Executive Times
Volume 3, Issue 9	September 2001
ã 2001 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. Seepage On a warm day, when you cup your hand and reach into a clear lake for a drink of water, as much water falls back into the lake as reaches your mouth. Some individuals and organizations are facing a similar seepage, as reported in many recent news stories. Busy executives make decisions every day to focus their attention toward certain areas and away from others. Sometimes a plan influences those decisions; other times, an external event or action demands time and attention. One of the hardest jobs for an executive is to focus on an area we’d prefer to avoid. Criminal behavior by an employee of a supplier causes enough potential damage to a major brand that two company CEOs are scrambling to limit the damage. One company that knew its product was being stolen regularly finally takes action against free-riding consumers. Wealthy investors try and fail to protect a passive investment. As you read about executives trying to dam the flow of damage to themselves and their organizations, think about what may be seeping out of your organization, with or without your knowledge. Consider what you need to do to stop the outflow. Scratching the Surface Some companies use games and contests as a way to increase business. A bottle top award plays to a consumer’s perception of getting something for nothing. McDonalds used the Simon Marketing arm of Simon Worldwide for managing its “Monopoly” and “Who Wants to be a Millionaire” games. The FBI arrested eight people in a scheme that involved rigging the game results since 1995. Simon Marketing security employee Jerome Jacobson had sole access to the winning game pieces, and he’s alleged to have distributed the winning pieces to selected individuals for a kickback. We learned from McDonalds CEO Jack Greenberg’s statement (http://www.mcdonalds.com/corporate/press/corporate/2001/08212001_2/index.html) that no McDonalds employees were involved in the scandal, and the company cooperated fully with the FBI. We expect that given Greenberg’s trouble in Europe with mad cow concerns, and in the U.S. with disclosure to vegetarians that the tasty fries really do contain beef, the last thing Greenberg needed to deal with was fraud. In an open letter to consumers in newspapers around the country, Greenberg explained what happened and announced a $10 million instant giveaway program for August 30 to September 3 to offer consumers the chance they should have had the first time around. Greenberg also appointed a task force to review all procedures for future promotions. “The task force will include leading independent anti-fraud and game security experts and is charged with scrutinizing our promotion processes to identify the ideal mix of checks, balances and oversight to ensure the integrity of future promotions.” As a response to the betrayal of trust, McDonalds cut off its 25-year relationship with Simon Worldwide, causing that company’s revenues to drop by two-thirds. Other Simon clients, including Kraft Foods and Philip Morris have also severed their relationships with the firm. Simon’s billionaire hands-off chairman, Ronald W. Burkle, struggles to salvage the company and steer it through this crisis, while investors left in droves, dropping the stock price by 75% within a few days. Burkle has tried to contain the damage by calling this the action of one rogue employee. As you’d expect, lawsuits, including consumer class action suits, have already been filed. How immune or how vulnerable are you to the actions of individuals at companies or organizations other than your own? When you outsource a business function, or use a supplier for certain specialized roles, how closely do you examine the business processes of that other organization? Does that company provide its own oversight, do you use another third-party to ensure the adequacy of controls, or do you monitor or audit the entity yourself? Have you thought about the risks to your organization when you outsource something core to your business like customer confidence, or the integrity of your brand? How much damage can a single rogue employee do to your organization? Inferior The business plan for Superior Bank was an accident waiting to happen: lend money at high rates with few questions asked to people who can’t qualify when evaluated based on the answers to prudent underwriting questions. The company was formed in 1989 when the Hyatt’s owners, the Pritzker family, and New York real estate investor Alvin Dworman, invested $42 million in a thrift being sold by the government. Regulators shut down the company in late July for poor lending practices and sloppy bookkeeping. The Pritzkers are trying to preserve their reputation by calling attention to the passive nature of their investment, and the fact that Dworman was the manager of the business. Losses at Superior Bank will run in the hundreds of millions of dollars. Meanwhile, we read in Business Week (8/22/01) (http://www.businessweek.com/reuters_market/Q/REUT-QEV.HTM.htm) that banking giant Bank of America announced its exit from such sub-prime lending, and super-giant Citigroup faces a lawsuit on predatory lending from the Federal Trade Commission involving unethical activities at its consumer lending companies. How can your reputation be damaged from your association with certain business practices? Are the short-term returns worth the long-term risk? Pirates in the Crosshairs While the DirecTV unit of Hughes Electronics has achieved 10 million customers for its satellite service, growth has slowed. We read in The Wall Street Journal (7/31/01) (http://interactive.wsj.com/archive/retrieve.cgi?id=SB996533436417376344.djm) that the company has expanded its efforts to battle unauthorized receipt of its programming by 1 million consumers. Until recently, Hughes battled piracy by filing suit against middlemen who sold equipment and access cards illegally. “DirecTV spokesman Bob Marsocci confirmed that the company has launched what it calls ‘an end-user campaign,’ including mailing strongly worded letters to potentially thousands of individuals and families suspected of pirating DirecTV signals.” Hughes is sending a message that it will vigorously pursue signal theft, and offending consumers will pay when caught. What amount of your product or service generates no revenue? How much shrinkage can you afford? How long are you willing to wait while thieves hurt your business? Talking Heads Virtually You Many executives have come to hate those ubiquitous PowerPoint presentations. Cute images pop up alongside text messages, slide after slide, making some point or another. Usually, the graphics fail to reinforce the text, and slide transitions can become downright distracting. We read in Forbes (8/23/01) (http://www.forbes.com/2001/08/23/0823tentech.html) about the latest tool to enhance PowerPoint presentations: the virtual you. Matrox has released a new graphics card called the Millennium G550 that when used with bundled software “will let you create a virtual copy of your talking head for use as an online communications tool or for giving presentations.” The company calls its new technology “Headcasting.” Just when you thought it couldn’t get any worse. How clearly do you communicate, especially to groups? Do your slides or written material reinforce or detract from your message? What tools will you use for your next “in your face” presentation? “Bully Broads” Ladies first We’re always on the lookout for programs that encourage executives to be themselves. We read in The New York Times (8/10/01) (http://www.nytimes.com/2001/08/10/business/10BULL.html) about a support group of senior women executives in California who are finding that the tough style that brought them success thus far has become an obstacle to future success. Instead of being assertive, they are being coached in a program called “Bully Broads” to be “ladies first”, and even cry at meetings to soften their intimidating personal styles. We’re skeptical. Often, behavior that is viewed as appropriate from a man can be seen as intimidating from a woman. We don’t think the answer for that situation is for women to be less assertive. No one in the workplace should create an abusive environment. Sometimes, leaders who are nice motivate followers to produce outstanding results. Other times, leaders who are harsh and demanding motivate followers to achieve outstanding results. Our usual advice remains: be yourself. How do employees, peers and bosses perceive your effectiveness? Does your demanding style ensure that competence is expected, and that you attract top performers? Does your friendly style ensure that followers will carry out your vision for success? How do the many dimensions of your personality help and hinder your performance at work? Do some of your rough edges need smoothing? Do some of your smooth edges need a little sharpening? Scanners Best practices Was it improved accounting practices, or a sense of humor that led to bar code and price labels appearing on bags of cocaine in Rio de Janeiro? We read in the Chicago Tribune (8/25/01) that police confiscated over 200 bags of cocaine labeled with the name of the gang Third Command and a slogan, “Now, it’s us,” which may refer to the gang’s takeover of a competitor’s territory. We wonder where the scanners are. Are your business practices best of class? How well do you market your products? Follow Up Here are selected updates on stories covered in prior issues of Executive Times: Ø Minutes after the August 2001 issue of Executive Times was released, we read on the Reuters wire (http://www.nytimes.com/reuters/business/business-tobacco-phil.html) that the good folks at Philip Morris came to their senses and apologized for the report they issued for the Czech government on the economic benefits of smoking to society. Ø The September 2000 issue of Executive Times called attention to the personal message of Ford CEO Jac Nasser that all the resources of the company are directed to resolve the Ford Explorer and Bridgestone/Firestone tire problem. Three recent announcements clarify the meaning of this message: 2001 earnings will be around 70 cents a share, not the $1.20 previously estimated; Nasser and Ford Chairman William Clay Ford will now share more power; and the company will be laying off staff. As Winston Churchill put it in a very different context, this may be the end of the beginning of the Explorer tire fiasco. Legacies Voice of the People Business executives rarely admire activists, and few local non-profit leaders accomplish results on a national scale. Gale Cincotta gained the admiration of the bankers she called to task, and built an organization that influenced national public policy. Her activism began in the late 1960s. When a Chicago alderman refused to pay attention to a problem with rats, Cincotta nailed a rat to the door of his office. The next day, the city’s rodent patrol arrived in the neighborhood. When lenders refused to make loans in the community, Cincotta lobbied the Federal Reserve and Congress to outlaw redlining. Through her leadership of a network of groups called National People’s Action, she encouraged passage of the Home Mortgage Disclosure Act and the Community Reinvestment Act. While bankers balked at the rules, some focused on community lending and called it “eating your vegetables,” finding the business profitable and healthy. Executives found Cincotta as an ally in building strong neighborhoods, not as a loud voice speaking against corporations. Just prior to her death in August, Cincotta succeeded in procuring state and local safeguards against predatory lending. Her dedication to community and to protecting people from discrimination will be remembered. 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.) Breezy John Hancock CEO David D’Alessandro draws on his personal experience and observations of other executives and companies to devise these 10 rules, each of which receives a chapter in his new book, Brand Warfare: 10 Rules for Building the Killer Brand: It’s the Brand, Stupid. Codependency Can be Beautiful – Consumers Need Good Brands As Much As Good Brands Need Them A Great Brand Message Is Like a Bucking Bronco – Once You’re On, Don’t Let Go If You Want Great Advertising, Be Prepared to Fight for It When It Comes to Sponsorships, There’s a Sucker Born Every 30 Seconds Do Not Confuse Sponsorship with a Spectator Sport Do Not Allow Scandal to Destroy in 30 Days a Brand That Took 100 Years to Build Make Your Distributors Slaves to Your Brand Use Your Brand to Lead Your People to the Promised Land Ultimately, the Brand Is the CEO’s Responsibility – and Everyone Else’s Too Each chapter presents breezy anecdotes and clear and practical advice from a skilled practioner of brand management. He offers ideas that sound simple and easy, but can be hard to implement, such as: companies should “allow the customer to decide how, where and when to obtain their products.” Easy to say, hard to do. Recommendation: ••• (Recommended). To read an excerpt from this book, visit www.hopkinsandcompany.com/books/Brand Warfare.htm. Shooting 108 Blanks Warren Blank’s new book, The 108 Skills of Natural Born Leaders will feed the tapeworm inside each executive addicted to self-improvement. There are not 107 skills, nor are there 109. We’ll take that back. There is a 109^th skill that Blank includes at the end of the book. If, like us, you find the language of HR-speak to be infuriating and meaningless, you’re not likely to enjoy this book. If you are one of the champions of proactive empowerment, read this book, and add “coactive” to your list, along with the other dozen buzz words per page. Blank’s premise is that leadership can be learned, and he describes 108 activities or behaviors (we can’t stoop to consider them skills) that the best leaders use to succeed. One chapter allows readers to perform a self-assessment (from the perspective of others?!) that allows an executive to hone in on areas for improvement. The advice in this book may be well-intentioned, and is based on observations or stories about selected executives, but no real facts or data are presented about leadership effectiveness. Blank just doesn’t seem to get it. He reminds me of the picture drawn by a pre-schooler depicting his father at work. It showed someone at a desk, talking on the phone, writing on a piece of paper. When asked what kind of work his father does, the boy answered, “He talks on the phone and writes on paper.” That’s accurate, but somewhat incomplete, and certainly out of context. Blank’s advice in this book may be accurate, but it’s also incomplete and out of context. Many of the 108 activities contradict each other, and can be a waste of time for certain executives. Recommendation: • (Read only if your interest is strong – in this case, only if you’re a self-improvement addict). To read an excerpt from this book, visit www.hopkinsandcompany.com/books/The 108 Skills.htm. Rises and Falls We didn’t make it to Maine on vacation this summer, but felt like we were there anyway after reading Richard Russo’s new novel, Empire Falls. Russo presents the rise and fall and rise again of the town itself and many of the characters therein. We meet Miles Roby who drops out of college and returns to Empire Falls to care for his dying mother, Grace. Grace would have preferred that Miles stay in school, and never return to Empire Falls, but he ends up never finishing college, and works at running the Empire Grill, a marginal eatery in a dying town. His landlord, the widow Mrs. Whiting, owns most of the town. The relationships among the characters resemble a soap opera, where Grace had an affair with the late Mr. Whiting, but ended up working for Mrs. Whiting. As Russo put it, “Whiting men, all of whom seemed to be born with sound business sense, each invariably gravitated like moths to a flame, toward the one woman in the world who would regard making them utterly miserable as her life’s noble endeavor; a woman who would remain bound to her husband with the same grim tenacity that bound nuns to the suffering of Christ.” Russo has written a fine novel in Empire Falls. His characters are real, and all their flaws come from being human. There’s an idealism sitting alongside cynicism; kindness paired with cruelty. All the inconsistencies seem to make sense, as in Mrs. Whiting’s words, “But that’s where you’re foolish, dear boy. Most Americans want it to be 1959, with the addition of cappuccino and cable TV.” We see Miles trying to get used to the fact of his divorce from Janine, while Janine goes on to lose weight, marry Walt Comeau, the owner of the local health club, find unhappiness of her own, and regain weight. We watch Miles’ daughter, Tick, face high school and friendships and trauma that clarifies to her father what’s really important. At his best, Russo is philosophical, and delivers life lessons through the experiences of his wounded characters. Recommendation: ••• (Recommended). To read an excerpt from this book, visit www.hopkinsandcompany.com/books/Empire Falls.htm. Ahoy, Matey Readers who loved C.S. Forester’s Hornblower novels or Patrick O’Brien’s Aubrey-Maturin series may find a new source for late eighteenth and early nineteenth century British naval fiction in the writing of Julian Stockwin. The first novel in the series, Kydd, introduces readers to Thomas Paine Kydd, and tells the story of his impressment from life as a wig maker to the crew of the Duke William, a ship-of-the-line heading out of port to fight the French. Sometimes the dialect became a distraction. The sequel to Kydd, Artemis, has been completed, but not yet published, and Stockwin is working on a third Kydd novel. Maybe over the course of the next two books, the dialect will become clearer, or a reader’s familiarity will grow with the story. Recommendation: ••• (Recommended). To read an excerpt from this book, visit www.hopkinsandcompany.com/books/Kydd.htm. A total of 19 book reviews were added during August 2001 at http://www.hopkinsandcompany.com/books/list.htm. Pick something to read from that list.
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