September 2010

This Month's Features

+	Leadership Book Series
+	FMI's 360 Feedback
Leadership Videos Online
+	Introduction to the Leadership Institute
+	An In-depth Look at the Leadership Institute
+	Leadership Institute Testimonials

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FMI's Executive Coaching

Just as the best athletes have coaches, strong leaders often have coaches as well. In tough times, the need for coaching is even greater. Our FMI coaches bring more than 100 years of combined coaching experience, coupled with specialized industry knowledge, that can help you through these turbulent times.

Click here to learn more about FMI's Executive Coaching.

What FMI Executive Coaching clients are saying:

• "When you have the ability to make change and improvement to someone who affects your business, affects the growth of team members and affects your image – can you afford not to complete something like this? My answer is no!"

• "I already have made a greater contribution to this company as a result of coaching – both from a performance and a supervisory standpoint. In working with my group of a dozen people, they have their subordinates as well; I think it’s important how the impact transcends my group."

The "Practical Tools for Exceptional Leaders" booklet series is designed to help you learn and apply best-of-class leadership principles in your life and within your organization.
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A Letter From Ron Magnus, Managing Director

John Paulson, a hedge fund manager, turned the residential market fall into one of the most profitable strategic moves in history. Over the course of his career, Paulson was thought of as an unremarkable money manager, delivering solid returns on investments with limited downside. All of that changed in 2004-05 when Paulson’s instincts about the valuation of the residential housing market drove him to collect data revealing a pattern in the market few others recognized.

Sensing a potential opportunity, Paulson led his team to launch a comprehensive analysis of the housing market. At the time, it was unclear whether the rising tide of the housing market was another bubble or a sustainable structural change. The analysis of the data showed that from 1975 to 2000, housing prices appreciated at an inflation-adjusted annual rate of slightly more than 1 percent. Between the years 2000 and 2005, returns skyrocketed to more than 7 percent a year, revealing that prices would have to fall more than 40 percent to return to the historical mean.

Armed with data confirming his intuition, Paulson’s team developed comprehensive scenarios to project the impact of a decline in housing prices. The effect was startling, revealing clear evidence that the housing bubble was being held up simply by rising home prices without any of the necessary foundational support. With data revealing a pattern in the market, Paulson and his team struck – buying billions of dollars worth of contracts (the now infamous credit default swaps) against mortgage defaults. Wall Street firms readily sold these contracts to Paulson since they assumed the housing market could only continue to climb.

The story of the crash of the housing market is clear now in hindsight and Paulson’s strategy paid off in a way few investments have ever paid off in all of human history. In 2007 and 2008, Paulson’s company made more than $20 billion in profits.

While the profit numbers are hard to fathom in the traditionally low-margin construction industry and the business model is very different, there are significant lessons to learn about strategic thinking from Paulson’s story. One of which is the important distinction between true strategic thinking and opportunism. Paulson’s rigorous, fact-based approach identified a “structural hole” in the marketplace offering significant return for little risk. He also leveraged deep knowledge and insight into a particular market to create a unique and valuable opportunity. All of these are insights construction leaders can sharpen and use to become better strategic thinkers.

This issue of the Leadership ENewsletter examines strategic thinking and how it is different from the process of strategic planning.

Ron Magnus

Strategic Planning versus Strategic Thinking

Briston Blair and Jake Appelman

FMI recently worked with a general contractor that has always been highly relationship-focused, committed to doing whatever it takes to satisfy the client, believing in a long-term investment with its partners. With cleareyed, data-driven analysis from strategic planning, this company aims to transform early opportunistic plays in the renewable energy market into its primary growth engine by matching its unique value proposition to the marketplace. Historically, its strengths as an organization did not align with the hard bid, often adversarial and transactional nature of its primary heavy civil markets. The company had been only marginally profitable and somewhat successful in those markets. This limited success resulted from its culture and passion for long-lasting relationships and client focus leading it to be less competitive in a marketplace that did not value its strengths. The company had survived due to its good reputation and strong local relationships. Early, opportunistic forays into the renewable energy market were successful because of the relational mind-set of that client base — a small number of clients who were looking for long-term partners they could trust. The company’s management recognized this was a market that matched its competencies. This realization came through the use of fact-based analysis in its strategic planning.

Read on to learn how the relationship between strategic planning and strategic thinking can create value for your company.

After the Storm — Thinking Past the Downturn

Gregg M. Schoppman

Leaders are spending more and more time working on day-to-day tactical areas of the business. Forgetting about the people in the organization is a tactical error that has long-term ramifications.

The time of unbridled expectations of prosperity has passed. Everyone in the country looks to the news channels to provide some glimmer of recovery. Earnings reports are deemed “promising” when they “aren’t as bad as expected.” What was once an industry characterized by gaudy backlogs and personnel shortages is now comprised of leaner and hungrier organizations. While there are bright pockets in a landscape devastated by the tempest, most experts would agree that the road to recovery will be long and the victims of the fall will be scattered along the right of way.

Read on to learn how organizations can strategize for the future by examining the way they operate.