Thursday, April 30, 2009

CEOs Have First 100 Days, Too

All the focus this week on President Obama marking his first 100 days in office should call to attention that this period of time is crucial in the life of every new CEO.

I went back into the Directors & Boards archives to dig out "The CEO's First 100 Days," an article I published in 2002 by two longtime and respected CEO recruiters, Dennis Carey and Dayton Ogden. Their prime thesis: If a new CEO is to succeed, the most important thing he or she can do is to move quickly to put their own team in place.

"Personnel is policy, goes a favorite Washington saying," the authors write. "It is no less true in the private sector. Indeed, the reason so many companies falter after a new leader takes charge is usually due neither to flawed management nor leadership style but rather the inability or failure of a CEO to assemble his own senior team that can enthusiastically implement a new strategic direction."

Here are two specific tactics they offer:

Look Right Away for the Stars: "New CEOs ought to spend less time on grand planning and more time on determining whether top managers fit their vision. With this knowledge, the CEO can weed out the disloyal, push aside the deadwood, and pass over ineffective veteran managers to elevate star players several rungs below," Carey and Ogden write. The board should encourage the new CEO to conduct what the authors call an "independent human capital audit" to better learn about the talent he has and facilitate the selection of a new team.

Do a Board Reassessment: "The fact that a new CEO inherits a board someone else appointed doesn't make change any easier," the authors acknowledge. They recommend that a leadership change is a good time for the board to do its own internal assessment — a process that would "encourage some of their members to step down and make room for new blood." This is a "delicate matter," they recognize, but nonetheless the board, with the best interests of the corporation in mind, ought to create an opportunity for the new CEO "to select some of his most trusted advisers as directors."

"The 'first hundred days' is a yardstick usually reserved for a new President in the White House," Carey and Ogden observed in their article seven years ago. "But it is exactly the type of timetable more CEOs need to follow." 

Monday, April 27, 2009

Handling Crisis: A Tale from Black Monday

Davia Temin (pictured) tells an interesting "Black Monday" market crash story in her recent client letter. Temin, president of Temin and Co. Inc. and a longtime colleague, is a top adviser to managements on mission-critical marketing, communications, and reputation management matters. Her client letter is intriguingly titled Crisis and Marketing Strategies for 2009: Swimming Naked with the Black Swans.

I'll let Davia tell her story. It's one that all directors and senior management can appreciate in these days of coping with business and financial crisis. From here on down in this posting, drawing from her "Swimming Naked..." client advisory, it's all Davia:

"It is widely known that stress brings out the best and worst in us, but crisis is the ultimate Rorschach test. And people—boards, CEOs, managers, clients, co-workers, family—are watching. And judging.

"I do a great deal of communications and crisis coaching at the C-level. One of the things leaders are most concerned about in their organizations right now, apart from survival, is the morale and behavior of those who are left after downsizing, bankruptcy, restructuring, and 'compensation readjustments.'

"Who sees clearly? Who remains laser-focused on mission and sales? Who keeps his or her cool and quickly figures out new ways to adjust?

"Alternatively, who acts out? Who uses the stress to excuse the worst kinds of cut-throat behavior and internal politicking? Who remains courteous and, yes, even compassionate, throughout the process? Who remembers the human costs of this global disruption?

"On Oct. 19, 1987, the day of the huge, precipitous drop in the markets called Black Monday, I was working at a major global money management company. The head of the New York headquarters was roaming the halls that day, looking into every office, instead of talking to his own clients. I thought that was a bit odd, and asked him why. He told me he wanted to see how people were handling the stress, and that their behavior would be taken into consideration the next time managing directors were chosen.

"No matter how bad the crisis, people still have to come to work each day and be productive—if they are lucky enough to be employed. Leaders have an obligation to guard the psychic well-being of their employees as well as the bottom line. Employees have an obligation to put their anxieties aside and work tirelessly for their organizations, as well as to help their less-fortunate colleagues and communities.

"So, model good behavior in your own organizations and families—it will rebound well for you in ways we cannot even know."

Davia's full "Swimming Naked with the Black Swans" client letter can be read on her firm's website, click here.

Tuesday, April 21, 2009

A Simple Question. Wait ... Not So Simple

I've been following the "high stakes contest," per the Wall Street Journal, to acquire Sun Microsystems. Any time an executive has written for me, I tend to follow their careers and keep track of major events and transactions in their lives. 

I published an article by Sun CEO Scott McNealy back in 1995, titled "A Winning Business Model for the '90s." McNealy did have a winning model for that last decade, and Sun's stock was a supernova in the late '90s dot-com era. (For the 2000s, not so much.) 

In his Directors & Boards piece he made the case for what he termed the "leveraged alliance model" — by which organizations would form strategic alliances to leverage their respective expertise and specialty products. Not a new idea now, but McNealy traced how it was an innovative model when Sun embraced it as a start-up in the early 1980s, back when closed systems and proprietary products ruled, and how by the mid-90s it should be gaining more adherents. "The central premise of the leveraged alliance model is that no one can do it all alone anymore," he wrote. Fair enough. And still holding true — witness yesterday's agreement to be acquired by Oracle. 

But there was something else McNealy stated in that article even more enduring. It's such a fundamental principle, almost a truth of Biblical proportion, and yet one that so many organizations have not come to terms with. Here it is — "The first step [in determining what strategy to pursue] is to ask a very tough question: What is the company good at?"

What is the company good at? It sounds like it should be a simple question. It could be, if only it is asked ... and answered honestly ... and then acted on. But that's what makes it not so simple. "Tough" indeed, as McNealy recognized. 

We can all think of organizations, perhaps our own, that could have been spared untold anguish, value destruction, damaged reputations (institutional and individual) and just pure spinning of wheels if the board and senior management had come to an honest (i.e., nondelusional) answer to that question — and acted on it. 

Scott McNealy asked the question in the pages of Directors & Boards almost 15 years ago. He seems to have asked the question again this year, first with IBM and now finding his answer in a $7.4 billion tie-up with Oracle. Good for him. And good for you if you as a board member ask the question. Just be sure to get an answer that satisfies your strategic sense of the organization and its management's capabilities. No delusions, please.

Thursday, April 16, 2009

Why Not a Corporate Governance Czar?

What's with all the czar appointments? Now it looks like the administration has just named a "border czar" to help bring special focus to drug and immigration issues on the U.S.-Mexico border.

This is the latest in a long line of czar coronations. The U.S. created an energy czar a while ago. But the Obama administration seems to have a comfortable affinity for crowning all sorts of new czars. 

Carol Browner is our current energy czar. Steve Rattner is playing the role of car czar. Paul Volcker came aboard as a kind of economic czar. Nancy Ann-DeParle is the Obama health czar. The Pentagon has recently appointed a weapons czar. And did you know we even have an arts czar?

Even the states are getting into the game. My home state of Pennsylvania has just named an open-records czar. And this czarism business is not limited to the public sector, as per this headline from a Wall Street Journal story in February: "Anheuser's Ad Czar to Step Down."

Well, if we think that crowning czars to take on targeted accountabilities is a successful tactic, let's name a corporate governance (CG) czar. 

We certainly have plenty of work for a CG czar. We have had a disheartening crop of failed boards and weak boards that have been exposed during this Great Recession. We have a lot of work that needs to be done to help restore confidence in our system of board oversight as a critical component of free market capitalism. A CG czar could prove useful in the nation's capital to help promote sound legislative responses to the ongoing economic turmoil and to push back against overaggressive regulatory forays into the nation's boardrooms. The right CG czar could and should speak truth to power — whether it be a lethargic board, an imperial CEO, a misguided legislator, or a ruthless regulator.

Any nominations? I have one. This is an easy nomination to put forth. 

This individual is already held in high esteem for his long and distinguished service as a counselor to boards, management, and the investment community. His "good governance" footprints are all over many boardrooms and executive suites. He has parachuted into ground zero of numerous governance conflagrations and always emerged with reputation intact, leaving a better board and management team behind to carry on. His authored wisdom on "doing the right thing" has graced the pages of many books and journals (I've been honored to have him in the pages of Directors & Boards for several path-pointing advisories). He has taken the "best practices" mantra not only to boardrooms but to many a conference hall and classroom over the past two decades and counting. 

Yes, that's Ira Millstein I'm teeing up for CG czar. He's well known as a governance guru, and I wouldn't be surprised if some of my colleagues in governance have already applied the czar designation, so I don't claim any great originality with this idea. But getting back to my point — if we're having a breakout of czars to bring a dedicated focus and voice to systemic problems, let's crown one who can do some good to help get corporate governance back on track and back into the good graces of the political system and with all those who have a stakeholding in sound capitalism.

Friday, April 10, 2009

A Cup of Tea with Tony

Will anyone previously considered among the best and the brilliant come out of this global financial crisis with, if not fortune, at least their reputation intact? As each day goes by, it appears not. Today it's Kirk Kerkorian's turn to see his investing genius reputation take a "body blow."

There is an old saying when times are good, markets are purring, and everyone is looking smart and prosperous, "Don't confuse brains with a bull market." What is the charitably appropriate analogue for a deep down cycle? Maybe, "Don't confuse feeling like an dimwit with a depression."

Here is another recent case in point: Sir Anthony O'Reilly. The media mogul (pictured above), once Ireland's richest man, according to the Wall Street Journal, was a less-grand Tony O'Reilly when I first met him in the early 1980s. He was still a larger than life character back then. The marketing wunderkind was born in Dublin and worked in Ireland and Great Britain until 1971, when he was called to H.J. Heinz's world headquarters in Pittsburgh. There he rose to the top of the staid family owned ketchup company and was propelling it into a global brands powerhouse. 

I flew out to Pittsburgh, where he and I enjoyed a cup of tea in his beautifully appointed office while we nailed down a few details of his bylined article that I was about to publish in Directors & Boards. I confess that he wowed me with the force of his personality and brilliance of his mind. Because of his unconventional (at that time) global background for a U.S. CEO, his article, "Corporate America's Next 20 Years," sparkled with nuggets of eloquence and insight that only an outsider to these shores would or could convey. Sample (and remember that 1983, which is when this article was published, was a dark time to be in business, not all that far removed in many measures from today):

"America encourages optimism. This is the first great nation of the world where the rules were written by victims and not the victors. If you go back through history, through the Greeks, the Romans, the Empire of Napoleon, the British, there is a recurring theme: the victor came and conquered and imposed his rules on the subject state. The people who came to this country were themselves victims, fleeing from famine, disease, economic deprivation, and religious oppression, and they concelebrated their recollection of all that was past in the Constitution of the United States — one of the mightiest and most generous documents ever penned by the hand of man. Nothing in the history of this country leads me to believe that it need be other then encouraged by the adversity it now finds itself in."

Inspiring even today, no? Well, that was vintage Tony O'Reilly, a titan with a firm grasp on history and strategy as drivers of destiny. Heinz under O'Reilly was a business success — the company had record sales in 1982 amidst the hard economy — but never was it a governance best practices case study. Hard to believe now, but the company back then had a board of 18 members — half of whom were insiders. That was very high for a Fortune company in the early '80s. The rules were looser, and he was a swashbuckler and an entrepreneur in a big corporate home. The term Imperial CEO has not yet come into vogue, but the crown would certainly fit snugly on this rugby star turned corporate chieftain. 

Back then he had the sideline venture going in his homeland with ownership of a newspaper company. And that's what has humbled him today. Is there any business outside of creating exotic financial instruments and manufacturing cars that has such a "third rail" aspect to it as newspaper publishing? (Maybe Las Vegas casino ownership.)

So, the global financial crisis unceremoniously shreds another reputation — that of Sir Anthony O'Reilly as the far-sighted tycoon with the deft grasp on the rudder. It looks like Kerkorian is headed into the same shredder. There have been many others before. Who's next?