Bob MacDonald on Business

Sage Advice for Superior Business Management

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Being Successful is Not Something You Buy Into – You Have to Own it

January 25th, 2015 · Business Management

Success is more likely and enjoyable when it is as personal as you are.

“Success” is the third most searched word on Google; right behind sex and money. The concept of becoming successful in life or business is such an all-consuming desire in our lives – some would say obsession – that more has been written on how to attain it than any other subject.

You would think, therefore, that when you combine the desire to be successful with the billions of words written about how to achieve success, it would be fairly easy to attain. But it’s not. And that’s because, all too often, we allow others to define our success.

The vast majority of those who say they want to be successful and are willing to pay the price to achieve it, fail. Why? key-to-successBecause most of what is said and written about success is intended to get you to buy into a vision of success as they define it, and the actions they say you need to take to be successful. It’s “they” from beginning to end.

This is an erroneous approach to achieving success that, as often as not, leads to failure because it’s not “you.” True success is not determined by what others want you to “buy,” but by what you own as a part of what you are. Success comes as the by-product of a life lived from the inside out; not from the outside in. Success comes from internalized ownership of what you want to be and a determined drive to achieve it. Success should be yours, not something someone else has tried to sell you.

It may seem incongruous, but the single greatest impediment to achieving success is the inability of the person seeking it to independently define just what success means to them. When we allow others to define our success, we are, in effect, abdicating control of our lives. Think about that. How can we ever be successful if we allow others – parents, teachers, bosses or peers – to define that success and the actions we should take to achieve it? Obviously, if we don’t personally define it for ourselves, we’ll never know how to achieve it, or even if we achieved it.

It seems that everyone has their own ideas about success and we are barraged with briefcases full of definitions, some no better than mere notions. It starts with parents who lovingly, yet persistently apply their image of success on their children. Be it sports, grades, competition with peers or the schools we should attend, we are constantly bombarded with the success expectations of others. The intentions are good, but the results can be disastrous.

We’ve all heard the horror stories of parents who push their children to achieve “success” as a proxy for their own perceived failures: the mother who literally thrusts her little girl into beauty contests; the dominant father who takes his kid out of high school to be a pro golfer; the star quarterback driven by the expectations of others.

Parents like these and many other adults go through life leading the famous lives of quiet desperation and unhappiness because they are led to think of themselves as “failures.” In most cases the perceived failure is in reality only a failure to live up to someone else’s expectations of success. (Or maybe they finally recognize what a wasted life it is to be a banker!).

There are legions of “successful” people who demonstrate dissatisfaction with their success by committing seemingly strange acts of personal self-destruction. This comes from either not having a strong enough personal self-worth to define their own brand of success, so they feel “guilty” and become trapped in a quest for success that fits the definition of others, but not theirs.

I would not attempt to define or quantify success for you, but I do encourage anyone to do so on your own terms. I have discovered that no matter how you define success or what level of success you may seek, the philosophies, techniques and actions are the same whether you define success as being the very best bus driver in the world or the very best fighter pilot.

The first step to achieving real success is to understand that allowing others to define and structure that success is the Successshortest road to failure. The first thing to do is forget everything every one has ever told you about success. Clean your mind of the expectations of others. Ignore my ideas of success along with all the other ego-saturated books of business leaders. Certainly all the ideas you’ve heard about success are good background, but they only serve that purpose.

What you need to do is call a meeting of your most trusted advisors; those who you know for certain care about you and your success above all others. So, call a me, myself, and I meeting. Ask them to help you define what success really means to you. Don’t let them get away with any BS here. This is a once-in-a- lifetime opportunity to be completely and totally honest, so don’t let them miss the opportunity.

From this point, it may seem like defining your own brand of success is a simple process, but it is not. First of all you have to eliminate everyone else’s definition of success; create your own definition. Defining success is difficult because so many confuse the rewards of success with success itself and they are not the same. Ask anyone to define success and most often they will mention fame, fortune and power as the preeminent criteria for success. It is important to recognize that these are the rewards for a successful career, not success itself. Success is about what you achieve, not what you receive. Ask yourself: Does the achievement of fame and fortune make me successful? Or do I achieve fame and fortune because I am successful?

It is incorrect to define success by identifying the rewards of success. For example, I have always felt it to be a poor definition of success to say my goal is to achieve fame as an actor. My viewpoint is that success is more fulfilling when defined by deciding to become a great actor. The point is you have a much better chance to become famous if you first become a great actor than you do if your goal is only to be famous. It’s a mistake to start a business to get rich. Start a business to take advantage of an opportunity others do not see, if you do that, riches will follow. Take on a job to be the best at doing it, don’t target that promotion, target those things that will earn you the promotion.

And the moral of the story is …

When you take it upon yourself to define your own brand of success you have your one and only opportunity to take control of your future. Success is the happiness you achieve by knowing that you have done what you wanted to do, not what others defined for you to do. When you have defined your own brand of success you free yourself to be yourself. Unlike others who have allowed others to define them, you become free of peer pressure and expectations of others. You have the freedom to own your future. This freedom will give you the opportunity to be what you want to be and that is the best definition of success. And the moment you define it, is the moment you’ll get closer to it.

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Corporate Compensation Plans and the Federal Tax Code are Brothers from Different Bureaucracies

January 18th, 2015 · Business Management

—They both reward the elite and the wealthy. It’s time for reform.

Most corporate pay plans are to effective compensation policy what the Federal tax code is to fair tax policy. Which is to say, they are needlessly bloated, convoluted, confusing, inequitable and highly inefficient.

What was once a simple process to raise revenue to run the government, has over time, become contaminated by peripheral objectives and motives that have made the tax system an opaque morass of unintelligible rules and loopholes. In the same way, business pay plans – which should motivate and reward exceptional effort and results – have become tainted with increasing needless complexity resulting in the same sort of inefficiency and unfairness that plagues the Federal tax code.

A Little Background . . .

Corporate pay plans were initially developed as a simple process to provide fair pay and incentive for the performance of defined tasks. Over time, however, the system has evolved, like tax policy, as a way to achieve other objectives and satisfy CompensationPlanspersonal motives. This has caused most corporate compensation plans to take on the complexity of a formula for analyzing human DNA; as a result, corporate pay plans have become highly ineffective as a motivator of superior performance at all levels of the organization. But even worse, unlike the tax code that everyone agrees needs to be fixed, corporate pay plans continue to become more and more complicated and less and less effective. And there’s no agreement that wholesale change is needed. But it is.

In the political world, adopting real reform and fixing bad tax policy is difficult because everyone is protecting their own sacred cows. Not so in the world of corporate compensation. Here, plans continue to become more complicated and inefficient primarily because management has abdicated one of its most significant responsibilities and powerful management tools to outside “compensation consultants.” These outside consultants have only one objective: to keep the fat fees rolling in. They know the only way to do that is by cobbling together plans that give the appearance of creativity and sophistication, but that are in reality nothing more than a warmed-over mishmash of peer-group comparisons.

What Smart Compensation Plans Can Achieve

A compensation plan can be one of the most powerful tools a leader has to motivate and reward those employees who have the ability to add value to the company. Such a plan can:

  • Set the cultural tone of the organization
  • Create a sense of equity
  • Identify what is most important to the success of the company
  • Motivate specific performance, and
  • Reward those who do the most to help the company achieve the most.

Admittedly it can be challenging to design a plan that offers these benefits, but making the effort is worth it. Difficult as that effort may be, opting out and abdicating this responsibility to an outside consultant shows a complete lack of understanding that borders on incompetence.

But there is a darker reason why management opts to use outside consultants to develop compensation plans. It is a way to provide cover for management when the real intent of the plan – as is often the case – is to pay out even more to the highest paid in the company.

Compensation plans can be a lot of things, but one thing they should never be is an attempt to find pay-parity with competing peer group companies. The truth is that compensation is the simplest, easiest and most effective tool in the hands of a strong leader. Simple, well-designed pay plans can be a constant, consistent communication that marshals the attention and efforts of the employees in a way that joins them in parallel with the leader to achieve the vision of the organization.

How Management can Create an Intelligent Compensation Policy

A corporate compensation plan starts with fair remuneration for the employee’s performance of clearly defined tasks. But it should be much more than that. “Compensation” is a broad term that includes all forms of recognition and reward for the efforts of the employee. The point is that a properly designed compensation plan permeates the entire culture of the organization in a way that unites line employees and management in the parallel pursuit of the betterment of all. And that kind of relationship simply cannot be developed by an outside consultant.

An efficient and effective compensation plan is the sum of three parts:

  1. Pay for the performance of a specific task.
  2. Increased reward for adding value to the performance of a specific task.
  3. The opportunity for employees to share in the value their efforts create.

It is always argued that if the cost of labor is higher than that of the competitor, then the company is at a disadvantage; but that does not have to be the case. If the pay is fair and is part of a balanced total compensation system, it can become an advantage. A recognized equitable pay system for the performance of the basic elements of a job attracts higher quality workers, reduces turnover and motivates employees to reciprocate by working harder to preserve their jobs. In the end, so long as it is reasonable, the increase in labor costs can actually become an investment in increased profits.

There are at least two other embedded policy errors in the structure of basic pay plans. The first of which is that these plans establish a rigid level of pay – entry, mid-range and top level – within a specific job description. Pay levels are more often PayScalethan not determined by time-in-grade and once the employee reaches the top level, they are not eligible for any further increases. This attitude is accepted and traditional in business, but it is counter-intuitive to logic. If the employee has been in the position long enough to reach the top pay-grade they are probably the most experienced and efficient at that job. Yet, no matter how long they stay or how well they do, they are locked into an intractable wage scale because pay is defined by the task, not the performance. Even if the employee loves their job and is good at it, to receive any increase in pay, they are forced to move to another job. What sense does that make?

The other miscalculation with this structure is that every employee in the same pay-grade is paid at the same level—regardless of productivity. This means that no matter how hard or smart employees work, they receive exactly the same pay as those who “go through the motions” or slough off. How fair is that? What type of incentive does this offer for those who do more? If the standard of measurement is how many files are processed and one employee produces at twice that level, shouldn’t they be paid more? In theory, if one does not measure up the minimum standards, they are fired. Yet, when one produces well above the standard, the pay is the same. Explain that logic to me.

The most important element of a successful compensation plan is a structure that allows those who use their talents to add value to an organization – at any level – to share in the value they create. There are two key elements needed for this type of plan to work:

  1. It must include everyone in the organization – not just senior management – and it must be structured from the bottom up – not top down.
  2. Rewards must be based on specific activities that create value and they must be based on results the employees feel they can control and profit from.

It does not unify the organization or motivate all employees when only the top people are allowed to participate in the real rewards for the success of a total company effort. To be motivating and effective, the rewards for creating increased value should trickle up from the bottom, not trickle down from the top. Trust me, when management receives their rewards based on the rewards earned by those below them, they become stronger, more involved leaders.

Probably the most glaring deficiency of most corporate compensation plans is that rewards are based on results that most employees feel they cannot impact. If they don’t feel they can make a difference, there is no motivation to make a difference. When rewards are based on macro items such as – increase in profits, reduced expenses, higher sales and even a rise in stock price, virtually the entire organization feels powerless to have an impact and, as a result, the compensation plan becomes powerless to impact their performance. Instead, it becomes largess for the already highly compensated executives of the company.

And the Moral of the Story …

If your company has a compensation plan designed by an outside “compensation consultant,” it is in all likelihood a bad plan. Chances are it is as complicated and as ineffective as the Federal tax code. Sure, just like the tax code is structured to protect and take care of those with money, because Congress knows how its bread gets buttered; the consultant-designed compensation plan is structured to reward the highest paid, because the consultant knows who contracts them and writes the checks.

A well-designed compensation plan can be an effective tool to gain the support of all members of the organization and motivate them to be concerned about and committed to the success of the organization. To abdicate the development of such an important part of leadership to an outside consultant is nothing less than squandering opportunity and an abdication of leadership.

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Stepping Up to Successful Leadership Calls for Many Small Steps

January 11th, 2015 · Business Management

Leadership is not about one giant leap, but about a lot of small steps that add up to a big success.

We’ve been raised and socialized on time-honored images of leadership. The standard-bearer of leadership is depicted as one who is out front or highly visible. We are conditioned to believe that the best leadership is provided when the leader is in the limelight, the clear focus of attention and attraction. Museums are chockablock with portraits that depict this quintessential view of leadership. You know, The Gallant Crusader with flapping flag in hand astride the supersized charger – rising above the chaos to lead his followers to vanquish the evil marauding mongrels.

The traditional images of the leader are often based on a single, dramatic event. The mention of Teddy Roosevelt evokes visions of his bravery while leading the Rough Riders in the charge up San Juan Hill. Think of Bonaparte atop his white Mythsteed on his way to glory at St. Bernard Pass. George Washington’s leadership is often depicted by him (foolishly) standing up in a leaky rowboat, leading his army across the Delaware River to attack the Hessians (German mercenary soldiers hired by the British) in the middle of winter. There is the World War II visual image of Gen. Douglas MacArthur wading ashore (it took four takes to get it right) in the Philippines as if he were the first one to confront and frighten off the Japanese.

I could go on and on with these time-honored examples of what leadership is purported to be, but why? The fact is, at best these are archaic myths of leadership, not the reality of what leadership is really about. Real leadership is acchieved» by following a much more mundane approach. And when leadership is exercised in this manner, it is much more effective and lasting, especially in today’s world.

Certainly one cannot be a leader if there are no followers. But attracting those who will follow cannot be mandated; that kind of dedication must be earned over time. In simple terms, leaders must give followers a reason to follow. An effective and successful leader approaches this task by adopting five specific steps: Teacher, coach, taskmaster, cheer leader and fan.

Teaching » When Franklin Roosevelt was trying to lead America out of its greatest economic crisis by changing the Rooseveltfundamental nature of how government functioned, he conducted a series of radio “Fireside Chats.” In doing so, he went directly to Americans (those he wanted to follow him) to explain in simple, down-to-earth terms they could understand the essence of the economic crisis and made clear his vision for solving it. By “teaching” the American public to understand the reasons for his actions and to explain his vision, he made them feel part of the process. This approach coalesced the power and support of the followers in a way that allowed him to overcome stiff opposition to his plans. In reality, to be effective, leaders must learn to teach before they lead.

Coaching » Winning coaches in any sport don’t just tell their players what they want – they show them. A football coach does not pass out diagrams of plays he wants run, and then leave it to the team to flesh them out. The coach will lead the team through the plays, making them practice and practice till they are run effectively. During the decisive Battle of the Bulge during World War II, General Patton was able to accomplish what no other general thought possible. He was able to pivot three divisions consisting of thousands of soldiers and mechanized armor and move them over 100 miles in less than two days, to thwart and defeat the German offensive. How was Patton’s army able to carry out this seemingly impossible maneuver? He had coached and practiced the very same movement when his army was training in the desert of California. Effective leaders don’t tell followers what to do, they coach them to victory.

Taskmaster » There is a negative connotation to the term “taskmaster.” (Taskmaster was the super-villain and antihero to the Avengers in Marvel Comics.) Generally a boss who imposes an unfair burden and work on others is tagged with the “taskmaster” moniker. But being a taskmaster as a leader can be very effective in achieving an objective—so long as the actions are fair and equitable. What a leader does as a taskmaster is demand and enforce accountability in order to successfully complete a task. When followers understand they will be held accountable – both in terms responsibility and reward – they are much more inclined to focus on the effort assigned by the leader.

Cheerleader » The effective leader is always there offering support and encouragement for the followers’ efforts. The leader is there to reassure the followers when times are difficult and to applaud their efforts as they move forward. Most people seek – indeed crave – recognition, support and approval for the efforts they are making. Nothing is more motivating for a follower to do more than to know that their leader is cheering for them, recognizing, appreciating and supporting their efforts.

Fan » Few things make people feel better than to know they have fans pulling for and committed to their success. An important role for an effective leader is to be a fan of their followers. True leaders become fans when they are involved with the efforts of the followers, show respect for the value they are adding and share the successful outcome with their followers. The best way for leaders to motivate others to follow is to be boisterous fan of the efforts and accomplishments of the followers.

Seeking success as a leader starts with breaking from the myth that leadership is defined by out-front flamboyance and the search for personal glory. Instead, put the mission and the people out front and make them the focus. Real leaders spotlight what is to be accomplished and the efforts of those who will accomplish it, not how accomplished the leader may be.

And the Moral of the Story …

The leader as a “demigod” out front and hell-bent-for-leather may have been an effective image in the past, but leadership in today’s world calls for a different approach. Leadership in the modern world boils down to understanding that the best leaders lead best when they appear to follow.

Genuine leadership has never been exhibited by a single, dramatic episode but rather an intricate series of actions and events that fuse the followers into a dynamic and focused force that is targeted to achieve the objectives of the leader – because the actions of the leader have encouraged them to adopt the objectives as their own. An effective leader teaches, coaches, demands accountability, cheers for the success of others and is an abiding fan of those they seek as followers.

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