Peter Drucker, a writer of 39 books and a management consultant, was considered the “father of modern management”. An avid student of managing complex businesses, he was the advisor who helped mold many corporations into industry leaders which forged this country’s ability to become an economic super power.
A Sampling of Mr. Drucker's Tenets:
“In most business failures, the board was the last to realize that things were going wrong.”
“Managers should make a decision no later than you need it, but as late as possible, because you always have more information.”
“Do reported profits exceed the cost of capital? Review and audit capital allocation decisions of the past year.”
(I suggest random sampling of capital expenditures for prior years and reviewing several to determine if the forecasted return on investment was achieved.)
“Above all management is responsible for producing results. Profit is a requirement for a company…profitability is not the purpose but rather the test of their validity.”
“Management is about human beings. Create an atmosphere where people are permitted to make mistakes.”
(His simple advice to clients: “It’s all about the people.” He was concerned with retaining “knowledge workers” which today most companies describe as the “A” level employees.)
“Never promote an employee on the basis of his or her potential, but based only on performance.”
“Picking a leader: would I want my son or daughter to work under that person?”
Source: “The Daily Drucker” by Peter Drucker, 2004
Showing posts with label Culture Change. Show all posts
Showing posts with label Culture Change. Show all posts
Thursday, May 20, 2010
Monday, June 15, 2009
Where Is China Heading?
Mark Leonard's book “What Does China Think?” presents a number of China's modern beliefs and challenges. Mr. Leonard discusses China's current struggles and the new priorities the Chinese State has determined are essential to address contemporary problems.
It is interesting, for the first time in China’s history, the State's 11th five-year plan does not list economic growth as the top focus. The plan includes mantras, such as: “put people first”…“respecting the natural environment”… and introduces a model which resembles some Scandinavian attempts in Social Welfare to address existing concerns.
The Book suggests China’s most pressing problems are:
Mr. Leonard maintains the theory, modern China hopes to develop into an “Asymmetric Superpower”. This conception believes the USA has an unhealthy obsession with military production, and this is the United States' greatest weakness, blinding policy-makers to the wider picture of military strategy. Mr. Leonard's offering suggests the current Leadership of China, must include the use of economic, legal, and political tools as well, which is referenced: “non-military warfare”. This modern version of China's “Economic Warfare” includes investing billions of dollars in “Special Economic Zones” within foreign Nations.
However, today China invests billions to improve it's military might, as Chinese Leaders correctly believe economic power without a strong Military, in context to the rest of the World, will reduce China as an overall power. They prefer to obtain a Military Force which will become equal to the United States.
It is interesting, for the first time in China’s history, the State's 11th five-year plan does not list economic growth as the top focus. The plan includes mantras, such as: “put people first”…“respecting the natural environment”… and introduces a model which resembles some Scandinavian attempts in Social Welfare to address existing concerns.
The Book suggests China’s most pressing problems are:
1. The rise in protests,Official records cite 87,000 protest demonstrations in 2005, which is a ten times the amount of such displays since 1993. It is most likely, the actual number of organized public protestations is much higher.
2. The gap between rich and poor,
3. The near bankruptcy of the rural economy,
4. The lack of domestic consumption,
5. The pervasive corruption of the political elite,
6. The environment.
Mr. Leonard maintains the theory, modern China hopes to develop into an “Asymmetric Superpower”. This conception believes the USA has an unhealthy obsession with military production, and this is the United States' greatest weakness, blinding policy-makers to the wider picture of military strategy. Mr. Leonard's offering suggests the current Leadership of China, must include the use of economic, legal, and political tools as well, which is referenced: “non-military warfare”. This modern version of China's “Economic Warfare” includes investing billions of dollars in “Special Economic Zones” within foreign Nations.
However, today China invests billions to improve it's military might, as Chinese Leaders correctly believe economic power without a strong Military, in context to the rest of the World, will reduce China as an overall power. They prefer to obtain a Military Force which will become equal to the United States.
“China is attractive to other nations because of its economic power but this attractiveness will not last. It will need to change its political system to become a ‘Hyper-Power’ equal to the USA”.But for China to achieve this status, the State will need to eliminate its incongruous and obsessive policy on a number of issues, it has mistakenly elevated to threats to its survival: Taiwanese and Tibetan freedom, the relationship with the Dalai Lama, the rise of Falun Gong, and various radical Muslim Enclaves.
Sunday, May 10, 2009
Why William Clay Ford, Jr. Failed
In October 2006, the Ford Motor Company replaced William Clay Ford, Jr. as its Chief Executive Officer.
Why did Mr. Ford fail?
His own words, reported by Micheline Maynard of the New York Times on July 16, 2006, titled "Is Ford Running On Empty" revealed the answer.
"I bowed to managers on what I knew were product development mistakes”. “I can’t delegate to anybody…dealing with unyielding managers that stymie and condescend to me.” “… would have performed better if not faced with people obstacles”. - William Clay Ford, Jr.
Mr. Ford cited as one of his victories his environmentally friendly new River Rouge assembly plant. He believed this to be a victory because “…I did it over the objections of company executives.”
He brought in a new Chief of Staff and Gatekeeper, who is his best friend and brother-in-law, whose prior experience was as manager of the Henry Ford Museum. “He helps me decide which meetings and projects deserve my attention.”
One of his priorities was examining “…everything from how we’re going to treat each other in meetings to the trappings of our job.”
All of the priorities he listed in the article were essentially 'trivial many' when he had vital priorities that need attention. His “River Rouge” victory was quite minor with the intractable problems Ford is facing. Crowing about it publicly was a polarizing mistake. His new Chief of Staff, his brother in-law, further undermined him.
He made the fundamental CEO error, not persuading his managers to change their position on vital priorities. If he couldn’t persuade them, he should have made the correct strategic decision. He was not leading the company. He was not in command.
One example of Ford’s bloated overhead is its executive dining room replete with waitresses, multi-course menu, and silver finger bowls. Mr. Ford would have been more successful if he had executed an operational restructuring that significantly reduced salaried headcount in 2006 – not phased in over 3 years.
Better yet, he would have been well served to adopt Toyota’s performance target of 10% improvements in salaried productivity every year. If he adopted these principals, Mr. Ford, Jr. might then have been in a position to encourage unions to voluntarily modify contracts, base wage rates, pensions, and retiree medical care.
Leadership is learned. Taking command is learned. Mr. Ford held the CEO position for five years. He did not learn.
His lack of leadership and lack of prioritized focus, as demonstrated by his poor relationship with his managers, turned into poor performance at Ford. Only increasing Ford's low quality ratings, unimpressive new models, lack of worldwide integration in sourcing - product development, and the negative financial performance.
Alan Mulally, Ford’s new CEO, would be well served if he followed the practice of Neville Isdell when he was first named CEO of Coca-Cola. He was asked what are his plans for the company. Mr. Isdell's memorable response: "I plan to spend the first 120 days visiting employees and managers around Coke finding out what the state of the business really is."
Certainly the correct approach.
It is just that simple to get a company focused. Establish a rough-cut strategy, lead and motivate the team.
Why did Mr. Ford fail?
His own words, reported by Micheline Maynard of the New York Times on July 16, 2006, titled "Is Ford Running On Empty" revealed the answer.
"I bowed to managers on what I knew were product development mistakes”. “I can’t delegate to anybody…dealing with unyielding managers that stymie and condescend to me.” “… would have performed better if not faced with people obstacles”. - William Clay Ford, Jr.
Mr. Ford cited as one of his victories his environmentally friendly new River Rouge assembly plant. He believed this to be a victory because “…I did it over the objections of company executives.”
He brought in a new Chief of Staff and Gatekeeper, who is his best friend and brother-in-law, whose prior experience was as manager of the Henry Ford Museum. “He helps me decide which meetings and projects deserve my attention.”
One of his priorities was examining “…everything from how we’re going to treat each other in meetings to the trappings of our job.”
All of the priorities he listed in the article were essentially 'trivial many' when he had vital priorities that need attention. His “River Rouge” victory was quite minor with the intractable problems Ford is facing. Crowing about it publicly was a polarizing mistake. His new Chief of Staff, his brother in-law, further undermined him.
He made the fundamental CEO error, not persuading his managers to change their position on vital priorities. If he couldn’t persuade them, he should have made the correct strategic decision. He was not leading the company. He was not in command.
One example of Ford’s bloated overhead is its executive dining room replete with waitresses, multi-course menu, and silver finger bowls. Mr. Ford would have been more successful if he had executed an operational restructuring that significantly reduced salaried headcount in 2006 – not phased in over 3 years.
Better yet, he would have been well served to adopt Toyota’s performance target of 10% improvements in salaried productivity every year. If he adopted these principals, Mr. Ford, Jr. might then have been in a position to encourage unions to voluntarily modify contracts, base wage rates, pensions, and retiree medical care.
Leadership is learned. Taking command is learned. Mr. Ford held the CEO position for five years. He did not learn.
His lack of leadership and lack of prioritized focus, as demonstrated by his poor relationship with his managers, turned into poor performance at Ford. Only increasing Ford's low quality ratings, unimpressive new models, lack of worldwide integration in sourcing - product development, and the negative financial performance.
Alan Mulally, Ford’s new CEO, would be well served if he followed the practice of Neville Isdell when he was first named CEO of Coca-Cola. He was asked what are his plans for the company. Mr. Isdell's memorable response: "I plan to spend the first 120 days visiting employees and managers around Coke finding out what the state of the business really is."
Certainly the correct approach.
It is just that simple to get a company focused. Establish a rough-cut strategy, lead and motivate the team.
Friday, July 11, 2008
Bankruptcy - The Fate of General Motors, Ford and Chrysler?
General Motors, Ford and Chrysler may have to enter into Bankruptcy to reduce their hourly cost of labor. Running out of cash may be the trigger that puts one or all of them into bankruptcy, but it will be a blessing in disguise.
One of their most significant problems is that their hourly labor costs are reportedly $20 to $30 per hour higher than their Japanese competitors. Some of the differential will be reduced with the UAW’s assumption of retiree health care with VEBA -- Voluntary Employee Beneficiary Association – beginning in 2010. This could reduce employee health insurance costs by one-third but will only produce a relatively small reduction in hourly labor costs. This won’t be enough - including consideration of the two-tier wage structure.
Most of the Japanese competitors have non-union hourly labor in their USA manufacturing operations. As such, their labor costs will not significantly increase over time. In fact, they will probably decrease because of higher capital investments with more effective productivity improvements.
By comparison, GM, Ford and Chrysler are at a distinct disadvantage. They are strapped for cash which severely limits their ability to invest capital for operating improvements. Recent plant closings and operational restructuring have reduced their overall costs by billions of dollars, as well as their hourly headcounts by the thousands. However, the overall impact is somewhat misleading. The hourly cost for direct labor employees has not been reduced. While the number of automobiles manufactured by the Big Three have declined in dramatic fashion, the actual cost of each automobile continues to be higher than its Japanese competition.
Will they be able to negotiate “voluntary” hourly labor cost reductions with the UAW?
One negative example from my turnaround experiences:
I was CEO of a legally insolvent, severely distressed manufacturing company. We asked the local union members to accept minor “voluntary” changes in the union labor contract. Specifically, we needed a delay in the contracted 3% increase in the base wage rate and an increase in the co-pay percentage for health insurance. These proposals were rejected by the local union leaders, although we had the International’s support for the changes. The local labor leaders proved indifferent to the company’s condition and were hostile to essential requests needed for the restructuring required to help save the company.
Admittedly this distressed company was not the size of GM, Ford or Chrysler. However experience suggests the UAW will not “voluntarily” agree to the significant reductions needed in hourly labor costs. (Which may require cuts as large as $10 per hour or more). Thus, the Big Three will be forced to attempt to terminate the labor agreement in Bankruptcy Court. If they fail to do so, they will continue to decline. And their future will offer even more desperate operating and financial conditions.
One of their most significant problems is that their hourly labor costs are reportedly $20 to $30 per hour higher than their Japanese competitors. Some of the differential will be reduced with the UAW’s assumption of retiree health care with VEBA -- Voluntary Employee Beneficiary Association – beginning in 2010. This could reduce employee health insurance costs by one-third but will only produce a relatively small reduction in hourly labor costs. This won’t be enough - including consideration of the two-tier wage structure.
Most of the Japanese competitors have non-union hourly labor in their USA manufacturing operations. As such, their labor costs will not significantly increase over time. In fact, they will probably decrease because of higher capital investments with more effective productivity improvements.
By comparison, GM, Ford and Chrysler are at a distinct disadvantage. They are strapped for cash which severely limits their ability to invest capital for operating improvements. Recent plant closings and operational restructuring have reduced their overall costs by billions of dollars, as well as their hourly headcounts by the thousands. However, the overall impact is somewhat misleading. The hourly cost for direct labor employees has not been reduced. While the number of automobiles manufactured by the Big Three have declined in dramatic fashion, the actual cost of each automobile continues to be higher than its Japanese competition.
Will they be able to negotiate “voluntary” hourly labor cost reductions with the UAW?
One negative example from my turnaround experiences:
I was CEO of a legally insolvent, severely distressed manufacturing company. We asked the local union members to accept minor “voluntary” changes in the union labor contract. Specifically, we needed a delay in the contracted 3% increase in the base wage rate and an increase in the co-pay percentage for health insurance. These proposals were rejected by the local union leaders, although we had the International’s support for the changes. The local labor leaders proved indifferent to the company’s condition and were hostile to essential requests needed for the restructuring required to help save the company.
Admittedly this distressed company was not the size of GM, Ford or Chrysler. However experience suggests the UAW will not “voluntarily” agree to the significant reductions needed in hourly labor costs. (Which may require cuts as large as $10 per hour or more). Thus, the Big Three will be forced to attempt to terminate the labor agreement in Bankruptcy Court. If they fail to do so, they will continue to decline. And their future will offer even more desperate operating and financial conditions.
Thursday, April 10, 2008
Kinko’s – Was It Damaged?
Claudia H. Deutsch of the NY Times reported on Clayton, Dubilier & Rice’s management of Kinko’s on May 5th 2007 with an article titled "Paper Jam At FedEx Kinko's". One quote referring to the culture change: “Some say Clayton, Dubilier massacred Kinko’s, and that FedEx can never repair the damage.”
On March 8, 2008 the New York Times reported again on the issue, “...the unit has underperformed since FedEx bought the business for $2.4 billion.”
In my experience as CEO, a culture change was necessary in every turnaround I have managed. The turnarounds were largely penal colonies staffed with brow beaten and frightened officers and managers. The uncoordinated top-down, silo management process was used. Analysis made it clear that mistakes mounted and financial deterioration occurred a matter of months following the start of a punishing culture.
Improving the cultures was accomplished via cross-functional communication meetings with candid discussions at all organization levels. Once an improved culture was accomplished and a self-confident team was developed, profits followed shortly thereafter – usually in just a few months.
One lesson I learned seeing the consequences of the angry, confrontational style used by Emerson Electric Co.'s CEO was not to bully and yell at employees. As CEO I want strong, assertive but civil officers and managers to build a solid performing company. A CEO can whisper and get results.
Emerson Electric conducted anonymous employee opinion surveys annually on each of its divisions. Ironically, if a division president was confrontational with employees and maintained a punishing culture, Chuck Knight would remove him.
As Peter Drucker and Jim Collins advise, use metrics to make people accountable for tangible results. Fire the non-performers. Only deal in brutal facts in an open culture in which everything can be discussed. A tyrant style can sometimes get immediate profit improvement, but it usually results in the company becoming uncoordinated followed by unexpected mistakes and short-term profit decline. It can make the sale of the company problematic if potential buyers realize the management is weak.
On March 8, 2008 the New York Times reported again on the issue, “...the unit has underperformed since FedEx bought the business for $2.4 billion.”
In my experience as CEO, a culture change was necessary in every turnaround I have managed. The turnarounds were largely penal colonies staffed with brow beaten and frightened officers and managers. The uncoordinated top-down, silo management process was used. Analysis made it clear that mistakes mounted and financial deterioration occurred a matter of months following the start of a punishing culture.
Improving the cultures was accomplished via cross-functional communication meetings with candid discussions at all organization levels. Once an improved culture was accomplished and a self-confident team was developed, profits followed shortly thereafter – usually in just a few months.
One lesson I learned seeing the consequences of the angry, confrontational style used by Emerson Electric Co.'s CEO was not to bully and yell at employees. As CEO I want strong, assertive but civil officers and managers to build a solid performing company. A CEO can whisper and get results.
Emerson Electric conducted anonymous employee opinion surveys annually on each of its divisions. Ironically, if a division president was confrontational with employees and maintained a punishing culture, Chuck Knight would remove him.
As Peter Drucker and Jim Collins advise, use metrics to make people accountable for tangible results. Fire the non-performers. Only deal in brutal facts in an open culture in which everything can be discussed. A tyrant style can sometimes get immediate profit improvement, but it usually results in the company becoming uncoordinated followed by unexpected mistakes and short-term profit decline. It can make the sale of the company problematic if potential buyers realize the management is weak.
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