So, with CPIs hovering around 3-3.5%, and most surveys showing 3.5-4.0% increases in salary budgets for 2007, life’s a breeze, right? Just add the percentages into the Excel formula, press “Enter,” and you’re done, right?
Actually, wrong.
Enter “wage inflation.”
I’m going to avoid the ecomomist argument that higher wages do or do not cause inflation. That’s just not our relative concern here. What is clearly our concern is that our currently strong economic growth lowers general unemployment rate. This, theoretically, can cause businesses to bid up the price of labor and (hopefully) pass through those higher costs in the form of higher prices.
If only it were so easy. As the CPI shows general inflationary trends (e.g., our product/service cost increases), wage inflation is an additional cost on top of inflationary pricing. In other words, it’s a potential incremental cost.
Now, again theoretically, profit-conscious firms aren’t going to hire employees at a rate of pay more than his utilitarian or marginal value, or more than the additional revenue earned. Hardly rocket science, right?
The reality, however, shows that sometimes wages do increase faster than general inflation, particularly for individual functions, positions and/or jobs, rather than an overall employment market.
Enter compensation planning. It’s easy to get in a cyclical rut: analyze the jobs, survey the market, establish a range. Then adjust for infation a couple of years and start all over again. That’s simply not enough. We must pay close, specific attention to the inflationary movement of key positions within our organziations and adjust accordingly — or at least be acutely aware of the disparity. No reason for a surprise here.
Sometimes compensation planning takes foresight, analysis, and a real awareness of what’s going on in the world.
Not too long ago, I worked with a group of division presidents for a fast-growing company. Two things struck me as interesting, and somewhat of a paradox: First, they were all reasonably successful in their jobs (and their jobs were substantially the same, just different geographic regions). Second, they were all incredibly different. Yes, they each had similar behavior characteristics, such as intelligence and work ethic. In other areas, such as sales, marketing, people management, organizational skills, strategy, planning, and do forth, they were all over the charts.
So what? Well, I’ll tell you “so what.” You hear a lot of garbage about understanding your “strengths and weaknesses,” and then you’re supposed to work on your weaknesses. Let’s look at it differently. How about we assume that succeeding in a position can be done in any of several different ways, using a variety of skills. Using that reasoning, you don’t have strengths and weaknesses, you have learned skills and skills you have yet to learn.
Wow!
So, then, we should then simply “learn more skills,” right?? No, no, no… We should, instead, clearly identify our skills, since we know that we can succeed with them, and work on improving our strengths! That’s right, improve our strengths, since we already know that they work for us. Learning new skills is time consuming, and depending on application, may or may not work for us the way they work for others.
Now, this logic assumes current success, so don’t confuse this with those managers who are clearly unsuccessful, though I would argue this could help them with their improvement also.
In other words, as Bum Phillips (retired Houston Oilers coach) would say, “Dance with who brung you.” Use the skills you have — improve and hone them to a razor’s edge — and continue your increasing levels of success. Over time, identify some additional skills you would like to pick up, and develop a plan to learn them in a reasonable time and fashion.
As such, I frequently read old military books, discourses, and papers to compare corporate leadership today with historical military leadership. The similarities are astounding.
A 1941 book published by the Military Service Publishing Company is one such work. Edited by the staff, it has no specific author, but is a compilation of thoughts, ideas, suggestions and directives from a stream of notable military leaders. Some — just as an example — include the likes of General J.G. Harbord, who began as a private in the Spanish-American war, achieved prominence as General Pershing’s Chief of Staff, and later commanding the USMC’s 2nd Division before assuming the Chairmanship of the RCA Corporation.
Just an example of the caliber of input for this book…
In this book, Chapter II discusses “Orientation.” Of course, it is meant to apply mostly to new officers at a new post or assignment. Truth is, the advice given there — some 65+ years ago to junior officers — is as appropriate today for first time managers as it is senior-most leadership.
Sections and brief summaries include:
Your Brother Officers:
The commissioned officers of the U.S. military are a cross-section of the American Public… as a group, they are subject to the same ambitions, variations in viewpoint, and human frailties as the people they serve.
This, of course, matches up with our corporate situations today. Managers and leaders have different backgrounds and experiences, bringing different thought-processes and judgment. When harnessed for the common good, this is an excellent trait, one we should exploit, not suppress. Different thinking means more choices. More choices usually means better decisions. Or, as many would put it — embrace your weirdness.
Performance of Duty:
In the military, the performance of duty to the limit of one’s capacity is a fetish. Striving for perfection is more than a figure of speech… as you demonstrate your capacity for additional responsibility, it will come to you; be not impatient… there is much to learn.
Wow, is this apropos or what…? Work hard, smart, and consistent. Do what you say you’ll do. Make well-thought decisions. Those of you who have achieved significant corporate rank: Did you get there through politics, trickery, and slight-of-hand, or was it hard work, diligence, and sacrifice??
This stuff really works.
Get Out, or Get in Line:
Mind your business. If the concern where you are employed is all wrong, and the Old Man a curmudgeon (I like that word), it may be well for you to go tell the Old Man, confidentially, privately, and quietly, that he is a curmudgeon. Explain to him that his policy is absurd and preposterous. Then show him how to reform his ways, and offer to lead the effort to cleanse the faults. Do this, or if for any reason you should prefer not, then take your choice of these: Get Out, Or Get in Line.
If you work for a man, in heaven’s name, work for him! Speak well of him, think well of him, stand by him and the institution he represents. If put to the pinch, an ounce of loyalty is worth more than a pound of cleverness. If you must vilify, condemn, and eternally disparage, why, resign your position and, when on the outside, damn to your heart’s content.
This quotation is so appropriate in corporate management today that it needs no explanation, segue, or pithy remarks from me. Simply put — work for whomever you work for. Grammatical errors aside, you get my point. Don’t we all get tired of those who work “for” us part of the time, and “against” us the rest?
Importance of the Word ‘NO’:
As an officer, many questions will come to you for decisions… the choice you make in the mere act of saying “yes,” or “no,” may constitute the measure of your success.
A weak man can say “yes” to troublesome situations, dissipating the efforts of the whole. An unwise man can say “no,” and by mere obstruction, cause the failure of the unit. It takes a happy combination of courage and wisdom to be able to say “no” at the right time and place.
Simply put, our most significant, regular responsibility — day to day and strategic — is making decisions. Anyone can make the easy ones… they seldom take forethought, intellect, or wisdom, since they are usually painfully obvious and accolades are near. No, they pay us for the hard ones. The lonely decisions. The times when we make the “right” decision in the face of dissent and conflict, and where the easier decision is to abide with consensus. That’s why they pay us the bucks, and give us these fancy business cards.
Adaptability:
Adaptability is required. Leadership is a new and different life. He must be equally quick to detect and avoid those things which are abhorrent to military life… the road to recognition and fame may lie ahead. How well and how quickly the opportunities are embraced depends upon the promptness of adapting himself to the new horizons the career provides.
You can’t always spell out the details of a leadership role in a nice, convenient job description. Our worlds are dynamic, fluctuating, and ever-changing. We’ve got to know when to “stay the course,” and when to turn on a dime. All the while keeping those looking to us for leadership engaged in our path. This is what sets us apart.
I only provided these today for two reasons. First, a reminder: Leadership — it’s theories, concepts, and approaches, really haven’t changed since the beginning of man. Yes, some applications of principles have evolved over time, given our changing workforce, demographics, and societal norms. The real concepts and basis of leadership, however, remain constant.
And lastly, we can learn a lot from simplicity. Sometimes we make this stuff too hard, when we could get to the same place — maybe even a better place — with approaches that embrace simplicity and ease of thought.
First, the fiasco in Chicago was averted — we should all stand and cheer.
For those living on Pluto (the new “non’-planet), Chicago attempted to vote in a “big box” minimum wage, a wage higher than what all other employers must pay, as a penalty for simply “being” a big box retailer.
Mayor Dailey vetoed the bill — his first such veto in his million years in office. Smart man.
Having said that, and against my personal beliefs and desires, minimum wage is going to change from its paltry $5.15 per hour. 10 states have enacted minimum wage laws in 2006 alone, making their state’s minimum wage some level above the Fed’s. That brings to 23 the total number of states with such legislation, and another 6 states have pending legislation awaiting November voting.
You can bet that all, or most, will pass.
Make sure you prepare accordingly, as minimum wage adjustments — particularly significant adjustments — impact more than just your unskilled entry workers. Minimum wage tends to be the benchmark by which other positions base their rates. In other words, you’ll likely face the need to adjust the rate ranges for multiple low and semi-skilled positions within your organziation.
I was an Arnie fan. A soldier in Arnie’s Army and damned proud of it. When I grew up, you affiliated with a particular golfer; Jack Nicklaus if you were textbook methodical (Mack, in my H.S. golf team), Gary Player if you leaned toward the flamboyant; Lee Trevino if you were a hustler; and Arnold Palmer if you swung hard, took risks and left everything on the course when you played. You led. Hard.
I was in the Arnie camp. “You swing out of your shoes,” they often told me. I didn’t care. Hell, even today I have trouble laying up for par 5’s. The rewards, when I actually connected, were worth it. And besides… Arnie did it. I only started golfing because of Arnold Palmer. The King.
My first set of clubs was an old, worn set of Tru-Matics by Arnold Palmer. 1-9 iron (yes, a 1-iron). Three woods (real persimmon—remember, I’m old), and a beat up full-size cart bag that I had to lug around. I started playing golf when I was 12, didn’t ride in a cart until I was 16, so that big, honkin’ bag was a chore.
Humble and plain-spoken, I met him once in 1994 as a guest of a friend at Latrobe, Arnie’s course in Pennsylvania. He was playing in the group ahead of us, but took all the time in the world to speak, shake hands, and cut a joke or two. He seemed a giant, even then.
Yes, Arnie was a helluva golfer. The best ever, as far as I’m concerned. He won the U.S. Amateur, 92 events on multiple tours, and seven major tournaments, including four at the Master’s, two at the British Open (Brits like to call it The Open), and once at the U.S. Open. He won a tournament every year for 17 consecutive years. No question, the man owned the links. But I consider Arnie the best, and a real Leader, because he was so much bigger than just a golfer.
The man (and his wife, Winnie) lent their name and provided funding, leadership and support to the Arnold Palmer Medical Center, the largest facility dedicated to children and women in the United States. The Center is comprised of the Winnie Palmer Hospital for Women & Babies and the Arnold Palmer Hospital for Children.
He provided financial and public support to so many more organizations. The list is long. He put his money, name and time where it needed to be, and simply did what he could. Because it was the right thing. And he did so with humility, dignity, respect and extraordinary generosity.
When recently asked in an interview to advise current golf stars, he said, “Generosity and work. Always be generous and appreciate what you have.” When asked in that same interview to name his proudest moments, he didn’t speak of the tournaments won, or the medals received by Presidents Bush and Obama. He said simply “I think of the charities and the results that I’ve seen, that’s very gratifying.”
He was an icon, a legend, and a Leader. A real one. He was, and will remain, The King.
This month’s Leadership Leader. Arnie, you will be missed.
September 10, 1929 – September 25, 2016
Leadership Milquetoast
What exactly is Eddie Lampert, Chairman and CEO of Sears Holding Corp, trying to do to Sears and Kmart? Did he learn nothing at Yale about Montgomery Wards? He must have missed that case study.
“Insanity: doing the same thing over and over again and expecting different results.” Albert Einstein
In brief, Lampert brought (or bought) Kmart out of bankruptcy in 2003 through his hedge fund, ESL Investments.
Within two years, he bought Sears and combined the two companies to create
Sears Holding Corporation (SHC) and became the company’s first Chairman.
As Chairman and CEO of SHC’s majority stockholder, ESL Investments, Lampert oversaw the closure of thousands of stores and year-after-year stock repurchases to dry up billions of dollars (like $7.5B) in cash… all without making significant capital investments in surviving Sears and Kmart stores (which nobody likes going to anymore). Winner: Lampert as the majority stockholder.
What’s wrong with that, since Lambert, a former Goldman-Sachs whiz kid – which means he knows exactly how to wring every investment dollar out of a company – believes that retail isn’t about selling, it’s about being profitable.
The Sears and Kmart team has seen falling sales revenue every year since 2006, and its stock has lost nearly 90% of its value in the same period (~60% in the past 12 months alone). But that doesn’t mean it wasn’t profitable, right?
Right, because since Lampert took over as CEO in 2013, he’s spun off Land’s End and set up a real estate investment trust to take over SHC’s real properties, offsetting operating losses with proceeds from the spinoffs. Did I mention he’s the Chairman of the REIT, too?
ESL is making money, Seritage (the REIT) is making money (remember, REIT’s pay no corporate taxes), and the shareholders are getting dividends. Looks like Lampert wins all the way around, unless you consider him a failure at leading the 160,000+ demoralized employees anxious about their futures. And unless this precarious house of cards implodes, which seems increasingly likely.
Now Sears is talking about spinning off the Kenmore, Craftsman and Diehard lines… though since we can get all of that stuff on the internet, I’m not sure of the point. His recent purchase of $700M of Sears debt and $300M loan ensures he’ll get paid back before the bankruptcy judge gives the stockholders squat.
Hey Eddie – your company needs a leader, not a liquidator. It’s difficult to see a path forward with $5.5B in debt and operating losses nearing $2B annually. I wasn’t a math major in school, but I do own a calculator.
Weak leadership (or an intentional Gordon Gekko impersonation) may have doomed another company that survived two world wars and the Great Depression. Maybe a better question is: “How long will the Board sit idly by and watch Lampert drain the last bit of money and hope out of the company?”
We’re going to give Fast Eddie — and the Board of SHC — a chance to reverse course as this month’s Leadership Milquetoast, but when the billionaire investment banker pushes the company to bankruptcy, you can count on an ‘I told you so’ with that month’s Laggard award.
Leadership Laggard
Culture starts at the top. So does accountability.
Wells Fargo Chairman and CEO John Stumpf’s protestations that the two million (2,099,713 to be specific) fraudulent bank and credit card accounts created over the last five years were the work of individual rogue employees – some 5,300 of them – are laughable.
And if Stumpf thinks anyone believed his “If I Could Turn Back Time” apology in front of Congress, he’s delusional. It’s exactly the kind of “apology that isn’t” that normally wins a Milquetoast award, but that’s not good enough this month.
After all, the dots aren’t hard to connect: years of lawsuits and investigations point to systematic fraud against Wells Fargo customers, encouraged (and expected) by management at the local and regional levels. Only a fool or the very naïve would believe that senior leadership wasn’t aware.
Stumpf says, “There was no incentive to do bad things.” I’m calling bullshit…
The numbers are staggering. TWO MILLION fraudulent accounts. That means nearly four hundred accounts apiece for the 5,300 rogue employees. Either their management was incompetently unaware of their activities or they were complicit. I believe it closely approaches criminal behavior.
If an employee knowingly breaks the rules, you have a behavior problem. If thousands of employees are knowingly breaking the rules, you have a leadership problem. Imagine that in your company, your division fires three employees for wrong doing every single day for five straight years. Seem excessive? Maybe gets someone’s attention?
At Wells Fargo, the head of community banking should have noticed. Stumpf used to be the Community Banking EVP, so he’s familiar with how that works. That’s why he praised the outgoing EVP for her selfless dedication (she’s the “standard-bearer of our culture”) and sent her into retirement with a $125 million bonus. Added to the other senior leadership bonuses, that ought to just about cover the $185 million settlement with the government.
The “standard-bearer of our culture?” A failed leadership culture, to be sure.
The CEO, COO, CFO and Community Banking EVP have a combined 100 years at Wells Fargo. Maybe it’s time for a little chlorine in that gene pool.
A CEO blaming the employees for his bank’s unethical behavior is an insult to his customers and the institution. And it’s a leadership failure that earned John Stumpf Triangle’s Leadership Laggard for Sep 2016.
That idiom has its origins in the Roman Emperor Caracalla, later known as Marcus Aurelius. He was known as one of the bad-ass Emperors somewhere before 200AD. Legend has it he was killed while relieving himself, hence “with his pants down.” Though it may actually have been a robe. Or chainmail. Whatever he was wearing, he had it down and he was killed. Going forward, warriors took care of their business with sword in hand, so not to be “caught with their pants down.”
So, what does this incredibly interesting trivia lesson mean to you? Funny you should ask…
Simply put, in the people equation, demand has—and will continue to—outpace supply. Our recent 2016 Survey of Senior Leadership (SSL) ranked Talent Acquisition/Talent Management as the #2 Leadership Challenge today. Behind only Revenue/ Earnings Enhancement, the perennial #1 for many years.
I know what you’re thinking… War for Talent?? Seriously? Oil is at or around $50. Global layoffs in oil & gas exceed 350k in the past 18 months. Article after article tells of the woes of recent graduates, unable to find anything but McJobs after incurring a bucket-load of student debt.
I was born at night, you say, but not last night.
Yeah well, listen up—it’s happening. We’ve got something of a perfect storm brewing for talent.
Demographics: Baby boomers continue their exodus. And many are stepping aside from leadership roles even if not leaving the workforce. Millennials aren’t just looking for a job, they are seeking specific roles with specific returns and rewards. Simply “needing to work” isn’t enough to cause action if the position and company aren’t a perceived fit.
Market stabilizations, though welcome, mean that hiring simply must take place. Some layoffs were too deep, others brought to surface shortfalls heretofore unrecognized.
Increased employee turnover is an added dynamic. National turnover rates in the U.S. continue to increase, nearly doubling (yes, you read that right, doubling) in the past four years. In other words, you’ve got to plan for new hires and replacement hires. And remember that about half of all that turnover occurs within the first 12 months of hire. Put that in your pipe and smoke it…
We’ve got to pay attention here, and plan for reality. Here are some simple suggestions:
No, really… plan for hiring well in advance of desperate need. Identify what you truly need, and project out for at least a couple of quarters (a year is better).
Be willing to hire when the right candidate is ready. Not when you’re ready, necessarily, but when the right candidate is ready.
Charge recruiters with keeping an eye out all the time. If they stumble upon someone available today who fits a Q3 need, see #2 above.
Be slower on staff reductions. Give market and company conditions some time to equalize. I know the short-term pressures can be big, but longer-term failures due to talent shortages are bigger.
Leadership matters. People will stay with effective, meaningful leadership. They’ll leave if it doesn’t exist. We know that now, so act accordingly. Employee referrals increase when leadership cares. We know that, too. Plus, engaging leaders drive discretionary effort; new hires and incumbents succeed more often with engaging leaders.
Talent matters—nothing new there. The right talent can be difficult to find even when you receive 400 applications/resumes. Ask anyone responsible for recruiting today—they’ll tell you. Bodies are plentiful, specific talent… not so much.
Sort of like the Twilight Zone episode, Where is Everybody?
