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The GM Nod, Culture and Leadership

July 18, 2014 //
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We have written a lot here about Culture and Leadership as the over riding and most defining aspects of most organizations. Now I am reminded of this again as the news media covers in great detail General Motors’s recall issues.

When the new GM CEO, Mary Barra,  discusses what apparently happened in countless internal GM meetings, she refers to the GM Nod. This is described as when everyone seems to nod their head as if they agree Something must be done, but then Nothing happens. She also is quoted discussing a similar issue, that GM, at times, seemed to have a “troubling disavowal of responsibility” . To help resolve all of this, she vows to upend the corporate culture responsible for this “pattern of incompetence”. To this I add, Good Luck!

General Motors has been around a very long time. For much of that time they were one of the greatest corporations in the world and, along with Ford and Chrysler, a wonderful training ground for decades of leaders inside and outside the auto industry. During that time, the Culture of GM was formed, in part by the Leaders. They were the best and they believed their way was The Only Way. During the last twenty years with the invasion, as they called it,  of “foreign cars” from Europe and Asia, things have not been as rosy. But, trust me on this one, the Culture of GM stayed essentially the same. If you read reports of the GM bankruptcy, the outside experts that the government sent in to “help” GM were amazed on how insular and isolated the GM leaders were. So a whole generation of them were retired or fired. But the Culture stayed on.

But the issue is not just with GM. As I consult or mentor young people, I hear similar stories. Two hour meetings of 20 people from four or five different operating and staff  groups that accomplish nothing except to hear people talk. Sometimes at the end of one of these meetings, some “Leader” will announce that is was great that we talked about this! Today, especially in large organizations, no one wants to show initiative or take responsibility for anything because they are Afraid. And as you have learned by now, fear should have no space in business or in a zoo!

The answer to this at GM and elsewhere is not first in trying to change the culture. It should be the leaders, who act, encourage and reward others to take personal initiatives. And to assume responsibility. I was taught, years ago, that if I was in any way responsible for something, I had to assume that responsibility and not try to Nod it off to others.

The last Chapter of my book, The Business Zoo, covers Culture and Leadership and how they are the flip side of each other and how either can make or destroy an organization. Good luck to GM CEO, Mary Barra. A lot of leaders try to change culture but often the culture wins!

 

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Leaders fitting a firm’s Culture

May 7, 2014 //
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The Wall Street Journal recently ran a story “Making Sure the Boss is the Right Fit”. The article cites some recent examples where seemingly exceptional leaders, from places such as Google, failed to mesh with the people or culture of their new firm.

We could go on with dozens of examples of this problem. The wizard from Apple who tried to transform J.C. Penney or the revolving door of leaders that Hewlett Packard had in the last decade.

One fascinating comment in the article was that it should take a lot more than interviews to avoid costly mistakes when hiring a new leader. And we will come to that. But one failure that both companies and potential executive candidates are guilty of, is not enough of or the right kind of interview. The higher the position is, in my mind, the more number and diverse the interviews should be.

My old private firm boss, Don Brown, had 7 interviews with a very qualified and ultimately successful candidate (that I had personally found!)  That seems like a lot and it is. But we had individual interviews, two on one interviews, two separate, private dinner interviews and even a dinner with spouse interview. Dinner interviews are especially critical and revealing. In an hour or so in the office, you can gloss over  a number of issues that can be much more fully explored or discussed in a two to three hour dinner. I am not saying that 7 is the right number, but too often in our fast paced world of business, we don’t spend enough time with interviews.

Which brings us to who should or could be included as part of the interview process. The direct boss, of course, and a couple other superiors who could be Board members. Also, a wide sample of the people who will report to the new hire. In the case of a potential CEO, the list should include the CFO, the heads of a couple businesses, the head lawyer and, my favorite, the head of HR. But smart firms also add to this list. Perhaps some very bright up-and-comer who is not shy. Maybe a soon to retire old, salty veteran who really knows the firm, its people and its culture. With a mix like this both the firm and the candidate could learn something about the possible fit.

But the hardest thing to analyze with any candidate is their fit or ability to adapt to the company’s culture. In my book, The Business Zoo, we talk extensively about this. Leadership and Culture, another famous business writer said, are the flip side of each other. A strong and dominate culture can destroy a new, very differently focused, leader. A weak or fading culture can be remade or revitalized by a new, strong leader. But most situations are somewhere in the middle. Candidates should study the hiring firm’s culture through the interview process and by doing their own research. With the internet this is certainly easier. Articles in business magazines or trade journals or a firm’s own written histories can tell you a ton. And the hiring firm needs to do research themselves, and not just with a search firm, on the candidate’s style and approach to people and problems as well.

Think of it like due diligence in a major purchase of a merger. The upfront, extra time and costs invested to improve the new leader’s chance of being successful is minor compared to the cost of a failed new leader and its impact on the company.

Leaders need to fit or adapt to a firm’s culture or they will fail; not the other way around!

Take more time and make more effort when hiring new leaders and when being hired.

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Merging the U.S. and Canada

December 19, 2013 //
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No, this was not the opening on The Today Show or announced on Fox or CNN recently. Rather this is the subject of a new book published by Harper Collins by a dual Canadian-American citizen, a Ms. Francis.

Normally, or never, have I done a book review on this blog. We will not start now but we will make several observations about the book and its main premise.

Ms. Francis’ main points involve the economic logic of the two geographic neighbors becoming more of a “more perfect North American union” to compete in the world’s economy. The two countries would have an economy larger than the European Union and a wealth of nature resources, energy, water and technology.  Each country would gain something to compete better in the global economy. And the two countries (and Mexico) already cooperate on a number of fronts.  All of that actually makes sense.

But, as with many grand ideas, this starts to fall apart in the detail and especially in what I will call the “softer” issues.

First and foremost is that U.S. citizens call our selves, Americans. We believe that we are the one and only Americans. Technically, of course, we have other neighbors like Canada that could say that but only we do. Why is that? Because we believe we are, to quote Ali, The Greatest! We really never think about Canada. If U.S. citizens are asked to name some famous Canadians, we might stumble on a sports figure like Wayne Gretzky or the younger kids might say Justin Beiber but we struggle to name anyone from up there. And do not ask us who the current Prime Minister is yet alone his party. We really do not think much about Canada or Canadians. Sorry about that.

Second, and Ms. Francis does mention this, is that both countries have strong regional issues. In Canada and in Quebec province we have the French. An equal language with English. U.S. citizens do not get that one at all. Of course, we have a third of our population whose primary language is Spanish, which the Canadians might find confusing. And as different as the U.S. is with its south and west, let alone its Texas and California, Canada has very unique cultural differences between the Maritimes in the east to the their own cowboys in Calgary.

But lastly and maybe the most importantly is a small Canadian secret. Ms. Francis talks about our two countries as best friends. As noted above, one of the friends knows or cares nothing about the other. But worst than that is something my old boss Don Brown taught me. Mr. Brown was born in Canada but spent most of his life and built his business in the States. One day, on one of our private lunches or helicopter flights together he asks me a question. Brad, you have traveled all around the world for my company and met a lot of people. Which country do you believe dislikes the U.S. the most? I assumed he meant France, since the French seem to dislike everyone so that was my answer. He smiled and said, No, it was his birthplace and our neighbor, Canada. The Canadians, he explained, are so close to the U.S. and all it offers but are not here. So they are jealous and secretly dislike the U.S. Over the years, I have asked a number of Canadian friends and they all privately agree.

So, no merger of the U.S. and Canada anytime soon!

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Office Depot/Office Max, a Merger of Equals

July 6, 2013 //
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Disclosure: I own a very modest amount of the stock of Office Depot. I brought it because the people who work in the Chicago and Florida stores we frequent are so helpful and polite (and thus well managed). They even talked me into their frequent buyer program and each year I get about $20, which is enough for a modest bottle of wine.

Because of my vast ownership, I and thousands of others, received the Joint Proxy Statement to announce their merger and to get my vote. The second line on the cover announces that this is “A Merger Of Equals”.

So, I naturally found this lead-in fascinating enough to actually read much of the important parts of the 250plus page Proxy. In the finer print, you find some interesting details: 1. Office Depot shareholders will get 55% ownership to 45% for Office Max, very interesting.  2. Office Max legally will become a subsidiary of Office Depot, also interesting. 3. For tax purposes, they hope to qualify the merger as a tax-free reorganization which makes sense. 4. For accounting purposes, this will be an acquisition by Office Depot of Office Max, those pesky accountants just don’t like equals! 5. The new Board will have equal representatives from both and will elect a new Chairman,  senior team, and headquarter location. That meeting would be fun to listen in on.

I am very sorry to tell the fine employees of both firms, but there are “No Mergers of Equals!” The banking world loves this phrase and uses it constantly. It sounds friendly and cooperative and even nice. But if you look at the history of bank mergers, someone always brought someone, period. Modern day JP Morgan/Chase goes back to Chemical Bank buying half their New York competitors. Most of the deals were called mergers of equals. But the old Chemical Bankers always came out on top. And within three to five years, two thirds of the other bank’s senior people were gone, “to pursue other interests”. Yes, Jamie Dimon, a non Chemical banker,  is now Chairman, but that is another story.

The reason most mergers can not be mergers of equals is that people in the same industry, whether it’s banking or office supplies, hate their main competitors at worst, and distrust and dislike them at best. Even in the same industry, the culture and leadership style of each firm is always unique and never easy to blend. That is the nature of companies and the people who run them. It is a dog-eat-dog world out there and in my forthcoming book, The Business Zoo. Deal with it.

Who will come out as the real buyer and winner of this deal? I don’t know but I am rooting for my Office Depot team!

Note to self: send in that Proxy, my shares may turn the tide!

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Culture and Leadership at Eastman Kodak

May 2, 2013 //
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My wife says I often tell new people we meet several things about myself. High on the list are: I was an accountant and my father owned a camera shop. I often say the latter, when friends, or strangers on the streets of Chicago, ask if we would take their picture. Like Eastman Kodak, the former corporate giant, my photographic knowledge and skills are all out of date. Cameras are now phones (we do have iPhones) and taking pictures and viewing them now has very little to do with what I learned in my father’s store.

So why write about a fallen corporate giant like Kodak? In part, because I knew and lived the story. And in larger part, because it can serve as a warning to today’s corporate giants just how fast and far you can fall. Eastman Kodak, like IBM, Apple, and Facebook, invented a whole industry: getting people to take and print pictures. And like these other modern giants, at one time, Kodak had a dominant market share, increasing sales, profits, and even a lot of cash.

When we owned the camera shop, we sold Kodak film, Kodak film processing chemicals and paper, Kodak darkroom equipment, Kodak prints and slides and of course, Kodak cameras. They did it all. Now they do almost nothing. Their stock once sold for $50; now, 15cents.

So what happened? Just about everything went wrong. Just as Sears ignored Walmart, Kodak’s Leaders and Culture dismissed the emergence of both Japanese cameras and Fuji film. As the world was experimenting with digital photography, they kept churning out their films and processing until no one was buying it. Their printing business, once legendary, was recently sold for peanuts to Shutterbug; another entity Kodak ignored!  Kodak also had thousands of patents on everything from photography to imaging to printing to whatever. They never tried to really license or sell these until it was too late.

Articles and probably books, can be written about what went wrong. But it gets down to a giant corporation with one main business whose Culture and Leadership seemed content to milk that business till the end. They went bankrupt and were forced to dispose of every asset they had. In the end, even their name, like Polaroid, will be sold. But don’t get me started on another innovative photography giant that disappeared.

Now, you may be thinking, well, that was Kodak. It could never happen to Apple or Facebook, they are unique and special. So was Eastman Kodak in the days of my father’s shop and even into the year 2000 when their stock was still $50. But when giant firms fall, they fall fast. Even the Wall Street Wizards can not predict the timing or the bottom.

Culture and Leadership are the key factors in any organization. They are often called the flip side of each other. In my book, The Business Zoo, we end with this critical subject that in some ways, ties everything together. They also drives firms to great success or to their untimely end.

And if you work in an organization that dominants its industry and has only one, main successful business, you better do a better job  managing your business and planning your future than some of these fallen giants of industry.

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Piling on Groupon

March 8, 2013 //
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Lessons from Groupon:

The Wall Street Journal just ran a comprehensive article on 3/1/13 “Struggling Groupon ousts its quirky CEO”. Being Chicago based, as I am, I have followed Groupon’s evolving story over the last few years.

Groupon’s premise is to issue daily coupons for mostly retail services to large groups. Thus the name.

A couple years ago, a lot of our Chicago friends, especially young ones, thought this was the greatest.

Some retail service and restaurant people we knew were not as excited to issue often hundreds of coupons at or below their cost to try to attract new customers.

But, for a while at least, Groupon became Wall Street’s latest darling. After turning down $6 billion from Google, it went public. Its initial stock offering (IPO) in November of 2011 was well received with the stock starting out over $25 and a total market capitalization or value of $16 billion.

Today, the stock is closer to $5 and the total market value below Google’s old offer. Not good.

In my book, The Business Zoo, we look at the critical factors that can lead to an individual or firm’s success or failure. Let’s look at a few of these using Groupon and see what lessons we can learn.

Strategy. Harvard’s Michael Porter stressed the need to understand your industry and have a significant advantage or barrier to entry versus your competitors. Although Groupon was one of the first to make group coupons big, it only took a short while for others to follow. You needed an office, a computer and a phone.

Groupon has recently stated they were reviewing and improving their business model. A little late.

Financial Integrity. Right after their IPO, Groupon had to revise/lower their financial results. They had used the novel approach of not expensing all their selling costs to obtain customers. The SEC also questioned their financial disclosures. Never good.

Culture. Groupon, like many startups and tech firms had a unique company style and approach. They acted aloof and private even after going public. This works for Apple, to a degree, but you must be growing and increasingly successful to do this. They are not.

Leadership. Groupon’s recently fired CEO was young and even described himself as a bit weird. He had an older partner who helped him start the firm. But recently the older partner was upset with the company’s performance and apparently its younger CEO. Issues at the top of a company must be resolved before they destroy the whole firm. But can a successor turn this ship around? We will see but it will not be easy.

Board of Directors. It took a year and a half before the Board decided to change leaders. Then it was reported that one Board member was contacting possible replacements for the last month. There are no secrets in most industries so this behavior seems hard to understand. But do not get me started on Boards of Directors, I spend a whole Section in my book on them.

So Groupon and its new leaders have their work cut out for them. But when there are issues with the Board, the Leadership and the company’s Culture, it may be too late. If you read that Groupon has hired some famous investment banker to “pursue strategic alternatives” that means the Board has figured it is time to exit.

Then its bye, bye Groupon and all those great deals!

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