Just one week ago, I asked the question, "Will the Recovery Have Legs?"  What I absolutely did not expect was the very real possibility that our "recovery" may be so short-lived in 2010 that we don't even notice it.  This past week was more than a little scary, and I believe we are entering an important moment.

Who would have seriously predicted just two weeks ago that the Democrats would lose their super majority with a Republican winning Ted Kennedy's Senate seat in Massachusetts?  Ironically, along with the surprise, the Democrats can no longer jam through the health care bill which was so emotionally tied to Kennedy's very own crusade.  And now, a young and inexperienced President can celebrate his first year in office with the fact he needs to change direction before he's really even begun. Clearly, this is a major challenge for an inexperienced President, but I wonder if he understands this is a tipping point on so many levels.

Not only was his push on health care and alignment with the Democrats in Congress a huge mistake, it was also a major drain of political capital.  While he has already softened his position, he has not demonstrated the awareness of how he needs to pivot to avoid rattling the markets.  In fact, he seems to believe that changing his focus from health care to punishing the banks is the answer.  Perhaps the timing was just coincidence, but can you believe he would sermonize on "never again will the American taxpayer be held hostage by a bank that is too big to fail".  Are you kidding me? We're trying to build confidence in the recovery not threaten it with saber-rattling.

In the very same week, Warren Buffet comes out and says "the tax on banks just doesn't make sense", and two additional Democrats on the Senate Banking Committee announce they plan to vote no on Bernanke's confirmation.  Really?  Is Congress so oblivious to the fact that a "no confidence vote" on Bernanke is completely irresponsible right now?  So, in spite of very solid earnings announcements from a host of companies, the equity markets sell off and will probably end the week with the Dow off by nearly 5%.  Sure the markets have gotten out ahead of themselves and were bound to experience some correction, but you'd at least expect that to happen based on some economic news.  The data looks good, but our leaders look terrible and that's the problem.

Obama had best figure out that punishing the banks and tongue lashing them in public is even more stupid than trying to push through a massive health care plan when we just went through the Great Recession.  Forget the political consequences for Obama and the Democrats, we can't afford more destabilization.  Somebody in Obama's camp better help him pivot and change direction or we're not going to like what's on the other side of this tipping point.

Let me know what you think.    

As we anticipate another primetime Obama press conference tonight, we are also approaching a defining moment in his presidency but also in our recovery as a country.  What Obama chooses to do on healthcare, and perhaps even more importantly, how and when he charges forward will make a huge impact on our politics and psyche.

On the economic front, the news is relatively good.  Although unemployment continues to rise and is expected to continue to do so for the next few quarters, the second quarter results for many companies have surprised on the upside and the stock market is enjoying a nice summer rally.  The recovery is clearly in process and the unprecedented moves to stabilize our financial system are clearly working.  While the stimulus plan and its impact are in question, the verdict on the massive government spending will likely be positive as a meaningful economic recovery will be shown to have been more difficult without the stimulus.  Take one look at how the stimulus in China has worked and it is clear the same argument will be made for how it made sense here in the US.

But these positive trends do not mean that these future outcomes are guaranteed.  We've got a long way to go and the steps taken now by Obama and our government on healthcare could dampen or slow the recovery, or possibly accelerate it.  While Obama is clearly passionate about the need to offer a government healthcare option and to cover the uninsured, he also seems compelled to use every ounce of political capital to make it happen quickly and early in his first year as President.  This "damn the torpedoes" approach belies the judgement and temperment that he has displayed in the election as well as his first six months, and if he recalls this was part of the problem with Bush. 

Tonight we will see what is likely to come.  Obama will either highlight that Congress is the problem and the American people elected him to move quickly and aggressively on healthcare, or he will display the shrewdness of a President and a leader who has the potential to be great.  If he takes the argumentative fast track, the downside is great with limited upside to be seen and felt during his time as President.  If, however, he displays the judgement to slow down to avoid slowing the recovery and throwing more fuel on the partisan political fire, he may just live for another day.

The American people know that getting healthcare reform right is much more important that getting it done fast.  This is a defining moment for Obama and my bet is that he's smart enough to put the blame on Congress for moving too slow and take credit for being the wise leader who is committed to getting it done right.  If he takes this tack, the markets will love it and this summer rally may just have some legs.

What do you think?  Does Obama only have one speed, "spend it fast and do it now"?    

As an executive recruiter and adviser focusing on the key roles of CEO, CFO and CIO, our clients consistently express the objective to recruit a leader who has in large part performed in a very similar capacity before.  This desire for "been there done that" executives begs the question, "Why is it that few companies choose to project talented leaders to the next level, and when should someone expect to get their first shot?"

While it is completely understandable to seek leaders who have done it before, at some point someone gave these leaders their first shot.  So why is it that companies continually seek the "been there done that" leader?  First of all, it's simply lower risk to recruit a CFO, for example, who has done it before; one of the most common requirements in nearly all of our public company CFO searches is having previous public company CFO experience.  The risk of assessment is lower and the risks associated with the transition and responsibilities as a corporate officer are mitigated.  Secondly, the short term orientation in most companies requires an immediate impact with limited time to develop a leader.  As a result, the experienced leader can hit the ground running and the new leader can lead with limited oversight from the Board or the CEO.  Finally, these are extremely difficult times and the stakes are high.  In what is arguably a buyer's market for talent in the most trying of times, why would you hire and project a talent over someone who has already proven they can handle the job?

These are the drivers behind the emphasis on "been there done that" executives, but when does it make sense to take a risk and give someone their first shot?  Clearly, the best time is when you have invested the time and energy in developing a talent and you've worked with them for many years.  I would argue that this is the most overlooked answer today.  Companies know the strengths and weaknesses of their existing succession candidates, but they choose to go outside rather than promote from within.  This can be a mistake and a costly one, but companies do it over and over again; sending a signal to the organization that leaders must leave to ascend while the company takes a risk on someone they really don't know.

But clearly the more difficult challenge is recruiting someone from the outside and projecting them to the next level.  In addition to assessing the challenges in your current environment and examing why a candidate has not been given the opportunity to ascend in their previous company, we suggest looking closely for three key attributes.  Aside from the compelling personal qualities and leadership skills that any talent must have to be considered for the next level, the "groundswell effect" must be evident.  Basically, the leader should have a groundswell of support from key mentors and people who have followed or been developed by this key leader.  When other key leaders are consistently supportive and entrust their careers with someone, this is a key indicator of future success.  Secondly, the leader should have led in a fairly autonomous organization, where he or she had direct responsibility for making an impact and can point to the successes and failures associated with the challenge over time.  Finally, the leader should be battle-tested evidenced by taking on very difficult challenges.  These situations are sometimes difficult to assess, but the learning curve is steep and the ability to handle the challenges in a new role at the next level won't be quite so daunting.

While today's environment has placed a renewed emphasis on "been there done that" executives, the cycle will shift and soon we will be back in a market for talent where the supply fails to meet the demand.  This will coincide with the retirement of a generation of leaders, and the companies who understand how to project talents will win.  Let us know your thoughts and experiences and how you assess the ability of key leaders to ascend to the next level. 

Over the last several months, we've all heard the comment that "things will never be the same".  Given the severity of the financial crisis and the erosion of wealth in this country and around the world, it's not surprising that many of us have made this comment and believe it. But what has really changed? And how will these changes affect your business?

I've been asking this question a lot and the answers are unclear.  On the one hand, a number of people predict a long extended period of economic malaise as the systemic and global nature of the recession will require time to recover.  On the other, some believe that the massive amount of stimulus and the likelihood of a simultaneous global recovery will accelerate the turnaround generating momentum as jobs and spending return much more quickly.  While I'm certainly an optimist and the worst is most likely behind us, the conventional wisdom suggests the recovery is more likely to be slower and take longer than most of us are prepared for.

So, what does this mean?  During this past week, I asked this question of two experienced leaders and each arrived at the same answer.  In one, I spoke with a CFO of a previously high-flying consumer products company who now finds himself in a struggling business with limited access to bank financing.  In the other, a leading consultant described the competitive pressures in the market and the inability to control pricing.  As the CFO described, "We thought we would benefit from the consumer trading down, but what we didn't understand is that consumers are trading all the way down or completely eliminating unnecessary spending where they can."  He went on to highlight the success of McDonald's and WalMart in the market and stated that "we're lost in the middle".  The consultant's view was much the same as his premium level service remained strong but the effort to bundle services and charge more just wasn't working.  He stated, "clients can do much of the work on their own and they are more selective while also demanding deep pricing concessions.  We'll just have to skinny down our business to survive."

Both comments reflect the explosion of products and services which have become available today.  Quite frankly, we've simply got too much of everything and the capacity in most industries will need to be reduced and refocused to meet the demand.  Whether it's reducing the number of breakfast cereals on the shelf or car dealers on the block, companies will need to get smaller, more focused and more efficient.  In such an environment, the premium product strategy with the ability to maintain pricing is attractive, and the low cost and high volume strategy will deliver success to the most productive and aggressive.  What isn't entirely clear is how businesses will survive positioned somewhere in the middle.  You're either the best or the most affordable option or you may find yourself "lost in the middle".

Let me know your thoughts.  How do you think things will change?  Will the markets ever be the same and what are the trends we're likely to see in the new normal?