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Sun Tzu’s Art of War
for
Managing Your Career
A Guide for Creating Shareholder Value by Creating Stakeholder Value
Dean Lundell
Mr. Lundell is a former Vice President at Merrill Lynch Capital Markets and a Principal of a regional investment bank. Mr. Lundell was also an independent futures trader where he focused on the equity index, interest rate complex and foreign exchange markets and is a licensed Commodity Trading Advisor. He has written articles for financial magazines such as Futures and SFO as well as on-line publications Investopedia division of Forbes and Suite 101.com. as well Mr. Lundell is the author of Sun Tzu’s Art of War for Traders and Investors (McGraw-Hill) and How to be a CTA for the Chicago Mercantile Exchange. In addition he has written educational material for a private consulting firm on large corporate and investment banking, interest rate swaps, foreign exchange and the fixed-income markets. Prior to his career on Wall Street, Mr. Lundell served with a
sub-unit of the 82nd Airborne Division in Vietnam. He can be reached at delundell@gmail.com.
Sun Tzu’s Art of War for Managing Your Career
A Guide for Creating Shareholder Value by Creating Stakeholder Value
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Acknowledgments:
To Socrates for his ethics
To Sun Tzu for his wisdom
To all the corporate executives I have ever met; you know who you are.
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Dedication
To my wife Ellen: My best friend, my soul mate, the love of my life.
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Note:
Any references to Sun Tzu and the basis of this text come from the original
translation of The Art of War, by Lionel Giles, M.A. (1910) and are in the public domain.
Table of Contents:
Introduction
Chapter One Vision The Chief Executive Officer
Chapter Two Competing Playing to Win
Chapter Three Creative Competition Winning by Not Fighting
Chapter Four Positioning Victory by Patience
Chapter Five The Art of Deception Surprise Attacks
Chapter Six Controlling the Situation Manipulation by Deception
Chapter Seven Confrontations Going Toe to Toe
Chapter Eight Being Flexible Going with the Flow
Chapter Nine Sign Language Reading Your Opponent
Chapter Ten Competitive Environment Reading the Lay of the Land
Chapter Eleven Nine Concepts What to Watch For
Chapter Twelve The Use of Fire Attacks Acting – and Not
Chapter Thirteen Intelligence Gathering Knowing the Score
Conclusion
Introduction
After twenty-six hundred years, The Art of War is still one of the preeminent books on strategy. It is the study of organizations in conflict, from the individual’s perspective, to cross border, multinational enterprises. The basic, fundamental underlying philosophy of this treatise is to defeat an opponent’s strategy, thereby making conflict unnecessary; to win without fighting.
The Art of War teaches us that war, or military action is of vital importance to the state. Therefore, we should study and understand it.
Little has been written concerning the “big picture;” examining the relationship between stakeholders and shareholders. In recent history, it seems that the best interests of shareholders and that of employees or stakeholders are often opposed. Quite to the contrary, those interests are not mutually exclusive and do share significant common interests.
Speak of investing and the first thought that occurs to most people is the stock market, bonds or perhaps real estate. The simple fact however, is that one’s job or career is the
most significant investment anyone will ever make. The largest commitment of time, energy and dedication any person ever makes is their job or career.
Pick up any business publication and you will see the latest figures on lay-off’s,
downsizing, restructuring, earnings reports and so forth, all of which is intended for the consumption of and the benefit for the shareholders, the owners.
Are the best interests of stakeholders really opposed to the best interests of shareholders? Think of any company or enterprise; are stakeholders treated as a commodity? To be bought and sold like a sack of potatoes? Would they lay anyone off in a heartbeat for a short-term bump in the price of the stock? Or are people in that firm treated as a valued member of a team who matters? It is truly ironic, that for devoting time, energy, education and skills to a company, presumably for the benefit of the owners, the stockholders, most stakeholders have little say so into how that company is managed. Their only option is to vote with their feet.
This book is not about rocket science, financial ratios or any other quantifiable measures; it is about creating shareholder value through sound management practices with an organization’s most valuable asset, their people. What drive’s any company’s success or failure are ultimately its people and management. Good management practices make for good and motivated employees. Well motivated and driven stakeholders will result in stellar performance for the shareholders.
Any employer expects a return on their investment in their people for the benefit of the stockholders; so likewise it is in a stakeholder’s best interest to evaluate an employer’s management practices so that they are not stifled in their career. Bad management not only hurts stakeholder but in the long run hurts the stockholders as well.
It is a sad commentary that many corporate managers and executives are as myopic as they are mercenary. Many are in management positions simply because they have been there for years. Tenure is a poor substitute for expertise or vision. Others are there because it is politically correct or because they are somehow connected to managers higher up. Quite often the vision of senior management is undermined by middle managers that are more concerned with protecting their turf than the welfare of their people and the ultimate benefit of the stockholders.
At the same time, there are executives and management teams that are positively brilliant; we should all be so lucky as to work for these companies.
Sun Tzu tells us that for your organization to prosper, you should measure, or compare five concepts, the way, the weather, the terrain, the leadership and the discipline.
The beginning of this book will start out by taking a good hard look at the chief executive officer. More than any other individual it is this individual’s vision, skill and drive that will determine the eventual success or failure of any organization. Next will be an examination of the value of innovation and creativity. Does a company or organization empower its people? Or is it’s management team a victim of conventional thinking? Are innovation and creativity balanced with economic reality? The fundamental tenant of business is taking risk commensurate with potential reward but there is no reward without taking risk.
Understanding one’s constituency is as important as knowing one’s adversary and understanding that all warfare is based on deception. There will be a discussion about competitive tactics and why it is just as important to innovate your business as well as its products. Innovation and creativity are always worthwhile but in a business context is an academic exercise without learning how to read competitors actions and interpreting what is seen and heard.
In the final analysis, the individual stakeholder is the chief executive of You, Inc. A discussion will follow about taking a common sense and frankly a mercenary approach and look at management practices; not only from the stockholders perspective but from the stakeholders as well. This will help anyone to evaluate any firm or company, whether buying their stock or making the ultimate investment, working for them.
Savvy shareholders buy winners and sell losers. So should stakeholders.
Chapter One: Vision The Chief Executive Officer
Sun Tzu: “the way” is to motivate people is to share the same view or vision as the leadership.
The singular most important aspect in evaluating any company is the vision of the chief executive officer. The chief executive officer is the captain of the ship, the one individual with the ultimate responsibility and authority.
Chief executive officers are paid for their vision of where they want the company to head and devising a strategy or plotting a course, to get there. Without a vision of where the company is headed or what they want to accomplish a CEO is just the captain of a ship without a rudder, drifting aimless at sea; sometimes running with the current other times floundering in a storm. Stakeholders as well as shareholders should take a good hard look at the current or prospective CEO. They’re entitled. Is this a company to invest in or work for?
History is replete with people of vision, Henry Ford, Eleuthere Irenee du Pont de Nemours, William Edward Boeing. The list is endless. Whether in industry, the arts, science, medicine or any other discipline, the common denominator with any chief executive officer, in particular founders, is vision and drive.
In the late twentieth century does any name typify this vision and drive more than Bill Gates of Microsoft? Whether people love him or hate him, there is no denying that going from a garage to the largest market capitalization corporation in America in twenty years
is remarkable. While others were busy building the wheels of technology, Microsoft was busy providing the fuel it ran on.
Successful chief executive officers and those that would be are a different breed of cat. They are not there to be nice people and hold hands. They are there to provide vision, drive and strategic direction. Period. Chief Operating Officers can be nice, Chief Executive Officers cannot necessarily be. It is the CEO’s job to see that everyone in the company shares a common vision and has the drive, tenacity and resources to see their mission accomplished.
“The weather” in Sun Tzu’s time was the seasons.
It is important to appreciate where an employer, or potential employer, is in the business cycle and economic environment. The accomplished stockholder realizes this and so should a well informed stakeholder. To an even further extent, investors and employees should find out what stage of the business cycle or career cycle the CEO is in. Does the chief executive officer still have an entrepreneurial spirit and drive or has complacency set in? Perhaps worse are partnerships, limited liability corporations or committees who refuse to recognize reality and go to extraordinary measures to preserve the status quo. These groups have blinders on and have lost their ability to adapt. They have become bureaucrats. Caretakers. This prompts a question; if a shareholder wouldn’t buy stock in this firm, why would a stakeholder invest their career in it?
The Art of War teaches us that “terrain” should be measured in terms of distance, difficulty of travel, dimension and safety.
For example, a typical response from people that have lost their entrepreneurial spirit or their ability to adapt is that “we are resource constrained.” This is an incredible feeble and short-sighted excuse. If a firm’s nearest competitor earnings are up 15% and the company a stakeholder works for are up 5%; what is the company going to tell its shareholders? That it is resource constrained? Try to imagine what the reaction is going to be in the investment community. Shareholders suffer because stakeholders are stifled and frustrated. If there was ever a clear sell signal, this is it. It’s time to leave for greener pastures.
Having a vision is wonderful and for certain the focal point for any organization; unfortunately no one gets paid for unrewarded genius. Part and parcel of providing
strategic direction, the chief executive officer has to have the ability or delegate that function to someone that does, to assess how to get from where the company is to where it wants to be. What competitors are standing in the way? Whether or not there is a market for the firm’s product and what is the risk and potential reward. What percentage of market share can the enterprise hope to achieve? When was the last time the CEO conveyed any of this? Has the CEO or even line or middle manager explained how an employee’s job is integral to the big picture? How often are stakeholders asked what resources they require or logistical support they need to accomplish their job? If the answer to any of these questions is negative, that is not a good sign. Management myopia is as devastating for stakeholders as it is for shareholders.
Sun Tzu: Leadership is a matter of intelligence, trustworthiness, courage and sternness.
Management hierarchies in any organization tend to reflect the values and business mores of the chief executive officer. Leadership is difficult if not impossible to quantify or measure. Yet all anyone has to do is talk to employees, customers or suppliers of any organization to assess the effectiveness of the management team. Any organization is made up of people, not machines; thus emotional quotient or EQ becomes just as an important attribute as IQ.
Of course intelligence is important in a chief executive officer, that’s how they got to be the CEO but the intelligent CEO or manager must know how to channel that intelligence to bring out the best in their people trough EQ. That’s the acid test. A stakeholder need only ask a simple question; would they go the extra mile for their boss? Why? Either a positive or negative response is going to ultimately correlate as a positive or negative influence on the price of the stock.
Founded in 1971, Southwest Airlines is now the fourth largest airline in the United States and has maintained profitability, even when their competitors have not. The credit goes to Herb Kelleher, their charismatic leader. Ask anyone that works at Southwest Airlines; it is a great place to work. There have been books written just about Southwest Airlines because it has been so successful.
In contrast, look at the results of Sunbeam under “Chain Saw” Al Dunlap. If Sunbeam was in trouble before he and his team arrived it was a disaster afterwards. Short term bumps in the price of a stock for laying-off thousands of people may prove to be penny wise in the short run but is extremely pound foolish in long run. When stakeholders are treated as commodities with such blatant disregard, not only do they suffer but the shareholders do as well.
People don’t follow technical wizardry; they follow leadership. Stakeholders should assess the leadership qualities’ of the chief executive officer of their company not to mention their immediate superior. Employees should ask a simple question but one with serious and far-reaching implications and consequences; Do they trust your boss? Would a stockholder invest in a company whose management team they could not trust? Of course they wouldn’t. If a shareholder can’t trust them enough to buy their stock, should a stakeholder do any less to actually go to work for them? Is anyone going to do their best for a manager or CEO who is not trustworthy?
Managers in general and chief executive officers in particular have to be tough with those people who do not perform. They have invested in them and they expect a return on that investment. If an employee fails to perform, they should expect a sell order coming their way. The other side of that same coin would be stakeholders exceeding expectations and excelling at their job. Employees should be rewarded and acknowledged commensurate with performance.
If being able to make difficult decisions is part of being a leader, so is compassion and courage. Like anything intangible, defining courage can be difficult. Along with their business acumen, chief executive officers are leaders and courage defines a leader perhaps more than anything else. People will follow courage long before they follow business acumen. The good leader will go to bat for their people and help them whenever, however and wherever they can. It is in the CEO’s and employees best interest that they do. When CEO’s and the management team does everything they can to help stakeholders, it makes sense that they will do their very best for them. When stakeholders do their best, it inevitably shows up in the financial reports and in the price of the stock for the benefit of the shareholders.
Sun Tzu: Discipline means organization, the chain of command and logistics.
While a focal point and important as it is, strategy is an academic exercise without support and logistics. On occasion stakeholders are given the responsibility for accomplishing something but are denied the authority and resources to execute the task. Responsibility for a project without the authority and resources to accomplish it is complete nonsense. It is a sign of weak management or one that is more concerned with turf than with results. Regardless of stakeholder or shareholder this is a good indication to get out. Good CEO’s and management teams outline the objective to be realized, give their people the authority and resources they need to accomplish their goal and get out of their way. Stakeholder empowerment not only produces tangible results for them and the firm but equally important, produces tangible results for shareholders.
While command and control are important, let’s not confuse concepts: Macro management is good and necessary; micromanagement is frustrating for employees and a misuse of time and talent for management. The end result is that no one gets rewarded; not stakeholders, not the CEO and management team and not the stockholders.
If there is any single individual that is directly responsible for Merrill Lynch being the financial powerhouse it was and is today as part of Bank of America, it is Donald Regan. Mr. Regan had been a former field grade commander in the Marine Corps and was not shy about getting tough. He was also an incredibly strong willed individual with exceptional drive and truly had a vision of what Merrill Lynch could become. Everyone had a mission and everyone performed it. The company’s success under Mr. Regan was undeniable. After Don Regan left Merrill Lynch to work for President Reagan as Secretary of the Treasury and then White House Chief of Staff, Roger Birk took over the reins of Merrill Lynch. Mr. Birk had never been a banker, a broker or a trader. He had no conception of what it took to be one and had come up through the operations part of the firm. It took about six months before the micromanagement techniques finally took hold. The result was that Mr. Birk resigned a year later and his replacement, Dan Tully, had to raid the pension fund to cover quarterly earnings shortfalls.
Sun Tzu: Generals who know these five concepts, will prevail. Those that do not will not prevail.
Regardless of whether one is a stockholder or stakeholder, when investing in any company or business it makes sense to do some comparison shopping. Even assuming an expanding market, stakeholders should view their investment or employment in any business as a constant. Each competitor in that business is going to have a certain share of that market. Which company of firm shows the most promise or potential? Winners and losers are defined by how much of that market share they win, maintain or lose. In this market, which CEO is the most capable? Which company has the best resources to draw upon? Who has the most productive and motivated employees? It all boils down to leadership. Which company and CEO is often a matter of personal choice. Perhaps it is the old established blue chip company or perhaps the new firm with fire in its belly. Not that one is better than the other per se; it’s just a matter of which suits the individual stakeholder better.