Wall Street by Charlie R. Geisst

This book was written in 1997 by Charlie Geisst, and does not cover any events after 1996. It is very difficult to summarize a history book, and in many cases it is probably useless, but I have attempted to focus on the beginnings of Wall Street for those who are interested in getting a very basic understanding of financial history in the United States.

Pre-Revolutionary Era
British and Dutch traders developed lucrative businesses, utilizing American land, food, furs, and minerals. European stock exchanges had existed for a century, but America lacked its own exchange.

Post-Revolutionary Era (1790-1840)
The US issued $80 million of federal government bonds. This bond market was formed as merchants gathered around Wall Street. Corruption was a problem, and in 1792, dealers and auctioneers agreed to establish a structured exchange. This was not enough to solve the problem of predatory practices.

After the War of 1812, transportation (canals and railways) emerged as the first US growth industry.

Survival of the Fittest (1840-1870)
Volatility was extremely high during this period, and the wealthy dominated wall street. These wealthy people did, however, finance the War of 1812, the Mexican War of 1846-1848, and the Civil War. In 1841, The Mercantile Agency was established as the first watchdog firm on Wall Street

The Robber Barons (1870-1890)
Railroad and Telegraph expansions continued after the civil war, and the first transatlantic telegraph was operational in 1866. In this time of great speculation, a few Americans (Carnegie, Rockefeller, Vanderbilt, etc.) became extraordinarily wealthy due to consolidations in American industry. By 1900, their stranglehold had turned Wall Street into a cartel.

Trusts (1880-1910)
In 1882, members of the oil industry gave up their shares for certificates issued by Rockefeller’s Standard Oil. As Standard Oil took over small companies in the same industry, it grew in size and influence. These trust certificates were then traded on stock exchanges. Some other companies to emerge as trusts in their respective industries were AT&T, General Electric, and American Tobacco Co. By 1900, stocks were more favorable investments than bonds, and the banking system was in danger due to the lack of regulation.

Money Trusts (1890-1920)
In 1913, the Federal Reserve was established to act as a lender of last resort. It maintained a good relationship with Wall Street until Louis Brandeis spoke out against money trusts such as J.P. Morgan. He spoke out against the close relationship between investment and commercial bankers.

In 1917, $21 billion of liberty loans were issued as a result of World War I. This was a first for many Americans, who had never owned appreciating intangible assets. It helped increase the public trust of government and investment bankers. Money trusts still existed, but they were less conspicuous.

The Roaring Twenties (1920-1929)
After World War I, inflation was low and productivity soared to record levels. Although there was a high income tax rate, people were still spending at record levels. Between 1925 and 1928, the market rose 200%, and many people were buying stocks on margin as a standard practice. In 1929, the market reached a top, and when sales began to slow in September, investors began selling en masse, calling prices to tumble downwards. By October, many investors had lost all of their money. Values had decreased by almost $15 billion.

The New Deal (1930-1935)
National income was down 30%, savings were down 50%, unemployment rose to 16%, and new housing was nonexistent. Companies were no longer loaning money, and on the political front, the Democrats regained control. Wall Street wrote the period off as “another recession.”

The following proposals were enacted by the Roosevelt Administration:

  • The Emergency Banking Act of 1933: Provided for Federal Bank Inspections
  • Glass-Steagall Act: Separated Investment from Commercial banking, and provided insurance for depositors through the FDIC
  • Securities Act: Regulated the securities market by the SEC
  • Federal Housing Administration (FHA): Mortgage loan guarantees were provided

Recovery (1936-1954)
The National Association of Securities Dealers, which was responsible for overseeing securities exchanges, was born in 1937 as part of the Maloney Act. The Federal Reserve was given the power to control the interest rates during World War II. Markets slowly recovered after the war. New stock issues dramatically increased, but corporate bond issues remained low and inflation was alarming (15% in 1946).

In 1947, the Justice Department filed a law suit against 17 investment banks for monopolizing the industry, but the case was dismissed in 1953. From then on, i-bankers were considered vital to the economy.

The Bull Market (1954-1969)
During these 15 prosperous years, US industries spent billions of dollars overseas, and the US became a creditor nation. However, interest rates and inflation were a problem. The use of credit cards began in the 1960s, and mutual funds began to emerge in numbers.

The Bear Market (1970-1981)
A complex series of events occured during the Nixon Administration:

  • Nixon froze wages and prices for 90 days and cut the dollar away from the gold standard
  • Investors began selling dollars on the foreign exchange markets, leading to high inflation.
  • In 1973, a tipping point occurred when OPEC sharply increased the price of oil, causing a recession.
  • Stocks declined while bond yields and short-term interest rates increased.

Mergermania (1982-1996)
During the period known for its scandals, many new securities were issued by numerous governmental and non-governmental entities. Underwriting (loans based on property value) increased and the bond market was healthy. The increase in corporate profits sparked new capital investments.

Interest rates hit a bottom in 1985, and in 1987, fear that interest rates would skyrocket caused a collapse. On October 19th, the Dow fell 22.5%. After hitting rock bottom, the crisis was over, and at the end of 1987, the market ended slightly ahead. A bull market began that, in the 1990s, became the largest in Wall Street history. Mergers increased, and in 1996, there were 5000 registered funds in existence. This brought about the gradual disappearance of the line between commercial and investment banking.

April 24, 2008 at 6:18 pm Leave a comment

Recommended: Lead Well and Prosper

Nick McCormick’s Lead Well and Prosper: 15 Successful Strategies for Becoming a Good Manager ($14.95) gets it. This is a great addition to the library if you want people to want to work with/for you. From those individuals who run households to the CEOs of the largest companies, this is a book to be kept by the bedside. The book is simple, clean, and compact. Nick McCormick provides you with light examples and plenty of easy to use supplementary documents. The only thing keeping this book from being a best seller is people not knowing about it.

In addition to the strategies which are laid out well, the book provides a Manager’s Test, Dos and Don’ts, and a number of other helpful tools. All in all this is a book that will show you how to be type of person people want to be around, hire, or recommend.

Buy

April 24, 2008 at 10:31 am Leave a comment

EPIC Change by Timothy R. Clark

EPIC Change outlines patterns of and steps required for large-scale organizational change through the EPIC methodology:

  • Evaluate
  • Prepare
  • Implement
  • Consolidate

Part I: The EPIC Methodology

The four spheres of leadership literacy:

  1. Personal: Leaders must have self-awareness and personal understanding. They must seek their own truth and accept feedback. Key Point: Leaders must first become intentional self-learners.
  2. Organizational: Leaders must have organizational understanding. This requires an understanding of an organization’s operational, financial, and cultural performance.
  3. Market: Organizations that understand the topography of their specific markets are able to spot trends, threats, and opportunities. Opportunities include finding solutions for inefficiencies or unmet needs in the market.
  4. Global: Continued innovation occurs in an environment where leaders understand the macro-level trends occurring in the world.

In today’s global age, lack of certainty in the market is a fact. Change leadership has become a necessary competency for survival and success. The EPIC Methodology explains this approach from a systems-level perspective.

Six consistent pattern form the basis of the EPIC Methodology:

Pattern 1: Change requires more work and creates more stress.

Types of change:

  1. Performance: Requires people and organizations to behave, work, and perform at a higher level (includes: department restructuring, creating a new product line, acquiring another company, or outsourcing a function.
  2. Compliance: Requires people to comply with something that is new but does not require performance at a higher level. It is often a change in policy or procedure and not often directly felt or seen.

Pattern 2: There are four stages of a successful change process.

  • Evaluation: Leaders evaluate competitive reality, international performance, and alternatives for change.
  • Preparation: This stage requires more work and additional stress than does evaluation. Shifting resource allocation signals the preparation stage and is the beginning of the break from the stability of the status quo. In this stage, organizations experiment, model, test, and trial options before making a final decision to pursue change.
  • Implementation: Organizations execute the tasks that were planned during preparation. Key Point: This is the stage where resistance is the strongest.
  • Consolidation: Happens after achieving sustained results; motivation increases and gradually becomes stronger than the resistance that may have originally opposed it.

Leaders must deliberately navigate through each stage for successful change to happen.

Pattern 3: The discretionary efforts of people drive change.

Organizational change is dependent on people. Factors that affect the success or failure are:

  • “Hard” or technical: Consist of inanimate and inter resources.
  • Human or “Soft”: Deal with people, thoughts, feelings, and behavior.

Pattern 4: Leaders provide the energy.

The change process begins with people, time, resources, and a plan. Large amounts of energy motivate people involved in the change process. Without energy, there is no change. Leaders must create and replenish that energy throughout the process.

Pattern 5: The power curve of change can absorb stress.

Organizations consume energy that is roughly equal to the amount of work performed and stress absorbed. Leaders who understand the power curve can help sustain different energy requirements for employees in the different stages to prevent the change process from faltering.

Pattern 6: The seven primary energy sources in the change process. (I’ve placed the stage which you mostly find the source)

  • Agility (Evaluate)
  • Urgency (Prepare)
  • Credibility (Prepare)
  • Coalition (Prepare)
  • Vision (Prepare)
  • Early results (Implement)
  • Sustained results Consolidate)

Part II: Evaluate

The first stage. Agility is the primary energy source used during this stage. Different types of agility are necessary for use in varying stages. There are three main categories:

  1. Intellectual: Organizations must be prepared to initiate change at any time. Leaders who can understand the nature of competitive advantage are inclined to evaluate a situation first. This means being in a constant state of readiness, and acknowledging change.
  2. Emotional: This is to understand, accept, and commit to the nature of leadership. There is tension between leaders to who maintain the status quo – doing “operational work” – and those who disrupt the status quo, which is called change work. It is critical that both work is performed so that the current strategies are being executed and preparation is being doin to execute the future strategy by altering some aspects of the culture, systems, processes, structures, and tools, in order to meet an adaptive challenge and create value tomorrow. Change work requires different competencies in a leader than operational work. The transition is more emotional and psychological than intellectual.
  3. Physical: Agility is also physical. Continually going back and forth between change and operational work can be physically taxing. In general, the new physical requirement for agility is flexibility and stamina in an intense environment.

Part III: Prepare

Moving from evaluate to prepare includes:

  • analyzing change alternatives
  • selecting a course of action
  • planning for implementation

It is here when the rest of the employee population gets involved to do the actual work. The leader must provide vision (“what”) and strategy (“how”) in order to be successful.

This move to implementation creates a disturbance to the organization because people feel destabilized as they are pushed to move out of an environment of inertia. Preparing with urgency jump starts the change process. During this phase, four of the seven energy sources come into play.

  • Urgency: Acts as a form of motivation. Three categories of adaptive challenge that affect preparation with urgency: opportunity, threat, and crisis.
  • Credibility: The only source derived from within the leader. It is vital to move and inspire people to make change credible. The most enduring energy source.
  • Coalition: Is a group of people inside or outside of an organization who together support change. Natural next step after establishment of credibility. Leaders rely on coalitions to continue to replenish energy, for leaders cannot lead change alone. Coalitions offer even more benefits, specifically in terms of what they can do to replenish energy, avoid obstacles, and increase chances of success.
  • Vision: People must understand the direction of their organization. Good change leaders can articulate straightforward visions of growth and operational excellence. Simplicity is the key because people need to understand the reason for change at a basic level. They need to understand the vision, the strategy, and the role they play. The vision educates, motivates, and coordinates.

Part IV: Implement

Significant amounts of energy from the first five sources are required to fuel implementations. Large-scale change comes from energy created by early results, which are also known as quick hits or small wins. In the case of large and complex change, results may not come immediately. The way to get early results is to set the right goals. Another challenge facing leaders is predicting problems on the human side: managing resistance. With major change initiatives come many smaller change elements.

That being said, there are four different types of change:

  • Discretionary: Requires little organizational preparation as it does not disturb the status quo
  • Delightful: Can represent improved performance and release positive energy
  • Demanding: Requires significant investment in time, resources, and energy. Solid leadership required.
  • Dangerous: Resistance is created and can grow and threaten the initiative.

Part V: Consolidate

The ultimate goal: sustained results. Consolidation is the final stage of the change process, which is about making change solid, strong, and firmly established. From beginning to end, change demands extraordinary fidelity. There are several pitfalls leaders suffer in the consolidation stage. There are three levels of change that take place before reaching consolidation:

  1. Structural change: This occurs when the nonbehavioral aspects of change are prepared. Nonbehavioral aspects of change relate to structure, systems, process, technology, and legalities.
  2. Behavioral change: Change moves here when individuals begin to behave differently under new conditions, and with the aid of different resources.
  3. Cultural change: Change will not last unless it takes hold of the elements of organizational culture. The culture must support change.

Based on the three levels of change, it is clear why so many change initiatives do not achieve consolidation after generating results.

Understanding organizational change and its underlying principles is precisely the challenge leaders are facing in the global age. Leaders who are open, collaborative, and approachable are more likely to generate and replenish the energy required for successful change management.

April 20, 2008 at 8:31 pm Leave a comment

The World Is Flat by Thomas L. Friedman

The platform for delivering content from anywhere to anywhere is what The World is Flat is all about. This book provides an understanding of how the world has become so small, in essence flat, and what the implications of this are for countries, companies, and individuals.

Part I: Waking up to Globalization 3.0

  • Globalization 1.0 (1492-1800): Columbus opens trade between the Old World and the New; shrinks the world’s size from large to medium.
  • Globalization 2.0 (1800-2000): Multinationals, led by the expansion of Dutch and English joint-stock companies, and then by the Industrial Revolution shrink the world from medium to small. Integration is first powered by decreasing transportation costs and then falling telecommunication costs.
  • Globalization 3.0 (around the year 2000-): This is not only the world shrinking from small to tiny, but also flattens the playing field as individuals, rather than countries or companies, collaborate and compete globally. It is driven by a diverse spectrum of non-Western people of color rather than by white Europe and America.

Because of the automation of everything, the gains in productivity promise to be staggering for those who can absorb the technology. And more people than ever before are going to have access. The convergence of 10 major flattening forces will create new social, political, and business model.

Flatteners

  1. 11/9/89: Not only did the fall of the Berlin Wall unleash forces that ultimately liberate the captive populations of the Soviet Union, it tipped the balance of power, worldwide, toward those advocating democratic, consensual, free-market-oriented governance. The period from this date until the mid-1990s was the age of “My machine and I can now talk to each other, better and faster, so that I can do more tasks. Moreover, my machine and I can talk better and faster to a few friends, and some other people in my company, so that we can become more productive.” True seamless global communication isn’t here yet, but on the horizon.
  2. 8/9/95: Netscape goes public and the world is never the same. The PC-Windows phase begets the Netscape email-browsing phase – begets the reality that “My machine and I can interact (i.e. email) with anyone, anywhere, on any machine, and my machine and I can interact (can browse) with anybody’s Web site on the Internet. This lays the foundation for #3.
  3. Work Flow Software: It didn’t take long before everyone wanted to do more than just browse and transmit email, instant message, send pictures, and listen to music over the Net. They also wanted to create, sell, and buy goods and services, keep track of inventories, read X-rays – and they wanted it ubiquitous. However, for this to happen, the flattening process had to go up another level: new application software was needed. The development of XML, a data description language, and SOAP, its related transport protocol, allowed digitized data to be exchanged between diverse software programs so that the data could be shaped, designed, manipulated, edited, reedited, stored, published, and transported and it didn’t matter where the individuals were or what computing devices the were connecting through. The new global platform had empowered entirely new forms of collaboration, which constitute the next six flatteners.
  4. Open-Sourcing: The open-source movement involves thousands of people, worldwide, coming together online to collaborate in writing everything from their own software and operating systems to dictionaries and recipes. Apache, a shareware program for Web server technology, is a prime example. Its collaborators set out to solve a common problem – Web serving – and discovered that collaborating for free in this open-source manner was the best way to assemble the best brains for the task. Apache, which powers about two-thirds of the Web sites in the world, is one of the most successful open-source tools available. Determining that is engineers could no better than this ad-hoc initiative, IBM threw out its own technology and decided to incorporate Apache into its own new Web server product, Websphere. The free software movement is another increasingly popular form of self-organized cooperation, in that it relies on open-source collaboration to help produce the best software possible, for free distribution.
  5. Outsourcing: During the late 1990s the Y2K computer issues became the Y2K crisis! And, India, with all its technies, from all those IITs (Indian Institutes of Technology), private colleges, and computer schools, was the one place in the world with enough software engineers to do it. The initiative became a tremendous flattener. Using fiber-optic-connected workstations, any service, call center, business support operation, or knowledge work, which could be digitized, could also be outsourced globally to the cheapest, smartest, or most efficient provider. This discover made Indian IT providers greatly respected, and outsourcing from the US to India exploded.
  6. Offshoring: Beginning in the 1980s, many investors, who knew how to operate in China, began to realize that, though they could not effectively sell many things to that market at the time, they could use China’s labor pool to make things and sell them abroad. And so it became that the only way companies could compete was taking advantage of China’s low-cost, high-quality platform. In 2001, China formally joined the WTO, agreeing to adhere to international law and standard business practices. A process has been created in which countries now scramble to see who can give companies the best subsidies tax breaks, and education incentives, in addition to the cheapest labor. This has been great for the consumer.
  7. Supply-Chaining: When a Wal-Mart cashier scans and item for purchase, a signal is transmitted across the Wal-Mart network to the supplier’s factory (whether in Maine or coastal China). A replacement item is manufactured and then shipped back to the originating Wal-Mart store, via the Wal-Mart supply chain, and the whole cycle starts all over. Wal-Mart’s ability to orchestrate this “symphony” on a global scale – moving 2.3 billion general merchandise cartons annually along its supply chain – is the most telling example of supply-chaining. Supply-chaining, a method of collaborating horizontally among suppliers, retailers, and customers to create value, is both enabled by the world’s flattening and a hugely important flattener in its own right.
  8. Insourcing: If an individual owns a Toshiba laptop, which breaks while under warranty, Toshiba will advise the customer to drop the laptop off at a UPS store to be shipped for repair. However, UPS does not deliver the laptop to Toshiba, but actually has it sown Toshiba-certified repair personnel fix the computer in a UPS-run workshop, dedicated to computer/printer repairs. With this process, UPS is not just delivering packages anymore – it’s coming right inside a business. This new form of deep collaboration and horizontal value creation is a unique new flattener. When a huge conglomerate can get packages delivered or goods repaired quickly anywhere in the world, it can act really small. And, when small businesses, or individuals working at home, can act big, the competitive playing field is leveled even more.
  9. In-forming:In-forming is “the individual’s personal analog to open-sourcing, outsourcing, insourcing, supply-chaining, and offshoring.” It is the ability to build and deploy one’s own personal information-knowledge-entertainment supply chain. It’s about “self-collaboration” – becoming one’s own self-directed, self-empowered researcher, editor, and selector of said information, knowledge, and entertainment without having to go to the library, the cinema, or watch network television. And, it’s about searching for knowledge and like-minded people and communities. Google shows how hungry people are for this form of collaboration with the number of daily searches is processes. Never before have so many people had the ability to find so much information on their own, about so many things, and about so many people. Google CEO Eric Schmidt say, “[If the flattening of the world means anything, it means] there is no discrimination in accessing knowledge.” The flatter the world become, the more transparent and available ordinary people become. In a flat world, no one can run and no one can hide.
  10. the Steroids: Friedman calls certain new technology steroids because they amplify and turbocharge all other flatteners. All steroids are going to amplify and further empower all the other forms of colaboration: Open-source innovations should become more open; Outsourcing will be enhanced because it will be so much easier to collaborate; Supply-chaining will be enhanced because headquarters will be able to connect in real time with everyone; Insourcing will be enhanced because every driver carrying his or her own PDa, will be capable of interacting with a company’s warehouses and every customer; and In-forming will be enhanced via every individua’s ability to manage his or her own knowledge supply chain.

Friedman contends that the most important force shaping global economics and politics in the early 21st century is a convergence of new players, on a new playing field, developing new processes ands kills for horizontal collaboration.

Unfortunately, this convergence has been obscured by another convergence. First, because many people equated the dot-com boom with globalization, when the bust came, and so many dot-coms imploded, the assumption was that globalization was imploding as well. “This was pure foolishness,” says Friedman, who believes, unequivocally, that the bust actually drove globalization into “hypermode” by forcing companies to outsource and offshore more and more functions in order to save scarce capital. In other word, the dot-com bust was a key factor in laying the foundation for Globalization 3.0

And then everything came to a half with 9/11, subsequent Afghanistan and Iraq invasions, Enron, Tyco, and WorldComm corporate scandals. Thus, the world’s flattening and reshaping were not part of the public discourse in the U.S. or Europe.

Part II: Globalization 3.0 – The Great Sorting Out

The world’s movement from what was primarily a vertical value-creation model to what is increasingly becoming a horizontal model, has affected everything. Friedman views flat and frictionless as a mixed blessing. It may be good for global business. But, it may also pose a threat to the distinctive places and communities that give people their identities and locate them in the world.

In the flat world, one person’s economic liberation could be another’s unemployment. The author contends that there is almost nothing about Globalization 3.0 that is not good for capital. If Dell can build all of its computer components in coastal China, and then sell them in the U.S., Dell benefits. Its stock does well, its shareholders do well, its American customers do well, and the Nasdaq does well; however it is difficult to say that American labor does well.

Essentially, management, shareholders, and investors, whose primary concern is sustainability, are largely indifferent about where their profits are found or even where employment is created.

As the world becomes flatter and flatter, the more it will need a system of global governance that keeps up with all the new legal and illegal forms of collaboration. “Who owns what?” is sure to emerge as one of the most contentious political/geopolitical questions of the century, especially if more and more American firms begin to feel ripped off by more and more Chinese enterprises, taking advantage of the newly flattened world.

April 13, 2008 at 11:30 pm 1 comment

The One Thing You Need to Know by Marcus Buckingham

the one thing you need to know

In this book, Marcus discusses the theme of leveraging your strengths and gives business students, entrepreneurs, and business professionals a fundamental course in outstanding achievement that captures the essence of great managing, great leading, and career success. The exploration of the “One Thing” exposes counterintuitive, but pivotal, differences, between great managing and great leadership and offers practical insights for acting on them effectively.

Part I: The One Thing You Need to Know About Sustained Organizational Success

Buckingham agrees with the premise that great organizations require great leaders, but stipulates that the importance of the role varies according to the challenges being faced. Although his experience more or less conforms to that of Warren Bennis (a great author on leadership) who says, “Leadership accounts for, at the very least, 15 percent of the success of any organization,” his research contradicts pretty much everything else.

  1. He does not believe that leadership and management are interchangeable
  2. He contends that it is inaccurate to say that everyone, regardless of his or her place in the organization, must be a leader
  3. He believes one’s performance as a leader or manager can be improved through practice, experience, and training, but if core talents are lacking, it will be impossible to excel consistently in either role
  4. He believes the most effective leaders are not self-effacing and humble – quite the contrary. “A powerful ego, defined as the need to take grand claims, is one of their most defining characteristics.”

Important Note: The chief responsibility of a great manager is not to enforce quality, ensure customer service, set standards, or to build high-performance teams.

Four Skills Important to not Fail as a Manager

  1. Great managers know what talents they seek and know it is imperative to select people who possess these requisite endowments.
  2. Defining clear expectations is the second basic skill of good management.
  3. The third skill concerns praise and recognition.
  4. Great managers show the care for their people by bonding with others deliberately and explicitly.

Key Point: “Discover what is unique about each person and capitalize on it.” Individuals are dissimilar in how they think, build relationships, and learn; and they are unique in how altruistic they are, how patient, how much of an expert they need to be, how prepared they need to feel, what drives the, what challenges them, and what their goals are.

Styles of Learning:

  • Analyzing – understand tasks by taking them apart, examining their elements, and reconstructing them piece by piece.
  • Doing – learn by being thrown into the middle of a new situation and tell them to wing it.
  • Watching – learn a great deal, but only when they are given the chance to see the total performance.

Part II: The One Thing You Need to Know About Sustained Individual Success

Only twenty percent of the working world report that they are in a role where they have a chance to do what they do best on a daily basis.

Key Point: “discoer what you do not like doing and stop doing it.”

The secret to sustained success lies in knowing what engages one’s strengths, what does not, and having the self-discipline to reject the latter. Although it is possible to experience some achievement when employed in non-strength-engaging activities, the activities are usually depleting, draining, frustrating, or boring. Thus, sustained success is lessa bout what to accumulate and more about what to edit.

The longer invidivuals put up with aspects of their work thy do not like, the less successful they will be.

April 7, 2008 at 8:12 am Leave a comment

Execution by Larry Bossidy & Ram Charan

Execution

In the year 2000, 40 CEOs of the Top 200 Fortune 500 companies were let go. This is because sometimes even smart, highly regarded people fail to produce critical results. Results they promised to deliver. Bossidy and Charan believe this is fast becoming an epidemic due not to the volatility or unpredictability of the business environment, but to the direct consequence of the lack of execution. The thesis here is that execution – the real job of business leaders and the key discipline for success today – bridges the gap between what leader want to achieve and the ability of their organizations to deliver it.

Part I: Execution – The Fundamentals

There are three critical points to understand:

1. Integral to strategy, execution is a discipline that prosecutes the three core processes of people, strategy, and operations with rigor, intensity, and depth.

2. It is the major responsibility of the business leader, who gets things done by taking responsibility of the business leader, who gets things done by taking charge of running the three core processes (no delegation).

3. Execution must be a core element of the organization’s culture, embedded in the reward systems and in the norms of behavior.

These points are built on seven essential behaviors of leadership, an effective framework for cultural change, and having the right people in the right place.

Leaders:

  • must know their business
  • have acquired a lot of knowledge, experience, and wisdom which they must pass on to the next generation of leaders
  • directly influence the behavior of the organization and behaviors deliver results
  • must change the beliefs that influence people’s behavior
  • have the most important job of selecting and evaluating people

Though the judgment, experiences, and capabilities of people make the difference between success and failure, many leaders do not pay enough attention to the quality of this resource – the one thing under their control. Instead they pay more attention to budgeting, strategic planning, and financial monitoring, when they need to commit as much as 40 percent of their time and emotional energy to selecting, appraising and developing talent.

Critical Point: Boards, CEOs, and senior executives place too much emphasis on education and intellectual qualities and neglect to determine how good a person is at getting things done.

Part II: Execution – The How

If leaders model the right behavior, create a culture that rewards execution, and have a consistent system for getting the right people in the right jobs, the foundation is in place for operating and managing the people, strategy, and operations processes effectively. Bossidy and Charan stipulate that the people process is the most important, for people create strategy and translate strategy into operations.

A robust process:

  • accurately/exhaustively evaluates individuals
  • provides a framework for identifying and developing all levels and kinds of leadership
  • is the basis of a strong succession plan

Most companies evaluate the jobs people do today instead of focusing on whether individuals can handle the responsibilities of tomorrow.

This kind of framework must be built on:

  • linkage to the strategic plan/milestones (near, medium, and long terms) and operating target
  • including specific financial targets
  • development of the leadership pipeline through continuous improvement
  • decisions on what to do about non performers

Most companies have three major flaws in their budgeting/operations process:

  1. The process does not provide for robust dialogue on the plan’s assumptions
  2. The budget is built on desired results, but does not specify the actions that ensure those results
  3. The process does not provide coaching opportunities for people to learn the whole business, nor does it develop the social structure for working together for a common cause

Thus, an operating plan must include the programs the business is going to complete within one year:

  • product launches
  • marketing plan
  • sales plan
  • manufacturing plan that stipulates production outputs
  • production plan that improves efficiency to reach specified earnings, sales, margin, and cash flows

Note: An open debate on assumptions is a critical component. Debating the assumptions and making trade-offs build the business leadership capacities of all involved.

March 30, 2008 at 7:12 pm 1 comment

The Leadership Challenge by James M. Kouzen and Barry Z. Posner

the leadership challenge

The Leadership Challenge is your “personal coach in a book”.

Part I: The Five Practices of Exemplary Leadership

People who guide others follow common patterns of actions. These patterns are not about actions, but about standard practices that the authors have forged into a dynamic model, the Five Practices of Exemplary Leadership:

  1. Model the Way
  2. Inspire a Shared Vision
  3. Challenge the Process
  4. Enable Others to Act
  5. Encourage the Heart

These practices lead to credibility and because it makes such a difference, leaders must take it personally. Not only do employee loyalty, commitment, energy, and productivity depend on it, credibility also influences customer and investor attitudes. For this reason the authors advise: DWYSYWD – Do What You Say You Will Do.
Part II: The Ten Commitments – Building your Competence to Lead

The authors note that a leader’s value is not only determined by a set of guiding beliefs, but also by his or her ability to act on these beliefs. Embedded in each of the Five Practices are behaviors, what the authors call “The Ten Commitments of Leadership.” They are:

  1. Find your voice by clarifying your personal values
  2. Set the example by aligning actions with shared values
  3. Envision the Future by Imagining Exciting and Ennobling Possibilities
  4. Enlist Others in a Common Vision by Appealing to Shared Aspirations
  5. Search for Opportunities by Seeking Innovative Ways to Change, Grow, and Improve
  6. Experiment and Take Risks by Constantly Generating Small Wins and Learning from Mistakes
  7. Foster Collaboration by Promoting Cooperative Goals and Building Trust
  8. Strengthen Others by Sharing Power and Discretion
  9. Recognize Contributions by Showing Appreciation for Individual Excellence
  10. Celebrate the Values and Victories

Leadership is about “[giving] courage, [spreading] joy, and [caring] about people, product and process all along the way.”

March 24, 2008 at 1:54 am Leave a comment

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