Are we overpaying our executives...

Blackberry recently announced a major shakeup in their executive roles as part of an ongoing restructuring plan.  Thorsten Heins stepped down as CEO less that two years after assuming the position, a period during which the stock value declined to near all time lows.  For his efforts he departed with a package in the range of $14 million dollars or roughly $21k for every day he held the job.  That means that on a long weekend he earned more than the average employee earned in a year.  And he FAILED.  Apparently he was only able to walk on water when it was frozen. 

Details from company documents suggest that his package could have been worth as much as $55 million if the company had changed hands and there had been some success from his efforts.  That translates to something in the order of  $82k per day meaning that on that same long weekend his income would have put him in the top 1% of all Canadian income earners in a YEAR.

But poor Mr. Heins compensation pales by comparison to the most noted failure in Canadian corporate enterprise.  That distinction falls to John Roth who rode Nortel from a net worth of over $350 billion to ultimate bankruptcy.  His tenure as CEO lasted less than 1400 days and yet reports say he earned something in excess of $130 million, much of it in stock options, before the company collapsed.  In simple terms, Mr. Roth earned in excess of $90k for each and every day that he was in control.  That is roughly 4.5 times what Heins earned to fail at Blackberry - and that is not adjusted for inflation.

Statistics Canada data for 2011 would put Mr. Roth's income for a long weekend in the top 1% of all ANNUAL wage earners in the country.  I can only imagine what he might have earned had Nortel succeeded.  Regardless, it is small  consolation for the 55,000 pensioners who have had their benefits slashed as Nortel headed towards its demise.

These examples are, admittedly, at the extreme end of the executive compensation debate.  But they are not wildly at odds with the present day reality of Canadian corporate compensation. 

Somehow there has been this fallacy develop that suggests that there is only one person capable of leading a company to success.  Therefore it becomes necessary to essentially pay whatever it takes to get that person to commit to the role.  To this notion I have just one word...hogwash.

In the two examples that I quoted, both men were quickly replaced.  Apparently the talent pool may not have been that shallow after all.  Microsoft is currently seeking a replacement for Steve Ballmer.  The selection committee is said to have started with a list of about 100 potential candidates before quickly working it down to about 20.  For a company that large and successful it appears that there really is more than one person who has the qualifications to be their next leader.  So it begs the question '...if it works at Microsoft, what makes other companies so unique that there is only one candidate to lead...'

Please don't get me wrong, I am not against a well paid CEO.  But is the boss at Royal Bank really worth 360 times more than the average teller.  Gordon Nixon made about $12.6 million versus a tellers wage of $35k.  What bothers me the most is not the salary of $1.5 million.  Rather it is the bonuses of $11.1 million for simply doing the job for which he has been hired.  If the Bank can justify a bonus almost 8 times the base salary, why are the tellers not in line for another $275k per year for their work. 

Very often the bonus consists of stock options.  And while there is no guarantee that the stock value will improve, there is no risk to the option holder if it does not. It strikes me that if someone is going to benefit from stock options, there should be more risk in the equation.  Perhaps an executive needs to hold personal company stock that represents 50% of the value of options that are granted.  In this way the individual bears some of the same kind of risk that any shareholder carries.

There are no quick and easy answers to this issue.  It is unlikely that we will see a CEO step forward to say that they are over-compensated.  And I don't see legislation as the appropriate answer.  I would be interested in your thoughts so that a future posting can present some options.
 

Put and end to New Year's Resolutions

As I sit to write this posting, January is approaching quickly.  Although there is no practical difference between December and January, most people feel that turning that page on the calendar somehow imparts an opportunity for renewal.  They can mentally put the past year behind them and they can begin to look forward to the days ahead with a renewed optimism.  It is almost as though some mystical power had been preventing them from reaching certain goals or achieving objectives that they knew were important.  But by turning the page they expect to break that spell and move in a positive direction.  And so we make resolutions...

Sometimes we write them down and, for added emphasis, we post them prominently.  Others will share these resolutions with friends in the expectation that this will make them more real.

Every January the membership roles at fitness centres take a jump.  Those resolutions for a healthier lifestyle or weight loss find hope inside these sweaty walls.  And for several days, even weeks, the crowds jostle for room in the fitness classes or on the equipment .  But then, almost as quickly as the numbers grew, they begin to decline.  By mid-February class sizes are back to normal and the regulars are able to get their treadmill of choice without issue.

The problem with resolutions - whether in our personal lives or our professional lives - is that, for most, they are only an expression of hope or desire.  The saying that the road to hell is paved with good intentions was surely born of failed resolutions.  Until that hope or desire is translated into a COMMITMENT CONFIRMED THROUGH ACTION, it will remain only an unfulfilled wish.

At the same time we need to recognize that there is nothing special about January 1st.  We all have things we need to change or goals we want to accomplish that we continue to defer to some future date.  It is so much easier to create the list than to do something about it. 

NOTHING WILL GET DONE UNTIL YOU COMMIT TO DO IT AND SET IT IN ACTION.  And that can be done any day of the year.  I committed to a healthier life in November 2012 and I have been pretty faithful in attending the local YMCA 6 days a week.  I am a lot healthier and stronger.  But I am not lighter.  Why...because I have not committed to eating fewer cookies and candies.  I have used my workouts almost as an excuse to reward myself more often.  This is a commitment to change that I need to address and no resolution will do that for me.

Don't wait.  The folks at Nike hit it on the head...JUST DO IT!  Whether it is part of your strategic plan at work or a personal priority, a resolution remains only that...until it is done. Commit and act; don't write and hope.

 

Why male executives are afraid...of women.

In survey results reported today in the Globe and Mail, a large majority of male executives are unconcerned that there are few to no women on their boards of directors.  Over 60% of respondents had no women on their boards and the average proportion of women on boards was only 9%.  The respondents stated that they were not discriminating against women but rather the problem was that there were insufficient numbers of qualified candidates to fill roles.

WHAT A LOAD OF NONSENSE. 

MBA programs across North America have been graduating women since the first classes started in the early 1960`s.  Today, leading institutions such as the Harvard Business School have female enrolment in the range of 40-45%.  Clearly over the past 50 years there have been a large and growing number of women executives who have the competence to take on director`s roles.  The fact that few are seen as having the qualifications to become directors is a direct reflection of the discrimination that continues to exist in the `old boys network` that controls the executive levels of so many corporations in Canada and across North America.

Why are these male controlled companies so concerned of a woman`s influence on their boards.  In a word...FEAR.  Internally they recognize their own incompetence but amongst `friends` they know that they do not need to be concerned about being exposed because they hold secrets on the other members.  But if the sanctity of the network was to be altered by a non traditional member, they risk losing some of their leverage.  So close the ranks; circle the wagons; lift the drawbridge. 

Let`s disregard the fact that women make most of the purchasing decisions in the family.  From the food on the table to the car in the garage, women make the majority of these decisions. 

Disregard the fact that women represent a large and growing percentage of the workforce in such notable careers as business, law and engineering.  These just happen to be the pool from which large numbers of directors are selected.

And disregard the fact that women typically bring an entirely different world view and set of `soft` skills to the table which could provide a more balanced opinion on strategies, initiatives or mergers and acquisitions.

Some companies have the resolve to look past gender in their selection of executive and board members.  Yahoo, General Motors, HP, IBM and Facebook are just a few who have female executives in place.  None of these companies was desperate to select a women.  It was not some knee jerk reaction to public opinion.  Rather it was simply a sound business decision. 

If these industry leading companies were able to find the necessary skills and character in a woman, how can any fair minded male executive suggest that there are insufficient numbers of women to fill more that 9% of board positions.  How can 60% of companies have no women on their boards and suggest that it is ok.  It is inconceivable and offensive.  And it is detrimental to both the short and long term health of these companies.

If men would stop comparing shoe size long enough to take off the blinders that restrict their choices of executives at both senior and board levels, more companies would benefit from the inclusion of a female opinion and input.  It will require these men to set aside both prejudices and FEAR.

It is beyond offensive that we continue to have these kinds of conversations.  Whether the discrimination is based on gender or any other of the multiple considerations in today's society, to imply that only old white males have the qualifications to fill these roles is a disservice to all. 

Gentlemen, set aside your prejudices or get out of the way.  The future mocks you and  history will not defend your resistance.

Mandela's most important leadership decision

Nelson Mandela is rightly remembered as one of history's most important leaders.  Through his unfailing influence the destiny of the nation of South Africa was turned in the most improbable direction.

For many years Mandela had fought against the injustice of apartheid. In some instances he resorted to the use of violence in support of his calls to action. He advocated nationalizing the mines, land and  industry of the white minority and redistributing it to the black majority.  His was a polarizing position...but ultimately it was a failed position.

It was not until Mandela rejected this philosophy and embraced reconciliation and abandoned nationalization that he was able to achieve his goal of equality and ultimately deliver South Africa from the shackles of apartheid. He reached this decision after consulting members of the international community and he came to understand the inherent problems with his position. In effect he stated a leader's most powerful words '...I was wrong...'

From that point forward he was able to effect the changes that brought about the South Africa of the 21st century.  By renouncing the radical in favour of the morally correct path, Mandela brought together peoples of all race and colour in South Africa.  But it took an important, some would say improbable, first step of personally acknowledging that his initial approach was wrong.  Regardless of how badly he had been treated; regardless  of how long others had been abused; regardless of the contrary opinions of the many, Mandela's confession and subsequent humility allowed him to pursue peace and not vengeance.  In so doing he achieved much more that anyone dared believe was possible.

This act of leadership in action is an outstanding example for everyone in positions of responsibility.  The belief that the 'boss' is infallible is so outdated as to be comical.  And yet, so many cling to the illusion.  They do so at their peril because they alienate their staff members who cease to be followers and instead become skeptics.  When the goal is not achievable or lacks a legal, moral and ethical imperative, the probability of success is slim.  But the vulnerability demonstrated by these words results in the team members rallying to support the leader as opposed to abandoning the cause.

Four other words that carry an equally powerful and positive message are '...I'm sorry...' and '...thank you...'

Both phrases acknowledge others and their feelings. It is always critical for the effective leaders to build into their staff members.  Leadership character is at least as important as leadership skill and these simple phrases demonstrate character in abundance.

As a leader, recognizing others and confessing your shortcomings come as  'no cost' actions. Both show that you are operating with a realistic perspective of the contribution that each person is making. And both bring your team closer together and aligned with a common goal. Practice humility and its' associated qualities of integrity and honesty.  The results will often exceed even your wildest expectations.

The Enemy Within.

Today's environment requires leaders to assimilate vast amounts of information and then make important decisions to keep their organizations competitive and successful. This responsibility is complicated by the fact that everything must be viewed through the lens of economic realities that are unlike anything any of us has experienced. Add to this mix the political activities that only serve to complicate rather than clarify this new normal. The reality is that we must trust our leaders to react and rely on instincts as much as analysis because there are so few precedents to guide them.

As difficult as this situation is that is, I believe that  the greater concern is not the competition or the economic environment. Rather, it is the enemy within.  I am not referring to any kind of industrial sabotage or cyber-spying because the enemy that concerns me is usually wears the same company ID. And therein lies the problem...they are hiding in plain view. 

I am referring to the person who sees themselves as a leader...without portfolio.  They want to make decisions, not follow them.  They view those in leadership roles as being out of touch or incompetent.  Accordingly they have a personal agenda that dictates their behaviour.  Left unchecked there are no limits to the damage that they can cause because it is not simply a matter of their response but also the influence that they may hold over others.  In these cases it is true that one bad apple can spoil the whole basket.

There are several reasons that someone may take on this 'anti-leader' persona. Some people feel as though they have been passed over for promotion and look to use their current position and influence in a subversive manner to cause the leader to fail.  In this way, the individual hopes for an opportunity to replace the leader and thereby assume their 'rightful' position.Sometimes the person genuinely wants to support the leader and feels that taking a different strategy is actually helpful.  In principle they disagree with the leaders approach but they do not dislike the person and therefore they view their actions to be supportive and not subversive.  The end game is not personal recognition; it is to prevent failure. And in some instances the individual actually takes on the role of enemy.  For any number of reasons this person wants to cause as much damage as possible before being found out and dismissed. 

If any of these situations exist in your organization, you must address it aggressively and proactively.  The impact of this subversive type of behaviour is seldom limited to that which is obvious. If the individual is otherwise liked and respected, it is probable that the consequences of their behaviour will have roots in several areas.  You must identify the extent of the impact to ensure that no residual damage remains.

As part of the remedial action - which has probably resulted in a termination - the leader should perform an unbiased appraisal of the environment that fostered this act of betrayal.   That is not to suggest that someone had just cause to be subversive.  But clearly something prompted this most vile kind of insubordination.  It is not enough to rid the organization of these actions.  It is equally important to ensure that any aspect of the company's policies,  procedures or environment that may have contributed to these actions are fully addressed and amended.  If that means a corporate 'mia culpa' so be it.  This is not the time to take pride in having solved an issue.  The enemy within is seldom a fluke and will return if the proper remedial action is not properly implemented.

An engaged leader will spot the problem early enough to mitigate damage.  An aloof manager will have a difficult time even acknowledging that a problem exists.  Which best defines your style?




 

The New Normal...this is as good as it gets!

It was September 8th, 2008 that Lehman Brothers declared bankruptcy.  For lack of a better indicator, that is the time that the Great Recession started.  Economists will say that it must have been later because the classic definition of a recession is consecutive quarters of negative growth (how's that for an oxymoron) but September 8th was the trigger.

In reality it was the day that the camel's back broke;  the contributing factors had been building for years. And since that time our politicians, bankers and economists have been seeking a solution to the problems.  Five years later, are we really any closer to an answer?

Christine Lagarde, head of the International Monetary Fund, warned in November 2011 that the world faced a lost decade full of economic difficulties.  If you think that she was speaking in hyperbole just look at Japan as an ongoing reference point as it enters its' third DECADE of constricted growth.  If Ms. Lagarde is correct we have at least another 5-8 years of this economic morass.

Folks, this is the New Normal...this is as good as it gets... for a long time.  The traditional economic levers that governments and federal banks are used to pull on are not working.  It seems as though they are all simply throwing 's--t' against the wall to see what sticks.  And they will likely only know after-the-fact because every attempt takes time to play out in the real world.  There are no simulations that they can try; no tried and true theories on which to rely. 

The individual experience will vary.  Many will continue to prosper.  Others will fall under the radar.  But for the large majority, it is time to plan, prepare and react to an ongoing difficult situation.  I don't think that I am a defeatist in these comments.  Rather I am a realist. 

So recent university graduates will continue to hone their skills as baristas and not as teachers; many will continue to live at home because even rent is out of reach; and a generation will be underemployed and gradually more dispirited.  To be sure, there are 'signs' that the economies in North America are recovering.  But GDP is barely keeping up to inflation.  Europe is concerned with deflation and high unemployment especially amongst the under 25 age bracket.

I hope that I am wrong, truly I do.  But if I am right - and all the indicators point this way - then plan accordingly. 

The side show in the Toronto mayor's office and in the Senates in Ottawa and Washington provide us some a diversion.  Perhaps they too are as good as it gets in the political arena.  The problem is that their antics will pass, likely sooner than they should.  For the rest of us, hunker down because this new normal may only have just begun.



   

Natural, not easy.

Some argue that leaders are born; others contend that leaders are 'made'.  In my experience it is a bit of both.  Individuals must have the innate characteristics of leadership and those are 'born'.  The person must also have the necessary skill sets for the role and those are 'made'. 

The blend of character and skill will certainly vary from person to person and from job to job.  Some roles will require a generalist; others will look for a specialist.  Some positions will require more experience; some will achieve results with a much less.  Clearly the significance of the leadership role in the organization has the greatest impact on the mix and the requirements.

Regardless of the level of leadership that one holds, for the person to be successful, the mantel of leadership must feel natural. By 'natural' I mean that the individual recognizes the legitimacy of their role and the sufficiency of their character and skills to fulfil that role. 

It does not imply that the individual will not have doubts or that they may not fail in some aspects of their performance.  But it does mean that the individual has the necessary self confidence that is required to exercise the skills and qualities to meet the daily challenges.  This self confidence is neither arrogant nor boastful.  This self confidence is natural.

While inspirational leaders find their roles to be a natural expression of their skills and character, make no mistake, their work is not easy.  It is not always easy to accept responsibility for the performance of a team.  It is not always easy seeing the glass half full after several disappointments.  It is not always easy being vulnerable and open, when others can use that against you.  And it really is not easy to acknowledge that you may not be the right person to lead when circumstances have changed and your skill sets do not match the need.

Authentic leadership - inspirational leadership - comes at a price.  If you recognize the natural inclination to lead, look for opportunities to demonstrate your abilities.  Be aware, it won't be easy...but you won't find contentment until you try.