I’m not advocating it – just asking you to think what the ramifications would be. Knowing how your absence would affect your company gives insight into what role you really play.

The extremes are:
Everything would go to hell in a hand basket. -OR- Not much would be noticeable at all.

If your absence would result in the first, then you are not functioning as the CEO – no matter what it says on your business card. You are performing work, not running the company. You’re selling, making product, raising cash. So when you stop, even for a short time (and a week is, in the grand scheme of things, a short time) things grind to a halt. Your company becomes a football team without a quarterback.

If a week’s absence would not be noticeable – CONGRATULATIONS! You’re functioning as the CEO (either that or you’re a bum and should get a real job). This is not to say you’re not needed. Rather that the things you’re needed to do don’t have such immediate consequences. You’re like the owner of the football team. You’re deciding if you should replace the head coach or not, working out salary allotments and future draft choices. Your work is what ultimately propels the team to a championship and then a dynasty. Even the best quarterbacks don’t have that kind of effect.

Back when Bill Gates was CEO of Microsoft, he routinely took a week off every year – until things started moving so fast he had to take two weeks off each year. He used the time to read and think about where the company was going and what new technologies were on the horizon. Here’s what he said about it:

Ours is a very fast-moving field. You have to be able to step back from it. Many years ago, I decided to take a week every year and absorb myself in thinking … ahead. I get colleagues to put together what PhD theses I should read, what products I should play with, what memos I should look at. So, it’s been, except for sleeping a little bit, day and night all by myself uninterrupted.

Of course, there are other things a CEO does besides take time off to think. And you probably can’t take a whole week. That’s because most companies of our size don’t need a full time CEO. So you play several roles – part time team owner, and part time quarterback. Not to mention sales person, delivery driver and janitor. That’s all needful and good. But the danger is you’ll not commit to putting in the amount of CEO time the company really does require because it never seems urgent enough. How much time do you take to read and think? When do you do the other things a CEO does? You can’t build a championship team, never mind a dynasty if you don’t.

Takeaways:

• Being able to function as CEO requires a team that doesn’t depend on you for day to day successes.
• You can’t do that if you don’t understand the concept of “Plateaus of Profitability” Stay tuned – I’ll write about it next.

[tags] Small Business, Entrepreneur, Management, How to be CEO,CEO Skills[/tags]

Solving problems is a typically American approach. We see the West to be conquered, the space race to be won, the journey as a destination, the problem to be solved. And to be sure, there are problems in your business. But just solving them is at best a short term fix and at worst a recipe for disaster. Here are a few thoughts about why.

Continuous improvement
Great companies don’t become great, or last a long time because they solve problems, meet goals or complete the check list. Great companies know there is no finish line. There is no plateau, no solution. There is continuous improvement. Always getting better. Usually in lots of small, incremental ways. Developing new ideas, most of which are not sexy and seem almost insignificant, but move you constantly – not to a better place but; in a better direction. Toyota knows this, while GM and Ford do not. [Thanks to Andrew Leonard for the link]

Jim Collins has documented this idea in his books, Good to Great and Built to Last. Solving problems gives you a mind set that you can stop when you find the solution. Continuous improvement is a mind set about moving forward a little every day.

Polarity
A polarity is something that looks like a problem – but only if you don’t have a long enough time frame. It’s a polarity because what looks like the solution is better in some ways but actually worse in others. The classic example is the distinction between centralized control and decentralized control within a company. Whichever end of that spectrum you’re on, the other side looks better. Centralization has efficiency but stifles creativity. Decentralization pushes authority down the ranks but at the cost of alignment. Companies with a short-term view point swing from one extreme to the other as soon as they’ve forgotten the bad points of the other side. Barry Johnson explains this distinction and what to do about it in his book Polarity Management.

Don’t just Solve Problems – Prevent Them
I’m not trying to say your business doesn’t have problems. Of course it does. But when you find one, don’t just solve it. Take the next step and prevent it from happening again. That requires finding out the real cause – not just a scapegoat. And then making a change in how you operate. This process often looks too tedious for entrepreneurs who are too busy making things happen to figure out how to make them happen better. But if you make the change, you’ll institutionalize a way of learning from mistakes, and make fewer of them – or at least you’ll make different ones.

Takeaway:

• When you study truly great companies, ones that endure, you realize they get the best results by focusing on the process not the product – on the method, not the outcome. Just solving problems is too short-term for them.

• What does a CEO do all day?
• What do you do all day?
• Is it good or bad if the answers are not the same?

Most business of our size get started because a person can make something or sell something. As the market responds, they need to build a company to meet the market demand. In the early stages they can juggle it all. But at some point the company needs a CEO. What does that mean?

The two things about being a CEO are:
1. Produce Results
2. Choose the Right Results to produce

How to Produce Results. By definition, the CEO is an executive. That means you don’t produce results yourself. You did that before the company needed a CEO. As CEO you produce results by organizing others to be productive. That means you devise, implement, monitor, and adapt systems within the company to help the group produce more than any one of you could on your own. To see all the systems I’ve identified so far click here. But think about that last phrase for a minute. It’s your job to help the group produce more than any one of you could on your own. It can be a noble calling when you think about it.

How to Choose the Right Results. This is a dance between your vision of the company and external forces. The primary force is your customer’s desire – what they value. But there are others whose desires you must accommodate: investors if you have them, employee’s needs and skill sets (and the pool of potential employees if yours is a growing company) the technology “space”, regulatory agencies, etc. Your job in this capacity is to see the big picture of where the company can go, then fall back to #1 to devise a way to get there. In short, you’re monitoring trends outside the company, and interactions of the company with the outside world.

This leads to the following observations.

CEO Time.
A company of any size needs some CEO time. But most small companies don’t need a full-time CEO. That means you’ll be spending some of your time selling and doing the technical aspect of producing or managing. It’s important for your sanity and that of your employees that everyone – especially you – knows when you have the CEO hat on and when you’re functioning in some other capacity.

CEO Skills.
I think it was Peter Drucker who said the tools of an executive are meetings and reports. You need to develop skills in using these tools. You have to develop the right reports for your company and the stage it’s currently at. And you have to understand your business model or you won’t be able to see ramifications of the trends shown by the data in those reports. Meetings include every one-on-one conversation as well as when groups get together. There are different kinds of meetings for different purposes and they need to be run differently.

CEO Priorities.
A CEO must work on what’s important not just what’s urgent. That means you have to plan space in your calendar for CEO time. Time to work on the important stuff. Don’t let that time get crowded out by the emergency-du-jour. Your company will need more CEO time as it gets larger. And if you compare two companies the same size, the one which is growing faster or changing more needs more CEO time.

CEO Instinct.
You must know when to go with your gut and when to go with analysis. It generally works like this. You can analyze the past. That analysis only helps plot the future when the future is an extension of the past; when you’re doing “more of the same.” When you need to make a revolutionary jump you need to go with your gut. Apple computer did this when it launched the Macintosh – a product that analysis showed was going to put their cash cow (The Apple II) out of business. They did it again when they launched the iPod which didn’t bankrupt any existing products but did take them into a whole new business.

But as soon as you make a gutsy move and launch a revolution, the future is now past. So analyze the hell out of what you’re doing and change, adapt, revise as necessary. Two more examples from Apple. They launched the Mac thinking it would be used for spreadsheets, database and word processing. Instead desktop publishing became it’s killer app. They did enough analysis to recognize this early on and exploit it well. Likewise with the iPod. Launching it was a gut move, but the frequency and timing of improvement (different sizes) and enhancements (selling songs and now video) requires analysis.

Takeaways:

• Plan time in your calendar to function as a CEO.
• If you don’t love that job, if you’re better at production or sales, perhaps you should stay there and hire a CEO. You can be the owner but not the CEO.
• The better you are at CEO skills and priorities the better your CEO gut instincts will be.

[tags]Small Business, Entrepreneur, Management, How to be CEO,CEO Skills,Leadership[/tags]

I heard it again last night – on NPR of all places. They said that the Democrats will make raising the minimum wage one of their first priorities – in no small part because most of the electorate thinks it’s a good idea. (Now there’s a concept.) But then they added that someone – I think they said Bush – would fight to exempt small companies from the devastating cost. The logic of that last statement is so out of touch with how my business works.

The traditional stand of pro-business thinkers is that anything the government does that costs them money is bad. That is way too short sighted for success. Here’s why. Anything you spend money on has a cost and also a benefit. The trick to a successful business is to spend money on those things that benefit your company and not on the other stuff. We know this when it comes to investing in equipment, advertising, training and that Lexus you drive (I’m sure it brings in a lot of sales). We know this because we can see the benefit directly connected to the investment.

Henry Ford knew this when he doubled – DOUBLED – the wage in his factories. Why? Because he as he said, cars don’t buy cars. In doing so, he was able to recruit and retain a better work force and more importantly, allow more people to buy his product, In effect he spent a little money to create a bigger market.

However, when the government makes us incur a cost we don’t always see the benefit so directly. That doesn’t mean there isn’t one. And of course just because the govt is spending money doesn’t mean there is a benefit – at least not one you and I enjoy. I know politicians can be stupid, selfish and corrupt.

My point is we have to look beyond the cost to see if the benefit is really there or not. And if it is, we have to make sure the money is well spent. If we do that, the government is in a unique position to help business. And by unique I mean no other institution on the planet is in a position to benefit your business like the government. Too bad we’ve had such jerks running the place. If you want more on this and like to read, check out Wealth & Democracy by Kevin Phillips.

Let me give you some examples. Obviously these are generalities and the devil is in the details.

Minimum wage. If you sell to normal people – not just the ultra rich, your company will do better if your market has more money to spend, and if they are able to make a decent living. A situation where the average CEO pay is a gazillion times more than the average worker is bad for most businesses. But left to their own devices, what board of directors would curb that? In fact you can argue that without a regulation that makes them pay everyone a fair wage, they’d be doing their shareholders a disservice to do so and put themselves at a competitive disadvantage. But with such a regulation that applies to everyone, they can be profitable in a situation where their customers are better off – and that’s good for business.

Health Care. If your customers and employees are sick, afraid they’ll be bankrupt if they get sick or in fact are bankrupt because a family member got sick that is bad for business. Health care costs somebody money. If you want to be “nice” or feel like you can get better workers if you spend some of that money fine. But if you’re in competition with someone who doesn’t, then they will have a lower cost basis than you and make it hard for you to compete in the market place. So, if done right, there should be a benefit to spreading the cost of health care in some even fashion so we all get the benefit. And have you noticed that compared to other countries we don’t get nearly the bang for the buck in this area that we could?.

The environment. Hasn’t anyone in power read The Tragedy of the Commons? You want protection from guys like Harry or they’ll put you out of business.

Alternative energy. What could be a more stupid waste of government money than to subsidize the oil industry? I’m talking direct subsidies as well as the security costs of propping up despotic regimes who happen to be built on oil fields. (No, I don’t mean Texas.) Look at the economic benefit this country got from a 10 year commitment of government spending to put a man on the moon.

We need the same kind of effort to develop alternative fuels that will allow us to be energy independent and environmentally beneficial. If we put our American ingenuity behind it (before someone else does) we’ll get the side benefit of developing a whole lot of high paying jobs in this country, and a lot of cool technology we can sell to the rest of the world. That would be a lot better use of the national debt than lowering Paris Hilton’s taxes.
Takeaway:

• My main point is that when it comes to political positions, the “traditional business thinking” is often bad for business.

I’m usually a glass half empty guy for two reasons. I like my surprises to be pleasant, and I figure I’ll get in more trouble if I’m wrong by ignoring a problem than by down playing an opportunity. Kind of like Andy Grove’s book title “Only the Paranoid Survive”.

But this post is written by perhaps the most hopeful man I know of. Read it today. And if you’re in the USA, don’t forget to vote. (If you don’t read it today you’ll have to click here to see it in his archives.)

Opps, I almost left for St. Louis without telling you. HBO is airing Hacking Democracy tomorrow night (Nov 2). I try not to be political unless it directly relates to business but if we can’t trust that our votes aren’t stolen then it seems pretty important.