Organization and Staffing – Ground Rule #2

This is the ninth in a series of posts that will describe what the CEO of the Reliance Electric Company thought about basic commitments, how the organization was going to operate and ground rules for managers. Once again, all the content of this article is based on the work of B. Charles Ames as outlined in his management manifesto titled Basic Management Concepts dated January 14, 1974.

Organization and Staffing – Ground Rule #2

“No manager can afford to fill first level management positions with people who are not going anywhere.”  Just let that one sink in for a while.  How many times have you seen a reasonably competent contributor promoted to a first line supervisory role, only to become toxic in a management position?  If he were writing today, Ames might have said something like don’t allow the Peter Principle to enter your organization.  That is, a “hierarchy where every employee tends to rise to their level of incompetence.”  It starts with first line supervisors.

Ames cautioned that the management pyramid in any organization narrows quite quickly as you move up the hierarchy.  Allowing marginal performers in first line supervisory positions limits the opportunities available to more talented individuals.  At the shop floor level it is also a leading cause of labor problems and unionization.

Look at first level management positions as a proving ground…a proving ground that tests first time managers. Consider the first management position a proving ground that provides experience for people with high potential.  Make it a proving ground for people who appear to have the capability to grow.  Or, in terms of the Peter Principle, select candidates based on their potential performance for a future role rather than their performance in their current (first line supervisory) position.

Turnover in these first line management positions is only a problem if it too low.  It is weed or feed time, right now.  The entire organization will become bogged down by B Players “clogging the first step of the management ladder.”  If you have experienced B Players in first line management positions, you have experienced mediocrity.  Good people become frustrated.  A Players quit.  A Players go to a competitor or another organization where they are given the opportunity to prove themselves.

First line management positions are the proving ground for developing great people.

Chuck Ames and his wife Jay currently manage the Ames Family Foundation.  They divide their time between a home in Vero Beach, Florida and a second home in a suburb of Cleveland.  


How to Be an Effective Group Leader

Why Dominating Leaders Kill Teams

Dominating leaders tend to stifle creative ideas that might otherwise emerge from group discussions thus making the teams less productive.

Francesca Gino is an Associate Professor in the Negotiations, Organizations, and Markets Unit at Harvard Business School.  In the November 13, 2013 edition for “Working Knowledge” published by the Harvard Business School, Michael Blanding discusses Professor Gino’s series of studies in which she and her colleagues, Leigh Plunkett Tost of the University of Michigan and Richard P. Larrick of Duke University found that when leaders are focused on their own sense of power, they can hurt the performance of their teams—but with an important catch. The effects only occur when leaders are actually in a position of power.

Usually when we think about groups, we think that a strong leader naturally improves the functioning of the team. Professors Gino, Tost and Larrick explore this in depth in their article “When Power Makes Others Speechless: The Negative Impact of Leader Power on Team Performance”. In their work they differentiate between a “subjective sense of power,” that is, when someone thinks they have control over others, and actual power, when someone has formal authority over compensation, promotions, how resources are allocated or how decisions are made. Actual power and as sense of power often go hand in hand, but not always.

Sometimes in a group situation without a formal leader, a leadership role can be assumed by a person who believes he or she has superior knowledge or skills. The researchers found that in cases when someone felt powerful but was not recognized as being in a position of authority, team members were able to override that person’s domination of the conversation and add their own input.

As I would expect, they found that in the best performing groups, the leader orchestrates the conversation, and gets everyone talking. In other words, strong leaders can and do improve team performance when they go into a situation with a sense of humility about their own relative power.

On the other end of the spectrum, poor performing teams were dominated by a leader who made his power known, controlling the conversation and stifling input from the non-leader members of the group.

In conclusion, Professors Gino, Tost and Larrick suggest there is a powerful opportunity to improve performance just by making leaders aware of the dangers of hogging airtime in a discussion.

“I want to believe that oftentimes we behave the way we do because we are not aware of the effects of our actions,” says Gino. “Bringing this type of awareness to leaders walking into group decision-making situations could set up a different process whereby they benefit from what others have to offer.”

They further conclude that being aware of the negative effects generated by an overpowering leader can make non-leaders feel more empowered to assert their own point of view—whether or not the person dominating the conversation is a formal leader.  I believe that this requires the non-leaders to trust that the leader with power will not exercise that power against them.

It is no surprise to me that getting leaders to listen to others and to facilitate a productive group discussion is powerful indeed.

Read the complete article, here.

Can You Lead Through a Disaster?

Headlines Read . . .

Violent thunderstorms. Fatal Flooding. Category 5 Hurricane. F-5 Tornado. Golf  Ball Sized Hail. 100 mph Straight Line Winds. Trees Uprooted. Power Outage for 12,000 Residents. Gas Line Explosion. Local Businesses Affected.

Leadership can be challenging when things are going well, there is always something you need to work through.

However, the rules of the game change when disaster strikes. Regardless of the cause, the best run businesses have prepared a plan to handle a potential disaster situation.

Are you prepared to operate your business the morning after a disaster?

Do you have a Disaster Recovery or Business Continuity Plan?

Up to 40% of businesses affected by a natural or human-caused disaster never reopen. (Source: Insurance Information Institute)

If your business is prepared you get an “A-Grade”!

If not, is a place you can get unbiased information and resources to help you and your team be prepared.

How We Will Operate | B. Charles Ames Series

How We Will Operate

This is the fourth in a series of posts that will describe what the CEO Reliance Electric thought about basic commitments, how the organization was going to operate and ground rules for managers. Once again, all the content of this article is based on the work of B. Charles Ames as outlined in his management manifesto titled Basic Management Concepts dated January 14, 1974.

Reliance Electric was a $1 billion conglomerate at the time our company was acquired.  They had been on a run of successful acquisitions for several years.  They owned about a hundred companies producing electric motors, power transmission equipment, retail food packaging and weighing equipment, telecommunications equipment, and more.

How do you run a conglomerate with a wide range of diverse businesses . . . effectively?  Ames wrote the following.

  • In light of Reliance Electric’s girth, the Divisions of the company needed to work together to take advantage of lessor endowed competitors.
  • The company centralized “certain functions” when it was economically advantageous.  The interests of the corporation trumped those of any individual Division.
  • Reliance followed a uniform set of administrative policies throughout all operations.  Human Resources, for example, would be managed consistently throughout the organization.

So far, so good.  Here is where it gets interesting. Ames was clear here:

  • The company would not force integration where it didn’t make sense or seek consistency among the Divisions without regard to individual differences of the Divisions.
  • The company would not impose corporate policies on decisions without seeking into from the Divisions.

What Ames wanted us to do was gain a competitive advantage from our size and diversity, without messing around with the basic integrity of the divisional profit center concept.  An interesting balancing act, to be sure.  And, the basic business strategy of the company.  Because Ames wrote it down and distributed it all of us, we knew what was expected.

B. Chuck Ames and his wife Jay currently manage the Ames Family Foundation.  They divide their time between a home in Vero Beach, Florida and a second home in a suburb of Cleveland.  


Our Growth Strategies

Our Growth Strategies

This is the third in a series of posts that will describe what the CEO Reliance Electric thought about basic commitments, how the organization was going to operate and ground rules for managers. Once again, all the content of this article is based on the work of B. Charles Ames as outlined in his management manifesto titled Basic Management Concepts dated January 14, 1974.

In a multi-business company like Reliance Electric, a one size fits all, master strategy defined by corporate was destined to fail, according to Ames. He did not see a single thrust in the business or an “either or” proposition. He saw a “combination of thrusts” that would create the best opportunity for obtaining the company’s growth and profit objectives.

With this multi-business, multi-thrust concept in mind, Ames suggested a three phased growth strategy that would 1) increase earnings at a rate that was attractive to investors and 2) improve the quality and stability of company’s earnings. To accomplish this he suggested the following:

  • Continued emphasis on our strengths to increase profits from our core businesses.
  • Increased emphasis on products and markets less vulnerable to the ups and downs of of the economy. Service businesses, maintenance, repair businesses, for example, fit here as did all of the telecommunications businesses.
  • Increased emphasis on acquisitions that added to our strengths, particularly in businesses less vulnerable to business cycles.

Ames left the rest up to the individual operating company to decide. He wanted dynamic product and market strategies that were tailored to the individual opportunities of each business. He suggested that each business strive for a momentum in order to “make things happen” rather than wait and react to the competition. He felt we could not win by being defensive. His advice was to be aware of the competition but take the initiative and let them react to us.

Interesting advice, on the competition, regardless of the business or industry.  Just as interesting was the reality that everyone in the organization knew exactly what was expected in terms of job performance. Ames wrote it all down for all of us. And that may be the most significant basic management concept of all.

B. Chuck Ames and his wife Jay currently manage the Ames Family Foundation.  They divide their time between a home in Vero Beach, Florida and a second home in a suburb of Cleveland.  


Failed Change Initiatives Come Down To The CEO

 Most TEC-involved CEOs and organization leaders are well aware of the elements that need to be in place to create change initiatives.  In today’s world, change comes more rapidly than ever.

But by and large, these initiatives are not sufficiently successful … at least they don’t reach the performance levels we aspired to.


In his TEC presentations, Michael Canic of Bridgeway Leadership, Denver, provides a litany of required efforts under the headings of the right environment, focus and people.  But we get all that.  We do it, at least most of it.  So, why don’t our people make it happen?

He was asked about the top three reasons after a recent presentation.  They are, in his consulting experience:

1.  CEO Commitment

We say we are, but we actually aren’t.  Canic says, “There is a massive difference between the will to win, and the will to do what it takes to win.”  We earnestly put in place the roadmap for the change initiative and make assignments to our most competent direct reports, with touch base sessions.  But then we get distracted with all the other demands on our time.  We fail to give the impression that the change effort is a “must”.  We send a “mixed message.”  The energy we initially created subsides.

What the CEO has to do, he says, is have just one major commitment at a time … and focus relentlessly on it.  There might be three important ones, but deal with them sequentially.  It will be CEO attention that makes them happen, he says.  By your paying attention, people take responsibility to perform on schedule.

2.  CEO Capability

Simply, this means that some important elements aren’t put in place.  The CEO doesn’t know about them, or doesn’t feel they’re important to the initiative.  We’re good at knowing the technical things that have to happen, but not the “people” things.  These include knowing that people really do understand the purpose … what success looks like … have the knowledge and skills to do what’s expected of them … that they know what’s expected and by when … that they get affirmation … and help when they have a problem.  Simple things when we say them … but often missed.  Have a very visible Master Calendar, showing initiatives, champions and timelines, and manage to it.  It shows people the whole process is being managed, and they see where their part fits in.

As Canic says, what YOU do as CEO is not as important as what your PEOPLE experience.  Don’t assume.

3.  CEO Control of His/Her EGO

Too often, he says, CEOs compromise their own forward success by reflecting their past success in how they comport themselves, in their demeanor.  People recognize this immediately.  You aren’t on the same “level” with them, not on the same “team” with them … and it affects their commitment.  Successful change leaders hold their egos in check.  They put what’s necessary in place, and then spend the rest of their time being a servant, helping others to be successful.

Interestingly, he notes, all failed change initiatives come down to the CEO!


WAIT: Why Am I Talking? | The Power of Silence in Business

The Sounds of Silence

“If we were meant to talk more than listen, we would have two mouths and one ear” is a famous Mark Twain quote, one that is good to reflect on when communicating in business.  Leaders that excel at active listening possess a critical asset that will elevate them from good to great.  That element however is often the hardest to grasp and incorporate into day-to-day interactions.  Why is it so hard to listen effectively?a

Most business leaders are very driven individuals, constantly moving forward with great intensity and a deep desire to perform.  This stereotype is well ingrained in our business culture.  The profile of a successful leader rarely includes appreciating and practicing the art of being a good listener.  BTW – have you ever seen a CEO  position description include “must be an excellent listener”?

True listening (not just waiting to speak) presents an opportunity to evaluate, process and uncover clues to solve problems and create strategic advantage.  Chances are when listening in earnest we will  learn something new or be motivated to think about an issue or topic differently, particularly when engaging individuals who view the world differently.  The best solutions and strategies can result from these diverse exchanges. Without this experience we might never grow and improve as business people!

The benefits of having those skills when interacting with colleagues and associates are many. Someone who is an authentic listener can and does evoke a higher level of trust within a relationship.  And, trusting relationships are priceless. When individuals feel that they have been heard, leaders are much more effective at inspiring professional development and overall performance.

So why is it so hard to shut up and listen?  It takes work. Wanting to be a better listener is a start.  A tip?  Recently a fellow TEC Chair shared this acronym. I think is terrific and use it as a reminder.  WAIT: Why Am I Talking?

Unexpected Business Lessons from Artist Henri Matisse

Thanks Matisse!

I somewhat reluctantly (I am now embarrassed to say) attended the Henri Matisse retrospective at the Minneapolis Institute of Art. I freely admit to a limited appreciation for art, but this was a fantastic exhibition. And Matisse offered up some unexpected business lessons:

 “Each picture as I finish it, seems like the best thing I have ever done…. and yet after a while I am not so sure. It is like taking a train to Marseille. One knows where one wants to go. Each painting completed is like a station—just so much nearer the goal. The time comes when the painter is apt to feel he has at last arrived. Then, if he is honest, he realizes two things—either that he has not arrived at all or that Marseille… is not where he wanted to go anyway, and he must push farther on.” – Henri Matisse

The artist’s quote illuminates the business canvas. Like why we, and the organizations we create, are in a constant state of change, chaos, and renewal. Which helps me understand why I have never met a satisfied, successful CEO. Which helps me appreciate the best CEO’s I know who take extreme pleasure in the journey, including the ups and downs, and treat the achievement of a goal simply as a part of the process.

Successful enterprises, and the CEOs who run them, embrace as compatible equals both evolution and stability; they neither fear, nor overly celebrate, the moments of light and dark that ultimately lead to business excellence.

A contemporary artist of a different sort, Steve Jobs, said: “If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on.”





Odds ’n Ends from Phil Hauck | Retirement Age, National Debt, TEC Meetings, and More!

On Retirement Age

This notion of having a Retirement Age, when the government begins making substantial payments to citizens, isn’t new.  It began in 1889 in  Germany.  The average life expectancy was 40, and the Retirement Age was set at 70, later reduced to 65.  For us, it began during the Depression, when average life expectancy was 61; it was set at 65; half the people were dead before these Old Age payments set in.  Today, our average life expectancy is about 79, yet the Retirement Age is still 65.

Corollary:  The federal budget-killer of just about every Scandinavian and European country is the government making payments to its people at around 60-65 years of age, even though life expectancy is much greater.  Like what we’ve now arrived at, they can no longer afford a defense budget because federal spending is taken over by Retirement Age and health care spending.

Also of interest, in most of Europe, the Fertility Rate is currently at about 1.3-1.5 children per woman, well below the 2.1 replacement level (that the U.S. is at thanks to the influx of Hispanics).  This means that they very quickly will have fewer and fewer working age adults to pay for those retirees.  Indeed, these levels foretell a shrinking of the population, and therefore their economies.  Their outlook as viable nations is very poor.  (These poor stats also apply to Russia and Japan.)  For more information, click here.

National Debt and Its Implications

How come we still aren’t hearing a lot about this approaching crisis … and its implications?Just sayin’!

Told at a Recent TEC Meeting, about a Koch Brother

The Koch brothers receive lots of abuse for their contributions to conservative causes.  What isn’t heard, though, is their astuteness as business leaders.  Recently, a senior executive of a TEC company who has worked at companies owned by the Koch brothers, such as the local Georgia-Pacific plant, but others as well, told this story:  When Charles Koch walked through one of his company’s plants, he would ask an operator, “Who owns this equipment?”  The response often, “You do, sir.”  The correct response:  “I do, sir.”

He required techniques that created team-based approaches that “focused relentlessly on Reliability.”  He contended that “Reliability focused organizations outperform Production-/Productivity-focused ones, and there is research that supports that.  Interesting.

The approach was to create Reliability teams, a replacement for Maintenance.  Maintenance experts were “downloaded” for their expertise, which was provided to production crews for them to use on an ongoing basis.  The crews had to plan schedules several weeks in advance, and then document any variation, called an “unplanned event.”  The objective, obviously, to reduce the number of unplanned events, resulting in increased up-time, productivity, efficiency and ultimately profitability.  “People found this approach much more engaging.”

Another metric:  Number of improvement ideas.  The metrics that the Koch brothers cared about were the Leading Indicators and Forecasts.

Quotes from Recent TEC Meetings

  • “Make sure every employee loves his/her job.  People who are successful are doing what they love to do.  It’s the only path to being the best in the world.”
  • An expert on Emotional Intelligence at one meeting cited this quote from EI founder Dan Goleman:  “Out of control emotions (bullying, anger, nmicro-managing, etc.) make smart people stupid.”  She also said that micro-managing is often a reaction to the leader’s inability to control his/her anxiety, and to impose behaviors on others to compensate.
  • “I built a large garage.  We call it the ‘Garage-Mahal’.”

Managing the Family Business – Firing the CEO

In the March 2014 edition of “Working Knowledge” published by the Harvard Business School, John Davis, Senior lecturer in Entrepreneurial Management discusses when to make a change at the top of a Family Business.  Firing the CEO is never easy.  It is a tough decision when the CEO is a “hired gun”, but this issue becomes especially problematic if the CEO is a family member.

The decision to fire the CEO often suggests that something has gone very wrong and the organization could be in trouble. It implies that the person was a bad choice in the first place, which reflects on the judgment of those who hired the CEO.

Davis argues that the family should fire their CEO when either of the following conditions exists:

  1. There is a weak and irreparable fit between the CEO’s skills and the needs of the company

  2. The CEO does not support, or worse, disrespects the core values of the company

And if the CEO must go, the family should develop good options to replace him or her, with manageable consequences that are generally positive.

In the article, Davis elaborates on each of these.

Factor 1: Fit

High performing companies require CEOs with the right skill set, decision style, and values. They are able to build strong executive teams that can help develop the strategy of the company and then execute it. A good CEO always as strengths, but of equal importance, they recognize their weaknesses.  So they surround themselves with strong executives who complement their skills, and help chart the right course for a company.

The family needs to look for a leader with the right skills, values, and abilities and who can build a strong leadership team. If a family member has the right mix of strengths, having a family leader is usually the better choice. If not, find a non-family executive who is a good match.

The CEO is always accountable for whatever affects overall performance. But Davis states that in a family business that more interested in long-term success, poor short term performance may not be enough reason to fire the leader. There may be circumstances that lead to the poor results, and the current CEO may even be the right person to help restore good health. Davis recommends that the family look beyond current performance to the kind of leadership the company needs over the long-term.  Often, if not usually, this is difficult for the family to clearly analyze and articulate, especially if the CEO is a son or daughter.

The family needs to judge their CEO on his or her fit with the needs of the company, and work to remove whatever may be blocking the leader from doing their job.

So if there is a good CEO-company fit consider Factor 2. If not, then a change may, and likely is, needed.

Factor 2: Does the CEO support the core values of the company?

There is nothing more detrimental to the culture of a company than a CEO that violates the company’s core values. This may manifest itself by cutting corners to boost profits when the company says it stands for excellent quality, or by showing disrespect to the legitimate needs of employees. Employees watch what the CEO does much more that what they say.  They see what he or she will tolerate and adjust their behavior accordingly.  If the CEO violates the company’s values (which is the same as violating the values of the family), the family must take action and fire the CEO, even if he or she is otherwise performing well.  Procrastination only serves to further damage the culture of the company.  When values are ignored or overridden by the CEO, employees see what is going on.  And once the CEO is gone, the family will be greeted with the comment “What took you so long?”

Refer to my post dated Friday, December 27, 2013 “Do You Know Your Company’s Core Values?

Factor 3: Do you have good options?

Finally, the family should have options ready if they must fire their CEO.  Even if they don’t contemplate a CEO change, they should always develop alternatives in the form of a succession plan in the event of an emergency situation. Unfortunately, they rarely do.

Davis concludes that the best approach is to make every effort to avoid the need to replace the CEO in the first place.  The family as owners must make sure that they provide the CEO with clear expectations, useful feedback, good guidance, and the understanding that he or she must be accountable to them first and foremost.

Read full article, here.