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Leadership Secrets of the World's Most Successful CEOs

This is first part of a two-part article

Who knows what it really takes to be an effective business leader? The world's most successful CEOs of course, the men and women who run the No. 1 or No. 2 corporations in their industry or market niche.

In “Leadership Secrets of the World's Most Successful CEOs,” 100 top CEOs reveal — in their own words and through exclusive interviews not published elsewhere — their secrets of effective leadership: the proven strategies, attitudes, behaviors, philosophies and tactics they used to help themselves and their organizations rise to the top.

Among them are William G. Crutchfield Jr., Crutchfield Corp.; Stevan Roberts, Edith Roman Associates; Lloyd G. “Buzz” Waterhouse, Reynolds & Reynolds; Ron Sargent, Staples; and Steve Wadsworth, Walt Disney Internet Group.

“Leadership Secrets of the World's Most Successful CEOs” was published by Dearborn Trade Publishing, copyright 2004.

Chapter 16: WILLIAM G. CRUTCHFIELD JR., CEO, Crutchfield Corp.

The fundamental role of a successful leader is to achieve alignment.

Crutchfield's CEO, Bill Crutchfield, feels that the fundamental role of a successful leader is to achieve alignment. “Much is written about executives' roles in aligning their teams around corporate strategy and tactics,” he says. “Kenneth Lay was probably very effective in this capacity at Enron.

“Unfortunately, too little is written or taught about the alignment of values and the creation of strong organizational cultures. The most powerful leadership technique that I know is identifying, inculcating, and managing an organizational culture.

“Leaders must possess the right set of core values and must be able to align everyone in their organizations around those values. Obviously, if Mr. Lay had possessed the right values, and created a healthy organizational culture and aligned his employees around them, Enron would not have collapsed in scandal.”

But what values should a leader embrace? “In a capitalistic society, there is always the temptation to do what it takes to get rich quickly. Aligning a company around those values too often leads to serious problems,” says Bill. “From my experience, I find that truly successful leaders possess values that are centered on responsibly serving the best interests of customers, employees, business partners and stakeholders over the long run.

“Another tough issue is how one balances the best interests of these various constituents. It is a very difficult balancing act. If you 'give away the store' to delight your customers, you obviously are not acting in the best interest of the stakeholders.

“On the other hand, if you are not genuinely sensitive to your customers' needs, you will never gain their loyalty. If you view your employees and business partners as overhead that needs to be minimized for the benefit of the stakeholders, you may miss a great opportunity.

“When treated with respect, and when the appropriate human and financial resources are invested, they become tremendous assets to an organization. And, if you concentrate too much on maximizing the wealth of senior management, you can ruin the business. The financial mania of the late 1990s lured many executives into making self-serving decisions that ended up hurting all of their constituents — customers, employees, business partners and, ironically, themselves.”

How can one align people around one's values? Bill says, “The obvious first step is to live them fully. A leader must be the embodiment of the organization's core values.

“The next step is to communicate those values constantly. A leader must be an evangelist for inculcating the organization's core values. Then, you must ensure that the organization has management systems that maintain these values.

“Crutchfield is a consumer electronics company. We sell primarily through mail order catalogs and online, and we also have two stores.

“We hire people based on our assessment of their ability to adapt to our core values. We include compliance with our basic beliefs into our employee reviews. And, we reward and discipline our people based on their compliance.

“When a leader does all of this, his or her business will have the best possible competitive advantage — a powerful institutional culture built around the long-term needs of customers, employees, business partners, and stakeholders. To me, the successful accomplishment of this objective is an excellent demonstration of leadership. Unfortunately, it is not an element of leadership that is widely understood or frequently addressed.

“Our sales continued to grow each year through 1982. However, the rate of growth kept slowing. Even more disturbing, our earnings started to erode considerably. We placed the blame on the recession and assumed our fortunes would improve when the national economy did.

“In 1983, the economy did rebound vigorously. However, our sales fell by 10 percent and earnings turned negative. Our cash dwindled rapidly as a result of these losses and the construction costs of a new building. By spring, I had to take out a bank loan.

“The losses continued to grow, and by late summer the loan had grown considerably. Although the company still had a substantial net worth, these losses deeply concerned me, my executives and, of course, the bankers. Something was fundamentally wrong with the company.

“In searching for the answer, I received mixed input. One of our vice presidents championed the argument that our strategy was wrong. He and his supporters strongly believed that we were adding too much value to our products and, therefore, had to charge higher prices than our mail-order competitors.

“They recommended that we adopt the strategy of a mail-order company in Baltimore. Their catalog was crude in comparison to ours. It had no helpful articles, was printed on newsprint, and used line drawings of products instead of photographs. This company did not offer the services that we provided our customers: toll-free sales, customer service and technical assistance lines, installation guides, liberal return privileges, technical services department or repair shop.

“However, their prices were lower than ours and they were reported to be very successful. My staff's strong recommendation was that we strip our business down and compete head-to-head with this company. I was so convinced that the stripped-down catalog approach would have been a disaster that I made a 'command' decision not to follow their advice.

“A totally different recommendation came from the University of Virginia's McIntire School of Commerce. Crutchfield Corp. was selected for the 1984 McIntire Commerce Invitational case. The faculty case writer conducted most of his interviews with me during the fall of 1983 when I was searching for the solution. He wrote in the case, 'Crutchfield Corp. has gotten bigger than Bill Crutchfield can handle.' From this, I assumed his recommendation was that I should be replaced as my company's CEO.

“Fortunately, I did not follow his recommendation either. Instead, I spent a great deal of time thinking about the problem philosophically. Rather than analyzing how the numbers had changed over the years, I thought of how the soul of the company had changed.

“When the business was much smaller, it embodied my beliefs — caring for customers, respecting employees, working closely with our business partners, and striving for perfection. However, what I saw now in the company was a culture out of phase with my beliefs.

“The salespeople cared more about their commission checks than about the welfare of our customers. Our warehouse had become so bureaucratic that it was taking several days to ship an order instead of 24 hours. Our customer service people viewed their role more to protect management from angry customers than to find solutions to our customers' problems.

“I realized that employees were not respecting each other to the degree that they once had. Morale was bad, turnover was high and cooperation was poor.

“Finally, I realized that we no longer tried to be at the leading edge of everything we did. The design of the catalogs had slipped. The product copy lacked excitement. Our catalog merchandising was confused. Packages weren't well packed. Our sales and technical advisers were inadequately trained. Our store was not neat or well merchandised. Basically, the culture of the company had slowly and insidiously evolved into something very different than what it had been only a few years before.

“During this intellectual probing, I read a statement that was so appropriate to our situation that it was almost uncanny. Thomas Watson Jr. made it during a lecture at Columbia University in 1962. The IBM chairman said, 'I firmly believe that any organization, in order to survive and achieve success, must have a sound set of beliefs on which it premises all its policies and actions. Next, I believe that the most important factor in corporate success is faithful adherence to those beliefs. And, finally, I believe that if an organization is to meet the challenges of a changing world, it must be prepared to change everything about itself except those beliefs as it moves through corporate life.'

“Now I understood exactly what the problem was. The company did have a set of beliefs — my beliefs. While the company was small, I was instinctively able to ensure that everyone adhered to them. As it grew, I lost this control, and my beliefs and the company's beliefs gradually started to diverge. By 1983, they were very different. Since this change had occurred so slowly, I never recognized the problem until I read Mr. Watson's comments.

“Once you discover a problem, the answer is relatively easy. Initially, I defined and wrote three basic beliefs. Soon I added the fourth. Over the past twenty years, the wording has evolved into the following:

1. Exceed our customers' expectations by providing a truly exceptional level of integrity, courtesy, service, and helpful information.

2. Maintain a passion for continuous improvement through commitments to excellence, productive change and innovation.

3. Respect each of our coworkers and provide a work environment that promotes dignity, team harmony, and personal satisfaction.

4. Respect our business partners and maintain mutually rewarding relationships with vendors who demonstrate high professional standards.

“Next, I had to articulate them to everyone in the company. The beliefs were attractively printed and given to each employee. In group meetings, I briefed everyone on exactly what they meant and how our employees were expected to adhere to them. Finally, I created the systems that inculcated them into our company's culture and ensured their adherence.

“I made the first item on our employee review form, 'Adherence to our Basic Beliefs.' Top management then started an extensive review process. Depending on how they complied with the basic beliefs, employees were retained in their current positions, promoted, demoted and, in a few cases, terminated. Very quickly, everyone got the message.

“Almost overnight, the company started to change. Employees cared more about our customers. They worked much more closely with their fellow employees. They gained respect for our business partners. And, they started to show a genuine commitment to excellence in the performance of their jobs.

“Sales started to grow again. The company quickly returned to profitability. Within a year, we were achieving results that exceeded our wildest expectations.

“On the other hand, I am confident that the company would have failed if I had not identified the problem and led a cultural revolution to correct it.

“As for the competitor my vice president had wanted me to emulate, they filed for bankruptcy.”

Chapter 24: STEVAN ROBERTS, president, Edith Roman Associates

Take somebody who doesn't know how to do something, show them how to do it, and give them credit for it.

“There's an old saying: 'Give a man a fish, feed him for a day; teach a man to fish, feed him for a lifetime.' My best leadership technique — take somebody who doesn't know how to do something, show them how to do it, and give them credit for it based on this principle,” says Steve Roberts, president of Edith Roman Associates, one of the largest mailing list companies in the United States.

“For example, one of my account executives showed me an e-mail she was planning to send to an important client. The e-mail attempted to resolve a negotiation on pricing and terms, but was worded in an undiplomatic way that the client would surely have found offensive.

“I rewrote it in a more diplomatic way, e-mailed my version to my account executive and suggested she send it using my version. But I didn't dictate to her which version to use, nor did I contact the client directly. I left it up to her.

“One of my key roles is to teach our people how to be successful in our business. I routinely accompany new account executives on sales calls so they can see how it is done. They learn to identify the client need, restate the need to the client, and close on the sale.

“A CEO cannot train everyone in a large organization personally. I select people, taking one person at a time under my wing.

“If someone does not work out, I prefer to let them go quickly. People have a calling, and if they are not suitable for your organization, they are suitable for someone else. You just make them miserable keeping them in an organization in which they will not succeed.

“Everybody screws up at one time or another. If you make a mistake, pick yourself up and move forward, and do not be afraid to take more risks. Without risk, there is no reward.”

Chapter 74: LLOYD G. “BUZZ” WATERHOUSE, CEO, Reynolds & Reynolds

Simplify until it fits on one page.

In an increasingly complex world, Buzz Waterhouse, CEO of Reynolds & Reynolds, believes the key to effective leadership is to keep things simple.

“I believe great leaders are great simplifiers,” says Buzz. “After all, leaders lead people, not organizations or companies. And leading people is about gaining understanding, alignment, and support. One of the best ways to do that is to simplify.”

Buzz outlines the three key questions every leader must ask himself:

1. Does everyone understand the direction you're headed and how you expect to get there?

2. Are your people aligned around that direction?

3. How can you gain their support for the actions needed to move in that direction?

“I try hard to simplify things to their essence,” Buzz says. “My approach to solving any problem is to synthesize the facts until I can find the essence of what the company is trying to do.”

The key to his method: Simplify the business plan until it fits on one side of a sheet of paper.

“It doesn't matter whether it's the most complex business or complicated market, an organization's core values, or any other critical focus. Simplify it to one page. That way, everyone in the organization is — literally — working from the same page. They see the same picture, and use the same language to talk about the essence of what you're doing. And then you hammer it home in everything you do.

“In my career, I've worked with leaders who have been extraordinarily good as simplifiers in the most complex, global businesses you can imagine. That ability makes an enormous difference. I've also worked with leaders who made the simplest business too complex, and it drove most of us nuts. It also made us less effective.

“Both experiences have stayed with me and reinforced the same lesson: A leader's ability to simplify is a powerful way to focus people on the essence of what you're doing.”

Reynolds & Reynolds serves automobile retailers with information technology and software. The technology enables these dealerships to manage their businesses more robustly and connect seamlessly with car companies and with consumers.

Recently they developed a new technology platform that captures a comprehensive picture of an automobile retailer's entire business and all the touch points with consumers — from the first visit to the dealer's Web site to the service reminder after 40,000 miles.

Following his philosophy of “keep it simple,” Buzz and his executive team managed to articulate the new generation of solutions — and the company's approach to the market — on one side of a single sheet of paper.

“We displayed the essence of what Reynolds offered by grouping solutions around the circumference of a wheel,” says Buzz.

“Each section of the wheel, like a slice of pie, represents a department in a dealership and a set of corresponding solutions from Reynolds. Adjacent slices on the wheel are linked, and together form a comprehensive, integrated array of technology solutions that match a customer's total business needs.

“That sounds pretty basic, I know, but the wheel takes two complex businesses — ours and the dealership — and simplifies both. All I have to do is mention the wheel, and everyone in the organization knows the reference point. This simplifies the essence of how we meet the customers' needs and creates value for them in every part of their auto dealership — from sales and leasing, to insurance and financing, to parts and service.”

Buzz concludes: “I recall reading a comment made by Einstein. He said, 'Always simplify things to the greatest extent possible, and not one bit more.' That seems like a pretty good formula for business success.”

To read interviews with Ron Sargent of Staples and Steve Wadsworth of the Walt Disney Internet Group, see the link below.


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