Succession Planning

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Succession Planning

There is nothing more important in the life cycle of an organization than the transition to new leadership. This is equally true both in nonprofits and in for-profit corporations. The key to a successful transition is careful and deliberate succession planning.

I am fortunate to have experienced this up close, first when I retired from Applied Materials and not long after when The Nature Conservancy was looking for a new CEO. I talk at length about those transitions in my book, Applied Wisdom. In this newsletter I want to look at what’s involved in successful succession planning.

I would say ten years is a reasonable assignment for a chief executive, whether in a for-profit corporation or a non-profit. In that period, you’ve made some good moves, you’ve made some mistakes, and you’ve worked to fix those mistakes. The trouble is, as time goes on, it’s human nature to spend more and more time defending what you’ve done rather than positioning the company or nonprofit for its next leap forward.

When it’s time for a chief executive to leave, succession issues become pervasive in a company. This can create a distraction. Executives tend to handicap the internal horses and align with the contender they think will get the job. As the various scenarios play out, lower level managers hold back making decisions while second-guessing what their odds-on favorite might want to do next.

You like to think that during your tenure you’ve helped some individuals take their skills to new levels, and so promoting from within is always an attractive idea. If an internal candidate distinguishes him or herself, has a vision for the future, has the respect of other employees, and is someone who the board thinks makes sense, then the transition can be very smooth. An internal candidate is intimately familiar with the organization, its challenges, its strategic goals, and its capabilities.

On the other hand, it’s not easy for executives to distinguish themselves above all the others. Each manager has a specialized role and may not be suited to running the entire organization. Make sure you understand which gaps in their experience might hinder them.

Zeroing in on a Candidate

By now you will have determined the qualities and capabilities of the person you need. I hope you’ll have followed my Rule of Three and kept in contact with a personal list of at least three people who you think could be a good fit to lead your team. These individuals could be the first candidates for the job.

Do not stop calling references and former employers of a candidate until you come across at least two negatives. Perhaps they’re not strong in finance. Do they listen and seek advice? You then have to decide if your organization can live with those negatives.

Advice for Succession Planning

As I pointed out in Applied Wisdom for Nonprofits, if you take the issues that most companies face and list them next to the challenges most nonprofits face, you will not be able to identify which is which. This holds true for succession planning.

A succession plan should be a joint effort between the current chief executive and the entire board. Assess what has made the organization successful so far, and what the CEO or executive director has done to make this success possible. What are the strengths of the organization under the current leader?

Now use your court sense to assess the driving forces surrounding your industry or nonprofit service and funding community. What are the challenges and opportunities the new CEO will have to deal with? At the same time, think about the whole executive team, and what will be needed in the years ahead.

For Smaller Organizations

These same considerations hold true for smaller nonprofits. They need succession plans as well. The scale of the problem may be different, but the basic requirements are the same.

A smaller organization may need hiring assistance from an outside consultant (or that expertise may be found among board members). The pool of potential candidates will be smaller, which may tip the scales toward promoting from within.

But the importance of a successful transition is identical, in nonprofits and for-profits, both large and small.

To your success,

Jim Morgan

As always, complimentary copies of Applied Wisdom for Nonprofits, print, digital, and the audiobook are just a click away.

What succession issues have your organization faced? How did you address them? Share your thoughts with me at  jim@appliedwisdombook.com.

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Book It and Ship It

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In the manufacturing business, “Book it and ship it” can simply mean, “We’ve finished building this. Let’s fill the orders and move on.”

But I’ve also used the expression more broadly as a way of saying, “No more dithering. We’ve done our best here; now let’s put the decision in motion and see what happens.” If problems develop, you manage them. But kicking the can down the road over and over just saps energy. Success comes from the implementation of ideas. Time must be spent on organizing, strategizing, and planning, but then you need to complete the project, release the product, hire the person, or get the donation.

Success is 10% planning, and 90% implementation.

The Cost of Perfect Information

Voltaire said, “Don’t let the perfect be the enemy of the good.” That’s sound advice. Time is wasted and opportunities are lost when people become fixated on having perfect information rather than trusting their instincts, making decisions, and then managing the consequences. Organizations in motion can alter course much faster than they can go from zero to 60. Decisions create momentum.

That does not mean you agree to pursue long shots or ignore troubling data just to make sure you do something. You always want good information. And you want extremely good information when you are calculating a moon shot or planning a brain surgery. But the cost of perfect information is too high for most decisions. Too many people agonize for too long making decisions and then they don’t pay enough attention to managing the outcome. They neglect to establish contingency plans and milestones and then do an honest assessment of whether the plan is working as the organization reaches (or doesn’t reach) those milestones. Once in motion, they often neglect the course corrections necessary for success.

More complex decisions require a staged process. Gather a few people with the best perspective to frame the decision needed. Assign for appropriate analysis and recommendation. Get used to not having perfect information to make a decision. Of course the decision is important, but more important is how you manage next steps. Establish a written set of milestones to assess each decision and how you are managing the consequences of the decision over time.

Stay on the Cliff

At Applied Materials, we used to envision ourselves standing on a cliff. One of three things can happen:

1) You give a correct answer to the question and you stay on the cliff.

2) Wrong answer, you’re pushed off.

3) No answer, you’re also pushed off!

This scenario sharpens the mind. Within their area of responsibility, most people will give the right answer most of the time. You just need to decide to decide.

Making Decisions at The Nature Conservancy

We accomplished a lot during the time I served on the board of The Nature Conservancy (TNC). With a mission “to conserve the lands and waters on which all life depends,” it’s the largest U.S. nonprofit focused on the environment. However, a disproportionate amount of time was spent reorganizing and strategizing. I became somewhat famous in TNC for using this phrase, “book it and ship it.”

Mark Burget, executive vice president and managing director of North America for TNC, put it this way:

“At one time TNC’s biggest shortcoming was our disproportionate focus on planning, internal discussion, and so on. In ‘book it and ship it’ I hear a plea to get on to execution. This is a challenge for any organization, but especially for a mission-driven organization facing very large, complex challenges. We could easily spend the rest of our lives talking about environmental problems and feeling pretty good about how smart we are. Jim reminds us to get to work on making change happen in the world. Make the purchase, get the easement, attract the funding, hire the person, close the opportunity. As William Blake said, ‘Execution is the chariot of genius.’”

Of course, this Morganism doesn’t apply just to environmental nonprofits. Making good decisions, timed right, is a challenge for all groups. My experience says that you just have to cultivate the habit of making timely decisions and then effectively communicate them.

I often think of the quotation, “When all was said and done, more was said than done.” Enough discussion: let’s book it and ship it!

To your success,

Jim Morgan

As always, complimentary copies of Applied Wisdom for Nonprofits, print, digital, and the audiobook, are just a click away.

What blocks you from making critical decisions?

How do you overcome uncertainty and move forward? 

Please leave your reply using the comment section below.

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Who Owns the Monkey?

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I’ve been building my collection of Morganisms—personal nuggets of business advice—throughout my career. I’m always collecting articles, lists, notes, and ideas while reading, listening to speakers, or just talking with people.

One of my favorite Morganisms is called Who Owns the Monkey?

Let’s say that one of your staff shows up in your office with a problem—a monkey—on his or her shoulder. As a manager, you want to acknowledge that you see the monkey, and that you care about the monkey. You may even pet the monkey for a few minutes. But you can’t let that employee leave the monkey behind for you to take care of. You want to be sure that when your employee walks out the door of your office, the monkey goes too. Owning the monkey means the person responsible cannot pass the buck; they must think through the consequences of decisions and try to solve the problem. There is no need to escalate it to the top at the first sign of trouble.

Both for-profit and nonprofit leaders are often overworked and under-resourced. Problems can easily move up the chain of command. You need to create a culture of accountability to ensure that the only issues that land on your plate are the ones that are your clear responsibility. When you empower employees to make decisions, you also empower them to solve problems that arise from those decisions.

The idea of owning the monkey comes from an article in the Harvard Business Review published back in 1974, Management Time: Who’s Got the Monkey? by William Oncken, Jr. and Donald L. Wass. They describe how managers should respond to employees who try to put a monkey on their back:

“At no time while I am helping you with this problem will your problem become my problem. When this meeting is over, the problem will leave this office exactly the way it came in—on your back.

“You may ask for my help at any appointed time, and we will make a joint determination of what the next move will be; and which of us will make it. In those rare instances where the next move turns out to be mine, you and I will determine it together. I will not make any move alone.”

The manager transfers the responsibility back to the direct report and keeps it there.

Empowerment
Oncken and Wass describe five degrees of initiatives that can empower staff decision-making.

The employee could:

  1. Wait until told (the lowest initiative).
  2. Ask what to do.
  3. Recommend an action, and wait for a decision.
  4. Act, but inform at once.
  5. Act, then report on the decision in due course (the highest initiative).

The manager’s job is to outlaw the use of 1 and 2, and to ensure that for each problem leaving his or her office, there is an agreed-upon level of initiative assigned to it.

Years later, management guru Stephen Covey pointed out in talking about monkeys, you should keep in mind that empowerment means you have to develop your staff’s skills, which is initially much more time-consuming than simply solving their problems on your own. But the investment pays off.

In a culture of accountability, employees are comfortable acknowledging reality, warts and all. Individuals do not just wait and hope things improve or spend their time crafting excuses or pointing fingers at others. They take responsibility for finding solutions and making improvements.

Make Your Management Toolkit

I have always encouraged people to develop their own sets of guiding principles. I urge everyone to do that as a habit that serves as a constant reminder that we evolve over our lifetime as managers, and there are always new ideas that can be helpful—or old ideas that suddenly apply to a situation in which we find ourselves. Learning to be a better manager is a lifelong process.

Latest Morgan Publishing News

I’m excited to launch a brand new website for my books, still at the old URL, www.appliedwisdombook.com. There are two main features. First is that I’ve brought all of the content related to my books under one roof. Second is that I’m launching two new resources, an accessible, downloadable audiobook of Applied Wisdom for Nonprofits, and also a set of snappy bite-sized videos to introduce newcomers to the core concepts in the book.

Here’s the video of the introduction:

As always, complimentary copies of Applied Wisdom for Nonprofits, both print and digital, are just a click away.

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Court Sense

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I’ve always liked Kenny Rogers’ song The Gambler. It tells the story of a chance encounter with a man who he calls “the gambler.” In exchange for a drink of whiskey, the gambler agrees to offer him some advice. The advice? “You’ve got to know when to hold ’em, know when to fold ’em, know when to walk away, and know when to run.”

The song makes me think about business strategy, knowing when to move ahead, when to re-engineer a project, and when the best move is just to shut down an initiative that’s gone off track.

There are many tools and techniques that can help you develop a sound business strategy. One of them I call “court sense.”

Why “court sense”?

Basketball is an intense and fluid game. I’ve always liked it because there’s no standing around waiting for a pitch or lining up and waiting for a snap. You have a game plan, but you have to adjust on the fly. You study your opponents’ behavior and focus on seizing opportunities as they arise. Playing basketball helped give me “court sense,” an ability to pay attention to more than one thing going on, to adjust to fast-changing variables in order to predict where the next opening or opportunity might be. And also to sense the challenges that will invariably arise.

The Morgan & Sons Cannery in the 1940s.

I grew up working in our family’s canning business, Morgan & Sons Canning. Canning vegetables might sound simple. But keeping a canning factory humming demanded focus and good judgment. As the equipment became increasingly complex and powerful it also became more dangerous. Training workers and making sure they followed safety procedures was essential. A shirt-tail or a sleeve caught in the canning line could lead to a serious injury; I saw men lose fingers or even a hand by being careless near gears and motors. That was my introduction to court sense. To this day I see things from the corner of my eye and project the probability of an accident.

Court sense is the alert, action-oriented posture that sports like basketball demand for success. It holds true in business and also for nonprofits. You can’t hone your court sense in a vacuum—or in an echo chamber. It’s valuable to take the time regularly to step out of your comfort zone and the weeds of daily details and immediate issues. As you develop your court sense you’ll see more clearly everything that’s happening around you, allowing you to rapidly adjust to changes.

In making decisions about the future direction of an organization, it’s critical to use your court sense to assess the driving forces. Driving forces can be macroeconomic factors, technology innovations, industry directions, and global trends. Moore’s Law was a driving force that helped us at Applied Materials, for example. Other driving forces today include a global interest in reducing reliance on fossil fuels, or the aging of the “Baby Boom” cohort. Micro driving forces can be unique, possibly fleeting opportunities such as a competitor’s strategic shift or stumble, or new tax incentives that encourage a specific investment.

It’s a good exercise to periodically look at the driving forces related to whatever you are doing. Assess whether you are positioning yourself to take advantage of the changes. Look at the demographic that you think represents your most important customers or funding sources and seek to understand what new ideas or cultural themes matter to them. Realize that this is a “best guess” domain so when you make a decision, keep recalibrating and adjusting.

In nonprofit management, it means not only paying attention to your personal agenda and actions, but realizing that managers must learn to simultaneously track the movements and momentum of the entire team, the entire organization, local and national politics, and current societal and economic trends.

Right now we have a very strong economy in the United States. A lot of people are making a lot of money, which is good news for fundraisers. But recent tax changes could make fundraising more difficult. Although the strong economy has reduced unemployment to record levels, it has increased housing costs in many communities, which in turn has made staff more expensive for every organization. Just like in for-profits, sudden policy changes in Washington are having an impact on many nonprofits, such as those focused on immigration or the environment.

It’s critical to adopt an alert, ready posture, constantly reminding yourself to look up, look forward, and look around. The better your court sense, the sooner you will see and react to changing conditions. You have to anticipate problems, process new variables, and adjust your strategy accordingly while finding ways to move forward. You become road kill if you don’t.

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Management Thoughts and Wildfires

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Sonoma County and the city of Santa Rosa are holding a ceremony tonight in observance of the anniversary of last year’s disastrous Sonoma fires, including a memorial bell ringing for the 24 people who died. Just 60 miles north of San Francisco, this community has pulled together over the last twelve months to understand the lessons of the fires and to chart a path forward.

2018 has been another terrible year for wildfires in California. And not just California. All summer long fires raged out of control in Montana, Idaho, Wyoming, Washington, Colorado, and Oregon, and in Canada in British Columbia, Alberta, Saskatchewan and Manitoba.

This summer’s Ranch Fire in Northern California was the largest wildfire in California history—it burned over 400,000 acres. A firefighter who died there was the sixth fatality among California firefighters this year. As I write this newsletter in early October the wildfires appear mostly to be contained, which gives us a chance to reflect on what management thinking is useful in addressing this worsening crisis.

Clearly collaboration, planning, and implementation are critical—but how can these be achieved? I understand the challenge at the regional level because I have watched the impact of an organization, the California Stewardship Network, that my wife, former State Senator Becky Morgan, started over 10 years ago. It’s a nonprofit alliance that pulls together fifteen diverse regional organizations from across California. It has proven to be a good means to achieve sustainable solutions with all the stakeholders—public, private, and nonprofit—engaged early. Each stakeholder should have a role, deliverables, and a responsibility to make and manage the consequences of their decisions.

A locus for action in addition to the normal regional work is the annual California Economic Summit. It is co-sponsored by the California Stewardship Network and by California Forward, a nonprofit devoted to improving the performance of government in California via an increased emphasis on accountability and transparency.

The Sonoma fires hit just a few weeks before the 2017 Summit, which was held in San Diego. Sonoma sent a cohort of elected officials, community and business leaders to the Summit. On the first day, one leader stood up and gave an impassioned plea for help. The Summit set aside a room during the cocktail hour when any attendee could join in a conversation about what Sonoma County’s next steps as a region should be. The turnout was amazing—at least 80 people from around the state, including state senators, nonprofit leaders, educators and businesspeople—gathered and offered their wisdom about what Sonoma needed to do to get back on its feet: act quickly while FEMA was still on the ground, think about getting temporary exceptions to regulations in order to expedite re-building, at the same time re-thinking zoning, while protecting jobs and restoring open space. The meeting was a wonderful example of democracy in action. One person summarized it by calling out both the reality and the opportunity: California will have more wildfires, but Sonoma County could set an example. The Summit’s goal was to work with local leaders to establish a governance model that can be adopted by every California community—before disaster strikes.

California Forward then partnered with the California Economic Summit to document Sonoma County’s response to the 2017 wildfires—and to analyze in real time the lessons learned and the opportunities for change that are emerging as a result.

As an example, the City of Santa Rosa and Sonoma County are working to improve their governance structures, seeking to integrate a variety of agencies and policies focused on common goals. This includes the creation of a new Office of Recovery and Resiliency structured around five critical functional areas—Community Preparedness and Infrastructure, Housing, Economy, Safety Net Services, and Natural Resources.

California Forward’s assessment focused on three areas where Sonoma has already made important progress—economic recovery, governance and fiscal sustainability. It also highlights several issues where California Forward believes local leaders need to focus next.

Other regions affected by wildfires can take a lesson from the way Sonoma pulled together across government, nonprofit and business lines, collaborating successfully to expedite recovery and chart a different course for how humans think about wildfires in the future.

This year’s Economic Summit will be held in Santa Rosa on November 15 & 16. Also inspired by Sonoma’s response to the fires, resiliency has become a major theme of the summit—the need for resiliency in every region—whether it is from natural disasters, climate change, or economic uncertainty.

Successful collaboration, planning, and implementation are possible when all stakeholders—public, private, and nonprofit—are engaged with goodwill, determined to achieve a collective solution.

 

 

 

To your success,
Jim Morgan

I’d like to hear from you on this topic, please comment below.

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A Crisis at Facebook

My friend Roger McNamee put it best: “It reads like the plot of a sci-fi novel: a technology celebrated for bringing people together is exploited by a hostile power to drive people apart, undermine democracy, and create misery.” This was in an article he wrote, “How to Fix Facebook—Before It Fixes Us,” published three months ago, in early January, in the Washington Monthly.

McNamee is one of the deans of Silicon Valley investing and has a great track record (Google, Facebook, Palm, Sonos). He’s looked at a lot of companies over the years and is a voice to be listened to. He was an early investor in Applied Materials, in the 1980s. I found him to be a very good resource for my external “porpoising,” seeking out potential bad news. He was smart, direct, sometimes critical, but always insightful.

In the article he describes his long-standing relationship with Mark Zuckerberg—he served as an advisor to Zuckerberg and Facebook from 2006 to 2009. He was responsible for recommending and recruiting Sheryl Sandberg and admires them both “enormously.” He still owns shares in the company.

In October 2016, a year-and-a-half ago, he contacted Zuckerberg and Sandberg to alert them to his concerns about privacy and the manipulation of Facebook data for political purposes. They assured him that he was “misinterpreting the news” and that they were “doing great things that you can’t see.” He then, a year ago, started to discuss the issues publicly.

One of the most troubling things he talks about is how the algorithms that social media uses to maximize attention give an advantage to negative messages. Then, by showing people “what they want” and encouraging them to join Groups of like-minded people, Facebook enables filter bubbles which create the illusion that everyone agrees with them.

The Truth Was Out There

But McNamee was hardly the only one sounding the Facebook alarm. There was plenty of warning. Concerns about Facebook have been mounting literally for years. The Guardian exposed the Cambridge Analytica story more than two years ago. There were stories published about Facebook privacy concerns three years ago, and even further back.

I find it mystifying that Facebook didn’t anticipate the current crisis. They seem to have had no preparation for the blowback that’s occurred. Why did they act like deer in the headlights? Why was there no basic response plan? That should just be part of good management.

There’s a question of who knew what and who approved what. I can guarantee someone knew. And where was Facebook’s board of directors while this was going on? Couldn’t they have stepped in?

The problem is compounding. By not being on top of it at the beginning these things get out of hand. Particularly with the flow of information today, it becomes a major crisis very quickly. Once it gets started it’s hard to stop.

A Classic Challenge

Facebook’s issues represent a classic management challenge that faces fast-growth businesses Here was a company with great ideas and brilliant people, but little practical management experience. Companies that are growing fast often fail to develop a business culture that really respects their customers, to develop the customer trust they need.

It’s clear now that Facebook appreciated mainly the people who were paying for the ads and not the people who were providing the data. They didn’t realize that they have a responsibility to protect people’s information. They seem to have believed that anything goes as long as they connected people. That clearly has limits.

Tackling a Crisis at Applied Materials

In 1982 the Silicon Valley Toxics Coalition was formed after groundwater contamination was discovered at IBM and Fairchild Electronics plants in Silicon Valley. When we first heard of the problems I ordered a check of our own facilities. As a result of a leak in an underground storage tanks we discovered contaminants in the groundwater beneath our Building 1 in Santa Clara. We were just one of dozens of companies facing this issue but with a name starting with “A” we were always near the top of the list of the companies identified.

Working in cooperation with the Environmental Protection Agency (EPA) we were soon at work fixing the leak and decontaminating the groundwater. By tackling the problem proactively and addressing the issue quickly we were able to avoid a crisis.

At Applied we were always on the lookout for problems before they started. We would periodically discuss what potential threats were out there. When I was talking to different people around the world I’d get a sense of what might become a difficult issue.

Depending on the subject, and in which functional area, senior staff would have a plan in place. I’d review it and we’d just keep it available, revising if necessary. This was part of our annual planning.

The board of directors provided valuable input. They would periodically discuss potential threats: what had roughly a 20% chance of being bad news in the following year. We’d do that at least once a year, more often if there was a specific change going on.

Three Morganisms

The crisis at Facebook brings to mind three of my Morganisms.

  1. Develop “court sense” to see everything that’s happening around you, and to rapidly adjust to changes.

Court sense often refers to the practice of being aware of the driving forces that surround your company and your industry. Facebook could see mounting concerns about privacy and about Russian meddling in American elections but failed to react in time. Now they will be forced to adjust by outside parties, outside of their control, possibly including the U.S. and European governments.

  1. Always listen for and even seek out signs of trouble. Bad news is good news if you do something about it.

Court sense is useful both outside and inside the company as bad news is often found within. Facebook management may have seen the mounting signs of trouble but they then failed to do anything to effectively address them.

  1. To create a culture of accountability, reinforce individual ownership of problems. Always ask, “Who owns the monkey?”

It seems clear that senior management at Facebook was not delegating responsibility as the problems grew larger. When you begin to hear of potential problems it’s important to assign someone to monitor the situation. We know now that there were managers sounding the alarm. But apparently, they were not empowered to address the problems they had identified.

Moving Forward

Facebook has established that it cannot be trusted. That perception is hard to turn around. This is why trust and respect are such a critical aspect of business.

Regardless of the industry or sector, all modern organizations must learn to operate within and to overcome paradoxes. Facebook’s paradox is that its business model is based on selling data about its customers at the same time that it must respect the privacy of that data.

Poor leaders tend to be dismissive of difficult and/or opposing forces. Good leaders convey to all stakeholders that they understand the paradoxes. By managing the consequences of decisions carefully and striking a wise balance, the organization can succeed.

Facebook is an important and potentially great company. I wish them every success in the future.

 

I’d like to hear from you on this topic, please comment below.

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Problems in Washington

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When I was in Washington, I was impressed with the politicians and the bureaucrats. As Majority Leader and later as President, Lyndon Johnson got a lot done. Presidents Reagan, Bush Senior, and Clinton were effective at accomplishing policy changes that made peoples’ lives better and made government work better. Part of the problem these days is that the extreme factions of the parties have driven so many moderates out of power.

I see a big shift at the cabinet level. Cabinets used to have people with solid experience. You don’t often see senior business people with global experience in cabinet positions anymore. There’s been rising influence among political consultants, pollsters, and young White House staffers. Somebody who’s been a CEO of a global company has a problem not being heard by the President and dealing with snarky staff people. It’s a weakness that’s evolved at the White House. Think about Lincoln and his “team of rivals.” He surrounded himself with people he knew disliked him and competed with him, but it worked because he actively sought the full spectrum of opinions, he managed the process, and he produced decisions that reflected all that input. We don’t have that today.

Government is supposed to figure out solutions for people and must collaborate to do that. I again stress the importance of my rules of collaboration. You can’t achieve the most basic element of those rules, mutual respect and trust, when you put extremists in key jobs. They don’t want to compromise to get effective solutions for the majority. I like to see groups work collaboratively, whether at the small unit level, corporate level, industry level, government level, or global level. I don’t care too much who gets credit, it’s about moving forward, accomplishing goals. Unfortunately, the culture of a government bureaucracy tends to be such that rapid change puts people at risk. Unlike the culture we created at Applied, government staff often are scared of bad news. They don’t want to go through the transformation exercises; change is not a medium of opportunity, it’s a risk to your job and promotion.

I believe a strong and fiscally responsible economy is a paramount goal, without borrowing from our grandchildren. The extremists today make me concerned that both parties are leaving moderates like me out of the process. Parties can’t just be against everything the opponents are for; parties have to be fiscally responsible and lead, govern, and solve problems for all Americans.

I’d like to hear from you on this topic, please comment below.

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Interview: Dr. Ichack Kalderon Adizes and Jim Morgan

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Dr. Ichak Kalderon Adizes

This blog post was featured in the Huffington Post on November 29, 2017.
Dr. Adizes: Jim, you have authored and published a book, Applied Wisdom, (2) in which you summarized your thirty years of leading Applied Material as its CEO and Chairman of the Board. Applied Material grew from a small company, with $17 million in revenues when you joined, into a company of $10 billion in revenues when you retired. You have put your thirty years of experience into that book. Why did you write it? It takes time and effort to write a book.

Jim Morgan: My first goal was to write something for my grandchildren, for them to know where I spent my adult life. But as I wrote the first draft, I realized there was enough “applied wisdom” from my experience leading the company that could be useful to people taking courses on leadership, people who do not have thirty years of experience. So, my goal in writing the book is for future leaders to gain from my experience and for it to be written so well that even my grandchildren can read and enjoy it.

Dr. Adizes: During your tenure, the company grew from $17 million to $10 billion in revenues. What were the causes for this successful growth? What do you attribute your success to?

Jim Morgan: We focused on innovating new products that would meet global customer needs and were early to new markets like Japan, Taiwan, Korea and China. We attracted very capable people, like Dan Maydan who eventually became the company president. Three major factors: great people, new markets, and new products.

Dr. Adizes: New products, new markets, and even the recruitment of excellent new people do not happen by themselves. Why did it happen at Applied Material?

Jim Morgan: It was the company culture of being close to the client. Very close. So, we always knew what their needs were and we worked hard to satisfy them. Thus, new markets. Thus, new products. And, that meant that we knew which people with which capabilities we needed.

Dr. Adizes: Having been your consultant for twenty years allows me to give you my insight into why you were able to attract good people and why you were close to the client and thus able to innovate what the market wanted. It might not be in your book because it is difficult to see the picture when you are in the picture.

Jim Morgan: Yes, tell me.

Dr. Adizes: It is your style, Jim. You allowed people to be free to think and to lead. You gave people space. The company was not top-down driven. On the contrary, it was bottom-up driven. Clients drove the sales people who drove the R&D which drove production. Dan Maydan was the same: very open-minded. And this climate of openness attracted people who were innovative and entrepreneurial. Furthermore, with my involvement, we almost annually restructured the company as it was growing so that decentralization could be implemented and sustainable. And it was. Thus, the good people came and stayed. Thus, the closeness to the client. Thus, the innovation. Thus, the success.

Jim Morgan: Yes. We insisted on decentralization, and the book I authored makes points on delegation and decentralization.

Dr. Adizes: What is the worst decision you have made?

Jim Morgan: Getting into the implant business.

Dr. Adizes: What was wrong?

Jim Morgan: The company had a good product when we bought it. But it did not succeed in its subsequent products, and it never became number one in its industry.

Dr. Adizes: Why did this division fail with new products?

Jim Morgan: They were not close to the market like the rest of the company. They were in England, and our culture did not get transmitted to them as well.

Dr. Adizes: Adizes was with you all the way, for twenty-some-odd years. What was it that Adizes did for you or for the company that made it worth holding on to?

Jim Morgan: Adizes was instrumental in leading the ongoing decentralization of the company by continuously working on restructuring. And, Adizes knew how to handle different cultures and teach the executives from different nation how to listen to each other and work as a team. Applied Material was like a United Nations in its top management: Indian, Iranian, Israeli, Argentinian, etc. You helped unite them and taught them how to work together in spite of their different cultural backgrounds.

Also, you taught us how to make the changes without losing alignment. To change a culture, you need to change structures and to change the process which will change the people and eventually the culture.

Dr. Adizes: Growing from $17 million to $10 billion through continuous reorganization and restructuring means a lot of change. How did you, as the CEO, handle those who were resisting change. You and I know who they were.

Jim Morgan: By never getting involved in the politics of the company. By always following what is strategically and functionally right for the company long-term and steering away from politics. We developed a culture that is included in Applied Wisdom: bad news is good news….. if you do something about it!! Dan and I could not remember a time bad news got to the Board, Wall Street, or the press that we did not know about.

Dr. Adizes: You had a very good Board of Directors. What are your guidelines for building the board and managing it?

Jim Morgan: I wanted competence on the board with a diversity of knowledge and of styles. We had equity fund managers, people from the industry, leaders from the accounting profession, etc. And I always worked to ensure that they would not be surprised but instead fully knowledgeable about the company’s problems and affairs. Board members should help think about solutions to problems, not be there to just cheer on the CEO.

Dr. Adizes: You retired…..

Jim Morgan: At 65, I stepped down as CEO after we hired Mike Splinter from Intel. He had a ten-year run until he retired. These were a tough ten years because the whole industry was in a downturn. But, he kept it going. Today, under the leadership of CEO Gary Dickerson, it is a $15 billion company setting new records and celebrating fifty years of global innovation.

Dr. Adizes: Thank you, Jim. It was a pleasure working with you, and it was a pleasure reading your book. I am sure future readers will find it fascinating.

Jim Morgan: Good talking to you, Ichak. Come see me when in the Silicon Valley.

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1) Applied Material (AMAT) is the leading company in the world in manufacturing wafer-producing equipment. Those wafers produce the chips that drive computers. AMAT byline: “The information highway starts here.” AMAT has been a client of Adizes Methodology for over twenty years, starting when the company was at $400 million in sales. The service was discontinued when a new CEO came aboard. At that time, the company was ten billion in sales.

2) Morgan, J. C., & Hamilton, J. O. (2016). Applied Wisdom: Bad News Is Good News and Other Insights That Can Help Anyone Be a Better Manager. Los Altos, CA: Chandler Jordan Publishing.

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Applied Materials Gives

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America has always been a country of givers. As waves of new immigrants came to this land, they built the schools, community centers, hospitals and vibrant arts organizations that now exist. Many people came to this country with very little, and yet they gave back.

I made charitable giving central to Applied Materials’ mission early in my career there.

The Applied board of directors authorized contributing a portion of our pretax profits to invest in local nonprofit organizations. We maintained the planned level of commitment in part by contributing to a company foundation in good times, setting aside funds that we could rely on during tough financial times when our communities were often under more stress.

I’m proud that Applied continues this commitment directly and through the Applied Materials Foundation. They’ve got a broad focus on giving in the areas of education, arts & culture, civic engagement and the environment. In 2016 the company and the Foundation made grants of over $9 million dollars to charities and nonprofit agencies in ten countries around the world. It’s one of the ten largest corporate philanthropists in Silicon Valley.

When I was at Applied last Friday I was reminded of all the good work that they do. Siobhan Kenney has worked in community affairs and with the Applied Materials Foundation for over fifteen years. “We’re a very engaged company,” she says. “We try to have a positive impact on the communities where our employees work and live.” She makes it clear that local is important, but that “local” also means all of the countries where Applied has a presence, including India and China.

The Foundation also runs Employee Matching Gift and Volunteer Time Grant Programs. “Generosity resonates with our employees,” Siobhan says. “Employees can choose their own charities and the countries where they wish to make donations.” More than 30 percent of U.S. employees participate in company giving programs – well above the 14 percent average for other corporations of the same size. In 2016, employees directed $4.1 million in donations and matching funds to charities and nonprofit agencies across the globe.

In addition, last year, among numerous other efforts, Applied employee volunteers and their families worked on conservation activities on Mt. Fuji in Japan, helped create a forest in the Tancheon Wetland in Korea, and replanted pine trees in fire-ravaged Bastrop State Park with the Nobelity Project in Austin, Texas.

As Siobhan says: “Giving is part of our identity.”

Since leaving Applied, I continue to be involved in the community and recognize the significant impact each of us can have on issues of personal importance. Environmental causes, education, and regional collaboration are in the mission of our family’s philanthropic efforts.

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Applied Materials at 50

Applied Materials will be celebrating its fiftieth anniversary on November 10. To be a 50-year-old company in Silicon Valley is quite an achievement. To be growing fast, setting new records and delivering cutting-edge innovation at 50 is almost unheard of. Few companies can make that claim.

When I joined Applied in October of 1976 the company had about $17 million in revenue. We were over-diversified, hemorrhaging cash and facing bankruptcy.

When I was first offered the position to lead Applied, I talked about the opportunity with some friends and colleagues. No one thought my joining Applied was a good idea. I wish I could say that I knew this was the job I would have for the rest of my career. The truth is, my initial ambitions were short-term. Little did I know that I would lead the company for over a quarter century.

Early on we decided that our goal was to be the “Leading Semiconductor Equipment and Services Company Worldwide.” It was a very ambitious statement for a small company that was way down the list in its industry, but when I looked around at the competition, I felt we could become number one. It was true we were up against some very large companies, but they were not focused exclusively on semiconductor equipment. I didn’t see anyone else who had the right to be the clear leader; nobody had a lock on this segment.

Today Applied’s mission is broader but solidly established: “to lead the world with materials engineering solutions that enable customers to transform possibilities into reality.” This uses the knowledge, technologies, equipment designs, and patents built up over the years to expand semiconductor and display markets and enter new areas. The company is on its way past $14 billion in revenue. Under CEO Gary Dickerson and the outstanding global team, Applied just delivered the best quarter in the company’s history.

Last Friday I took part in an event at Applied’s Santa Clara office. It was billed as a conversation, and Joe Pon, who is VP of communications and public affairs at Applied, had set up a stage where we could chat. I was honored to find a full house, standing room only. I’ve known Joe for a long time and the interview was relaxed and fun. He asked what it was that made me successful as Applied’s CEO and I said that it has always been the people: their commitment, persistence, and collaboration. They succeed with a strong focus on the customer and a connection with the community.

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