Your Business Needs a Strong Foundation
by Lori Ann LaRocco
As a senior producer at CNBC, I have had the privilege of working with some of the world's most successful and innovative business leaders. In my new book, Opportunity Knocking, I explore the lessons we can all learn from nine of these individuals. In this article, we'll focus on what I've learned about business from Ralph Schlosstein, president and chief executive officer of the boutique investment banking firm, Evercore Partners. Ralph is an example of someone who has built a strong foundation.
When you hear the word "foundation," you probably think of the bottom layer of a building or structure. But a foundation is more than that. It's the layer from which any structure grows upward. It takes you where you want to go.
Like any good leader, Schlosstein has learned from both his accomplishments and setbacks, and used those experiences in building a solid foundation. His success is built on being able to adapt: "There is always a 'new normal' and every business has to adapt in order to continue to be successful," Schlosstein says. "In this new normal, financial services is going to be a world where there will be more segmentation and specialization in order to grow and seize on opportunity. The big institutions are going to have to have more capital for the amount of business that they plan to do and I believe that will create a lot of opportunity for high-quality specialty firms."
This is where taking an honest look at his strengths and weaknesses came in. Based on the environment that he was in, Schlosstein asked himself what he had to offer that his competition didn't. And in today's world, he found it's better to be specialized.
Key Ingredients for Building a Business Foundation
A solid foundation contains several key ingredients. One of those ingredients is an ability to focus on the long term. According to Schlosstein, this approach can sometimes make you "look like a chump" if your short-term returns take a hit, but it's critical to keep your eye on the future.
"The markets that have better growth prospects and are fairly valued today have the opportunity to produce solid returns over the long term," he advises. "You need to be a long-term believer in the things that enhance productivity. Areas like technology, green technology, and energy are three areas that could enhance America's competitiveness, which could mean strong long-term investing opportunities."
Over the course of building a foundation, all good leaders employ strategies based on their strengths. Since Schlosstein is in private equity, his strategies are all about identifying the best investments to make:
- Set financial objectives: "You can't ignore the financial objectives. You have to have your view on your expected return; how much capital, if any, that business will take; and, if you are starting a company, what's the burn rate until it gets to an income producing business rather than an income-eating business. You need to have a very disciplined financial perspective."
- Focus on present market conditions: "You need to carefully assess the market environment in which you are competing. Is there really a need in the marketplace for what you are proposing to do?"
- Look at your company's skill set: "You have to clearly look at what skill set or talent pool is needed to succeed in a meaningful way in that opportunity. Sometimes you can find the right opportunity but your business may not have the necessary ingredients to successfully capture that opportunity or your business may have some significant competitive disadvantages to be a winner in that market. That is something you cannot ignore. You need to have discipline about carrying forward on the things where you do have a competitive advantage, while ignoring the opportunities in areas where you don't have a meaningful competitive advantage."
- Execute: "Figuring out a business strategy is relatively simple compared to making sure that you execute it well. Execution I think is the bigger challenge. The fundamental building block to good execution is a realistic view of what your company is good at."
You're probably thinking that this isn't rocket science—and you're right. Sometimes in our pursuit of growth, we forget the basics. Schlosstein told me that once you have these strategies established, you need to be sure your organizational culture nourishes that strategy because that is the key to success for all organizations, including your own. You can have the greatest strategy in the world, but if your team isn't on board, it will fail.
The Qualities of a Leader
What are the qualities of leadership that Schlosstein has displayed throughout the process of building his business foundation? Roger Altman, the founder of Evercore who hired Schlosstein, says the characteristics that make Schlosstein special are his values and ethics as well as his interpersonal skills: "He was held with such high esteem at Blackrock because of the way he treated his people. That is also why he made a seamless transition to Evercore. One thing I know about CEOs because I've been doing it for so many years is that the ones who are most successful are the ones who project these values."
Altman added that Schlosstein's ability to be fair and respect people helped him handle difficult people issues at Blackrock. "He was in charge of merger integration. In a business like ours with highly talented, driven people, having good people skills and coupling them with a strong backbone is absolutely vital."
In business, it's your personality and your ability to connect with people that matter. Book smarts are good, but if you can't interact well with people, you will not achieve your full potential. In my work as a producer, journalist, and author, you need to be to be a people person. I go with my gut and listen to what people are telling me. I find that, too often, people are so consumed with what they are going to say next that they fail to listen to what others are trying to tell them. Listening is crucial in connecting with someone; Schlosstein is a great example of someone who is able to recruit great people because of his listening skills.
Finding an Identity
Schlosstein's secret to success is that he isn't afraid to be himself—he is bluntly aware of his strengths and weaknesses. And more importantly, he knows how to use them. Schlosstein knows Schlosstein. He takes this honesty into the boardroom and beyond. If you do not have the proper skill set to execute an opportunity you are considering, you may actually do more harm than good to yourself, your organization, or your clients.
Having a clear sense of yourself and your values is one of the keys to success. Schlosstein laid it out simply: know what your company is about, create a business plan that is built around your core values, and have the discipline not to stray from those values. By executing on your strengths, you have a better chance to seize the opportunity.
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Excerpted from Opportunity Knocking: Lessons from Business Leaders. ©2014 Lori Ann LaRocco. Published by B2 Books, an Agate Imprint. Available at local and online booksellers everywhere.
© 2014 Lori Ann LaRocco
Lori Ann LaRocco is the senior talent producer at CNBC and one of the producers of Squawk Box. She has worked at CNBC since 2000, when she was hired as one of Maria Bartiromo's producers on Market Week. She lives outside of New York City with her husband and three children. Prior to CNBC, Lori Ann was an anchor, reporter, producer, and assignment editor in various local news markets around the country. She is the author of the book Opportunity Knocking: Lessons from Business Leaders, Dynasties of the Sea: Shipowners and Financiers Who Expanded the Era of Free Trade and has also written Thriving in the New Economy. You can connect with Lori Ann through Facebook or Twitter, and contact her at LoriAnn.LaRocco@nbcuni.com.
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