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...

Contact Erich via:

Contact Form
Become A Guest Blogger
Idea Box


Enter your email address:

Live Webinar


Search
Sunday
Nov032013

My Leadership Style

 

My Leadership Style – Erich Stolz

 

1.  It Always Starts At The Top and It Begins with the Customer

On a continuous basis, I make it a point to understand my customers’ needs better than the competition. That leads to more effective products and superior service. Establishing an authentic relationship and building trust is the core of everything. The goal is to go beyond normal customer “satisfaction” to customer “delight”. The company’s focus must be on customers so they not only return but also refer others. Ensuring customer success requires hard work by every person within the company, commitment, and an investment in time to support the customers’ solution. That investment is worth the effort. I strongly believe in meeting customers and listen to their ideas, issues, and feedback.

Message: Superior Customer Delight Will Reap Handsome Rewards

        

 

2.  Visionary Leader - Create and implement a sound business strategy plan

My sound business strategy starts with a vision – where does the company need to be / or want to be in a few years? The vision must be crystal clear. Then I bridge the gap between vision and execution.

Together with my team members, I clearly define a strategy of how we can move the company toward that crystal clear vision. The strategy will be coupled with disciplined execution to achieve breakthrough performance. Any good business strategy must be measured. We measure and size up of how close we are to the goals and take corrective actions. I talk with my people and customers and other stakeholders – constantly evaluating our progress. The best approach: I get a “buy-in factor” as early as possible by having all my key players participate in the creation of the plan and the metrics. I empower employees to take responsibility and ownership of the business to exceed their objectives regardless of level of position. I also believe that a compensation plan should be part of the business strategy. A good compensation plan is geared and tailored to the key metrics of the expected results throughout the organization. The compensation package should be based on several metrics to support a well designed “balanced scorecard”.

Message:  Create a Performance Dashboard; Measure, Monitor, and Manage your Business

 

3.  Prioritization

Many entities fail because they try to do too many things and, as a result, they tend do only a few very well. I fully understand the importance of prioritization, of creating clear expectations of what must be done now, what can wait, and what should not be done at all. Focus and prioritization are important differentiators in successful companies.

Message: Focus, Focus, Focus

 

4.  Using Metrics for P&L Management

Good P & L management is similar to a machine – it does exactly what it is designed to do. It needs to be monitored by a set of meters, gauges, alarms, and accelerators. My main thrust: I drive exceptional performance in both top line sales and operating income. In most companies, the CFO is responsible for the accuracy of the P & L statements. However, accomplishment is the responsibility of the entire organization – from operations to sales to service. There should be a number of measurable items on the list: e.g., customer growth, revenue and gross margin by customers or products or regions, fixed and variable costs, accounts payables / accounts receivables, liquidity ratio, DSO, etc., etc. What about your inventory – do you have too much or are you losing some customers because you cannot deliver on time? Do you have enough working capital?  And don’t forget your cash flow. Regardless of how much or little profit you make, if you are running out of cash, you are running out of steam!

Message: Measuring is Important - Winning Companies always Keep Scores!

 

5.  Leadership by Example – Inspiring Leadership Style

I coach others to make them a success

A critical component of my leadership is the ability to attract and retain outstanding talent. I inspire and motivate my team members to their highest level of achievement. I empower employees to reach their full potential, abilities, and results. I foster an environment of personal performance, continuous improvement, and trusting relationships. I go out of my way to look for the extraordinary accomplishments – and then make their great performance a well-known story. Celebrating individual success stories creates a positive response by others. I develop a culture that keeps people motivated and thus solving problems and keeping customer happy is a huge competitive advantage. Productivity soars and creativity is unleashed in a workplace with great culture. A great culture is a sustainable competitive advantage.  

Message: Lead By Serving and Coaching Others To Make Them A Success!

 

6.  Passion and Enthusiasm

My passion about my work brings a level of enthusiasm that can produce win-wins all around. My high energy level motivates others to perform. My energy is contagious – a genuine sense of enthusiasm for what I am doing builds a desire to succeed in others. Feeling like we are winning generates the willingness to win in others. 

Message: My Passion Is Contagious

 

7.  Transparency with All Stakeholders

My philosophy is simple, yet effective: Clear, honest, open communication with all stakeholders. It has multiple benefits. Stakeholders can be team key players, board members, shareholders, vendors, and all  employees. My open style leads to faster, more effective decision-making, establishes trust, eliminates misunderstanding, and helps employees understand where their contribution fits into a company’s overall strategy.

My Message:  Always Be Clear, Honest, Open

Sunday
Nov032013

Why Some CEO's Fail and Others Succeed

Why Some CEO's Fail and Others Succeed

CEOs are tasked with running their companies in the most uncertain economic climate in years. At the same time, research indicates that shareholders tolerate failure less than before. Between 1997 and 2006, average tenure for departing CEOs in the US declined from 10 to 8 years. The 40 percent of CEOs with the shortest tenure had less than 2 years in the position.

One of the biggest challenges facing CEOs remains the ability to bridge the gap between strategy and results. Aligning, energizing and enabling the organization to follow through on the strategic roadmap are the crucial challenges which determine success or failure. The majority of CEOs who are fired are not terminated because they lacked vision, but because they failed to engage their own organization in what appeared to be well thought-out strategies. CEOs often lament that their vision and strategy ought to be crystal clear. It may be well-documented and communicated. The problem is that every business unit understands things differently and goes in its own direction. Barriers form between functions that ought to be cooperating. A strategy that everybody seemed to agree upon begins to dissipate in 1,001 different directions.

The 2010 Conference Board Survey of 2,000 senior executives identified strategic alignment and speed of execution as the most pressing CEO challenges. Successful CEOs understand that comprehensive kick-off events, monthly town hall meetings, executive roundtables and hefty investments in technology are not enough to ensure the success of a new strategy. Instead, results are determined by the degree and the speed with which leaders align their organization to the strategy and build execution capability among important players to deliver the desired results.

One major roadblock to strategy alignment and execution is the failure to get executive teams, managers and employees to view change as an opportunity. How does the CEO motivate his or her workforce for success? And even more fundamentally, how does a CEO get the organization to understand the need for change? As Jack Welch said, 'Getting every employee’s mind into the game is a huge part of what the CEO job is all about…There’s nothing more important."

Successful leaders understand and appreciate that force-feeding views to employees who have been hired to think for themselves is not the solution. What works better is to let valuable employees discover the advantages of new approaches on their own terms, let them take ownership for their roles and develop action plans that reflect their positions and specialized expertise in the strategy execution. This approach is likely to result in a motivational and inspirational atmosphere and a "can-do" culture that remains true to core beliefs while continually adapting and changing.

 

Sunday
Nov032013

Surviving a Deep Downdraft: What the Board Can Do

Surviving a Deep Downdraft: What the Board Can Do

 
 
The economic recession is probably going to be deeper and longer than we’d like it to be. This is going to be a new experience for most of the executive management teams who are leading companies today. You would have to reflect back to the early 1980s to have an experience that even approaches the potential of the coming economic slowdown.

The inability to forecast revenue in a prolonged descent is horribly destabilizing, demoralizing, and flat out debilitating to the management team and the employees as well. It is quite unimaginable until you’ve experienced it. And, it creates the context in which one must live and operate.

Then, of course, there is the existential question — i.e., can the entity survive? That, to me at least, is the one question that the leadership cannot seriously publicly entertain because it is, inevitably I believe, self-fulfilling. So, the leadership is left to ponder that question during sleepless nights and, at best, hushed conversations among the few trusted lieutenants and advisers.

Desire for Hard Answers
By the way, there is not a lot of sympathy around during all this tumult. Everybody — investors, the board, the employees — wants hard answers and certainty and they want it immediately. And, of course, it’s the one thing that can’t be given because it doesn’t exist.

During the bursting of the tech bubble, our management developed a set of principles, or objectives, which would guide it through the downturn, however long and deep that might be. The principles are probably somewhat generic, but perhaps could be tuned for each situation. Our principles were: “We will attempt to remain cash flow neutral while protecting our key assets — which are our people, our client relationships, and our intellectual property.”

That simple set of objectives, communicated to all constituents — employees, investors, and the board, as well as clients — seemed to have a positive effect, even if it wasn’t a certain answer about how, when, or if the business would recover. It gave everyone a consistent set of rules within which management could develop and then explain its quarter-to-quarter tactical moves as the business descended to wherever it was going. While it didn’t provide certainty, it did provide some ability to forecast how the management group might make decisions, and that was comforting.

An Arm Around the Shoulder
For the board of directors, it’s important to understand the pressure and sense of helplessness that the CEO feels in these times.

I was always encouraged by one director in particular who would put his arm around my shoulder and tell me I was doing the right things and the business would recover. I knew he hadn’t a clue more than I did. But, hearing him say it to me helped me not feel so alone and burdened. He earned his director comp 10 times over because he was sensitive enough to understand.

Here are a few more pointers on how the board can help management work through hard times:

1. A tough economy is not an environment conducive to fixing secular problems caused by a faulty business model or weak leadership. Those problems should have been addressed when times were favorable. Addressing CEO succession or major business model change in a challenging macroeconomic environment points to board failure and adds significant business risk.

2. Directors, even on the most independent board, need to understand that they are part of the fabric of the company — not observers. In hard economic times, management, employees, and customers will be particularly sensitive to cues from directors.

3. Significant stress for long periods can lead to poor decision making and destructive behavior. When economic headwinds are strong, directors need to be proactive in their relationships with senior managers and the CEO. Directors should be particularly sensitive to changes in affect, physical appearance, and lifestyle among the management team. Directors need to provide support, not additional pressure.

4. Research suggests that when costs need to be cut, they be cut with a scalpel, not a hatchet. Proposals for across-the-board cutting, particularly of personnel, may indicate a lack of thought by the management — or, worse, desperation.

5. Directors should encourage the CEO and senior managers to spend time in the market with customers and prospects. In hard times, managers can get swamped by the need for investor and employee communications as well as internal problem solving. There is no substitute for firsthand knowledge of customers.

A Supreme Test
Unfortunately, Diamond’s experience in the tech bubble burst of 2001 will be repeated by many companies across many industries in the coming year(s). It will be unpleasant, and it will test each management team’s resilience and ingenuity — to say nothing of their integrity and commitment.

But, at the end of the day, on the theory that what doesn’t kill you makes you stronger, management teams that survive will be better, seasoned leaders.

Sunday
Nov032013

The crisis: Mobilizing boards for change

The crisis: Mobilizing boards for change

To meet the challenges of the economic crisis, corporate boards must change the way they work.

As companies grapple with uncertainty of a magnitude that few have experienced before, their boards should begin by questioning fundamental strategic assumptions: Is our view of the market realistic? Does our financing strategy take into account the new conditions? Should we reset the incentive scheme or abandon any approach based on share prices? Can we exploit the current glut of talent? How can we take advantage of the pain our competitors are experiencing?

Unfortunately, most corporate directors are likely to assume that radical change is unnecessary and that “normal service” will soon resume. Their experiences during less severe crises—such as those in 1990, 1997, or 2001—will lull them into a false sense of complacency; few will adjust their strategies and policies sufficiently. This behavior is the result of a clinically observed human trait of being overly influenced by past experiences and judgments. Experts on decision making call it anchoring. The problem is made worse by the natural rhythms that characterize how many boards are used to working—rhythms that tend to reinforce rather than challenge anchored thinking. We therefore argue that board chairmen need to play a special role in the coming months by challenging their boards to think things through afresh.

This is not an easy task. Board procedures are anchored too. Meetings, agendas, and timetables typically follow a preset annual pattern. Advisers are scheduled to appear before audit and compensation committees. Attempts to make changes are often resisted—in part because of habit and in part because those involved have busy calendars. Even if there is energy for fresh, substantive work, the diary may defeat the best intentions. Granted, most boards have an annual offsite day when members talk strategy, but there is an understanding that major change is not expected. New ideas generated from the offsite are viewed as creative input rather than part of a fundamental review of strategy.

Mobilizing the board to tackle the economic crisis requires a fundamental overhaul of how its members interact. The only solution is to force change. The chairman needs to underline the gravity and urgency of the situation by summoning the board to extraordinary “credit crunch” meetings, “survival” meetings, “does our plan still make sense” meetings, and “how can we turn this pain into an opportunity” meetings. Without disrupting the rhythm, anchored thinking will continue to dominate.

The style of interaction can be another obstacle. Boards tend to establish patterns of behavior; for example, seating can become regularized, and some members may be expected to say little. Moreover, most boards have a default operating mode. Some place a premium on running smoothly—no disagreements, no late papers, no fluffed presentations, and no late finishes. Some are preoccupied with the formal aspects of governance: process dominates and content gets less attention. Some are financially oriented, with board members peering at their responsibilities through the numbers. But amidst all this heterogeneity lies, in our experience, one simple theme—there tends to be relatively little scope for genuine free thinking or for any fundamental reexamination of the premise of the company.

The solution is to explicitly change the way the board interacts. The chairman should insist that members articulate what they have thought but have not had the confidence to express. These conversations will often be more conceptual than rote, and participants will have to take the risk of “saying something stupid.” Chairmen will need to muster up the courage to drive relentlessly the discussions that will take most boards into deep and frightening waters. Long-cherished assumptions, existing plans, or defined ambitions may go down the drain.

One board we are familiar with used the Edward de Bono “six thinking hats” technique to force members into new conversations. The technique defines different styles of approaching a problem (for example, one concerned with facts and figures, another with creativity and new ideas) and asks members to signal which hat they are wearing. This encourages an improved climate of communication and creativity and helps the chairman spot when one or more hats are being over- or underused.

Many boards use outsiders either to facilitate a change in style or to challenge the thinking of their members. In one board, the work involved identifying the six to ten premises of the company’s plan for 2009. The outsider then interviewed each director and asked them to offer their opinions on each premise confidentially. When shown to the group, the results demonstrated that most of the board no longer believed the premises were valid.

Different kinds of meetings and a different style of interaction won’t be enough, however. To meet today’s challenges, boards need open discussion as well as stronger follow-through than is normal: fresh thinking needs to lead to changes in plans and budgets. One board we know has followed up new thinking with weekly calls to confirm the new direction and check whether the flood of new data and news about the credit crunch requires further recalibration by the board.

Of course, the measures we have described will achieve little if board members are not tangibly in touch with what’s going on in the economy. So there is one additional job for the chairman. It may mean encouraging the board to attend gatherings of bankers, visit customers or distributors, or interview managers in another country to understand how the country has been hit by the crisis. It may mean encouraging corporate directors to talk with middle managers to understand the impact of a share incentive scheme that is underwater. What is important is that directors have new, visceral experiences that trigger their thinking and help them to let go of past anchors.

Without dramatic leadership from chairmen, many companies will wander into 2009 focused more on survival than revitalization, hoping that their past view of the world will be restored. As a result, they will find themselves struggling to withstand tough conditions and badly positioned in the new environment. By shaking up the natural rhythms of the board and challenging corporate directors to reexamine their thinking, chairmen can ensure that their companies are ready to meet the challenges of the coming year.

 

Sunday
Nov032013

What to Ask Before Joining a  Board

What to Ask Before Joining a Board

The hardest, and sometimes most important, questions to answer when considering joining a board are often the least measurable.

 

You are considering joining a company’s board. You reviewed the publicly available financial, legal, and business information; spoke with management, internal and external legal counsel, and auditors; and evaluated the D&O policy. You are all set, right? In fact, this is the beginning of your due diligence process: the hardest questions are the least measurable, but equally and sometimes more important than the measurable ones. With many questions, a company might not want to share the details until you have actually joined the board. In those cases, focus on whether the board and management have a process in place that supports a thoughtful discussion. In particular, think about these questions against the backdrop of your board value and effectiveness.

 

Mission, vision, strategy, and related plan. Does a well-thought-out strategic planning process exist, including consideration of risks (e.g., market shift) and the ability to execute the strategy? How often is strategy discussed, and how is it integrated with the yearly planning process? Once a year is not enough. Focus on the board’s value and how the changing external environment (e.g., political, economic, competitive) is integrated into the evolution of strategic priorities.

Market, market share, and market dynamics. Delve into the market size, growth rate, and whether market share is or isn’t increasing. Look at the key drivers and the expected demand for existing and new products in development over the next three to five years. Does management correlate market information with the product development process? Are new geographies or sales channels considered? A risk/return evaluation (i.e., the cost of investments in R&D and new products versus expected revenue and profit stream) in both the strategic plan and the one-year plan is important. This information is probably restricted, but you can assess it if this has been thought through by management and discussed by the board.

Products. Discuss the internal process for developing new products. Many companies integrate information on market dynamics, competitor information, and customer requirements. Does the company look at the product development pipeline versus market demands? What happens if products are delayed in delivery to the market or if they are not successful? Will the company be financially viable for one to three years, or until this is righted? The key is to determine if a management process exists and is reviewed with the board.

Competitors. Find out how they collect competitive intelligence and how they process this insight. Identify information about who (big/small), what (how do they compare), and when (new-product development timeline). Is thought given to “up-and-comers” who could take the company by surprise?

Customers. Understand the customers’ viewpoints and whether there is a focus on customer satisfaction. Determine the sources the company uses to understand satisfaction levels, issues, and how they are resolved. How does the company learn about new products desired by both existing and potential customers? What changes are needed to current market channels to grow the business? Finally, does the board meet with customers? How does it get information that has not been “sanitized”?

Financials. In addition to reports to the board and audit committee and public information, take a hard look at operating cash flow against ongoing requirements. Understand the financial strength— in case there is a stumble in the operating plan execution—if debt exists or a need to raise capital is required. Evaluate the triggers that might cause the company to take unexpected actions.

Legal. Having already reviewed pending or threatened litigation, investigations, and possible violations of the Foreign Corrupt Practices Act, find out how international risk scenarios are evaluated and how they would be approached if a problem occurs. Will the D&O policy pay for legal fees up front so directors do not have to lay out cash? If the company is in a highly regulated industry, understand the relationships with the regulators and how they interact with the company.

Board relationship and interface with management. These relationships should be based upon mutual respect and a willingness to listen and consider different experiences, so pay close attention to how these questions are answered.

  • What is the relationship between the audit chair and the CFO, or the compensation committee chair and the head of human resources? Do discussions and face-to-face exchanges occur on a regular basis? For example, does the CFO feel that he or she can call the audit chair at any time to seek advice?
  • Consider the relationships between board members and other members of executive management. One of my boards had a program that matched board members with an executive (not one they normally dealt with), and they were expected to speak to them regularly and have dinner or breakfast together at least quarterly. These “matches” were rotated every one to two years so that over a prolonged period of time board members would know the entire executive team beyond the formal presentations they might see in the boardroom.
  • How are differences resolved? When board members disagree with management, do people listen to each other’s opinions respectfully? Can you have a fulsome discussion and then proceed in a functional manner that supports the company and gets to the best result? Find out if there have been these types of discussions and how the board and management work through them in a constructive, effective manner.

Board structure and relationships (tone at the top and practical reality of the board). Understand the committees, responsibilities, and what you will be asked to take on. The hardest questions involve how the directors function with each other and with management.

  • How does the board function when it has conflicts?
  • How capable and committed are other board members?
  • Is there an “orientation” program to bring new directors up to speed?
  • What about board governance education requirements? How do members stay abreast of the latest industry, geography, and technology trends?
  • What are existing board members’ views on management? Are they forthcoming, honest, and competent?
  • How does the board go about reinforcing ethics and values? Are there appropriate processes? How does one check on this? What has happened in the past when there has been a problem?

Shareholder relationships. What is the board’s role in shareholder communications? Do board members know how to respond if a shareholder reaches them directly? Have management and the board taken steps in crisis management planning? It is not a question of “if” but of “when.”

Quality. This area includes products, value placed on people, and how the company handles issues. Most companies have quality programs, but identify how they actually respond to concerns and issues globally.

Human resources. How does the company approach retaining, motivating, and attracting talent? How involved is HR with the business? Does the CEO view HR as a partner? These same questions need to be asked of the CFO and CEO.

Your own value. Understand why the board wants you to join. Are you being added for the skills you bring? What is the expectation of your skills? Are you a good fit if this is a growth company or, alternatively, a distressed company?

Other Risks
What is the company’s method for identifying and discussing business and corporate risks? Included on this list would be internal controls and the identification of any issues, health and safety, environmental concerns, and cyber risks.

Have the company and board been working to understand how social media is transforming the business landscape in addition to impacting the board’s oversight of the company?

Reputational risks. Today this is a heightened risk. How do management and the board think about it?

Governance model. Is this an active board that focuses on both performing its fiduciary and compliance duties as well as taking an active approach to raising key short- and long-term issues to promote thorough and complete decision making? Or is it a passive board? How does this match with your own beliefs?

Keep in mind there are no perfect companies and no perfect boards. Prospective board members need to understand that they will find some issues as they evaluate any company. The important part is making sure a board is thinking about the right issues, and that management and the board can discuss, process, and come to conclusion (and actions) in a positive and constructive manner.

Having asked the questions and gotten answers, now you must evaluate the culture fit for yourself with the rest of the board as well as with management, and whether you believe you can add real value.