The burden of leadership

When I started my own company there were days when it just wasn't happening.

I would drive into the car park and not want to go into the office to meet my team. Obviously I did, and I would always try to be confident and optimistic, regardless of what I was actually feeling deep down.

As a CEO, the key attributes you must have are confidence and dynamism. In tough market conditions, always appearing to be optimistic makes a massive difference to your employees. You must also combine this with energy.

Busy people are generally happy people, so even if there doesn’t appear to be a lot you can do, create something to keep people busy and interested. Also, make sure your diary is full as keeping yourself active and on the go is the best way to show your commitment to the business. You must have a passionate belief in your company and products and the confidence and energy to make it happen.

We all know that successful companies sell a lot to their established business base, but when was the last time your company had a meeting just to discuss how much more you could do for them? No doubt new sales opportunities have been mooted, but when did you last talk about your existing customers and how to improve the service they receive?

In the early days of Virgin Airways, Richard Branson had a suggestion book on board his planes and regularly urged customers to talk about their experience on his airline.

Being a stickler for quality falls into the same category as attention to detail. This can be a double-edged sword as you can miss out on new opportunities, but being absolutely on top of your numbers is a prerequisite for any successful CEO.

I wonder how many of us can reel off by heart our weekly cash balance, payroll costs, sales by major product line and the like. Not many I bet, but we ought to be able to. Allied to this is the importance of using your time effectively. Having support staff such as a driver or even a secretary seems a luxury in these more ascetic days, but if it really frees you up to squeeze that extra bit out of all the parts of your business, it may be worth it.

In the software sector, upfront licence fees used to be the norm, but there is now an increasing trend towards software-as-a-service where, apart from the technology aspect, licence fees are spread over a period of years.

The downside is a hit to short-term cash and profits; the upside is that it is cumulative and once critical mass is reached, highly profitable on a month-in, month-out basis.

From a product perspective, it is amazing what can happen to your business when you look at a product and decide on ways to slice and dice the offering to customers. This may involve analysing what has made you successful in your current market, and exploring how those strengths could be applied to new opportunities.

Also, look at your customers and have a think about your outliers – i.e. customers that don’t seem to fit into your normal pattern. I recently did this with one of my portfolio companies and we found that there was a small but very profitable niche market that we had completely ignored.

Why leaders make the difference

I’m not a big bridge player, but I’ve always been fascinated by ‘duplicate bridge’.

Here identical cards are dealt to two different tables and the games played. The results are – to my surprise anyway – almost always completely different. Same cards, totally different result.

In business, two companies can start in exactly the same market. One will be successful, going from strength to strength, while the other atrophies. Unlike in duplicate bridge, I can identify a reason behind this phenomenon: management. Or more specifically, the founder, leader or managing director of a business.

One of the best cases is the return of Steve Jobs to Apple. In a three-year period he transformed the business with the inspirational launch of the iPod and, latterly, the runaway success of the iPhone. Prior to the crash you would have made 20 times your money having backed him on his return.

This is also a classic case of a successful turnaround that won through because innovation, design and marketing skills were at the heart of the business – not merely cost cutting.

Indeed, I firmly believe that great leaders make all the difference and these people are united because they are almost always marketing and innovation led. This needs to be remembered because in tough times people tend to think that cost cutting is what it’s all about. Yes, you need be efficient, but increased sales have to be underlining the decisions you make if you’re seriously thinking long term.

Getting your business model right takes strong leadership. Take Hornby, the model train-maker as an example. If ever there was a business that seemed to have had its day, Hornby was it. What self respecting kid would buy a train set when you could get a computer game starring Angelina Jolie alias Lara Croft?

And yet Hornby has not only survived but thrived under new management. Production was moved to China to make products cheaper and get new models to market quicker. But the real coup was branding trains such as Thomas the Tank Engine, and the Hogwarts steam engine from Harry Potter combined with some real product innovation at Scalextric. This was all down to good, visionary management. We await the result from Corgi, their most recent acquisition.

From trains to Homebase, the ‘DIY’ store – or should I say that’s what it was described as when Sainsbury’s owned it. The supermarket chain then sold it to Permira, the private equity firm and the changes soon came. Although not flavour of the month, Permira did a great job. It established that Homebase’s market was not DIY fanatics but – surprise, surprise – the same profile as Sainsbury’s own customers: the middle class. Ergo soft furnishings and things to complement your home rather than hammers and planks to build your house. Twelve months later, Permira pocketed a multimillion pound gain by selling the company on to the Argos group.

So when you wake up tomorrow morning, don’t just think about how you are going to cope with this recession and immediately look at your employee payroll with a view to cutting people off it.

No, look at your business, your market and your business model. See how you can be smarter, innovative and think your way out of your problem.

Do this and you can rightly claim you are a real leader – and yes, it does make a difference.

See also: Styles of business leadership – Every team needs the right mix of intelligence and assertiveness. Chris Ingram looks at the different personality types and styles of leadership found in every office and how best to manage and motivate them.

The alpha leader in turbulent times

Forceful ‘alpha’ types are good at overcoming obstacles to get things done: perfect in a recession, you would have thought. But tough times can also bring out the ugly side of their dominant personalities, writes Kate Lanz, executive director of leadership coaching specialist Sandler Lanz.

In particular, alphas face three traps in the current economic crisis.

The first is the confidence trap. Part of the alpha make up is supreme confidence, or at least the ability to project the appearance of it. The flip side is that alpha leaders often struggle to admit to their fears and vulnerabilities. As a result they can find it difficult to reach out and ask for help or make connections and build relationships. Under deep stress the tendency is to want to look like they have everything under control.

The second big pitfall is the competition trap. Alpha leaders are programmed to compete. When the external wins are not forthcoming this competitive energy can be targeted within the organisation. Subtle rivalries can build up as the emotional high of winning is achieved internally rather than externally. This is dangerous territory, with board relationships being particularly vulnerable.

The final trap is alpha’s need to control others. Pushed too far, this tendency to insist on ‘my way or the highway’ can seriously limit the ability to get the best out of people.

Take the managing partner of a small venture capital firm who fell into all three traps during the last few months. He did not build relationships with key players in the investment businesses. Initially confident that he could add value alone he did not reach out. He jostled with colleagues and told people how things should be done. When it came to driving through changes in the investment companies he found he did not have a real voice. Frustrated, he started to throw his weight about, creating even more resistance. Finally, he was asked to step down from the partner group, his position untenable.

Alpha leaders at their best can provide exactly what is needed psychologically and emotionally to lead through a crisis: straight talking, fast but considered action, and real inspiration (the alpha’s self-belief is contagious). However, they often fall down when it comes to empathy. The emotionally intelligent Alpha can stay in touch with the emotional temperature at the same time as being brutally honest about the reality.

In growing companies the alpha’s role is even more important than in a larger corporate: in fact, it can make the crucial difference between failure and survival.


Michael Jackson

Michael founded Elderstreet Investments in 1990 and is its exec chairman. He was also chairman of Sage, the FTSE-100 accounting software group, until 2006. He is a specialist in raising finance and investing...

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