Last week I shared some insights about how leaders rise out of groups and how groups react to bad leadership. A number of people asked me whether I thought the same rules applied to situations where a leader was imposed from above. To gain some insight I asked a local expert. 

Mary Abbajay, chief executive of the Careerstone Group, specializes in organizational change. In connection with an upcoming book, she has been looking at the skills required for followers to successfully manage relationships with leaders they don’t pick. 

Abbajay finds commonality whether a leader rises or is imposed. Followers must be an active participant in the relationship with a leader.  People who are passive and just do what they are told rapidly find themselves disillusioned.

Followers need to create a positive relationship with their leaders. They shouldn’t rely on leaders to do right by them.  nstead they need to manage upward through a conscious and deliberate effort to communicate to those above you in the chain of command.   

This is not an easy thing to do.   

Not every message from a subordinate will be met with openness. Much depends on the willingness of a leader to hear contrary viewpoints. Because it can be a risky proposition to manage upward, Abbajay recommends that followers have reasonable expectations for what speaking up can accomplish.   

When leaders do not rise from a group, their leadership likely occurred through external achievements or by pleasing someone other than the group members. This makes it less likely that the leader will be beholden to the group and more likely followers will have to adapt to the leader’s behavior traits. Successful people are particularly hard to change because they generally attribute their success to their dominant personality traits, so they will be slow to change unless they have to.

In these situations, it is best to look for incremental changes. Because the grant of authority in an imposed leader is one way – authority of the leader over the followers – the delegation of authority that occurs when leaders emerge from a group does not exist. This means that changing leadership behavior for an imposed leader is more in the nature of a negotiation.

To change the behavior of imposed leaders, followers must communicate clear benefits to the leader to be gained by changing his behavior. Additionally, responsible followers then must ask whether they are willing to do their part. Followers need to be self-critical. Why are they asking a leader to change, and what will they do in response? Followers are obligated to speak up and follow through.   

Assuming that the leader is open to input, and the followers are willing to do their part, an effective bond can be built. Even in the case of an imposed leader, the best leaders and followers develop a sense of shared responsibility. In a way, the best imposed leaders delegate some of their authority to the group, even when they don’t have to. Where leaders and followers become tightly connected and develop a bi-directional relationship, organizations are healthy and the morale of followers is high.

The lesson is clear: effective leadership, however it arises, is a shared responsibility. Even a boss imposed from above is more likely to be effective by positively engaging with her followers.  

As I tend to, when looking at these issues I ask whether these lessons for business are equally true for politics. When it comes to leaders imposed from above, there is one big difference. In business, if followers determine they can’t work with a boss, the most likely remedy is to change jobs.  

In politics, if you don’t like your leaders, you vote them out of office.

 

 

 

 

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In business and politics, we most often act as part of a group. Understanding group dynamics and its relationship to leadership is a topic very much on my mind these days. Let me explain why. 

As an innovation expert and educator, I spend a lot of time working with groups and teaching group behavior. I have found certain consistent behaviors among the hundreds of groups I have instructed or worked with over the years. 

In the United States, when a group does not have a person designated as leader by virtue of title or position, group members have a very strong bias towards adopting majority rule as their decision-making paradigm. I consistently see this regardless of the group members’ age, income, education or other demographic attributes. Absent a clear leader, group members most often consult with each other and then assemble a majority vote to support a decision. 

Interestingly, while groups are driven to find common ground and make decisions through majority rule, they are also very willing to be led. But only if they are comfortable with who leads them. Left to their own to act, groups find their leaders through questioning or conduct to identify special expertise, a job title that carries authority, or other indicia of authority. Then, they follow the leaders they choose. 

Understanding the contradictory impulses of majority rule and a willingness to be led is essential for effective leadership. The grant of leadership is always contingent. Groups may be willing to be led, but only if the leaders consistently demonstrate that they are competent to lead, that their decision making is sound and that they give credence to the opinions of those whom they lead. 

What happens when a leader proves not to be worthy of continued leadership? Groups and their members become frustrated and look to reassert their power to decide. And if the leader does not cede authority back to the group or to a leader the group prefers, the group gets more frustrated.   

I’m sure you’ve experienced this group dynamic for yourself. Perhaps it was when a boss gave a poorly qualified relative a management job over more qualified non-family members. Or, when a team is adversely affected by a team captain that doesn’t challenge management or the refs on behalf of the players. It could have been when a chief executive turns out to be sexually harassing employees, while espousing a corporate culture of inclusion. In each case, there was a group that experienced the delegation of authority and the frustration and anger that followed when the leader proved unworthy of following.  

Everyone knows that his or her opinion matters. Every group expects deference and acknowledgement from its leaders.   

This is something every business leader must understand to be successful. The best business leaders take the time to remain in touch with their employees through 360-degree reviews, strategic planning, organization retreats, employee training and development and many other means. Indeed, the entirety of best practices in management and leadership rests on understanding the needs of the group and on individuals participating in forming the group consensus. 

Which brings me to the world of politics and policy. Too many political leaders seem to have forgotten that they owe their leadership roles to the individuals and groups that delegated authority to them. They no longer treat them as if their opinions matter. A business leader that ignores the well-being of his employees would surely be fired. Why shouldn’t political leaders be evaluated by the same standard?    

Don’t let the noise of current events confuse or dissuade you. Leadership is not taken. It is earned. No one should be a leader without honoring that fundamental truth. What is true in business should also be true for politics.  

 

 

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I have been wondering recently whether the current strength of the stock markets is attributable to expectations of tax cuts. I decided this week to check in with local financial market experts and find out.  

They uniformly told me that the biggest reason for the rise in the equity markets is economic fundamentals. For example, Anne McCabe Triana, president and CEO of the Reston wealth management firm Curo Private Wealth, told me “stock prices are definitely elevated,” but there were objective facts supporting valuations. The equity market was not a bubble, and reflected instead “low interest rates and an increasingly positive business environment.” Brad Smith, chief investment officer at MTX Wealth Management in Reston, pointed to continued corporate earnings growth and low unemployment as additional contributing factors. 

I did hear from these experts that the possibility of federal tax cuts was contributing to some recent acceleration in stock market gains. John Devine, partner and strategic advisor at Brown Advisory, thought that “optimism about tax cuts” was reflected in the market, but that “it is always hard to pinpoint what drives the market in the short term.” Triana echoed this point and also highlighted that companies likely to benefit from tax cuts were getting a recent valuation boost in the market. 

In fact, the biggest effect of the tax cut anticipation may be in the valuation of smaller public companies. Barry Glassman, president of Glassman Wealth Services, said the possibility of tax cuts was having a disproportionately positive effect on these businesses, with their valuation as a group increasing 11 percent in the last month alone, a valuation change significantly higher than that of larger companies.

Since the expectation of tax cuts is providing a boost to some companies’ market value, this raises the question of what happens if tax cuts don’t happen.  Not surprisingly, these financial experts who see the underlying economic factors as the primary driver of the market don’t see the failure of tax cuts to materialize as likely to cause a lasting downtown in valuations. The absence of tax cuts would be the sort of unexpected news that can cause markets to dip in the short term, but the underlying economy is what drives the long-term trend. And, those objective facts support ongoing growth in the value of equities.  

But, what happens if the proposed tax cuts occur?  There was agreement among those that I spoke with that the stock markets would get an upward valuation boost. How much was difficult to predict, since the current valuations have already built in the expectation of tax cuts. For them the biggest determinant for future growth would be the objective facts of the underlying economy.  

This is where many of these experts expressed concern. Tax cuts and their accompanying changes in the federal debt raised significant risk of higher inflation and higher interest rates. For example, Glassman pointed out that inflation could occur either because the tax cuts accelerate wage growth through new hiring, or through a rapid increase of federal deficits.

Inflation causes higher interest rates, which adversely affect private borrowers and federal expenditures on debt service. Inflation will also erode the value of the U.S. dollar, which will make imports and oil more expensive. Hard to imagine that this is a policy choice to make if you are a President trying to promote manufacturing jobs, exports and traditional energy industries. 

This is where many of these experts expressed concern. Tax cuts and their accompanying changes in the federal debt raised significant risk of higher inflation and higher interest rates. For example, Glassman pointed out that inflation could occur either because the tax cuts accelerate wage growth through new hiring, or through a rapid increase of federal deficits.

Inflation causes higher interest rates, which adversely affect private borrowers and federal expenditures on debt service. Inflation will also erode the value of the U.S. dollar, which will make imports and oil more expensive. Hard to imagine that this is a policy choice to make if you are a President trying to promote manufacturing jobs, exports and traditional energy industries. 

For years Republicans have been saying they believe in free markets. The financial markets are clearly saying that tax cuts are not necessary. Who is telling them that they are?  

 

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Politicians agree on the soundbite: everyone should have a job that pays a living wage. But they don’t agree on how to make that happen. I’d like to help them by sharing some things I have learned. 

Working with leading community and economic development entities over the last two years, I’ve had a close look at our region’s workforce. The data consistently show our region has been adding and filling lower-paying jobs that do not require technical or specialized expertise. At the same time, however, many high-paying jobs that require technical skills are going unfilled.  

For example, experts tell me there are as many as 40,000 unfilled jobs in the cyber security industry in the greater Washington region. Business owners in hospitality, construction and healthcare tell me the same thing: good jobs are going unfilled.  

Here’s what some people who are currently working this problem have told me.  

Ed Barrientos is chief executive of Brazen Technologies, a rapidly growing startup focused on matching talent with jobs. He sees a “major crisis in the ability of businesses to hire qualified and skilled candidates” and points out that this is a broad issue that cuts across industries. More and more frequently, employers are expecting new employees to have the required skills at the time of hiring. Pressures on margins and competition make them less willing to take on the expense of training on the job. They need to hire people who can hit the ground running. 

This is a theme that was echoed by Dario Marquez, president and CEO of Wize Solutions, a business that matches high tech job opportunities in Northern Virginia with workers in Southwest Virginia. His work shows him that “many employers look for candidates to have technical certifications.” Employers not only want workers who say they are skilled – they want some objective measure to ensure that workers are skilled. 

Meeting this challenge of training and certification can’t happen business by business. There must be a paradigm shift in in how we train workers and satisfy employers that workers have the required skills. Glenn Nye, a former U.S. congressman and now an advisor to regional tech companies, including Palantir and FiscalNote, believes that “the jobs of tomorrow will require a rethinking of education, from content at the secondary level to more holistic approaches at the post-secondary level.” 

Addressing the reality of skilled employment is complex. Janet Van Pelt, the CEO of the education firm CourseMaven and an expert on training, sees the issue as having three main components: access to education, credentialing students to demonstrate skills attainment, and public policy. The locations that are the most successful are those where government and the private sector work closely together.

These are just a few examples of what I hear every day. Businesses need skilled employees, but for the most part they do not have sufficient resources or the time to solve this problem on their own. When a business is growing rapidly it can be a tremendous job creation opportunity. Paradoxically, that is the time when they can least afford to train, but most need, skilled workers. 

Owners of rapidly growing businesses in our region haven’t told me that if their taxes are lower, they’d hire more people. What they have told me is that their biggest problem is finding skilled talent to fill they jobs they have ready and waiting. 

Politicians who want to grow our region’s economy need to focus on what the region’s businessmen are saying. After all, they should know best what they need.  

 

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Virginia will be electing its next governor in a few weeks. Many observers see it as a bellwether election. I think they are correct, particularly for what the election will tell us about entrepreneurs’ attitudes towards government and elected leaders. The job creators of our society have a strong message for our elected officials: tax cuts might be nice to have, but social stability and problem-solving are more important. Let me share some of what I have heard from them. 

Michael Avon, chief executive of ICX Media, a digital video start-up, told me that he has grown tired of partisanship. The current environment makes him “fiercely independent – more so than ever before.” He’s looking for elected officials to focus on “working with others to solve problems.”  

Eric Koefoot, president and CEO of Public Relay, a PR monitoring service, raised a similar concern. He thinks that he and many entrepreneurs are “political unicorns – socially liberal and fiscally conservative.” For him, political extremes won’t get the country to where it needs to be. He fears that the parties have become too focused on running towards their perceived bases – the Republicans becoming “socially backward and fiscally reckless” while the Democrats run the risk of becoming “anti-capitalist.” 

The concern that the GOP is abandoning its conservative roots was something I heard from a number of long-term Republicans. Rob Quartel, chairman and CEO of NTELX, a technology implementation firm, is a lifelong Republican who has run for federal office three times. He is very concerned that “both parties are more factionalized, tactical, more ideological” than ever. However, he has particularly strong words for his Republican brethren, because a focus on populism has made the Republican party “all negative all the time” and unwilling to work to solve problems on issues like immigration, free speech and human rights at all levels. These are all issues on which Quartel believes “real conservatives” can engage Democrats in constructive and respectful conversations. He worries that there are few real conservatives left in his party to work across the aisle. 

Worry about stability is another theme that came up frequently. Ajay Sravanapudi, a serial entrepreneur, finds that the current climate is making him more, not less, political. Although he does not identify with a party, he finds himself “pushed to the left even more.” He added that the “tolerance of the chaos of Trump by the right drives me nuts.” 

There’s one thing that I find truly striking as we head into Virginia’s gubernatorial election: the region’s entrepreneurial community is not choosing sides as much as it is choosing to stand for constructive engagement. For the first time in its history, the Northern Virginia Technology Council did not endorse the Republican candidate for governor, instead commending both Democratic Lt. Governor Northam and Republican Ed Gillespie for their willingness to promote innovation and workforce development. 

Another group of regional CEOs, led by James Quigley, the founder of GoCanvas, a mobile technology firm, delivered to both campaigns a letter asking the candidates for focus on workforce development and support for innovation to grow the economy. Almost uniformly, my entrepreneur friends are telling me that they will support politicians and leaders that are serious about solving problems, whatever their party affiliation. They are dismayed by the messages of division that have emerged as a political strategy. 

Both of the candidates say that it is entrepreneurs who will create the jobs our people need. Statistically, that is absolutely correct. Small and rapidly growing businesses founded by entrepreneurs have long been our national and regional economic growth engine. Since the candidates believe that entrepreneurs are so valuable, then my recommendation is that they listen to what they say are saying. 

Entrepreneurs want a government that works with them and politicians who work together. The politics of distraction and division being practiced by some just won’t get it done. 

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I was fortunate to be the moderator of a discussion with Lt. Governor Northam and Vice President Biden. We talked about how important it is to invest in our people, and take positive steps to create 21st century jobs. I was proud to be with them.

Vice President Biden pointed out that the Lt. Governor is a genuine and authentic man. This is consistent with what I have seen over the last 6 years. Public service is a phrase that has come to carry negative weight from some — but when I am with people like the Lt. Governor Northam and Vice President Biden I am reminded that there are many who try to do the right thing every day. Progress doesn’t happen by accident. It happens with intentionality.

 

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The moment when science fiction becomes fact can take even a technologist’s breath away. I confess to gasping for air when I talked about artificial intelligence last week with Max Tegmark, a professor at MIT and the author of “Life 3.0: Being Human in the Age of Artificial Intelligence.”

Tegmark pointed out we need to understand that artificial intelligence is not science fiction any more. Within the lifetime of most who are reading this column, software will develop the ability to complete complex tasks without human intercession. And it will do it faster and better. And that is a very disquieting thought.

So, should we stop developing AI? Tegmark doesn’t see that as the right question to ask. As he puts it, the question is “not whether you are for or against AI. That’s like asking our ancestors if they were for or against fire.” Tegmark believes that as tool makers we inevitably create software that achieves artificial intelligence. It is just in our nature. 

He then suggests that rather than deny the inevitable, we need to address what achieving  artificial intelligence will mean. How comfortable should we be with using it to direct military force or cyber security? Should we have AI allocate healthcare or other societal benefits? What is the role of ethics–our collective sense of right and wrong–in a world where software makes instantaneous decisions on its own? 

And then there is the thorny issue of consciousness itself, which Tegmark describes as the subjective sense of being. For him, it’s the difference between software that gets you from point to point and software that admires the scenery and feels the wind rushing over its sensors.

Does consciousness matter? Tegmark thinks that it does. Eventually, our software will develop the ability to process the world around it with a subjective sense of self. Software may never have feelings like we do, but it will think for itself based upon a sense of “thereness” that will be distinct from the task at hand. Software will be conscious, but in a way that will be alien to us because it will not be human.  Software may provide us with a “first contact” opportunity. 

When that happens, we will face profound challenges. What will be left for the human brain, when software can write better songs, make better artwork and allocate resources more efficiently? Will software become our overlords, our allies or our servants? Tegmark is asking us to consider that once artificial intelligence exists, these questions won’t be answered only by what we want.  

 

 

 

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Some people prescribe tax cuts whenever the question of how to accelerate economic growth comes up. But is that prescription right for this region?

I have been immersed for many years in fostering regional economic development sparked by rapidly growing technology businesses. Over the years, I have spoken with a broad range of educators, entrepreneurs, policymakers, economists and other stakeholders in economic development, and I have gathered a pretty comprehensive picture. Let me share some of what I have learned.

Maintaining our region’s ability to create high-paying jobs requires that we stay in the vanguard of new industries. The leading edge of what is truly new is where consumers and businesses are most willing to pay high prices and where demand is often the strongest. The combination of high prices and high demand creates businesses that can pay workers well and provide for career advancement. The challenge is that staying at the forefront of innovation requires a willingness to undertake basic research that is often expensive and equally often entails a substantial period where there is no profit opportunity.

Regarding the workforce, it is abundantly clear that already existing technologies are displacing unskilled workers and, to growing extent, skilled workers. Moreover, they do so at an increasing rate. Meanwhile, existing approaches to training and developing talent are not adapting to the new jobs that are being created, thereby creating supply shortages or leaving workers on the sidelines.

Infrastructure is chronically underfunded. We see it in Metro and the roads. Less visible but equally important is how many people lack broadband in our region — either because the infrastructure doesn’t exist or because it is far too expensive to sign up.

These are issues that can only be solved by collective action and substantial investment. We know how to do this. The difficulty is motivation. Solving these problems creates long-term social benefits, which are hard to measure. Financial returns are easy to measure — it’s how much additional money you get from investment. While we sometimes try to measure social benefits in financial terms, the reality is investing for financial profit and investing for long-term broader benefit are different.

The most successful regions in our country have figured out how to balance financial investment with social investment. Those that do it best are the ones that lead new industries. These orchestrated investments can be seen in communities that develop infrastructure (e.g., Research Triangle Park in North Carolina), commit to business attraction and support (e.g., efforts to attract Amazon’s HQ2), support local research institutions (e.g., connecting business entrepreneurs with university researchers) or support an environment that integrates larger and smaller businesses into a single community (e.g., Nashville’s rapidly growing innovation culture around health care). There is no single way, because no two regions are exactly the same.

Which brings us to tax cuts.

I will be the first to admit that tax cuts are a very seductive policy prescription. Who wouldn’t love to have more money to spend? But that is the point.

Historical data show that when tax cuts are targeted at higher income levels, the tax savings goes disproportionately into financial investments. There is no guarantee that the money will be invested in businesses (think of index funds, for example, where no direct investments in companies are made) or even a guarantee that the money is invested in the United States. The greater financialization of our economy may make some investors wealthier but it doesn’t provide for a pool of capital for social benefit.

I believe that right now, the best way to grow our region’s economy is increase social investment. To create a skilled workforce, to develop a 21st century infrastructure and to foster new industries, we need to make long term and considered investments. We need to be both wise financial and social investors.

At a time when objective data show that our overall tax burdens are at historical lows, is putting more money into financial assets what is best for our business and innovation community?

There are times where you can’t cut your way to success. This is one of them.

 

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Looking for opportunities to create economic growth, we should not overlook an invisible export. Media is one of the greater Washington region’s largest industries. News is the reason. 

I discussed this recently on “What’s Working in Washington” with J.J. Green, national security correspondent for WTOP-FM and host of the TargetUSA Podcast, Brian Fanzo, founder and chief executive of social strategy consulting firm iSocialFanz, and Judy Kurtz, In the Know columnist for The Hill.  

For all of them, Washington’s importance as a media center really begins with news. News is different from mere information. News is information that is important and worth knowing. What makes news worth knowing? In other words, what gives news its relevance?  

Green said for him the relevance of news begins with novelty, “News is not what people are talking about; it’s what they don’t know.” This makes Washington, D.C. a generator of lots of news, or as he puts it, “Hollywood when it comes to news.” The confluence of the White House, Congress, the Pentagon and other cabinet departments, courts, diplomats, businesses, professionals, and more ensures that there is always something important happening. 

But it is not just novelty. Information can be novel but trivial. Previously unknown information that can affect a person’s life, situation or prospects is news. Impact – consequentiality — is what separates the newsworthy from the trivial. Much of what happens in Washington, D.C. has the possibility of widespread impact.  

The region itself is a news-generating machine, and its productivity is enhanced by the visits of celebrities. The shared trait of all celebrities is that lots of people pay attention to them and listen to what they say. Kurtz sees how celebrities act when they come to town: they are often star-struck by the politicians and political leaders whom they meet. For many of them, “D.C. is their Hollywood,” a place where they attempt to convert their fame into social good by influencing politicians. And in doing so, they create news. 

Fanzo observed that D.C. also creates its own celebrities based on titles and position. As people serve in government as senators, congressman, presidents and judges, they become famous. This makes their words and actions newsworthy. Add to this the leaders of the countless trade groups, not-for-profits, and commercial businesses operating in our region.  

News originated in our region supports a vibrant and dynamic media industry, stretching from traditional media companies to new media startups. It’s an industry that is supported by technology, public relations and advertising businesses. Fanzo, a recent returnee to the D.C. region, has really seen the change and is “beyond impressed in the tech community, entrepreneurship and different brands” that have created exciting business opportunities 

News matters to our region’s economy. 

That is why our region must take so seriously preserving the veracity of news. While other regions of the nation may be concerned about “fake news” as a political issue, our region’s economic health depends upon the objective truth of our news. Without veracity and trust, news loses its value, both politically and economically. For our journalists, veracity and trust in the news is not a theoretical discussion. Nor should it be for those of us concerned with economic development. 

News can drive our region forward. As Green puts it, “the opportunities are just off the charts.” 

At a time where we are looking for industries that can create economic opportunity and jobs, news might be our most meaningful export of all. 

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Do entrepreneurs ever relax? On a Labor Day weekend, I checked in with a number of entrepreneurs to see what they thought. 

Certainly, the idea of relaxation seems to be counter to the image we all have of entrepreneurs – that they are engaged in an all-consuming activity, 24—7, to the exclusion of everything else.

Some of the people I spoke with didn’t think that an entrepreneur could ever relax. Ed Bersoff, chairman of PFF, referred me to the Merrian Webster Dictionary definition of relax (“to relieve from nervous tension”). He didn’t think he had ever found an entrepreneur who truly stopped feeling nervous or worried about their business. “I don’t think that relaxing exists in the entrepreneur’s vocabulary,” was how Bersoff summed up his thinking on the matter. 

This concept of being consistently worried was echoed by many. Being truly off duty was a risky thing – you might miss out on an opportunity for your business if you took your eye off the prize. Lee Weinstein, founder of the digital design firm Brightfind, summed up this conflict in saying, “sometimes it’s good for an entrepreneur to take time off – but not always!”  

Does the constant struggle for success mean that entrepreneurs can never relax? Perhaps the answer is in how entrepreneurs think about relaxation. 

Eric Koefoot, founder of the media monitoring business Public Relay, believes that entrepreneurs approach relaxation differently. In his experience  people who are not entrepreneurial associate relaxation with coasting and not worrying. “This is not a perspective that most experienced entrepreneurs would endorse, because they know that what is termed ‘relaxing’ is really distancing oneself from the daily push and intensity to gather perspectives.” 

This was a recurring theme. Universally the entrepreneurs I spoke with pointed out that for them, relaxation was not the absence of worry – it was an intentional separation from worry and the substitution of a time with a different activity. For these entrepreneurs, this separation occurred within the context of the entrepreneurial journey. Pat Sheridan, founder of Modus Create, an application development firm, explained it as a checkpoint along the way. “It’s important to make sacrifices,” he said, “but keep in mind when it’s time to pay back those debts to yourself.” 

Overall, my entrepreneurial friends all reinforced the importance of self-reflection. Without the external structure of an employer or job description, the entrepreneur needed to find the time to stop. Entrepreneurs relax, but they don’t do it by chance. 

For my part, in case you wondered, I take breaks in my entrepreneurial journey by playing the guitar. Here’s a song I wrote on the topic of entrepreneurial relaxation. I hope you enjoy it. 

Happy Labor Day.

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