1. What Executives Value in Their CEOs

    March 20, 2015 by BPIR.com Limited

    Originally posted on HBR by Leslie Gaines-Ross

    A CEO’s reputation is a key part of a company’s success.

    Few would disagree with that. But how about specifics? Weber Shandwick conducted new research with KRC Research, The CEO Reputation Premium: Gaining Advantage in the Engagement Era, among more than 1,750 executives in 19 markets worldwide. We sought out the perspectives of those closest to the CEO, those in the best position to judge.

    We found that nearly one half of a company’s corporate reputation (45%) is attributable to its CEO’s reputation. Similarly, 44% of a company’s market value is attributable to its CEO’s reputation. Tellingly, one-half (50%) of the global executives we surveyed report that they expect CEO reputation to matter even more over the next few years.  Global executives also say that a positive CEO reputation attracts new employees (77%) and helps to retain them (70%).

    We found that executives value a few key attributes more than others. Among them:

    1. Humility. Only one out of four CEOs in our study were described by their executives as being humble. Yet we found that highly regarded CEOs are nearly six times as likely as less highly regarded CEOs to be described as humble (34% vs. 6%, respectively). While there are still some well-known celebrity CEOs out there, today’s CEOs have to demonstrate their humility, not their celebrity, and make it clear that the company, not themselves, is their focus.

    Humble CEOs motivate and empower those around them, share employees’ values, and listen well. They use their reputations on behalf of all.  They rely on their senior teams to validate strategy.  They build cultures that are about the collective whole, not individual rising stars.

    This is a nascent trend that will undoubtedly continue to grow. Global media coverage of humble CEOs has spiked 200% in the past year and mentions have risen 70% in a Google search.

    2. Visibility. While it’s important to be humble, a successful CEO can’t be a wallflower. A hefty 81% of global executives believe that for a company to be highly regarded it is important for CEOs to have a visible public profile.  In addition, admired CEOs are four times more likely to be skilled at engaging the public than those with less admired status (50% vs. 13%, respectively).  When engaging the public, CEOs are the purveyors of the company’s narrative. It is this narrative that must stand out amidst the informational deluge that besets the public. The CEO therefore must attend to the clarion call, standing up and standing out so as to tell the company’s story.  Given the glut of competing information bombarding society, however, standing up and standing out is no easy task.  It is immensely difficult to get the story of one’s company not only heard, but also recalled and shared.  All of which leads to our next finding.

    3. Persuasiveness. The CEO must convey the company narrative and satisfy the marketplace’s demand for content and transparency through both traditional methods of storytelling (such as media interviews) and newly developed digital channels.  Which of the many communications channels are most important?  The majority of global executives (82%) believe speaking engagements to be most beneficial when engaging external stakeholders.  Industry-specific speaking engagements are more important than non-industry ones. Other important external CEO activities are building relationships with the media, using the company website strategically, and identifying compelling thought leadership platforms. Social media participation is also viewed favorably.  A full 43% of respondents deem using social media a worthwhile CEO activity to demonstrate the company’s forward-looking ideas and clear vision for the future and, of course, to elucidate the company story.

    Along with public visibility and engagement, however, comes some risk.  When asked whether CEO visibility positively or negatively impacts company reputation overall, an equal number said it improves reputation (41%) as said it can either improve or harm reputation (41%).   Just 10% said visibility serves only to harm a company’s reputation. So the smart CEO takes advantage of the positives but is wary of the negatives.

    Global executives today are luckier than ever — a rich ecosystem of channels exists to promote the company’s business strategy, greater purpose, and company story. Customers are ready to engage with the CEO, and conferences with receptive audiences are exploding.

    CEOs now generally accept what has long been apparent:  like it or not, they are public figures.  By virtue of digital communications we all have in some sense or another gone public.  It is just that some of us, CEOs in particular, are more public than others. There is no turning back. It’s time to embrace engagement — but in a most humble way.

  2. What Are You Waiting For?

    March 12, 2015 by BPIR.com Limited

    Originally posted on Linkedin by Diane Kucala

    The future belongs to those who believe in the beauty of their dreams.”, Eleanor Roosevelt

    Imagine having a thought and immediately grabbing whatever is within reach to make that thought a reality. In 1991, Jimmy Ray, founder of Gogo in-flight communications services, sketched a vision for a future aircraft telephone system on a paper napkin. With a goal in mind and the determination to see it through, the company was awarded an exclusive frequency license by the FCC in 2006 and the company designed, patented and deployed an uninterrupted cellular network to the aviation market in the U.S. With its debut in 2008, Gogo brought Internet access to 30,000 feet, giving airline passengers the means to communicate and access the World Wide Web in the sky. Today, the company continues to lead global aero-communications with innovative technology and services for the commercial and business aviation markets.

    Ray envisioned new possibilities and created an innovative market space that enriches our travel experience today and has become a necessity for many business travelers. He created something people wanted and subsequently, people needed. Innovations such as this demonstrate the long-term value of futuristic thinking. Futuristic thinking serves customer needs and in some cases, makes the world a better place.

    In addition to envisioning possibilities, futuristic thinkers inspire others to imagine what lies beyond the current scope of vision. In essence, those that follow this innovative way of thinking paint a picture of the future that the rest of us don’t yet see. Leaders at companies like Apple, Google, Southwest and Gogo dare to push the boundaries in their industries, anticipate what’s to come, and bring innovative products and services to life without hesitation, knowing there are always risks. In order to survive and thrive in our ever-changing technological world, futuristic thinking is imperative. This school of thought should begin immediately, without hesitation, not in the future. Maybe the idea of futuristic thinking should be coined ‘futuristic thinking now.’

    Now that we know what’s at stake, let’s take a look at what it means to be a futuristic thinker.

    Be a visionary. Look to the grander scheme instead of getting intellectually trapped in the short term and existing conditions. Use your imagination to think creatively about the long term with no limits. Predict changes in your current reality and open your mind to the endless possibilities that have not been thought of yet. Understand the interdependency between your customer’s needs and technology, for this will be the new tomorrow.

    Be fearless. Challenge the status quo. Ask probing questions that challenge assumptions and the current state of thinking. With a strong sense of curiosity and a spark of creativity, we all have capacity to envision a new and improved future. However, in order to do this, one must possess the humility to acknowledge that the current parameters may not suffice as technologies and customer needs shift over time. Consider how your decisions today are limiting the expansion of your long-term vision.

    Be an expert. Collect and analyze valuable information that contributes to shaping the future of your business. This may include finance reports, risk assessments and technology options. Also, pay attention to intuition and be willing to take risks. As bestselling author Daniel Pink explains in his book “A Whole New Mind,” our left brains are going to play a bigger role in breakthrough thinking over the coming years and decades.

    Be proactive. Prioritizing your organization’s success requires setting aside sufficient time to think forward and around corners. Many leaders voice major concerns about getting caught in the day to day, not spending enough time contemplating the future. Strategic thinking takes time and must be purposefully addressed. Futuristic thinking has to start now to reflect the future you desire to create.

    How do you begin developing futuristic thinking?

    • Start engaging in conversations with colleagues and mentors who demonstrate futuristic strategic thinking.
    • Allocate time to brainstorm critical shifts impacting your sector of the marketplace.
    • Set aside time to ask tough questions.
    • Think long term, not just the immediate effects an idea may have.
    • Take risks knowing you may not always succeed when attempting to predict the future.
    • When you have an idea, act on it immediately and know if you don’t, your competition will.
    • Explore shifts and trends. Here are a few websites to investigate: www.futureconscience.com/top-10-futurist-websites/
    • Invite people from diverse backgrounds with various education and expertise to share ideas. (Visit www.ideo.com for examples of working well with people across industries and platforms.)

    As every moment passes, the world is evolving. We challenge you to inspire and lead your organization to a future not yet imagined. Grab a napkin and a pen, and get started. What are you waiting for?

  3. How Do You Rank the World’s Best CEOs?

    March 5, 2015 by BPIR.com Limited

    Originally posted on HBR by Charles Fombrun

    How do you measure a CEO’s impact? An HBR team recently addressed that question by ranking CEOs according to the increases their companies have seen in total shareholder return and market capitalization across their whole tenures. HBR’s resulting list of the 100 Global CEOs who have delivered the best financial results, published in its November 2014 issue, placed Amazon.com’s Jeff Bezos squarely at the top.

    There’s no doubt that Mr. Bezos has done well for the company he founded. And clearly CEOs can and should be judged by the financial results they generate. But increasingly, CEOs and their companies are also being called to account for their impacts on employees, communities, governments, and society at large. The changing expectations have magnified the relevance of non-financial metrics and the need to paint a more complete picture of a CEO’s performance.

    Companies now need to understand what value they are creating, not only for their investors, but also for their employees, customers, and society at large – and they need to know how their reputations reflect this net value creation. This is why Reputation Institute regularly surveys people around the world about their perceptions of companies, and produces a ranking on this score. It’s also why, since 2000, individual companies have consulted the Institute to gain a deeper understanding of how well they are regarded on non-financial metrics – and why. To develop consistent and reliable data, we rely on a scientifically developed and standardized survey instrument designed to gauge public perceptions of companies on seven dimensions: finance, leadership, workplace, citizenship, governance, products, and innovation. We call it the RepTrak scorecard.

    When HBR invited Reputation Institute to add a nonfinancial perspective to its top 100 CEOs coverage, our team of researchers, led by Dr. Leonard Ponzi, Brad Hecht, and Viktoria Sadlovska, began with the RepTrak methodology, and created a special “non-financial performance index” using a subset of its categories – specifically, the scores for each company’s workplace, citizenship, and governance. Based on those scores, we reranked HBR’s list. (Note the caveat that our data reflect perceptions of companies, not individual CEOs. The assumption here is that, because most of these value-adding leaders have had substantial tenures, the reputations of the firms, no less than their financial success, reflect these individuals’ leadership. )

    Next, we set out to examine more closely the relationship between HBR’s financial indicators and our non-financial indicators of performance.

    Based on our past research, we thought it likely that companies with higher reputations would tend to financially outperform those with lower reputations. On average, we have found that high-reputation companies have higher returns (both Return on Assets and Return on Equity), deliver higher earnings multiples, have higher market/book ratios, and have a higher Enterprise Value/EBITDA ratio – the key measures on which investors assess corporate performance.

    But the scatterplot presented below demonstrates clearly that, within this set of top CEOs’ companies, there is not a linear relationship between financial and non-financial measures of performance; companies that deliver strong financial results do not always have good reputations with the public, and vice versa.

    Look, for instance at the company names in the lower-right quadrant – the ones who did well financially but not so well on reputation. Monsanto is a case in point, its CEO ranked #8 on HBR’s financially based ranking, despite having the weakest reputation of all the companies. Meanwhile the upper-left quadrant of the chart is also well populated. These are the companies earning the highest public respect, but turning in lower financial results. (Again, let’s keep in mind that all these companies are financial high performers in the greater scheme of things; otherwise they would not be on HBR’s list.) Germany’s car manufacturer Volkswagen stands out in this regard, as does France’s food giant Danone. Both of their CEOs were well down the list of HBR’s top 100, but have managed to win their companies high praise from the public on non-financial criteria. In general, the broad dispersion across quadrants shows that financial and non-financial metrics provide different points of view on a CEO’s performance.

    This nonlinearity of course complicates the question of how one would arrive at a “net” assessment of a CEO’s legacy. How much weight should each ranking get? Should financial and non-financial criteria matter equally, or should they be weighted differently? More weight given to the financial or more to the non-financial?

    We would argue that the truer measure of CEOs’ legacies is the amount of “public support” they helped to create for their companies during their tenures – the changes in people’s willingness to recommend, work for, buy products from, or invest in their companies. In fact, this is a measure that Reputation Institute regularly captures in its public surveys. And we have calculated the relative statistical contribution that financial and non-financial criteria make in predicting this index of public support. Our statistical analysis suggests that some 35% of a CEO’s legacy can be explained by financial performance, with the remaining 65% by non-financial criteria.

    Thus, to assess these CEOs’ full legacies, we developed a combined ranking based on weighting the financial and non-financial performance rankings used in the scatterplot. Take a look at the table below. The second column in it is the original ranking released by HBR based on financial performance. The third column is the re-ranking of the same set based purely on reputations in non-financial (that is, “social”) performance areas. The first column is the ranking of CEOs that Reputation Institute arrives at by applying our weighted combination of the two. (And we’ve added a fourth column to highlight whose ranks change most.)

    Now who rises to the top? CEOs one and two, as you can see in the overall rankings column, are Novo Nordisk’s CEO Lars Sorensen and American Tower’s CEO James Taiclet. Volkswagen’s Martin Winterkorn leaps up 68 slots to 21st thanks to favorable non-financial results. Disney’s Bob Iger also rises dramatically (from 60th to 10th) as do the CEOs of Fastenal, Alfa Laval, and Antofagasta. Starbucks’s Howard Schultz moves up from 54th to 14th place, reflecting a well-balanced commitment to governance, citizenship, workplace, and financial performance. Amazon’s Jeff Bezos drops only slightly from 1st place in HBR’s original ranking to a robust 3rd in the combined ranking.

    Some CEOs see significant drops in ranking when we factor in the weak non-financial performance reputations of their companies. They include Japan’s Fast Retailing, and Taiwan’s MediaTek. Monsanto’s Hugh Grant suffers most heavily when ranked by this more holistic assessment of how his company has fared under his leadership. It drives down the assessment of his legacy from a lofty 8th to a more remote 82nd place in the adjusted ranking. Perhaps he has decided Monsanto must do more to boost its non-financial performance reputation; within the past few years, the company joined the World Business Council for Sustainable Development (WBCSD) and started offering Business Ecosystems Training globally to its employees.

    The fact that financial performance and nonfinancial performance reputation do not correlate among HBR’s top 100 CEOs underscores why it is so important to keep refining our non-financial metrics and ensuring their rigor. And if both kinds of metrics are important to take the measure of a company, they may matter even more to assessments of a CEO’s tenure. The most holistic measure of a CEO’s contribution over his or her tenure would be a reliable answer to one question: How much better or worse is the overall reputation of the company compared to the day this leader stepped into the role? A great CEO’s legacy is never as one-dimensional as the ledger.

  4. Tackling Fat Cat Pay

    October 23, 2014 by

  5. Hoshin Kanri Helps Toyota Improve for the Long Term

    October 21, 2014 by

    Originally posted by  in Lean Leadership Ways

    When the 2008 Lehman Brothers bankruptcy triggered a global recession, Toyota Motor Company lost money. In December of that year, with a photo of Toyota board members bowing in shame, a New York Times headline trumpeted, “Toyota Expects its First Loss in 70 years.” “They’ve caught the same cold that Detroit has caught,” said Christopher J. Richter, senior analyst in Tokyo at Calyon Capital Markets Asia. “Everything is going wrong for Toyota this year.”

    My reaction was anger at the idiocy of some of these articles. How could Toyota be compared to the Detroit automakers who were on the verge of bankruptcy? Why isn’t the focus on the 70 years of profitability and the huge cash reserves Toyota had piled up for a crisis just like this?

    However, I soon discovered Toyota did not share my point of view. They were very unhappy about their loss. It was not because of the loss of a few billion dollars which they could absorb like an annoying mosquito bite. It was because, through serious reflection, they found serious weaknesses.

    In Toyota Under Fire we chronicle how Toyota responded to the worst global recession since the Great Depression. Of course they downsized, but they did it by reducing a temporary workforce designed to absorb inevitable downturns in the business cycle. Management bonuses and overtime were eliminated. Less energy was used. Travel was reduced. But the jobs of long-term team members were protected.

    I visited two of the hardest hit plants—truck plants in Indiana and Texas—and watched as people frenetically worked even though about half the production workers were not needed for production, with sales down about 40% from planned capacity. They were busy because they had gone from two shifts to one shift, maintaining a high production rate, and about half of the people produced cars for four hours, while the other half observed and worked on kaizen, and then they reversed roles.

    The Japanese executive in charge of the Indiana plant calmly explained that they were investing in the future: “Every winter has its end,” he explained to me. And they were preparing. He showed data on the average age of vehicles and how more were being junked then purchased, and they needed to prepare for the expected sales boom—the boom we are now experiencing.

    Back to the first loss of money in 70 years. Toyota did a great job of utilizing and developing their human resources with very low demand, but their reflection still identified a serious problem. There had been signs the truck market was declining in the United States, where gas prices were rising. There were even signs of the recession to come given the inflated housing market. Yet, Toyota in North America had built months of inventory of trucks. When gas prices almost doubled in the U.S. during the summer before the 2008 recession, Toyota was stuck with enough inventory to stop making any large trucks and sport utility vehicles for three months; during this time they did daily training and kaizen on the shop floor. Then the recession hit and the pain continued.

    Toyota could offset a good deal of the downturn, reducing labor costs by about 20% through eliminating the variable workforce (the temporary pool) and overtime. But still 80% of costs were fixed. The board of directors set a target to reduce fixed costs to 70% so that Toyota, famous for its ability to flexibly respond just-in-time, could be ready for the next downturn.

    Turning this goal into action is one of Toyota’s strengths and it is done through the hoshin kanri process. The target of lowering the break-even point required changes in all parts of the enterprise, including product development (e.g., more standard architecture and parts, value engineering), production control (satisfying customers while leveling the schedule, even with high variety), production engineering (developing simple, slim, flexible systems, often with lower capital investment and more manual work), supply chain (collaborating with suppliers to better respond to flexible volumes), and manufacturing (launching new vehicles more quickly, simple automation for material delivery, parts kitting, changing takt while balancing workload more quickly). Thousands of organizations developed plans for achieving higher flexibility and worked through the kaizen process of experimenting and learning.

    By the time Toyota had achieved the lower break-even and billions of dollars in cost reduction, another problem eased up—the yen went from about 80 yen per dollar to about 110 yen per dollar. Since Toyota is committed to keeping jobs in Japan to benefit Japanese society, and maintain their hotbed of innovation in Japan, they benefited greatly, leading in the 2013-14 fiscal year to the most sales and the most profit of any auto company in history.

    With the huge demand of 2014, and the deep cash reserves Toyota maintains, one might expect a massive spending spree—buying companies, buying new automated equipment, buying new plants in low-cost countries. Toyota did none of those things. They continued belt-tightening and Akio Toyoda announced there would be no new plants built. The hoshin kanri goals became: Do more with less. Find ways to utilize existing capacity while improving throughput, thereby producing more autos per square foot.

    Toyota does not want creeping fixed costs to put them in the same bad situation in the next big economic downturn. They will be ready because of intensive and continuous improvement with a purpose.

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