My CEO Life

There are many different types of people that operate within a business.  Based on my experience, here are some of them.

Worker Bees- These are hard workers who are happy with their lot in life and have few long term leadership aspirations beyond doing a good jobs and putting bread on the table for thier family. 

Survivors – These are not so hard workers who do what is necessary to survive in the business and are either looking for something else or see work as a means to end – an enjoyable life.

Aspirants- Employees in this group truly aspire to be leaders in a business and believe that hard work and doing a good job will get them recognised.  They let their work to the talking for them.  Not everyone in this will become a leader in the business however their aspire to get there.

Politicians - Employees in this group also aspire to be leaders however they often look for opportunities to climb the corporate ladder by shamelessly promoting themselves, sometimes at the costs of others, and often are divisive in the business in an attempt to curry favour or use wedge politics to get themselves noticed.

I have come across people in each of these groups during my working life.  The funny thing is that people often clearly fall into one of these categories although they often dont know it themselves.  Of course as the CEO you want a great combination of Worker Bees and Aspirants in the business and should ensure that the Survivors and Politicians are shown the door as soon as possible. 

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A while ago we made a decision to give as many people as reasonable a Blackberry.  Now the cost conscious out there will argue that this is a waste of resources, however i think for what is a relatively small investment ($800 for the handset and ~$35 per month for the plan) it meant that the team members were able to become more productive and in their own time.  What we also noticed was that people embraced the new technology and also the freedom it gave them.  Often people could go home to attend to their kids but were able to stay in touch with what was happening in the office. 

However there are some tricks of the trade. 

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During my time with the REA Group we grew the business from operating in just one culture – Australia – to one operating across many different cultures – from Australia and New Zealand through to the English and European cultures.  When we started a small office in Shanghai and acquired Squarefoot in Hong Kong, we further enriched the cultural mix. 

Now the challenge i always had was do i change my style to adopt to the various cultures or do i maintain, as much as possible, my approach to doing business and help move the operating cultures in each of the countries to a more common culture.  I made the choice that i would, where possible, adopt the second approach as i felt it was more important that we had a unique REA Group culture rather than half a dozen different cultures.

“How did you make this happen”, i hear you ask.  Well first and foremost i lived the cultural values that i have written about before http://myceolife.com/2008/06/what-makes-great-culture/. 

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Over the last 3.5 years i have been extremely fortunate enough to work with an excellent CFO – Georg Chmiel.  Georg and his family moved from Munich to Australia in early 2005 to work for the REA Group.  He and I had known each other from the McKinsey days and had kept in touch over the years.  Having him come on board to the business was a blessing.  He has a strong mix of strategic, financial and people skills that meant we were able to complement each other on our day to day running of the business.

The strong relationship and the mix of skills meant that we were able to share the work load of managing the business.  Quite often when i was travelling, he was able to take over the decision making on the home front and i would trust his decisions while he was able to run past me financial issues knowing that i would be able to understand what was happening and that i would more often than not go with his recommendations.

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I had a great meeting with a guy in San Francisco yesterday.  During the meeting we chatted about his current businesses and his aspirations for where he wanted to take them.  What was interesting was the breadth of ideas that he was tackling all at once and it got me to thinking about how important focus is. 

In any job there are always competing priorities.  It doesn’t matter whether you are in sales, marketing, finance, HR, what ever, there are always 100 things you can do and only time to do 5 of them.  What differentiates the effective people from the rest of us is that they decide what they are not going to do and this decision is based on the goal that they are striving for. 

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I had the opportunity today to visit the San Francisco offices of Google.  They are fantastic.  I was given a guided tour and saw just how the Google guys do it.  A couple of things i observed were:

• The technology (ie screen / keyboard) was identical on every desk – this means that people can move desk and just plug in
• There were some offies but these were shared – evidently no one has their own office
• The office was decorated with lots of fun things that people had obviously bought in from home
• Casual clothes is the order of the day – and i dont mean business casual – i mean casual
• They have a free cafeteria with a great selection of food
• There are TV screens everywhere
• The office is in general very open plan
• They had a huge slide between floors – unfortunately i didnt get a chance to ride it

So it made me think about how important open plan is to the culture of a business.  In many businesses, management have their own offices and sometimes, they have their own floors.  Often they have an office with a secretary sitting out the front.  I always remember doing a study at the National Australia Bank in Melbourne in the mid 90′s and there the senior management had their floor and even an express lift from the carpark to that floor.  These senior management floors still exist today in many large businesses.

Now, for me, this is old world culture – a representation of the baby boomers and not in alignment with what Gen X or Y expect.  At the REA Group we went for open plan.  I had a desk just like everyone else and i think it helped create a very open culture.  Quite often people would just walk up to my desk and have a chat.  I found i could keep in the loop and openly participate in discussions that were randomly happening around me.  If a private meeting was required, people can go to a separate meeting room and then have their discussion. 

I would recommend to any business that wants to build a open, fun, engaging, happy culture that they think about the structure of the office and how they keep it open and equal.

I was recently asked a question on what i think about outsourcing (to India)?  Well i thought  would talk about outsourcing in general rather than just to India.

Firstly i think outsourcing is a great idea for certain jobs, not all of them.  In particular i think outsourcing in the technology space makes alot of sense.  However, what is required to make outsourcing work?

To me outsourcing is like any other relationship – it has to be built on mutual trust, understanding and respect.  When selecting an outsourcing partner, no matter where they are in the world, they must have these characteristics, as well as the skills, to complete the task at hand.

At the REA Group, we used the team at EarlySail in India to do a chunk of the IT work.  Now this relationship has been built up over a couple of years and was started based on a relationship between my CIO, Chris Vulovic, and a Director of EarlySail – Push Mohta.

We started the relationship by giving them relatively simple work in doing express changes and then slowly ramped it up from there as they became more and more familiar with the REA Group systems and processes.  In addition, we had a team at the REA Group head office that did QA on the work from EarlySail.

The relationship has progressed now to the point where the EarlySail guys are helping with QA and are considered as part of the team.  They have visited Australia and some of the team in Australia have visited them.  Above all, we treat them as any other team member, including inviting them to the annual conferences.

I have so much confidence in the EarlySail team that i am commissioning them to build out the next generation of my latest site www.propertyportalwatch.com.

So any approach to outsourcing takes time and has to be built on trust, understanding and patience.

I have been very busy since leaving the REA Group (realestate.com.au) a few weeks ago.  One of the things that i have been working on is the launch of Property Portal Watch.  (www.propertyportalwatch.com)

Property Portal Watch will be the one stop shop for all information on property portals around the word.  It is designed to provide news, views, rumours, overviews and general information on property portal sites throughout the world.  In addition it will provide tips and techniques for those wanting to advertise online.  Its first incarnation is as a blog (while i get the proper site built).

If you have a chance, check it out and please give me your feedback.  If you have an article or an idea for an article, please let me know and i will get it posted. 

We are also building out the team around Property Portal Watch – there is just too much of the world for one person to cover.

I have worked in a number of businesses and i find that employee ownership in the business is important to the long term success of that business.  In talking to employees who have some sort of ownership in a business, they feel more engaged, are more understanding of the challenges of management and tend to go above and beyond far more often.  Now the question is how can employees gain ownership in a business?

If the business is listed, then employees can of course buy shares on the market.  Management can make this process easier by implementing a discounted share purchase plan.  At the REA Group, we implemented a plan whereby employees could sacrifice a percentage of their salary to buy shares at a 15% discount to market.  The company pays the difference and purchases the shares on the market for the employee.

Another approach is share performance rights.  We implemented this for senior management at the REA Group.  The share performance rights work as follows.  At the beginning of a period, each employee is allocated a number of share performance right.  For example they may be given $100,000 worth of share performance rights at the cost of $5 each (usually the weighted average of the period just before allocation).  This would be 20,000 share performance rights.  Now usually these have a vesting period of say 3 years – therefore the 20,000 share performance rights would vest in 3 years time.  Now as they are performance related, they are usually tied to the long term performance of the business – the 3 year plan.  At REA they were tied to the 3 year revenue and EBIT targets.  Therefore if you hit the targets, then you get the performance rights and if you under or over achieved, then they were prorated up or down.

Yet another approach is to allocate options to employees with a vesting period.  The number of options allocated could also be tied to the performance of the business. 

Now i have a couple of thoughts on this. 

Firstly, in uncertain times, share performance rights are probably preferable over options as they will always have a value.  Options may not have a value if the share price is lower than the strike price.

Secondly, i wouldn’t tie the number of share performance rights or options allocated to the performance of the business as the value of them is already tied to the performance of the business.  If the business is going well, they will be worth more and if the business is not tracking well, they will be worth less.  Having the amount allocated tied to performance is almost double dipping.  In addition, as the number of rights / options are tied to performance against a long term plan, you may have management making sub-optimal decisions, especially if long term investment or divestiture is required but it would affect the performance against the long term plan.  Either they wont make these recommendations to the board or the business spends too much time adjusting the long term plan to keep it fair.   

Thirdly, when you have rights or options that are tired to performance, it is important that the employee has control over the levers otherwise the whole reason for having them wont work.

Finally, i think any employee ownership should be at all levels of the business, not just the management.  It is important that you dont create class structures within a busness – especially if you want a great culture to grow.  To this extent, we are in the process of implementing an employee share ownership scheme at Artshub – another business i am involved in.

Business always conducts employee satisfaction surveys in an attempt to find out just how happy their teams are.  Often, when they revew the results, they are looking for downside risks rather than upside positives.  In addition they will spend time reading the comments and trying to work out what the real issues are.

Now the problem with employee surveys is that not all employees believe they are anonymous and therefore dont tell you what they really think or they just don’t complete them.  Therefore you need to look at what people are doing to get a better grip on the true feelings within a team.

The first measure i would look at is absenteeism.  This is simple to measure and can provide very quick feedback on the happiness of the people in the business.  I was talking to a senior person at a business recently who said they had recently noticed a sharp increase in the number of people who are taking sick leave.  Managers need to watch this.

Secondly i would look at outstanding leave or accrued leave.  A happy business tends to have high levels of outstanding leave as employees often dont take it as they are wrapped up in their jobs.  In an unhappy work place, employees with always take their leave.

Thirdly, turn over of staff is a traditionally clear way to track an unhappy culture.  However how do you know BEFORE HAND that people want to leave?  Well in today’s world that is simple – just join linkedin and facebook and see what happens.  Now i have been on linked in for ages and have hundreds of contacts.  These contacts tend to be people that you have or are working with.  Now when someone is thinking of moving on, they ask people to recommend them.  The result is that by looking at the number of “recommendation requests” you can get a feeling for what the true culture is in a business.  Now the problem is most senior people in organisations are Baby Boomers or Gen X and they dont embrace social networking sites.  This is where they are missing a great chance to track the actions, rather than words, of those they work with.

OK … i am now off to answer all those recommendations requests