Volume 3, Issue 11
ă 2001 Hopkins and Company, LLC
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Our most effective leaders are the ones whose actions encourage us to follow them. Sometimes, we want a leader to just tell us what to do, and an autocratic style of leadership works well in that situation. Often, we want to align with a leader who listens to our issues and concerns, and then makes decisions that indicate we were heard. A democratic, participative or consensus style of leadership works well in that situation. We want leaders who inspire us to draw out our best skills to produce outstanding results. A motivational style of leadership works well in that situation. Sometimes, we want leaders to set some overall direction and give us the space to make our own decisions. Some experts refer to that as a laissez-faire style of leadership. We want different leadership styles at different times and in different situations. Our best leaders adapt their styles to what is most likely to work with a given person in a particular situation. Our least effective leaders are usually those whose behavior is viewed as inconsistent with the values they and the organization espouse. As you read about individual executives and how they are leading, consider whether your own leadership style remains consistent, or if it adapts well to changing situations. Think about the times when your most comfortable approach to leadership, or your predominant leadership style, works best and when it falls short of the expectations of others. Decide what changes you will make to improve the versatility of your leadership skills so you are more effective in more situations.
Big Ideas First
How do you assess customer needs and wants in your product development efforts? Do you expect customers to tell you what products to produce? If you need to make a major change, what will it take to shake up your organization?
One United Company
Many executives face significant challenges in trying to create a single, unified organization, especially when acquisitions involve management methods and practices that are difficult to align. Jack Welch, former GE CEO, describes in his biography (reviewed on page 5 of this issue) that he insisted that all employees be motivated by a single corporate currency: GE stock. Welch was willing to lose those employees who wanted to participate in the rise of stock in Silicon Valley companies financed by GE Capital. The only piece of the action Welch was willing to offer was his company’s own stock. We read in The New York Times (10/26/01) (http://www.nytimes.com/2001/10/26/business/26WALL.html) that Credit Suisse First Boston CEO John Mack has changed the employment agreements of 100 executives, most of whom came to the company from its acquisition of Donaldson, Lufkin & Jenrette last year. Instead of guaranteed pay no matter what profits CSFB earns, the investment bankers have agreed to pay cuts, reflecting the current realities on Wall Street. Mack’s predecessor, Allen Wheat, provided $300 million in incentives to retain another segment of the company, the Silicon Valley based technology investment group. The Times expects Mack will reel in that group next, if he can.
When you isolate a group of employees for special compensation treatment, what’s the impact on the rest of the organization? Will the actions you take in one environment need to be reversed when times change? How quickly can you implement a change? When a prior leader behaved one way, how will that limit or facilitate your ability to go in a different direction? To what extent do you reward individual success, and to what extent are individual rewards constrained by overall corporate results? Does your leadership of the reward system work well?
Many large companies have what are called “related party transactions” between the company and insiders. Usually, these transactions are carried out without any special benefits and occur in the normal course of business. What were the leaders of Enron thinking two years ago when they allowed CFO Andrew Fastow to set up and run two partnerships that purchased Enron assets for his personal gain? We read in The Wall Street Journal (10/17/01) (http://interactive.wsj.com/archive/retrieve.cgi?id=SB1003237924744857040.djm) that while special processes were established with the intention of creating effective controls, the job of chief financial officer gave Fastow significant insider knowledge that should not have been used by an entity, unaffiliated with Enron, that would be engaging in billions of dollars in transactions with the company. A small part of a recent $1 billion write-down of bad investments involved a charge of $35 million for the partnerships led by Fastow. While the company defended Fastow, his credibility became eroded, and he was replaced as CFO with former Treasurer Jeffrey McMahon. According to The Journal, McMahon had left Enron last year after voicing concerns about Fastow’s role in the partnerships. The company stated, “Enron and its Board established special review and approval processes with its senior management and external audit and legal counsel to ensure that each transaction with the LJM partnership was fair, in the best interest of Enron and its shareholders, and appropriately disclosed.”
How do you decide what actions are inconsistent with your leadership role? When considering areas of potential conflicts of interest, how do you decide where conflicts exist and where they don’t? Whom do you rely on for advice about conflicts of interest? Can controls overcome a loss in confidence that could arise from potentially conflicting behavior? Would you continue to work for a boss who ignored conflicts of interest?
On November 1, a new CEO takes over at Nortel Networks, Frank Dunn. We read in Business Week (10/3/01) (http://www.businessweek.com/bwdaily/dnflash/oct2001/nf2001103_7050.htm) about all the challenges he’ll face, including a drop in optical market share from 47% to 17%, huge declines in sales, significant corporate job cuts, and upset investors who have seen the price of a share of Nortel drop from $70 to $5 over the last year. Someone compared for us the experience of two Canadians with $1,000 to invest a year ago. One bought Nortel stock with the money, and now holds an investment worth about $75. The other bought cans of Labatt’s and Molson’s, drinking a six-pack every day for the past year, and recovering $80 from recycling the empty cans. Who’s been happier with their decision? Let’s watch how Dunn leads a well-known company through its many challenges.
What approach would you take in leading Nortel in this environment? How would you influence the expectations of multiple constituents?
Feet to the Fire
Have It Your Way
You’ve probably attended a meeting that involved some type of group exercise that was intended to promote some corporate skill or another, like teamwork or trust. Sometimes, these exercises don’t turn out as planned. We read on the Associated Press wire (10/6/01) that some Burger King marketing employees experienced something not intended as part of their training. Over a dozen people received first and second degree burns while walking across white-hot coals in a firewalking ritual meant to improve bonding. Now they know what it’s like to be grilled.
Do your training activities really relate to the behavior people will use at work? If not, change them.
If The Walls Could Talk
You’ve seen those motivational posters hanging in different workplaces: “Success”; “Teamwork”; “Determination”; and “Imagination.” The pictures show mountains to climb, skydivers holding each other, sunsets, trees, etc. An Executive Times reader who shares our gag reflex when we see these posters told us about alternatives available, including: “Blame”; “Ineptitude”; “Pessimism”; and “Mistakes.” In this case, the pictures tell another story. Blame shows one runner passing a flaming baton to another. Ineptitude shows a skier about to crash. Pessimism shows a lightening strike and says, “Every Dark Cloud Has a Silver Lining, but Lightning Kills Hundreds of People Each Year Who Are Trying to Find It.” Mistakes shows an iceberg and expresses the sentiment, “It Could Be that the Purpose of Your Life Is Only to Serve as a Warning to Others.” If you’re looking to express yourself in a contrary way, visit the Despair, Inc. De-motivators at http://www.thinkgeek.com/stuff/fun-stuff/posters.shtml.
How comfortable are you with expressing points of view that differ from your co-workers? How comfortable are you with individuals when their outlook differs from your own? If you were hanging a poster in your workspace, which type would it be? Would the image bear a resemblance to the way you usually express yourself at work?
Here are selected updates on stories covered in prior issues of Executive Times:
Ř We forecast in the May 2000 issue of Executive Times that following its acquisition Unilever would retain those things that made Ben & Jerry’s successful. We read in The Financial Times (10/16/01) that Unilever has contributed millions of dollars through the Ben & Jerry’s Foundation to activist organizations, many of which led anti-globalization protests and are critics of corporations. Guess we were right.
Ř Since we published the October 2001 issue of Executive Times, more information has come from Cantor Fitzgerald about how it will commit future profits to the families of employees who died on September 11. Both the company and CEO Howard Lutnick have come under criticism for some of its actions since the emotional interview between Lutnick and Larry King. Bonuses will be paid prior to Thanksgiving based on 2000 performance to the families of workers whose pay did not include sales commissions. Over the next five years, 25% of the profits that would have gone to partners will go to the families of the victims, up to $100,000 per family. The families will also receive health insurance for 10 years.
Like all politicians, New York City Mayor Rudy Giuliani will leave office with friends and foes remembering different aspects of his leadership. Friends will recall how his tough-on-crime approach made city streets safer and cleaner, with an improved quality of life. Critics attribute his autocratic micro-management to creating an environment for police brutality and violations of civil rights. Over the past year, his personal life dominated stories about him, from his battle with prostate cancer that removed him from the race for the United States Senate, to the lurid details of his divorce and the living arrangements that became bizarre. Giuliani’s visibility and assertive leadership at ground zero in the events following the terrorist attack on the World Trade Center will alter the way he is remembered. Worldwide media featured him exercising leadership during crisis, and expressing grief while making decisions to get the city back to normal. Despite our 2000 review (www.hopkinsandcompany.com/books/Rudy Giuliani.htm) of the book Rudy Giuliani: Emperor of the City by Andrew Kirtzman, the complete book on Giuliani continues to be written. Recent images that add to his legacy include him telling Prince Alwaleed bin Talal bin Abdul Aziz Alsaud what he could do with his $10 million check, and receiving knighthood from England’s Queen Elizabeth II (via her son Prince Andrew) for his “outstanding help and support to the bereaved British families in New York” after the September 11 attack. New York City voters select a new mayor this month, and many will miss the current mayor, who will always be remembered for taking charge at a time of crisis.
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Good Things to Life
A total of 21 book reviews were added during October 2001 at http://www.hopkinsandcompany.com/books/list.htm. Check out the others for books you may enjoy.
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