It’s not hard to find examples of myopic decision making in the boardroom. Recently, the Walt Disney Company announced that its board had appointed Bob Iger as Chairman in addition to his role as CEO and that Bob Iger’s annual compensation package would increase from $26M to $30M (a little over a 15% increase…$30M represents over 300,000 day tickets to Walt Disney World!).

Proxy advisory services (ISS and Glass Lewis), as well as the Treasurer of Connecticut (whose pension fund is a large institutional shareholder) urged shareholders to vote against reelection of various board members involved. Additionally, proxy advisory services were not supportive of the increase in Iger’s annual compensation package from $26M to $30M. In 2004, Disney had faced public perception that it had a weak governance model and a rubber stamp board of directors. At that time, Disney separated the position of CEO and Chairman. Eight years later, the Disney board has proven that boardroom myopia is alive and well. It should be noted that 73% of shareholders approved the slate of board directors (who made the decision to combine the positions) and 57% of shareholders approved the company’s compensation packages in an advisory vote. Roy Patrick Disney was quoted as saying “The stock’s at $43, we’re happy” (note, a year ago, Disney stock was trading in the $41 – $42 range…so, the share price has increased at best, 5% in a year while Mr. Iger’s compensation has increased 15%…I’m not sure why Roy Patrick Disney is happy).

Disney denounced the negative reaction as lack of public understanding of what is best for Disney and its shareholders. They justified their decision to combine the CEO and Chair role as best for long-term succession planning. Disney stated that Mr. Iger’s $30M compensation package is competitive with his peer group. Perhaps…but, Disney’s board missed two of the key questions that if asked, could have led to different decisions or better prepared the company to address stakeholder concerns.

The Question of Optics:

Boards make decisions in private, closed sessions; many of which are considered to be material information to investors and cannot be discussed outside of the boardroom prior to public announcement. This creates a situation where boards do not have the opportunity to solicit feedback on decisions.

In this situation, it is critical that boards ask themselves about the optics of the decision they are about to make. How will employees react to the decision? How will shareholders react to the decision? How will the media react to the decision? Asking these questions might not lead to a different decision, but it will better prepare the board and the organization for potentially negative reaction and build a decision making process that is stronger. It will allow the organization to deal proactively with potential negative reaction and to explain the context of the decision. If the Disney board had addressed the question of optics in their decision to increase Mr. Iger’s compensation package, there might have been a discussion on the current public sensitivity to perceived excessive executive compensation. Who knows if it would have led to a different decision, but, at a minimum, it would have helped the organization to proactively address stakeholder concerns.

The Question of Precedence:

Myopia can also take the form of short-term focus. Boards should ask themselves if the decision that they are about to make will set a precedent for the organization. If so, is it a precedent that they will be willing to live with over time? In Disney’s case, the decision to combine the CEO and Chair position could be either a one-time decision for a transitional succession plan or it could signal that the Disney board supports the combination of the CEO and Chair roles.

Effective Board Suggestion: Decision Sieve

Boards should establish a Decision Sieve: a series of questions against which all decisions are measured. The Decision Sieve should address the consistency of the decision in supporting the strategic goals and mission, vision and values of the organization. The Decision Sieve should also consider questions of stakeholder reaction, e.g. the questions of optics and precedence.

The consistent use of a Decision Sieve will help ensure that boards are asking themselves the right questions for all decisions they make. The application of a consistent process to question all decisions will also minimize the discomfort factor that some directors might feel when faced when with difficult and complex decisions.

The creation and use of a Decision Sieve is also a useful tool to create shared understanding of the organization’s values, mission and strategic priorities in the boardroom.

Utilizing a Decision Sieve will increase the probability of consistent and thoughtful decision making in the boardroom and help cure boardroom myopia.

Sources: http://www.deadline.com/2012/03/investor-service-blasts-disney-for-giving-ceo-bob-iger-too-much-pay-and-power/

http://www.foxbusiness.com/news/2012/03/13/disney-shareholders-approve-board-election-executive-pay/

http://www.bloomberg.com/news/2012-03-13/disney-holders-brush-aside-proxy-advisers-to-elect-board-iger-as-chairman.html

Practical tips from board members on how to avoid wearing-out your directors!

The challenge: It’s no secret that there are an increasing number of demands on boards.

Directors are expected to keep abreast of the organization’s business model, performance,
strategic challenges and risk environment, understand the industry, understand the
legislative environment, be knowledgeable of and ensure compliance with regulatory and
reporting requirements and changes, evaluate the CEO and board’s performance, has a
compliant and effective compensation program, be current on applicable accounting
rules and ensure that the organization has a solid succession plan and effective culture.

Consider that most boards meet approximately 6 times per year for 1 to 2 days per meeting,
with half of the time allotted to committee meetings (Audit Committee, Compensation>
Committee, Governance and Nominating Committees, etc.) and you might begin to appreciate
the challenge that Board Chairs and their support teams face when they try to fit in
business and industry updates, financial reviews, required board voting/approval matters,
board member education, succession planning, executive compensation and strategic
discussions into six days. And that’s just the workload for times when the organization is running
“business as usual”. In the event of a CEO transition, M&A activity, shareholder
activism, an internal or a regulatory agency investigation, and the time demand on
board members starts to increase exponentially.
Further, consider that the most sought-after board member is a sitting CEO and that
most board members also have their own ‘day-jobs’ and are already heavily burdened
aside from their outside board duties.

One of the most common complaints I hear from board members is that when they consider
the amount of time and effort required as a director, they do not feel the majority of
the time that is spent on topics that create value or address strategic challenges.
Board members who are least satisfied and most ‘burnt out’ feel like their time and
service is not valued by the organization.

Tips on Avoiding Director Burnout:

In interviews with over 30 board members, when asked the question “Why do you serve
on a board?”,the responses were consistently centered on adding value, helping the
organization grow and achieve its goals. When asked “why were you selected to
join Board XYZ?”, board members answered because their experience makes them a good
fit to advise the organization on its strategic challenges. My interpretation: board
members understand that part of their role is to satisfy their fiduciary, regulatory
and compliance roles, but, they believe they add the most value when they are working
on strategic issues.

To achieve that goal, the board members interviewed would overwhelmingly like to have
as much of the meeting time as possible spent in strategic conversations with the
CEO and leadership team.

The challenge is to satisfy thoroughly yet efficiently the ever increasing number of
compliance requirements, yet allow ample time for strategic discussions. Here are some
practical ideas on how to create more time!

Tip 1: Don’t waste precious meeting time presenting information that was distributed 

in the board materials.
As a board member, this is one of my pet peeves. Board materials frequently include a
business update, current financial statements, functional updates, competitive updates,
etc. and the majority of board members read the material, make notes and form questions
to ask in the meeting. Nothing is more annoying than coming to the board meeting
prepared only to have the CEO or leadership team present all of the information to you
that you’ve just read.

Effective Board Suggestion: Skip the presentations of the information that was distributed
and move directly to questions on the material distributed. (PS – make sure you get
your materials out well in advance of the meeting! Do not distribute materials on a
Friday afternoon for a Tuesday board meeting; board members do not enjoy spending their
weekend reading board materials.)

Tip 2: Utilize Committees Effectively
Boards often establish committees to address specific and specialized topics, e.g. the
Audit Committee is formed to address the review of the organization’s financial controls
and reporting. The committees often spend a significant amount of time on relevant
education and in-depth reviews and committees bring the conclusion of their work to
the full board in the form of reports and recommendations. Review your board’s
committee structure and assignments to ensure that you have the appropriate committees
and that they are being effectively utilized.
Effective Board Suggestion: Rely on your committees and avoid repeating the committee work
with the full board.

Tip 3: Annually Assess the Work of the Board
As any organization grows and evolves, it is important to continuously review and assess the
organization’s priorities/strategies to insure that the organization’s work assignments match the
priorities/strategies. Organizations often assess their work assignments by considering the following:
“What should we start doing or do more of? And, what can we do less of or even stop doing?” This
process allows organizations to evolve and expand their work activities without unchecked headcount
growth.

Effective boards undergo a similar review in their annual assessment process. Effective Board
Suggestion: As part of your annual board assessment process, take the time to review how the board
spends its time vs. the organization’s strategic priorities. Is your board focused on your strategic
priorities? Do you have special purpose committees that are no longer relevant? Are there things your
board can stop doing? Review the materials you are sending out in your board book. If you send it, you
are obliging your board members to read the material; don’t send 60 pages of financial information if 15
pages will suffice.

These simple changes will help your board feel valued and create more value for your organization…save
your board members from ‘boardroom burnout’!

During the event, Roz received words of encouragement from many industry leaders and board members. One of the most powerful pieces of advice was that, as the Board Chair of the NRA, Roz should remember that people will always be watching her. The advice was intended to remind Roz that in her role as board chair, the eyes of the restaurant industry will be on her. No matter if she is ordering at a fast food restaurant or walking the dog, the position of board chair has more significance than just her work on the board. She is representative of the organization, and how she behaves and interacts with people reflects on the organization as a whole…a great reminder for anyone in a leadership position.

As I reflect on that advice, it is also a strong reminder of the board’s impact on the culture and values of an organization. By appointing an entrepreneurial black woman as its board chair, the National Restaurant Association has sent a strong message that it values, supports and promotes diversity. This is a powerful message to an industry that represents a remarkably diverse group of employees, leaders and owners. Roz mentioned that during her visits to various restaurants, many employees had already expressed their pride in the N.R.A.’s choice of Roz as board chair.

Organizations send clear messages to their constituents by their choices in leadership and the composition of their boards. An organization with a value statement that includes ‘innovation’ as a core value should be mindful to include board members who not only have a strong track record of innovation but also bring a diversity of thought and experience to the board room. Moreover, an organization that includes ‘caring’ as a core value should remind board members that this behavior should be exemplified in all aspects of their lives.

This is easier said than done. The words used in an organization’s statements of its values (e.g. innovation, caring, excellence, diversity, etc.) can have different meanings to different individuals. For example, ‘excellence’ can mean a grade of 85 to one student but a grade of 100 to another. The best way I’ve seen organizations establish common meaning for values is by story-telling. At Buca, the leadership began every large employee meeting by selecting one of our core values, e.g. justice, and telling a story with an example of a situation where we saw the value in action.

Ensuring a common understanding of your organization’s values is the best way to make sure that everyone in your organization is ‘walking the talk’ and behaving as if ‘people are watching’. It’s important for boards to understand that their role reaches beyond the boardroom; they are also ambassadors of the organization’s brand – its culture, its values and its constituents. Remember, people are always watching.

Two weeks ago, Kaye O’Leary participated on a panel discussion on “Corporate Governance and Your Private Company”. The event was sponsored by MTK Accounting (Moquist Thorvilson Kaufmann & Pieper LLC), Monroe Moxness Berg and Tevera Consulting and covered a number of governance topics that are specific to privately-held businesses. It was a great session and our thanks to MTK for organizing the session and including Tevera.

During the Q&A session, an audience member asked if we thought it was a good idea to separate the role of the Board Chair from the role of the CEO. It is a great question and the answer depends on the ownership structure of the business.

Ownership Structure and the Role of the Board

Boards of Directors of publicly-traded companies are governing boards with fiduciary responsibility. They exist to represent the owners of the company (shareholders) because the owners of the company do not run, manage or lead the business. There is a separation between the ownership of the business and the operation of the business. The larger the company… the larger the separation. While the recent behavior of some publicly-traded boards might suggest that they think they report to and are responsible to the organization’s CEO, in fact they are accountable to the shareholders who vote them into their positions. Several years ago, NACD’s (National Association of Corporate Directors) Blue Ribbon Commission on Corporate Governance recommended that publicly-traded companies split the position of the CEO and the Board Chair to insure that there was an independent leadership voice for shareholders. For companies that felt that was undoable (e.g. ‘grandfathered- in’ CEOs who served as Board Chairs), the Blue Ribbon Commission recommended the appointment of an independent Lead Director to serve as an independent lead voice for shareholders. For the large part, publicly-traded companies have accepted and embraced this as best practice.

For privately-owned companies, it is a different matter. The first consideration is the ownership structure of the private company. Is it a Founder/Owner business, a Private Equity/Venture Cap owned business, a Family-held business, Employee owned, or is there a broad group of owners? The second consideration is the nature of the Board…is it an active Board that meets regularly or is it a ‘paper’ Board that meets annually to satisfy legal requirements? The third consideration is the type of Board…is it truly a Governance/Fiduciary board (e.g., does it have financial/transactional authority and responsibility) or is a Strategic Advisory Board (e.g. does it exist to provide business advice, but, does not have any approval authority or responsibility)?

To Separate or Not to Separate? That is the Question.

If it is a Strategic Advisory Board, there is no need to establish an independent Board Chair. In general, these boards exist when the owner is also running the business or is significantly involved in the operations of the business. The majority of a Strategic Advisory Board’s work is to consult and advise the owner/operator on business issues at the discretion of the owner/operator. It probably goes without saying, but, in the event that the organization has a ‘paper’ Board to satisfy legal incorporation requirements, there is also not likely to be a need for an independent Board Chair.

In our experience, Private Equity/Venture Capital owned businesses either have a number of board seats at the table based on their share of ownership or retain financial approval authority. Successful Private Equity/Venture Capital businesses excel at making sure that their interests are heard and served in the businesses they invest in.

In other privately-held organizations, there might be an argument for separating the role of CEO and Board Chair. Instances where it might be advisable are when there are multiple owners where one owner does not have a majority and/or the owners are not involved in running the day-to-day business. If you are an owner in this type of business, consider how well your investment in the business is represented and if an independent leadership voice at the board table would improve your representation.
Form follows Function

Our advice? Look to the purpose and role of your board. If the voice of the owner (and the value of the business) would be better served by an independent leader of the board, the roles should be separated.

Compare this to U.S. corporate boards where, according to Spencer Stuart’s 2011 review of the proxy statements of the S&P 500, 16.2% of corporate directors are women and 9% of all boards have no female directors.

Are Australians more enlightened than we are? Are they more accepting that the inclusion of women in the board room builds stronger businesses? Nope. The ASX (their public company listing exchange – similar to NYSE or NASDAQ) added corporate governance guidelines and regulations for publicly-traded companies that shines a bright light on diversity in the board room and in their executive ranks. Moreover, their federal government hints that if the ASX’s corporate governance guidelines are not effective they might institute diversity quotas in the boardroom.

The article explains that “Under the guidelines, companies will need to set ‘measurable objectives’ on gender diversity, and publish breakdowns on the proportion of women on staff, in senior management and on the board. If they don’t comply, they will have to explain why not”.

What a disappointment. Do we really need regulations to increase the number of women in the board room? Do we need a Title IX for Corporate America?

According to the 2011 Catalyst Census: Fortune 500 Women Board Directors and prior Catalyst Censuses, women have made no significant gains in the last year and are no further along the corporate ladder than they were six years ago. Their census included the following:
• Women held 16.2% of board seats in 2011, compared to 15.7% in 2010.
• Less than one-fifth of companies had 25% or more women board directors.
• About one in ten companies had no women serving on their boards.
• Women of color still held only 3% of corporate board seats.
• Women held 14.1% of Executive Officer positions in 2011, compared to 14.4% in 2010.
• Women held only 7.5% of Executive Officer top-earner positions in 2011, while men accounted for 92.5% of top earners.
• Less than one in five companies had 25% or more women Executive Officers and more than one-quarter had zero.

Despite extensive research supporting that diverse boards are stronger and beneficial to the organizations they serve, the pace of change remains sluggish at best. A lot of talk…no action.

It is depressing to think that in 2012 we still need governmental regulations to tell us to do the right thing. I am not a proponent of big government and I firmly believe in free enterprise. The last thing I’d support is adding more SEC rules and regulations that increase the expense and burden of corporate reporting or government quotas that diminish business competition. However, given the lack of change in our board rooms am I a victim of Einstein’s theory of insanity?

How can we drive diversity in the board room without adding regulations and quotas? What are your ideas? I’d love to hear from you…you can email us at information@teveraconsulting.com.

While products, services and society have been rapidly and dramatically changing, the only changes that have occurred in the boardroom have been driven by legal and regulatory changes.

Boards Resist Change

My impression, which is most likely over-generalized, is that Corporate Boards resist change. Here’s just one example that I’ve observed:

• Board Books & Technology – Most organizations rely on providing their board members with materials in advance of the meeting to make sure that board members are informed of the agenda and have time to review and become current on financial and operational reports. 20 years ago, as a Financial Manager with the responsibility of making sure that board members had the information they needed, our team ran copies on 3-hole punched paper, created section dividers, assembled 3-ring binders and shipped them out to board members via over-night delivery. Fast forward 20 years, despite a number of fantastic ‘on-line’ board room tools, email, intranet and internet options that allow electronic, efficient and less expensive solutions to deliver board materials, the majority of boards that I know of still prepare and over-night hard copy board books. When I’ve seen organizations try to migrate to electronic board tools, board members create an unbelievable fuss. Reactions I’ve personally heard: “It’s too hard”, “I can’t remember another password”, “my internet connection isn’t fast enough”, “the files are too large”, “I don’t know how to unzip the file”, “I don’t have a printer at my vacation home”…it goes on. Seriously.

While this is an amusing anecdote on how boards resist change, there are many more serious examples of how change inside the boardroom has not kept pace with change in business and society. The lack of change diminishes the board’s ability to provide strategic and valuable insight.

In the November 2011 issue of the Harvard Business Review, their Idea Watch: Vision Statement section highlighted an overview of how corporate boards have changed (or not) from 1987 to 2011 based on Spencer Stuart’s, an executive search firm, annual survey of proxy statements of the S&P 500. Here are a few highlights of who is sitting in corporate board room:

• In 2011, 37% of boards are comprised of board members with an average age over 64. In 1987, only 3% of boards had an average age over 64.
• In 2011, only 15.3% of board members on the top 200 companies are African-American, Hispanic or Asian.
• In 2011, 16.2% of board members are women.

Conclusion? Our board rooms remain largely homogenous and are dramatically aging. These are not the ingredients for change. One of the key responsibilities of boards is strategic oversight – if the board room does not represent current and diverse thinking, it is improbable that our corporations will be able to successfully compete in today’s ever-changing operating environment.

Impactful Innovation

I’m not an advocate of change for the sake of change; change is beneficial when it strengthens strategy, adds value and improves results. There are a number of aspects of corporate governance that I believe are ripe for change and can add value to the organizations that they serve:

• Board Composition – Who’s on your board? Does your board represent a diversity of backgrounds, experiences and skill sets? How does your board identify prospective new members? Do you consider the strategic goals of the organization and the capabilities that will be required to succeed? Can your board understand your customer base? Is your board truly ‘independent’ of the organization and the CEO? Has your board separated the Board Chair role from the CEO role? What is the structure and role of your Committees?

• Strategy & Strategic Risk – How is your board engaged in conversations about strategy and strategic risk. How are new risks identified? As the business grows (new products, new markets, new delivery methods, new regulations, technology changes, etc.), is the board’s discussion or risk keeping pace with the changes in your business model?

• Annual Goals, Agendas and Performance – Is your board proactive about setting goals? How does your board measure its success? How does your board deal with conflict in the board room? Is there conflict or are all votes ‘unanimous’? What does a healthy debate look like in the board room?

• Succession Planning – Is your board focusing on CEO succession planning? Board succession planning? How is the board insuring that the organization is sustainable beyond the current CEO and board?

• Organizational Reports vs. Boardroom Discussion – Is your board spending the majority of its time listening to operational reports from the organization? Are the majority of your board agendas devoted to presentation of materials that were provided in the board book? Are you devoting your board meetings to meaningful strategic discussions?

It is time to start talking about innovation in the board room! This space will be devoted to a series of topics on innovation in the boardroom…including ideas on how to drive value-added changes in corporate governance and address the above questions. I’d love to hear from you and learn how you’ve driven innovation in the board room…share your innovation!

The difference between Management and Governance
What does NIFO mean? A great board member needs to understand that the organization’s leadership/management team is running the business on a day-to-day basis…not the board! The board’s role in relation to operations is to make sure that the leadership/management team is on the right track (e.g. has set a solid vision/strategy and tactics)…not to implement the tactics!

NIFO & Not-for-Profit Organizations
The NIFO principle becomes particularly challenging for board members of not-for-profit organizations that are dependent on volunteers to help deliver their services. Two factors contribute to this. First, in non-profits, board members are often also operational volunteers. Second, the boards are often composed of board members with little board-room exposure or experience and very often, the board members might have little management experience.

I served on one non-profit board that devoted one session of new board member training to outlining the differences between decisions made by board members and the decisions made by the management team. It was a useful exercise and a helpful tool that set appropriate expectations and boundaries for board members. It helped avoid misunderstandings and conflicts between the management team and the board. It is a practice that I continue to recommend to non-profit boards.

When it all goes wrong…Board Members that cross the line
What’s wrong with Board Members getting involved in operational/executional decisions? Here’ one sad tale that I recently watched unfold. This is the story of a non-profit organization with a lean management team and small number of employees; the organization relies upon volunteers to augment its employees to deliver its services and a number of the board members also serve as volunteers. In their volunteer roles, the board members often report to lower-level management team members (management team members who are not in the board room).

One particular board member was unhappy with the junior-level manager who she reported to in her volunteer capacity. She did not raise her concerns with the Executive Director/CEO but, instead she went directly to other board members. She was very vocal and very convincing and rallied a majority of board members around her cause. At a board meeting, the board told the Executive Director/CEO that the junior-level manager had to be terminated.

The Executive Director/CEO was so upset that her authority had been undermined and that operational employee review processes were not followed, that the Executive Director/CEO resigned. Operational chaos followed and unfortunately, the organization had to scale-back its services. The board was flabbergasted by her reaction and the board did not understand that it had crossed the line.

The majority of the board had never served on a board of directors before. Had the organization trained the board on its responsibilities vs. management’s, the situation might have had a happier ending.

Our Advice
We strongly urge CEO’s and Board Chairs to proactively work with their boards and, especially new board members, to provide training that outlines the responsibilities of the board vs. the responsibilities of the management team. This is critical component of training for first-time board members and for non-profit organizations where board members also serve as operational volunteers (these board members need to understand when they are wearing their board hat vs. when they are wearing their operations hat).

Board Members, if you consistently believe that you need to be involved in operational/executional decisions…then you don’t have the right leadership team in place!

Further consider that there are a lot of things in the United States that require more than a four-year term to fix…not to mention that you effectively lose two years of the four-year term to ‘get up to speed’ and then the re-election process. Would it be easier to lead the United States (and accomplish something) over a long-term basis if there was a long-term Strategic Plan that existed beyond and across election cycles?

Maybe it is time for the United States to build a Strategic Plan…should ‘we, the people’ have a voice in defining our Mission and Strategic Goals and then vote for the candidate(s) who we think can best deliver strategies to achieve the Mission and Strategic Goals?

Simplistically, Strategic Plans generally have three components. What would it mean to have a voice in these?

1) Mission/Purpose/Value Proposition…why do we exist? Who are our customers and why do they choose us? What does our ‘brand’ stand for?

In a very, very unscientific poll, I’ve asked friends and acquaintances about what they think the United States stands for as a brand. A few adjectives are commonly used: Freedom, Democracy, Opportunity, Equality, and Prosperity. As a people, should we ask ourselves about the Mission of the United States? What do we stand for? How do we differentiate ourselves from other countries? Why do people want to live here?

2) Vision/Strategic Goals…What are our goals for the future (e.g. size) ? How do we define success? What does it look like if we are delivering on our Mission/Purpose/Value Proposition?

As a people, could we share and identify the strategic goals that are reflective of our Mission? Why is this important? Because the same word used in a Mission statement can mean very different things to different people. Let’s look at the word ‘Prosperity’. The dictionary defines prosperity as ‘the state of flourishing, thriving, success, or good fortune’; a single definition with many meanings. To one person it might mean being able to provide basic shelter and meals for their family…yet another person might think prosperity means having a large home, multiple cars and a comfortable retirement fund. In a country where one word with one definition can have so many different meanings, it will be a challenge for the United States to set a common goal for ‘Prosperity’. Instead, we could define and set goals around, for one example, what it means to be middle class, what percentage of our population should meet that definition…think back to the generation that strived for a ‘chicken in every pot and a car in every garage’ (Herbert Hoover’s campaign slogan in 1928). It would be a lot of work, but, helpful for all of us to know and support our common goals for measurements like: tax rates, employment rate, national debt, interest rates, education, etc…what are our ‘target’ goals…what is acceptable? We could vote on Strategic Goals for Social Security, Medicare, Healthcare, Immigration, etc.

It wouldn’t be easy. We’d have to become an educated and informed public and have a sophisticated strategic polling system. For example, you couldn’t vote for a 0% tax rate and expect a robust public education system. We’d all have to understand that resources are limited and trade-offs exist.

3) Strategies and Strategy implementation. Finally, how do we make it happen? As a people, if we had shared Strategic Goals, we could then approach voting for our elected leaders as if we were on the Board of Directors for the United States and picking a CEO and leadership team to deliver the Mission and Vision. We could vote for the person with the best strategies to deliver our long-term goals and vision.

What do you think? Does business’s approach to strategic planning have a place in government? Would it help for Americans to take a step back and define our strategic goals before we vote on the person(s) with the best plan to deliver the goals? Let me know!

We shared the story of ‘What Really Happened’ at Buca and then talked about how the new leadership team led the company out of the crisis. For those of you who are unfamiliar with the Buca story: in March of 2005, on the night before the company was due to file its 2004 10K with the SEC, the independent audit team uncovered an altered invoice. This raised a lot of alarms, led to a forensic audit, a material restatement of the company’s financial statements, missed deadlines and possible NASDAQ de-listing, investigations by the DOJ, SEC, FBI and Postal Inspector and ultimately, an individual came forward with evidence that the former CEO, CFO, CIO, Controller and some vendors had committed fraud against the company.

The most valuable part of sharing the events with the students is the ‘questions and answers’ segment. The students asked insightful and thought-provoking questions. As interesting as the legal aspects and financial fraud are (at least to Rich and Kaye); the majority of the questions centered on the ‘human side’ of what happened…

Motivation:
There is a lot of interest around how we kept employees engaged at both the corporate office and in the restaurants. The truth of the matter is that it wasn’t hard and we weren’t exceptionally gifted motivational leaders…Buca was blessed to have a lot of employees who were passionate about their restaurants and were determined to show that Buca had employees who were ethical and worked hard.

Communication:
A majority of the questions center around communication: “When and what did we communicate with employees?”; “How did you communicate with your investors and your lenders?”; “How did the leadership team communicate with each other and resolve conflicts?”.

It was a fast and furious time period. A lot of what we could or couldn’t communicate or when we could or couldn’t communicate was determined by the status of the investigation and the fact that we were a publicly-traded company. This was a challenge…our employees were uncertain and anxious and our investors were incredibly patient but very concerned. As a leadership team, everything happened so quickly that we rarely had time to disagree on anything…it was a ‘just get it done’ mode of operating. We shared information as soon as we could and as completely as we could without hurting the investigation. It was a difficult time for all.

Ethics…Project vs. Culture:

We also answered questions on how we ensured that ethical leadership became a part of Buca’s culture at the corporate office and all of our stores…not just a one-time, ‘check the box’ project. Our CEO at the time, Wally Doolin, did a masterful job of making sure that our Mission, Vision and Values were not just words that appeared on a chart. We started every all-employee meeting by sharing stories about what one of our Corporate Values (e.g. justice, hospitality, excellence) meant to us. We engaged the Center for Ethical Business Cultures to work with our restaurant managers on every day ethical issues that they encountered in their restaurants. We were committed and relentless around discussing ethics and walking the talk. Cindy shared some examples of how we saw the benefits of an ethical culture in day-to-day operations over the following three years.

It was a challenging time but an equally rewarding time. We developed many great friendships at Buca and are thankful to all of our wonderful co-workers who were integral and dedicated to restoring Buca’s good name…it never would have happened without them.

1) You Can’t Plan for Everything
2) Prepare Your Team for Adversity
3) Embrace Cultural Differences

This is the third, and final, blog in a three-part series that shares their adventure and the leadership lessons they learned along the way.

When we last left Ken and Kaye, our intrepid climbers, Ken had just spent a sleepless night agonizing over his decision over whether to continue to his attempt to summit Kilimanjaro or be medically evacuated with Kaye after her series of calamities.

Trek Day Three – LeMosho Route – Evacuation

The third morning, over breakfast of red millet porridge (excellent!) and Spanish eggs, Ken and Shabani, their guide, discussed the options, and Ken told Shabani that from the very beginning the climb was to be as a two-some…Ken and Kaye were a team! Ken was adamant that he was not going further on without Kaye. After some debate, Shabani reluctantly agreed that Ken and Kaye would both end their trek.

The sun was finally shining and the group had spectacular views of peak of Kilimanjaro. The sun rising over the mountain was breathtaking and Ken was deeply disappointed. Kaye couldn’t get off the mountain fast enough.

It was a two hour trek to the evacuation point where the park rangers could pick up the group. Not an easy evacuation route…there were two steep ravines to negotiate along the way.

After arriving at the evacuation point and waiting an hour for the vehicle to arrive, the group learned that the park rangers had first stopped and picked up another couple who were struggling with AMS (altitude sickness). Shabani had explained that the trucks used for evacuations were Land Cruisers. Kaye pictured the Americanized version of a Land Cruiser SUV that comfortably seats 8! Shabani said there would be plenty of room for everyone in the truck.

When the truck finally arrived, it was indeed a Land Cruiser. The similarity between what Kaye had pictured and what was stopping in front of her ended at the branding of the truck. The park ranger’s Land Cruiser had a cab that seated three (already occupied by the Ranger and the other couple) and an open flat-bed that carried seven of the other couple’s porters with all of their packs and gear. By Kaye’s standard’s, it was full.

Dumbfounded, Kaye and Ken stared at Shabani. Shabani asked “What are you waiting for? Get in in the truck!” Before they could ask, “Are you kidding? Where? How?”, Shabani was throwing their duffel bags into the flat bed, hustling the two of them into the flat bed and wedging them in between porters and equipment. Kaye found herself tucked in between a duffel bag and a Bob Marley wannabe for the 2 ½ hour drive back to the hotel. Picture itinerant farm workers being shuttled between locations.

Leadership Lesson 3: Embrace Cultural Differences (with a smile!)

The cultural differences between their Tanzanian guide, Shabani, and our American trekkers (Ken and Kaye) were highlighted by the differences in expectations for an evacuation from the mountain.

While the difference between the image of a Land Cruiser in suburbia and a working, park ranger’s Land Cruiser in Africa is amusing, it is also a poignant reminder of the differences in living standards. Kaye and Ken’s definition of a “safe ride” involves a seat and a seat belt for every passenger. The local definition and expectation was “you’ve got a ride and you don’t have to walk”.

If you do business internationally, you will encounter differences in cultural norms, living standards and expectations. While it may be difficult or uncomfortable, you will be well served if you can embrace the differences and enjoy the experience.

Epilogue:
Kaye and Ken are happily home in “fire-ant-free” Minneapolis (thankful for a hard freeze).

Ken is already scheming about his next high-altitude adventure.

Kaye is casting for a stunt-double.
☺