Executive Times

Volume 3, Issue 4

April 2001

ã 2001 Hopkins and Company, LLC

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Fits and misfits

What makes an employee “fit” into your organization? What qualities, skills, experience, attitudes, competencies and abilities lead you to select or retain one individual over another? During times of layoff, who leaves, who stays, and why? What causes you to conclude that an individual who fit at one time no longer belongs in your organization? What causes you to decide that you no longer belong within your company?

In recent weeks, many companies have announced significant layoffs, and must now determine which employees leave and which ones stay. Following most mergers, the culture of an organization evolves, and the components of fit change. As you read about examples of this phenomenon with individuals and organizations, consider what you might do if faced with similar circumstances. Consider the risks you run from your current practices in determining “fit”, and select those changes that will reduce your risks in this area.

The Bell Tolls

Performance management consultants (but not Hopkins & Co.) often recommend to organizations that employee performance be ranked according to a bell curve to eliminate what’s called the Lake Woebegon Effect (where everyone is rated “above average”). Forced distribution demands that managers differentiate the top and bottom performers from the vast middle. Extraordinary rewards are provided to the very top performers, and the bottom performers are usually fired within a short period of time, since they no longer fit the company’s expectations of them. We read in The New York Times (3/19/01) (http://www.nytimes.com/2001/03/19/business/19GRAD.html) that at least three large companies (Microsoft, Ford Motor and Conoco) have been sued over these practices. While objective standards may appear to be the basis for the performance ranking distributions, some classes of employees can appear to receive lower rankings for subjective or stereotypical reasons. Older workers, for example, can be perceived as having less potential than younger workers when it comes to learning to use new technology. White male evaluators may rate blacks and women based on personal bias rather than job performance. When small units are forced to rank employees, there may be a dysfunctional incentive for high performers to gravitate away from units with other high performers and into units with lesser performers to improve one’s relative ranking.

How does your organization approach employee performance ranking? What influences the ratings of employees, and are those influences defensible? Have you examined whether the impact of your approach has an adverse impact on certain groups of employees? What are the perceptions of employees and managers about your organization’s methods of performance assessment?

Creamed

Mergers create the opportunity for using the skills and talents of experienced executives, but more often than not, highly talented executives find no room for themselves at the top, and are often surprised when they’re forced out. The Wall Street Journal (3/22/01) presented a lengthy story http://interactive.wsj.com/archive/retrieve.cgi?id=SB985210367309655944.djm) of what happened to former Morgan Stanley head John Mack and former Dean Whitter head Philip Purcell following the merger of those two companies. When Purcell got the top job, Mack reassured former Morgan staff to be patient, that “cream always rises to the top.” Instead of rising to the top, the Morgan head resigned, along with a half dozen or so other former Morgan executives, creamed by Purcell’s concentration of power. Read this story of personality differences, misunderstandings, and the impact of personal loyalty during organizational change. Mack thrived in a partnership where lively debate led to consensus, while Purcell’s managerial style is more authoritarian, and unaccustomed to questioning. Purcell won control, and Mack is gone, at a time when the combined company would benefit from Mack’s particular skills and experience. Purcell is left to fill empty slots with less experienced players.

Can different management styles co-exist within your organization? When a talented manager is perceived as not fitting your organization’s style, what happens? If you’ve been involved in a merger, have you created a new culture, or has one or the other of the former cultures dominated? Are employees always associated with their past organization, rather than with the combined organization? Does “cream” in your organization rise to the top, or does it get whipped?

Do you know the way to San Jose?

When Jay Harris quit his job as chairman and publisher of The San Jose Mercury News in mid-March most observers were shocked and surprised. Parent company Knight Ridder set profit margin targets at 20%, and cyclical advertising revenues made that target unrealistic from Harris’ perspective, so he quit rather than reduce cost by cutting news resources. We read in The San Jose Mercury News (3/20/01) (http://cgi.mercurycenter.com/premium/business/docs/papers032001.htm) that, “Harris said he feared the pursuit of higher profits would degrade the quality of the newspaper's journalism and alienate readers.” Knight Ridder CEO Tony Ridder needs to balance the interests of shareholders, employees, readers and advertisers, and with Harris gone, he has to find someone at The News who will negotiate a budget that achieves a balance acceptable to Ridder.

What would cause you to decide that the targets set by others leave you no choice but to resign from your job? When you make changes in an attempt to balance divergent interests, what changes are unacceptable to you, and why? In considering budgets, what costs can’t be cut? Do you and your boss answer those questions the same way?

Derailing the Soul Train

We first paid attention to the Xerox sales organization in reading David Dorsey’s fine book The Force (http://www.amazon.com/exec/obidos/ASIN/0679410309/hopkicompa). Having read that book, it came as no surprise when we read about an employee lawsuit in The New York Times (3/15/01) (http://www.nytimes.com/2001/03/15/technology/15XERO.html). A dozen and a half former and current Xerox sales reps have filed discrimination lawsuits claiming that because they are black or Hispanic, they were not assigned more lucrative accounts. During annual reorganizations, the minority reps received assignments “shunned” by white reps, rather than receiving account assignments based on merit. According to the Times, “Other black representatives said they were placed on a sales team known as the ‘soul train’ team because six of the eight members were black, according to the charge made by Alicia Dean-Hall. Ms. Dean-Hall said she tried to get what she described as ‘a choice sales assignment’ but she contends she was rejected because she was not the ‘right fit’ because she is not white.” Xerox believes the lawsuit is without merit.

Have you decided that certain of your employees “fit” best in certain segments of your business? What’s the basis of your determination? When you consider account or territory assignments for your company’s representatives, how do you match individuals with clients? Is there the equivalent of a “soul train” in your organization? How aligned are your employees and managers on the opportunities for advancement within your organization?

Stamina

Another dimension of “fit” involves the physical fitness requirements for executives. We’ve observed that most successful senior executives possess considerable stamina and can endure successive long workdays and extensive business travel and entertaining, often with only a few hours sleep. We found support for these observations in The Wall Street Journal (3/20/01) (http://interactive.wsj.com/archive/retrieve.cgi?id=SB985040878457937781.djm), “This boundless energy is a common trait in most CEOs, and a critical one. As business becomes more global and technology calls for 24/7 performance, those who lead companies must be able to move through several time zones several times a week, and communicate with staff and customers around the clock.” Executive stamina and endurance may become new measures for performance.

What do you do to prepare yourself and others for the physical demands of work? How fit are you and those who work for you? Are you or they fit enough to deal with the demands of the job and the organization? When do endurance expectations become unreasonable?

Ja’recuse

Conflicted, powerless or unfocused?

We were more than a little surprised when we read in The New York Times (3/6/01) (http://www.nytimes.com/2001/03/06/business/06HOLD.html) that Secretary of the Treasury Paul O’Neill would hang on to about $100 million of Alcoa stock and stock options and recuse himself from any matters that would create a conflict of interest. Since so many Treasury Department decisions have a significant impact on global and regulated players like Alcoa, either O’Neill remains permanently recused, or his position is powerless. Paul Gigot, writing in The Wall Street Journal (3/16/01) (http://interactive.wsj.com/archive/retrieve.cgi?id=SB984701850872862520.djm) used the decision to retain the stock as an example of O’Neill’s deaf political ear. According to Gigot, “Mr. Bush promised to set a different ethical tone, and his Alcoa holding gives Democrats a chance to say nothing's changed.” When a major O’Neill story reached page one of The Wall Street Journal (http://interactive.wsj.com/archive/retrieve.cgi?id=SB984957630380475155.djm) describing his rocky start as Treasury Secretary, we expected political heat would increase. Sure enough, O’Neill announced on talk TV on March 25 that he’d be selling his Alcoa stock.

What criteria do you use to evaluate your own conflicts of interest? How well tuned in are you to the issues and concerns of your boss? How do you pull yourself out of a rocky start? When do you know it’s time to give in to outside pressure?

Follow Up

Here are selected updates on stories covered in prior issues of Executive Times:

Ø You may have read some of Warren Buffet’s comments from the Berkshire Hathaway Annual Reports in both the April 1999 and April 2000 issues of Executive Times. Here’s our favorite quote from this year’s report (http://www.berkshirehathaway.com/2000ar/2000ar.pdf): “Agonizing over errors is a mistake. But acknowledging and analyzing them can be useful, though that practice is rare in corporate boardrooms. There, Charlie and I have almost never witnessed a candid post-mortem of a failed decision, particularly one involving an acquisition. A notable exception to this never-look-back approach is that of The Washington Post Company, which unfailingly and objectively reviews its acquisitions three years after they are made. Elsewhere, triumphs are trumpeted, but dumb decisions either get no follow-up or are rationalized.
The financial consequences of these boners are regularly dumped into massive restructuring charges or write-offs that are casually waved off as “nonrecurring.” Managements just love these. Indeed, in recent years it has seemed that no earnings statement is complete without them. The origins of these charges, though, are never explored. When it comes to corporate blunders, CEOs invoke the concept of the Virgin Birth.”

Ø We’ve picked on Coca-Cola’s executive foibles in the August 1999, December 1999, April 2000 and December 2000 issues of Executive Times, so it’s about time to note the company again. We were not surprised to read the perspective of stock and investment analysts in Fortune (4/2/01) (http://www.fortune.com/indext.jhtml?channel=print_article.jhtml&doc_id=201024) that Pepsi is now winning the cola wars. Coke CEO Doug Daft has already reorganized, so he’s running out of options. Stay tuned.

Legacies

For all the people

S. Dillon Ripley became head of the Smithsonian Institution in 1964, and over the following twenty years he changed the face of the Mall and museum life for generations. He made museum exhibits and events fun, out of a philosophy that a museum should reach out to people, and the experience should be easy, diverse and varied. Ripley’s reach was phenomenal. Among his many accomplishments are: building the Hirshhorn Museum, the museums of Asian and African art, and the Anacostia museum; opening the Air and Space Museum and the Renwick Gallery; putting a carousel on the Mall; starting the American Folklife Festival; starting Smithsonian Magazine and organizing the Smithsonian Associates. Ripley wanted museums to be friendly and exciting, and that’s what museums around the world are like today, as a result of Ripley’s vision and leadership. We remember that in 1968 during the Poor Peoples March on Washington, when other government buildings locked their doors to the “riffraff” descending on the city, Ripley kept the Smithsonian museums open all night, and instructed staff to stock extra soap and towels in the rest rooms. Ripley died in mid-March at age 87. His respect for others, his visionary leadership of a major organization and his way of looking at life leave a lasting legacy for all of us, as solid as all those museums.

Reading

(Note: readers of the web version of Executive Times can click on the book covers or titles to order copies directly from amazon.com. When you order through these links, Hopkins & Company receives a small payment from amazon.com. Subscribers to the print version of Executive Times can receive the web version at no additional cost. Send e-mail to hopkinsandcompany@att.net with a request to be placed on the web version distribution list. Also, not all books we read make it to the pages of Executive Times. For expanded reviews of Executive Times selections and other books, visit our book review site at http://www.hopkinsandcompany.com/books/list.htm.)

Amazing Arrogance
Ken Auletta wrote about the Microsoft trial for The New Yorker and turned his time spent in that endeavor into a great book, World War 3.0: Microsoft and Its Enemies. Auletta talked to the right people to get this book written. In fact, Judge Penfield Jackson’s interview with Auletta was one of the things that got Jackson in hot water with the appellate court. You can’t miss the arrogance of Microsoft on the many pages of this book, and see where their hubris got them into trouble in the courtroom and outside. Tod Nielson of Microsoft was quoted, “Because our culture demands that we must respond to every false piece of mud thrown at us, it means that we clutter things up.” That’s a rare moment of accurate Microsoft candor. Most of the story from Microsoft’s perspective is spin. Here’s one of Auletta’s insights: “When Boies spoke to Judge Jackson in the courtroom, he treated him as if he represented America; when Microsoft spoke to him, it was often as if he were an inconvenient obstacle on the way to the Court of Appeals.” World War 3.0 is an engaging book, full of insights about corporate behavior. For a longer review of this book, visit http://www.hopkinsandcompany.com/books/World War 3.htm. Recommendation: •••• (Highly recommended).

Good guy
Charlie Munger is a good guy. You can read page after page of Charlie doing the right thing in Damn Right: Behind the Scenes with Berkshire Hathaway Billionaire Charlie Munger by Janet Lowe. We first noticed Charlie Munger in the 1980s when his perspective on the savings and loan mess placed him at odds with other owners and with the lead trade association. He was right and they were wrong. Lowe takes us through Munger’s life with enough detail for insight, but with appropriate brevity to remain readable. Charlie and his family cooperated with Lowe in writing this book, and her sources were more than adequate to paint a complete picture of this fascinating and eccentric character. Business leaders can learn many lessons about trust and integrity from the life and example of Charlie Munger. For a longer review of this book, visit http://www.hopkinsandcompany.com/books/Damn Right.htm. Recommendation: •••• (Highly recommended).

Eureka!
Do you need to learn how to innovate? Can you learn innovation? Tom Kelley’s book, The Art of Innovation, answers both questions in the affirmative. We first ran across IDEO in the pages of Business Week in their annual design awards. More often than not, IDEO topped the list of best design firms. Here’s a quote from the chapter titled “Innovation Begins with an Eye”:

“Observation and inspiration don’t have to be formal. Each one of us can learn to be a better observer simply by taking stock of our environment. Try this simple exercise. The next time you visit another company – or even your own – watch and listen carefully. Is it clear where you’re supposed to go? Does a receptionist greet you and ask you to go somewhere else? Is it a comfortable place to wait, or do you feel like you’re at the dentist’s office. Which parts of the process welcome you like a special guest, and which parts leave you feeling like a drone in the hive of industry?
What about meetings? Who arrives late? Where do people sit? Who runs the show? Next time at the airport, think of how you might reorganize the whole experience if you were running the show, everything from baggage check-in and finding your gate, to waiting for information on seat upgrades.
If you’re like most of us, you’ll probably find many of these human systems lacking. The office waiting room feels like a presentencing chamber, the meeting may be chaotic or overly hierarchical, and let’s face it, kindergarten classes are run more efficiently than some airline check-ins.”

If there’s any part of your business life that requires innovation, and there must certainly be, reading this book with provide you with approaches that help you. It’s worth the cost of the book to learn and apply the seven secrets for better brainstorming. Recommendation: •••• (Highly recommended).

Brief Recommendations

Title and Review link	Author	Rating	Comments and Purchase Link
Nothing Like It in the World http://www.hopkinsandcomany.com/Books/Nothing Like It in the World.htm	Ambrose, Stephen E.	•••	History comes alive in the story of the building of the transcontinental railroad. http://www.amazon.com/exec/obidos/ASIN/0684846098/hopkicompa
The First American http://www.hopkinsandcompany.com/books/The First American.htm	Brands, H.W.	•••	Comprehensive biography of Ben Franklin: stories are rich and teach many lessons. http://www.amazon.com/exec/obidos/ASIN/0385493282/hopkicompa
Brunelleschi’s Dome http://www.hopkinsandcompany.com/books/Brunelleschi's Dome.htm	King, Ross	•••	Genius and intrigue at work in 15^th century Florence. http://www.amazon.com/exec/obidos/ASIN/0802713661/hopkicompa
Prodigal Summer http://www.hopkinsandcomany.com/Books/Prodigal Summer.htm	Kingsolver, Barbara	•••	Delightful novel of small community life and fragile ecosystems. http://www.amazon.com/exec/obidos/ASIN/0060199652/hopkicompa
Cutout http://www.hopkinsandcompany.com/books/Cutout.htm	Matthews, Francine	•••	First novel by former CIA worker features espionage heroine; predictable action and weak dialogue. http://www.amazon.com/exec/obidos/ASIN/055310893X/hopkicompa
Potshot http://www.hopkinsandcompany.com/books/Potshot.htm	Parker, Robert B.	•••	Spenser’s back in a light, easy reading mystery. http://www.amazon.com/exec/obidos/ASIN/0399147101/hopkicompa
First to Die http://www.hopkinsandcompany.com/books/First to Die.htm	Patterson, James	•••	Fast-paced crime mystery with tight scenes and high tension; female narrator awkward at times. http://www.amazon.com/exec/obidos/ASIN/0399147101/hopkicompa
The Bonesetter’s Daughter http://www.hopkinsandcompany.com/books/The Bonesetter's Daughter.htm	Tan, Amy	•••	Amy’s back with fine writing; story within a story captures modern life and old China. http://www.amazon.com/exec/obidos/ASIN/0399146431/hopkicompa

ã 2001 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). E-mail subscriptions are $30.00 per year. Single issues: $10.00 print; $5.00 electronic. To subscribe, sign up at www.hopkinsandcompany.com/subscribe.html, send an e-mail to hopkinsandcompany@att.net, 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 hopkinsandcompany@att.net. 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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