|
 2007 Hopkins and Company, LLC
Note
re: links---certain hyperlinks assume that you are registered as a subscriber
to the site. If you are not a subscriber to certain sites, the links will
fail. If you register, the links should work. Also, certain hyperlinks expire
and may not be available when you try to go to the site.
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:
Ø 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.
Ø 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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
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.
|
|
|
