Follow This Advice When Negotiating a Joint Venture Agreement

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Article originally published in the American City Business Journals on September 18, 2018

Over the course of my career, I have negotiated many joint venture agreements. Based on those experiences, in August 2017 I wrote an article on the key questions and issues that need to be considered to maximize the probability of success.

This is an update of the advice I shared in that article.

The time to find out whether the strategic objectives of each party align is before negotiations start. Not having the same strategic objectives is a significant reason that JVs fail.

What would success look like? If you don’t know where you want to go, you will never get there. Is this the right strategic direction for your company?

What are the minimum outcomes you must achieve? If you cannot achieve them, are you prepared to walk away from the table? If not, perhaps you have not yet properly defined your minimum outcomes.

Do you need this deal more than the other party, or do they need it more than you? Are you dealing from strength, or are you in a weaker position? Are the concessions you need to make in your company’s short and long-term best interests?

Every negotiation requires compromise and trade-offs. Therefore, it is important to determine the issues that are deal-breakers for you. Try to determine which issues are deal-breakers for the other side, and decide if you can agree to them.

Spend sufficient time doing due diligence on your prospective partner. Do you and your prospective partner embrace similar values and tone at the top? Do the organizations share similar cultural norms and do they have similar operating philosophies? Will you like working with this partner when the JV is up and running?

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

Understand the negotiating style of the lead negotiator on the other side of the table. What is their reputation and track record in past negotiations with you and with others? Can they be trusted to meet their commitments?

Listen to the other party and ask questions to further understand what they want to accomplish. Communicate what you want to accomplish. Identify where your goals overlap and where they don’t so you can work to close the gaps.

Will your partner be committed to investing in future operational improvements as well as invest in future JV growth opportunities?

How is your prospective partner financing their portion of the joint venture? How much equity are they investing vs. debt?

If the other party is a subsidiary of a larger company, does the subsidiary have a sufficiently strong balance sheet to meet their financial obligations under the agreement? If not, you should determine if you need a guarantee from the parent company.

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

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

One reason for structuring the JV with majority/minority ownership positions is due to a difference between the JV partners’ financial capacity to make the initial investment or to fund future growth initiatives.

Once you make an offer, wait until the other side responds with a counteroffer or acceptance. If you put another offer on the table before a counteroffer is made, the other side will view this as a weakness and try to exploit it to their advantage.

To avoid not receiving a counteroffer, ensure that your offer is credible. If it isn’t, the other side may just ignore it and not make a counteroffer, prematurely ending negotiations.

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

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

A joint venture permits each partner to accomplish goals that individually they could not accomplish by going it alone. If done right, the partnership is long-lived and successful for both parties.

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.

What We Can Learn from John McCain’s Leadership and Patriotism

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Article originally published in the Philadelphia Business Journal on Sep 5, 2018

I have written many articles describing the traits of effective business and political leaders. The passing of Sen. John McCain (R-Arizona) provides an opportunity to reflect on those traits that differentiate McCain from his peers.

Since his death on Aug. 25 after a valiant battle with brain cancer, Americans have paid their respects to McCain, former congressman, presidential candidate and statesman, a true American hero and patriot. He was a man of courage, values, honor, ethics and integrity.

Accolades and expressions of respect have come from a broad array of both Republican and Democratic colleagues. What can we all learn about the leadership qualities of John McCain?

McCain was known as a maverick – a courageous leader and patriot who did what he thought was right, rather than what was politically expedient.

McCain served with honor as a naval aviator during the Vietnam War. He was shot down on his 23rd mission over Hanoi and was captured and brutally tortured while a prisoner of war from 1967 through 1973.

When the North Vietnamese learned that his father was an admiral in the U.S. Navy, they offered to release McCain from prison for propaganda purposes. McCain refused, demanding that those prisoners of war held longer be released first, consistent with the military code of conduct. He courageously placed principle above exposure to further torture and his freedom.

In 2008, when McCain was running for president, he defended his presidential campaign opponent Barack Obama against false allegations that Obama was an Arab and was not born in the U.S. – a common claim among those in the birther movement. At a campaign event in Minnesota, McCain responded to a woman making those allegations by stating, “No ma’am, he’s a decent family man, a citizen that I happen to have fundamental disagreements with…”

In today’s toxic political atmosphere, the defense of a political opponent rarely happens. He did what was right, rather than let the false allegations against Obama stand.

As a legislator, McCain practiced the art of compromise. He reached across the aisle to his Democratic colleagues in the Senate to get legislation passed. He was often criticized by his Republican Senate colleagues for selling out conservative principles. Both the Republican and Democratic parties are increasingly dominated by doctrinaire views. This is not in our country’s best interest.

In August 2017, I wrote an article headlined, “
Trumpcare Was Stopped in Its Tracks. Will the Republicans Now Invite the Democrats to the Table?
”

The Senate bill known as the Health Care Freedom Act, President Donald Trump’s signature legislative health care initiative, came to a vote on July 28, 2017. McCain and two other Republican senators voted “no,” resulting in one vote short of the 50 needed to pass the HCFA.

McCain had deep concerns about the legislation that might ultimately be passed by the Republican-controlled House and Senate, which the Congressional Budget Office projected would result in as many as 32 million people losing their health care insurance over time due to high cost and insufficient funding going forward. The loyalty of McCain was to his constituents and those Americans at risk for losing their health insurance, not the Republican party, and not the president.

McCain demonstrated courage in voting against the HCFA, unlike some of his Republican Senate colleagues, who placed loyalty to party above the welfare of the people who elected them. They would likely vote for any Republican health care legislation no matter how bad it was.

At his funeral service, McCain was eulogized by both former Presidents George W. Bush and Barack Obama.

In his remarks, Bush said, “John was honorable, always recognizing that his opponents were still patriots and human beings. … John detested the abuse of power. He could not abide bigots and swaggering despots. There was something inside him that made him stand up for the little guy. To speak for forgotten people.

“Courage and decency defined John’s calling, and so closely paralleled the calling of this country. … At various points in his long career, John confronted policies and practices that he believed were unworthy of this country. … To those in authority, John would insist that we are better than this. America is better than this.”

Former President Barak Obama said, “John believed in honest argument and hearing other views. He understood that if we get into the habit bending the truth to suit political expediency or party orthodoxy, our democracy will not work. That’s why he was willing to buck his own party at times. … [and] champion a free and independent press as vital to our democratic debate.

“John understood, as John F. Kennedy understood, as Ronald Reagan understood, that part of what makes our country great is that our membership is not based on our bloodline [or] … where our parents or grandparents came from or how recently they arrived, but adherence to a common creed that all of us are created equal.”

During her eulogy, McCain’s daughter, Meghan McCain remarked to the applause of the attendees, “The America of John McCain has no need to be made great again because America has always been great.”

Meghan McCain was sending Trump a direct message. Bush and Obama were more subtle in contrasting the values of John McCain with those of our current president.

The phrase “country before party” comes to mind as John McCain’s legacy to our country. All of our elected representatives should take a lesson. They pale in comparison to him. We will miss you, John McCain. Thank you for your service. Rest in peace.

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. 

Advance Your Career by Being Different from Your Peers

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Article originally published in the Philadelphia Business Journal on August 28, 2018

People advance in their careers by differentiating themselves from their peers, just as businesses differentiate themselves from their competitors. An individual’s track record of accomplishments, skills and the experience gained in previous jobs can be used to achieve that peer differentiation.

Recently I had lunch with a college sophomore at Drexel University who was just finishing up his first six-month co-op work assignment at a company before returning to school. The co-op program is an opportunity for students to work full-time in their field to gain valuable hands-on experience. I asked him what he had learned during his co-op job and what he contributed to the organization.

He responded with the many ideas he offered to improve the organization’s business processes. Because his suggestions fell on deaf ears, he thought his experiences at this company would not help build his resume, which is one of the most important things anyone can do regardless of where one is in their career.

I told him to the contrary, his focus on continuous improvement is exactly what might make his resume stand out from the dozens submitted for a job opening and get him an interview. A commitment to continuous improvement, among other factors, is a differentiator for any job candidate.

In November 2017 I wrote an article headlined, “Eight ways to differentiate yourself to land that next job,” in which I identified traits attractive to potential employers. Employers will want to know if you possess these traits. How you respond to the following questions will differentiate you from your peers. 

1.   Are you results oriented?

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

2.   Are you customer/client-focused?

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

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

3.   Do you embrace continuous improvement?

In your previous jobs, did you challenge paradigms and the accepted ways of doing things within your area of responsibility if you felt there was more effective or efficient approaches to accomplishing your organization’s goals?

4.   How do you de-risk your decisions?

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

5.   What is your leadership style?

You should share your expectations and jointly develop goals with your direct reports without micro-managing how those goals are achieved. You should help create a sense of ownership in your employees for what they do, and hold them accountable for results.

6.   Are you effective at selling your ideas?

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

7.   Do you keep commitments?

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

Don’t make a commitment unless you can keep it. If you find that for whatever reason, you can’t keep a commitment, let the other person know immediately. She might have made a commitment to another based on your commitment to her.

8.   Do you fit the culture?

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

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

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

Newly-Minted CEO? Focus on These 6 Areas

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Article originally published in the American City Business Journals on August 21, 2018

In August 2016, I wrote an article headlined, “Your first 100 days as CEO. What should you do?” I wrote that article after being asked by a newly-minted CEO for advice and guidance.

This is an update of that article, including what she felt was critical to her success during her first two years on the job.

You were just appointed CEO at a new company. The press announcements have been singing your praises, outlining your previous positions, expertise and track record of results.

The employees at your new company are wondering about your leadership style, your tone at the top and what changes you might make to the culture and strategy, as well as possible changes to the senior leadership team reporting to you. Your board of directors will be wondering the same thing. What you say and do will be watched intently by everyone within the organization. Expectations that you will move the company forward will be very high.

As the new CEO, what should you do during your first 100 days? The knowledge gained during this learning process will help you formulate changes to both the operational and strategic initiatives of the company.

1) Listen, ask questions and form impressions

Get to know the company and your direct reports. Talk with your board members and the individuals reporting to you, as well as those individuals reporting to them. What was the tone at the top and organizational culture under the previous CEO? Will the culture of the organization need to be changed?

2) What is the state of the company’s strategic plan?

How current is the company’s strategic plan, and are the various areas within the company pursuing strategies to achieve the plan? When was the last time the company performed a SWOT (strengths, weaknesses, opportunities and threats) analysis?

Is the strategic plan written to act on the SWOT analysis findings: build on the company’s strengths, minimize the impact of its weaknesses, exploit its opportunities, and defend against its threats?

When you are sufficiently knowledgeable about the business, you will need to discuss the changes you want to make to the company’s strategic plan with the board. It is critical that as CEO, you “own” the strategic plan, because you and your team will be held responsible for executing it.

3) What is the competitive position of the company?

What is the competitive position of the company’s various businesses vis-a-vis their competition? How active is the competition in attacking the company’s markets with new product offerings or aggressive product pricing?

Does the senior leadership team know why its customers buy from the company, and why other customers buy from its competition? Is this knowledge known throughout the organization, so every employee, even those who do not directly touch the customer, can perform their jobs in a way to strengthen the company’s competitive advantage and deliver a great customer experience?

What are the company’s growth opportunities? What is the cost position of the company in its markets? How competitive is the company’s process and information technology?

Are the employees committed to continuous improvement? Is the ethos of the company to be on a journey to be the best in the world at what it does? Do all employees and board members buy into and share ownership of this ethos?

4) What is the company’s financial position?

How strong is the profitability and cash flow of the company and how much debt is on the company’s balance sheet? How capital intensive is the company and what major capital projects are on the horizon?

What is your signature authority for capital projects beyond which you will need to take a capital project to the board for approval? What is the signature authority of your direct reports, and are you comfortable with it?

5) Learn about the senior leaders who report to you

What are the leadership styles, tone and culture of the senior managers of the company? Can they execute and deliver results? Do they inspire their employees?

Do they micro-manage their direct reports, or do they empower them to make decisions, so they have a feeling of ownership in what they do? Are employees allowed to take risks, and do they know how to de-risk their decisions? Do some of your direct reports need to be changed?

6) Develop a good relationship with your board and stakeholders

How does the board operate, and what are their expectations of you, the new CEO? What level of information detail do they require to oversee the company? How much experience does each have as a board member? Do they tend to drift beyond oversight and governance and get into operational issues, which is the responsibility of the CEO?

You should also spend time focused externally, speaking with major stockholders and customers. What are their expectations? What would they like to see that’s different from the previous CEO?

In my recent conversation with the newly-minted CEO that inspired that 2016 article, she validated the advice I had shared with her two years ago. She also commented, “Critical to my success was building trust with my colleagues and the board. The importance of having the support of my leadership team and the board cannot be overestimated.”

I cannot overemphasize this CEO’s comment on the importance of building trust, the foundation of which is honesty, ethics and integrity. Without trust, initiatives undertaken by the CEO will not have the full support of the board or her leadership team. It is the foundation of long-term sustainable success. Once trust is lost, it is nearly impossible to regain it. A lesson for all.

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.

Be Aware of the Unintended Consequences of Your Decisions

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Article originally published in the Philadelphia Business Journal on July 30, 2018

Nearly all of us have heard the term “unintended consequences,” but we may not be aware of how to avoid them. In February 2018, in the publication The Library of Economics and Liberty, Robert Norton wrote, “The law of unintended consequences, often cited but rarely defined, is that actions of people – and especially of government – always have effects that are unanticipated or unintended.”

When the unintended consequence of a decision is favorable, there is never an issue. The favorable outcome is considered a bonus. When the unintended consequence is adverse, depending on its impact, the decision-making process is questioned, as is the leader who made the decision.

In his article, Norton wrote about sociologist Robert Merton, who in 1935 identified the causes of unintended consequences – three of which are in the control of the decision maker. I would like to focus on these three causes: ignorance, error and immediacy of interest.

Ignorance and error

In both of these cases, leaders make decisions on issues without considering the unintended consequences, or before needed information is obtained. These are decisions that are not well thought out nor operationalized.

During my tenure as the CEO of our company, I sat through meetings at which the management of a business unit presented their plan to enter a new market without any consideration of the unintended consequence of a competitive response and how it would impact our company’s market entry.

I would ask, is the market growing at a sufficient rate to absorb a new supplier without a competitive response? Will competitors respond by price cutting, or in a different way? What differentiates our product in the marketplace to limit a competitive response? Why would customers switch buying from their incumbent supplier and decide to buy from our company?

How competitors might respond to a new market entry is unknown. A leader will often need to make a decision, but the information desired to make a fully informed decision is not available. Before making that decision, effective leaders listen to the opinions of their experts and they fall back on their own experience, common sense and good critical judgment. This is how they de-risk a decision and minimize the chance of unintended consequences.

Immediacy of interest

Merton describes the type of decision where “someone wants the intended consequence of an action so much that he purposefully chooses to ignore any unintended effects,” to the peril of the decision maker and the organization.

NASA’s decision to launch the space shuttle Challenger on Jan. 28, 1986 against the advice of the Thiokol engineers is an example of a decision driven by immediacy of interest. NASA had promised Congress a too aggressive and unrealistic launch frequency. The pressure to meet this schedule resulted in a catastrophic decision to launch the Challenger in adverse temperature conditions, well below the ambient temperature for which the solid rocket booster O-rings were designed.

Upon hearing Thiokol’s recommendation to delay the launch due to risks to the astronauts and the shuttle, one of the NASA officials stated, “I am appalled by your recommendation.” Another NASA official stated, “My God, Thiokol, when do you want me to launch – next April?” NASA launched Challenger, and shortly after the launch the O-rings failed, resulting in an explosion and the catastrophic deaths of seven astronauts and loss of the shuttle.

What is the cause of immediacy of interest type decisions? Certainly, hubris is one cause. Dictionary.com defines hubris as “excessive pride or self-confidence, arrogance. Arrogant leaders are rarely if ever successful over the long term.

Another cause of immediacy of interest decisions is the pressure to act, which in and of itself is a way of achieving results. However, at what risk and at what cost? How many times do we read in the press about unethical or illegal acts that were committed due to the pressure to get something done? These situations eventually almost always become public, adversely impacting the reputations of the individuals and organizations involved. The reputations of organizations recover over time. Those of the individuals never do.

How do you avoid immediacy of interest decisions? If you are the boss, set high expectations for achieving great results, but make it clear to the organization that it must be done in an honest and ethical manner. No other way is acceptable.

Surround yourself with people who will tell you what they think, not what you want to hear. Listen to your experts. They know more about the unintended consequences than you do. And remember, what you do reflects not only on you, but on your organization and your colleagues as well. Don’t let them down.

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 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. 

Advice to Professional Service Providers Early in Their Careers

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Article originally published in the Philadelphia Business Journal on July 16, 2018

I recently shared advice with a financial advisor relatively new in his profession on how to be successful as he builds his business. For the purposes of this article, I will call this individual David. The advice I shared was based on my own personal experiences dealing with financial advisors and asset managers, and my leadership experience in building trust with customers and clients. I believe this advice is applicable to anyone in the professional services business.

I told David that his success would be based on his ability to differentiate himself from others in the profession. He needs to ask himself, “Why would clients want to engage me and not someone else as their financial advisor?”

It’s all about the client

How many of us have had interactions with professional service providers where we felt that their approach was not about the client, but about them?

Where their focus was on selling you a financial product of their own firm, when the product of another firm was a better fit. Where their services were only transactional in nature, and not advisory. Where once you were signed up, their contact with you was infrequent. Where the investment product generated high fees for the provider compared with other investment alternatives. Where the product was so complex, you needed a consultant to help you understand it.

Clients lose trust in financial advisors when they attempt to sell you investment products on which they make a commission, rather than suggest the best investments that fit your needs, on which no commission is earned.

I told David that he needs to always do what is best for the client, regardless of whether or not the investments he suggests earn a commission. The best situation would be never to suggest an investment in which he had a financial interest, and if he did, it needs to be fully disclosed to the client. Over the long term, this would earn the client’s trust and lead to a much longer-lasting relationship.

Network, network, network

Networking is an important part of building any successful career. It is even more important as a professional service provider. Meeting new people who may become potential clients, asking friends and colleagues for referrals and providing recommendations is important in building one’s business.

Rejection and continued persistence is part of the job. David told me of an instance in which he had pursued a potential client for some time until that client invested a portion of his assets with him. David asked the client why he decided to do business with me, and he responded, “I admire your tenacity.” Obviously, David was not annoying to the client as he pursued him. It takes a lot of emotional intelligence to know how to do this and is a major key to success in any business.

Always provide your clients with a great experience

It is human nature for some financial advisors close to retirement age to be less aggressive than in their earlier years. They may no longer be paranoid about their business, which exposes them to competitive risk. I told David this provides an opportunity to win the business of new clients who may feel that their current financial advisor is not providing a great client experience.

There is also an opportunity for a newer associate to team up with an experienced financial advisor who may no longer be as focused as they once were in providing a great client experience. David could provide that great client experience, which will help protect the more experienced financial advisor’s client base.

Honesty, trust, and reputation are everything in all businesses, but more so when you are advising people on investment decisions. The minute a client feels that you are not putting their own interests first and foremost, trust is lost, and the loss of the client will shortly follow. David agreed, and stated that this is how he was building his financial advisor business.

We all should make honesty, trust and reputation the foundations of our careers, regardless of what business we are in. Once you lose your reputation, it is nearly impossible to earn it 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 a MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School.

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. 

7 Principles for Building an Enduring Business

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

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

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

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

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

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

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

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

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

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

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

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

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

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

4. Listen to the brutal facts of reality

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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