For CEOs, Lessons From an NBA Legend

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As the media sort out the winners and losers of the NBA lockout, Charlotte Bobcats owner Michael Jordan (yes, the Michael Jordan) has drawn some criticism. In the back office, it's true that Jordan has underperformed at times. On the court, however, Jordan's career with the Chicago Bulls provides invaluable leadership insight for investors and managers alike.

Here are three leadership traits every CEO should emulate, revealed through the lens of an NBA legend.

1. Leaders should have a clear view of where their team is headed.
A former teammate, BJ Armstrong, once said Jordan could feel a game's momentum shift before anyone else on the court. Jordan knew precisely when the opposition was most vulnerable.

Jordan was a unique visionary in this regard. On a different scale, a great CEO should be a visionary in an industry. Amazon.com's (NAS: AMZN) Jeff Bezos, for example, implemented a game plan for his company and uprooted multiple industries along the way. From its modest roots as an online bookseller, Amazon has grown into an e-commerce giant and a key player in tablets, multimedia, and publishing.

Amazon's highly successful Prime service even caught the eye of Google (NAS: GOOG) execs recently. Perhaps intimidated by Amazon's expanding market share, Google decided to go on the offensive in the online retail space. Google has yet to reveal a detailed strategy, but it will be interesting to watch the head-to-head battle between tech titans.

2. Leaders should focus on their strengths and adapt to gain an edge on the competition.
When he returned to the game in 1995, Jordan could no longer dominate with sheer athleticism. Naturally, he developed a new weapon: a virtually unstoppable fade-away jumper. Defenders would overcompensate on a fake to the basket and leave the jump shot wide open. It was the evolution of a champion.

How can investors learn from Jordan's ability to evolve? Take a look at how certain companies have evolved because of savvy management. General Electric (NYS: GE) and IBM (NYS: IBM) , both founded more than a century ago, remain leaders in their respective industries. GE became known for its operational excellence when Jack Welch took the helm in the 1980s. He streamlined divisions, shut old factories, and created a high-performance culture. Welch focused on being No. 1 or No. 2 in every business segment. To this day, a tradition of excellence and constant evolution persists at GE.

IBM has done the same under Sam Palmisano. Recently, Warren Buffett noted that Palmisano has "delivered big-time" through a well-defined company road map. Buffett announced that Berkshire Hathaway (NYS: BRK.B) was buying shares of IBM, an interesting move considering Buffett's aversion to the tech sector. He trusts that IBM's CEO will adapt its business model to maintain a competitive advantage.

3. Leaders should take risks and readily admit to their mistakes.
Most sports fans have heard the classic motivational story about Jordan being cut from his high school squad. It's ironic now, but Jordan would fail again and again in his career. Yet, he was never deterred. He once stated, "I can accept failure, everyone fails at something. But I can't accept not trying."

During his career, Jordan missed more than 12,000 shots. Great CEOs will miss their target as well. Netflix (NAS: NFLX) CEO Reed Hastings received all types of criticism for a blunder earlier this year. When Hastings tried to split the Netflix business and create Qwikster, customers and shareholders were baffled. Netflix's stock price has plummeted 75% since its highs. At the end of the day, Hastings needs to take risks to compete in the streaming war. He backtracked on the split, but provided a new direction for the company. In the end, he might still be a visionary.

Hastings can take comfort in poor decisions by other great executives. Steve Jobs introduced several mediocre products as Apple's (NAS: AAPL) CEO, including the Apple III and the G4 Cube. He was an ambitious risk-taker, though, and many other bets paid off. He also recognized his shortcomings and stated this in a commencement address at Stanford. His parting words were, "Stay hungry. Stay foolish."

Investors should seek out CEOs who take risks but also address their missteps. When possible, listen to earnings conference calls and read management's letter to shareholders in the annual filings. In this context, does management admit their mistakes candidly, ignore them, or try to cover them up entirely? Warren Buffett is a strong believer in full disclosure and avidly reads through annual reports to provide insight on management's character.

Identifying bold managers with honest intentions is critical for long-term investors.

Fourth-quarter finish
I was lucky enough to witness Michael Jordan play basketball. He raised the bar for the generation of players that followed. Successful CEOs will do the same. When investors evaluate company leadership, they should focus on their vision, their ability to evolve, and their willingness to learn from mistakes. CEOs with these qualities will deliver exceptional returns for shareholders.

Of the leaders mentioned above, I believe Jeff Bezos has incredible potential with Amazon. Investors should take a closer look at how he transforms the industries he enters. To understand how Amazon and another retailer will threaten Wal-Mart's dominance in the future, check out the Motley Fool report "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." Don't miss out on this free opportunity to learn more -- click here.

At the time this article was published Fool contributor Isaac Pino owns shares of GE. He regularly listens to the Chicago Bullsintrofor inspiration in his articles. Follow him on Twitter @TMFBoomer.The Motley Fool owns shares of Berkshire Hathaway, IBM, Apple, and Google.Motley Fool newsletter serviceshave recommended buying shares of Berkshire Hathaway, Apple, Netflix, Google, and Amazon.com, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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