Executive Times

Volume 2, Issue 6

June, 2000

ã 2000 Hopkins and Company, LLC

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Mistakes and Consequences

Some executives view mistakes as learning opportunities. Other executives look to place blame quickly once mistakes are discovered. Most effective executives act quickly when mistakes are called to their attention. Certain mistakes produce limited impact while other activities can lead to unexpected and unwelcome results. Almost all mistakes have consequences and wise executives choose to match the consequences with the impact of the mistake. Sometimes an individual will be fired for a mistake; other times a business process will change to help prevent that mistake from taking place in the future. Over the past few weeks, we’ve continued to bump into old and new mistakes that may present an opportunity for your reflection on what you might have done the same or differently from executives who acted in response to mistakes.

“Spark Service”

We winced when we read the title “Spark Service” atop an editorial cartoon in the Orlando Sentinel picturing Smoky the Bear in front of a burned-out forest. The people around Los Alamos, New Mexico found no humor in that cartoon as they faced a wildfire from a United States Park Service controlled burn gone bad. When Interior Secretary Bruce Babbitt received a report on what happened, he read,

“The Fire Investigation Team concludes that federal personnel failed to properly plan and implement the Upper Frijoles Prescribed Fire, which became known as the Cerro Grande Prescribed Fire. Throughout the planning and implementation, critical mistakes were made.”

Those who planned the fire did not have appropriate cross-functional experience and expertise. Supervisors who signed off on the plan provided cursory rather than diligent oversight. Some commentators placed blame on many years of fire prevention in forests that have allowed dangerous levels of undergrowth causing today’s fires to be more damaging than if smaller fires were allowed during the past century.

Over the past few days, how often have you signed something without reading it? When those who report to you make mistakes, how do you react? What parts of your business processes are prone to mistakes? What are you doing to improve those processes? What environmental factors create conditions ripe for mistakes to occur? What are you doing to minimize the impact of the mistakes that are likely to happen?

Recalled (again)

You may remember that after General Motors refused to build a plant in his hometown in Spain, former VP Ignacio López departed the company in 1993 to work for more receptive leaders at Volkswagon who seemed willing to take on both the project and López. It turned out that López didn’t leave GM empty handed. It seems that he brought some proprietary GM information with him, and as one condition of the terms GM and VW negotiated over this matter, López resigned from VW in 1996. That was the last we heard of the matter until recently when the United States Department of Justice indicted López for wire fraud and interstate transportation of stolen property. López suffered head injuries and loss of memory from an auto accident two years ago, and may be unable to stand trial. The car plant was never built. According to The New York Times (5/23/00), “In an interview last autumn, Mr. López voiced regret that he had ever left G.M., given that VW never built his dream factory. "If I had known that, I wouldn't have changed" jobs, he said. "It was my error."” The Times also reported that a similar indictment was dropped by the German government after López contributed over $200,000 to certain charities.

Have you ever had the experience of one mistake leading to another? Are certain past errors continuing to impact your life negatively today? What actions do you take to correct the mistake once and for all? What documents belong to you and what ones belong to your organization? Would your employer agree with your understanding of what you believe is yours?

Survey spies

Ron McMillan, president of the Houston division of Time Warner Cable, must have had a difficult day not long ago, when he found out about a creative form of market intelligence gathering devised by his employees that violated the company’s ethical standards. We read in The New York Times (5/24/00) that Time Warner Cable employees received paycheck fliers that offered them free Internet service or $100 for gathering information about the service capabilities of competitor Southwestern Bell. Employees were instructed to request high speed Internet service from Southwestern Bell and report back to Time Warner Cable whether or not Southwestern Bell was capable of providing the service to the employee’s residence. The cost to Southwestern Bell to process a confirmation letter for high speed Internet access is almost $400, and when Bell found out about the paycheck fliers at Time Warner Cable (given to them by two Time employees), Bell was furious, and has filed complaints with regulatory authorities. From Time Warner’s New York headquarters where top management remains engaged in their planned merger with America Online, a spokesperson reported, "As soon as management in Houston found out about it, they stopped it. It was a mistake and won't happen again."

How well do your employees understand what competitive actions are appropriate and what activities are out of bounds? How closely have you examined the market intelligence gathering operations of your organization? McMillan recognized the ethical problem and acted quickly. How promptly would you have acted if this activity came to your attention?

Trashing competitors

We’ve always preferred companies that promote their individual strengths and benefits over those organizations that bad mouth their competitors. When we read in Forbes (5/29/00) about the actions of a U.S. Tobacco (UST) employee to overcome competition, we were amazed. Forbes reports the claims of an Iowa convenience store manager that the UST rep would routinely remove the products and display advertising of competitor Conwood (a smokeless tobacco maker) and drop them in the dumpster. Similar actions around the country including bribes to retailers led Conwood to file suit against UST, and a Kentucky jury reached a $350 million verdict against UST, which is currently under appeal. When tripled under the Sherman Antitrust Act, this verdict will wipe out UST if it stands on appeal and create a windfall for the owners of privately held Conwood. While Forbes did mention that allegations of wrongdoing in the Kentucky trial went all the way up to UST CEO Vincent Gierer, it failed to pass along that a few days after the verdict, UST President A. Gary Smith resigned for personal reasons. Even more incredible to us, given the company’s litigation around its practices, is that Gierer appointed Murray Kessler as the new president. Formerly, Kessler headed sales and marketing for the company.

Have you ever thought that sales practices could destroy your company? How closely have you examined the sales tactics used by your representatives? Are you subject to unfair competitive practices by other companies? What remedies will you seek to eliminate those practices?

Burnout Prevention

With prime vacation season approaching, we read an interesting story in The Wall Street Journal (5/5/00) about companies offering extended time off to tenured, high-performing employees. We read about a Wall Street lawyer who rented an apartment to hang out in Paris for three months, and an Intuit executive who played jazz piano. Another executive spent seven months backpacking through Australia and New Zealand. Some executives used the time off to sleep or relax at the beach. Whether employers have formal extended leave policies or not, an increasing number of stressed executives are choosing to take a hiatus from their jobs. Some return back to their old jobs with a fresh outlook, while others revise their priorities and direct their careers toward greater balance between work life and personal life.

When was the last time you took a work break longer than two weeks? Will your organization survive without you for a longer period of time than that? What signs of burnout do you detect in yourself and in those around you? How do you assess the quality of your personal relationships? Would those relationships benefit from increased time and attention? What’s preventing you from spending the time and paying attention to those relationships?

Scotchguarding 3M

Minnesota Mining and Manufacturing Company (3M) announced that as a result of tests indicating the persistent and pervasive presence of low levels of certain chemicals in the environment, it would discontinue the production of most Scotchguard stain-repellent products. The discontinued products currently represent 2% of 3M sales. Executives at 3M volunteered to take this action well in advance of any government intervention as well as in advance of positive indications of the chemical harming humans.

"Our decision anticipates increasing attention to the appropriate use and management of persistent materials," said Dr. Charles Reich, executive vice president, Specialty Material Markets. "While this chemistry has been used effectively for more than 40 years and our products are safe, our decision to phase out production is based on our principles of responsible environmental management."

Tests on lab rats proved the chemical to be toxic at high doses. We wonder what the world’s air and water would be like if other companies acted in a similar fashion.

Are you more likely to wait for conclusive proof before taking action, or will certain indicators drive you to act? If you were a 3M executive, would you have been in favor or against this decision to discontinue a successful and profitable product?

Follow Up

Here are selected updates on stories covered in prior issues of Executive Times:

Ø The May 2000 issue of Executive Times called attention to Conseco and the analyst who forecast bad times ahead for the company. We read a few days after we published that bad times were also ahead for top company executives. CEO Stephen Hilbert and CFO Rollin Dick resigned. Founder and 21-year veteran Hilbert stated in the company announcement: “This has been one of the toughest decisions Conseco's board and I have ever made. Over the last few quarters it became clear that my and Rollie's ability to engender investor confidence was impaired.” While Hilbert received a severance package worth over $70 million, according to The Wall Street Journal (5/3/00), he owes Conseco over $160 million to repay loans, the proceeds of which Hilbert used to purchase Conseco stock at levels higher than today’s price.

Ø When the February 2000 issue of Executive Times called attention to the talent wars for attracting and retaining employees in a challenging labor market, we didn’t have the hard data to back up our concerns. Manpower, Inc. has surveyed company hiring plans for 24 years, and they found the highest rate (35%) of employers expect to be hiring in the third quarter. Manpower told The Wall Street Journal (5/23/00) “the traditional labor supply is essentially exhausted.” On the same topic, we were amused by the Fortune (5/29/00) series “Invasion of the Body Snatchers”, advice to employees and employers on dealing with headhunters and other talent seekers. Also, an Executive Times subscriber told us about an online newsletter focused on workplace issues for Generation X. Visit http://www.rainmakerthinking.com/printWOTF.html for a copy of the May issue. Bruce Tulgan, author of a new book, Winning the Talent Wars, to be published in 2001, writes the newsletter.

Legacies

We arrived in the theater on opening night thirty years ago to purchase tickets for a future performance of an odd John Osborne play, A Patriot for Me. As we turned from the ticket window, we recognized a familiar face behind moustache and glasses: David Merrick. He was yelling at managers or assistants to remove a juvenile from the performance at once. Disaster would occur if the press focused on a minor’s presence during the first brief nude (male, rear) performance inside a reputable theater in Washington, DC. When we read the reviews, the play was critiqued, but the press remained silent on the minor, and mentioned the nudity in passing. We’ve never forgotten our glimpse of Merrick’s explosive personality. For a time, Merrick was Broadway. In 1960, he had ten plays running at the same time, and Time estimated that at one time he had 20% of the people working on Broadway in his employ. A relentless promoter, Merrick also made enemies easily and was known for tough financial dealings with stars and others. He changed the business and the art of producing plays. Merrick died in London at age 88.

She was the one who got the recipes from the Mexican Embassy and expanded the seasonal nine-seat root beer stand into Hot Shoppes. Alice Marriott died at age 92 in late April knowing that her sons were doing a fine job running the business she and her husband, J. Willard Marriott, started from scratch. In addition to leading and participating in many civic endeavors, Alice worked as a Marriott Vice President for many years, influencing the company’s policies and practices, as well as raising her two sons who were expected to contribute to the success of the company. When the company opened its first hotel in 1957, Alice was there all night helping to hang pictures in the 365 guest rooms.

Summer Reading

Several readers have asked for expanded reading recommendations, so this month’s issue includes a wide range of books we’ve read recently along with some we’re planning to read over the Summer.

(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).

Books We’ve Read

We’ve enjoyed reading John Kotter’s frequent articles in Harvard Business Review, as well as his many books on change and leadership. We jumped on the opportunity to re-read the HBR leadership articles in one place in a new book, John P. Kotter on What Leaders Really Do. He does a great job in separating leadership from management and helping readers understand the difference as well as the need for both. Here’s a sample:

“Management is about coping with complexity….Without good management, complex enterprises tend to become chaotic in ways that threaten their very existence. Good management brings a degree of order and consistency to key dimensions like the quality and profitability of products. Leadership, by contrast, is about coping with change....More change always demands more leadership….leading an organization to constructive change begins by setting a direction---developing a vision of the future (often the distant future) along with strategies for producing the changes needed to achieve that vision.”

We like Kotter’s focus on actual management behavior, as in the “what leaders really do” articles. We found it interesting to re-read articles from 1979, 1990 and 1995 and observe how well Kotter put his wise imprint on management literature. We recommend this book.

When you’ve run out of Turow and Grisham novels to read for escapist pleasure, give William Bernhardt a try. We should support lawyers who write novels rather than practice law. While the quality of his writing falls short of Turow, and his action pales in comparison to Grisham, Bernhardt creates narratives that twist and turn and characters that are a pleasure to behold. In his latest novel, Silent Justice, a Fortune 500 company and its executives are portrayed as evil personified, engaged in practices well known to readers and viewers of A Civil Action, to which Bernhardt gives passing acknowledgement. Put on some sunscreen, and take this one to the beach, the boat or the deck for an enjoyable afternoon’s reading.

If you enjoy historical fiction and the precise writing style of William Safire, give Scandalmonger a try. We found Safire’s attempt to recreate the writing style of the American Revolutionary era somewhat distracting, but finished reading the novel nonetheless.

A friend gave us a copy of Robert Wright’s Three Scientists and Their Gods several years ago, and we found his writing style to be engaging and his theses well developed. In his latest book, Non-Zero: The Logic of Human Destiny, Wright takes on cultural evolution with the same care and precision. His premise is that “organic history and human history have a direction.” For the business reader, we especially enjoyed this quote, “People by nature seek the highest status they can attain, under the circumstances, and they accept leadership only so long as it seems to serve their interests. When it doesn’t, they start to grumble.” We highly recommend this book, especially if you like game theory and believe that we tend to prefer mutual cooperation.

We’ve enjoyed reading Gina Kulata’s articles in The New York Times where she serves as a science writer, so we looked forward to reading her book Flu: The Story of the Great Influenza Pandemic of 1918 and the Search for the Virus That Caused It. She’s structured this book like a fine mystery, and we enjoyed the skillful ways in which she pieced together this compelling story. We recommend this book.

If you’ve been at all curious about day traders, there’s a fine new book out that describes how one individual lived and traded. Dumb Money: Adventures of a Day Trader by Joey Anuff and Gary Wolf provides a well-written glimpse into day trading. One of our favorite quotes: “To be a day trader is to make regret into a lifestyle.” Here’s a meatier taste of the writing:

“Most of the time, I look at the Nasdaq symbols on my execution statements and can’t even remember the name of the company much less why I was trading it. MSTG, OPTN, ONEM, ICOS, TWLB: these are meaningless things to me, though I let tens of thousands of dollars ride on them without a minute’s hesitation. Did I make money on them? Sometimes. But usually not enough, I’m forced to admit in my more sober moments, to justify the risks. And looking back at the riskier maneuvers I’ve been party to, it looks like summertime livin’ on boob beach. Why not let’s use this syringe I found as a back scratcher? Why not let’s do some naked wrasslin’ with those jellyfish. Why not trade an IPO?”

We found this book amusing and recommend it.

Stephen Amidon’s The New City is perfect vacation reading. This fast moving novel creates tales of Newton, Maryland, a planned suburban community, and the dynamics of racial and family tension taking place there in 1973. We read it in two sittings and enjoyed it thoroughly.

We Plan to Read (more at www.hopkinsandcompany.com/toread.html)

Author	Title	Comments
Barzun, Jacques	From Dawn to Decadence: 500 Years of Western Cultural Life	Sounds like a downer, but we are likely to give it a rainy day try.
Bradley, James and Ron Powers	Flags of Our Fathers	Bradley’s father was in the Iwo Jima battle in 1945 and this book chronicles the battle and the men who raised the flag.
Brooks, David	Bobos in Paradise	The reviews make this sound like fine social criticism.
Doctorow, E.L.	City of God	A literary master’s view of New York.
Friedan, Betty	Life So Far	Memoirs are hot this year, and this one should be fascinating.
Gallagher, Carol	Going to the Top	Results of interviews with 200 successful women execs.
Kaufman, Henry	Of Money and Markets: A Wall Street Memoir	A glimpse at the old days of prudence, safety, stability, and Dr. Doom.
Kozol, Jonathan	Ordinary Resurrections	We’ve enjoyed his earlier books, and expect this one to be a pleasure to read.
Luhrmann, T.M.	Of Two Minds: The Growing Disorder in American Psychiatry	Highly recommended by a friend and Executive Times subscriber.
Modahl, Mary	Now or Never	Internet guide from Forrester VP.
Morrison, Toni	The Bluest Eye	This is Morrison’s first novel, originally published thirty years ago. Here’s another chance for those of us who missed it the first time around.
Poitier, Sidney	The Measure of a Man: A Spiritual Autobiography	A conversational and self-critical story of an amazing life.
Roth, Philip	The Human Stain	Volume 3 in Roth’s post war trilogy.
Shiller, Robert J.	Irrational Exuberance	We’ve loved the title phrase; we’ll see about the book.
Smiley, Jane	Horse Heaven	She’s a great novelist and we look forward to reading this one.

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. The company’s website at www.hopkinsandcompany.com/archives.html contains the archives of back issues beginning in the month after the issue date.

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