Bob MacDonald on Business

Sage Advice for Superior Business Management

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Distinctively Different Times Call for Distinctively Different Leaders

April 13th, 2014 · Building Better Business Managers, Business Ethics, Business Management

The long-held dictum that if you do what is expected of you, you will do well is no longer the sure path to success.

There have been more changes in business orthodoxy in the first 15 years of the 21st century, than occurred during the entire 20th century. When the last century ended, it marked not just a turning of the page, but also a closing of the book.

The world of accepted business mores and the time-honored requirements of success and leadership were hit with the unannounced suddenness and destruction of a 9.2 magnitude earthquake. This tremor of transformation shook the traditional concepts of business and leadership to the core, and the resultant tsunami of change washed away all that had been customary and comfortable. The result is that these new times call for a new type of leader; a leader who not only does what is ethical, but is cheerfully ready to go the extra mile.

Perhaps you think these comments are too dramatic and overstate the situation to the point of biblical hyperbole (Matthew 5:41, “And whosoever shall compel thee to go a mile, go with him twain (two).” Well, consider the following. It’s fair to say that the American economic system (if not the world’s) has been at war with itself since the start of this century. It was not so long ago when – in simpler times – top- and bottom-line growth (no matter how achieved) were the sole goals of business leaders. But over time, the simplicity of that model and the abuses it perpetuated ultimately caused the very fiber of the business world to unravel.

Think about it. In just a little more than a decade we have witnessed the illicit machinations and ultimate destruction of Enron, Tyco, EthicsAdelphia, Lehman Brothers and many others; all the result of slavish – to the point of being unethical – focus on top- and bottom-line growth. It is still hard believe that over a span of just a few years such icons as General Motors, United Airlines, AIG, Merrill Lynch, Bear Stearns, Fanny Mae, Freddy Mac, Citicorp and scores of other established institutions of business suffered the turmoil of restructuring, bankruptcy, dissolution or acquisition; but it happened.

The game is different now; meaning that for individuals to become successful leaders in this new environment, they are going to have to be different, too. The conventional concepts of ethics and leadership skills are not going to be enough to be successful. It will take more than the time-honored perception of being ethical and more than the classic traits of leadership if one is to emerge as a new type of leader who can be successful in these new times. The successful leaders of tomorrow will be those who employ new concepts and altered skill-sets.

The business world is filled with thousands of well-intended, dedicated individuals working diligently to meet the standards of ethics and to apply the accepted techniques of successful leadership. That is good, but it is not enough to stand out and distinguish oneself as a leader in these new times. If you want to be the one to rise above the rest and achieve truly unique levels of success as a leader in this new environment, you first have to come to grips with the understanding that it is no longer enough to simply follow the rules and lead like everyone else. You need to be willing to take a different approach than other hard-working, ethical individuals trying to achieve leadership and business success.

Believe it or not, it is possible – and not all that difficult – to absorb what has been learned in the past regarding ethics and leadership and then take it just one step further. Being willing to go “one step further” is what will distinguish the average leader from the exceptional one.

Traditionally, being ethical means doing the right things that are required to be done. Follow the laws and regulations and don’t lie, cheat or steal. That’s the way it has always been. However, to distinguish oneself as a new type of leader will require doing the right things that are not required to be done. It is a different philosophy of leadership that embodies the notion of simply doing more than what is required to be done and instead focuses on what should and can be done.

A Pregnant Idea?

The idea of “maternity leave” is a simple example of how this new concept of ethics in leadership might work. Most states have laws mandating maternity leave, a period of paid absence from work, to which a woman is legally entitled during the months immediately before and after childbirth.

Failure to comply with these laws certainly would be unethical as it is something required to be done. Compliance with the law is the accepted and ethical way of acting, but what if the mother is given the option to “take as long as she needs” to be with her baby? Even if taken without pay, allowing the mother to take as much time as she needs and keeping the job open for her when she returns is not required, but it is what should be done.

Many will argue that this type of approach will only increase costs and the payoff is not measurable; but they are wrong.

Leadership that is based on doing more than what is required becomes a social influence that encourages followers to reciprocate with increased loyalty and effort for the leader.

It is no coincidence that companies with a culture of leadership that is dedicated to doing more than what is required to do and doing what should be done do better. Many, in fact, are extending the concept of “parental” leave to include maternity, paternity, and even adoption leave. Smart move.

The Price of Merely “Being Ethical”

Another, more complicated, example of this leadership concept would be the current travails of General Motors. Ten years ago GM discovered an important safety defect in cars they were manufacturing. If you trace all the actions of GM management from the time they GMdiscovered the defect to the present, you will find the company complied with everything “they were required to do,” but not one leader stepped up and said, “We have to do more.” GM set about to discover the defect and find a solution; they reported the incidents and actions to the National Travel Safety Bureau, it made refunds to complaining buyers under “lemon laws,” but they went no further. The NTSB dropped the ball and did not order a recall and so GM did not do a recall. GM did what was required, but no more.

In the meantime GM profited from the sale of millions of defective cars that resulted in the deaths of at least 15 people killed and hundreds injured. No leader at GM stood up and said, “Look, we are being ethical by doing what is required to be done, but we need to do more than that.” They were playing by the accepted old rules of leadership and business; and look at the cost to GM is now.

If, 10 years ago, there had been leadership and a culture at GM that set the standard of not just doing what was required to be done, but what should have been done, then GM would have been transparent regarding the problem, recalled the defective cars and stopped making others until the problem was solved. No doubt it would have been time-consuming and expensive, but GM would be better off for it today.

And the Moral of the Story …

Times are different now and the old way of leading and doing business is not enough to assure success. What is needed now is a different attitude and approach from leaders and businesses. The old idea that doing what others are doing and just doing what is required to be done is the wrong thing to do now.

The new world calls for a new type of leader and corporate philosophy if real success is to be achieved and maintained. There is nothing complicated or secret about this new order of leadership. All it calls for is an attitude and a new standard for doing the right thing. Understanding that doing the right things that are required to be done is not enough and that the real standard for successful ethical leadership in the 21st century is doing what should be done.

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Corporations are People, and They Should be Free Like People, Too

April 6th, 2014 · Business Management

The attack on the activities of General Motors is just the latest example of wanton government interference with free market capitalism that is stunting economic growth.

Just show me one place in the constitution where the government is given the regulatory power to dictate how businesses should operate or to protect people against the alleged dangers of corporate activity. Look all you want, but you won’t find it, because the original intent of the constitution was to limit, not expand the powers of government.

Regulations imposed by the government on businesses are clearly nothing more than an attempt to countervail the limitations on GovernmentIntrusiongovernment power outlined in the constitution. The only thing that government regulations on business do is to increase the size, scope and power of government, while limiting individual freedom and stunting economic activity. Not only are the business regulatory actions of government an anathema to free market activities, they are unconstitutional; the fact is, these regulations do more harm than good.

Overstepping Constitutional Authority

Why should the government have the power to tell us we can’t smoke, eat all the “trans fats” we want, or that we have to wear seat belts and can’t text while we are driving? Even more flagrant is the government’s effort to regulate individual rights to own, carry and use guns. For Christ’s sake, it’s right there in the constitution: Citizens have the right to as many guns as we want! Besides, anyone with any experience at all knows it’s much easier to take down a buck with an AK-47 than a bow-and-arrow.

Government regulatory interference with business is even more brazen and constricting than its sometimes-draconian control on individuals. Remember, corporations are people, too, and they are entitled to be just as free from government intrusion as any individual. These regulations are clearly harmful to both the natural self-regulatory powers of the free market and the unfettered expansion of free market economic activity. What these power-grabbing government bureaucrats don’t understand is that these unwelcome and unnecessary regulations are preventing corporations from being “free” to do what they do best, which is to help the consumer, create jobs and stimulate the economy.

It has been estimated that U.S. businesses waste almost $2 trillion every year just to comply with existing government regulations. And don’t think these regulations don’t ultimately harm the consumers. All these costs are passed along to us in the form of higher prices so that corporate profits are not impacted by the costs.

Consider how much stronger the economy would be if businesses did not have to waste this $2 trillion every year to comply with government regulations. That’s $2 trillion in increased profits that companies could use to expand their business and hire new workers. Just imagine how many workers could be hired if you had $2 trillion to pay them! And you know that is exactly what the companies would do. Even if the companies just distributed the extra profits to shareholders, those shareholders would certainly re-invest that capital or buy more things like yachts, vacation homes and expensive trips; all of which would further stimulate the economy; creating more service jobs for those at the lower-end of the socioeconomic pyramid like maids, cooks and gardeners that would cause the benefits to trickle down to everyone.

God Bless the Free Market

These government mavens of regulation don’t understand the most effective regulation of the “free market” is the “free market.” That natural regulatory control of a free market is called “market forces.”

Here’s how it works: Let’s say some bank is making huge profits ripping off the consumer with abusive loan practices, high costs or excessive fees, the natural regulatory and competitive nature of “market forces” would encourage the other banks to take action in an effort to attract customers away from the abusive bank. Certainly the pure competitiveness of the free market would not have all the other banks jumping in to do the same thing, just for higher profits. And even if they did, those extra profits would just stimulate the economy.

Even worse than the economic cost, these government regulations run amuck even have the power to destroy a highly profitable, flourishing industry. The tobacco industry is a great example of this type of government abuse of power. The tobacco industry was once one of the driving forces of the American economy. It employed millions of workers; generated billions in profits and the industry’s efforts to export cigarettes and educate millions of people around the work to start smoking them, significantly enhanced America’s balance-of-trade. All of this happened because of a free market economy. In fact, the government even provided huge subsidies in an effort to develop the tobacco industry.

Then some government meddlers decided that just because tobacco caused cancer that the entire industry should be subjected to crippling regulation. Not only did this action interfere with the natural free market forces, it drastically reduced individual freedom by attempting to prevent individuals from exercising their constitutional freedom to decide if they wanted to smoke or not. Today, if it were not for the tobacco industry’s efforts to increase tobacco use in developing countries, the entire industry would be up in smoke. (I didn’t say that!)


Is this silly congressional oversight of GM really necessary?

General Motors is just the latest target of the government’s effort to interfere with the free market economy. It seems like 10 years ago or so General Motors became aware that some of the cars they were selling had a defect that could potentially cause death or the maiming of occupants. To their credit, when GM became aware of a potential defect, the company tried to identify and correct it. Sure, it took 10 years for GM to disclose and resolve the problem, but in the meantime the company was able to sell these defective cars – estimated at around 10 million – which generated millions in profits, created thousands of jobs and helped stimulate the economy.

The cost? Only 13 lives and a few hundred injuries. (That is barely more than the number of people who were on Malaysian Flight 370.) And General Motors has even graciously offered refund the price of the car and compensate the families of those who were killed and those injured.

But that is not enough for an intrusive government. No, it wants to embarrass General Motors with government hearings and even millions in fines. Don’t these self-serving politicos and bureaucrats understand that these actions interfere with the free market economy and could end up costing thousands of workers their jobs and millions in dividends to shareholders?

Of course, General Motors is not the only victim of government interference with the free market. Just last year MetLife was forced to pay $500 million to settle a multi-state investigation into unpaid claims for dead policyholders. It seems that MetLife discovered that thousands of their policyholders had died, but since surviving families had not filed a claim, the company simply kept the money. Then again just this past week MetLife was fined $60 million just for some pesky licensing violation in New York. Over the past couple of years Citicorp has been fined or entered into settlements with regulators worth almost $1 billion. Just think of how much more in shareholder profits these companies could have reported, how many jobs could have been created and how the economy would have been stimulated if the government had just minded its own business and had not interfered with the free market economy.

Here are a few things to ponder when considering the efficacy of the government regulation of a free market economy:

  • If the present plethora of government regulation of the free market has failed to stem the tide of abuse and collusion on the part of corporations, why should we think that even more regulation would be better? Instead, since they don’t work and are obviously costly, wouldn’t it be better to just get rid of them?
  • The constitution clearly gave every individual freedom of choice, so shouldn’t we – not the government – have the right and responsibility to decide what to do with our money, bodies and lives? If we want to risk cancer by smoking, shouldn’t that be our choice? If a bank gives us a mortgage we can’t afford, should the government take that choice away? If we want to buy a car, shouldn’t we be responsible to ask the carmaker for a list of known defects in the car?
  • Just remember that corporations exist just to help us. They can exist only when they provide us goods and services we need, want and are willing to buy. They create jobs, support communities and pay taxes; all in exchange for profits that further stimulate the economy. Regulations only increase costs and get in the way of corporations doing what they do best, so shouldn’t they be free to do what they want?

And the Moral of the Story …

The constitution of the United States was structured with an eye toward offering as much freedom to the people as possible and to limiting the power of government as much as possible. Operating under this philosophy America became a bastion of individual freedom and the most dynamic free market economy the world has ever known.

One thing that some people seem to forget is that corporations are people too. As such corporations should be just as free as individuals to go about their business. Corporations just want to help their customers, create jobs and help the economy grow, but unfortunately they are being hampered by a government that thinks it knows what’s best for people and wants to increase its size and power. To accomplish this objective, the government is taking more and more freedom away from corporations to act the way they want to achieve their goal of helping people.

This increasing burden of constricting and unnecessary regulations – the free market naturally regulates itself – not only are costly, cumbersome and ineffective, they take away individual freedoms from everyone. If we want to be true to the constitution we need to get rid of all the government regulations on business so that all people are free to do what they want to do. And the people can’t be free if corporations are not free to do what they want to do, too.







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The Five Most Telling Attributes of Business Mavericks

March 30th, 2014 · Business Management

Let there be no doubt that the winners in business are those who break the rules and chart new, creative courses of action. I’ve seen it countless times as a CEO of major insurance companies and it’s good to know that rule-breaking is alive and well in business. Often, these trailblazers are running new, entrepreneurial businesses, but just as often they head some of the biggest names in business. What these successful individuals all have in common is that they are branded as mavericks who seem to be willing and eager to cheat. But, it is a different type of cheating. These unconventional thinkers seek only to cheat on conformity to be able to do what others say can’t be done.

Think of Fred Smith, founder of FedEx, Steve Jobs, the guru of Apple, Inc., Bill Gates of Microsoft, or Richard Branson of the Virgin empire. CuriosityEntrepreneurs like these are noted first and foremost for breaking the rules; for challenging the tradition which says, “You can’t do that.” Still, true maverick rule-breakers are too few on the American business scene.

If you want to join these successful business rule-breakers, you’ve got to start by thinking like they do. And the first sign of a rule-breaker is relentless curiosity. The man or woman who “cheats” on the old, outmoded rules of business is constantly asking questions and challenging the way things are done. Good cheaters take exception to established procedures and mores.

Rule-breakers often exhibit other attributes as well:

  1. Willingness to adopt new perspectives whenever possible
  2. Openness to try new things and to do old things differently
  3. Compelling drive to act on ideas to test their true value
  4. Eagerness to listen to others and profit from their input, regardless of who gets credit
  5. Respect for and support of others when they propose new courses of action

Rule-breaking behavior requires an openness and willingness to look at the world in new ways. Rule-breakers know that new ideas need nurturing and support. But they know that thinking about a new idea is not enough. The true value of a good idea resides in its implementation. As management expert Peter Drucker said, “Ideas are cheap and abundant. What is of value is the effective placement of these ideas into situations that develop into action.”

On the surface, rule-breaking doesn’t require any special skills. You don’t have to have an MBA from an Ivy League university. In fact, you don’t need a degree at all. But if it’s so easy to be a cheater, and the potential for reward is so great, why, then, doesn’t everybody do it?

The Will to Cheat Is Hammered Out of Us

When we’re young, we’re much more apt to be cheaters. Children commonly exhibit the cheater’s inclination to question why things are done the way they are. It’s natural. As soon as babies can talk, they ask, “Why?” It’s often irritating for parents because they don’t always have the answers. So the response is “Because.” Or, if the kid persists, “That’s the way it is. Go watch TV.”

Schools only exacerbate the problem. The educational system is founded upon the pedagogy of answering questions, not asking them. Students are rewarded for the proper rote playback of answers, not their ability to question the reasons for the answers or, sometimes more important, the assumptions behind the questions. The pressure to “go along with the crowd” is overwhelming for anyone, particularly kids in their formative years. Not surprisingly, most buckle under the pressure. A child is forced to see things the way their peer group does, dress as they do, talk as they do, and worse, think and act as they do. Pretty soon, a child’s willingness to question and break rules is exorcised as if it were a troublesome evil spirit.

Rule-Breakers on the Fringes

We have to recognize that daring to think and do things differently exposes us to risks as well as rewards. But you know what? Even though you may risk the ridicule and tsk-tsk of your friends, teachers, parents, business associates, boss, and an endless string of others; even though there is a risk that you’ll come up with a dumb idea for which you’ll be chastised; even though some may perceive you as a show-off or know-it-all; even though all of this may be true, when you finally succeed by doing things differently, the reward and personal satisfaction is so much better than the punishment, it’s not even a contest.

The only reason the downside exposure exists is simply to control you: to intimidate you so that you’ll be unwilling to be a rule-breaker and a creative thinker. The result? Many potential rule-breakers are afraid to engage in behavior that could potentially make waves. Instead, they lay low and avoid BeDifferentthe possibility of future embarrassment and pain. The bottom line is that, even though we start out in life as rule-breakers and cheaters, most of us become timid feeders in a sea of conformity before we ever get our first job out of college.

Fortunately, even if one is not a born cheater, cheating to do the right things can be an acquired talent, a talent well worth learning and practicing. To develop and nurture this talent for ourselves, we have to overcome the way our psyche has been bullied for so long in an effort to get us to stop asking questions. To achieve real success in our life and career, it is essential to recondition ourselves to challenge convention. I know that this is easy for me to say, but fortunately there pgreat examples of those who rock the boat and cheat to win.  And it is something you can do too; so long as you are willing to step us and step out to be different and do what others say you can’t do. Try it. You just might find it is fun and rewarding to be a maverick in a world where mediocrity is the accepted standard for most.

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