Greetings! Two seemingly unrelated things got me thinking about the theme of this week's Monday Morning CEO. The first was a report by Charles Osgood on the Sunday Morning Show on J. Irwin Miller and the other an article that appeared in Friday's edition of the Atlanta Chronicle entitled "It's time to treat America like a business." They both speak to the quality of decisions you make as a CEO and to aspects of leadership that can increase your effectiveness and enhance the quality of the life you lead. 
I've never been to Columbus Indiana - but have recently read things about the surprising representation of world-class 20th century architecture that makes this otherwise unremarkable midwestern city truly remarkable. The reason for this unusual notoriety was the vision of one man, J. Irwin Miller, who as CEO and then Chairman of the Cummins Corporation, set up a foundation that funded the fees paid to some of the world's most renowned architects - making Columbus Indiana America's sixth most important city in terms of architecture, according to the American Institute of Architecture. From my viewpoint, Mr. Miller's personal legacy -his vision, dedication to excellence  and devotion to humanity- and long list of accomplishments is as noteworthy as the architectural wonders that adorn the streets of Columbus. In good measure it was his unwavering belief that anything you worth doing in life should follow the pursuit of excellence. The same approach that guided his vision to bring the world's most celebrated architects to a quiet middle-American community was consistent with his demand for excellence in the engines Cummin's Corporation built - and the way employees were viewed as valuable assets, but equally important, as valued fellow human beings. Miller once wrote: "We understand the fact that we must give a machine the best care and the best treatment if we are to receive from it the best work. We have sometimes shied away from the similar fact that we must give a person the best care and the best treatment if we are to receive from him the best work." I have often noted that, we, as CEOs, through the power of our decisions, truly have the freedom to make of our companies anything we choose. We crystalize the vision, drive the culture and set expectations of ourselves and of our employees. Anything we don't like we can choose to change. Yet how often do we choose to settle, or simply tolerate poor behavior or performance? And what about your own behavior and performance? I've never met a person who couldn't benefit from some personal improvement. Vistage Chair and speaker Richard Englebrott reminds us that "the boundaries of an organization are defined by the limitations of it's leadership. J. Irwin Miller perhaps best personifies the qualities of personal and professional leadership that move us beyond our personal boundaries. The article from the Atlanta Chronicle addresses an aspect of critical decision making that I address in my workshops as Fiscal Leadership. It's a skill that otherwise talented, even visionary CEOs fail to do well and as cited in this article is also clearly lacking in our leaders in Washington. The article itself (see link below) makes a good argument that anyone who has ever navigated a business through difficult times and cash-flow problems can appreciate. Lee Katz, the author and a well-regarded turnaround specialist, notes that our nation's debt crisis is a problem should be looked at as a business matter rather than a political issue. In a company, internal politics often get's in the way of sound business thinking and kills companies. He suggests that politics interfering in the business of running a company may have the same effect. Download a PDF of the Article from the Atlanta Chronicle by clicking here The reason this is relevant to the discussion here, is that the political argument over how to address our nation's cash flow is not much different than how you must decide to address cash flow concerns in your company. I'm not going to argue the political merits of either position, but just point out the decisions you must make to manage cash flow involves principally the same issue that Washington has been at loggerheads with. It boils down to balancing cost cutting and raising revenues. The obvious difference is that you and I can't raise taxes or print money to generate revenue, but the underlying concerns and solutions are pretty much the same for both the private and public sector. When revenues fail to keep up with expenses we generally find ourselves making some tough decisions. Cutting costs is an obvious short-term solution, but not always a good long-term one. Cutting waste and excess is always a good idea, but once you have cut waste to the bone, cost-reductions can undermine your ability to increase of even maintain revenue. Staff reductions can overburden the remaining workforce - or just demoralize your employees. In some cases, your core talent may get nervous and head for greener pastures. Reducing advertising and sales is the last thing you want to do when sales are lagging and operationally, trimmed-down inventory will increase available cash, but may also cause shortages or delays your competition will feast on. Once the fat has been trimmed and your workforce understands that you've gotten lean and strong- and you're not going out of business - the better option is to increase revenue. The problem is that if it was easy to do, chances are it would already be done. No one deliberately turns away profitable revenue. The answer is actually in your pricing. The tendency in reacting to cash flow problems is to reduce prices in order to increase the revenue stream. In the short-term this may solve the problem, but can actually quickly make things worse. By reducing margins you spend more cash per dollar of revenue generated, and unless you can quickly reduce your costs - your cash flow will worsen and eventually so will the financial sustainability of your company. The better solution generally is to raise prices. As counter-intuitive as this seems, in most cases, raising prices is a quick and durable solution. Most people avoid raising prices in fear that it will lose customers and revenue will decline. Even though this may happen, the net result is generally surprising. Let me illustrate. If your company operates at a 30% contribution margin, and you were to increase your prices, overall, by 10%, you could afford to lose 25% of your sales volume and still realize the same dollar value to your bottom line. That means any decrease in sales by less than 25% will actually increase your profits. (The attached charts indicated the relationship of pricing to your contribution.) In a many cases, raising prices will increase the perception of quality and value and has been linked to actually increasing demand. The second chart illustrates the problem with discounting prices to capture revenue. At the same 30% margin, you would need to increase your sales volume by 50% just to break even at the bottom line. This may seem hard to believe, but it's true. The charts contain no calculus - just simple mathematical computation. Download Price Increase Impact Chart Here PDF Download the Price Discount Impact Chart Here PDF The bottom line is that pricing strategy is philosophy. How you price is dictated by the decisions you make. Decisions are driven by your vision for success, and understanding of these pricing fundamentals, the courage of your convictions and your willingness to drive quality and as Peter Drucker suggests, operate under the assumption that the purpose of the sum of your company's efforts is to create value. It's what J. Irwin Miller understood and practiced and what is demanded of you in order to achieve the success you ultimately strive for. This week there is an interesting article on what the author calls the inverse law of sanity - suggesting that when facing tough times, what we normally consider mental balance might not be the resource that best suggests success. Also a look at what Apple might be planning to do with the a stockpile of cash is has accumulated that turns out to be, larger than what the US treasury currently in it's coffers! As always, wishing you a great and successful week ahead. 
Philip R. Liebman Managing Director, Strat4 Group Chair, Vistage International | 
The news media this past week made a lot of noise over the fact that Apple has more cash on hand the US Government; $76 billion compared to Uncle Sam's $74 billion. So, what is Steve Jobs going to do with this hoard of cash? Some say he'll do some big deals but technology columnist Robert X. Cringely thinks Jobs is looking inside his company first for killer opportunities. 
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