Used Company Salespeople

On September 9, 2001 I went to visit the JFK museum on the outskirts of Boston. At the end of the tour I bought a number of things including Kennedy's book Profiles in Courage. I read quite a few chapters of it on the subway ride home and early that evening. I found my self wondering what situations would present themselves in our world that would allow for courage and principled stands.

Little did I know that within forty-eight hours there would be so many examples of courage exhibited by so many people in response to the various September 11 attacks.

But what does this have with finance, you may ask? Well increasingly the role of leadership, vision and courage is one that is under the spotlight as the values and judgment of senior business people seem to be constantly being questioned by the media, analysts and investors.

What is the difference between boldness, brashness, pigheadedness and courage? In my view which adjective chosen would depend on the point of view of the person writing the description.

A colleague of mine told me a number of years ago about his meeting with the founder of one of the most successful banks in the Middle East. The founder told my colleague that all that was needed for successful lending was to be able to look the borrower in the eye and see if he was a man you trusted to do business with. It was that simple. My colleague was somewhat disconcerted as he was at the closing dinner for a credit course he had just been teaching for the founder's bank, a week which had been concentrated solely on numbers and not on eye contact.

Now, my view is that the truth is somewhere in between a judgment call and deep analysis. I personally think that banks in the US and Europe have moved too far in the last two decades in looking solely at the numbers and have taken too little notice of the fundamentals of the company's business and where the person at the top is trying to lead that company. As the pace of change increases in all sectors of business the historical numbers will be of less significance than the future strategy of the company.

This leads to a problem for anyone who wishes to pronounce on the health of a company whether it be for share purchasing or lending. A healthy balance sheet, strong cashflow are all traditional measures of a companies health. In the post-Enron age the numbers are going to be looked at more carefully but there are still common criteria that can be used to make sure that the company is in robust health.

Leadership and strategy are a lot more subjective than analysis of the numbers. A strong leader and visionary can often take a company off a cliff as much as take it to the stars.

Reputations of people like Messier and Welch can crash down to earth very quickly. Vivendi, once the darling of analysts has been put under a lot of pressure in recent months as people analyze not only its numbers but more importantly the strategy and style of its leader. Jack Welch's reputation, as the leader who could do no wrong for twenty-five years, is suddenly under attack from a number of quarters including a recent edition of the Economist. My colleagues have discussed Messrs. Lay and Skilling in earlier articles and frankly enough has been said about the current state of their reputations!

There seem to me a great number of things that one should look at when examining the leadership and direction of a company. Here are my personal top five:

Who carries the pig's bladder?
In medieval times the King would have a Jester who would amongst other things hit him over the head with an inflated pig's bladder. The purpose was to remind the King he was mortal. One important thing to look at when examining the leadership style of a CEO is whether s/he can tolerate dissent. If there are only no-face Yes-Men around then there is something to be concerned about.

Does the leader make mistakes?
If so he or she is mortal and I would believe that even the most wonderful leaders mess up on occasion. Maybe a better question is "Do they own up to their mistakes?" In my view if they don't then I would have serious doubts about their ability to be honest with themselves and you.

Is the leader more interested in self-publicity?
Too many interviews in Hello, People or other none-core publications can often be a sign of more interest in self-publicizing than the job in hand.

What happens if a bus hits?
The story goes that Lord Carrington, then Foreign Secretary, was asked to predict who would replace Mrs. Thatcher as leader. As she was very unpopular at the time this was a very tricky question to answer. He politely refused to answer but then was asked who would replace her if a bus ran her over. His response was "the bus wouldn't dare." We have all heard about succession planning and lots of companies pay lip service to it, however, if there is no obvious successor does the vision die under the bus too?

Can you divorce the company from the leader?
Where does Microsoft end and Bill Gates begin? With the founders of companies it is often the most difficult question but it is also relevant for companies like General Electric, whose leader had become so synonymous with the company. This is neither a good nor a bad thing but something that you should be aware of.

There are many other criteria to be concerned with. This really is an art not a science and each individual has to make a call on what their personal blend of values tells them. All I can say is that do not just look at the numbers but look up at the person presenting them and decide whether you would buy a used car from them.