Mergers and acquisitions is not strategy

Based on the many customer engagement I work with in the field of Mergers and Acquisitions, I would like to write about some of the ideas, benefits, critical success factors and pitfalls. However let me start with saying that  M&A is not strategy in and of itself, but a vehicle for executing a strategy and delivering shareholder value. A Merger and Acquisition is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. There are 15 different types of actions that a company can take when deciding to move forward using M&A. Usually mergers occur in a consensual (occurring by mutual consent) setting where executives from the target company help those from the purchaser in a due diligence process to ensure that the deal is beneficial to both parties. Acquisitions can also happen through a hostile takeover by purchasing the majority of outstanding shares of a company in the open market against the wishes of the target's board. In the United States, business laws vary from state to state whereby some companies have limited protection against hostile takeovers. One form of protection against a hostile takeover is the shareholder rights plan, otherwise known as the "poison pill". Historically, mergers have often failed (Straub, 2007) to add significantly to the value of the acquiring firm's shares (King, et al., 2004). Corporate mergers may be aimed at reducing market competition, cutting costs (for example, laying off employees, operating at a more technologically efficient scale, etc.), reducing taxes, removing management, "empire building" by the acquiring managers, or other purposes which may or may not be consistent with public policy or public welfare.

 

M&A is buying smart and integrating successfully. Although they are often uttered in the same breath and used as though they were synonymous, the terms merger and acquisition mean slightly different things. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. In the pure sense of the term, a merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals". Both companies' stocks are surrendered and new company stock is issued in its place. For example, both Daimler-Benz and Chrysler ceased to exist when the two firms merged, and a new company, DaimlerChrysler, was created.

 

In practice, however, actual mergers of equals don't happen very often. Usually, one company will buy another and, as part of the deal's terms, simply allow the acquired firm to proclaim that the action is a merger of equals, even if it is technically an acquisition. Being bought out often carries negative connotations, therefore, by describing the deal euphemistically as a merger, deal makers and top managers try to make the takeover more palatable.

 

 

M&A is challenging and requires focused  and sustained effort. The dominant rationale used to explain M&A activity is that acquiring firms seek improved financial performance. The following motives are considered to improve financial performance:

Synergies: This refers to the fact that the combined company can often reduce its fixed costs by removing duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit margins.

Increased revenue/Increased Market Share: This assumes that the buyer will be absorbing a major competitor and thus increase its market power (by capturing increased market share) to set prices.

Cross selling: For example, a bank buying a stock broker could then sell its banking products to the stock broker's customers, while the broker can sign up the bank's customers for brokerage accounts. Or, a manufacturer can acquire and sell complementary products.

Economies of Scale: For example, managerial economies such as the increased opportunity of managerial specialization. Another example are purchasing economies due to increased order size and associated bulk-buying discounts.

Taxes: A profitable company can buy a loss maker to use the target's loss as their advantage by reducing their tax liability. In the United States and many other countries, rules are in place to limit the ability of profitable companies to "shop" for loss making companies, limiting the tax motive of an acquiring company.

Geographical or other diversification: This is designed to smooth the earnings results of a company, which over the long term smoothens the stock price of a company, giving conservative investors more confidence in investing in the company. However, this does not always deliver value to shareholders (see below).

Resource transfer: resources are unevenly distributed across firms (Barney, 1991) and the interaction of target and acquiring firm resources can create value through either overcoming information asymmetry or by combining scarce resources.

Vertical integration: Vertical Integration occurs when an upstream and downstream firm merge (or one acquires the other). There are several reasons for this to occur. One reason is to internalise an externality problem. A common example is of such an externality is double marginalization. Double marginalization occurs when both the upstream and downstream firms have monopoly power, each firm reduces output from the competitive level to the monopoly level, creating two deadweight losses. By merging the vertically integrated firm can collect one deadweight loss by setting the upstream firm's output to the competitive level. This increases profits and consumer surplus. A merger that creates a vertically integrated firm can be profitable.

 

However, on average and across the most commonly studied variables, acquiring firms’ financial performance does not positively change as a function of their acquisition activity.Therefore, additional motives for merger and acquisiiton that may not add shareholder value include:

Diversification: While this may hedge a company against a downturn in an individual industry it fails to deliver value, since it is possible for individual shareholders to achieve the same hedge by diversifying their portfolios at a much lower cost than those associated with a merger.

Manager's hubris: manager's overconfidence about expected synergies from M&A which results in overpayment for the target company.

Empire building: Managers have larger companies to manage and hence more power.

Manager's compensation: In the past, certain executive management teams had their payout based on the total amount of profit of the company, instead of the profit per share, which would give the team a perverse incentive to buy companies to increase the total profit while decreasing the profit per share (which hurts the owners of the company, the shareholders); although some empirical studies show that compensation is linked to profitability rather than mere profits of the company.

 

The failure rate among M&A deals is very high:

·         58% of mergers failed to reach goals set by top management (Survey by AT Kearney)   

·         Deal costs were recovered within 10 years in only 23% of all transactions (The Economist Survey)

·         In almost 60% of all cross-border transactions, the acquiring company did not earn back its cost of capital (Business Week Research)

·         50% of transactions result in same or lower profits (Business Week Research)

·         Of 150 recent deals about half destroyed shareholders wealth (Business Week Research)

 

I have looked over the numerable M&A projects I have worked with and have come to the overall conclusion that M & A failure occur during different stages of the transaction^:

·         About 30% Strategy development, candidate screening, and due diligence

·         About 20% Negotiation and closing

·         About 50% Post-merger integration

 

The classic M&A challenges:

 

Rewards:

• Produces rapid growth
• Adds capabilities
• Builds scale
• Expands geographic markets

 

Regrets

• Adds significant risk
• High probability of failure
• Very expensive
• Effects on management

 

Effects on management:

A study published in the July/August 2008 (Mergers and Acquisitions Lead to Long-Term Management Turmoil Newswise) issue of the Journal of Business Strategy suggests that mergers and acquisitions destroy leadership continuity in target companies’ top management teams for at least a decade following a deal. The study found that target companies lose 21 percent of their executives each year for at least 10 years following an acquisition – more than double the turnover experienced in non-merged firms. In order to change that, three major assumptions determine the content of the change management work streams:

1.    Strategic rationale behind a merger has to determine the focus of the post-merger transition and integration tasks

2.    Merger is never one merger, but made up of tens of hundred of mini-mergers. Each mini-merger needs its own reconciliation process

3.    Cultural clashes and differences in management processes and styles reflect different mind-sets of two organizations. Recognition of this fact and the necessity of professional expertise in addressing these problems is blocked by perception of their vagueness and invisibility

 

However often forgotten is that there has to be a link between change management and the critical value drivers (critical success factors). E.g. here are six critical success factors to make a Merger and Acquisition a success:

1.    Wisdom of the deal - as seen by the marketplace and the merger partners

2.    Soundness of the due diligence - understanding what you face

3.    Preoccupation with driving the value of the deal

4.    Moving as fast as possible

5.    Thoroughness of the post merger integration programme and its implementation

6.    Utilisation of scarce leadership talent: effecting the merger while leading the existing businesses

 

In order to get these and other important critical success factors throughout the M&A lifecycle in place, real success demands a value-creating approach. I have over the years developed such a  M&A value-creating approach/method and if you need help in better understanding and exploiting such a value-creating approach. Let’s talk about how I can help you explore the levels of value creation you are looking for in your merger and/or acquisition.

 

If you have any questions please feel free to contact me via email: mvr@rosenteam.com

 

Regards your moderator

 

Mark von Rosing

something to ponder about

In psychology as well as in spirituality, it is argued that one most find the balance in and between the extremes. I always felt that leadership had a lot to do with that as well.

 

So when I feel over this quote, I was really happy and want to share it:

 

“The challenge of leadership is to be strong, but not rude; be kind, but not weak; be bold, but not bully; be thoughtful, but not lazy; be humble, but not timid; be proud, but not arrogant; have humor, but without folly. The difficulty is to communicate and live this in word and in action”

 

In the many years I have worked with coaching and helping people in growing and developing, have I realized that a weakness is often a missing balance/opposite of a big strength one might posses.

 

Not always applicable, but maybe it gives you something to ponder about

 

Regards Mark

Leadership Growth and Development through strengthening your Character traits

I will try to summaries’ how you as a manager or executive can grow through a Leadership Character Development Model. The Leadership Character Development Model is a prescriptive leadership growth development theory developed in 2006 by Cay Clemmensen and myself in a Leadership Development Coaching engagement we had in our company Rosen Team for a large Global Company.

Why work on your Leadership Development? Well, let’s face it........ all of us know that there are certain things in our leadership skills, that we should or could do in a better way, but too often we don't know how - or don’t really get started on the change process we should be going through. So we all actually work against some barriers that somehow keep us from doing what is best for us and the people we lead- and from realizing and living our true leadership potential.

The leadership Character Development Model that we believe that could be useful for each manager or executive, could actually in a simplistic way be visualized as a scale, where integrity is the strong and solid base, and respect and responsibility are balanced on either side. A leader with integrity is honest, trustworthy and authentic. They are also respectful of others and have a strong sense of leadership responsibility. Relationship and respect is developed by the component qualities of Empathy, Emotional Mastery, Lack of Blame and Humility. Responsibility is developed by the component qualities of Accountability, Courage, Self Confidence and Focus on the whole (as a leader with the abilities).

The 10 Social Competences of the Leadership Character Development Model that a each leader should have:
1. Social Competence skill - Respect
2. Social Competence skill - Empathy
3. Lack of Blame
4. Emotional Intelligence skill - Humility
5. Emotional Intelligence skill - Emotional Mastery
6. Emotional Intelligence skill - Responsibility
7. Emotional Intelligence skill - Accountability
8. Emotional Intelligence skill - Self-Confidence
9. Emotional Intelligence skill - Courage
10. Social Competence skill - Focus on the whole

1. Respect
The leader, that demonstrates Respect show’s unconditional high regard for others, acknowledging their value as human beings, regardless of their behavior (and isn't that what it is we wish from others). The respect comes through in all situations, even during times of conflict or criticism. Demonstrating respect for others requires developing and refining the following core leadership qualities (not faking it).

2. Social Competence skill - Empathy
Treating everyone in the organization with empathy helps leaders earn trust. Leaders who are empathetic create strong bonds and are seen as less political. The leader who demonstrates the core quality of empathy:
• Can understand others’ points of view, including the views of those who are different
• Shows genuine concern for others
• Listens with understanding
• Is respectful even when he or she has nothing to gain from the relationship

3. Lack of Blame
The leader who doesn’t blame others is not defensive. They are able to reflect honestly on their own behavior and are willing to admit mistakes. When things go wrong, they don't spend time assigning blame; they spend time fixing the problem. A leader who demonstrates the core quality of lack of blame:
• Admits fault when appropriate – even to customers
• Does not look for a scapegoat in a crisis
• Spends time fixing problems, not assigning them

4. Humility
Humility is a lack of pomposity and arrogance. It is the recognition that all leaders are fallible, that we are all combinations of strengths and weaknesses. Each one of us who demonstrate humility, as someone has said, "don't think less of themselves; they just think more of others." Arrogance derails more leaders than any other factor. A leader with the core quality of humility:
• Listens to others with an open mind
• Doesn't brag or name drop
• Clearly sees and admits their own limitations and failings
• Is not afraid to be vulnerable

5. Emotional Intelligence skill - Emotional Mastery
Leaders’ who have developed emotional mastery recognize that, as Epictetus said 2000 years ago, "It's not the facts and events that upset man, but the view he takes of them." For those in positions of formal power, the most important aspect of emotional mastery may be controlling anger. Outbursts of anger have no spot in the workplace, and can quickly destroy a sense of organizational equity and partnership. A leader with the core quality of emotional mastery:
• Says what he or she thinks, but never berates others
• Stays calm even in crisis situations (which makes him or her active rather than reactive)
• Doesn't let anxiety interfere with public speaking or with other things that need to be done
• Reflects before reacting and is able to consciously and actively choose an appropriate response (which is different than 90% of all leaders)

6. Responsibility
Responsibility is the acceptance of full responsibility for leadership success and for the success of the chosen partner and kids.

7. Accountability
The leader who is truly accountable expand their view of organizational responsibility. At all levels, accountable leaders do what they can to get done what needs to get done, no matter where in the organization they have to go. They NEVER say, "It's not my job." They also hold themselves accountable for making their team and relationships work - they don't say, "Well, I'll go halfway if they will." They take 100% responsibility for making any relationship work. A leader with the core quality of accountability:
• Takes the initiative to get things done
• Is not afraid to hold others accountable
• Is willing to cross departmental boundaries to help with a meaningful company development
• Takes leadership responsibility for organizational success

8. Emotional Intelligence skill - Self-Confidence
The leader who is self-confident feels that they are the equal of others, even when those others are in positions of much greater formal power. The leader who is self-confident also recognize the value of building the self-confidence of others and won't be threatened by doing so. Self-confidence in everyone builds a sense of partnership and helps the organization get maximum effort and ideas from everyone. A Leaders’ with the core quality of self-confidence:
• Has a self assured bearing
• Is flexible and willing to change
• Easily gives others credit
• Isn't afraid to tell the truth

9. Emotional Intelligence skill - Courage
The leader with courage is assertive and willing to take risks. They ask forgiveness rather than permission, and are willing to try even though they might fail. They are willing to risk conflict to have their ideas heard, balancing that with the respect that makes constructive conflict possible. A leader with the core quality of courage:
• Champions new or unpopular ideas
• Talks to others, not about others, when there is a problem
• Accepts feedback and really hears what others say
• Takes the ball and runs with it, even when there are obstacles

10. Focus on the whole
The leader that focuses on the whole think in terms of the good for the entire organization, not in terms of what's good for them, their team or their department. They can see interdependencies and can see beyond what is immediately observable. They have an understanding of and enthusiasm for the business and an understanding of their industry. For example, if working on a software project, they consider the implications of the whole project and commit to an outcome that works for the customer rather than focusing on just their piece of the project. A leader who demonstrates the core quality of focusing on the whole:
• Realizes that they represent their company (not themselves)
• Sees how the work in their area affects the entire project and the entire organization
• Gathers information from people involved when making important decisions
• Shares information throughout the company and understands the value of a knowledgeable workforce

I know that when we talk about the Leadership Character Development Model necessary for leaders’ to influence the way they manage their leadership development process, that these are very psychological soft skills we are talking about and as you can read from my different article, do I strongly believe that leadership excellence is made, not born. That's why I actually wanted to create this Blog and Forum and I'm dedicated to helping you leadershiply grow beyond where you are today. If you need help in better understanding and exploit your potential in order to turn you into action mode and help you break through self imposed limitations that are holding you back from the power, balance, growth, and success that you strive for. Let’s us talk about how I can help you explore how it is possible to build new levels of a character - helping you to remove the mental and emotional obstacles that are limiting your leadership and professional growth, power and leadership development.

If you are interested in a course that can strengthen this ability this could be an option:
1) www.rosenteam.com/leadership-performance/emotional-intelligence-in-leadership/

2) www.rosenteam.com/leadership-performance/become-a-mentor-and-coach/

3) www.rosenteam.com/leadership-performance/advanced-leadership-coaching-program/

If you have any questions please feel free to contact me via email: mvr@rosenteam.com

Regards your moderator

Mark

 

Different qualities of a leader

A very interesting realization I have made is that on nearly each leadership coaching I have, there are a lot of different discussions about what leadership really is and what different qualities of leadership are there? Surly there will be so many different answer, some go in the direction that you are ether a leader or not (the born leader theory), which is basically not true. But the question remains what is a leader and or what makes a leader and what are some of the qualities?

 

Studies of leadership have suggested qualities that people often associate with leadership. They include:

·         The ability to get a vision of something or a vision of direction

·         A clear sense of purpose (or mission) - clear goals - focus - commitment

·         Charismatic inspiration - attractiveness to others and the ability to leverage this esteem to motivate others

·         Ability to encourage and nurture those that report to them - delegate in such a way as people will grow

·         Results-orientation - directing every action towards a mission - prioritizing activities to spend time where results most accrue

·         Preoccupation with a role - a dedication that consumes much of leaders' life - service to a cause

·         Cooperation - work well with others (this is a part of social competence)

·         Role models - leaders may adopt a persona that encapsulates their mission and lead by example (it should always be – do as I do, not only do as I say)

·         Technical/specific skill at some task at hand

·         Self-knowledge (in non-bureaucratic structures)

·         Self-awareness - the ability to "lead" (as it were) one's own self prior to leading other selves similarly (emotional intelligence competence)

·         Social-Competence (this has become a more and more demanding task in leadership)

·         Optimism - very few pessimists become leaders

·         Rejection of determinism - belief in one's ability to "make a difference" (your mindset, is in reality will make the difference)

 

I know we talk about traits, but in the end the end I would like you to think about what the Leadership business guru -David McClelland said about leadership skills. He believed that it was not so much as a set of traits, but as a pattern of motives (very interesting thought). He claimed that successful leaders will tend to have a high need for power, a low need for affiliation, and a high level of what he called activity inhibition (one might call it self-control). The rest they need to learn

 

I'm looking forward to read some inspiring thoughts about this subject

 

Regards – Mark von Rosing

Leadership Excellence - That Gets Results

Managers often fail to appreciate how profoundly the organizational climate can influence financial results. It can account for nearly a third of financial performance. Organizational climate, in turn, is influenced by leadership style—by the way that managers motivate direct reports, gather and use information, make decisions, manage change initiatives, and handle crises. There are six basic leadership styles. Each derives from different emotional intelligence competencies, works best in particular situations, and affects the organizational climate in different ways.

 

1. The coercive style. This “Do what I say” approach can be very effective in a turnaround situation, a natural disaster, or when working with problem employees. But in most situations, coercive leadership inhibits

the organization’s flexibility and dampens employees’ motivation.

 

2. The authoritative style. An authoritative leader takes a “Come with me” approach: she states the overall goal but gives people the freedom to choose their own means of achieving it. This style works especially

well when a business is adrift. It is less effective when the leader is working with a team of experts who are more experienced than he is.

 

3. The affiliative style. The hallmark of the affiliative leader is a “People come first” attitude. This style is particularly useful for building team harmony or increasing morale. But its exclusive focus on praise can

allow poor performance to go uncorrected. Also, affiliative leaders rarely offer advice, which often leaves employees in a quandary.

 

4. The democratic style. This style’s impact on organizational climate is not as high as you might imagine. By giving workers a voice in decisions, democratic leaders build organizational flexibility and responsibility and help generate fresh ideas. But sometimes the price is endless meetings and confused employees who feel leaderless.

 

5. The pacesetting style. A leader who sets high performance standards and exemplifies them himself has a very positive impact on employees who are self-motivated and highly competent. But other employees tend to feel overwhelmed by such a leader’s demands for excellence—and to resent his tendency to take over a situation.

 

6. The coaching style. This style focuses more on personal development than on immediate work-related tasks. It works well when employees are already aware of their weaknesses and want to improve, but not when they are resistant to changing their ways.

 

The more styles a leader has mastered, the better.

 

In particular, being able to switch among the authoritative, affiliative, democratic, and coaching styles as conditions dictate creates the best organizational climate and optimizes business performance.

 

It has been more than a decade since research first linked aspects of emotional intelligence to business results. The late David McClelland, a noted Harvard University psychologist, found that leaders with strengths in a critical mass of six or more emotional intelligence competencies were far more effective than peers who lacked such strengths. For instance, when he analyzed the performance of di-vision heads at a global food and beverage company, he found that among leaders with this critical mass of competence, 87% placed in the top third for annual salary bonuses based on their business performance. More telling, their divisions on average outperformed yearly revenue targets by 15% to 20%.

 

More important is that the findings revealed that those executives who lacked emotional intelligence were rarely rated as outstanding in their annual performance reviews, and their divisions underperformed by an average of almost 20%.

 

Further research was made to gain a more molecular view of the links among leadership and emotional intelligence, and climate and performance. A team of McClelland’s colleagues headed by Mary Fontaine and Ruth Jacobs from Hay/McBer studied data about or observed thousands of executives, noting specific behaviors and their impact on climate.

 

How did each individual motivate direct reports?

Manage change initiatives?

Handle crises?

 

It was in a later phase of the research that they identified which emotional intelligence capabilities drive the six leadership styles (mentioned on the top).

How does he rate in terms of self-control and social skill?

Does a leader show high or low levels of empathy?

 

The team tested each executive’s immediate sphere of influence for its climate. “Climate” is not an amorphous term. First defined by psychologists George Litwin and Richard Stringer and later refined by McClelland and his colleagues, it refers to six key factors that influence an organization’s working environment: its flexibility – that is, how free employees feel to innovate unencumbered by red tape; their sense of responsibility to the organization; the level of standards that people set; the sense of accuracy about performance feedback and aptness of rewards; the clarity people have about mission and values; and finally, the level of commitment to a common purpose.

 

The research revealed that all six leadership styles have a measurable effect on each aspect of climate. Further, when they researched the impact of climate on financial results

-          such as return on sales,

-          revenue growth,

-          efficiency,

-          profitability

 

It was found a direct correlation between the two. Leaders who used styles that positively affected the climate had decidedly better financial results than those who did not. That is not to say that organizational climate is the only driver of performance. But it was proven to have a direct relation!

 

Conclusion:

Economic conditions and competitive dynamics matter enormously. But the analysis strongly suggests that climate accounts for nearly a third of results. And that’s simply too much of an impact to ignore. Therefore many managers mistakenly assume that leadership style is a function of personality rather than strategic choice. Instead of choosing the one style that suits their temperament, they should ask which style best addresses the demands of a particular situation. Don’t be a product of your basic emotions and behaviors, you have a choice.

 

Research shows that the most successful leaders have strengths in the following emotional intelligence competencies: self-awareness, self-regulation, motivation, empathy, and social skill. There are six basic styles of leadership; each makes use of the key components of emotional intelligence in different combinations. The best leaders don’t know just one style of leadership—they’re skilled at several, and have the flexibility to switch between styles as the circumstances dictate.

 

Having worked many years as a leadership coach, I do realize that few leaders, of course, have different styles in their repertory, and even fewer know when and how to use them. In fact, when I discuss this subject with many leaders and organizations, the most common responses have been, “But I have mainly one or two of those!” and, “I can’t use all those styles. It wouldn’t be natural.” Such feelings are understandable, and in some cases, the antidote is relatively simple. The leader can build a team with members who employ styles he/she lacks. Take the case of a VP for manufacturing. She successfully ran a global factory system largely by using the affiliative style. She was on the road constantly, meeting with plant managers, attending to their pressing concerns, and letting them know how much she cared about them personally. She left the division’s strategy – extreme efficiency – to a trusted lieutenant with a keen understanding of technology, and she delegated its performance standards to a colleague who was adept at the authoritative approach. She also had a pacesetter on her team who always visited the plants with her. An alternative approach, and one I would recommend more, is for leaders to expand their own style repertories.

 

To do so, leaders must first understand which emotional intelligence competencies underlie the leadership styles they are lacking. They can then work assiduously to increase their quotient of them. For instance, an affiliative leader has strengths in three emotional intelligence competencies: in empathy, in building relationships, and in communication. Empathy –sensing how people are feeling in the moment – allows the affiliative leader to respond to employees in a way that is highly congruent with that person’s emotions, thus building rapport. The affiliative leader also displays a natural ease in forming new relationships, getting to know someone as a person, and cultivating a bond.

 

Finally, the outstanding affiliative leader has mastered the art of interpersonal communication, particularly in saying just the right thing or making the apt symbolic gesture at just the right moment. So if you are primarily a pacesetting leader who wants to be able to use the affiliative style more often, you would need to improve your level of empathy and, perhaps, your skills at building relationships or communicating effectively. As another example, an authoritative leader who wants to add the democratic style to his repertory might need to work on the capabilities of collaboration and communication. 

 

I strongly believe that Leadership excellence is made, not born. Such advice about adding capabilities may seem simplistic – ”Go change yourself” – but enhancing emotional intelligence is entirely possible with practice. That's why I’m dedicated to helping you grow and master practice this difficult task.

 

Regards - Mark

What are hidden drivers of great performance

A growing body of research on the human brain proves that, for better or worse, leaders’ moods affect the emotions of the people around them. The reason for that lies in what scientists call the open-loop nature of the brain’s limbic system, our emotional center. A closed-loop system is self-regulating, whereas an open-loop system depends on external sources to manage itself. In other words, we rely on connections with other people to determine our moods. The open-loop limbic system was a winning design in evolution because it let people come to one another’s emotional rescue – enabling a mother, for example, to soothe her crying infant. The open-loop design serves the same purpose today as it did thousands of years ago. Research in intensive care units has shown, for example, that the comforting presence of another person not only lowers the patient’s blood pressure but also slows the secretion of fatty acids that block arteries. Another study found that three or more incidents of intense stress within a year (for example, serious financial trouble, being fired, or a divorce) triples the death rate in socially isolated middle-aged men, but it has no impact on the death rate of men with many close relationships.

 

Scientists describe the open loop as “interpersonal limbic regulation”; one person transmits signals that can alter hormone levels, cardiovascular functions, sleep rhythms, even immune functions, inside the body of another.That’s how couples are able to trigger surges of oxytocin in each other’s brains, creating a pleasant, affectionate feeling. But in all aspects of social life, our physiologies intermingle. Our limbic system’s open-loop design lets other people change our very physiology and hence, our emotions.

 

Even though the open loop is so much a part of our lives, we usually don’t notice the process. Scientists have captured the attunement of emotions in the laboratory by measuring the physiology – such as heart rate – of two people sharing a good conversation. As the interaction begins, their bodies operate at different rhythms. But after 15 minutes, the physiological profiles of their bodies look remarkably similar. Researchers have seen again and again how emotions spread irresistibly in this way whenever people are near one another. As far back as 1981, psychologists Howard Friedman and Ronald Riggio found that even completely nonverbal expressiveness can affect other people. For example, when three strangers sit facing one another in silence for a minute or two, the most emotionally expressive of the three transmits his or her mood to the other two– without a single word being spoken.

 

The same holds true in the office, boardroom, or shop floor; group members inevitably “catch” feelings from one another. In 2000, Caroline Bartel at New York University and Richard Saavedra at the University of Michigan found that in 70 work teams across diverse industries, people in meetings together ended up sharing moods – both good and bad – within two hours. One study asked teams of nurses and accountants to monitor their moods over weeks; researchers discovered that their emotions tracked together, and they were largely independent of each team’s shared hassles. Groups, therefore, like individuals, ride emotional roller coasters, sharing everything from jealousy to angst to euphoria. (A good mood, incidentally, spreads most swiftly by the judicious use of humor. For more on this, see the sidebar “Smile and the World Smiles with You.”) Moods that start at the top tend to move the fastest because everyone watches the boss. They take their emotional cues from him. Even when the boss isn’t highly visible – for example, the CEO who works behind closed doors on an upper floor – his attitude affects the moods of his direct reports, and a domino effect ripples throughout the company.

 

When I say that managing your mood and the moods of your followers is the task of primal leadership, I certainly don’t mean to suggest that mood is all that matters. As I’ve noted, your actions are critical, and mood and actions together must resonate with the organization and with reality. Similarly, we acknowledge all the other challenges leaders must conquer–from strategy to hiring to new product development. It’s all in a long day’s work.

 

But taken as a whole, the message sent by neurological, psychological, and organizational research is startling in its clarity. We’ve known for years that emotional intelligence improves results – often by an order of magnitude. Now, new research shows that a leader’s mood plays a key role in that dynamic – a discovery that should redefine what leaders do first and best. So remember emotional leadership is the spark that ignites a company’s performance, creating a bonfire of success or a landscape of ashes.

 

I strongly believe that Leadership excellence is made, not born. Such advice about adding mood capabilities may seem simplistic. Moods matter that much and especially yours as a leader, therefore “Go change yourself”, add the discussed capabilities. Having worked many years as a leadership coach, I do realize that the most common response to this would be “But I have a certain style, I can’t use this style, it wouldn’t be natural. This wouldn’t fit my personality” Such feelings are understandable, but the conclusion is wrong, for this has nothing to do with the personality. A leaders should expand their own style repertories. That's why I’m dedicated to helping you grow and master practice this difficult task.

 

Regards – Mark von Rosing

Great findings on Leadership!!!!!!!!

The things that puzzle me on nearly each leadership coaching I have, is that there are so few people that can say or communicate what leadership really is and what are the actual skills that make up a leader?, what are the talents (natural characteristics) …………..there are so many that answer that you are ether a leader or not, which is basically not true. But the question remains what is a leader and or what makes a leader?

 

Very interesting findings have been revealed by comparison, bonobos, the second-closest species-relatives of man. The study from Richard Wrangham and Dale Peterson (Professors in Biological Anthropology at Harvard University) revealed that bonobos do not unite behind the strongest chief male. The bonobos show deference to an alpha or top-ranking female that, with the support of her coalition and relationship of other females, can prove as strong or even stronger as the strongest male in the land. Thus, if leadership amounts to getting the greatest number of followers, then among the bonobos, a female almost always exerts the strongest and most effective leadership.

 

Some have argued that, since the bonobo pattern inverts the dominant pattern among chimpanzees and men with regard to whether a female can get more followers than a male, humans and chimpanzees both likely inherited gender-bias against women from the ancestors of the chimpanzees; gender-bias features as a genetic condition of men. And the bias against women having leadership as a position of authority occurs in most cultures in the world. As of 2002, Sweden had the highest percentage of women in the legislature and Denmark the highest in Leadership positions, which is 43%. The United States, Andorra, Israel, Sierra Leone, and Ireland tied for 57th place with less than 15% of the legislature women. Admittedly, those percentages significantly outclass the occurrence of female chimpanzees becoming alpha of the community by getting the most followers, but similar trends exist in manifesting a general gender-bias across cultures against females gaining leadership as a position of authority over followers.

 

An alternative explanation suggests that those individuals best suited to lead the group will somehow rise to the occasion and that followers (for some reason) will accept them as leaders or as proto-leaders. In this scenario, the traits of the leaders (such as gender, aggressiveness, etc.) will depend on the requirements of a given situation, and ongoing leadership may become extrapolated from a series of such situations.

 

In cultural anthropology, much speculation on the origins of human leadership relates to the perceived increasing need for dispute resolution in increasingly densely-populated and increasingly complex societies.

 

The image of swarms of lemmings which follow the first lemming off a cliff appears frequently in characterizing followers. The animal kingdom also provides the actual model of the bellwether function in a mob of sheep. And human society also offers many examples of emulation. The fashion industry, for example, depends on it. Fashion marketers design clothing for celebrities, then offer less expensive variations/imitations for those who emulate the celebrities.

 

Unintentional leadership can also occur from more pro-active forms followership. For example, in organizations which punish both leadership inaction and mistakes, and in which a predicament has no good solution, a common tendency involves declaring oneself a follower of someone else — metaphorically passing the buck.

 

Another example of followership without intentional leadership comes with the market leadership of a pioneering company, or the price leadership of a monopolist. Other companies will emulate a successful strategy, product, or price, but originators may certainly not desire this — in fact they often do all they can legally do to prevent such direct competition.

 

The term "leadership" sometimes applies (confusingly) to a winning position in a race. One can speak of a front-runner in a sprint or of the "leader" in an election or poll as in a position of leadership. But such "leadership" does not involve any influence processes, and the "leader" will have followers who may not willingly choose to function as followers. Once again: one can make an important distinction between "being competitive and being in the lead" and the process of leadership. Once again, leadership implies a relationship of power - the power both to be competitive and to guide others.

 

What a great finding.......it is about social competence, that we know a lot of leaders lack............I'm really looking forward to read your thoughts on this.

 

Regards your moderator - Mark

Things you do when you use Emotional Intelligence in your Leadership

Again and again I get asked from Executives around the world where they can use Emotional Intelligence and what most of the Executives don’t realize is that the most Leaders already use Emotional Intelligence in their daily life without realizing it (or they would not be where they are). These are things you do when you actually use your EI:  

·         You become more familiar with your own and other people's emotions. You can name them correctly, attribute them to the right sources, and avoid acting upon them too quickly.

·         You can identify the way emotions are caused and understand the psychological factors beyond.

·         You manage your emotions and behavior to handle different situations in a better way.

·         You improve your self-regulation and cope with frustration in a smarter way to better reach your goals.

·         You take advantage of emotional intelligence in managing your team in a motivating way.

·         You build a strong, flexible and highly effective team - motivated by the right culture.

·         You become good at triggering a decision – it goes faster, more effective and efficient.

·         You deal with objections in a positive way.

·         You inspire and motivate.

·         You encourage confidence and trust.

·         You enhance your conflict management skills.

·         You conduct better performance reviews.

·         You build more successfully relationships with other people.

·         You improve your empathy. Are able to better identify other people's emotions - and understand their feelings and the reasons behind.

·         You become better at listening to other people and become aware of what their feelings are – and where they come from. This will help you better identify the needs and wants of the people you try to lead.

·         You become better at solving problems in relationships - to connect better with others - and maintain good relationships with honest expression of emotions based on diplomacy, consideration and respect. This will, for example, help you do much better in negotiations and in handling objections.

 

While every one of us, can agree that the Executives who master this, are truly great leaders, we all realize as well that these are competences are something that need to be practiced. In this process, just remember that no one ever learned to swim or ride a bicycle by simply reading a book on the subject or having someone tell you all about it. You learn to swim or to ride the bicycle by doing it. First someone must explain what you should do and how you should do it. Then you need more instruction and help as you start to practice it. The more you practice, the better you get. The same type of process is what you need to go through in your development of this Emotional Intelligence competence  - to make certain that you pick up the type of skills and competencies that you need in order to grow, change or even become a peak performer.

 

I strongly believe that excellence is made, not born. That's why I am dedicated to help people grow.

 

Regards Mark