The Complex Case of Customers as Stakeholders

This is the fourth in a series on stakeholders’ value creation.

The case of customers as stakeholders appears self-evident. Simply, a company cannot exist without customers. The purpose of every business centers on creating customer value. Forgetting that customers are the ultimate decision makers of what they will buy can be fatal. The premise that customers are stakeholders is more complex however. Where do a company’s interests intersect with those of its customers? Corporate boards and management are focused on financial performance, stock prices, and maintaining sustainable and profitable growth objectives. Customers want products and services to meet their standards, expectations and needs at a price they are willing to pay. In addition, an increasing number of their buying decisions are influenced by whether a company’s values align with their own (e.g., fair trade coffee, the green revolution etc.). The challenge is to ensure that the needs and wants of the company and of its customers are met simultaneously.

Forward-looking companies, Such as Apple and Southwest Airlines, devise strategies to satisfy and to reconcile the needs, interests and behaviours of their customers and of their shareholders. Trust is the cornerstone. When customers trust a company, they implicitly give it permission to influence them. Customers want to know that the companies they are doing business with are honest and dependable. Companies built trust by interacting with customers with transparency, integrity and respect. The prevalence of social and mobile technologies has changed the traditional ties that build trust between companies and their customers. These technologies are an accelerant and an amplifier of this process.

Present-day consumers have more power than ever before. They are better informed than they were only a few years ago. For many, trust means respect of privacy. “Seventy-two percent of Americans are reluctant to share information with businesses because they just want to maintain [their] privacy” (J. Gin, “A New Paradigm for Building Customer Trust”, Entrepreneur, June 27, 2016). This reluctance is intensified when global companies, such as Amazon, Google and Facebook, have little or no direct interaction with customers. It should be noted that in-store customers also value privacy. (See C. Esmark, “Your In-store Customers Want More Privacy”, HBR, Dec. 28, 2016.) Successful companies do not manipulate their customers. They ask only for personal information that is necessary to complete the transaction, forgoing near-term marketing opportunities offered by collecting additional data. Respecting privacy is an important branding differentiator for companies competing for the business of often leery customers. (See J. Hinz, “The Power of Customer Trust in Brand Marketing”, marketingland.com, October 29, 2015.)

The most successful brands, such as Starbucks and Disney, ensure that their clients are satisfied at every point of interaction with the company. They create environments that customers value. They eliminate practices and people that detract from the optimal customer experience. They empower their employees, and encourage creativity and innovation in dealing with customer wants and concerns. (See my December 5, 2016, post: “The Case for Employees as Stakeholders”.) One well-known retailer had for many years this simple rule for its employees:

Rule #1: Use good judgment in all situations. There will be no additional rules.

These businesses recognize that acquiring a new customer costs up to seven times more than retaining an existing one. (See “10 Reasons Why Customer Satisfaction Is Still a Crucial Business Metric”, July 16, 2016, by Infinit Contact.) Simply put, excellent customer service leads to customer loyalty, which in turn leads to sustainable long-term success.

The most successful companies treat customers as valued stakeholders. They develop and implement strategies that accommodate and leverage synergistically the interests of all of their stakeholders.



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The Case for Employees as Stakeholders

This post is the third in a series on stakeholders’ value creation in volatile times.

As traditional and social media unfailingly reiterate, we are living in turbulent and potentially dangerous times. Traditional spheres of political and economic power are mutating rapidly. Established values are being shaken. The certainties of yesterday are falling away. Managers and employees are increasingly stressed out and disengaged.

The gap between economic winners and losers is widening. Some evidence suggests that wealth inequality measures are the greatest ever recorded. This can lead to the social and political unrest stirring in many advanced economies. (See my October 24, 2016 post, “Value Creation in Volatile Times: The Case for Ethical & Socially Responsible Companies”.)

Governments have registered only limited success in addressing these dangerous tensions. Conversely, multinational corporations with their vast resources, global footprints and market orientation are well positioned to alleviate them. While companies depend on profitability for their existence, corporations are increasingly recognizing that the interests of each stakeholder - shareholders, employees, vendors, customers, the larger community and the environment- complement synergistically the others and lead to the creation of even greater, sustainable, value. For many, this starts with their employees.

Corporate leaders often repeat: Our employees are our greatest asset! As so eloquently put in the slogan of Dofasco (part of ArcelorMittal), one of Canada’s oldest and most efficient steel makers, Steel is our product. People are our strength. Research confirms this adage by showing the link between superior human resource management and superior organizational performance. “Along with the intellectual and knowledge property they create, human capital has become the most important intangible asset most corporations possess.” (Jay A. Conger and Edward E. Lawler III, “Human Resource Management: The Role of Boards”, The Handbook of Board Governance, Wiley, 2016, p. 501)

Successful corporations hire the best talent, and devote considerable resources to retain them and keep them engaged. They invest the necessary time and effort to hire the right candidates who not only possesses all the required competencies (see my November 12, 2015 post, Great Leaders: The Competencies Imperative), but who also share their business purpose, values and culture. They stress employee empowerment and engagement. These companies - such as Starbucks, Southwest Airlines and The Container Store - are future-looking, playing the long-game. They invest in better trained and more service-oriented workforces. They promote teamwork and a team culture characterized by sharing and collaborating. A good team always produces better results than individuals working alone. Incentive programs are often team-based. Compensation policies are transparent, fair and generous; senior executives don’t earn disproportionately more than the average pay of all employees. Some provide their employees with a share of their profits (profit sharing or equity). Forward-looking companies create purposeful work environments that challenge and encourage their employees to learn and grow.

The benefits accruing from having engaged and collaborative employees as full-fledged stakeholders are evident. V. Kumar and Anita Pansari cite the following statistics in their article, “Measuring the Benefits of Employee Engagement”, (MIT Sloan Management Review, June 16th, 2015). Businesses with more engaged employees:

  • Outperform disengaged employees by over 20%
  • Have 10% - 15% higher profits versus 0% - 1% in companies with disengaged employees
  • Are 87% less likely to have employees leave the organization

We are in the midst of an historic transition where many companies are starting to recognize that the best way to create value in the long term is to integrate the interests of its multiple stakeholders in a single strategy. The most successful corporate leaders see beyond the sole imperative of quarterly profits. Forward-looking companies understand that sustainability depends on their ability to understand and accommodate the needs of all stakeholders, starting with their employees. The most successful ones (such as Tata, Google and Costco) do already …



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Value Creation in Volatile Times: The Case for Ethical & Socially Responsible Companies

This post is the second in a series on Stakeholders’ Value Creation.

Large publicly traded multinationals are considered by some to be the real centres of power of the global economy in the 21st century, where technology and innovation are integral to success (See James McRichie, The Individuals Role in Driving Corporate Governance, The Hand Book of Corporate Governance, Wiley, 2016). If true, this is both a challenge and an opportunity to shareholders’ long-term value creation.

The challenge, here, is that these corporations are so widely traded, have such vast resources and large global foot prints that they risk being more accountable to management than to shareholders. According to Robert A.G. Monks, a shareholder activist and corporate governance advisor, shareholders’ ultimate right to control corporations is “aspirational at best”. Today’s corporations, he contends, are “so widely owned and so widely traded that they have no owners” (defined by the SEC as 10% or more). Control, in such scenarios, has effectively been separated from ownership (“The Happy Myth, Sad Reality: Capitalism without Owners Will Fail”, The Hand Book of Corporate Governance). Corporate managers thus might end up being too focused on quarterly results to the detriment of considerations of the public good and long-term corporate sustainability.

Large multi-nationals, as well as large privately-held companies, naturally do gravitate to countries offering the best incentives and the lowest corporate tax rates. This, over time, could exacerbate strains between economic winners and losers. Some evidence suggests that wealth inequality measures are the widest ever recorded. (Jill Treanor, “Richest 1 Percent Own Nearly Half of Global Wealth, Says Report”, The Guardian, Oct. 14 2014). This leads to the social and political unrest stirring in many advanced economies.

Conversely, the very power of multinational corporations with their vast resources, global footprint and market orientation positions them well to alleviate these dangerous tensions. These corporations advance employment and reduce poverty through access to new markets, workforce development, product innovation and distribution. Unilever’s purpose, for example, is to make sustainable living commonplace by enhancing the livelihoods of millions of people as it grows its business. (See Unilever’s 2014 Annual Report).

Increasingly corporations are being held to account by their stakeholders - shareholders, employees, vendors, customers, the larger community and the environment. While companies depend on profitability for their existence, forward-looking corporate boards recognize that it is not sufficient in and of itself (see my September 6 2016 post, CEOs & Stakeholders’ Value Creation). The most successful boards are comprised of directors of diverse experiences, expertise, age and gender. They understand that “non-financial” environmental and social issues are risks that can over time impact corporate capital and long-term shareholder value creation. They realize that devastation created by the increasing frequency and severity of natural disasters due to climate change; scarcity of food, water and medicine; and poverty are global existential threats.

Forward-looking boards focus on generating sustainable value for all their stakeholders. They recognize that the interests of each stakeholder complement synergistically the others and lead to the creation of even greater, sustainable, value. These companies codify and publicly state their commitments to ethical, socially responsible and sustainable business practices. A number report on how they perform in the financial, social and environmental areas. There is a clear connection between such a corporate culture and profitability. Research indicates that the performance of stock prices of companies is influenced positively by clearly stated sustainability practices. (See Alice Korngold, “Board Governance for a Better World, The Hand Book of Corporate Governance).

The success of companies to resolve the highly complex and volatile challenges they are facing rests on the excellence of the CEOs, and of the boards of that hire them and provide strong oversight, strategic direction on long-term value creation and support.



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CEOs & Stakeholders' Value Creation

The primary goal of CEOs is to leave a meaningful legacy, something greater than themselves and the organizations they lead. They aspire to accomplish the extraordinary. Today’s legacies differ from yesterday’s. We are in the midst of a historic transition where old paradigms are giving way to new challenges and innovative possibilities.

Based on our experience with high performing executives and our review of the best thinking on leadership, we have determined that the most successful CEOs are purposeful leaders. They create motivated, successful organizations that work well in both human and business terms. While companies depend on sustainable profits for their very existence, these leaders recognize that they are not sufficient in and of themselves. Not all profits are equal. It matters how money is made. David Gregory Roberts, author and former heroin addict and convicted “gentleman bandit”, said it well: “If we can’t respect the way we earn it, money has no value. If we can’t use it to make life better for our families and loved ones, money has no purpose.” (Shantaram, 2004) For purposeful CEOs, leadership includes social responsibility.

As Michael Porter and Mark Kramer contend “profits involving a social purpose represent a higher form of capitalism, one that creates a positive cycle of company and community prosperity.” (“Creating Shared Value: How to Reinvent Capitalism - and Unleash a Wave of Innovation and Growth”, HBR, January-February, 2011) Great CEOs make a positive contribution to society through their organizations. These leaders are self-aware, optimistic, persistent and resilient. Their message is one of hope, respect and compassion. As a seasoned CEO and mentor once told me, “If you treat your stakeholders as children and they will act as children. But if you treat them as adults, with respect and trust, they will act as mature responsible adults.”

The most successful CEOs understand the purpose, values and culture of their organizations. They realise that business is about creating lasting value for all their stakeholders: shareholders, team members, vendors, customers, society and the environment. All are linked, interconnected. This interconnection creates a vibrant circle of harmony where each stakeholder complements synergistically the others and leads to the creation of even greater value, including higher profits.

Ah but the proof is in the pudding. Companies win in the marketplace. Respected companies such as “Southwest Airlines, Google, Costco, UPS, POSCO, Tata, The Container Store, Amazon.com, Whole Foods Market, Nordstrom, Patagonia, Trader Joe’s, Panera, and Bright Horizons have all shown that this way of doing business is leads to multifaceted success over time.” (John Mackay and Raj Sisodia, Conscious Capitalism, 2013)

Purposeful leadership is not for the faint of heart. It calls for great vision, courage and resolve. But the rewards are real and fulfilling. As stewards of all their stakeholders’ values, purposeful CEOs choose service over short term self-interest. They embrace the interdependencies and synergies between them. They inspire all their stakeholders to build an enterprise which is greater than its individual constituent parts. This is their legacy. By fashioning a vibrant circle of harmony between all of their stakeholders, purposeful CEOs create the extraordinary.

We will explore in subsequent posts the role of CEOs as stewards for each of their stakeholders, starting with shareholders.



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Complexity, Volatility, Purpose & Leadership

At the Bonar Institute for Purposeful Leadership, we work with executives who are dealing with the demands of increasingly complex problems in a volatile and uncertain global economy. The most recent example is the immediate and dramatic global reaction to the “Brexit” result. In the past, issues were generally more straightforward and could be solved more quickly and efficiently. Today, executives face problems that typically have no single right solution. How, for example, to respond to the ultimatum from a major client for more customized (and expensive) products at significantly reduced prices? Or, how to square increasing shareholder returns while simultaneously raising employees’ salaries? According to David Dotlich, Peter Cairo and Cade Cowan, these types of issues are paradoxes: Problems “complicated not just by a single set of contradictory forces but by many” (The Unfinished Leader, p. xi, 2014). Our focus at the Bonar Institute is to help leaders effectively manage these issues by helping them accept their inherent complexity and ambiguity, and then develop strategies to move forward.

While problem solving and flexibility remain necessary skills of a successful leader, they are not sufficient. Steven Stein and Howard Book identify in TheEQEdge (pp. 269-271, 2011), four pillars of highly successful leaders:

  1. Being centered, self-aware, straightforward and composed under stress
  2. Taking action, being decisive with follow-through on important decisions
  3. Having a participative management style, excellent listening and communication skills, focus on winning hearts and minds, accountable for their mistakes and imbued with a strong sense of social responsibility
  4. Being tough-minded, assertive, resilient and optimistic

Social responsibility is becoming increasingly important for executives and the companies that they lead.

From our experience with executives, it is their strong sense of purpose, of embracing a reality greater than themselves that brings the characteristics of successful leadership together. This creates the sharp focus that leads to effective, practical and transformational results. A leader’s “most important role is to be the steward of an organization’s purpose” (Nick Craig and Scott Snook, From Purpose to Impact. HBR, May 2014). Successful companies such as Johnson & Johnson, Royal Bank of Canada and Whole Foods identify and embrace the raison d’être of why they are in business. This is their higher purpose. It transcends the sole imperative of superior quarterly earnings. Profits are of course one of the most important drivers of business. But, they cannot be its sole purpose. A company’s higher purpose guides overarching decisions from governance and corporate structure to next generation succession planning to investments, including product development. These corporations align their purpose at the highest level with those of all their stakeholders: shareholders, employees, vendors, customers and the larger community. They devise strategies that engage stakeholders, as well as accommodate their specific behaviours, interests and needs. Business leaders “must never knowingly allow the overall enterprise to be harmed just to benefit one of its shareholders in the short term” (John Mackey and Raj Sisodia, Conscious Capitalism, 2013, p.305).

We are in the midst of an historic transition in corporate governance where the community and the environment are beginning to be seen as key stakeholders. At the Bonar Institute, we offer tailored programs to assist companies and their leaders acquire the skills and mind sets to be agents of change and responsible corporate stewards of our complex, volatile and uncertain world. The most successful companies already are …



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Risk Mitigation for Businesses in Early Stages of Development: The HR Imperative

The dynamics underlying the everyday business situations of companies in early stages of development is a particular focus of the Bonar Institute for Purposeful Leadership. We are currently working on developing an effective and practical customized Leadership Risk Mitigation Program to help investors identify and mitigate the leadership risk component of their investments.

In today’s highly complex, volatile and uncertain economy, risk and expected ROI are very much on the minds of investors. While risk is unavoidable, it can be significantly reduced. The most serious and difficult risk factor facing potential investors in start-ups and businesses in early stages of development deals with the founder-CEO. Investors’ expectations for the business prove over time to be significantly different than those of the founder. In the case of ROI, entrepreneurs often make decisions that conflict with the wealth-maximization principle of the investors (Noam Wasserman, The Founder’s Dilemma, HBR, February 2008).

The following statistics are stark: Within three years of a venture’s founding, only 50% of founders are still the CEOs of their companies ; in year four, the percentage is 40%, and by the time of the companies’ initial public offerings, the percentage falls to less than 25%. Most entrepreneurs are forced to step down. Change in leadership is often stormy and damaging for the prospects of young companies. A caveat: As founder-run companies grow and become mature, they have proven to be very successful at maintaining profitable growth (Chris Zock, Founder-Led Companies Outperform the Rest – Here’s Why, HBR, March 2016). But they are the minority. 90% of all start-ups fail.

The need to have the right leadership in place is the cornerstone of the success of young ventures. However, the attributes of the right leader change as a company grows from early stage start-up to a more mature and complex organization; from founder, to manager to strategic leader. The ROI depends on how well the CEO manages risk, while creating sustainable growth and wealth creation.

According to a recent study, there are four factors that predict start-up success when assessing the strengths and potential of the founder-CEO in the IT sector (See Tucker. J. Marion, HBR, May 3, 2016).

  • Age: Technology favours the young: Younger entrepreneurs in technolog c ompanies are a key success factor.
  • Diverse teams, including gender diversity: High-performing investments have at least one female founder; female-founded IT start-ups outperform all-male teams by 63%.
  • Education: A top education is a significant ingredient for start-up success. Companies with at least one founder from top school perform 220% better than other companies.
  • Experience: Prior work and start-up experience in top tech companies predict success of founder.

    o Investors view this experience highly as a form of pre-screening

    o Acquired hard skills (e.g., project management)

    o Acquired soft skills (e.g., politics and networking)

Other key factors that predict success include alignment among members of the investment group on risk tolerance, their understanding of the complexities of the sector they’re investing in, their expectations regarding the ROI and their expectations of the founder-CEO; and, finally, there needs to be alignment between the expectations of the investors and those of the founder-CEO on the type of leadership required at both the investors and CEO’s tables.

Identifying, assessing and evaluating the areas of alignment and misalignment between the investor group and the founder-CEO, and creating tailored-made coaching and mentoring programs where appropriate, is a crucial element in the work we are doing to mitigate leadership risk for investors in companies in the early stages of development.



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Succession Planning: Skills Gap & Corporate Risk

In our volatile, uncertain, complex and inter-connected world, the challenges facing corporate executives are often outpacing their cognitive abilities. This is undermining the sustainability of companies across North America, Europe and Asia. The need to find the right leader to navigate their corporations through these unchartered waters, teeming with unknown dangers and new opportunities, is paramount.

Increasingly, companies are hiring internal candidates for their top executive positions. Research reveals that CEOs brought in from outside the company succeed less often than those who are promoted from within. (Joseph L. Bower, More Insiders Are Being Hired and That’s a Good Thing, HBR, March 18, 2016). Hiring external senior executives is warranted however in some cases; for example, bringing in a Chief Digital Officer to overcome organizational inertia and to lead digital transformation and innovation. The ideal CEO is one who is promoted from within, but with as wide-ranging experience as possible working in different cultures and countries, a passion for deepening his or her knowledge and a rich network of contacts to broaden perspective. The ideal CEO looks at the “world in a way that allows one to weigh on opposing and contradictory demands and manage them on an ongoing basis.” (David L. Dotlich; Peter, C. Cairo and Cade Cowan 2014, The Unfinished Leader, p. xi) Companies with a history of success and innovation over the long-term, such as Johnson and Johnson and the Royal Bank of Canada, have placed the development of their next generation leaders at the top of their agendas.

Digital technologies are disrupting and transforming the economy. Nowhere is this more prevalent than in the media industry. According to a recent survey of 2,000 c-level executives, media companies anticipate massive disruption to their business models in the next 12 months (72%); followed by Telecom (64%) and Consumer financial services (61%). (Rhys Grossman, Industries That Are Being Disrupted the Most by Digital, HBR, March 21, 2016).

Even with digital strategies in place, the sheer rate of change has created a skills gap. This is undermining established companies, with legacy business models that still generate most of their revenues. It is difficult for companies and leaders to embrace change and break with the past. “Too many companies and leaders, and often the best companies and the most successful leader, struggle with the frustrating reality that the more deeply immersed you are in a market, a product category, or a technology, the harder it becomes to open your mind to new business models that may reshape that market or exciting way to leapfrog that technology.” (Bill Taylor, Companies Can’t Be Great Unless They Almost Failed, HBR, March 21, 2016).

In forward-looking companies, the task of driving growth and finding new meaningful revenue streams is often given to the Chief Digital Offer (or Chief Growth Officer). These companies create a culture of decision-making based on the best available evidence/data, which will enable them to manage the changes that lie ahead. This requires commitment that starts at the highest level of the organization: the board.

The management of board continuity and renewal, along with executive succession, is imperative for corporations. Increasingly, greater gender diversification is driving corporate governance , along with improved mechanisms for renewal of directors based on performance management and accountability.

A proper succession process for top executives requires considerable planning and time, sometimes several years, to implement successfully. The process of nurturing the most promising next-generation leaders within an organization is one of the most serious and complex issues facing business today. It is challenging for corporations, and their boards, to devote the time and resources required to properly nurture these leaders amid the intense pressure to achieve higher quarterly earnings. But those that don’t are falling behind.

The most successful companies understand that leadership development is one of the best investments an organization can make to ensure its future. Today, executive coaching is recognized as a vital component of leadership development. By committing to excellence in their corporate leadership, boards are fostering the enduring success of their companies.



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Reframing: The Hallmark of Great Leaders

The challenges facing today’s corporate leaders often outpace their cognitive abilities. Errors, failures and chaos are an everyday occurrence in the life of an organization – some are small, others are catastrophic such as the 2008 Wall Street debacle. Calamities occur because executives are unable to foresee clearly the emerging issues that will impact their organizations. They lack awareness and/or the skills to chart a different course. These executives are afflicted with what Lee Bolman and Terrence Deal (2003) call the “curse of cluelessness”. They are not the innovative leaders that their companies desperately need them to be. (See my November 2015 blog: Great Leaders: The Competencies Imperative.)

These executives regularly surrender to ingrained mental models instead of seeing old problems in a new light or finding more promising ways to solve persistent challenges. They inevitably do more of what they know. Communications in organizations aren’t always candid, open or timely. When challenges become issues, and issues become problems, some leaders may resort to “artful camouflage” to down play anything that might have a negative impact on unexpectedly poor quarterly results. At times, ambiguity is deliberate. But, more often, the information and processes are so complex and uncoordinated that they are unintelligible. In the end, irrationality often prevails. When companies flounder; it is usually due to managerial error. (See Charan and Useem, 2002.)

Ah… improving management is the answer. Organizations will work splendidly if properly managed. The short answer is rarely. Executives and consultants draw on a variety of approaches to improve their organizations ranging from Six Sigma to Emotional Intelligence. But these approaches, while worthwhile, can easily become dogma, blinding us to other possibilities. There is always more than one way to respond to a problem or dilemma.

An increasingly turbulent, rapidly shifting economy requires contemporary organizations to learn better and adapt faster just to survive. The ability to see things from various perspectives helps redefine situations so that they become understandable and manageable. This ability to reframe is one of the most powerful capabilities of highly successful leaders and the coaches who assist them. Leaders need to find new ways of seeing things. They have to create a coherent and compelling vision for the organization going forward. They need to articulate and communicate this vision so all their stakeholders (employees, boards, vendors, customers) can learn to shift perspectives when needed.

In devising his first telescope, Galileo discovered that each lens he added contributed to a more accurate image of the heavens. Similarly, successful leaders reframe until they have a solid understanding of the situation at hand. They do this by using more than one perspective, more than one “frame”. Bolman and Deal espouse the Four-Frame Model, comprising the following components: Structural (the architecture of an organization; its goals, structure, technology, roles and relationships), Human Resource (understanding people and their relationships), Political (emphasizing power, competition, and winning scarce resources), and Symbolic (focusing on faith and meaning). Each frame is powerful and coherent. Taken together, they enable us to “reframe”, to see the challenge or issue from multiple perspectives.

Research shows that the ability to use multiple frames is associated with greater effectiveness for leaders. When leaders are stuck and nothing is working, reframing is a powerful tool which coaches use to help executives initiate, effective, practical, meaningful and lasting change.



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CEO Performance and Board Oversight

Corporate governance is under increasing scrutiny. Intense competition, a shifting marketplace, increased regulatory review and activist stakeholders - these are the hallmarks of the myriad complex challenges facing today’s corporate boards. Directors are the stewards of their corporations. They are elected by shareholders to oversee the management of their organizations with the goal of increasing long-term shareholder value.

The board has the fiduciary responsibility to assess management’s performance and effectiveness. Its key functions include setting the organization’s strategic goals; the hiring, compensation and performance review of the CEO; succession planning; development strategies for key senior executives; and leadership’s readiness to deliver on the corporation’s goals.

In this heightened environment of governance accountability, boards are compelled to govern at levels once considered the exclusive purview of management. The immutable line between the roles of governance and management is blurring. Boards and management are defining their roles and responsibilities according to the particular situation unique to their organization. Nowhere is this more pronounced than in crisis situations (e.g. severe tensions between the board and the CEO, the abrupt departure of the CEO…).

The successful hiring and development of effective CEOs is especially challenging. The Economist (October 10th, 2015), notes that “confidence in business leadership is at a record low”, and fewer than 50% of respondents in an opinion poll trust CEOs. Furthermore, according to recent academic studies, one in two leaders is deemed a disappointment, incompetent, miss-hire or complete failure. In my experience, ingrained mental patterns which have been successful yesterday, may no longer be so. A strong track record of accomplishments does not guarantee an executive’s success today, let alone tomorrow.

Another serious issue facing corporate boards is CEO compensation. Some say that a CEO’s salary should be left solely to market forces. However, CEOs often command high compensation regardless of the financial performance of their companies and of the state of the economy. According to a study cited in Forbes (Susan Adams, “The Highest-Paid CEOs are the Worst Performers, New Study Says”, June 16, 2014), the higher a CEO’s compensation, the worse the company’s success over three years in terms of stock valuation and accounting performance. Chiefly, this is due to hubris: some highly paid CEO’s ignore differing opinions, their own limitations, and act according to what they have convinced themselves is right.

In 2013, 23.8% of CEO turnover in the US was due to dismissals (The Conference Board). The situation is no better for new externally hired or promoted executives. From 40% to 64% of these executives leave their jobs (voluntarily or otherwise) within the first 18 months of being hired. Many more underachieve. (See my blog, Great Leaders: The Competencies Imperative, November 2015).

The conequences for a board of not addressing purposefully the issue of CEO oversight, including leadership development, can be dire. Boards can find themselves with CEOs who lack required competencies such as:

  • A strategist who can’t deliver actionable plans.
  • A business or operations leader who can’t lead change.
  • A visionary who doesn’t pay careful attention to the bottom line.
  • A leader who can’t see beyond the ordinary, to identify new possibilities and the potential for the extraordinary.
  • An executive who lacks the emotional intelligence to manage effectively, losing key personnel.

The most successful organizations are those with strong corporate governance, and effective oversight of their human capital. To foster excellence in their senior executive leaders, boards understand that leadership development is one of the most important investments their companies can make.



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Great Leaders: The Competencies Imperative

Many believe that business leaders have the requisite competencies to manage their companies capably. Ah, but do they? At the Bonar Institute for Purposeful Leadership we see many clients struggle, some stumble, as they move into new management positions.

In a recent issue of The Economist (October 10th, 2015), we read that “confidence in business leadership is at a record low”. Fewer than 50% of respondents in an opinion poll trust CEOs. (Endelman, 2014). And, according to academic literature, one in two leaders is deemed a disappointment, incompetent, mis-hire or a complete failure.

The current macro-economic situation, characterized by unusual uncertainty and volatility, is posing significant challenges to corporate executives. The world is becoming ever more turbulent and complex, and ingrained mental patterns which may have been successful yesterday, are no longer so. A strong track record of successes does not herald an executive’s success today, let alone tomorrow. The title of Marshall Goldsmith’s celebrated book: What Got you Here, Won’t Get You There (2010) comes to mind. The challenges facing leaders often outpace their cognitive abilities. It is difficult for them to be the innovative leaders that their companies desperately need them to be.

The situation is no better for executives new to their positions – either external hires or those who are newly promoted. Shockingly, according to a Corporate Executive Board Recruiting Round Table survey, 89% of new US executive hires indicated that they did not have the optimum level skills to do their jobs. And, from 40% to 64% of new executives leave their jobs (voluntarily or otherwise) within the first 18 months of being hired. Many more underperform. (M. Watkins, 2003, cited in Centerstone, 2014).

Is this due to some deficiency in the recruitment process? Are executive recruiters to blame? Typically, executive search firms do an excellent job in identifying and screening exceptional candidates for their clients. Often however the rigour, focus and attention given to the recruiting process don’t carry over to a commitment to successfully integrate new executives into their new roles, and to addressing the skill gap many invariably have. In the case of internal hires, they are promoted to executive ranks based on a record of past achievements and on senior management’s recognition of their potential to assume greater responsibilities. It is not the recruitment process that leads to so many new executive hires underperforming; rather, as noted above, it is that few hires possess all the required competencies to do their jobs at the highest level. Corporate orientation programs are not adequate for this purpose; and learning on the job, which is the fate of approximately half of the executives in at least one survey (Career Partners International, June 2014), is mostly insufficient.

The consequences for a company of not addressing purposefully the skills deficit of its executives can be dire:

  • A leader who can’t see beyond the ordinary, to identify new possibilities and the potential for the extraordinary.

  • A visionary who doesn’t pay careful attention to the bottom line

  • A strategist who can’t deliver actionable plans

  • A business or operations leader who can’t lead change

  • An executive who lacks the emotional intelligence to manage effectively, losing key people.

In some cases, these deficiencies can be fatal.

The most successful companies have prospered over many generations through innovation; they are guided by strong, insightful and accomplished leaders. They understand that leadership development (of its current and new executives) is an essential investment to ensure their future. Today, executive coaching is recognized as a key component of leadership development. Corporations consider it as a vital investment in its senior management. By fostering excellence in their executive leaders, corporations understand that they are nurturing the success of their entire organization. Leadership development is one of the most important investments a company can make.

Is your company making the necessary investments in its leaders to compete and thrive in an uncertain and volatile economy?



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Are You Overwhelmed While Other Leaders Thrive?

Today’s headlines point to an economy in a state of unusual volatility and uncertainty.

The ongoing energy sector meltdown, the decline of metals, minerals and gold prices, weak aggregate demand, as well as a Chinese growth and currency crisis have all been contributing factors. The mixed global economic outlook led the US Federal Reserve Chair, Janet Yellen, to announce that the Federal Reserve would not increase interest rates following its most recent Board meeting. The Bank of Canada twice this year lowered it overnight rate target – it now stands at just one half of one percent. The current macro-economic situation is, no doubt, posing additional challenges for many senior executives of North American corporations.

In my coaching practice, I have a number of clients who are challenged by many serious and complex issues ranging from the ongoing viability of their companies, to changing the corporate culture, to successful succession planning and executive renewal. This is compounded by the severe time pressures weighing on them in our 24/7 connected world. Some feel as if they are just doing whatever it takes to get things done by squeezing everything into “in-between” or “on-the-way” moments. They know deep down, however, that they will never be able to get it all done. “At least that’s out of the way”, they tell themselves; only to realize that they are falling farther behind. These executives feel an urgency to have more time. “If only I had fifteen or more hours a week” is a refrain I frequently hear. And many try bravely, even heroically, to find them, neglecting health and family. Is it any wonder that these executives are anxious, sleep-deprived, and lose perspective? They are caught up in old patterns that no longer serve them, and which stop them from being the leaders they can be, and that their organizations desperately need them to be.

Successful leaders, on the other hand, cope and thrive in these trying situations. Paradoxically, they do this by slowing down. The most effective leaders choose purposeful, mindful, awareness over impulsive reaction. They embrace the need for reflection, consultation, strategizing and, yes, physical exercise. They make sure to carve out time from their busy schedules accordingly. These leaders elect to delegate the important and routine to concentrate on what they feel can make a real difference. They search out new, innovative, ideas that can help their organizations move forward successfully. They simplify complex situations into easily understandable components, and prioritize them according to their organizations’ strategic directions, ROI and ease of execution. Successful leaders diligently analyse the issues they are facing with a fresh perspective. They see old problems and patterns in a different light and they will find some promising ways to work on perennial challenges. They search for the opportunities that often lie hidden within the issues they are confronting – if but seen through a different lens.

While successful leaders are not immune to anxious moments, they have the resilience and inner resources, including a strong belief in their capabilities, to achieve practical, effective and lasting results. They demonstrate the confidence, creativity, flexibility, discipline and insights to successfully manage the unexpected.

In our ever more turbulent and complex world, the need for aware, purposeful and successful leaders is paramount for the health of the companies they lead and, more generally, of the overall economy. Typically, senior executives lack an adequate support system. Overwhelmed executives need assistance and guidance to be successful, while purposeful leaders often need support, perhaps in the form of a confidante, to help sustain them.

A good mentor or an experienced executive coach can offer valuable assistance by providing leaders with perspective, insights and feedback within a safe and confidential environment. Increasingly, successful organizations see this as an investment well worth making.



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Avoiding the Rush to Action

In my coaching practice, I encounter executives who are confronting unexpected crises, some which even threaten the ongoing sustainability of their businesses. The pressures on these leaders are great. They feel an urgency to act - quickly - to mitigate the risk to their organizations; and, longer term, to implement strategies and tactics to avoid any recurrence. They also feel compelled to be seen by their superiors, boards, markets to be on “top” of the situation. They feel their careers depend on successfully dealing with the problem; and most often they are right. Typically, these leaders’ instincts are to rush to action. I can relate to such scenarios, having managed similar situations during my career.

Avoiding the rush to action doesn’t mean inaction. Rather, it means recognizing that the risk of acting, or more accurately over-reacting, hurriedly to a crisis is significant. Without taking sufficient time to properly analyse the nature of the crisis (notably its often complex root causes, along with its immediate and future impact on the business), leaders frequently repeat the same actions that were effective in the past, but which are no longer so today. The title of Marshall Goldsmith’s celebrated book: What Got You Here, Won’t Get You There (2010) comes to mind. In rushing to action, it is difficult to be fully aware of the contextual reality of the current, evolving, situation. Successful leaders know this frequently leads to mistakes, leading sometimes to disastrous consequences; and they act accordingly.

In times of crises, the most successful executives are calm, alert, attentive, self-aware and highly inquisitive. By resisting the rush to action, they purposefully separate the veils of their routine activities. They purposefully set aside personal and corporate biases, and are open to new outcomes. They distinguish the unimportant from the important and urgent. They are focused on what truly matters. Their visions are fresh. Beyond the ordinary, these leaders see new possibilities and the potential for the extraordinary. This often fosters meaningful insights, which in turn lead to purposeful, actionable solutions and the lasting results their organizations require. Paradoxically, then, by avoiding the rush to action, these purposeful executives achieve effective, practical and lasting results more quickly.

Purposeful leaders are successful leaders. The effort required to achieve positive results should not be underestimated however. Niccolò Machiavelli said it well:

There is nothing more difficult to take in hand,
or more perilous to conduct, or more uncertain
in its success, then to take the lead in the
introduction of a new order of things.

Senior executives often lack an adequate support system. Many feel isolated, with almost no one to talk to openly on the significant business challenges they are facing. This is especially true for CEOs. With whom can they discuss their dealings with their direct reports, or with board members? And, to whom can they safely confide in about painful personal issues that are weighing heavily on them?

A good mentor or an experienced executive coach can offer valuable assistance by providing perspective, insights and feedback within a safe and confidential environment to assist executives to be the purposeful leaders their organizations require. Successful organizations see this as an investment well worth making.



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Why New Leaders Fail

In my coaching practice, I see organizations struggle because they fail to offer key executive hires the support they require to successfully integrate into their new organization, their new position, and to learn the intricacies of the corporate culture. This support is a process called executive onboarding; it aims to build new executive hires’ effectiveness and impact on the business as quickly as possible. This is especially important if the executive is an external hire from a different industry. In the case of external hires, executive search firms normally do an excellent job in identifying well qualified candidates to fill key executive positions. Typically, their mandate does not include ongoing support to effectively integrate these executives into their new roles. In the case of internal hires, they are often promoted to executive ranks based on a record of past accomplishments and on senior management recognition of their potential to assume greater responsibilities. Regrettably, however, these recently promoted executives often lack some important skills required for their new positions. Corporate orientation programs are not adequate for this purpose; and learning on the job is often insufficient.

The consequences for a company of not providing newly hired executives proper support can be dire:

 89% of new US executive hires indicated that they did not have the optimum level of knowledge and skills to do their job (Corporate Executive Board Recruiting Round Table survey);

 40% of all executives who change jobs or get promoted fail in the first 18 months - this number has remained steady for the past 15 years;

 64% of new leaders without previous industry-specific experience fail within 18 months.

The estimated financial cost of replacing a new executive within 18 months of hire is roughly three times the leader’s first year salary (Career Partners International). The cost is much higher when lost productivity and opportunity costs are factored in. When an executive position turns over in a short period, team productivity is greatly impacted and the credibility of the leadership team may be tarnished. In addition to the new replacement hire’s learning curve, each incoming executive brings new strategic intentions, and reorganizes and redirects the activities of team members accordingly.

Even if new leaders remain with the company, they may never reach their full potential. Many factors contribute to this (e.g., lack of role clarity, failure of the organization to deal effectively with resistance to new leadership etc.). But, the new executive’s inability to manage the perceptions that others have of him or her during his first months on the job is chiefly responsible; this shortcoming can be fatal. If companies were to commit to executive onboarding as an integral part of the executive hiring process, there would be fewer failures.

When executed properly, executive transitions develop capability for people and for organizations. Executives get a new assignment that can build and broaden their experience, often at earlier stages in their careers. Organizations get new leadership to energize the company and advance its strategy. Boards, as well, fulfill their succession and governance responsibility. An accomplished executive coach, with a keen understanding of business issues, can assist newly hired/promoted executives to position themselves for success.

The very best companies have prospered despite the ravages of time over many generations through constant innovation. They understand that executive onboarding is a key component of leadership development. For these companies, leadership development is not a cost, but an essential investment to foster their competitive advantage in an ever changing business environment.



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Organizational Change: From Cluelessness to Reframing

In a world that is becoming ever more turbulent and complex, organizations are pervasive and dominant. The challenges facing leaders often outpace their cognitive abilities. Indeed Lee Bolman and Terrence Deal (Reframing Organizations, 2003) speak of the “curse of cluelessness” that afflicts many leaders. These executives have great difficulty in “surrendering ingrained mental models instead of seeing old problems in a new light or finding more promising ways to work on perennial challenges.” They inevitably do more of what they know. In the end, irrational forces most often prevail. And more often than not, the companies they lead founder due to managerial error. (See Charan and Useem, 2002.)

Ah, improving management is the answer. Organizations will work splendidly if properly managed. The short answer is rarely. Executives and consultants draw on a variety of approaches to improve their organizations ranging from Six Sigma to Emotional Intelligence. But these approaches can easily become dogma, blinding us to other possibilities. There is always more than one way to respond to a problem or dilemma.

Leaders need to find new ways of seeing things. They have to create a coherent and compelling vision for the organization going forward. They need to articulate and communicate this vision so all their stakeholders (employees, board, vendors) can learn to shift perspectives when needed.

In devising his first telescope, Galileo discovered that each lens he added contributed to a more accurate image of the heavens. Similarly, successful leaders reframe until they have a solid understanding of the situation at hand. They do this by using more than one perspective, more than one “frame”. Bolman and Deal (2003) espouse the Four-Frame Model, comprising Structural, Human Resource, Political and Symbolic components. Each frame is powerful and coherent. Taken together, they enable us to “reframe”, to see the challenge or issue from multiple perspectives.

Research shows that the ability to use multiple frames is associated with greater effectiveness for leaders. When leaders are stuck and nothing is working, reframing is a powerful tool which coaches use to help executives initiate effective, meaningful and lasting change.



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Coaching as Alchemy

What a wonderful metaphor for the coaching experience. As the sacred practice of alchemy transforms base metal into gold, and transmutes physical consciousness into higher awareness, the experience of being coached by a master fosters the personal and organizational transformation of even the most successful executives as leaders.

The first phase of this transformation involves “unfreezing” the leader’s perceptions of herself and the world, of her leadership, management style and impact on others*. The masterful coach aids the executive, by asking powerful questions and providing pertinent and timely feedback, to become self-aware, to see herself as others see her, to become open, ready, and vulnerable for the work ahead.

Many people are caught up in old patterns of thinking and of behaviour that no longer serve them. Leaders are no exceptions. Old patterns often impede executives from being the leaders they can be, and that their organization needs them to be. So, the second phase of the coaching process entails intervening in the context of the leader. How? 1) By distilling the feedback the coach has received about the executive he is coaching in a 360-degree process. 2) By understanding, distinguishing and articulating the existing patterns that shape the leader’s reality. And 3) by identifying and articulating with the leader new enabling patterns, a new context – such as being collaborative rather than predominately directive.

The last phase of the process requires the executive to set, to crystalize, and to integrate the new patterns, the new context, that the coach and the leader have worked together to create. For this to be truly effective and lasting, the leader has to focus on a positive vision of the future. The coach helps the executive to imagine, visualize and feel how she is going to be different, think differently and act differently going forward. In a word, the coach is helping the leader to make this new future state present, real, one step at a time.

Transformation is not easy or fast. It requires the firm commitment of the leader to achieve effective, practical and lasting results. Coaching fosters the personal and organizational transformation of high performing executives as leaders.

*See Robert Hargrove 2010.



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Ruthless Compassion? Really?

"Ruthless compassion” may appear to be an oxymoron. But, if we think of it as a form of “tough love” adapted for executive coaching, it takes on real meaning.

The role of an executive coach is to ask powerful questions and to provide meaningful feedback in the form of observations and assessments. This allows the coachee to identify what is holding her back from taking successful, sometimes transformational, actions. But, what is holding back our leader? Often, she cannot see herself as others see her. She fails to detect and correct her errors because she is unaware of them.

The first phase of the coaching process involves “unfreezing” the leader’s perceptions of herself, of her leadership, management style and its impact on others*. The masterful coach provides the executive with honest and timely feedback so that she can see herself as others see her, and become open, ready, and vulnerable for the work of transformation ahead. But, if our coachee is “blind” to her current state of being, the task of having her hear our questions and integrating our feedback will very difficult indeed.

This is where ruthless compassion and meaningful feedback intersect.  As coaches, we are committed to making a positive difference in our coachee’s life, to transform her roadblocks into opportunities. To do so, we need to penetrate her “blindness”, to allow her to see the world and herself as they truly are. While being always professional and sensitive to the leader’s needs, we have to ask difficult and often painful questions. According to Robert Hargrove*, it is by discussing the “undiscussable” that masterful coaches get to the nuggets of truth that make our feedback meaningful for our coachee and lead to transformational breakthroughs.

The second phase entails intervening in the context, the old patterns, that are stopping the executive from being the leader she can be, and that her organization needs her to be. How? 1) By distilling the feedback the coach has received about the executive in a 360-degree process. 2) By understanding, distinguishing and articulating the existing context (patterns) that shape the leader’s reality. And, 3) By identifying and articulating with the leader a new enabling context, new patterns, e.g. being collaborative rather than a lone-ranger.

The last phase of the transformation process requires the executive to freeze, to crystalize, and to integrate the new context that the coach and the leader have co-developed. For this to be truly effective and lasting, the leader needs to imagine, visualize and feel how she is going to be different, think differently and act differently starting immediately. If there is no firm commitment on the part of the leader to make this real in her life, the coaching will fail and our leader and her organization will suffer ….

 

* See Robert Hargrove (2010, p.95 and 315, and 2000, pp. 218 – 238)



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What Balance? It's about Survival!

As an executive coach, I recognize the importance of work-life balance. I even offer a program to help stressed-out executives manage the tension, often dynamic but sometimes toxic, between work and personal time. Then one day, a prospective client told me pointedly: “There is no balance where I work, period! The best I can hope for is to survive. I regularly leave home Sunday night on business trips in various cities, with meetings typically starting at breakfast and ending with a late dinner. Then, I get back home on Thursday night, and have to be back in the office at 8:00 Friday morning for a management meeting.” She went on to say, “Show me how to survive and I will gladly give you my business!”

After giving this considerable thought, I have come to the conclusion that without some kind of harmony between her business and personal life, this executive will most probably burn out – no matter how resilient she might think she is. So the question then becomes how do we create harmony in a survival-mode environment?*

Avoid busyness, be present: We often adopt feverish activity to mask our inability to deal with the real underlying issues confronting us. With no respite in sight, we can fall prey to growing, snowballing, worry. By being present on the other hand, we can see more clearly the true nature of the issues and what possible solutions may be available. This awareness leads to informed, purposeful, action.

Embrace Change: Many of us resist change until things, the pain, become unbearable. Why? The reasons are many, but chief among them is fear of change and the risks of loss associated with the unknown. “Better the devil we know”. But change is inevitable in business as in life. We may choose to resist it. But it is at our peril. Rather, if we approach change with openness and curiosity, the transition will be much easier.

Simplify and simplify some more: When we keeping adding to our to-do list, without taking anything off, our productivity, creativity and well-being will inevitably suffer. This is common-sense, yet it is often ignored.

To be effective, our executive will need: (1) To prioritize, and to take off her to-do list an existing item for every new one she adds. (2) Under-promise and over deliver. Many of us do the contrary, which can seriously damage our reputation. (3) Say NO! Yes, it is very hard to say no to the boss… But, it is far better to say no, than to say yes when saying yes will ultimately lead to failure. And 4, Build up reserves. To be efficient, our executive will have to concentrate on being present, to be aware of what is working for her and what isn’t; to be organized, to have sufficient down-time and outside interests, and to laugh…

In working on these steps with my client-to-be, I am convinced I can help her not only to survive at work, but to thrive…

  • The following draws largely from Coaching Out of the Box’s Personal Groundwork for CoachingTM.


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Poor Skills Limit Growth

During a recent coaching session, an executive complained of a phenomenon in her company that is limiting revenue growth: younger employees’ poor sales skills. We explored a number of possible reasons for this ranging from inadequate hiring practices to the need for better training to improved mentoring of younger employees. All had been tried, with little success. According to this executive, the problem goes beyond her company; she feels it is an industry-wide issue.

We discussed how prolonging the working life of older employees might mitigate the extent of the problem, at least in the short-term. This would involve effectively managing the strengths of older employees, leveraging their talents and their energies. I believe the following themes are relevant:

Intellectual: Self-awareness is the necessary first step. Older employees must acknowledge to themselves that they no longer have the energy and resiliency they once had. Ideally, these employees would also acknowledge their age-related limitations to their bosses. This requires uncommon courage on their part and genuine openness on the part of employers, which still few seem to have. Frequently, older employees are no longer able to do what they easily did only a few years earlier. To be successful, they must analyse their limitations and manage them.

Physical: Earlier in their careers, these employees responded to stress in the work place by working harder and longer. Often, they exercised little or not at all. No time, they said. Then they would wolf down the wrong food at irregular hours. And, often, they would get insufficient sleep. “Who needs sleep?” They were resilient; they were young. Now health suffers. They must work hard to sustain their bodies in order to be effective.

Emotional: As they age, many employees become preoccupied with fears and concerns, mostly (but not exclusively) financial: How will I survive “retirement”? This self-absorption drains energy and impedes performance; they have less energy for positive action. Yet, positive action leads to creativity and resilience, and helps alleviate the isolation many feel. It is central to an active and productive work life.

Purpose: Purpose is the source of energy, focus and power. Our spirit is renewed when we reconnect to our sense of purpose and to our deepest professional and personal values. This translates itself at the most basic level by telling the truth to ourselves about ourselves: Do I still want to work for this organization? Am I happy? Purpose enables us to live and work with passion, and to reach for our dreams. It is transformative.

Self-awareness, physical and emotional well-being, and purpose are necessary components to effectively manage the strengths of older employees, and to leverage their talents and their energies. But, leveraging older employees to mitigate the shortcomings of younger ones is a short term solution. Older employees will at one point be unable to work and have to be replaced. Real solutions still need to be found… I plan to write more on this topic in the coming months.



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The Silver Tsunami, Skill Shortages and Ageism

In the past while, a number of my executive coaching clients have shared with me their experiences with skill shortages and ageism.

Only a few years ago, the world was, some say still is, facing an unprecedented war of talent and competencies. Two critical shifts in workforce demographics were creating an alarming brain drain throughout the world: First, the retirement of the baby boomers, the workforce’s largest segment. And second, the declining birth rates in Western countries. These shifts lead to severe labor shortages and a critical loss of both skills and corporate knowledge.

Many people believed that young people would fill the gap. However, a great many young people are woefully ill prepared for the demands of the knowledge economy. An estimated 70% - 90% of new jobs in North America will require a college degree over the next decade. Yet, only some 35% of 25-29 year graduated from university in the US in 2012. Today, many of today’s youth are seen as a “lost generation”, unable to find meaningful employment.

If not youth then, immigration would surely fill the gap. This was perhaps true once, but no more. Asia, for example, is now having its own skilled labor problems – ranging from airline pilots to lawyers and judges, doctors, accountants... And it’s getting worse with its increasing affluence. So no, immigration and globalization are not the answer to the silver tsunami.

Well then is retaining older employees the answer? Increasingly retirement is seen as a quaint 20th Century custom, which fewer and fewer older employees can seriously hope-for and organizations can ill afford. Many organizations recognize the need to preserve invaluable know-how.

Executives in the late stages of their careers are seen by some as part of the most innovative and creative generation the world has known, as least since the Enlightenment, some 300 years ago. These are the leaders that we need to help weather the silver tsunami. But, by working longer, sometimes well into their so-called golden years, these executives are holding on to jobs that younger employees feel should rightly be theirs. As diverse generations cross paths at work, we see clashes of attitudes, ethics, values and behaviours that result in misunderstandings and conflict. According to a survey a few years ago by Monster.ca, more than half of Canada’s younger workers have a deep resentment of the boomer generation. Younger employees also don’t value the boomer do-or-die work ethic. They place greater value on work-life balance. They believe their performance and pay should be judged on results – not time spent on the job. And when younger workers rise to management roles, they often put little value on the skills of older subordinates.

The silver tsunami, skill shortages and ageism is one of the most serious and complex issues facing business today. Intergenerational work groups are typically seen as one of the most promising solutions. Another calls for older leaders to learn the talk of younger ones. But, these solutions seem partial, insufficient to me. I sense that other, more innovative processes are required for organizations to survive and thrive in the increasingly knowledge-based economy. I expect to write more on this in the future.



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An Enduring Myth of Business Innovation

One of the mantras we hear most often in business is that we need to innovate in order to compete and to be viable. In scouring the best thinking on business innovation, we have discovered that innovation is not a revolution; it is evolution and execution. It is the successful implementation of creative ideas within an organization. It is about challenging whether the business has the right business model. Consistently successful organizations have clear processes around innovation.

In the business world, the distinction between innovation, value creation, value extraction and operation execution is often blurred. This has led to the acceptance of a number of myths as conventional wisdom. Perhaps the most enduring is that the breakthrough idea is key to innovation.

But this is rarely the case. We can all identify companies that have become industry leaders due to a breakthrough, transformational idea. We also know that these companies are few and far between. Indeed, the established business models of many organizations are somewhat less than optimal. Increasingly, executives recognize that their companies’ long-term successes rest on the ability to better understand future trends and to identify their impact on existing operations and strategies. Their refrain is innovating is better than waiting. Executives cannot move fast enough to find the solutions they require in the constantly changing global economy. They search for new ideas, methods and techniques. They create new experiments, new pilot projects and new networks of collaboration. In short, they are searching for seminal ideas that will drive transformational change.

This type of innovation is disruptive in nature. Disruptive innovations either create new markets or reshape existing ones by delivering relatively simple, convenient, low-cost innovations to a group of customers who are ignored by industry. From a technological perspective, disruptive innovation is most often the domain of small companies that are new to a market. Typically, established companies will avoid disruptive technologies and products that lower profits and, they fear, kill the market. This opens the door to entrants who offer products that are simpler and less expensive. Their success leads ultimately to a paradigm shift within the market sector.

Disruptive technology doesn’t just occur. It is messy and halting. Disruptive products frequently take a number of years to realize their full potential. All the while, companies must continue to hone their new business models and innovate beyond their first products.

Disruptive innovation ultimately restructures the very essence of what has existed previously. It reflects a change in the very nature of an institution, concept, method or technique. The challenge for managers is that while transformational change is essential to new growth, organizations must not neglect their core offerings. Profits generated from the core offerings are essential to fund initiatives leading to transformational change and sustainable growth. The key is to put in a set of processes that can simultaneously balance disruption and attention to the core. This point may appear obvious, but it is often forgotten.



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