A few excerpts from "Legislation includes extra snag for start-ups", from the November 2009 issue of Australian Private Equity & Venture Capital Journal:
Passage of the Federal Government's Tax Laws Amendment (2009 Budget Measures No. 2) Bill 2009 will damage the ability of start-up companies to attract high calibre staff through change to taxation rules on employee share plans.
Plans that currently offer either a cash or share alternative at the discretion of the employer or where the number of shares to be acquired under the plan cannot be determined until a future event, have not, until now, been subject to tax under the employee share scheme (ESS) rules until a definite share or right to a share is acquired. Such employment benefits will now be taxed under the ESS rules as though they have always been ESS interests.
According to Sally Morton, tax partner with Deloitte, many companies will find that existing plans are affected by these changes and where the award under the plan has not yet vested in either cash or shares the company may discover unexpected tax consequences for participating employees.
The legislation was initially outlined in the federal budget in May and was primarily intended to restrict the advantages of employee share plans as used by large listed companies.
[The Australian Private Equity & Venture Capital Association Limited] pointed out that such plans, and particularly the allocation of share options that were tax free until vested, were important means by which cash-strapped start-up companies could recruit high calibre staff. Changes were made but not in this area, however the government did ask the Board of Taxation to determine whether relief should be afforded to small companies including start-ups.
In the second module of Leadership In Action (Fortune's DIY leadership development system see video), Steve Brown says:
"The way you evaluate a manager is not how badly people need the manager, but what can they do without the manager. The purpose of leadership, the purpose of management, is to create an entity that will function in the manager's absence."
In other words, a fundamental element of leadership is instilling in people the critical importance of being accountable. And when we don't, we set ourselves and our business up to fail. How could we possibly succeed if our employees rely on us to solve every problem they face, if they expect us to be on call 24/7 to be 'the answer person'? You would think no one would try to build or run a business with such dependent employees (unless failure's okay with them, I guess!).
However, all of us, all too often, deal with employees who clearly have no sense of accountability. For example:
On a Saturday afternoon a few months ago, Angelo, General Manager (Client Services) at Fortune Australia, went to an auto shop to purchase a new set of tyres. This was a place he'd been countless times before, always with good customer service. But on this occasion, it was only 15 minutes until closing time. And because the employee on duty had already started to clean up, he refused Angelo's business and directed him to one of the company's dealerships five kilometres away.
Angelo didn't drive the five kilometres; instead, he drove across the street to a competitor. And now, despite it being only 10 minutes to closing time, the competitor didn't flinch on Angelo's request. A mere 20 minutes later – now 10 minutes past closing time – Angelo had a fresh set of tyres.
Thanking the competitor, Angelo remarked, "I've always gone to the guys across the road, but when I asked them for these tyres, they refused. I'm surprised you were willing to do it."
The guy laughed. Angelo asked why.
"The boss must not be there."
Say what you want about the employee – sure, he should have helped Angelo – but for him to feel so little sense of obligation in the boss's absence, for him to feel like he could refuse a customer 15 minutes before closing time, that falls squarely on the shoulders of the boss. This is a failure of management, not of the employee. Everything begins and ends with management!
When the boss doesn't hold employees to account, the business absolutely fails in his or her absence to help the customer. And because that's the reason the business exists, it deserves to fail. This auto shop missed out on Angelo's business... not just on that day, but probably forever. What's the lifetime value of a customer worth to your business?
Part 1 of this series of posts on leadership development illustrated how more and more of today's leaders are neglecting to develop their next tier of managers and thus failing in one of their primary duties to their organization. Part 2 touched on how we can avoid this problem altogether: in short, treat that next tier of managers like strawberries, not mushrooms.
Now we look at the first of a few examples for how we can treat middle management like strawberries.
Sam Walton, founder of the American retailer Wal-Mart, espoused a list of what he considered to be the ten most important rules for business success. Recapped by Jim Thomason here, a common theme throughout the list is that of transparency. For example:
Rule 2: Share your profits with your associates, and treat them as partners.
Rule 4: Communicate everything you possibly can to your partners.
Rule 7: Listen to everyone in your company.
A couple of things to note about these rules.
- This transparency isn't just a one-way road from the top of the organization to the bottom. Rule 7 illustrates that it's just as important for a company to be transparent from the bottom up, so that everyone in the business can be heard.
- Thomason notes that Walton "uses 'associates' and 'partners' as interchangeable terms for his employees and vendors. That was his genius; that he felt everyone who worked for him or supplied to him was his equal and an expert from whom he could learn."
In creating a fully transparent company, with open avenues of communication both up and down the corporate ladder, Walton created a culture of inclusion, in which management felt as though they were a trusted and valued part of the business. And who can argue with the results: today Wal-Mart stands as the world's third largest corporation!
Can you think of other examples of companies that have employed transparency to such good results?
Please share your thoughts in the comments section of this post.
As discussed in Part 1 of this series of posts, we're seeing more and more that today's leaders are neglecting to develop their next tier of managers and thus failing in one of their primary duties to their organization. Today we look at how this relates to the title of these posts, and how it can be avoided.
During a Fortune Group management workshop, a disgruntled employee re-iterated an age-old sentiment, "We feel like mushrooms in here. They keep us in the dark and feed us on **** otherwise known as manure." This may sound like an extreme sentiment, to be sure. But as the links from last week's post (here and here) demonstrate, there's no doubt it continues to happen in today's business environment.
So how does this problem get fixed? Or better yet, how do we avoid it altogether?
In theory, it's an easy, straightforward answer: senior management must create a culture of inclusion, one in which middle management never feels like a mushroom. Instead, they are treated as, say, strawberries. They should receive attention, they should receive encouragement and they should receive the appropriate resources to grow... themselves, their people and the organization.
In practice, the answers to these challenges aren't always so easy to answer. Not because they're necessarily hard issues to address, but because there are so many ways to address them!
We have a few unique and innovative examples of businesses that have treated middle management like strawberries, and we'll get to those in future posts. But for now, we want to turn the floor over to you.
How can we treat middle management like strawberries? Can you cite examples that exemplify this?
Let us know your thoughts in the comments section of this post.
Steve Brown, Chairman of The Fortune Group International, asserts that a leader has two purposes:
- Provide for the continuation (aka survival and prosperity) of the business
- Develop your next tier of managers
This second purpose, of course, feeds directly back into the first; in order to ensure a company's lasting success, a leader must develop people to do their job 'as if they would be replacing them' after they leave. However that requires emotional maturity and a longer-term perspective, something leaders are often conditioned to neglect. They can so easily get caught up in the now – in appeasing shareholders, in reaching quarterly targets, in looking good in the press – that they fail to look effectively beyond the next board meeting. It also requires a leader's willingness to be open and transparent, and to communicate not only what the role is but how to do it.
Over the last few weeks, I've been seeing more and more evidence that this absolute imperative is being disregarded more than ever.
First I came across a press release which says that in 2008, nearly half (36 out of 80) of the new CEOs appointed to Fortune 1000 companies were from outside the firm. By the simplest of measurements, the preceding CEOs of those 36 companies failed as leaders.
Then I read a piece on John Baldoni, who argues that CEOs must empower middle managers. This encourages greater levels of commitment, which in turn translates into fulfilment of the second purpose: the development of future leaders. However, Baldoni ends with a sobering commentary on the current economic environment:
This economic recession has seen far too many senior executives leaving their companies in dire straits; in retrospect, they failed totally as leaders. Had stronger leaders existed – and had they been allowed to voice their opinions – some of the more egregious risk-taking might have been mitigated.
Clearly, many of today's leaders are failing spectacularly!
How does this all relate to the title of this post? Find out in Part 2 next week...