Executive Times

Volume 3, Issue 6

June 2001

ã 2001 Hopkins and Company, LLC

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Defection

The word used most often in media reports recently to describe Vermont Senator James Jeffords switch from the Republican Party to become independent has been “defection.” When we checked www.dictionary.com for definitions of this word, we liked the version “the act of abandoning a cause to which one has attached himself.” On further examination, we saw a use in Middle English from the Latin defectus, “to be wanting.” Organizations attract people with common interest in the causes or mission of the organization. Those who disagree with the direction of the organization, or who are left wanting, defect, and the organization goes on, for better or worse without the talents of the defector. Process flaws are also referred to as “defects” and companies spend significant time and money trying to lower the defect rate.

What attracts people to your organization, and what keeps them aligned with the causes and actions of the company? What makes certain individuals feel comfortable working at your company, and why do others leave? What would cause you “to be wanting” from the ways in which your organization lets you down? How does your company deal with people who no longer work there? How often are your comments, opinions and positions at odds with others in your organization? What would cause your company to defect from a business relationship with a valued partner? What defect rates will you decide to lower this year?

One Vote Short of Unanimous

When we read about the actions of boards of directors, especially when voting specific actions recommended for shareholder approval, we usually find that the votes are unanimous. When we noticed the action by the board of Wachovia Bank recently in rejecting a bid from SunTrust to buy the bank, the vote was reported as 14-1. The majority of directors prefer the friendly deal between Wachovia and First Union to the hostile bid from SunTrust. The Wall Street Journal (5/24/01) (http://interactive.wsj.com/archive/retrieve.cgi?id=SB990635555813326838.djm) identified the dissident as Morris Offit, second largest shareholder among the directors. “When it came time for the board to vote, Mr. Offit explained he wouldn't reject the SunTrust offer because he liked the SunTrust business model and thought the cultural compatibility of SunTrust and Wachovia was better than that of First Union and Wachovia. Mr. Offit also raised concerns earlier in the meeting about whether Wachovia management and its advisers had adequately disclosed details of SunTrust's overtures. Other directors believed they had been adequately informed.” While investor reaction to the First Union/Wachovia deal has been positive, SunTrust continues its hostile offer, and the fact of Offit’s vote helps to support SunTrust’s case to shareholders.

How likely would you have been to be the dissenting vote on such a significant action? How firm are your positions and opinions, and how willing are you to stand for them against an overwhelming majority that takes a different position? What differences do you have that are strong enough to lead you to defect? In your leadership roles, how important is unanimity? How many dissenting votes can you afford? How well do you recognize the dissent that may be there?

Rust on Their Trust

Top executives of Bridgestone/Firestone and Ford Motor Company continue their mutual blame game over whether tires or cars are causing accidents, and each have acted dramatically in recent weeks to limit ongoing damage to their companies. Each uses data to support one position and refute another. Days before Ford announced its own expanded recall of Firestone tires, Firestone CEO John Lampe sent Ford CEO Jacques Nasser a letter terminating the century-long relationship between the firms. Lampe said, “Business relationships, like personal ones, are based upon trust and mutual respect. We have come to the conclusion that we can no longer supply tires to Ford since the basic foundation of our relationship has been seriously eroded.” Nasser responded by saying, “We are deeply disappointed that upon hearing and seeing this analysis of Firestone Wilderness AT tires, Firestone decided not to work together for the safety of our shared customers, which is the only issue that matters.” We can expect to hear more about the defects on the cars, the tires, the brands, the relationships and the earnings of both Firestone and Ford.

Under what circumstances would you sever a relationship? How well do you articulate your expectations of your business partners? Given your observations of the behavior of executives at Ford and Firestone, what would you do the same or different from what they did?

Freedom From Want

Customer loyalty and retention is a concern for most executives. How far should a company be willing to go to avoid customer defection? Mike Ruettgers, CEO of EMC Corp., tested that willingness early in his career with that company. We read an interview in the June 2001 issue of Fast Company (http://www.fastcompany.com/online/47/emccorp.html) that after customer meetings where he heard horror stories about EMC data storage devices freezing up and customers not having access to data, he devised a bold strategy. “To make customers whole again, he insisted that they be given a choice: receive a new EMC storage system, or take one made by archrival IBM - but paid for by EMC. So many customers opted for IBM that during one quarter in 1989, at the height of the fiasco, most of the storage systems shipped by EMC were actually made by its biggest competitor.” Customers recognized EMC’s commitment to stick with them, and once quality control on EMC devices was improved, customers bought the EMC-made products again. Ruettgers said, “What that proved to me, to all of us, was that when a customer believes in you, and you go to great lengths to preserve that relationship, they'll stick with you almost no matter what.”

To what extent do your customers believe in you? How likely are they to stick with you? If your products or solutions were found wanting by a customer, how willing would you be to deliver a competitor’s solution to your customer? What have you done to minimize the chances of customer defection? What can you do next?

Wanting Another Job

We’ve offered career advice for executives in a consistent manner for a long time: the best way to get a better job is to do your current job in an exemplary way. One executive we’ve watched, Deborah Hopkins (no relation), has taken a different path. She’s let the world know she wants to move from CFO positions to CEO, and she’s made lots of job moves in what so far has been a failed attempt to achieve her objective. She moved from Unisys to General Motors to Boeing to Lucent, growing impatient with each employer when her goal didn’t seem imminent. Her Boeing tenure was 16 months, and in May 2001, after about a year with Lucent, she was fired in what the business press reported as a personality clash with returning Lucent CEO Henry Schacht. In hindsight, Boeing improved since her departure, and Lucent has been in a dive since her arrival. Stay tuned to see whether she achieves her goal with another employer.

When you know what you want, and you’re not getting it from your current employer, how long are you willing to wait around? How well matched is your personality with other executives on your team? How likely is it that you or others on your team will defect? What can you do to prevent unwanted employee defection, or how quickly are you prepared to act to drop a non-team player?

Wise Guys

The Vision Thing

We read two fascinating interviews with executives recently. Wired interviewed Intel’s Andy Grove in its June 2001 issue (http://www.wired.com/wired/archive/9.06/intel.html). Some readers of his books and observers of Intel may have concluded that Grove’s confidence and clarity come from genius and knowledge. We were glad to read that his wisdom goes deeper: “When you are in a strategic transformation, you kind of get lost. Part of you would want to retreat back to doing what you know how to do, because it's familiar, because you know what you're good at, you know where the problems are. But your intellect tells you that's not where you really want to be. So you strike out in a new direction. In a way, you have to feign more confidence than you feel, and you have to be convincing enough and courageous enough that you can affect the rest of the organization to follow you. You can course-correct as you go.” You may also enjoy reading about the money he’s lost investing in amazon.com and Webvan. Even smart and successful executives can get lost.

Herb Kelleher reminisces on what it took to build Southwest Airways in an interview in Fortune’s May 28, 2001 issue (http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=202450). Here’s one of our favorite quotes, “You have to treat your employees like your customers. When you treat them right, then they will treat your outside customers right. That has been a powerful competitive weapon for us. You've got to take the time to listen to people's ideas. If you just tell somebody no, that's an act of power and, in my opinion, an abuse of power. You don't want to constrain people in their thinking.” Thanks to Kelleher’s leadership, Southwest has been profitable and successful. In the “America’s Worst Airline” story in the June 11, 2001 issue of Forbes, (http://www.forbes.com/forbes/2001/0611/105.html) Southwest was noted as the airline that’s lost the least amount of baggage. That’s a far cry from competitor America West, consistently weakest in all areas, or United, best at ensuring that passengers arrive late.

How clear is your vision for your organization and its future? What makes you comfortable, but leaves you with the feeling that you want to be somewhere else? What course corrections will you make soon? How much time do you take to listen to the ideas of employees? What do you do that may constrain people in their thinking? How would your employees define “treating them right?”

Follow Up

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

Ø We quoted in the August 1999 issue of Executive Times an observer of newly selected Hewlett-Packard CEO Carly Fiorina that she “swims like a fish in the male and female environment.” According to an assessment article in the June 11, 2001 issue of Forbes, (http://www.forbes.com/forbes/2001/0611/054.html) she may not be swimming well in the eyes of the H-P workforce, who report “widespread anger over poor communication, sloppy execution and a disconnect between the words and actions of H-P's brass.” It may be time for swimming lessons at H-P.

Ø We called attention to pirated software at reputable companies in the January 2001 issue of Executive Times. The Wall Street Journal reported (5/21/01) that, “Software piracy grew in 2000 for the first time in more than half a decade, and 37% of the programs used by businesses world-wide are illegal copies, according to a report by the Business Software Alliance.” You may want to ensure that all software used on machines in your organization is properly licensed.

Ø Many issues of Executive Times have called attention to pay for performance approaches. We read of a growing trend of pay for performance in the May 9, 2001 issue of The New York Times (http://www.nytimes.com/2001/05/09/business/09ADCO.html). According to a survey of the Association of National Advertisers, more than two thirds of the agreements between companies and ad agencies last year involved incentive pay for the results achieved from ad campaigns, rather than traditional commission percentages.

Legacies

Crisis Manager

The job of conducting effective public relations changes dramatically during a crisis. John Scanlon, a public relations expert who helped define the way that business is done today, died in New York in early May. He tended to take on the toughest and riskiest clients, at times when they most needed his skills. He helped CBS fight off libel charges from General William Westmoreland, and when representing Brown and Williamson, he unsuccessfully tried to cast aspersions on the character of scientist Jeffrey Wigand. Just before he died, he was working with Bob Kerrey on the current controversy over action in Vietnam, and was at Jesse Jackson’s side when news broke about Jackson’s paternity of a staff aide’s child. According to The New York Times (5/5/01), “He would often suggest ideas to journalists that were totally unrelated to any paying client, in the belief that the favor might be remembered.” Clients remember Scanlon for helping them when they most needed his sage advice and his finely tuned rhetoric. For better or worse, he personified the term “spin doctor” and may have been the best practitioner ever.

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.)

The Philanthropic Poor
It’s rare for executives to have a clear view of what prosperity looks like from the perspective of minimum wage workers. Read Barbara Ehrenreich’s new book, Nickel and Dimed: On (Not) Getting By in America, for a glimpse at the world of low-wage workers. Ehrenreich left her home and family, pretended to be a divorced woman returning to the workforce at midlife without prior experience, and looking for a job and affordable housing. The book describes her experiences in Florida, Maine and Minnesota as she tried three times to live on her own while holding down a minimum wage job. Despite long hours and hard work, she couldn’t earn enough to pay for housing, food and transportation. In Key West, she was worn out holding down two jobs, waitressing and housekeeping, and failed to make enough money to survive. In Maine, she worked for a cleaning service, and we learn about the failure of a supply and demand of workers to influence pay. In Minnesota, where we expected “nice” to prevail, the cost of housing was prohibitive. Read what Ehrenreich went through, observe how she was treated, and compare what she encountered with what employees in your organization may face daily. You may come away from this book sharing our shame at our dependency on the underpaid labor of others. As Ehrenreich says toward the end of the book,

“When someone works for less pay than she can live on – when, for example, she goes hungry so that you can eat more cheaply and conveniently – then she has made a great sacrifice for you, she has made you a gift of some part of her abilities, her health, and her life. The ‘working poor,’ as they are approvingly termed, are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect; they endure privation so that inflation will be low and stock prices high. To be a member of the working poor is to be an anonymous donor, a nameless benefactor to everyone else.”

Recommendation: •••• (Highly Recommended). For a longer review and more excerpts, visit www.hopkinsandcompany.com/books/nickel and dimed.htm.

Quirky Queen of Change
Rosabeth Moss Kanter is a Harvard Business School professor who listens, absorbs, and then tells stories that can resonate with the experience of many executives. She’s back with a new book, Evolve! Succeeding in the Digital Culture of Tomorrow. Kanter offers stories about three-dozen companies and how they are changing. The stories might provide you with two or three good ideas to develop on your own, since her attempts to explain how to change will likely be inadequate for your needs. Recommendation: ••• (Recommended). To read a sample from this book, visit www.hopkinsandcompany.com/books/evolve.htm.

Lamentations
Jill Andresky Fraser has written a book full of bad workplace experiences called White-Collar Sweatshop: he Deterioration of Work and Its Rewards in Corporate America. She makes the case that except for huge rewards to top executives, the condition of white-collar workers has deteriorated over the last twenty years. She surveys the increase in job-related stress, including longer work hours and 24/7 availability, especially with pagers, cell phones and home computers. She elaborates on reductions in the benefits provided by employers to workers, along with the trend to change permanent full time workers into contract or temporary employees to reduce costs. Whether you may agree or disagree with any or many of the points Fraser raises in this book, she has captured the experience of many companies and many employees. This book is well worth reading as a way of listening to the voices of workers who feel they’ve been exploited. Recommendation: ••• (Recommended). To read a sample from this book, visit www.hopkinsandcompany.com/books/white collar sweatshop.htm.

Back to Basics
Much of the process of developing corporate strategy involves asking tough questions and coming up with clear answers. Chris Zook provides dozens of good questions in his new book, Profit from the Core: Growth Strategy in an Era of Turbulence. This is a great book to use to jump-start your corporate planning activities. You can also use the website www.profitfromthecore.com. The examples in the book are rich with lessons. The real value comes in the form of the good questions to ask yourself. How you answer, and what you do with the answers, will be up to you. Recommendation: ••• (Recommended). To see ten key questions from the book, visit www.hopkinsandcompany.com/books/profit from the core.htm.

Brief Reviews

Title and Review link	Author	Rating	Comments and Purchase Link
Far Appalachia: Following the New River North http://www.hopkinsandcompany.com/Books/Far Appalachia.htm	Adams, Noah	•••	A virtual vacation lush with images, rapids, people, stories in Adams’ slow, deliberate writing style. http://www.amazon.com/exec/obidos/ASIN/0385320108/hopkicompa
Scarlet Feather http://www.hopkinsandcompany.com/Books/Scarlet Feather.htm	Binchy, Maeve	•••	Good writing, engaging characters and interesting plot. http://www.amazon.com/exec/obidos/ASIN/0525945938/hopkicompa
More Than a Game http://www.hopkinsandcompany.com/Books/More Than a Game.htm	Jackson, Phil and Charley Rosen	••	If you really love basketball, you’ll enjoy the game after game recap in this book. http://www.amazon.com/exec/obidos/ASIN/1583220607/hopkicompa
The Dark Room http://www.hopkinsandcompany.com/Books/Dark Room.htm	Seiffert, Rachel	•••	First novel captures life of ordinary Germans during and after WWII. http://www.amazon.com/exec/obidos/ASIN/0375421041/hopkicompa
Hotel Honolulu http://www.hopkinsandcompany.com/Books/Hotel Honolulu.htm	Theroux, Paul	•	Dark and dreary stories of Paradise Lost. http://www.amazon.com/exec/obidos/ASIN/0618095012/hopkicompa
Back When We Were Grownups http://www.hopkinsandcompany.com/Books/Back When We Were Grownups.htm	Tyler, Anne	•••	Multi-generational stepfamilies in Baltimore care for each other, live, grieve, all with Tyler’s craft displayed. http://www.amazon.com/exec/obidos/ASIN/0375412530/hopkicompa
Moral Freedom: The Search for Virtue in a World of Choice http://www.hopkinsandcompany.com/Books/Moral Freedom.htm	Wolfe, Alan	•••	Like it or not, moral freedom and non-judgmentalism are here to stay, according to 209 Americans. http://www.amazon.com/exec/obidos/ASIN/0393048438/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). 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 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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About Hopkins & Company

In addition to publishing Executive Times, Hopkins & Company engages in a variety of other activities focused on helping executives succeed, including:

• Coaching: helping individuals or teams find ways to do more of what works for them, and ways to avoid what's ineffective
• Consulting: helping executives solve business problems, especially in the areas of strategy, service to market, performance and relationship management
• Communications: helping executives improve their written and oral messages

To engage the services of Hopkins & Company, call Steve Hopkins at 708-466-4650 or visit www.hopkinsandcompany.com.