Louis Ferrante, a former associate of the Gambino Mafia family, has written a very interesting book on management based on his experience in a dynamic entrepreneurial run crime family entitled: "Mob Rules: What the Mafia Can Teach the Legitimate Businessman" published by Portfolio.  Many of the lessons he learned can be used in any business the following is an interview with Mr. Ferrante, who spend much of his time speaking to college students on leadership and entrepreneurship. 

 

Why did you write this book?

Ferrante:  “I was sort wanted to branch out into other types of books.  My agent and publisher wanted me to do another mafia book.  I wasn’t sure what I would write.  I still think like a mobster.  I came to the conclusion that my old mob ways get me through business today.  I realized that we , the mob, did things a little better.”

Do mob guys read business books?

Ferrante:  “Not active members.  The men I was on the streets with didn’t read any books.  In prison Mafia guys read Mafia books to see their name in print.  I am guessing there a few prisoners that are probably reading my book.   I didn’t read books until I was in prison and I feel in love with books.  If it wasn’t for prison I wouldn’t have been a reader.”

How did bosses train young associates to take on leadership roles?

Ferrante:  “There is a balance.  They train you through building your confidence so you can do more.  They are careful on who they train to take over a leadership role because it is a Darwinin world and they are sometimes afraid of their protégés.  They are afraid the protégé has their sights on the boss’s job.  In a world where bullets are dispensed easily so leaders can be replaced easily.”

Although violence can always be used in a society where killing someone is acceptable, what steps would a boss take if someone made mistakes that weren’t malicious, but cost the organization money, to improve the guy’s performance?

Ferrante: “If you cost someone big money it can cost you your bones at the least and your life at the most.  It all depended where you stood in the organization.  If a boss or captain went to bat for you or you are a major owner and can recoup it plus 10 times that then you would be given a pass.  You would be waiting for a decision.  For everyone else, they probably would get a beating so you will remember to not make the mistake again.  You can’t give a murder a beating because he will kill you , so you might give him a pass depending on the circumstances.”

When recruiting potential members of a crew, what attributes did you look for that lined up with what a legitimate organization could also use in screening applicants?

Ferrante:  “I wanted loyalty, trustworthiness and he had to be dependable.  You want people who are ambitious.  You mold people to meet their leader’s ambitions.  You might find someone who isn’t as ambitious as you but he is loyal so that is okay.  The mob had certain values like a company has and this translated into the long term success of the organization.  Dependability is most important because if they aren’t dependable that affects the crew and everyone up the line.”

When does a boss realize that he has made a mistake moving someone up and how did they rectify it without hurting or killing someone? 

Ferrante:  “What they usually do when they make someone who is an acting or real captain and it doesn’t work out.  The boss can break you back down to a solder.  If they didn’t want to kill you they could put you on a shelf.  They take away your right to be a member of the family and can’t make money through the mob.  If you have a legit business you can keep.  Any illegitimate business they would shut you down or they would let you keep it, but wouldn’t let you grow it or tax you more.   The boss can take you back or a new boss takes over and can promote you.  There is a lot of office politics.”

Are there other motivators besides money?

Ferrante:  “When you start out it is a belief in that life.  Money is the secondary.  Money takes the top spot.  As you get older your ideals wane and money is the biggest motivator.”

If a mob guy was being cheated  and he didn’t want to use violence how would he obtain justice?

Ferrante:  “You aren’t allowed to use violence.  You can’t shoot or beat their brains in.  if you are in equal positions and ask for a sit down to discuss it.  If he is in a higher position you would go to your captain.  If the person is in your crew then your captain renders a decision.  If the person is from a different crew then your captain negotiates with the other guys captain.  When the captain’s can’t agree then they take it up to the next level.  A deal is eventually worked out.  Rarely is violence used and that happens when one of the people agrees, but doesn’t honor the agreement.  It’s no different than when a judge tells you that you have to pay.”

Was their one mob leader that really impressed you and why?

Ferrante:  “Vincente “The Chin” Gigante, who was head of the Genovese family.  He lived by the old rules.  He didn’t let money interfere with his judgments.  He had an ego, but you didn’t see it.  He seldom exposed.  He didn’t care about mansions, yachts or nice suits.  He believed in that life.  One time there was a meeting with other bosses about millions of dollars and chastised over meeting for money.  That bosses should only meet about saving or taking a life.  He had a mysterious aura.”

 

 

Published 02 January 2012 - 0 comments (View/Post Comments)   

Yinglan Tang, a Harvard, Stanford and Carnegie Mellon, is the author of "The Way of the VC: Having Venture Capitalists on Your Board," talks about his book:

Why did you write this book?

Tan:  "There are perhaps more than 10,000 VCs in the world but perhaps only about 1% are any good. In fact, although 95% of companies listed on NASDAQ are backed by 900 VC firms, 46% are backed by 5. How do the world's top venture capitalists consistently obtain supernormal returns? How do they add value to entrepreneurs they have backed? That was the puzzle I was trying to answer in my book."

What are the common misconceptions about venture capitalists by entrepreneurs?

Tan:  "There are two extremes. One type think they are vultures. The other just wants a check and think VCs are philanthropists. Although there are folks at these two extremes, most VCs are somewhere at the centre."

What are the three to five things venture capitalists are looking for when deciding whether to make an investment or not?

Tan:  "It is like surfing a wave - you need a good team to catch the right market just like a good surfer can catch a good wave. A good team will, on average, yield 3 times that of a mediocre team with mediocre market. A good team with a great market will, on average, perform 12x better.

What are the three to five mistakes entrepreneurs make when presenting to venture capitalists?

 Tan:  "VCs like to see how quantitative entrepreneurs are. In consumer internet for example, do they track the metrics and keep track of traffic conversion under matrix?

What do venture capitalists look for in business plans?

Tan:  "The best VCs flip to the back and look at the numbers. If the numbers are interesting enough, then they look further. First is logic and coherence. But fundamentally is whether the business model makes sense. Then, whether the team can execute the business model."

How important is it to have experience in your industry when trying to raise venture capital considering many of the great start-ups such as Microsoft, Dell, Oracle and Facebook, the founders had little business or industry experience?

Tan:  "The examples you listed are exceptions. Most of the time, the chances of success is greatly increased by industry experience."

Do venture capitalists have a predisposition to investing in elite school students over others?

 Tan:  "Elite schools have the advantage of drawing awesome talent - access to top networks, great education, preselection process, good stamp of approval and intellectual prowess. We have a portfolio company where CEO (from an elite school) has engineering background and can juggle complex math, sociable and does biz dev naturally and employees love him. We will back him any day."

How hard is it to raise money today?

Tan:  "For Fundable companies - very easy. For not fundable companies - it is hit and miss. There are some dumb money around."

The number of venture firms is almost half of what it used to be, will we ever see a resurgence of the number of venture funds?

Tan:  "In the dot-com days, there were many folks (most notably investment bankers) who hung out their shingle to raise VC funds. These non-performing funds last 6-8 years and take a long time to die. Failure doesn't happen quickly in the venture capital industry.  Nowadays, there are more experienced smart money with well-defined strategy, so these funds with a sales engine (good track record) will continue to succeed."

 If there is one piece of advice you would give an entrepreneur trying to raise capital, what would that be?

Tan:   "Don't do it unless you have to do it. It's a time bomb. And if you really have to, raise it from the smartest money you can get. I won't worry about valuation and dilution - just focus on the smartest money you can get so that the enterprise can suceed. It is better to own 1% of Shell than 100% of a gas station."

Published 18 November 2011 - 0 comments (View/Post Comments)   

Stephen Denny is a competitive strategy and marketing consultant, helping brands in technology, consumer products, clean energy and services define their competitive positioning, communication strategies and implementation plans in the market. He is the author of Killing Giants: 10 Strategies to Topple the Goliath In Your Industry (Portfolio US & Penguin UK).

Apart from writing and consulting, Denny is a frequent speaker at corporate events, industry conferences and graduate business schools on topics relating to competitive strategy and marketing. He holds multiple patents, has lived and worked in both the US and Japan, and has an MBA from the Wharton School.

Prior to consulting, he was a 20 plus year senior marketing executive having managed the people, strategy and budgets at brand name technology companies like at Sony, Onstar, Iomega and Plantronics.  He lives just south of Santa Cruz, CA.

Why did you write this book?

Denny:  “In the mid-90’s, I was working for a small $86 billion upstart company called Sony and the giant in my particular industry was TDK, who at $500 million or so in revenue was twice my group’s size but a rounding error to the corporate mother ship. It was clear to me that giants came in all shapes and sizes. We did good work in those days, taking our #4 share position and driving it to #1 in video media, so my early education in toppling the giant started there.

Skip to the present and it took an email from a former colleague telling me she was “stuck between two giants” in her new role to kick me into gear. I hit “reply” and had a 500 word response ready to send within minutes. I realized I had a lot to say on the topic and that email probably wasn’t the right medium.

I’m surprised that more hasn’t been written on this subject given its importance and the passion it stirs up in people. This was a book that needed writing.”

What are the five strategies a small product company should use to overcome a bigger competitor?

Denny:  “All ten of the strategies I discuss in Killing Giants will help a giant killer out-maneuver the giant they face, so let me pick the five that may be the most counter-intuitive: 

“All the Wood Behind the Arrow(s) discusses how being great at one thing is never enough. When Method co-founder Eric Ryan told me, “I could never have been successful if I had launched a single attribute brand… the big guys would have figured us out,” it struck a nerve. “Interestingness” is often the missing element – the brand tension that combines two seemingly incompatible elements into a more nuanced brand. This idea contradicts a lot of old marketing thinking that says brands need to be known for One Big Thing.

“Inconvenient Truths discusses how pricing is used as a weapon. It’s never about making it cheap enough to get the business. Price can be used as a lever – together with the speed of your inventory turns – at retail to maximize what they get from investing in your products. It can also be used to flip the emotional polarity from rational to emotional or vice versa.

“Polarize on Purpose sings the praises of defining who you are and who you’re not. You have to be willing to leave some people behind – some brands are quite content offending a lot of people, come to think of it. But for those who are in on the joke, the brand becomes part of their identity. 42 Below vodka and even MINI are brands that aren’t for everyone, but for those who identify with them they’re the perfect choice.

“Winning in the Last Three Feet is as much a mindset as it is a tactical counter-punch. Being nimble, ready and willing to let your giant drive the demand for your category and smart enough to intercept that demand as it reaches for its collective wallet has real Zen-like beauty to it. This works in physical retail locations and it works in search, with two good case studies in the book describing the details. A lot of brands I talk to want to get better at this.

“Fighting Dirty is probably the chapter that gets people wound up the most. Changing structures, shifting perspectives and refusing to play the giant’s game – or even the established game – is the heart and soul of winning competitive strategy.

What examples of small companies can you give that demonstrate giant killing and what were the keys to success?

Denny:  “Black Like Me, a brand that grew out of the townships of South Africa, is an example of how a brand can create an argument that its giant competitor can’t win. For a black entrepreneur in the townships of South Africa in the 90’s, you were fighting against more than just global players – you were fighting apartheid, too. But the defining feature of this brand is its name. You don’t have to ask who Black Like Me is for. This sense of identity and the “for the people” attitude of the company made it impossible to dislodge.

“Baidu is another example of a local champion who in this case persuasively convinced new Internet users in China that it simply spoke Chinese better than Google did. When most of your prospective customers can’t even spell “Google,” this is an argument that’s easy to win. Robin Li’s story is an inspirational one for any local brand fighting against a global player.

“Go Daddy was languishing with a 16% share when it realized that the reason it wasn’t bigger was because no one knew the brand. Bob Parsons gambled on a Super Bowl ad in 2004 and the rest is history. He’s #1 in the business, larger than all of his competitors combined, and is growing at a faster rate than they are. For many, a Super Bowl ad isn’t the answer but if we distill the real lesson here, it’s that sometimes seizing the microphone is the big idea.

“Killing Giants is filled with 33 stories like these. There are no “buzz” stories. Every interview tells of how a smart, nimble company out-maneuvered the giant it faced.” 

Why do great companies like Microsoft cease to be great innovators and smaller companies with less resources become leaders?

Denny:  “Giants become vulnerable when they become trapped by their own success. They can’t imagine that their way of going to market could be wrong. Think of IBM’s Watson defeating the two reigning Jeopardy champions, one having won the game 33 times and the other a multi-million dollar winner. Could either of these two champions in their wildest dreams conceive of a situation where their tested and true approaches could be wrong? Probably not. Watson won because it didn’t play the game like a human. And the humans got mowed down as a result.

“Giants develop ways of doing things and these ways become instilled in their culture. They become masters at winning the game their way. This works right up until the moment that a giant killer comes along and changes the rules. Intel was unbeatable in microprocessors until the market grew up to include more than just PC’s – once it included smart phones and tablets, they were behind. They resoundingly won the last war. But they’re in a new one now using old weapons.

What are the attributes of the leaders who are able to lead their teams to success in areas giants dominate?

Denny:  “The giant killers I interviewed routinely stressed culture, speed and alignment. Bob Parsons at Go Daddy, Jim Koch of the Boston Beer Company and Eric Ryan all stressed that their primary roles were to make sure the culture stays the way it is. Many discussed the ability to “end the internal debate” and get a “facts not feelings” culture instilled quickly, with alignment and execution following closely.

“Once a decision is made, the expectation is that everyone is striving for the best possible implementation plan, even if it wasn’t your idea. “There is no room on a high performance team for, ‘I told you so,’” serial entrepreneur Mike Cassidy explained to me.” 

How do you create mismatches when the competitor has greater name recognition and funding?

“Head to head mismatches are typically easier in technology industries where a ‘winner takes all’ dynamic is more prevalent. I recall being at Iomega in the late ‘90’s when Syquest launched its Sparq drive – a removable storage device with the capacity of Iomega’s bigger Jaz drive but priced at parity with its smaller Zip drive. This drive stalled Iomega’s growth and produced the biggest backlog in Syquest’s history. Iomega had no answer and frankly got lucky that Syquest just ran out of cash.

“In a decidedly non-technological field, Hershey pitched its smaller Krackel brand against Nestle’s powerhouse Crunch bar in the relative backwater of the vending machine class of trade. Hershey’s massive 30% trade discounts forced Nestle to first stand and fight, which caught the attention of Nestle’s significantly larger national accounts, who quickly demanded the deep discounts they learned the company was handing out. The brand was forced to retreat and the resulting vacuum allowed upstart Hershey to gain a number of additional facings in the process. Awkward mismatches like this one make the giant’s size a liability.

Is there one company that has been very good taking on Giants on continuous basis?

Denny:  “A number of the brands I interviewed in Killing Giants have been able, over a period of decades, to continuously fight off successive competitors who dwarf them in size. A good example would be Jim Koch at the Boston Beer Company, who has been largely described as the grand-daddy of the craft beer movement in the US. The giants have awoken at times and launched their own craft-styled beers from all quarters, but the brand – now the largest American-owned brewery left, incredibly – is still growing and thriving.

“How is this possible? The Boston Beer Company has focused its attention on more than just making great beer. “I set out to change how Americans thought about beer,” Jim told me. This is a wonderfully loaded statement, isn’t it? It says, ‘I won’t rest until you, too, understand what makes this incredibly interesting 10,000 year old human tradition so important.’ His employees all do stints in the brewery. They’re encouraged to home brew. They’re experts. This is more than what a training course or a new employee orientation course could possibly teach. They have it “under their fingernails,” as Jim puts it. And still, Jim says, “They spill more than we brew!” And it’s true. “

You give an examples in the book where large companies who were either small players in a particular market or didn’t own a market used pricing as a way to push the opposition to losing market share or crumbling completely.  How can early stage companies use this strategy to their advantage?

Denny:  “Using pricing effectively starts with understanding how your channel partners make money. If you sell through retail, understanding how fast inventory is turning is just as important as understanding their margins. Helping your partners make more money with your products than they can with your larger competitors is how smart brands secure and hold scarce shelf space. I talk a lot about return on inventory investment in Killing Giants and it’s a smart strategy.

“Another pricing strategy that works is re-imagining how the product is consumed. How could a capital investment become a subscription? Zipcar did in a category synonymous with American culture - cars. Germany’s Prizeotel re-imagined the overnight stay, providing a high end design environment for E 59 a night by removing all those elements that no longer mattered to modern business travelers like landline phones and minibars. Giant Killers are usually the first ones to re-imagine a stable industry and destabilize it to everyone’s benefit.”

How is social online services changing the playing field between brand names and aspiring entrepreneurial companies?

Denny:  “Social media has given us so many tools that we didn’t have a few short years ago. We have the means to project our “interestingness” – our brand’s personality and even its people – in ways that make the world very small. Social media has radically, dramatically transformed the playing field to the point where those willing to invest the time and the effort at interaction and dialog can up-end the giants who have more dollars than time.

“Look at Indium Corporation, a maker of industrial materials for the manufacturing industry. The company hosts over 70 blogs written by their materials scientists, essentially eliminating the need for a heavy rotation of print ads and an escalating trade show budget. They’re publishing critical need-to-know content that their customers, the materials scientists in their customer locations, require. This has served to eliminate the sales funnel. When someone downloads three white papers on a problem, an Indium salesperson calls the exact person with that burning problem and the person picking up the phone is thrilled to get the call. That’s what social media can do. “

What do you tell entrepreneurs who use the excuse that they don’t have the financial capability to compete against larger players?

Denny:  “This is an age of smarts, of brains instead of brawn. It isn’t about big budgets for most of us and the customers we’re trying to reach with these dwindling budgets trust the message and the medium less and less. We’ve changed as consumers, too. We’re looking more to friends, to others like us in our communities (both physical and virtual) to understand what experiences others have had. As a result, the outlook for entrepreneurs has changed dramatically – and I’d argue that this change is for the good.

“Competing against giants rarely comes down to out-gunning them in the market. As one serial entrepreneur with several name brand technology companies behind him confided to me, “Giants would rather die than change.” Giants are rarely the reason a start-up goes under, he told me, and based on the interviews in Killing Giants and the consulting work I’ve done with entrepreneurs and start-ups, I believe him.

“Another advantage that entrepreneurs have going into this fight is that all things considered, we want them to win. We love underdog stories, particularly in this culture. This isn’t an entitlement – all things are rarely equal, after all – but the door is open. It’s a good time to be a giant killer.”

Published 24 June 2011 - 0 comments (View/Post Comments)   

Bill Draper, one of the country’s legendary and most successful venture capitalists, is the founder of the Sutter Hill Ventures and Draper Richards.  He has invested in over 1,000 companies and many of his hits are household names such as Skype.  Now he has a new book out entitled “The Startup Game,” published by Palgrave Macmillan. The book is a very fun interesting read.  The following is an interview with Draper.

 

Why did you write this book and who is the intended audience?

Draper: “I wrote the book because I had so much experience in venture capital and with entrepreneurs and I should get the word out before it is too late.  The fact I was part of a three-family generation of VCs gave me the punch to get going.  The intended audience is entrepreneurs, VC and business people interested in how venture capital and startups get going and the inter-relationship between venture capitalists and entrepreneurs.  Actually anyone interested in  the creative sparks of American economy.”

How much has the venture capital profession changed in the last 50 years?

Draper: “It has changed dramatically.  When I was driving a car around the prune orchids in Santa Clara, before it became know as Silicon Valley, I would write the terms of a deal on yellow piece of paper.  I would discuss it with the entrepreneur and have him look it over and he would say he was ready to go. 

“I would then give it to an attorney.  There was no term sheet back then.  There is more formality today.  The size of the industry has dramatically changed.  There were only a few funds back then and we all cooperated a lot . 

“If we had a $2 million dollar deal and we were putting in $1.5 million and we would get two others to come in to make up the difference.  The sizes of the funds have become so large they can’t share because they have so much money under management.  I don’t think it is good because when we partnered we shared due diligence, shared ideas and provided different support from contacts. 

“The greater the number of funds the better it is for the entrepreneur because there are more people to talk and negotiate with.  We would start the equity split with the entrepreneur at 50-50.  There are going to be more specialized venture funds focused on socialization or chips.  The technology has gotten so sophisticated and is dramatically so it is hard to keep up without specialization.”

How important is a business plan?

Draper:  “That again has become more important today then it was 50 years ago.  I remember when we backed Quantum and there were four guys who were all engineers They were building storage drives.  We talked about what they wanted to do and had backed another company in the field, so we knew the territory.  They didn’t have a business plan and we just discussed their ideas.  Today you wouldn’t think of backing a company without a business plan.”

What do you look for in plans today?

Draper:  “The first thing I do is look at the biographies of the management.  I am most interested in the leader.  I want to get to know them.  I talk to others about the leader.  I want to make sure the entrepreneur has strength of character, empathy and that they have the internal strength to stay with it.  I want to know that the leader can recruit people smarter than themselves. 

“I look for good margins in the area of 50% or better because margin gets into by marketing, distributors and other things.  I look for what is different.  You don’t know what is going on at various companies and you might not know what the competitor is coming out with.  I look at the financial projections to see how they will scale up. 

“The entrepreneur always underestimates cost and overestimates sales.  I look for spelling and grammatical errors.  Details are very important.  I look to know they have done their home work.”

What if the entrepreneur has a great idea, but no money or so little money is spouse is afraid to risk it?

Draper:  “That is why they need a venture capitalist.  We like them to have skin in the game, but if they don’t have it or the spouse doesn’t want to take the risk that is okay.  That is what VC’s are in business for.”

What has been your experience of investing in husband-wife teams?

Draper:  “The most well known team example is Cisco, which was started by a husband and wife team.  My old firm, Sutter, looked at it and turned it down because the husband and wife were a little wacky.  They did the right thing, but Sequoia went in and replaced the husband with John Morgridge  who was the CEO and it was a huge success. 

“I haven’t invested in any.  It wouldn’t be a positive, but it wouldn’t be an overwhelming negative.  There was a company called Measurex and was lead by a great leader, which became a New York Stock Exchange company.  He was married to a very nice person and he made her the vice president of personnel.  That was a problem because they people in the company go to the personnel to discuss problems about the boss and was a bit of a drag on the company because employees didn’t feel they could come to her.”

What is the youngest entrepreneur you would invest in?

Draper:  “We backed a guy who was 26 or 28.  He came into the office in shorts and sandals.  He ended up running a company called Oona.  We had backed Skype and  the entrepreneur wanted to use Skype to develop hardware to use on Skype.  We once had a 29-year-old nerdy kid come in and he wanted $2 million for 10% of the company.  We made the same offer others had, but he turned us down and that was Bill Gates.”

 

All of the examples of entrepreneurs you invested in all went to elite schools, have you ever invested in a person who graduated from a state school?

Draper:  “I am sure we have.  We want to back brain power so we don’t care where they come from.  I can’t remember anyone right now that I had invested.  I probably backed over a 1,000 companies, so there must be a few there.  I don’t focus on the elite schools; it just depends on who comes through the door. 

“I am interested if they graduated cuma cum laude.  We backed a guy named David Lee, who went to school in Minnesota, who was Asian, and didn’t go to an elite school.  Many of the foreign entrepreneurs don’t go to elite schools.  The foreign students are risk takers and are ambitious because they were willing to come here.”

Is there a difference between East Coast and West Coast investors?

Draper: “I think West Coast investors are more like gun slingers.  They worry less about entrepreneurs who have failed.  There is more risk taking tolerance.  It shows.  I was speaking at Harvard that they say they haven’t been as good at backing their entrepreneurs so they go West.  An example is Facebook, who came to Silicon Valley to raise its money.”

What is the biggest mistake entrepreneurs make when trying to convince a VC to invest?

Draper: “They should be themselves and not put on an act.  They don’t level right away about their weaknesses or their plan has.  It’s best to get that out early.  I don’t like when they come in and show a lack of knowledge of the venture capitalist before coming in.  They need to know how the VC can help them build their company. 

“They try to put on a front or an arrogant attitude.  They act cocky.  They come in alone without bringing in a couple of other people who has a certain expertise that would show the depth of the team.  I don’t like to see them reading off the Power Point because I want to look in their eyes.”

What do you look for during due diligence and how long does it typically take?

Draper:  “It varies dramatically.  After a first meeting you do a few phone calls.  Then you have a second meeting to ask better questions.  Then you start aggressively calling people to tell them about the deal and getting information.  It shouldn’t take months, but weeks.” 

Is it good to start the conversation with the VC by asking them what they liked about your business?

Draper:  “It is a good idea, but not to start off with it.”

If you had one piece of advice to give an entrepreneur trying to raise capital what would that be?

Draper:  “Go where the money is.  Let me explain. There are a lot of VC’s are on time clocks because their funds end usually in a 10-year period.  You shouldn’t go to a fund that is in the process of raising money.  Go to firms that just completed raising money and they need to put the money to work.”

Published 16 May 2011 - 0 comments (View/Post Comments)   

Jeff Grimshaw, a Philadelphia native and a graduate of the University of Utah, is the co-author, along with Greg Baron, of a new book  “Leadership Without Excuses:  How to Create Accountability and High Performance,” published by McGraw-Hill.   In an era of high management turnover due to either poor performance and/or unscrupulous leadership, the authors interview leaders that have turned around the companies they run by learning from past mistakes, hiring people they believe are smarter than they are and a willingness to adapt to new situations.  The following is an interview with Mr. Grimshaw, an accomplished consultant who has worked with entrepreneurial and Fortune 500 companies.

Why did you and your co-author write this book?

Grimshaw:  “Gregg and I have been consulting for two decades. Many years ago we observed that while everybody talks about the need for more accountability, few actually do anything about it.

 “At the same time, we’ve had the opportunity to work with some great leaders whoand who don’t make excuses for why they can’t. We wanted to showcase their wisdom and experience.

"“Finally, over the years we’ve found many great insights—largely untapped—from behavioral economics, evolutionary psychology, and other social sciences about why humans make so many excuses…and what to do about it.

“We saw a unique opportunity to pull it all together in a relatively quick, enjoyable, and highly practical read for busy people.  Interested readers can download two chapters of the book there for free at www.takeawayexcuses.com.”

Who is the intended audience?

Grimshaw:  “We wrote the book for leaders and aspiring leaders. Some of what we talk about is particularly applicable to very senior executives. But we’ve been surprised—and enormously gratified—by how many people have said to us, “I’ve had some success applying the Leadership without Excuses philosophy at work. But I’ve had even more success applying it home with my spouse and kids.” It turns out the three Conditions of Accountability we prescribe—communicating clear and credible expectations, creating compelling consequences, and leading conversations grounded in empirical reality—are broadly applicable in all walks of life!”

Are people avoiding accountability?

Grimshaw:  “Yes. And we think we know why.  As fallible creatures we have lots of hardwired quirks, but two in particular are relevant here: One’s called self-serving bias. The other’s called fundamental attribution error—by the scientists who study these things. Put these two things together and you get something that we call “heads I win, tails you lose” syndrome.

"Here’s what I mean: As humans, we give ourselves credit when things go well, but we blame external factors when things go poorly. When we’re looking at other people, however, we often do the reverse. We chalk up their successes to external factors (e.g., luck) while chalking up their failures to “the kind of person they are.” How does this net out for leaders? When they see their people doing great things, they give themselves credit: “My team’s performance is evidence of what a terrific leader I am.” But when their people are stumbling, they blame it on the kind of people they are: “They’re idiots who lack accountability!” The Leadership without Excuses philosophy says: “Before I chalk up my people’s failures to the kind of people they are, I better first make sure I’ve done my best to create the three conditions of accountability.” At the end of the day, it’s about demonstrating appropriate stewardship for what you’ve been given: People to lead.

“In case that’s confusing, let me put it another way: There are three kinds of people. Saints are always accountable. Sinners never are. Then there are Save-ables. Most people are Save-ables. When the Save-ables aren’t doing what you need them to do, it’s easy to write them off as Sinners. But until you’ve created the three conditions of accountability, you don’t know the difference. The best leaders turn their Save-ables into Saints. There are still going to be some Sinners left over…but then those Sinners stand out…and are easier to “cast off,” if you will.

How can leaders hold non-reporting employees accountable when they have no leverage?

Grimshaw:  “We work for lots of CIOs and in lots of complex, matrixed organizations where this is a real challenge. What we tell our clients is that they have more leverage than they realize. We ask: “Are you increasing confidence and reducing anxiety among the people you need to be accountable but over whom you have no positional authority?” If the answer is “yes,” and consistently so, you can get them on board with just about anything. If the answer is “no,” they’re never going to give you what you need. So in the book we talk about how to do those two things—increase confidence and decrease anxiety—when you have no positional leverage.”

Many employees think their leaders push their failures down the chain of command, how can employees hold their leaders accountable for poor decisions?

Grimshaw:  “You’re not going to like this answer. There’s not much they can do that’s sure to work—except go to work somewhere else. Short of that, the best you can do is try to change the culture…which is difficult and largely thankless, but is also possible in many instances. For example, when problems happen, don’t point fingers yourself. Instead, try to get others engaged in a root cause analysis. Make “reserving the right to get smarter” your personal mantra and model it for others—including your leaders.”

Based on your interviews, what are the traits of a good leader in today’s business environment when leaders are no longer kings with employees, boards, media and the government questioning their leadership?

Grimshaw:  “Our research and experience have shown us time and again that the very best leaders do three things: They communicate clear and credible expectations. They create compelling consequences. (Our slogan is “Reward what you want to see more of and stop tolerating what you don’t.”) And they lead conversations grounded in empirical reality. We get lots of questions about that third one. It’s about confronting reality—the world as it really is and not the fantasy world we’d prefer to inhabit. It’s about confronting risks with eyes wide open and learning from mistakes.

“I think it’s worth noting that we can trace the financial crisis back to failures to create the second and third conditions of accountability. If you’ve read Michael Lewis’s amazing book, The Big Short, you know that in the run up to the crisis, consequences on Wall Street were out of whack. Traders who took big risks got big rewards if it paid off…and they personally lost little or nothing if their wager failed. And there was nobody leading conversations grounded in empirical reality. At Harvard, for example, where their endowment got clobbered because of crazy investments, anybody who said, “Hey, this seems a little bit nuts” got shot down.”

What are the best ways to motivate people to maximize their potential?

Grimshaw:  “Forgive me but I’m going to use the f-word here. As in “feelings.” In serious business settings, it’s taboo to talk about feelings—a mushy word that evokes rainbows, unicorns, and Johnny Mathis. Despite all that, we tell leaders that “Your greatest source of power is the ability to change how people feel.”

“If that sounds too New Agey for you, consider this: You can’t really understand why people make the economic choices they do without taking feelings into account. As Daniel Kahneman said, upon accepting the 2002 Nobel Prize in economics, “economic utility cannot be divorced from emotion…A theory of choice that completely ignores feelings…leads to prescriptions that do not maximize the utility of outcomes as they are actually experienced.”

“Highly oversimplified layman’s translation: People pretty much do what they feel like. And the practical implication for leaders (and one of our mantras): Your greatest source of power is the ability to change how people feel.

 “Lots of our work focuses on helping leaders leverage their “greatest source of power” more effectively and efficiently to drive accountability and performance and deliver business results. The book shows readers how concepts like social comparison, loss aversion, and declining marginal utility help to predict which rewards and consequences will have the strongest motivational value. For example, did you know that humans are twice as sensitive to losses as they are to gains? So when you want to change behavior, wield your biggest stick: Your power to take things away!

“On the positive side, you have more reward currency than you realize to motivate performance. Because the opportunities to positively change the way your people feel are nearly limitless.”

Should every employee be treated the same or do you adjust for the employee’s personality, learning and communication style?

Grimshaw:  “When it comes to holding people accountable, the answer is “yes.” You can’t let your favorites operate outside the rules while holding everyone else to those standards. That crushes leadership credibility.

“But when it comes to motivating people, the answer is “no.” You shouldn’t treat everyone the same. We quote Florida football coach Urban Meyer in the book. He says: ““The old adage about ‘treating everybody the same’ is something with which I cannot disagree more. You have to get to know someone before you can understand how to coach them, how to treat them, how to get the most out of them.” Our research tells us he’s right.”

Is there a leader, business, government or sports that people are familiar with that exemplifies this and what makes him or her unique?

Grimshaw:  “There are a couple of really special leaders here in Philadelphia that we write about in Leadership without Excuses. They’re not famous, because neither does anything to draw attention to himself, which is refreshing. But they’re both world class.

 “The first is Jack Brennan, chairman and former CEO of Vanguard. One of the things we talk about in the book is his acronym, DAWAW. It stands for “Don’t ask who, ask why.” When we asked him about it, he explained, “We’re always trying to do things better on behalf of our clients. But the way we do that is not by pointing fingers or assessing blame.” Instead, he says, it is about asking, “Why aren’t we doing as well as we can? Where are the opportunities to improve? And what are the opportunities to capitalize on businesses that we can build?”

“Another exemplary leader is Walt Buckley, chairman and CEO of Internet Capital Group. At the height of the Internet boom, ICG’s market capitalization exceeded GM’s—back when that meant something!

“He told us that in the late nineties, “Every time we made an investment, the stock went up—we could do no wrong…and this created a false sense of invincibility. We lost a good deal of our discipline and focus.”

“When the crash eventually came, it hit hard. But instead of blaming everything on forces outside their control (namely, the dot-com crash), Buckley led his team in meditating on their mistakes.  As he says in the book, “We had to be honest with ourselves about the mistakes we’d made that put us in that place, including the mistakes I made. What mistake didn’t I make? Looking back, I now call that time the MEMP period—Made Every Mistake Possible,” he says. “For example, our decision-making process broke down. We had too many people at the table. There was far too little transparency and, as a result, far too little accountability. That was a tough lesson.”

“But with the tough lessons came an interesting perspective. Think about it: You make every mistake possible, and you’re still around to fight another day? For a band of warriors, that’s a liberating feeling. And with it, Buckley created an environment where, without being paralyzed by defensiveness, he and his team could thoughtfully catalog their mistakes, treat them as “intellectual capital,” and apply them in their return to battle.

“As we headed up the next hill, we turned every one of those mistakes into a guide for how to climb back up to the top,” Buckley said. And they did.”

 What is the one piece of advice you would give a leader?

Grimshaw:  “Recognize that intentionally or unintentionally, you’re always broadcasting messages to the people you lead. And it’s not just your words. What sends a louder message than the words you use are the decisions you make, the actions you take, what you reward, and what you tolerate.”

Published 18 January 2011 - 0 comments (View/Post Comments)