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Your Stance on Innovation Depends on Where You Sit

September 15, 2014 By: azjogger Category: Management, Operations

By Jonathan Vehar. Center for Creative Leadership

Do leaders in different levels of the organization have to lead differently? Of course they do.  A line supervisor has very different leadership challenges than the CEO.  That’s where CCL’s leadership roadmap is useful in helping leaders figure out how they can grow and develop as their careers advance.

Similarly, leaders who are looking to drive innovation have different challenges.  Innovation leadership is not a one-size-fits-all solution.  Our colleague Dan Buchner, Director of CCL’s Innovation Labs, led some important work to help distinguish the differences among the leader levels.  Knowing this is useful in helping leaders focus.  Given that schedules are too full already, it’s useful to know what to do, and this helps shape what not to do as well.

Here then is a run-down of the roles and responsibilities by leader level specific to innovation:

Leading self — CREATING: At the level where one doesn’t have direct reports, but serves as a role-model or perhaps leader of project teams, the responsibilities around innovation fall mainly into the realm of knowing how to generate creative solutions and a keen ability to participate on an innovation team made up of diverse participants.  Core to this is the ability to find sources of inspiration for new approaches, whether that means looking at other industries, engaging customers and stakeholders, or exploring patent databases for similar challenges that have been solved by others.

Leading others – FACILITATING: Team leaders or line supervisors need to have other skills as well.  They must know how to lead the group innovation process (i.e. Design Thinking, Creative Problem Solving, TRIZ, etc.), which requires special facilitation skills in addition to those necessary for being an effective team leader/project manager.  And for innovation to take root and spread through the organization, it requires an ability to obtain resources from outside their unit.

Leading managers – ADVOCATING/BRIDGING: When one leads people who are leading others, one key value they bring to the challenge of innovation is supporting and protecting the innovation team from superiors/other parts of the organization.  Great leaders create a protective umbrella over their people to ensure that the discomfort, risk, and potential disruption of the business don’t cause others to try to shut down the innovation efforts.  Also required is to ensure that there is due diligence in building a case for grass-roots innovations and bridging groups that are working on similar challenges to ensure constructive cooperation.

Leading functions – DIRECTING/PROTECTING: Leaders of a function or significant silo (or what one participant recently called a “cylinder of excellence”) need to provide clear direction for the scope of the innovation efforts and also need to manage conflicting demands for resources.  They also need to initiate strategic and structural changes to accommodate promising innovations and establish an innovation strategy that bridges the silos.  As if that’s not enough, they are critical to modeling behavior and driving communication that sets the tone in the organization that determines the support of innovation.  They’re also critical in the management of innovation pipeline and balancing the portfolio “bets” that help determine the future direction of the organization’s innovation.

Leading the organization – MANDATING/FOSTERING: Finally, we have the top of the organization.  These are the people who have the critical job of setting an innovation strategy for the organization to ensure that the organization has clear direction on where the organization is to go.  More than that, they are the keystone for fostering a culture of innovation, a big part of which is modeling behaviors to ensure that the walk matches the talk, which sometimes means showing support for different/new/disruptive ideas.  Like other top leadership responsibilities, it’s imperative that they communicate the vision of innovation over and over and over and over and over and over again.  Perhaps the hardest job is finding ways to hear/see “unfiltered” concepts since the further one goes up the hierarchy, the less connected to “what’s really true” the leader becomes.

So, where are you in the leadership pipeline? And what do you need to do to keep the innovation pipeline full?  We’re also interested in what other key tasks you see in the levels of leadership.  Let us know!

Changing Culture: 4 Phases, Not Four Steps

April 16, 2013 By: azjogger Category: Human Resources, Management, Operations

From: Center for Creative Leadership (CCL), Learning Effectively

Changing culture is about changing minds.

Executives, leadership teams and entire organizations need more mature minds to deal with the increased complexity, uncertainty and inter-connectedness of our world.

 CCL’s approach to changing culture is focused on growing bigger minds and fostering the thinking that allows for creative action in the face of complexity. Based on five principles, we use four broad, overlapping, reinforcing phases:

Discovery learningdetermining willingness. What is the feasibility of entering the culture-change process? This is a mutual learning phase between CCL (as facilitators) and the client (as change agents and organizational leadership). It begins with an assessment of the current level of leadership culture and a look at the capability required by the business strategy.

Players’ Readinessdeveloping understanding. What are the long-term implications of integrating a new culture into the organization’s work? What is senior leadership’s ability to engage in the change process? It requires a commitment to participate in public learning — practices that many conservative institutions will decline.

Game Board Planningframing the change process. What does culture change look like? How does interdependent leadership play out in business and leadership strategies, the learning process and organizational work targets? What are the beliefs and behaviors required? As senior leaders’ understanding of the change process grows, they are better able to frame the change challenge and engage other leaders.

Playing the Gamebuilding capability. Once senior leadership has internalized the change work and discerned the way forward, they begin to move the new culture forward into the broader the organization. The same beliefs and practices that moved the leadership culture at the top are taught, practiced and required elsewhere in the organization.

The four phases are not a list of simple steps to take, cautions CCL’s John McGuire.

“Many of the traditional serial, step-by-step change management methodologies regard human beings as things to be managed,” McGuire says. “But we’re not things. We’re complex beings with minds and imaginations and beliefs. We have to engage and participate in order to learn and change.”

“We know this work is not for everyone,” McGuire continues. “But if senior leadership is fully engaged, they become adept at their own collaborative learning. Then the senior team is able to immerse larger numbers of leaders from across the organization and develops toward a critical mass for enterprise-wide change. Our goal is to eventually involve everyone in the organization in a learning process that creates trust, ownership and increasing forms of interdependence.”

3 Types of Leadership Culture

Organizations that grow from dependent to independent to interdependent leadership cultures become increasingly capable of creative action in the face of complexity.

  • Dependent: A form of leadership culture or mindset based in conformance or tradition.
  • Independent: A form of leadership culture or mindset based in heroic individual achievement.
  • Interdependent: A form of leadership culture or mindset based in the collaboration of otherwise independent leaders and groups.

Office Politics: Neutral, Not Negative

March 26, 2013 By: azjogger Category: Management, Operations

From Center for Creative Leadership, Leading Effectively

Do you think of yourself as “politically savvy” at work? If not, CCL’s Jean Leslie and Bill Gentry can help you out.

Politically savvy people have better career prospects, are seen as more promotable and are less likely to have derailed careers. People who bumble through the political realities — or avoid or ignore them — are missing opportunities, connections and resources.

Politics is neither good nor bad 

According to Leslie and Gentry, the first step in overcoming your political weaknesses is to accept politics as a natural, neutral part of work life. Politics is neither good nor bad.

“Navigating politics doesn’t come easily for most of us, so we have a negative reaction to it,” says Leslie. “But you can be politically savvy without playing games or taking advantage of other people. Political savvy isn’t about being false and inauthentic. Instead, it involves the sincere use of your skills, behaviors and qualities in order to be more effective.”

Focus on Behaviors

A key CCL study found that a select set of leadership behaviors vary according to level of political skill.

“These findings suggest that if you strengthen these behaviors, you’ll strengthen your political skills in the process,” says Gentry.

  • Building collaborative relationships. Developing and maintaining effective working relationships is related to two measures of political skill: interpersonal influence (a convincing personal style) and thinking before you speak (ability to size up situations well before speaking). Those who are highly skilled in interpersonal influence are capable of adapting their behavior according to their audience, which appears to translate into especially strong relationships with bosses.
  • Composure. Are you calm in a crisis? Do you recover quickly from mistakes? Composure has to do with controlling impulses during difficult times and being responsible for what you say. Composure ratings seem closely linked to measures of how well an individual thinks before speaking.
  • Putting people at ease. This gets at the heart of what it takes to make others relaxed and comfortable in your presence. People who are warm and have a good sense of humor are often able to make others feel at ease. Bosses saw the ability to put people at ease as related to interpersonal influence. The ability to adapt according to contextual conditions is related to how comfortable others are in your presence.
  • Career management. How well do you manage your own career? Those adept at career management develop, maintain and use professional relationships for mentoring, coaching and feedback. Bosses related career management to two important political skills: networking ability (adept at developing and using diverse networks) and thinking before you speak. In other words, managers who are seen as being good at managing their careers are likely to have strong networking skills and are able to think about the potential impact of their words on others.

A Word to the Women

Office politics can be especially difficult for women.

“Many women are uncomfortable with the idea that political savvy may be an important component of leadership,” Leslie explains. “Because of this perspective, they find it difficult to incorporate political behaviors into their repertoire.

But, if you accept that organizational politics is a neutral, natural part of the workplace, you can build your capacity to lead, influence and persuade others in a sincere, authentic manner — advice that applies to politics-wary men, as well.

HP Pipeline: Work/Life Conflicts Hurt Business

January 30, 2013 By: azjogger Category: Management, Operations

From: Center for Creative Learning, Learning Effectively

Looking to increase employee engagement and boost productivity?

Then help employees better manage their work/life conflicts.

 

Companies that foster employee well-being — including a culture that supports people’s commitments outside of work — are more productive and profitable, according to Ellen Ernst Kossek, a Basil S. Turner Professor at Purdue University’s Krannert School of Management. “Helping employees manage work/life conflict also gives organizations greater ability to attract top talent, reduce turnover and reduce health costs.”

So, why do so many work/family policies fall short, leaving employees and employers wondering about their value?

Employee support programs have not filtered through

 An international authority on workplace issues related to changing work/life relationships and new ways of working in a 24-7 global world, Kossek argues that the business case for supporting employees has not filtered through most organizational cultures.

“At all ends of the labor market, work schedules and demands are dictated by short-term employer needs,” Kossek says. “Many companies — and managers — just don’t buy into the idea that helping people better manage work-life conflicts will improve productivity.”

In contrast, productive organizations that use human capital effectively take a longer-term perspective on the employment relationship. Quality human resources are seen as a core competency of the organization. People are seen as an asset to be nurtured and developed rather than merely a cost to be minimized.

“In these healthy work environments, employees feel engaged in their jobs and also in their home lives. They feel an energetic connection to their work and family activities,” says Kossek. “This fuels their engagement, productivity and effectiveness both on and off the job.”

Concentrate on greater congruence between employee and employee interests

 

Rather than thinking of work/life issues only in terms of policies or benefits, HR teams, top executives and managers across the organization should focus on creating greater congruence between employer and employee interests.

Kossek says three factors are indicators of employee well-being:

  1. They feel they are recognized and valued for good work. They believe that their jobs are a good fit with their abilities and interests.
  2. They believe they are able to have a career with their employer with “mutual positive social exchange in the employment relationship.” This means they are fairly paid and job demands are not excessive. They do not feel they have to sacrifice their personal and family well-being in order to perform their jobs.
  3. They are developing skills and knowledge that keeps them employable for a lifelong career.

In addition, the organization can provide support for individuals looking for new strategies to better manage their work/life conflicts. CCL partnered with Kossek to develop the WorkLife Indicator, a tool to help people understand the factors that come into play when managing work/life boundaries.

The WorkLife Indicator is a simple 10-minute assessment that managers or human resources can provide to help employees as well. The tool helps people to rethink how they manage the boundaries between work and family, identify choices and put together a plan that will benefit them as well as their employer.

Do You Treat Your Brain Like Junk?

October 22, 2012 By: azjogger Category: Management, Operations

From Center for  Creative Leadership, Leading Effectively, September issue

If you were to design a lifestyle that is the antithesis of good cognitive function and long-term brain health, the life of an average executive would come pretty close.

Sharon McDowell-Larsen, Ph.D, is an exercise physiologist who is in charge of the Fitness for Leadership module of Leadership at the Peak, CCL’s course for senior executives.

The brain initiates movements and behaviors 

“The brain is the seat of intelligence, emotion and memory, and it initiates movements and behaviors,” says McDowell-Larson. “But we are prone to treating our brains like pieces of junk.”

Lack of sleep, poor dietary habits, stress, lack of regular exercise and smoking can all contribute to worsened cognitive performance — today, tomorrow, next week — and brain health in the long term.

In fact, the same factors that increase our risk for heart attacks — elevated cholesterol levels, diabetes, high blood pressure, obesity — have also been shown to increase risk for dementia, mild cognitive impairment and Alzheimer’s disease.

What to do? In her new white paper, The Care and Feeding of the Leader’s Brain, McDowell-Larsen draws on many research streams and shares findings from CCL’s database of thousands of senior leaders. She gives recommendations for exercise, diet, stress reduction and sleep, creating a compelling read on how to boost brain health and function.

Exercise: The Magic Bullet. CCL asked more than 1,500 senior leaders if they think exercise affects how they perform. Eighty-eight percent said exercise “clearly impacts” their performance, and 12 percent said it had “some” impact. None said it had no impact.

When we asked how exercise impacts performance, we heard it improved energy and helped with stress. But many of the responses had to do with brain performance. Clearer thinking, improved problem-solving and focus, increased alertness during the day, improved mental clarity and creativity and better mental health were among the benefits cited. Others were improved mood, outlook, attitude, self-confidence and a sense of well-being.

You don’t have to aggressively train to see the cognitive benefits. Even walking a few times a week can make a difference. But sessions of more than 30 minutes seem to have the most positive impact.

Feed Your Brain. Does the amount and type of food we eat impact our ability to think and the long-term health of our brain? More and more, science is showing that yes, food can and does have profound effects on the brain.

Executives report this to be the case as well.

When CCL asked whether diet impacted their performance, 75 percent of executives said it clearly impacted how they felt and performed. Most reported that when they didn’t eat well, they felt sluggish, lethargic and less alert. Conversely, they said a healthy diet helps with sleep, energy and feeling better.

A plant-based whole foods diet is the best course of action, says McDowell-Larson.

Counter the Effects of Stress. What gets our brains into trouble is the prolonged stress we encounter in modern living. It’s the type of stress that is measured in days, weeks and months, not minutes.

Stress and its hormonal by-products profoundly affect the brain. Protracted elevations of cortisol, which is released by your adrenals as a stress response, are detrimental to good brain function.

Probably the biggest moderators of distress are control and predictability. As control goes up, perceived distress goes down — and so does cortisol, which is released by your adrenals. The reverse is true: as your perceived level of control goes down, the distress and cortisol go up.

As leaders face ambiguity and uncertainty, efforts to find coping strategies (i.e. exercise, relaxation, re-framing problems) and to clarify areas of control are all the more important.

Sleep. Like exercise, sleep is critical for good health, mental sharpness and consistent energy. In fact, we can last longer and function better on no food than on no sleep. Exactly how much sleep a person needs can vary from person to person, but the sweet spot seems to be in the seven-to-eight-hour range. Only about 10 percent of the population can function optimally on less than seven hours.

Getting a solid night’s sleep can certainly be an ongoing challenge with travel, work and family demands. It can often come down to a trade-off between extra sleep and other healthy habits, but guard your sleep time as much as possible.

For specific tips and lists from Sharon, as well as research findings and a detailed bibliography, download the free white paper, The Care and Feeding of the Leader’s Brain.

What Does it Take to Lead Innovation?

October 22, 2012 By: azjogger Category: Management, Operations, Training

From Center for Creative Leadership, Leading Effectively, September issue

Does your organization stifle creativity even as leaders push for innovation? Have well-meaning efforts to become “more innovative” stalled or fallen short?

In a new white paper, “Becoming a Leader Who Fosters Innovation,” CCL’s David Horth and Jonathan Vehar argue that actively pursuing innovation requires considerable resources and deliberate focus — and that innovation leadership is often missing.

A picture for leaders

In the paper, Horth and Vehar create a picture (and to-do lists) for leaders who seek innovation but have been frustrated by lack of results. They draw on recent studies, best practices and hidden gems, as well as their own research and experience working with individual leaders and client organizations. They share:

The differences between innovation thinking and business thinking — and how leaders need to manage the tension between them. Leaders and organizations that are able to switch between these two modes of thinking will find a powerful antidote to complexity and an engine that can help them thrive — even during uncertain times.

Two myths of innovation … No. 1: Individual Creativity Can Be Mandated and Managed. No. 2: Simply Unleashing Creative Talent Can Help You Navigate Complexity.

Three essential building blocks of innovation leadership — the tool set, the skill set and the mind-set. A collection of tools and techniques are needed to generate new options, implement them in the organization, communicate direction, create alignment and cause commitment. Innovation leaders also need a framework that allows them to use their knowledge and abilities to accomplish their goals. The mind-set is the fundamental operating system of the creative thinker and distinguishes those leaders who enable creative thinking and innovation from those who shut it down.

Horth and Vehar also offer specific actions you can take to help your organization develop innovation leadership, including:

  • Create a mandate for change, backed by a strategy that embraces innovation. If you are not senior enough to create the mandate, gather peers around you who share your passion for innovation and collectively approach those who can create the mandate, or scale it back to a level where you have authority to make it happen. Use the IBM 2010 CEO Study, IBM 2011 Creative Leadership Studies, 2012 Capgemini Innovation Leadership Study and other evidence to get their attention.
  • Model what it will take individually and collectively for the organization to become more innovative. It is particularly important for senior leaders to walk the talk. Make managing the tension between business thinking and innovative thinking a priority.
  • Communicate challenging strategic issues throughout the organization. Use them as vehicles for promoting collaboration and seeking creative ideas.
  • Create highly diverse teams to address strategic issues. Help them overcome limiting differences so diversity becomes a source of novel ideas.
  • Give people access to creative methods and experiences. Even those with creative potential get stuck. Readily available tools, methods and experiences help them reframe and think differently about challenges and opportunities.
  • Design and build systems to nurture innovation. Look for low-cost ways to test and prototype new solutions.
  • Champion ideas that don’t quite fit, and network with your peers to find a home for them. Actively break down barriers to innovation, including internal politics and destructive criticism, as well as hurdles, gates and other unnecessary systems.

Read the full white paper: “Becoming a Leader Who Fosters Innovation.”

Are You an Adaptive Leader?

September 17, 2012 By: azjogger Category: Management, Operations

By Marty Jacobs

Have you ever searched on the term “leadership,” either in Amazon books or on  Google? Try it. It’s mind boggling how many hits you get in both. So for those  in search of leadership tips, it can make your eyes swim sorting through all the  options. There’s one thing, however, that all those leadership gurus can agree  on: organizational life is becoming increasingly complex.

So how do you lead in the age of complexity? The first step is to understand  the nature of the problem you’re trying to solve. Does it fit any of the  following characteristics?

  • The problem is unclear: you know you’ve got a problem but  you’re just not sure exactly what’s going on.
  • The problem is rooted in attitudes, values, and beliefs:  the solution relies on the people involved changing how they think.
  • The solution involves many: once you understand the nature  of the problem, you realize that the solution involves those outside of your own  department, possibly even outside your entire organization.
  • No single entity has the authority to impose a solution:  because the solution crosses departmental, if not organizational, boundaries, it  requires partnering and negotiation.
  • Implementation requires learning: since the solution  requires those involved to change their thinking, they will need coaching and  support in reflecting on their own work habits as well as thinking together with  others to approach problems differently.

Problems that fit these characteristics are called adaptive problems, and  they require an adaptive leadership approach. Adaptive leaders are those who do  not impose solutions but rather help stakeholders explore their differences and  discover solutions. Adaptive leaders spend a great deal of time asking questions  and reflecting rather than directing. They’re what I would refer to as “leader  as convener” – they bring key people together in conversation.

What do adaptive leaders do to be successful? Here are typical steps to  applying adaptive leadership:

  • Identify stakeholders: determine who the key people are who  can solve this problem.
  • Build relationships: take time at the beginning of the  process to establish rapport and build trust.
  • Define the nature of the problem: resist the temptation to  jump to solutions immediately – gather data and identify trends.
  • Explore the possibilities: practice brainstorming and  encourage outside-the-box thinking.
  • Try out options: narrow the choices to the few best options  and test them.
  • Evaluate and reflect on successes and/or failures: measure  outcomes and impact and determine if you are moving in the right direction.
  • Repeat as often as necessary: the first solution may not  prove to be the best, so be ready to cycle through this process as often as  needed to achieve the desired outcome.

This last item is probably the most important part because it involves  learning. As we have so often heard Albert Einstein quoted, the definition of  insanity is “doing the same thing over and over again and expecting different  results.” Our work lives may sometimes feel insane, but adaptive leaders can  help rein in that chaos just enough to help move us in the right  direction.

Marty Jacobs, president of Systems In Sync, has been teaching and consulting  for 20 years, applying a systems thinking approach to organizations. Her  practice focuses on strategic planning, board development, community engagement,  organization development, and team facilitation. A graduate of Dartmouth  College, Marty received her M.S. in Organization and Management from Antioch  University New England in Keene, NH. She can be reached at http://www.systemsinsync.com/

Article Source: http://EzineArticles.com/7272951

What Does it Take to Lead Innovation?

September 17, 2012 By: azjogger Category: Human Resources, Management, Operations

From Leading Effectively magazine, Center for Creative Leadership

Does your organization stifle creativity even as leaders push for innovation? Have well-meaning efforts to become “more innovative” stalled or fallen short?

In a new white paper, “Becoming a Leader Who Fosters Innovation,” CCL’s David Horth and Jonathan Vehar argue that actively pursuing innovation requires considerable resources and deliberate focus — and that innovation leadership is often missing.

In the paper, Horth and Vehar create a picture (and to-do lists) for leaders who seek innovation but have been frustrated by lack of results. They draw on recent studies, best practices and hidden gems, as well as their own research and experience working with individual leaders and client organizations. They share

The differences between innovation thinking and business thinking — and how leaders need to manage the tension between them. Leaders and organizations that are able to switch between these two modes of thinking will find a powerful antidote to complexity and an engine that can help them thrive — even during uncertain times.

Two myths of innovation … No. 1: Individual Creativity Can Be Mandated and Managed. No. 2: Simply Unleashing Creative Talent Can Help You Navigate Complexity.

Three essential building blocks of innovation leadership — the tool set, the skill set and the mind-set. A collection of tools and techniques are needed to generate new options, implement them in the organization, communicate direction, create alignment and cause commitment. Innovation leaders also need a framework that allows them to use their knowledge and abilities to accomplish their goals. The mind-set is the fundamental operating system of the creative thinker and distinguishes those leaders who enable creative thinking and innovation from those who shut it down.

Specific actions

Horth and Vehar also offer specific actions you can take to help your organization develop innovation leadership, including:

  • Create a mandate for change, backed by a strategy that embraces innovation. If you are not senior enough to create the mandate, gather peers around you who share your passion for innovation and collectively approach those who can create the mandate, or scale it back to a level where you have authority to make it happen. Use the IBM 2010 CEO Study, IBM 2011 Creative Leadership Studies, 2012 Capgemini Innovation Leadership Study and other evidence to get their attention.
  • Model what it will take individually and collectively for the organization to become more innovative. It is particularly important for senior leaders to walk the talk. Make managing the tension between business thinking and innovative thinking a priority.
  • Communicate challenging strategic issues throughout the organization. Use them as vehicles for promoting collaboration and seeking creative ideas.
  • Create highly diverse teams to address strategic issues. Help them overcome limiting differences so diversity becomes a source of novel ideas.
  • Give people access to creative methods and experiences. Even those with creative potential get stuck. Readily available tools, methods and experiences help them reframe and think differently about challenges and opportunities.
  • Design and build systems to nurture innovation. Look for low-cost ways to test and prototype new solutions.
  • Champion ideas that don’t quite fit, and network with your peers to find a home for them. Actively break down barriers to innovation, including internal politics and destructive criticism, as well as hurdles, gates and other unnecessary systems.

Read the full white paper: “Becoming a Leader Who Fosters Innovation.”

How Good Are Your Leadership Fundamentals

September 12, 2012 By: azjogger Category: Management, Operations, Training

From Leading Effectively, Center for Creative Leadership

Did you play a sport growing up? Remember that feeling of wanting to play on the team, but being unsure of what to do when the ball came to you? Until you learned the fundamentals of the game, you couldn’t really play.

It’s the same with leadership. You need to know some basics just to get involved.

Informal leaders have a tremendous impact 

That’s why more organizations are looking to develop leaders at all levels, not just within their management pool. Individual contributors — experienced professionals as well as early-career employees — are part of the leadership process. They may not be playing at the same level as experienced managers, but as informal leaders they have tremendous impact.

Think about the engineers and designers, the sales and marketing professionals, the medical staff or the scientists who manage projects, serve on cross-functional teams and influence decisions. As they navigate their work and the organization, they have many opportunities to lead. They can also stall a process or fumble through important work.

CCL’s Leadership Fundamentals program introduces individual contributors to the basics of effective leadership — including self-awareness, learning agility, communication and influence — while allowing them to define and refine a personal leadership style. Four messages thread through the program and can help you today:

  1. Think “process,” not “position.” Rather than looking for someone else to be a leader, ask yourself: “What am I bringing to the leadership process?” and “How can I better facilitate effective leadership in my group or on my project team?”
  2. Understand your leadership brand. Everybody has a leadership brand. It is created by the ways people behave, react and interact — and it is linked to effectiveness on the job. How well do you know your own brand? What does it say about you?
  3. Take control. You are in charge of your leadership brand. What will you do to change or strengthen it? What do you need to learn, do or change to grow in your career? How can you make it happen? You will get guidance, suggestions and support — but nobody will do this for you.
  4. Know you can make a difference. Your employer needs you to be as effective as you can be. Your co-workers do, too. Your leadership abilities are critical to your own success … as well as your company’s. Don’t sit on the sidelines, wishing you had a chance to play in the game.

Read more: 4 Leadership Messages Your Talent Needs to Hear, By CCL’s Stephanie Lischke and Joel Wright, Forbes.com

 

Should You Use Cash or Accural Basis Accounting When Valuing a Business?

August 29, 2012 By: azjogger Category: Financial, Management, Operations

By David Annis

When determining the value of a business, it is important to know on what  basis the income statement was prepared to ensure that you come up with an  accurate appraisal. Many small businesses use cash basis accounting, where sales  are recognized when the money for those sales is received and expenses are  recognized when they are paid. Others use accrual basis accounting, where  revenue is recognized when services are performed and expenses are recognized  when the expense becomes an obligation (not when the expense is paid). Accrual  basis accounting gives a more accurate picture of the financial performance of a  company because it is not affected by a late payment from a customer or to  suppliers.

Distortions caused by cash basis tend to be balanced 

When valuing a well  established, relatively stable business, the distortions caused by cash basis  accounting tend to be balanced so the net effect is zero. In December, the  company you are valuing may do work that will not be paid for until January, but  in January there were revenues recognized from the previous December that would  approximately equal those unpaid bills. Similarly on the expense side, you might  not pay the current year’s phone bill until January of next year, but you  probably paid last year’s December phone bill this year, which would offset  that.

However, there are situations in which using cash basis accounting  significantly impacts the valuation. If there are significant changes in working  capital over the course of the course of a year the profit figures can differ  significantly based on the accounting method that you choose to use. If profit  figures are significantly different between accounting methods, you should  perform the valuation based on the accrual basis.

Cash and accural basis examples

Here’s an extreme, hypothetical example of how different a cash and accrual  basis accounting can be. Joe decides to open a widget factory on January 1. He  pays all expenses as incurred, in cash. For the first three months, he incurs  expenses of $250,000 but makes no sales, in the second quarter he begins making  sales. Each quarter, expenses grow by 40% and he can makes sales of 125% of the  quarter’s expenses. On an accrual basis the company would show a profit of over  $250,000 and on a cash basis a loss of $658,800 as shown in the table below:

Expenses By Quarter:

  1. 250,000
  2. 350,000
  3. 490,000
  4. 686,000

Total: 1,776,000

Sales By Quarter

  1. 0
  2. 465,500
  3. 651,700
  4. 912,380

Total: 2,029,580

Collections by Quarter:

  1. 0
  2. 0
  3. 465,500
  4. 651,700

Total 1,117,200

Cash basis profits: -658,800 (Collections – Expenses)

Accrual Basis profit: 253,580 (Sales – Expenses)

Any time that there are significant changes in current assets from the  beginning to the end of the year you should either use accrual basis income  statements when performing a valuation or use an online calculator that will  make adjustments to offset changes in the balance sheet automatically.

David Annis is one of the founders of Valuations, LLC whose websites  include: Guide To  Selling A Business provides information and tools to allow you to sell your  business with or without a broker and  EzValuation.com Free Business valuations with optional paid  downloadable reports. The Pro version includes both PDF and Microsoft Word  formats and will make adjustments to cash method financial statements.

Article Source: http://EzineArticles.com/?expert=David_Annis

Article Source: http://EzineArticles.com/7229498