Posts in category: Articles

Article originally published in the American City Business Journals on Dec 5, 2017

The Oxford dictionary defines “nepotism” as “the practice among those with power or influence of favoring relatives or friends, especially by giving them jobs.”

At family companies, the owner often will bring a son or daughter into the firm as part of the natural transition process to the next generation of family leadership and ownership of the firm. Nepotism in this case is appropriate.

The advice I give to friends who run family businesses is to have their son or daughter work outside the family firm for a few years and develop a track record of success. This enables them to bring relevant skills and experience when they join the family firm and establishes credibility with other employees and customers. These are important factors in building their track record of success as well as their confidence.

Owners of family companies must remember it is difficult to fire family members if they don’t perform.

Sons or daughters at family firms may rotate through a number of positions to learn the business, applying what they learned at previous companies. Other employees understand and accept the family succession objective of the owner — the continuation of the family firm by the next generation.

At public and larger private companies, no such succession objective exists. The objective of these companies is to hire the very best people so the company can effectively compete with what are in many cases world-class competitors.

Nepotism at these public and private companies is problematic because it undermines morale and may inhibit the best from rising to the top. Nepotism at these companies could raise conflict-of-interest issues, have a toxic impact on the workforce, and ultimately affect the company’s performance.

Employees with high potential may leave the company or may never join because they feel that relatives of the boss may be treated preferentially. Other employees within the organization question whether they are on a level playing field with respect to performance standards, accountability, salary increases, promotions and plum assignments. They wonder if they will ever be part of the “inner circle.”

What about the situation where an individual is hired by a company in which a family member already is employed, or two individuals within the company marry? These situations are not uncommon. Companies have policies prohibiting a direct or indirect reporting relationship to avoid the issues described above. Both individuals must report up through separate chains of command.

The two patriarchs of each of the founding families of the private company at which I worked, PQ Corporation, made a strategic decision in the early 1970s to end the firm’s limited practice of nepotism. The company had employed members of both families for many years. A decision had to be made whether the company would continue to be an employment vehicle for a handful of family members or if the company would be used to drive shareholder value for the hundreds of family shareholders who were not employed by the company.

The patriarchs chose the latter — hire the best people and create wealth for the shareholders. They resigned from their positions of CEO and CFO and became chairman and vice chairman of the company. They hired outside professional managers to fill their former C-suite positions. Other family members left the firm.

Under outside professional leadership, the company embarked on a strategy to expand globally from a small commodity chemicals business in the United States, Canada and Mexico. By the time PQ was sold in 2005, an engineered glass materials business was acquired, performance materials and catalyst businesses were developed, and the company expanded its presence to 19 countries.

Shareholder value increased significantly. This would not have happened if nepotism remained in place and the best and brightest were not recruited to develop and execute the strategy needed to grow the company.

So, what can happen when nepotism is practiced where it is not appropriate? One only has to look at President Donald Trump hiring his daughter Ivanka Trump and son-in-law Jared Kushner for an example. Trump named them to senior White House posts involving implementation of policy — jobs for which neither is qualified because they have little to no experience in the world of politics or diplomacy. Their hiring is not part of a succession plan in a family business where such appointments wouldn’t be unusual or draw scrutiny.

In an April 5 Business Insider article headlined, “Here are all the duties Jared Kushner has in the Trump administration,” columnist Maxwell Tani outlined Kushner’s responsibilities: Middle East peace, government reform, opioid crisis management, criminal justice reform, and liaison to Mexico, China and the Muslim community.

This is a portfolio of responsibilities that would challenge the most seasoned and experienced leaders and career diplomats, let alone someone with little to no experience or credibility in these areas. The fact that Kushner did not reject the broad scope of these assignments indicates the degree of his inexperience.

Kushner has the title of senior White House advisor. By giving Kushner these operating responsibilities, Trump undermined those within the administration whose specific job it is to work in these areas, something effective leaders don’t do.

Ivanka Trump, meanwhile, was asked by President Trump to represent the United States at the G20 economic summit in Germany this past July and has been asked to represent the country in other venues, as well. She lacks credibility, but she does have the ear of her father, which is valued by the people she deals with. However, this access may not be in the best interests of the United States.

If you are a governmental leader, don’t hire relatives. If you are the controlling stockholder of a private company, you need to decide whether to use the firm as an employment vehicle for family members, or reject nepotism and use the firm as a vehicle for wealth creation for all stockholders by not hiring family members — but, rather, hiring the best people you can find.

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.

Article originally published in the Philadelphia Business Journal on November 28, 2017

Successful entrepreneurs have an intense passion for developing and growing their businesses. They identify a market need and differentiate their products or services from other providers.

Such was the strategy pursued by Pat Roberts and Nancy Blair when they founded AIM Academy, a first through 12th grade school for children with dyslexia and other language-based learning differences.

Roberts, an educator, and Blair, a nurse anesthetist, both had young daughters struggling in school. When they met, both realized that their children were experiencing similar learning difficulties. After not getting the services their daughters needed at the schools they were attending and unable to find a suitable school in the Philadelphia region, Roberts and Blair sent their daughters to a boarding school in Massachusetts.

Roberts and Blair became volunteers and worked in the field of language-based learning differences. They benchmarked schools focused on teaching young children with these learning differences, including The Lab School, with locations in Washington, D.C., and Baltimore, Maryland, founded by educational entrepreneur Sally L. Smith.

Roberts and Blair spoke to many parents whose children faced similar difficulties and realized there was a Philadelphia market for a school that provided an education to these children.

According to the International Dyslexia Association, “About 13 to 14 percent of the school population nationwide has a … condition that qualifies them for special education. Nevertheless, many more people – perhaps as many as 15 to 20 percent of the population as a whole — have some of the symptoms of dyslexia. …Not all of these will qualify for special education, but they are likely to struggle with many aspects of academic learning and are likely to benefit from systematic, explicit, instruction in reading, writing and language.”

Inspired by Smith of The Lab School, Roberts and Blair in 2006 founded Academy in Manayunk, named for the school’s location in a neighborhood of Philadelphia. In 2012, the school was renamed AIM Academy when it moved a short distance to its current location in Conshohocken, Pennsylvania.

In addition to the passion of founders and a market for a product or service, all successful entrepreneurial initiatives are based upon one or more differentiators that attract customers. AIM’s approach to educating children with dyslexia and other language-based learning differences is based on ongoing research at leading research universities and data that measures the effectiveness of the program the school provides.

Enrollment at AIM Academy has climbed from 24 students in 2006 to 340 students in 2017. Originally opened as a second through seventh grade school, it now educates children through the 12th grade. Students who overcome their language-based learning differences transfer out of AIM prior to 12th grade to attend private or public school.

The Wilson reading method, as well as a low ratio of students to highly trained teachers, plays an important role in the school’s success. The school is near capacity, and there are plans to expand at a nearby site. Every student is on a journey to college. In 2017, AIM seniors were accepted to Rensselaer Polytechnic Institute, Villanova University, Babson College and Drexel University, to name a few.

Said Blair, “Parents come to us when their child is struggling in either reading, writing or math. We start on the path of finding the child’s strengths, talents and interests, and build on those, as well as help our students build confidence in themselves. Our teaching staff, who receive training every year, are dedicated to making a difference in the lives of our students.”

One of the precepts of Judaism is, “Whoever Saves a Life Saves the World.” Said Roberts, “Our parents tell us that in different ways. Parents tell us you have saved my child’s life. … I can finally sleep at night because I know my child is in the right place. My child doesn’t fight me to go to school anymore. I can’t get my child to go to bed at night because he [or she] is under the covers reading a book and doesn’t want to put it away.”

True to the entrepreneurial mindset of its founders, AIM and the Charles D. Close School of Entrepreneurship of Drexel University have formed a partnership in which five AIM seniors travel to the Close School each week to take an entrepreneurship course, Life Strategies, required for entrepreneurship majors. Dr. Roy Carriker, their professor, noted, “The AIM students arrive already demonstrating an entrepreneurial mindset and in class continue to develop valuable entrepreneurial skills.”

The class comprises not only students majoring and minoring in entrepreneurship, but also students pursuing disciplines from across the university. “In class, you can’t tell the difference between the AIM students and Drexel students, which speaks to the caliber of the AIM students and program,” Carriker said. “In fact, one Drexel senior in the class expressed amazement these students were high school seniors, not university students.”

One of the goals of nearly every entrepreneur is to scale their business, and Roberts and Blair are no exception. Through AIM’s 12 years of experience and their ongoing application of the latest research, they are on the forefront of educating children who learn differently. Through the AIM Institute, Roberts and Blair are teaching what they have learned to educational professionals at other schools. More than 5,000 educators have been trained since 2006.

I came away from my interview with Roberts and Blair thinking how fortunate AIM’s students are – the beneficiaries of the entrepreneurial approach of the school’s founders and the lack of bureaucracy that constrains or slows public and other private schools from adopting programs that aid children with language-based learning differences.

AIM Academy is successful in part due to three factors: the passion of its founders, a market demand for its educational services and the way it differentiates itself from other providers in the market. This is a fundamental lesson for all entrepreneurs: Regardless of the business, a focus on these three factors will increase the probability of the venture’s 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.

Article originally published in the Philadelphia Business Journal on November 21, 2017

On Nov. 14, the National Transportation Safety Board released a synopsis of its report on the investigation of the Amtrak train crash in April 2016 near Chester, Pennsylvania, 15 miles south of Philadelphia. A passenger train was traveling southbound at about 100 mph when it slammed into a maintenance backhoe blocking the track, killing two maintenance employees and injuring 39 passengers. A chilling video from the train’s engine shows the 27 seconds just prior to the crash.

There were many factors deemed to have caused the accident, including lack of communication between shift foremen and train dispatchers and the failure to use a shunting device to take the track out of service while it was being worked on. Many other safety protocols also were violated.

Both workers who were killed and the train’s engineer tested positive for drugs. An NTSB press release stated that this was not the cause of the crash but was “symptomatic of a weak safety culture at Amtrak.”

That press release summarizing the NTSB report was critical of Amtrak, stating that the derailment “was caused by deficient safety management across many levels of Amtrak and the resultant lack of a clear, consistent and accepted vision for safety.”

NTSB Chairman Robert Sumwalt said, “Amtrak’s safety culture is failing, and is primed to fail again, until and unless Amtrak changes the way it practices safety management. … Investigators found a labor-management relationship so adversarial that safety programs became contentious at the bargaining table, with the unions ultimately refusing to participate.”

At an NTSB hearing on the crash, Sumwalt said, “Despite the emphasis on rules compliance, investigators did not find a culture of compliance. Rather, they found a culture of fear on one hand and a normalization of deviance from rules on another hand. … Amtrak had such a focus on rules, but we found widespread non-compliance with the rules.” Sumwalt added, “That is ironic.”

After the NTSB news release was issued, newly appointed Amtrak CEO Richard Anderson and outgoing CEO Charles Moorman sent the obligatory letter to employees stating, “Our customers expect us to operate safely and our jobs and lives depend on it. We can and will do better. Our pledge to you is that we will do everything possible to help move us forward.”

What that letter should have said is that the safety of our employees and passengers is our highest priority – more important than the on-time performance of our trains. During the investigation, workers told NTSB investigators that Amtrak emphasized on-time train performance before safety.

Amtrak has been in existence since 1971 and has experienced more than its share of accidents, many involving fatalities. What was it about this particular accident that got Amtrak to recognize that its customers and employees expect the railroad to operate safely? Words are meaningless unless they are backed up with a real change in culture leading to improved safety performance.

Where has the Amtrak board been over the years on the issue of safety? Why has the Amtrak board tolerated the lack of an effective safety culture within the company? As a former CEO of a chemical and glass materials company, safety was paramount for me. At each board meeting, I reported on our environmental, health and safety performance during the previous quarter before we reported on financial performance.

We empowered our employees who operated chemical processes to cease production if they felt that an unsafe condition existed. Unlike the reported failed culture within Amtrak, at my company management and labor were partners in making the workplace safe. This culture drove the company’s safety performance from fourth quartile to first quartile within the chemical industry.

In a Nov.14 article for The Philadelphia Inquirer, columnist Jason Laughlin reports that Jed Dodd, head of the rail-repair workers union, objected to workers being required by Amtrak to report safety issues, feeling that “… all the onus [is] on workers.” I would say to Mr. Dodd that this is certainly the responsibility of all managers and unionized workers. Within the right corporate culture, this is a non-issue and is imperative to improving safety performance and saving lives.

The adversarial nature of the relationship between Amtrak management and labor must end. All operating employees must take personal responsibility for their own safety, that of their fellow employees and their passengers. Employees must be empowered to not proceed with a task if safety protocols are not in place, even if it delays a train.

Safety is more important than on-time train performance.

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.

Article originally published in the American City Business Journals on November 14, 2017

The Free Dictionary defines “paradigm” as “a set of assumptions, concepts, values and practices that constitutes a way of viewing reality.” People who hold onto paradigms are apt to say, “We have always done it that way.” Former Australian Executive Woman of the Year Catherine DeVrye has called these “The seven most expensive words in business.”

Challenging paradigms is imperative to advancing your business and creating competitive advantage.

In August 2014, I wrote an article headlined “Breaking paradigms to achieve breakthrough results,” in which I described how my company innovatively broke process design and operational paradigms to push our technology forward. This effort allowed us to economically justify a new manufacturing plant to provide a product to the pulp and paper industry in Alberta, Canada.

The plant delivered the highest return of any of my company’s manufacturing investments and became the model for future plants of this type. It also gave my company a competitive advantage in the marketplace. The innovative chemical process and operational design was catalyzed by the need to raise the economic return above what was needed for the board to approve the project. Sometimes it takes such a situation to move technology forward.

Early in my career, I was the business manager for a granular product that was used in the formulation of high-temperature acid resistant cement sold into the refractory industry. One of the product’s specifications was particle size range, which had not been changed for as long as anyone could remember.

One of our engineers suggested that we evaluate increasing the product’s particle size range, which would increase the output of the plant and hence its capacity, allowing us to meet growing demand. Our technical service people argued that particle size was sacrosanct to the performance of our product and resisted any change. Needing more capacity, we increased the particle size range and asked our customers to evaluate the modified product’s performance.

Most customers found that there was no change in product performance, and in a few cases, the wider size distribution product had superior performance. By challenging a paradigm, we were able to meet growing demand and delay the capital expenditure for a plant expansion.

A technology-intensive, relatively new global business unit had been operating at a significant loss when I became CEO of my company. Due to years of losses, a paradigm developed that we could not compete in the marketplace against the entrenched industry leader. Board members and many of my direct reports were nearly unanimous that we should throw in the towel and sell the business unit, thinking we would never achieve the returns originally anticipated.

I believed our technology had advanced to the point where it was at least as good as the industry leader. We were building market credibility and slowly gaining share. However, the business unit was not executing as well as it should.

I resisted the temptation to sell the business unit but instead replaced the general manager with a highly skilled and experienced leader from within the industry who I thought could turn the business unit around.

Within two years, the business unit became profitable. It continued to thrive and is now a major contributor to the company’s profitability. Had I bought into the paradigm of my colleagues and sold the business unit, significant shareholder value would have been forgone.

As leaders of our organizations, how many times do we hear from our employees that something can’t be done? In December 2015, I wrote an article titled “Don’t tell me it can’t be done. Find a way,” in which I describe how Lt. Col. Jimmy Doolittle broke the paradigm that Tokyo was too far away to bomb during World War II.

In April 1942, Doolittle broke that paradigm by leading a bombing raid on Tokyo with 16 B-25s launched from the aircraft carrier Hornet, the first time bombers had been launched from a carrier. The raid resulted a significant boost to American morale early in World War II.

So, what have I learned about paradigms? Don’t wait for an adverse condition or event to catalyze the process of change. Every company needs a culture of continuous improvement that drives the organization and in which paradigms should constantly be challenged.

Challenges and impediments are good for your business. They require your team to step up and achieve results beyond expectations.

When my company adopted a culture of continuous improvement where all employees were empowered to challenge paradigms within their area of responsibility and implement change, we saw significant bottom-line improvement. This helped build our competitive advantage.

So, the next time one of your employees says something can’t be done, respond by saying, “Find a way to do it.” My experience is that you may not be able to achieve 100 percent of the objective, but you likely will find a way to achieve most of it. This is how businesses advance.

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.

Article originally published in the American City Business Journals on November 7, 2017

You graduate from college and are looking to land your dream job. Or, perhaps you are competing for a promotion within your company or starting a new job search. Regardless of your current situation, you should always work to ensure that you will be highly marketable.

I coach and counsel college seniors and individuals who are already employed and prepare them to get promoted or search for their next job. I share with them advice on how to differentiate themselves so they stand out from the crowd. Just as businesses differentiate to gain competitive advantage, individuals must do the same.

Employers will want to know these eight things:

1. Are you results oriented?

You will be asked about the results that you achieved in your previous positions. How did those results support the goals of your organization, or those of a customer or client? Show how you have been innovative and have exercised initiative. A potential employer will assess what you can do for their organization based on what you accomplished within your previous organization.

Be sure to achieve results in your current job, or if a college student, in campus organizations. Be proactive and go beyond expectations. This will differentiate you from the dozens of other people applying for the job.

2. Are you customer/client-focused?

All employees have internal and/or external clients. If you are in a staff position, your job is to help other staff and line organizations within your company be successful in achieving their goals. If you are in a line position, your job is to help your company’s clients or customers achieve their goals and to help them be successful in their businesses. How have you done so?

The Holy Grail of any business is to be the preferred provider to its market and the company that customers/clients will first choose to go to for products or services. How have you helped your previous employer travel the journey to be the preferred provider in its market?

3. Do you embrace continuous improvement?

An important driver to creating competitive advantage in the marketplace is the process of continuous improvement within your company. What have you done in your previous jobs that demonstrate your commitment to continuous improvement?

Challenge paradigms and the accepted ways of doing things within your area of responsibility if you feel there are more effective or efficient approaches to accomplishing the organization’s goals. The competition is constantly changing, and to remain competitive, your company needs to do the same.

4. How do you de-risk your decisions?

You may have sole authority to make a decision that you deem risky. The way you de-risk that decision is by asking others for their opinions. It is not a weakness to ask others for their views; it’s a strength. The decision is still yours, but you get the benefit of others who may see the issue in a different light. Share examples of how you have de-risked your decisions.

5. What is your leadership style?

You should share your expectations and jointly develop goals with your direct reports without micro-managing how those goals are achieved. You should help create a sense of ownership in your employees for what they do, and hold them accountable for results. The interviewer will want to know how you lead others and would like to be led.

6. Are you effective at selling your ideas?

People who are in sales aren’t the only ones who sell. Everyone is selling their ideas to their boss, their peers, the teams they serve on and to their direct reports. This requires good presentation skills. It also requires good listening skills, not only to address objections, but also to hear and to be open to better ideas. Discuss how you have sold your ideas to your organization, and demonstrate that you listen and value the opinions of others.

7. Do you keep commitments?

People who keep commitments engender trust. Without trust, no organization can properly function.

Don’t make a commitment unless you can keep it. If you find that for whatever reason you can’t keep a commitment, let the other person know immediately. He or she might have made a commitment to another person based on your commitment. You may be asked at an interview about this, so share a time when you could not keep a commitment and what you did about it.

8. Do you fit the culture?

Prospective employers will want to know if you are a good fit. Conversely, you will want to determine if the culture of a prospective company is a good fit for you. Stay away from a company that has a reputation for unethical dealings with employees or with clients, or has a toxic culture.

Don’t forget to do your own due diligence on a prospective employer, checking on the reputation of the company and its leaders. If during your interview you get a bad vibe, trust your judgment and cross that company off the list of potential employers.

One of the most important things everyone should do is network with others. You never know when an individual you meet will provide you with assistance or introduce you to someone else who can do the same. By developing a strong personal network, you can also help others in need of assistance.

Most jobs are found through your network. The larger your network is, the easier it is to find your next job. Use your network contacts to ask for advice and guidance, but not for a job. Eventually, a network contact will know of a job opening within their personal network and make an introduction for you.

The key to landing your next job is differentiating yourself, demonstrating that you are an effective leader and developing a reputation of achieving results within your field. Do this well, and employers will seek you out.

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.

Article originally published in the American City Business Journals on October 31, 2017

One of the best parts of my job as a columnist is writing about and providing guidance to young entrepreneurs. In addition to watching them develop their businesses, I have the privilege of watching them grow both personally and professionally.

Entrepreneurs see a world full of possibilities and abundance, versus some people who see only a world of limitations and scarcity. Entrepreneurs are not afraid to pivot — that is, change direction if what they are pursuing proves not to be viable. Entrepreneurs sometimes fail, but they pick themselves up and keep moving forward.

Entrepreneurs also know how to take responsible risks and de-risk their initiatives. They work outside their comfort zones. Frequently, they invent and develop products and services that people don’t yet know they need.

One such entrepreneur is Maggie Treuting, CEO of LawDecoder and a June 2016 graduate of Drexel University with B.S. degrees in marketing, entrepreneurship and management information systems. Currently, Treuting and her team work out of the Baiada Institute, an incubator and resource center at Drexel University’s Charles D. Close School of Entrepreneurship.

LawDecoder is an app that serves as an information aggregator, providing resources and information to individuals searching for a solution to their legal issues. After using LawDecoder, if an individual would like to further consult with an attorney, the app serves up options for attorneys with the appropriate specialty.

“LawDecoder strives to empower the public by educating individuals about their legal rights,” Treuting said. “We use smart search technology to help users articulate their legal issue and then produce ‘plain English’ translations of the statutes relevant to their problem through artificial intelligence.

“When a user arrives at the LawDecoder website,” Treuting added, “they choose their legal issue from a menu of topics. The app then provides information on their issue in understandable language.”

Use of the LawDecoder app is free. Currently as many as 18,000 people visit the app each day. Revenue is generated, Treuting said, from attorneys advertising on the website.

The app currently focuses on real estate, immigration, cannabis use, privacy law and, soon, family law. The site is populated with legal information by law students under the supervision of a practicing attorney.

LawDecoder also provides content for startups. Entrepreneurs have many questions about getting their businesses up and running, including questions on how to incorporate, protection of intellectual property, and what should be included in partnership agreements.

I asked Treuting what drove her to be an entrepreneur. She said, “During my first six-month co-op job [as a Drexel student], I tried the corporate environment but didn’t really like it. In a subsequent co-op job, I had the opportunity to work at Dreamit Ventures, a growth-focused accelerator designed for startups with market-ready products. I found the work interesting and very rewarding, working with passionate people building their businesses.

“At the time,” she added, “I had some issues with my landlord and wished I had a source of legal information to guide me. I wondered how other people addressed their legal issues. This was the basis of developing the idea for LawDecoder.”

I asked Treuting what are the traits of a successful entrepreneur. She replied, “Passion for the business you are building. Entrepreneurs need to want to get up every single day and do this. They need to be optimistic that problems can be overcome. They need to have the ability to push through impediments.

“Entrepreneurs need to recognize that they don’t know it all and need to surround themselves with experienced and knowledgeable people with a variety of skill sets,” she added. “Entrepreneurs need the ability to ask people for guidance. The worst they will say is no. Most people will help; it’s their way of giving back.

“Entrepreneurs need to understand that the first thing they try is probably not the best thing, and that they need to learn to adapt. Entrepreneurs need to learn how to fail, and start again. They need to listen to the market and adjust their value proposition if needed. Entrepreneurs need the ability to sell their idea not only to the marketplace, but also to potential investors.”

I asked Joan Lau, founder and managing partner at Militia Hill Ventures, to describe the traits she sees in the entrepreneurs with whom she interfaces. Militia Hill is an innovation hub that provides space and resources to life sciences companies to develop and grow.

Lau’s responses were consistent with those of Treuting. Said Lau, “I see entrepreneurs who are extraordinarily passionate about solving a problem that they have encountered or seen and are singularly-minded in providing a solution to solve that problem. They will stop at nearly nothing to try to bring something forward that benefits society. These are people who want to make a difference.

“I also see in these people a strong, inquisitive nature, Lau said. “They are receptive to feedback, suggestions and advice from others who are also entrepreneurs or who are subject experts in the area. I also see people who get back up and try again when they run into adversity. Most importantly, entrepreneurs should have fun developing and growing their businesses.”

There is no other career path that exposes an individual right out of school to the broad span of business responsibilities and challenges than that of an entrepreneur.

Even if one eventually works for an established company, the mindset and skills learned as an entrepreneur are invaluable to an individual’s success. It sets them apart from others and is a significant differentiator that will help that individual compete for a promotion or their next job.

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.

Article originally published in the American City Business Journals on October 24, 2017

My article published Oct.17 about the Harvey Weinstein scandal headlined, “Sexual harassment cases put the role of a company’s board in the spotlight” garnered a significant number of comments from women who have been subjected to sexual harassment. I also received comments from both men and women who have been bullied in the workplace.

An email from a former executive of a company within the entertainment industry that produces and distributes films wrote, “[the company was] deplorable in [its] business practices and treatment of both employees and members of the creative community. I quit the job within a year of starting.”

There is often a power differential between the victim and those they accuse of bullying or harassment. Frequently, victims don’t file a complaint on the company hotline or with HR because they don’t want to harm their careers, face retaliation or are unsure if others will believe their story.

In a June 20, 2014 Fast Company article headlined, “What if you worked for a boss like former American Apparel CEO Dov Charney?,” columnist Art Markman writes “… one complicating factor in a situation like this is that our culture excuses bad behavior by creative individuals. Artists, musicians, and even business leaders with big personalities garner respect for their ability to push boundaries within their genre….”

Why do “big personality” individuals who bully or harass employees or tolerate a culture of bullying or sexual harassment survive at their companies for so long? They are tolerated due to the financial rewards they bring to the company with little concern for harm to employees. The more these individuals benefit the company, the more leeway they are granted.

This was certainly the case with Harvey Weinstein, at The Weinstein Company, Travis Kalanick at Uber and both Bill O’Reilly and Roger Ailes at Fox News. It was only after these four individuals became a financial or reputational liability to their respective companies that they were removed from their positions.

In an Oct. 21 article in The New York Times headlined, “O’Reilly settled new harassment claim, then Fox renewed his contract,” columnists Emily Steel and Michael Schmidt wrote that Fox News parent company 21st Century reportedly made a “business decision” to renew O’Reilly’s contract with the knowledge of him privately settling numerous previous sexual harassment suits.

Didn’t 21st Century Fox assume that given O’Reilly’s history of sexual harassment, he would continue to sexually harass employees? Were financial considerations more important than protecting Fox News employees? O’Reilly finally departed Fox News after the loss of numerous sponsors.

On Oct. 21, Gretchen Carlson, former Fox New host, released a statement saying, “It’s horrifying to think that any company would dismiss an employee following multiple allegations of sexual harassment and then allow him back on the air a few months later.”

In an Oct. 22 article in The Wall Street Journal, columnists Sarah Krause and Kristen Grind report that Fidelity Investments is investigating allegations of sexual harassment within the firm. According to the article, it was reported that in a staff meeting, Brian Hogan, president of the Equity Group at Fidelity Investments, reiterated the company’s “zero tolerance policy for inappropriate workplace conduct, including sexual harassment.” Expect other companies to do the same.

Many times, men and women who are the victims of bullying in the workplace are reluctant to report this bad behavior for the same reasons women are reluctant to report sexual harassment – they feel they may face retaliation and don’t want to jeopardize their careers.

In a November 2014 article headlined, “Do you work for a tyrant? Do you have one working for you?” I wrote, “Tyrants who disrespect their direct reports cause untold damage to the performance of their organization as well as make life miserable for those who work for them. These managers tend to micro-manage, blame others for their mistakes and sap the creativity, initiative and vitality from the workplace. They also adversely impact the ability of people to make decisions without ‘checking with the boss.’

“No one can effectively do their job in an atmosphere of fear and intimidation. No employee should have to work in such a toxic environment. The best people don’t put up with it, and they eventually leave the company, resulting in a significant loss of talent that will adversely impact the firm’s performance and potential for growth.”

In that article, I relate my personal experience of having worked for a bully and tyrant who led one of the company’s divisions. He caused huge damage to the organization. At the time, my company did not have a hotline to the board or to the audit committee of the board.

The HR department knew he was a bully and tyrant as did the CEO. In the company’s climate survey, we didn’t report his bullying behavior, for fear that he would be able to identify those who wrote negative comments. We felt sure that we would face retaliation.

I was eventually promoted to a peer position of the tyrant. Three years later I was promoted to be his boss and shortly thereafter, I fired him, to the relief of the employees of that division.

So, what should be the best practices of organizations to protect against the type of leaders who harass and bully employees? All boards need to hold the CEO accountable for the right tone at the top and organizational culture so that employees aren’t sexually harassed or bullied. The head of HR needs to be strong so employees have confidence that HR will do something about the harasser or bully. Employees need to have trust in the board, the CEO and HR.

The leaders below the CEO also need to hold the leaders reporting to them accountable for tone and culture. Employees should not fear retaliation by using the employee hotline or confiding in the HR department.

The board and CEO should not tolerate anything less than ethical behavior from all the company’s employees.

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.

Article originally published in the American City Business Journals on October 17, 2017

Leaders at three high-profile companies have been forced to resign their positions this year due to sexual harassment scandals within their business or personal lives.

The latest to this list is the Weinstein Co.’s co-founder and CEO Harvey Weinstein following allegations that he sexually harassed more than three dozen women over many years. Weinstein has apologized for his behavior but has denied accusations of assault.

Weinstein had the power to influence the careers of many women, as did Fox News Chairman Roger Ailes and Bill O’Reilly, host of Fox News’ “The O’Reilly Factor.” Both Ailes and O’Reilly also faced allegations of sexual harassment this year and were forced to step down by the Fox board after the allegations persisted in the mainstream media and, in the case of O’Reilly, was followed by the loss of major sponsors.

Uber CEO Travis Kalanick, meanwhile, was forced out by major investors, not by the company’s board, after a number of scandals including a well-established culture of sexual harassment of female employees within the company that went ignored by Uber’s HR department.

What do Uber, the Weinstein Co. and Fox News have in common? They are companies led by prominent, powerful men within the testosterone-driven high-tech and entertainment industries. Unfortunately, the cultural norm at many of these companies is to turn a blind eye to sexual harassment of women, doing so without regard to the adverse impact on these women or the reputational risk to the company.

When the allegations against Weinstein became public, four directors of the all-male Weinstein Co. board resigned. Weinstein was fired two days later, on Oct. 8. On Oct. 14, a fifth director resigned, leaving only three directors.

Over the years, Weinstein reportedly made private financial settlements with his accusers. On Oct. 10, the Weinstein Co. board issued the following statement: “These allegations come as an utter surprise to the board. Any suggestion that the board had knowledge of this conduct is false.”

This statement by the Weinstein Co. board was contradicted in an Oct. 11 article in The New York Times. Columnist Megan Twohey wrote, “Lance Maerov, the [Weinstein Co.] board member who handled the [employment] contract negotiations [for Harvey Weinstein], acknowledged in an interview that he had been told of settlements, but said that he had assumed they were used to cover up consensual affairs.

“Mr. Maerov said that his chief concern had been whether Mr. Weinstein’s behavior posed a legal liability for the business, and that after receiving assurances that no company money was used and that no complaints against Mr. Weinstein were pending, he had approved the contract.”

What happens in a CEO’s private life has a bearing on that person’s ability to effectively lead a company. A board needs to trust that its CEO’s actions will not tarnish the company’s reputation. Harvey Weinstein violated that trust.

When the culture within a company or the behavior of the CEO tarnishes the company reputation, stakeholders will wonder why the board tolerates it, regardless of how important the CEO is “viewed” to the success of the company. This is something all boards need to think about.

Public companies are mandated to have a hotline to the audit committee of the board for employees to report sexual harassment, financial improprieties or other wrongdoing. Private companies should also have them. It is the job of the audit committee to ensure that hotline reports are investigated and that if employees using the hotline suffer retaliation, swift action is taken against those who retaliate.

Fox News is a subsidiary of 20th Century Fox, a public company. Did victims of sexual harassment within Fox News use it? If they did, what was the action taken? Did Uber and the Weinstein Co. have hotlines? If they did, were they used and what were the actions taken?

The board’s job is to hold the CEO accountable for establishing the right tone at the top and an organizational culture, as well as for his or her own behavior, and to take appropriate action if warranted. Given Harvey Weinstein’s behavior, he is hardly establishing the right tone at the top.

So why do boards keep CEOs whose ethics and values damage the reputation of the company? Are they so important for the results they achieve? Does it take the loss of sponsors, as in the case of Fox News?

No employee should be “safe” from being sanctioned, up to and including termination, regardless of their position or “how valuable” he or she is viewed by the company — or, in the case of Kalanick and Weinstein, even if they are the personification of their company.

Speaking at a recent Women in the Workplace dinner hosted by the Wall Street Journal, Sheryl Sandberg, COO of Facebook, said, “We can’t tolerate Harvey Weinstein-like behavior. … It’s not just about him, it’s not just about the other men that do it. It’s about all the people around the men [that] know and don’t do anything.”

Will the prominence of the Weinstein Co., Uber and Fox sexual harassment scandals catalyze a change in the culture of not only the entertainment and high-tech industries that are frequently in the news, but also industries that are less visible and do not attract as much publicity? Time will tell.

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.

Article originally published in the American City Business Journals on October 10, 2017

We frequently read about ordinary people doing extraordinary things to help others by exhibiting courage and, in some cases, exposing themselves to danger and possible death. In many of these cases, altruism drives their actions. Merriam-Webster defines altruism as an “unselfish regard for or devotion to the welfare of others” and is in the top one percent of words searched.

A horrific tragedy was perpetrated by Stephen Paddock on Oct. 1 in Las Vegas when he murdered 58 people and injured more than 500 attending the outdoor Route 91 Harvest music festival. Paddock sprayed the crowd with automatic-weapons fire from the 32nd floor of the Mandalay Bay Resort and Casino. Authorities have yet to establish a motive for the crime.

The number of individuals who lost their lives or were injured could have been even higher if not for ordinary people attending the concert who, along with first-responders, exhibited courage by performing acts of heroism. They exercised initiative at great personal risk, shielded loved ones and strangers, and herded people out of the line of fire.

On Oct. 2, White House Press Secretary Sarah Huckabee Sanders became emotional when in a press conference she honored those who protected others.

Sanders commented, “One man, 29-year-old Sonny Melton, had traveled from Tennessee to Las Vegas for the concert with his wife, Heather. When the bullets began raining down from above, Sonny shielded her from danger, selflessly giving up his life to save hers. …

“Others risked their own lives to save people that they have never met. Mike McGarry of Philadelphia laid on top of students at the concert to protect them from the gunfire. ‘They’re 20, I’m 53’ he said, ‘and I’ve lived a good life.’…

“Gail Davis, who was attending the concert with her husband, said she owes her life to a brave police officer who instinctively served as a human shield, protecting her from harm.”

In the June 6, 2014 NPR opinion piece headlined “Heroes among us: When ordinary people become extraordinary,” Laurel Dalrymple wrote, “I believe that many people have a little bit of hero inside them, and sometimes all it takes is one person [who assumes the mantle of leadership] to get the ball rolling.”

Dalrymple’s comment is typified by the events on United Airlines flight 93 on 9/11, when a handful of leaders among the passengers forced the flight to crash in a field in Pennsylvania before the hijackers could potentially cause a catastrophe in Washington, D.C. They knew they were about to make the ultimate sacrifice.

In February 1943, during World War II, on the torpedoed SS Dorchester, four army chaplains — a priest, a rabbi, a Methodist minister and a Dutch Reformed minister — gave up their own life jackets to others. It was reported that the four courageous chaplains were seen standing on deck with locked arms, singing hymns and praying as the ship went down. There is no higher act of altruism or valor than giving up your life to save another.

Leaders have a bias for action. Notwithstanding possible personal risk, they inspire others to do the same. This is the case whether the venue is an outdoor music venue, the cabin of an aircraft, a sinking ship or, to bring it into a workplace environment, an employee within an organization who decides to report illegal activity to a company’s hotline — such as in the recent Wells Fargo bogus account scandal. A number of these employees were fired for doing so.

Hurricane Harvey tragically disrupted the lives of the residents of Houston and those who live along the Gulf Coast of Texas and Louisiana. Many of the victims had to be evacuated from their homes because of the record rise in flood waters. A significant number were rescued by citizen volunteers using their personal water craft, demonstrating that Americans help each other in times of need.

Two of these citizen volunteers were Bill Brock and Doug Lile, employees of Femco Holdings’ East Texas facility in Gladewater, 200 miles north of Houston. I am on the board of this company, which provides repair and machine shop services to a variety of industries, including oil and gas production as well as mining. I know both Brock and Lile and spoke to them about their decision to help.

Brock owns a pickup truck and Lile a 20-foot fishing boat. Hearing the news about people stuck in their homes endangered by rising flood waters and the response by ordinary Americans to help rescue them, they decided to drive to Houston and do the same.

When they arrived, they were stunned by the number of citizen first-responders who arrived with fishing boats, duck-hunting boats and ski boats to help the police and the military rescue people in harm’s way.

Brock said, “Mail boxes were underwater, and at many houses, water rose to beyond first floors. We ran into boats that were overloaded with people and their pets. We approached people in their homes who did not want to leave. We took people back to their homes to pick up keepsakes and pets.”

Lile added, “At night, we slept in our truck and went back out the next morning. There is nothing like knowing you made a difference in other people’s lives.”

Brock’s and Lile’s compensation and all their expenses were covered by Femco. As a Femco board member, I am proud of these two employees and my company.

Someday, each of us may have the opportunity to demonstrate courage and leadership – to step up to help others – to do the right thing. Hopefully, we will do so.

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.

Article originally published in the American City Business Journals on October 3, 2017

President Donald Trump continues to face criticism of his leadership style and values from many Americans.

Some pundits have argued that a CEO cannot be an effective president. I don’t agree. Let’s not broad-brush an entire profession because of the performance of one individual.

On Aug. 1, Lucy Marcus wrote an article in Market Watch headlined, “If Trump were America’s CEO, he would be gone by now.”

Marcus wrote, “Trump fancies himself America’s CEO; indeed, he won the presidency partly because he pitched himself as a successful business tycoon…. If any CEO walked into a meeting as ill-informed and poorly briefed as Trump often is, breezily spouting empty superlatives and faulty information, they would have quickly lost respect outside the company and support within it.”

I agree with Marcus’s assessment. Trump as president would not last as a CEO reporting to an independent board of directors.

Trump has earned low marks in five imperatives that are critical for his (and anyone’s) success as a leader:

1. Build a strong and effective team

The White House team that Trump has built has been adversely impacted by frequent firings and resignations, as well as the hiring of people – his daughter and son-in-law, to name two – who have no political or diplomatic experience. This undermines trust among the staff, and without trust, little gets accomplished.

Trump has not been consistent in his positions and has not been factual on many issues, two traits valued by all effective leaders. This makes it difficult for White House staffers to do their jobs, since consistency, personal credibility and being factual are the underpinnings of the success of any team.

There are reports that many staffers have their résumés out, looking to leave the White House before normal practice of completing a full year in their positions. This is not a good sign.

2. Do what’s right for your “customers”

In the president’s case, this means the American people.

A cornerstone of Trump’s legislative agenda is to repeal Obamacare. He should not do it in a way that hurts millions of Americans.

A handful of courageous Republicans have put people before party and refused to support legislation that would make health insurance unaffordable for up to 30 million Americans and weaken protections for those with pre-existing conditions. This proposed Republican legislation was supported by Trump, in violation of his promise to be “president for all Americans.”

If the Democrats were to propose legislation that fixed the Affordable Care Act and dubbed it “Trumpcare,” Trump would most likely support it. It would appear that his only interest is to tell his base that he fulfilled his campaign promise to repeal and replace Obamacare; it doesn’t matter what that replacement is.

3. Strengthen relationships with allies

Through actions and words, Trump has repeatedly put distance between himself and our allies. His lack of diplomatic skills is appalling. He is like a bull in a china shop.

Trump has announced his intention of pulling the U.S. out of the Paris climate accord, even though there is overwhelming evidence that the earth is warming as evidenced by rising temperatures, rising sea levels and the loss of arctic ice.

Trump also has aggressively announced his intention to renegotiate or withdraw from the North American Free Trade Agreement in a way that enflames our relationship with Canada and Mexico. He has done the same thing in his announcement that he would build a wall and have Mexico pay for it. They won’t, as a matter of national pride.

You don’t accomplish initiatives by enflaming situations; you defuse them.

4. Be credible, admit mistakes and have a thick skin

In the aftermath of Hurricane Maria, Puerto Rico’s infrastructure has been crippled. Homes have been destroyed. The hurricane has heavily damaged electric power and telecommunications systems. Gasoline, food, water and medicine have been in short supply. People are suffering. Conditions remain tenuous for many people.

The federal response to the hurricane’s impact on more than 3.5 million American citizens who reside in this U.S. territory has been slower than the response after the impact of Hurricane Harvey on Texas and Hurricane Irma on Florida.

When criticized for the delayed response by the mayor of San Juan, rather than admit help could have arrived sooner, Trump went on the attack and criticized her and the residents of Puerto Rico for not doing more to help themselves.

Trump needs a thicker skin. He should have acknowledged the reason for the delay and outlined the resources currently being brought to bear to help these U.S. citizens. That is what effective leaders do – not criticize the victims.

5. Create a sense of unity

President Trump has polarized the country more than any former president. People on the fringe of the far right have been empowered by Trump to express their hate for people not like them.

Trump has used the issue of NFL players kneeling during the singing of the national anthem in a divisive way. His inflammatory comments have further divided people. Effective leaders do the opposite; they unite people.

In response to racial slurs written on message boards at the United States Air Force Academy Prep School, USAFA Superintendent Lt. Gen. Jay Silveria on Sept. 28 gave a powerful speech to his cadets, faculty and staff in which he was crystal clear about the values he demanded within the academy. This is what effective leaders do.

Silveira said, “That kind of behavior has no place at the prep school, no place at USAFA and no place in the United State Air Force. You should be outraged not only as an airman, but also as a human being. …

“We come from all walks of life, all parts of this country, from all races, from all backgrounds and gender all makeup, all upbringing. The power of that diversity comes together and makes us that much more powerful. …

“So just in case you’re unclear on where I stand on this topic, I want to leave you with my most important thought today: If you can’t treat someone with dignity and respect, then you need to get out. If you can’t treat someone from another gender, whether that’s a man or a woman, with dignity or respect, then you need to get out.

“If you demean someone in any way and if you can’t treat someone from another race or different color skin with dignity and with respect, then you need to get out.”

Silveria’s speech went viral, indicating the thirst Americans have for a leader to take this stand. It’s exactly the type of speech President Trump should had made after Charlottesville.

This is what real leadership looks like.

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.

Article originally published in the American City Business Journals on September 26, 2017

Reputation is defined by Merriam-Webster as “overall quality or character as seen or judged by people in general.” Reputation is within the top 30 percent of the words whose definition is searched on the Merriam-Webster website.

Ethics, meanwhile, is in the top one percent of the words searched, indicating its importance within our society. People do not want to work for or deal with leaders or companies whose reputations are tarnished or who are not ethical.

Reputation and ethics are key determinants to building a sustainable competitive advantage and becoming a preferred provider to a market.

Why do so many organizations and people act in a way that damages their reputations? To cite just two examples, Uber and Wells Fargo (as well as their former CEOs) have damaged their reputations this past year. Here’s a look at some of what it cost them.

Uber

Uber has had a host of scandals including sexual harassment that went unaddressed within the company. These scandals have hurt Uber’s reputation and market share. Uber’s major investors, not the company’s board, forced founder Travis Kalanick to step down as CEO of the company in June.

Neither Kalanick nor the board realized the importance of an ethical culture in building and operating Uber as a transformational change agent of the ride-hailing industry.

In the latest incident adversely impacting Uber’s reputation, Transport for London, the governmental organization responsible for the city’s transportation system, recently announced that it would not renew Uber’s operating permit.

TfL issued a statement that said in part, “TfL considers that Uber’s approach and conduct demonstrate a lack of corporate responsibility … [including the] use of Greyball in London – software that could be used to block regulatory bodies from gaining full access to the app and prevent officials from undertaking regulatory or law enforcement duties.”

This is not the first time Uber has been accused of using Greyball to avoid detection by law enforcement, either.

Dara Khosrowshahi, who was named Uber’s new CEO in August, issued a statement — first published in London’s The Evening Standard — following the TfL decision that said, “While Uber has revolutionized the way people move in cities around the world, it’s equally true that we’ve got things wrong along the way. On behalf of everyone at Uber globally, I apologize for the mistakes we’ve made.”

Wells Fargo

Wells Fargo’s reputation was seriously damaged when, in September 2016, it was revealed that bank branch employees opened as many as 2 million bogus customer deposit and credit card accounts to meet unrealistic sales goals. Recently it was revealed that the number of bogus accounts was as high as 3.5 million.

The Consumer Financial Protection Bureau fined Wells Fargo $185 million and ordered the bank to reimburse customers $5 million in fees they were charged due to these unethical practices.

In a Sept. 21, 2016 CNN Money article headlined, “ I called the Wells Fargo ethics line and was fired,” reporter Matt Egan wrote that the news organization spoke with a number of Wells Fargo employees who were fired for reporting unethical practices on the ethics hotline and to the bank’s human resources department.

In a subsequent CNN Money report, Eagan wrote, “Wells Fargo says it has found evidence that at least some of these whistleblower retaliation claims published by CNN Money and elsewhere may have merit.”

Wells Fargo CEO John Stumpf was forced to step down in October 2016. Senator Elizabeth Warren (D-Mass.) has called for the entire Wells Fargo board to resign. The bank has suffered significant reputational damage and loss of business, not to mention the damage to the careers of those lower level employees who reported the wrongdoing.

Personal reputation

The reputations of companies often bounce back over time due to a change in leadership that brings a change in culture.

Damage to personal reputations, however, may never be fully repaired. The most important thing any of us really have is our personal reputation. We need to protect it at all costs.

Your personal reputation depends on your values and ethics and on doing the right thing.

As a board member serving on both for-profit and nonprofit boards, I view my reputation and that of my fellow board members through the eyes of a new director joining the board. I never want a new board member to ask, “Why haven’t the incumbent board members done their jobs?”

The most admired leaders are those who have a personal reputation for acting ethically and establishing a culture in which their employees do the same. The organizations with these types of leaders are the ones that flourish over the long term.

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.

Article originally published in the American City Business Journals on September 19, 2017

I recently wrote an article titled “7 principles for effective negotiations” in which I describe the primary principles of any negotiation. In today’s article, I outline five questions that need to be addressed by those about to a negotiate a long-term strategic partnership, such as a joint venture.

1. Do you and your prospective joint-venture partner share the same strategic objectives for the JV?

The time to find out whether the strategic objectives of each party align is before negotiations start, not after the JV is up and running. Not having the same strategic objectives is a significant reason that JVs fail.

Will your partner be committed to investing in future operational improvements as well as invest in future JV growth opportunities? Find out now rather than later.

2. Does your prospective partner have similar values and ethics as your organization?

Whether entering a new business with a JV partner or buying the JV ownership interest of an existing business, spend sufficient time doing due diligence on your prospective partner. Do the CEOs of each organization embrace similar values and tone at the top? Do the organizations share similar cultural norms and do they have similar operating philosophies?

If values, tone and culture are not compatible, the time to know is before discussions get too far down the road. End the discussions if the differences cannot be bridged.

3. Does your prospective JV partner have the wherewithal to meet the necessary financial obligations?

How is your prospective partner financing their portion of the joint venture? How much equity are they investing vs. debt? The higher the debt, the higher the potential of them walking away from their obligations in the event of a downturn in business — which may make your company liable for their debt obligations.

If the other party is a subsidiary of a larger company, does the subsidiary have the assets to meet their obligations under the agreement, or should you get a guarantee from the parent company?

4. Will the JV be a 50/50 partnership, or will one partner have a majority ownership interest?

I have participated in joint ventures holding majority, minority and 50/50 ownership positions. I prefer majority ownership to ensure operational control of the joint venture, even when the appointment of the CEO rotates between the partners in the JV.

It is not always possible to get your prospective partner to agree to your desire to have a majority ownership position and the best that can be achieved is a 50/50 ownership interest. Or, your partner may insist on a majority interest. Holding a minority ownership position, your interests are protected by the terms in the JV agreement on minority rights, which you should make as exhaustive as possible.

A reason for majority/minority ownership positions is if there is a difference between the JV partners’ financial capacity to make the initial investment or to fund future growth initiatives. In these cases, the partner with the higher capacity takes the majority ownership position.

5. Does the joint venture agreement include a satisfactory divorce process?

What are the terms governing the termination of the JV? Some JV agreements include a “shootout clause,” in which one party makes an offer that must be accepted or alternatively topped by the other party.

A shootout clause is potentially dangerous for either party and therefore, if included in the JV agreement, it is rarely exercised. In the divorce negotiations in which I have participated, the threat of either party using the shootout clause drove both parties to enter into good-faith negotiations with each other and reach agreement on the terms of exit without the use of that clause.

In any negotiation, carefully review contract terms and obligations. Certain events may have a low probability of occurring but could have a catastrophic adverse impact to the venture or to your company as a partner in the venture. Operationalize all scenarios that could occur to determine their impact. This is important before entering any business arrangement.

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.