CEOs need to be open to novel solutions

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

How many of us have been challenged to accomplish an objective where the path to
success was not clear? How many of us found a way to get it done? This is a challenge
that we face many times during our careers.

In August 2015, I wrote an article headlined, “AT&T’s lesson in leadership: How
to break paradigms.” Given the importance of breaking paradigms, this is an
update of that article.

In the 2001 film “Pearl Harbor,” soon after the U.S. declares war on Japan following the
attack on Pearl Harbor, President Franklin Roosevelt orders the Joint Chiefs of Staff to
strike back by bombing Tokyo. These military leaders offer reasons 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 and Russia won’t let the U.S. launch from Russian territory.
Roosevelt says to them, “Do not tell me it can’t be done.”

What Roosevelt did was challenge the existing paradigms of his military leaders.
Paradigms are an established and accepted set of beliefs. Roosevelt 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 aircraft striking range of Tokyo. After the
planes launched, 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 James Doolittle. Even though the 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 technical disciplines
and operating units are sometimes needed to find the path forward, as when the assistant
chief of staff for anti-submarine warfare came up with the idea of how to bomb Tokyo.

Rebuilding the phone system

As manager of operations planning early in my career at PQ Corporation, one of the most
impactful lessons I learned was the imperative of breaking paradigms.
Our CEO, Paul Staley, asked Russell Ackoff, then professor of management at the
Wharton School of the University of Pennsylvania, to talk with the senior leadership team
at PQ about applying his idealized design approach to our manufacturing technologies to
break our paradigms. As a mid-level manager, I was very fortunate to be included in
these sessions.

Ackoff described a meeting that he attended in 1951, consisting of engineers and
scientists at Bell Labs, a division of the phone company AT&T, in which the facilitator
abruptly announced to the meeting participants that the phone system in the U.S. was just
destroyed. How would they not only rebuild the system, but reimagine and improve it?
The only criteria that they needed to meet were that the new phone system design had to
be technically feasible and operationally viable. The facilitator was asking the meeting
participants to break their paradigms and think out of the box.

In the process of establishing the specifications of the new phone system, the participants
realized that given the expected growth of phone usage, continued use of the rotary dial
phone system in use at the time was not practical. Touch-tone dialing cut 12 seconds off
the time it took to dial a phone number and required much less investment than the
capital-intensive mechanical rotary dial system.

At that moment in history, the touch-tone dial system became the technology of choice
for the future phone system. Little did the participants know the significant impact that a
reimagined phone system based on touch-tone dialing would have on our lives in the
future.

The ideal plant concept

A number of years later as president of PQ’s Industrial Chemicals Group at a meeting
with our plant managers, I posed a similar question to the one that was posed at Bell
Labs. I told the group that our Augusta, Georgia manufacturing plant, built many years
ago, was just destroyed. How would they reimagine, redesign and build the plant to fulfill
the product needs of the plant’s customers? The only criteria were that the redesign
needed to be technically feasible and operationally viable.

We identified new manufacturing approaches we wanted to include in the new plant
design. We subsequently estimated the cost to build and operate the plant and found it
would be significantly less using these new technologies.

Our approach to reimagine this plant was called our ideal plant concept, similar to what
Ackoff called his idealized design. Whenever capital additions were made to our plants,
we considered the risks involved in adopting new technology, and whether we needed to
de-risk the decision by applying and testing out the new technology before putting it into
commercial practice.

Of course, what is the latest state of the art today will be surpassed by new innovations
tomorrow. In addition, this approach fit with our commitment to the continuous
improvement of our manufacturing plants, as well as other aspects of our business
operations.

Leaders, create a culture focused on breaking paradigms. This is a way to differentiate
and create a sustainable advantage over your competitors. And remember, when you hear
from employees that something can’t be done, respond with, “Don’t tell me it can’t be
done. Find a way to do it.”


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

6 ways for a CEO to think like an activist investor

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.

Graduates, get out of your comfort zone and never compromise your integrity

Article originally published in the Philadelphia Business Journal on May 20, 2019


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


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

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

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

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

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

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

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

Failure happens. It is not the end of the world. Learn to mitigate risks. Winston Churchill once said, “Success is not final, failure is not fatal. It is the courage to continue that counts.” Get outside of your comfort zone. You never know where the future may take you.

Many of you will choose to advance the state of the art of your profession in areas that make a positive difference in people’s lives. Many of you will work to change the world and make it a better place. There is no higher calling.

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

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

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

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

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

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

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

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

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

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


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

People quit bosses, not companies

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.

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

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.