Monthly Archives: January 2016

Expertise 15 years later

Expertise and the Independent Consultant

I recently reread my book, A New Brand of Expertise, published in 2001. It was a book about, as the tag line said, how ” free agents, independent consultants and interim managers are transforming the world of work.”

bookIt was an odd experience, after all of these years to read the words. Perhaps more prolific authors are used to it, but for me it was very strange. I was surprised at the passages I didn’t recall at all, (really, I wrote that?) including some rather remarkable anecdotes. I had to laugh at the few (and luckily there were only a few) references that didn’t hold up at all; for example, my advice to new consultants to build a personal brand offered Martha Stewart as the role model. Obviously this was written before her prison sentence. My opening chapter referenced the Donna Reed show, because her husband, ” the company man” was becoming an anachronism. My guess is there isn’t a millennial around who could relate to that TV reference. (Oops, I am dating myself, but I only saw the show in reruns as a very young child…)

What dismayed me was one aspect of the forecast I made 15 years ago about what would happen to this nascent independent marketplace in the years ahead. I had suggested that on the horizon there could be some simplification of the legal ambiguity that was a threat to the dynamic growth of an independent talent market. I offered hope that U.S. 344, the Independent Contractor Simplification Act, authored by then Senator Kit Bond of Missouri would pass. I was overly optimistic. Not only did it not pass, it never made it to the floor — It died in committee the following year.

And now, the independent contractor issue is in the limelight again as the “gig ” economy has been caught up in the ambiguous regulatory environment, as firms like Uber, Handy and Instacart try to maneuver in the anachronistic definition of employment today. . In the meantime, the free agent and interim management part of the gig economy has only continued to grow. Perhaps the sharing economy, led by the Uber driver lawsuit, will help bring much needed clarity to this issue. Isn’t it about time?

Imagine what the #Xfiles and #Resurge International have in common

Perhaps it was not so surprising to have an "out of body" experience when watching the premiere of the new X Files mini-series.  At one point, Dr. Dana Scully is reviewing  patient photos for an upcoming procedure on a child with microtia, a condition where the external ear does not form.  Given the subject matter of the show, the child's head, devoid of ears, looked  like an alien head, reminiscent of alleged images of aliens who landed in Roswell New Mexico in the 50's.

The plot line and alien innuendo aside, kudo's to the X files for shining a light on a condition that is known to very few outside of the world of reconstructive plastic surgery. Microtia is a very real congenital condition that affects people around the world. In certain cultures, these children born without an external ear structure, are shunned because of this deformity.  In some cases their families are shunned, and some parents may suffer from unfounded emotional guilt, feeling responsible for the disfigurement that plagues their child.

Just before watching the show, I had been at a Board meeting for ReSurge International http://www.resurge.org/home/home.cfm, where we talked about microtia. At ReSurge International , we not only provide surgeries to remedy the condition, but through our Global Training Program, we  teach surgeons in  developing countries how to handle this type of reconstructive plastic surgery.  In fact, in October of 2015 we  convened our first program to train plastic surgeons in Vietnam on the proper way to handle an ear reconstruction.  At one Board meeting, our Consulting Medical Officer, shared photo's from the session, where the attendees were practicing fashioning external ears from potatoes.  Once they mastered that, they would do the same with cartilage.  The results were amazing.

As a result of that training, these surgeons will be able to provide a surgery that will eliminate this deformity for their patients, and in so doing transform their lives.  No longer will they be shunned, no longer will they look like aliens.  That is the power of reconstructive surgery.

David Bowie Bonds and the Future of Work

David-BowieDavid Bowie was an innovator of so many things including  in 1997 the first securitization of music royalties which came to be known as David Bowie bonds.  In my book, A New Brand of Expertise  published 15 years ago, I posited that Bowie was the first to create a human capital bond, since he was in essence creating a security from the creative works of a brilliant mind — his own.  In my final chapter discussing the future of work, I asked this question: Why couldn’t there be similar bonds created in the human capital marketplace, synthetic instruments which could pool the revenue streams of thousands of the top independent consultants, protecting against down time, slow periods or any other cash flow disruption? A consultant bond, I argued, would place a value on knowledge much as companies value their intellectual property assets.

Now fast forward 15 years, the Bowie bonds, made David a cool $50 million but were not such a windfall for his investors given the industry economic disruption caused by the onset of music streaming.  For more on this see http://money.cnn.com/2016/01/11/media/bowie-bonds-royalties/.

Although the music royalty bond notion may have fallen from favor, the consultant bond has more legs than when I originally described it.  The weaknesses to my early argument, to be completely candid, was in the issuer.  I suggested that the consultants collectively would be the issuer.  Although I knew that was an unwieldy structure, it was thought provoking when discussing the future of work.  What is different now, though is the human cloud.

Whereas my firm, M Squared,  was one of the first to provide on demand expertise 28 years ago, now there are all sorts of intermediaries parsing work into everything from looking up addresses to  writing code to managing corporate operations.  These firms  source, place and pay their resources in the cloud, and many rank them there as well.  So my year 2000 notion of taking the top 500 consultants in an area was aspirational, but now there  could be ways to do it through the yelp like data being collected on consulting purveyors.  Human cloud companies could be the issuers.  Investors would be buying into the knowledge and talent market, with prices fluctuating with demand and supply.

I know it still sounds a bit far fetched.  But in the words of the inimitable Davide Bowie,

“Turn and face the strange, ch – ch- changes.”

 

Independent Contractors and the Bubonic Plague

Katy Steinmetz of Time Magazine had a great piece this week summarizing a joint Aspen Institute /Time study on the future of the gig economy. http://time.com/4169532/sharing-economy-poll/?xid=tcoshare  She discussed what may be the first attempt to quantify how many Americans are participating in the various aspects of the sharing world, from shared car services, to rented rooms, to odd jobs, as either a buyer or seller.  As you may imagine, the numbers are fairly staggering, with more than 44% of Americans taking part.

She also gets into the implications of the employment status of those who offer services.  In most cases they are classified as independent contractors (ICs)  rather than employees.  ICs, of course are not subject to withholding taxes and ineligible for benefits typically accorded employees.  Ride sharing giant,  Uber, is facing a class action lawsuit, where drivers are claiming they should be employees not ICs, an action now scheduled for June of 2016.

The IC versus employee  issue is a murky one and Steinmetz does a good job explaining the accurate and curious fact that there is no one legal definition of an employee. The IRS has 20 points which define employment status, but the primary factor comes down to who directs and controls the work.  That subjective framework is why the subject is fraught with abuse from both sides of the transaction.

Later in  a brief comment, she explains that the ambiguity of this body of law is inherent in its origins in 18th century England.  She didn’t quite get that one right…it was a bit earlier.

Our current employment structures are based on  the Master Servant body of English Law which is actually from the 14th century. As the bubonic plague, also called the Black Death, ravaged England, there was a need to identify who was the master of a particular area and who was the servant — hence the name.

Although the Uber case and others in the sharing economy have put the IC vs. employee question in the forefront, it has been an issue for years. Issues can create opportunities; companies like Collabrus Inc., which I founded, as well as others like MBO Partners, have created business models to eliminate the ambiguity inherent in the misclassification of workers.

Issues also create investigations. In the mid 90’s, I testified about the problem at hearings in Sacramento. At the time , the state of California was ardently pursuing anyone who was paid with a 1099 (an IC) versus a W2 (an employee), claiming that those receiving 1099s were just trying to skirt taxes. I explained there in the new world of just in time talent, old employment designations  and the social contract that goes along with it  were no longer relevant.  I ended my remarks pointing out that the bubonic plague ended a long time ago, so maybe it was time to update our regulations,

The wonderful State Senator, Milton Marks , of San Francisco, who served in the California senate for more than 30 years at that point chimed in and said, “She is absolutely right .  I know because I am so old, I was there  in the Middle Ages.”

I have to smile when I think of that hearing.  I also have to agree with my original assertion, it is time to rethink our employment law structures as the gig economy grows. IC status shouldn’t have anything to do with the bubonic plague, rather it should have to do with empowering individual business pursuits.

An Exercise in Goal Setting for 2016

I facilitated a peer group meeting today of CEOs  where the topic was personal goals for 2016. Given that they were all running companies, most of the goals focused on  achieving revenue, profit, share price  or fundraising targets for their companies.  There were a number of objectives that involved load balancing the management team, i.e., making sure that the right expertise was in the right role, correcting a mismatch that exists now. Several of these executives also sought to improve their leadership skills either by being able to focus on higher order tasks, like thought leadership, or successfully instilling a common leadership framework and language in the management ranks.

Much to my surprise, all of them offered at least one personal goal as well.  And although there was the obligatory, “get in better shape”, (it is just post New Year’s Resolution time after all…)  there were also some audacious aspirations, everything  from learning acrobatic flying to completing a series of 8 abstract paintings.  I asked each CEO which goal  was the most at risk for the year, and many times it was that personal goal. That was due in part to the fact that the time allocation for the personal goal was totally dependent on the success of achieving the business goal; if product releases don’t happen on time, golf handicaps won’t go down, and if revenue stalls there won’t be a personal best in one of several half marathons.  Common sense  demands the business priorities come first.

On the other hand, my surmise is that for some of these busy folks, setting personal goals may have been a new exercise. We  have all had to live and die by business goals — that is the way of the world.  But how many of us plan to accomplish what some may deem less important or even frivolous goals? There is a power in saying what you want out loud. It gives it import; it makes it real. Years ago I did this exercise and I said I wanted to get on a corporate board.  Within two years I was. In reality, the fact that I said it out loud had nothing to do with my ending up on that Board, but there is the power of  intention.  To me, speaking it helped make it so.

So I am very optimistic about the goals set by my CEO cohort.  Certainly there will be bumps in the road for some, but I am eager to hear not just of the revenue targets achieved, but also about the abstract paintings.

 

A Reminder of the Primacy of Succession Planning

Valeant Pharmaceuticals appointed an interim CEO today following the hospitalization of the CEO, Michael Pearson, who is suffering from sever pneumonia.  Although a temporary leadership structure had been put in pace at the onset of his illness, as it worsened the Board moved quickly to name an official interim manager.  A current Board Member and prior CFO, Howard Schiller, was tapped  given his key role in the implementation of the company’s current strategy.

This news item should be a lesson for every  public or private company Board, that succession planning is key.  How would your Board handle the sudden medical leave of its CEO?  Are you prepared if you suddenly need to fill his/her  seat?

15 years ago, a Board on which I served faced the same issue, although our situation was more dire, as our CEO lost his battle with pneumonia.  Like Valeant, we had appointed co-Presidents to oversee the organization during the illness.  Once a permanent solution was needed,more challenges arose. As an organization, we learned many lessons during that period, and as a Board we built new muscles to strengthen and constantly flex executive development and succession planning.

Some key thoughts I offer when a CEO takes ill are these:

Recognize that the interim solution may need to be in place for quite a while, so it needs to be workable.

Although no one wanted to think that our CEO would not return at the time, that eventuality should have figured into our calculus. Asking a few direct reports to shoulder more of a burden for a month or so is one thing, asking them to do it for up to a year is quite another.

As a Board, demonstrate support for the interim team.

Unexpectedly losing a CEO is like losing the captain of a ship; the crew and passengers need to know that the course ahead will be safe and sure.  The Board needs to support the interim  team without micromanaging their efforts.  The Board Chair or Lead Director can play a critical role. Board members should recognize there may be a need for more frequent meetings and or conference calls.

Gain consensus on the breadth of the process

In some cases, an unanticipated vacancy can prompt someone to up his/her game and assume a new senior role with vigor.  Alternatively, such a vacancy may provide an opportunity for new eyes and new leadership from outside the organization.  The Board needs to agree about whether there is a bias for  internal or external candidates.  There also needs to be agreement on the nature of the process; if external candidates are considered, will existing firms be used or will firms be interviewed; who will comprise the search team; will the job specification remain the same as for the prior incumbent or will it change.

Know that communications to all stakeholders for the next 12 – 18 months  is key,

The Board needs to communicate regularly to shareholders, management and staff about both the current business  and the succession process ahead. Over communicating is not possible in this situation.   To ensure we were capturing as much feedback from the rank and file as possible, the Board  instituted a 360 degree employee survey, assessing sentiment 6 months into the interim structure and then 6 months after the permanent successor. We wanted to make sure that certain shifts to the organization had not created unforeseen problems.

Develop your succession plan to include sudden events

Most people consider succession in a more deliberate way, noting the development needs of key  managers and the steps they needs to take to grow into a new, more senior role.  A sudden illness or death precludes that deliberation.  As such, you need the “hit by the bus” section that outlines what happens if the unthinkable does.  For those of you who have that already in place, Bravo!  For those of you who don’t, add it to your Board agenda.

Flunking Retirement Celebrity Style

One of our holiday traditions is seeing some version of the Grateful Dead at the San Francisco Civic Auditorium.  As we watched Dead and Company this year it occurred to me that Bob Weir deserves a spot in the “Flunking Retirement” celebrity Hall of Fame.

Here you have a guy that had a tremendous reason to retire, when his Grateful Dead co-founder, Jerry Garcia died in 1995.  But the music would not be stopped and he continued  playing and touring with his own band Ratdog, The Other Ones, a group of former Dead players and then Further, a partnership with Phil Lesh, the Dead bass player.  This year during the 50th anniversary of the Dead, the players created yet another variant, Dead and Company, with younger , and some might say hipper, John Mayer at lead guitar. So at the age of 68, Bobby is going strong.

But like many other Boomers, Bobby has also parlayed his industry knowledge into an enterprise to support his passion. In 2011, he founded Tamalpais Research Institute, (TRI), a world class audio, video streaming and recording facility.  It provides the best sound experience possible and can emulate the acoustics of any music venue in the world.

“TRI was kind of built on the principle that it was going to be a fun place to be,” explains Weir on the TRI website, . “The ultimate playpen for a musician.”

So thank you, Bob for the encore career you have chosen.  It is perfect for you and all of us music lovers.

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