Politics and Power in Business…

The use of politics and power is endemic to organizations. People come to work situations with many goals, not just one unified goal. These goals invoke conflict and competition among workers for the expenditure of scarce resources. This competition, in turn, effects the use of power and politics.

Although several researchers recognize the presence of politics and the use of power in organizations, the approaches used to study this topic vary considerably. Crozier (1964), for example, was among the first to identify subunit power. He observed how the ability of plant maintenance engineers to control uncertainty (by being the only group that could repair broken-down machinery) was a source of power for them.

Thompson (1967) also stressed “uncertainty coping” as a source of power. Salancik and Pfeffer (1977), and Tushman and Romanelli (1983) argued that those who are able to cope with uncertainty will adjust their social standing and increase power in the organization. Woodward (1965), on the other hand, emphasized one’s critical function in an organization as a source of power, while Hickson, Hining, Lee, Schneck and Pennings (1971), Salancik and Pfeffer (1977), Astley and Sachdeva (1984) identified several important variables including, resource control, hierarchical authority, non-substitutability, uncertainty coping, and centrality as sources of power and as connecting links to organizational politics.

In the book “The Concepts of Power and Organizational Politics” by John Gardner writes: “Of course leaders are preoccupied with power! The significant questions are: What means do they use to gain it? How much do they exercise it?” To what ends do they exercise it? He further states, “Power is the basic energy needed to initiate and sustain action or, to put it another way, the capacity to translate intention into reality and sustain it.” In a similar vein, Richard Nixon wrote, “The great leader needs . . . the capacity to achieve. . . . power is the opportunity to build, to create, to nudge history in a different direction.”

Dahl writing about the pervasiveness of the concept of power states, “The concept of power is as ancient and ubiquitous as any that social theory can boast.” He defined power “as a relation among social actors in which one actor A, can get another social actor B, to do something that B would not otherwise have done.” Hence, power is recognized as “the ability of those who possess power to bring about the outcomes they desire” (Salancik and Pfeffer 1977).

The concept of organizational politics can be linked to Harold Lasswell’s (1936) definition of politics as; who gets what, when and how. If power involves the employment of stored influence by which events, actions and behaviors are affected, and then politics involves the exercise of power to get something done, as well as to enhance and protect the vested interests of individuals or groups.

Thus, the use of organizational politics suggests that political activity is used to overcome resistance and implies a conscious effort to organize activity to challenge opposition in a priority decision situation. This indicates that the concepts of power and organizational politics are related, and organizational politics is the use of power, with power viewed as a source of potential energy to manage relationships.

Power is attractive because it confers the ability to influence decisions, about who gets what resources, what goals are pursued, what philosophy the organization adopts, what actions are taken, who succeeds and who fails. Power also gives a sense of control over outcomes, and may in fact convey such enhanced control. Particularly as decision issues become more complex and outcomes become more uncertain, power becomes more attractive as a tool for reducing uncertainty.

Power and the ability to use it are essential to effective leadership. Strategic leaders who are uncomfortable with either the presence of great power in others or its use by themselves are probably going to fail their organizations at some point. The critical issue is why the leader seeks power and how it is used. Some see power as a tool to enhance their ability to facilitate the work of their organizations and groups.

Others value power for its own sake, and exercise power for the personal satisfaction it brings. There can be good and bad in both cases. However, the leader who uses power in the service of his/her organization is using power in the most constructive sense. The leader who seeks power for its own sake and for personal satisfaction is at a level of personal maturity that will compromise his/her ethical position, risk his/her organization’s effectiveness, and perhaps even jeopardize the long-term viability of the organization (Jacobs 1996).

Organizations also play a political game. Organizations seek influence. Influence increases autonomy (freedom to control own assets); organizational morale (the ability to maintain cohesion and effectiveness); essence (sanctity of essential tasks and functions); roles and missions (exclusion of options that would challenge these); and budgets (increased roles and missions will always favor larger budgets) (Jefferies).

To increase their own influence, agencies in government and other organizations will provide information, recommend options, and execute directives in ways that enhance their own self interest. Jefferies illustrates with the decision to send a U-2 reconnaissance aircraft to over-fly the Cuban missile sites. The decision to send the U-2 was actually made 10 days before the flight occurred, but the implementation was delayed by the CIA-USAF struggle for the mission.

The CIA defined the mission as intelligence gathering and advanced the argument that it had a better U-2 than did the USAF. The USAF was concerned that the pilot be in uniform to avoid repetition of the Gary Powers crisis if the aircraft was shot down. (The total mission delay came from five days to make the decision and five days to train an Air Force pilot to fly CIA U-2s.)

A number of authors writing in Strivastva’s Executive Power (1992) argue that power at the strategic organization level is manifested and executed through three fundamental elements: consensus, cooperation, and culture. “An organization is high in consensus potential when it has the capacity to synthesize the commitment of multiple constituencies and stakeholders in response to specific challenges and aspirations.”

In this area, strategic leader power is derived from the management of ideas, the management of agreement, and the management of group and team decision making processes. “Cooperative potential refers to an organization’s capacity to catalyze cooperative interaction among individuals and groups.”

Power is employed by a strategic leader in the management of organization structures, task designs, resource allocation, and reward systems that support and encourage this behavior. “Cultural/spiritual potential refers to a sense of timeless destiny about the organization, its role in its own area of endeavor as well as its larger role in its service to society.”

Strategic leaders use power in this area to manage and institutionalize organizational symbols, beliefs, myths, ideals and values. Their strategic aim is to create a strong culture that connects the destiny of the organization to the personal goals and aspirations of its members.

Although the road to power is open to those who wish to travel it, not all will distinguish themselves as master practitioners. What skills and attributes distinguish those strategic leaders who use power effectively from those who do not? Pfeffer’s (1992) research and observations emphasize the following characteristics as being especially important for acquiring and maintaining strategic power bases:   “High energy and physical endurance is the ability and motivation to work long and often time grueling hours.

Absent this attribute other skills and characteristics may not be of much value.  Directing energy is the ability and skill to focus on a clear objective and to subordinate other interests to that objective. Attention to small details embedded in the objective is critical for getting things done.

Successfully reading the behavior of others is the ability and skill to understand who are the key players, their positions and what strategy to follow in communicating with and influencing them. Adaptability and flexibility is the ability and skill to modify one’s behavior. This skill requires the capacity to re-direct energy, abandon a course of action that is not working, and manage emotional or ego concerns in the situation”.

“Motivation to engage and confront conflict is the ability and skill to deal with conflict in order to get done what you want accomplished. The willingness to take on the tough issues and challenges and execute a successful strategic decision is a source of power in any organization.  Subordinating one’s ego is the ability and skill to submerge one’s ego for the collective good of the team or organization.

Possessing this attribute is related to the characteristics of adaptability and flexibility. Depending on the situation and players, by exercising discipline and restraint an opportunity may be present to generate greater power and resources in a future scenario. The skills and attributes relevant not only to the work of strategic leaders but may contribute to their overall capacity to acquire and use power effectively”.

“Professional Competence is one of the many ways leaders “add value” by grasping the essential nature of work to be done and providing the organizing guidance so it can be done quickly, efficiently, and well. ‘Conceptual Flexibility’ is the capacity to see problems from multiple perspectives. It includes rapid grasp of complex and difficult situations as they unfold, and the ability to understand complex and perhaps unstructured problems quickly.

It also includes tolerance for uncertainty and ambiguity. ‘Future Vision’ reflects strategic vision, appreciation of long-range planning, and a good sense of the broad span of time over which strategic cause and effect play out. ‘Conceptual Competence’ relates to conceptual flexibility in that both are essential for strategic vision.

It has to do with the scope of a person’s vision and the power of a person’s logic in thinking through complex situations. ‘Political Sensitivity’ is being skilled in assessing political issues and interests beyond narrow organizational interests. It means possessing the ability to compete in an arena immersed in the political frame to ensure that your organization is adequately resourced to support your stated organization interests”.

“Interpersonal Competence is essential for effectiveness in influencing others outside your chain of command, or negotiating across agency lines. It suggests high confidence in the worth of other people, which is reflected in openness and trust in others: Empowering Subordinates, Team Performance Facilitation, Objectivity, and Initiative/Commitment.

Understanding the character of strategic leader power and the requisite personal attributes and skills sets the stage for employing power effectively. We need to know more than the conceptual elements that constitute power in organizations at the strategic level. But, we need to know the strategies of how to use power effectively and to get things done”.

In contrast, power can be lost when organizations change and leaders don’t. “Organizational dynamics create complex conditions and different decision situations that require innovative and creative approaches, new skill sets and new dependent and interdependent relationships. Leaders who have learned to do things a specific way become committed to predictable choices and decision actions.

They remain bonded and loyal to highly developed social networks and friendships, failing to recognize the need for change, let alone allocating the political will to accomplish it. Ultimately, power may be lost because of negative personal attributes that diminish a leader’s capacity to lead with power effectively. A number of negative attributes that when linked to certain organizational dynamics will generate potential loss of power: Technically Incompetent, Self-Serving/Unethical, Micromanagement, Arrogant, Explosive, and Inaccessible”.

Pfeffer has described learning about power most succinctly: “it is one thing to understand power–how to diagnose it, what are its sources, what are the strategies and tactics for its use, and how it is lost. It is quite another thing to use that knowledge in the world at large…

In corporations, public agencies, universities, and government, the problem is how to get things done, how to move forward, how to solve the many problems facing organizations of all sizes and types. Developing and exercising power require having both will and skill. It is the ‘will’ that often seems to be missing.

Myopic Madness in Business…

Myopic: Narrow-minded approach to a marketing situation where only short-range goals are considered or where the marketing focuses on only one aspect out of many possible marketing attributes. This is a short-sighted and inward looking approach to marketing that focuses on the needs of the firm instead of defining the firm and its products in terms of the customers’ needs and wants.

Such self-centered firms fail to see and adjust to the rapid changes in their markets and, despite their previous eminence, falter, fall, and disappear. This concept was discussed in an article (titled ‘Marketing Myopia,’ in July-August 1960 issue of Harvard Business Review) by Harvard Business School emeritus professor of marketing, Theodore C. Levitt, who suggests that firms get trapped in this bind because they omit to ask the vital question, “What business are we in?”

“Every second, every minute: It keeps changing to something different.”-Enlightenment, Van Morrison

In this article, Levitt proposed that companies fail to successfully maneuver market transitions because they have a myopic view of the scope of their business. With reference to the railroad industry, he noted, “The reason they defined their industry incorrectly was because they were railroad-oriented instead of transportation-oriented; they were product-oriented instead of customer-oriented.” 

Some commentators have suggested that this publication marked the beginning of the modern marketing movement. Its theme is that the vision of most organizations is too constricted by a narrow understanding of what business they are in. It exhorted CEOs to re-examine their corporate vision; and redefine their markets in terms of wider perspectives. It was successful in its impact because it was, as with all of Levitt’s work, essentially practical and pragmatic.

Organizations found that they had been missing opportunities which were plain to see once they adopted the wider view. The paper was influential. The oil companies (which represented one of his main examples in the paper) redefined their business as energy rather than just petroleum; although Royal Dutch Shell, which embarked upon an investment program in nuclear power, subsequently regretted this course of action.

One reason that short sightedness is so common is that people feel that they cannot accurately predict the future. While this is a legitimate concern, it is also possible to use a whole range of business prediction techniques currently available to estimate future circumstances as best as possible. There is a greater scope of opportunities as the industry changes. It trains managers to look beyond their current business activities and think “outside the box”.

George Steiner (1979) claims that if a buggy whip manufacturer in 1910 defined its business as the “transportation starter business”, they might have been able to make the creative leap necessary to move into the automobile business when technological change demanded it. People who focus on marketing strategy, various predictive techniques, and the customer’s lifetime value can rise above myopia to a certain extent. This can entail the use of long-term profit objectives (sometimes at the risk of sacrificing short term objectives).

In an article by Russell J. White, president of PinnacleSolutions.org, he wrote: “Imagine, you have created something that is state of the art: The envy of the industry. You spared no expense and focused on every detail. Everyone says: It’s a can’t miss smash success! Everyone applauds your launch, customers wishing they could be the first to use your product, and you are ready to make money by the vault-load. What could go wrong?”

“Myopic Madness is what could go wrong: Your inability to see out in front of you causes you to crash into an avoidable obstacle and your project becomes the poster child for failure, in fact they make a movie about it and everyone enjoys watching your failure unfold in real time. This is the story if the Titanic. But it could be the story (up to the movie part) of many business ventures that failed to look far enough into the future.

Myopia is commonly known as near-sightedness or the inability to see clearly into the distance. American business has never been so myopic in its vision as it is today and the madness it creates is frustrating managers across the country. Myopic Madness is creating work atmospheres that are so short-term bottom line focused, managers are no longer properly training newly-hired employees, are employing bad work practices in order to boost end of the month numbers to make a report look healthier than it really is, and exploring offshore options to save money while ignoring the long term effects of all of these practices. Want to stop the Madness?”

“Leaders need to be able to see the future today and drive the organization toward that destination. Kodak ignored the future of digital photography and finally announced film would not be a profit center for their organization, all the while scrambling how to find a share of the new age of photography: Kodak without film profits? Invest the time, energy and resources looking where you are going, instead of focusing how to get one more order out by the end of the month. Success takes consistency and persistency, not herky-jerky short-term moves for all the wrong reasons.

“Consider the fad chasers. Cadillac now makes a small car that is more affordable for the masses. (So much for the elite brand, they are now just another division of GM.) Banks approve credit card applications as long as the applicant is breathing (and the write-offs are significant.) Anybody notice how much a share of Berkshire Hathaway still is? Here is the exception.

Warren Buffet defines fads, he doesn’t follow them and his success is off the charts. Your brand is something you should never sacrifice in the pursuit of short-term profits. If you make the biggest burger – then make the biggest burger and be proud. If you make an elite car, then only make an elite car! If you want to demonstrate strength as a company then don’t sacrifice your brand identity to make a few extra dollars this quarter. Your short-term vision may have you heading straight for an iceberg.”

At times, managers face short-term incentives that lead them to engage in “myopic marketing management”, in order to artificially inflate current-term earnings (and thereby increase current stock price), they cut marketing expenditures. How prevalent is this phenomenon of myopic marketing management? What are the long-term performance implications of myopic marketing management?

In the article “Myopic Marketing Management: The Phenomenon and Its Long-term Impact on Firm Value” by Natalie Mizik and Robert Jacobson they investigate these questions in the context of seasoned equity offerings (SEOs), i.e., when a firm issues additional equity to collect additional capital. Since the amount of capital collected by the firm depends on the stock price on the day of issue, managers have an incentive to engage in earnings inflation at the time of an SEO. This incentive stems from the fact that investors rely on current-term accounting performance measures to form their expectations of the future-term performance and, as such, to value equity.”

“Using empirical modeling and data from Thomson Financial Securities, COMPUSTAT, and the University of Chicago’s Center for Research in Security Prices (CRSP) databases, Mizik & Jacobson found the following: “A significant number of firms are engaging in myopic marketing management and are inflating their earnings by cutting marketing spending: at the time of an SEO, 65.0% of firms fall below their expected levels of marketing spending and 58.5% fall above their expected levels of earnings. 

Financial markets appear unable to distinguish firms that are practicing myopic marketing management at the time of an SEO from those that are not: myopic firms are overvalued at the time of an SEO, but in years subsequent to the SEO year, as the consequences of cutting marketing spending are realized in inferior financial performance, they have large negative abnormal stock returns.”

“While myopic marketing management has some short-term benefits in terms of higher current-term earnings and stock price, it has a detrimental long-term impact on firm value. Myopic firms have long-term stock returns significantly lower than other firms.  Myopic marketing management might have negative consequences not only for the firms undertaking myopic strategies, but also for the firms not doing so: non-myopic firms may be undervalued at the time of an SEO issuing and, as such, might not be able to collect a fair price for their new equity.  These results are likely to generalize to other contexts.

Firms practicing myopic management forego strategies with superior future profits for those that generate immediate returns. In general, managers have incentives to behave myopically when (1) their performance evaluation depends on a current-term outcome measure or on the stock market reaction and (2) they can engage in an inter-temporal shifting of expenditures that cannot be fully discerned by the evaluator.

The authors argue that myopic marketing management impairs marketing function, harms intangible marketing assets, and ultimately destroys shareholder value, and they suggest ways to change the attitudes and behaviors of managers and the financial market.”

In the article Marketing and Firm Value: Metrics, Methods, Findings, and Future Directions by Shuba Srinivasan and Dominique M. Hanssens they wrote: “Traditionally, marketing has focused its attention on customer or product-market results, such as customer counts, sales, and market share. The link to financial outcomes and stock price is rarely considered. Increasingly, however, marketing profession is being challenged to assess, communicate the value created by its actions on shareholder value. These demands create a need to translate marketing resource allocations and their performance consequences into financial and firm value effects.”

“In recent years, researchers in marketing have begun to examine the demand creation aspect of firm valuation. Although demand creation is but one aspect of management strategy, it is arguably the most important and the most challenging. If marketing’s contributions were readily visible in quarterly changes in sales and earnings, the task would be simple because investors are known to react quickly and fully to earnings surprises.

However, much of good marketing is building intangible assets of the firm—in particular, brand equity, customer loyalty, and market-sensing capability. Progress in these areas is not readily visible from quarterly earnings, not only because different nonfinancial “intermediate” performance metrics are used (e.g., customer satisfaction measures) but also because the financial outcomes can be substantially delayed. As with research and development (R&D), marketing is requesting the investor community to adopt an investment perspective on its spending.”

This article integrates the existing knowledge on the impact of marketing on firm value. Specifically, the authors examine the methods for determining the impact of marketing on investor valuation and summarize the existing findings in this area. The authors first frame the important research questions on marketing and firm value and review the key investor response metrics and relevant analytical models as they are related to marketing. Then, they summarize the empirical findings to date on how marketing creates shareholder value, including the impact of brand equity, customer equity, customer satisfaction, R&D and product quality, and specific marketing-mix actions on firm value.”

“Overall, the studies point to the link between marketing actions and investor response. In particular, the evidence supports the notion that investors are long-term oriented. In general, they favor marketing developments that improve the firm’s long-term outlook and discourage myopic marketing actions, though exceptions exist.

Thus, corporate executives are advised to generate better information about their intangibles (e.g., investments in brand building, product and service innovations, R&D) and the long-term benefits that flow from them and then to disclose that information to the capital markets to give investors a sharper picture of the company’s performance outlook.”

Customer Value : Realities and the Value of Perception

     “We don’t see things as they are. We see them as we are” – Anais Nin

A study by Stanford and Caltech found that increasing the perceived price of a bottle of wine increased the ‘actual’ and perceived enjoyment that tasters derived from drinking the wine: According to researchers at the Stanford Graduate School of Business and the California Institute of Technology, if a person is told he or she is tasting two different wines—and that one costs $5 and the other $45 when they are, in fact, the same wine—the part of the brain that experiences pleasure will become more active when the drinker thinks he or she is enjoying the more expensive vintage…

The researchers recruited 11 male Caltech graduate students who said they liked and occasionally drank red wine. The subjects were told that they would be trying five different Cabernet Sauvignon wines, identified by price, to study the flavor. But in fact, only three wines were used—two were given twice. The first wine was identified by its real bottle price of $5 and by a fake $45 price tag. The second wine was marked with its actual $90 price and by a fictitious $10 tag. The third wine, which was used to distract the participants, was marked with its correct $35 price.

A tasteless water was also given in between wine samples to rinse the subjects’ mouths. The wines were given in random order, and the students were asked to focus on flavor and how much they enjoyed each sample. In the study, the participants said they could actually taste five different wines, even though there were only three, and added that the wines identified as more expensive tasted better. The researchers found that with an increase in the perceived price of a wine that it lead to increased activity in the  mOFC (medial OrbitoFrontal Corte) of the brain, which was due to an associated increase in taste expectation.

The ability of “framing” to impact perceived value is consistent with the signalling function of digital virtual goods… basic point of the study is that there are physiological reasons for peoples perceptions (e.g., high price can be perceived as higher value, whether it true or not)…

  “What is madness? To have erroneous perceptions and to reason correctly from them.” – Voltaire

Part of our job as sales professionals revolves around our ability to understand how customers think. The more we can understand the way customers perceive value, the better we can position our solutions to help them derive the value that they seek. It is important for us to remember that… customers don’t choose one vendor over another accidentally; they choose for specific reasons that they value. Like an investigative reporter, or a detective trying to solve a complex mystery, we (as salespeople) endeavor to understand what causes customers to see the world the way they do.

The better we can understand the way customers think the more influence we can have on what they think about. Customers see the world through their perception and the way they interpret value (e.g., higher price could mean higher value). This creates a perception of the world and everything in it that customers accept as reality. Their perception seems to be the truth to them, and in fact, it is the truth to them. But what we think is truth, and what they (customers) think is truth could be two different realities.

Therefore, when an enterprise enters the marketplace; its business, people, and solutions have unique characteristics (differentiation) that distinguish them from other competitors. But every customer or decision-maker who might be asked to evaluate your enterprise; its business, people, and solutions could see a completely different picture, filtered by his or her own perception…it’s critical that both perceptions (customers & enterprise) are completely aligned with each other or the enterprise will not survive…

  “Often we color perception with other people’s pencils” – Tim Winter

In an article by Steven Bradley he writes: “Why do people buy your products? Why do they purchase any product or service? One thing is for certain, it’s not about the price. It’s a common fallacy that people buy based on price alone. Well some do, but most people buy based on value or rather their perception of value. Many small business owners begin their business life with the thought that they will enter their market and simply offer what they have at a slightly lower price, and all will be good. In truth it’s not the best or even a good idea, instead you should compete on value.

Everything about your enterprise should be about increasing the perceived value of your products and services in the eyes of your potential customers”. People don’t buy on price. They buy on value or more correctly their perceived value in a product of service. People buy brand name foods in the supermarket, because they believe the brand is better in some way and offers a better value. Two people can argue over which of the exact same television set is the better bargain because each perceives the set they are buying offers a better value.

There will always be some other business that can charge less than you can. A better option is to charge what you will and offer more value for that price. Give customers the perception that your products and services are a better value than the competition, and you have a good chance of selling to them. Then, back that up with real value to sustain that perception, and you’ll create loyal customers who buy again, and again….

 “It is one of the commonest of mistakes to consider that the limit of our power of perception is also the limit of all there is to perceive” – C.W. Leadbeater

In the article “More Expensive Placebos Bring More Relief” by Benedict Carey writes: In marketing, as in medicine, perception can be everything. A higher price can create the impression of higher value, just as placebo pill can reduce pain.  Now researchers have combined the two effects. A $2.50 placebo, they have found, works better than one that costs 10 cents.  The finding may explain the popularity of some high-cost drugs over cheaper alternatives, the authors conclude. It may also help account for patients’ reports that generic drugs are less effective than brand-name ones, though their active ingredients are identical.

The research was published in The Journal of the American Medical Association. The investigators had 82 men and women rate the pain caused by electric shocks applied to their wrist, before and after taking a pill. Half the participants had read that the pill, described as a newly approved prescription pain reliever, was regularly priced at $2.50 per dose.

The other half read that it had been discounted to 10 cents. In fact, both were dummy pills. The pills had a strong placebo effect in both groups. But 85 percent of those using the expensive pills reported significant pain relief, compared with 61 percent on the cheaper pills. The investigators corrected for each person’s individual level of pain tolerance.

“It’s a great finding,” said Guy H. Montgomery, an associate professor of cancer prevention at the Mount Sinai School of Medicine who was not involved in the research. “Their manipulation of price affected expectancies of drug benefit, and pain is the ultimate mind-body phenomenon.” Previous studies have shown that pill size and color also affect people’s perceptions of effectiveness. In one, people rated black and red capsules as “strongest” and white ones as “weakest.”

Other information like the country where the drugs were manufactured can also affect perceptions. “It’s all about expectations,” said the lead researcher, Dan Ariely, a behavioral economist at Duke and the author of a new book, “Predictably Irrational: The Hidden Forces That Shape Our Decisions” (HarperCollins). His co-authors on the report were Rebecca Waber, Baba Shiv and Ziv Carmon. “When you’re expecting pain relief, you’re secreting your own opioids,” Dr. Ariely added. “And when you get it on discount, you doubt it, and your body doesn’t react as well.

 “Don’t try to give your customers the best price; give them the best customer value for the price.” – “But only as the customer perceives value & price; not as you perceive value & price.”

Agony: Executive Failure…

“An organization is like a tree full of monkeys, all on different levels, some climbing up, some falling down, most just swinging round and round. The monkeys on top look down and see a tree full of smiling faces. The monkeys on the bottom look up and see nothing but ass-xxxx.” –In the April 16, 1999, issue of the Informant, a newsletter written by and for district attorneys, in the county DA’s office for a major metropolitan area.

Several years ago an article in Time Magazine wrote: During the years of business growth and expansion, executive promotions came soon and often in a long list of fast-growing U.S. companies. But all too frequently the rising members of the executive suite were hard put to handle their new assignments.

“A boom market,” says Pittsburgh Executive Recruiter Richard MacQuown, “can camouflage anything, including incompetence.” Now business is slowing down, and the camouflage is harder to keep up. Corporate chiefs increasingly must face the agonizing task of reinvigorating or dismissing failing executives.

The problem is surfacing in some of the biggest corporations. Yet the causes and cures of executive failure often baffle top managers. They are turning to behavioral scientists, who have classified at least three types of failing executives: “The Early Flameout”. Dr. Herbert Klemme, a psychiatrist at the Menninger Foundation, has found that many men go through a “midlife crisis” at about age 35.

Just around then, says Klemme, a man often faces the jolting realization that he cannot accomplish all his early dreams, and, more important, begins to think seriously for the first time about the inevitability of death. Some flameouts simply sink into depression, others start to drink heavily. In any event, their work and their careers suffer.

“The Climacteric Man”: Executives in their late 40s or early 50s often begin to perform sloppily in jobs they did well for years. Boredom is one reason. Paul Armer, director of Stanford’s computation center, explains another reason with his Paul Principle: “Individuals often become incompetent at a level at which they once performed quite adequately.” The executive may feel, rightly or wrongly, that he is undereducated, that he cannot keep up with the complexities of modern business and the talents of younger executives. Typical lament: “I’m too old to learn about this.”

“The Indecisive Boss”: This executive is so paralyzed by fear of making a mistake that he lets major problems pile up on his desk while he becomes preoccupied with trivia. Charles Bowen Jr., president of the management consulting firm of Booz, Allen & Hamilton, recalls that “one head of marketing for a large corporation spent his first six months almost totally concerned with the decorating of his office. There were things that needed his attention, but he could not face them.”

The Empty-Box Ploy: Whatever the cause, the executive who is slipping often betrays himself by telltale signs. He will work long hours, nag his staff about petty details, or replace competent subordinates with yes men. Refusal to take a vacation is an almost certain symptom. Failures are terrified that their shortcomings will be discovered in their absence.

Sometimes the failures resort to elaborate —and costly—ruses to cover their traces. In one TV-set manufacturing company, for example, a vice president could not meet his production goals and shipped empty boxes to distributors. When they complained, he insisted it had all been a mistake; by that time, he had managed to finish the sets.

Coping with obsolescent executives, says Wayne M. Hoffman, chairman of Flying Tiger Lines, is “the toughest job of top management.” U.S. business often goes to extraordinary lengths to shield its failures. Next to early retirement with an extra-generous pension, the most common tactic is to move the failure to an impressive-sounding job that has no content.

In fact, says Harvard Business Professor Abraham Zaleznik, he is “vice president of nothing.” The man with a lofty title, a high salary and little to do may seem to be in an enviable position, but few enjoy it. “I have talked too many of them,” says David Gleicher, a research executive at Arthur D. Little. “They are dying and they know it.”

The Sternest Test: Much more intelligent—and effective—methods could be used. Menninger’s Klemme believes that many early flameouts could be prevented by competent psychological counseling, which few companies offer. Older executives could be reinvigorated by sabbaticals or company-paid refresher courses in subjects that now frighten them (example: computer technology). They could be switched from jobs in which they are getting stale to different but important assignments. A shift need not be downgrading; on the average, a man in middle management today stays in his job only 18 months before moving on.

As a last resort, the most humane method may be simply to fire the man, with an honest explanation of the reason why. “Being fired,” says Los Angeles Management Consultant Thomas J. Johnston, “is another part of the executive job”—and the ability to bounce back from dismissal is perhaps the sternest test of executive fiber.

Back to Business Growth: A Business Imperative…

Competitive pressure on companies has never been greater. Globalization, mergers and acquisition, eroding margins, outsourcing, the technological revolution, shrinking customer bases; these and other developments are creating unprecedented challenges for business manager, especially for those who manage strategic accounts.

More than ever, maintaining and building relationship with these key customers has become essential for sustaining the P&L profile that you need to survive and grow.

In the book “The New Successful Large Account Management” by Robert Miller and Stephen Heiman they write: There are two approaches to maintaining a healthy P&L. Cut costs or improve revenue (ideally, you do both). By now the first approach, which dominated corporate strategies for at least the last decade, is approaching the stage of limited returns, as organizations realize that there’s only so much excess any company can cut out.

As a result the second approach, revenue improvement, is fast becoming a universal imperative.  Recognizing that revenue is the lifeblood of their organization, managers increasingly following the mantra “back to growth”.

There are two approaches for business intent on growing revenue. Expand into new markets and new customers bases, or optimize the business you have in your existing accounts. These approaches are meant to be complementary, but with global competition severely curtailing market expansion, leading firms are focusing on the second option, seeking to develop untapped potential in their existing customer bases.

Alert to the traditional benchmark that 50 percent (or the 80-20 rule) of a company’s revenue comes from 5 percent of its customers, they are concentrating on that critical 5 percent; the accounts that companies define variously as their key, strategic, or simply “large” accounts. Even small businesses are following this pattern, by focusing on those critical accounts that are large to them.

There are two approaches to improving business with your strategic accounts. The old-fashioned method is to try to sell them more and bill them accordingly. A more reliable method, as measured by enhanced revenue over the long term, is to work on building relationships that bring the accounts value.  In fact the single “secret” to business success in the twenty-first century is to make contributions to your key accounts that ensure their success. That’s correct:

It’s not just about your business; you work with your key accounts to improve their business and ensure their success; rather then just trying to sell them something.

Whatever their size and whatever their markets, businesses everywhere need to protect their key account “assets”. They need to deliver real customer value or risk being de-positioned as commodity suppliers. They need to invest appropriately in the strategic relationships, which is the only safeguard against account erosion.

                “Change alone is unchanging”—Heraclitus

In their book Miller & Heiman write: If you are competing for major account revenue today, you’ve got to rely on something other than your latest generation products or services. To achieve competitive advantage today, especially in targeting large or strategic accounts, the key differentiating factor is the ability to build relationships that bring your customers measurable value over time. In a sense there’s nothing new about this imperative; bringing ‘customers value’ has always been key to success. But the world in which we now must compete has in fact changed; and changed in ways that are only marginally related to your technology.

While good account management, like good selling, has always depended on effective information management, today’s hyper-connected, information-saturated, wireless environment, that requirement has been pushed to an entirely new level. Not only is there now infinitely more information out there than ever before, but that information is both instant and ubiquitously accessible.

Now, thanks to Google, Yahoo, Hoover’s, and a host of other unlikely-named data-banks and search engines, the newest market entrants can acquire, within minutes, the kind of  rich customer data that used to take days, and that pre-Web sales and marketing teams could only dream about. Which means, with very little investment of either time or money, a potential competitor can acquire as much pubic information about your account as you have yourself.

However, here’s another hard truth: Your customers have access to this new information, too. They’re using it to research your capabilities, to compare them against those of your competitors, and to bring to the bargaining table a much higher degree of sophistication than businesses have ever had to contend with before. The accounts that you acquired fairly easily during the 1990s boom are both more resource-poor and data-rich than they were then; and fully capable of using that scenario to their competitive advantage.

In this highly competitive market, the central lesson is that your success is a function of your customers’ success. Not for this quarter alone, but for the long haul. Businesses are successful over time because they ‘add value’ to their customers’ business, while simultaneously realizing value themselves. Only this kind of mutual benefit justifies continued investment in a relationship.

To many senior-level people, who must answer to shareholders quarter-by-quarter, this is a difficult lesson to act on, especially when markets are volatile. Some of them frankly still see long-term account management as an investment that they’re making in their successors’ career. But it’s a valid lesson nonetheless. And the narrowing of the vendor base makes it an all the more urgent imperative.

Be Prepared: Your-Time Will Come…

Dr. Brian Sutton-Smith writes: “The opposite of play isn’t work. It’s depression.” “Furthermore, the opposite of success is not failure—it is living a life where you are comfortably numb.”

In the book “Sink, Float or Swim” by Scott Pelton & Jogi Rippel they write: “The truth is that in every crisis, there are opportunities: Opportunities for evaluation, for change, for reinvention, for innovation”.

In the article “Change Management is an Oxymoron” by Jim Clemmer he writes: “Those two words (change and management) make about as much sense together as “holy war”, “non-working mother”, “mandatory option”, and “political principles”. Many of the books, models, theories, and “processes” on change have come from staff support people, consultants, or academics who’ve never built a business or led an organization”. “Change management comes from the same dangerously seductive reasoning as strategic planning.

They’re both based on the shaky assumption that there’s an orderly thinking and implementation process which can objectively plot a course of action like Jean Luc Piccard on the starship Enterprise and then ‘make it so’. But if that ever was possible, it certainly isn’t in today’s world of high velocity change”.

In the book by Jim Collins, “Good to Great: Why Some Companies make the Leap” he writes: “If I was running a company today, I would have one priority above all others; to acquire as many of the best people as I could. I’d put off everything else…to fill the bus”.

Michael Jordan said, “I’ve missed more than 9,000 shots in my career. I’ve lost almost 300 games. Twenty-six times, I’ve been trusted to take the game-winning shot and missed. I’ve failed over and over and over again in my life. And that is why I succeed.”

Kjell Nordstrom, author of “Kararoke Capitalism” writes: “Business today has turned into a karaoke bar. Everything is a copy of a copy of a copy. He explained that it is similar to some untalented drunk patron in a bar singing someone else’s song; business is full of copy–cats. Further, he says “imagination and innovation will place societies, organizations, and sad individuals on center-stage”. “Creativity is the commodity of the future. But taking the same information that everybody else has and doing something unique, useful, and impactful; this is the ticket for success”.

Tiger Woods said “after a round of golf, he goes over went wrong but more importantly, he goes over what went right. This means he is rehearsing (practicing) success over and over and over again. In contrast, what are people practicing when they focus on their mistakes? They are mentally rehearsing their poor performance. So what will they get good at? You got it; poor performance. Does this mean you should ignore your mistakes? Absolutely not: But focus on the success and not the failure”.

“Challenge is based on the belief that change is a constant in one’s life. Successful people tend to see change as an exciting challenge to embrace and master rather than as a stressor to avoid. They welcome new opportunities to learn, grow, and change when faced with challenges, and do not perceive these opportunities as threats.  The feeling of control or ownership is at the root of almost every theory of effectiveness. People who are able to make critical decisions and to make change happen have developed this sense of control”.

Scott Pelton & Jogi Rippel, write: “An action plan is important but without execution and ‘movement’ the plan accomplishes nothing”. “The typical (linear) approach is to think that the harder you push the greater you improve the chance for success—false. As you keep trying harder & harder and work longer and longer at some point there is the law of diminishing return and your efforts become counter productive. To be more productive set a ‘rhythm’; plan, execute, follow-up, disengage; plan, execute, follow-up, disengage; …etc”.

In business, there is a preponderance of goal setting, which is perceived as crucial for measuring results and creating accountability. The type of goals most commonly used are ‘SMART’ goals: Specific, Measurable, Attainable, Realistic, and Time-based. Unfortunately, they lack “emotion”. One of the biggest factors in success is developing emotional & meaningful goals. If a goal has no meaning and doesn’t touch an emotional chord, then the chances of achieving it are very unlikely. It must be personally meaningful: Why is it important to an individual?

Find this meaning provides the emotion for the goal. In order for the goal to be achieved, people must visualize themselves achieving it. The goal must bridge the GAP between where they are and where they want to be in the future.  Developing the “To Be” goals is vital to making the change”.

John Kotter, Harvard Business School, writes: “Behavior change happens mostly by speaking to people’s feelings. In other words, making change is all about your emotional connection to the change”.  A very effective way to create an emotional connection is with a clear and compelling image of who you want to be in the future (“To Be”). This is different from what you want “To Do” or what you want “To Have”.

Geoff Colvin author of “Talent is Overrated” writes: “What separates world-class performers? The poorest performer doesn’t set goals. The mediocre performer set goals that are general and often focus simply on achieving a good outcome. The best performers set goals that are not outcomes but rather about the process for reaching the outcome”.

Change can be ignored, resisted, responded to, capitalized upon, and created. But it can be managed and made to march to some orderly step-by-step process. However, whether change is a threat or an opportunity depends on how prepared we are.

Whether we become change victims or victors depends on our readiness for change.  An inspiring quotation from Abraham Lincoln (in his decades long string of failures in business and politics before becoming one of America’s greatest presidents): He once said, I will prepare myself and my time must come.”

Leadership: The Price of Arrogance

           “I set no limits to what a man of ability can accomplish” –Alexander the Great

Few figures in history are as venerated as Alexander the Great, the young Macedonian king who believed that ability, focus, and determination in a leader would enable him to conquer the world. The Romans were the first to append the moniker “the Great” to his name, and history and popular perception have kept his legend intact for centuries.

Alexander’s leadership style reflected his conviction that a man of ability and determination could inspire and direct others to accomplish anything he set his mind to. For Alexander it was all about conquest –“acquisitions” in today’s corporate world. He was willing to pay whatever price was necessary to achieve his goal of nothing short of conquering the world.  In the early years of this career, Alexander was pragmatic enough to recognize that success does not come without cost: “The path is difficult and requires great personal sacrifice”. Alexander was able to connect with those he led because he exuded determination, projected confidence and ability, and generated excitement and passion for what he was doing.

An idealized or romantic view of Alexander’s conquests often overshadows some of the negative aspects of his leadership style, especially in the latter stages of his career. Though idolized in the West, he is not always viewed in the East as an enlightened leader, guiding the eastern barbarians toward the light of Greek learning and culture. He is sometimes demonized as the Hellenic version of Genghis Khan, sweeping across central Asia in 330 BC and bringing suffering, enslavement, and death to millions. Some of the countries that Alexander subjugated nearly twenty-four hundred years ago: Iran, Afghanistan, and Pakistan, make up today’s “terrorists” areas in which anti-Western sentiment is at its most virulent. There, Alexander, or Iskander as he is called, is often portrayed as an early example of Western cultural arrogance and exploitation.

In the book ”Power, Ambition, Glory” by Steve Forbes & John Prevas they write; “The real story of Alexander is a tragic case of what happens when too much power is concentrated in hands not strong enough to use it constructively or wisely. Each successive conquest and the power and wealth that came with it bred arrogance in Alexander instead of caution, moderation, and reflection. He not only destroyed himself but carried with him an entire civilization that believed his success was confirmation of its cultural superiority over the rest of humanity.

Alexander is a cautionary example for today’s leaders. Success not only in the corporate world but in politics, entertainment, and professional sports can frequently end in personal tragedy and failure. It can undermine the best achievements of the most brilliant leaders if they lack self-control and the discipline to remain focused on what is important and keep their success in perspective.  Relatively few entrepreneurs and CEOs today seem capable of managing lofty levels of success while maintaining a sane perspective. The dramatic downturn in the current economy is providing a humbling lesson for many at the top as they see their fortunes radically devalued and they become the focus of federal and state investigations for financial irregularities”.

In the book, Forbes & Prevas continue: “Leaders like Alexander often have an inclination to rely on their instincts and abilities instead of on objective information and analysis to conduct business. Seduced by their success and the constant praise of those who surround them, they come to believe that they alone know what is best. They stop seeking, listening, and learning. They become rigid, authoritative, and no longer receptive to feedback from their own organizations or the markets. Large corporations often come apart for the same reasons as Alexander’s empire did; leaders don’t create structures and cultures that keep them functioning profitably when the founder or creator leaves the scene or is carried out. Alexander’s empire disintegrated as soon as he died.

Ambition and the desire for immortality destroyed Alexander the Great. His story is the tragedy of what happens when a leader achieves power and wealth equal to his passion, something the Greek historian Plutarch warned about when he wrote: “No beast is more savage than man when he is possessed of power equal to his passion”. Alexander failed because he came to believe his own propaganda, and he lacked the self-control to keep his success within a sane perspective. He was weak within and not strong enough to carry the weight of his success. Alexander refused to accept the fact that success in large part can be due to a combination of ability, circumstances, and luck; factors that often converge in the career of a leader for a brief period when his stars are aligned”.

Young Alexander often impetuously destroyed the very things he had fought hard to achieve. He was blinded by his ego and failed to learn the lesson a simple Indian ascetic tried to teach him on the banks of the Indus River: Power is ephemeral , all glory is vanity, and in the end all that any man controls is the small piece of land on which he stands while he lives.

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Alexander III of Macedon (20/21 July 356 – 10/11 June 323 BC), commonly known as Alexander the Great (Greek: Μέγας Ἀλέξανδρος, Mégas Aléxandros), was a Greek king of Macedon. He is the most celebrated member of the Argead Dynasty and the creator of one of the largest empires in ancient history. 

Born in Pella in 356 BC, Alexander was tutored by the famed philosopher Aristotle. In 336 BC he succeeded his father Philip II of Macedon to the throne after he was assassinated. Philip had brought most of the city-states of mainland Greece under Macedonian hegemony, using both military and diplomatic means. Upon Philip’s death, Alexander inherited a strong kingdom and an experienced army. He succeeded in being awarded the generalship of Greece and, with his authority firmly established, launched the military plans for expansion left by his father. In 334 BC he invaded Persian-ruled Asia Minor and began a series of campaigns lasting ten years. Alexander broke the power of Persia in a series of decisive battles, most notably the battles of Issus and Gaugamela. Subsequently he overthrew the Persian king Darius III and conquered the entirety of the Persian Empire. The Macedonian Empire now stretched from the Adriatic sea to the Indus river. Following his desire to reach the “ends of the world and the Great Outer Sea”, he invaded India in 326 BC, but was eventually forced to turn back by the near-mutiny of his troops. 

Alexander died in Babylon in 323 BC, before realizing a series of planned campaigns that would have begun with an invasion of Arabia. In the years following Alexander’s death a series of civil wars tore his empire apart which resulted in the formation of a number of states ruled by the Diadochi – Alexander’s surviving generals. Although he is mostly remembered for his vast conquests, Alexander’s lasting legacy was not his reign, but the cultural diffusion his conquests engendered. Alexander’s settlement of Greek colonists and culture in the east resulted in a new Hellenistic culture, aspects of which were still evident in the traditions of the Byzantine Empire until the mid-15th century. Alexander became legendary as a classical hero in the mold of Achilles, and features prominently in the history and myth of Greek and non-Greek cultures. He became the measure against which generals, even to this day, compare themselves; military academies throughout the world still teach his tactical exploits.

Subtle Shifts in Business, Leadership, Management, Organization, Strategy, Innovation– Bring Big Results…

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