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7 Qualities That Turns Bosses Into Leaders

Employees work for bosses

Employees follow leaders.

Under a boss, most people will do their job until it’s completed.  Under a leader, people develop a passionate commitment towards work, often motivating them to do more than the job if it means it can help the team achieve the leader’s vision. Organizations are dramatically more satisfied and more productive when they follow a leader rather than work for a boss.

What are some key qualities that leaders have that bosses don’t?

– COMMUNICATES a clear vision of goals together with each  employee’s role and benefit from making it happen.

– CONFIDENCE in a successful outcome for his/her plan.

– TEAM BUILDER in adding competent people who have the skills for achieving the vision and enhance the organizational culture.

– RESPECT for the team, both for the people and ideas.

– FAIRNESS without double standards.

– RESPONSIBILITY is taken for his/her decisions no matter their outcome.   The team feels that the leader always has their back.

– THANK YOUs are given generously.


Stan Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

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7 Tips On Bringing New Executives Into Your Leadership Culture

Most companies have an orientation training program for new executives joining the team. Unfortunately, many programs do not include much, if any, orientation pertaining to the company’s Leadership Culture. Unless the new executive understands and embraces the Leadership Culture, it is unlikely they will be able to maximize his or her effectiveness at your company. Below are seven recommendations for introducing new executives to your Leadership Culture:

1) If you haven’t already done so, define your Leadership Culture and make sure your current leadership team knows it, can articulate it, supports it and is living it.

2) Communicate about your Leadership Culture with your HR team, so they identify candidates, in the first place, who are most likely to embrace your distinctive management environment and Leadership Culture.

3) At the time of the interview, ask executive level job candidates about the tone at the top they embrace and institutional culture they prefer to work in, as well as the culture they will establish within the organization they will lead. Also ask them about their leadership and management style, to assess whether they are a good fit.

4) Communicate your Leadership Culture to the new executive, and reinforce it at orientation and during the early days of employment.

5) Request feedback from the new executive to ensure that he/she understands and is comfortable with the Leadership Culture.

6) Also, during the interview process, invite other members of your team to discuss your Leadership Culture with the candidate so that he/she hears about it from others and understands its high priority at your organization.

7) Follow up in about 2-3 months after employment, to discuss with the new executive how he/she is succeeding within that Culture. Obtain informal feedback from the organization on how the new executive is doing.

Leadership Culture begins at the top. It is critical that every executive makes it a priority by living it and inspiring others.


Stan Silverman is the founder and CEO of Silverman Leadership. He is a writer and speaker, advising C-suite executives about issues and on cultivating a leadership culture within their organizations. Stan is Vice Chairman of the Board of Drexel University and a director of Friends Select School and Faith in the Future. He is the former President and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

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How To Grow Philadelphia’s Economy By Revitalizing Manufacturing

Article originally published in Philly Biz in the September 2015 issue.

At one time, Philadelphia was the world leader in manufacturing. Since World War II, that dominance has diminished to the point where today, manufacturing makes up only about five percent of the region’s economy. According to a Brookings Institute study that ranks the 300 largest metropolitan areas by GDP per capita and job growth, the Philadelphia Metropolitan Area ranks 250th out of 300 and is one of 60 in that group that has been experiencing negative growth.

The Philadelphia economy of today is largely based on sectors such as education, healthcare and government, the so-called “eds, meds and feds” triumvirate. In recent years, these sectors have experienced flat or slow growth and face limited growth potential in the immediate future. Therefore, the questions must be asked: Can revitalizing a fourth sector, manufacturing, grow the region’s economy? What would it take to stimulate the growth of manufacturing in Philadelphia?

The answer to the first question is obviously “yes”; revitalizing the manufacturing sector would grow the economy because at five percent, this sector is still significant and offers the potential to become the economic engine that drives growth in other sectors. For example, growth in manufacturing would also grow jobs, real estate values, tax revenues to regional governments and many other benefits.

The answer to the second question about what it would take to revitalize manufacturing, is a bit more complex. To revitalize manufacturing requires focus, priority and commitment from a number of diverse groups. They will need to take a “long view” and weigh the potential benefits they can bring to their individual groups, to the region at large and to future generations. We believe that all groups will reap significant benefits from revitalizing manufacturing.

A key reason for making a manufacturing revitalization argument is that Philadelphia already has at hand many assets which can support the revitalization of manufacturing. These assets just need to be focused on achieving the goal of revitalization.

The Philadelphia region is located in the middle of the northeast market of the U.S. and is within a few hundred miles of about 50 million people, nearly 20% of the U.S. population. Philadelphia is a port city with access to U.S. and world markets. The city has a highly developed rail and highway system for moving raw materials and finished goods. The close proximity of Marcellus Shale natural gas and other energy resources gives Philadelphia additional unique features compared to other regions. The city also has an above average educated population and features the second highest number of institutions of higher education in the nation. Access to capital is also an advantage in that some of the largest financial institutions in the world are located within 100 miles of Philadelphia. In many respects, revitalization of manufacturing is the “low hanging fruit” of options available which can put our region on a growth track.

With Philadelphia’s unique advantages, what needs to happen to grow manufacturing? It is interesting to note that benchmarking those American cities that are most successful in growing their manufacturing sectors may not actually be that instructive, in that much of their growth comes from the auto industry growing in or relocating to those regions. Instead, we recommend looking within our region at some of the successful or potentially successful manufacturers and/or categories that are currently performing well here. These include larger manufacturers, such as those involved in energy production, as well as some of the smaller manufacturing industries, such as craft brewing, medical device manufacturing and others. How can make them even more successful and also stimulate the growth of additional manufacturing this area?

Ultimately, we believe stimulating growth in manufacturing is a leadership issue. The catalyst is the point when leadership concerns itself both in generating today’s results while also leaving a lasting legacy of accomplishment. To achieve this, our diverse group of leaders will need to cultivate a leadership culture such that their diversity of skills and experience will blend together behind this singular initiative. A leadership culture is an environment where leaders feel empowered and individually responsible for their activities, while also working together for the success of a larger goal or vision.

Such diverse segments as finance, unions, media, energy, government and others must decide to be committed to revitalizing growth in manufacturing as a top priority and then work within each of their areas to make it happen.
To accomplish this, leaders will need to redirect their outlook. Instead of competing to get a bigger share of the pie, leaders must work together to make the pie larger. These diverse groups must create synergies that will enable the Philadelphia region to compete and win in the world.

Ultimately, leadership must view revitalizing manufacturing as a legacy initiative. What kind of an economy and community will they grow for the future resulting from their actions today? Our region’s leadership has the power to own this opportunity and to nurture the revitalization of manufacturing to build a stronger economic base that will enhance the lives of our generations to come.

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Stan Silverman is a writer, speaker and advisor on effective leadership. He is the Leadership Catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

Leo Levinson is CEO of GroupLevinson Public Relations. He is a writer, speaker and marketing and brand strategist. Follow: @leoadman, Connect: Leo@grouplevinson.com Website: GroupLevinson.com

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Saxbys Coffee – How treating your people right can lead to success

Article originally published in the Philadelphia Business Journal on May 4, 2015

Attending the grand opening of the Saxbys cafe April 13 on Drexel University’s campus was a unique event. What made it unique is that the cafe is entirely managed and operated by Drexel undergraduate students. It has a different feel than its well-known competitor in the coffee business. The atmosphere is “millennial trendy” – from the decor, to the background music, to the willingness of the Saxby team members to engage in friendly conversation with customers, who are referred to within the Saxby culture as guests. There is no doubt that this Saxbys cafe will be a huge hit with the students on Drexel’s campus.

Nick Bayer, the CEO of Saxbys Coffee, hosted the grand opening along with two key Drexel leaders who helped make this student managed and operated cafe a reality – President John A. Fry and founding dean of the Close School of Entrepreneurship Donna De Carolis. Congressman Chaka Fattah was also present to help celebrate the grand opening. I was so impressed with Bayer’s focus on creating a great customer experience that I interviewed him to learn more about his leadership philosophy and his focus on his team members and guests.

I asked Bayer why he decided to pursue the idea of having a Saxbys cafe managed and operated by college students. He said, “I saw college students who were looking for entrepreneurial opportunities, I saw colleges embracing entrepreneurship, and I felt that I wanted to provide the experiential component.”

Bayer chose Drexel for this Saxbys’ cafe because of the University’s reputation for being on the forefront of innovation and entrepreneurship. Bayer said that he received great support from the University on choosing the right location for the Saxbys cafe – a corner that borders the academic and residential part of Drexel’s campus that is passed by over a thousand students each day walking to and from class.

Bayer feels that Saxbys’ culture is the most important determinant of his company’s success. I asked Bayer, “How do you differentiate Saxbys – why do customers come to your cafes and buy coffee?” He said, “We compete on people, not on product. Most people think that we are in the product business – we are actually in the people business. I realized that I can compete [with other companies] on people and on hospitality. People are at the core of what we do – our team members and guests.”

Bayer continued, “I thought that if you take people who are smart, passionate and prideful, and give them the tools and wide enough boundaries, good things could happen. I want this to be a place where people want to work. Our culture is defined by our people not by a product.”

Bayer and his senior leadership team give significant support to their cafe managers. He said, “I personally am an absolute zealot of the mentality of ‘servant leadership.’ Organizations work best when they are upside down. Our cafe managers are the CEOs of the businesses. All the people at headquarters exist to serve our cafe managers and their teams. We are here to help them to be better at their jobs. My expectation of them is to be servant leaders to the members of their teams. Their job is to make life better for their guests every single day.”

On the subject of empowerment, Bayer said, “We hire people with good critical judgment and empower them to make decisions. Other employers take power away from their employees. I don’t want to get in the way. I want my people making decisions. I hire people who will develop a sense of ownership in their business.”

The first manager of Drexel’s Saxbys cafe was Meghan Regan, a pre-junior on a six-month co-op work assignment. After being trained as a manager at other Saxbys locations, she assumed her role as manager of the Drexel cafe while it was being constructed. She was responsible for marketing and promotion of the cafe and hiring the staff – all part-time Drexel students.

I asked Regan what she thought about the culture of Saxbys. She stated, “I think the culture is amazing. Every Saxbys I worked at [during my training] felt like home. People come first. Team members are friendly with their guests and get to know their names.” Regan said, “Guests don’t mind waiting in line for 20 minutes. We apologize and give them a free drink card or ask if we can get them a cookie to enjoy while they wait. We ask them how their day is going … we don’t want them to be bored while waiting in line.”

Kelsey Goslin, another pre-junior on her co-op work assignment, followed Regan as the second cafe manager of the Saxbys at Drexel. I asked Goslin what traits she looks for when hiring team members. She said, “Saxbys looks for people who are outgoing, detail oriented and disciplined, a core value of Saxbys. People come back for that atmosphere and want to interact with the team members who work there. We want to hire people who are positive in their outlook and are hard working.”

Goslin stated that as a co-op student, she had the same decision-making authority and was held to the same metrics as any other Saxbys cafe manager. Goslin feels that the management experience she is gaining as a college student is invaluable to her future career, and will differentiate her among other job seekers in the market.

Bayer’s leadership philosophy is somewhat different than that of the franchisee of the Popeyes restaurant in Channelview, Texas that I wrote about last week. Bayer’s philosophy however, is the same as we adopted when I was CEO of PQ Corporation, a capital-intensive manufacturing business. It guided our approach to continuous improvement and how we helped our customers be successful in their businesses, with great results.

So, what are the takeaways on how to build your business and differentiate it from the competition, regardless of the business that you are in? Hire people with strong interpersonal skills and with good critical judgment, empower them, and create a culture where the focus is on creating a great customer experience. Treat employees and guests, customers and clients like you would like to be treated. Lead employees like you would like to be led. The businesses that adopt these principles are the ones that will excel.

Stanley W. Silverman is a writer, speaker and advisor on effective leadership, and serves as the leadership catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

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How not to treat an employee – A lesson from a Popeyes franchisee

Article originally published in the Philadelphia Business Journal on April 27, 2015

Columnists who write about effective leadership occasionally learn of an outrageous news story in which the principles that they write about are violated – an organizational culture that values employees, avoids reputational risk and values the exercise of good critical judgment by its leaders.

Last week, it was reported that a pregnant employee working as a manager for a Popeyes restaurant in Channelview, Texas, was fired because she refused to reimburse the restaurant for $400 taken in a robbery, during which she was held at gunpoint. The franchise owner of the restaurant claimed the employee violated policy by keeping too much cash in the register. She stated that it was a very busy day at the restaurant, and that “she had moved the money as fast as she could.”

So, she loses her job because she was doing her job – serving her customers on a very busy day, and taking in lots of cash due to high sales volume. One of my editors who works part-time in a restaurant once had a conversation with the owner about the culture he wants to cultivate in his organization. He stated, “I don’t own this restaurant. The customers and employees do.” How true – a sign of an effective leader.

After the news story went viral, Z & H Foods, owner of the restaurant, issued the obligatory apology, gave the fired employee back pay and offered her job back. Her response was that she is not sure she wants to work for this owner again. No one would blame her for feeling this way.

My first reaction after reading this story was that you can’t make this stuff up. Unfortunately, these types of situations occur all too often. Let’s take a look at three elements of the organizational culture that lead companies on a journey towards preeminence, and violated by this Popeyes franchisee:

Valuing employees

Restaurants are in the people business – hiring the right people to serve customers. Restaurants on a journey towards preeminence strive to provide a great customer experience, which gives them a significant competitive advantage and attracts lots of customers. To be successful on this journey, restaurants need to attract the best people, and treat them as valued employees, not disrespect them.

Asking the Popeyes employee to reimburse the restaurant for the stolen $400 was insulting and disrespectful. How does the franchise owner expect to hire great people to staff his restaurant when it becomes known that this is the way he treats his employees? Great employees treat their customers in a way that encourages them to return to the restaurant. Employees will not act in this way towards customers if they are disrespected by their managers and are not happy employees.

After reading the news story, one wonders the degree to which the employees at this Popeyes restaurant trust the restaurant owner and are loyal to him, are empowered to make decisions and feel a sense of ownership in what they do. This is the type of organization that people want to work in and develop professionally. One gets the sense that the Channelview Popeyes restaurant is not that type of organization.

Avoiding reputational risk

In today’s world of social media, a reputation built over the years can be tarnished in minutes. Perhaps the Channelview Popeyes owner did not realize that blaming and then punishing his employee would generate such a negative response on social media. Not only did he embarrass himself and his own restaurant, he embarrassed all restaurants within the Popeyes chain.

The CEO of Popeyes Corporation needs to establish the right organizational culture, and ensure that all franchisees embrace it down through their respective organizations. The front line employees that serve customers day in and day out are key to the success of the company. Popeyes’ reputation rides on the customer experience that these employees provide.

Exercising good critical judgment

It is obvious that this Popeyes franchisee did not exercise good critical judgment when he fired the employee. One of the most important attributes to look for when bringing on a franchisee and when hiring employees is to ensure they will exercise good critical judgment. When a decision is not clear cut, individuals with good critical judgment will tend to make the right decision.

People with good critical judgment and a sense of self-confidence will violate company policy in the rare instance when the decision will save the company money or protect its reputation. When this occurs, these employees should be celebrated.

What can all leaders learn from this unfortunate event at the Popeyes restaurant in Channelview, Texas? Establish a strong culture throughout your organization that respects employees. Empower them to make decisions. Protect the company’s reputation. Associate yourself and hire people with good critical judgement. The success of your business depends on it.

Stan Silverman is a writer, speaker and advisor on effective leadership. He serves as the leadership catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

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How Pennsylvania can become the preeminent place to live and work

Pennsylvania and Philadelphia must focus on infrastructure, energy, education and entrepreneurship.

In 2014, Pennsylvania ranked 37th in economic performance and 33rd in economic outlook, according to the Alec-Lifer State Economic Competitive Index. In the Forbes Best States for Business List, Pennsylvania was ranked 30th. This is a third quartile performance in all three measures.

The ability of Pennsylvania to improve to first quartile economic performance depends on our state’s ability, as well as that of our largest City, Philadelphia, to create an environment that encourages existing businesses to stay and grow here, encourages new business formation, and encourages people to choose our state and City as places they want to live and work.

I believe there are four ways for Pennsylvania and Philadelphia to accomplish this:

Transit & Energy

Many of our roads and bridges in Pennsylvania are in need of major repair or replacement. This investment cannot be avoided, and must not be delayed. The longer these projects are delayed, the more expensive they will be. Ignoring this infrastructure will eventually impede the distribution of goods and services, and adversely impact quality of life. These projects provide high-paying jobs and will have an excellent long-term return on investment.

Continued development of Pennsylvania’s Marcellus shale natural gas is an imperative. It has already resulted in the creation both directly and indirectly of thousands of high-paying jobs and lower costs to heat our homes and run our factories, putting more money into other parts of the economy, stimulating economic growth, resulting in job creation.

Through the development by the oil and gas industry of fracking and horizontal drilling technology, as well as continued development of solar and wind technology, the U.S. will become energy self-sufficient by the end of this decade. Building off of Philadelphia’s existing energy infrastructure, our City has the potential of becoming the East Coast Energy hub, favorably impacting our state and local economy.

Energy development and the need to protect the environment are not mutually exclusive. The technology exists to do both. Rigorous monitoring is needed to insure all environmental laws are obeyed. Protecting the environment is an important focus in oil and gas production, transportation, processing and distribution.

Improve Education

The state of public education in Philadelphia will prevent the City from achieving preeminence. Due to the drain of funds by charter schools, the school district has reduced spending to the point where it has impacted the quality of education of our children. Funding of the Philadelphia school district and how charter schools are funded is an issue that needs to be addressed.

The school district also needs to hold its administrators accountable for providing the best leadership possible at every level. Administrators need to be held accountable for the performance of their principals. Principals need to be great leaders and role models. They need to be held accountable not only for the education of their students, but also for how effectively they lead and inspire their teachers. Principals also need to be held accountable for the tone at the top and the organizational culture they establish within their respective schools. Ineffective administrators, principals and teachers need to be replaced. They should not be protected. They shortchange our students.

Teacher unions need to be treated as full partners in the improvement of the education of our children. Their members are on the front line every day, some teaching in very difficult conditions. One of the things business leaders learn early on is that the best performing organizations have nurtured a culture in which their employees are empowered and feel a sense of ownership in what they do. Schools are no different.

Attract Business

My association with the Close School of Entrepreneurship at Drexel University and its students, as well as with a number of startups in Philadelphia has convinced me that entrepreneurship is a very important driver of economic activity in the region. Philadelphia is a place to be for young college students to stay after graduation to launch their businesses. To keep them here, we need to ensure that the business environment and quality of life is attractive to them.

In an article that appeared in the Philadelphia Business Journal on Dec. 1, 2014 headlined “Educational ecosystem is driving Philadelphia entrepreneurship,” I wrote “Philadelphia’s stature as a major hub for entrepreneurial activity will only grow in the future, and its educational ecosystem for entrepreneurs will play a key role. We want entrepreneurs to recognize that this is where they can learn needed skills, tap advice and expertise, start their business and grow them. Few initiatives will have a greater impact on the health and vitality of the region.”

Our state and City need visionary leadership by government, business and labor leaders. Courage is sometimes needed to break old paradigms. I would like to see Pennsylvania and Philadelphia become preeminent places to live and work. I think we are moving in the right direction, but with much to be done.

Stan Silverman is the Leadership Catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth, as well as vice chairman of the board of Drexel University, and authors a weekly column on effective leadership in the Philadelphia Business Journal.

Stan Silverman is a writer, speaker and advisor on effective leadership. He is the Leadership Catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

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The VA investigation – Can the agency provide our veterans with a great customer experience?

Article originally published in the Philadelphia Business Journal on April 20, 2015

Last week, the Veterans Affairs Inspector General issued a damming 78-page report on an investigation started 10 months ago into the operation of the Philadelphia office of Veterans Affairs. The types of problems identified in this report were consistent with those found in other VA offices across the country that were made public last year.

Nine months ago, Robert McDonald, the former chairman and CEO of Procter & Gamble and a successful leader from the private sector, was unanimously confirmed by the Senate as the new secretary of Veterans Affairs to fix the widespread failures of his predecessors and to improve the customer experience of our veterans when dealing with the VA.

The Inspector General’s report on the VA Philadelphia office indicated that among other issues, over 31,000 inquiries by veterans to the Philadelphia call center went unanswered for an average of 312 days, records were falsified regarding the backlog of claims, quality reviews were altered and staff received credit for uncompleted training. Serious instances of mismanagement and employees’ mistrust of VA managers were uncovered. Our veterans deserve better than this.

Allison Hickey, the VA’s under secretary for benefits, has indicated that management and other changes have already been made at the Philadelphia VA office to improve operations and the level of service to veterans, and that the Inspector General’s report identified issues prior to these improvements.

Let’s go back prior to the confirmation of McDonald as the new VA secretary and prior to the management, system improvements and cultural changes he is implementing, and ask: Why was the VA mired in disarray? Let’s compare the difference between private sector companies and government organizations.

Companies operating in the private sector, whether they are publically or privately owned, need to provide a return to their shareholders. Most operate in a competitive environment. The more effectively the leaders of private sector companies operate their businesses and delight their customers, the higher the return to shareholders. Great companies strive to reach a level of preeminent customer experience, which differentiates them from competition and permits these companies to grow their market share because customers want to deal with them.

To experience a preeminent customer experience, all one has to do is visit an Apple Store. In addition to being driven by the need to provide a return to shareholders and the need to compete in the marketplace, Apple had one advantage that is rare with other companies – the visionary leadership of someone like Steve Jobs, who created a preeminent customer experience culture.

The senior leadership teams of successful private sector companies focus on tone at the top and nurturing the right institutional culture, as well as hiring and developing the most effective leaders who engender the trust of their employees. These leaders create an environment in which their employees develop a sense of ownership in what they do, and they inspire their employees to achieve great results.

Effective leaders encourage their employees to break their paradigms, embrace the philosophy of continuous improvement and empower their employees to pursue these improvements. The most successful private sector companies strive to be the best in the world at what they do, a journey that never ends. This is what the VA needs to do.

The VA and other government organizations, however, do not have stockholders which hold management accountable for generating great results, and do not have competition driving them to continually improve their operations and how they treat their customers. Most leaders of government organizations do not get the type of training or experience that leaders get in the private sector, and are not exposed to the mindset of leading private sector companies.

As secretary of Veterans Affairs, McDonald has a huge job ahead of him. He needs to bring to the VA a mindset that private sector companies have that drive the journey to preeminence, without having the imperatives of meeting stockholder expectations and going up against competition. Not only does he need to fix the current issues facing the VA, but also to understand which managers need to be replaced, introduce and change attitudes, and nurture a new culture at the VA. This will take time. Our veterans as well as anyone else who deals with the VA deserve a preeminent customer experience.

Stan Silverman is a writer, speaker and advisor on effective leadership, and serves as the Leadership Catalyst at Tier 1 Group, a firm of strategists and advisors for preeminent growth. Silverman is vice chairman of the board of Drexel University, a director of Ben Franklin Technology Partners of Southeastern Pennsylvania and former president and CEO of PQ Corporation. Follow: @StanSilverman. Connect: Stan@SilvermanLeadership.com. Website: www.SilvermanLeadership.com

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Hey CEOs – Think like an activist investor

Article originally published in the Philadelphia Business Journal on April 16, 2015

The CEOs of many public companies raise their guard when they receive a phone call from an activist investor wanting to discuss how a company can improve its performance and shareholder return. This is not necessarily the right reaction.

Activists invest in underperforming companies and push for improved shareholder return through cost reduction, a change in business strategy, a leadership change or the pursuit of strategic options. If shareholder return cannot be improved through other means, the activist might push for outright sale of the company or one or more of its operating units.
If unsuccessful in convincing the CEO and board to implement their proposals to increase shareholder return, an activist may pursue one or more board seats, and threaten a proxy fight to seat their own director slate. All outside directors have a fiduciary duty to be independent, even if nominated by an activist and seated through a proxy fight. These directors need to make their own independent decisions based on what is best for the shareholders after board deliberation, not what is best for the activist who nominated them.

Some activists are interested only in making a quick return, with no interest in the potential of a company to generate much higher returns for its shareholders over the long term. This adds to the pressure of companies to sacrifice the long term in favor of shorter-term quarterly results. The interests of short-term oriented activists may not be in the best interests of most of the company’s shareholders. Other activists are in it for the long term as are many shareholders, and their proposals need to be heard and if valid, seriously considered.

Dealing with activists who are adversarial is a distraction to the CEO and to the board, and takes time and focus away from the business. A proxy fight impacts the CEO’s reputation as well as that of the board. So, how do you lessen the likelihood that your company becomes an activist target?