In the past several blog posts, I’ve spoken for the need for timely, accurate, and appropriate communication to the team, not only as a matter of operational necessity, but also as an important means of establishing trust and credentialing the Musher’s role as the leader of the team, or enterprise.
But what is going on when communication is absent, or deliberately withheld? What are the ramifications, both operationally and politically, of this sort of information vacuum? On a dogsled, failure to communicate typically has only one of two outcomes — disaster, or inertia. By disaster I mean damage to dogs, sleds, payloads, and the Musher. By disaster I mean not finishing the race, let alone winning it. Similarly, by inertia I mean not moving at all. No progress. No momentum. No finish.
The failure of the Musher to demonstrate his or her own intentionality is the driver of these two negative outcomes. By intentionality, I mean a demonstration of serious intent to manage the sled and the team (the business) to an optimal outcome that will benefit all. Without intentionality, motives will (and should be) questioned.
One instance from my recent consulting comes to mind. A client is a multi-billion dollar business electronics company that is the product of a merger of equals. It has experienced growth, but unremarkable growth. It is reasonably profitable. Within this company, the executive in charge of worldwide sales and the executive in charge of worldwide service (break/fix, warranty, and consulting), and their organizations, are viciously at odds with one another. Sales believes that service is overpriced, that selling service is “too hard” and that it disrupts the sales cycle. Service believes that sales “leaves too much customer money on the table,” and that sales is diminishing the service operations performance because they promise things that service has to fulfill which are outside the service organization’s core offering. Etc. The CEO has consistently seen this interaction as a dog fight, or like two warring brothers, and thinks these two executives should “just work it out”. The problem with this point of view is that it damages the CEO’s credibility, as it calls into question his intentionality, especially to the Board, which now has this conflict on their radar.
The Board now knows that services drive unit margins at the 60% range (before the frequent application of a sales discount — another problem for another blog). This is 30% higher than the contribution margin for most products. On a unit basis, the revenues for a service contract are small compared to the price of the capital goods. Yet the quick math I did for the CEO showed that if the sales force improved the attachment rate of service contracts to new product sales by 20%, it would contribute $80MM (that’s right EIGHTY MILLION) dollars of additional profit to the company — which at a current price-to-earnings multiple of 22 would add $1.76 BILLION to the market cap of the company!
Remind me, don’t most US CEO’s have a large part of their compensation tied up in options?!! The CEO’s personal interest in his own wealth notwithstanding, does the CEO have profit, and shareholder return, first and foremost in his operating agenda? What are his intentions? When there’s a proverbial elephant in the room, the team looks to the leader to define his or her intentions through their willingness to deal with the elephant. In this instance, the responsibility of the CEO to generate maximum profitability supersedes his “do nothing” largesse.
Now, the CEO client has asked that the warring factions be moderated and arbitrated, and that a work plan be put together which unites the product sale and the service sale. How the CEO follows through on this initiative, by getting involved and providing visible executive sponsorship for the change, will demonstrate his intentions — and prop up his political capital not only as the leader, but as the right leader for the company.
Where do you see, in your leadership, or in your own daily work, a failure to express intentionality? How has that undermined the organization’s confidence in you, or your leadership?