SEX, ETHICS AND BOSSES

An AICPA Economic Outlook Survey, which polls chief executives, chief financial officers, controllers and certified public accountants with executive roles in U.S. companies, found that businesses expect an increase in recruitment, staff training and spending in the next 12 months as economic conditions improve. Most of the executives questioned (56 percent) say their companies have the right number of employees, but 15 percent said they planned to hire immediately, up from 13 percent last year. Meanwhile the portion of those surveyed who said their companies had too many employees shrank from 10 percent to 8 percent.

Part of the problem with C level executives when dealing with employees, is that the employees don’t share nor understand the Type A+ personality of their bosses and they judge them harshly for it during tough economic times. Some mentioned that executives were thought to be ‘job slashers’ and lacked concern for their employees.  In fact, based on executives' own survey responses, they agree that they are getting worse at basic human interaction as the economy improves.

What’s the Disconnect?

A survey conducted last year by Booz Allen (BAH) found that executives largely believed the job was out of their hands and that they couldn't help their company achieve its’ goals. A full 64 percent said they had conflicting priorities, while 54 percent said they don't believe employees and customers understand their strategy.

That's bad news for companies where executives' capabilities in no way support the strategy. In that scenario, only 14 percent of such firms report above-average growth. It's particularly troubling when 64 percent of managers don't feel their company's strategy will lead to success.

Being Ethical

A study released last year by the Economist Intelligence Unit, titled "A Crisis of Culture: Valuing Ethics and Knowledge in Financial Services" found that executives in the financial services industry didn't see much to gain by conducting their business ethically. Does anyone remember the economic downturn of 2007-2008 which had a direct correlation from the securitization and purchase of ‘subprime’ mortgage loans?

Although 91 percent of those surveyed placed equal importance on ethical behavior and financial success, more than half (53 percent) think advancing their career would be difficult without being “flexible” on ethical standards. Only 37 percent believe their firm's performance would improve if employees acted in a more ethical manner.

While 97 percent of those same executives feel qualified to handle their job -- and 67 percent have raised awareness of the importance of ethics at their firms -- 62 percent of financial executives admit they care very little about what goes on in departments beyond their own. But many of those same execs think their own departments are an ethical breach waiting to happen.

Sexism

Harvard Business School professor Boris Groysberg and research associate Robin Abrahams reviewed interviews of nearly 4,000 C-suite executives conducted by the school's students between 2008 and 2013. Of those executives, 44 percent were women.

What is interesting is that 88 percent of male execs were married, compared with 70 percent of women. A full 60 percent of male execs had spouses who don't work full-time outside of the home, while only 10 percent of women did.

Most male executives saw work-life balance as women's work. Each side found it inconceivable that a man could pick up the slack, address work-life conflicts and actually contribute something other than money to the household. Meanwhile, the amount of stay-at-home dads has doubled since 1994.

What this review found is that executive’s contracts are locked-in and 16 percent said their company didn't have a succession plan in place and that it would take up to three years to find their replacement.

Conclusion

Executives have lost the trust and understanding from their employees, and therefore honest and open communication has ceased.  To engage employees, it is imperative that all executives and employees fully understand and embrace the strategic plan for the business.  It is no longer acceptable to point the finger and say it's management, and visa-versa. The real disconnect is the lack of accountablity, with shared core values and a common and shared goal.

THOUGHTS FOR DUMMIES

You likely never heard of Pat McGovern until this week, but the man behind the 'For Dummies' series of books and many other media brands left a lasting legacy.

The world lost a multibillionaire entrepreneur recently--a great leader whom most Americans have probably never heard of. Given that he was the person behind some very successful media brands, that says a lot.

Pat McGovern, 76, began his business career in the 1960s, as the founder and chairman of International Data Group. He was the man responsible for magazines such as Computerworld,  Macworld, PC World, and many other brands in the U.S. and abroad, including the "For Dummies" series of instructional and self-help books.

Think Big / Be First

McGovern wrote an article for Inc. in 2007, in which he talked about the importance of expanding your horizons to be successful. He was one of the first American CEOs to establish a joint publishing venture in China, for example, and his company was a pioneer in venture capital in Vietnam and India. With the establishment of a website operating from Antarctica, IDG became the first company in the world to have a presence on all seven continents.

"When a company ventures abroad, its point person should be its CEO, traveling frequently and acting boldly and enthusiastically," McGovern wrote. "IDG launches businesses in three to five new countries each year, and for virtually all of them I'm first on the ground, meeting with potential customers, government ministers, and management candidates."

Step Aside and Trust

McGovern was thinking globally long before most of his peers. His companies launched titles in Japan and the Soviet Union in the 1970s, and he reportedly spent four months of the year traveling overseas to drum up new business. Yet he was a hands-off leader, allowing the people he put in charge of overseas divisions to make decisions.

"His primary control is financial," Inc. reported in 1988. "His headquarters works as an investment bank, putting money into each unit's worthwhile ventures, denying or withdrawing it from ones that are not worthwhile, while McGovern cruises from office to office like a cheery potentate on a magic carpet, bringing enthusiasm and bonuses wherever he goes."

Get Out of Your Way

Inc.'s Leigh Buchanan started out at IDG as a copy editor in the late 1980s, and she described her surprise when McGovern stopped by her cubicle to hand her a year-end bonus check.

Pat thanked me for my contributions. He asked how things were going and looked vaguely disappointed when all I could muster was an unilluminating "Fine." Then he complimented me on a column I had ghostwritten for some technology honcho. The column was my most substantive accomplishment to date and the thing I was proudest of. But my name didn't appear on it anywhere, so how did he know? After three or four minutes, he handed me my bonus and proceeded to the next cubicle.

When she interviewed him years later, Buchanan said she learned that McGovern made one-on-one visits like that to every single one of the company's 1,500 employees at the time, and that the process took almost four weeks.

Be a Personality, But Be Humble

McGovern was worth an estimated $5.1 billion, but he cultivated a modest image. He lived in a same house in Hollis, New Hampshire, which he bought in 1989. He flew coach and drove used cars, reported The Wall Street Journal. He would show up at employees' 10th anniversaries to take them out for dinner.

"I don't think he did these things because he was naturally outgoing," wrote Harry McCracken, who covers technology at Time, but who spent 16 years working for McGovern at IDG. "If anything, he seemed to be on the reserved side--but...he believed that one of his responsibilities as IDG chairman was to make other staff members feel good about their work. Even when I was a low-level editor, I got occasional complimentary notes from him--always written on the same ultra-cheery letterhead, with GOOD NEWS!  and a rainbow at the top. He must have bought it by the truckload."

Earned a Lot and Give it Away

In 2000, McGovern and his wife founded an institute for the study of the brain at his alma mater, MIT, with a $350 million gift. It was one of the largest donations ever to a university in the U.S. To put it in context, the donation dwarfs the entire endowments of more than 640 American colleges.

BRAND YOUR PURPLE COW

You can have the greatest product in the world, the most superb service, but, if no one knows about it, you will have a warehouse full of excellent products, and you will be sitting around your office, waiting for the phone to ring.

Strategic Positioning

This is where companies make a big mistake with their marketing. It's important to have great products and great services. But too many companies fool themselves by thinking, "If people knew how great our products or services are, they'd buy us every time."

They try to market themselves by saying things like: "We've got the best quality, the best product, the best customer service, and the best people." I've got three words for you: WASTE OF TIME. Yes, all those things are important, but they won't help you be successful with your marketing.

It's not about the product; it's about the positioning. Strategic Positioning or Brand Positioning is a statement of who you are. It is what your target customers think about when they hear your brand name. Red Bull owns the words "Energy Drink." 1-800-GOT JUNK? owns "junk removal." What words do you want to own? What will make you stand out from the herd?

Seth Godin in his book The Purple Cow says that you should stand out from the herd of competitors the way a purple cow would stand out from a herd of cows. That's not just a little different. We're talking "dramatically different," and that takes courage.

The old rule of marketing was playing it safe. So, you created a good product or service, and then you sold it with sales people and advertising. You took out ads, you spent money, and you tried to drive customers to your business that way. That used to work, but it doesn't any more.

Today it is different, you need to create remarkable products or services that your target market customers will seek out and talk about. They will spread word‑of‑mouth about your brand.

It starts with being dramatically different. You're either a Purple Cow of a product or service, or you're a commodity (whereby you sell only on price). But that's only part of the challenge. You must also be dramatically and meaningfully different to your ideal target market customer.

Just being good is not enough. Your competitors are good. Your customers won't even start down the path to buy your product unless they think you're remarkably, distinctively, and meaningfully different. You don't win the marketing battle with the best product or service. You win the marketing battle with Strategic Positioning. So let's think about how you can position your company.

There's no one best way to position your company (or brand) so you appear uniquely different from your competition. You need to choose a position that sets you apart in a way that appeals to your ideal target market customer. There are six basic ways to achieve that:

1. Position your company based on price point.

Walmart, for example, offers "everyday low prices." Price positioning can work the other way, too, when people use a high price as an indicator of high value. Consider this story told by Dr. Robert Cialdini, the author of Influence.

The owner of a jewelry store that specializes in Indian jewelry purchased some good quality turquoise pieces and priced them reasonably, based on her experience. But, even though the store was full of tourists, those pieces didn't sell. That happens in retail.

The store owner did what store owners have probably done since the beginning of commerce. The night before she left on a buying trip, she wrote a note to her staff, directing them to display the turquoise pieces prominently and to cut the selling price in half. She imagined that customers would snap up the jewelry at the low price and she could move on to other things.

When she returned from her trip, she was pleased to note that, as she expected, the pieces had all been sold. Then she discovered that her staff had not done what she had asked. Her assistant misread the note, and, instead of cutting the prices by half, the assistant had doubled them. The jewelry sold better when the higher prices sent the message to customers that the pieces were of higher quality. There are many stories like this that marketers tell each other.

2. Position your company by creating a new category.

That's what Red Bull did. Before them, there was no "energy drink" category.

3. Position your company as something different from the category leader.

In rental cars, the classic Avis advertising campaign, "We're number two, so we try harder," is a great example.

4. Position your company as a specialist.

1-800-GOT-JUNK? is the specialist in junk removal. There are coffee shops all over the country that sell coffee and a host of other things like hamburgers and breakfast, but Starbucks positioned itself as the coffee specialist, the brand you know offers premium coffee.

5. Position your company as the master of a distribution channel.

L'eggs was the first supermarket pantyhose brand and became the largest-selling pantyhose brand in the country. Paul Mitchell became a $600-million hair and skincare brand by focusing on the professional hair salon channel. Ping did the same in golf clubs by focusing on the pro-shop channel.

6. Position your company by being explicit about Who your target market customer is.

Curves is the gym solely for women. AXE cologne positions itself as the cologne that makes young men irresistible.

How to find your Strategic Position

Here are two questions that I recommend to help you identify your Strategic Position:

1.     In what area(s) could you be perceived as the leader of a category or niche in your industry?

2.     In what area(s) could you be perceived as being dramatically and meaningfully different from your competitors?

SALES MANAGEMENT DONE RIGHT

1.  What percentage of your salespeople consistently over-achieve?

2.  Are your salespersons’ order-takers and account managers instead of proactive Hunters and Closers?

3.  Are your sales people effective selling value and trust rather than selling price?

4.  What is the percentage conversion of your pipeline to closed transactions?

5.  Are there enough qualified opportunities to close in your pipeline?

6.  How many steps in your sales process have been properly mapped?

7.  Do you have a formal sales process that everyone follows every time?

8.  Do you have a formal sales recruiting process that consistently yields the ‘right’ salespeople?

9.  Does your sales force execute your strategic plan, and keep it moving forward?

10. Is your sales team aligned with your sales strategies and core values?

11. Are your salespeople coached on a consistent basis?

12. What Key Performance Indicators (KPI’s) do you track and test that drive sales?

13. Do you hold a daily short (10 minutes) ‘huddle’ where salespeople are held accountable for their KPI’s?

14. Is everyone using your automation to track clients, sales and the sales process?

15. Have you optimized your selling demographic and geography?

16. Do you have a formal 90 day orientation and professional sale training process that prepares each salesperson for success at your company?

17. Are your salespeople selling consistently regardless of outside influences?

18. How have you optimized your sales cycle and reduced your ‘Cash Gap’?

19. Does your sales management spend too much time over-managing your sales persons accountability?

20. Have you identified and quantified all the value drivers for:  total sales call, closed sales calls, the cost of a bad hire, etc.?

21. Are your salespeople fully engaged?

22. Do your salespeople know exactly what is expected of them at work?

23. Have you supplied your salespeople the necessary materials and equipment to their work right?

24.  Do your salespeople have the opportunity to do their ‘best’ every day?

25. In the last seven days, have you given a salesperson recognition or praise for doing good work?

26. Do your sales support personnel, respect and care about your salespeople?

27. Do you have an active role of encouraging your salesperson personal and professional development?

28. Do your sales people opinions count?

29. Does the company mission/purpose of your company make your salespeople feel their job is important?

30. Are your salespeople committed to doing quality work?

31. Have you, in the last six months, talked to your salespeople about your progress?

32. In the last year, have you created opportunities for salespeople to learn and grow?

IMPROVE YOUR CUSTOMER EXPERIENCE

Gallup’s research shows that few employees are aligned with or empowered to deliver the core elements of their company’s brand identity and promise. Executives must start by engaging their employees and then taking these steps to help their workers become effective brand ambassadors.

1- ACKNOWLEDGE THAT ALL EMPLOYEES PLAY A KEY ROLE IN BRINGING THE BRAND TO LIFE.

Successful branding is not just a marketing or sales function; it is an essential activity for human resources, management, and leadership.

2- AUDIT YOUR INTERNAL COMMUNICATIONS.

Thus ensuring that all communications are consistent with your brand identity and promise. Invest in making employees aware of your brand promise, and empower them to act on it.

3- ARTICULATE WHAT YOUR BRAND REPRESENTS AND WHAT YOU PROMISE TO YOUR CUSTOMERS.

Inject the core elements of your identity into the workplace constantly and consistently across time, locations, and channels. Use these elements to define not only how you treat your customers but also how you manage, coach, and treat your employees.

4- DEPLOY SIMPLE PROCESSES

Ensure that you highlight and discuss the core elements of your company’s brand identity every day. Use minute meetings, lineups, or staff gatherings to provide specific examples of how to deliver the brand promise.

5- USE SIMPLE TOOLS

This might include such things as wallet cards as ready references to the brand, and require employees to memorize the key brand elements.

6- REGULARLY ASSESS HOW WELL YOUR EMPLOYEES KNOW AND UNDERSTAND YOUR BRAND PROMISE.

All employees — especially those in customer-facing roles — should believe in and feel they have the resources and permission to deliver your brand promise. Provide additional support in areas that fall short.

7- ENSURE THAT NEW EMPLOYEES UNDERSTAND YOUR BRAND IDENTITY AND PROMISE.

All new employees should be able to articulate what your company stands for and what makes you different within their first 30 days of employment, and your managers should reinforce this message every day.

8- MAKE SURE THAT EVERY EMPLOYEE UNDERSTANDS HOW HIS OR HER JOB AFFECTS THE CUSTOMER EXPERIENCE.

This is particularly important for roles that are not customer-facing. Constantly connect the dots between what employees are paid to do and what your organization stands for.

9- RECOGNIZE EMPLOYEES WHO DELIVER YOUR BRAND PROMISE TO YOUR CUSTOMERS.

Recognition is an important psychological need. Employees who know that they will receive recognition for acting on the brand promise will have a strong incentive to do so.

10- REGULARLY SOLICIT OPINIONS FROM YOUR EMPLOYEES ON NEW AND BETTER WAYS TO DELIVER YOUR BRAND PROMISE.

Convene town hall meetings that allow employees to share their ideas and receive feedback. Demonstrating an authentic commitment to alignment is the best way to embed it in your company’s culture.

ARE YOU A BAD BOSS?

Your staff avoids you. No one stops by your office, desk or “skypes” you to check-in. This is a probable sign that your employees are afraid of you or have simply lost confidence in your leadership.

Inability to make decisions without your input. You staff constantly asks you for advice on the smallest details. It’s likely you haven’t empowered your employees, or they’re just too afraid of potential consequences if they don’t approach you on everything. There’s definitely a balance so make sure you check out my colleague’s post (Stephen Lynch) about having an open door policy.

A high turnover. Look at how many people you’ve directly or indirectly managed and have resigned within 1-2 years. Leaving for more money is likely not the initial motivator. People typically leave their boss not the company (unless you have a terrible company culture). Quite obvious, but few fail to face this reality.

Former employees disappear, forever. Nothing says it more than anything if your ex-employees don’t keep in touch or you don’t get recommendation requests. Good bosses typically become mentors or role models for ex-employees.

Lack of feedback. You fail to communicate with your team and may not have set expectations, goals or timelines. Bad bosses often change their mind frequently leaving their team feeling off balance. You’re also not available to receive feedback about yourself. Most people like to see progress and to progress in their careers. It’s important that you provide timely feedback. Positive feedback is typically best and constructive feedback is important if something needs to be improved or corrected.

If any of the above is true, here are 4 simple tips you can use to engage your team and help you get out of that bad boss category:

1.     Create transparency. Don’t keep your team in the dark. Share your company's performance, track and communicate progress. It will help your team understand that the things they work on directly impact the company’s success and ultimately their own.

2.     Make work meaningful. Reinforce the importance of everyone’s role. Provide clarity and direction by defining both team and individual goals. Avoid ambiguity at all costs. This will help foster ownership and will help get things done.

3.     People-Focused Culture. Promote the sharing of ideas, suggestions and improvements. Recognize people for their achievements. Live your company core values and have your team nominate colleagues who meet different core values.

4.     Nurture employees and create a path for growth and opportunity. Create opportunities for career development and progression. Talk to your employees about their career plan. Does their current role make full use of their strengths and abilities? Provide feedback (both the good and constructive) sooner than later.

CONCLUSION:

Take the time to think about the points above and keep in mind that highly engaged employees are 26% more productive and on average their company’s earned 13% greater returns. Creating a more engaged workforce benefits the company, your team, and yourself.

EXCERPTS FROM WARREN BUFFET’S ANNUAL LETTER

"Investment is most intelligent when it is most businesslike." --Benjamin Graham, The Intelligent Investor

This tale begins in Nebraska. From 1973 to 1981, the Midwest experienced an explosion in farm prices, caused by a widespread belief that runaway inflation was coming and fueled by the lending policies of small rural banks. Then the bubble burst, bringing price declines of 50% or more that devastated both leveraged farmers and their lenders. Five times as many Iowa and Nebraska banks failed in that bubble's aftermath as in our recent Great Recession.

In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier. I knew nothing about operating a farm. But I have a son who loves farming, and I learned from him both how many bushels of corn and soybeans the farm would produce and what the operating expenses would be. From these estimates, I calculated the normalized return from the farm to then be about 10%. I also thought it was likely that productivity would improve over time and that crop prices would move higher as well. Both expectations proved out.

In 1993, I made another small investment. Larry Silverstein, Salomon's landlord when I was the company's CEO, told me about a New York retail property adjacent to New York University that the Resolution Trust Corp. was selling. Again, a bubble had popped -- this one involving commercial real estate -- and the RTC had been created to dispose of the assets of failed savings institutions whose optimistic lending practices had fueled the folly.

Here, too, the analysis was simple. As had been the case with the farm, the unleveraged current yield from the property was about 10%. But the property had been under-managed by the RTC, and its income would increase when several vacant stores were leased. Even more important, the largest tenant -- who occupied around 20% of the project's space -- was paying rent of about $5 per foot, whereas other tenants averaged $70. The expiration of this bargain lease in nine years was certain to provide a major boost to earnings. The property's location was also superb: NYU wasn't going anywhere.

Fundamentals of Investing:

• You don't need to be an expert in order to achieve satisfactory investment returns. But if you aren't, you must recognize your limitations and follow a course certain to work reasonably well. Keep things simple and don't swing for the fences. When promised quick profits, respond with a quick "no."
• Focus on the future productivity of the asset you are considering. If you don't feel comfortable making a rough estimate of the asset's future earnings, just forget it and move on. No one has the ability to evaluate every investment possibility. But omniscience isn't necessary; you only need to understand the actions you undertake.
• If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so. Half of all coin-flippers will win their first toss; none of those winners has an expectation of profit if he continues to play the game. And the fact that a given asset has appreciated in the recent past is never a reason to buy it.
• With my two small investments, I thought only of what the properties would produce and cared not at all about their daily valuations. Games are won by players who focus on the playing field -- not by those whose eyes are glued to the scoreboard. If you can enjoy Saturdays and Sundays without looking at stock prices, give it a try on weekdays.
• Forming macro opinions or listening to the macro or market predictions of others is a waste of time. Indeed, it is dangerous because it may blur your vision of the facts that are truly important. (When I hear TV commentators glibly opine on what the market will do next, I am reminded of Mickey Mantle's scathing comment: "You don't know how easy this game is until you get into that broadcasting booth.")
• During the extraordinary financial panic that occurred late in 2008, I never gave a thought to selling my farm or New York real estate, even though a severe recession was clearly brewing. And if I had owned 100% of a solid business with good long-term prospects, it would have been foolish for me to even consider dumping it. So why would I have sold my stocks that were small participations in wonderful businesses? True, any one of them might eventually disappoint, but as a group they were certain to do well. Could anyone really believe the earth was going to swallow up the incredible productive assets and unlimited human ingenuity existing in America?

Summary

When Charlie Munger and I buy stocks -- which we think of as small portions of businesses -- our analysis is very similar to that which we use in buying entire businesses. We first have to decide whether we can sensibly estimate an earnings range for five years out or more. If the answer is yes, we will buy the stock (or business) if it sells at a reasonable price in relation to the bottom boundary of our estimate. If, however, we lack the ability to estimate future earnings -- which is usually the case -- we simply move on to other prospects. In the 54 years we have worked together, we have never forgone an attractive purchase because of the macro or political environment, or the views of other people. In fact, these subjects never come up when we make decisions.