A Worthwhile Management Book

Thomas E. Ricks’ book, “The Generals”, is the history and essentially a performance evaluation of more than a dozen US Army Generals from World War II through 2012. It is not very flattering for some generals.

It is a well-written management and leadership book. Although not intended to be a textbook its examples of what led to successes and failures may be helpful for civilian business managers - including members of Boards of Directors and Chief Executive Officers.

Although the entire book is interesting, its reading can be limited to the first chapter. It covers General George C. Marshall, Army Chief of Staff, and describes how he built the Army into an effective fighting force in World War II. Marshall was faced with two equally daunting issues – people and equipment.

In 1939 the Army was too small in the total number of officers and enlisted personnel. Its leadership was poor and needed to be overhauled. There was not enough equipment and what was available was too antiquated to be effective - most of it dated from World War I. He started in 1939 with an unqualified for battle 197,000 soldiers led largely by inept senior officers and ended in 1945 with 8.3 million and victory.

General Marshall’s leadership and management tenets included a “brutally” straightforward style with everyone including President Roosevelt – he practiced “speak truth to power”. He employed the management practice of “removal” of any senior officer with substandard performance – he fired hundreds to build a successful organization. He was a "tough taskmaster" - but consistent, rational and respected throughout the Army's ranks.

For a more complete summary of the book click on this link: “The Generals: American Military Command from World War II to Today” by Thomas E. Ricks.

My Leadership Excellence magazine article “Seven lessons from a turnaround CEO”

Leadership Excellence magazine published my article: "Mastering Leadership - Seven lessons from a turnaround CEO"

By Robert F. Amter

There are many theories about what it takes to be an effective Chief Executive Officer.  Most are based on observation and research.  They lack the hands-on, in the trenches experience of what it really takes to lead a company – especially one that is experiencing bad times.

When I enter a company that is severely distressed and losing money I find that the previous CEO whom is usually a decent, hard working executive, has failed because he or she simply did not know how to be a leader.

Having worked 22 years as a turnaround CEO, I’ve learned seven key practices that have worked for me in restructuring distressed companies.

1. Understand the True Meaning of CEO

Naturally born leaders are very rare.  It takes hard work to learn how to lead effectively.  You must be a serious, passionate, and accessible student, to develop into a capable CEO.

Focusing on the true definition of the Chief Executive Officer is central to illustrating the basis for sound leadership.  Common dictionary descriptions may be simplistic, but they accurately define the position:

Chief: The person with the most authority, who ultimately controls or commands all the others.

Executive:  A person having administrative or supervisory authority in an organization with the power to put plans into effect. To execute.

Officer:  One who holds an office of trust, authority, or command.

Yes, the Chief is the highest in rank; however, the ability to execute is key. Anyone can write a plan, but few can execute it - implement it. Having a team carry out a focused plan is vital.  To guide all to remain disciplined in the executing a strategy can be difficult.  Providing clear-cut direction only grows more problematic, while facing competing forces, considerable distractions, and intense challenges.

The word Officer is also significant. A person appointed to this elevated position is held in trust with genuine fiduciary accountability. They are entrusted with the management of the property, with the power to act on behalf of the owners. Fiduciary is a solemn responsibility – take it seriously.

2. Learn To Whisper 

A CEO’s primary focus is people.  A CEO gets the job done by working through others.  People greatly appreciate a CEO who can command authority without condescension.  Moreover, there is no room for hubris.

Some leaders believe a tormenting style can motivate, but the mistreatment of people eventually leads to loss for all.  At no time should a CEO bully employees.  If an officer yells at an employee, the news will spread and reduce the CEO’s effectiveness.  Even high-ranking officers, will become timid, wary, fearful, and suspicious.  Many will wonder if they will be next to receive ugly treatment.  Trust is lost, eroding confidence and efficiency.

When I joined General Electric, this training precept was passed on to me:  “When you become a CEO remember that people are your most important resource.  Successful leaders motivate.  They do not intimidate.  They whisper to get results and remain calm.  They are viewed as having high integrity and being distinctly competent.  Leadership is learned.  Respect is earned.”

3. Interact With Employees at All Levels

Whether newly appointed or a 10-year veteran, a CEO only knows 10 percent of what is actually going on in the company – particularly the key issues and problems.  To be successful, CEOs must submerge themselves into all levels to learn the status of the company’s vital issues – to get the facts. 

Effective Chief Executive Officers are not office bound, nor isolated from employees. They are seen walking the halls, the floors of the manufacturing plants and distribution facilities.  People are curious about you.  I’ve had employees touch me and remark in an excited voice “I’ve never touched a CEO”. That’s a humbling experience.  Remember how much influence you can have on people.

When walking around, be approachable.  Today, many company dress codes are business casual. If there is a formal dress code, do not wear a suit coat – be more informal. Interact with people. Stop to answer questions and ask what the employee is working on. Do not be aloof. You are the ultimate boss and people will be nervous around you. Display a likeable personality, a sense of humor – don’t be judged a stiff. Do not answer requests for improvements in work rules, bonuses or wages by saying “I’ll check and get back to you.” Be decisive and say no – if the ultimate answer is no – but explain why the answer is no.

4. Demand Excellence

It is perfectly acceptable for a CEO to demand excellent performance.  Expectations for above average results can motivate a team.  Intense encouragement for quality will inspire all to work harder. 

This winning style can grow capabilities.  People will stretch and can reach higher performance. Success foments self-confidence.  It builds a gung ho team – the enthusiastic and dedicated attitude of working together.

Always use a constructive tone.  Never intimidate anyone with bullying.  Again, instead of raising your voice, remember to whisper in a productive manner.

5. Consider Failure

Managers often require that rigorous, in-depth and detailed analyses be completed prior to implementing priorities, initiatives and capital investments. Management wants to know what positive incremental profitability and free cash flow will result from executing the project or making an acquisition.  But the analysis should also analyze the impact on the company if the initiative fails. What will the effect of the capital expenditure be on the capital structure and the cash flow?  If it’s a new product introduction, what will the reaction be in the channel segment, with customers and competitors?  If an acquisition, are we ready to handle integrating the new operation into existing operations?  Does management have the time for an acquisition, or will they be overwhelmed with other priorities?  What are the short and long-term consequences on the businesses that may result by an overwhelmed management? 

Once a management team decides on its priorities, a project tends to get a life of its own, to not be killed once work has started on it.  Still you need to periodically judge its viability. 

6. Foster Communication

Well-run companies have candid cross-functional communication.  It is essential for the new CEO to maintain open exchanges of information.  Meetings should include everyone involved with the initiative, issue, or problem including those from the third and fourth tiers of the company.  For example, do not invite only the VP of sales and his team, while investigating a problem with sales.  Include marketing, manufacturing, supply chain, product and accounting in the meeting, since each of these functions affect sales.

Cross-functional communication is almost always lacking in distressed companies, because it takes the direction, energy, and patience of management to maintain it. Silo management with top-down decision making is easier but always results in a failing business.  Mistakes are easily hidden and multiply when information isn’t shared.  When internal functions do not discuss vital issues, a business becomes uncoordinated and produces negative surprises.

I encourage leaders to meet face-to-face.  Avoid depending on email, telephones or video conferencing. Judging performance and initiatives is best evaluated first hand, in the same room with the people orchestrating the endeavor.  Seeing body language, facial expressions, and sensing a person’s passion, provides signals often missed when using various technologies.

7. Empower The Team

Ownership of the strategic plan to fix or run a company must be held by the people on all the levels who contribute to creating the plan and are crucial to its being implemented.  It cannot be only the CEO’s action plan.  It will never get implemented.  Do not legislate the strategies and tactics.  Do not dominate the process.  Persuade your subordinates and remember to listen to their input.

While it’s important to have consensus and ownership of decisions by the officers and managers, in the end the CEO is the final decision maker.  Don’t abdicate the role or decide based on since we all agree.  If, as CEO you do not agree, don’t approve a group decision.  You may decide on an alternative solution and not implement the consensus solution. 

As the CEO, you have fiduciary responsibilities.  Take them seriously.

Being a CEO is a position of great power, but not an easy one.  If you follow the steps, you and the company you lead will thrive.

Steve Jobs compared to Peter Drucker

Steve Jobs built Apple Computer into one of the most successful and valuable companies in history. He had a distinctive management style.

How would his management compare to the advice Peter Drucker would give a CEO?

Steve Jobs’ practice of management:

Heavy stress on innovation. He did not have all the innovative thoughts that proved successful but he quickly recognized a potentially successful idea or product. Since he was not risk averse, he forcefully pushed for its development.

Focused on and generated well above average profits.

Strictly limited priorities to three.

Had excellent judgment on who were the A level employees. Successfully hired and retained them. Categorized employees performing below the A level as “Bozos” – a Bozos’ employment was terminated or he made the person’s life so difficult that they left the company.

Submerged himself in all levels of the company via random walk and meetings. Aggressively practiced hand-on management of even the most minor factors. Was incredibly exacting.

Practiced full and open cross-functional communication. Hated PowerPoint presentations and written documents – preferred face-to-face, verbal discussions. His meetings included all organization levels –whoever was knowledgeable was included.

Treated all people harshly. He was difficult to work with – emotional, explosive. Angry. Accusatory. Brutally candid. Demanding in the extreme. But he created an exciting and successful culture that motivated and retained the A level employees.

Steve Jobs and Peter Drucker were in agreement with:

Innovation was one of Mr. Drucker’s key factors for success. He advised that successful organizations abandon outdated strategies, products, and processes and have a bias for innovation. Absent innovation organizations become complacent, insular and corrupt.

“Above all management is responsible for producing results. Profit is a requirement for a company…profitability is not the purpose but rather the test of their validity.” “The ultimate test of a manager, and the only one that counts, is …accomplishment…it isn’t only accomplishing things…it’s accomplishing the right things (i.e., generating profit).”

He was concerned with retaining and motivating “knowledge workers” – his words for A level employees.

He advocated for “ruthlessly” terminating employees who failed to perform at the A level.

Elimination of excessive bureaucracy and management layers. Apple had a layered organization but Mr. Jobs' management practice created a somewhat unique organization with integrated, seemingly un-layered functions.

Communication. Communicate a clear strategy throughout the organization. Successful companies have a bias for frequent, repeated and in-depth communication.

Write down your priorities – no more than two. “Companies must avoid the temptation to dabble in many things.” Mr. Jobs had three.

Peter Drucker differed from Mr. Jobs with:

He “…argued for decentralization – the process of delegating decision making down into an organization, closer to the people who actually do the work…”. Mr. Jobs did not; he made the decisions, even minor ones.

To Mr. Drucker the customer was a factor critical to success. He coined the phrase: “Outside-in perspective”. Definition: customer focus, involvement, input – spend time with customers. Mr. Jobs did not want customer input, he did not seek it.

He advocated for the dignity of the individual and for humanizing the workplace. “Management is about human beings. Create an atmosphere where people are permitted to make mistakes.” He would not have agreed with Mr. Jobs confrontational, bullying style.

 Click on this link for an earlier posting on: Peter Drucker’s Tenets

Sources: The comparison is from Walter Isaacson’s biography of Apple Computer’s Chief Executive Officer titled ‘Steve Jobs’ and from two books on Peter Drucker’s tenets: “The Daily Drucker” and “Inside Drucker’s Brain”

Miyamoto Musashi, “The Book of Five Rings”

There are several revered authorities whose management principles result in businesses becoming and continuing to be successful. Two of the most famous: Peter Drucker and the legendary Sun Tzu.

Peter Drucker is the eminent author of 39 management books and is considered the “father of modern management”. Sun Tzu is the author of “The Art of War”. He was China’s first professional General. Prior to Sun Tzu's leadership, armies in China were largely disorganized, impotent, failures.

Surprisingly Peter Drucker’s and Sun Tzu’s advice is quite similar. Both list almost identical characteristics needed for effective leadership. Each focus on developing and executing strategic and operating plans. They also stress the importance of innovation to achieve success, or in Sun Tzu’s words, “do the unexpected”.

Another source frequently referenced when effective management and leadership is discussed is the famed Miyamoto Musashi, the author of “The Book of Five Rings”. This work is described as a classic guide to strategy. He was one of the most accomplished Japanese Samurai warriors of the 17th century.

While Miyamoto Musashi’s book is a worthy and interesting read, it is not truly a guide for effective management and strategy development. It is a manual more specifically focused on the Samurai, especially offering proven tactics for prevailing in battle. Topics include insight on combat expertise needed to excel, such as swordsmanship, weapons, technique, intimidation, etc. There is even teachings on Machiavellian concepts designed to distract and demoralize an opponent.

The value of his book is the healthy guidance it gives for leadership. There are very interesting portions of the book, which include a sound philosophy of life helpful for anyone seeking a successful leadership role. Here are a few quotations to be remembered:

“A truly confident person never loses self-control in whatever situation he is forced into.”

"One’s state of mind must be like a shiny blue sky without clouds – free from doubt and confusion."

“If a person is determined to accomplish something without fear of the outcome, nothing is impossible.”

Miyamoto Musashi, “The Book of Five Rings”.

Click on the following links for the earlier Peter Drucker and Sun Tzu posts:

Peter Drucker

Sun Tzu 

Peter Drucker's Tenets

Peter Drucker, a writer of 39 books and a management consultant, was considered the “father of modern management”. An avid student of managing complex businesses, he was the advisor who helped mold many corporations into industry leaders which forged this country’s ability to become an economic super power.

A Sampling of Mr. Drucker's Tenets:

“In most business failures, the board was the last to realize that things were going wrong.”

“Managers should make a decision no later than you need it, but as late as possible, because you always have more information.”

“Do reported profits exceed the cost of capital? Review and audit capital allocation decisions of the past year.”

(I suggest random sampling of capital expenditures for prior years and reviewing several to determine if the forecasted return on investment was achieved.)

“Above all management is responsible for producing results. Profit is a requirement for a company…profitability is not the purpose but rather the test of their validity.”

“Management is about human beings. Create an atmosphere where people are permitted to make mistakes.”

(His simple advice to clients: “It’s all about the people.” He was concerned with retaining “knowledge workers” which today most companies describe as the “A” level employees.)

“Never promote an employee on the basis of his or her potential, but based only on performance.”

“Picking a leader: would I want my son or daughter to work under that person?”

Source: “The Daily Drucker” by Peter Drucker, 2004

Sun Tzu - “The Art of War”

Sun Tzu’s book “The Art of War” was written in 400BC. Peter Drucker’s and Sun Tzu’s management tenets for success are essentially the same.

Sun Tzu was China’s first professional General. Prior to him the Sovereign (i.e., King) led his army which was frequently disorganized, under-funded and unsuccessful. He developed strategy and tactics of war but also detailed financial budgets, manpower required, basic training and logistics (e.g., the number of helmets, chickens)

It is a surprisingly practical manual of war with basic advice, such as: “Dust spurting upward in high straight columns indicates the approach of chariots.” “There are five methods of attacking with fire. The first…, the second…”.

In his tenets listed below, I suggest as helpful guidelines for substituting a Board of Directors, an Owner, a Ruler, or a Chief Executive Officer.

1. “There are five qualities that are dangerous in the character of a general..."

• "If he is reckless..."
• "If he is cowardly..."
• "If he is quick-tempered, he is obstinate and hasty - does not consider difficulties. The essential temperament of a general is steadiness..."
• "If he is defensive. One anxious to defend his reputation pays no regard to anything else..."
• "If he is too much of a humanitarian..."

"These five traits of character are serious faults in a general and in military operations are disastrous.”

2. “The ways in which a Ruler may bring misfortune upon the army is by interfering with its administration and operations. He whose generals are able and not interfered with by the Sovereign will be victorious. There are occasions when the commands of the Sovereign need not be obeyed.”

3. “If one ignorant in military matters is sent to administer the army, then every movement will be hamstrung. This engenders doubts in the minds of the officers. A confused army leads to another’s victory.

4. “He whose ranks are united in purpose will be victorious. Thus, command them with civility and imbue them uniformly with martial ardor and it may be said that victory is certain.”

5. “And therefore the general who in advancing does not seek personal fame, and in withdrawing is not concerned with avoiding punishment, but whose only purpose is to protect the people and promote the best interests of his Sovereign, is the precious jewel of the state. Few such are to be had.”

6. “It is the business of a general to be serene and inscrutable, impartial and self-controlled. If serene he is not vexed; if inscrutable, unfathomable; if upright, not improper; if self-controlled, not confused.”

Basically his book describes the development and execution of a strategic plan. His emphasis on doing the unexpected is a synonym for Peter Drucker’s innovation.