Here’s a list of things that CEO’s almost never hear directly from members of their management team, although it would be useful if they could!

• “Here’s how to improve your company or product.”
  They fear your judgment, or your telling them why it won’t work, and they won’t take risks with you.
• When the project will really be done.
  Do you give them the room to tell the truth about deadlines?
• Who, how, or why they don’t get along with another key manager.
  No one can NOT look like a team player to you.
• That they have made a critical mistake.
  They can’t bring you bad news without paying a personal price.
• That a customer is unhappy.
  If you’ve created a “win” all the time atmosphere and you punish the messenger of bad news.
• That they remember every negative thing you say, and every positive thing.
  It takes 5-10 positives to counter every negative.
• That they can do more for you.
  If you will explore their capabilities thoroughly with them.
• Why they do or don’t want to work for you. Resulting in over-paying satisfied people, and losing unsatisfied people.
• That they want more clarity.
  To really want to know what is going on – the good, the bad, and the ugly – because it helps them understand the relevancy of their own work.
• That they are looking for another job.
  We call them the “mentally unemployed”.

Why are the people of West Point, GA, looking forward to KIA’s new plant, where wages will be $14/hour, when the average UAW employee in Detroit makes double that? What is a dollar of EBITDA worth in value to your company? Let’s see how these questions tie together.

Taking the second question first: historically, small private businesses can expect a value of 3 -10x EBITDA; larger public companies 10 – 20x. The stock market has tolerated 15 -20x for most of the past 15 years (although now around 12x). For every dollar you fail to earn in profit, you reduce your value by the multiple that applies to your company. In an up market, company shareholders don’t care so much if you grow 8% or 10% – especially if the profitability is high. But in today’s economy, size (of growth or decline) matters. Let’s say a company did $50 mil. in revenue in 2007, with $3 mil. EBITDA. One could argue that if that company continued to grow steadily, it could be worth $25 to $30 mil., or much more if producing a technical product. But suppose that same company only does $45 mil. next year, and profit drops to $500K. And suppose it takes 3 years for that company to bounce back from this recession. What is the value then? Perhaps as little as $10 mil, or even worse.

What is the single biggest factor in a down economy, that can impact, revenue, EBITDA and value? People. In a crisis management mode, some companies become short-sighted, worrying more about current income and expense, and much less about ultimate value. If you aren’t worried, consider this op-ed quote from last week’s New York Times: “The combined equity valuations of Chrysler, Ford and G.M. total less than $6 billion, which is not even a fifth the valuation of Honda and only about a twentieth that of Toyota.” Honda, Toyota and KIA now have 50,000 workers in the US (counting their sub-system vendors), all making half what US automakers pay, and they produce a better product! We’ve all heard of the Toyota Production System (TPS). But did you know that TPS is derived from Toyota’s early studies of the US automakers!? Now, many US companies have copied TPS to great success. Time for the Big 3 to do the same. Employees that are part of this understand their individual roles and buy in to the process. The team atmosphere is palpable. Two of the main principles of the Toyota Way are:

1. Grow leaders who thoroughly understand the work, live the philosophy, and teach it to others.
2. Develop exceptional people and teams who follow your company’s philosophy.

The people in West Point, GA anticipate success. They know that the new KIA factory will help their entire community. Over 40,000 people have applied for 2500 jobs there. If your team is not capable of protecting your value, there probably isn’t a congressional committee (like what the Big 3 faced) waiting to rake them over the coals. You need to do it. Don’t let the value of your company erode due to inadequate but overpaid managers who can’t keep up, don’t get it, aren’t on your side, and can’t generate enough EBITDA. Get some stars who can do the job, and provide them with solid leadership, and you’ll be on your way to protecting and building your value. When your people value your company, your value will increase.

A rising tide lifts all boats. When a company is doing well, growing sales, achieving customer satisfaction, etc., it is easy to see all the members of a management team as “A” players. After all, if the company is successful, why would anyone be seen as holding the company back? On the other hand, when a company’s sales or its market share declines, or when customers start canceling or pulling back on orders, etc., it is easy to look around and ask, “who is at fault here?” With the 20/20 vision that comes with a crisis, the CEO begins to see more clearly, and can more readily distinguish between excellence and mediocrity.

The reality is that very few companies have 100% “A” players on their management team, and almost every company is tolerating a “B” or even a “C” player most of the time. Winston Churchill once said, “A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty.” Smart CEOs do see the opportunities in the difficulties of today’s economy. The pie is shrinking, so to stay even or grow, and effectively compete in a challenging economy, more companies are aiming at a bigger piece of the pie – increased market share.

To achieve increased market share in a down economy may require painful analysis about what it will take in terms of executive talent, and acting decisively to improve the company’s ability to compete. The winning formula often means strategically replacing the sub-par person with a real leader, an impact player who can increase market share, revenue, performance, etc. Ask yourself if you’ve been tolerating a “B” or a “C” for too long, and if you can achieve your goals for next year with the team you have. If not, make the tough decision now, and upgrade your team.

I’m opposed to the big 3 bailout. I think it rewards dinosaur companies for moving too slowly and too stupidly to be able to compete with more nimble companies. I haven’t owned a US car since the early 80s, and when I get rentals, I am unimpressed by US product.

Honda and Toyota turn out higher quality cars, in the US , while paying their people 60% of what GM pays. And, they have anticipated the market by producing higher MPG cars too. What is wrong with this picture?

We keep rewarding companies who screw up (like Wall St. bailout) and that sends a message to CEOs to keep doing what they are doing – badly – because they will be rescued! Do I sound angry? I guess I am! I am a real capitalist, and I believe in natural and logical consequences of our actions. People, companies and governments don’t change unless they experience pain that changes their paradigm. Our economy might have to take a few hits in order for US business to learn to act more ethically and responsibly.

In the winter of 1776, Thomas Paine said “These are the times that try men’s souls”. He was describing the challenges encountered in the American Revolution. Recently, at my Vistage CEO group, our speaker (a Vistage speaker of the year), Michael Allosso, gave a talk called “You on Your Best Day.” This talk reminded me of the importance of using all of my resources, to find my highest and best use, and be at my best everyday. This is particularly important now, with the state of our economy, and the post-election uncertainties we are facing. Here are the 5 ways I tap into my resources:

1. Remember peak experiences: Thinking of the times when I have excelled, where I produced extraordinary results, and asking myself, what was it about me that enabled me to do that? The innate skills that enable us to do excellent work, in business or in our personal life, are always available as a resource to be reused again. Sometimes we forget these skills are there! Don’t stop at one – keep going until you have a strong list.
2. Ask others: What do people like best about you? We did a survey of our customers a few months back, asking them what aspects of our process and our services they liked best. They mentioned attributes we don’t always remember to discuss. It was very informative in terms of how we can be approaching new customers.
3. Differentiation: What is it that I can do that is unique, special, different or better than the way my competitors approach the same thing? This is an asset with value.
4. Unconditional Giving: I tell everyone I’ve placed in a job to put me on their contact list as a resource (about anything they need) – forever. If you network a lot, you probably can steer anyone to a resource that can solve their problem. Offer to do this, and the payback will be automatic. Be a resource, without a quid pro quo expectation, and people will always want to work with you. Allosso says, “People should be better as a result of having spent time with you.”
5. Focus: I am easily distracted. I’m a possibilities and alternatives thinker, so I’m always wondering about something else. Being fully present helps me concentrate on the task at hand, and apply the particular resource I intend to bring into play that day. This makes me more effective!