Erich Stolz

Building on a very successful International Management career in several corporations, Erich has concentrated on helping companies to provide the foundation to grow, turning around or restructure.  Read more...

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What is servant leadership?

A leader that supports and elevates all those around him or her can be said to be a servant leader. This leadership style focuses on an unselfish approach to the development of people and their management to deliver results.

What is servant leadership?

Servant leadership focuses on the basic principle that if you serve your employees and provide them with the support they need, they will deliver above and beyond results. Such a leader constantly searches for the needs of his team, organisation and community with the aim of identifying solutions to their needs. A key focus is always on the employees and their personal development, because only supported and motivated teams are able to achieve outstanding performance. Servant Leadership can be thought of as an inner moral leadership code which requires a deep understanding on one's own identity, mission and vision with a focus of caring for all those around them.


Key Characteristics

Robert K. Greenleaf first came up with the concept of the 'The Servant as Leader' is an essay published in 1970. He states "The servant-leader is servant first... It begins with the natural feeling that one wants to serve, to serve first. Then conscious choice brings one to aspire to lead. That person is sharply different from one who is leader first, perhaps because of the need to assuage an unusual power drive or to acquire material possessions...The leader-first and the servant-first are two extreme types. Between them there are shadings and blends that are part of the infinite variety of human nature."

The Robert K. Greenleaf Center for Servant Leadership outlines 10 characteristics of a servant leader:

  1. Listening
  2. Empathy
  3. Healing
  4. Awareness
  5. Persuasion
  6. Conceptualization
  7. Foresight
  8. Stewardship
  9. Commitment to the growth of others
  10. Building community

The above list is not meant to be a complete or definitive list. A servant leader reflects on these characteristics on a regular basis and seeks opportunities to implement them within his scope of influence. Think about this list – do you display these characteristics in the leading the people and organisation you are responsible for? Self-reflection is key for any leader.


Autocrat vs. Servant

Contrary to an autocratic and top down leadership style, servant leadership gives great importance to trust, compassion, cooperation and the moral use of power. Such a leader is guided by the desire to lead in order to better serve others rather than increase their own power status. The key aim should be to develop individuals, improve teamwork and foster personal commitment without being self-serving or domineering.


Servant leadership delivers great results for customers 

If you lead people in this way, their commitment will help result in great customer satisfaction and loyalty. Southwest Airlines is one of the largest US airlines whose adoption of servant leadership as part of their corporate culture is well known. Their CEO Herb Keller has stated that "Just as Southwest has their customers, the passengers, the management has their customers, the employees. If the customers are not satisfied, they will not fly again with Southwest. If the employees are not satisfied, they will not deliver the required performance."


In reality

It is not possible to always give everyone what they want. Servant leadership and autocratic leadership are two extremes. One will often need to find a middle ground where one always tries to consider the needs of employees but balances this with the needs of the business. The principles of servant leadership are admirable and should be our initial reaction to any situation versus an authoritarian and self-focused approach. A servant leadership style should be our preferred club in our golf bag.


The New Leader’s Playbook

The New Leader’s Playbook

Leadership transitions are some of the toughest challenges people face.  Nearly half of new leaders fail in their first 18 months*.  Often, failure is the result of crucial mistakes made in the very beginning that can be devastating for organizations and leaders alike.  Make no mistake about it – anyone that thinks the next 100-days will be like the last 100-days is in for a terrible surprise.  The world is changing too fast.  Thus, we are all new leaders all the time and must treat the next 100-days as though they were the first 100-days of the rest of our careers.  They are.

Leadership is about inspiring and enabling others to do their absolute best together to realize a meaningful and rewarding shared purpose.  To that end, three things make a big difference: Get a head start – Manage the message – Build the team.  The components of those are your playbook for the next 100-days.


1) Position yourself for success.  Start by connecting your values and goals, strengths and communication.  Know yourself.  Know your audience.  Know and deliver your message in your own voice.  Leadership is personal. Your message is the key that unlocks personal connections. The greater the congruence between your own values, attitudes, behaviors, the environment you create, and the way you relate to other individuals, the stronger those connections will be. This is why the best messages aren’t crafted; they emerge.  Great leaders live their messages not because they can, but because they must. As Martin Luther said at the Diet of Worms in 1521,“Here I stand, I can do no other.”

2) Choose the Right Approach for the Business Context and Culture you Face.  Context is a function of the business environment, organizational history and recent business performance, informing the relative importance and urgency of change.  Culture underpins “the way we do things here” and is made up of Behaviors, Relationships, Attitudes, Values, and the Environment feeding into readiness for change.  Crossing context and culture helps you decide whether to Assimilate, Converge and Evolve (fast or slow), or Shock.  Choose your way.  Then map contributors, detractors, and convincible watchers so you can move each of them one step by altering their balance of consequences.

3) Embrace and Leverage the Fuzzy Front End Before Day OneThe time between acceptance and start is a gift you can use to rest and relax or to get a head start on your new role or next 100-days. Our experience has shown that those who use this fuzzy front end to put a plan in place, complete their pre-start preparation, and jump-start learning and relationships are far more likely to deliver better results faster than those who choose to rest and relax. Five important steps:

  1. Identify the most important stakeholders up, across, and down – both inside and out.
  2. Plan your message, fuzzy front end, and first or next 100-days.
  3. Manage your personal setup so you have less to worry about after you start.
  4. Conduct pre-start meetings and phone calls to jump-start important relationships.
  5. Gather information and learning in advance to jump-start learning.


4) Take Control of Day One: Make a Powerful First Impression.  Everything is magnified on Day One, whether it’s your first day in a new company, or the day of a big announcement. Everyone is looking for hints about what you think and what you’re going to do. This is why it’s so important to seed your message by paying particular attention to all the signs, symbols, and stories you deploy, and the order in which you deploy them. Make sure people are seeing and hearing things that will lead them to believe and feel what you want them to believe and feel about you and about themselves in relation to the future of the organization.

5) Motivate and Focus Your Team with Ongoing Communications (including social media).  Where the emphasis used to be on logical, sequential, targeted, ongoing communication campaigns, the communication revolution has made it essential to manage multiple, concurrent, ever-evolving conversations across an ever-changing network of stakeholders.  Leverage your core message as the foundation for those conversations by seeding and reinforcing communication points through a wide variety of media with no compromises on trustworthiness and authenticity. 


6) Embed a Burning Imperative.  The burning imperative is a sharply defined, intensely shared, and purposefully urgent understanding from each of the team members of what they are “supposed to do, now.” Get this created and bought into early on — even if it’s only 90 percent right. You, and the team, will adjust and improve along the way.

Sam Martin has a lot of experience in this area.  As he describes his early days as CEO of supermarket chain A&P, “It was essential to have an articulated plan available to share robustly around the organization and with all our stakeholders…If our employees are not properly armed with the right information, they will give the wrong message…they’re going to give a message anyway.  So getting the right message in the right hands quickly is important and essential to getting off on the right foot and having any chance of success in the outcome.

7) Exploit Key Milestones to Drive Team Performance.  Milestones map and track what is getting done by when by whom. Leaders of high-performing teams take that basic tool to a whole new level, exploiting it to inspire and enable people to work together as a team!

8. Over-invest in Early Wins to Build Team Confidence.  Early wins are all about credibility and confidence. People have more faith in people who have delivered. You want your boss to have confidence in you. You want team members to have confidence in you, in themselves, and in the plan for change that has emerged. Early wins fuel that confidence.

9) Secure ADEPT People in the Right Roles and Deal with Inevitable Resistance. Acquire, Develop, Encourage, Plan, and Transition talent to strengthen the team over time:

Acquire: Recruit, attract, and onboard the right people

Develop: Assess and build skills and knowledge

Encourage: Direct, support, recognize, and reward

Plan: Monitor, assess, plan career moves over time

Transition: Migrate to different roles as appropriate

As a case in point, Chiquita’s CEO, Fernando Aguirre, met an employee, Leo Urzua, during his stint on CBS’s show “Undercover Boss”.  Leo was a harvest coordinator who tried to teach Fernando how to pick and prune lettuce.  Through the process, Fernando learned of and was inspired by Leo’s quest to become a U.S. citizen.  Fernando committed to helping Leo Achieve his goal.  When Leo got sworn in as a citizen in Yuma Arizona several months later, the keynote speaker at that ceremony was…Fernando Aguirre. 

10) Evolve People, Plans, and Practices to Capitalize on Changing Circumstances.  By the end of your first or next 100-Days, you should have made significant steps toward aligning your people, plans, and practices around a shared purpose. Remember, this is not a one-time event but, instead, something that will require constant, ongoing management and Darwinian improvement because we're all new leaders all the time.

Questions to consider:

What inspires the people you lead?

What enables them to do their best together?


Ten Qualities Of An Effective CFO

An effective chief financial officer is critical to the success of any organization; an ineffective one may be the reason for its failure.  Bad CFOs are easy to spot—but what about the average ones, with some good qualities but also some key limitations?   This question is most crucial in a turnaround.  With cash flow tight and lender cooperation essential, a merely average CFO can inhibit progress or even derail the process.  How does one evaluate a CFO's capabilities to handle a turnaround situation?   When is immediate replacement appropriate?

There are no absolutes, but a "70% rule" can help provide a framework for rating qualities that effective CFOs must possess on a scale of one to 10.  The significance and weight of each quality can be adjusted as necessary to a particular situation.  CFOs who rank below an average of 70% weighted proficiency in the following 10 qualities probably should be replaced or supplemented.

1)      Uncompromising Integrity And Ethical Standards
A good CFO must be honest, ethical and able to develop and maintain the trust and confidence of all constituents.  It's not in the job description, but a good CFO knows he is the custodian of everyone's money.  The best CFO in a turnaround situation will understand he owes allegiance to all constituents and that sometimes his role is to deliver bad news to the CEO—even if it means risking his job—because it will benefit the stakeholders.

2)      Financial Accounting, Cash Management And Corporate Finance Competence
A successful CFO must possess fundamental accounting knowledge, cash management skills and the ability to manage the financial function.  A CFO need not be a CPA, but the person absolutely must know how the numbers are generated and be able to communicate effectively with managers, creditors, shareholders and others.

3)      Basic Business Knowledge And Strong Understanding Of Company Operations
To be effective in a turnaround, a CFO must understand business fundamentals, a company's basic operations and its business model.  A CFO who merely reports numbers and has no interpretive ability does not add value in a restructuring.

4)      Strategic Vision And Leadership Skills
The best CFOs can think strategically, help create and execute business plans and demonstrate strong leadership within the financial departments and with the management team as a whole.  The CFO can't just be a "numbers guy"; he's got to be a negotiator.  CFOs who stay in their offices all day, demonstrate no executive presence, hoard information or are arrogant or condescending are generally ineffective.

5)      Problem-Solving Abilities
A CFO's knowledge of the company, its resources and the numbers is critical in formulating a plan to secure a company's future.  Good CFOs look for "win-win" situations, rather than trying to get a "good deal."

6)      Communication Skills
Especially in turnaround situations, a CFO must be able to communicate the financial performance and resources of the company to all key constituents orally and in writing.  A good CFO will give you the answers before you ask the questions; a bad CFO will make you feel that if you hadn't asked, you would never have found out.

7)      Strong Work Ethic
A CFO in a turnaround must be willing to work long hours, processing a tremendous amount of work product while paying extreme attention to detail.  A CFO who only works eight-hour days will not accomplish the objectives.

8)      Self-Confidence And Willingness To Take A Stand
To gain and keep the trust of all constituents in a turnaround, including the company's employees, the CFO must be self-confident without being arrogant.  That means the ability to transmit appropriate messages to appropriate audiences, a willingness to admit mistakes and the ability to offer input without insisting on being right.

9)      Results-Oriented Mindset
A company in turnaround needs a CFO who is committed to results first.  The CFO who elevates process above all impairs his ability to see problems, which is a problem in itself—especially when the company's procedures are likely part of what got it into trouble in the first place.

10)  Reliability
A CFO who works reliably under pressure to produce timely, accurate information and is willing to do whatever is necessary to bring about results is invaluable.  The right CFO not only wants change, but also can help set the ball in motion.


What to do once you know the score?  A failure to replace or supplement the work of an average CFO can have far-reaching negative economic and organizational consequences.

On the other hand, even an average CFO can be useful.  If a CFO averages between 50 and 60 but scores well in integrity, business and financial knowledge, work ethic and reliability, retaining the person but hiring an interim financial manager might be the answer.



Top TEN Limitations of EBITDA

Top 10 Limitations of EBITDA

While many lenders, investment bankers and others involved in evaluating the financial performance of companies use EBITDA (earnings before interest, taxes, depreciation and amortization) as a cash flow measurement tool, it is important to recognize that EBITDA has its shortcomings. Here's the top 10 list of limitations of EBITDA developed by Moody's Investors Service.


  1. EBITDA ignores changes in working capital and overstates cash flow in periods of working capital growth.
  2. It can be a misleading measure of liquidity (quick access to cash).
  3. It doesn't consider the amount of required reinvestment - especially for companies with short-lived assets, whether it's cable equipment or trucks.
  4. It says nothing about the quality of earnings.
  5. It's an inadequate stand-alone measure for a company's acquisition multiples.
  6. It ignores distinctions in the quality of cash flow resulting from differing accounting policies - not all revenues are cash.
  7. It's not a common denominator for cross-border accounting conventions.
  8. It offers limited protection when used in indenture covenants.
  9. It can drift from the realm of reality.
  10. It's not well-suited for the analysis of many industries because it ignores their unique attributes.

Lessons For Healthy Companies From The Turnaround Trenches

Lessons For Healthy Companies From The Turnaround Trenches

Today's managers would be wise to think like turnaround professionals because the gap between a healthy and an underperforming company is very narrow.

As a matter of fact, most turnaround situations could have been avoided by early intervention.  Selling an underperforming business, securing new financing when the company was still creditworthy, questioning a glowing sales forecast, efficiently integrating a new acquisition—all are missed opportunities that have pushed once healthy companies onto the slippery slope toward insolvency.

The boom years that hid performance issues are a distant memory.  Today, every penny of earnings must be made the hard way: through astute management.  Many executives who looked so capable during the good times now face a challenge they have never seen before or been trained to handle—building profitable businesses in an adverse environment.

A key concept to remember when managing in the gap between underperforming and distress is: time is not your friend! The options available to fix performance problems decrease exponentially and the severity of action needed increases rapidly as a company travels the continuum from health to underperformance to crisis.

Lessons For Success

Here are five lessons for success from the turnaround trenches that can help companies—whether healthy, underperforming or crisis-bound—stay on the right side of the gap.

1) What You Know Counts. It seems obvious, but it is surprising how often management and directors are completely unaware of their company's liquidity position.  So even though this cardinal rule in the turnaround business may seem simple, companies continue to go out of business because they run out of cash and credit unexpectedly.

Few of today's executives have seen, let alone successfully managed through, a real financial crisis.  The typical finance curriculum of various business schools teaches cash management using projections of profit and loss plus or minus changes in balance sheet items.  That's close enough for healthy companies that can assume that good performance will provide sufficient cash flow to support the needs of the business or to borrow needed funds.  But for troubled companies, this method is imprecise and can lead to an unexpected crisis.

Almost every company in a cash crunch gets there because sales fall, fixed costs remain high, working capital is not managed, and they have too much capacity.  The company misses its projections significantly, causing its lenders and the credit markets to lose confidence in management and to tighten credit terms and lower credit ratings.  Unfavorable cash flow also leads to broken promises of payments to vendors and creditors—in turn leading to accelerated demands from the creditors, which results in an even tighter cash position.  It becomes a desperate downward spiral.

2) Recognize The Value Of Cash Management As A Business Tool. An effective cash management system is based on a highly accurate plan of actual receipts and disbursements, which is quite different from accrual accounting.  In fact, accrual accounting often obscures cash flow.  Inventory, payables, and other profit and loss items are subject to enough GAAP interpretation that the consolidated financial statements of many companies do not reflect the real financial condition.

Without an understanding of cash flow, management and the board may have a misplaced sense of security based on a misreading of a company's financial statements.  To avoid being misled, a wise board and skilled management team should have a cash management plan with an accurate cash forecast based on receipts and disbursements.  True cash management works by actively managing and making decisions about each of the line items of a company's weekly, or even daily, receipts and disbursements.

What kinds of tools are best to manage cash? A 13-week detailed cash flow statement is critical, but not something most accounting systems routinely supply.  Another tool is a longer-term cash forecast, not only based on profit and loss projections and changes in working capital, but also showing major debt and capital expenditures.  More important than having the tools is using them: the board and management must monitor cash closely enough to see a problem coming.

In healthy companies, a weakening liquidity position is a symptom of something needing attention.  The factors that cause a dire financial crisis begin to stir early.  Sales may be softening, fixed costs can be out of alignment with revenues, working capital is not being managed properly, or capacity is too high.  The same processes used in turnaround situations—tight cash management and rigorous cash forecasts—can alert management in healthy companies to the early symptoms of weakening liquidity when it is much simpler to fix and there are more alternatives available.

3) Don't Rely Solely On The Numbers. By the time you see the numbers, you already may be behind the eight ball.  The time lag between events and their financial reporting can be sufficient enough to be damaging.  The tricky part is learning to recognize events early enough to act upon them.

Turnaround experts have many alternative ways to measure business performance beyond financial reports.  Several of them include: defections of key executives, industry corrections, significant regulatory changes, creeping bureaucracy, product development delays, lagging performance versus peers, bloated inventory, decreased employee productivity, product recalls, and increased customer complaints.  Skilled leaders see these events as early warning signs that something in the organization is in need of improvement, and they take immediate and effective action to correct the problem.

Make certain that the company's information systems are measuring the right things.  Poor information systems and weak financial controls obscure symptoms and hide their causes.  In troubled companies, the lack of information is not only a cause of the crisis, but a major hurdle to the company's turnaround.  In healthy organizations, poor information systems allow a progressive weakening in the organization that can go undetected until it is too late.

4) Apply A Turnaround Mentality. Even the healthiest company has a process, a division, or a customer relationship that can be repaired.  Find it.  Fix it now.  Every company should always have something in turnaround mode.

Continuous improvement is more than a process; it's a mindset that keeps a company in the peak of health.  This is not to suggest that all companies put themselves in a crisis mode at all times.  That would be destabilizing and would yield diminishing returns.  Instead, companies should look at individual pieces of the business—units, functional departments, or regions—that might benefit from the laser-sharp focus of turnaround mentality.

This mindset sends the message of continuous improvement throughout the entire organization.  More importantly, it builds the organization's capability to perform turnarounds, so when the early symptoms of distress do show up, the organization and management have already developed skills to cope with underlying problems.  Think of continuous improvement not only as a way to strengthen a healthy company's position, but also as a practice drill or training for dealing with significant challenges that may come some day.

5) Don't Waste Time — Take Action Early.  It bears repeating that in a turnaround, time is of the essence! When financial resources are depleting rapidly and creditors are tightening the screws, solutions must be found before the company accelerates into the ground.  In troubled companies, delay translates into fewer and more Draconian options.  In healthy companies, the same principle applies.

The earlier action is taken to correct a problem, the more flexibility there is to fix it and the less damage that is done; the sooner a process is improved, the more benefit that accrues.  This follows from the lessons above.  At the first sign of trouble, an alert management team has options: it can rethink strategy, make major changes to the business model, get new financing, or implement new information technology.  If the company is running out of cash in a matter of weeks, the alternatives are few and ugly: quick-and-dirty cost-cutting and asset fire sales.

If every CEO, CFO, and senior manager focused on these five basic lessons to improve corporate performance, there most likely would be far fewer insolvent companies.  The difficulty is that most people fear and avoid change—even positive change—because it's uncomfortable.  Yet, it's always better to address weaknesses early, because as problems grow, alternatives diminish.