Volume 3, Issue 9
ã 2001 Hopkins and Company, LLC
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On a warm day, when you cup your hand and reach into a clear lake for a drink of water, as much water falls back into the lake as reaches your mouth. Some individuals and organizations are facing a similar seepage, as reported in many recent news stories. Busy executives make decisions every day to focus their attention toward certain areas and away from others. Sometimes a plan influences those decisions; other times, an external event or action demands time and attention. One of the hardest jobs for an executive is to focus on an area we’d prefer to avoid. Criminal behavior by an employee of a supplier causes enough potential damage to a major brand that two company CEOs are scrambling to limit the damage. One company that knew its product was being stolen regularly finally takes action against free-riding consumers. Wealthy investors try and fail to protect a passive investment. As you read about executives trying to dam the flow of damage to themselves and their organizations, think about what may be seeping out of your organization, with or without your knowledge. Consider what you need to do to stop the outflow.
Scratching the Surface
How immune or how vulnerable are you to the actions of individuals at companies or organizations other than your own? When you outsource a business function, or use a supplier for certain specialized roles, how closely do you examine the business processes of that other organization? Does that company provide its own oversight, do you use another third-party to ensure the adequacy of controls, or do you monitor or audit the entity yourself? Have you thought about the risks to your organization when you outsource something core to your business like customer confidence, or the integrity of your brand? How much damage can a single rogue employee do to your organization?
The business plan for Superior Bank was an accident waiting to happen: lend money at high rates with few questions asked to people who can’t qualify when evaluated based on the answers to prudent underwriting questions. The company was formed in 1989 when the Hyatt’s owners, the Pritzker family, and New York real estate investor Alvin Dworman, invested $42 million in a thrift being sold by the government. Regulators shut down the company in late July for poor lending practices and sloppy bookkeeping. The Pritzkers are trying to preserve their reputation by calling attention to the passive nature of their investment, and the fact that Dworman was the manager of the business. Losses at Superior Bank will run in the hundreds of millions of dollars. Meanwhile, we read in Business Week (8/22/01) (http://www.businessweek.com/reuters_market/Q/REUT-QEV.HTM.htm) that banking giant Bank of America announced its exit from such sub-prime lending, and super-giant Citigroup faces a lawsuit on predatory lending from the Federal Trade Commission involving unethical activities at its consumer lending companies.
How can your reputation be damaged from your association with certain business practices? Are the short-term returns worth the long-term risk?
Pirates in the Crosshairs
While the DirecTV unit of Hughes Electronics has achieved 10 million customers for its satellite service, growth has slowed. We read in The Wall Street Journal (7/31/01) (http://interactive.wsj.com/archive/retrieve.cgi?id=SB996533436417376344.djm) that the company has expanded its efforts to battle unauthorized receipt of its programming by 1 million consumers. Until recently, Hughes battled piracy by filing suit against middlemen who sold equipment and access cards illegally. “DirecTV spokesman Bob Marsocci confirmed that the company has launched what it calls ‘an end-user campaign,’ including mailing strongly worded letters to potentially thousands of individuals and families suspected of pirating DirecTV signals.” Hughes is sending a message that it will vigorously pursue signal theft, and offending consumers will pay when caught.
What amount of your product or service generates no revenue? How much shrinkage can you afford? How long are you willing to wait while thieves hurt your business?
Many executives have come to hate those ubiquitous PowerPoint presentations. Cute images pop up alongside text messages, slide after slide, making some point or another. Usually, the graphics fail to reinforce the text, and slide transitions can become downright distracting. We read in Forbes (8/23/01) (http://www.forbes.com/2001/08/23/0823tentech.html) about the latest tool to enhance PowerPoint presentations: the virtual you. Matrox has released a new graphics card called the Millennium G550 that when used with bundled software “will let you create a virtual copy of your talking head for use as an online communications tool or for giving presentations.” The company calls its new technology “Headcasting.” Just when you thought it couldn’t get any worse.
How clearly do you communicate, especially to groups? Do your slides or written material reinforce or detract from your message? What tools will you use for your next “in your face” presentation?
We’re always on the lookout for programs that encourage executives to be themselves. We read in The New York Times (8/10/01) (http://www.nytimes.com/2001/08/10/business/10BULL.html) about a support group of senior women executives in California who are finding that the tough style that brought them success thus far has become an obstacle to future success. Instead of being assertive, they are being coached in a program called “Bully Broads” to be “ladies first”, and even cry at meetings to soften their intimidating personal styles. We’re skeptical. Often, behavior that is viewed as appropriate from a man can be seen as intimidating from a woman. We don’t think the answer for that situation is for women to be less assertive. No one in the workplace should create an abusive environment. Sometimes, leaders who are nice motivate followers to produce outstanding results. Other times, leaders who are harsh and demanding motivate followers to achieve outstanding results. Our usual advice remains: be yourself.
How do employees, peers and bosses perceive your effectiveness? Does your demanding style ensure that competence is expected, and that you attract top performers? Does your friendly style ensure that followers will carry out your vision for success? How do the many dimensions of your personality help and hinder your performance at work? Do some of your rough edges need smoothing? Do some of your smooth edges need a little sharpening?
Was it improved accounting practices, or a sense of humor that led to bar code and price labels appearing on bags of cocaine in Rio de Janeiro? We read in the Chicago Tribune (8/25/01) that police confiscated over 200 bags of cocaine labeled with the name of the gang Third Command and a slogan, “Now, it’s us,” which may refer to the gang’s takeover of a competitor’s territory. We wonder where the scanners are.
Are your business practices best of class? How well do you market your products?
Here are selected updates on stories covered in prior issues of Executive Times:
Ø Minutes after the August 2001 issue of Executive Times was released, we read on the Reuters wire (http://www.nytimes.com/reuters/business/business-tobacco-phil.html) that the good folks at Philip Morris came to their senses and apologized for the report they issued for the Czech government on the economic benefits of smoking to society.
Ø The September 2000 issue of Executive Times called attention to the personal message of Ford CEO Jac Nasser that all the resources of the company are directed to resolve the Ford Explorer and Bridgestone/Firestone tire problem. Three recent announcements clarify the meaning of this message: 2001 earnings will be around 70 cents a share, not the $1.20 previously estimated; Nasser and Ford Chairman William Clay Ford will now share more power; and the company will be laying off staff. As Winston Churchill put it in a very different context, this may be the end of the beginning of the Explorer tire fiasco.
Voice of the People
Business executives rarely admire activists, and few local non-profit leaders accomplish results on a national scale. Gale Cincotta gained the admiration of the bankers she called to task, and built an organization that influenced national public policy. Her activism began in the late 1960s. When a Chicago alderman refused to pay attention to a problem with rats, Cincotta nailed a rat to the door of his office. The next day, the city’s rodent patrol arrived in the neighborhood. When lenders refused to make loans in the community, Cincotta lobbied the Federal Reserve and Congress to outlaw redlining. Through her leadership of a network of groups called National People’s Action, she encouraged passage of the Home Mortgage Disclosure Act and the Community Reinvestment Act. While bankers balked at the rules, some focused on community lending and called it “eating your vegetables,” finding the business profitable and healthy. Executives found Cincotta as an ally in building strong neighborhoods, not as a loud voice speaking against corporations. Just prior to her death in August, Cincotta succeeded in procuring state and local safeguards against predatory lending. Her dedication to community and to protecting people from discrimination will be remembered.
(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 email@example.com 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. For expanded reviews of Executive Times selections and other books, visit our book review site at http://www.hopkinsandcompany.com/books/list.htm.)
It’s the Brand, Stupid.
Each chapter presents breezy anecdotes and clear and practical advice from a skilled practioner of brand management. He offers ideas that sound simple and easy, but can be hard to implement, such as: companies should “allow the customer to decide how, where and when to obtain their products.” Easy to say, hard to do. Recommendation: ••• (Recommended). To read an excerpt from this book, visit www.hopkinsandcompany.com/books/Brand Warfare.htm.
Shooting 108 Blanks
Rises and Falls
A total of 19 book reviews were added during August 2001 at http://www.hopkinsandcompany.com/books/list.htm. Pick something to read from that list.
ã 2001 Hopkins and Company, LLC. Executive Times is published monthly by Hopkins and Company, LLC at the company’s office at 723 North Kenilworth Avenue, Oak Park, Illinois 60302. Subscription rate for first class mail delivery of the print version is $60.00 per year (12 issues). Web version subscriptions are $30.00 per year. Single issues: $10.00 print; $5.00 web. To subscribe, sign up at www.hopkinsandcompany.com/subscribe.html, send an e-mail to , call (708) 466-4650, or fax to (708) 386-8687. For permission to photocopy or e-mail Executive Times, call (708) 466-4650 or e-mail to . We will send sample copies if requested. The company’s website at contains the archives of back issues beginning in the month after the issue date.
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