Executive Times

Volume 9, Issue 11

November 2007

 

 2007 Hopkins and Company, LLC

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Delusions

Many successful executives understand that deeply held beliefs will trump facts every time. That’s one reason why organizations create mission statements, talk about shared values, and try to align employee behavior with achieving a vision of the future. Successful organizations are the ones in which the beliefs emerge from facts. Disaster comes when facts are ignored, and some executives lead organizations to ignore reality as long as beliefs remain intact. Most of us gravitate naturally toward the set of facts that support our beliefs. The best executives seek out new facts that oppose the current beliefs, and look for trends that could upset what has made the organization successful. In this issue, we examine a variety of delusions, and explore ways in which executives and others can seek out viewpoints that assist in marking an organization and an executive to the realities of the market. As you read about what others have faced, think about how you can change the extent to which you’ve become deluded. 

 

Fifteen new books are rated in this issue, beginning on page 5. Two books received highly recommended four-star ratings; eleven books are rated three-stars, and two books received two-star ratings. There’s a higher than usual weighting of political books in this issue, in anticipation of the condensed Presidential campaign season. Visit our current bookshelf at http://www.hopkinsandcompany.com/2007books.html and see the rating table explained as well as explore links to all 567 books read or those being considered this year, including 21 that were added to the list in October. If there’s something missing from the bookshelf that you think we should be considering or if there’s a book lingering on the Shelf of Possibility that you think we should read and review sooner rather than later, let us know by sending a message to books@hopkinsandcompany.com. You can also check out all the books we’ve ever listed at http://www.hopkinsandcompany.com/All Books.html.

 

Burned
Some of us prepare for disaster by using available methods of prevention and protection. Others wish for the best, and hope that one way or another disaster strikes elsewhere. Our political leaders tend to select the facts that pander best to what voters want to hear, and when disaster strikes, they try to say the things that most constituents want to hear. The messages strike to the heart of beliefs, and avoid uncomfortable facts. We read in Jim Surowiecki’s column in the October 29 issue of The New Yorker, (http://www.newyorker.com/online/2007/10/29/071029on_onlineonly_surowiecki) that the widely held belief in supply side economics has not been supported by facts that prove this approach works. According to Surowiecki, “The supply-side argument that, in the United States, tax-rate cuts pay for themselves—that, after cutting taxes, the government actually ends up with more revenue—has little or no support within the mainstream economic profession, and no hard empirical data to back it up. … Yet the absence of proof for supply-side theory has not dimmed Republicans’ devotion to it. … This supply-side orthodoxy is striking in a couple of ways. First, it requires Republican politicians to commit themselves publicly to a position that is wrong—and wrong not as a matter of ideology or faith but as a matter of fact. Saying today that tax cuts will increase tax revenues is not like saying that bombing Iran constitutes a sensible foreign policy, or that education vouchers will wreck the public schools. It’s more like saying that the best way to treat sick people is to bleed them to let out the evil spirits. Second, despite the fact that the supply-side faith has no grounding in reality, within the Republican Party there is little room for dissent. … In one sense, of course, it’s odd that a Republican President should treat higher government revenues as a point of pride. Historically, after all, Republicans have been the party of small government and fiscal restraint. But, while Republicans still talk a good game about the need for spending discipline, in practice it matters far less to them than tax cutting. After all, if tax cuts pay for themselves, then there’s not much reason to worry about restraining government spending—we can afford it all. In fact, if government spending grows too big, you can cut taxes again to pay for it.” That excerpt could be replaced by one about Democrats on another issue in which facts are overwhelmed by a strongly held belief. In either case, when we elect individuals of any political stripe, we want them to act in the public interest, as we see it. When wildfires struck in California in recent weeks, the resources that were available to fight fires were deployed, a half million people were evacuated from their homes, lives were lost, and the property damage toll will exceed $1 billion. There are other facts that will emerge as the rebuilding efforts begin. Homeowners who chose to keep insurance premiums low will find themselves underinsured, and the claim payments will be inadequate to replace the homes that were lost. One commentator estimated that 60% of the homes were underinsured. In financially strapped San Diego, efforts to raise taxes to pay for increased fire protection failed, leading to a 2006 resignation of the fire chief. At that time, the San Diego Union Tribune reported (http://www.signonsandiego.com/news/metro/20060620-9999-1n20chief.html), “National firefighting standards, set by the Commission of Fire Accreditation International, say a city the size of San Diego should have at least 22 more stations than the 46 it has, and 400 more firefighters than the 901 on staff. … (Former fire chief) Bowman has said it would cost at least $100 million to build and equip the stations, and $40 million a year to staff them. … ‘In a perfect world, that's what we need, but that's not the situation we're dealing with,’ (Mayor) Jarman said. ‘It's got to be an incremental approach, given the fiscal restraints we have.’” Stay tuned to see if California citizens and politicians are courageous enough to raise taxes to provided needed resources, and if homeowners in other areas learn how to ensure they have the appropriate levels of insurance protection.

 

Are your beliefs leading your organization away from reality? Do you compare your organization against the market using some standards or benchmarks? Are you prepared for likely disasters? Will you be burned by allocating resources ineffectively? Are you prepared to combat a belief held by your organization that no longer reflects reality?

 

Cataracts
The disappointing earnings results reported in recent weeks by major banks provided great examples of reality checks. We read a statement from Citigroup CFO Gary Crittenden in The New York Times (10/16) (http://www.nytimes.com/2007/10/16/business/16citi.html) that, “Citigroup acknowledged yesterday that its risk management models did not function properly during this summer’s credit crisis, contributing to the company’s 57 percent drop in third-quarter profit. … ‘We had a market-risk lens looking at those products, not the credit-risk lens looking at those products,’ Mr. Crittenden said. ‘When it in fact was a credit event,’ the bank was caught off guard. Next time, it hopes to take a more integrated approach, he said.” Stakeholders can only hope that the cataract removal will provide clearer vision in the future. They could replace one faulty lens with a new lens containing new faults. Bank of America CEO Ken Lewis may have decided to abandon his long-held view that investment banking is a critical service that his company needs to provide to customers. We read in The Wall Street Journal (10/19), ‘“There will be some places we do things differently,’ Mr. Lewis said in an interview. He added that he is considering scrapping entire investment-banking businesses and has all but ruled out a near-term acquisition or joint venture to try to shore up the unit. Mr. Lewis told analysts he has had ‘all the fun’ he can take from investment banking. Mr. Lewis even raised the possibility of scaling back the business to its revenue and expense levels of roughly two years ago. That suggests job cuts are looming for the 20,000 corporate and investment-bank employees. Investment banking has been a painful slog at Bank of America for a decade. Predecessor NationsBank Corp. paid $1.2 billion for Montgomery Securities in 1997, but a culture clash led to a personnel exodus. Mr. Lewis has long preferred to grow internally to help minimize such problems, but Bank of America's investment-banking operation still has grown in fits and starts, with three top executives in the past six years.” Stay tuned to see how different investment banking becomes at Bank of America.

 

What lens is cloudy as you examine your organization? How do you know? Have you believed strongly in a particular strategy that is now strained by reality? Have you believed strongly that things are one way, and are you now aware that reality may be quite different? Is there some place where you’ve had ‘all the fun’ you can take?

 

Listening

Here’s the sobering opening from Carol Hymowitz’s In the Lead column in the 10/15 issue of The Wall Street Journal (http://online.wsj.com/article/SB119240607692558680.html): “Executives know success in business depends on identifying and fixing problems before they become crises. It is the most basic rule in management: No matter how smart your strategies seem on paper, if you don't know how they're being executed and whether there are urgent problems, you won't be successful. The higher executives climb, the less likely they are to know what is and isn't working at their companies. Many are surrounded by yes people who filter information; others dismiss or ignore bearers of bad news.” Read the rest of the column for advice and examples of how others are dealing with this issue.

 

Who do you listen to in your organization? Do you know whether or not your strategies are being executed effectively? How quickly do you learn about bad news? Who do you rely on for the straight scoop?

 

Excuses

Jared Sandberg’s Cubicle Culture column in the 10/16 edition of The Wall Street Journal (http://online.wsj.com/article/SB119248871302359915.html) provides some fascinating observations about why people say they work. Despite many claims that if it weren’t for the kids’ tuition bills, people would leave their current jobs to pursue their dreams, most people are happy with their jobs and would continue to do them if freed from obligations. In other words, they are already following their dreams and doing exactly the work they want to do. “While people may talk about freeing themselves from work once they're done with the bulk of child-rearing costs, they usually don't. The Families and Work Institute, a nonpartisan research organization, found that only 3% of parents over 57 years old whose youngest child is between 22 and 25 said they were very likely to leave their job in the next year. And the same paltry percentage said they were ‘somewhat likely’ to leave their job in the next year. … ‘People are as happy as they were 20 years ago,’ says Natalie J. Allen, a professor of organizational psychology at the University of Western Ontario. That's why when people say they are staying on the job only for the benefit of the kids, she says, ‘I'm not convinced that people mean it.’  According to a Gallup Poll, 90% of Americans are at least somewhat satisfied with their jobs and 75% say they're satisfied with their pay. Two-thirds would take the same job again ‘without hesitation.’” So stay happy and blame the kids. Don’t be deluded into thinking you’d really rather be elsewhere.

Why do you work? Are you happy? Are you in your dream job? If not, how will you get there?

 


Follow-up

Here’s an update on stories covered in prior issues of Executive Times:

Ř  We last checked in on J.P. Morgan Chase CEO Jamie Dimon in the April 2006 issue of Executive Times and we’ve been following his success since his split with former Citigroup CEO Sandy Weill a decade ago. All the business press showed a smiling Dimon announcing his company’s third quarter results, and some showed stock performance versus Citigroup that seems to indicate that under Dimon’s leadership, Chase has avoided some of the trouble that has recently plagued Citigroup and others.

Ř  Readers who have followed our attention to innovation and product development will want to read a fine article titled, “Innovative Management: A Conversation with Gary Hamel and Lowell Bryan” that will appear in McKinsey Quarterly 2008 Number 1, and can be accessed online at http://www.mckinseyquarterly.com/Innovative_management_A_conversation_between_Gary_Hamel_and_Lowell_Bryan_2065_abstract. Here’s an excerpt: “Gary Hamel: For almost 20 years I’ve tried to help large companies innovate. And despite a lot of successes along the way, I’ve often felt as if I were trying to teach a dog to walk on his hind legs. Sure, if you get the right people in the room, create the right incentives, and eliminate the distractions, you can spur a lot of innovation. But the moment you turn your back, the dog is on all fours again because it has quadruped DNA, not biped DNA. So over the years, it’s become increasingly clear to me that organizations do not have innovation DNA. They don’t have adaptability DNA. … Now there’s a new set of challenges on the horizon. How do you build organizations that are as nimble as change itself? How do you mobilize and monetize the imagination of every employee, every day? How do you create organizations that are highly engaging places to work in? And these challenges simply can’t be met without reinventing our 100-year-old management model.”

 

Legacy

Visiting
Sometimes no matter how long an executive has been with an organization, they still are considered an outsider because of the time they spent with other organizations, or the absence of certain experience with that organization. We observed that lesson recently when we read about the New York Yankees not coming to terms on a new contract with Joe Torre. After twelve years and winning more games than all but one previous Yankee manager, Torre was offered a deal that he said insulted him. At a packed news conference, Torre said, in part, that the owners no longer trusted him. “I’ve been there for 12 years and I didn’t think motivation was needed. I just didn’t think it was the right thing for me, and I didn’t think it was the right thing for my players. Any pressure that was caused by thinking the manager’s going to lose his job, I didn’t think we needed. … The fact that somebody is reducing your salary is just telling me they're not satisfied with what you're doing. … There really was no negotiation involved. I was hoping there would be, but there wasn't. … If somebody wants you to do a job, if it takes them two weeks to figure out, yeah, we want to do this, should do this, yeah, you're a little suspicious. If somebody wanted me to manage here, I would be managing here. … I still feel very much like a visitor to this whole organization.” The fact that he is being replaced by Joe Girardi who played for the Yankees may prove Torre’s point. All managers are visitors, spending a short or long time leading an organization that, more often than not, was there before them, and will be there after they leave.

 


Latest Books Read and Reviewed:

 (Note: readers of the web version of Executive Times can click on the book covers to order copies directly from amazon.com.  When you order through these links, Hopkins & Company receives a small payment from amazon.com.  Click on the title to read the review or visit our 2007 bookshelf at http://www.hopkinsandcompany.com/2007books.html).

 

Title (Link to Review)

Author

Rating

Review Summary

Purchase

The Argument:  Billionaires, Bloggers, and the Battle to Remake Democratic Politics

Bai, Matt

**

Alliances. Interesting description of multiple alliances of those trying to achieve Democratic Party success, written by New York Times reporter. Not much unity has been created yet around what author calls “the argument,” that which will bring out voters.

11cJHgtPjhL

Away

Bloom, Amy

***

Longing. Novel transports readers to the 1920s and to a Russian immigrant who does whatever it takes to survive and thrive in New York, and then leaves her life again to head across the continent in search of the daughter she thought had died.

11FaiXYjhlL

Presidential Diversions

Boller, Jr., Paul F.

***

Tidbits. Author selects for each U.S. President a hobby or an interest that in many cases illuminates the character of the individual.

2188aqc8ySL

New England White

Carter, Stephen L.

***

Mirrors. Fine literary writing fills almost 600 pages with philosophical questioning of why we do what we do, within the structure of a mystery. Audience isn’t serial mystery genre readers, but those who love intelligent examination and reflection.

11sHrPXj-dL

The Pesthouse

Crace, Jim

***

Refuge. Finely written novel set in America in the distant future which seems more medieval than technological. Some characters look to leave America for a better place, while others find ways to overcome all odds and thrive.

11tOJ0apc+L

Um-Slips, Stumbles, and Verbal Blunders, and What They Mean

Erard, Michael

**

Disfluency. Read this and find out more than you may ever want to know about the thirty types of disfluency that are normal. It may be enough to know that to um is human.

11W5ZU37SnL

The Preacher and the Presidents

Gibbs, Nancy and Michael Duffy

***

Pastoring. TIME writers present the complicated relationships that Billy Graham developed with each U.S. President from Truman through G.W. Bush. 

21wzRaU4HgL

Circling My Mother

Gordon, Mary

****

Release. Finely written memoir and biography uses various points of view to gain understanding about the author’s mother, a complex woman who above all wanted to be released from her time and place.

11V048699vL

North River

Hamill, Pete

****

Home. Finely written historical novel, set in New York during the Depression, in which a doctor faces his demons, finds love and makes a home for others during challenging times.

11+PSxPjQ2L

Father Knows Less or Can I Cook My Sister?

Jamieson, Wendell

***

Parenting. City editor of The New York Times takes seriously the many questions of his young son and other kids, goes out and gets the answers from experts, and compiles the results in this book.

110SBkiMW2L

Run

Patchett, Ann

***

Family. Skilled writer explores many of the issues faced by all families through this novel, set in Boston, which allows readers to enjoy getting to know an interested family assembled through birth and adoption.

11EQ3C0dOhL

Microtrends: The Small Forces Behind Tomorrow's Big Changes

Penn, Mark J.

***

Nichy. Burson-Marsteller CEO who identified “Soccer Moms” as key influencers a decade ago, offers 75 relatively unseen groups in this book, any few of which could drive big changes. Scratch the niche you choose.

11+e+ZwfQSL

World War IV: The Long Struggle Against Islamofascism

Podhoretz, Norman

***

Endurance. After reading this book, any advocate or opponent of cut and run from Iraq will think twice about the resolve and patience that will be necessary for what is likely to be a lengthy war.

11gsqa9y2+L

The Reagan Diaries

Reagan, Ronald

***

Chronicle. 785 pages of diary entries from both Presidential terms chronicle reflections on the big issues of the day alongside haircuts, movies and expressions of love for the First Lady.

11QbQyUiwRL

Supercapitalism: The Transformation of Business, Democracy, and Everyday Life

Reich, Robert B.

***

Citizenship. Former Labor Secretary pleads with us to separate our role as citizen from those of consumer and investor and reclaim what we have ceded to corporations. Separate capitalism from democracy and stop corporations from setting the rules.

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2007 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 executivetimes@hopkinsandcompany.com, 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 reprints@hopkinsandcompany.com. We will send sample copies if requested. The company’s website at http://www.hopkinsandcompany.com/archives.html contains the archives of back issues beginning in the month after the issue date. 

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