Executive Times
Volume 3, Issue 1	January 2001
ã 2001 Hopkins and Company, LLC Note re: links---certain hyperlinks assume that you are registered as a subscriber to the site. If you are not a subscriber to certain sites, the links will fail. If you register, the links should work. Also, certain hyperlinks expire and may not be available when you try to go to the site. A First Time for Everything A turn of the calendar page changing from one year to another can provide executives with a convenient opportunity to do something different, both personally and for their organizations. Most companies have already completed operational plans and start the new year with a clear sense of purpose and direction. Over the past few months, certain executives and their companies have taken actions that had never been taken before. Have you been one of those executives? Have you had the courage to move in a new direction? Have you made a personal commitment to your own growth for 2001? Is it time for you to examine some overlooked parts of your organization where there may be some hidden liability? As you read the following stories about other executives, think about what you’re prepared to do this year. What will you do differently in 2001? How will your leadership evolve? What skills and talents will your organization need this year, and will you and those who report to you possess the skills and talents needed? Out with the Olds General Motors CEO Rick Wagoner knew that he needed to make a critical decision about the brands supported by GM. Rumors abounded for years that the Oldsmobile division had no future, so it came as only a modest surprise in mid-December when GM announced the end of Oldsmobile. “We stretched to find profitable ways to further strengthen the Oldsmobile product line, including developing products with our global alliance partners, but in the current environment, there was no workable solution,” said Wagoner. In the past, GM counted on Oldsmobile for many innovations in automotive engineering, manufacturing and distribution. If you’re interested in finding out the number of “firsts” from Oldsmobile, visit http://207.37.252.232/olds/newstuff/didyouknow.htm. Despite a hundred year history and heritage, Wagoner and team couldn’t convince car buyers that Olds was anything other than our grandparents’ car. What’s been around your organization for too long, not pulling its own weight? Will you be the executive with the courage to say, “Enough is enough?” After trying hard to make something work, when do you cut your losses? What baggage do you need to let go of during 2001? The Buck Stops Here The stories about executive compensation don’t usually hit the business press until proxy statements catch the attention of reporters. When top executives at Charles Schwab and Company announced a new plan to cut expenses, the Associated Press wire spread the word quickly. Instead of layoffs or changes in non-salary expenses, Schwab decided to cut executive pay from 5 to 50% during the first quarter of 2001. The three top Schwab execs will see a salary cut of 50% from January into April. Other senior executives will face 10-20% cuts in January and February, and junior managers will see a 5% cut. The company is also encouraging workers to volunteer for unpaid leaves of up to twenty days as a way of helping cut expenses until conditions rebound. What messages do employees and investors receive from your organization about executive compensation? Have you considered creative ways of ensuring that your compensation remains appropriate in changing environments? In what ways does your executive compensation lead by example? Would you have done what Schwab did as a way of implementing expense cuts in your organization? Who’s the Best? The Fortune issue (1/8/01) covering the “100 Best Companies to Work For” came out recently. It can be interesting to examine what a team of magazine writers and editors define as “best” and get ideas on approaches and practices that can be used elsewhere. While this particular list has been created only four or five times, we always like some of the quotes from executives at these “best” companies. Jack Walters, vice president of HR at Alcon Labs, says, "We don’t need people who work like robots anymore. We need people who watch robots." Can you picture a tired robot watcher heading home after a long day? No must-see TV for them; they’ve been watching robots too long already. Look for those robot watcher ads in your local paper. "Everybody at every level gets something that is meaningful to them," says Marcia Hyde, vice president of human resources at Valassis about compensation. Somehow we think that those workers who get incentive pay representing 10% of a $30,000 salary would also find an amount considerably higher to be meaningful to them. The current 100 list includes a retrospective on the changes that have taken place over time that have separated good companies from the best ones. Some executive or organization had to be first to do something that elevated that company in the eyes of employees by offering benefits or perks including paid vacation, water coolers, onsite day care, dry cleaning pickup or pet insurance. While we’re usually skeptical of the criteria for these “best” listings, any executive or organization can decide to take action that will represent significant improvements. The importance of any particular change is relative to what it means for an individual executive or for their organization. What will you do in 2001 to move ahead in becoming whatever it is that would make you “the best”? What two or three changes can your organization make to elevate its image in the perception of employees? What does “being the best” mean for you personally? How do you currently measure up to that standard? Poised for Action The competition for executive talent requires the best organizations to be prepared to fill top jobs quickly when talent is available, and to possess patience and a willingness to wait until certain individuals are available to be hired. Following General Electric’s selection of Jeff Immelt to succeed Jack Welch as CEO, two GE executives were perceived to be available to become CEO elsewhere. 3M acted quickly to appoint W. James McInerney, former head of GE Aircraft Engines as its new CEO. Home Depot followed a day later and named Robert Nardelli, former head of GE Power Systems as its CEO. In Home Depot’s case, it was in no hurry to appoint a new CEO, with 58-year-old co-founder Arthur Blank comfortably in place. While they were quietly looking for a number two executive to share leadership with Blank, the availability of skilled GE executives caught their attention, and the company acted quickly to bring Nardelli on board. Blank was willing to step aside when it became clear that Nardelli would join the company only in a CEO role. Do you search for talent when no jobs are open? Are you willing to wait until the person you want most is available? Would you be as willing as Arthur Blank to step aside earlier than planned in order to bring top talent into your organization? Pirates Walk the Plank Nail Your Boss We read with alarm in The Wall Street Journal (12/13/00) that a group called the Business Software Alliance (BSA) tracks down organizations using unlicensed software and takes enforcement action. What was alarming was one of their campaigns called, “Nail Your Boss” which encouraged disgruntled employees to report abuses of software. The bill for pirated computer software came due in the amount of $108,000 for an Atlanta law firm that was turned in by the former employee who installed the software! BSA also has a program called “Truce” which gives a company an amnesty period in which it can bring its licenses current. Executives may want to spend some extra time ensuring that all software on corporate machines is legal and licensed properly. How organized are your software records? How disciplined are the personal computer users in your organization about ensuring that all software is legal and licensed? It’s been a long time now since the Y2K lockdowns that ensured all software and hardware was compliant. Can you rest easy that you’re not likely to be a victim of a BSA raid on your organization? Who moves the bar? Raise carefully If we had a nickel for every time we’ve heard the phrase “raise the bar”, we could pay a score of people to raise the bar for us. It turns out that raising the bar might not be as appropriate a business practice as it seems. We read in The New York Times (12/6/00) that Southern Company, parent of Georgia Power, is being sued by certain former and current black workers claiming the company moved the goal post too many times for them to be promoted. After preparing for the requirements of a job, workers were passed over because of new requirements for the job. One worker in underground power lines claims that he was denied a promotion and told he needed more experience working on overhead lines. While he disagreed, he worked on overhead lines for a year, re-applied, and was denied this time for not having enough experience on underground lines. While lots of companies have good business reasons for “raising the bar”, there can be hidden liabilities, especially when a pattern of promotion may exclude certain workers. How do you communicate and document the changing requirements for jobs in your organization? What hopes and expectations do you raise in employees who are not selected for particular jobs? Will your words to them come back to you in ways that will generate significant financial exposure for your organization? All promotional decisions discriminate among individuals as a subjective judgment is made about the “best fit” for a particular job. How risky are those decisions for you and your organization? How do you ensure that wrongful discrimination is eliminated or reduced from your decision processes? Just Say No Lock-ins and hostages In one of the strangest business stories we’ve ever read, we were amused to learn from The Nando Times (12/13/00) that 2,000 employees of Korea’s Kookmin Bank stormed the company’s headquarters and kept Chairman Kim Sang-hoon hostage in his office for two days as a protest against expected layoffs following an expected merger. Two weeks later, we read that 2,000 police surrounded 15,000 workers who barricaded themselves at the bank headquarters protesting the merger. What motivates your employees to action? What would you do if employees held you or your manager hostage over executive decisions they disagreed with? When your decisions aren’t aligned with the expectations of your employees, how do you behave? What do you communicate? Follow Up Here are selected updates on stories covered in prior issues of Executive Times: Ø The November 2000 issue of Executive Times mentioned Michael Armstrong’s recent restructuring of AT&T. Since that issue, Armstrong took a step that none of his predecessors ever did: he cut the dividend. With the stock price down by about 60% in 2000, we can expect more scrambling by company executives during 2001. Ø The lead story in the February 2000 issue of Executive Times was called “Waging Talent Wars.” The January 2001 issue of Fast Company reports on a McKinsey survey that provided seven lessons for winning the war for talent: 1. Instill a talent mindset at all levels of the organization -- beginning with senior management 2. Create "extreme" employee value propositions that deliver on your people's dreams 3. Build a high-performance culture that combines a strong performance ethic with an open and trusting environment 4. Recruit great talent continuously 5. Develop people to their full potential 6. Make room for talent to grow 7. Focus on retaining high performers. Legacies Superman Jack Liebowitz died in mid-December at age 100. You may not recognize his name, but chances are his vision and business expertise has caught your attention at some time during your life. Jack started Detective Comics in the late 1930s and changed the comic book business dramatically. The company became DC Comics, and Liebowitz started Action Comics and brought Superman and Batman to American culture in print and other media. Through acquisitions, Warner Brothers eventually acquired Liebowitz’s companies, and Jack served as a director of that company and Time Warner for years. The New York Times reported that he came to the office every day when he was over 90 years old. "Some people viewed comics as just a passing fad," Mr. Liebowitz said in an interview in 1985. "Not me. From the beginning, I felt that comics could be a vital part of the publishing field. They had a broad appeal and a great potential for telling stories." It was that vision that led Liebowitz to make and grow a business where others paid no attention, and brought him to work every day, long after his contemporaries retired. Reading (Note: readers of the web version of Executive Times can click on the book covers or titles to order copies directly from amazon.com. When you order through these links, Hopkins & Company receives a small payment from amazon.com. Subscribers to the print version of Executive Times can receive the web version at no additional cost. Send e-mail to hopkinsandcompany@att.net with a request to be placed on the web version distribution list. Also, not all books we read make it to the pages of Executive Times. Check out http://www.hopkinsandcompany.com/bookshelf.html for other book selections. For expanded reviews of Executive Times selections and other books, visit our book review site at http://www.hopkinsandcompany.com/books/list.htm. Note the new star rating system for 2001.) Narrow Span There are two new books about Fed Chairman Alan Greenspan that, when taken together, represent about half a biography. Neither book covers Greenspan expansively, and neither seemed to receive his active involvement. The more interesting book of the two is Bob Woodward’s Maestro: Greenspan’s Fed and the American Boom. Woodward uses his journalistic skills to make the reader feel you’re standing side by side with Greenspan and a wide cast of characters. Justin Martin’s Greenspan: The Man Behind Money doesn’t approach Woodward’s depth on economics and reveals less about what goes on behind the scenes at the Fed. He does something Woodward doesn’t: he tells us about Greenspan the man, and about many of his formative relationships, including that with his mother and the influence of Ayn Rand and the Objectivists. You can sample chapter one of Maestro at http://www.nytimes.com/books/first/w/woodward-maestro.html and chapter one of Greenspan at http://www.nytimes.com/books/first/m/martin-greenspan.html. If you want to learn more about the Fed and how it works, give Maestro a try. If you want to learn a thing or two about Alan Greenspan the person, read the Martin book. For a longer review of Maestro, visit: http://www.hopkinsandcompany.com/books/Maestro.htm. For a longer review of Greenspan, visit: http://www.hopkinsandcompany.com/books/Greenspan.htm. Recommendation: •• for Martin; ••• for Woodward. Masterful There’s no shortage of things to love about Margaret Atwood’s award winning novel, The Blind Assassin. Atwood’s dialogue consistently remains in the style of the 1930s and 1940s, and she captures the flavor of elements of that period flawlessly. The book’s structure involves a book within a book, and the ease with which Atwood makes transitions from one to the other shows off her considerable skill. The characters and plot lead us through a time and into places that Atwood develops with care and precision. Here’s a sample: “Richard joined us as if on cue, and the two men shook hands. My own hand was taken, squeezed briefly. Then my elbow. That was how men steered women around in those days - by the elbow - and so I was steered by the elbow into the Imperial Room. Richard said he’d wanted the Venetian Café, which was lighter and more festive in atmosphere, but unfortunately it had been fully booked. It’s odd to remember this now, but the Royal York Hotel was the tallest building in Toronto then, and the Imperial Room was the biggest dining room. Richard was fond of big. The room itself had rows of large square pillars, a tessellated ceiling, a line of chandeliers, each with a tassel at the bottom end: a congealed opulence. It felt leathery, ponderous, paunchy - veined somehow. Porphyry is the word that comes to mind, though there may not have been any.” Our curiosity remained piqued throughout this book, wondering just where Atwood was taking all this. By the end, she pulled all the treads together, and when we closed the book, we knew at once that we already missed the joy of reading this book. You can sample chapter one of this book at: http://www.nytimes.com/books/first/a/atwood-blind.html. Recommendation: •••• Lysine Liar Kurt Eichenwald delivers a fascinating business thriller in his new book, The Informant: A True Story. You may recall the many stories in the business press during the 1990s concerning Marc Whitacre, an Archer Daniels Midland executive turned FBI mole. After taping price fixing conversations among ADM executives and their counterparts at competitor lysine producing companies, Whitacre continued his sideline business: stealing funds from ADM through phony invoices and other forms of fraud. You’ll shake your head on many pages wondering why ADM’s controls were so weak. You’ll be amazed at Whitacre’s lack of character, and his multiple lies to everyone who talked to him. You may be concerned that you might be unable to identify a criminal like Whitacre within your own organization. You can sample chapter one of this book at: http://www.nytimes.com/books/first/e/eichenwald-informant.html. For a longer review, visit http://www.hopkinsandcompany.com/books/The Informant.htm. Recommendation: •••• Playing with Fire When it comes to action and suspense, readers have relied on the skills of Robert Ludlum for many years. Ludlum delivers another outstanding suspense novel with his latest book, The Prometheus Deception. Espionage itself can be delightful to read, especially with ongoing shifts in alliances. Add cryptology to that mix, along with conspiracy, and a heavy dose of information technology, and Ludlum provides a recipe for reading pleasure. If you have any concerns at all about privacy, power brokers and the use of technology, you’ll enjoy how this book puts those themes in a context that is believable and frightening. For a longer review, visit http://www.hopkinsandcompany.com/books/The Prometheus Deception.htm. Recommendation: •••
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