Leadership Beyond Old Boy´s Networks

In many traditional business cultures, the main criterion for business leadership was the social background as part of the establishment. Business competence - even the ability to read financial statements - was often an afterthought. And, by the way, the social order was led by "alpha males".

Now, we see some disturbing results from this selection of leaders out of the limited pool of the "Old Boy´s Network". Some of these highly praised "leaders" wreaked havoc with their entrusted companies.

Worst examples are Arcandor (Quelle), Constantia Privatbank, Citibank, GM, and more. After the fact it seems obvious that the leadership of these companies lacked management skills, personal integrity, or both.

Now, with a much more harsher business climate, owners and boards of companies need to look out for professional management talent. And they will need to tap into leaders that often do not conform to their "tried and true" stereotypes.

For example, women in boards still amount to less than 10%, here and here. Also, many countries only recruit out of their local networks. Or, they only consider graduates from their own university. In some countries, a key to a successful career still is the affiliation with a political party.

Leadership is not defined by background, color or gender, nor by other traits per se. Leadership is a question of results. In order to tackle the tough decisions of the next years, we need strong leaders that can deliver these results together with their teams.

Therefore, we need a more open minded leader recruitment approach. The criteria must include more than a nicely polished background and blind loyalty. Keys to success include the ability to face reality, the professional experience required for the job and the integrity to serve as an example.

And most likely, the best contenders are not only found within the Old Boy´s Network or Club rooms ....

Marketing Cost Cutting in Downturn

Marketing budgets have been severely cut during the economic downturn. A recent study by the Finance Marketing Association in Vienna found that up to 60% of financial marketing departments have responded to the crises by cutting costs. Is this wrong? Not necessarily.

Looking at the dire situation from the point of view of the agencies, they should shoulder some of the blame for this reduction of marketing budgets. Why? Because in economically strong times the agencies sold anything and everything to image-obsessed CMOs and CEOs.

The main consideration seemed to be that the client manager was "happy" at the moment of campaign launch. Concerns about the Return of Investment (ROI) of such campaigns were an afterthought, if at all. Maybe they were eager to win one of the prestigious prizes, but it was not cash they were after.

Insightful is the fact that the only category getting more budget in the crisis is direct marketing. This makes sense, because direct marketing is much more performance oriented and supports the hypothesis that performance was lacking until now.

Also, the explanation that companies cannot "afford" the marketing budgets seems odd. This sounds like marketing is something like luxury, reserved for good times. In fact, marketing needs to be an investment. And like every investment it needs to return the cash plus a profit margin.

Taken it from this angle, the solution is quite simple: rigorous marketing controlling with pre-testing and performance measurement, based on hard data.

However, this is not an entirely new thought and many agencies would offer it to their clients. The only question then is why it was not marketed before?

Yes, we can

Last night I took part in a TV talkshow (Club 2, ORF, Austria) on the topic of President Obama´s economic policy and its effect on the world economy. The discussion made it clear to me, how little the new US administration is prepared to really solve the economic crisis; this, despite the massive $825 billion stimulus package.

The start of Obama´s administration seems to be driven by three types of factors:

1. Strong leadership and optimism: Yes, we can!
Obama´s leadership and strong performance as communicator created massive expectations and high hopes for the renewal of American values at home and abroad. Although the expectaions are extremely over-hyped, strong belief in his leadership is an absolute plus.

2. Hard, cold interests
Obama is not an island by himself. There are real pressures to deliver on the expectations and to answer these interests. Call them pork barrel, special interests or any other name. He needs to work with these groups that demand their share for support; nationally (unions, states, military, energy, Wall Street, Big 3, etc.) as well as internationally.
Even in case he would have the best laid plans, to implement these in the real world is an entirely different challenge. It seems he is building a team that balances competence with affiliation in order to deliver on this "realpolitik".

3. Wrong-headed economic policy
The economic issue is the most important and the "make-or-break" topic for Obama´s performance as a president now. But, as far as we can read the administrations´economic plans and intentions, these by far do not measure up to the challenge lying in front of the US, and the whole world, in fact.

The key problem of the current economic crisis is the credit crunch. The articulated measures so far are based on Keynesian-inspired demand stimulation, which is the wrong strategy. It will lead to hyperinflation, but will not accelerate the urgently needed build-down of toxic waste credit in the financial system.

What does it mean for managers and entrepreneurs? How to address the economic crisis?
We need not despair, however, not yet. Obama seems to be a smart individual who is capable of working with the best and to change his approach in order to learn what works. Also, we as managers and entrepreneurs can and should pro-actively address the economic crisis:

Individually, managers can implement three measures:
First, we can take a leaf out of Obama´s book and provide leadership in difficult times, believing in better solutions and communicating clearly to generate rational optimism.

Second, managers should go back to a proven success formula and focus on customer value in everything the organization does. Everyone should think from the point of view of the customer and ask oneselves: "Would I really buy that now?"

Clearly, necessity is the mother of invention. Managers´ task consists of supporting the never ending pursuit to providing ever higher value and additional benefits at lower cost to customers - now. Then, customers will keep buying even in recession and bad times.

Third, managers need to prove their mettle - especially in these trying times . There will be difficult situations where a shortcut seems the easier way out. It can concern downsizing, cutting salaries or asking individuals to work better, smarter and harder.

Because, to lead an organization requires to stand up for one´s values and to give the respect to every employee, customer and other stakeholder. The human values are the foundation of every success and need to be preserved right now, when they count most.

asattlberger@fortee.com

Marketing in Times of Recession

What does it mean to market in times of recession and low demand?

This is a new question to many managers, having been spoiled by success. Same - same and business as usual are definitely out.

Nevertheless, some managers are clinging to the old habit of sitting still, waiting for the storm to abate. Hey, it worked in the past.

This time, though, is different and here are some of the reasons for urgent change:

1. The recessionary business climate will take longer, at the minimum 18 months or - god forbid - even years, so sitting still will lead to insolvency
   
2. Global competitors will start to enter new markets, maybe already next month in search of new customers (most probably yours)
3. The internet and international exchange help to spread innovations much faster, therefore, innovations will be obsolete earlier and will not last until the next up-turn
   
4. Lower demand and smaller budgets require lean and more frugal offers, products and solution to be marketed fast
5. Cost reduction while keeping talents and brain power demands creative approaches in order to develop profitable business in a time of change
6. Thrifty customers will force everyone, from CEO to engineer to sales rep, to figure out what exactly customer really value so much that they will spend their scarce budget
   

These reasons - among others - will force CEOs, CMOs, and other managers to think hard and to come up with better market solutions. But not to wait, because time can run out on the ones who come late.

Between the option of cutting costs and the option of pushing for better customer solutions, managers are well advised to overcome the seeming paradox and to do both: developing and delivering better solutions at lower costs.

Now, that is a task worth of managers of our times. What else would they need us for otherwise?