Archive for the ‘Books’ Category

This post is in continuation to my earlier post on Winning-Take 1. Earlier, I wanted to go one chapter at a time, which I like but now, I am going to pick chapters as I feel about it. So, the chapter of the discussion will be random but at the end of this series, I feel I am going to share a lot of myths and usual working professional style in conjunction with the book.

We are going to concentrate Take 2 on “Leadership”, one of the most confused and badly defined word in today’s corporate world. Well, we will first point out the the different traits the book discusses as the defining characteristics of “Leadership” and then discuss them all putting the present scenario around and break some of the common myths that we see around. Before that, let me be very clear, all managers are not at all “leaders” but all leaders are definitely good managers. This statement makes us ask why there is a question on “managers”. Well, because in the corporate world, unfortunately managers (or sometimes, Leads such as Project Leads, Team Leads) are named as leaders. I am sure one would have encountered a statement like this too often, “we choose to decide Mr. XXX to lead the team. Again, a wrong word all in all. It should be “manage” and sometimes, it just remains to few predetermined guidelines with no power at all. At times, I have heard my friends say to me, I don’t know what’s wrong with Mr. ABC. He was a good guy till he became a manager. Now, he feels as if like he owns us. In other terms, Hitler left his hierarchy as attitude of managers.

According to Jack Welch, the following traits define a leader:

  1. Leaders relentlessly upgrade their team, using every encounter as an opportunity to evaluate, coach, and build self-confidence.
  2. Leaders make sure people not only see the vision, they live and breathe it.
  3. Leaders get into everyone’s skin, exuding positive energy and optimism.
  4. Leaders establish trust with candor, transparency, and credit.
  5. Leaders have the courage to make unpopular decisions and gut calls.
  6. Leaders probe and push with a curiosity that borders on skepticism, making sure their questions are answered with action.
  7. Leaders inspire risk taking and learning by setting the example.
  8. Leaders celebrate.

Let us consider point 1. Three points become prominent here: Leaders evaluate, coach and finally, build self-confidence. Evaluate what? Evaluate making sure right people are in the right jobs, supporting and advancing those who are. There is an issue here in advancing. In my short career span, I have seen a lot of highly talented people going mediocre because his/her manager does not care about him. The general statement is: one is paid for doing something in the job, no matter it is a routine job. Well, be careful when you hear these words. These are kind of “signals”, signals that convey that you are at the wrong place and with a wrong person. Once evaluated, Leaders Coach, helping people improve in every way possible. And finally but most importantly, Leaders build self-confidence poring out encouragement, caring and recognition. Why point is important is that too many managers limit the people development to annual performance review and sometimes, just in discussions rather than being open in with the comparisons. Many times I have heard that don’t compare yourself, but then I have one question for all those: when one is given 4/10 and 9/10 in performance, then it makes me hard to believe one has not been compared because for simple reason that it is not a Mathematics course test, where you multiply right to get the right answer immaterial of what.

Point 2: Vision. This is one characteristics that will differentiate the leader from usual managers. Leaders possess visions and they don’t fear to communicate it. I feel visions should be loud and loud enough that everyone hears it. But no vision in worth the paper it’s printed on unless it is communicated constantly and reinforced with rewards. Only then will it leap off the page and come to life. Please don’t confuse vision with “deadlines” or “expectations”. We will take about them sometime later. Vision is something a leader visualizes for the benefit of the whole group for a long term. Visions can make a simple manager CEO and its group as the star performing group of the organization. And of course, please don’t confuse it with number of years that one has to stay with the organization. Generally, when an organization grows to a big size, the general rule dictates one has to stay for x years to be at Y position. This is not vision. Vision is something that will break these borders, redefining the rules of the game by setting news standards and if a general rule is x years, then in x-z years, one gets the position, where z is a substantial period.

Point 3: There is an old saying, “The fish rots from the head”. It’s mainly used to refer to how politics and corruption filter down into an organization, but it could just as easily be used to describe the effect of a bad attitude at the top of any team, large or small. Eventually, everyone’s infected. An upbeat manager goes through the day with a positive outlook somehow ends uo running a team or organization filled with…well, upbeat people with positive outlooks. A pessimistic sourpuss somehow ends up with an unhappy tribe all his own. The right attitude makes a manager leader.

Point 4: With Indian attitude, becoming a manager (or so called leader) is a real power trip. Probably, more than an individual, it is our society that has imbibed this attitude but the issue is we resist to change. Such people relish the feeling of control over both people and information. And so, they keep secrets, reveal little of their thinking about people and their performance, and hoard what they know about the business and its future. With this attitude, they forget that leaders are leaders because people feel strongly about their leadership skills and not because someone is a Manager by the tag name. Trust plays a major role here but honestly, you know it when you feel it. It is that simple. Most importantly, leaders take responsibility for what’s gone wrong and generously pass around the praise. To be a good leader, never forget you weren’t give an crown, you were give a responsibility to bring out the best in others. For that, your people need to trust you. And they will, as long as you demonstrate candor, give credit and stay real.

Point 5: Leaders don’t fear to make tough calls because they don’t consider themselves to be in a popularity contest. I feel one’s gut feelings play a very important role here.

Point 6: When you are an individual contributor, you try to have all the answers. That’s your job – to be an expert, the best at what you do, maybe even the smartest person in the room. When you are a loeader, you job is to have all the questions. You have to incredibly confortable looking like the dumbest person in the room. Every conversation you have, must have “What if?” and “Why not?” and “How come?”. Questioning alone, however, is not enough. You have to make sure your questions unleash debate and raise issues that get action. At the same time, what distinguishes a leader from a manager is leaders know that saying something doesn’t mean it will happen.

Point 7: Winning companies embrace risk taking and learning. But in reality, these two concepts often get lip service – and little else. Too many managers urge their people to try new things, and then whack them in the head when they fail. And too many live in not-invented-here wordls of their own making. Leader set examples themselves if they their people to experiment and expand their minds.

Point 8: What is it about celebrating that makes managers so nervous? Maybe throwing a party doesn’t seem professional, or it makes managers worry that they won’t look serious to the powers that be, or that, if things get too happy at the office, people will stop working their tails off. One another eason is as if like they are spending fro their own pocket for the celebration. Whatever be the reason, there is just not enough celebrating going on at work – anywhere. What a lost opportunity. Celebrating makes people feel like winners and creates an atmosphere of recognition and positive energy. Imagine a cricket team winning the World Cup without champagne spraying everywhere. You just can’t! And yet companies win all the time and let it go without so much as a high five. Work is too much part of life not to recognize moments of achievement. Grab as many as you can. Make a big deal out of them. If you don’t no one will.

To summarize, the beat leaders care passionately about their people – about their growth and success. And we can find them comfortable in their own skins. They are real, filled with candor and integrity, optimism and humanity. Please don’t fall into the trap that leadership happens one day when one becomes a boss and gets the power to change the rules.

Disclaimer: In no form, the above perceptions can be related to any particular individual or organization. In case done so, I take no responsibility and the firm/individual will be doing so for its own insecurity, thus, proving the negative effects mentioned being followed by themselves.

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Some of you might know, I am currently reading a book titled “Winning” by Jack Welch with Suzy Welch. This is my first attempt to write something about a book, in detailed fashion. As I read, we are going to have more reviews and perceptions.

I am going to devote the Part1 to Second Chapter “Candor Effect”.
I am still new to the industry but at the same time I feel that my observations have been very rich. The benefit I have from my observations will be in future. Hopefully, I will have the freedom to speak and act which I see a lot of managers not being able to do and thus, continue to harm the long term growth prospects of a firm. I have been in IT industry for quite some time now. So, let me tell you what I have felt strongly. IT managers are neither MANAGERS nor LEADERS. I feel they don’t fall in either of the categories. According to the industry trends, mergers and acquisitions is the buzzword. Developments and Inventions have been done. They hire nice smart people not to make them smarter but to make them mediocre. A lot of time, we, ourselves, don’t speak our feelings and minds and even if we do, the so-called managers never take it upward. Irrespective of place, I have found this attitude of Indians very disturbing. To some extent, I feel we are socialized from childhood to soften bad news or make nice about awkward subjects. Till date, parents hesitate to talk about sex to their children. Isn’ t it? How can a company justify with “average” hikes to people when it is out making huge acquisitions worth of billions and millions of dollars almost every quarter? Executives are often found to have been speaking on the importance of human knowledge power but very few of them (my experience has been NONE) actually practices them. Everyone knows that showing EPS to an investor quarterly is good but if someone has to show it consistently and for a long period of time, one has to look within and that’s where almost all IT MNC’s are lacking. Currently, I find most of the so-called managers hiding themselves behind the processes and rotting systems and giving various explanations instead of fighting for the right. One question to all: As a father, if something wrong or bad has happened to you, you try your best not to develop the similar circumstances for your son/daughter, then why how do do you justify to your sub-ordinates that your experience of x years has seen the same trend and hence, is justifiable irrespective of the fact that it is WRONG? To all CEOs, Mind you Sir, by having such so-called managers you are actually driving your firms to extinctions rather than growth and prosperity.

Coming back to the candor effect, it is about giving the freedom to the employees and well-wishers to speak and be heard. So, how is it useful?

  1. Candor gets more people in the conversation and when you have more people in the conversation, you get ideas rich. More ideas surface, discussed, pulled apart, and improved.
  2. Candor generates speed. When ideas are in everyon’e face, they can be debated rapidly, expanded and enhanced, anmd acted upon.
  3. Candor cuts costs. Meaningless meetings and reports (IT MNCs are now know for this two qualities) are cut down by candor.

Therefore, no matter which B-School you attended, irrespective of that one must know lack of candor blocks smart ideas. fast action, and good people contributing all the stuff they have got. It’s a killer. Eventually, we realize that people don’t speak their minds because it’s simply easier not to. It is true that candid comments definitely freak people out at first but then if you are an effective manager and leader, it is your responsibility to get candor and to do so, praise it, reward it, and talk about it. Most of all, you yourself has to demonstrate it in an exuberant and even exaggerated way. Personally, I would like to see a firm where a voice of lowest grade employee, provided it is justified and reasonable, reaches to the CEO irrespective of the levels of hierarchy between them.

Disclaimer: In no form, the above perceptions can be related to any particular individual or organization. In case done so, I take no responsibility and the firm/individual will be doing so for its own insecurity, thus, proving the negative effects mentioned being followed by themselves.

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Recently, with the recession knocking at the doors and the global financial meltdown, Warren Buffet seems to be unaffected as he bought shares of Goldman Sachs and commented that if the market continues its run like no, he may have 100% equity in the US market. So, I present an article from rediff.com of Warren’s tactics:

Back in 1999, Robert G Hagstrom wrote a book about the legendary investor Warren Buffett, entitled The Warren Buffett Portfolio. What’s so great about the book, and what makes it different from the countless other books and articles written about the “Oracle of Omaha” is that it offers the reader valuable insight into how Buffett actually thinks about investments. In other words, the book delves into the psychological mindset that has made Buffett so fabulously wealthy.

Although investors could benefit from reading the entire book, we’ve selected a bite-sized sampling of the tips and suggestions regarding the investor mindset and ways that an investor can improve their stock selection that will help you get inside Buffett’s head.

Think of stocks as a business
Many investors think of stocks and the stock market in general as nothing more than little pieces of paper being traded back and forth among investors, which might help prevent investors from becoming too emotional over a given position but it doesn’t necessarily allow them to make the best possible investment decisions.

That’s why Buffett has stated he believes stockholders should think of themselves as “part owners” of the business in which they are investing. By thinking that way, both Hagstrom and Buffett argue that investors will tend to avoid making off-the-cuff investment decisions, and become more focused on the longer term.

Furthermore, longer-term “owners” also tend to analyze situations in greater detail and then put a great eal of thought into buy and sell decisions. Hagstrom says this increased thought and analysis tends to lead to improved investment returns.

Increase the size of your investment
While it rarely – if ever – makes sense for investors to “put all of their eggs in one basket,” putting all your eggs in too many baskets may not be a good thing either. Buffett contends that over-diversification can hamper returns as much as a lack of diversification. That’s why he doesn’t invest in mutual funds. It’s also why he prefers to make significant investments in just a handful of companies.

Buffett is a firm believer that an investor must first do his or her homework before investing in any security. But after that due diligence process is completed, an investor should feel comfortable enough to dedicate a sizable portion of assets to that stock. They should also feel comfortable in winnowing down their overall investment portfolio to a handful of good companies with excellent growth prospects.

Buffett’s stance on taking time to properly allocate your funds is furthered with his comment that it’s not just about the best company, but how you feel about the company. If the best business you own presents the least financial risk and has the most favorable long-term prospects, why would you put money into your 20th favorite business rather than add money to the top choices?

Reduce portfolio turnover
Rapidly trading in and out of stocks can potentially make an individual a lot of money, but according to Buffett this trader is actually hampering his or her investment returns. That’s because portfolio turnover increases the amount of taxes that must be paid on capital gains and boosts the total amount of commission dollars that must be paid in a given year.

The “Oracle” contends that what makes sense in business also makes sense in stocks: An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.

Investors must think long term. By having that mindset, they can avoid paying huge commission fees and lofty short-term capital gains taxes. They’ll also be more apt to ride out any short-term fluctuations in the business, and to ultimately reap the rewards of increased earnings and/or dividends over time.

Develop alternative benchmarks
While stock prices may be the ultimate barometer of the success or failure of a given investment choice, Buffett does not focus on this metric. Instead, he analyzes and pores over the underlying economics of a given business or group of businesses. If a company is doing what it takes to grow itself on a profitable basis, then the share price will ultimately take care of itself.

Successful investors must look at the companies they own and study their true earnings potential. If the fundamentals are solid and the company is enhancing shareholder value by generating consistent bottom-line growth, the share price, in the long term, should reflect that.

Learn to think in probabilities
Bridge is a card game in which the most successful players are able to judge mathematical probabilities to beat their opponents. Perhaps not surprisingly, Buffett loves and actively plays the game, and he takes the strategies beyond the game into the investing world.

Buffett suggests that investors focus on the economics of the companies they own (in other words the underlying businesses), and then try to weigh the probability that certain events will or will not transpire, much like a Bridge player checking the probabilities of his opponents’ hands. He adds that by focusing on the economic aspect of the equation and not the stock price, an investor will be more accurate in his or her ability to judge probability.

Thinking in probabilities has its advantages. For example, an investor that ponders the probability that a company will report a certain rate of earnings growth over a period of five or 10 years is much more apt to ride out short-term fluctuations in the share price. By extension, this means that his investment returns are likely to be superior and that he will also realize fewer transaction and/or capital gains costs.

Recognise the psychological aspects of investing
Very simply, this means that individuals must understand that there is a psychological mindset that the successful investor tends to have. More specifically, the successful investor will focus on probabilities and economic issues and let decisions be ruled by rational, as opposed to emotional, thinking.

More than anything, investors’ own emotions can be their worst enemy. Buffett contends that the key to overcoming emotions is being able to “retain your belief in the real fundamentals of the business and to not get too concerned about the stock market.”

Investors should realise that there is a certain psychological mindset that they should have if they want to be successful and try to implement that mindset.

Ignore market forecasts
There is an old saying that the Dow “climbs a wall of worry”. In other words, in spite of the negativity in the marketplace, and those who perpetually contend that a recession is “just around the corner”, the markets have fared quite well over time. Therefore, doomsayers should be ignored.

On the other side of the coin, there are just as many eternal optimists who argue that the stock market is headed perpetually higher. These should be ignored as well.

In all this confusion, Buffett suggests that investors should focus their efforts of isolating and investing in shares that are not currently being accurately valued by the market. The logic here is that as the stock market begins to realize the company’s intrinsic value (through higher prices and greater demand), the investor will stand to make a lot of money.

Wait for the fat pitch
Hagstrom’s book uses the model of legendary baseball player Ted Williams as an example of a wise investor. Williams would wait for a specific pitch (in an area of the plate where he knew he had a high probability of making contact with the ball) before swinging. It is said that this discipline enabled Williams to have a higher lifetime batting average than the average player.

Buffett, in the same way, suggests that all investors act as if they owned a lifetime decision card with only 20 investment choice punches in it. The logic is that this should prevent them from making mediocre investment choices and hopefully, by extension, enhance the overall returns of their respective portfolios.

Bottom Line
“The Warren Buffett Portfolio” is a timeless book that offers valuable insight into the psychological mindset of the legendary investor Warren Buffett. Of course, if learning how to invest like Warren Buffett were as easy as reading a book, everyone would be rich! But if you take that time and effort to implement some of Buffett’s proven strategies, you could be on your way to better stock selection and greater returns.


Courtesy: Rediff

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