Lessons from the Theranos Debacle

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Article originally published in the Philadelphia Business Journal on June 18, 2018

What is the responsibility of a CEO to her investors? For public companies, there is a legal responsibility to follow the Securities and Exchange Commission Rules and Regulations pertaining to disclosing material events and providing accurate information about the financial and operational condition of the company.

For private companies, the obligation to disclose is not as well prescribed. However, the CEO still has a responsibility to disclose pertinent information to the company’s shareholders and prospective investors, so they can make informed investment decisions about the company.

The obligation of a CEO to be honest and ethical transcends any prescribed legal reporting responsibilities. It shouldn’t be necessary, but one would hope this is taught in business school.

Privately held startup company Theranos is a case in point. On June 15, the Department of Justice announced that a federal grand jury indicted Theranos CEO Elizabeth Holmes and former president Ramesh Balwani, charging them with wire fraud and conspiracy to commit wire fraud associated with false claims about the performance of the portable blood analyzer manufactured and marketed by the company.

The indictment follows charges by the SEC on March 14 against Theranos, Holmes, and Balwani for deceiving the company’s investors. Quoting the SEC press release, “numerous false and misleading statements [were made] in investor presentations, product demonstrations, and media articles by which they deceived investors into believing that its key product – a portable blood analyzer – could conduct comprehensive blood tests from finger drops of blood, revolutionizing the blood testing industry.”

Steven Peikin, co-director of the SEC’s Enforcement Division, commented, “Investors are entitled to nothing less than complete truth and candor from companies and their executives. The charges against Theranos, Holmes, and Balwani make clear that there is no exemption from the anti-fraud provisions of the federal securities laws simply because a company is non-public, development-stage, or the subject of exuberant media attention.”

Many tests purported to have been performed on a Theranos blood testing device were actually tested by the company on other commercially available testing devices. Holmes and Balwani also claimed their products were deployed by the U.S. Department of Defense in Afghanistan, but it was discovered this never happened. They further claimed revenue for their company would reach over $100 million in 2014 but ended up only generating $100,000.

Due to hyped-up claims that were not accurate, Theranos attracted over $700 million from investors. At its peak, the company was valued at $9 billion.

Holmes, a Stanford University drop-out, founded Theranos in 2003. Sure, investing in startups is risky, and investors should understand those risks. However, investors have an expectation that the CEO will not make false and misleading claims. Does Holmes feel any remorse for defrauding these investors? Where was her ethical compass?

What happened at Theranos begs the question, where was the company’s board and why was there a breakdown in the governance process? Were they blind to what was going on? Did they understand their oversight and fiduciary responsibilities to prevent false disclosures by the company?

The board consisted of luminaries such as Henry A. Kissinger and George P. Shultz, both high profile and well-respected elder statesmen who served in the administrations of former presidents in a variety of high-level positions, as well as former senators Bill Frisk and Sam Nunn. Secretary of Defense Jim Mattis once served on the board.

These individuals have excelled during their careers, but one must ask what do they know about corporate governance or enterprise risk management? Why didn’t they hold Holmes accountable for the claims the company was making? It appears as if they were appointed to the board as window dressing to give an aura of credibility to Theranos. They should have done their job and held Holmes to high ethical standards.

Whether a privately held startup or established public company, directors have a duty of care and a duty of loyalty to the company and its investors. Investors should be able to rely on them to do the right thing. Did the directors of Theranos know these duties? Their personal reputations depend on it, but more importantly, it is the right thing to do.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and a MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

Why Emotional Intelligence Is a Key Leadership Trait

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Article originally published in the Philadelphia Business Journal on June 12, 2018

Is emotional intelligence (emotional quotient) more important than IQ in one’s success? Are street smarts more important than book smarts?

In a 2004 Harvard Business Review article, “Leading by Feel,” University of New Hampshire psychologist John D. Mayer wrote, “Emotional intelligence is the ability to accurately perceive your own and others’ emotions; to understand the signals that emotions send about relationships; and to manage your own and others’ emotions.”

In a 1998 Harvard Business Review article, “What Makes a Leader?,” Rutgers University professor Daniel Goleman wrote, “The most effective leaders are alike in one crucial way: They all have a high degree of what has come to be known as emotional intelligence. It’s not that IQ and technical skills are irrelevant. They do matter, but mainly as ‘threshold capabilities’; that is, they are the entry-level requirements for executive positions. But my research, along with other recent studies, clearly shows that emotional intelligence is the sine qua non of leadership. Without it, a person can have the best training in the world, an incisive, analytical mind, and an endless supply of smart ideas, but he still won’t make a great leader.”

Based on my own experiences, working for and observing both effective and ineffective leaders, I would agree with Goleman that “without … [emotional intelligence], a person can have the best training in the world, an incisive, analytical mind, and an endless supply of smart ideas, but he still won’t make a great leader.”

In his article, Goleman identifies five components of EQ. These are:

  • Self-awareness: The ability to recognize and understand your moods, emotions and drives, as well as their effect on others.
  • Self-regulation: The ability to control or redirect disruptive impulses and moods. The propensity to suspend judgment – to think before acting.
  • Motivation: A passion to work for reasons that go beyond money or status.
  • Empathy: The ability to understand the emotional makeup of other people. Skill in treating people according to their emotional reactions.
  • Social Skill: Proficiency in managing relationships and building networks. An ability to find common ground and build rapport.

How do these five components of EQ translate into a leader’s day-to-day interactions and effectiveness with the people they deal with? I would like to share with you, based on my experience interacting with others, seven EQ behavioral rules that will contribute to your leadership effectiveness.

1.   Recognize how others perceive you.

All individuals should perceive how their words, body language, verbal tone and actions are read by others. If the way they are being read is a way not desired or effective, he or she should change. One can tell how they are being perceived by other people’s subtle or not so subtle cues.

2.   Don’t communicate with others in a way that puts them on the defensive.

Communicate in a way so people feel respected and valued. Don’t criticize others in public. If you need to give them negative feedback, do it in private. Don’t waste your personal capital correcting individuals on minor irrelevant misstatements of fact. If a correction is necessary, do it in a way so that the individual maintains their dignity and you are not showing how smart you are.

3.   When a direct report shares an idea or proposes a new initiative, listen.

Don’t accept or reject an idea out of hand before vetting it. Show respect by discussing the idea with the direct report, asking them questions on how it might be implemented, its impact and if there could be any unintended consequences.

It’s better to have them reach their own conclusion through dialogue rather than you prematurely tell them what you think. After a dialogue, you both might have new positions, or discover an alternative that is more effective than the original idea.

4.   Base your decisions on what is best for the business and your customers.

Never make a business decision based on personal considerations. It undermines your credibility within the organization and might lead to a bad decision. You don’t want the organization to question your judgment or to think you are advantaging yourself of playing favorites by promoting people based on personal considerations.

When promoting or appointing people to leadership positions, ensure they have the requisite experience and skills to ensure their credibility and success. When you don’t, it’s a bad reflection on you.

5.   Take the blame if it’s your fault. Give credit where credit is due.

Everyone makes mistakes. Own up to yours. You will be a much more effective and respected leader if you do. Publicly acknowledge the successes of others. It will motivate them to continue to succeed. And, never throw people under the bus. It destroys trust and any respect people within your organization might have for you.

6.   Avoid being an imperial leader.

When negotiating with others, making threats to get what you want rarely works. People don’t like to be bullied. It strengthens their resolve. There are more effective ways to meet your objectives while maintaining good relationships, which is to your advantage in future negotiations. People have long memories, and you may need their support in the future.

7.   Don’t self-aggrandize.

Avoid telling everyone how great you are, compared to your predecessors. Don’t blame them for their decisions that you disagree with for the purpose of boosting your own perceived standing. Narcissistic, insecure people do this. It does nothing to win the hearts and minds and earn the respect of your organization and the other people you deal with. It makes you look bad.

So, practice street smarts and perceive how others see you. Lead like you would like to be led and treat people like you would like to be treated. Follow these emotional intelligence rules for leadership and business success.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com. 

7 Principles for Building an Enduring Business

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Article originally published in the American City Business Journals on June 4, 2018

This is my 200th article published within American City Business Journal’s various publications, including my hometown Philadelphia Business Journal. In those articles, I have written about many principles for building an enduring business.

In this article, I share with you the seven most important principles, based on my own experience rising through the organization to the position of CEO of my company and as director on numerous boards observing other CEOs and their leadership teams.

1. Become the preferred provider to your markets — the Holy Grail of any business

This is a universal principle that all businesses need to pursue and that I frequently write about.

What is a “preferred provider?” It’s a provider that a customer or client favors when purchasing a product or service versus its competition. A preferred provider has a significant competitive advantage over all other providers, because it is the “go-to” provider in the marketplace.

How does a business become the preferred provider to the markets it serves? It differentiates itself from competitors by excelling in the following six areas: it offers high-quality reliable products and services; is on the forefront of technology; provides a great customer experience; is trustworthy; is committed to the process of continuous improvement; and is on a journey to be the best in the world at what it does.

2. Set the right tone at the top and organizational culture

Tone at the top is set by the CEO and the senior leadership team and reflects the ethical climate of the organization, while culture reflects how employees within the organization deal with each other and with customers. As the leader of your business, ensure that you set the right tone and culture. They become the behavioral norms of your employees.

Both tone and culture determine whether employees will trust their leaders and their fellow employees. Employees should be focused on growing the business and exceeding the expectations of their customers, and not worrying about whether they are about to get thrown under the bus by a fellow employee.

One only has to look at Uber and Wells Fargo to see how poor tone and culture can cause the loss of talented employees and customers, as well as the damage that can be done to an organization’s reputation.

3. Act as if your competition is trying to eat your lunch

Why act this way? Because that’s what competitors do. It may not be across the board, but it happens in a business niche where they feel they can take advantage of your weaknesses and exploit their competitive advantages.

Andy Grove, former chairman of Intel Corporation, was right when he said, “Only the paranoid survive.” Ensure that you not only survive but continue to thrive.

4. Listen to the brutal facts of reality

This is a critical principle taught by the January 1986 Challenger space shuttle disaster.

After being warned by Thiokol engineers Roger Boisjoly and Robert Ebeling not to launch the shuttle due to an ambient temperature below the design temperature for the O-ring seals on the solid fuel rocket boosters, NASA launched the shuttle anyway. The O-rings failed, resulting in the catastrophic loss of the lives of seven astronauts.

In response to the warning, one NASA manager is quoted as saying, “I am appalled by your recommendation.” Another NASA manager said, “My God, Thiokol… when do you want me to launch — next April?” It’s obvious that NASA did not want to hear the brutal facts of reality, resulting in tragedy.

Leaders need to listen to their experts and to be open to hearing unwelcome news. They need to create an environment that welcomes this input.

5. Treat your employees as you would like to be treated

Act in ways that will encourage employees throughout your organization to talk with you. Walking around, asking questions and listening to how things are going will help break down barriers in communication. Don’t violate the chain of command by giving orders on what you want them to do. Discuss it with your direct report responsible for that area.

Don’t act like an imperial leader. It will reduce the likelihood that your employees will be comfortable talking to you, hurting your ability to learn about issues that need to be addressed.

Quoting entrepreneur Richard Branson, founder, chairman and CEO of Virgin Group, “The way you treat your employees is the way they will treat your customers.” Wise advice.

6. Empower your employees to continuously improve their area of responsibility

Create an environment in which your employees have a feeling of personal ownership in what they do. Empower them to launch improvement initiatives within their area of responsibility, and to propose improvement projects above their approval authority.

Share with employees your expectations and hold them accountable for results. Don’t micro-manage.

In my experience, a philosophy of continuous improvement, led by the CEO and embraced by all organization levels, is a huge source of competitive advantage.

7. Hire people who are change agents — they will help you break paradigms

There are people who have a positive attitude, see a world of opportunities and abundance and are not afraid to take risks, and there are those who have a negative attitude, only see a world of limitations and scarcity and never leave their comfort zone. Hire the first type of individual.

Following these seven principles will give you the best chance of building an enduring business.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

Entrepreneurship Skills Differentiate High School Students From Their Peers

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Article originally published in the Philadelphia Business Journal on May 29, 2018

As the 17 teams of high school students from the Archdiocese of Philadelphia recently gathered at Drexel University, you could feel the excitement and energy in the air. They were about to compete in the Rising Starters competition hosted by the Charles D. Close School of Entrepreneurship, pitching a new business idea to a panel of judges.

Each team won pitch competitions at their individual high schools to earn the right to compete in the championship event at Drexel.

Donna De Carolis, the founding dean of the Charles D. Close School of Entrepreneurship, the first school of entrepreneurship in the U.S. that is independent of a business school and grants degrees, commented to the audience of students, their parents and teachers, “Introducing high school students to entrepreneurship education exposes them to an entrepreneurial mindset, a habit of mind that incorporates innovative thinking and doing in their life, career and profession.

“At the Close School of Entrepreneurship, all students will start something, learn how to fail and start again. They learn resilience and initiative – traits of all successful people. With this mindset, students are empowered to be the entrepreneur of their lives.”

De Carolis, a board member of Faith in the Future Foundation, the organization that operates these high schools for the Archdiocese, came up with the idea of an entrepreneurship competition as a way of introducing high school students to the traits and skills of an entrepreneur.

Entrepreneurship is not commonly studied in high school. When the Rising Starters competition was announced, there was a significant amount of interest expressed by students at each high school. The students received training in how to effectively present an idea to a potential investor who may fund the idea, or to a customer or client who may buy the product or service. They spent weeks practicing and refining their pitches to the judges of the Rising Starters competition.

They were taught to evaluate the market and competitors for their product or service, and to present the benefits of the product or service versus the alternatives. They also learned why it is critical that the benefits must outweigh its cost, and that there are non-financial considerations in the decision by a potential customer or client to purchase.

These high school students are learning how to sell their ideas and become aware of how important selling and presentation skills are in their professional success, regardless of their career path.

The successive rounds of competition at their high schools and the semi-final and final round competitions at Drexel reinforced these skills in the students. This builds their personal confidence that will carry over to nearly everything these high school students will be involved in throughout their lives.

I served, along with five other individuals, as a judge for the championship round of the competition. The six teams that presented varied from one to four individuals. All team members were poised, self-confident and mature in presenting the business ideas. Having attended numerous pitch competitions, I could not tell much difference between these high school competitors and college undergrads.

After the competition, I interviewed Hailey Gibson, a senior at Bishop Shanahan High School and one of the four members of the winning team. They pitched a novel design of a consumer product jar that increases the amount of product (in this case, peanut butter) that is extracted before the jar’s disposal, which could potentially save at least hundreds of millions of dollars in wasted food and lessen the impact of the discarded jar on the environment.

I asked Gibson what she learned from participating in the Rising Starters pitch competition. She said, “Don’t be afraid to present an idea, because no idea is a dumb idea. Working within a team – putting four heads together is better than one person working alone when developing a new product.” Gibson also said that how effectively one communicates is very important in getting others interested in an idea.

Students, remember that the mindset and skills of an entrepreneur are very valuable, whether you eventually start a company, work for a startup or work for a traditional company. It differentiates you from your peers, and helps you compete for that next job.

Even if you develop a product or service that is ultimately not successful, that experience and mindset makes you more attractive to future employers. You will have gained experience and demonstrated perseverance and resilience. This is the type of individual employers want to hire.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.

Graduates: Take Risks, Fly High and Never Compromise on Your Ethics or Integrity

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Article originally published in the Philadelphia Business Journal on May 21, 2018

As the former chairman of the board of Drexel University’s College of Medicine and as the current vice chairman of the board of Drexel, I have the honor each year of addressing the University’s College of Medicine graduates. I always try to share some advice that may help them navigate their careers.

At this year’s commencement, I shared the following message:

Graduates, you have just completed an enormous undertaking. As you seek solutions to work or life’s challenges, I urge you to remember what you learned here about the power of teamwork, and the importance of interpersonal skills in accomplishing your goals.

Many of you will dedicate your lives to the practice of medicine, healing the sick. Others will become researchers, or work in other areas of the healthcare profession. You will be making a difference in the lives of others, working towards the betterment of the human condition.

The best advice I can share with you as you pursue your careers is to be open to new opportunities that come your way and embrace change – the only constant in life. In addition to taking advantage of opportunities that come your way, I encourage you to be proactive and create your own opportunities. You never know where these might take you.

I am a chemical engineering graduate from your University, who just happens to be the vice chairman of its board. Now, how does that happen? How does an engineer become the vice chairman of the board of his alma mater?

Shortly after becoming CEO of my company, I was honored to be asked to join the Drexel board of trustees. The following year, I was named chairman of the board’s finance committee. A number of years later I became chairman of Drexel’s College of Medicine, followed by being named vice chair of the University’s board of trustees.

I can look back to the first day after my commencement and recall the steps along my career pathway. I took advantage of opportunities and accepted assignments outside of my comfort zone to learn and to broaden my knowledge and experience. I took risks. Sometimes I failed, but I never let that stop me from moving forward.

Tomorrow is the first day after your commencement. Take risks, and step out of your comfort zone. To quote Stephen S. Tang, president and CEO of the University City Science Center, “Failure is a valuable experience. It is a natural consequence of [taking] risks.”

Always take advantage of opportunities to do something new and different. And someday, you may have the honor of addressing graduates at their commencement ceremony, as I am doing today.

The story of Icarus, a character in Greek mythology, is a great metaphor for how one should manage their career. According to legend, Icarus flew too high, too close to the sun. The wax holding the wings to his back melted and he crashed into the sea.

Should Icarus have played it safe, and flown lower, avoiding the risk presented by the sun?

Seth Godin, the author of “The Icarus Deception: How high will you fly?” writes, “It is far more dangerous to fly too low than too high, because it feels safe to fly low. We settle for low expectations and small dreams, and guarantee ourselves less than what we are capable of. By flying too low, we shortchange not only ourselves, but also those who depend on us, or might benefit from our work.”

During your career, be sure you don’t fly too low. Take risks and fly high, and if you crash, you will pick yourself up and fly again.

The following achievements and personal attributes will help you advance in your career:

  • your commitment to yourself and others to always strive for excellence,
  • how you differentiate yourself by doing new things, and proactively implement positive change in everything you do,
  • your interpersonal skills and how you lead others,
  • your good critical judgment and common sense,
  • your contacts and personal network, and
  • your ethics, your integrity and your professional and personal reputation among your colleagues, your patients and the public.

During your career, be sure to protect your good name, integrity and reputation. Once damaged, you never earn them back.

There is a passage in the West Point Cadet Prayer that reads, “Make us to choose the harder right instead of the easier wrong.” Remember this, especially when you run into situations that require difficult ethical decisions.

Good luck, and may the wind always be at your back.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

Rethinking Traditional American ‘Retirement’

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Article originally published in the Philadelphia Business Journal on May 14, 2018

The prevalent cultural norm within American society is to work hard for some 40 or 45 years and then retire and enjoy life. But retire to what? A second career doing something else? Pursuing a life-long interest or hobby? A life of day-long leisure without responsibility nor a care in the world?

The Merriam Webster dictionary defines retirement as “withdrawal from one’s position or occupation or from active working life.” I would like to suggest an alternate definition: “the opportunity to renew oneself and to pursue new interests, engaging the world in a different way.”

Some people retire with no plans beyond traveling and playing golf and are happy doing so. Others start out this way, but inevitability, they find something lacking in their lives – a purpose, a mission. Their identities were tied to what they did and accomplished during their working years. In retirement, without a purpose, that has all changed. This has caused some of them to go into depression for which they seek help.

Many articles have been written about retirement. One of the most instructive is an April 2016 article by Neil Pasricha in the Harvard Business Review headlined, “Why retirement is a flawed concept.”

Pasricha writes, “We don’t actually want to retire and do nothing. We just want to do something we love. And I’m not talking about endless days of back nines, fishing, and sailing into the sunset. While we might want some time to do those things, you’d be surprised to learn how quickly the bloom can come off of that type of rosy retirement.”

Pasricha cites a study of the people of Okinawa who have one of the longest life spans, seven years longer than Americans. Within Okinawan society, there is no concept of retirement from work. Life is a continuum, where people move through life’s phases.

Pasricha writes, “They don’t even have a word for … [retirement]. Literally nothing in … [the Okinawan] language describes the concept of stopping work completely. [Their lexicon however] has the word ‘ikigai,’ (pronounced ‘icky guy’), which roughly translates to ‘the reason you wake up in the morning.’ It is [the] thing that drives you most.”

So, does having a “reason for being” spell the difference between some people suffering from depression and others living a fruitful life, not only in retirement, but through the years before retirement?

Pasricha identifies four elements of life that significantly contribute to one’s happiness and well-being in retirement. He has dubbed these as the 4 S’s. Quoting Pasricha, they are:

  • Social: Friends, peers and coworkers who brighten our days and fulfill our social needs.
  • Structure: The alarm clock ringing because you have a reason to get up in the morning, and the resulting satisfaction you get from earning time off.
  • Stimulation: Keeping our minds challenged by learning something new each day.
  • Story: Being part of something bigger than ourselves by joining a group whose high-level purpose is something you couldn’t accomplish on your own.

I agree with Pasricha. I believe that all four elements enhance not only retired life, but also life prior to retirement.

I stepped down as CEO from my company 13 years ago upon its sale. I didn’t “retire.” During my second career, I served on a number of public company, private company, private equity company and nonprofit boards.

I am currently in my third career as a board member of four educational institutions and as a nationally syndicated writer on leadership, entrepreneurship and corporate governance for the Philadelphia Business Journal and its 42 sister publications across the U.S., having never been a writer or trained as one.

The adages “you need to get out of your comfort zone” and “you never know what the future will bring” are true. You never know what opportunities might come your way or what opportunities you can create for yourself.

Everyone is different. Some people will be happy pursuing a life of leisure after they retire, while others will pursue second careers. Many will pursue an interest that makes a difference in their lives or in the lives of others. One should think where along the retirement continuum they want to be and do what makes them happy and content.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

Lessons Learned from the Philadelphia Starbucks Incident

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Article originally published in the Philadelphia Business Journal on May 7, 2018

On May 2, the City of Philadelphia announced that it had reached a settlement with the two African-American men, Donte Robinson and Rashon Nelson, who were arrested on April 12 at a Starbucks in the up-scale Philadelphia neighborhood of Rittenhouse Square.

Within minutes after their arrival, Robinson and Nelson were asked if they would like to make a purchase. When they indicated that they were waiting for a colleague, the café manager called the police who arrested them for refusing to leave.

Under the terms of the settlement, Robinson and Nelson will each receive one dollar from the City. Their attorney has waived his fee. The City also committed to a $200,000 program to introduce Philadelphia high school students to careers in entrepreneurship.

Starbucks has also reached a settlement with Robinson and Nelson, the financial terms of which have not been disclosed. Both parties agreed to work together to address the issue of unconscious racial bias. Starbucks also offered to pay for Robinson and Nelson to obtain online degrees through the Starbucks College Achievement Plan at Arizona State University.

The arrest of these two individuals caused an uproar and accusations of bias and discrimination against black customers. In a public statement, Starbucks CEO Kevin Johnson described the incident as a “disheartening situation … that led to a reprehensible outcome.”

Quoting from the Starbucks Value Statement, “With our partners, our coffee and our customers at our core, we live these values … creating a culture of warmth and belonging, where everyone is welcome.”

This is Starbucks’ business model. It is not unusual for people to wait before making a purchase until their friends or colleagues arrive.

So, what are the lessons learned from this incident?

Practices are just as important as policies, and must be applied in a consistent manner

Starbucks has a no loitering policy, as indicated by a photo of a “No Loitering” sign in one of its cafés, published in Heffx. When should that policy be invoked, and are all people treated in the same manner?

Given Starbucks’ mission statement and business model, improved training is needed so employees understand when the presence of an individual within a café becomes loitering and when calling the police is justified. As a result of this incident, this is especially important moving forward.

Always work to defuse situations, rather than inflame them

Philadelphia police commissioner Richard Ross apologized for the arrests of Robinson and Nelson, stating, “While … [it] is apparently a well-known fact with Starbucks customers, not everyone is aware that people spend long hours in Starbucks and aren’t necessarily expected to make a purchase.”

In many situations, the police exercise discretion in how they handle incidents and defuse situations. Perhaps in this case, had they probed for additional information from the café manager and patrons, they would have learned that it is not a regular practice to ask individuals to leave within minutes after arriving, and the entire incident could have been avoided.

The CEO needs to be front and center in these types of situations

Credit goes to Starbucks CEO Kevin Johnson for promptly responding to this public relations crisis by traveling to Philadelphia to apologize to Robinson and Nelson, and engaging in dialogue with city leaders on how to move forward. He certainly limited the reputational damage to the company by doing so. A lesson for all CEOs.

This incident could have been avoided had everyone involved exercised common sense and good critical judgment. This should be a major criterion for hiring anyone to a position where lack of these traits can lead to significant adverse legal and reputational issues for any organization.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

8 Important Traits to Look for When Hiring New Employees

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Article originally published in the American City Business Journals on April 30, 2018

What are the traits business leaders should look for in future employees? Based on my own experience as a former CEO and as a board member observing the hiring practices of other leaders, I offer the following advice. Hire people who:

1. Differentiate themselves from their peers. What has a job applicant accomplished in previous positions that differentiates them from other job applicants? Have they taken the initiative to do things that went beyond their job description? How have they moved the business of their previous employer forward? Are they a team player, and do they help others within the organization achieve their objectives?

These are the characteristics of employees who are your change agents. They will differentiate your business versus your competitors.

2. Have a proactive, can-do attitude. What is the applicant’s track record of accomplishing new things? In deciding to implement a new strategy, how did they go about assessing risk? Inquire about initiatives that the applicant has undertaken and that have failed. How did the applicant handle failure, and what did they learn from it?

People who have never failed have never accomplished what they are capable of, nor have they built the internal fortitude to move on after inevitable failures.

There are people who see a world of possibilities and abundance. There are others who see only limitations and scarcity. You want to hire the former.

3. Possess the skills to do the job or can rapidly develop them. It doesn’t help your organization or the job candidate if there is a significant mismatch in know-how or credibility to do the job. If you want to place a high-potential individual into a stretch position, ensure they have the needed resources and advisors available to help them be successful.

4. Will help you become the preferred provider to your market. This is the Holy Grail of any business: to become the preferred provider of products or services in your geographic market, that is, the provider everyone wants to do business with.

To achieve preferred provider status, employees need to be focused on providing a great customer experience. This builds repeat business and is a real competitive strength, as outlined in an October 2016 article, “Six ways to become the preferred provider to your markets.”

5. Have common sense and good critical judgment. Stories appear in the news and on social media about an employee who makes a bad decision while dealing with a customer, harming the company’s reputation. Hiring people with common sense and good critical judgment will minimize the likelihood of this occurring.

On occasion, an employee may need to violate an organization’s policy when it’s in the best interests of the company. In a September 2014 article headlined, “When an employee violates company policy for the right reasons,” I describe a situation when this occurred. You need to hire people with common sense and good critical judgment, so they know when to violate the rules. Celebrate these employees, rather than terminate them.

6. Are committed to continuous improvement. The only constant in life is change, and those companies that don’t embrace change and continuous improvement will fall behind their competitors.

Hire people who are committed to continuous improvement. You certainly don’t want to hire continuity people. They will stifle your business.

7. Are people of integrity. You and no one else within your organization will trust an employee who lacks integrity and ethics, regardless of the great results that individual has achieved in previous positions. Hiring such a person is a recipe for disaster.

Do your due diligence on a potential employee’s reputation. An April 4 article headlined, “Dealing with toxic individuals in the workplace” describes the damage that these people can do. Avoid hiring them.

8. Can develop other leaders. Even if the job you are filling is that of an individual contributor and is not a formal leadership position, that individual should still have leadership potential. When serving on a team, an individual with the needed knowledge and expertise may need to step up and serve as the leader for a particular initiative.

While this article shares advice to business leaders on the traits they should look for in new hires, the advice is also for those who want to improve their attractiveness to potential employers. For those seeking a new job, it will put you at a competitive advantage versus other applicants for any job for which you apply.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

At Starbucks, Where Was the Common Sense and Good Critical Judgment?

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Article originally published in the Philadelphia Business Journal on April 23, 2018

An April 12 incident at a Starbucks in Philadelphia has led to a public relations crisis for the company. Two African American men were arrested for not making a purchase within minutes after their arrival.

Shortly after Donte Robinson and Rashon Nelson arrived at Starbucks, they were asked if they would like to make a purchase. They responded that they were waiting for a business colleague. They were then asked to leave the café but refused.

The café manager called 911 and told the police dispatcher, “I have two gentlemen in my café that are refusing to make a purchase or leave.” The police responded, and after a conversation with Robinson and Nelson, arrested them.

Why did the café manager ask Robinson and Nelson to leave, and then call 911 when they refused to do so? If they were disruptive, the manager would have said so in her call to 911. How are other people who don’t make a purchase soon after arriving treated? Did the café manger fail to use common sense and good critical judgment, or was her decision to call 911 a reflection of racial bias?

Starbucks promotes its cafés as a comfortable and inviting place to meet friends, hang out, enjoy coffee, food and conversation and use its wi-fi service. This is their business model. It is not unusual for people to arrive and not make a purchase until their friends or colleagues arrive.

Quoting from the Starbucks Values Statement, “With our partners, our coffee and our customers at our core, we live these values … creating a culture of warmth and belonging, where everyone is welcome.” Perhaps not so for everyone at this Starbucks that day.

To say that the arrest of these two individuals caused an uproar and accusations of bias and discrimination against black customers is an understatement. The incident went viral, and smartphone videos of the arrests have been viewed around the world millions of times. There has even been a call to boycott Starbucks.

Immediately after the incident, Philadelphia police commissioner Richard Ross, who is African American, defended the actions of the police officers. On April 19, he changed his position and apologized to Robinson and Nelson.

In a public statement, Ross said, “… It is no excuse … [that] my lack of awareness of the Starbucks business model played a role in my message. While … [it] is apparently a well-known fact with Starbucks customers, not everyone is aware that people spend long hours in Starbucks and aren’t necessarily expected to make a purchase. … It is also reasonable to believe that the officers [who responded to the 911 call] didn’t know it either.”

In response to this incident, Starbucks has announced that on the afternoon of May 29, the company will close all its 8,000 U.S. based cafés for racial bias training.

The company’s CEO Kevin Johnson arrived in Philadelphia to apologize to Robinson and Nelson and express his regret that this situation occurred. In his statement about the incident, Johnson called it a reprehensible outcome.

This is not the first time that Starbucks has seen its reputation damaged due to a lack of common sense and good critical judgment by an employee. In November 2014 at a Phoenix, Arizona Starbucks, a pregnant woman was denied the use of the restroom even after her husband offered to make a purchase.

In September 2015 at another Philadelphia Starbucks, a police officer was refused the use of the restroom. In this and the Phoenix incident, Starbucks offered the obligatory apology, but there was no public announcement about specific actions to avoid these types of events in the future.

What do all three Starbucks incidents have in common? The employee in each incident didn’t use common sense and good critical judgement.

For Starbucks to deliver on its Values Statement, it needs to review its pre-employment screening procedures, its policies and procedures as well as conduct ongoing training of its employees. Racial bias training is a good start.

Lack of common sense and good critical judgment in employees is a risk factor, like many others, that can damage a company. It needs to be treated as such by management. This is a lesson for all companies.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

Drive for a Win-Win When Negotiating a Deal

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Article originally published in the Philadelphia Business Journal on April 17, 2018

In August 2017, I wrote an article headlined, 7 principles for effective negotiations. Since that article, I have been asked to elaborate on how to avoid damage to a business relationship during heated negotiations.

I’ve spent years negotiating many types of deals and living with the results, as well as observing the negotiating styles and skills of other senior leaders. Sometimes a deal can’t be reached, but a good relationship remains intact, which bodes well for future negotiations.

A negotiation style that damages a business and personal relationship should be avoided. The key is to attack issues, not people. In sports, you want to defuse, not enrage your opponent in what you say before a game. In a business negotiation, it’s the same: You don’t want to enrage your counterpart on the other side of the table.

In a one-off negotiation, you need to decide how hard you want to take advantage of your “perceived” strengths and drive toward a “win-lose.” You could run into the other party again in a different situation where you may not have as strong a position.

If you have an ongoing relationship, it’s important for a win-win result. If after a deal is struck and one party finds that the terms are significantly adverse and lopsided, they might ask the other party for changes in the terms of the agreement.

The best way to destroy any possibility of continuing an ongoing relationship is for the party with the advantage to insist they have an iron-clad agreement in place and try to force the disadvantaged party to continue to meet those terms. They do so at their peril. Maintaining a good relationship in the long-run is more important than a win-lose result.

This must be a civil discussion between both parties. Neither should personally threaten nor intimidate the other in any way. It will hurt their reputation. Threats have the opposite effect of getting the other side to capitulate – that party becomes more entrenched in their position. This only poisons the relationship moving forward.

I once was the lead negotiator for my company in a negotiation to sell our ownership interest in a joint venture to our partner. After the second time the attorney for our partner misrepresented what we had negotiated in the agreement he was drafting, my team and I stood up and announced we were leaving the table and would not return until my counterpart replaced that attorney.

Two days later my counterpart apologized and informed me he was appointing a new attorney to record our decisions, and negotiations resumed.

Don’t misrepresent what was previously negotiated. It damages your credibility. In a calm manner, I attacked my counterpart’s attorney, not my counterpart, but he got the message. Had I not challenged the dishonesty of his former attorney, my counterpart would have taken that as an indication that I was a weak negotiator.

Before entering a negotiation, be well prepared. Know your objectives and the terms under which you are willing to walk away. Understand the situation of the other party, including strengths, weaknesses and alternatives.

Remember, it’s business, not personal. When in a long-term business relationship, drive for a win-win. Even if you don’t care about maintaining a long-term relationship, exercise caution driving for a win-lose. People have long memories.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

Dealing with Toxic Individuals in the Workplace

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Article originally published in the Philadelphia Business Journal on April 10, 2018

At some point in our careers, nearly of all us will find ourselves working with bosses, direct reports or peers who lack ethics and integrity. These people are toxic and hinder the organization’s ability to achieve its objectives.

Toxic people will throw others who stand in their way under the proverbial bus for their own purpose of advancing through the organization at the expense of others. They will complain about others and talk behind their backs to undermine them.

Those who are toxic are not trusted by their peers or direct reports. The actions of everyone they work with have a defensive component, which hinders any group from becoming a high-performance team. Toxic people within the organization don’t realize that their personal integrity and reputation is a valuable asset. It determines if people want to deal with them.

Toxic people are good at managing up, so their behavior may not be transparent to their boss. Eventually, the boss learns about them and everyone hopes that sooner or later they will be terminated.

So, what do you do if:

You work for a toxic boss

Do your job and do it well. More than likely, you will not be permitted to make many decisions without the boss’s approval, so over-communicate to make sure you are both on the same page.

Ensure you are part of an informal network within your organization. It’s a source of mutual support on developing strategies to deal with toxic individuals.

You may decide to transfer to another position within the organization or the company. Or, you may decide to wait until your toxic boss leaves the company or is fired. You need to weigh your alternatives and decide on your personal course of action.

You work with a toxic peer

As in the case of working for a toxic boss, do your job and do it well, and develop informal alliances with others. They are a great source of information as to what your toxic peer is saying about you. Be on guard for criticism of your work behind your back.

Don’t play the same game as your toxic peer. Let your results speak to the quality of your work.

You have a toxic direct report

If one of your direct reports exhibits toxic behavior, that individual must be confronted and told to stop. They will deny the accusation. Expect them to be defensive. They need to know that if their behavior continues, they will part company with the organization.

How can you understand the interpersonal styles of the individuals that report to you? How can you tell if you have a toxic individual working for you?

As the leader, you need to periodically talk with those within your organization below your direct reports. Hold skip level meetings with them and ask how things are going and what they are working on. Ask questions for understanding, but never violate the chain of command by telling them what to do.

If the people within your organization trust you, they will tell you if there is a toxic individual within the organization. If one of your managers objects to you talking to their direct reports, it’s a dangerous sign they want to keep information from you.

The other way of obtaining information on your direct reports is through a 360-degree interview process, where information about an individual’s effectiveness is obtained through interviews with those within the organization with whom the individual interfaces.

There are those who say that 360 results should only be shared with the individual for personal performance improvement. I disagree. The results also should be used by the boss for a performance assessment.

You are a toxic individual

As a toxic individual, you need to realize that your behavior will not lead to sustainable success. Eventually you will be terminated, and your reputation ruined. No one will trust you nor want to work with you. There is a valuable adage, “never burn your bridges.” So true.

Rex Tillerson, former chairman and CEO of Exxon Mobil and the former secretary of state under President Donald Trump, in his departure comments to employees of the U.S. State Department, stressed the importance of “honesty and integrity in all that you do.” Tillerson said, “Never lose sight of your most valuable asset, the most valuable asset that you possess – your personal integrity.”

He continued, “[Your integrity] … belongs to you, and [will] always … belong to you and you alone. Only you can relinquish it or allow it to be compromised. Once you’ve done so, it is very, very hard to regain it. So, guard it as the most precious thing you possess.”

Tillerson’s comments are an important message for all of us. Don’t do things that will damage or undermine your integrity or reputation. Aside from being the wrong thing to do, it’s just not worth it.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

American Airlines’ Colasante Is a Trailblazer for Women

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Article originally published in the Philadelphia Business Journal on April 3, 2018

The airline industry, historically, has had few women in leadership positions. That is changing, and is being led by women like Olympia Colasante, vice president of American Airlines’ hub operations in Philadelphia.

I had the pleasure of listening to Colasante share her story during a dinner event at the Cosmopolitan Club in Philadelphia on March 26. She is truly an inspirational trailblazer for women and a role model for all who want to differentiate themselves and advance within their profession.

Colasante began her career in Ottawa, Canada, with Wardair Canada in 1986 when she was hired as a part-time ticket agent. In a test that all would-be ticket agents needed to pass, Colasante achieved a perfect score of 100, the first in the history of the airline.

That perfect score came to the attention of the executives at Wardair headquarters and they suggested that her boss look at her potential beyond a part-time ticket agent. When her boss asked what she wanted to do at the airline, Colasante said, “I brazenly responded, I like your job, if you let me have it.” Her boss commented, “You can’t have it today, but I can help you get it.”

Colasante said, “I never started the job as a ticket agent but worked with my boss in the office where he exposed me to all facets of the airline and airport operations.”

When USAir (later renamed US Airways) started to fly to Ottawa in 1990, they hired Colasante as a supervisor, which was an exception to how people advanced at the airline. Traditionally, supervisors came from the rank and file.

After her six-month probationary period, she caught the eye of her boss’s boss, and she became the first USAir-sponsored employee to be transferred from Canada to the U.S. where more opportunities for advancement were available for her.

Colasante said, “USAir took a chance by moving me to the U.S. and into a male-dominated culture. My reaction was I needed to work harder, so I took on all kinds of extra assignments. I took training classes outside of my day job on nights, weekends and on my days off. This set me apart from my peers and became known as being very different. I felt pressure to succeed.

“Most of the skepticism about me succeeding wasn’t from my superiors. It came from my peers. One day, two of my fellow female managers asked me to go to coffee with them, so I did. They asked what I thought I was doing? They said, ‘You sign up for all these extra projects and stay late every day. Why are you wasting your time doing that?’

“I told them I was not wasting my time. I am doing it to advance in my career. They said, ‘You’re just kidding yourself because this is a boy’s club and you will never rise higher in the organization than where you are today. You are only here today because you are the token female. So, don’t waste your time because you are never going to go anywhere.’”

Colasante responded, “That is not what I feel and that is not what I believe. Have you really asked yourself why you aren’t getting ahead? Maybe you need to do things differently. It has nothing to do with you being female.”

At the Cosmopolitan Club dinner, Colasante was asked how she differentiated herself and created a pathway to advancement within a male-dominated industry. She said that it all went back to her acing that test to become a part-time ticket agent. She constantly studied and became the expert at the airport she was stationed at and developed a reputation for being the go-to person on any issue. This is how she differentiated herself vis-à-vis her peers.

She explained, “I learned more than anyone else, and that became obvious. Not everyone took the time to do all that reading. The other thing I learned was about how you effectively lead people. If you take care of the people within your span of care, you can’t lose. If you take care of people, they will do their jobs exceptionally well.

“It’s about listening to them and providing them what they needed to do their jobs. I cared about them as individuals. I mentored them. I helped them develop into leaders. I am proud that many have gone on to jobs with much greater responsibility.”

Notice that Colasante used the phrase “span of care,” rather than the phrase “span of control.” That is a fundamentally different approach to leadership, which is based on command and control.

Colasante continued, “My leadership and mentoring skills were acquired by observing effective leaders during my career. I also learned from other leaders who were not so effective, and I decided I never wanted to grow up like them.”

When US Airways and American Airlines merged in 2013 to form the largest airline in the world, Colasante continued to advance. Prior to being named to run American Airlines’ hub in Philadelphia in July 2017, she ran the airline’s operations at London’s Heathrow Airport.

So, what are the takeaways from Colasante’s remarks?

  • To advance in any organization, you need to work hard and to differentiate yourself vis-à-vis your peers.
  • In addition to taking every opportunity that comes your way, create your own opportunities. Don’t be afraid to tackle difficult assignments.
  • Be a role model for others. Blaze the trail for those who follow you.

Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.