Volume 2, Issue 10
ã 2000 Hopkins and Company, LLC
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All in the Family
Can you recall Katherine Hepburn delivering that great line as Eleanor of Acquitane in The Lion in Winter? “Every family has its little ups and downs.” The business press has been full of stories recently about family members and their dynamics. Large and small organizations often employ members of the same family, which opens the organization to the ups and downs of family relationships. Heir-apparent individuals from one generation can be challenged to prove themselves while they play out some natural conflict with elders. Non-family managers inside family operated companies can find their careers stymied because they’ll always be outside the family. As you read these stories, from the many we could have chosen from the past few weeks, think about your own organization and your own family. What skills and expectations exist inside and outside the family? How open are the lines of communication? If it comes to taking sides, whose side are you on?
“Everyone leaves home sometime”
Following in the 1995 footsteps of his brother, Jeffrey, Evan Greenberg said good-bye in late September to American International Group CEO and his father, Maurice R. “Hank” Greenberg. Just a few months ago, Hank named Evan President and COO, and he was expected to become CEO whenever Hank, age 75, retires. Evan told The New York Times (September 20, 2000), “Everyone leaves home some time. This is my time.” According to The Wall Street Journal (September 22, 2000), Evan’s decision will cost him at least $25 million, representing unexercised stock options and forfeited deferred compensation. Brother Jeffrey left AIG in 1995 and is now CEO of Marsh & McLennan. Evan says he doesn’t know what he’ll do next, but told AIG employees that he’s not the right person to become CEO of AIG. Barrons suggests that the reason Evan may be leaving home is that in the AIG house, it’s Hank who makes the rules, and Evan “had been chafing under the tight management strictures that his father, 75, had imposed on him.”
Have you ever been in a situation where what others expect of you bears no resemblance to what you think you want to do? Have you been in a job or in line for a job that you really don’t want to do? Would you be as willing as Evan Greenberg to leap into the unknown? Golden handcuffs didn’t mean much for AIG in this case. Do your golden handcuffs keep you from doing what you really want to do? Does your manager impose tight management strictures on you, or allow you the freedom to do your job the way you see fit? Do you, as a manager, give others appropriate levels of discretion to perform their jobs?
Whose name is on the door?
Back in 1996 John Whitacre became the first non-family member to head Nordstrom, Inc. as CEO. In September, the company announced his ouster, in favor of Blake Nordstrom as President, and Blake’s dad, Bruce Nordstrom, coming out of retirement to serve as Chairman. They ditched the CEO title as well. One of Blake’s early decisions was to appoint his brother, Pete Nordstrom, as president of the full line store group. Leaving along with Whitacre was CFO Michael Stein, who arrived from Marriott in 1998 to bring costs under control. CIO Richard Lennon came to Nordstrom from BrownForman earlier this year, and has also departed. Company performance has been sluggish and changes are likely, but what those changes are remains undisclosed for now. Lead independent director Enrique Hernandez, Jr., stated that because of disappointing performance, “We are now at the point where we believe the company would benefit from a different style of leadership.” All we know is that there’s a familiar name back at the top of the organization.
To what extent is blood thicker than water inside your organization? Who are the “in” and “out” members of your organizational family? What does it take to succeed inside a familial organization? Are you in the “in” or the “out” group? What style of leadership does your organization require today? Are you, as a leader, emulating that style?
You would think that things couldn’t have gotten much worse this year for Saul Steinberg. His company, Reliance Group Holdings, Inc., has been on the ropes, having suspended dividend payments and talking about declaring bankruptcy. Steinberg sold his Park Avenue condo ($35 million) and its contents ($12 million). We expect Steinberg reached his nadir when he opened The New York Times (September 9, 2000) and read that his mother has sued him for repayment of a defaulted loan of $4.5 million. Counsel for Mrs. Steinberg indicated that his client would have preferred to resolve this matter without resorting to litigation, but “her less formal appeals for payment have so far been unavailing.” Sounds like it’s time for Saul to phone home.
How well do your business associates know your family life? What family matters are public and what do want to be sure remains private? How does your reputation change when you are viewed from a family perspective?
We read in the Detroit Free Press (September 15, 2000) that Ford Chairman William Clay Ford may have been less visible during the Explorer/Firestone tire recall controversy for personal reasons. At a press conference, Billy Ford said, "My other great-grandfather was Harvey Firestone and my mother was a member of the Firestone family. It's been very disappointing and sad for this to happen. It hurts to see a family name tarnished so badly.” The Ford-Firestone 100 year business and personal relationship is being tested by the actions of executives of both companies. Stay tuned to see if the weakened family bonds can assist in weathering the current crisis.
Do your personal relationships with customers or suppliers provide you and your organization with added trust and confidence? In a crisis, will you be able to count on those ties? Have the ties been strained to the point where a future relationship is doubtful? What can you do to build and improve relationships that will survive crises?
While most of the time we need to learn from our own mistakes, the best executives look for opportunities to avoid the mistakes made by others. Who better to learn from that the U.S. Postal Service when it comes to addressing worker complaints? We read in The New York Times (September 6, 2000) that the lawyers who set up an employee complaint process called Redress at the USPS, have set up in private practice with a renamed process called Wins. Redress now resolves 80% of employee complaints at USPS, and the lawyers figure that if it works that well at USPS, it can work anywhere. Lots of companies have found themselves embroiled in lengthy employee disputes involving discrimination or harassment. Finding ways to mediate disputes faster and easier makes great business sense.
How satisfied are managers and employees in your organization with the process for hearing complaints and grievances? How long does it take for your organization’s process to reach resolution? What are the costs to your organization of your current process? Is there a better way?
His money’s not soft
Just when we reached the point of exhaustion from listening to pious and insincere politicking about campaign finance reform, Warren Buffet comes to the rescue with an editorial in The New York Times (September 10, 2000). Buffet explores a scenario in which a reform bill is introduced to increase the limit on individual campaign contributions to $5,000. An “eccentric billionaire” comes along and proposes a deal. If the bill is defeated, the billionaire offers $1 billion in soft money to the party delivering the most votes. Through applied game theory, Buffet posits that legislators would naturally shift their positions 180 degrees to prevent the big payoff from going to the other party. The bill would sail through, and the billionaire would end up paying nothing. Buffet dramatizes that a system that would allow a billionaire to influence legislation by a $1 billion promise makes no sense. He proposes that since it’s individuals who vote, not companies, it’s individuals who should be able to contribute to politicians. “Otherwise, we are well on our way to ensuring that a government of the moneyed, by the moneyed, and for the moneyed shall not perish from the earth.”
When you observe something in your organization or community that doesn’t make sense to you, how do you speak out? Are you willing to take positions that might be unpopular? Do some approaches, like soft money contributions, make you uncomfortable, but you participate because your competitors or other stakeholders provide soft money too?
While we acknowledge Bobby Knight’s impressive winning record, we’ve never cared for his leadership style. Indiana University President Myles Brand fired Knight in September after months of scenes reminiscent of a Shakespearean tragedy: we knew what would happen in the end, we were just not sure how long it would take to get there and what would happen along the way.
Does an employee or co-worker produce the desired results, but in a way that’s inconsistent with your organization’s culture? At what point do you decide that the misfit between that person and the organization demands a parting of the ways?
Here are selected updates on stories covered in prior issues of Executive Times:
Ø The April 2000 issue of Executive Times led with some stories called “Dirty Dealing”. We learned from The New York Times (September 23, 2000) that one explicit cost of the price fixing between art houses Sotheby’s and Christie’s will be $512 million, the announced civil settlement with art buyers and sellers. The Times estimates that the settlement represents three or four years of profits for each firm.
Ø The August 2000 issue of Executive Times reported that the National Education Association rejected alternative pay plan structure. We read on the Associated Press wire (September 16, 2000) that the Cincinnati Federation of Teachers approved a pay for performance plan that made the Cincinnati public schools the first in the U.S. to implement a system wide merit pay plan.
Ø Hundreds of stories have appeared in the business
press in recent weeks about the Bridgestone/Firestone tire recall that
we called attention to in the September
2000 issue of Executive Times.
Our favorite story explained how the pattern in tire problems was
Wall Street Journal (September 1, 2000)
told us about Sam Boyden, a State Farm Insurance employee who
researches for claims adjusters whether particular kinds of equipment
failures have happened before. After responding to a routine inquiry about
tire tread separation in 1998, and discovering 21 prior cases since 1992,
Boyden went on to study all 21 cases. He passed the results of his findings
to the National Highway Transportation Safety Administration.
When the next United States Congress convenes, the current Ranking Minority Member of the Senate Committee on Finance, better known as Daniel Patrick Moynihan, won’t be there to display his talents as a politician and statesman. Moynihan served in four successive administrations at the cabinet or sub-cabinet level: Kennedy, Johnson, Nixon and Ford. You may not recall that he was ambassador to India before serving as U.N. ambassador. His first elected office was to the United States Senate where he’s served New Yorkers since 1977, and either Rick Lazio or Hillary Clinton will fill his seat next year. Author of 18 books, Moynihan has been considered among the brainiest of Senators. Moynihan’s social science work led to deeper understanding of welfare and racial assimilation, and he proposed specific action to address emerging problems. The Almanac of American Politics calls him “the nation's best thinker among politicians since Lincoln and its best politician among thinkers since Jefferson.” He’ll be missed in the Senate, but we expect we’ll hear and read Moynihan long after his Senate career ends.
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Do It Yourself
One of the best business books we’ve read this year is Built from Scratch: How a Couple of Regular Guys Grew The Home Depot from Nothing to $30 Billion. Chapter after chapter tells stories by Bernie Marcus and Arthur Blank (with help from Bob Andelman) about themselves and how and why they acted in forming and growing The Home Depot. One of our favorite stories was how they turned down $2 million in capital from Ross Perot when they were forming the company. It seems that Perot wanted to become more hands on than the founders wanted, and when he wanted them to ditch their company cars, they decided to walk from his money. Had Perot been more willing to let these guys do it their way, his $2 million investment would be worth $88 billion today. If you’re trying to focus your organization around the customer, read this book to find out what that concept really means. If you’re trying to build an organization based on principles and values, read this book to find out how to reinforce values through executive behavior. If you compete against Bank One, read this book because we heard CEO Jamie Dimon has a copy on his desk, and has made it required reading for executives there. Highly recommended.
Reading Gary Hamel’s new book, Leading the Revolution, is annoying, disturbing and uncomfortable. That’s three good reasons to pick up this book. Hamel proposes that companies face diminishing returns when they fail to reinvent themselves and take a fresh approach to business. He encourages executives to imagine different ways of doing business, and suggests that we become novelty addicts and heretics. Like those annoying questions following each Executive Times article, Hamel asks the reader hundreds of questions during the course of this book, and the answers you may have are likely to make you uncomfortable or disturbed, and may lead to some action. Another reason to read this book soon is that some irritating colleague with a rebellious streak is likely to find favor in these pages, and you want to be sure to beat him or her to the punch. For a sample of what Hamel is talking about in this book, read his article in The Wall Street Journal (September 18, 2000), that lays out what GE will face post-Jack Welch.
A league of one’s own
The title, Bowling Alone: The Collapse and Revival of American Community, caught our attention, so we picked up a copy of Robert D. Putnam’s new book. Filled with charts and research from a wide array of sources, Bowling Alone starts by presenting a compelling story of the decline in social capital. While we found this 200-page exposition tedious, we recognized that Putnam approaches the topic from many perspectives, and leaves almost no stone unturned. Once the groundwork on what happened has been established, Putnam goes on for another 100 pages in a systematic way of trying to figure out what has killed the civic engagement of Americans. While some of the causes are those you’d expect, ones he dismisses may surprise you. Another 100-page section explains why the decline of social capital is so important, which Putnam describes in multiple dimensions. He wraps up the book with his own suggestions on what could be done next to support the revival of social capital. Putnam calls attention to one positive dimension we’ve seen elsewhere: the volunteer activities of those in their teens and twenties today signify a revival in civic engagement. If you enjoyed books like Ray Suarez’ The Old Neighborhood (Executive Times January 2000), you’ll also like Bowling Alone. If you’re a reader who likes to see facts and statistics to support points of view, Bowling Alone will bring you great pleasure.
As we read through Mary Modahl’s Now or Never: How Companies Must Change to Win the Battle for Internet Customers, we kept veering away from now and toward never. Modal is a VP of research at Forrester Research, Inc., and this book recycles research Forrester has delivered to their corporate subscribers. Since we hate pigeon holing, the names of customer groups like Mouse Potatoes and Handshakers annoyed us, probably because we’re High Income Pessimists. Every time we were coming close to dropping the book altogether, we read something that encouraged us to turn another page. If you’re an executive thinking about how your organization can better use the Internet, you may actually get an idea or two from this book about what to do as well as what not to do. What we noticed in our reactions while reading the book is that we were suspicious of data from 1999 since in Internet terms that is so totally out of date. Modahl’s advice may have some current value for you, but we thought of this book as an infomercial for Forrester. Sample this book if you must and see if there’s value in what you’ve missed by not being a Forrester subscriber. If you’ve subscribed to Forrester, see whether Modahl’s recent perspective matches what you heard when you first received the data.
Orphan This Book
Kazuo Ishiguro won the Booker Prize for The Remains of the Day, so when we heard about his latest book, set in the 1930’s, When We Were Orphans, we were anticipating an enjoyable reading experience. For the first hundred pages, the language and dialog fit the time period, and the restraint of Christopher Banks, the protagonist, was reminiscent of The Remains of the Day. The remaining two thirds of the book just didn’t live up to the beginning. It’s almost as if the balance of the book had been written by someone else. We were disappointed with When We Were Orphans because our expectations just weren’t met, and we know Ishiguro can do better. Take a pass.
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