Bob MacDonald on Business

Sage Advice for Superior Business Management

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The Secret Weapon Known to All Successful Leaders

October 5th, 2014 · Building Better Business Managers, Business Management, Effective Leadership

Anyone can be calm before the storm. The trick is to be calm during the storm.

There are many diverse talents a person in a position of leadership needs to be successful. Any search for the “qualities of leadership” will consistently uncover terms such as visionary, integrity, inspiring, innovative and confident. When looking for the “techniques of leadership,” the capabilities most often mentioned are consistency, communication skills, decisiveness, planning ability, transparency and focus. Certainly without the systematic interplay of these qualities and techniques, the chance for leadership success is extremely limited.

There is one other leadership component, however, that is absolutely essential to the success of any leader even though it is rarely mentioned and is never given the prominence it deserves. As such, this talent has become the “secret weapon” that successful leaders draw on in times of need. With it, every crisis can be reduced to a manageable size and without it every crisis will be magnified and create the potential for it to spin out of control.

Can You Recognize the Secret Leadership Weapon when You See it?

Sunday, December 7th could have been a day that lived in leadership infamy. When word reached the White House that the Germans had bombed Pearl Harbor, it is fair to say that all hell broke loose. As reports of further devastating attacks in the Pacific05-fdrandpacificwarcouncil5201943-398h filtered in to Washington, government leaders and military bigwigs rushed to the White House in a virtual state of panic. All day long and into the night cabinet officers, administrators and generals shuffled into the Cabinet Room of the White House for meetings.

Sitting at the head of the table, acting as if it were just another day at the office, was President Roosevelt. He chaired each meeting exhibiting a sense of urgency, but without a hint of panic as he listened to the frantic fears of others. Many of those who attended the meetings that hectic day reported that they were struck by the President’s calm demeanor and measured approach that turned what seemed to be a terrifying crisis into a problem to be systematically resolved.

Roosevelt did not get caught up in the pandemonium of confusion and fear exhibited by many when a crisis explodes on the scene. Instead, patiently and calmly, he listened to the information available, assessed it, waited for additional clarification and then began to formulate a response to the crisis. In fact, Roosevelt did not make any public statements until the following evening – 36 hours after the initial attack – when he spoke to a joint session of Congress. (although he did ask his wife, Eleanor, to give a short radio address on Sunday evening to reassure Americans that plans for victory were in the works)

When Roosevelt spoke before Congress he was resolute, strong and most of all, calm. In the end, the calm leadership exhibited by Roosevelt in the wake of the attack on Pearl Harbor shifted the reaction to the crisis from one of fear and panic to one of tenacious determination to overcome and resolve it. It was probably Roosevelt’s finest moment as a leader.

Yes, the secret weapon to success in leadership is the ability to remain calm in the face of crisis. Leaders show their worth when they can coolly work their way through a crisis, so the followers can work their way through to a solution. Despite the lack of recognition and attention to this leadership ability, remaining calm in the face of crisis is more critical than any other leadership trait, because it will always be needed.

The Real World Never Knows the Plan

No matter how much leadership talent an individual is blessed with or how the systems of leadership are applied, the real world is fraught with unpredictable challenges and unforeseen crises that can wreak havoc on even the best-laid plans. It is not the crisis that will determine the future, but how the leader responds to crises when they arise – and they surely will — that determines success or ruin.

Remaining calm when there appears to be every reason not to be

A leader should never lose sight of the truth that their emotions are infectious. Even more than words, followers are always infected and impacted by the emotions that the “body-language” of the leader signals. In times of crisis, followers always look to the leader for an indication as to the magnitude of the difficulty and how they should react to it. If the leader exhibits confusion, fear and panic, so too will the followers. When the leader remains calm and unflinching in the face of crisis, followers are inclined to do the same, freeing them to work on the solution, rather than run from the problem.

In the Revolutionary War, Washington and his army suffered defeat after defeat. His army was routed from New York, barely escaping capture and annihilation. And yet Washington acted almost as if it was all part of his plan to suck the British into a trap to defeat them.

Washington’s army had every reason, save for one, to give up and give in to the overwhelming power of the British army, but they didn’t panic because Washington was always among them exhibiting calmness and steadfastness in his message that the crisis would be overcome. The Army of the Potomac held together in the face of crisis and ultimately achieved victory, because their leader remained calm and gave them confidence. (It should also be noted that when the British approached Virginia, the governor of the state – Thomas Jefferson – panicked and fled. It was a failure of leadership in the time of crisis that would haunt him for the rest of his life.)

So how do You Keep Your Wits When all about You are Losing Theirs?

The most important thing a leader can do to stay calm in a crisis is to be prepared for it. It’s not possible to predict a specific crisis, but it is safe to expect a crisis will happen. It is possible to have a plan for how to deal with a crisis, even though the timing and type may be unknown.

Leaders must determine: How will the crisis be identified? How will the crisis be quantified as to its potential impact or threat? Who will they talk to first? What will be their initial actions? A crisis not met by a plan can quickly become a catastrophe, even if it is soluble. It is surprise that opens the door to panic; while a plan engenders calmness. Roosevelt did not know how or Quote2when war would come, but he did know it would come. When it did come, he had a plan to confront it and this allowed him to be calm in the face of it.

The desire to move quickly to nip a crisis in the bud is good, but a leader must be careful not to overreact. Frenetic activity at the instant a problem emerges can give the impression of panic. The legendary basketball coach John Wooden used to tell his players, “Be quick – but don’t hurry.” That is cogent advice for any leader confronted by a crisis.

In the midst of a crisis the tendency is to speed-up, but the most effective approach is to slow things down. The truth is that very few crises are really a crisis. They may be problems that need to be resolved, but rarely is a “crisis” a clear-cut life and death – success or failure situation. When leaders understand this perspective it becomes easy for them to remain calm and effectively assess the situation and find the best path to a solution.

In the end, the leader who understands and is prepared to employ the “secret weapon” of successful leadership is positioned to turn any crisis into opportunity. And that is the secret that defines a truly successful leader.

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Fireman’s Fund Insurance Ravaged by Allianz Bureaucracy

September 28th, 2014 · Allianz, Allianz/Hartford, Business Management

Once again bureaucracy is shown to be the most efficient way to snatch defeat from the jaws of victory.

A German newspaper recently reported that insurance giant Allianz, owner of California based Fireman’s Fund Insurance Company (FFIC), is planning to dismantle the company and sweep it into the dustbin of bureaucratic failures. Allianz has tacitly confirmed the report but only complaining that the planned action became public before intended by the company. As with any bureaucratic failure, the hope of those responsible is that no one will notice.

The newspaper (Sueddeutsche Zeitung) article revealed that Fireman’s Fund commercial business is to be folded into another German industrial insurance company owned by Allianz, while the “personal lines business” of FFIC will be allowed to “runoff” until it is gone or FF2offered to another company interested in scavenging the the tattered remnants of the deceased company.

This is a sad and totally unnecessary ending for Fireman’s Fund; a valued, 150-year-old company that had survived the 1906 San Francisco earthquake, but could not withstand the upheaval heaped on it by the bureaucratic management minions of Allianz who virtually squandered the $3.3 billion in cash Allianz paid to acquire Fireman’s Fund in 1991.

Good Idea Soiled by Bureaucracy

When Allianz purchased Fireman’s Fund the transaction seemed (and was) a sound strategic move that would provide Allianz – the largest casualty insurer in Europe – with an entrance into the American market that it had heretofore desired but lacked. For Fireman’s Fund the affiliation with Allianz promised to offer the resources, credibility, expertise and capital of one of the world’s largest insurance companies; providing it with the capability to become a substantial player in the American market. But the relationship was star-crossed from the beginning.

The timeline of activity and actions following the Allianz acquisition of FFIC offers the mother of all examples of how a bureaucracy-riddled company can ravage the value of any investment and kill the opportunity to leverage it to success. In the interests of transparency, I both worked for Allianz as the CEO of a company (LifeUSA) it acquired in 1999 and served on the board of directors of Fireman’s Fund; so I had a front row seat to observe (and experience) how a bureaucratic company functions. In fairness, the vast majority of those I dealt with at Allianz in Germany were extremely intelligent, highly ethical and well-intended; it’s just that they were raised to be bureaucrats and excelled at practicing that art. Even more revealing to me was that the most senior executives of Allianz – especially the CEO – recognized and were frustrated by the inadequacies of a bureaucratic culture, but felt powerless to change it.

The conundrum is that when bureaucracy ridden companies – such as Allianz – are able to scrunch up the courage to make a strategic decision such as an acquisition, they immediately retreat into a bunker mentality, trying to protect their investment, rather than leverage it. Bureaucrats are dedicated to analysis, but terrified by action.

Bureaucratic companies seem incapable of understanding that an investment to acquire a company is the start of the process, not the ending. The clear message given to those leading the acquired company is, “Okay, we took the risk of putting up the money to buy the company, now it is your job to grow the company, but we are not going to risk any more capital to help make that happen.”

This mentality triggers a chain of events that invariably emasculates the culture of the acquired company, leading to the diminution of the initial investment, if not the outright destruction of the company. This inevitable process starts when the bureaucrats of the parent company, begin to impose their stifling bureaucratic rules and controls on the acquired company; limiting the actions and strategies that made it an attractive acquisition. The suffocation of the entrepreneurial culture of the acquired company soon begins to trigger the departure of those individuals capable of creating the desired growth. This leads to a string of increasingly less capable executives charged with running the acquired company. These executives are hired, not for their creativity and independence, but rather for their acquiescence of and compliance with the bureaucratic culture.

It is noteworthy that in the past nine years alone, Fireman’s Fund has had seven different CEOs; all hired and fired by the Allianz bureaucracy. (Believe it or not, one of these CEOs, in the midst of downsizing the company and laying-off hundreds of employees, purchased a Rolls-Royce and parked it at the company for all employees to see.) In the end, the acquired company is populated by managers with the same attitude, aptitude and recalcitrance to action as the bureaucrats who hired them. And then the executives of the parent company wonder why the company fails!

Fireman’s Fund also serves as a classic casebook example of how a bureaucratic culture will send good money chasing after bad money. To comprehend this process it is critical to understand that a bureaucrat will do almost anything to avoid acknowledging and accepting responsibility for failure. As failure looms the bureaucrat will become more and more frantic and irrational in their actions to hide the failure.

Despite investing $3.2 billion to acquire Fireman’s Fund as an entrance into the American casualty insurance market, Allianz was unwilling to allocate the additional capital necessary to bring FFIC up to the competitive levels of the other players in the market. AllianzPressed for growth, but lacking the necessary capital and falling deeper and deeper into the catacombs of the Allianz bureaucracy, Fireman’s Fund was forced to take risks that became gambles, that turned into losses. As the losses at FFIC mounted the bureaucrats at Allianz had the choice of acknowledging the failure of its initial investment or to hide the fact by pouring in additional funds to keep the company afloat. Soon good money was chasing bad money in a bureaucratic effort to avoid the inevitable. But this money was only intended to cover past mistakes, not invest in the future. As such it only accelerated the downward spiral that ultimately destroyed both Allianz’s investment and Fireman’s Fund.

Over a decade ago Allianz executives internally acknowledged that the investment in Fireman’s Fund was a failure and sought to sell the company. Unfortunately, the bureaucrat culture at Allianz had already triggered a decline at FFIC that made the company unmarketable—at least at a price anywhere near what Allianz initially paid. Not wanting to publicly admit failure, the Allianz bureaucrats hung on, but in so doing they took actions that made the situation even worse. Allianz not only refused to invest the capital necessary to build up the capabilities and competitiveness of FFIC, they began to suck as much money as possible out of the company. (One year Allianz required FFIC to pay a dividend of $1 billion dollars to the parent company.) Having reached the conclusion that it would not be possible to sell Fireman’s Fund without exposing the failure of Allianz management and the loss of the company’s investment, it was decided to let the company “bleed-out” and die. What we are witnessing now are the attempts of Allianz bureaucrats to dispose of the decaying body.

And The Moral of the Story …

Don’t let your kids grow up to be bureaucrats! If success is what you seek, then you must do anything and everything to keep bureaucracy at bay in your company. Recognize bureaucracy as the Ebola virus of management that ultimately destroys all it infects.

The comments expressed here are not an attack on Allianz, but on bureaucracy. Allianz is one of the largest companies in the world, but it is also the epitome of a bureaucratic culture. Just imagine how much more successful Allianz could be and how effective Fireman’s Fund could have been as an entrance into the American market, had it not been for the ravages of bureaucracy. Instead, the investment has been wasted, Allianz is still not in the American casualty insurance market and Fireman’s Fund is dead. It is a lesson anyone in any company needs to learn and remember.

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The Prerequisite for Leadership is the Willingness to be Alone in the Future

September 21st, 2014 · Building Better Business Managers, Business Management, Effective Leadership

The essence of successful leadership is the ability to scout out the future and find the best path to reach it.

We can all recall the stories and vivid imagery of the early 19th century “wagon trains” that carried Americans looking for a brighter future into the great unknown of the American west. Those brave souls who gathered up their belongings and climbed aboard the Conestoga carriages had grand dreams for their futures, but there was also anxious uncertainty: no one in the wagon train had traveled in the uncharted territory of the unknown. They only knew they wanted to escape from hardscrabble lives in the East and “go West.” But they were as naive as newspaperman Horace Greeley as to what they would encounter or how to get there.

“Washington is not a place to live in. The rents are high, the food is bad, the dust is disgusting and the morals are deplorable. Go West, young man, go West and grow up with the country.”

                                                                       –Horace Greeley, New York Tribune

To have any chance of getting where they wanted to go, wagon trains needed a “scout” to show the way. The responsibility of the scout – often portrayed as a buckskin clad, rifle-toting loner – was to be out ahead of the wagon train to gather information about the unknown road ahead.

Each morning the scout would set out alone, ahead of the wagon train. He would survey what was over the 84-1horizon and out of sight of the wagon train to determine how to overcome risks and find the best path to move forward. Each evening he would return to the wagon train to explain what he had seen, what they could expect to encounter and the best way to prevail over any obstacles that could threaten the wagon train’s goal.

Step by step along the journey the scout moved out ahead of the wagon train, never venturing too far ahead to lose touch, but far enough so that each day the wagon train knew what perils to expect and how to deal with them. Wagon trains that attempted the journey into the unknown of the west without the guidance of an experienced scout were doomed to failure.

When you think about it, for the contemporary organization that seeks to move forward into the unknown of the future, the leader becomes the modern-day scout. They are out ahead of the group, surveying the landscape and determining the best strategy to move forward. The leader is constantly coming back to the group to communicate what lies ahead and how best to overcome any obstacle. Organizations that attempt to move forward into the unknown without a leader who can scout out the future are similarly doomed to failure.

The challenge most often faced by wagon trains and being faced by many organizations today is that the need for experienced scouts and effective leaders exceeds the supply. It took a unique person to safely shepherd a wagon train to the west and it takes the same type of person to lead on organization into the future.

Many long to be leaders, but far too many fail to understand what it takes to be a leader; even fewer are willing to pay the price of leadership.

The leader must be willing to be alone, out ahead of the others to scout out the future and determine the best way to get there. The extent of the aloneness will define the level of leadership provided.

It is difficult for many to comprehend that if they are not out front and alone, they are not leading.

Being a wagon train scout was a lonely job and so is leadership, but it is the only way a successful outcome to any venture can be achieved. Unfortunately the price of leadership – being out ahead and alone – is a price that many are unwilling to pay. And that is somewhat surprising.

After all, everyone is supposed to want to be a leader. In reality, though, most would rather be followers than leaders. (Perhaps that’s one reason why leadership opportunities are so frequently available.) Many are more comfortable riding in the wagon as part of an organization than being responsible for it. The truth is that more are content to follow a path than to create one.

Fundamental to leadership is a willingness to step out, step ahead and to stand alone until others can be Scoutbrought along. A scout to the future needs the confidence to be vulnerable, exposed to the risks, criticism and complaints of others and many are uncomfortable with that vulnerability. But, that is okay; there is nothing wrong with that. The real work to accomplish great things is done by those who follow rather than lead. Leaders and followers need each other in order for both to be successful. The scout to the future can be successful only when they give others a path to follow. Those driving the wagons will have no path to success if there is not a leader willing to accept the responsibility to show the way.

If the truth is told, many of those who profess to be leaders are uncomfortable in the lonely role of leadership and their actions confirm that. All too often, those in leadership positions are unable to understand or accept the responsibilities of being out ahead of others and fall into a defensive attitude of entitlement. Seeing the leadership position as an end, rather than a responsibility, they act as though power, respect and compliance are their due. In order for the followers to be willing to follow, the leader must be willing to scout out the future and postulate a clear, specific path, while convincing the followers that it leads to success for everyone.

This attitude of being unwilling to be out ahead of the group, to stand up and stand out is clearly evident in the dearth of real leadership in the political arena. We only have to look to the current quagmires in the Middle East and the Ukraine, to understand that few politicians are willing (or able) to be out ahead of the wagon train to offer and layout a clear course of action. As a result, actions are only reactions, not part of plan. We are told the objective is to rid the world of ISIS, but are not given the path to do so.

Rarely do we see an elected official who is willing to be out front alone, scouting the future. At least not until they have read, analyzed and digested the latest opinion poll. That is like a wagon train scout waiting until he gets the opinions of all those in the wagon train – who have not been down this path – before deciding which path to recommend. That is following, not leading. True leaders will drive opinion, not be driven by it.

And the Moral of the Story …

It is okay to be a follower—not a leader. Many achieve their greatest satisfaction and accomplishment by following the lead of others to accomplish great things. But if you do seek a leadership role – if you want to be a scout for the future – you must recognize and accept that with the role comes a responsibility to step up and step out.

Leading means risking the slings and arrows of criticism and complaint so the followers are free to achieve the vision the leader created. Unfortunately too many individuals seek leadership positions simply for the perceived comfort, power and perks of the office. In doing so, they become more follower than leader. It is great if you want to be the one to scout out the future and figure out the best way to get there, but you can’t do that riding in the security of the wagon with everyone else.

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