Leslie Stevens-Huffman

Wednesday, 25 October 2006 20:00

Effective leadership

Managing and obtaining value from today’s work force can be a challenge for any executive. As more seasoned workers continue to move to consulting and freelance positions, the younger employees who are entering the workplace behind them have more of a free agent mindset and don’t expect to stay with any one company or in any one position too long.

Add to this equation the increasing diversity of the work force and the number of remote workers, and suddenly a firm’s most valuable assets — its people — can be hard to retain and difficult to manage.

“The greatest challenge for a CEO today is getting ROI from employees while they are with the organization,” says Ken Goldberg, Ph.D. and associate professor of public administration for the School of Business and Management at National University.

Goldberg says that managing workers who build a portfolio of skills and move from assignment to assignment is especially difficult for CEOs of mid-sized or emerging companies.

Smart Business spoke with Goldberg about the tools that can help CEOs develop the skills and the competencies to succeed in obtaining an acceptable return from today’s worker.

How can CEOs obtain greater ROI from today’s highly mobile work force?
The way to do it is by raising your emotional intelligence quotient (EQ) and getting the most out of workers while they are with the company. Start by having the knowledge of who you are as a leader and a person and a greater knowledge of where your organization is today. That will take you down the path to understanding the feelings of others — including your customers and your employees.

How does that knowledge enable a CEO to become a more effective leader?
It gives you a more rational approach to people’s problems and teaches you to be an empathetic listener. By understanding the problems that your employees are facing, you are better able to provide the best solution. For example, an employee may come to you and ask for a pay raise. As you attempt to understand his or her concerns, what you may actually uncover is that the employee is really looking for more recognition or responsibility. Then you are better able to help resolve the true issue.

What is the correlation between EQ and employee ROI?
When CEOs understand employee needs, they begin to build employee trust and that employee’s commitment to the organization, which increases employee engagement. When employees are engaged, they stay longer and they are more productive, which increases that employee’s ROI to the company.

Just the right words at the right time can sometimes mean that people will stay longer. With the end of lifetime commitments by employees, every day that they stay matters. This skill is not only helpful in managing internal company relationships but also external associations, such as building relationships with clients through a better understanding of their needs. And that increases client retention.

What are the other ways that CEOs can demonstrate their competency with EQ?
By being an active listener and by separating your emotions from the issues. CEOs should try looking at the issue from the other person’s perspective and use techniques such as repeating the other person’s concern. This will help you clarify the concern and demonstrate empathy as well as your ability to be an ethical leader.

How can I become a more ethical leader and transfer my values to my employees?
The best way to show that you are ethical is by using leadership transparency. You will not always be able to get everyone on board with your decisions, but by being open and honest about your reasons for your decisions you will be able to at least get people to see why you made the call. By sharing the reasons for your decisions and the data that you considered, the staff will start to see examples of your logic and reasoning.

These are living examples of your values that the staff can then apply to their own decisions so that they represent the ethical culture of the company’s leadership.

What types of training and coaching are available to CEOs?
The Center for Organizational Excellence has trained faculty available to act as mentors and coach practitioners in one on one sessions with CEOs. The tutoring is customized to the needs of the CEO and can be used to refine or build skills. In addition, National University offers both executive level and MBA courses geared to the needs of busy CEOs.

KEN GOLDBERG, Ph.D., is associate professor of public administration for the School of Business and Management at National University. Reach him at (858) 642-8478 or kgoldber@nu.edu.

Tuesday, 24 October 2006 20:00

Family incentive trusts

As executives plan for their retirements and ways to secure their familys’ futures, they have traditionally set up wills and trusts to pass along wealth to their children and to mitigate tax consequences.

These types of estate-planning documents can provide peace of mind for executives along with financial security.

A relatively new way to pass along a sense of ethics and values that helped to create the family wealth is the Family Incentive Trust (FIT). The FIT provides more than just a vehicle to distribute assets; it establishes a framework that correlates to the beliefs of the grantor and helps to reduce the worry that heirs will make errors or life choices that are not reversible.

Executives and CEOs have worked hard and put a great deal of effort into building their wealth, and they don’t want a child to become a less than productive member of society because of a significant inheritance, says Kerry-Michael Finn, vice president of financial planning for the Western Region of Comerica Bank.

Smart Business spoke with Finn about FITs and how they can help high-wealth individuals assure the future for their families.

What is an FIT?
An FIT is a trust that passes along assets to the next generation while trying to minimize potential negative effects. For example, the trust may specify that the inheritance be passed along through income matching or it can be distributed based upon clauses that require the heirs to achieve specific education levels or contribute community service time.

Income matching can be very valuable, because it may allow an heir to pursue a career in teaching or philanthropy that might not otherwise be an affordable option. It is also possible to tie monetary rewards to other achievements, such as refraining from drug or alcohol abuse or raising a family. Monetary awards can also provide the capital to make a down payment on a home or start a business.

How can CEOs benefit from having an FIT?
If the family business is privately held, it may be possible to pass along the ownership through the trust and preserve the same values that built the business. Even if the wealth has been built through a career in public companies, the concept of transferring values as well as cash can still be achieved.

How can I make certain that an FIT is a positive motivation for my heirs?
This can be accomplished by making certain that the document is flexible enough to accommodate a variety of circumstances while allowing each heir to become successful in his or her own way. For example, placing a requirement of obtaining a four-year university degree might not be achievable for everyone, but receiving a certificate through a trade or technical college as a substitute might be the type of incentive that will transfer the value without placing an unreasonable restriction on the heir.

If I currently have an existing trust, can it be amended to include an FIT?
In some cases yes. Incentive language can be added or incorporated into an existing trust document. It may be best to review the existing trust as some tax laws may have changed since it was originally drafted, so it might be more efficient to draft a new document.

What measures can I take to make certain the FIT is flexible enough to handle unforeseen circumstances?
When an FIT is created as an irrevocable trust, it has a safety net built in, because the assets in the trust are not considered as assets of the beneficiary and therefore cannot be attached by creditors or subject to division through a divorce decree.

The standard provisions of an FIT allow for additional distributions based upon the need for health, education or maintenance and support by the heirs. In addition, the FIT allows for additional distributions at the discretion of the trustee.

I normally recommend that the trustee be a family friend, attorney or accountant along with an institution. In these cases, having a family friend and an institution serving as co-trustees can be beneficial, because the institution will outlive the individual trustee. It is always good to start the process well in advance, so that the staff at the institution can get to know you and your values and thus make decisions and interpretations that they believe are in line with your core beliefs. I also recommend that grantors draft a letter or statement that very specifically states their beliefs and wishes for this trust.

KERRY-MICHAEL FINN is vice president of financial planning for Comerica Bank. Reach him at (714) 424-3823 or kfinn@comerica.com

Thursday, 21 September 2006 10:08

Successful attorney-client relationships

According to search results from the State Bar Association of California’s Web site, there are more than 10,000 licensed attorneys in Orange County; that’s one lawyer for every 300 Orange County residents.

For many CEOs, that ratio creates angst because businesses need to engage and manage relationships with attorneys, and there is a large pool from which to choose.

In fact, attorneys are needed to start, run and protect all businesses, says Mark Himmelstein, partner with Newmeyer & Dillion LLP. He says that even if a CEO views the need for attorneys as a necessary evil, an attorney can actually be a competitive advantage for your business — when you have the right one.

Smart Business spoke with Himmelstein about what criteria CEOs should consider when selecting an attorney and the best practices for successfully managing the relationship and performance of lawyers and their firms.

What are the criteria that CEOs should consider when selecting an attorney?
First, the CEO should consider the experience and qualifications of the attorneys to make certain they are skilled for the area of need. Lawyers have become extremely specialized. Even within an area of expertise, you must make sure that the lawyer is right for that matter. If you have been sued and you foresee that you will be trying the case, you will want not only a litigator, but one who has significant trial experience with similar types of matters. In addition to technical skills, many lawyers have connections, whether with governmental entities or potential adversaries, that can help facilitate a positive outcome.

Second, meet with prospective attorneys face to face, as a means of evaluating the match between you, the culture of your organization and the attorney’s style. Remember that publicly, this person becomes an extension of your organization from a communications standpoint.

Third, make certain the law firm has the ‘horsepower’ and the time for your project and inquire as to who will actually be performing the work. Prevailing positively in some cases requires a team approach. You are entitled to know who will be working on the case and just how much time the lead attorney (usually the person you hired) will devote to the matter. This will avoid the scenario in which you hire the big name lawyer and then are disappointed to later learn that he or she may not have the necessary time to devote to your case and have delegated much of the work to an associate with less experience.

Fourth, ask for project cost estimates, hourly rates and references. Much like hiring other consultants, it is important to actually check the attorney’s references and ask why that law firm was originally selected and how it performed.

How should CEOs establish and communicate performance expectations to an attorney?
There are two aspects to the attorney’s performance. First are the goals for the outcome of the matter. Second are the client’s reporting and procedural requirements that the attorney must satisfy. The attorney and client should develop these goals at the outset and revisit them throughout the engagement. Establishing deadlines that keep in mind those items that are within the attorney’s control, and communicating in advance your company’s process for decision making will help assure that results and timeliness expectations are met.

What types of on-going communication should a CEO require from an attorney?
The CEO should establish up front the frequency of expected communications and the best means to communicate such as phone, fax or e-mail. Many companies require scheduled written communication such as a monthly report that is supplied to the board updating them on all pending legal matters. By communicating those requirements at the outset of the engagement, you will ensure that your attorney sets aside adequate time each month to meet the deadline.

In order to get the most out of your phone calls, try to schedule them in advance. This avoids the potential for ‘voicemail tag’ or an unproductive call with an unprepared counsel and potentially helps to lower costs in that the calls are less frequent and more efficient.

What types of information should a CEO supply or not supply to an attorney?
Tell and give your lawyer absolutely everything. Don’t leave anything out. Even if some of the facts are detrimental to the case, it is important to know those up front. Your communications with your attorney are privileged, so err on the side of telling everything. The bad facts usually come out eventually, so you want to formulate a plan to deal with them at the beginning.

MARK HIMMELSTEIN is a partner with Newmeyer & Dillion LLP in Newport Beach. Reach him at (949)271-7217 or mark.himmelstein@ndlf.com.

Tuesday, 29 August 2006 20:00

Smooth operator

Garry Ridge doesn’t define sales for WD-40 Co. in terms of international and domestic markets.

“I only see one market, and it’s global,” says Ridge, president and CEO. “I prefer to say that we are a global company headquartered in San Diego, Calif.”

A strong global vision has been one of the keys to his success in transforming WD-40 from a company with a single product to a firm that successfully operates in the worldwide marketplace with multiple brands.

Growing a company like WD-40 was a challenge that not many CEOs would want to take on. Consider the scenario: There was the brand dominance of the product, a lubricant used in most households, which had been on store shelves for more than 40 years.

That product positioning had garnered strong margins, and when combined with fairly conservative expense management, the company had consistently produced a nice return for shareholders with little risk. Expansion would require changing the company’s philosophy, increasing investments, taking more risk and potentially breaking something that was not already broken.

Ridge had been with WD-40 for almost 10 years before being named CEO. He had worked in international marketing at the firm, and coming from inside the company had its advantages.

He was familiar with the company culture and the obstacles to expanding the firm’s stagnant sales, and he used that knowledge in creating his growth plan.

“Our shareholders had been used to making a profit, and I knew that they wouldn’t take too kindly to giving that up, so I had to move more slowly and strategically,” says Ridge.

Unlocking knowledge
“The first thing I had to do was work on transforming the company into a learning culture,” says Ridge. “The employees had been used to the same style for 29 years, and within the company, information was power. There were silos of knowledge out there, and unconsciously, people were holding onto it. It was impacting sales because hidden in there was the knowledge of what was working and not working in the international markets.

“I needed people to learn to share this information and learn that they could do that without repercussions so we could move forward.”

Ridge had to teach people to not be afraid to fail and he had to earn their trust by showing that he would not take adverse action if they tried something new without success. He knew that time and his actions would handle one part of the challenge, but he had to coax employees to begin stepping out on the limb.

“I initiated a monthly reward contest for providing the best new idea or tip,” says Ridge. “The first month, I only received a couple of entries, but as people started to see that it was safe, we got more and more.”

There was also an incentive. The employee who submitted the best new idea that first year won a trip to visit all of the company’s operations and locations around the world. As Ridge demonstrated that he was open to new ideas, he began to earn the staff’s trust. He further demonstrated his commitment by offering another prize at the end of the second year, and once he was armed with the information that he needed and employees that were no longer risk-averse, he was ready to take on the world.

 

Expanding the brand
Ridge’s first expansion moves were designed to find additional opportunities to spread the sales of WD-40 by establishing new markets and increasing the channels in which the product was sold. He prioritized the expansion into countries that offered a lower cost of entry in order to deliver a quick turn to profitability.

“I would wait until the new channel became profitable before expanding again,” Ridge says. “That was usually six months.”

To plot his moves, Ridge used a decision-making grid populated with data gathered by his team. The team began by mapping the market, looking at where competing products had market share and where those products were distributed and exposing the gaps that WD-40 could fill.

He avoided mistakes by knowing that his mapping data was accurate and by meeting potential business partners face-to-face.

“By going to their place of business, I show them that I have both passion for the business and that I care,” says Ridge.

He verifies his data by checking out the situation on the streets.

“I like to use what I call the ‘Columbo technique’ for validating mapping data,” says Ridge. “Most CEOs would fly in to town, go to their hotel and then the distributor would meet them for dinner there. The next day, that CEO flies out of town.

“I arrive in town, check in to the hotel and hit the streets. I’m out verifying the data in the heat or the rain 130 to 150 days per year, kicking the tires and going store to store. If a distributor tells me that he has space for the product, I want to see it. If I understand that automotive retailers do not have a similar type of lubricant on the shelf, I want to see it for myself.”

When expanding into new outlets within your channel, you also have to be prepared to explain the strategy to your existing customers.

“One of the obstacles to channel expansion is that the people within your existing channel relationships don’t like it when you begin offering your product elsewhere,” says Ridge. “You have to be able to take the heat.”

Ridge says he has honed a three-pronged formula for success in channel expansion.

“Start with the right product to open up multiple trade channels,” says Ridge. “Be able to cope with the pressure your existing trade channels will put on you and continue to provide a strong value proposition for them, and learn from your previous mistakes.

“In some places, we also had to unseat a competitor. We weren’t the market leader in Germany when we started. Today we are.”

The numbers suggest that more than a few competitors have fallen. In the nine years under Ridge’s leadership as CEO, WD-40 product sales have increased 80 percent.

 

Acquiring markets
When barriers to entry were too great, Ridge looked to acquisitions to generate growth.

“In Spain and France, 3-IN-ONE Oil was a competitor to WD-40 with a strong market share,” says Ridge. “In this case, we bought versus fought. This gave us the opportunity to buy the culture and the market share.”

That 1995 acquisition increased distribution in 17 countries. Ridge says the key to successful acquisitions is following a set of beliefs and practices.

“I believe that we are in the squeak, smell and dirt business,” he says. “I don’t make acquisitions unless they eliminate a squeak, a smell or dirt.”

When it comes to new product acquisition, Ridge looks for products with strong brand dominance that complement the company’s existing suite of offerings and then evaluates the product’s channel gaps.

“I look for brands that offer us the opportunity to expand the channel for that brand and our other products,” says Ridge. “If they have underrepresented channels, then we will make that acquisition.”

Such was the case in 1999, when WD-40 acquired Spot Shot, a brand of instant carpet stain remover. The product was mainly sold in supermarkets and drugstores. Ridge expanded into hardware, automotive and club stores, increasing sales of the product to a new customer base.

 

Focus on research
With his conservative plan, Ridge says that initially he did not want to put the WD-40 brand at risk by placing it on new products. The next phases of growth have come from the reinvestment of increased profits into research and development that has produced new products and packaging that leverage both the WD-40 brand and the larger distribution system.

From 2004 to 2006, Ridge has increased annual R&D spending from $1.5 million to almost $4 million to develop new products.

Ridge is relying on the strength of the learning culture to make certain the company is ready for the R&D phase. He has improved the opportunities for employees to continue their education and their willingness to take risks and innovate.

“I continually work to develop an infrastructure that will drive the continuous learning process and a culture that drives the business by developing people,” says Ridge.

To facilitate continuous education, Ridge has structured monthly lunch-and-learn sessions and introduced his a leadership academy to develop new talent. He further supports his philosophy of learning through his own Web site portal , “The Learning Moment,” a collection of resources and stories that reinforce his ideas on leadership.

Taking a page from his initial success in behavior change through sharing ideas, Ridge has encouraged innovation by building a project marketing team called Team Tomorrow, which is charged with increasing revenue from the newly developed products by $100 million over a three-year period that commenced in 2005.

When he’s not developing new products, he’s finding increased market share by offering new packaging and uses for the old, reliable WD-40 formula. The firm recently began marketing the lubricant in a “travel size” called the WD-40 No-Mess Pen.

The end result of Ridge’s efforts has been a total transformation of the company. Since taking the CEO position in 1997, Ridge and his team have moved the company’s annual sales from $100 million — with 70 percent coming from domestic sales of WD-40 — to $263 million in 2005. They are projecting sales of $285 million in 2006 — with 56 percent of that coming from WD-40 sales outside of the United States.

The job hasn’t been easy, but Ridge never tried to do it alone. The transformation came about from a commitment to not only change but also to learn.

“I believe that you have to show people how to get an A, not just mark their papers,” says Ridge. “It can be a little bit of tough love. You have to define for people what getting an A means, like delivering the product on time 98 percent of the time, then you have to show them how to achieve that. You continue to define the difference between an A and an A+, benchmark the outcomes and hold them accountable. Put a process in place that allows people to measure, learn and react.

“I think in order to be successful, you have to be candid, you have to win trust and you have to be a man of your word who treats people right.”

HOW TO REACH: WD-40, www.wd40.com

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