whistle-blower

Whistleblowers are crucial to uncovering wrongdoing. They must be protected.

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Article originally published in the Philadelphia Business Journal on October 14, 2019

The whistleblower accusation about President Donald Trump’s July 25 phone
conversation with Ukraine’s President Volodymyr Zelensky has dominated the
news. Since then, another whistleblower has come forward. Given the spotlight on
these whistleblowers, I decided to update an April 2016 article I wrote on the
importance of protecting whistleblowers from retaliation.

Many times, a report by a whistleblower is the only way to uncover illegal or
unethical acts in the private sector or in government. The whistleblower who
uncovers and reports wrongdoing in business is a hero, and in government, a patriot.

Whistleblowers in government are protected by the Whistleblower Protection Act of
1989. Congress passed the Sarbanes-Oxley Act (SOX) in 2002, requiring public
companies to put in place a whistleblower hotline to report fraud and illegal
activity. Those who retaliate against whistleblowers are subject to criminal
penalties. All organizations should have a hotline in place.

Why is a whistleblower hotline important?

A hotline provides employees a safe place to file a report about illegal or unethical
activity. Hotline reports from employees provide an opportunity for your company
to address issues in a proactive manner, and avoid or lessen financial liability and
legal or reputational damage to your company.

Are some hotline reports found to have little substance or be malicious in some
manner? Yes. The reports with no merit can be screened out. That is part of the
process. A rough measure of the climate within an organization and a company’s
relationship with employees are reflected in the types and substance of the hotline
reports that are submitted.

In practice, employees use hotlines for anything they are uncomfortable reporting
using normal company channels, mostly due to fear of retaliation. In addition to
financial fraud or other illegal activities, these reports could run the gamut from
perceived violation of employee anti-discrimination laws, to violation of company
travel and entertainment policies, to a tyrant in a management position making life
miserable for direct reports.

Role of the audit committee

The audit committee of the company’s board has the responsibility to review hotline
reports and the results of the subsequent investigation. The hotline is monitored
either by the organization’s internal auditor, legal counsel, or in some cases, an
outside firm.

Whoever is monitoring the hotline informs the chair of the audit committee and the
CEO of hotline reports, as long as the CEO is not the subject of the report. In the
event that the hotline report involves the CEO, the monitor directly informs the
chair of the audit committee.

Because I used to work for a tyrant, when one is reported through the company’s
hotline, as a member of many audit committees, I always take a personal interest in
how the complaint is investigated by executive management and the actions to be
taken.

Without hotline protection, employees might not report wrongdoing for fear of
retaliation

While president of PQ’s industrial chemicals group, an employee informed me that
his general manager had violated an important company policy, which could have
had serious ramifications. PQ did not have a hotline at that time.

After searching for and identifying his accuser, the general manager brought him to
meet with me and asked the employee if he, the general manager, had violated the
policy. What an intimidating position in which to put the employee! Not knowing if
the general manager would be terminated and fearing retaliation if he wasn’t, the
employee withdrew his report of the violation.

I terminated that general manager a short time later. I don’t know why the general
manager thought he could get away with intimidating his employee.
Outside of the protection of a company’s hotline process, don’t expect an individual
to make an accusation of wrongdoing if the accused will continue to exercise power
over or could cause harm to that individual. Why would they place themselves in
harm’s way?

Even within the hotline reporting process, the reporter is taking a risk if the accused
remains in their position. This is clearly evident as the hunt for the identity of
Trump’s whistleblower by the president’s supporters plays out on the national stage,
in attempt to damage the whistleblower’s credibility.

Is it necessary to reveal the identity of a whistleblower? Not if evidence is
uncovered that corroborates the allegations made by the whistleblower. Why put the
whistleblower in harm’s way?

All hotline reports need to be investigated

Even when the evidence and subsequent investigation indicates that the allegations
are factual, there are those who will attack the whistleblower to divert attention
away from the accused. Those who attack a whistleblower to discredit or intimidate
them don’t realize that they destroy their own credibility and character, and damage
any trust that people may have in them in the future.

Those who retaliate against hotline reporters need to be terminated. Handling
hotline reports in the right way builds employee trust and will significantly reduce
the possibility of a scandal and damage to your reputation or that of your
organization.


Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist 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.

360 degree feedback

360-degree input: The most effective way of assessing employee effectiveness

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Article originally published in the American City Business Journals on September 4, 2019

As CEO, how do you determine whether the individuals who report to you are
effective with the people they deal with? Have you ever been concerned about the
people reporting to your direct reports? Some individuals manage up very well, but
their peers and subordinates may find them untrustworthy or very difficult to work
with.

A major responsibility of every boss is to assess the performance of the individuals
who report to them and provide feedback on strengths and areas for improvement.
This includes boards providing feedback to CEOs.

A more complete picture of an employee’s performance

The best way to understand how a direct report performs is to obtain 360-degree
input from the people they deal with. A 360-degree anonymous input process can
provide a more complete picture of an employee’s performance. Information is
collected by interviewing the employee’s direct reports and peers to get a sense of
their effectiveness and how well the employee works with others in the organization.
Interviews can be conducted by the individual’s boss or by an outside firm,
depending on the culture of the company.

In my role as a coach and counselor, I am periodically told of leaders within
organizations who are ineffective at what they do, lack the trust of those they deal
with or are tyrants. Those who deal with these people question why the ineffective
individuals remain in their roles or aren’t given feedback to improve. They ask, why
don’t their bosses know about how poorly they are viewed by the organization and if
they know, why don’t they do anything about it?

I often hear frustration from those who I coach and counsel about their bosses who
are terrible leaders. Because that individual’s boss may not be aware of how
ineffective these direct reports are, I would add an additional feature to the 360-
degree interview process.

Ask how effective their leaders are in their roles

360-degree interviewees should be asked if they would like to share anything about
the effectiveness of any of the direct reports of the individual under review. This
would help alleviate frustration because there would be a way to make their views
known about the ineffectiveness of that direct report.

In a perfect world, this should not be necessary. In the real world, it only indicates
the degree to which tyrants and those who do not engender trust are tolerated. The
employee hotline to the audit committee of the board is a way to report a tyrant if
senior management takes no action. In some cases, it’s the CEO who is a tyrant or
does not engender trust of the organization. If the CEO is not coached to improve
their style, it reflects poorly on the board. When the company starts losing good
employees to competitors, perhaps the board will take action.

From personal experience, 360 degree feedback was the most valuable performance feedback

My personal experience working for a tyrant was prior to the introduction of
whistleblower hotlines and the 360-degree input process. I was promoted to be the
tyrant’s peer, and then promoted to be his boss. He continued to create an atmosphere
of fear and intimidation, so I fired him. While working for the tyrant, I was very
close to leaving the company. Had I left, the company would have been deprived of a
future CEO.

As chief operating officer of PQ Corporation, I introduced the practice of 360-degree
assessments to the organization. When I became CEO, I asked my board to conduct
annual 360-degree assessments of me. It was the most valuable performance
feedback I have received during my business career.

What to do if the process is politicalized?

There are those who believe that the results of the 360-degree input process should
only be shared with the employee as a developmental tool. Even if an outside firm
conducts the interviews, I believe the boss should also receive the report to
understand how the employee is interacting with their direct reports and their peers.
The 360-degree process can be politicalized, and feedback could be tainted.
Inconsistent, one-off politicalized comments can be readily identified and screened
out.

Be sure to provide performance feedback periodically to your employees. Done
properly, it is the best way to help your employees grow, develop and improve their
leadership effectiveness.


Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist 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.

businessteam

9 ways to build trust within your organization

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Article originally published in the American City Business Journals on August 6, 2019

Given the importance of trust in enabling organizations to thrive, this article
updates my April 2016 article, “How to earn employee trust to build a high-
performance team.”

Have you ever worked in an organization where there was a low level of trust
among peers, or where direct reports did not trust their boss or the CEO of the
company? This type of organization has a toxic atmosphere, which significantly
reduces its effectiveness.

What is “trust?” The Merriam-Webster dictionary defines trust as a “belief that
someone is reliable, good, honest and effective … one in which confidence is
placed.” Wouldn’t we all like to work within organizations where all employees
feel this level of trust in their leaders and peers?

Stephen Covey, the late motivational speaker, writer and advisor, once wrote,
“Without trust we don’t truly collaborate; we merely coordinate or, at best,
cooperate. It is trust that transforms a group of people into a team.” When people
don’t trust each other, there is an invisible elephant in the room, which may
adversely impact the effectiveness of the decision process.
Whether you are CEO, a mid-level manager or an individual contributor with no
direct reports, trust needs to be earned. So, how do you earn the trust of others?

Be consistent and readable by those within your organization

As a CEO or other leader, there should be no misunderstanding as to your tone at
the top – the values to which you hold yourself and your employees accountable,
and the type of organizational culture you are nurturing. Employees trust and want
to work for an organization with high ethical standards, and work for a leader that
lives by those standards.

As a leader, ensure your expectations are understood. Situations will arise when
decisions need to be made by your employees for which there is no operating
procedure or precedent. Employees will fall back on their good critical judgment
and proceed in a way consistent with your expectations, tone and culture.

Meet your commitments

Don’t make a commitment you cannot keep. If the situation changes and you find
that you can’t keep a commitment, notify the individual immediately. She may have
made a commitment to others, based on your commitment to her.

Don’t blame other people for your mistakes

If you make a mistake, own it and share how next time the issue will be handled in
a different manner. You don’t create trust by blaming others for your mistake.
Employees that do this never last long within the kind of organization in which we
all want to work.

Allow your direct reports to share with you a contrary point of view

I have worked for bosses who were not interested in contrary views. This did not
engender trust. As the leader, compare other’s opinions on how to proceed on an
issue with your own view. Through discussion and debate, you may accept their
view, or may discover a third alternative path, better than either of the first two
paths. Follow this process and you will rarely choose the wrong way to proceed.

Create an environment that allows employees to share the brutal facts of
reality

As a leader, you want your people to feel safe in sharing bad news. Don’t shoot the
messenger. You can’t solve a problem unless you know what it is. You want your
people to have trust and confidence that you will listen to them.

Help employees develop a sense of ownership in what they do

Empower employees, don’t micromanage. Show your employees that you trust
them by letting them decide how to accomplish an objective. This will help your
employees develop a sense of ownership in what they do. When this occurs, you
can rely on them to drive results.

Be accessible and transparent

Create opportunities for all employees – not only your direct reports – to talk with
you. Walk around the office or factory floor. Ask how people are doing. However,
avoid telling them what to do. If an issue arises that needs to be addressed, talk with
your direct report responsible for the area. Hold town meetings to talk about the
business and respond to employees’ questions. Be as transparent as possible,
realizing that there are things that cannot be publicly shared.

Before making a decision, hear both sides of an issue

No matter how compelling an argument is presented by an individual on one side of
an issue, there is always the other side, which may be more compelling. Hear both
sides before making a decision. The individual on the losing side of the issue won’t
like your decision, but will respect the fact that you went through a fair process and
heard both sides.

Live your values

Living your values engenders trust. As CEO of PQ Corporation, I experienced a
minor OSHA recordable accident while traveling on business. I insisted that the
accident be written up, and for that quarter, I was one of PQ’s safety statistics.
Word was spread to our 56 manufacturing facilities around the world that the CEO
called an OSHA recordable accident on himself. This demonstrated that I held
myself accountable to the same standards as I held our employees.

The best talent will want to work for companies where there is a high level of trust
with the senior leadership and among fellow employees. These are the companies
that have the lowest turnover and achieve the highest long-term returns to
shareholders. This is the type of company at which we all want to work.


Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker,
advisor and nationally syndicated columnist 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.

shutterstock215304949

6 ways for a CEO to think like an activist investor

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Article originally published in the Philadelphia Business Journal on July 22, 2019

CEOs of many public companies raise their guard when they receive a phone call
from an activist investor wanting to discuss how their company can improve its
performance and shareholder return. This is not necessarily the right reaction. In
April 2015, I wrote an article on this subject. This is an update of that article.

Activists invest in underperforming companies and push for improved shareholder
return through cost reduction, a change in business strategy or leadership, or the
pursuit of strategic options. If shareholder return cannot be improved through other
means, the activist might push for outright sale of the company or one or more of its
operating units.

If unsuccessful in convincing the CEO and board to implement their proposals to
increase shareholder return, an activist may threaten a proxy fight to seat their own
director slate.

All outside directors have a fiduciary duty to be independent, even if nominated by
an activist and seated through a proxy fight. These directors need to make their own
independent decisions based on what is best for the shareholders after board
deliberation, not what is best for the activist who nominated them.

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

Dealing with activists who are adversarial is a distraction to the CEO and the board
and takes time and focus away from the business. A proxy fight puts the CEO and
the board in the public spotlight. How do you lessen the likelihood that your
company becomes an activist target?

Think like an activist when formulating and executing strategy

Companies that outperform their peer group are usually not targets of activists,
because the potential for improvement is less when compared to companies that
underperform. Outperforming your peer group should be your objective regardless.

The board needs to hold the CEO (and themselves) to high-performance standards

Activists like to target under-performing companies that have a weak CEO and are
governed by a weak board. I have served as a director of three public companies.
When a new director joins our board, the last thing my fellow incumbent directors
and I want is to be viewed as not having held the CEO to high-performance
standards.

Ensure decisions are made based on what is best for the shareholders, not the CEO or board

What is in the best long-term interests for the shareholders should be the focus of
the CEO and the directors, not what is in their personal best interests. After an
evaluation of the alternate strategies to improve financial performance and
shareholder return, if selling the company is in the best interests of the shareholders,
this is the strategy that should be pursued by the board, recognizing that the CEO
might be replaced and the directors will step down after the sale.

Guard against complacency

The directors of a company need to guard against complacency, which may set in
due to the growing relationship directors have with the CEO over time. Independent
directors are just that – independent. The most important responsibility of directors
is to hire the CEO and determine the CEO’s compensation based on results. The
board of directors must also be capable of terminating the CEO if warranted.

Engage with large shareholders

In his February 2015 letter to independent directors, F. William McNabb III, former
chairman and CEO of Vanguard, the world’s largest mutual fund company, wrote,
“We’ve observed that the best boards work hard to develop ‘self-awareness,’ and
seek feedback and perspectives independent of management. They ask the right
questions to understand how their company may be different than [their] peers, and
whether those differences are strengths or vulnerabilities.”

McNabb continues, “We believe boards that provide such context to investors are
less likely to be surprised by activists or proxy votes, and more likely to have strong
support of large long-term shareholders.” Wise advice.

If you do receive a phone call from an activist, listen

Activists spend a significant amount of time studying industries and the companies
that comprise those industries. Many times they know more about the industry and a
company’s competitors than the company itself. They are a source of valuable
information, and can provide a prospective different than that of the CEO or
directors of the company. The strategies they suggest to increase shareholder
performance may have validity, and change the paradigms of management and the
board.

In addition to public company CEOs, much of the advice above is also valid for the
CEOs of private companies. CEOs, think like an activist. Boards, hold the CEO to
high-performance standards.

Recognize that the company is there for the benefit of the shareholders and guard
against complacency. Engage with large shareholders, but be careful not to violate
SEC Fair Disclosure rules against providing inside information to selected
shareholders. When an activist calls, listen to their ideas to increase shareholder
value. These are the best defenses against activists, who will go after lower-hanging
fruit.

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.

business-goal

How to use the goal-setting process to achieve great performance

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Article originally published in the American City Business Journals on July 9, 2019

Setting an organization’s annual financial goals has importance beyond financial considerations. If the probability of achieving the financial goals is low and in most years the goals are not achieved, employee morale suffers and the ongoing funding of growth initiatives critical to the long-term success of the company is jeopardized.

I have written articles on this subject, in January 2015 and in December 2018. This article shares some additional perspectives on the goal-setting process.

Setting goals at PQ Corporation as a business unit leader, then as the company’s CEO and later as a board member of other companies approving the financial goals of their CEOs, I have developed a perspective on the annual goal-setting process. Done effectively, goal setting drives execution and individual, team and organizational performance.

As a business unit leader, I worked for CEOs who set stretch financial goals for the company. Upside potentials were not balanced against downside risks. These CEOs believed that actual performance with stretch goals would exceed the performance that would have been attained, had the goals been set more realistically.

However, since there was a relatively low probability of achievement, many employees did not take ownership in these goals, and most years the company fell short of achieving them. The board of directors held management accountable for achieving what they said they would achieve, and when performance fell short, the board was not happy.

After I was named CEO of PQ, I changed our annual financial goal-setting approach. Each business unit set goals that were reasonably attainable, based on strategies that provided a path toward achievement. However, I set the expectation that the financial goals should be exceeded by the greatest extent possible, and our employees should have fun doing so.

The higher the financial performance, the higher the bonus payment for that portion of the bonus tied to financial results. We were completely transparent by sharing with the employees the bonus pool formula, and they were energized as their results increased the size of the pool as well as their own possible bonus payment.

PQ business unit leaders occasionally wanted to build a reserve (i.e. commit to a lower earnings number) in their goals, if there were downside risks in their business plans not offset by upside potentials. I permitted them to do so. Adding up all the earnings of the business units, I would consider whether the corporate earnings goal was reasonably attainable. If not, I would build a president’s reserve into the company’s earnings goal. This is not common practice among many CEOs.

As the months passed, employees developed and executed strategies to exceed their goals. With this new approach, PQ’s earnings grew from $14 million (adjusted for an adverse material competitive situation) to $43 million over five years which included 9/11 and the severe recession of 2002.

After 2000, we never had a down quarter. As measured by revenue growth, earnings growth and return on assets, we moved from fourth quartile performance to first quartile performance, compared with 17 public peer companies within the chemical industry.

I did not achieve these earnings results — the men and women who operated our businesses around the world achieved them. I focused on tone at the top, corporate culture, ensuring we have the right people in senior leadership positions, and corporate strategy.

My approach as CEO of PQ — setting reasonably attainable goals that resulted in achieving earnings growth — was endorsed by Shark Tank star Kevin O’Leary. At the 2018 Disruptor 50 conference in Philadelphia, O’Leary discussed the factors that influenced the return of capital of the 37 companies within his venture portfolio. O’Leary said, “A study showed … 90 percent of the [cash] returns came from companies run by women.” Why?

O’Leary said, “Companies run by men hit their quarterly sales targets 65 percent of the time. … Women-led companies hit their targets 95 percent of the time. … If you are on a winning team in any sport, … you have a winning culture. Winning cultures have different metrics than just financial reward. Being part of a winning team is powerful. These [women-led] teams are constantly hitting their targets.”

O’Leary talks about his views in a March 2018 CNBC article headlined, “Shark Tank star Kevin O’Leary: Women-run businesses make me the most money – here’s why.”

In this article, O’Leary says, “If employees aren’t meeting their goals … frustration can lead to turnover, which is particularly costly for small operations. Women are better at avoiding this pitfall.

“When you meet your goals 95 percent of the time, you change the culture of your business. People feel they’re working in a winning organization. That’s why women are doing better in business — they keep their people. The staff are sticky. They want to work there because they’re hitting their goals. … You don’t have to reach for the stars, you want to win 95 percent of the time. That’s the secret sauce.”

The shareholders of the company don’t know what the annual financial goals of the company are and don’t care. They only care if the financial results exceed previous year’s results and exceed the investment returns of similar companies within the industry.

The goal-setting process is a means to an end — great performance. As leaders of our respective organizations, we should change our paradigms about goal setting. Financial goals should only be an intermediate target, and exceeded by the greatest extent possible, in an environment where employees are rewarded handsomely for doing 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.

People quit bosses, not companies

People quit bosses, not companies

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Article originally published in the Philadelphia Business Journal on April 29, 2019

Performance goes beyond the achievement of financial or other goals to which leaders are held accountable. I frequently hear complaints by employees, including those employees who report to CEOs, that their bosses lack fundamental leadership skills. Ensure you don’t lose your good employees because of the lack of leadership skills of the individual they report to.

I offer the following advice to all leaders to improve their leadership style:

Don’t micro-manage

A frequent complaint is that bosses micro-manage and tell direct reports how to accomplish a task, rather than state expectations, ensure the resources are available to get the job done, and cut the direct report lose to achieve results.

Steve Jobs, the former chairman and CEO of Apple once said, “It doesn’t make sense to hire smart people and tell them what to do. We hire smart people so they can tell us what to do.” Lee Iacocca, former automobile industry executive once said, “I hire people brighter than me and then I get out of their way.” Why don’t all leaders have the same philosophy as Jobs and Iacocca?

Acknowledge the work of a direct report

A number of individuals have shared with me that their work is not acknowledged when passed up through the organization. I personally experienced this when I was told that all work leaving our department had to have the name of the department’s manager on it, rather than a cover letter transmitting the work of a direct report. I knew that this was not the kind of manager I wanted to work for.

In another instance, I was told by the creator of an advertising campaign of an experience she had after she presented her work during a meeting with a client. The client loved the campaign. After the presentation, she was not invited to join her boss and the client at a lunch celebrating the campaign’s creation. Why was her boss tone-deaf and insensitive to how that made her feel? This is not the way to inspire and motivate direct reports.

Respect female colleagues as you would respect male colleagues

I have heard from many women that they are not as respected as men within the workplace. Many feel that this is not purposeful, but part of an ingrained cultural norm.

A company with an organizational culture that tolerates a hostile work environment or doesn’t respect both men and women sends signals to some current and potential employees that they are not welcome and valued. The recent #MeToo movement has shined a light on the issue of sexual harassment in the workplace and it hopefully signals the start of a cultural change.

All organizations should create a respectful environment and provide advancement opportunities regardless of gender to all employees based upon their skills and track record of accomplishments.

Don’t tolerate a direct report who is a tyrant to his or her direct reports

I used to work for a tyrant who did significant damage to morale. I nearly left the company but was promoted around him and became his peer within the company. I was promoted again and became his boss. I fired him. Had I left, the company would have been deprived of a future CEO.

I still wonder why the CEO of the company tolerated the tyrant. Don’t make this mistake if you have a tyrant working in your organization.

Perform 360-degree reviews of your direct reports

What is the best way to obtain a full picture of the effectiveness of a direct report? Obtain 360-degree feedback on their performance. Done properly in organizations where this process has become a cultural norm, this performance tool provides feedback to direct reports to help them be more effective.

Obtain input about your direct reports from people reporting to them, from peers and from senior individuals within the organization. This information can be used in the direct report’s performance review. In many cases, it is the best way to identify and communicate to the direct report their strengths and areas for improvement.

At my company, I introduced a 360-degree feedback system while president of our world-wide chemicals business. Not only did I receive and communicate 360-degree feedback to my direct reports, but I subjected myself to the same process, conducted by our company’s CEO.

When I became the CEO of the company, I continued this process, with the chairman of our board who obtained 360-degree input on me from my direct reports. I found it to be one of the most valuable feedback mechanisms to help me improve my performance as a CEO. To undergo 360-degree reviews was my decision. It should not be mandated by the board but be a decision for the CEO.

It is said that people quit bosses, not companies. Boards, ensure your CEO is an effective leader. CEOs and other leaders within the organization, ensure the leaders below you are effective. If they are not effective, you are apt to lose your high performing employees, perhaps to a competitor. In today’s tough business environment, you can ill afford to lose them.


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.

howto

To develop your company’s future leaders, push them outside their comfort zone

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Article originally published in the American City Business Journals on April 9, 2019

An important responsibility of every leader is to develop future leaders for their organization.

One of the most effective ways to do this is to push your direct reports outside of their comfort zone. Give them challenging assignments in areas that they have never faced to broaden their experience and see how they perform.

In June 2017, I wrote an article describing my experience taking a large French multinational chemical company to the U.S. International Trade Commission, accusing them of dumping product in the U.S. at below their home market price. I share an update of this article because it’s illustrative of how you can develop employees by getting them outside their comfort zone.

The benefits of stepping out of your comfort zone was a lesson I learned early in my career as my company’s business manager for anhydrous sodium metasilicate (ASM), which is used in a variety of metal cleaning and other industrial applications. It was also a lesson for the senior leadership of my company in the further development of a mid-level manager who eventually became CEO of the company

We faced import competition for ASM from Rhone Poulenc, a large French chemical and pharmaceutical company, at a price significantly below their home market price in France. We felt this was a violation of U.S. dumping regulations, designed to protect U.S. industry from unfair international trade practices.

ASM producers in the U.S., including my company, were losing market share. If found guilty of dumping, the remedy would be the assessment of dumping duties on imported ASM from Rhone Poulenc.

As the business manager of this product line, I received approval from my company’s CEO to file dumping charges against Rhone Poulenc with the U.S. International Trade Commission. I was 33 years old at the time, with no experience in these kinds of legal matters. However, my product manager and I knew the market well, which provided the foundation for building the case, and we both relished the challenge.

The attorney retained by our company’s general counsel insisted that my product manager and I be the public face of our company’s case. I soon learned what that meant.

I recall flying to Washington, D.C., for an evidentiary hearing in front of the ITC staff, asking our attorney at the airport just prior to boarding if he was ready to provide testimony for our company.

He said, “No — you are the one who is going to testify today.”

He said he didn’t tell me ahead of time because at this hearing, he didn’t want me to over-prepare, but just to respond to questioning.

It is hard for anyone to imagine the horror I felt not having written out in detail what I wanted to say. Talk about being outside of one’s comfort zone.

Fortunately, I knew the facts, which helped me state my company’s case despite my trepidations.

The hearing accomplished the substance and optics of what our attorney wanted — to pit a small, privately-owned, domestic company dedicated to serving the ASM market against a foreign company many times our size competing illegally through product pricing that met the criteria of dumping.

The preparation for the hearing in front of the ITC was very intense. Over a period of months, we responded to questions from the ITC investigative staff in preparation for the hearing in front of the ITC commissioners. The staff asked for significant details to ensure that the commissioners had the information needed to understand the dynamics of the market in order to determine if dumping was occurring and render a decision.

Our credibility and the trust we built with the investigative staff was an important factor in the case. Whenever we realized that we had provided information to the staff that was inaccurate, we immediately corrected it, even if it hurt our case.

The hearing in front of the ITC commissioners was held in a chamber very similar to that of the Supreme Court. Somewhat intimidating.

At the ITC hearing, my product manager and I were well-prepared to give testimony as the plaintiffs. A pivotal moment occurred when the Rhone Poulenc attorneys misrepresented a meeting their clients had with us, accusing us of improper marketplace behavior. As I was listening to their mischaracterizations, I whispered to our attorney that we had notes of that meeting which countered their testimony. He asked me to pull the notes, and as he read them, a smile crossed his face.

Our meeting notes, entered into evidence, undermined much of Rhone Poulenc’s credibility.

When the ITC commissioners announced their decision, they unanimously found in favor of my company and against Rhone Poulenc. They assessed the highest dumping duty on any chemical imported into the U.S. to date. My product manager and I felt as if we had won gold medals at the Olympics.

So, what did we learn from this experience? Whether you are dealing with customers or the investigative staff of a federal agency, you develop credibility with those you deal with by always being honest and factual. This will differentiate you from those that aren’t. Credibility builds trust and confidence, and this will favor you in borderline decisions.

We also learned to operate under pressure and to get out of our comfort zone. It was a rewarding experience.

Leaders, expose your employees to new, meaningful experiences. Get them out of their comfort zones. There is no better way for them to develop.

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.

Simone Biles, a gold-medal winning gymnast, said she was abused by Nassar.

Lesson from Michigan State University: Empathy Is a Key Leadership Trait

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Article originally published in the Philadelphia Business Journal on January 22, 2019

One of the most important skills of any leader is to know when and how to communicate empathy. The third senior leader at Michigan State University during the past 12 months, Interim President John Engler, has just demonstrated that he lacks this skill in remarks he made about the sexual abuse victims of Dr. Lawrence G. Nassar.

On Jan. 24, 2018, Nassar, physician to athletes at MSU and national team doctor for USA Gymnastics, was sentenced to 40 to 175 years in prison (concurrent state and federal sentences) for sexually abusing young women. Around 150 women gave impact statements in court prior to his sentencing. It has been reported that there are at least 265 Nassar victims.

A Jan. 11 Detroit News article quotes Engler, speaking about those sexual abuse victims who were not personally in the news, as saying, “In some ways they have been able to deal with this better than the ones who’ve been in the spotlight who are still enjoying that moment at times, you know, the awards and recognition…”

“Enjoying that moment … the awards and recognition?” Did Engler not understand how inappropriate and insensitive that sounds?

On Jan. 12, the chair of the MSU Board of Trustees, Dianne Byrum, commented in a Twitter message, “[Engler’s] remarks were ill advised and not helpful to the healing process, survivors, or the university.”

On Jan. 16, Engler resigned his position as interim president of MSU effective Jan. 23, after learning he lost the support of five of the eight MSU trustees and would be terminated if he didn’t resign. In his resignation statement, however, Engler did not acknowledge the comments that led his loss of MSU trustee support. He did not express regret that his comments were hurtful to the athletes who were abused by Nassar. He blamed politics as the reason for his loss of trustee support.

Understanding when and how to express empathy was an issue with the previous president of MSU, Dr. Lou Anna Simon, who Engler replaced, and the vice chairman of the MSU board, Joel Ferguson. I wrote an article about Simon and Ferguson in February 2018 headlined, “Viewpoint: Michigan State tone deaf to abuse by Nassar.”

In that article, I wrote that in the face of growing criticism from many of the students, faculty and staff at Michigan State on how Simon handled the accusations against Nassar, and after losing the confidence of a number of MSU board members, Simon resigned her position as long-time president of the university on Jan. 24, 2018.

In her resignation letter, Simon wrote, “To the survivors, I can never say enough that I am so sorry that a trusted, renowned physician was really such an evil, evil person who inflicted such harm under the guise of medical treatment.”

Simon added later, “As tragedies are politicized, blame is inevitable. As president, it is only natural that I am the focus of this anger.”

“Politicized,” Dr. Simon? I am not sure how the abuse of so many young women can be politicized.

Similarly, MSU Vice Chairman Joel Ferguson was also insensitive and tone deaf to Nassar’s victims. During an interview on a Detroit radio show before Simon’s resignation, Ferguson commented, “There are so many more things going on at the university than just this Nassar thing.”

“Just this Nassar thing,” Mr. Ferguson? As someone who holds the same position as Ferguson at another university, I believe his remarks and attitude were completely inappropriate.

After being widely criticized for his insensitive comments, a spokesperson for Ferguson released a statement that in part said, “Mr. Ferguson deeply regrets his comment and apologizes to those he offended.” Amid calls for his resignation from the MSU board, he chose not to do so, and remains on the MSU board.

An important responsibility of an effective leader is to set the right tone at the top and nurture the right culture at their organization. What a leader says or doesn’t say in part sets the tone and culture. Your employees and other stakeholders listen to you. Be sensitive to what you communicate to them.

Your employees may make statements or act in a way consistent with your attitude or what you say. Show compassion to those that have been wronged or hurt. That’s what effective leaders do.

Stan Silverman is founder and CEO of Silverman Leadership, and is the former CEO of PQ Corporation. 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. Follow Silverman on LinkedIn here and on Twitter, @StanSilverman.

Dealing with Organizational Bureaucracy

Dealing with Organizational Bureaucracy

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

How many of us have worked in bureaucratic organizations in which overly-prescriptive policies, procedures and controls approach the point where employees are micro-managed, and encroach on time better spent running and growing the business and providing a great customer or client experience? Unfortunately, too many of us.

Early in my career, I was introduced by the senior leadership of my company to the management tool called “management by objectives,” or MBOs, as it is commonly referred to within industry. This is a system in which employees document their own objectives as well as those that support their boss’ objectives and so forth, up through the reporting structure of the organization, all in support of the objectives of the company. This process was overly time-consuming.

Each year we wrote detailed business plans – documents which not only outlined the objectives of a business, but also outlined detailed strategies to accomplish those objectives. Due to changes in the business environment, many business plans became obsolete after they were written. Perhaps that’s why they often just sat in a desk drawer or in a bookcase in someone’s office until a year passed and it was time to write the next business plan.

Many of us are required to write lengthy reports, communicating to our bosses our activities and results accomplished during the month or quarter. Shouldn’t we only be focusing on communicating what’s important? Is there a better way of informing upper management of this information?

MBOs, business plans and monthly/quarterly progress reports serve a purpose. The question is how can that purpose be most effectively served with the least amount of bureaucracy, and without taking a leader’s time away from operating the business?

To address the issue of burdensome bureaucracy in my company, when I became CEO I reduced written detailed reports sent to me to the minimum, focused on what was important. Written reports consisted of a one to two-page executive summary, not on pages deep within a multi-page report. The amount of verbal reporting was increased. This had the benefit of increasing the dialogue between leaders and their direct reports, and also made for better decision-making and understanding of the issues facing the business.

How many of us have worked in organizations that required approval by the next level up for decisions that we should have been trusted to make? Unfortunately, too many of us.

As I rose up in leadership positions of increasing responsibility in my company, I rebelled against the requirement that I review all travel expense reimbursement submissions of my direct reports to ensure they had adhered to policy. I never performed these reviews – I just signed off so my employees could be rapidly reimbursed for their travel expenses. That saved me a significant amount of time which I spent on more productive tasks.

I had the philosophy that if I couldn’t trust my employees to follow my company’s travel policies, or if they didn’t have the common sense to inform me that they were violating a policy for a good reason, I didn’t want them working for me.

Did a direct report ever ask for forgiveness after an action was taken versus asking for permission before taking the action? Yes, of course. However, if they were exercising common sense and good critical judgment, I would celebrate and not sanction them.

I never held my direct reports accountable for the individual expense line items between the revenue line and the net income line on the P&L statements for which they were accountable. They were free to manage their costs as they saw fit to meet their revenue, net income and growth goals. If they weren’t capable of managing the resources available to them to run their business, they were not the right people in these positions.

Challenging policies, procedures and controls is a good thing. Some policies address issues that no longer exist, and now only increase bureaucracy and hamper the operation of the business. When policies no longer serve a useful purpose, they need to go.

On occasion, policies, procedures and controls are put in place because of actions by an employee that violated a policy. Avoid the one size fits all solution to this type of issue. Deal with the offending individual, but don’t shackle the rest of the organization by adopting policies that impose unnecessary controls that impede leaders from doing their jobs. The less a leader with good critical judgment is constrained by overly burdensome rules and bureaucracy, the better the performance of their unit and the company.

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. Follow Silverman on LinkedIn here and on Twitter, @StanSilverman.

benchmarking sister operations

To Improve Results, Benchmark Sister Operations Within Your Own Organization

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

I recently attended a conference at which the general manager of a business unit within a large company described how he was able to achieve a significant turnaround in operating results by benchmarking sister operations in his organization. He broke all accepted paradigms about what was possible. The adage, “don’t tell me it can’t be done – find a way to do it” came immediately to mind.

After his presentation, I asked how successful other general managers within his company were at applying his approach to improve the results of their business units. He responded that although he was willing to share his approach, no other general manager bothered to internally benchmark what he did to achieve the turnaround. He said there wasn’t a culture within the company to benchmark other operating units.

External benchmarking competitors is important to determine a company’s competitiveness in the marketplace and learn about best practices within the industry. However, it can be a difficult process to externally benchmark competitors due to the frequent inability to get the data that is needed.

Internally benchmarking sister operations that are achieving great results within the company is much easier. The data is available. So why isn’t it done as a matter of course?

Internal benchmarking is not part of the corporate culture

As with many other techniques to improve operating performance such as the process of continuous improvement, delivering a great customer experience or empowering employees to make decisions, internal benchmarking is not part of the leadership mindset in some organizations.

The CEO needs to be held accountable by the board to bring this mindset to the company and make it part of their culture.

Bonuses are based on business unit results and not corporate results

If there is no incentive to share what works across all business units, a huge opportunity is wasted. The shareholders don’t care about the results of individual operating units. They care about the results of the entire company.

Bonuses should be based both on individual operating unit results and corporate results, so there is an incentive for sharing what works within an operating unit with other operating units. When benchmarking improves the results of a business, it needs to be celebrated throughout the company to encourage more benchmarking.

“By helping you, I diminish my own chance for career advancement”

Unfortunately, some business unit leaders feel that they are playing a zero-sum game: “If I help to make you look good, I will not look as good.”

It needs to be made clear that in fact this attitude diminishes one’s chances of career advancement and will have a negative impact on the individual’s performance review. The desire to help others within the company will have a positive impact on one’s chances for advancement.

“It is a weakness to apply successful techniques developed by others”

Business unit leaders who feel that benchmarking others diminishes their own stature lose out on opportunities to improve their operating unit’s results and limit their chances to advance.

Using the ideas and applying the techniques of others shows you are open-minded and are not limited by the “not invented here syndrome,” which is universally frowned upon by all effective leaders.

Some business unit leaders are not comfortable with change

There is a universal expectation that all leaders will move their areas of responsibility forward and not be wedded to the status quo. Leaders who resist change shouldn’t be in their jobs and need to be replaced anyway.

Internal benchmarking and operational improvement need to be key components of any organization’s culture. It’s a source of competitive advantage.

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. He can be reached at Stan@SilvermanLeadership.com. 

Breaking Paradigms to Create Competitive Advantage

Breaking Paradigms to Create Competitive Advantage

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

In December 2015, I wrote an article headlined, “Don’t tell me it can’t be done. Find a way.” The article is about an event that changed how I viewed the necessity of breaking paradigms to create competitive advantage. That event influenced my leadership style, and still does so today. This is an update of that article.

As the leader of your organization, how many times do you hear from employees that something can’t be done? When I am told this, I now respond, “Don’t tell me it can’t be done. Find a way to do it.”

When I was the president of my company’s Canadian subsidiary, I led the team attempting to financially justify a new manufacturing plant to supply one of our products to a small geographic market in Alberta. There were insufficient revenues and cash flow to achieve a rate of return on the investment needed to justify the plant’s construction.

The CEO of our company challenged every standard design parameter of the plant. Due to his challenge, we changed our paradigms and redesigned the plant to reduce its capital cost and the number of people needed to staff it. The rate of return increased to above the threshold to fund the investment, and we were given approval by the board to build the plant.

This new plant design became the model for future plants of its type and gave us a very significant competitive advantage in the marketplace. The thought process we went through to design the plant was foundational to the company’s subsequent continuous improvement philosophy.

As depicted in the film “Pearl Harbor,” soon after the U.S. declares war on Japan after the attack on Pearl Harbor, President Franklin Roosevelt orders the Joint Chiefs of Staff to strike back by bombing Tokyo. These military leaders offer reason after reason why it can’t be done – the U.S. long range bombers don’t have the necessary range from the nearest U.S. base on Midway Island; Russia won’t let the U.S. launch from Russian territory, etc. Roosevelt says to them, “Don’t tell me it can’t be done”.

What Roosevelt did was challenge the existing paradigms of his military leaders. He wanted them to be innovative and think out of the box. It took the assistant chief of staff for anti-submarine warfare to do so, an individual you would not necessarily expect to come up with a solution to this challenge. He proposed that B-25 bombers carrying extra fuel be launched off an aircraft carrier that would sail within a distant range of Tokyo, reducing risk to the carrier. After launch, the carrier would turn back, and after the bombing run, the planes would fly to China and land there.

This bombing mission over Tokyo is enshrined in history as the Doolittle Raid, named for Army Air Corps Lieutenant Colonel Jimmy Doolittle, who trained the pilots and led the bombing mission. Even though the bombing mission did little damage to Japan’s military capability, it provided a needed boost to American morale, and at the same time showed the Japanese that they were within the reach of American bombers.

When “something can’t be done,” there is usually a creative path forward that can achieve the result desired, or a similar result that might serve the purpose originally intended. Your corporate culture must encourage out-of-the-box thinking and risk-taking for this process to take place. Collaboration among people from different operating units, technical disciplines and business units are sometimes needed to find the path forward, as occurred when the assistant chief of staff for anti-submarine warfare came up with the idea of how to bomb Tokyo.

I have learned that if accomplishing the original goal proves to not be doable, a path can be found to accomplish 80 or 90 percent of that goal, which is better than not accomplishing it at all.

Leaders, whenever you are told something can’t be done, challenge your direct reports to find a way to do it. To those who are tasked to find that path, think outside the box and challenge existing paradigms. You will be surprised at what you can accomplish. 

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. 

9_ways_to_build_effective_business_teams

9 Ways to Build Effective Business Teams

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Article originally published in the American City Business Journals on March 27, 2018

There is no shortage of advice offered to business leaders on how to build teams and lead effective organizations.

As a business leader climbing the ranks of my company and eventually reaching the position of CEO, I have learned much from my own experiences. I have also observed other leaders and learned from them.

I offer the following list of what to do and what not to do if one wants to be an effective leader and build a thriving business.

1. Communicate to your team what you are trying to accomplish

The Holy Grail of any business should be to become the preferred provider of products or services to its markets — the company that customers and clients go to first. Develop strategies with your team to be on a journey to become that preferred provider and share with all employees why this is important.

2. Choose your employees wisely

Your employees represent you and your company. The results they achieve or fail to achieve and the ability to work cohesively as a team have a direct impact on your reputation as an effective leader. Ensure they have common sense and good critical judgment and can see themselves as others see them.

Choose direct reports that you can trust and whowill be trusted by fellow team members. Don’t tolerate individuals who play destructive politics at the expense of others. These people are toxic and can cause significant damage to your business. Fire any employee who acts in this manner.

3. Don’t undercut those in your organization

Empower your people and give them the authority to do their jobs. Give them space to disagree with you. Insecure leaders hold their people to a tight script and lash out if they say the wrong thing. If questioned why a member of your team has a different viewpoint than yours on an issue, just say you respect that view, but this is the direction the team is going.

If, however, a direct report cannot get onboard and impedes the direction you are taking, you need to part company with them, but in a respectful way, so they can maintain their dignity. Personally tell them, face to face. Jointly write the announcement. You will be judged on how you handle their departure.

4. Don’t criticize a team member publicly

If you don’t like their performance, talk with them one-on-one. Public criticism not only undermines that individual and their ability to do their job, but it is also a bad reflection on you.

Public criticism destroys their ability to get things done. Put yourself in their position. Would you want to be publicly criticized by your boss?

5. Chaotic organizations are ineffective

Build a stable team. Chaos is bad for the organization. People need to build working relationships and trust among team members as well as those they deal with outside the company. Frequent turnover prevents this from happening and inhibits the achievement of your objectives.

Customers will be reluctant to believe any commitments made by an individual who has been undermined by their boss because he or she may only have a short tenure. They will think, why cut a deal now, when I might be able to cut a better deal with the next individual who is appointed to that position?

6. Engender trust by being consistent in your policies and decisions

You need to be readable by your employees. This provides them with guidance on how to act in various situations. Being consistent also engenders trust with those you deal with outside the company.

7. Don’t hire people who lack credibility to do the job

It is a bad reflection on you, the leader, if you send a lightweight to do a job that requires an experienced heavyweight. You also harm the reputation of that individual if you give them an objective they don’t have the skills and experience to accomplish.

8. It’s okay to admit you were wrong and change direction

If an initiative you previously committed to becomes impractical or has unintended adverse consequences not initially foreseen, it’s okay to admit you were wrong and to change direction. The worst thing you can do is continue to pursue a bad initiative because of a previous commitment. Not acknowledging issues is a sure way to lose trust, and once trust is lost, it is hard to gain it back.

9. You want to be respected and not feared

Respect keeps lines of communication open. Fear shuts them down. You want everyone in your organization, regardless of position, to feel comfortable in sharing things with you. You can’t resolve issues if you don’t know what they are.

Leaders who self-aggrandize are insecure and lose respect of their organization. It’s not about you. It’s about serving your customers, and how well you do that brings long-term sustainable success to your company.

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.