business-goal

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

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.

howtocompetitive

How to Win Business in a Competitive Marketplace

Article originally published in the American City Business Journals on March 5, 2019

All business leaders face the issue of how to win business in a competitive marketplace. Price the product or service too low, and you are leaving money on the table. Price it too high, and the customer or client will go to a competitor.

While I was national sales manager of PQ Corporation, a producer of both commodity and specialty chemical products, they constantly faced competitive pricing decisions to retain current customers’ business was well as win the business of new customers.

Many of PQ’s customers and the customers of our competitors were supplied under the terms of sales contracts that were one or more years in duration. Before the end of their supply contract, many of these customers would put their business out for bid for the next contract term.

In the competitive marketplace, this was an opportunity for us to win a future customer’s business currently supplied by a competitor, and an opportunity for a competitor to win the business supplied by our company.

We worked hard to differentiate ourselves on customer and technical service, as did our competition. Price, however, played a large factor in whether we won or lost the business.

So, as a business leader, how do you increase the probability that you will win in the competitive marketplace?

Work to be the preferred provider

At PQ, we were always on the journey to be the preferred provider by providing a great customer experience. We wanted to be the company that every customer would preferentially buy from. Our goal was to help our customers be successful in their businesses by being a great supplier.

Our products always met specifications, our plants were responsive to emergency deliveries and our sales and customer service people worked to resolve any issues with the account.

Build strong customer relationships 

The larger and more strategic the customer, the more we called on them and developed relationships with the leadership hierarchy within the customer’s organization.

Our sales representatives “owned” the customer relationship — they were the ones who kept in frequent touch with the customer to understand trends in their business and any issues they faced with the use of our products. They brought in our knowledgeable technical service people to trouble-shoot and resolve issues.

The regional sales manager as well as the national sales manager would develop relationships up through the customer’s organization. After I was appointed the CEO of PQ, I developed a relationship with my counterpart —the CEO, or if more appropriate, the group president of the business purchasing our product.

Get the “last phone call” 

If a competitor out-bid us for a customer, we needed to know about it before the competitor was awarded the business. We wanted the opportunity to convince the customer of the value we brought to the supply relationship beyond just the product price, and if necessary, meet the competitive price. That is the value of developing a strong customer relationship — to get the last phone call before the business is awarded.

When I was president of PQ’s Canadian subsidiary, we were working on a 10-year contract to supply a pulp and paper mill in Whitecourt, Alberta, with product used in pulp bleaching. Our plan was to build a production plant adjacent to the customer to ensure a reliable supply of product.

One afternoon, the business manager responsible for negotiating the supply contract with the customer came into my office in Toronto and told me he just learned that we had competition for the business — a U.S.-based supplier.

This customer was strategic for us. The plant we would build to supply their pulp and paper mill would be strategically placed to supply other pulp mills throughout Alberta. We didn’t want this opportunity to go to a competitor.

I asked our business manager to make an appointment with the customer’s CEO. I wanted to meet with him to close the deal.

We arrived in Whitecourt the next day and sat across from the CEO and his team. We presented how our company was in the best position to supply not only their product requirements but also their technical service needs, and how our multiple plants in Canada would be there as backup to provide product to their pulp and paper plant.

We didn’t need to cut the price we originally offered — all we needed to do was freeze the price for three years, something the U.S. competitor wouldn’t do. At the end of the meeting, the CEO and I looked each other in the eye, stood up and shook hands across the table. I knew we had a deal.

Without the relationship previously established by our business manager and the non-monetary value we could deliver to the customer, in addition to being able to freeze the price for three years, I am not sure we would have prevailed in winning the business.

Be dedicated to continuous improvement

In PQ’s commodity chemical business, where our products and those of our competitors were the same chemically, price was an important competitive differentiator. A strong commitment to continuous process improvement to drive costs down was critical to the ability to compete.

In our specialty chemical business, where our products and those of the competition were differentiated based on product cost/performance, this metric must continually improve at a pace greater than that of competition. Continuous improvement can be incremental or step-wise, with large improvements based on innovation and a change in paradigms. This permits greater pricing flexibility than a competitor, whose improvements may lag, and is key to long term competitive success.

When going up against a competitor, you want them to think, “Oh no. Not those guys.” That’s how good you want to be. That’s how you win business in a competitive marketplace.

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.

How to be an inspiring leader

Learn How to Be an Inspiring Leader

Article originally published in the Philadelphia Business Journal on February 26, 2019

What makes a truly great leader? In part, it’s the ability to inspire followers toward an aspirational goal. I miss the inspirational leadership of three former leaders, whose words and their delivery of those words inspired many of us.

Former President John F. Kennedy, in his Sept. 12, 1962 speech, announced the national goal of sending men to the moon and returning them safely to Earth before the decade was out. As a high school student at the time with the goal of going to college and earning a degree in chemical engineering, I was inspired by not only Kennedy’s audacious challenge to overcome the immensely difficult technical and engineering barriers, but also by his confidence that the goal could be achieved.

Former President Ronald Reagan, in his Jan. 20, 1981 inaugural address, spoke of the exceptionalism of Americans in a very positive, uplifting message, describing the “will and moral courage of free men and women,” and how committed we are to defending freedom. Reagan’s eloquent speech was a call to action for all Americans to be the best they could be, and serve as an example for the rest of the world to emulate. He is the president I most admire.

Former British prime minister Winston Churchill on June 4, 1940 delivered his “we shall fight on the beaches” speech to Parliament to rally his citizens during World War II. Churchill’s speech, reenacted by Gary Oldman, in the film, “The Darkest Hour,” is an inspiring example of how a national leader can mobilize a nation’s citizens toward the most challenging goal it has ever faced – national survival. In the film, one can overhear the comment, “He mobilized the English language, and sent it into battle.” Unfortunately, not very many leaders can do the same today.

So, what did Kennedy, Reagan and Churchill have in common? They had wonderful command of vocabulary and knew how to inspirationally communicate their goals and beliefs with emotion in an up-lifting way that won the hearts and minds of their citizens. They united the nations they were leading at the time.

How does a business leader win the hearts and minds of those they lead? How do you become an inspiring leader? Certainly, it takes more than great communication skills. Inspirational leaders have other skills as well.

Lolly Daskal is a leading executive leadership coach and founder of Lead From Within. In her article, “Six powerful traits of the most inspiring business leaders,” Daskal identifies these traits as people skills, credibility, authenticity, emotional intelligence, motivation, and positivity.

Murray Newlands, an entrepreneur, business advisor and speaker, in his article, “Seven characteristics of inspirational leaders,” says that inspirational leaders have a clear vision of the future, express unerring positivity, listen to their people, are grateful to their team, communicate impeccably, are trustworthy, and are passionate about what they do.

Based on my own experience as a CEO and director on the boards of numerous companies, I would like to add to the list of characteristics and traits of inspirational leaders identified by Daskal and Newlands, as follows:

Is genuine in words and actions, and is a person of high ethics and integrity

A leader who is not genuine and lacks ethics and integrity will not earn the respect and trust of the people within their organization. They will certainly not inspire followers to achieve great results. Board members, be sure you hire a CEO with these traits.

Communicates the importance of the company’s goals

The senior leadership team of the company needs to communicate the importance of the company’s goals in both group meetings and in one-on-one conversations with key opinion leaders within the company.

Employees need to feel that the goals are meaningful and achievable and will have a positive benefit for them and the organization. The goals should be aspirational, and stretch beyond the normal reach of individuals.

Identifies the role that employees play in attaining the goal

After completing a new strategic plan, as the recently appointed CEO of PQ Corporation, I communicated the goals of the company to our business units, and just as importantly, the role each business unit had in achieving those goals. The role of our low-growth commodity chemical business was to generate cash flow, through very heavy emphasis on continuous improvement. This cash flow would be invested in our high-growth specialty chemical and catalyst businesses.

After I made my presentation to the employees of our commodity chemical business, one of the employees commented, “This is the first time I was told what our role is in the achievement of the company’s strategic goals.” In my former position as COO of the company, I was too close to the strategic planning process to realize that the different roles of business unit employees to achieve the company’s goals had not been explained to them. All individuals who take part in achieving the goals of the company should have a personal ownership of the role that they themselves play in the achievement of those goals.

Frequently provide updates on progress

By frequently sharing updates on the progress towards achieving the company’s goals, an inspirational leader has the opportunity to keep the focus on what the company is trying to accomplish. It keeps the company’s employees in the game.

Great inspirational leaders have great communication skills. To those that have a fear of public speaking, you can conquer that fear by facing it head on, by receiving coaching and taking every opportunity to publicly speak. You will never regret that you developed this skill. Someday, you, like Churchill, Kennedy and Reagan, may be able to mobilize the English language and send it into battle.

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.