Lone Wolf --- Lead Wolf: "The Evolution of Leadership"

By Rick Johnson

Wholesale distributors range in size form very small "Mom & Pop" operations with revenue as low as $100,000 or less, to huge multi- million dollar distributors with locations all across North America. Wholesale distribution also has some mega-distributors with sales ranging from $1 billion to as much as $27 billion. The majority of wholesale distributors are family owned.

Family owned organizations, both small and large, with succession issues, family preparation and second and third generation leadership issues have been subjected to the evolution of leadership. These organizations are often founded by an aggressive, highly talented entrepreneur. Many of the principles of leadership that helped build the success that the organization enjoyed in the past is not the type of leadership that will maintain that success through generations of ownership. Contrary to some "leadership authorities" belief, the Machiavelli theories on leadership just don't apply today. Niccolo Machiavelli is considered by some a leadership guru who lived during the renaissance period and is often quoted and written about today. Machiavelli believed that "Men are more ready for evil than good." "A leader's goal is one of power and domination."

The Evolution of Leadership

Times have changed, leadership has evolved. The days of the "Lone Wolf" leader at the top who dominates with power are gone. Successful privately held organizations have gone through the leadership evolutionary process. They understand that today's leader must create change in the organization to meet the needs of their customers, to meet the needs of their employees and to meet the needs of their vendor partners. It involves a particular life cycle change. This change varies according to the generation of leadership.

More often than not, the "seat of the pants" based on intuitive judgment leadership style of the founder with highly autocratic methodologies won't work in today's business environment. Today's environment demands a stable administrative structure that requires a change in the nature of past leadership practices. Simply put, it's an evolution from a highly reactive, autocratic individualistic style to a more empowering, people employee oriented proactive style. It's about going from a "Lone Wolf" leadership style to a "Lead Wolf" leadership style that has confidence in the employee's ability to make things happen and empowers the employees to get the job done.

Founders and even second and third generation successors may find it difficult to make the transition from the "Lone Wolf" to the "Lead Wolf" leadership style. When this happens, ownership may put personal needs ahead of business needs and the organization is not managed in the best interest of its customers, its vendors and its employees. Organizations that are still run in the "Lone Wolf" style have an owner at the helm that has a strong dominating personality that is likely to be a poor listener. This "Lone Wolf" syndrome is easy to recognize. The same problems seem to arise over and over. Market share deteriorates, cash flow problems exist, there may be a vision but no plan exists to accomplish that vision. Anxiety may set in and the owner becomes defensive or even paranoid and resorts to blaming others for the lack of success or pending failure. Without outside intervention, executive coaching, a solid board of directors or even an advisory group, the company may end up being sold or worse yet the company may go into a death spiral.

The Lone Wolf Leader Still Exists

This doesn't mean that there aren't some "Lone Wolf" leaders that still exist today that are successful. Remember, they have a strong entrepreneurial spirit that makes them dynamic and decisive. They often have a clear vision and these traits can drive a company for some time. However, I submit to you that the "Lone Wolf" leaders that have not evolved today can not maximize the success of their organization. They will not leverage the competitive advantage that has become the life line of their survival. The strong traits that brought them success in the past quickly become liabilities in today's environment. They don't believe in empowerment. They don't believe in long range planning. They are reluctant to develop structure, policy and procedure because it inhibits the ability to shoot from the hip and it slows them down. They mistakenly believe that shooting from the hip is part of their competitive advantage because it worked so well in the past. They can make reactive crisis-driven decisions with little or no help from their management without recognizing that they must identify and correct the root cause. If they do have a board of directors, they are hand picked friends that basically do whatever they want and challenge very little. They count on only those that seem to be the most loyal and they motivate by fear and guilt. Sure, they'll hold staff meetings but it's more of an exercise in power to report on crisis intervention or simply to chew people out. They have difficulty in letting go of the past.

Evolution has Created the Demand for Lead Wolf Executives

Successful growing organizations have gone through the experience of change. In fact, these organizations recognized the necessity to create change. That is what leadership is really about; the ability to create change. These successful organizations have developed their employees along the way. The Lead Wolf executives have earned the respect and trust of their employees by demonstrating respect and trust in the employees themselves. Most employ a servant, situational leadership style that is based on an empowerment platform. They develop future leaders; make proactive decisions based on calculated risk. They employ root cause analysis even if they don't formally call it that. They employ best practices and make staffing decisions based on responsibility, competency, training and capabilities. They develop a real board of directors that provide value to the organization, challenge the executive staff and hold them accountable.

The Evolution is a Growth & Learning Process

Owner executives that have evolved to the Lead Wolf style of leadership have gone through an individual growth and learning process. They have accepted the fact that they may not have all the answers. More importantly, they recognize that they don't have to have all the answers. Many have found a mentor or an executive coach outside the organization. Changing a leadership style is not the easiest thing in the world to do. Coaching becomes a very useful resource. This evolutionary process includes:

1. Enhancement of their instinctive curiosity and a strengthening of their focus on being a customer driven organization. Service and quality become a way of life within the organization and it is used to support their competitive advantage.
2. Taking their vision and redefining it as an end game which challenges their executive team to create a strategic plan to meet this end game. This plan incorporates growth and profitability as well as other specific goals and objectives.
3. The recognition that employees are the most precious asset and backing up that recognition by the willingness to invest profits in the development of these employees.
4. Empowerment that is accompanied by the resources necessary to succeed and accountability for results.
5. Utilizing a board of directors as a resource while sharing management challenges seeking policy and guidance. Incorporating contingency planning and scenario planning as a regular exercise.

Wholesale distribution organizations increasingly are characterized by a large and incredibly complex set of independent relationships between highly diverse groups of people. That is what the evolution is about. To be successful, the Lead Wolf executive determines how to get active involvement, innovation and creativity out of their employees. Success depends on more than just "best practice" success drivers. Success demands a superior level of leadership-a level that requires deep commitment. This commitment will not flourish in workplace environments that are still dominated by the Lone Wolf--"slap & point" or the "carrot and stick" method of management often used in the past.

The Lead Wolf Executive

Lead Wolf executives get results. They are high impact leaders. They are consistent, explicit and concise and they command a presence when they walk into a room. They have enough charisma to turn the dullest moment into a high-energy event. When they move on, others want to go with them. They have a following. Their openness and honesty create a legacy which people admire and look up to. They gain commitment and foster trust.

Creating change, managing during turbulent times, or fostering growth all depends on balance and the Lead Wolf type of leadership. No one person can make a company successful. It takes a lot of people, but one person with a command of leadership, utilizing the Lead Wolf style can transfer enough influence, creating enough leadership amongst the management group to guarantee success. Management must figure out how to get more active involvement and creativity out of their employees. Questioning of the status quo and the generation of new ideas is a mandate of success. That success depends on a superior level of performance, a level that requires deep commitment.

Most of us are not born leaders. We are not adept at communication. However, a good percentage of us long to become leaders of men and make deep connections in our careers that lead to commitment, a commitment to success. For family owned organizations, leadership is passed on from generation to generation. To achieve objectives, each generation must understand the following basic principles of leadership.

1. Honesty
2. Integrity
3. Respect
4. Trustworthiness
5. Sincere concern of others
6. Willingness to take calculated risk

Once these principles are learned and practiced, leverage of these leadership skills to develop the management team is the next step. Lead Wolf family executives that have gone through the evolution of change understand this and they are clear as to what their responsibilities are.

"The true test of a successful leader is that he leaves behind the conviction, the will and the understanding to carry on."

The Lead Wolf executive understands the importance of making emotional connections with the management team that surrounds them. They must encourage these people to open up, share dialog and reveal dreams. They must teach and mentor. It's not as easy as Willie Nelson would have you believe. Leveraging their leadership entails advancing their personal agenda by advancing the agenda of others. A good leader is not intimidated by the success of others. They encourage others to succeed and help them fulfill their wants and needs. Leveraging leadership helps determine the hidden factors in communication. Understanding inferences and assertions become a key component to understanding people. Lead Wolf executives have high questioning and prospering skills that allow them to drill down to real facts and issues. Leveraging their leadership allows successful leaders to establish emotional connections, which diminish fear and intimidation. This encourages enthusiasm and cooperation and that is what being a Lead Wolf leader is all about.

About the Author: Dr. Eric "Rick" Johnson is the founder of CEO Strategist Ltd. an experienced based firm specializing in Distribution. CEO Strategist Ltd. works with distributor executives in board representation, executive coaching, team coaching and education & training to make the changes necessary to maintain or create competitive advantage. Visit http://www.ceostrategist.com for more information.

When Formal Budgets Don't Make Sense

By Dr. Herman W. Andre and Norman L. Ritter

Many companies operate - or strive for - a system of strict, annual budgets. This is usually counterproductive. The companies that benefit most from rigid budgetary controls are old or well-established firms with a consistent rate of sales growth and a relatively unaltered product line form year to year. Firms that are inhibited rather than helped by strict budgeting:

• Are growing rapidly or erratically - fast one year, slow the next.
• Do not always know which segment of the business will produce the most growth in the coming year.
• Serve widely varying markets, some of which may be very strong one year, while others turn quite weak.

Example: A chemical company supplies products to the automotive and electronics industries. When the auto market is weak, the firm's auto market is weak, the firm's auto business will be lower than budgeted. Meanwhile, electronics may be doing better than the budget anticipates. To shift more capability into electronics may mean hiring more personnel because electronics is more people-intensive than automotive, which relies more on capital equipment.

Under rigid budgeting, such sudden shifts can be difficult. Managers are nomally held accountable for what they had budgeted several months earlier. They would most likely be in trouble if their sales were 5% above or below their projections. They may actually be penalized if they exceed their targets 9the electronic manager) as well as if they fall shower (the automotive manager). In the final analysis, the budget is keeping the company from taking advantage of changing opportunities.

The chemical company's alternative is ad hoc budgeting. A formal, detailed budget is prepared each year as in other companies, but it is not continually revised with every shift in business conditions. Instead, changes are made in succeeding years' budgets. One benefit of this approach is that managers know they are not going to be forced to live by the old budget when circumstances change. This permits them to respond to external event and capitalize on opportunities without having to spend time revising budgets.

Another is that the company avoids getting topheavy in its management. The company in question, for example, has a small management group and wants to stay that way. By not repeatedly revising the budget, there is no need for a huge financial department. And the real world, not budget, becomes the true control mechanism. Both the board of directors and management use the budget as a guide, not as a bible that tells managers what they can and cannot do.

Ad hoc budgeting lets fast-acting managers change operations without going through numerous formal budget revisions. It gets around the common problem of managers who try to live with out-of-date assumptions rather than go back and change projections. For example, a company's raw-material costs soar far beyond the budget. Unless the budget is revised (perhaps several times), the purchasing staff goes on buying as scheduled. Meanwhile, the marketing department keeps pricing the product on the basis of the budget because it does not know the actual costs. In extreme cases, marketing may sell more and more and think it is doing a great job, while margins narrow or even disappear entirely.

The company's ad hoc budgeters prevent this by preparing detailed, monthly cost sheets that keep all top managers informed of changes as they occur. Direct manufacturing costs account of 60% of the company's sales dollar. So, the changes reflected in the cost sheets are what the managers use to shift tactics. But this continually updated information is not used to recast the budget, because it would keep managers working on budgets instead of on real tasks.

If a company does not pay attention to the budget, why bother to go through the exercise at all? The answer is it should pay attention to the budget, but as a planning tool rather than an operational control. This company uses its budget to plan in the following way:

• Marketing forecasts where sales will come from in the next year.
• Production determines whether enough capacity is in place to fill those orders.
• Selling prices are determined and costs are estimated to see what is happening to margins.
• Managers project overhead, staffing, and expenses.
• Financial managers project cash flow and figure out whether internally generated funds will be sufficient to finance or whether to borrow.

The key requirement of ad hoc budgeting is an active, attentive management. Managers cannot simply rely on a computer to punch out numbers and put up a red flag if the figures stray a certain percentage from the budget. Managers must look at the monthly cost, production, sales, and other figures intelligently and ask the right questions. The best control is management by people, not by mechanism.