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Thoughts On Leadership From A Person With A Right-Hand Man MO

A blog reader asked me to write down a few thoughts on leadership. I appreciate the request as it can be hard to come up with new topics to write about. Leadership is an interesting topic as a number of the business schools have programs related to the topic. As it turns out, I am also in the midst of adapting a blogging seminar around a leadership theme (for an MBA student audience).

My off-the-cuff on leadership. It is probably one of the most important things in business. People underestimate its importance.

But I don't think leadership can be taught in a few sessions or through reading a book. It's not something that can be learned quickly. It's something that has to be developed over many years through different experiences. And there are many styles of leadership. While MBA programs may not be able to teach leadership, they can foster an environment conducive to feeding leadership skills and knowledge.

For me, I had to develop and become more acutely aware of my own leadership style over decades. In the past seven years or so, I've become very aware that my leadership style manifests itself as that of a right-hand-man-type MO. I refined this style of leadership by developing strong analysis skills (important for advising) and doing skills (important for executing plans). Facilitation skills are also important for people with this type of leadership style. I thus developed a style that is flexible such that I can work with many types of people, yet my style is driven by pragmatism and a need to get things done at all cost.

My leadership style does not manifest itself as being a broad visionary, an area where some CEOs draw their strength. When I am "visionary" (for lack of a better word), it will likely be in a very focused area.

Where did I learn "my leadership"? I drew from all sources ... taking lead project roles on the job,  cutting my teeth in management consulting, reading books like "Killer Angels" and Chamberlain's efforts at Little Round Top during the Civil War, taking negotiation classes in business school, facilitating board meetings in non-profits and ventures, identifying professional mentors, and watching partner-level consultants in prior employers and asking them for their insights are just some of the ways that come to mind.

Real learning came from doing. Thus, true learning for me came from taking risks and either actively seeking out positions or creating tasks that would force me to lead. It could be as simple as publicly announcing a date when one will be running an industry/trade seminar - one then has to follow-through. It could be taking an active role to organize a board meeting. It could be taking on a lead project manager role of a visible project.

So put yourself in a position where "your leadership" must be born.

Update (7/28/05): Andy adds on to this thread and refers to some prior posts he's done on leadership that are also good.

Revisiting Post On Why (Intranet) Corporate Blogging Works

Back in May, Hugh Macleod had a post (and signature cartoon/illustration) on why corporate blogging works. I thought it would be useful to highlight to some of his text regarding using blogging for intranet and internal blogging purposes. He writes:

A few 21Publish users have let me know about their use of our platform as a knowledge base and intranet. In the spirit of eating our own dog food, at 21Publish we also use the platform (since it has a built-in intranet) in this way. When I wanted to draw up my presentation on blogging and non-profits (see righthand sidebar for presentation), I was able to go to our intranet to locate good links and material that had already been gathered on the subject.

So if you are interested in using blogging in an intranet scenario out of the box, check out the whitepaper here on "Your Corporate Blogosphere" (pdf).

Update (7/22/05): I posted my own animation comparing email to blogging here. The point is to show how email is ad-hoc and disorganized (but instantaneous). Blogging on the other hand creates individually addressable pieces of content. This is a key thing forgotten by some people that just liken blogs to websites.

New Person Comes Knocking At My Door On Offshoring 2.0

Not a topic that I cover much at this blog, but because I follow outsourcing and offshoring very closely as I suspect it will affect my kids more than either my wife or I, here's a post at my other blog.

The Death of Organizational Structures In Three Internet Stops

As a U of Chicago business guy, I have a tendency to lean toward things that breathe free market theory. Markets are (mostly) efficient. Market are (mostly) right. Stems from Chicago's strong grounding in economics.

So it's interesting to think about why organizations of today just aren't freely forming efforts. Why isn't there a free market in organizational structures? Why can't organizations just freely form and dissolve? I haven't really analyzed this very closely at all, but here's three interesting Internet stops for you that could spell the death of business organizations as we know them:

1. Internet Stop 1 (BusinessPundit) - Outsource the CEO
2. Internet Stop 2 (Business Plan Archive) - Comb the business plan document archive of failed dot coms (compliments of the Library of Congress et. al.) and learn what not to do in business
3. Internet Stop 3 (The Business Experiment) - Participate in an actual experiment on an open source business model (where the business model and governance structure is all open source) ... "The goal is to have the registered users of this site collectively start and run a real business."

Update (7/20/05): As for Internet Stop 2, I should probably not characterize the business plan document archive as "things not to do in business". These are mostly the planning documents of businesses that are no longer around or in a reduced state of operations (e.g., Blue Meteor, marchFirst). The companies may have very well taken the correct steps in points in time or done the best thy could given the circumstances. That's one issue with analyzing cases. It is frequently not possible to see from static documents how management teams reasoned, whether they used consistent reasoning, if it was inconsistent with a best practice, etc.

Updated Sidebar to Include Blogging Information

I've updated the right-hand sidebar of my blog to cover some blogging-related information associated with group blogging, blogging intranets, and use of blogging in non-profits. My presentation on blogging in non-profits has not gotten as much circulation so here's another bump/plug.

When I Still Love The NPV <= 0 Customer

What the heck does that title mean? It is a concept called net present value, and it is a time value of money concept taught in business school and relates to making investments. At some risk of simplifying things too much, if a project has an NPV less than zero, it means that expenditures will exceed income. In other words, don't take the project. On the other hand, projects (or customers) that have an NPV greater than zero, well these will add to the enterprise value of a firm.

So the other day I had a customer prospect say to me numerous times that we weren't going to get much money from him based on his simple requirements. It wasn't a negotiating tactic by the customer prospect. His requirements were pretty straightforward and fit into our affordable pricing plan (I mean people sometimes don't realize that they can get like 100 ad-free and customizable blogs for $19.90/month ... that's $0.20 per month per blog). No complicated pricing plan or upsell needed. The person was legitimately concerned about my investment in the pre-sales process - perhaps I was spending too much of my time (which costs my employer money) gathering info for him.

So why do I spend so much time with working with customers that use our products, but where we may not even make any money?

The answer is this. Blogging a growing "industry". I'm a new kid on the block for 21Publish. I hone in on honest and talkative users of the 21Publish product. I need to get product feedback from them. I need to experience what they are experiencing. I need to know what they want. How they perceive the product. How they value the product. Where improvements can be made. While we (21Publish) can't accommodate every request for enhancements, we're working at it. It's my role as an employee of the company to really understand the product at an intimate level. At some level, all of the users of a product (regardless if you are bean counting the lifetime value of a customer) can become advocates for a company if the company earns their trust.

The University Chicago may revoke my MBA with such sacrilegious talk about accepting NPV <= 0 projects ...

Pausing to Reflect on Technology and Associated Challenges of Preventing Terrorism

Posted here at The CIO Weblog.

Professional Peer Support Networks Are Very Useful To Leverage In Both Ventures And Larger Companies

I participate in a group of about 50-60 CFOs that focuses on the software sector, finance, and operational issues. Participants range from sole proprietorship consultants to CFOs in public companies and venture-backed Series A-ZZ firms. Online inquiries by group members can be restricted to an intranet-based discussion (potentially using a group blogging service down the road).

When working for ventures, you need to try to leverage informal networks as much as possible (including using counsel). As examples of the high-quality things that the peer group can help you get data points on (sort of a "wisdom of the crowds" thing provided that you watch out for biases), here are two results polls related to:

1. pricing of underwater options
2. whether VPs, CXOs, etc. can be contractors

• Most people who have dealt with this historically have chosen to cancel underwater options and reissue them in 6 months and 1 day.  This was the cleanest solution that avoided triggering variable accounting.  Employees are "naked" for 6 months, but good communications plans help avoid any associated morale issues.
• After further research, [CFO] found a very interesting solution working with [deleted] auditors - a new alternative that leverages the changing regulations around expensing stock options.  There is no such thing as variable accounting if you adopt FAS 123R - Expensing Stock Options, which all private companies need to do by 2006 [deleted].  In essence, if the company adopts FAS 123R now, it can reprice the underwater options immediately.  The company simply needs to recognize an expense for the delta in value of the options (via Black-Scholes) caused by the repricing, and expense it over the remaining vesting period of the options. 
• To make a long story short, the company will solve the problem by adopting FAS 123R six months before it otherwise would have done so.  There may be some administrative pain to being on the cutting edge of implementing this, but the company avoids a lot of overhead and administration for education seminars and general employee confusion.  Accounting absorbs some pain sooner than it would inevitably face, but the rest of the organization gets to focus on business execution.

Topic #2 - Whether VPs, CXOs, etc. can be contractors (each bullet point is a snip of a selected response from peer support group participants):

• A couple of years ago I did a consulting engagement for an early-stage company on a 1099 basis and the guy who ran the company introduced me to people as "my CFO" because that's how he viewed me and what I was doing.  However, I listed the position on my resume as "CFO (Consulting)" in the interests of accurate disclosure. If the principals involved have no
  objection to use of a particular title and the 1099 person is filling the role, I don't see why not.
• Absolutely, in the past we have contracted out VP of Sales Position, albeit the person worked for us full time, however he preferred to have his consulting firm (sole proprietorship) pick up the billing and expenses.
• I also had a similar situation a few years ago.  An attorney advised me that the risk if any resided with the company as a result of an individual being held out as an officer of the company, which carries with it the presumption by outside parties dealing with the individual that the person has the usual authority associated with a company officer.  In many contract situations this is likely not the case.
• I am assuming this is a question for a resume. Guess I would look at it from a personal credibility perspective.  If I were consulting and acting as CFO, I might put CFO (consulting, acting or contract) down, but not just CFO.  If I put myself into a hiring manager's role and asked how I would respond once I found out that it was not a direct employee position (and I would probably find out), I would probably react more favorably to the accurate representation.  The risk is getting left behind in the initial cut of the search, which will partly depend on what someone did in the role.
• We had the same type of situation with an interim CEO.  It really depends, in my opinion, on the responsibilities and authorities granted by the Board.  A title of C-O, to the outside world, implies an authority, regardless of whether the person is a W2 or 1099 employee.  That, to me, would govern whether the individual assumes the title.

Note: None of the information in this post should be construed as legal nor accounting advice. Information presented here is a summary of personal perspectives of various CFOs and finance folks.

Practicalities of Early Boards (Profits and Non-Profits)

This post has been reproduced from my other blog.

In the past few weeks, I've been asked by three folks about the legal and practical requirements of implementing a board in an early-phase organization. There is a lot of information around on the subject of corporate governance - probably the most notable resource that comes to mind for me is National Association of Corporate Directors. There are also books on the subject (e.g., Corporate Governance), but there can be a lot to wade through depending on how deep you want to go.

Here's my introductory $0.02 on the subject:

1. The board's primary purpose is to work on behalf of the ownership of the organization both a) to see that the organization achieves what it sets out to do and b) to provide a monitoring framework that ensures what management is doing is acceptable.
2. Boards then, can be viewed as the balance point between the shareholders (which own) and the management (which controls day-to-day operations).
3. Laws and articles of the organization may dictate the minimum requirements, but generally speaking, two key roles that are basically the minimum to organizations (profit and non-profit) are the chairperson and the secretary.
4. The chairperson is often referred to as the servant leader of the board - that is, the integrity of governance starts with the board, and the chairperson is basically a facilitator.
5. The secretary has responsibility for accurately documenting (guardian of) what the board has done.
6. In some situations, the secretary may also play a key role in helping the chairman put together board documents and doing behind-the-scenes work to facilitate the board meeting (so that it is a non-meeting in many cases). Tends to be more true in environments where more legal mechanics and knowledge of confidential organizational infrastructure is required.

Early-phase organizations may have some wiggle room (e.g., number of directors, amending by-laws) as to how governance works for numerous reasons, e.g., the management largely represents all of the shareholders.

Some key things that I would consider (in the case of wiggle room) include:

• Speed and convenience - larger boards may slow you down unless one of the following counterbalances the effects.
• Leverage - boards can be a way to get help at no to minimum cash cost. Here some key things to capitalize on are the board directors' networks, skills (e.g., legal or accounting), etc.
• Advice - although this is one I personally put the less stock in because one can get some of this without a board director relationship, it depends on the makeup of the management team and desire of the owners. Board directors can complement the management team's experiences.
• Independence - as the owners of the organization differ in total composition as compared to management, the need for board directors to be non-management and independent increases.

As a final closing thought, fund raising is huge timesink that affects both for-profit and non-profit organizations. Some non-profits have even segmented their board into operating and fund raising groups. The former group looks at current operations, controller activities, etc. The latter group is more forward-looking and gets involved with the strategic direction and milestones for the group. Fund raising is something that should not be forgotten because it is buried in the notes I've outlined above (probably could be categorized as a way to get leverage). Consideration should be given as to how the board makeup should look based on putting fund raising in the proper perspective.