Greetings! In my experience, you can not be a fully effective CEO unless you demonstrate both Vision and Fiscal Leadership.  Fiscal Leadership means taking deliberate action to ensure that the financial engine that keeps a business alive and growing is sound, tuned, fueled and lubricated and is running smoothly and efficiently. When it is - you can sleep comfortably at night. But when it's not, it's like leading a ship that is listing out of control - and praying you don't run into a storm.
During easy times leaders can get by with far less need for control - often it feels that not much is really needed. But when either the economy becomes challenging - or circumstances test the leadership's control of matters, it becomes apparent that whatever success was being enjoyed may very well been largely accidental. Employing deliberate leadership and knowing how to maintain control in tough times is the difference between having a successful and sustainable enterprise - and being among the casualties that currently litter the landscape with ugly reminders of their failure in the vacant offices, stores and factories that have become all too common during the recent recession. Small and mid-size companies typically have the toughest time controlling their fiscal engines. Most of their CEOs tend to be visionaries and tend not to be financially trained. For the most part they focus on sales, innovation or operations. The trick is to bring vision and fiscal reality to a common intersection. In my experience, this occurs when the leadership views the company as an investment and understands that profits are really the return generated from the leveraging of risks against the companies assets. Deliberate fiscal leadership versus accidental success can be compared to the difference between degenerate gambling and prudent investing. It's a matter of knowing what information you need and what to do with it. Two of the most critical things you need to do are 1) identify the assets that are being placed at risk, and 2) understand the risk/reward relationships and make decisions accordingly. There are three key soft assets you need to pay particular attention to: cash capital, human capital and reputation capital. Unlike your fixed assets, like real-estate and capital equipment, these soft assets are by nature very fluid and highly leveraged by the risk you expose them to in order to generate a return. - Managing Cash Capital Asset Risks: Understanding how to effectively manage cash flow is the key to managing the risks involved with your cash
- Managing Human Capital Asset Risks: Recruiting, hiring, on-boarding, retention, training and asset development, and regeneration. (Human Capital includes the fostering of culture and the creation of Intellectual Capital*)
- Managing Reputation Capital Asset Risks: Doing the right things and doing them for the right reasons. Doing the right things not just doing things right.
*Intellectual Capital can be one of the most valuable and critical assets a company owns. The reason this is not included as a separate category is simply that Intellectual Property is many ways is like a fixed asset: it can be safeguarded through intellectual property protection such as copyrights and patents - or locked up as trade secrets much as you protect physical property. The growth in value of Intellectual Capital, however is a subset of Human Capital: it is the work-product of the organization's talent and is often driven by the organization's culture. Managing Reputation Capital -Never underestimate the True Value of Reputation In a free-enterprise society, how a company is perceived is as important to its success as what it does or produces. As long as customers have a choice in what they buy or who they conduct business with, reputation is as valuable - and often, more valuable than any other asset a company owns. Sometimes reputation is everything. Warren Buffet once said "It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently". There are two distinct aspects to your reputation. First is the primary reputation you develop with the people who you directly do business with. This kind of reputation is fundamentally built on two foundations: 1) the quality, value and suitability of our products or services; and, 2) the quality of the experience of doing business with us. The second is the reputation held with people who have never done business with you, whose reputation is founded in the shared opinions of others they know, or perhaps in opinions they have formed themselves from news, rumors or deliberate, malicious efforts to damage your reputation for someone's intentional gain. The problem with reputation is that it must be built and demonstrated and is not always easy or even possible to control. Companies attempt to manage their reputation through advertising and public relations. Fortunes are spent each year to repair damaged, or restore tarnished reputations. Some brands like Tylenol miraculously bounce back, and even the recent tarnish to Toyota seems to have faded. But for the most part, reputations cannot be bought - they need to be earned, and a destroyed reputation generally equates to the death of a business. Building and protecting your Reputation Asset cannot be handled by an outside expert or service agency. Having outstanding customer service and responding effectively to complaints, or publically sponsoring events and supporting civic and charitable organizations all help, but the value of reputation and how to safeguard it must be part of your company's culture and be understood by every single employee and demonstrated in everything they do. This is why the effort must begin and end with the CEO. Back, to Buffett, below there is a link to a great article that appeared in yesterday's NY Times Week in Review - and speaks to how The Sage of Omaha manages his company's Human Capital. There is also something old, borrowed and blue - some relevant, nostalgic reading from the folks at the Harvard Business Review and some technical insight into the issue around our mounting national debt. As always, wishing you a great and successful week ahead. 
Philip R. Liebman Managing Director, Strat 4 Group Chair, Vistage International P.S. I have room for ONE MORE GUEST at tomorrow's (Tuesday April 26) workshop on Effective Financial Management for CEOs. This is a must-attend program whether you are financially astute - or needing to gain a better understanding of the numbers you need to watch, gain better control of your financial reporting, or learn how to work more effectively with your accountants or negotiate more successfully with your bank. If you curious about becoming a Vistage Member - this is a perfect opportunity to get a look "under the hood" at what my members benefit from every month. I have a very limited number of guest opportunities. Please call me right away to learn if you qualify - and for availability. | 
