When You’re the Boss—and the Youngest Person in the Room

by
Claire Zillman

@FortuneMagazine

September 27, 2016, 1:44 PM EDT

Thomas Saueressig assumed the role of chief information officer at the German software company SAP in May, which means he now leads a team of 1,500.

He’d turned 31 the month before.

Luckily, Saueressig—who is No. 5 on Fortune’s 40 Under 40 list—is used to being one of the youngest people in the room. In elementary school, he barely made the cutoff date for his class. “I was a half year younger than everyone else, which, when you are 8, is huge,” he says.

He got more comfortable with the designation as he rose through elementary school, secondary school and university, and the streak continued after graduation. By 26, he was leading a team of 12, and today, many of his employees are decades older than him.

SAP clearly takes pride in his wunderkind status. Saueressig, a memo from the company boasts, “was born only a year after Apple launched the Macintosh, flash memory was invested, and the term cyberspace was coined.” But youth can present a unique set of management challenges.

Despite America’s obsession with young leaders, its family structure socializes people into a culture where elders are shown deference, says Jennifer Deal, a senior research scientist at the Center for Creative Leadership and author of What Millennials Want from Work. When older employees end up reporting to younger managers, it shifts social norms that people grew up with. “What I’ve seen is that it makes everyone uncomfortable,” she says.

For employees, having a younger boss can feel like a slight, particularly if they were angling for the position, says Charlotte Sutton, an associate management professor at Auburn University. Meanwhile, in an attempt to diffuse any awkwardness, young managers often think “I need to assert my authority to gain respect,” says Paul Harvey, an associate professor of management at the University of New Hampshire. But with this approach, “there’s a high probability that employees will default the wrong way,” which can reinforce the belief that he or she is arrogant or was unduly promoted.

In some circumstances, the best approach is the most direct approach. Harvey recommends young managers acknowledge that older employees often have more years of experience—experience that is valuable to the team. The tactic eases any awkwardness and gives the manager access to the employee’s skillset. At the end of the day, “everyone wants to have a functional supervisor relationship,” says Harvey. “Unless there’s a hardwired perceptional bias against a young manager, it shouldn’t be a huge problem.”

That’s welcome news for the modern workforce: Data from EY shows that 62% of full-time millennial employees manage the work of others, versus 65% of Gen Xers and 46% of baby boomers. It’s a responsibility millennials gained only recently; 85% of managers from that generation say they moved into the role between 2009 and 2014.

As millennials continue to climb the corporate ladder, more leaders will find themselves managing older employees.

Finding common ground

Saueressig is well aware he’s younger than many of his subordinates, but insists it hasn’t led to any problems in the workplace. Nevertheless, he understands the age difference may cause unspoken tension, and makes an effort to build personal bonds with older individuals by talking about travel and sports, unifying interests that “you can relate to, quite frankly, throughout your entire life.”

Morgan Vawter, the head of analytics for equipment manufacturer Caterpillar and No. 26 on Fortune’s 40 Under 40 list, leads a team of 120 that spans multiple generations, from college students to individuals who’ve worked for the company for 30 years. At 35, she falls somewhere in the middle. Like Saueressig, she tries to strike personal relationships with all her employees. When planning group bonding activities, she keeps in mind the generational diversity of her team. A college student might be game for a 6 p.m. happy hour, but that doesn’t always work for an employee with children. “We try to mix up the events,” she says, like having potluck lunch events, lunch and learn sessions, and volunteering excursions.

Beyond relating to employees on a personal level, both Saueressig and Vawter strictly adhere to Harvey and Sutton’s suggestion of giving credit where credit is due. “I try to treat people like experts,” says Vawter. Part of being an effective leader is recognizing when your employees know more than you do. Regarding analytics, “I work with people who have advanced degrees,” she says. “They are extremely educated and in a lot of cases they are more deep into a subject matter than I am.”

Listening to and acknowledging individuals’ input is an important step towards gaining their respect. In her first 30 days on the job, Vawter met with all the leaders on her team, as well as several other individuals, and asked them questions such as, “What are your biggest constraints?,” and, “What are the most promising unexploited analytics opportunities?” She shared the feedback she received in an all-hands meeting.

But listening was not enough. She wanted to act on what they had to say, and made strategic decisions for the team based on the input she collected in those early one-on-one meetings. That included “kicking off projects to address our operational challenges” and “hiring for areas where we had insufficient resources.”

“If you listen but don’t do anything about it,” she says, “you’re not getting anything out of the exercise.”

The 10 Best Productivity Tips From Fortune’s 40 Under 40

by
Claire Zillman

@FortuneMagazine

September 26, 2016, 7:57 AM EDT

How do you make more time in a day that’s already packed to the brim? We asked the influential young business leaders on this year’s 40 Under 40 to share how they organize their lives.

Here are their top 10 productivity tips.

1. “Write down your priorities on Monday morning, and rearrange your agenda for the week to make sure it will allow you to address these priorities. If I don’t do this, I find myself reacting to what’s most urgent during the week, instead of focusing on what’s most important.” -Fidji Simo, Director of Product, Facebook

2. “Have a clear system for to-dos: whether it’s ‘Getting Things Done’ or the ‘Checklist Manifesto,’ just have a system and stick to it. I have a very specific method I use in Slack and in email that works for me, and knowing I have that system keeps me from feeling overwhelmed even when I’m behind or the to-dos pile up.” –April Underwood, Vice President of Product, Slack

3. “Inbox zero is a fool’s errand. I don’t try to keep up. I feel perfectly fine picking and choosing what I want to engage in.” -Jeff Lawson, CEO, Twilio

4. “Review your diary at the end of each week. Literally print it out and review it. Ask yourself three questions: (1) did we achieve what we wanted to (2) did I personally need to be there (3) could it have been achieved in a shorter time frame. It will transform how you spend your time.”
–Scott Farquhar, co-CEO, Atlassian

5. “Know what significant goals you want to work towards every day. Many days, I start the day by writing, ‘How I will build the company today’ on a blank sheet of paper, and then I list a small number of high value tasks or goals for the day.”-Rachel Haurwitz, CEO, Caribou Biosciences

6.”At the start of each week I write an email to my team to share what I’m focused on and what’s inspiring me outside of work. It not only forces me to prioritize my week, but the act of writing helps organize my thoughts clearly. It also means each week I’m making deposits into the ‘context bank’; my team gets early transparency into what issues I’m thinking about. I find that all of these benefits accelerate me for the week by reducing confusion and need for 1-off meetings.”
-Joe Zadeh, Vice President of Product, Airbnb

7. “The key for me is you have to understand how your brain works and when you are most productive. For me, I’m most productive and creative in the morning through early afternoon, so I’ve gotten rid of lunch meetings to keep my productive time going as long as I can. I make sure the tasks I have at the beginning of the day are the tasks that require the most creativity or, in other words, tasks I have never done before.” -Ryan Smith, CEO and co-founder, Qualtrics

8. “Most people type much, much slower than they think. Work on increasing your typing speed—or invest in voice recognition software. And then stop wasting time reading productivity tips.”-Adam Grant, Professor of Psychology, Wharton School, University of Pennsylvania.

Related: What Would Tim Ferriss Do?

9. Never procrastinate. Just get it done right away. I don’t wait until I get home, I take calls wherever I am. I execute on any feedback I get right away. That way, the work never piles up.”
-Anthony Tan, CEO and co-founder, Grab

10. “Turn off everything – email, phone, stock tickers, news, etc. – as often as possible and focus on a single task without interruption.” –Dianne McKeever, Co-founder and Chief Investment Officer, Ides Capital

How an ‘Insufferably Arrogant’ Kid Transformed Into a 38-Year-Old CEO

by
Claire Zillman

@FortuneMagazine

September 22, 2016, 10:11 AM EDT

Joel Gay is the CEO of Energy Recovery, a California-based firm whose technology helps recycle the energy wasted during processes such as fracking and cleaning water. At 38, he is one of the youngest black CEOs of a public company. He is also No. 13 on Fortune’s latest 40 Under 40, a list of young movers and shakers in business, tech, and beyond.

His path to the C-Suite was hardly traditional. In high school, Gay became a father — the most difficult and rewarding decision he says he’s ever made. Before diving headfirst into business, he also played professional soccer in Belgium.

Here, he shares what he has learned about leadership and life — and where he wants to go next.

Responses have been edited for clarity and length.

What personality quality has been most critical to your success?

Intellectual curiosity. From an early age, I strived to examine conventional wisdom in a rigorous way. I remember exhausting my teachers and parents with endless debates; if I could no longer rebuke an argument, I would voraciously research the subject and return with counterpoints.

One such exchange was with my second-grade teacher who attempted to explain the concept of taxation as it relates to capitalism and communism. For whatever reason, I latched onto the word “capitalism.” That evening I went into my father’s study and searched for a book with that word in its title. As fate would have it, I found Capitalism and Freedom by the inimitable Milton Friedman, attempted to read it, and have been studying the concept ever since.

Intellectual curiosity has led me to see opportunity where others have not, and helped me tackle problems in business in new and creative ways.

What personality quality have you had to work on the most?

Like most hypercompetitive individuals, I struggle to embrace the virtue of patience. Impatience, left unchecked, quickly develops into professional intolerance; in most corporate cultures, that does not correlate to one’s growth and progression. I learned rather early on to recognize the thin line between exacting standards and unreasonable standards.

What’s the best advice anyone ever gave you, and who did it come from?

“The ceiling of your success is an imaginary construct that should be demolished, rebuilt and elevated each day.” My father, Michael Gay Sr.

What advice would you give your 20-year-old self?

I was quite the jock at that point of my life and was playing soccer professionally in Belgium. For an inexplicable reason, I dyed my hair bleach-blond. My advice? “Ditch the hairdo, guy.”

What’s the hardest decision you ever made?

My son, Jean-Patrick, is 21 years old. I had him in high school, the summer before my senior year. The decision to have, keep and raise him (with the massive support of my parents) was both the most difficult and rewarding decision I have ever made.

What was the lowest moment in your career?

In one of my early jobs, I was passed up for a promotion I thought I not only deserved, but was entitled to. I could not reconcile my performance and potential with management’s decision. Now, thanks to maturity and experience, I understand they made the call because I simply wasn’t ready. I was talented and a high performer, but I was also insufferably arrogant. It was a hard experience, but a valuable one.

What’s the most difficult thing about managing?

Engineering enough flexibility into your management style and philosophy to account for the diverse personalities on one’s team, while maintaining the consistency that defines your very brand as a leader.

What’s your best productivity tip?

I think that in the context of the modern corporate world – excluding financial services – an individual’s output capacity is infinitely elastic. If we were to compare the capacity utilization of today’s corporate employee to that of the European worker during the Industrial Revolution, we would most likely find, on a normalized basis, that we are far less utilized. My tip? Stretch your rubber band to the limit to realize your potential.

What are you binge watching these days?

New-age Kung Fu movies, particularly the ones starring Donnie Yen.

What’s your favorite way to unwind?

Detailing my cars. I have something of a fetish for fast, entirely impractical cars, and bringing them to a state of cleanliness that would defy ever driving them.

What is something we wouldn’t find out by Googling you?

Somewhere down the road, politics will be the next arena I will compete in.

How to Make a Deplorable Error Even Worse

by
Claire Zillman

@FortuneMagazine

September 16, 2016, 10:37 AM EDT

We’ve all said things we come to regret. What sounds like a good idea at the time can turn into “What was I thinking?” in hindsight. In a digital culture where sound bites, emails and tweets can go viral overnight and live forever, one snafu can turn into a full-blown crisis.

This presidential election cycle has been full of cringe-worthy gaffes. Hillary Clinton’s latest is destined to be classic: “You can put half of Trump supporters into what I call the basket of deplorables,” she said, meaning those who are “racist, sexist, homophobic, xenophobic, Islamophobic.”

When she tried to walk it back the next day, she said, “I regret saying ‘half’ – that was wrong,” leaving cynics to ponder whether she actually meant to say “all,” instead. That’s not how you defuse a crisis; that’s how you perpetuate it.

Whether that turns out to be Clinton’s version of Mitt Romney’s “47%” comment — that 47% of people would inevitably vote to re-elect President Obama because they’re entitled and dependent on the government — remains to be seen. Many, including Romney, saw that as a turning point that ultimately led to his defeat in 2012.

Every political and business leader experiences crises; they simply come with the territory. But the crises that often do the most damage are the ones we create ourselves. It’s those unforced errors that can come back to haunt us if we don’t take them seriously.

We all make mistakes, and we all have the power to make them better or worse after the fact. As jazz great Miles Davis once said, “When you hit a wrong note, it’s the next note that makes it good or bad.” Inherent in every self-made disaster is the potential for redemption. A little humility goes a long way.

Take Snapchat CEO Evan Spiegel, for example. In May 2014, things were looking good for the 23-year-old Stanford grad: he had raised $163 million from some of Silicon Valley’s top venture capital firms and reportedly turned down a $3 billion cash offer from Facebook to acquire his ephemeral messaging startup.

But that all changed when Gawker site Valleywag released a string of emails from Spiegel’s frat days that included graphic references to sex, drugs and alcohol abuse. Instead of making excuses or simply ignoring the firestorm of bad press, he swiftly owned up to it, issuing a sincere and unconditional apology:

“I’m obviously mortified and embarrassed that my idiotic emails during my fraternity days were made public. I have no excuse. I’m sorry I wrote them at the time and I was jerk to have written them. They in no way reflect who I am today or my views towards women.”

That was exactly the right thing to do.Spiegel didn’t sidestep. He didn’t wait. He got to keep his job and Snapchat has since emerged as a social media powerhouse. It’s raised $2.6 billion to date, carries a valuation of $20 billion and is reportedly planning a 2017 IPO.

What makes that particular example so stunning isn’t just the level of maturity Spiegel displayed but its rarity, even among experienced executives who should know better. Countless stories come to mind but one stands apart, particularly in terms of its dramatic impact on a company that once dominated the smartphone market: BlackBerry, formerly known as Research In Motion (RIM).

When Apple launched the first iPhone in 2007, RIM’s co-founders were caught completely by surprise by its groundbreaking multi-touch display, web browser and third-party apps. They could not understand how Apple managed to pack so much functionality into a single device. But they never took the competitive threat seriously, either publicly or internally. And that cost them the market.

Co-CEO Jim Balsillie dismissed the iPhone’s potential at the time, saying, “It’s kind of one more entrant into an already very busy space with lots of choice for consumers. But in terms of a sort of a sea-change for BlackBerry, I would think that’s overstating it.” His partner, Mike Lazaridis, was similarly unimpressed, “Try typing a web key on a touchscreen on an Apple iPhone, that’s a real challenge,” he said, “You cannot see what you type.”

For the next four-and-a-half years, the two executives displayed nothing but abject denial as Apple and Google all but put their company out of business. After destroying $70 billion of shareholder value, Balsillie and Lazaridis finally stepped down. On his first conference call, their hand-picked successor, Thorsten Heins, said, “I don’t think there is some drastic change needed.” Investors disagreed; the stock dropped another 8.5% that day.

It’s painful to look back and see how much our unforced errors cost us, especially the ones we failed to own up to and take seriously. Save yourself the trouble and deal with them proactively. Crisis management may not be rocket science, but for far too many leaders, it may just as well be.

If You Don’t Know Your Company’s Inventory Turnover Ratio, You’re in Trouble

by
Claire Zillman

@FortuneMagazine

August 29, 2016, 11:22 AM EDT

Having spent 17 years in the business of accounting and financial analysis, it’s upsetting to see how few founders understand their company’s inventory turnover. And even fewer realize it’s a problem.

If you’re in an inventory-based business, managing your inventory efficiently is critical to your profit and success. Too much and too little stock both drag down your bottom line.

You may be wondering: What’s the solution, then?

It varies based on the nature of your business, your industry, and your financials, but ultimately, it’s about finding a balance that’s right for your business.

First, you need to determine your company’s inventory turnover ratio. This ratio helps you find the sweet spot between having so much product it becomes obsolete and having enough so it doesn’t hinder sales. It will help your inventory flow smoothly through your supply chain, keeping your customers happy and increasing your margins.

Here are some things to keep in mind as you calculate your inventory turnover ratio.

What is inventory turnover?

Inventory turnover is a simple ratio showing how many times a company’s inventory is sold and then replaced over a period of time. It measures the amount of capital invested in inventory. The higher the inventory turnover number, the more often inventory is “turned,” or replaced, which means the company is more efficient at managing its inventory.

Often, the ratio is calculated as: Inventory turnover = Net sales / Inventory

Sometimes it is calculated as: Inventory turnover = Cost of goods sold / Average inventory, where average inventory is ideally the average ending inventory for the previous 12 months.

Generally, it’s better to err on the side of less inventory rather than more. Less inventory on the shelves means less risk of damages and obsolescence, as well as greater protection against fluctuating market prices.

Yet there is also risk in having too high an inventory turnover rate. Not having enough stock on hand to meet a sudden surge in demand can cause a stock-out, leading to missed sales and unhappy customers.

On the other hand, companies turning their inventory over at a sluggish pace, or overstocking, are unnecessarily limiting their cash flow, and may get themselves into a position of needing to sell their stock at cost or liquidate at a loss.

These are not situations you want for your business. Instead, your business needs to find the right balance between having too much inventory and not enough.

Finding your ideal turnover ratio

Inventory turnover ratio varies by industry. While you can get an idea of what your industry-specific turnover ratio should be by consulting this resource, nothing replaces crunching the numbers yourself.

The best method to find your ideal inventory turnover is to use your inventory software, such as QuickBooks, NetSuite, Sage 100, and Dynamics GP, to evaluate what products are selling more than others. To optimize inventory turnover, companies must ensure that the products in demand are shipped and delivered to the customer in the shortest timeframe.

Different supply chain management techniques will also influence inventory turnover ratios. For instance, reducing purchase order quantity and increasing the frequency means less inventory sitting idle in your facilities. Another way to reduce inventory hold times is by improving efficiency for inbound transportation. For the best supply chain strategy, it’s important to compare your numbers against companies with a similar structure to determine the most relevant benchmarks. For example, comparing two companies, one that carries inventory and another that drop ships directly from the manufacturer, shows how completely different inventory turnover ratios do not tell the entire story.

To get a handle on your inventory turnover rate, it’s important to keep up with your financials to evaluate performance and metrics. It also requires using effective inventory management software to track and monitor your inventory on a regular basis.

Inventory turnover for high-growth companies

In the appealing chaos of a rapidly growing business, regular financial reporting can sometimes go by the wayside, which is a big mistake.

Financials are key. Keeping up with financials allows these companies to evaluate performance and metrics, at least once per month. By keeping up with day-to-day accounting, companies can turn their receivables faster than their payables. They need to sell inventory, collect revenue, and then pay their vendors to avoid cash-flow shortages.

Using digital tools to analyze product lines, sales efficiencies, and order lead times, help ensure delivery schedules can meet customer demand on time.

This is especially important for rapidly-growing companies. They must have real-time inventory on hand, and make sure their inventory back-order system is in place to avoid ordering traditional inventory that is already tucked in the back corner of one of their warehouses.

Improving your turnover ratio

There are many ways to improve your turnover ratio, whether you need to get old stock off the shelves or receive inventory more often. Here are a few ways to make your inventory turnover more efficient:

Reduce the price of obsolete or excess inventory to get it out the door and free up cash
Work with suppliers to deliver purchases more frequently
Create ways to forecast sales demands
Implement cycle counting of inventory balances, either on a daily, weekly, or monthly basis
Limit bulk orders to big sellers to prevent excess inventory on the shelf

Companies can also evaluate how inventory shipments are managed. For example, some companies will only ship to a customer when all the back-orders have been complete. Others will ship as product is received in the warehouse, such that multiple shipments are sent to the customer. Either method is acceptable but in a high-volume industry, this can impact inventory turnover ratios.

Whether the issue is too much inventory or not enough, businesses are wise to determine their inventory turnover ratio and use that to make more informed purchasing decisions for the future. The result is better business and a more desirable bottom line.

– Jason Kruger is the president of Signature Analytics.

Theranos Founder Elizabeth Holmes Had the Chance for Redemption – and She Blew It

by
Claire Zillman

@FortuneMagazine

August 5, 2016, 9:36 AM EDT

It was a Monday like any other Monday, but for one entrepreneur, it was different. It was a time for redemption. A chance to lay everything out on the table. An opportunity to take ownership of past mistakes, set things right and chart a new course. It was time to pivot.

In a highly anticipated event, Theranos founder Elizabeth Holmes faced a crowd of more than a thousand of the world’s foremost experts on laboratory testing and medicine. They were there to see the embattled CEO present, for the first time, credible data underlying her company’s controversial technology.

Instead, Holmes delivered a sales pitch. Even worse, she pitched yet another prototype that has never been vetted or peer reviewed. And she refused to answer questions about the remarkably flawed technology that led to federal sanctions, the voiding of tens of thousands of blood tests and a ban from the industry.

That is not how you pivot. It was actually just more of the same nonsense that got her and her company into this mess in the first place.

It’s said that doing the same thing over and over again and expecting different results is the definition of insanity. I’m not saying Holmes is crazy, but she did once tell a room full of Stanford grad students that “the minute you have a back-up plan, you’ve admitted you’re not going to succeed.” By that logic, nobody should have medical insurance, a spare tire in their car or a fire extinguisher at home. It’s spectacularly bad advice, especially if your product affects people’s lives, as Theranos’ does. It’s the stuff of grandiose zealotry that has thwarted business leaders with more hubris than common sense for ages.

There is a time to stay the course and a time to pivot. Knowing how and when to do one or the other can make or break your company and your career. Not that any of this is easy, mind you. It requires a certain sense of balance – a genuine understanding of your own capabilities and limitations that comes from experience and maturity.

When Carly Fiorina was running HP, she pitched investors on a plan to diversify into services by acquiring PricewaterhouseCoopers (PwC). Wall Street panned the deal and Fiorina got cold feet, leaving IBM free to scoop up the consulting firm and finalize its own successful transition to become the global leader in IT consulting services.

Had Fiorina trusted her gut and stuck to her guns, HP’s future and her legacy as a chief executive might have turned out much differently.

Then there’s Microsoft. While PCs were becoming less and less relevant in an increasingly mobile world, former CEO Steve Ballmer essentially stayed the course and the stock flatlined for more than a decade. But since Satya Nadella took the reins and decided to turn Windows and Office into cloud-based services, shares of Microsoft are trading near all-time highs.

Faced with declining global consumer demand for soda, PepsiCo CEO Indra Nooyi aggressively diversified, acquiring Tropicana, Quaker Oats and Gatorade along with it. Meanwhile, Coca-Cola doubled down on Coke and Diet Coke, which still make up the vast majority of revenues. As a result, shares of Pepsi are up 72% compared with Coke’s lackluster 30% gain over the past five years.

Twitter has been stuck at about 300,000 monthly active users (MAUs) for what seems an eternity while Facebook continues to grow, blowing past 1.7 billion MAUs and going strong. For years, former Twitter boss Dick Costolo tried to figure out how to make the site more engaging for users. Now it’s Jack Dorsey’s turn. As I said, none of this is easy.

Any smart venture capitalist will tell you that most successful companies don’t make it big on their first concept or product. Bill Gates was originally a contract developer of programming languages. Sony started out as a radio repair shop. Toyota made looms. Nokia was a paper mill. The McDonald’s brothers spent their first 20 years on hot dogs.

That’s why VCs are all about the quality of a startup’s team. They want to know how tenacious you’ll be in the face of adversity. They want to know how you’ll handle the pitfalls that every company encounters. They want to know what kind of decision-maker you’ll be when your plans crap out and there are no easy answers.

My advice is simple. You want to be confident, not over-confident. You want to trust your gut, not defy the laws of physics. You want to believe in yourself without being delusional. You want to reach for the stars, but stay grounded in reality. As with so many things in business as in life, knowing when and how to pivot is all about balance.

Is Hillary a Better Dealmaker Than Trump?

by
Claire Zillman

@FortuneMagazine

July 28, 2016, 10:30 AM EDT

Given that Donald Trump “wrote” the best-selling “business” book of “all time,” it’s surprising that Hillary Clinton in the last few weeks has proven to be the better dealmaker in at least one case: how they have dealt with their main political rivals.

The difference between Trump’s management of Ted Cruz and Hillary’s approach to Bernie Sanders is telling.

Trump seemed to view the relationship with Cruz in terms of power dynamics. He did whatever he thought necessary to win short-term victories — declaring that Cruz’s wife was corrupt and, even worse in Trump’s mind, un-sexy; that Cruz was a “very unstable” “pussy” who’s real first name was “Lyin’”; and that his father palled around with Lee Harvey Oswald and probably helped kill JFK.

Who could have imagined that Cruz would bear a grudge? Trump apparently thought there would be no repercussions because once he won, his rivals would have no choice but to fall in line. That probably has been Trump’s experience in life: the intense desire of people to be with The Winner, or a billionaire, makes folks suppress their hurt feelings.

And remarkably, it pretty much worked with other rivals. Trump was endorsed by Little Marco Rubio (whom he mocked for sweating too much); Ben Carson (“pathological”); Scott Walker (“We sent him packing like a little boy”) and Rick Perry (“He put on glasses so people think he’s smart.”) Dominance did lead to submission.

As far as we know, he never made any particular effort to smooth things over with Cruz, or make him feel like he’d won something.

Perhaps this is a big business thing. For a large corporation, if you take market share, you can exert power over vendors. While delighting customers is certainly relevant to large companies too, leveraging market clout really can increase margins. Muscle works. Or perhaps it’s just a Trump thing.

By contrast, Hillary’s approach to her main rival was one that Trump probably would have mocked as weak. Sanders withheld his endorsement, stayed in the race long after he’d lost, kept making more and more demands. Yet Hillary gave him one concession after another on the Democratic platform.

It enabled Sanders to justifiably claim victory. She knew that psychologically, someone like Sanders could not have invested so much of himself without having gotten something meaningful for it. “I am happy to tell you that at the Democratic Platform Committee there was a significant coming together between the two campaigns and we produced, by far, the most progressive platform in the history of the Democratic Party,” Bernie said in his convention speech.

In a way, Hillary’s approach resembled more that of a small businesswoman (her father started a drapery store). As a startup guy myself, I have always assumed that any current competitor – no matter how loathsome — may be a future ally, employer or employee. And when it comes to contracts and deal terms, one aspires to create wins for the person on the other side of the table, not because you’re soft or generous but because it leads to renewals.

Clinton has certainly been known to hold grudges but she nonetheless viewed Sanders as both current enemy and future ally.

Throughout the spring, the approach taken by the two candidates to their adversaries on the surface followed cartoon gender stereotypes – the macho man vs. peacemaking woman.

But as the convention approached, the styles reversed. For all her solicitousness of Sanders, Clinton apparently drew a hard line: if you want to speak at the convention, you have to first endorse me. And he did.

Trump, by contrast, invited Cruz without having gotten that promise. It was a such an obvious error in negotiation tactics, that it seemed impossible that the author of the Art of the Deal could have done it. It led to speculation that maybe it was an elaborate ambush of Cruz. I doubt it. I think Trump just figured that Cruz had no leverage, and therefore would capitulate.

Part of good deal-making is reading people. Trump has always boasted of his ability to do that but he completely misread Cruz, while Clinton acutely understood what motivated Sanders.

The results of the two strategies were on display at the conventions. Instead of endorsing Trump, Ted Cruz oozed “vote your conscience.” Bernie Sanders declared, “Hillary Clinton will make an outstanding president and I am proud to stand with her here tonight.”

Small businesses tend to care more about preserving relationships, creating new customers, in effect, developing new constituencies. In that sense, being a small businessman is more like being a politician than being a mogul.

Perhaps the management style differences between Trump and Clinton are not so much insider vs. outsider, but big business vs. small business.

Where Is the CEO Who Can Fix USA Inc.?

by
Claire Zillman

@FortuneMagazine

July 27, 2016, 7:46 AM EDT

Is becoming President of the United States similar to becoming CEO of big company? That was the topic of a panel I moderated in Philadelphia yesterday, sponsored by the Miller Center, with former Treasury Secretary Robert Rubin, Deputy Labor Secretary Chris Lu, McKinsey’s Vivian Reifberg, and political historian Sidney Milkis.

The group agreed on some key similarities – getting the right team in place quickly, having a clear set of priorities, and clearly and repeatedly communicating goals. But inevitably, the discussion bogged down in the disturbing differences – the inability to get political appointees confirmed by Congress quickly, the barriers to removing poor performing bureaucrats, and the complete breakdown of bipartisan comity in Congress. Whether any leader will have the ability to repair our badly broken political system was a question that remained unanswered.

Later in the day, I visited the convention hall, where Bernie Sanders’ Bitter Enders were staging an assault on the press tent, and Bill Clinton was proving why Hillary was smart to keep him around all these years. You can read Fortune and Time coverage of the convention here and here.

Meanwhile, if you are still struggling to understand why so many Americans, like the Bitter Enders, have grown cynical about corporate leadership, consider the case of Yahoo Chief Marissa Mayer. By most measures, she failed in her task of making Yahoo a media powerhouse. Yet for that honor, she will receive a payday that Fortune’s Steven Gandel calculates was worth over $120 million. Perhaps she was given an impossible task. But I’m not sure why failing at an impossible task merits that kind of compensation.

A Manifesto for Corporate Leadership

by
Claire Zillman

@FortuneMagazine

July 26, 2016, 10:20 AM EDT

Good morning,

I’m in Philadelphia this morning, but rather than dwell on the Democratic convention, I want to focus on what it symbolizes. We live in a time of unprecedented prosperity – the last two decades have seen more people around the globe lifted out of poverty than at any time in human history. Yet, we also live in a time of growing uncertainty, especially in developed countries – as the Brexit revolt in the U.K. and the rise of the Sanders and Trump in the U.S. indicate. Support for the twin drivers of post-World War II prosperity – globalization and digitization – is eroding.

How should global business respond? Rich Lesser and Martin Reeves of BCG have an interesting piece out this morning that calls on business leaders to adopt a new “corporate leadership manifesto.” It “won’t be easy,” they say; but failing to adopt it may mean companies lose their “freedom to operate.”

You can read the full piece here, or read my summary of their “seven imperatives” for business below:

1) Use technology to rethink globalization. In the future it must be less about global supply chains and low-cost offshoring, and more about serving the needs of individual markets.

2) Create business platforms and ecosystems that allow more people to participate. That’s not just for tech businesses, but also for things like energy, with decentralized grids, or manufacturing, with decentralized supply chains.

3) Deploy technology from front to back. Business often adopts technology with a view toward increasing efficiency and eliminating jobs. Lesser and Reeves says they should start with serving the needs of customers, and work back from there.

4) Invest in human capital. The rapid pace of change requires people to constantly be acquiring news skills to survive. Companies should facilitate that re-skilling.

5) Apply a social business mindset. Business must think about the effects of their operations on communities and underserved populations. The Milton Friedman construct – that the social responsibility of business is to make a profit – is no longer sufficient.

6) Rethink compensation. Workers need a living wage, and exorbitant pay for corporate leaders, particularly when not linked to performance, undermines support for business.

7) Own the narrative. Business leaders need to do a better job explaining to the world how capitalism solves problems and creates prosperity.

Simple enough? Let me know your thoughts.

Hyperloop Fires Back, Accusing Co-Founder of Plotting a “Failed Coup”

by
Claire Zillman

@FortuneMagazine

July 19, 2016, 2:33 PM EDT

It’s not just Turkey that put down a coup in recent weeks.

It’s also Hyperloop One, the technology company that is seeking to revolutionize transport and that has been accused of intimidation and breach of fiduciary duty by its former co-founder, Brogan BamBrogan. At least, that’s what Hyperloop One claims, in the latest chapter of a saga that gets weirder by the second.

In a cross-complaint filed this morning in Los Angeles, the company charges that BamBrogan and three others (the same three that filed this lawsuit last week) made up a “Gang of Four” intending to “manufactur[e] a rebellion and incit[e] conflict in a transparent attempt to seize control of the company.”

The allegations are almost as ugly as BamBrogan’s charge that former general counsel Afshin Pishevar, the brother of controlling shareholder Shervin Pishevar, left a noose on BamBrogan’s chair as a threat. (A separate request by former SpaceX engineer BamBrogan for a restraining order against Afshin was denied last week; the company says the object left on the chair was a “lasso.”).

Hyperloop now accuses BamBrogan of being “increasingly erratic and unhinged,” often showing up for work with “liquor on his breath,” and engaging in “brazen sexism.” It goes into florid detail about the Gang of Four’s alleged plot to steal away the assets of the company. The new suit claims that a letter signed by 11 top executives was a plot—not, as the other side’s claim asserts, a cry for better governance—and that the letter followed the plotter’s purchase of the domain name hyperlooptoo.com.

Attorneys for the BamBrogan team call this document “pure fiction,” deny the liquor assertions and say that those 11 executives “reasonably, and quietly,” tried to put the company back on track. They admit that BamBrogam purchased the domain name, but say it was done “as a joke.”

It’s hard to know, at this point, which parts of which case are true. But whether it’s some, both, or neither, a few things seem likely: One, there’s not a lot of work getting done this week at Hyperloop One, which in May closed a $90 million Series B round. Several people who stayed with the company are known to be seeking work, even after Shervin Pishevar agreed to share more of his ownership stake (something that he was probably discussing from Greece, where he was a guest at the wedding of former TechCrunch editor Alexia Tsotsis last weekend and, says another guest, was on his phone for most of the event). And we still haven’t heard one peep from Rob Lloyd, the CEO and former Cisco executive who is now presiding over this, er, imbroglio. He did, say sources, host an all-hands meeting last week, but the current mood is very tense.

Said one source close to the company last week: “This is nuclear war.” How damaging will the fallout be?

This story was updated at 4:27 p.m. to include a response from Justin T. Berger, attorney for Brogan BamBrogan, Knut Sauer, David Pendergast and William Mulholland.

Hyperloop One Cross-Complaint by Erin Griffith on Scribd

Pages:
1
2
3
4
5
6
7
8
9
10
11
«

Want the Full Story?