Greetings! One of the true tests of any leader is the ability to successfully lead through uncertain times. While the business environment for most of the companies I work with - and most of the Vistage member companies across the US has improved since the worst days of the recession - the impact of global economic and political factors is creating an increasing sense of concern for the future. While the opinions of respected economist differ, there is at very least a growing worry that the US economy may be headed for a double-dip recession - something that rightfully has many CEOs worried. 
An example of a company and industry still struggling was illustrated in an article in yesterday's New York Times. It addressed the impact of the ongoing housing slump on Marvin Windows and Doors, located in Warroad Minnesota. They compete with Pella, Jen-Weld and Anderson for their piece of a severely shrunken market. http://tinyurl.com/NYTimes-MarvinWindows Despite the their difficulties, Marvin has vowed zero layoffs - but to cope with a 60% drop in revenue has reduced workers wages by an average of 20% off of their base salary by reducing the work -week to just 32 hours and eliminating certain perks and more importantly, overtime. The elimination of overtime combined with the shortened week has in many cases dramatically reduced the income of many of the 2,000 employees working at their Warroad facility. The two factors providing for this arrangement is the financial ability to hopefully weather the storm - but also, according their CEO - the fact that as a privately held company - they can elect to forego profits in the short-term and continue to support the needs of their community - which includes their friends and neighbors. The problem, in my view- for the economy and for many companies, more than the prospect of a stalled recovery, or even a newly minted recession, lies in the fact that this still looks like a good time to make guarded or at least well considered investments in order to gain competitive advantage in many markets and to take advantage of conditions that will support near-term growth. The test of deliberate leadership lies in the ability to effectively manage the degree of risk one undertakes in the face of a possible impending downturn. While major corporations are stockpiling cash and are seemingly willing to ride the wave of chaos made worse by the upcoming election-year political gyrations, small and mid-size companies may well find that the opportunities today can be leveraged into short-term growth and a longer term competitive advantage. The trick is to remain fiscally focused on managing growth to keep risk at acceptable levels while being selective in approaching opportunities that not only will provide strong returns - but also preserve both flexibility of options and optimal financial liquidity should things either not go as planned - or if economic conditions should begin to rapidly collapse again. While there are many uncertainties to deal with - it remains fairly certain that small companies cannot easily look to credit options to fuel growth, and where funding is available, the level of collateralization required is keeping a good portion of the market out in the cold - and many of those who theoretically can qualifying are justifiably concerned about placing their personal assets and consequently their family's in harm's way. There is no easy answer to how much personal risk anyone should take these days - but there is some sensible thinking to help guide CEOs who are struggling to weigh their options and balancing the comfortable safety of being overly risk adverse and throwing too much caution to the wind. Managing Your J-Curves Driving growth typically involves investment such as hiring, leasing facilities or equipment, engaging in new R&D projects, opening new markets, expanding advertising campaigns and making improvements to technology systems. These are all what I call J-Curve investments - meaning - there is an initial investment and some period of time until the benefits are realized. The biggest challenge is that these all consume cash - and risk diverting attention and resources from existing profitable activities. The solution is to measure the "breadth and depth" of the curve, create a plan for how much will be spent, how long it will take to recoup the entire investment and when and how to kill the project if need be. The hazard is falling prey to operating by "sunk cost logic" - and consuming cash today that you may wish you had tomorrow. Cash is King Of all the things that CEOs tend to worry about, cash flow is the most recurrent theme with regard to what keeps people up at night. We all expect cash flow to tighten when business slows- but are often surprised to find that cash flow is actually more challenged during times of rapid growth - when we consume cash at a faster rate than we can collect. The hubris of growth gives companies a false sense of cash flow immunity. In days when credit was easily secured - that was perhaps a survivable error in judgment - but without easy access to credit - it can be deadly. You need to make a clear distinction between "good growth" and "bad growth." Understand most growth puts pressure on inventory levels, staffing skills and levels, collections, supply chain management and margins. The result is often growth that is unsustainable from a purely cash-related perspective. Bad growth is perhaps the most common reason good companies go bankrupt. A wise man once pointed out to me that: - Revenue is Vanity
- Profit is Sanity
- Cash is Reality
Lean and Mistake-Proofing Your Company Vistage resource expert Robert Devine is a true guru in driving sustainable growth. He did this at Hartz Mountain for many years and in the company he ran and sold to Hartz in the first place. Today, Bob consults and leads workshops on Lean and Mistake-Proofing as strategic culture - and the use of self-directed teams to achieve these objectives. The simplest way manage the risk of your operational investments is to lower costs by improving efficiency and effectiveness and to reduce the incidents of costly mistakes. It all seems so simple, even obvious - but clearly isn't as easy as it sounds. Or is it? According to Devine - embedding the principles in the culture of an organization is what makes the difference. Knowing what to do is important - but getting people to understand and apply the principles is critical. (Bob is presenting to my Vistage Chief Executive group on September 27th - along with a few guests from MMCEO). It All Gets Back to Leadership... I read a worthwhile interview with David Barger, CEO of JetBlue in yesterday's New York Times online. (see below for link) Barger speaks about simplifying strategies to the objectives truly at the core of your organization; explaining how they had set out with a plan containing 23 objectives and four pathways. Within 3 years they realized that their objectives could be distilled down to two: culture and offerings. From observing mistakes (and understanding that mistakes lead to critical insights) JetBlue has taken the course of "Inspiring Greatness in Others." Speaking about how to do this, Barger suggests what I consider the basics of all leadership: being present, connected and centered (resourceful). He suggests that connection is the key to driving their culture. "It doesn't take a lot. People know you're there. Go see them. Be present." It's what Vistage expert Kraig Kramers calls "walking the four corners" of your business. Like Jack Welsh he speaks to the value of just asking great questions.. And the benefits of Executive Peer Groups I have little doubt that having an external sounding board and a safe place to gain perspective beyond his industry, get unvarnished feedback, vet solutions and allow himself to let his guard down - would have accelerated the rate that David Barger could move his team forward. Barger learned some valuable lessons on how to drive better decisions within JetBlue. I am fully certain - that a board of peers like a Vistage group would have provided immeasurable value. As always, wishing you a great and successful week ahead. 
Philip R. Liebman Managing Director, Strat4 Group Chair, Vistage International | 
The interview, conducted by Adam Bryant offers insight into Barger's observations from the CEO's seat - and a window into his thinking about leading an organization, building a productive culture and hiring talent.
Over the past few centuries, Western cultures have been very good at creating general prosperity for themselves. Historian Niall Ferguson asks: Why the West, and less so the rest? He suggests half a dozen big ideas from Western culture -- call them the 6 killer apps -- that promote wealth, stability and innovation. And in this new century, he says, these apps are all shareable.
About Phil Liebman: 
About Vistage 