“We live in a ridiculous world where Boards, in fear of investors, give CEOs six months to turn around multi-billion dollar companies that have been drifting, if not actually plunging, downwards for years; expect them to do it no matter what the situation or economy; where the slightest miss is considered grounds for firing; and long-term is a quarter.
Even when Wall Street recognizes the need to change a deeply entrenched culture they still demand that it be done in a quarter and analysts not only want perfect visions of future direction, but also exact execution plans, preferably grounded in heavy cost-cutting (read layoffs).
So, like the politicians who once elected spend much of their time fund-raising, CEOs and the senior managers below them spend much of their time focused on immediate numbers, which they must produce quarterly by hook or, more and more frequently, by crook.”
“Along with the burden of replacing the most celebrated CEO of his generation, Immelt inherited an inflated stock price—the so-called Welch premium—that fostered unrealistic expectations. Yet he has still managed to produce 14% growth in annual earnings and 13% annual revenue gains, on average, over the last five years.”
But that’s not enough.
In the holy name of “maximizing shareholder value” corporations are raped, workers brutalized and communities trashed.
What else does Wall Street do besides cripple corporate strategic efforts?
(Pssst. Come back tomorrow for a look at the fiasco of self-regulation.)
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
Sam Walton made no bones about it. He was not going to lose control of Wal-Mart to the stock market. Even after they started selling stock over the counter, top management at Wal-Mart was able to maintain control over the strategic direction of the company right up to Sam’s death in 1992.
Sam was a leader. He had a clear vision that he would not compromise. He took risks, built a support team to “manage” the company, empowered and nurtured employees, shared profits, and built a company that is still the envy of most retailers. It also became the Alpha in discount retailing due to that leadership.
Compare that with the life of most CEOs today: shareholders and stock analysts really run their companies, because stock price is the measurement of their success. Their bonuses are based upon it, and their future employment is based upon it.
CEOs who have to answer to the whims of the stock market cannot be leaders, because they have already defined themselves as followers.
Is it possible for a CEO of a publicly-owned company to maintain leadership?
Certainly, but it takes an extremely charismatic, visionary, focused individual who is willing and capable of bucking stock analyst and shareholder pressure for short-term profit results and instead keep the company focused upon long-term success.
All of the Alpha companies I researched for my book, The Alpha Factor, had such leadership in their early formative years. What killed most of those companies later on was the compromise of allowing stockholders and stock analysts (or other outsiders) to drive the strategic management of the company.
How would you protect your company from this if you had to generate significant financing?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
If you’re alive, you’ve probably been watching the drama being played out at Starbucks. Hundreds of stores are slated to close across the country, and customers ranging from local neighbors to business owners to the mayors of cities are calling to lobby for their local store.
Starbucks management claim that they “over expanded,” and that has caught up with them as they experience the same economic downturn that is haunting everyone else. That is certainly the case, but there is something even more significant being displayed here: the power of an Alpha company.
Alpha companies are the leaders of customer expectations in a product or service category. They define what it means to be “good.” Everyone else has to either emulate or overcome them to establish themselves as acceptable. They accomplish that by driving emotional needs fulfillment ever higher to “self-satisfaction” and “significance.”
One of the benefits of making yourself this kind of company is that you have a lot more margin for error when you really blow it.
Not since Coca-Cola nearly immolated itself with “New Coke” in the 1980s has there been such a customer response as we are seeing for Starbucks. Customers saved Coca-Cola from disaster. They are trying to help Starbucks in the same way. What a testimony for leadership over management.
Cost-side management has really been the cause of the problem. What was forgotten was that cost-side management could never have created this kind of customer response. Only revenue-side management (which is the focus of leadership vs. management) could do this.
Luckily, Starbucks has been given a gift by its customers. I hope that it recognizes the true cause of its decline is a cost-side focus and uses this time to re-focus upon the customer experience that defined new experiential expectations for a coffee shop.
How will you react when your local Starbucks closes?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
It is seldom the “big” decisions that kill a company, except in the final stages, when big decisions are needed to “save” it. It is the day-to-day sacrificing of “Alpha Assets” that drive a company to ruin. Alpha Assets are the real strategic assets a company has, based upon the Alpha Factor model defined in my book.
What happens is that leaders start to believe the lies they hear from customers, retailers, and salespeople that they have to compete on price. They make decisions based upon short-term internal needs before addressing strategic needs of customers. They make budget and other decisions based upon satisfying shareholders and stock analysts, whose interest in the company is extremely short-term.
When I see the kinds of problems that most corporate leaders face on a day-to-day basis, more than 90% of them are ones that either would not exist or would be much less threatening, if the company had not made many small compromises and small “mistakes” over a long time. They have given away the competitive influence they might have had by “playing by the rules.”
In the research for my book, The Alpha Factor, I was continually surprised to find that many Alpha companies struggle with this. The difference is that Alpha’s compromise less and stay focused more upon their core Alpha Assets when making decisions.
What kind of pressure have you seen that tempts you to just solve the problem today without regard to how it might harm your long-term potential?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
To grow a company and make that growth sustainable, top leadership must be focused upon strategic decisions, not short-term tactical ones. That means decisions that further the long-term objective of creating more growth potential for the company, not just satisfying short-term demands—whether those are internal or external.
Too many top executives are among the greatest offenders in this, largely due to the extraordinary pressure created by the stock market. In fact, I believe the stock market and its “gambling mentality” is the greatest threat to American business today—even more of a threat than the U.S. government has tried to make itself.
Unfortunately, I hear CEOs so concerned about their stock performance that this concern starts filtering down to the ranks of staff. This creates a frightening problem. Lower-level staff, where most of the real strategic initiatives can originate, start thinking as the CEO does and slowly stop thinking strategically about initiatives that will sustain growth.
Since the top of the company has become so focused upon tactical response to stock market performance, the company has actually been turned upside-down with mid- and lower-level staff becoming the real source for strategic growth. Can a company actually survive being driven from the bottom up, especially if mid-level staff start thinking about stock price as a real goal for their initiatives? This creates a terrible problem of both how to train these staff to become more effective in a strategic role, how to nurture strategic thinking from lower levels, and how in that environment to still maintain a proper management hierarchy.
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
Corporate ADD (see last Tuesday’s posting) may be one of the chief causes of the lack of “leadership training” in corporate America today, other than a simple lack of know-how. Who has time to nurture a subordinate or to model “strategic leadership” in an environment that is all tactical all the time? And, as noted in last Tuesday’s posting, this only gets worse as you go up the corporate ladder.
The danger is that lower-level employees are the only ones with any perceived freedom to experiment or to make truly strategic proposals… at least until they realize that there’s no one upstairs who is listening. That’s when the young ranks of “best and brightest” start looking for another place of employment.
Not all Alpha companies, as I describe them in my book, The Alpha Factor, avoid this problem, but I was lucky enough to work for two where young employees were encouraged to experiment. At one of them, I made a bold comment about how staff at my level were being under-utilized, and the VP of my division challenged me to prove what I could do. That opened up an opportunity for me to initiate a limited, but strategic initiative that created my first big personal success at growing sales.
Be aware, however, that just because a company is the Alpha of its category doesn’t make it the greatest place to work. Some of the Alphas I discuss in the book have extremely threatening cultures, but they seem to work because they are designed to nurture a specific type of employee that can thrive under that management style.
What are your thoughts on how to nurture future strong strategic leaders?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
There is a growing phenomenon among upper-level executives in American corporations that we could easily call, “Corporate ADD.”
Even stretching down to upper-middle management levels, there is a growing problem with having too much to think about too quickly with too little information, but too much pressure to get it done and done right.
Every time I talk with mid- to upper-level execs, I hear the same thing. They can’t get anything done, because there are too many meetings talking about too may things that have to be solved immediately, and the pressure upon them to turn around impossible problems increases almost daily.
This is exacerbated by the stock market for the CEO, who finds himself putting out investor relations and stock analyst fires more than he does even the panicked internal fires that are driving his staff crazy.
Is it any wonder that there are fewer visionary “leaders” heading up companies?
Who in their right mind would step into such a role, if he were a visionary?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
Have you ever wondered where leaders get the inspiration that helps them guide and lead their organization? The responses I’ve received to that question have been pretty amazing.
For instance, I’ve heard… “I wake up in the morning and get my inspiration in those few moments between sleep and being completely awake.” Or “I start reading something, and before I know it, I’m thinking through the critical things I need to solve and I’m getting great ideas.”
More often, unfortunately, I hear, “Inspiration? I feel lucky just to be able to maneuver through the day.” Or “I had so many meetings today that I didn’t have time to get any inspiration.”
Inspiration is the lifeblood of a dynamic, growing company. I hurt for those corporate leaders who are so driven by the “tyranny of the urgent” that they can’t hear the inspiration to greater greatness that is calling to them.
Sadly, this describes all too many corporate leaders and managers.
Compounding that problem is the fact that very few corporate leaders have anyone they can honestly talk with to really work through their fears and weaknesses so they can discover a real vision they can passionately pursue.
What do you say we all chip in to buy them a vacation?
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
Most employees of larger corporations would agree that the majority of the persons they see being moved upward are not leaders.
In many cases, they aren’t even very good managers. They just happen to be willing to stay around and put up with more #*&@ than other people around them.
Is that too harsh? I speak not just from all the research I did into “Alpha” companies for my book, The Alpha Factor, but also from personal experience working for one Fortune 100 and one Fortune 500 company. In most cases, the best (who stick around) eventually do filter to the top, but I have often questioned the process larger companies follow that allows restrictive, managerial personalities to rise so high in the ranks where they can negatively affect so many other people by their focus upon managing more than leading, nurturing, or inspiring.
The result is most often that all the entrepreneurial personalities drift out into the marketplace, when most of them would much rather have been able to practice their innovative thinking within the structure and using the resources of a larger organization.
By Wes Ball, author of The Alpha Factor – a revolutionary new look at what really creates market dominance and self-sustaining success. Read all of Wes’ posts here.
In my fifteen year research project for my book, The Alpha Factor, that finally uncovered the core transferable secrets to creating sustainable market dominance no matter how big or small you are, I discovered something that seemed to fly in the face of most business mythology. I discovered that many companies that are the dominant leaders are not run by extraordinarily gifted visionary “leaders.” I know that the book Good to Great came up with the conclusion that “great” companies had great leaders, but I did not find that to be true across the board.
A prime example: Harley-Davidson. They are clearly the Alpha in the cruiser motorcycle category and have been for many years. In the mid-1990s, Harley-Davidsons were found to be the most desired item in the world. Not the most desired motorcycle; the most desired item.
Yet their leadership is not visionary. It is not inspirational. It is not truly “Alpha” material.
The difference between H-D and many other Alphas, Victoria’s Secret for instance, is that one created its Alpha status, the other had it thrust upon them. Victoria’s Secret very purposefully created the aura and dominance they enjoy. Harley-Davidson discovered that they had that aura after they finally got their quality up to an acceptable level in 1983, after the company was purchased from AMF.
H-D’s “Alphaness” is the result of their customers, not their own marketing or strategic vision.
Because of that difference, we may be watching the beginning of the demise of one of the greatest success stories in American manufacturing, as H-D begins to let its quality slide, as I heard from one distraught factory manager.
Could we see them slide into oblivion over the next decade or so, just because their management doesn’t “get it?”
What a shame. As a long-time, die-hard Harley fan, my hope is that they finally catch their customers’ vision!
Entrepreneurs face difficulties that are hard for most people to imagine, let alone understand. You can find anonymous help and connections that do understand at 7 cups of tea.
Crises never end.
$10 really does make a difference and you’ll never miss it,
Tuesday Wes Ball asked if Wall Street’s demands for shot-term performance undercut leadership performance; last November I wrote and When leaders can’t practice leadership and said,
If you’re alive, you’ve probably been watching the drama being played out at Starbucks. Hundreds of stores are slated to close across the country, and customers ranging from local neighbors to business owners to the mayors of cities are calling to lobby for their local store.
It is seldom the “big” decisions that kill a company, except in the final stages, when big decisions are needed to “save” it. It is the day-to-day sacrificing of “Alpha Assets” that drive a company to ruin. Alpha Assets are the real strategic assets a company has, based upon the Alpha Factor model defined in my book.
Too many top executives are among the greatest offenders in this, largely due to the extraordinary pressure created by the stock market. In fact, I believe the stock market and its “gambling mentality” is the greatest threat to American business today—even more of a threat than the U.S. government has tried to make itself.
Have you ever wondered where leaders get the inspiration that helps them guide and lead their organization? The responses I’ve received to that question have been pretty amazing.
In many cases, they aren’t even very good managers. They just happen to be willing to stay around and put up with more #*&@ than other people around them.
A prime example: Harley-Davidson. They are clearly the Alpha in the cruiser motorcycle category and have been for many years. In the mid-1990s, Harley-Davidsons were found to be the most desired item in the world. Not the most desired motorcycle; the most desired item.
