Mike Smith Featured

7:00pm EDT January 31, 2007

It takes a lot of energy to ensure that the booming Georgia population has the energy it needs. Land must be purchased years in advance, and transmission lines can require 10 years to build. So Mike Smith, president and CEO of the $200 million Georgia Transmission Corp., needs to plan years ahead to anticipate the needs of a state with 12 of the nation’s 100 fastest-growing counties. So even though the company is batting .995, that .005 of failure causes Smith and his team to carefully evaluate the risk of each potential purchase as if it could result in a drop to a .250 average. Smart Business spoke with Smith about how he pushes his people to take chances despite the risk and the possibility of failure.

Lead by example. Anybody who feels so risk-averse that they’re not going to step out there, you’re never going to get any creativity or breakthrough ideas in your company.

People become risk-averse for fear of reprisal or punishment.

There is a tolerable amount of business risk that you have to be able to accept. While it’s OK to take an acceptable level of risk, I also sense what is my comfort and our corporation’s comfort of what is tolerable and what could be damaging.

There’s a wide gap between the two. When someone takes the risk, they’re not telling you to bet the bank. There’s a wide gap between take a risk and bet the bank, and you’ve got to have a work force that has the maturity to understand the difference between the two. Do it through example of your own actions and do it through saying, ‘What I mean here is you can do A, B, C, D, E, F ... but I don’t mean you can do Z, and it should be obvious why we shouldn’t be doing Z and why we can do A through N.’

You have to crystallize it. I’ve had people that were so risk-averse that said, ‘We can’t do this because they could do Z.’ I said, ‘No, they won’t, and to say we’re not going to do A through Y because they may do Z, you’re not giving yourself enough credit, and you’re not giving your organization enough credit to understand the differences between A through Y and Z.’

Think longer term. Do you look beyond your budget year? Some companies tend to be so focused in on the short-term and so focused in on the current year.

You cannot manage quarter to quarter. It’s going to be frustrating to your employees. You’re jerking around your strategy for really short-term oriented reasons.

You have to be serious about putting together a five-year forecast and a 10-year forecast and trying to almost map out where you need to be, where you want to be in five to 10 years. A lot of companies say, ‘We’re growing so fast and we have so much to do that we don’t have time to do that.’ Take the time out to do long-term planning.

Don’t kill yourself with detail. You cannot put every level of detail in a five- to 10-year forecast that you do in a quarterly budget or an annual budget. Make some assumptions, but in those assumptions, understand what are the key variables that drive your business and the key risk factors.

Balance efficiency and growth. There’s the continual struggle between cost-efficiency and growth. People always ask, ‘Do you want increased production, or do you want us to keep our costs down?’ The answer CEOs have to give is, ‘I want both.’

When I say I want to keep our costs down, I want us to stay cost-efficient. Cost structure can grow if it’s tied to the underlying growth of your business because you still have to show, on an efficiency basis, that you’re being productive while your costs are going up. Some CEOs may characterize that, year to year, I need my cost structure to be flat because [if] my cost structure grows, I’m not efficient. You can’t keep your cost structure flat if you’re in a growing environment. We’re looking at cost from a per-unit type of metric and not what was our absolute cost year to year.

Trust your employees. We’re fast growing and have to keep up in demand and have a motivated work force. Lead with positive incentives and not negative incentives. That’s the way you get things done.

You get more done by being informal and inspiring. A boss that motivates me positively and allows me the freedom to get done what I need to get done, I feel more at ease and productive. When you have somebody who’s more bullish in the way they lead, people tend to be more defensive and more insecure.

They tend to question how much am I going to get questioned about my decisions, and it stifles creativity and proactivity. I’ve been in a situation before where people literally gave up. They said, ‘The president wants me to produce this report, but he or she is going to change 99 percent of it, so I’m going to give a half-hearted effort because it’s going to get changed.’

Let people know that we’re all in this together. If you produce something, I’m going to support it. I’m not going to come down on it or manipulate it to make it my own because, as a leader, you’re expected to show productivity through your folks. I don’t have to present or make everything in this company my own to have it reflect the best interest of our people.

I’m willing to be successful or not be successful based on my ability to identify people I can trust. I don’t see how you can run an organization of any size not having that comfort that you can trust them. It’s through example. The proof is in the pudding.

You can say a lot of things, but down the road, are they going to see your actions and behaviors match your words? They have to see when they’re making a decision that you’re backing that decision. When you promise that you’re communicating, you communicate. When you say you’re going to reward team performance, show them that you’re rewarding team performance.

As a CEO, you live or die by the people you surround yourself with. Surround yourself with good people, and then let those people flourish.

HOW TO REACH: Georgia Transmission Corp., (800) 241-5374 or www.gatrans.com