Tag Archives: executive decision making

Effective Leadership: How to Optimize the Decision Making Process

by James D. Roumeliotis

Maze and Businessman

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Face it! Like it or not you are defined by the decisions you make. Think of successful organizations and the people responsible for guiding their authority and well-being. Often, high performance is the result of an executive choosing the right move at the right time. It’s not purely a lucky streak. Corporate strategy is not “Black Jack” nor 5-card stud poker.

Decision-making is a complex activity and at times a long process. Your ability to identify and excel in your decision-making tasks will greatly increase the chances that the choices you make will have a strong and positive impact on your organization. Why take any additional risks when you know instinctively that this is the case to sound growth and prosperity?

Where to begin in contemplation

Your first step is to understand the external and internal factors that affect decision-making, from aspects of the organizational environment to your personal decision-making preferences. While you aren’t always able to control these influences, recognizing and identifying these factors will enable you to take them into consideration as you strive to achieve the best decision outcome.

Reality check

Every day you make sense of what goes on around you by interpreting what you see and hear, taking into account your past experiences, values, needs, attitudes, and goals. Even your understanding of what another person says is only an estimate, as you can never completely share the viewpoint of someone else concerning the world.

Given the increasing complexity of organizational life, along with the quantity of information that must be processed, it is no wonder executives too often experience stress as they strive to balance agendas and please many of their people.

It can happen that you put a lot of time and effort into a decision study or a formal analysis, only to be disappointed in the results. When this happens, you need to re-evaluate both the information that went into the analysis including your expectations.

On the one hand, no process is any better than the information that goes into it and when you get a result that your experience suggests may be flawed or biased, this is a strong indication to probe.

On the other hand, it’s extremely tempting to tinker with the data until you receive a result that you’re happier with ─ but this is a form of deception that can lead to an adverse outcome. In this case, it helps to remind yourself to maintain a high standard of accuracy and objectivity and to seek a reality check from someone whose judgment you respect and who’s not personally involved in the decision.

The decisions you make are only as good as the process you use to make them. Asking yourself the following questions will help you to assess whether or not you are on the right track:

  1. Have I done adequate research and gathered all of the appropriate information for the subject matter at hand?
  2. Have I considered all of the stakeholders and their probable responses to various decision outcomes?
  3. Have I been honest in assessing my own decision making style and taken that into account?
  4. Have I recognized and acknowledged my personal agendas and bias?
  5. Have I considered the various options available to me in selecting the most appropriate decision making method?
  6. Have I solicited the advice and assistance that was required?
  7. Am I prepared to be accountable for the consequences of the decisions I make?

You have the responsibility for making decisions that deeply affect your employees’ performance, morale and your organization’s future. You cannot afford to rely on personal preferences or hunches alone.

Now that you are familiar with some practical, yet highly effective approaches offered here, your challenge is to develop a positive future possible through the decisions that you make today.

Business man confused with his good and bad conscience

Business man confused with his good and bad conscience

Bottom line

Your decisions are only as good as the information you use to make them. The cliché “Garbage in, garbage out” applies here. Your ability to recognize bias and evaluate the reliability and validity of the information you gather can make a tremendous difference in the effectiveness of your decisions.

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Business Vitality: Preventing Adversities Before They Occur

by James D. Roumeliotis

Businessman with telescope

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“Panic” and “chaos” are not what one should undergo in business. Unfortunately, many entrepreneurs are caught off guard more often than necessary when operating their business. In his book “The E-Myth Revisited”, dynamic author Michael Gerber states that a business person ought to work “on” his/her business, rather than “in” his/her business.

Start-ups have a leg-up if they launch and persevere on the “right track.” The appropriate definition of these two words together imply following a proper course of action. The analogy which can be applied to a business well-being is our own personal state of formidable health comprising of a healthy diet, frequent exercise and undergoing an annual physical. The objective is to be proactive, rather than reactive.

Remaining diligent and active as opposed to reactive

Entrepreneurs may be quite well versed with the products and/or services offered, but not necessarily with running their business including a bucket list of daily administrative tasks. Most notably, sales, marketing and finance/accounting undertakings. This is where honest consideration should be given in either bringing in a partner to complement the entrepreneur’s weaknesses or an external adviser and/or mentor to guide him/her. A sounding board should not be dismissed as prohibitive, thus solely for larger organizations. Seeking professional help is an important way to avoid or plan for business challenges.

Moreover, when drafting a business plan as the road-map, include a SWOT (Strengths, Weaknesses, Opportunities & Threats) matrix and “what if” scenarios — which will reveal and prepare one in avoiding the pitfalls of running a business, as well as coping with various challenges which can arise. In addition, consider plotting a business model as a prelude to the business plan. It makes you think through your business plan, which in turn communicates the business model. Both should synchronize. Make certain a short term (less than 12 months), medium term (13-30 month), as well as a long-term plan (30-60 month) have been conceived.

Savvy business people – whether new or seasoned entrepreneurs or CEOs of large corporations possess:

  • Insight and foresight;
  • Strategies and execution competence;
  • Alternative plans with an exit strategy in case situations turn awry;
  • The perception to take “calculated” risks rather than dive into the abyss;
  • Openness to third party advice;
  • Focus and consistency to achieve their goals and objectives;
  • The ability to see opportunity before their competition does and act upon it in a timely manner.

Negligence with current enterprises

Growing pains in any organization require a formidable administration to keep the business operating efficiently which includes customer front & center, profitability and more than adequate cash flow. Telltale signs of weak organizations can be traced to inept leadership. The following points highlight the deficiencies:

  • Poor customer service – slow or no customer inquiry replies – abysmal handling of sales and service complaints. Service is portrayed as a reward, not a right or benefit.
  • No Unique Selling/Value Proposition. Companies need to define and articulate their unique value proposition and deliver on it consistently. Create the platform for sustainable and competitive advantage.
  • Operational deficiencies – various ailments and no structure
  • Absence of or very little communication amongst staff and management. Divisions aren’t well-coordinated and do not function as a team.
  • No transparency. There is hardly any openness from management.
  • Unethical practices – short-term selfish objectives in search of market share. Top executives should promote social norms and principles as moral agents.
  • Lack of proper execution of decisions and with new products/services.
  • Productivity incentives should be implemented to boost results and employee morale. People must be given a reason to work hard and be efficient.
  • Creativity is practically non-existent. An absence of innovation and employee empowerment will hurt progress and stifle new ideas.
  • No clear vision/strategy – there needs to be a strategic vision that reflects a truly unmet need and has the commitment of a dedicated CEO. That means that there is a well-defined target audience with a distinct value position that is differentiated, meaningful, and deliverable.
  • A weak sales force along with an unattractive compensation plan.
  • Favoring nepotism and bias – promoting family members over other qualified employees often leads to resentment or, worse, prompts valuable non-family employees to leave the company.
  • Poor hiring practices – should hire for attitude and train for skills.
  • Slow/delayed decision-making process – too many layers – overwhelming bureaucratic structure.
  • High turnover, which leads to poor employee morale, reduced intellectual capital, lower service levels, higher operational costs and decreased productivity.
  • Management in a state of denial about their organization’s shortcomings – remaining with the dysfunctional status quo.
  • No channel strategy. Some companies focus on building a product, but don’t think through how to get it into the hands of customers. Even if your product is great, unless you can sell directly, you may be dead in the water without strong channel partners.
  • The hidden game – corporate politics – power plays by a handful of individuals for their own benefit to the detriment of their colleagues and the company.
  • Misrepresentation of brand(s) – too much hype – empty promises – not delivering on expectations – leads to dissatisfied clients who will alienate the brand.
  • Weak financial controls – cash flow dilemmas – over leveraged/under-capitalized (high debt-to-capital ratio) – not reinvesting a certain percentage of profits for future growth.
  • Absence of sound marketing program(s) and/or brand strategy. A brand is defined by how it behaves, from the products it builds to how it treats its customers, to the suppliers with whom it works.
  • Growing too fast and not staying on course as the company grows.
  • Lack or very little employee training & development.
  • Deficient in control systems – reactive rather than pro-active.
  • Lack of continuous improvements or complacent.

The way to solve an organizational problem is to swiftly confront the structural issues with a moral sense of purpose and ethics. It must also have preventive systems in place in anticipation of issues which may arise.

For its clients to receive stellar service, the enterprise must have its house in order. Besides structure and an efficient operation, employees should be trained and empowered to do their jobs efficiently.

Companies that disrespect their employees and shut-out clients get willfully isolated and have a short life span through an erosion of market share and significant loss of revenue. Thus, a company’s goal should place emphasis on serving its people properly and fairly. Higher morale generates higher profits – though occasionally other priorities hinder that objective, for example, self-serving behavior by certain executives.

Superman Businessman

Operational prevention: Implementation of systems and risk management

To preventing operational problems before they even occur requires anticipating them through operational intelligence. The purpose of risk management is to identify potential problems before they occur. To do so entails early and in-depth risk analysis through the collaboration and involvement of all parties involved in running the business. It’s where brainstorming occurs about potential problems regarding the product(s), service(s), market(s) etc. to search for and foresee issues, as well as create solutions in advance – eluding the element of surprise at some point in time. Risk management is comprised of: 1) Identifying, outlining and analyzing potential risks; 2) A course of action in handling the identified risks, as well as the implementation of risk control/elimination plans when/where necessary.

Business leadership should contemplate allowing constant flexibility to adjust strategy when necessary if the initial one isn’t effective.

There should be continuous checks and balances – especially with regards to internal financial controls through various procedures implemented to reduce errors or possible embezzlement by staff. Trust but verify ought to be the organization’s mantra and actual implementation.

Perhaps you can consider a risk analysis software such as a SAS platform whose practical use offers best practices to help the company establish a risk-aware culture through various enterprise risk models and forecasting. We note examples of aircraft pilots who diligently prepare prior to a flight – or ship captains making their plans prior to voyages at sea.

When all is said and done – avoiding pitfalls

Companies with inept leadership usually fail in the first or second year, but even established companies can stumble badly when they outgrow the capabilities of the founding team. According to statistics, as the latest available numbers from the two U.S. government statistical agencies responsible for providing data about new businesses illustrate, The Census Bureau and the Bureau of Labor Statistics, five years after new establishments were founded (1995, 2000 and 2005 respectively), 50%, 49 and 47 percent of them (correspondingly) were still in operation.

To be a successful and sustaining entrepreneur requires vision, strategy, execution and constant diligence – along with plenty of sacrifice. A new generation of young entrepreneurs think the road is smooth and a fast track to easy wealth. Obstacles and sacrifice are part of the deal. Harnessing opportunity and overcoming challenges on a daily basis to top the competition is constant work. These conditions are true no matter what the sector of business engagement or company size.

Enterprises spanning a wide array of industries, have earned distinction as “well-” or “best-” managed” by demonstrating business excellence through a meticulous and independent process that evaluates their management abilities and practices – by focusing on innovation, continuous training, brainstorming and caring for their employees’ well-being – as well as investing in meeting the needs of their clients.

Well-run companies thrive no matter what and learn from their mistakes – making certain they don’t repeat them. However, never give failures a second thought. There are no dress rehearsals in business either.

Onwards and upwards!

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The Short-sighted and Passive Business Leader: Reform or Descend

By James D. Roumeliotis

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Blindfolded Executive 

How often do we hear of CEOs who have been discharged for lack of performance? Contrast this with those whose Boards have kept them on the job despite controversy and/or inept leadership. The latter decision seems troubling. Consider Steve Ballmer of Microsoft and Mike Duke of Walmart amongst others.

It is my belief that the key issue here is organizational structure. Far too often, successful groups grow and get out of control. No organization should be too large. When it grows in size, inevitably it becomes overburdened and self-protecting. Incompetence is a guaranteed result.

The prime decision maker of the organization exercises a variety of leadership styles. Leadership is linked to personality. ‒ there is the empty, well compensated, well-tailored, neat and polite dapper boss; the absolutely lost and ineffective one; the barking, intimidating, eager for respect boss;  then you have the hypocritical and/or bipolar type ‒ one day treats you well, whereas, the next day treats you with utter disrespect. For the most part, there is the worship me and exceedingly charismatic kind in vast numbers who mostly got there because of that particular trait along with shrewd politicking each step on the way up.
What most, as described above, do have in common is incompetence. Despite all the act and ego stroking, in the end, they do what it takes to remain in their dynamic position.

Short term results at the expense of long term consequences

Shareholders and the Boards focus on quarterly earnings growth results. As a result, we often witness severely dysfunctional decision making with public corporate leadership. This includes irresponsible behavior, as well as lack of depth and vision. HP’s Board is a case in point. It has been notoriously dysfunctional in the ways it has governed itself which resulted in a spate of upheavals over the last few years.

There is tremendous pressure to perform in a short period of time. There are no silver bullets for quick results. Seeds need to be planted for the future and for the good of the organization.  Panacea creates decision making blunders which abound. At times it’s error in judgment and neglect. Every business sector is riddled with poor senior management. Here is a sample of some companies whose inept and/or negligent decision making have made headlines in unflattering ways.

–       KODAK: In 1975, engineers at the company introduced the first digital camera to its executives. Rather than embracing it, fearing it would cannibalize its lucrative film sector, the top brass asked that the digital camera be kept under wraps indefinitely.

–       WALMART: The company leadership has a long record of unethical behavior, from brutally exploiting workers to discriminating against women to bribing Mexican officials.

–       MICROSOFT: Its CEO has remained long enough in his position to wipe out shareholder value by falling asleep at the wheel rather than vigorously pursuing web and mobile based businesses which companies such as Google and Apple, amongst others, have remained ahead of the game.

–       JOHNSON & JOHNSON: Its former CEO who was employed at the company for 40 years resigned amid a series of missteps over the last few years of his tenure which damaged his and his company’s once sterling reputations. This included recalls of numerous over-the-counter well established drugs, including the largest recall of children’s non-prescription drugs, as well as medical devices. In addition, it was warned by the FDA about false claims it issued about its popular mouthwash, while another U.S. Federal agency, the Securities and Exchange Commission, charged the company with bribing doctors in several countries to prescribe its drugs and medical devices.

–       ABERCROMBIE & FITCH: CEO Michael Jeffries’s snarl and insensitive remark that the brand’s apparel are solely targeted to the hip, slim, attractive and affluent “All American” teenager, offended many. As expected, it set off a storm of controversy. For someone concerned about his company’s image, the self-inflicted incident has damaged his and his company’s reputation. Even A&F’s investors are not pleased with the discriminatory statement which has negatively affected revenues and the stock price.

Organizational leadership is bestowed with the authority and accountability for creating value for customers, employees and its owners or shareholders. In spite of this, a significant weakness in running an organization is pushing for short-term profitability at the expense of solid planning. It’s my notion that the leader of many large multinational corporations, competence is not the primary value but rather the connections, politics, and clever tactics. Such “benefits” can usually compensate for incompetence.

The best-managed companies are constant achievers in their respective industries. They exude managerial excellence and financial performance is a reflection of capable management.

Typically, small businesses with inept ownership usually fail in the first year or two, but even companies in their growth stage can stumble badly when they outgrow the capabilities of the founding team. Research by the U.S. Bureau of Labor Statistics demonstrates that nearly 6 out of 10 businesses shut down within the first 4 years of operation.

Enterprises spanning a wide array of industries, have earned distinction as “well-” or “best-” managed” by demonstrating business excellence through a meticulous and independent process that evaluates their management abilities and practices – by focusing on innovation, continuous training, brainstorming and caring for their employees’ well-being – as well as investing in meeting the needs of their clients.

Businessman with telescope

Identifying the shortcomings of incompetents

Regrettably, there are not many business leaders who make the cut. This includes those who also possess credentials from Ivy League educational institutions and/or oodles of charisma. A President or CEO grooming school doesn’t presently exist. Contrary to what many may think, there are no natural born leaders. In the past two decades, the average tenure of a CEO has halved. This is adequate proof how demanding the job is.

Our experiences and conditions shape who we are as people and as leaders. Leadership, like management, is not a science but a practice. The difference between the two, according to the late management guru Peter Drucker, is “Management is doing things right; leadership is doing the right things.”

Telltale signs of poor leadership in an organization include:

  • in a state of denial about shortcomings – persisting with a dysfunctional status quo;
  • slow/delayed decision-making process;
  • lack of foresight for innovation;
  • short-term selfish driven decisions with no regard for long-term consequences;
  • no clear vision/strategy;
  • passive-aggressive;
  • unethical practices including apathy and lack of scruples;
  • irrational thinking/decision making;
  • an absence of or very little communication amongst staff and management. Chaos reigns amongst various internal departments which don’t function as a team;
  • narcissistic;
  • shielded from the lower ranking staff and the customer as he/she spends most, if not all of the time, behind the desk and perpetual committee meetings;
  • inflexible;
  • lack of transparency ‒ there is hardly any openness from management.

Anatomy of a competent boss: in search of sustainable leadership

A prime responsibility of leadership is the capability to constantly be one step ahead of their game, to envision what lies ahead, and in the process, be well prepared to lead the organization to great heights.

Effective leaders focus on long-term growth not short term decisions to increase or stabilize the company’s stock price. Furthermore, they should be open to ideas from lower level management not exclusively from their inner circle of “yes” men/women.

The following skills may appear as a list intended for a job description. However, they should be deemed a prerequisite for a leadership role regardless of the size or type of organization.

–       Bonds emotionally

–       Communicates well

–       Possesses character

–       Accountability

–       Humility, not ego

–       Foresight but with an open mind for feedback

–       Passionate

–       Can handle criticism

–       Tenacious

–       Articulate

–       Regard for people

–       Able and willing to delegate

–       Team player

–       Sales and marketing savvy

–       A disciplined and flexible individual who is not only open to change but a driver of change

Examples of highly effective business leaders who possess many of the above characteristics include Sir Richard Branson (Virgin Group), Megg Whitman (HP), Howard Schultz (Starbucks), Jeff Bezos (Amazon), Brad Smith (Intuit), Indra Nooyi (Pepsi), and Carlos Ghosn (Nissan), amongst others.

Public vs Private leadership ‒ and the authentic luxury enterprise

There is no doubt that the pressures and priorities of heading a private company differ as opposed to a publicly traded company. Different industry sectors may also require certain competencies.

Kellie McSorley, founder of SILK Search, the London-based boutique headhunting firm specialising in senior executive appointments in the luxury industry, explains the differences with the type of top executives sought in various sectors this way:

“For example, our Private Equity clients look for certain qualities in a person generally around urgency and result orientation whereas a Public company may place more value on other characteristics and competencies such as process, procedure and thought leadership. With Private companies there is a level of sensitivity and emotional attachment to the brand that any new hire absolutely has to understand, respect and harness, in order to succeed.”

Authentic luxury brands, on the other hand, operate by their own distinct rules as they do what it takes to retain their aura of exclusivity and cachet by focusing on production limits, premium quality and catering to UHNW patrons ‒ the antithesis of mainstream brands and products. For instance, Hermès has no need to deal with pressures of shareholders and stock analysts that are prevalent with corporate brands such as the LVMH luxury group. Instead, Hermès’ family stakeholders choose to keep the current business ethos along with their complete independence.

As for what the luxury sector desires in its future CEO, Ms. McSorley states this succinctly as follows:

“Historically C-Suite recruitment in Luxury was much more based on who you are, but now it is definitely about what you have done. Brands are looking for people with results, across industries, people that have proven themselves as key collaborators, innovators, people that can manage change.”

She further adds:

“We are noticing luxury brands really looking into other industries for both talent and inspiration. When you talk about digital, brands are looking to Google or pure play companies. In retail they are looking to hospitality for knowledge of customer service. Luxury fashion brands are also speaking about Apple when it comes to best in class service and customer engagement.”

Woman - Business Leader

In the final analysis

In large corporations, the Boards should be held more accountable by paying closer attention to the behavior and actions in the C-suite ‒ thus reacting before things go awry.

The top executive’s job is to operate a business that adds value by means of the goods and services it provides to customers.

The way to solve an organizational problem is to confront the structural issues with a moral sense of purpose and ethics. Higher morale generates higher profits – though occasionally other priorities undermine that objective, for example, self-serving behavior by certain executives or chasing short-term selfish objectives in search of rapid market share, profits and self-interests before people. Monsanto’s executive conduct would make for a marvelous case study in this regard.

According to marketing maven Seth Godin, “It’s the flameouts and the scams that get all the publicity, but it’s the long-term commitment that pays off.”

In the end, what you manage and how you manage it is what you get.

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