Tag Archives: CEO

Tall & Stupid – Meet the CEO

Robert WadlowThe average height of an Australian Male in 1995 was measured at
174.8cm (~ 5ft 9in) by the ABS. I am 174cm (5ft 8in & ½) tall. So imagine my irritation when I met with the CEO of a major (AUD$1B in revenue) Australian organisation who was around 188cm (6ft 2”). He followed me around the board room as we chatted and not only stood to close to me, but was even leaning over a bit.

I realised afterwards that he was used to using his height to his advantage, which I thought was a bit stupid, so I decided to do a bit of research to make myself feel better. And voila.

Tall people are Authority figures
Pretty much everyone realises that size and status are related, its kind of hard wired from children looking up to adults There has been numerous studies around the phenomena and all its variations. Interestingly, the reverse is also true, we perceive that the more authority a person has, the taller he is. Con men know that titles, height, clothes & trapping convince you that they are authorities as they take your money. Robert B. Cialdini, PH.D. The American Psychologist laid this out plainly in his seminal work from 1984 : Influence – The Psychology of Persuasion.

Authority Figures get Promoted
Professor Tim Judge of the University of Florida discovered in 1993 what had been suspected for a long time. Being tall prompts employers and customers to ascribe more status and authority to a tall person. It also boosts self-confidence, actually making them more successful. When it comes to review time the subjective and objective results of their performance gets them the promotion.

Malcolm Gladwell is his book Outliers discovered that men over 6ft made up only 14.5% of the US population, but the made up 58% of Fortune 500 CEOs. This trend isn’t just overseas either, Andrew Leigh of Australian National University found that in Australia, taller people get paid more!

Stupid People are Overconfident
Its called the Dunning-Kruger Effect named for Justin Kruger and David Dunning of Cornell University who published their study of the cognitive bias in a 1999 scientific paper. According to the scientists, “Overestimation occurs, in part, because people who are unskilled in these domains suffer a dual burden: Not only do these people reach erroneous conclusions and make unfortunate choices, but their incompetence robs them of the metacognitive ability to realize it.”

Overconfident People get over Promoted
Overconfidence is an interesting trait – there are many papers on the strategic and mathematical value of overconfidence in negotiations and approaches to problems as well as its role in the downfall of individuals and organisations. Cameron Anderson and Sebastien Brion at the University of California Berkeley had a look at this and concluded that “overconfident individuals will be perceived as more competent by others, and should attain higher levels of status, compared to individuals with more accurate self-perceptions of competence”. That’s because overconfident people send out more “competence cues”. For example they talk louder, have more confidence in their opinions and use more emphatic gestures. This is all wrongly interpreted as signs of actual ability.

The Conclusion
So now I have a new hypothesis which I am testing regularly. If I meet a CEO and he’s tall and overconfident, chances are he’s completely stupid.

Hard or soft serve?

Last year I met with a British researcher who was out in Australia to talk about Innovation policy.  From my point of view, the interesting thing about David Connell was that not only was he a researcher at Cambridge, but he was also, until recent years, the CEO of a Venture Capital fund specializing in technology.

David spoke of a concept that he had, dividing business offerings into “hard” and “soft”.  Basically when your offering was quite malleable and different for every customer, you were considered a soft business, or when the offering was fixed, a hard business.  Businesses could also have both hard and soft offerings at the same time.

Fore example, consider a hairdressing salon.  They sell shampoos and hair treatment products and hair colouring services, these products and services are the same every time they are sold, and are therefore “hard” offerings.  However the salon also sells haircuts, which are different for every customer and are priced differently.  This would be considered a “soft” offering.

David was using the concept ,amongst other reasons, to differentiate whom was paying for innovation.  When you have soft offerings, your customer pays for your R&D, with hard offerings the business or its investors pay.

Now when I was in advertising, we regularly had small engineering businesses, wanting marketing assistance.  However they always shied away from mass marketing programmes, as direct selling had traditionally been where they had got results.  Unfortunately, we didn’t have a conceptual framework to explain what was happening and work with their intuition.

It’s occurred to me since though that this hard / soft concept also makes for an interesting way of viewing marketing spends.  When your offering is soft, business is best generated through one to one relationships (salespeople).  When your offering is hard, one to many advertising spends always work best.

Soft offerings need that (more expensive) feedback loop where the salesman listens to the requirements and continuously tailors the offering to suit.

I feel that this explains a phenomena I regularly see in small technology and consulting businesses, where the CEO normally outsells all other sales people combined.  The offering is generally much more than just a product, and therefore generally a soft offering.  Consequently it needs a salesperson to get the sale across the line; and whom better than the CEO, who has the authority to make any change instantly to make the customer happy. Consequently he will always be the person that customers want to develop a relationship with.

Alternatively it can also explain why sometimes mass marketing programs have difficulty selling your offering.  It may be because your offering is actually soft, and it takes a one-to-one “relationship” to close the deal.

So I’m thinking that this idea creates a couple of useful points:
1.       If your offering changes depending on what the customer wants, spend the majority of your money on sales programmes, not advertising.
2.       If you want to be able to access efficiencies through mass marketing programs, you need to harden up your offering before you will achieve success.

There is a fair bit more that you can do with this concept, especially around redesigning a business to make it more scalable.  For the meantime though I think it’s a nice concept, especially considering the conflict that normally concurs when you have sales and marketing people try to agree on anything.

From Kitchen table to IPO – Pick up the New Skills

Last week I talked about the selecting your Advisors when going public that came out of the Churchill Club programme “from Kitchen table to IPO”. which we ran on the 17th April.   We were joined by Silvio Salom of Adacel Technologies Ltd , Leon Lau of Peoplebank Ltd and Michael Abela of Mobi Ltd .

This week I wanted to pass on the main points (as noted by me) that were made by our panel around the news skills required for a public company CEO that you better get on top of:

1.    First and foremost, check your expectation as at the door.  Remember that if you end up with less than 20-30% of your business, you may no longer actually be in control.

2.    Get good at managing your time and your life as the CEO of a Public Company job layers on top of your “managing the business” job.  As a corollary, get good at finding good people to delegate to and trust them to do their job.

3.    Understand that operational management is now very much focused on hitting your forecast numbers, not just simply doing your best.

4.    Good governance and good processes are now critically important.  As a public company you are now much, much, much more likely to be sued.

5.    Understand Australian accounting standards.  Disappointing I know, but just because you want to recognize a transaction as revenue, doesn’t mean you will be allowed to.

6.    If you’re going to grow overseas, get an understanding of relevant international laws, tax and accounting standards.  Its not just Australian companies that are going to sue you.

7.    Get some media training and get good at briefing your PR agents.  The market will be unforgiving if the right thing comes out the wrong way.  Also remember you will now have at least 400 shareholders that will be happy to ring and give you advice on “their” company.

8.    Its not just managing your chairman anymore, get used to managing the entire board.  Handled right, the board can be of enormous benefit.

9.    Accept the fact that you have lost your privacy.  Your staff and competitors now know where you live and how much you earn.

10.    Finally, understand and appreciate that you operate within a stock market.  If you don’t understand the ethical and legal issues around Directors taking out margin loans to invest in your stock in an environment of continuous disclosure, then you better get on top of it.

Apparently though, the perks outweigh the pressures.

From Kitchen Table to IPO – Select your Advisor carefully

Last week I talked about the strategy for going public that came out of the Churchill Club programme “from Kitchen table to IPO”. which we ran on the 17th April. We were joined by Silvio Salom of Adacel Technologies Ltd , Leon Lau of Peoplebank Ltd and Michael Abela of Mobi Ltd ..

This week I wanted to pass on the main points (as noted by me) that were made by our panel around selecting advisors to go public with:

  1. If you are thinking about going public, the market will soon know and you will be inundated with offers from potential advisors. But select those you want to interview from recommendations you get from your peers.

  1. Select Advisors that you feel comfortable with. You are a novice in the area and simply can’t know everything. So make sure you trust your instincts as well as your spreadsheets.

  1. Recognize that you are potentially swimming with sharks. As a general indicator – Large Advisor means large fees, small Advisor means small fees but no discipline.

  1. Be prepared to cancel a contract if you don’t like where it’s going. The short term pain is worth the long term gain.

  1. The best advice was to select Advisors that will be offering you advice not just up to the listing, but for future activity and capital raisings as well. Advisors that will be there for the long haul, not just dumping you as soon as you have left the altar. Consequently you should look at remunerating your advisors for long term success, not just listing.

  1. Understand that once you have listed, you have moved up to a brand new bracket for costs and fees. The lawyer’s advice that took $5,000 may now cost $20,000.

Next week, I want to cover off the last topic – the new skills required as a public company CEO.

From Kitchen Table to IPO – What’s your strategy?

During the dotcom era, the Holy Grail was to found a technology company, get capital, list it then move on. But very few achieved this. In fact the few that did setup business that listed generally hung around and had some fascinating learning experiences on the way.

So on the 17th April at the Churchill Club, we ran a programme called “from Kitchen table to IPO”. Which was a look at those experience. We were joined by Silvio Salom of Adacel Technologies Ltd , Leon Lau of Peoplebank Ltd and Michael Abela of Mobi Ltd .

The evening was a look at what has been learnt by founders of public company’s in three areas:

A. The underlying strategy for going public
B. The issues around selecting advisors, and
C. The new skills to be acquired.

This week I wanted to pass on the main points (as noted by me) that were made by our panel around the strategy of going public:

1. Know exactly you are going to list and what you are going to do with the money. Because if you don’t your share price will tank and you will get removed.

2. You are either listing to be rewarded and exiting, or, to get access to capital. Decide which it is before you float. If its get access to capital, make sure you leave room for going back to the market.

3. The business better be prepared to grow with the capital before you list. Because you are simply not going to have time to address these operational problems effectively afterwards.

4. Accounting systems, operations and governance should be tidy before the float, not afterwards. See above.

5. Be prepared for a new job (CEO of a Public Company) to be added on top of your existing job (managing the business). The CEO’s job is a completely new set of tasks which may take you years to master.

6. Be prepared for at least 400 new shareholders holding you personally accountable for the share price. They will ring you!

7. Be prepared to no longer control your business. Its no longer your shop. You effectively need to have 20-30% equity to control what’s going on.

8. Think carefully about how you want to list. A small market capitalization (say less than $100M) means low liquidity for shareholders (not many buyers or sellers) which translate to an inability to raise further capital. Analysts and brokers will not be interested in you either.

Next week, the issues around selecting an advisor.