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Imperfect Organizations and People

August 16, 2019 //
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I only follow a couple blogs but my favorite is Leadership Freak by Dan Rockwell. The site focuses on leadership and culture in organizations. Recently, Dan had two blogs that dealt with working with imperfect organizations and imperfect people.

In the organization one, he emphasized the distinction and importance of the concept of acceptance. His point was that you first need to accept the limitations or constraints of your firm in order to have any influence or chance to improve it. And that by accepting the way things were, was not approval; just a place to start working from.

One of my jobs as CFO was with a firm going through a ton of change. The Chairman/CEO was new as were most of the top C level jobs–HR, Legal and me as CFO. It only took me a short time to realize that the place was a mess. What to do? My old mentor, Frank, said I could not quit as this was a public company with shareholders and debtors counting on the new CFO! So I tried to do what I always did: rebuild my own financial team, forge strong relationships with the other senior people and try to relink the parts of the organization that had come undone. Often I would seek out and work with the second in command of an area when I sensed they were the key to some positive change. All this takes a lot more time and energy but you can improve anything if you really try.

On the idea of imperfect people, Dan’s blog emphasized that you need to take the weak or quirky sides of people as well as their strengths. In staff roles, I saw this a lot. You could have a tax person who knew all the critical parts of the the IRS Code which impacted your firm but could not, to save their own life, try to explain any of this to others who needed to know. A good leader tries to bridge these gaps initially, with the hope that eventually the people will find a way to work together. And sometimes it really works.

The main point here is not a new revelation but maybe a new way to look at things.  Imperfections are a big part of organizational life. In fact, imperfections are a big part of most personal lives and relationships as well. But, the important takeaway is that you can still make improvements if you learn to accept and move forward versus becoming so frustrated that you do nothing. After all, none of us are perfect!

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Kiplinger Letter, Mergers and Fake News

March 15, 2019 //
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My father, who never attended college read two publications to which I still subscribe. One was the Wall Street Journal even though the only stocks he ever owned were utility companies. The other was a little known newsletter called The Kiplinger Washington Letter. At the time he read them, both were standalone firms.

For the last ten years,  the Wall Street Journal has been owned by Rupert Murdoch’s New Corp. which owns Fox News, the London Times,  and like half the media in the free world.  I have been concerned about the WSJ ever since, but somehow, to date, it seems that both its news and editorial work has managed to remain independent from its parent company. This is what was “promised” when that merger occurred. There have been complaints by now former employees and negative articles written by competitors, like the U.K. Guardian, but no Congressional committee meetings!

Now, today, in my re-titled The Kiplinger Letter, as a P.S. at the end, next to the fine print, I am told their 99 year, several generation ownership is no more. It was been sold to a U.K. media firm called Dennis Publishing which is owned by a U.K. private equity firm. And in that brief announcement it says “no changes here, same talented staff and the same mission…”. Of course, when I look on line, the last Kiplinger family editor has been replaced but will remain as editor emeritus, which means basically no title or duties.

Why am I upset? After all, Amazon’s Jeff Bezos purchased the family owned Washington Post. And the long-time business magazine, Forbes, owned and run by the Forbes family for three generations was also acquired. In all cases, the world did not end.

I am upset because, like my father, I viewed the four page Kiplinger Letter as very straight forward, well-researched and with limited bias. I have given subscriptions to a number of family, friends and mentees over the years. In a quick read, you could get caught up on where the world was and where things were trending. Now I don’t know.

Fake News in my headline is there not just to get possible new readers but because every time someone is acquired or merged, the press announcement always says the same thing. No changes, everything and everyone will stay on. But this is not the real world And things Always change especially the leadership and eventually the culture.

Is the media world better off with unique and maybe quirky people like the Forbes or Kiplinger families or is it better owned by much bigger corporate owners? As some of you know, I have worked and prospered in both small, private firms and much larger public ones. Give me the private family owners anytime!

And good luck to the small staff of Kiplinger; I do provide references.

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Indigenous or First People Day

October 12, 2018 //
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On my Apple calendar, I was told that October 8 is Indigenous People Day. Although the day is still called Columbus Day, the new term is meant to honor those people who were in North America long before our European ancestors.

In fact, historians now believe that there were several million native people here which were part of up to a thousand separate nations that ranged from Alaska, throughout the U.S. and into Mexico.

I became interested in this at a series of museums we visited in Canada and Alaska. I came to both appreciate and admire these First People. So, as I tend to do, I have now read parts of five books on the subject.

These nations or tribes often had diverse lifestyles based on the land area they occupied and their unique history and cultures. Yet all these native people, regardless of where they lived, had similar stories about the world’s creation, natural phenomena and good versus evil. Some very geographically separated groups, like our Southwest Apaches, even have a similar language to the Alaskan Athabaskan tribes.

And all these Indigenous or First People had issues establishing and transferring leadership and maintaining and spreading their culture. Just like our organizations do today. Only this was way before computers and even the written word.

Because of this, I am using stories about the First Peoples to help me illustrate points in my second book. It only seems fitting to reach back over the past millennia to seek guidance and explanations from those who came before us.

So here is a sample of how I will tie this all in. This provides a lead story in the chapter on Mentoring.

Honor Your Elders who Show the Way

In the far north of Alaska is the Inupiat nation. In the winter, there is no light for 67 days. In the summer, there are 84 days of only daylight. If you lived to become an Elder, you earned it and thus should be honored. The First People all over North America shared that same belief. The young were trained or mentored by the old. And the wisest elders were usually elected the leaders of their tribes.

The Iroquois Council, at its peak, consisted of six tribes, that working together, controlled our entire Northeast and part of the Midwest. The Council had devised a unique set of rules to govern both their overall territory and their individual tribes. Their system of government was studied by Benjamin Franklin and became the general framework for our emerging nation. And, although the Council Elders were all men, they were chosen, and could be removed, by the women of each tribe.

Fascinating and true. But I could not help but notice that old Ben did not include the part about the women in each tribe have the final power!

So think about our nation’s real First People as we honor them with a long overdue holiday in their name.

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Mergers and Culture; AT&T/Time Warner and Amazon/Whole Foods

November 5, 2017 //
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The Wall Street Journal had an article called “AT&T to Keep Time Warner’s Culture.” This refers to the proposed acquisition of the media firm by the  telecommunications firm. The deal is currently being challenged by the Justice Department. The article goes on to quote the CEO of AT&T saying he is “not a media tycoon” and he does not want to “screw it (Time Warner’s culture) up” by bringing them “a telephone company culture”.

Then the Journal had an interview with Amazon’s second in command, Jeff Wilke. In talking about their recent acquisition of Whole Foods, he said that Amazon “works hard to respect cultures that have been successful,” but that perhaps they can “help” Whole Foods with “resources, ideas and maybe IT services that Amazon has.”

This all sounds very smart and maybe even noble, but sadly, it will probably not play out this way for one or both companies. The larger, acquiring firm almost always screws up the leadership and culture of the smaller firm they spent a lot of money to buy. AT&T has offered $85 billion for Time Warner; Whole Foods cost Amazon $14 billion.

In most acquisitions, within three years two-thirds of the senior management of the acquired firm are gone. The Chairmen/CEOs go first, sometimes immediately with a huge payout for their stock and retention bonus (often equal to three years total pay.)   Sometimes they hang around a couple years to collect an additional bonus. But Chairmen/CEOs go fast followed by their key reports. With these people goes some of the knowledge and value that the acquiring firm paid for. And after the senior leaders are gone, the culture of the company starts to fade away as well. Leadership and Culture are, after all, the flip side of each other.

Why do smart companies willingly or sometimes subconsciously change the successful culture and leadership of the firms they spend a fortune to buy?

First, the acquiring firm, by definition, is the winner in the deal. Thus, they believe that their systems, procedures, people and business strategies are far superior to the firm they just acquired. When the accounting firm PricewaterhouseCoopers took over the legendary consulting firm Booz, the PWC people felt they were in charge, regardless of the rich 100 year history of Booz.

Second, the acquiring firms have lots of staff that are dying to “help” the firm they just took over. From Information Technology to accounting to Human Resources to legal, etc. etc., there are plenty of people who just want to “help.” The building material firm, USG Corporation, acquired my old Donn Corporation which was one tenth its size. USG setup 24 committees to “help” integrate Donn into USG. Donn was a loosely structured, oral culture company with few charts and procedures. USG was much the opposite. A few years later only three of the top dozen Donn leaders remained.

Third, strategies and circumstances change rapidly in business. An old friend said that large firms can change core businesses and strategies faster than people change their underwear. Honeywell just announced that they will spin off two large business groups with $7 billion of sales, so that they can focus more on their core businesses, the remaining $30 billion. Ironically, the original Honeywell business, thermostats, will be spun off with a number of businesses that were acquired in more recent years.

In closing, having been both an acquirer and one who was acquired, I would like to wish the Time Warner and Whole Foods leaders and their culture the best of luck! Things will never really be the same. It will help if you keep in mind that your firm sold and those other guys bought. There are winners and losers in deals just like in everything.

 

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Uber’s Leadership and Culture Crisis

July 23, 2017 //
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Not many firms have had the continued bad press as Uber has over the past couple years. Sued on their business and employment practices and then on their self-driving car technology. Employees filing numerous sexual harassment and discrimination suits. Now the private Board throws out the Founder and CEO, Travis Kalanick. Mr. Kalanick is a self-described bad boy who admitted before his firing that he needed help managing the company. He is also the person most people believe created and encouraged the firm’s toxic culture.

Uber has fired some twenty managers and brought a couple female executives on board. But all of these measures may be too little and too late.  So what is Uber to do?

Leadership and Culture are the flip side of each other. What Uber needs is not only a new CEO but a new senior management team. Uber should also replace most of the Board, especially the long time Directors.  Mr. Kalanick is no longer CEO but he was allowed to remain on the Board, which is another mistake. Why? Because it will take a new CEO, senior team and Board to create a new corporate culture. This is not an easy or a quick thing to do. Leadership starts at the top and that is the Board. If the existing Board could not figure out the many legal problems and ethical missteps that Mr. Kalanick and his team were subjecting the firm to, they need to be replaced. Actions speak much louder than words. And major cultural change, in this and most cases, must start at the top. The Board is who everyone in a company look to for guidance.

Uber is often cited as an example of industry disruption as taxi cabs are disappearing. But Uber has other capable competitors like Lyft. These competitors may find a way to gain an advantage while Uber tries to rebuild both its Leadership and Culture. We will see if Uber can truly change and survive.

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Millennials Choosing Where to Work

June 12, 2017 //
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Linkedin just had an article about the best places to work today. The usual suspects are listed: Google,  Facebook and Amazon and some newer, and surprising  ones to me,  Uber (lots of bad press and legal issues)  and Tesla (who makes no profits and may run out of money, not gas.)

But was really struck me was how few of the top companies even existed 25 let alone 10 years ago! The ones that remain have changed a lot: Time Warner (magazines to cable), JPMorgan (a dozen mergers later started as Chemical Bank) and Disney which looks like it may be around forever and never age like Mickey Mouse!

Fortune magazine had an article that stated that 88% of their 500 largest firms from the 1950’s are gone and predicted that 40% of today’s largest firms will be gone in 10 years.

Since I constantly advise graduates and young people where to work, this got me thinking. People used to get a job right out of college and then retire there 40 years later with a good pension. None of this is true today for millennials.

In my book, I stressed that as one moves up in their careers, they needed to study beforehand the leadership and culture of the next company they wanted to work for to try to gauge their personal fit and thus improve the chance to succeed. Now I believe that even graduates and young working people need to do this plus reading all they can about their targeted potential employer. What is their overall strategy, how sophisticated are they on technology and social media, are they well financed? And is their own business model sustainable or will they be the next industry subject to what we increasingly call disruptive innovation, like Uber to taxicabs?

Even though young graduates may work for a half dozen or more organizations in their career, they need to try to look down the road to try to figure out if their next employer will even be around! I believe this new group of millennials are better equipped and more comfortable, than my generation ever was, to research and analyze all the available, on-line information that now.  After all it is their future world. This may also be one of those few areas where most well meaning parents are just not able to help. Looking for your first job or your next job has always been difficult and in this rapidly changing world it just got harder!

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Leadership and Founders

December 25, 2016 //
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A new movie is coming about the life of McDonald’s Founder, Ray Kroc who created late in life not only a major company but a whole new type of business.

The consulting firm Bain & Company has a study and a new book called The Founder’s Mentality. In their study, Bain points out that founder-led companies delivered three time higher returns to shareholders than other large public firms.

Bain cites three main traits that they believe help founder-led firms to perform so well. In a Wall Street Journal article they relate their work to McDonalds and Ray Kroc. Having worked in my formative years for Donn Corporations’s founder, Don Brown, I wanted to add some thoughts to this important topic.

The three traits that Bain describe that distinguish founder-led firms are:

1. Insurgency where the firm declares war on its industry. For McDonald’s that involved  a whole new way of delivering food with their fast service. At Donn, we had a sense of urgency in everything we did and a disregard for traditional corporate hierarchy or functions like Human Resources.

2. Obsession with how customers are treated. At McDonalds this occurred with watching every detail from the size of the burgers to what potatoes were used for their fries. At Donn we were the first to create customer incentive trips for our customers plus unlimited expense accounts to entertain them including a yacht and condo in the Bahamas!  I would add here that I think the best founder-led firms also treat their own employees in special ways as well. For a small firm, Donn had annual employee outings, turkeys at Thanksgiving and Christmas gifts for our employee children in every world-wide location.

3. Companies are steeped in the owner’s mindset. For Ray Kroc this meant setting up a next generation of founders in his unique franchise system. For Donn Corporation, Don Brown’s vision and values formed its culture and leadership style that caused the company to grew rapidly and prosper. Much of the culture was based on respect, trust and faith in each other. Thirty years after Donn was sold to USG Corporation over 125 former employees signed up for a potential reunion.

In my book, The Business Zoo, on Amazon the ending chapter is on Leadership and Culture. Ray Kroc built that at McDonalds as did Donn’s founder, Don Brown.

I wish all my readers of this blog or my book a wonderful Holiday Season and great 2017!

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Volkswagon’s Board Flawed Culture

December 26, 2015 //
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The Wall Street Journal recently ran an article about the engine emission crisis at Volkswagon (VW). Senior executives of VW acknowledged that their firm had a “culture of tolerance for rule breaking” that lead to this “chain of mistakes”. Although the article did not name exactly who ordered their engineers to install the software to fool the tests, the article did state that it found no evidence that “VW executive or supervisory Boards were involved in the fraud”.

Yeh. Heard that one before. After British Petroleum (BP) had the disastrous oil spill in the Gulf, a top writer from Fortune magazine stated that BP’s long time focus on cost cutting versus safety goes back directly to the Board of Directors. The Gulf spill was proceeded by several major safety events including a huge explosion in Texas that killed a dozen workers. All organizations look for guidance or direction from the top and a Board is the ultimate top. It appears that maximizing profits through cost cutting was a top priority over safety for BP and its Board.

At my old firm, USG Corporation, every meeting, even the Board meetings, started with a review of safety. This goes back to when USG started as a gypsum mining firm. Major accidents, especially deaths, are reviewed in often grisly details. Senior people, including myself, would attend safety dinners when a plant reached an accident free milestone. Safety was a core value at USG Corporation.

Sadly in most of these disasters like BP and VW often a few, token senior people are fired but with huge severance packages. But a lot of staff or line engineers at these firms lose their job and often their livelihoods because of their presumed role.

At VW, the Board and the senior executives looked the other way or showed a tolerance for rule breaking or it would not have occurred. And  German car companies are known for their excellence in their engineering and engines. That makes this all the more unbelievable to me.

In my view, senior executives and Board members must be held to higher standards than they are and at times, they need to bear the blame and responsibility for not focusing on what is right.  Read the rest of this entry »

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Banks, Culture and Federal Regulators

February 8, 2015 //
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The Wall Street Journal just had an article about how the federal regulators are trying to figure out if the Banking industry has some inherent flaws that somehow tie to a Bank’s culture. The regulators are worried that the specific crimes or security violations we read about are not just isolated examples, but relate to deeper issues in the Banks. But the regulators are having trouble figuring out how to define each Bank’s “culture”. Even the Banks themselves are hiring legions of Consultants to help them define their own culture. One well known Bank created a “happy to grumpy” ratio of their employees as one way to measure culture.

Well, if they had only asked certain retired Chief Financial Officers, like me, who had worked with Banks, they could have learned a few things in a hurry. The reason I chose “retired” CFOs is that they can be more honest now than when they worked for companies who needed the Banks to survive or grow.

Wall Street Bankers are certainly a unique breed. In my book, The Business Zoo, I have a lot of stories that relate to Bankers and their culture. A few of these are as follows:

“It’s only Business, not Personal.” This means a Banker can lie to you, but because it’s about business, he is not a bad person. Heh.

“I would sell my mother for an eight of a point!” This means that in a large deal, even a very small extra fee or interest charge, is worth doing almost any unthinkable thing to achieve. This can include breaking laws or client confidentiality or whatever. That quote is word for word from a senior U.S. banker.

“Dining with Wolves, Rats and other adversaries”.  Does this one really need more of an explanation? Let me just say I admire and respect wolves.

Bankers also have the same trait that relates to many Consultants. They believe they are smarter or better than the rest of the world. Even in my youth in public accounting, at the now defunct Arthur Andersen & Co., we were taught this. It becomes part of the ‘Culture” that these firms use to distinguish themselves from others. But it can also lead to trouble.

But the most fascinating aspect of this WSJ article was how both Bankers and their Regulators are apparently having trouble identifying Culture and are even hiring outside consultants (often with their own problems) to help!

So here are a couple of tips about Culture from my final chapter in The Business Zoo. 

Culture and Leadership are the flip side of each other. Study the Bank’s past and current leaders and you will learn about the firm’s culture as well. The good, the bad and the ugly.

Culture, as defined in the Royal British Columbia Museum, is a complex system of tools, language, arts and beliefs that help humans survive. To determine any organizations’s culture you must spent time studying their systems, procedure, policies, whether written and unwritten, or formal or, more importantly, informal. To study and define a bank’s Culture, Regulators will need to invest a lot of time and hard work.

Or you could hire a few retired CFOs who have spent decades around Banks!

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Microsoft and Minecraft, A Culture Clash

January 6, 2015 //
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My 14 year old grandson with his younger sister were in Chicago this fall for a visit. He and I went to lunch for his favorite food, snow crab legs, while my wife, Tricia, took the grand daughter shopping on Michigan Avenue.

While watching my grandson devour his second order of snow crab legs, I am trying to engage him in a conversation. Conversations with teenagers are always a challenge.  I cover one of his favorite topics, the latest super hero movies-is the new Thor (God of Thunder or something) movie the second one in the series? No, Grandpa Brad, he politely says, it is the third. Who would know? Are D.C. and Marvel movies and super heroes the same group? No, again. I should have known since decades ago, I read comic books!

I decide to try to teach him something about business using one of his other favorite subjects, Minecraft. For those of you not familiar with Minecraft, it is described, on the source of all wisdom, Wikipedia, as a sandbox indie game involving building structures in a 3D generated world. Like most video games it involves exploring, acquiring resources, combat and survival. Which really does sound like business or The Business Zoo! Any parent or grandparent with a teenage boy especially knows about Minecraft. It actually seems more civilized and almost educational compared to most video games which focus on zombies or flying birds attacking hungry pigs. It was originally developed by a Swede called “Notch” and has a cult like following.

The week before my grandson arrived in Chicago, Microsoft, the software giant of Bill Gates, agreed to buy Minecraft for a couple billion dollars. “Notch” will not be part of the new business but will walk away with a lot of marbles and a lot of swedish krona.

I, sadly, tell my grandson to enjoy Minecraft now because it will either become boring to its fans or it will disappear once Microsoft gets their hands on it. Why he asks me? I tell him the sad corporate truth. Big, sleepy giant firms like Microsoft love to buy smaller, trendy niche companies like Minecraft but they almost always destroy the unique Culture and Leadership the smaller company had. The big firms can not help themselves. They want to make the new, smaller firm just like them and by doing so they ruin it. Microsoft has been around almost 40 years and they believe they are much smarter than the people at 4 year old Minecraft. As I have written before, within three years of a takeover like this, two thirds of all the senior and upper level people at the acquired firm, Minecraft, will be gone. With the founder leaving here it will even be accelerated.  Sorry, grandson, that’s the way business and deals work.

My grandson shrugs and he goes back to explaining to me the difference between the Justice League (D.C. Comics) and The Avengers (Marvel Comics).

Happy New Year to all!

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