Speaking of Leadership®, Vol. 2, No. 13
Phil Holberton

When I pick up the Wall Street Journal and read of companies like Enron and Tyco and the financial shortfalls that occur so often, I step back and reflect upon what caused them and what I would do differently. Many, if not all, CEOs are pressed by stakeholders to produce profits (often immediately) for their company. I've been there and have been forced to reluctantly agree to estimate earnings that were unlikely to be achieved.

As leaders, we can become entangled in a never-ending habit of agreeing to expectations of external stakeholders that are more aggressive than we are able to achieve. We confuse what we would like to accomplish with what is possible and our communication reflects this confusion. We have seen it time and time again.

We'd be hard pressed to find any CEO who deliberately mistakes aspiration for accomplishment. By the very nature of his or her position, the CEO is obliged to carry the flag of confidence and optimism. However, this same enthusiasm can cause trouble when translated into promised financial results. Here are some ideas that might just offset this tendency to "get ahead of ourselves":

1. Reduce by 10-20 percent what you expect revenues will be.

2. Look at what part of the quarter you are in and assess realistically if desired results are achievable given your performance during the same part of last month's quarter or last year's equivalent.

3. Look for milestones or achievements that are already "in the bag."

4. Remember that shortfalls in revenue translate to larger shortfalls in profits.

5. Hedge your bets; pick one or two items of strategic importance and focus on delivering it/them.

6. Avoid press release de jour; when something important happens, your stakeholders may not be able to differentiate the wheat from the chaff.

7. Focus on building shareholder value and sticking to your company values.

8. Under promise and over perform!

I have found these principles work whether you are a public or private company. The most important part is to practice them from the start of the business.

Balancing the need for optimism both outside and within the organization, the leader has his or her work cut out for them. On one hand, the CEO needs to provide encouragement and support, assuring stakeholders that some uncertainty is acceptable and that things will go according to plan. Of course, for those of us who have been around a while, the plan is never what actually happens.  On the other hand, leaders need to be evenhanded with their constituents about what is truly happening within the business. It's okay to admit that the future is a little foggy. After all, it just may be!

Now ask yourself... Am I a Leader?

Linking Strategy To Financial Results

As the leader of a department or organization, it is our responsibility to create a vision and then translate that vision into strategy and that strategy into action. As we shape our vision, it is important to develop the vision in context with the current economic and financial environment.  It is easy to craft a vision to "change the world," but is it realistic given an understanding of our industry's history, evolution, customers, etc.? In crafting the vision, we must be certain that the followers, those who will have to implement it, have confidence that the vision is realistic and achievable. If vision is overreaching or too abstract, people will shy away, not understanding how the vision can be implemented practically

After the vision is set, leaders need to build the strategies to achieve the vision. This is where the heavy lifting comes in—developing strategies that managers and others can implement relatively easily. How many times have we heard, "This is an execution strategy"? And, how many times have we seen it fail?

Leaders and managers need to check and recheck the underlying assumptions for achieving any strategy. Just think about your favorite sport.  Each of the teams is strategizing each week or each day against a different team. Our set of business competitors comes and goes, but we need to compete against all of them every day. We need to be continuously checking our strategies and measuring our results against our expectations—market share, product development, corporate growth, profitability. If we continuously do this, with one eye always on the financial prize, we will make great progress in linking business strategies to financial results.