I find myself contemplating a topic I used to teach many years ago: Leadership. In the course of the developing that course I did extensive research reading literally dozens of books on the topic. (OK, I read 22 and three of them were pop-up books and another was a colouring book, but still it was a lot of work.) There’s no shortage of people who write books on leadership, even though there seems to be a scarcity of real leaders.
You don’t need a book – or even this article – to tell you what constitutes a good leader.
Most of you know intuitively what it takes to lead, so let this serve not as a “how to” guide, as much as a reminder of what it takes to be a genuine leader.
I guess I should begin by disclosing one of my most deeply held biases: Business leaders are born, not made. They are forged in the crucible of crisis and honed in the conference rooms of the corporate world. A person who does not have the traits to be a great leader isn’t likely to miraculously acquire them, but that’s a matter of opinion and fodder for a different article.
Dr. Wess Roberts in his 1990 work, Leadership Secrets Of Attila The Hun, identified seven key characteristics. Other authors have waxed on about the leadership styles of everyone from Genghis Khan to Kermit the Frog to Sitting Bull to Charles Manson. (OK, probably not Charles Manson.)
While there is anything but consensus on the topic, I’d like to submit the following subset of all the leadership dross that’s floating around out there. Let’s call mine “Leadership Secrets Phil La Duke Stole From Famous People.” (Just kidding, I don’t plagiarise.)
When I taught that leadership course, we covered 17 characteristics of effective leaders, and there might be more. But here are my top five favourites, the ones my experience has taught me are most crucial.
People are more likely to follow someone whose reactions are predictable. I’ve worked for some great leaders who were feared by one and all, blowing up when subordinates erred, throwing furniture at the walls, and calling underlings everything but a child of God. But those same subordinates worshiped these ogres with the reverence that the acid-addled deserters have for Colonel Kurtz in Apocalypse Now.
Knowing exactly how your leader will react to your successes and failures allows you to take risks and behave with a minimum of stress. Patton may have slapped a soldier and Woody Hayes roughed up a player, but in both cases the people who followed each would willingly walk through the bowels of hell for him.
Harry Truman had a sign on his office that read: “The buck stops here.” It meant, “I am ultimately accountable for anything that happens on my watch.”
This is a refreshing sentiment at a time when baby boomer leaders belly ache about millennial entitlement, while at the same time blaming any and all their missteps on media misquotes, things being blown out of proportion, or a curse placed on them at birth by an evil troll.
How long before we can get back to leaders who say, “I did it. The blame is mine and mine alone”?
A good leader can be trusted. When we feel betrayed because a boss promised a raise or a promotion that didn’t happen, we become dispirited and have no motivation to make the sacrifices that same boss needs us to make. We may do what they tell us to do, but we may also engage in malicious obedience.
I once worked for an executive who told me that if I wanted to be promoted, I would have to leave the company. He explained that while I was a valued member of the team I would always remain a “sole contributor.”
I didn’t like the message but I was glad that he was honest with me. It was empowering knowing that no matter how hard I worked I was stuck where I was. It turned out he was wrong.
In part because I didn’t let his view of the world affect my performance, I ended up being promoted twice before leaving the company for greener pastures. I knew that I could trust him, not just to be fair with me but also to be honest and to tell me the unpleasant truths I needed to hear.
When Pancho Villa died, his last words were reputed to be, “It can’t end like this, tell them I said…something.” The best leaders have a clear and articulate vision for life. We know what they stand for. What’s more, a good leader can inspire us to put aside our own wants, needs, and desires in favour of a greater good.
This is why we revere military leaders so much. Generals have to inspire people to die for their visions. Think about that. Our bodies are designed primarily to keep us alive and well, and military leaders need to motivate us to do something that every cell in our central nervous system is telling us not to.
To lead is to make unpopular decisions that need to be made without regard to whether people are going to like it. I worked with a CEO who had to cut 400 jobs, a substantial portion of the workforce. I remember someone telling him that the people weren’t going to like it.
He looked them straight in the eye and said, “I don’t like it, but either we do this now or 5,000 people lose their jobs in six months.”
We don’t follow people because we like them – hell, I can think of a score of people I like who I wouldn’t follow out of a burning building. But there is a handful I would follow even when they seemed at odds with my values. No one follows a leader who is afraid to fail, afraid to make a mistake, afraid to admit mistakes, or afraid to lead.
This article was originally posted here on Entrepreneur.com.
4 Common Myths About Leadership That Can Hold You Back
Alignment with your values and belief systems is the foundation of becoming an effective leader.
To be a great leader in today’s world, being a brilliant knowledge expert or technician is no longer enough. Even harder is trying to learn the golden rules of the wrong and right ways to be a great leader. The amount of content spouted in countless books and resources is overwhelming let alone confusing.
To be unstoppable leaders for our businesses and our people, tuning out from the noise and distractions potentially misguiding us is pertinent now more than ever. Pay attention to any presence of these four myths and make guiding your people a more soul-enriching journey that they and you will want to continue well past your leadership term’s end.
Myth 1: Great leaders are highly ranked individuals
Richard Branson proves a classic example of how great leaders can get to the top without having ivy-league school connections and astounding qualifications. Having had enough of struggling at school, Branson dropped out of the highly reputed Stowe boarding school at the age of 16 to start a magazine called Student. The first publication sold $8000 worth of advertising. We all know the Virgin story from there on. Then there are the likes of Rachael Ray, food industry personality whose empire has amassed a $60M fortune without her having any culinary qualifications whatsoever.
There’s a common entrepreneurial DNA that runs through the veins of such leaders. An avant-garde vision, tenacity and patience seem to be common underlying themes for many. For others, it’s about making sacrifices and taking risks that could cost their life to serve a cause extending far beyond serving their own needs.
By publicly speaking out against the Pakistan Taliban’s extremist rulings, one of which of was to prevent females from accessing education, Malala Yousafzai became a target. At 15 years of age, a masked gunman boarded her school bus and shot her in the head. She survived and many months of rehabilitation spurred her determination to fight for every girl to have the opportunity to attend school. The work she achieved through establishing the Malala Fund with the undying support of her father, earned her the Nobel Peace Prize in December of 2014.
Whether from desperation or a happy place there is always the genesis of a passion driving a persistence to go against the grain and to continue the fight. Often there’s no formal training, qualification or certification in sight.
Myth 2: Following a certain checklist of behaviours will make you a great leader
The ‘fake it ‘til you make’ adage has become a common throw-away phrase consultants and coaches spout as a means to quickly build confidence. Following advice to merely emulate the behaviour of those you admire and respect can pose grave risks, especially when you become a leader by default as opposed to by your own audition. Smart teams can smell falsehood and copycats a mile away. Your integrity will often be scrutinised and your jury will constantly evaluate the values and principles you lead by. One foot wrong might end your leadership term just as quickly as it began and not necessarily by your team’s choosing.
Imagine being tasked with driving credit card sign-ups yet you yourself struggle to make repayments on your own overdraft. How long can you resist your inner conscience? You’ll feel the tug every time you invite a customer to sign up and at every request to your team to follow suit. At some point, you’ll be struggling to face yourself see in the mirror.
This article was originally posted here on Entrepreneur.com.
9 Ways To Get Employees To Buy Into Your Vision
Your business is your dream come true, now it’s time to include your employees in your vision to drive future success.
Your vision statement is the foundation of your business. It is the baseline against which all strategic planning is assessed and the benchmark against which all results are measured. However, as important as it is to have a vision when it comes to business success, it is equally important to get your employees to buy into this vision to ensure that success.
Here are nine ways to get your employees to buy into your vision by making it their dream, as much as it is yours…
- It must be believable – Your company vision needs to be within the realms of possibility otherwise people just won’t believe in it. It must be steady, achievable and relevant.
- It must be inclusive – Employees need to see how they can play a part in achieving this vision to make it relatable and inclusive. If they don’t understand what the business does, they won’t care how well the business does.
- It must be reinforced – Talk about your vision all the time. Don’t assume everybody has read it or is familiar with it as new people may not have seen it and older people may have forgotten. Constant communication is critical to ensure everyone is, literally, on the same page.
- It must be transparent – Make sure your communication around your vision is open and clear. Talk about it with clients, with all staff members, at all meetings and keep on talking until everyone understands it. When a vision is tangible and accessible it is far more achievable than when it is ethereal and vague.
- It must be practical – Don’t make flamboyant statements that are almost impossible to achieve like, ‘We will be number one in X!’. Be practical. It doesn’t matter if you’re not number one, it does matter that your vision is practical.
- It must be shared – Connect people’s careers to the vision by creating opportunities for them. Show them how the work they do is tied back to the vision and the business. If the business is only about profit and customer, then employees often don’t see how they fit in or why they are important. Create opportunities for them and they will be inspired to achieve your vision.
- It must be people-centric – People make up the core of your business. It is bigger than just one person or one idea. So, give them something to aspire to with a realistic, practical and human company vision.
- It must have purpose – Embed your vision and its values into the way you do business. The way you treat your employees and your customers and the choices you make should all reflect your vision. Take it beyond just ‘We want to make money’ and show how your vision positively affects your community and others.
- It must be visible – Put your vision on doors, in emails, on letterheads, in proposals. Show what you stand for at every opportunity. Employees need to feel that there is a cohesive plan for the future. This will not only drive engagement but it will keep them steadfast when times get tough – they believe in the ship too much for it to sink.
What’s Your Number? How To Unpack Company Valuations
Business is booming. Investors want in. But how do you put a price on the value of the company you have built with your own hands?
Company valuations is such a hazy part of the scale-up journey of a private company. Putting a price tag on a business is both art and science. At the end of the day, the number that makes the headlines (if ever disclosed) will be where willing buyer and willing seller meet.
But how do you , as business owner, go about setting your asking price? Before approaching investors, it’s a good exercise to determine your own valuation range for the business. Choosing the right valuation method is the first big question. The answer has many parts to it, but the most important driver is the stage of the business.
Let’s look at some of the most commonly accepted valuation methods in our market:
Applicable stage: Established, profitable companies
Listed companies, institutional players and private equity investors normally invest in a company for its cash flow profit that can contribute to their portfolio income. More often than not, companies will be valued based on their current earnings (bottom line profit after tax).
This method can only be used for companies that consistently make a profit. A multiplier will be chosen based on the company’s perceived risk. Younger, more risky businesses will likely have lower multipliers (as low as 3 and 4) and high growth, well established, lower risk companies will get higher multipliers (8-15).
Sometimes small adjustments are made to current year earnings (like non-standard, non-repeating income statement items) after which the valuation is set at Earnings times multiplier equals company valuation.
Discounted Cash Flow (DCF)
Applicable stage: Post-revenue start-ups, growth companies and established businesses
The most commonly used method in practice, the DCF method argues that a company’s value is determined by the future cash flows that it will yield to investors.
The starting point is creating a five to ten year cash flow forecast for the business. This is no small feat. In order to create a full financial model – income statement, balance sheet and cash flow statement – for the next decade requires a lot of work, both from a strategic and technical perspective.
Investors love this model because if forces the owners to put a clear strategy and expansion plan for their business into numbers. It will include dozens if not hundreds of assumptions – all of which can be scrutinised for reasonability. The result of financial model will be five to ten years’ worth of projected cash flows. These amounts are then discounted to present value at a discount rate that reflects the company’s risk and expected cost of capital.
The sum of the discounted future cash flows plus a terminal value (that represents the value after the five or ten year period of the model) then represents the valuation of the company after some final small adjustments for things like existing debt in the business.
A revenue multiple valuation approach is focused on the market for similar businesses and is underpinned by your company’s current turnover. It seeks out the sales price of other similar companies in the country or worldwide, adjusted for size, stage and market differences.
A company that sold for R100 million at a turnover of R50 million would have a two times revenue multiple (valuation/revenue). If the average revenue multiple for similar companies is in a certain range, this multiple is then slightly adjusted and applied to your business.
If the average sale in your industry has been two times revenue but you are growing much faster than the average with a better competitive advantage, you can argue that two and a half times revenue is a more applicable number for your business. Revenue multiples are often used as a reasonability check in the market for the current asking price.
Most established companies are valued using one or a combination of more than one of the above three methods. At start-up stage, there are a number of other methods like Cost to Replicate or the Scorecard Method that early stage investors look to. When a company is simply in too early stage to practically value it, seed stage investors would also consider SAFE Agreements (Simple Agreement for Future Equity) – an instrument that determines that the percentage of the company the investors are buying with their investment. This is only determined when the Series A round is raised at a future date and under certain conditions, generally at a discount to the price the series A investors are paying.
Company valuations are complex. Many of the above technical factors play a role. A lot of it also comes down to the salesmanship of the owners and the negotiating capabilities of the parties. In ‘How Yoco Successfully Secured Capital And The Importance Of A Pitch’, the Yoco team speak about the importance of the right approach in their recent R248 million fundraising
Don’t go into this process without seeking some kind of expert advice. The price of the wrong valuation is simply too high. Make your numbers and your arguments bulletproof and you will be on your way to defending a strong and exciting valuation for your next raise!
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