Executive Times
Volume 2, Issue 2	February, 2000
ã 2000 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. Waging talent wars With unemployment rates at generational lows, and companies searching for talent and experience, many executives are challenged today to attract and retain skilled employees. Job seekers have many offers to evaluate, and talented employees are recruited away from companies. Competition for people can be tougher than market competition around an organization’s products and services. Concurrent with hiring challenges, organizations are also dealing with the consequences of mergers, cost cutting and other changes that lead to revised roles and responsibilities. Read about how some organizations are dealing with these challenges, and think about what else you, as an executive, need to do for yourself and your organization in this environment. When you can’t beat ‘em, own ‘em Professional partnerships have faced increased attrition among partners as the upside of stock options beats the rewards of partnership. Arthur Andersen announced on 1/23/00 a new strategy that involves the creation of a venture capital fund whereby the accounting firm will invest $500 million in web start up companies worldwide. Jim Wadia, senior Andersen partner, said “We want to find a regulatory structure that will let our employees get a piece of the action, so we can compete in the war for talent." Even McKinsey & Company will be taking equity in clients as payment for consulting advice.(The New York Times, 1/19/00). The Securities and Exchange Commission has raised concerns about conflicts of interest, and Andersen along with the other top accounting firms is working to find ways to invest without creating conflicts. The SEC found that about half of PricewaterhouseCoopers partners owned investments in corporate audit clients, a violation of the SEC’s auditor independence rules. Executive recruiting firm Heidrick and Struggles (now publicly traded) often accepts equity for all or a portion of their fees, according to The New York Times 1/25/00. As a fee for placing Robert Zollars at Neoforma a few months ago, Heidrick & Struggles received a warrant convertible into 436,623 shares of Neoforma stock at 10 cents a share. As of the last week in January, that warrant was worth about $23 million. That sounds a whole lot better for Heidrick than the typical fee of a third of first year compensation; in Zollars’ case, that would have been about $250,000. Time will tell how much of Heidrick’s earnings come from these equity interests. Do your talented workers have the opportunity to participate in the success of your company or client companies? Are there barriers relating to equity that lead to a brain drain from your company? When talent leaves your company, do you know where they go, and under what terms? What have you done lately to assess your competitiveness? Do you think of this area as one for Human Resources to worry about, or are you fully engaged? Do you have all the tools you need to attract and retain the best talent for your organization? If not, how can you acquire those tools? How do you deal with conflicts of interest about equity interests in your clients and customers? I’m the best and I work for the best This is the time of year when Fortune publishes its list of the best 100 companies to work for. You may disagree with some criteria, but we’re hard pressed to understand why a company would not want to be on this list. Those who feel the cost of perks like concierge services detract from corporate performance should notice that the publicly held companies on Fortune’s list all beat the S&P 500 average for 1999. Flexible scheduling and day care are critical decisions for some workers when they select an employer; companies without these benefits are at a disadvantage. Work/life balance continues to be a major concern of workers and managers; those companies who respond well to this issue are most likely to attract and retain those workers for whom balance is important. We share a major concern raised by Fortune about comprehensive community building around the workplace. When someone identifies too closely with an employer, there can be a loss of individual identity. Here’s a section from the Fortune article: Berkeley sociologist Arlie Hochschild, author of The Time Bind: When Work Becomes Home and Home Becomes Work, worries that the trend could leave public life increasingly barren, widening the gap between haves and have-nots. "It's basically privatizing the village green," she says, "and denuding the real community outside the corporate realm." While many of the benefits clearly do ease life for employees, Hochschild adds, it's important not to forget their ultimate purpose: undistracted, profitable workers. (As one HR exec puts it, "When they're at work, they're at work.") Free coffee and Advil are a benefit, sure--but so are the free drinks in Vegas. Others worry that over-swaddling employers could foster a new sort of dependence. "It used to be that people lived in their homes. Now they sleep in their houses," says Dave Arnott, a professor at Dallas Baptist University and author of Corporate Cults: The Insidious Lure of the All-Consuming Organization. What’s keeping your organization from being considered the best? Are you the best manager that someone could have? What’s keeping you from becoming the best? What three improvements can you make this year to attract and retain highly skilled talent for your organization? How do you draw boundaries between your own work life and personal life? Does your organization support your local community or replace it? Letting the talent go Joining lots of cost-cutting companies, AT&T announced that all segments of the company will feel the impact of their planned $2 billion cost reduction. One out of four officer and director jobs will be eliminated, according to The Wall Street Journal (1/24/00). The remaining executives will take on broader responsibilities. That means that around 150 talented executives who have helped AT&T succeed will be available to bring their skills to other companies, and the remaining 450 executives may become less than satisfied with the demands of their newly expanded roles. How wide and deep are your contacts within other companies? In a situation like the one at AT&T, are you prepared to offer talented executives you’ve gotten to know roles within your company? Can you offer selected executives a value proposition that beats their current situation? If you’re heading into a job, especially a start up with stock options, you should know both what you’re worth and what the dot.com can afford. See The Wall Street Journal 1/11/00 for more information. Bribing the talent to stay Metro Philadelphia is one community that attracts bright, well-trained technology students, too many of whom move away after graduation. The Wall Street Journal 12/22/99 reported that the Philadelphia E-Commerce Commission is offering $2,500 fellowships to college students who take certain coursers and who stay in the area working for local companies for three years. The commission is also trying to raise money to fund signing bonuses. Are there hidden assets in your community, like students, that you’re not able to utilize effectively? How do you assess which incentives are necessary to attract and retain workers? hiladelphia sees the need to create a buzz around the e-commerce in that area. How well does your community get the word out about itself? What do you and your organization do to help? No Irish Need Apply Did you know that Germany largely bars highly skilled foreign workers from working in their country? When we read about the shortage of technical workers in Germany in the 1/17/00 issue of The Wall Street Journal, and how the country is dealing with the shortage, we were reminded of a holiday gift we received in the form of a commercial sign saying “Help Wanted. No Irish Need Apply.” What surprised us was the date on the sign: 1916. We knew about such discriminatory labor practices in the mid and late 19^th century, but didn’t know they continued for the Irish in America into the First World War and long thereafter. To compete in today’s global economy, we can’t see how any nation can afford to close its doors to highly skilled labor. Germany is open for workers from other EU countries, so the talented Irish may apply, but most Russian or Indian programmers are out of luck. How easily can you import or export talent to where it’s needed in your organization? Are there barriers or borders that constrict the flow of highly skilled workers to where they are needed and to where they want to be? Thanks to the help desk Workplace shortages are emerging, especially in jobs at the lowest end of the wage scale. Companies have cut back on support, especially as computers have become more familiar and easier to use. Networks continue to be challenging to manage, and requests for help from limited support staff gives those individuals great power in the organization: deciding who waits for hours to get back on the network, and who gets back up quickly. We read in The New York Times 1/5/00 that thankful managers at a branch office of Phoenix Mutual Life sent a jazz quartet to entertain corporate VIP’s at the Connecticut headquarters, and in addition to serenading corporate executives, the quartet made a special stop at the company’s internal help desk. How do you express appreciation to those less-visible workers whose actions can have a significant impact on others? What do you do to attract and retain those individuals? What would they like from you? Is that what you give them? Finding loyal customers Do you have a coupon for that Catera? Direct mail marketers, periodicals and supermarkets regularly present customers with coupons for products. We read in The Wall Street Journal 1/5/00 that General Motors has joined the soap companies in mailing millions of coupons to existing and potential customers, good for about $500 off the purchase or lease of a new GM car. Other car companies are expected to match the GM offer. No stops at this depot When a large company is the customer of another large company, demands can create significant pressure, and the failure to meet customer needs can lead to disaster. We read in The Wall Street Journal (1/24/00) that Whirlpool is one of two appliance suppliers to The Home Depot, and after supply chain glitches led to product shortages, Home Depot dropped Whirlpool as a supplier “indefinitely.” Whirlpool Chairman and CEO David R. Whitwam stated that neither Home Depot nor Whirlpool has concluded discussions and no final decisions have been made. Good-bye eCompanyStore.com, decided to give up on 98% of their customers, and focus solely on doing business with a handful of large companies. According to The Wall Street Journal (1/3/00), they sent a “good-bye letter” to existing customers referring them to competitors while eCompanyStore.com developed online stores for big players. What gives you confidence that you’re serving the right customers? As your customers and their needs change, how do you stay current? When you face obstacles in serving customers, are they likely to stay with you or go elsewhere? Will sending your customers coupons tell them you value their loyalty? Turning over a new leaf How long will it be before we all forget that there once were mutual life insurance companies? The New York Times reminded us on 1/23/00 that John Hancock, Met Life and Prudential are all in the process of “de-mutualization”. One reason given for these conversions to stock ownership is the need to provide stock incentives to attract and retain talented executives. Another reason for the changes is to allow for these companies to use stock for acquisitions. Analysts expect increased consolidation in insurance and financial services as a result of the removal of ownership restrictions. A common strategy seems to involve the ability to provide consumers with one-stop shopping for financial services. We remain skeptical that consumers want, need or will prefer a single financial service provider. How do you know when something very basic and fundamental, like the form of your corporate organizational structure, needs to change? How do you decide which of your customer’s needs you will fill? When you’ve been doing a single thing well for years, what will lead you to doing more things? Are you able to recognize when it’s time to turn over a new leaf? Follow Up Here are selected updates on stories covered in prior issues of Executive Times: Ø Leo Wolinsky, a Los Angeles Times editor who was critical of the Staples deal and other practices was promoted in January to head newsroom operations. (The New York Times 1/10/00). See the January 2000 Executive Times for more information. Ø Prior issues of Executive Times have called attention to the challenges of co-chief roles in companies. One executive to watch in such a role is Bob Pittman, President of America Online who will be co-chief operating officer of AOL Time Warner. Ø The September 1999 issue of Executive Times recommended Buckingham and Coffman’s book, First, Break All the Rules. One of their twelve questions that measure the strength of the workplace to attract, focus and keep the most talented employees is: “Do I have a best friend at work?” Sue Shellenbarger’s 1/12/00 Work and Family column in The Wall Street Journal called attention to the ways in which accelerating change in the workplace breaks up friendships. Companies that notice and pay attention to those friendships can improve their chances of retaining top talent. Ø The April 1999 issue of Executive Times led with the challenge for new CEO’s in deciding when to stay the course and when to change in relation to a predecessor’s policies and style. So, if you were Steve Ballmer following Bill Gates as CEO of Microsoft, what would you do? Ø We called attention to the Lyndon Johnson tapes on C-SPAN’s radio and website in the May 1999 and November 1999 issues of Executive Times. If you want equal time for Republican presidents, you can now purchase the Nixon tapes from the National Archives. For information, go to http://www.nara.gov/nixon/tapes/. Enjoy. Legacies Some executives become identified by a defining moment that calls the individual to the attention of many people. Elliot Richardson faced a personal and professional crisis in October 1973 when he had to choose between two important values: loyalty to his President and maintaining personal integrity. When Richardson chose to resign as Attorney General rather than follow President Nixon’s order to fire Watergate special prosecutor Archibald Cox, the world noticed and Richardson is remembered for placing the interests of the country above his own and those of the incumbent President. Richardson’s legacy goes far beyond the historic choice he made while Attorney General. He held dozens of positions in Massachusetts as well as for the federal government. While serving at the old agency, Health, Education and Welfare, he directed funds toward the study of sickle cell anemia. Because he monitored the election when Nicaragua voted out the Sandinistas, that election had worldwide credibility. Read his memoirs, Reflections of a Radical Moderate, to learn more from one of the finest executives of his generation. 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 other book selections on our bookshelf at http://www.hopkinsandcompany.com/bookshelf.html.) Net Sense For those executives who continue to grapple with the tremendous changes the Internet represents, reading Andrew L. Shapiro’s The Control Revolution can help. Shapiro’s premise is that the Internet has triggered a radical shift in who is in control of information, experience and resources. Individuals have taken power from large institutions that are trying hard to limit this digitally enabled autonomy. He explores what’s likely to happen (diminishment of values like community, free speech and privacy) if individual control is pushed too far. He calls for a balance of power between self-interest and public interest involving personal control and shared power. Here’s a quote that gave us pause: “Ignorance and narrow-mindedness, then, are hidden dangers of the control revolution---hidden because they are self-imposed and, even more, because the Net seems so open and diverse. But in fact the infinite scope of today’s information sphere may lead indirectly, if somewhat perversely, to a loss of diverse experience and a flattening of perspective.” If you or your organization provide any intermediary roles, this book can help you update how to perform those roles in the digital world. Going Home Again We enjoyed reading Tracy Kidder’s House many years ago, and The Soul of a New Machine a long time ago. His latest book, Home Town describes life in Kidder’s hometown of Northampton, Massachusetts. Kidder’s skills create a wide perspective on life in this small and diverse town through stories about the real people, normal and strange, who live there. Kidder has the ability to take the ordinary and make it fascinating for a reader. Tommy O’Conner is a complicated character we’re likely to remember for a long time. Pug and Kat We were thinking about a good Valentine’s Day book to feature in this February issue. We had more to choose from than we expected, and chose to browse the letters exchanged over a lifetime between Winston Churchill and his wife Clementine. Their daughter, Mary Soames, edited thousands of letters exchanged in a loving relationship that spanned almost sixty years, and created a fine book, Winston and Clementine: The Personal Letters of the Churchills. You can eavesdrop on their relationship by reading this book, and come away with new admiration for these individuals, and renewed confidence and hope that leaders can have multiple positive dimensions to their character and personality. We particularly enjoyed their nicknames for individuals including: “The Canary”, “The Chimp”, “The Fiend”, and, of course, “Pug” and “Kat” for each other. Speaking of Churchill, we were intrigued to read Charles Krauthammer propose that Churchill rather than Einstein would be a better choice as the person of the century. In Krauthammer’s view, the story of the 20^th century can be summed up in the defeat of totalitarianism, and without Churchill’s stand against Hitler in 1940, the world would be a different place today. We agree. One more Grisham from the mill We read the first chapter of John Grisham’s new novel, The Brethren, and decided there’s no hurry to read the rest. Unless you really love his novels, we suggest there’s no reason for you to rush out and read this one. More Executive Times To subscribe to Executive Times, sign up at www.hopkinsandcompany.com/subscribe.html and we’ll bill you later. ã 2000 Hopkins and Company, LLC. Executive Times is published monthly by Hopkins and Company, LLC at the company’s office at 100 Forest Place #P-2, Oak Park, Illinois 60301. Subscription rates for first class mail delivery of the print version are $60.00 per year (12 issues). E-mail subscriptions are $30.00 per year. Single issues: $10.00 print; $5.00 electronic. 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