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Who creates value in a firm? Is it the CEO? Lee Raymond thinks so.

You’ve probably heard that Lee Raymond, ex-CEO of Exxon, was given a half-billion-dollar retirement package that amounts to about $144,000/day for his great work. You go, Lee.

It always amazes me to deal at lower levels of organizations where, as Leona Helmsley would likely say, “only the Little People get paid for doing work.” For the Little People, pay is roughly tied to performance. If they don’t show up for work, they actually risk getting fired. And–get this–even if they’re doing a good job, they might be “outsourced” for the good of the company.

Size doesn’t matter…

The justification for this bloated pay package? In his 12 years at the helm, Exxon became the biggest oil company in the world.

First, Lee was CEO during the boomest economy the world has ever seen. Oil demand skyrocketed, so even if he’d done nothing, Exxon would likely balloon like a pustulant sore in a rain forest.

And jeez, he got there by buying Mobil. I suppose an acquisition is impressive, if only because the closing documents stretch to the top of the Washington monument. Signatures really cramp up the thumb joint, so when you think of it that way, $144,000/day really makes sense.

What else did he do? Begin pioneering alternative energy … uh, no. That was BP. Bring down prices? Uh, no, prices are twice what they are when he took over. … Well, I guess he kept them really good at doing what they’ve always done anyway. And keeping the Status Quo is also really hard work. Just ask the 16,000 folks he laid off at Christmas 19991; they’ll tell you just how hard it is to keep the status quo!

But note well the framing

But at the end of the day, it’s our beliefs that cause the disconnect. When we talk about CEOs, we totally give them credit for everything. If someone wins the lottery on their watch, we should pay the CEO.

Give me break! There’s already given you a much, much better way of thinking about it. Read carefully the word “Helm.” A CEO doesn’t do the work; the CEO decides where to go and spins the wheel. Kind of like being the guy2 when driving to Disneyworld: you drive with no map, never ever admit you’re lost, but when you accidentally drive down Main Street USA and turn Mickey into rodent road kill, you proudly proclaim your great success. (Should the woman2 actually participate in the navigation or steering, she graciously gives the guy the credit.)

Navigating and steering is so, so important. In ships, if you don’t navigate, you end up on land. Then the ship stops and everyone gets mad. But if you do navigate, no one believes for an instant that you’re somehow responsible for moving the ship. Essential? Yes. So’s the crew. So’s the ship itself (Exxon was built long before Lee took over). Giving Raymond all the credit (and a half-billion dollars) is just silly.

Can’t we turn back time, outsource the CEO job to a really capable housewife, and see what happens? Maybe she could do even better. Housewife Katharine Graham took over the Washington Post and made it one of the most respected papers in the world. Surely there’s a housewife out there who could make a dent in Exxon.

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1 Let’s assume an average salary of $30,000 for the layoffs. 16,000 of them is $480 million. And Raymond’s compensation package was … nah. It’s just coincidence. But if I were those 16,000 peeps, I’d find the coincidence more than a little disturbing.

2 I am using the traditional gender designations in this example. Your relationship may vary. In my case, for example, I’m definitely the one who remains silent, nods, and smiles. A lot.

Do ‘open loops’ push multi-tasking into overwhelm?

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I have several important projects on my “to do” list. Instead, I’m typing on my BLOG. I’m making phone calls for my business school reunion. Everything except what I “should” be doing. Just the thought of the projects leaves me dizzy. But why?

When I have a hundred tiny, no-thought things to do, I can just stick ’em on a list and blast my way through them. When a project requires thought, Life Slows Down.
I was never a very fast problem solver. Pondering, reflecting, and going deep work best. My brain latches onto something and follows it and follows it … and follows it. The problem is that my brain’s not terribly good at following too many things at once. With four high-thought projects in the midst, the brain stalls, and none of them get any progress. But gee, does my BLOG get updated 🙂

Maybe there’s an important distinction here. Maybe overload is sometimes “detail overload,” where there are just too many things to keep track of. But maybe there’s also a form of “depth overload,” where there may not be high quantity, but the amount of thought needed for the few items is so great that progress is tough to make.

That suggests a simple solution: defer one or more of the high-thought projects until others are done. First, gotta figure out what the Deep Thought limit is. I fear in my case, it just may be One…

(Also see my more thoughtful articles at https://www.steverrobbins.com/overcomingoverload/index.htm)

The Fortune 500: Blessed are those who Waste on a Spectacular Scale

I just received my copy of Fortune. It’s Fortune 500 time once again. I often hear businesspeople speak of landing the Fortune 500 as clients. Browsing the list, I suddenly realize why.

The Fortune 500, culturally, simply have so much money that they’ve lost all perspective on value. In startups—the world I’m from—every penny counts. You don’t spend a boatload of money on something without at least some idea what the return is.

In my work with the Fortune 500, even so-called cost-cutting would qualify as abundant extravagence in any other world. I’ve seen companies fly three vendors across the country and put them up in a hotel for a one-hour meeting to decide whether or not to meet again the following month to proceed with a contract. They spent as much deciding whether to spend money as I would spend on the entire initiative.

So for those of us who are in the Fortune-below-2000, let us say a word of thanks for Exxon Mobile (still hasn’t paid the Valdez penalty), Wal-Mart, GM, Chevron, Ford, ConocoPhillips, GE, Citigroup, and all the rest. If it weren’t for them, the rest of us wouldn’t have access to the free flowing coffers that comes from overabundance.

Are engineers living on another planet? Don’t they use their software?

Ok, I admit it. I spent 17 years as as engineer before going to business school and becoming a dyed-in-the-wool non-techie. It’s hard to remember the years as a programmer, rather like trying to remember early childhood. My brain was just too different back then. My brain of today won’t process that way any more.

Today I purchased an upgrade to my video editing software. Being an upgrade, it requires you to have the previous version installed already. But there’s a problem: my disk isn’t big enough to hold both the upgrade and the original.

With a small program of only a few megabytes, this oversight can be forgiven. After all, one can usually free up some space with a little detective work. But when the install is multiple gigabytes, it’s sheer sloppiness not to think through the issue of an install that eats up so much of the drive.

I like to think I was never that sloppy as an engineer. I like to think I used my own products and made sure they at least installed and ran smoothly. And since my whole goal today is to bitch about my frustration with Studio’s inability to install, my memory paints only a glowingly happy memory of being such a responsible, user-oriented programmer. And lost in my haze of manufactured memory, I can feel as self-righteous as ever, as I wait on hold (20 minutes and counting) for tech support to bail me out of this mess…

The eyes have it… Body language and the Body Politic

Last night (April 7, 2006) we were watching Scott McClellan in the White House press room responding to an onslaught of questions from reporters about leaks, classified information, and whether President Bush has declassified information for his party’s political gain (versus for the good and safety of the country).

Scott was a masterpiece of composure and a masterpiece of rhetorical wordgames. I find it funny that people decried Clinton from playing semantics, yet as far as I can tell, every politician from both parties pushes semantics to the hilt. Clinton wants us to know what the meaning of “is” is. Bush wants us to know that “declassified today” means “released to the public today” and that leaks aren’t leaks when he decides to leak them.

The funnest part was watching Scott’s body language. Check out Paul Ekman’s book “Emotions Revealed.” Ekman tells us that we have microexpressions that reveal our true emotions, even when we’re trying to hide them. Through the miracle of our DVR, we were able to freeze-frame and slow Scott’s face during critical questions. He was a veritable case study for Ekman’s micro-expressions. Our favorite came when a reporter asked Scott about the President’s reaction to the news story. We replayed it on super-slow-motion about a dozen times. He had sudden tightened lips, brows drawn slightly together, and his lower eyelids tightened. All signs of anger.

At this point, politics is so broken that I’m even losing the will to act. I have no faith in either party to understand, much less act in, the country’s long-term best interest. I have no faith in either party to understand, much less act on, the truly catastrophic dangers of our time: peak oil and global warming.

Values-wise, I happen to be socially liberal and fiscally conservative. Relatively speaking, that means I side with the Democrats. (At least during my lifetime, the four Republican administrations have racked up $7 Trillion in debt, and I highly disapprove of such fiscal recklessness. Give me tax-and-spend over borrow-and-spend any day. At least you feel the pain immediately rather than burdening your grandchildren for life!)

I don’t know what to tell you about politics, and it doesn’t matter, because it won’t change your mind anyway. But certainly check out Ekman and body language. At least you’ll get some entertainment out of the circus.

What is Viral Marketing? (What the buzzwords mean, and why not to use them)

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What the buzzwords mean, and why not to use them

“We will leverage our viral marketing efforts, resulting in widespread adoption of our revolutionary ‘no-revenue’ product, as customers recommend us to their friends.” — Any of a million forgettable business plans

Blech. Let‘s get real. It is mid-2000. Tech stocks are tanking, and VCs have boldly declared startups should have a revenue model. In this brave new world, the old “new rules” don’t apply, and the new “old rules” say business plans need more than New Economy Buzzword Hype.

Nonetheless, every plan I read will blow the world away with “viral marketing.” They almost always use the phrase incorrectly, Let’s explore the correct use of Viral Marketing.

The best plan: don‘t use buzzwords like “viral marketing.” Buzzwords rarely impress your readers. If you can’t say it in plain English (or your native language), then it‘s probably fluff and doesn’t belong in a serious document.

If you must use “viral marketing,” use it correctly. Viral marketing campaigns piggy back on your product, exposing non-customers to your company automatically when your existing customers use the product.

Hotmail spawned the viral marketing revolution. Hotmail is web-based e-mail that appends “Try hotmail!” to every outgoing message. Without any user action, every e-mail advertises the service to the message recipient, who (at that time) probably didn’t know about Hotmail.

Hotmail was weak viral marketing, since the recipient could ignore the ad without trying the service for themselves. Weak viral marketing requires voluntary action. MCI’s successful “Friends and Family” plan gave discounts for calling people in your plan circle if they were also on the plan. This made customers persuade friends to join the plan, and friends could refuse without trying it. The need for both customer and recipient action made this weak..

Strong viral marketing requires the non-customer to try the service. To receive money e-mailed with the “Paypal” payment service, a recipient must register with the service. Since registration means receiving money, Paypal recipients are highly motivated to join. Evite online invitations also require recipients to use the service to confirm an event invitation. Other strong viral applications include Yahoo!’s shared calendar service and their briefcase service.

Pressuring customers isn’t viral marketing. If you’re selling manufacturers a production planning system, and the manufacturers pressure their distributors to switch to the same system for convenience, that’s simple peer pressure. It may be effective, but it isn’t viral marketing, since using the system normally doesn’t automatically expose new prospects to the system.

Word of mouth is neither viral nor marketing. Since it depends on the customer acting voluntarily, it isn’t viral. Since it’s what the customer does, it’s not marketing (marketing is what your company does; not what your customers do).

In short, Viral marketing works in transaction oriented businesses where a customer transacts with a non-customer. The opportunity comes in controlling that interaction so the non-customer must be told about your product (weak viral) or actually made to try the product (strong viral) without action by the current customer.

Losses and Responsibility: How everyday business language lets us engage in accounting…deception.

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How everyday business language lets us engage in accounting…deception.

We’re living in interesting times. Worldcom announced $4 million in losses that had been buried as, um, capital expenditures (oops. Don’t you just hate it when that happens?). Enron’s collapses from horrendous mismanagement, taking Arthur Anderson down for obstruction of justice. Tyco apparently funneled billions of company dollars straight to the founder’s family. Global Crossing… Xerox… Merck … Everyone is so upset about the losses. We’re losing so much money. Losses, losses everywhere. But wait!

What does that mean? When I "lose" my wallet, it’s because it got accidentally (and thoughtlessly) misplaced. Getting into the cab, it was there. Six tequila shots later, when it was time to pay, the wallet was gone. Whoops. I must have lost it. Fortunately, the realization comes after the six shots, so the consequences (while probably severe) seem like little more than a hazy dream…

This article is continued in “It Takes a Lot More than Attitude … to Lead a Stellar Organization!" Click here to purchase.

What is Leverage? What the buzzwords mean and why not to use them.

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What the buzzwords mean, and why not to use them

“We will leverage our viral marketing efforts, resulting in widespread adoption of our revolutionary ‘no-revenue’ product, as customers recommend us to their friends.”
— Any of a million forgettable business plans

Leverage

Where you put in the same force but get much bigger result.

You leverage "X" to do "Y". You need a second verb in order for the construction to make sense.

You leverage small amounts of money to control a lot of money by borrowing with a small downpayment.

When you leverage X to do Y, Y must be something you could do without X. And having X must make Y a whole lot easier. If having X doesn’t make Y easier, it’s not leverage.

You leverage one person’s smarts by having them be a teacher.

You don’t leverage one person’s smarts by having them do their work.

You leverage your salesforce by having each of them get a dozen customers to become evangalists.

You don’t leverage your salesforce by having them go out and sell.

If you’re going to "leverage your technical expertise," that means you’ll use your technical expertise to produce a multiple of the results you could produce without that expertise, by automating, etc. Fedex has leveraged their package tracking system to lower costs, and increase offerings [web-based tracking, and now at-your-printer printing of airbills]

If "use" is a synonym for "leverage," you can probably safely use "use."

You don’t leverage your people unless you have a mechanism for turning 5 people’s knowledge into many more.

You leverage an expert by having them write a column. Not by hiring them to do work.

You don’t "leverage the power of the internet." You leverage the broad reach of the internet to aggregate customers from around the world. You leverage the speed of the internet to get product to your door faster than any other kind of ordering. You leverage the automation of the internet to … etc.

Click here to read about “viral marketing,” another hot buzzword.

Fund Raising Destroys Value! Do it wisely and carefully.

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“I just hit a major home run!” exclaimed the entrepreneur.
“Did you ship product? Did you make your first sale? Did you get a large contract?” asked his friend.
“No, no. Something much better: today we closed on a $20 million round of financing.”

Congratulate yourself for raising money, but don’t think it was time well-spent. You need money to stay in business, but raising it destroys value: money changes hands, with a big chunk siphoning off to lawyers, filing fees, travel expenses, and phone calls. You’re left with less than when you started, and that’s before buying your first paper clip! Money may make the business viable, but it doesn’t make it valuable.

Nor does fund-raising use your time wisely. Your investors are betting on what you uniquely bring to the table. Your competitors have all raised money. Most entrepreneurs out there have raised money. fund-raising ability doesn’t distinguish you one whit. Spend your time bringing your vision to life by building your organization.

Actually, your investors would love it if you never raised money again! Every new share of stock issued dilutes current shareholders. With every dollar you raise, your investors wince. In the late 1990s, many companies raised so much capital that they’ll need to be in the Fortune 10 to give investors a decent return. Some may make it. Most won’t.

And beware! Successful fund-raising can snare a CEO. It let’s them avoid their real challenge—building a stellar business—in favor of the “success” of a $20 million closing. You see, fund-raising is easy: the customers are VCs, angel investors, and banks. Their buying criteria is simple and public; most of them will even outline it on their web site. And the product, your business plan and sales pitch, can be created by one or two people.

Running a company is much more challenging. You don’t necessarily know your customers. In fact, you may find they don’t even exist! If you do have customers, you may not know their buying criteria. In fact, they may not know their buying criteria! And delivering your product and services means coordinating dozens of people, each with different priorities and demands on their time. Yet knowing the customer and delivering the product will make or break you. fund-raising is a stressful—but much safer—place for an entrepreneur to spend their time.

So yeah, you have to do it. You have to raise money. Businesses need money to operate. If you aren’t yet profitable, that means pitching investors, haggling over terms, and repricing your round at the 13th hour. Just remember that getting the money merely opens the starting gate. Then it’s time to add value, and you add far more value as a leader and manager than you do as a fund-raiser.

So raise your money, then run your business. Run it well and profitably and you’ll repay your investors a dozen times over.