looking for corner office suites, but recruiters say their numbers are growing.  Fewer big businesses are switching bosses these days and mergers and bankruptcies have further reduced their job prospects.  Only 48 companies in the S&P 500 index changed leaders last year, the lowest level since recruiters Spencer Stuart began tracking it in 2004.

Just two of 13 major corporations switching leaders in the latest quarter chose an outsider.  Some boards are loath to change chiefs during economic turbulence, and the choppy recovery so far hasn't sufficiently heartened boards, recruiters say.  Big-company mergers have eliminated dozens of senior management jobs, too.

"We have a much higher flow of former CEOs than we have seen in many years looking for a position again at the CEO level," says James G. Aslaksen, a senior client partner for recruiters Korn/Ferry International.  He finds these job hunts can now last 18 months, up from no more than a year in 2005.  Among major corporations, however, "the [CEO] opportunity pool is fairly small," adds Dennis Carey, also of Korn/Ferry.

Smaller companies have started to look for new CEOs again, recruiters report.  But many former corporate chiefs want another big-company post.

Source: The Wall Street Journal, July 14, 2010

When in doubt, will your stockbroker tell you to get out?

Many individual investors were tiptoeing back into stocks in the spring.  Now, they're running for cover again. 

Some investment advisers are telling clients that, for long-term investors, this summer will turn out to have been a great time to buy stocks on the cheap. So far, not many clients are listening.

Small investors' faith in stocks, which surged in the 1990s, has collapsed since the technology-stock debacle and the Enron and WorldCom scandals of 2000-2002.  The 2007-2009 financial crisis only made things worse.  Now, the pullback among ordinary investors means they are a declining force in a market that is increasingly dominated by professionals.

Understanding Personal Leadership Power

By Guest Author Marcia Smart, Ph.D. of Smart Leadership Solutions ([email protected]) 

 

 

One of the key facets of effective leadership is in the creation and use of personal power. Leadership is a process and in cultivating your leadership style it is important to understand the sources of your personal power. The sources are infinitely varied and a number of social scientists have tried to identify them.   

 

Lee Boleman and Terrence Deal (2003) in Reframing Organizations: Artistry, Choice, and Leadership summarized some of the key sources of power in groups and organizations: 

·  Position power where the position confers certain levels of formal authority.

·  Information and expertise power that flows for those with information, competence, and know-how.

·  Control of rewards power refers to the ability to deliver rewards, such as, jobs, money or political support.

·  Coercive power that rests on the ability to constrain, block, interfere, or punish.

·  Alliances and networks that get things done in organizations through complex networks, individuals, or groups.

·  Access and control of agenda enable power through access to decision arenas.

·  Framing control of meaning and symbols refers to establishing the context within which issues will be viewed and decided.

·  Personal power where individuals with charisma, energy, political skills, or the capacity to articulate a vision are imbued with power independent of the sources.

How do you use or overuse your power?

 

All sources of power yield influence and there are both positive and negative impacts from the use of power.  In cultivating personal leadership it is important to consider the impact of your choices.  It can be an indicator of your individual effectiveness within your group or organization.

 Lee G. Bolman: Reframing Organizations: Artistry, Choice and Leadership (JOSSEY-BASS BUSINESS & MANAGEMENT SERIES)

Exceptional CEO Tenure

Like fine wine, certain business leaders may improve with age.

Even as the average chief executive's tenure shrinks, a cadre of CEOs is beating the odds for corner-office stays.  Nearly all run companies that have outperformed the stock market for years.

Excluding founders, 28 CEOs of companies in the Standard & Poor's 500 stock index have held office more than 15 years, according to an analysis by recruiters Spencer Stuart for The Wall Street Journal.  The typical S&P 500 CEO has held the title about 6.6 years.

Twenty-five of those 28 chieftains have seen their company's total shareholder return—stock-price change plus reinvested dividends—exceed the S&P 500 index performance during their tenures as public-company CEOs.

In interviews, CEOs attributed their longevity to good internal relationships, emphasis on long-term objectives and ability to surpass competitors.  Veteran chiefs include such well-known names as Warren Buffett, who has run Berkshire Hathaway Inc. since 1970, and lesser-known ones such as Peter J. Rose of Expeditors International of Washington Inc.  Spencer Stuart said Mr. Rose was the best performer in the study. Returns have soared about 83-fold since he began steering the freight forwarder in 1988.

Source: The Wall Street Journal, July 6, 2010

The Certainty: A Bias that Leads to Bad Decisions

A growing body of research reveals that our behavior and decisions are influenced by an array of strong psychological undercurrents.

Scientists have identified five flaws in how we think when making decisions. They’re hardwired into our thinking process, so we often fail to recognize them.

The Certainty Bias: Fifth of 5 Flaws

Leaders forget the mind’s fallacies.  They believe in their people and senior team.  They are generally confident that colleagues are well-intentioned, with the company’s best interests in mind.

After gathering as much information as possible and weighing all of the arguments, leaders must make decisions and embrace an attitude of certainty and confidence.  Persuading others to execute the plans is the next step.

Certainty, however, can lead to other errors, such as failure to adjust plans, when required, and shutting out conflicting information.  The only way to counteract the certainty bias is to encourage dissonance.

Perhaps Alfred P. Sloan, president of General Motors in its prime, said it best.  After adjourning a meeting shortly after it began, he announced:

“Gentlemen, I take it we are all in complete agreement on the decision here…  Then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.”

This Time is Different

 “THIS TIME IS DIFFERENT” was published last September, just as the nation was coming to grips with a financial crisis that had nearly spiraled out of control and a job market that lay in tatters. Despite bailout after bailout, stimulus after stimulus, economic armageddon still seemed nigh.

Given this backdrop, it’s perhaps not surprising that a book arguing that the crisis was a rerun, and not a wholly novel catastrophe, managed to become a best seller. So far, nearly 100,000 copies have been sold, according to its publisher, the Princeton University Press.

Still, its authors laugh when asked about the book’s opportune timing.

Co-author Carmen Reinhart in digging through old records and piecing together a vast puzzle of disconnected data points, her ultimate goal, in the book, has always been “to see the forest,” she says, “and explain it.”

Ms. Reinhart has bounced back and forth across the Beltway: she left the I.M.F. in Washington and began teaching in 1996 at the University of Maryland, from which co-author Kenneth Rogoff recruited her when he needed a deputy at the I.M.F. in 2001. When she left that post, she returned to the university.

Despite the large following that her work has drawn, she says she feels that the heavyweights of her profession have looked down upon her research as useful but too simplistic.

“You know, everything is simple when it’s clearly explained,” she contends. “It’s like with Sherlock Holmes. He goes through this incredible deductive process from Point A to Point B, and by the time he explains everything, it makes so much sense that it sounds obvious and simple. It doesn’t sound clever anymore.”

But, she says, “economists love being clever.”

They began the book around 2003, not long after Mr. Rogoff lured Ms. Reinhart back to the I.M.F. to serve as his deputy. The pair had already been collaborating fruitfully, finding that her dogged pursuit of data and his more theoretical public policy eye were well matched.

Although their book is studiously nonideological, and is more focused on patterns than on policy recommendations, it has become fodder for the highly charged debate over the recent growth in government debt.

The recent G-20 meeting in Toronto has resolved to engineer tightened government spending to reduce global government deficits and here in the U.S. budget hawks have cited the book’s warnings about the perils of escalating public and private debt.

 Carmen M. Reinhart: This Time Is Different: Eight Centuries of Financial Folly

 

Source: The New York Times, July 4, 2010

Diagnosis: A Bias that Leads to Bad Decisions

A growing body of research reveals that our behavior and decisions are influenced by an array of strong psychological undercurrents.

Scientists have identified five flaws in how we think when making decisions. They’re hardwired into our thinking process, so we often fail to recognize them.

Diagnosis Bias: Fourth of 5 Flaws

When we encounter new people at a party, we quickly diagnose them by placing tags on them, such as “approachable” or “standoffish.” This helps us quickly decide if we want to engage them in conversation.

By employing this mental shortcut, we fail to see a person’s good qualities. Nowhere is this clearer than in job interviews.

Managers value their intuition and think they have a refined ability to truly see and understand an applicant. They overestimate their ability to form objective opinions and underestimate their subconscious biases.

Decision Effectiveness

Decisions are the lifeblood of action, and little gets done without them.

A recent Harvard Business Review article recommends a decision audit to identify key organizational needs, using the following short survey:¹

·    How do your organization’s decision abilities stack up against the competition?
 

o   Quality: When looking back on critical decisions, how often have you chosen the right course of action?

o   Speed: How do you rate the speed of your critical decisions in comparison to your competitors’?

o   Yield: How often do you execute critical decisions as intended?

o   Effort: How much effort does your company put into making and executing critical decisions?

1. Reference:  Blenko, M., Mankins, M., Rogers, P., “The Decision-Driven Organization,” Harvard Business Review, June, 2010.

 

Value Attribution: A Bias that Leads to Bad Decisions

A growing body of research reveals that our behavior and decisions are influenced by an array of strong psychological undercurrents.

Scientists have identified five flaws in how we think when making decisions. They’re hardwired into our thinking process, so we often fail to recognize them.

Third of 5 Flaws: Value Attribution

It takes enormous energy to consciously work through all possibilities and risks when weighing important decisions, so the brain looks for shortcuts.  But these shortcuts also present traps because they largely occur without our awareness.

Value attribution serves as a quick mental shortcut to determine what’s worthy of our attention.  When we encounter new objects, people or situations, the value we assign to them shapes our future perceptions of them.

If, for example, we see a poorly dressed street performer playing music in a subway station, we assume he’s a struggling amateur with little talent, even when the music is good.  These assumptions were proved true when Joshua Bell, one of the finest violinists alive, participated in a field study for the Washington Post.

While Bell, dressed in jeans and a baseball cap, played a $3.5 million Stradivarius, subway travelers rushed by without paying attention.  While he certainly sounded far from mediocre, he looked the part—and commuters attributed the value they perceived (appearances) to performance quality.

Audio:   Listen to Joshua Bell's Complete Metro Station Performance.

The Bell experiment illustrates why we may turn down a pitch or idea based on appearances, rumors or any other peripheral value.  It also explains why we may blindly follow the advice of someone who has been highly recommended.

Becoming aware of our brain’s tendency to make assumptions can help us prevent disastrous mistakes and missed opportunities.

 

Commitment: A Bias that Leads to Bad Decisions

A growing body of research reveals that our behavior and decisions are influenced by an array of strong psychological undercurrents.

Scientists have identified five flaws in how we think when making decisions. They’re hardwired into our thinking process, so we often fail to recognize them.

Second of 5 Flaws: Commitment

We have a tendency to stick with the status quo.  When we’ve invested our time and money in a project, it’s difficult to let go—even when things clearly aren’t working.

History shows us how hard it was for Lyndon B. Johnson and George W. Bush to find solutions to the wars in Vietnam and Iraq, respectively.  They were strongly influenced by the forces of commitment and aversion to loss.

When CEOs and boards of directors are charged with making critical strategy decisions, determining the best outcomes often proves challenging when strong egos and competitive personalities are added to the mix.