This week's newsletter has two sections:

• Smart Growth
• Personal Integrity – The Need To Blow The Whistle
• A Year Ago – Reflections on 9/11

Smart Growth

I've never put together an annual budget without having the obligation to show an increase or a growth in the business. It doesn't matter whether the economy is growing at a double-digit rate or whether it has been declining year after year. Senior managements are so obsessed with showing increases—we can be oblivious to the rest of the world and what it is doing as long as we attempt to show improvement.

We are moving into planning season for 2003 and we will be faced with the same questions we are asked each year. How much should our revenues increase? Should it be 5%, maybe 10%, or even 25%? We may rationalize these optimistic projections by thinking of a new product or service we expect to introduce in the first half of the year. But, never would we plan for a decline of 10%. This is just against our management way of life. As managers, part of our job is to ensure growth. Regardless of the hopeful revenue source, we need to be aware that if we put too much expense in place before the revenues are realized, we may end up with a financial disaster on our hands.

Take for example, sales and marketing expenses. These expenses need to be recognized before the sales occur. In other words, these expenses are an investment in the potential of the business. If we show a budgeted sales increase of greater than 25% and we scale our sales and marketing budget to that level, we may well add headcount and certainly other sales and marketing expenses. If we misjudge the rate of sales growth, we may very well put in sizable operating expenses without realizing the revenues to absorb these expenses.

Several years ago, I had a client that did just that. They invested in sales and marketing in anticipation of a new product introduction. What happened? The introduction was delayed, the expenses piled up, and sales results were less than anticipated. The result? The company ran out of money quickly. Ultimately it was not able to survive.

This is why management needs to be very sensitive to the many faces of uncertainty and possibilities. We all have been around long enough to know that Murphy's Law is alive and well. What can go wrong will!

So as a senior leader in your organization, examine the possibilities from all angles. The time invested in looking at all potential outcomes, both positive and negative, will be much better spent than the time it would take to repair a weakened budget caused by unmet sales objectives. How does the saying go? Haste makes waste. Or, measure twice and cut once. How often do we take a short cut and mentally justify to ourselves that what can go wrong will never go wrong, only to experience disaster later? Don't underestimate the power of what can go wrong. From a financial viewpoint, it takes guarded discipline to avoid a failure.

This situation puts a modest schizophrenia in the air. As leaders, we crave to view the glass as half full and that is the mindset we need to use to inspire our followers to accomplish great results, particularly in times of stress and difficult economic conditions. We need to set the balance between the positive and the necessary contingency plans to protect our future. It is important to remember that success comes to those who are prepared and see the opportunities. Keep your eyes open.

Now ask yourself... Am I a Leader?

Personal Integrity — The Need To Blow The Whistle

In our professional lives, we often see behaviors or actions that we consider inappropriate and we want to report their occurrence. But we fear we may lose our jobs and therefore we do nothing. As a result, the rotten apple continues to impact others and often a calamity occurs.

When should I or can I safely blow the whistle? This is probably one of the more complicated questions to answer. Let's face it. Most of us are economically dependent upon our place of work and to a certain extent, these financial circumstances will dictate whether we will blow the whistle. Only those who are independently wealthy need not worry. They can report the incident and it doesn't matter whether they get fired or keep their jobs.

On a subtler note, the psychological impact of reporting someone's inappropriate actions may be the more difficult hurdle to overcome. I am not a trained psychologist, yet I know from personal experience that it may be difficult to come out publicly and report a wrongdoing. It doesn't make me or anyone else a bad person, but just points to the inherent element of human nature that doesn't want to instigate confrontation.

Many might not want to be dragged into a questionable situation, particularly if it is illegal. For those of us who have familiarity with investigative prosecutors, they can be very intimidating. Even though you might not be the guilty party, the tone of the questioning and accusations are always nerve racking. Just ask anyone who has been through the test.

Since it is very hard for companies to have willing participation in reporting wrongdoings, leaders need to set up a system that allows individuals to report wrongdoing without the individuals being subjected to extreme scrutiny—and more importantly, retribution. Creating such a system is not easy to do yet it can be important for large companies when they need to be assured that the corporate practice allows for spotting and exterminating wrongdoing before it becomes too pervasive.

Earlier in my career, when a senior executive was mentoring me, he described the need for an internal auditing function in the company. Although internal auditors have somewhat of a checkered reputation within corporate America, they can provide a very important service, particularly for those leaders at the top. Auditors work outside the chain of command and check on transactions and the viability of internal controls at all levels. This established infrastructure is the appropriate place to report wrongdoings. Corporate internal auditors are autonomous enough and have the backbone and training to decipher right from wrong. When there is no established internal auditing function, senior leaders should set up a system for an audit committee to step in and handle any allegations.

Corporate reputations are hard to come by and easy to destroy. Why wait for the horse to get out of the barn? Do something about it today.

A Year Ago – Reflections on 9/11

I found myself weeping the other day as I read the letter from my sixth-grade son's school telling us of the elaborate preparations they have taken to be ready for tomorrow. They will have an all-school meeting and the school psychologist will be available for the kids and their parents. They are taking every precaution to be sensitive to the possible anxiety and unsettling behaviors that might ensue.

As I flash back to last year, my oldest son was 50 yards from ground zero in an adjacent building. He has now relocated to Denver and started a new life with his wife. Over Labor Day weekend, he was visiting with us in New Hampshire, celebrating our family life together. At one point, we were having a discussion and on the television was a reference to 9/11. He still has memories burned into his mind (I'm sure they will never leave) that caused him to have an emotional outburst. I didn't fully understand it then, but on reflection, it makes sense. After all, terrorists invaded his and our collective lives, changing us forever.

We had a spirited debate at the dinner table about American civil liberties and whether we, as a nation, are going too far to limit our freedom in the interest of nailing the terrorists. On one hand, my father-in-law thinks we are going too far in limiting our freedom—forever taking away our civil liberties. My son, on the other hand, thinks we should search and destroy until we find the perpetrators. I guess if I had been 50 yards away, I'd feel the same way.

It is difficult to return to a normal life after a traumatic event like this happens. All loss needs to be mourned and this was a tremendous loss, by any measure. Mourning will occur for a long time and it may take years for many to understand the implications of this tragic event. I know I need to be more tolerant with those who are especially affected by the aftermath of September 11th.

When an event like this happens, do you feel like all the good you do in your lives is not really worth it or do you redouble your efforts and press ahead even more vigorously? I suggest we look at the world as it can be, the possibilities for a safe and happy world, one where we can live in harmony with each other. When you go home tonight, turn to the person closest to you and give them a big hug. After all, this is what living is all about.