Managing Key Personnel – Do What Is Inevitable – evasion and self-deception will not work

Recently I was speaking with the owner of a financial services firm. She has 15 people in her organization which is now almost 18 years old. By any measure a successful firm.

She told me about one person who has been with the firm for eight years. The owner described this person as the most professional and reliable person in the organization. She performs all sorts of important customer-facing activities flawlessly. This employee is a key person in the organization. The owner went on to tell me about a recent conversation she had with this key person who confided that she did not want to be just an “insurance geek”. She was emphatic about this. The owner told me that this statement jived with other comments this person had made recently. She believed her and felt that her days are numbered.

The owner then went on to describe how she had begun to put together a job manual for all of the key tasks now under the wing of the key employee. This seemed to me to be just the right step. First, the key employee was cooperating in constructing the job manual. This is a great sign of continuing good faith. Second, the owner is testing out the manual to be sure that it really will be a solid platform for training a replacement. Continue reading

Podcast – How to Hire a Part-time CFO

Five steps to hiring a part-time CFO to simplify your life.

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This podcast lasts for 8 minutes 49 seconds.

A written format is available here.

How to Hire a Part-time CFO

In my earlier article, Seven Reasons to Add a CFO – part-time or full – to Your Team, I discussed the reasons to add a Chief Financial Officer (CFO) to your team. If you have not read that article you should do so before reading this one.

The first step in the hiring process is to define the job you want filled. What specific results should the CFO produce for you and your company? Are you concerned about running out of cash because you have taken on a big project but will not get paid until completion? You worry about having enough cash on a regular basis. You are not certain that the bookkeeping is being done in an efficient and rigorous manner? What else of a financial character concerns you? Is your CPA driving you crazy with questions or suggestions that you do not entirely understand?

Make a list. Look back at the seven reasons I gave in my earlier article and see if this don’t provoke some additions to your list of worries. When you have completed your list, these are the problems, largely, that the CFO should solve.

Do not spend too much time thinking about exactly which functional skills are required to produce these results. It is the job of candidate CFOs to demonstrate to you that they have solved problems like yours and produced the required results. You are not hiring a trainee or development project, you are hiring an experienced CFO.

A few concrete skills and experiences you should look for.

First, your CFO must know how to get their hands dirty. This means they must have active skills to build spreadsheets and extract information from financial software systems and paper documents. Second, they must know how to present this to you in a clear, actionable format. A key task for them is to get financial information about company performance into your hands in a timely fashion and in a format that leads to making decisions. Third, preferably they will have experience in your industry so that they can set the analysis within the context your business lives in. Fourth, they should have worked as part of a team so that they have the skills to present the financial “score” clearly and then engage in a dialogue with the other management team members to help drive the business forward in a coherent fashion. At the level of the CFO, finance is not an isolated function, rather, it plays an integral role in managing the ongoing business and developing new strategies. Continue reading

Seven Reasons to Add a CFO – part-time or full – to Your Team

Many small businesses operate with only a bookkeeper and CPA to manage the finances. The owner or GM fills in, or at least think that they fill in,  for all of the duties of a Chief Financial Officer (CFO). As a result owners of these businesses frequently have inadequate financial information to effectively move ahead. And, they are frequently using scarce resources (their time) performing tasks far better done by a professional, experienced hand.

In this time of readily available outsourced or part-time professionals there are very few worthwhile reasons not to have your own CFO. Depending on your size, your CFO might appear once a month or several days a week.

So, let me list a few reasons for you to find a part-time CFO. Continue reading

Successful Intelligence – R. J. Sternberg – book review

Successful Intelligence: how practical and creative intelligence determine success in life by Robert J. Sternberg (NY: Penguin Putnam, 1997)

(download a PDF of this book review whitepaper)

Throughout my life I have been interested in intelligence, mine and that of others. From early years at Taft School where I was regularly described as a “gross underachiever” to later in my work life when I began to understand that “smarts” came in all shapes and sizes, intelligence has been an interesting issue. Who has it and how can you figure out what kind each person has?

Successful Intelligence (SI) presents an interesting addition to my own practical knowledge of intelligence and a further jumping-off point from Howard Gardner’s efforts in Frames of Mind: the theory of multiple intelligences.

The preface gives away the whole story. Let me quote a bit:

“Successful intelligence is the kind of intelligence used to achieve important goals. People who succeed, whether by their own standards or by other people’s, are those who have managed to acquire, develop, and apply a full range of intellectual skills, rather than merely relying on the inert intelligence that schools so value. These individuals may or may not succeed on conventional test, but they have something in common that is much more important than high test scores. They know their strengths; they know their weaknesses. They capitalize on their strengths; they compensate for or correct their weaknesses. That’s it.” (bold in text) (p. 12)

So, this is quite an invigorating start! Intelligence is something we use in day-to-day life.

The first half of SI takes up a review and critique of traditional efforts to define and measure human intelligence. For those of us who followed the uproar over The Bell Curve (Herrnstein and Murray, 1994) or have otherwise been exposed to critiques of standard approaches to intelligence, skip quickly to Part III “Successful Intelligence Is What Counts”.

SI posits three key elements of successful intelligence:

  • analytical
  • creative, and
  • practical intelligence

Analytical intelligence focuses on problem solving. SI discusses this under the following headings:

  • Problem recognition
  • Problem definition
  • Formulating a strategy for problem solving
  • Representing information
  • Allocating resources
  • Monitoring and evaluation
  • Well-structured and ill-structured problems
  • means-ends analysis
  • working forward
  • working backward
  • generating and testing
  • Mental sets and fixation
  • Decision Making
  • economic models
  • utility models
  • game theory
  • satisficing

Creative intelligence focuses on finding good problems. Here SI struggles to develop a coherent and satisfying definition for creative intelligence by posing an “investment theory of creativity”. Unfortunately, this discussion struggles with a metaphor standing in as a definition: “Creatively intelligent people are like investors. They buy low and sell high.” This line of argument leads to the following notion of what creativity is about:

“In the investment view of creativity, then, the creative person buys low – comes up with an idea that is likely to be rejected and derided. That person then attempts to convince other people of the value of the idea and thus increase the perceived value of the investment. If he has finally convinced others of its value, the creative person sells high – leaves the idea to others and moves on to the next unpopular idea.” (p.190-191)

From my perspective and experiences in the business world, this gives much too much importance to the Don Quixote aspects of the process. What exactly is the “investment” here? Is it really true that creative people set out to be “rejected”? (Perhaps, some reading in the literature of innovation in industry might be helpful here. Although these are looking at the problem of creativity from a more macro level, Eric von Hippel’s Sources of Innovation and Everret Roger’s Diffusion of Innovations might shed some light on creativity.)

Leaving aside my quibbles about the difficulties SI has with defining creative intelligence, this chapter closes with a set of observations about how to develop creative intelligence. The section headings provide a good slice though these (paraphrased here):

Successfully intelligent people:

  • actively seek out, and later become, role models
  • question assumptions and encourage others to do so
  • allow themselves and others to make mistakes
  • take sensible risks and encourage others to do the same
  • seek out for themselves and others tasks that allow for creativity
  • actively define and redefine problems, and help others to do so.
  • seek rewards for, and themselves reward, creativity
  • allow themselves and others the time to think creatively
  • tolerate ambiguity and encourage tolerance of ambiguity in others
  • understand the obstacles creative people must face and overcome
  • are willing to grow
  • recognize the importance of the person-environment fit

The discussion of practical intelligence is altogether too brief because too much of this chapter is taken up with further efforts to debunk various standing notions of the connection between standard views of intelligence and real world success.

Practical problems are characterized by, among other things, an apparent absence of the exact information necessary for solution and also by their relevance to everyday experience.” This leads to a discussion of the roll of “tacit” knowledge. BUT, SI’s use of the word “tacit” bears little resemblance to either my own usage or a dictionary definition (in this case my usage and the dictionary are in good synch).

“What, exactly, is tacit knowledge? It has three characteristic features. First, tacit knowledge is about knowing how – about doing. It is procedural in nature. Second, it is relevant to the attainment of goals people value, not the kind of academic drivel without practical value that teachers sometimes try to stuff in students’ heads. And, third, it is typically acquired with little help from others.” (p. 236)

Now, if we strip out SI’s confusing use of the word “tacit” (perhaps you may want to substitute “practical” or “worldly”), we now have a statement about that body of knowledge that one gains through the actions, association,and activities of day-to-day life – the world of knowledge accumulated through work, hobbies, social interactions and play. Go back and reread the paragraph quoted above. Excise “tacit” and substitute “worldly”. Now we can see what SI is trying to say. I have more than a small quibble with SI’s third feature. In my experience, most of my “worldly” knowledge was directly or indirectly gathered from the people around me. This usually occurred in an expressly “helping” mode.

Although SI is hardly a comprehensive or mature statement of exactly what successful intelligence is or how we can encourage its development, it at least moves the discussion of intelligence onto a plane where we can think of intelligence as a poly-dimensional entity. This gets us beyond the intellectually barren territory of IQ and other such nonsense. Further, SI helps to move us towards notions that can support practical thinking and policy making to support increasing the body of successful intelligence in all human beings.

Viewing this from my personal perspective as a business manager, I could not help but note the immense surface overlap between SI’s description of successful intelligence and many of the underlying principles ascribed to high-performance organizations. Here, for example, are statements (bolded in the SI text) from the discussion of Problem Solving:

“Successfully intelligent people don’t wait for problems to hit them over the head. They recognize their existence before they get out of hand and begin the process of solving them.“(p. 158)

“Successfully intelligent people define problems correctly and thereby solve those problems that really confront them, rather than extraneous ones. In this way, the same problems don’t keep coming back into their lives. They also make the effort to decide which problems are worth solving, in the first place, and which aren’t.” (p. 160-161)

“Successfully intelligent people carefully formulate strategies for problem solving. In particular, they focus on long-range planning rather than rushing in and then later having to rethink their strategies.” (p. 163)

“Successfully intelligent people represent information about a problem as accurately as possible, with a focus on how they can use that information effectively.” (p.165)

“Successfully intelligent people think carefully about allocating resources, for both the short term and the long term. They consider the risk-reward ratios and then choose allocations that they believe will maximize their return.” (p. 169)

“Successfully intelligent people do not always make the correct decisions, but they monitor and evaluate their decisions and then correct their errors as they discover them.” (p. 170-171)

Now, if you substitute the words “successful companies” or “successful organizations” for “successfully intelligent people, you will get a set of useful statements about high-performance organizations. Hmmmm…

(download a PDF of this book review whitepaper)