Leading & Managing your Business: Dealing with People Randall S. Cheloha, Ph.D.

1. September 23, 2011 Leading & Managing your Business: Dealing with PeopleRandall S. Cheloha, Ph.D. Plumbing, Heating, and Cooling Contractors Association (PHCC) Minneapolis, MN

2. Introduction & Background • Presentation Goals • Introduction/Background I. Understanding Human Nature II. Leading a Business III. Managing People IV. Managing Yourself V. Succession Planning

3. Introduction • My Goals: Share insights, learning, ‘truth’ accumulated over time in working in the trenches of organizations; not academic, not theoretical; but practical and applied • Education Session: Teach, share, answer questions • My hope for you: ‘Finding the Pony’

4. Maps/Models to Plot your Course • The map is not the terrain • You need to know where you are and where you are going • Circumnavigate/Triangulate: What makes sense? • How manage/lead people. It’s very conceptual, abstract, and amorphous? The nature of CONSTRUCTS… • Human Nature • Leadership • Personality • Company Culture • Brain Function • Emotion

5. Points to Remember • Human nature remains the same • Have a theory to understand people • Brain physiology: Reaction time of amygdala (50 milliseconds); via cortex (500 milliseconds) • Most reactions/perceptions/insights are hard-wired by age 5 • We are all MASTERS of Projection • Nobody is perfect • Create a work environment where Progress on Meaningful Work can Occur • Chances are, as a boss, you get in the way

6. Fast (1) & Slow (2) Brain Circuits: Our Reactions Cerebral Cortex Hippocampus Thalamus AMGYDALA The Event, The Trigger Reaction

7. I. Understanding Human Nature • Human nature remains the same over time (HBO: TheTudors, Rome) • Working Theory of Personality (and leadership style flows from personality) • Relationship of values, attitudes, and behavior

8. A Framework for Human Behavior and Personality • Assessing Capability 1) Values (drivers) 2) Strengths 3) Weaknesses/Development Needs/Blind spots 4) Multiplier Effect: Work Ethic

9. Making the Right Hiring Decisions • Draw on a Quality Feeder System: Local Schools, Tech Schools, Personal Network, Apprenticeships • Screening: Multiple Methods/Multiple People • Interviews -- Tests • Partner/Apprentice -- Probation (6 months) • Provide Immediate Feedback • Frequent Performance Reviews • Right hiring decisions saves 90-95% of management work • Productive people can be 200-300% more productive

10. Mathematical Equation for Assessing Human Capability ((V + S – (DN))) * WE = CAPABILITY Key: V-VALUES S-Strengths DN-Development Needs/Weakness/Blindspot WE-Work Ethic

11. VALUES: What do you want from Work? • Aesthetics (Quality control) • Affiliation • Altruistic • Commerce ($$) • Hedonism (Salesmen) • Power (B of A) • Recognition (Strokes) • Science (Engineer/Technician/Craftsman) • Security (Loyal, hierarchy-Utility) • Tradition (Loyal, hierarcy-Utility)

12. STRENGTHS (What you bring to the party!) • Adjustment/Emotional Stability (the governor) • Ambition/Drive (work ethic) • Sociability • Interpersonal Sensitivity • Insight? Read people? Avoid confrontation? • Prudence/Judgment: • Mistakes lead to experience; the experience that accumulates when we learn from our mistakes produces judgment • Inquisitive • Learning Approach

13. Development Needs/Weaknesses/Blind-Spots (lo scores are STRENGTHS) • Excitable—ups and down in moods; emotional; expressive (lo=EQ) • Cautious--risk averse, avoid making decisions (lo=Decisive) • Skeptical—mistrustful, vindictive (lo=builds trust with others) • Reserved—introverted; poor communicator; insensitive to morale (lo=communicator) • Leisurely--passive/aggressive, mean (lo=responsive) • Bold-narcissistic feelings of entitlement (lo=modesty) • Mischievous-careless about commitment, loose ‘honesty’ (lo=integrity) • Colorful–reactive, manage by crises, center of attention (lo=good judgment) • Diligent—over controlling micro-manager (lo=delegate, empower) • Dutiful-eager to please boss, ‘brown nose’ (lo=provide support, independent)

14. Mathematical Equation for Assessing Human Capability ((V + S – (DN))) * WE = CAPABILITY Key: V-VALUES S-Strengths DN-Development Needs/Weakness/Blindspot WE-Work Ethic

15. Understanding Types • Types: Salesmen? Craftsman Plumber? Loyal/Dedicated employee?

16. Salesman • Values • Hedonism, Commerce, Recognition • Strengths (time in the Marriott lobby) • Ambition • Sociability • Interpersonal Sensitivity • Development Needs (Quantity vs. Quality) • Bold • Mischievous • Colorful • Diligent (lo)

17. Craftsman Plumber • Values-Aesthetics, Science, Security, Tradition • Strengths: • Emotional Stability • Prudence/Judgment (rigid, don’t listen, defensive; detailed) • Development Needs: • Skeptical (challenge authority) • Reserved • Diligent (hard working; too a fault)

18. Loyal Employee/Does what you tell him to do! • Values: Affiliation, Altruism, Recognition, Security, Tradition • Strengths: • Emotional Stability? • Interpersonal Sensitivity • Prudence (it looks like it) • Development Needs: • Cautious • Leisurely/Passive-Aggressive • Dutiful

19. Relationship of Behavior, Attitudes, Values • Iceberg Analogy Behavior: What’s Visible Attitudes VALUES

20. Entrepreneurs/Owners/Founders: What Makes You Special? (re. Economist Joseph Schumpeter) The Rare Alchemy of the Driven Entrepreneur (WSJ, 8.26.11) • Characteristics: • Have the will to found a private kingdom, usually (although not necessarily) a dynasty. • Henry Ford, Bill Gates, Warren Buffet, Steve Jobs, You • Example of business cards: Edison, Ford, Carnegie,… • Will to conquer; the impulse to fight; to prove oneself superior to others; to succeed for the sake of succeeding (not for the fruits of $$) • An achiever and competitor • Joy of creating; getting things done; exercising one’s own energy and ingenuity • Drive, perfectionist, over-control

21. WHY Owners/Entrepreneurs may not be good BOSSES; their Personality Characteristics...(succession) • Independent • Determined & focused (stubborn, rigid) • Assume other people are the same (they’re not) • Over the top drive/strong work ethic • Willing to take a risk (most people aren’t!!) • Assume other’s can manage themselves (many require management) • Overly hands-on; need to know; detail; perfectionist • Over control (micro-manager) • Don’t need many ‘strokes’ or recognition

22. IIa. Leading a Business (Job Description) • Boss, Numero Uno, El Jefe’: Represent the business (CCBW), Chief Cook & Bottle Washer) • Finance the business and pay the bills • Staff the business; hiring and firing • Satisfy customers and maintain high quality standards • Marketing/Business Development • print, fliers, mailings, networking, internet, ‘word of mouth’ • Build your brand—What makes you Special?; Always ask yourself: ‘where do I add value?’(JED) • Make money!! (operate profitably)

23. Maturing as a Leader: the Process • What’s my job/role? Maybe different than what you are best at, or what you want to do, or even what you think you should do… • Continual learning from experience/mistakes/pain • What’s my real job? (Slide IIb) • Do an ObjectiveAnalyses of your strengths and weaknesses • How do I fill the ‘gaps’? Delegation, new hires… • Current person being coached, the engineer—what if promoted…

24. IIb. Leading a Business: Your Real Job • Set Goals/Provide Direction (smaller vs. larger business) • Communicate (you are the only one who has this unique perspective) • Building Relationships (CORE) • Leadership by example is redundant • Setting the right tone for your company culture (the way we do things around here) • Telling, Policy, and Rules • Showing/Modeling • Partnering-working together side by side (raising children; Randy and trimming shrubs)

25. IIb. Leading a Business: Your Real Job • Kaiser Permanente Health (SFO) study: • About 24% of employees (study of 39,000) reported mild to severe depression • Sick days and depression cost US $44 billion year • Health insurance is cheaper if employees take less sick days and are less likely to visit their primary care physician • What Can you Do? Happier Workers are More Productive • Gallup estimates cost of employee disengaement-$300 billion • Study of 238 workers, 12,000 diary entries • 33% of entries—unhappy, unmotivated, or both • Manager/Boss’s Job: How do you make ‘People happy’? ` - Remove obstacles; Provide Support; Provide Autonomy • Create opportunity to ‘Make Progress Doing Meaningful Work’

26. III. Managing People • Providing Respect and Positive Affirmation (Golden Rule--treat your neighbor as yourself; give the benefit of the doubt; see the glass as ½ full; assume the best (Rosenthal effect) • Percent of ‘Bad Bosses’??? (Hogan) • Motivating Others • Motivation comes from the inside • But, The Boss Creates the Work Environment

27. Making the Right Hiring Decisions • Quality Feeder System: Local High Schools, Local Tech Schools, Apprenticeships • Screening: Multiple Methods/Multiple People • Interviews -- Tests • Partner/Apprentice -- Probation (6 months) • Immediate Feedback • Frequent Performance Reviews • Right hiring decisions saves 90-95% of management work

28. Performance Reviews: Providing Feedback and Coaching • Principles of Providing Good Feedback • The closer in time to the good or bad event, the better • Direct, focused, and tactful • Supervisors focus most on recent events (vs. Annual Review) • Review again during Annual Review; no surprises • Ratio of 10:1 positive to negative • Negative feedback engenders Defensiveness and emotional “shutdown” • People don’t hear what you say after 1st negative comment, so… • Keep it brief—make your point • Check for understanding then—and then again within next 5 days

29. How Much can People Change? • NOT MUCH…Most hard-wiring in place by age 5; but we can learn/change and adapt • In talented motivated and bright people a LITTLE goes a long way • Frequently less ‘change’ and more re-directing their focus/energies • Sometimes it is increased Self-Awareness • Analogy: Taut wire guide on young willow tree • Where do Managers go wrong? Assuming things will get better if they do nothing (procrastination; avoiding conflict…)

30. Formula for Employee Coaching & Change 1 Awareness and Acceptance 50% 2 Skill Building 25% 3 Energy 25%

31. Realities of Coaching • Needs to be positive/trusting alignment between coach and coachee for coaching to work (interests aligned); that’s why boss/subordinate coaching is rarely effective. • ‘Boundaries’ • Most emotional memories are laid down by age 5 (Doyles); if there’s a threat, most people naturally react with emotion (amygdala) • Coaching: combine Challenge & Support • People can only change a little; but that little has a big impact on behavior (willow tree and guide wire) • Build off strengths; acknowledge and ‘fence off’ weaknesses • Counter-intuitively: people change most in the area of their strengths

32. When is it Time to Cut the Cord? • Most frequently expressed regret of managers/supervisors—I waited too long, I was optimistic that things would change, I thought it would work itself out… • To be fair, apply the three pronged Readiness/Capability test: • Knowledge—know what to do • Skill—know how to do it • Attitude—want to do it • Use an outside resource (another senior employee?) • Otherwise, you do yourself a favor by releasing the individual early so they can get on with their lives/career (People will thank you)

33. IV. Managing Yourself • Most common BOSS/MANAGER blind spots • Not listening • Criticize not praise • Perfectionism • Over Control; Not Delegate • Managing your Emotions, Frustration, and Temper • The Brain, Functions, and Relationships • Taking Care of Yourself • Stress • Managing Stress (exercise vs. ‘oral’ satisfaction) • Depression, ‘the blues’

34. Symptoms of Depression (National Institute of Health) • Persistent sad, anxious, or ‘empty’ mood • Feelings of hopelessness, pessimism • Feelings of guilt, worthlessness, helplessness • Loss of interest or pleasure in hobbies and activities that were once enjoyable • Decreased energy, fatigue, being ‘slowed down’ • Difficulty concentrating, remembering, making decisions • Trouble sleeping, early morning awakening, oversleeping • Change in appetite or weight change (up or down) • Thoughts of death, suicide, ‘suicidal ideation’ • Irritability, easily frustrated • Persistent physical symptoms, e.g., headaches, digestion, chronic pain

35. Blind Spots; Most Common Areas for Coaching • Not Listening (can’t receive feedback about yourself; defensive) • Criticize not Praise (Boss finding person’s weak point) • Perfectionism (setting a good example; do the job right; partner/model) • Over Control/Lack of Delegation (Why?) • 1. An ego as big as all of Montana; Nobody can do it as well… • 2. Control needs; I like to be in control and on top of things • 3. Subordinates are weak; now---you have a selection/staffing problem

36. Managing your Emotions, Frustration, Temper • Amygdala—Seat of Emotion; Sensory Integration • Hippocampus, Thalamus—Emotional Go-Betweens; Way Stations • Frontal Cortex—Control/Inhibit Emotion • Fast/Slow Circuits in Reacting

37. Fast (1) & Slow (2) Brain Circuits: Our Reactions Cerebral Cortex Hippocampus Thalamus AMGYDALA The Event, The Trigger Reaction

38. Model: Understanding Brain Structure, Brain Functions, and Behaviour • Evolution of the Brain (A. Koestler, 1967) • ‘Automatic Pilot’ Brain (Rat) • Emotional Brain (Smell) • Executive Brain (Judgment) • Big Changes in Psychological and Psychiatric Understanding in Last 15 Years: • Joseph LeDoux-New York Univ., ‘96 • Better Understanding of Brain Influence on Behavior • Better Understanding of Neuro-transmitters and how they work • Therapy: Best with both Relationships & Rx (scripts) • Louis Cozolino (Neuroscience of Psychotherapy) • David Siegel (Mindsight) • John Arden (Rewire Your Brain)

39. The Ghost in the Machine: The Evolution EXECUTIVE BRAIN Emotional Brain AUTOMATIC PILOT BRAIN

40. Fast (1) & Slow (2) Brain Circuits: Reaction to Stimuli Cerebral Cortex S2 S2 Hippocampus S2 Thalamus S2 S1 AMGYDALA STIMULI Reaction

41. Functions of the Brain • Automatic Pilot Brain (Brain Stem) • Autonomic • Breathing • Circulation • Consciousness • Emotional Brain (Amygdala, Hippocampus, Cingulate Gyrus) • Emotion • Integration of Range of Brain Functions • Senses • Attention

42. Functions of the Brain (Continued) • Executive Brain (Frontal Cortex); The Seat of Reason • Self-Control; Control • Inhibition of Impulses • Thinking; Complex Cognition • Judgment & Decision Making • Context/Subtleties

43. The Ghost in the Machine: The Evolution • EXECUTIVE BRAIN • Evolves until 30’s • Control/Inhibition/Focus • Emotional Brain • Senses: Light, Sound, Balance; Hearing; Touch • Disruptive: Computer Screen; texts; Multi-Tasking • ‘AUTOMATIC PILOT’ BRAIN

44. Reaction 1= Anger, Lose Temper, or ‘Meltdown’ Cerebral Cortex Hippocampus S2 Thalamus AMGYDALA Fast & Slow Brain Circuits (Reaction to Stimuli) S2 S2 S2 S1 STIMULI Reaction 2 =Think, Consider, Context, Address Subtlety

45. Bobby Knight (Retired and Ex-Coach, Indiana U., Texas Tech Basketball)

46. Va. Succession Planning for the Next Generation • 88% believe the same family or families will control business in 5 years • Familiar Family Businesses: • Ford Motor Co. --Interface (Atlanta) • McCormick Spice Co. --SC Johnson (Racine, WI) • Only 30% of family businesses survive into 2nd generation • Clifton’s (West Coast-Finance) • Acquisition (VIC) • Only 12% are viable into 3rd generation • Succession planning is a process (like a snowflake-each unique) • Do you have a plan? Do you have a process?

47. Evolutionary Stages of Companies (Adizes, 1990) • Self-Employed • ‘Family’—Succession can be an issue down the road; ‘letting go’ • Professional manager • Mature/Bureaucratic (dying!)

48. Vb. Succession Planning for Next Generation • The long runway is better than the short runway; start planning when in early (40’s, 50’s) • Succession planning is very, very easy to put off: • Concerns about our own mortality; you block it out • Brings out denied/covered-up family issues • My work defines me, what will I do if it’s gone? Impact on my marriage? • Control needs; can I let go? • Will your successor be an immediate family member • Capabilities and Fit • Drive and Motivation • Sell to Outsider (How value?)

49. Summary: IMPLICATIONS FOR YOU AND YOUR BUSINESS • Understand People and Human Nature • Build Relationships (leadership by example is redundant) • Understand strengths and weaknesses of your employees (model) • Lead: Provide Direction; Communicate; Create a Positive Work Environment • Provide & Receive Feedback • Listen and be open • Don’t be defensive • Manage your emotions • Make Progress on Meaningful Work • Manage Yourself: Deal with your Emotions, Frustration, & Temper • Stress management • Depression • Over eating/drinking • Exercise to relieve stress and improve mood • Plan for succession

50. Cheloha Consulting Group Wynnewood, PA Randall S. Cheloha, Ph.D. 610-896-9494 610-755-7879 (mobile) randycheloha@aol.com