Why I blindly believe in transparency, accountability, and creativity?

As a Generation Y professional (born between 1978 and 1992), I have some principles, as many other Gen Y colleagues do, that I consider cornerstone in my management thinking. I could have enumerated a short list, but I will stick in the three most relevant: transparency, accountability, and creativity.

Transparency is the most powerful principle in order to transform an ordinary rank of employees into a network of people who trust each other. Team work without transparency is pointless; nobody would delivery his strongest efforts if he hasn’t perceived a similar behavior from other peers. To achieve a pragmatic transparency, an organization should quickly and accessibly turn public all major and minor decisions. Freely access to information is essential to overcome the asymmetric information measles. By the same token, an organization either public or private should publicize all audited financial report to external stakeholders. Government agencies, suppliers, customers, and shareholders demand this kind of information to strengthen their relationship and deposit more value. As external stakeholders do, internal stakeholders (e.g. employees), also demand detailed financial reports to better understand in which areas their company is most profitable; and then to target their efforts.

Very related to transparency, accountability is a principle that requires every employee to be accountable to each other. In other worlds, a CEO has to report his accomplishments to a low-rank manager in the same way that a plant worker has to report his shift’s production to his supervisor. Any employee, regardless of his title, cannot keep his job’s results concealed. Every barrier should be shut down immediately to conceive a transparent and fair employee’s evaluation. Thoroughly access to every employee evaluation is a guarantee of higher engagement, because nobody wants to be part of the lower quartiles. Moreover, accountability calls for more accuracy when performance is been measured, what is vastly useful to improve reward calculation. A noted caveat is to avoid unfair report because it might bring enough discreditability to harm all the system.

The third principle, creativity, plays a chief role in set new competitive advantages. Stimulating its employees to think out of the box, a company can always position itself ahead the curve. Otherwise, every single product, process or strategy would merely be the same among all competitors. Therefore, once one flaw or bad economic moment has spiked, every company would be equally damaged. Organizations that focus on innovations, such as Toyota and Apple, have learned how important is to engage every employees in this process to reach the maximum of new ideas. Every idea, regardless of its origin, is a potential improvement. Do not consider low-rank worker’s ideas as vital as high-rank worker’s is unacceptable and a waste of brainpower. Furthermore, creativity shouldn’t be restricted to operational, product, service, and strategic innovations; likewise management innovations are indispensable in an era that companies need to be exceptionally flexible to catch up with a world of continuous changes.

In summary, transparency, accountability, and creativity are three paramount pieces to play the 21^st century business game.  For sure, professionals who have these principles already conceptualized are better prepared to take leadership position and deliver more value to their companies.

Contemporary Leadership

Personally, I believe that leadership is one of the most fascinating areas in management nowadays. In a recent post, I reported that Brazilian top executives have new business leaders’ develop as a top priority for the next five years. Certainly, this link between leadership and business is not casual; in fact a businessman who also is a leader has much higher probability to be successful.

Since leadership can be formally defined as the ability to influence a group toward the achievement of a vision or set of goals, clearly, it is a powerful tool in a business environment. Set a detailed strategic planning can be a stressful task, but doubtlessly persuade all employees to get this plan done is a much more demanding task. Leaders can play a vital role in these tasks; they have a unique ability to convince people to head their efforts to a specific goal. Furthermore, leaders might influence how people see and understand events by selecting and highlighting one or more aspects of a fact while excluding others. Therefore, strong leaders can put organizations in a higher level in terms of results.

Nevertheless, not all kind of leadership brings upper limit results. Contemporary approaches to leadership focus on charismatic leadership, transactional leadership, and transformational leadership. The first is very popular, and it is used worldwide. Basically, charismatic leaders use the best of their charisma to lead people through a vision, and they are really willing to take personal risks for that. Moreover, they are sensitive to follower needs, and exhibit behaviors that are out of the ordinary. Regardless of the controversy whether charisma is inherited or it can be made, most experts believe that individuals also can be trained to exhibit charismatic behaviors, and thus can enjoy the benefits. Charismatic leaders often complete blur the boundary that separates their personal interests from their organization’s interest. It is bad, and should be avoided. Otherwise, their self-interest and personal goals can eventually override the organization’s goal. A good example of this leadership style is Steve Jobs, Apple CEO and Bill Gates, former Microsoft CEO.

On the other hand, but not exactly oppositely to charismatic, transactional and transformational leaders are gain ground in the business environment day by day. Transactional leaders guide or motivate their followers in the direction of established goals by clarifying role and task requirements. Fundamentally, they manage by exception. In other words, they watch and search for deviations from rules and standards, and then they take actions. However, transformational leaders inspire followers to transcend their own self-interests for the good of the organization and are capable of having a profound and extraordinary effect on their followers. Also, they excite, arouse, and inspire followers to put an extra effort to achieve group goals.

For the current scenario in the business world, a professional who has been engaged on transformational leadership is better adapted to the twenty first century demands. Leaders cannot be concerned only in achieve goals. It’s too narrow and outdate. They need to inspire their follower through clarified explanations for, though apparently simple, but in fact not so much, questions such as why our company is in this industry or why our company is so profit-oriented. Leaders need to spend time coaching their folks individually, promoting intelligence, rationality, and careful problem solving, and providing vision and sense of mission. By the end of the day, employees must have consistently understood that they are not working only to this month goal; indeed they are work for the long term company’s value creation. Undoubtedly, they will put more effort in their actions than previously expected.

In summary, transformational leaders are more likely to model high-efficient teams than charismatic or transactional does. They are more synchronized with constantly changing world, in which people should be more focus in long-term achievements than short-term goals. Otherwise, people will just swing with the tide; going nowhere.

Reference: Essential of organizational behavior / Stephen P. Robbins, Timothy A. Judge. – 10^th ed.   

Biggest Brazilian Real Estate Developers

Brazilian real estate developers that went public in the last decade have been facing enormous growth in revenue. This blog’s author keeps track of the six biggest developers  – Cyrela, Gafisa, PDG Realty, Rossi, MRV, and Even- all of them are public companies with shares trading at Bovespa New Market. Those companies growth can be explained by two major factors. First, all of them did an IPO in the last ten years raising enough equity to invest in large land banks and work capital.  Moreover, the debt leveraging has substantially increased through debentures and private loans.  Second, the credit supply for real estate financing has increased with lower interest rates and longer maturity.  The availability of credit started a favorable growth trend in 2005 when the annual SELIC (federal bank interest rate) was close to 20%. For 2010, SELIC is expected to 11.75%, and it tends to decrease in 2011. In 2005, pubic funds designated to real estate financing reached R$ 10 bi, however in 2009 this figure was R$ 50 bi. For 2010 it is expected to R$ 73 bi. Although real estate financing has skyrocket, it still represents only 3-5% of Brazil’s GDP. Thus, there still has a huge potential to further investments.

Those companies have been pointing their market target to low-income households during the last years. This trend is a result of the new Lula administration policy’s of reduce Brazilian household deficit by facilitating low-income people to have credit access. For example, the program “My house, my life”, which is managed by a federal government bank, has a goal of finance 2 millions houses until 2014. Furthermore, this program grants R$ 72 bi in subsidies.

Brazilian real estate developers have a vertically integrated characteristic. Traditionally, they control developing, construction, and selling. Their EBITDA rates are ranging 19-25%, and net income margins are between 10 and 20%. Debt ratios are from 50 to 60%. Nonetheless, the most impressive figure is the land bank potential sale values; for instance Cyrela’s  was R$ 39.10 bi on the end of 2009. Moreover, almost developers have their activities spread throughout Brazil’s territory. Cyrela and PDG have already gone internationally to Argentine and Uruguay.

The following chart shows the shares’ performance of the above companies during the last three years.

Brazilian developer share prices

The share prices plunged to very low levels during the world financial crisis, achieving their lowest point in the beginning of 2009. During 2009 all companies’ shares recovered their former prices, and stabilized in 2010 so far.

The following spreadsheet is a summary of those companies’ numbers.

Brazilian RE developers overview

2010-2015 Brazil Business Outlook

In a recent survey among 1,065 Brazilian top executives conducted by HSM and Empreenda, outstanding business leaders shared their thoughts for the next five years.

• 80% believe that Brazil’s GDP will grow between 3 and 5% in the next five year.
• 46% believe that their own company will grow more than 10% in 2010
• 64.5% intend to hire new employees in 2010

These three bullet points show that Brazilian top businessmen are extremely confident about the country’s economy. Expectations are high even for a typical developing country and BRIC member. Even though 2014 FIFA World Cup and 2016 Olympic Games, both held in Brazil, will bring major public investments, 55% said that it won’t cause changes in their companies’ strategic plan and 44.5% view it positively whereas without extensive impact.

Regarding the period between 2010 and 2015, Brazilian tops have the following chiefly objectives.

• Increase profitability
• Raise market share
• Concentrate in current market segment
• Spread a culture of customer-oriented into their companies
• Create value for customers without raise costs

On the other hand, they are not considering.

• Go internationally
• Merges and takeovers
• Invest in outsourcing
• Pursue new equity partners

Another interesting finding is a massive demand for new business leaders

• 39% answered that the development of leaders to get the strategic plans done is a priority
• 35.4% require people with a “hand on” profile
• The most demand features are focus, engagement, and passion
• 57.1% feel necessity for develop and train new leaders
• 55.5% ask for leaders able to transform equips in high-perform team
• 36% require leaders able to persuade stakeholders
• 35.9% demand leaders able to motivate people
• 33.9% claim for leaders with a “ownership” profile

In summary, an optimist scenario is surrounding Brazilian for the next five years. Profitability, domestic market, and current customer are key priorities. Furthermore, develop business leaders oriented to attend client demands and strategic planning is preeminent.

Download the whole survey report (Portuguese).

Time is a scarce resource.

How can we estimate our time’s monetary value? First possibility, dividing our yearly income by the number of worked hours in that period. Second, dividing how much value we created (if feasible to measure up) to our organization by the period spent in the related task. Certainly, there are other possibilities but all of them, including those above, are worthless. Indeed, time’s value cannot be measured because it is a flow that once consumed doesn’t have value anymore. For this reason, in our life and especially in the business world we have to manage time as an utmost resource.

Almost all companies in the world set a rigid time frame to their employees. For instance, nine hours daily split in four hours before lunch, one lunch-hour, and five hours after lunch. Even unconsciously an employee will spread his task to fulfill this time frame. Perhaps, seven hours were enough, but nobody wants to leave early, and be judged by others. It’s a nonsensical approach. Doing that, companies are transmitting to their people the following message: we are paying for your time-spending either productive or not. This approach is out of reality. Employees, more than ever, need to be paid by their accomplishments, value-creating ideas, and so on.

If a company set this kind of time frame and strictly track it, a red flag should be raised. Managers have to do their best to change this. A different approach can be to set just a minimal number of hours to somebody be present at office daily, rather than a total number of hours. For example, folks from the purchase department are supposed to be at office only between 11 am and 2 pm. If somebody else needs to have an in presence meeting with them, then one will look for them at this time. Purchase department people can work six, nine, or twelve hours daily, it doesn’t matter at all, since they are conscious that they are being paid by their accomplishments rather than their time spending.

Moreover, a time managing culture has to disseminate that two things are not equal if one were done faster and creating-value tasks have priority in our time spending. The former idea is basically the sense of urgency. From this perspective time should be viewed as a costly resource that has to be extremely rationed. For instance, if somebody sends the presentation’s slides out before the meeting, a presentation can be shortened, thus more time will be available for attendees have discussions. Also, it is a well-manner issue. It is, at least, impolite to consume others time needlessly. The latter idea is connected with how we organize our day. A productive priority list is to start our daily journey with the tasks that in fact generate profits. In other words, what increases revenue and/or reduces cost. We ought to keep in mind that it is why the company is paying our wages. Once these tasks are done, we can step to the most common tasks, it means the ones that just keep the business running adequately. At last, the tasks that someone expects or wants us to do, but which adds no value to the bottom-line.

To wrap up, time management is not only about how we allocate our task during the day. It is a huge component of the company management model, and has to be analyzed all the time.

Is everybody equal?

In a company, like in a society, people are gathered, at least in such extension, randomly. Thus, there will always have some people more or less engaged with the corporate objectives. This high engagement level, desired for all companies, can be related with people internalities and externalities. In an internal level, people have different levels of ambition what lead to different levels of engagement in a specific activity. In an external level, people have to cope with all sort of life situation, such as diseases and unhappy marriages.

Managers have to be aware of their subordinate status in order to quickly point out who are putting more efforts to achieve goals. Generally speaking, engaged employees are more committed with the company strategic planning, hence they should be assessed properly. That’s a major point; people are different and have to be treated as so. Treat everybody equally is a way of underuse individual potentials, thus a waste of time and money.

Managers should ask themselves “who is really creating value to the company?”, “Who is making some thing different to creatively and rigorously improve the bottoom-line process and results?”. Employees who fill this type of question are clearly value creators. This type of people makes the whole difference in a day by day journey. They bring the company from point A to point B, rather than seat and watch others working on that. Managers have to open avenues in front of value creators to let them work their ideas. Moreover, managers have to figure out how to properly recognize these people contributions. Frequently, they don’t see their paycheck as a most relevant retribution for a good work. Conversely, they want to see their work implemented and creating value. Furthermore, value creators wish to step forward in their career path as fast as their ideas flow. It can be a huge roadblock to companies that don’t generate growth opportunities.

On the other hand, another sort of employees is the ones who work for their paychecks. These people aren’t committed with the company objectives. Their contributions are very limited; and they want to keep the balance between the input, how much they are paid, and the output, how much they delivery, always tending to the input side. Usually, these employees fill bureaucratic positions and last for years in the company rank. They immediately set an alliance with somebody more influential in order to be shielded.

To sum up, even though differentiate people is neither an easy nor a pleasant task, this job has to be done. In a competitive business  environment it is unacceptable to not use the most of an employee potential. What’s more, never apologize for treat employees different, there’s nothing to apologize for it in a meritocracy performance based company.

Why stimulate employee discussions?

When managers face their subordinates fighting among themselves over some issue, for instance lack of commitment to follow procedures, they have basically two choices. The first is to cap the discussion, giving some rapid solution or at least postponing the negative issue’s implications. The second choice is to fuel even more the fighting.

Traditionally, managers have preferred to cool of every issue in order to bring the business environment back to a peaceful level. Nevertheless, this practice has some setbacks. Managers should learn to indentify whether people are fighting to protect their vanity or to improve the company processes. The former is harmful for all kind of organization and has to be promptly hampered. The latter is beneficial in a sense that people are placing the company interest above their self-interest.

Once a manager had figured out the true intention of the fighting, they have to play a role of moderator rather than holder of the whole truth. A good practice to bring the discussion to effective solutions is to stimulate people to discuss even deeper about the central issue. Doing that, managers are stimulating people to think more about the company processes and realize that they are also part of the solution. Furthermore, acting as moderator rather than as peacekeepers, manager can spread the responsibilities, and, consequently, the glories of an effective solution. Obviously, people are willing to share their thoughts only if there is an environment of trust and transparency. Somebody would feel free to criticize a company process, peer behavior, or boss attitude only if him believe that it will not bounce negatively to himself through bad judgments. Though it is not the reality of the majority of companies in the world, it shall be their main goal. Once a manager had established a trustful link between him and his subordinates, he has already built the solid basis for this discussion forum. Another aspect to achieve this participative problem-solution degree is to set a tool that everybody can have access, and the information is symmetrically shared. For instance, an internet blog can be a good spot to address these issues. Presumably, everyone has access to internet and skills to interact in this democratic environment, thus it has high chances of work out. Topics and answers can be stored, hence they area always available to help in further related situations.

In summary, through a blog or any other tool, the most important point is to have people interacting about the company problem as their own problem. Managers have to be aware of this discussion and point out who are the most value creator players.