iDealReview

Six Challenges to Hiring a Negotiator

By STEPHEN C. SOPKO (June 13, 2005)

Another Monday, another exasperated Human Resources Director.

"But we never negotiate salaries. Surely your candidates must know that!"

When hiring a negotiator, HR professionals are shocked that the successful candidate always wants to negotiate the offer. I've only encountered two negotiators who did not come back with some sort of counter to my initial discussion about salary and intangibles. I immediately moved on to other candidates. If they won't negotiate for themselves, why should I expect them to do a good job negotiating for me?

There are six challenges facing anyone hiring a negotiator. The fact that they want to negotiate their salary is a result of these challenges. In order to hire and retain the best, you need to understand the challenges, and modify your hiring process to meet them.

Negotiators are rarely identified by their title or job description. They can be sales people, contract administrators, business development or corporate counsel. That said, if the job you are hiring them for requires negotiation, you are hiring a negotiator, whatever the title.

Before working with Human Resources on your next negotiator position, have a talk with them about the type of people likely to receive an offer, and what will happen during the resulting negotiation. Better yet, bring them a copy of this article and review it together.

 

Challenge #1: Negotiator Positions usually Omit the Word "Negotiator"

It is rare to find the word "Negotiator" in a job title. Most jobs involve negotiation of one sort or another, therefore most employers view negotiation as an assumed skill and fail to mention it in the job title or brief description. This causes problems in two dimensions: the recruiting process and interpreting candidate skill profiles.

One example is the position of "Corporate Counsel" to a sales organization. Most people reading the job description would never realize how much negotiation is a part of the job. Corporate Counsel for another division might have very little need of this talent. My favorite example from Public Sector is the title "Supply Clerk," used to identify a mid-career professional negotiating multi-million dollar intellectual property deals.

Solution - when specifying the profile to Human Resources or your recruiter, use the word "negotiate" in the first line of the job description. By all means, include it in the short job description, and detail the kind of negotiation to be conducted in the long description.

Examples:

Sales Account Executive Builds effective, enduring customer relationships, negotiating customer purchase agreements and following through on delivery…

Sales Support Manager Leads a team of professional negotiators, expert at turning opportunities identified by sales teams into executed agreements…

Procurement Agent Responsible for a broad class of commodities, negotiating long-term agreements with global suppliers…

When sending these job descriptions to the HR team, make sure you specifically identify that these positions will involve negotiations. If you've never met your recruiters before, now is the time to introduce yourself and educate them about your business. If they know ahead of time that your requisition will require extra effort, they will either (1) head for the hills, or (2) plan to devote extra time and energy to the staffing process. Without fail, I've found that the preparation pays off, and true staffing professionals appreciate the engagement in the actual business need.

 

Challenge #2: Successful Negotiators are Hard to Identify

Many agreements specify that the terms, conditions, pricing and other negotiable elements are confidential information. Beware a negotiator who is too willing to share intimate details with you. They are probably violating their current or former employer's policies, and you might expose your company to risk by listening to them.

In this environment, then, how is a prospective employer to determine the success of prospective negotiators? Simple, check their references - not from the current employer, that will just be name, rank and serial number. Look for names the candidate cites as past negotiation partners. Suppliers make for risky references - they did business with your candidate in the past and hope for future business. Customers are far less likely to sugar coat the truth. If you are hiring for a type of position that only deals with suppliers, look for internal customer references in past positions. In both cases, sell-side and buy-side, look for peer references in similar, competing businesses.

When speaking to the reference, and you as the hiring manager are best qualified to do this, listen for key phrases:    

What the Reference Says	What They Might Mean
Very easy to work with.	We took them to the cleaners.
Their team was tough but fair.	I don't remember the person, but the entire team was good.
Very responsive, proactive.	They were quick with NO.
Struggled with his/her internal bureaucracy.	May not have good skills in managing internal approvals and relationships.

Some follow-up questions:

• Did the candidate sign the deal?
• Who was the lead negotiator?
• Was the candidate simply part of a winning team?
• How long have you dealt with the candidate?
• Have you observed him/her on other negotiations?
• Do you think he/she knew about your company before beginning the negotiation?
• What did you observe about how they handled other members of their negotiating team?
• Were there disruptions in the process? How did the candidate handle them?

Finally, do not be fooled by a lot of negotiation classes on the resume. This can be a bad sign, as it may mean that improving poor negotiation skills were identified by the candidate's management - who picked up the tab for the classes. It may also mean that the candidate was a junior team member on a lot of deals, but rarely the strategist or lead negotiator. They could be attempting to use classroom experience as a gateway to more significant negotiator roles.

 

Challenge #3: Size Matters

Beware hiring negotiators from businesses vastly different from yours in size. Negotiators for big companies have a significant amount of leverage, and often struggle when shifting to smaller companies. Likewise, negotiators for smaller firms can miss key opportunities to exercise the power of size when working for bigger companies.

Does this mean you should only hire negotiators from similarly sized firms? It depends on the ramp time between hire date and full effectiveness. If you have a long time (45-90 days) to induct and train the negotiator, you can broaden your search. If you expect full productivity in just a few weeks after the hire, try to stay in the same weight class when screening candidates.

 

Challenge #4: There are Different Types of Negotiators for Different Situations

So, if negotiators rarely have their skill noted in their job title, how can recruiters identify people with significant negotiation background? To meet this challenge, we must consider the significant variation in what the word "negotiation" means in a business context. In recent years, the field has evolved into many specialties, including:

• Terms & Conditions
• Deal Structure & Pricing
• Alliances & Partnerships
• Intellectual Property
• Procurement
• Sales
• Public Sector
• Outsourcing Services

This is where the long-format of your job description can provide clues for the recruiter. Most prospect resumes simply state, "...negotiated $4B contract…" without specifying what that means. It is unlikely that a resume will break down the specific negotiation tasks performed; so your pre-screening calls from the recruiter should ask for specifics. Specific negotiation examples include:

"Negotiated contractual terms and conditions for $4B contract" means someone else set the price. Dive deeper here by asking, "Was the price a part of the negotiation? If so, who set the pricing and what was your role in that process?"

"Led pricing negotiations" usually means there was a T&C expert on the team, or there was very little give in T&Cs. Dive deeper here by asking "Give me three terms of the contract that were specific challenges in this negotiation. How did you approach them?"

"Organized joint venture to pursue a $4B deal" might mean that there was no negotiation at all, simply project and personality management of existing partners. Be very wary here, as many people confuse Relationship Management with true negotiating. Ask, "Were the members of the Joint Venture already under contract with your company? What were the specific roles of each of the JV players in structuring the final deal?"

"Negotiated a $4B deal with a Government…" is very different than negotiating a deal with GM. Not easier, just very different.

None of these are bad things. In today's complex business environment it is rare to find a single person doing it all. That said, be mindful of the type of role you expect your negotiator to play. If you lean heavily on Legal for T&Cs, look for someone who is more versed in the art of the deal. If you have very little support or process, look for a negotiator with some T&C background relevant to the types of deals you expect to be doing. If your company rarely pursues business alone, look for someone with experience building alliances. If you find someone with a broad variety of these experiences, realize that you will need to keep them challenged - too many of a single type of negotiation and this high-powered candidate will get bored.

 

Challenge #5: Salary Negotiations are Run by HR

Now, you've navigated the challenges above, and have a short list of candidates. You select your favorite and tell HR, "Go forth and hire." This is the most dangerous time in the entire hiring cycle. Your staffing department will review compensation policies, what other people in the same job code make, and the earning history of the selected candidate. At that point, they may or may not consult you, the hiring manager, about how best to present the offer to the candidate.

To avoid disaster, communicate to staffing that before any offer is made, you must be engaged and have a significant role in reviewing and approving the offer. You have to prepare for this negotiation like any other, and if your HR team is unused to negotiations, you have to prepare them as well.

As in any negotiation, finding out as much as you can about the counterpart is key. Compensation can do this via background, references and credit checks. If you don't have a Compensation department, put your staffing expert to work finding this information. Do not, under any circumstances, do this research yourself! Privacy laws are nothing to mess with; leave it to the professionals in your HR or Legal department.

Once you believe you have enough information on salary background, ask the candidate for a salary history. Many will refuse to provide one, but highly qualified, confident candidates will not hesitate. Compare the candidate's representations to the facts your HR team has unearthed. If they match, great. If they don't, you may want to bring that to the table while negotiating salary with the candidate.

Allow your staffing expert to open negotiations, calling the candidate on the phone and saying, "We are ready to make an offer of $X." When the candidate immediately counters, or expresses concern that you can "do better," do not say, "We never negotiate." Ask for an unambiguous counter (by email is best, less opportunity for miscommunication) that the candidate would accept.

This is not an article on how to negotiate salary, but, here are a few things to consider as you do:

• Negotiating imbalance here is enormous - the candidate is approaching this 100% personally, whereas you and HR are treating it like just another business negotiation. This sets the stage for deadlock unless you phrase things in personal terms from the hiring side of the table.

• Too many Staffing departments fail to ask for a counter offer from the candidate after the initial offer. Encourage them to do so. This sets the candidate's "Top End" price. If it is within your means, do not simply accept it to be done with the process. If you do, the candidate will think they did not ask for enough, and may throw in unreasonable additional demands.

• Use the same negotiating channel the job will require. If the job requires a face-to-face negotiating presence, this is the way to negotiate salary. If most of your negotiations are done via email, do it that way. If you usually get neutral ground for negotiations, find it for this discussion. If, however, you are always negotiating on the customer's turf, put the candidate in that position. This is your last, best chance to evaluate the professionalism, poise and creativity of the top candidate - don't pass it up just to save time or travel dollars.

• Let the hiring manager say "Yes," use the staffing professional to say "No," The hiring manager needs an excellent working relationship with the candidate after they start, don't let a tough negotiation ruin that.

• Use soft concessions. Too many people focus only on cash compensation. In fact, many HR departments forbid "promises" to employees that aren't cash. Even in that environment, both sides need to demonstrate creativity and flexibility. If you are stuck on the last $5000, ask why the candidate needs it. If it's for a car, education, child care or home office, the company might be able to help.

 

Challenge #6: Top Negotiators will Walk from Inflexible Employers

In this article, I've encouraged you to view the employment negotiation as a final test of your candidates. The reverse is true as well. It is the candidate's final chance to see how your company operates. Let's close with two stories, think about the company and boss for whom you would want to work.

Sally Candidate has been through 11 rounds of interviews at BigSlow, Inc. She is being considered for a Deputy to the Assistant Director of Sales Contracts. She has not spoken with the hiring manager since round eight of the interviews, and he is not returning her calls. When he did interview her, he refused to answer any questions about the job, department or role in the company. The staffing professional, Ed Stingy, from BigSlow offered a starting salary that is only 5% more than Sally currently makes, and refuses to discuss any salary concessions. In addition, Ed set a sharp deadline after which the offer is off the table, saying, "We will just move on to the next candidate."

Think about Sally's experience here. What opinion might she form about BigSlow?

• Requires eleven rounds of interviews - This company thinks it is thorough, but in fact it looks like nobody is able to make a decision. They probably waste time the same way on other issues.

• "Deputy to the Assistant Director of Sales Contracts" is evidence of a hierarchical, title-oriented company.

• The hiring manager, probably on the advice of HR, is totally disengaged from the hiring process. Sally might think, "Wow, if he doesn't care about me when he is trying to attract me to this job, he surely won't care after I am working for him!" 

• Another problem with the hiring manager is that he did not answer Sally's questions about the job. That probably means that he does not feel the need to "sell" his team to candidates. This can be an indication that he is weak at selling the team to other business units or power players in the company.

• Ed Stingy is playing hardball, with a cheap offer that hardly entices Sally to move. This makes BigSlow look cheap, and probably indicates how raises and bonuses work as well.

• Ed's refusal to negotiate and use of time pressure to force Sally into a decision indicates that the company revels in its power. They probably negotiate with customers and vendors the same way.

Now, let's look at a different story.

Sally is also considering an offer from UtopiaSoft. The contrast with BigSlow couldn't be more obvious. UtopiaSoft made an offer after two rounds of interviews. The hiring manager, Cindy Stellar, flew to Sally's hometown to talk over the package at the corner Starbuck's. The opening offer was generous, 15% higher than Sally's current compensation, but some of it is at risk, based on meeting sales targets. The only time Sally has dealt with anyone other than Cindy is when she asked for something (a company car) that Cindy did not have the authority to authorize. Cindy has expended a lot of effort showing off her company, department and this job to Sally. It is obvious that Cindy is proud of what she does, and while she hopes Sally will join the team, she said, "If we aren't able to reach agreement now, let's leave the door open and talk again in a year or two."

• Two rounds, then an offer - UtopiaSoft does not waste any time; they decide things quickly and efficiently.

• The manager really cares about getting Sally on the team, otherwise why would she come to Starbucks? This makes the company look like they will be as customer-focused in their negotiations.

• While the offer is generous, Sally has to stretch to earn it. This indicates that UtopiaSoft is focused on rewarding star performers.

• Sally respects Cindy because she obviously has the "juice" to negotiate on behalf of UtopiaSoft. This bodes well for the future working relationship.

• Finally, Cindy eliminates the high pressure sell by offering a long-term relationship. Things may not work today, but Cindy demonstrates confidence that they will eventually. This is a great demonstration of relationship selling that communicates something about UtopiaSoft's corporate culture.

Conclusion

These six challenges often appear insurmountable. This is because they can only be overcome with advance planning, great communication, and a lot of effort. When the candidate opens negotiations, it is usually too late to begin education of the HR team. Every stellar negotiator can be counted upon to negotiate their next job. If your company wants to hire and retain the best, while preventing a crisis every time you hire a negotiator, make this negotiation a desirable part of the hiring cycle.

Transforming Contracts Organizations: Three Things to Do Right Now

Stephen Sopko Copyright © Cedar Key Ventures, LLC 2006

Caveat: The organization model discussed here is a SAMPLE.  Every contracts group is different, and the following should be viewed as a process for determining the right mix, not a prescription for a complete contract organization!

Organizational transformation is a tough, thankless exercise. When you attempt to transform a group of lawyers, negotiators, administrators and project managers – well, you might as well paint a large target on your chest before even getting started.

This article presents how to execute transformation in a contracts group (sales or procurement) by recognizing some tough realities, making tough decisions, and using existing HR and other tools to execute the basics of change.

This article does not talk about what you should change; it charts how to set change in motion.

Oh, and as for that target, may I suggest red and white paint?

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#1: Assess the Impact of Automation & Outsourcing

In the last 15 years, the Contracting professions (procurement, sales & counsel) changed substantially. The role of automation (reverse auctions, source selection, procurement streamlining) drove many simple, repetitive tasks out of the profession and into computers.

Example - A Multi-year Deployment of Procurement Automation Software During the deployment, the classic procurement skill sets continued to form the basis for hiring & promotion. People with deep commodity knowledge, solid relationships with suppliers, and an understanding of day-to-day operations in manufacturing are well compensated primarily due to their seniority with the company. Then, in the space of a single quarter, the system comes on line, and commodity procurement is largely handled via automation. What happens now? In about three months, all of the seniority in the department is flipped on its head. Suddenly, the new hires with technological and negotiating expertise are as valuable as the experienced hands with deep commodity knowledge and solid relationships. As a leader, though, it is very difficult (politically and emotionally) to flip the department around to reflect the new reality. So reorganization happens slowly, if at all. The senior people end up in manager or consultant-type positions, and the department ends up with a reputation for “deadwood” in expensive, senior levels.

The next 10 years will witness a similar impact at the middle level of the profession, as mid-level repetitive tasks involving some judgment are automated or sent to outsourcing centers around the world.

These changes are real, but they tend to build over time. The small changes then reach a tipping point and big changes happen all at once. As a result, the skill sets necessary to run your department may change, substantially, in a very short time.

Think it can only happen in procurement? Another example would be a software publisher who sells only to customers in the United States. The publisher merges with a professional services firm, and suddenly services are involved in every deal. To compound matters, the merger expands the scope of business to global customers, meaning that the cozy domestic contracts must now scale worldwide.

The team of people who ran contracts for a domestic, software-only firm will be seriously challenged by adding services and going global. Compounding the problem, there is substantial inertia in the contracts profession, meaning that people aren’t necessarily going to recognize that perhaps they are no longer qualified. So you try to encourage change, and put the merger at risk with a sub-par contracts team that increasingly resists change.

These are tough problems to solve, but the good news is that the tool to solve them already exists in most companies with an HR system.

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#2: Review Job Codes, Classifications & Salary Structures

The job classification system in your company can help you hire and retain the best negotiators, if it is used properly. Start out by reviewing the current job classification structure in place for your teams. Odds are, if your department grew by reorganization and combination, that you have a hodge-podge of job codes, skill levels, and pay grades. The salary levels for your teams may vary widely, and totally out of proportion to the relative value added. Even if your department hasn’t changed in years, the job codes still merit a close look, primarily for what they can do in retention.

Roll up your sleeves; this is bureaucratic, unpleasant work! That said, it is the fastest way to transform your department while minimizing turmoil, avoiding conflict, and ensuring that your decisions do not create a perception of discrimination or favoritism.

There are three considerations here: job definition, ability to progress, and impact on pay. If there are four roles that 90%+ of your people fit into, why not modify existing job codes and align people into them? Most contracting teams can get by with four basic functional areas:

• Contract Acquisition (Sales) or Negotiation (Procurement)

• Contract Administration (Post-award administration of sales or procurement contracts)

• Contract Infrastructure (runs the systems and/or outsourcing arrangements needed to support the contracts effort)

• Manager, Contracts (people managers)

Now, there will be a broad spread of grades, in most systems that will result in an as-is map that looks like the following:

 

After the job definition work is done, we need to reshuffle to address ability to progress. Start by answering a few tough questions about your organization today.

First, which jobs are appropriate entry-level points to your organization for new graduates? Do people learn things here that translate to the other functional areas?

Second, which functional areas should “top out” by mid-career (i.e. senior level staff in these functions do not add enough value to justify their higher cost)?

Third, where do you need to allow for high-level individual contributors to attract and retain the best talent?

Based on answers to these questions, you may end up with a functional/organizational map that looks like this:

In this organization, the following logic applies:

Entry-Level

• Automation and outsourcing eliminated most clerical and task-oriented work. People entering the organization need to have the education and drive to progress to higher levels without extensive hand-holding by the company.

• New entries start in either acquisition (bids/proposals) or administration, this gives them the seasoning and business experience necessary to progress. Ideally, people spend time in both acquisition and administration to get a full view of the business cycle.

• At first promotion, people can either stay in their current functional area, or rotate to the other. There are also two other paths available: infrastructure (building/managing the systems and relationships needed for the contracts organization to operate) and people management. In both of these branches, specific technical or leadership ability is required for success.

By Mid-Career, the expectation is that:

• People with a genuine passion for their jobs will continue to excel in their functional area.

• Burn-out may start to be a factor, some people will rotate out of the organization into parallel fields (legal, finance, sales, manufacturing).

• People will enter the organization from parallel fields, and need to be brought up-to-speed on processes and skills.

• Mid-career is an ideal time for an assignment in Infrastructure, or formal experience with people management.

• In this organization, there is little perceived value in high-level staff progressing in Administration, this plateau must be clearly communicated and reflected in lower pay increases and minimal progression.

Finally, in Senior & Global levels

• People continue rotating out of and into the organization, but the time to come up to speed for senior level people is going to be quite high.

• Because of salary differentials, some infrastructure positions in technology may start off at this level

• Senior specialists in acquisition and infrastructure should have clearly defined roles, and be viewed as peers to the Senior Managers in the organization, that said, these specialists are not in the chain-of-command, this plateau should be communicated.

• An excellent negotiator (Contract Acquisition) is not usually in-line to be the next Director without significant people management experience coupled with political savvy. This will come as a shock to many, and you will lose extremely high-value negotiators to the competition. Address this by creating a super-category (“Global”) for these unique individual contributors. While they are not in the chain of authority, they outrank senior managers and report directly to the Director or VP.

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#3: Encourage a Mix of 1st and 2nd Chairs while Avoiding Victims

To recap, say you are in the “top-heavy” organization identified in step #1. The first step was to recognize the changes that put your people out-of-step with the mission of your company (as well as the current state of the profession.) Next, you mapped the as-is and desired organization with job codes, plateaus and salary caps.

Once this is done, you now must communicate the expectations for each level to the entire team. In the example, this would mean working out a plan with senior-level people in the Administrative functional area, giving them time & assistance to rotate into other areas. People who do not meet the minimum educational requirements to progress within the organization are given encouragement and tuition assistance to obtain the right level of credentialing.

While all of this takes time, the clock is ticking on your organization, you must see rapid and enthusiastic progress from individuals on the team, or move them out.

To this point, our focus was on capability, now let's turn to ambition and passion.

An organization needs a balance of talents to survive. Going back to my time in a concert orchestra, I think of these as 1st and 2nd chair performers.  1st chair performers are Stars, high-caliber fast-track high-potential people who close major deals, revolutionize administration, develop high quality infrastructure or consistently lead their team to new heights.

All of this is great, but an organization made up of Stars usually ends up infighting as each person tries to get their share of limelight. This is where the 2nd chairs come in. In an orchestra, or an organization, these are the people who deliver consistent quality, and are satisfied with a paycheck and predictability rather than the limelight. This is also great, but an organization made up of Second-chairs may lack the zip for real progress, miss opportunities for executive visibility, and occasionally devolve into Victims if left uninspired for too long.

While an organization must encourage the growth of Stars and Second-chairs, it must act to limit the growth of Victims. These are the people who find fault with everything, complain incessantly, never come up with an idea, and excel at tearing down others and stalling progress. While the contracts profession has its fair share of Stars and Second-chairs, for some reason it seems to attract more than its share of Victims. Even a few Victims in a contracts organization will drag the organization down by impairing its credibility. As a leader, it is your job to identify the Victims, give them a road map to improve, and if they don’t change, shove them not only out of the organization, but all the way out of the company.

In a sales contracts organization, I’ve found an ideal ratio of one Star to five or ten Second-chairs, the precise numbers are less important than the fact that there is a mixture.

In procurement organizations, one Star for twenty Second-chairs may be more appropriate. Opportunity-based (sales) organizations value and reward the fast-burner Star mentality more than risk-managing procurement organizations.

The ideal mix of Victims is ZERO, but that is unlikely. At any given time, however, more than one Victim per 50 staff will significantly drag the organization. More than 1 in 10, there is likely no hope for the organization without a massive change.

Other thoughts here:

• The fastest way to turn a Second-chair manager into a Victim is to move too many Stars through their organization.

• Stars rarely become Second-chairs - if aggrieved, true Stars simply leave the organization.

• Many Second-chair staff think they are Stars, until they work with one. Then, a Second-chair will usually demonstrate the professionalism and self-knowledge to be satisfied with their important role. Occasionally, the example transforms the Second-chair into a Star.

• All Victims think they are Stars, just terribly unappreciated.

• Stars tend to get bored unless they are challenged, recognized and promoted frequently. Most contracts groups tend to value long tenure and predictability over quick wins and popularity. Managing this dichotomy is the fundamental challenge faced by leaders of contracting organizations.

• Second-chairs must see a promotion path that does not involve Stardom. The second-worst thing that can happen to your organization (after a Victim infestation) is an exodus of Second-chair staff. Expect Stars to leave, but pour money into retaining those Second-chairs!

• In any pay cycle, award promotions and bonuses to Stars, award pay increases and stock options to Second-chairs, give Victims NOTHING.

So, to continue with the example above, assume that every part of your team needs those Second-chair traits of reliability, professionalism and teamwork. Sections of the team friendly to Stars are flagged in Red below:

Rationale

• Contract Acquisition offers the pace, opportunity for recognition and promotion that attracts Stars. Infrastructure is a good place for Stars who have a gift for the administrative side, and a passion for automation, streamlining and other quality initiatives.

• Administration, with its need for stability and governance, often does not provide the opportunity for quick advancement that Stars require.

• Many will find my omission of Stars from middle Management to be disconcerting. My experience is that while Stars tend to be promoted into management, their short attention span, desire for rapid change, and hunger for recognition often cause them to become unhappy in the role. By all means, attract a Star to the top rung of the organization, but encourage the steady, reliable Second-chairs to lead the various teams.

• Why no space for Stars at the Entry-level and First Promotion rungs of the ladder? At this stage, people need to be demonstrating that they are capable of high quality, repeatable & desirable work. Encouraging the development of Stars too early can cause the next wave of a contracts organization to devolve into glory-hounding and interpersonal conflict.  This runs counter to increasingly high expectations of Generation Y, but this is another challenge that must be faced.

• Remember, Stars are valuable because they shake things up, challenge the status quo, and create great new opportunities for the company. They can also be a royal pain because of just those traits. The successful contracts organization wants a core of Second-chair performers who enjoy the job, leavened with Stars to put the fire in the organization.

 

Summary

• Assess the impact of automation on your organization. Do you have too many people with the wrong skills? Worse, are they refusing to recognize this and evolve?

• Realize that significant outsourcing and offshoring of the contracts & procurement function will be a reality over the next 10 years. Plan your team’s career tracks accordingly.

• Realign job codes and “top-out” points to reflect the relationship of job functions to your corporate mission, as well as where you believe the team & profession are headed. Communicate these as realities, and give people time to meet the new expectations.

• Some people either will not be able to adapt fast enough, or will demonstrate a marked lack of enthusiasm. They need to go before they become Victims and poison the team.

• Enthusiasm & initiative count, so individuals must be encouraged to try. The team, however, needs people who can meet the needs of the company today. Balancing between individual and team needs is why you earn the big bucks.

• Every organization needs Stars and Second-chairs, your value add is setting the ratios, helping Second-chairs become Stars, and avoiding the proliferation of Victims.

- Stephen Sopko

Leading Through Catastrophe

By STEPHEN C. SOPKO, Founding Director, Cedar Key Ventures, LLC (March 22, 2001)

The year is 1914.  France and Germany have prepared for the Great War for decades.  The day comes, and France has the wrong guns, wrong strategy, wrong training, and wrong technology.  Even wrong generals up to the very highest level.

From the very first minute, the fact that Germany has immense advantage is obvious.  The French misinterpret the German advance.  The Belgians try to warn them, but the French Generals are so enamored of their plans that the warnings fall on deaf ears.  Battles start, and the advantages of German industry, technology, training, manpower and strategy are obvious, to all but the French.

And so, for weeks, the French lose.  Battle after battle, mile after mile of ground.  They retreat, defeated, ever closer to their capital city.  Generals are replaced, and still the French lose.  Plans are altered, and nothing works.  Allies arrive, and still the relentless error of the French causes them to lose miles of ground and tens of thousands of lives.

At the center of it all stands one man, General Joffre, leader of the French forces since the first days of the war.  This is the wrong man, in the wrong place, at the wrong time.  Or is he?

Joffre’s greatest weakness is his steadfastness, his refusal to change plans until disaster is upon the French army.  But this steadfastness, wrong though it was during the opening days of the War, is exactly what is needed to give the French a chance to turn debacle into survival.

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This is the concept that today's executives must realize.  The steady, focused, calm leader of people is exactly the type who tends to thrive during crisis.  They were not the right managers for a year ago, and many companies passed them over for glossier, sexier, ‘new-economy’ managers.  In the new-economy, leadership was mostly about form over substance.  The ability to motivate, cajole, recruit and spin was paramount.  Investors and analysts were blind to execution, they wanted hype, and new-economy managers delivered, in spades.

Leaders who focused on long-term vision, team-building, interpersonal skills, and fostering a sense of loyalty were portrayed as dinosaurs.  Meanwhile, the selfish, ‘me-first’ style of manager was absolutely the right individual for the bubble.

In case anyone missed it, the bubble has burst.  The enemy is pouring over the border, and the new-economy is in full retreat before the forces of reality.  Managers who were successful at spin and shuffling projects are panicked.  Message boards are full of employees wanting vision, empathy, open communication, and focus – in short, they want leadership, and the successful new-economy managers are not delivering.

What does work now is focus.  General Joffre went to bed at 10pm every night, he relied upon his staff, and he admonished subordinate commanders for losing their nerve.  Many misinterpreted his imperturbability as stupidity, believing that he had no idea of the magnitude of the disaster.  Again, during the opening days of the War this may have been true.  But, as the full scope of the disaster unfolded, Joffre was the calm, steady, focused hand that the officers responsible for the troops needed.

This is a critical point.  Senior executives very rarely connect with ‘the troops.’  They connect with senior and line managers on a daily basis, and tend to see front-line workers only at awards ceremonies.  Line managers are in far more frequent contact, and they magnify the mood of the managers above them in the hierarchy.  If the big boss is panicked, the first-tier managers will amplify that panic and scare the hell out of the front-line people delivering value to the Customers.  By the same token, new-economy managers who try the same seat-of-the-pants spin control that worked during the boom will communicate that paucity of ideas through the line-managers to the troops.

That’s when the network printers start spewing resumes.

Senior executives in this business climate must reconnect with the people.  Executives must put aside that Rolodex of analysts, spin doctors, coaches and gurus – and call their direct reports.  The topic?  Self assessment.  Everyone who manages in this environment must ask, "Are we the type of new-economy managers who have valued form over substance?  Have we engaged in ‘business development’ and ‘brand management’ while the core competencies of our business suffered?"  Managers who succeeded during the bubble will usually find that to some degree they had to be new-economy form over substance managers.  The question then becomes, "Are we the right people to lead now?"

The old adage "Ask yourself before the Board asks you" is even more true today.

So, what to do with the new-economy risk takers?  First and foremost, do not fire them!  These people will be critical when the economy booms again.  They are also the risk takers who will explore new lines of business and form new alliances.  While they might not be right for COO or CFO posts, they need to be put aside for the future.  Create a post-recovery team, with conditions under which they will shine.  The new-economy was all about personal success, find ways to motivate these people, and they will become a secret weapon during the inevitable upturn. 

Whatever the outcome of the self assessment, there are common-sense things that leaders are doing right now:

• Kill Sexy Initiatives That Do Not Deliver Real Results

These projects are usually obvious:  acronym laden, analysis heavy, b-school exercises that always include the word ‘Customer’ but are more about charts and graphs than delivery.  Kill all of them today, drive a stake through their hearts and bury them at the crossroads.  Use the time and energy these initiatives absorb to improve execution, morale, and Customer contact.

• Connect with Customers, not Analysts

Customers are going through this same self-examination.  As a result, project leaders who are the best and brightest with a great pedigree are no longer the right people to impress the Customer.  These were the spin-doctors who amazed the Customers when times were good.  Amaze Customers now with execution focused project leaders that enable Customers to survive and thrive.

• Shutter Product Lines Before Of Laying Off Across The Board

It takes courage to lay off 10% across the board, but it takes more courage to kill an entire product.  Too often, executives reduce all divisions by a flat rate, or focus the pain on ‘back-office’ functions that don’t seem to generate revenue.  Often, however, there is an entire division that is under performing, obstructionist, or does not fit with the future direction of the company.  This division has to go, through layoff, outsourcing, or sale.  It takes real courage to lop off an arm, but sometimes that is the only way out of the trap – losing a few pounds just won’t do the trick.

• Your Direct Reports Must Handle Today While You Plan For Tomorrow

General Joffre couldn’t have held the line without a relentless focus on the fundamentals – by his subordinates.  This is critical, and often overlooked when leaders are under pressure.  A senior executive must ensure that the business can be stabilized, albeit at a lower level than optimal, then leave execution to able subordinates.  The executive first ensures the company will survive the moment, then focuses relentlessly on the future.

• Put People First, Really

During a crisis, one temptation is to short staff before taking other measures.  The theory is that they are the least likely to take action, because the employer can always hold their jobs over them.  What the finance experts who advocate these cuts forget is that if the company is to survive, it must have the goodwill of Customers and employees.  When employees feel cheated, they communicate this fact to the Customers, immediately and directly.  Morale was often not a concern of new-economy managers, but in a crisis, true leaders take it very seriously.

• Never Assume That Support Workload Evaporates With Staff

Most companies have already slashed support and ‘back-room’ staff and functions – there is usually very little room left for reductions.  Unfortunately, a knee-jerk reaction for executives is to cut these departments again when trouble threatens.  Then, when Customers are enraged at shoddy invoicing and failure to comply with contracts, the morale of any remaining support staff plummets.  Administrative overhead is difficult to compress or ‘optimize’ – even with high technology, a clerk can still only process so many invoices in a day.

• Never Trust HR To Determine Who Should Stay And Who Should Go

Generals always plan for the last war, and HR departments always staff for the last boom.  Look at the job descriptions that the HR department is using; they will probably have very little relationship to what front-line people are actually doing.  Also, realize that after any lay-off, the Great Workload Shuffle begins.  Mid-level managers who made assumptions that workload would move to other departments cut too deeply in the wrong areas.  This is where all of that business process engineering navel gazing can be put to good use.  Always try to make a change for the better, which incidentally involves fewer people.  

• Be Relentlessly Compassionate

The news is full of arrogant dot-coms having lavish parties during layoffs, or paying millions of dollars to executives who have manifestly failed to meet expectations.  A leader thinks carefully about the perception that investors, workers, and their community will form around actions during a crisis.  Give people time to adjust to new roles or responsibilities.  Recognize that none of the rules of human interaction disappear during tough business times, in fact they become far more important.  A leader puts their personal stress aside, and focuses on others.  Finally, remember that what was 'quirky' but appropriate during the boom is front-page news during the bust.

• Be Visible, Every Day

The worst thing a leader can do is hide.  Every employee needs to have a sense that the people at the top have a plan.  If those top people disappear, it is hard for the front-line people to build that confidence in a vacuum.  Hiding behind inspiring emails sent through administrative assistants is the absolute worst.  Some consultants advise that the senior executives be invisible around layoffs, and this may be good advice.  Do not, however, fly to Switzerland, go skiing, or participate in some other highly visible activity.  Either be totally visible, or disappear without a trace – never let the employees believe that executives are partying while they are worried about their jobs.

• Find The High-Touch, Execution Focused Managers, Then Get Them Moving

This is a hard pill for most executives to swallow.  It implies that retention and promotion decisions made during the bubble were wrong.  They weren’t, but failing to change the team to meet the times is the worst error an executive can make.  Communicate that these are different times, and different leaders can achieve better results.  Change a few of the executive team at the same time, and eliminate the ‘hangers on’ to executive management.  All of those high-potential individuals belong in the trenches, saving the business – not holding the coats of executives.

• Focus, Focus, Focus

Stay relentlessly focused on rebuilding.  If the management team has a short attention span, it will not survive.  In the bubble, it was possible to pursue a dozen different initiatives and hope that the long shots would pay off.  Now that the bubble has burst, it is time to look at return on investment, and make the hard choices that will enable the business to survive.  Trying to balance too many initiatives is even more damaging than pursuing too few.

Finally, realize that the leaders who will survive the hard times are not the ones to lead during the next upturn.  General Joffre did not win the war; he bought time for the French and their allies to learn the hard lessons.  When the time came, he was replaced by a successful, optimistic risk-taker.  This is the way leadership works, no one person is right for every time and circumstance.  If the risk-takers were encouraged and kept with the company, this is their time to re-emerge.

The trick for senior leaders is always to put the right people, in the right place, at the right time.  It is amazing how often we forget that.

- Stephen Sopko

Copyright 2001-2009 Stephen C Sopko, All Rights Reserved.