Executive Times
Volume 2, Issue 5	May, 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. Great Performances We’ve never forgotten the story of an interview with the late Yul Brenner as he reached some milestone in playing the King on Broadway in The King and I. When asked if he got nervous before a performance, he replied that his stomach becomes tied in knots and his knees shake. The incredulous interviewer replied surely after so many performances in the same role, these symptoms must disappear. Brenner replied that the anxiety has grown because now people come to see Yul Brenner play the King, and he must either be that Yul Brenner of legend or let the audience down. Executives can face similar performance anxiety every day when a critical audience of employees, shareholders, customers, voters and other stakeholders assesses their work. Visible signs of performance, such as stock price, can be volatile despite steady leadership at the top. Most executives do their best work when they know the audience is watching closely. The most confident executives welcome scrutiny and attention. Better, faster, bigger Of all the lists that rack and stack executive and corporate performance, the one from Barron’s has become our favorite. This year’s improvement (4/24/00) incorporates a metric used by Holt Value Associates, CFROI, the cash returns on the capital invested in a company, stripped of inflation and accounting practices that can distort comparisons. Barron’s looked at the past three years and forecast current CFROI as well as market capitalization to issue an investor report card on 500 companies. As Barron’s summarized: “The winners were those companies that not only were bid up by a giddy stock market, but those that also generate strong, and growing, cash-flow returns. Not surprisingly, what might be called our Dean's List is dominated by New Economy, technology-based companies.” If you are not yet familiar with number one ranked Broadcom and its CEO, Henry T. Nicholas III, we suggest you read the Barron’s story. A surprise for us was number three in the listing, Oracle, which had the largest market capitalization of the top 100 companies on the list. CEO Larry Ellison has reason to brag: over 93% of public dot coms and 96% of Fortune 500 e-businesses use Oracle software. These top three companies have been hit by the technology sell-off, and if you believe the CFROI methodology, this may be a great buying opportunity. What performance measures best evaluate you and your organization? How are you performing in relation to other individuals and other organizations? What score do you want to receive on this year’s report cards? What are you doing to achieve that score? If you feel anxious about performance, what do you think is the root cause of that anxiety? How clearly do those who report to you know how they rank in your estimation? Roses and bologna When the World Bank and International Monetary Fund meetings took place in Washington in mid-April, the last thing that District of Columbia police chief Charles Ramsey wanted was a replay of the Seattle police’s bungling of the WTO protests and meetings in that city. Ramsey led a fully staffed, clever, and coordinated effort to contain the protesters and allow the delegates to meet. Ramsey seemed to be everywhere. He supported the police officers behind barricades. He spoke to the media about the right to protest as well as the right for the delegates to meet. His team thwarted several efforts of the protestors to block the delegates from meeting by isolating the protestors behind barricades where they could protest freely, but not prevent the meetings from taking place. Three images stand out from this week of trial by fire for this executive. In one image, the chief receives a rose from a protestor, which he accepts graciously and carries around with him along the barricades. In another, a protestor complained that while under arrest the only food provided for the mostly vegetarian and vegan crowd was bologna sandwiches. We wonder if that, too, was part of the plan. Finally, when success was achieved, Ramsey gives deputy Terry Gainer a “high-five” for a job well done. Lets hope that police chiefs in Philadelphia and Los Angeles learn from Ramsey as they prepare for this summer’s political conventions. When a spotlight shines on your performance, how do you behave? When the stakes get higher, what do you do? How do you learn from the success and failure of others? How can you apply what worked elsewhere into what you do? When you see something handled poorly, do you think about how you might have handled it differently? Change of heart In late April, Michael DeBakey was one of thirty individuals who received a living legend award from the Library of Congress, which is celebrating its 200^th anniversary. Among DeBakey’s great performances include over 60,000 heart operations, and innumerable consultations. Just a few weeks ago, 91 year old DeBakey performed a successful coronary bypass surgery on a longtime patient. What barriers like age limits do you place on the performance of others? Do those barriers make sense? How do you capture the experience and expertise of older workers? Wanted: dead or alive Many executives accept responsibility and accountability easily and readily. Few executives would like to see their pictures on the walls of certain government offices. The executives who report to DC Mayor Anthony Williams have no choice: their performance objectives and pictures are hanging on posters in city offices all over town, according to The Washington Post (4/21/00). Williams said, "Clearly we've put ourselves on the spot. It's not a lot of platitudes. . . . You're talking about miles of road resurfaced, a certain number of cops on the streets. These are things people can really see, touch and feel." We’re sure that citizens will accept any approach that produces results. Do you stay in the realm of platitudes, or are you focused on “things people can really see, touch and feel”? What will it take for all the individuals in your organization to accept responsibility and accountability for specific results? How do you call attention to success and failure in clear and specific terms? How easily do you make excuses for performance shortfalls? Can a gimmick like posters work for your organization? Now that’s a chunky monkey Cherry Garcia leveraged The media presented the sale of Ben and Jerry’s to Unilever by emphasizing that after two years much of the “personality” of Ben and Jerry’s would go away. Unilever was portrayed as large organizations are typically described: uncaring and remote. We didn’t read any story about the rich heritage at Unilever in community building. The Lever brothers did much to improve the quality of life for English laborers in the 19^th century. They hired the best architects of the day to design and build housing for plant workers on company owned land near their factory. Called Port Sunlight Village, this model community featured the first municipal swimming pool, as well as other recreational spaces for residents. The Levers themselves lived in the community and ensured that the members of the community had childcare, good education and safety for all residents. Landscaping provided a daily reminder of the beauty of nature. The Lady Lever art gallery provides an enriching arts experience at Port Sunlight Village, where today’s residents need not be Unilever employees. We’ll be surprised if the executives at Unilever mess up the unique recipe that’s made Ben and Jerry’s a success. So far they’re off to a good start with Ben and Jerry’s, and even hedged their position with a purchase of Slim Fast. Fat or slim, we can expect Unilever to know what it takes to succeed. How does the history and heritage of your organization impact today’s actions? How well is the organization’s history known by insiders and outsiders? Do you and other executives value that history and communicate it to new employees and other stakeholders? Does your view of your organization match the one conveyed by the press or other observers? How can you align those perspectives? Perks are back Armed guards and lawyers in the foursome? We weren’t surprised to read in The New York Times (4/2/00) that new economy CEOs have been better rewarded than old economy CEO’s, but we were amazed by the magnitude of the gap. A comprehensive Times report on executive pay proved that accumulated equity holdings, the biggest executive pay component, is ten times greater, on average, for CEOs in new economy companies. Stock performance of new companies made a huge difference for 1999, and with a pullback in certain technology issues in 2000, we’ll be interested in seeing how the gap changes this year, especially given the large equity grants that old economy companies granted in an effort to retain executive talent. We were surprised to read in this report that despite the huge compensation increases executives have received, perks have returned. Executives read each other’s proxy statements, and then look for a match. In one example from the Times, Honeywell provides Michael Bonsignore with lifetime use of security guards and paid the legal costs Bonsignore incurred in negotiating his contract. Multiple country club memberships are back, along with the gross-up of the value of perks so the executive need not dig into his or her own pocket to pay tax on the perks. How do perks fit into your overall compensation? What messages do selected perks send to employees and shareholders? What components of compensation are most important to you? Does your compensation reflect your value to the company? Sometimes I feel like a gnut As a publisher of intellectual content (or whatever else you may call Executive Times), we respect copyright laws and the value of protection of intellectual rights. A movement started by a college student may be leading to dramatic changes in the way content is owned, distributed and protected. We read in The New York Times (4/21/00) that Yale and Indiana Universities have banned Napster from their campus computer servers. Napster is a free Internet-based service on which users trade digital music using free software. Much of the music traded is copyrighted. The band Metallica filed suit against several universities claiming they encourage copyright violations. Another open source service, Gnutella, doesn’t use a central server, but creates a network between two people, then disappears. We read in ZD News (4/20/00) that once Gnutella starts using encryption technology, it will become impossible to find copyright violations. CNN reported that America Online pulled the plug on Gnutella just as it appeared in March. The music industry continues to explore ways to maintain the status quo in the face of dramatic structural change. This is no time to be caught napping. How do you deal with dramatic change? How quickly do you embrace or reject new technology? How vulnerable is your organization to the changes initiated by others? Leaves fall from Green Tree Many analysts thought that Conseco’s purchase of Green Tree Financial in 1998 made a lot of sense. According to The Wall Street Journal (4/14/00), one analyst, Colin Devine of Salomon Smith Barney, broke from the pack a few months after the deal, and downgraded Conseco. Devine took heat for his decision for about a year, as other analysts continued to recommend Conseco and Chairman Stephen Hilbert complained openly about Devine’s work (“doesn't know how to read an income statement.") Investors who followed Devine’s advice saved themselves the 77% drop in stock price since he issued the downgrade. Conseco announced at the end of March that they would sell Green Tree, which hasn’t met their growth expectations. How firmly do you stand behind your convictions? When isolated from peers on an issue, how do you behave? Do you tend to follow consensus advice, or do you rely on the valued opinions of expert individuals? Follow Up Here are selected updates on stories covered in prior issues of Executive Times: Ø We didn’t propose a short list of candidates to fill John B. McCoy’s old CEO job at Bank One in the January 2000 issue of Executive Times. We placed just one name in parenthesis as our choice: Jamie Dimon, so we were more than a little smug when Bank One announced that he’s the new CEO. We’re glad the directors agreed with us, and that early reports of Dimon’s reluctance to move from New York were in error. We continue to believe that for the immediate future, the company will remain independent. We noted with pleasure that Dimon purchased two million shares of Bank One stock with his own cash sending a visible vote of confidence in the future of the company. If we’ve read the proxies correctly, his share ownership exceeded what McCoy held in 1998 after sixty years of family involvement in the company. Ø The August 1999 issue of Executive Times called attention to changes in the glass ceiling for women executives. Recent data from the Bureau of the Census confirm that the rate of increase for women in executive and managerial roles well outpaces that of men. Legacies As a teacher, he observed that what was happening outside the classroom worked better than what was required inside the classroom, and as a result of this observation, he changed the lives of generations of deaf students. When William C. Stokoe, Jr. arrived on the campus of Gallaudet University in 1955, students were expected to lip-read professors, who would occasionally finger spell words for the students’ benefit. Stokoe observed animated student interaction outside the classroom where students used sign language. Although an English professor, not a linguist, Stokoe proved successfully that American Sign Language (ASL) is a real, mature, full-fledged language, through a series of books beginning in 1960. Stokoe died in April, knowing that ASL is now the fourth most commonly used language in the United States, thanks in no small part to his diligent efforts. For more information about Stokoe, read Jane Maher’s 1996 book, Seeing Language in Sign: The Work of William C. Stokoe. 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). Take my advice A friend of ours uses an expression whenever she hears a theory that befuddles her: “what does that look like in a real person?” Chris Argyris takes on a bevy of consultants in his latest book when he asserts that the advice given can’t be implemented because it’s not specific, and it goes against typical models of behavior. We’ve always enjoyed Argyris’ writing, and he’s at his best in Flawed Advice and the Management Trap: How Managers Can Know When They're Getting Good Advice and When They're Not. Here’s a sample: “The advice examined so far contains four characteristics that limit both its validity and its actionability…: 1. The advice represents espoused theories of effectiveness. 2. The advice, as crafted, contains evaluations and attributions that are neither tested nor testable. 3. The advice is based on self-referential logic that produces limited knowledge about what is going on. 4. The advice does not specify causal processes.” Maybe because we’ve always found Stephen Covey’s advice to be shallow and unreal (at least for who we are), we particularly enjoyed Argyris’ assessment of Covey: “…like most people, Covey employs two mutually inconsistent theories of effective action: the one that he espouses and the one that he actually uses.” Pow! Enjoy reading this book in which Argyris helps managers and consultants focus appropriately on the actual behavior it will take to implement real change. For more information about Argyris and his descriptions of Model I and Model II behavior, visit www.actionscience.com. For the Covey cult only We thought we’d give Covey another chance, so we picked up a copy of Living the 7 Habits: Stories of Courage and Inspiration. We thought a book meant to help people see how the 7 habits translate for real people living their lives would help us find some way to consider Covey’s advice as useful and practical. Some reviews suggested that this is a great book for skeptics who can see how using the 7 habits changed lives. We remain unbelievers. The stories were vapid anecdotes that usually lacked context, leading us to conclude that the use of Covey methods and buzzwords can help some people feel better, but for many of us, the approaches in the 7 habits don’t match the real and complicated human behavior most of us practice. Following the habits for some of us can be inauthentic and those around us can see the gaps between what we say and what we do. Take a pass on this book as well as Covey in general, and continue to practice whatever habits work for you. This billionaire is nuts We laughed our way through Liar’s Poker many years ago, and were captivated by Michael Lewis’ latest book, The New New Thing. Lewis is a fine writer, and he tells the story of Jim Clark using the building of a new boat as a principal motif. Clark made fortunes from Silicon Graphics and Netscape, and is currently involved in Healtheon. We came away from this book concluding that Clark is rich and crazy. Here’s an explanation of the title: “That’s where his job ended, so far as Clark was concerned. After he’d draw his little diagram of the world’s largest market with himself in the middle, he was finished. Other people could take care of the messy details of turning Healtheon into a giant corporation. That’s what he always said just after he had disgorged the new new thing, and the new new thing became, simply, the new thing. He was not finished, however. The one hard rule in Jim Clark’s life was that he must always pursue the new new thing.” And here’s a taste of Lewis’ fine writing and clear imagery: “Why do people perpetually create for themselves the condition for their own dissatisfaction? Listening to Clark talk about how much money he needed to make was like watching the racing dog who had the wit to grab hold of the remote device that controls the mechanical rabbit. Rather than slow it down, however, he speeds it up.” This book is a reading pleasure, and we recommend it highly. Prequel to Hamlet We first read John Updike more than thirty years ago, and while we continue to marvel at his craftsmanship, we are often left short by his apologies for foul behavior. Gertrude and Claudius, Updike’s latest novel, presents a twist to the characters of Polonius, Gertrude and Claudius, far different from the familiar one in Shakespeare. We savored Updike’s language, as in this sample: “Rarik’s hand, an old man’s hand, knobby and mottled and as light as if hollow, was lifted on the wave of his insistent murmurous eloquence and rested, like driftwood nudged forward by the froth, on his daughter’s.” That sure is a fine way to say, “he put his hand on hers”. The reader develops empathy for Gertrude and we’re led to overlook her adultery. We judge Updike’s Rabbit series as better than Gertrude and Claudius, but if you’re a fan of either Hamlet or Updike, give this short novel a try and savor Updike’s poetic language. 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 # P2, 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. To subscribe, sign up at www.hopkinsandcompany.com/subscribe.html, send an e-mail to hopkinsandcompany@att.net, call (708) 466-4650, or fax to (202) 338-0065. For permission to photocopy or e-mail Executive Times, call (202) 486-3816 or e-mail to hopkinsandcompany@att.net. We will send sample copies if requested. 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About Hopkins & Company In addition to publishing Executive Times, Hopkins & Company engages in a variety of other activities focused on helping executives succeed, including: Ø Coaching: helping individuals or teams find ways to do more of what works for them, and ways to avoid what's ineffective Ø Consulting: helping executives solve business problems, especially in the areas of strategy, service to market, performance and relationship management Ø Communications: helping executives improve their written and oral messages To engage the services of Hopkins & Company, call Steve Hopkins at 708-466-4650.