Bold Exec

This Blog is All About You...the Aspiring Bold Exec

...an encyclopedia of turnaround techniques I have used, highly successfully, in fixing over a dozen dysfunctional companies, operating as one of America's most successful turnaround CEOs. However, the largest turnaround we face today is this country--the U.S.A. So I've expanded the scope, now dealing with both company and U.S. policy issues. In fixing and saving a dysfunctional company or country, breakthrough policy and operating changes--rather than marginal ones--are always required. And--always remember, it's not what you intend to do, it's not even what you do, it's how you do it!!     Also, go to www.plagueofgoodintentions.com to learn more about turnaround techniques applied to dysfunctional countries.

Who's Tom Epley? »  | What does it take to be a Bold Exec? »

Click here to view presentation to UCLA Anderson MBA students on Value Creation >>

Dead on Arrival

Do you set targets for bonus plans, incentive compensation that is, on an annual basis? Why?

"Well, that's what we've always done."

Today's business pace-of-change is such that objectives and bonus plans based on a 12 month period are interesting antiques. Such a process is antique, and the objectives are antique by the time they're realized. If you simply use bottom line financial performance as your only metric (a rather lazy bonus-setting approach) then you can get by, I suppose, with annual targets and payouts. But if you set specific, establishing targets for those items that set the stage for future growth then a much shorter fuse is appropriate. See the follow-on for such objectives.

Nits for "Nots"

Cost cutting is an art, not a science. Anyone can reduce costs, what brainpower does it take to fire a lot of people. Those, however, who recognize this as an art do it in artful ways, looking at systematic improvements, creating systemic thrusts, re-thinking how the organization works, assessing that is really required.

Those who think they need to reduce costs but have no idea how to go about it, issue press releases about the most inane, ridiculous, and meaningless cost controlling ideas. I label these "nits", meaning they are irrelevant as a cost reducing item, for "nots", meaning those that proclaim these are useful and meaningful have not any idea, about anything. Don't buy their stock, or their story. Here are some examples:

Bernie Ebbers, as WorldCom was imploding all around him and who was billions short of avoiding bankruptcy, stopped watering the plants in their corporate headquarters building.

Monster CEO Iannuzzi proclaimed he was eliminating paper cups in the break rooms.

And South Carolina governor Mark Sanford instructed his staff to use both sides of post-it notes.

Doctors and Data

  Intelligent and extensively trained U.S. doctors make thousands of smart and highly experienced decisions concerning individual medical and health situations every day. Yet (a) the costs are the highest in the world, (b) the results are mediocre, and (c) the costs vs. outcomes in different regions vary substantially. A recent business week article stated that UCLA's costs were over twice that per patient in the same medical category as those at Duke, with about the same outcome; that the region around the Mayo clinic had about half the costs per patient as other comparable demographics. When you see a business situation that is out-of-control but with pockets of good performance; you study those pockets to find an overall solution.

Burnt Sienna

 

I struggled with choosing a subject this week, that's why this blog is late--sorry :-(. This article in Newsweek created an inspiration. All through my childhood burnt sienna was my favorite color and remains so. My kids all kid (yes kids kidding) me about this; but i've stood my ground. Then several years ago the Crayola company held a contest in which voters could save one of five soon-to-be-discontinued colors from retirement. The candidates were burnt sienna, blizzard blue, teal blue, magic mint and mulberry. Burnt sienna won the contest and was saved from oblivion--not exactly the most stirring victory for mankind but...............

29

Numerical targets are a good thing; they are easy to communicate and therefore bring clarity to the team. "54 40 or fight" helped define our Northern border. Moses Malone of the Sixers said, going into the playoffs, fo', fo', fo'--meaning the objective was three straight sweeps in each best-of-seven series. General Motors management, after their U.S. market share had shrunk from the 40's started wearing buttons with the number 29--"we're flooring out at 29" was the mantra! Well.......

Hire and Fire, Cut and Fill: Simultaneously

The smart companies still hire even when they're firing; still fire even when they're hiring. Boeing cut 3000 jobs in the first four months of 2009 but added over 100 employees in its defense unit, and at the same time had more than 1500 current and anticipated job openings.

When the economy, your markets, the acceptance of your products, and your overall strategy change, the size and make-up of your work-force also has to change.

The cartoon show cutting and filling. It's not easy for a CEO to add positions and hire new people while layoffs are being enacted. It's also not easy to do pruning even when the company is doing well and growing. But the American economy has always shown robust growth basically because this type of practice is embraced, even if too-infrequently practiced. It is in your company's best interests, and in the long term also in your employees' best interests to cut and fill

How Does It Know?

Peters and Waterman's best seller, In Search of Excellence, proclaimed to determine which companies were truly great and what made them great. Collins' best-seller Good to Great made the same claims. Both authors did a tremendous amount of research and created some interesting and useful observations. But the arguments in both cases had a fatal flaw, almost exactly the same flaw in each case.

One Trick CEO-Ponies

  When you're hiring a new CEO, how do you measure their track record? Sure you can look at revenue growth, earnings per share, margin improvements, market share improvements, and all the other quantitative metrics. And they do tell a story, let's assume in this case a positive one.

Then you ask what specific things they did to achieve those results, and you will get a listing of techniques, attitudes, approaches that resulted in the achievements. Perhaps they sound right, so another test has been passed. But at this point you have done nothing to separate a truly excellent CEO from a one trick pony.

The Tale of Two Ideas

After losing share to imports, General Motors under then CEO Smith launched a revolutionary plan--the Saturn car accompanied with breakthrough ideas; no haggle pricing, no-work-rules union environment, singular dedicated production facility, promises of evolutionary design, friendly dealer customer service, and a cult-like individuality. It was loved by the public: this small-car business plan was a good idea! But there are a million good ideas in the world. What separates good ideas from meaningful results is the attention to execution, and in this specific case within the mind-boggling bureaucracy and old-think atmosphere of GM, a ferverent dedication to continued isolation. GM had a good idea, and-not unexpected-lousy execution (more on this on page 2). Tata has a great idea in the launch of it's $2500 Tata-nano. I'm willing to bet that the clear thinking Tata company will radically outperform GM's execution; they'll stick to their plan, improve it incrementally as is appropriate, and be highly successful.

Succession Planning

This week's edition of BusinessWeek's featured headline was "CEO's of Tomorrow". The article then commented on the virtues of sanctioned CEO's in waiting; successions and successors that had been planned internally for a long period. I used to believe that succession planning was a good thing, but now have alternative thoughts. The pace of business change today mandates continuing to look at fresh approaches, seeing around corners, and re-thinking the strategies. Long standing in-line successors may tend to create an environment in which these following not-so-good attitudes are ensconced:

• making "saluting the chief" a winning philosophy
• perpetuating the existing CEO's mindset
• reducing the creative drive of potential other inside candidates

• reducing the probability of new outside-the-box thinking

Made in the U.S.A.

 The greatest strength of the U.S. is the willingness, ability, and desire of millions of citizens to create something new and positive out of, well, thin air. Our recovery from this current economic dilemna will be faster than in other countries because of this. We get irritated that some of those who helped create the sub-prime mortgage mess are now making money profiting off the carnage; but their actions are helping the recovery. We get sad thinking about people who have lost their jobs, but many of those are starting new careers. Contrary to our esteemed ex-Senator Phil Gramm's comments on this being a country of whiners, these winners, those that individually will create economic growth, will bail us out.

Do CFO's Make Good CEO's?

Maybe! Sometimes! Depends! Real definitive answers!!! Without any hard data, I suspect that this promotion path, CFO to CEO, occurs more often than it should. I know a lot of great CFO's, and I know of severalgreat CEO's that came up the CFO path. That's not the issue; I'm not being discriminatory. The issue is whether CFO's as a category wind up being favored more for the top spot. Is that true? Why would that be?

Fast, like a bunny

In celebration of Easter weekend, we honor the bunny for his speed. Fast, like a bunny, is  equally appropriate for business decisions and action. Decision making is a skill; appropriately timed decision making is an art form. When is it too early--you really don't know enough to make an informed decision and you're just guessing or going on impulse. When is it too late--procrastination and bureaucratic pontification is usually a precursor for organizational failure. John Chambers, the long-time CEO of highly successful Cisco Systems, has often stated that his biggest mistakes occurred when he didn't act fast enough. The skill is recognizing when you have enough information or inputs or judgments or intuitions, and then speed into action.

BK Lite Part 2

GM, Chrysler, Citi, BofA, AIG--each faced three and only three clear choices; bankruptcy Chapter 7 (liquidation of assets--meaning shutting the company), bankruptcy Chapter 11 (reorganization--a laborious legal process in which all constituencies lose something on the prospect that the company can survive), or Government rescue. Most in the public and apparently many in government don't understand the difference between 7 and 11, believing that a company going into bankruptcy is kaput! As a result there was very little governmental will to have allowed an 11 bankruptcy. Instead, the third option, Government rescue, was applied without any regard--it seems--for the meaningful and useful provisions inherent in an 11 bankruptcy. Last week I explained why BK Lite would have been a breakthrough for the government/auto industry;this week the same for the government/financial industry.