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ã 2003 Hopkins and Company, LLC
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They’re Doing What?
The news doldrums of summer may contribute to creating
the phenomenon we observed while reading the business press over the past few
weeks. More often than not, after reading a story, we asked ourselves the
question, “They’re doing what?” Perhaps it’s a form of strategic encryption,
or a way of expressing the dictum, “The best defense is a good offense.” One
way or another, we noted frequently that companies and executives were
surprising us by their actions. This month we look at a company that’s suing
its customers; a company that’s thrown out its own practices to copy a
competitor; a CEO who gave back his severance pay; and a media giant whose
lawsuit helped an enemy. As you read these stories, consider the impact of
the element of surprise as you carry out your objectives. Do you fear the
unexpected? Do you surprise your competitors? Are your actions
counterintuitive? Are your actions likely to lead toward unintended
consequences?
Fifteen new books are
rated in this issue, beginning on page 5. This month’s reviews are full of
surprises. We awarded two stars to a book written by Ken Blanchard.
Who would have anticipated that, given our run of DNR ratings for his
earlier books? We read a bunch of debut novels as midsummer arrived, and
actually liked some of them. On the other hand, four books received skimpy
one-star ratings this month. It says something about the lazy days of summer
if we actually kept reading books we didn’t like. Jump ahead to find out
which ones rated so low. You may be surprised at some of our judgments. You
can also visit our 2003 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html
and see the rating table explained as well as explore links to all 2003 book
reviews.
Hammered
At the completion of construction
of almost every newly built house, there are a few items left to finish,
either before or after the new owners take possession. Usually called a punch
list, these items can be large or small in the mind of the builder or the
homeowner. Every builder wants to finish a house, get paid, and move on to
next house. Tract builders want to wrap up entire subdivisions and move on.
Most builders will accommodate all but the most fussy buyers in the haste to
collect money and move on. Sometimes problems arise after closing, and most
builders will respond quickly and perform repairs. Occasionally, there are
disputes between builders and homeowners, and most get resolved
expeditiously, given the motivation of the builder to finish and move on and
avoid negative publicity. We were surprised to read a page one story in The
Wall Street Journal (August 18, 2003) (http://online.wsj.com/article/0,,SB106115762963621600,00.html)
about troubles in Texas between KB Home and many homeowners. KB has an
almost 50-year reputation for building inexpensive tract homes. Founded by Donald
Kaufman and Eli Broad, and formerly known as Kaufman & Broad
Home Corporation, the company sold almost 8,000 homes in Texas last year.
According to the Journal, KB dropped the ball on follow up repairs of some
homes, causing consumer backlash. One subdivision was built on land used by
the Navy in the 1940s as a practice-bombing range. While KB relied on
a 1956 letter from an Army Corps of Engineers bomb removal team
stating that bombs had been removed from the surface of the site, homeowners
are finding buried ordinance on the site, and are worried about safety. KB
claims the bomb that was found on the site was planted there by the
protestors, and that they found no bombs when they excavated the site prior
to construction. The lawyers seem to have taken over, and what KB thought was
a certification of remediation may turn out to be fodder for the homeowners
who interpret the 1956 letter as discouraging anything other than above land
use of the property, not something going below ground like homebuilding. We’d
expect a typical lawsuit, and that is proceeding. In addition, homeowners
have protested at KB work sites and offices. So, KB sued a group of
homeowners for $20 million in “malicious damage the defendants did to its
reputation and business.” Suing homebuyers must really help new home sales.
How do you ensure that small customer problems and complaints don’t
escalate for your organization? What defect percentage is acceptable to your
organization for your products and services? Is that the same percentage
that’s acceptable to your customers? To what lengths are you willing to go to
satisfy a customer? If customers picketed your office or work sites, what
would you do?
Short Circuited
Successful executives usually make
a conscious decision to match the practices of a competitor, or differentiate
their organization to provide better satisfaction of customer needs. Customer
expectations are built over time, and customer perceptions change slowly.
We’ve watched the battle of Circuit City for years, in using a
somewhat knowledgeable, commissioned sales force to compete against companies
that deliver products in warehouse-like settings like Best Buy and Wal-Mart.
We read in The New York Times (August 18, 2003) (http://www.nytimes.com/2003/08/18/business/18ELEC.html)
that the executives at Circuit City may be making a significant change. When
they relocated a store in Virginia, not far from headquarters, they changed
the format to a warehouse style, and parked themselves across the street from
a Wal-Mart, which surpassed the chain in electronics sales last year. They
replaced the sales force with hourly workers, who don’t necessarily need to
try to convince buyers to purchase warranties on low priced items. Two
factors seem to have influenced their decision to change. Product life cycles
for electronics are shortening, which means unsold new products become
commodities quickly, and margins are cut dramatically. Second, Circuit City
wants to eliminate some intermediaries by purchasing goods directly from
factories in China. While Circuit City may be emphasizing low priced items
and self-service, Best Buy is moving upmarket and offering more services, and
Wal-Mart is beginning to carry higher priced electronics, including $5,000
plasma TVs. Which company’s strategic move will produce the greatest success?
How quickly can consumers change their image of what a company offers?
Is your organization known for its way of doing business? How well do
your methods work today? If you wanted to change your approach, what would it
take to succeed? Why do customers choose to do business with your
competitors? Should you become more or less like those competitors?
Throw It Back
There’s a rare opposing team home
run at Wrigley Field that isn’t thrown back on the field. Rarer still is the
ousted CEO who returns severance pay without receiving great pressure to do
so. Here’s what we read in The New York Times (August 19, 2003) (http://www.nytimes.com/2003/08/19/business/worldbusiness/19alst.html):
Among this summer's oddities, which have included a record-breaking
heat wave and a lack of tourists, the French were startled today by news that
a former senior executive at one of the country's largest conglomerates was
forgoing a $4.6 million severance payout after being criticized for his
management record. The manager, Pierre Bilger, the former chairman and
chief executive of Alstom, which makes things like gas turbines, told
his successor in a letter that he would repay the money, 4.1 million euros,
because he did not want the issue to be a burden on present management. In
the letter dated last Thursday to Patrick Kron, Alstom's present chairman,
Mr. Bilger wrote that he had taken his decision, "not to be an object of
scandal for the hundred thousand employees of Alstom whom I had the honor to
direct, and for the shareholders, whether employees or not employees, who
placed their trust in me." Mr. Bilger said that he had received a total
of 5.1 million euros upon leaving Alstom, but that a part of that represented
his pay for the final period of service. He said that he had received a
severance payout of 4.1 million euros, which he would return to the company.
Alstom teetered on the edge of
bankruptcy under Bilger’s leadership. It’s too early to see if this is a
trend. The Times reported that Credit Suisse and ABB
executives returned compensation under pressure, while former Vivendi
executive Jean-Marie Messier won a court ruling that the company owes
him severance pay, even though such pay was not approved by its Board.
How do you think about your
reputation? Would you be more likely to do what Bilger did, or more like
Messier? Are other leaders in your organization more like Bilger or Messier?
Which one would you rather follow?
That’ll Show Him
What were the executives at Fox
thinking when they filed suit against Al Franken for including the Fox
slogan “fair and balanced “ in the subtitle of his new book, Lies and the
Lying Liars Who Tell Them? After news stories hit, the book zoomed to the
top of the amazon.com best seller list. Fox claimed that consumers might
associate the Franken book with Fox, and use of the phrase would “blur and
tarnish” it. The judge who heard the case dismissed it quickly. The Drudge
report (http://memes.org/modules.php?op=modload&name=News&file=article&sid=1882)
speculated that Fox filed the lawsuit to placate Bill O’Reilly, who pressed
the company into defending itself. Instead, Fox helped an enemy succeed, and
caused a lot of observers to poke fun at the whole issue. Our favorite
sidebar came in an op-ed (The New York Times, August 19,2003) (http://www.nytimes.com/2003/08/19/opinion/19NEWM.html)
from Paul Newman saying: “Unreliable sources report that
the Fox suit has inspired Paul Newman, the actor, to file a similar suit in
federal court against the Department of Housing and Urban Development,
commonly called HUD. Mr. Newman claims piracy of personality and copycat
infringement. In the 1963 film "HUD," for which Mr. Newman was
nominated for an Academy Award, the ad campaign was based on the slogan,
"Paul Newman is HUD." Mr. Newman claims that the Department of
Housing and Urban Development, called HUD, is a fair and balanced institution
and that some of its decency and respectability has unfairly rubbed off on
his movie character, diluting the rotten, self-important, free-trade, corrupt
conservative image that Mr. Newman worked so hard to project in the film. His
suit claims that this "innocence by association" has hurt his
feelings plus residuals.” Thanks to
Fox, a future issue of Executive Times
will review the new Franken book.
How easily can you be led into an
action that will help your competitors and hurt your organization? How
sensitive are you to criticism or parody? Can you take a joke?
Follow-up
Here are selected updates
on stories covered in prior issues of Executive Times:
Ø Not long after our update about new forms of
variable pricing in the July 2003
issue of Executive
Times, we read an article in Business Week titled,
“Sharper Tools for Discriminatory Pricing.” (http://www.businessweek.com/technology/content/jul2003/tc20030731_6139_tc073.htm).
Andrew Odlyzko, the director of the University of Minnesota's
Digital Technology Center, will present a paper this fall at the Fifth
Annual Conference on E-Commerce. Readers interested in this topic will find
the BW interview with Odlyzko interesting.
Ø We encouraged readers of the August 1999
issue of Executive
Times to think about
women in leadership positions and the extent to which a glass ceiling exists
in your organization, and what you can do to remove it. We updated that cover
story in the May 2000
issue with data from the Bureau of the Census reporting the rate of
growth of women achieving leadership positions. We read recently (Chicago
Tribune 8/9/03) (http://www.chicagotribune.com/news/printedition/chi-0308090150aug09,1,3897593.story?coll=chi-printnews-hed)
of a research study from Northwestern University that reveals
something many workers have recognized for a long time: women are better
bosses than men. That study should stir things up a little.
Legacy
World Service
A Brazilian diplomat who worked for the
United Nations since 1969 was unknown to almost all Executive Times readers until his death. Sergio
Vieira de Mello was the U.N. High Commissioner for Human Rights since
2002, and was tackling another challenging job as a special representative in
Iraq when his office in Baghdad was bombed on August 19, 2003. His dying
words were to ask the U.N. to continue its work in Iraq. U.N. Secretary
General Kofi Annan said of Viera de Mello, “He impressed everyone with
his charm, his energy, and his ability to get things done - not by force but
by diplomacy and persuasion.” Thanks to the work of Viera de Mello, the
Indonesians reconciled with the people of East Timor, and Bosnian Serbs
cooperated with relief efforts. In Iraq, Viera de Mello was trying to keep
all parties focused on the common goal of creating a stable, democratic
nation. We read in one obituary (http://www.time.com/time/covers/1101030901/wbomb2.html)
a quote from long-time friend, Richard Holbrooke, former U.S.
Ambassador to the U.N.: “He had two skills that you don't usually find in the
same person. He was a consensus builder, but he wasn't a
lowest-common-denominator person. There was only one Sergio.”
In
a world of competing self-interests, Viera de Mello worked to find common
ground, to solve problems peacefully. He lived a life of service to all
citizens of the world. He earned our gratitude. He will be missed.
Latest Books Read and Reviewed:
(Note: readers of the web version of Executive Times can click on
the book covers to order copies directly from amazon.com. When you order through these links,
Hopkins & Company receives a small payment from amazon.com. Click on the title to read the review or
visit our 2003 bookshelf at http://www.hopkinsandcompany.com/bookshelf.html).
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Title
(Link to Review)
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Author
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Rating
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Review
Summary
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Purchase
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Jennifer
Government
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Barry, Max
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Affinities. Corporate marketing becomes malevolent in this creative satire.
If you think marketing is already evil, you’ll love this book.
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Full
Steam Ahead
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Blanchard, Ken
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••
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Steady As She Goes. Expecting seasickness, nausea and a DNR rating
for the latest from the perennially sappy Blanchard, we came away nodding
in agreement with some of the practical and useful thoughts from this new
offering.
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Seizure
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Cook, Robin
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•
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Slippery Slope. Unethical medical behavior leads to major crimes and
punishment. Poor writing overall, with weak dialogue, predictable plot, and
shallow character motivation.
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Moon’s
Crossing
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Croft, Barbara
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••
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Spinning. Debut novel from short story writer spins together the
life of Jim Moon with tales from the Civil War, his Iowa marriage, the way the
World’s Columbian Exposition captivated him, and how he died in New York.
Lyrical, confusing at times, and replete with subplots that seem to go
nowhere.
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The
Quality of Life Report
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Daum, Meghan
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•
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Addicted. Debut novel pokes fun at NYC self centeredness and
Midwestern political correctness as protagonist leaves NYC seeking an
improved quality of life, but finding cycles of addiction and recovery.
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E2: Using the
Power of Ethics and Etiquette in American Business
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Davis, Phyllis
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•
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Right Shoulder. More etiquette than ethics, and few business leaders
want to read about etiquette. Agreed with her name tag advice (right
shoulder). Read our excerpt
on business meetings before taking on the whole book.
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How
to Become a Great Boss: The Rules for Getting and Keeping the Best
Employees
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Fox, Jeffrey J.
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•••
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Straightforward. Brief, clear and plain talk about being a boss. Even
if you hate “how to” books, you may find some of this inspiring, practical
and usable.
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The
Curious Incident of the Dog in the Night-Time
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Haddon, Mark
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•••
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Unique. Creative debut novel uses a narrator with autism to reveal
the story and allow readers a glimpse into the worldview of those with autism.
Best debut novel read so far this year.
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Under
the Banner of Heaven: A Story of Violent Faith
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Krakauer, Jon
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•••
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Quest for Truth. Well-written exploration of the sources and
formation of modern Mormon Fundamentalists and their violent and bloody
quest for creating and preserving religious faith in the West.
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Moneyball
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Lewis, Michael
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•••
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Facts. Liar’s Poker author examines major league baseball and
why the Oakland A’s win so many games while spending so little money on
players. Great lessons for any business about paying attention to the right
performance measures.
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The
Pursuit of Alice Thrift
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Lipman, Elinor
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•••
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Personality. Romantic, not sloppy story of medical resident, Alice, and
her unusual suitor, Ray. Lots of funny scenes and throwaway lines as well
as some complicated mother-daughter relationship expectations.
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A
Close Run Thing
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Mallinson, Allan
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•••
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Charge! Readers who enjoy Patrick O’Brian’s naval fiction set during
the Napoleonic wars will enjoy Mallinson’s portrayal of the cavalry of the
same era.
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Bush’s
Brain: How Karl Rove Made George W. Bush Presidential
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Moore, James and Wayne Slater
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•••
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Relentless. Political junkies of all stripes will read the vignettes
presented about Rove and come away thinking about how much they know and
don’t know about this close advisor.
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The
Devil Wears Prada
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Weisberger, Lauren
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•
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Role Models. Odd novel of the relationship between the boss from hell
and a naïve and submissive assistant in a job a million women would die
for. Some funny parts, then pathos, then ennui. Unappealing characters.
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Born to
Steal: When the Mafia Hit Wall Street
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Weiss, Gary
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••
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Unwise Guys. Business Week reporter uses the life of Louis
Pasciuto to describe some ways that the Mafia operates on Wall Street. Meet
unsavory characters doing bad things.
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