|Volume 1, Issue 1||April, 1999|
|Helping Executives Succeed
Hopkins and Company, LLC was formed in February 1999 to help executives succeed.
Steve Hopkins, President, helps executives in three areas:
Executive Times presents ideas monthly to help executives take action to improve their individual effectiveness and the success of their organizations. Most articles call attention to stories in the news about executives and how they are dealing with issues and situations. As executives, you can consider how you might handle a situation dealt with by a colleague. Steve welcomes your comments at email@example.com or (202)486-3816.
Stay the Course or Not?
Transitions for CEO's: When to Stay the Course and When to Change
Whenever an executive follows another into a job, there are critical decisions about what to leave alone and what to change. When following a strong and successful manager, it's often the choice of the new manager to continue the direction set by the successful predecessor. No matter how great the prior leader, the transition provides the new leader with the opportunity to make their personal mark on the organization. Here are some recent stories about how CEOs have made decisions after transitions from strong leaders.
The reins at Mellon Bank passed from Frank Cahouet to Marty McGuinn at the beginning of this year. There was an expectation that McGuinn, as an insider, would continue the direction set by the prior management team, of which he was a key member. Cahouet himself managed expectations along those lines, indicating that many decisions were made in collaboration. Cahouet was brought in to turn the bank around when they were experiencing trouble in the late 1980s, and he was extremely successful in meeting that objective. He improved asset quality and made bold acquisitions for the bank, including a historic merger with The Dreyfus Corporation. In other words, Cahouet was an outstanding leader who accomplished great results for the company and for shareholders. McGuinn had to decide what he would continue and what he would change as he stepped into the big shoes of Cahouet. Within days of becoming Mellon's new CEO upon Cahouet's voluntary retirement, McGuinn announced that he was putting three "non-core" businesses of the bank up for sale: mortgage banking, credit cards and teller machine processing. Some observers were surprised; others were not. McGuinn acted quickly and decisively to define himself in the new role. He understood that the time to differentiate oneself from a predecessor occurs early on, and the clearer you make the differences and similarities, the better. One bank analyst reported that there is more "team-building consensus" under McGuinn than was the case under Cahouet. Another analyst reported that morale at Mellon is better than it's been for a long time. What a great example of taking strength, and making even further improvements. (To read more about this situation, check out American Banker, 3/3/99. You may also want to check out the 1998 annual report at www.mellon.com. The shareholder letter provides symbolic value in showing the equal-size photos of McGuinn along with President Kip Condron and CFO Steve Elliott. There's a tone of collegiality in the letter, which is followed by a special tribute to Frank Cahouet.)
There's a window of opportunity at the beginning of a transition period. If you're thinking about a new position, work on your plan for action within those first weeks and months. Act swiftly and communicate why you are doing what you're doing. Even in a company that has achieved remarkable success, there are opportunities to make significant improvements.
Business Week reports in its March 15 issue that Ford Motor Company's new CEO, Jacques Nasser, has been moving at breakneck speed since taking on that role January 1. "Nasser, say insiders, has a road map-what some call "Jac's 100-day plan." He is making bold moves that signal how Ford is changing." You. ve certainly heard about Ford's deal to buy most of Volvo. He's also brought in execs from Chrysler who helped that turnaround.
As a Ford insider, did Jac have this 100-day plan in his pocket ready to go? Why didn't the prior CEO take some of the actions that Nasser is taking now? Does your successor have grand plans for your company after you're gone? Why can't you implement some of those plans today?
If you haven. t read Warren Buffett's letter to the shareholders of Berkshire Hathaway yet, go to it. You can access it at their website, specifically at: http://www.berkshirehathaway.com/impnote.html. Some comments:
How would you like to be Tony Nicely of GEICO, and receive Warren's message: "His instincts are unerring, his energy is boundless, and his execution is flawless." How are your instincts, energies and execution these days? What are you focused on improving?
How consistent is your approach as CEO to the mission Buffett gives to the CEOs at Berkshire Hathaway? "Just run your business as if: 1) you own 100% of it; 2) it is the only asset in the world that you and your family have or will ever have; and 3) you can. t sell or merge it for at least a century."
When it comes to taking accountability, shareholders have counted on Buffett to speak plainly and clearly about himself. "The portfolio actions I took in 1998 actually decreased our gain for the year. In particular, my decision to sell McDonald's was a very big mistake. Overall, you would have been better off last year if I had regularly snuck off to the movies during market hours." Think about how clearly you have communicated to others your reflections about mistakes. Give it a try.
Have you reflected lately about stock options? More wise words from Buffett: "Though options, if properly structured, can be an appropriate, and even ideal, way to compensate and motivate top managers, they are more often wildly capricious in their distribution of rewards, inefficient as motivators, and inordinately expensive for shareholders." Does your compensation program work? How capricious is it? Are you doing anything about it?
How well are you and those who report to you aligned on what to say and what not to say externally? Buffett describes in this year's letter his reasons for deviating last year from the standard practice of not disclosing specific investment actions. Spend some time checking to see if everyone on your team is clear today on what they say and what they don't say to others. And as a reminder to those of you who talk to co-workers in public places like airplanes: those conversations aren't private, so they should be conducted with care.
When you communicate to shareholders or other significant audiences, how clear are your messages? Do you use plain language? Do you explain things about your business that help investors learn more about your company? Is your annual meeting a boring ritual empty of meaning, or is it the kind of sales event the Berkshire Hathaway meeting is? What kind of annual meeting is ideal for your company, and is that the meeting you'll have this year?
Scapegoats and accountability
In case you missed the few days in mid-March (15-17) when Dilbert featured a scapegoat, you can still check those cartoons out in the thirty day archive at www.dilbert.com. Scott Adams, as usual, brings humor to a situation that unfortunately takes place in some companies: the assignment of blame to individuals who are not at fault. When individuals accept accountability for their actions, and recognize and acknowledge their successes and mistakes, organizations tend to thrive. When organizations look for somebody to take the blame or accept a fall, especially someone at lower levels of the organization, and the CEO or top leader avoids accepting accountability that is properly placed at the top, those organizations tend to fail.
It was disturbing to hear the International Olympic Committee express an overwhelming vote of confidence in their leader, Juan Antonio Samaranch, after a recent meeting of the IOC which expelled six of the total 108 unpaid volunteer members. Samaranch stated at a news conference "We promised to clean house and we did it." Clueless. Even some of the most casual observers have concluded that leadership and members created an environment that led to inappropriate behavior. Accountability for that environment rests at the top of the organization. The six individuals expelled may well have earned their expulsions, but there's a missing acceptance of accountability at the top of the IOC. A resignation at that level might have been a better message to send.
Are there activities conducted in parts of your organization that you feel might harm the organization's valuable reputation if revealed in the light of day? What have you done personally to ensure that everyone in the organization understands which behaviors are acceptable and which are intolerable. How do you deal with sanctions within your organization? Do individuals acknowledge their accountability, or are they inclined to duck for cover? When you hear about something that has gone wrong, do you focus more on the "who" or more on the "why?"
What first sounded like a model of accountability is beginning to smell. All 20 members of the European Commission, the executive body of the European Union, resigned following an ethics report that called attention to a significant amount of inappropriate behavior. Now it appears that most members remain at work, and many expect to be re-named to the commission.
What happens when the system itself needs to change? Who takes that step? Within your organization, are there parts of your system, the ways you do certain things, that places the organization at more risk than is appropriate. As a leader, you can take action to change the system. Take that action now, especially in those areas that could damage the reputation of the organization.
Faux Pas Déjà vu
We. ve all said something at one time or another that wasn't exactly what we meant. Usually, that's the comment that. s heard and remembered. Vice President Al Gore has been ridiculed extensively for his comment in March that he invented the Internet. Some of the ridicule came from opponents like Trent Lott who claimed to have invented the paper clip. Even the master of mis-statement, Dan Quayle stepped in with his rejoinder: "If Gore invented the Internet, I invented spell-check." What a great self-deprecating reference to his own "potatoe" problem some years ago. After a few days of uncertainty, while under attack from opponents, Gore came out with jokes of his own to lighten the impact. The best was that he was tired when he made the comment because he was up late the night before inventing the camcorder.
Nobody's perfect. We all make mistakes. How we respond conveys many messages about us as people and as executives. Some executives enjoy the endearment of associates and subordinates precisely because of their very human shortcomings. Take them head on; be humble; remember that you. re human .
Love that Business Model
Merrill Lynch has had a great business model for growing earnings and for serving their clients. Rumors are floating as we go to press that Merrill is likely to merge or ally itself with a bank. A year ago, we would have thought the Merrill team would lead such a consolidation; today, it's possible that a bank would swallow Merrill, and the bank executives would become the leaders of the organization. Many of Merrill's current woes relate to their debt business, and the heavy losses they experienced in Japan. There may be more amiss than we've seen so far.
On the consumer side of their business, they have been responsive and innovative for many years. They led the way in showing consumers how to take money from banks and put it into a Merrill Lynch Cash Management Accountâ . They learned that "stock brokers" were perceived by their customers as more interested in commissions than in relationships, so Merrill converted their brokers to "financial consultants" and backed them with computer support for financial planning with clients and a full array of Merrill products to deliver to consumers. They created a fee structure that creates incentives to place assets with Merrill. From all appearances, the Merrill business model looks like it's extremely successful.
Some time not long ago, the market capitalization of Charles Schwab surpassed that of Merrill, which must be driving the executives at Merrill crazy. Using a different business model, focused on the Internet and on letting customers do many things on their own, rather than through a broker, Schwab found a winner. Years ago, through distributing the mutual funds of other companies, Schwab responded to what it heard consumers wanted. Ever since, their business has been booming. Schwab has also attracted significant assets by cultivating relationships with independent financial planners.
In the meantime, Merrill has been going very slow with the Internet. The risk they face in letting their clients do transactions online at competitive prices is the alienation of their huge retail sales force, these "financial consultants" that have produced tremendous strength and growth for Merrill. Something. s likely to happen soon. What will it be?
What are the threats and opportunities for your current business model? Are your distribution channels competitive and profitable? How often do you re-examine key components of your business plan? Are you realistic about your vulnerabilities, especially to new, low-cost competitors? Are the barriers to entry so low that you're in constant jeopardy? Has someone else found a new way to do what you do?
As executives and as individuals, our legacy will always be in relation to those around us. We had a poignant reminder of that in March as we recall Justice Harry Blackmun. When appointed to the Supreme Court by President Nixon in 1970, Blackmun was considered a conservative justice, which he certainly was in relation to the justices on the bench at that time. By the time he retired from the court in 1994, he was considered the most liberal justice there. He changed as the court itself changed. He will always be tied to the opinion he wrote for the majority in the Roe v. Wade decision that he called "both difficult and elusive."
As you think about your legacy as an individual and an executive, how do your accomplishments compare to those around you?
Joe DiMaggio was a model for executive behavior. While on the playing field, he was a master of his craft, playing with confidence and grace. Off the field, he remained reticent about his private life, not alienating his fans, but not disclosing that which he considered out of bounds.
Where do you set boundaries for what is "on the record" and off the record for you as a professional and as a person? Since so much of your behavior is visible and reflects on your business, how and when do you find quiet, private time for yourself?
You might have read excerpts in The Wall Street Journal from Thomas Petzinger, Jr.'s book: The New Pioneers: The Men and Women Who Are Transforming the Workplace and Marketplace. He's written "The Front Lines" column each week in the Journal for the past four years. Buy a copy and read this book on your next flight. If you really love your current business plan, be sure to read it right away because what he says will likely cause you to make some significant changes.
For light reading, pick up George Stephanopoulos' All Too Human: A Political Education. As you read it, imagine that you're the President, and the author is one of your top advisors.
Some of the topics being considered for upcoming issues of Executive Times include:
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