Bob's meltdown

Annette Innella is just coming into the lunchroom at Concord Machines when Bob Dunn starts screaming at her. After throwing his lunch tray against the wall, he stomps out, leaving Annette stunned. Naturally, Annette, the new senior VP for knowledge management, is beside herself. She knows her proposal to establish a cross-functional knowledge management committee is progressive thinking for this oldline manufacturer, but Bob's reaction is totally over the line. If Bob stays, she goes--that's all there is to it. Bob is contrite, but he's under a lot of pressure. The general manager of the Services Group, he's just returned from a two-week trip around the globe to gear up his troops to beat revenue targets again, despite shrinking budgets and hiring freezes. And what does he see when he gets back? An e-mail from Annette requesting that two of his best people devote half their time to what he calls her "idiotic" Knowledge Protocols Group. He's carrying the company on his back, and she's throwing this nonsense at him. Graphics specialist Paula Chancellor is surprised. Sure, Bob's gruff, but his staff loves him, and he's the only one of the big shots who ever talks to her. But HR director Nathan Singer is incensed; Bob's never been a team player, Singer complains, and it's time he learned a lesson. CEO Jay Nguyen is in a bind. Bob is his top manager; he brings in all the money. And even though future revenues are going to have to come from somewhere else, Jay is not totally behind Annette's initiative in the current business climate. He can't afford to lose Bob. But if he reins in Annette, it will look like he's condoning Bob's outburst. What should he do? Four commentators offer advice in this fictional case study.     

Selling the brand inside

When you think of marketing, chances are your mind goes right to your customers--how can you persuade more people to buy whatever it is you sell? But there's another "market" that's equally important: your employees. Author Colin Mitchell argues that executives by and large ignore this critical internal audience when developing and executing branding campaigns. As a result, employees end up undermining the expectations set by the company's advertising--either because they don't understand what the ads have promised or because they don't believe in the brand and feel disengaged or, worse, hostile toward the company. Mitchell offers three principles for executing internal branding campaigns--techniques executives can use to make sure employees understand, embrace, and "live" the brand vision companies are selling to the public. First, he says, companies need to market to employees at times when the company is experiencing a fundamental challenge or change, times when employees are seeking direction and are relatively receptive to new initiatives. Second, companies must link their internal and external marketing campaigns; employees should hear the same messages that are being sent to the market-place. And third, internal branding campaigns should bring the brand alive for employees, creating an emotional connection to the company that transcends any one experience. Internal campaigns should introduce and explain the brand messages in new and attention-grabbing ways and then reinforce those messages by weaving them into the fabric of the company. It is a fact of business, writes Mitchell, that if employees do not care about or understand their company's brands, they will ultimately weaken their organizations. It's up to top executives, he says, to give them a reason to care.     

Interview God

"Come in,"God said to me,"so,you would like to interview Me?" "If you have the time."I said. He smiled through His beard and said:"My time is called eternity and is enough to do everything;what questions do you have in mind to ask me?" "None that are new to you.What's the one thing that surprises you most about mankind?"     

How to restore the fiduciary relationship. An interview with Eliot Spitzer. Interview by Louise O'Brien

Eliot Spitzer's investigations into the mutual fund and investment-banking industries have made the New York State attorney general the de facto flag bearer of corporate reform. His exposure of conflicts of interest between investment bankers and research analyst in Wall Street firms led to the $1.4 billion global settlement between regulators and banking houses in 2003. In this interview, Spitzer describes the challenge of protecting public markets from conflicts of interest, paying particular attention to how such conflicts get institutionalized in an industry. "The cases that have gotten me and my fellow regulators most upset are the ones where we've seen senior management being tolerant of rank abuses," he says. "Because then you know that the entire structure is rotten." He also points the finger squarely at boards, maintaining that board members are drawn from pools of company and industry insiders. He cites "a void in values in a lot of boardrooms," holding up executive compensation as a powerful example. "Board compensation committees ... are self-selected and interwoven--it's a rigged marketplace." He continues, "It would be interesting to see what the world would look like if CEO pay packages had to be submitted to shareholder votes." Spitzer suggests that what's really needed is for all business leaders to reinstill throughout their organizations the critical notion of a fiduciary duty--whether it is to the shareholder or to the customer. Using the mutual fund industry as an example, he also contrasts the value of enforcement with that of regulation and articulates an important--and surprisingly limited--role for government in protecting free markets.     

After the layoffs, what next?

Harry Denton, the CEO in this fictional case study, has been caught off guard. As the head of Delarks, a venerable department-store chain in the Midwest, he has engineered a remarkable turn-around in only a year. Sales have rebounded, and Wall Street is applauding. Sure, a few trees were felled in the process--to make room for new growth, Denton had to clear out 3,000 pieces of what he privately refers to as "dead-wood"--but he'd saved the company. Didn't people understand that? Not exactly. When Delarks's head of merchandising defects to a competitor, Denton is shocked to realize that many of the survivors, in fact, have had it with him and with the company. The last straw was the recent closing of the Madison store, which Denton announced without warning to anyone--not even the company's head of HR, Thomas Wazinsky, a supposedly trusted adviser. In the wake of that coup, store employees from Wichita to Peoria are wondering, Are we next? The rumor mill says that many of them are considering leaving before Denton can inflict the next blow. And senior managers are not immune to the fear and anger. Even Wazinsky, one of the few links to Delarks's proud past, confesses to Denton, "I'll bet you're thinking of firing me." Denton has to act--and fast. He calls a "town meeting" for the 600 employees of the St. Paul store. The plan: rally the troops. Instead, Denton is routed. Angry questions are hurled at the CEO, and he is forced to beat a hasty retreat through the back door. Five experts offer advice on how to revive morale at the successful but troubled company.     

How to motivate your problem people

Managers who motivate with incentives and the power of their vision and passion succeed only in energizing employees who want to be motivated. So how do you motivate intractable employees--the ones who never do what you want and also take up all your time? According to Nigel Nicholson, you can't: Individuals must motivated themselves. Nicholson advocates a method that turns conventional approaches to motivation upside down. Instead of pushing solutions on problem employees, the manager should pull solutions out of them by creating circumstances in which the employees can channel their motivation toward achievable goals. That means addressing any obstacles-possibly even the manager's own demotivating style--that might be hindering the employees. The author's method demands that a manager take charge of a difficult situation and resolve it. An investment of time is required, but it will bring the manager to a resolution sooner than other means would. Using detailed examples, Nicholson walks the reader through his method, pointing out potential pitfalls along the way. First, the manager creates a rich picture of the problem person. Second, the manager exercises flexibility and reframes goals so that the employee can meet them. Third, in a carefully staged, face-to-face conversation, the manager meets with the problem employee on neutral ground. Whether a problem is solved or simply resolved, the payoffs from using this method extend beyond the specific employees who have been difficult to motivate. Besides increasing a manager's chances of motivation problem people, the method can inspire an entire team by signaling that the organization deals with difficult people rather than discarding them.     

Is this the right time to come out? Case study

In this fictional case study, Adam Lawson is a promising young associate at Kirkham McDowell Securities, a St. Louis underwriting and financial advisory firm. Recently, Adam helped to bring in an extremely lucrative deal, and soon he and a few other associates will be honored for their efforts at the firm's silver anniversary dinner. George Campbell, vice president in mergers and acquisitions, is caught unprepared when Adam tells him that, after serious reflection, he has decided to bring his partner, Robert Collins, to the banquet. George is one of Adam's biggest supporters at the firm, and he personally has no problem with Adam being gay. But it is one thing for Adam to come out of the closet at the office. It is quite another to do so at a public company-client event. After all, Kirkham McDowell's client roster includes some very conservative companies--one of the country's largest defense contractors, for example. George is concerned with how Adam's openness about his sexual orientation will play with their clients and, as a result, how senior management will react. Adam has not come to George for permission to bring Robert to the dinner. But clearly Adam wants some sort of response. George has never faced sexual diversity issues in the workplace before, and there is no company policy to guide him. Just how negative an effect could Robert have on Adam's career with the firm and the firm's relationship with its clients? Isn't it possible that even the firm's most conservative clients will simply decide that Adam's choice of guest is a personal matter--not a business one?(ABSTRACT TRUNCATED AT 250 WORDS)     

Realizing what you're made of

A ruptured disk pressed against Glenn Mangurian's spinal cord several years ago, leaving the lower half of his body permanently paralyzed. One minute, Mangurian was healthy and secure in his career as a management consultant; the next, his life was transformed and filled with uncertainty. The injury has taught him volumes about resilience and leadership. In this first-person account, he explains how people can create a new future after a crisis hits--and how, even if they're simply tackling everyday challenges, they can prepare themselves for the worst. Mangurian identifies resilience as one of the key qualities desired in business leaders today, but he says that many people confuse it with toughness. Toughness certainly can be an advantage in business, because it enables you to separate emotion from the negative consequences of difficult choices. But it can also be a disadvantage, because it can cut you off from many of the resources you'll need to bounce back after a crisis. Resilience, by contrast, is mostly about absorbing challenges--not deflecting them--and rebounding stronger than before. The author has learned a number of lessons about leadership in the face of adversity. For instance, although crisis distorts reality by reinforcing your fears, it also puts an emphasis on what matters right now; it highlights what's important to you and what you're capable of. Another major lesson is that loss amplifies the value of what remains, pushing you to take stock of what you have and to celebrate your assets. Perhaps most important, you can't know what will happen tomorrow--and it's better that way, because it's far more rewarding to engage with the present than just to prevent bad things from happening.     

How we went digital without a strategy

Once you say what business you're in, you put your employees into a mental straitjacket and hand them a ready-made excuse for ignoring new opportunities. So rather than dictate his company's identity, Ricardo Semler--the majority owner of Semco in S?o Paulo, Brazil--lets his employees shape it through their individual efforts and interests. "I don't know what Semco is," he writes in this first-person account of his company's expansion from manufacturing to Internet services. "Nor do I want to know." Ten years ago, Semco employees who were selling cooling towers to owners of large commercial buildings heard customers complain about the high cost of maintaining the towers. The salespeople proposed a new business in cooling-tower maintenance, and the venture is now a $30 million property-management business. That initiative led to the creation, with Semco's support, of an on-line exchange to facilitate the management of commercial construction projects. The exchange is revolutionizing the construction process in Brazil and has become a springboard for further Web initiatives such as virtual trade shows. The author shares some of the lessons he has learned along the way: Forget about the top line. Never stop being a start-up. Don't be a nanny (treat your employees like adults). Let talent find its place. Make decisions quickly and openly when it comes to reviewing proposals for new businesses. And partner promiscuously: "Our partners," Semler says, "are as much a part of our company as our employees."     

How to keep A players productive

After graduating from Harvard Business School with highest honors, Jane rapidly moved up the corporate ladder at a large advertising firm, racking up promotions and responsibilities along the way. By the time she became the company's creative director, she was, in everyone's estimation, an A player--one of the organization's most gifted and productive employees. But although she received an extraordinarily generous pay package and had what some people considered to be one of the most stimulating jobs in the company, Jane felt underappreciated and was talking to head-hunters. Eventually, she was lured away to a competing company that, by her own admission, offered less-challenging work. Both Jane and the advertising firm she left behind lost out. Of course, not all A players are as vulnerable as Jane. Some superstars soar to stunning heights, needing little or no special attention, and have the natural self-confidence and brilliance to stay at the top of their game with elegance and grace. But as every manager knows, megastars with manageable egos are rare. Far more common are people like Jane who are striving to satisfy an inner need for recognition that is often a sign of irrationally low self-esteem. According to the author--an executive coach, management consultant, and former faculty member of the department of psychiatry at Harvard Medical School--if you do not carefully manage the often unconscious need A players have for kudos and appreciation, they will burn out in a way that is damaging to them and unproductive for you. The key is understanding what makes your A players tick. The author suggests that you assist your stars by offering them authentic praise, helping them set boundaries, and teaching them to play nicely with subordinates. In the process, you can turn these high performers into even more effective players.     

The case of the machinists' mutiny

"You can't be serious!" Mike Trail, the president and fourth-generation owner of Trail Manufacturing, stared at five older men standing in his office. "I'm afraid we are, Mike." Sandy, the most senior of the five, was polite but firm. "We won't switch over to the new equipment." Trail Manufacturing was a small Midwestern company trying to define itself in a new world of competition. Working with engineering chief Marco Duncan, Mike Trail, its young CEO, developed a program to revolutionize the company's manufacturing capability by installing six computerized machining centers. The $4 million automation program was proceeding smoothly, or at least it seemed to be, until the sixth of eight production teams, whose members included the company's most respected machinist, refused to continue participating. Mike canvased his colleagues for suggestions. "We can't let any screw machines remain in operation," Marco insisted. "The problem wasn't just old machines. The problem was--and is--the whole company. We need a clean break with the past." Shop manager Darrell Montgomery didn't necessarily disagree, but he worried about alienating Sandy. "You know what Sandy means to this place," he said. "If it wasn't for him, we never would have survived the startup." Bob Block, the company's CFO, went a step further. He questioned Marco's all-or-nothing vision and counseled compromise. "With half the new cells up, the screw machines are running a lot fewer jobs," he noted. "But they still account for over half our sales and even more of our profits. Maybe these guys are right." Four experts on change examine the crisis at Trail Manufacturing and debate Mike Trail's next step.     

Does Option Compensation Increase Managerial Risk Appetite?

This paper solves the dynamic investment problem of a risk averse manager compensated with a call option on the assets he controls. Under the manager's optimal policy, the option ends up either deep in or deep out of the money. As the asset value goes to zero, volatility goes to infinity. However, the option compensation does not strictly lead to greater risk seeking. Sometimes, the manager's optimal volatility is less with the option than it would be if he were trading his own account. Furthermore, giving the manager more options causes him to reduce volatility.     

How right should the customer be?

If your salespeople aren't sure who their boss is--the district manager? the regional manager? the customer?--it could be a sign that your company's sales force controls are working at cross-purposes and that your sales function is in trouble. Sales force controls are the policies and practices that govern the way you train, supervise, motivate, and evaluate your sales staff. They include the types of compensation you offer your people and the criteria your sales managers use to evaluate the reps' performance. These controls let salespeople know which trade-offs the company would prefer them to make when the inevitable conflicts arise between what they want to do (spend lots of time and money to get a sale) and what they actually can do (use limited resources and still get the sale). When sales force controls aren't aligned--when, say, the system simultaneously encourages reps to be entrepreneurial but also to file detailed call reports and check in frequently with their bosses--individuals become discouraged and unproductive, and they eventually leave the company. The authors' research suggests there are significant differences between the control systems of companies that encourage salespeople to put the customer first-outcome control (OC) systems--and those that encourage reps to put their managers first--behavior control (BC) systems. In this article, they list the characteristics of OC and BC systems, describe the potential fallout from conflicts within these systems, and explain how you can tell which control system is appropriate for your firm. In most cases, the right choice will be a consistent system somewhere in the middle of the OC-BC continuum.     

Is your company ready for one-to-one marketing?

One-to-one marketing, also known as relationship marketing, promises to increase the value of your customer base by establishing a learning relationship with each customer. The customer tells you of some need, and you customize your product or service to meet it. Every interaction and modification improves your ability to fit your product to the particular customer. Eventually, even if a competitor offers the same type of service, your customer won't be able to enjoy the same level of convenience without taking the time to teach your competitor the lessons your company has already learned. Although the theory behind one-to-one marketing is simple, implementation is complex. Too many companies have jumped on the one-to-one band-wagon without proper preparation--mistakenly understanding it as an excuse to badger customers with excessive telemarketing and direct mail campaigns. The authors offer practical advice for implementing a one-to-one marketing program correctly. They describe four key steps: identifying your customers, differentiating among them, interacting with them, and customizing your product or service to meet each customer's needs. And they provide activities and exercises, to be administered to employees and customers, that will help you identify your company's readiness to launch a one-to-one initiative. Although some managers dismiss the possibility of one-to-one marketing as an unattainable goal, even a modest program can produce substantial benefits. This tool kit will help you determine what type of program your company can implement now, what you need to do to position your company for a large-scale initiative, and how to set priorities.     

Investigative negotiation

Negotiators often fail to achieve results because they channel too much effort into selling their own position and too little into understanding the other party's perspective. To get the best deal -or, sometimes, any deal at al--egotiators need to think like detectives, digging for information about why the other side wants what it does. This investigative approach entails a mind-set and a methodology, say Harvard Business School professors Malhotra and Bazerman. Inaccurate assumptions about the other side's motivations can lead negotiators to propose solutions to the wrong problems, needlessly give away value, or derail deals altogether. Consider, for example, the pharmaceutical company that deadlocked with a supplier over the issue of exclusivity in an ingredient purchase. Believing it was a ploy to raise the price, the drugmaker upped its offer--unsuccessfully. In fact, the supplier was balking because a relative's company needed a small amount of the ingredient to make a local product. Once the real motivation surfaced, a compromise quickly followed. Understanding the other side's motives and goals is the first principle of investigative negotiation. The second is to figure out what constraints the other party faces. Often when your counterpart's behavior appears unreasonable, his hands are tied somehow, and you can reach agreement by helping overcome those limitations. The third is to view onerous demands as a window into what the other party prizes most--and use that information to create opportunities. The fourth is to look for common ground; even fierce competitors may have complementary interests that lead to creative agreements. Finally, if a deal appears lost, stay at the table and keep trying to learn more. Even if you don't win, you can gain insights into a customer's future needs, the interests of similar customers, or the strategies of competitors.     

Short-term termination without deterring long-term investment: A theory of debt and buyouts

The option to terminate a manager early minimizes investor losses if he is unskilled. However, it also deters a skilled manager from undertaking efficient long-term projects that risk low short-term earnings. This paper demonstrates how risky debt can overcome this tension. Leverage concentrates equityholders' stakes, inducing them to learn the cause of low earnings. If they result from investment (poor management), the firm is continued (liquidated). Therefore, unskilled managers are terminated and skilled managers invest without fear of termination. Unlike models of managerial discipline based on total payout, dividends are not a substitute for debt—they allow for termination upon non-payment, but at the expense of investment since they do not concentrate ownership and induce monitoring. Debt is dynamically consistent as the manager benefits from monitoring. In traditional theories, monitoring constrains the manager; here, it frees him to invest.     

Right away and all at once: how we saved Continental

In 1993, when Greg Brenneman started working at Continental Airlines, it was the most dysfunctional company he had ever seen. It had been through two bankruptcies and ten presidents in ten years. There was next to no strategy. The company was burning through money. And employee morale couldn't get any worse. Today Continental is flying high. It posted revenues of $7.2 billion and a net income of $385 million in 1997. It regularly ranks as one of the top five U.S. airlines for key performance measures such as dispatch reliability. And employee turnover has been drastically reduced. What happened? In this first-person account, Brenneman, now Continental's president and COO, describes how he and the new team at Continental's helm transformed the company "right away and all at once." More specifically, he describes the five lessons he learned during this dramatic turnaround. At the beginning, there was so much wrong with Continental that he felt as if any one misstep could bring the whole effort down. But in a time of crisis, when time is tight and money is tighter, you can't afford to mull over complex strategy. With Gordon Bethune, Continental's chairman and CEO, Brenneman devised the Go Forward Plan, a straightforward strategy focused on four key elements: understanding the market, increasing revenues, improving the product, and transforming the corporate culture. He admits that the plan wasn't complicated--it was pure common sense. The tough part was getting it done. "Do it now!" became the rallying cry of the movement, and the power of momentum has carried Continental to success.     

Nobody trusts the boss completely--now what?

Catching problems early is a big advantage to any manager, and the best way to find out about developing headaches is to have your subordinates tell you. But how do you get them to be candid? How do you get them to talk freely about their own mistakes-and, harder yet, about yours? Candor depends on trust. Both have strict natural limits. People keep their mouths shut in order to protect themselves or their subordinates, to avoid the limelight, or because they are afraid of seeming timid or ineffectual, and so they try to fix their own problems without help. Company politics can also stand in the way of plain talk. Worst of all, trust avoids authority and flees a judge. Since employees always see the boss as judge, managers need to be aware of how they can increase trust-or destroy it. There are six critical areas: 1. Communication must always be a two-way street. 2. Support means being approachable, helpful, and concerned, especially when the chips are down. 3. Respect is a question of delegating authority and listening to what subordinates have to say. 4. Fairness means giving credit and assessing blame where they are due. 5. Predictability is being dependable and keeping promises. 6. Competence means knowing your own job and doing it well. But given the limits of trust, good managers watch for other telltale signs of trouble: decline in the information flow, deteriorating morale, ambiguous verbal messages, nonverbal signs, and diminishing results.(ABSTRACT TRUNCATED AT 250 WORDS)     

A question of character

For the most part, Glamor-a-Go-Go's board has been thrilled with CEO Joe Ryan's performance. Ryan, after all, had transformed the private-label cosmetics company into a retail powerhouse with flashy outlets from New York to Los Angeles. In addition to saving the company from bankruptcy shortly after his arrival in 1992, Ryan had made Glamor-a-Go-Go a fun and exciting place to work, increasing workers' wages and creating boundless opportunities for anyone willing to work hard and think out of the box. He had also brought more women and people of color on board. And he had made many employees wealthy, with generous stock giveaways and options for the most senior employees down to the most junior. Glamor-a-Go-Go's stock price had grown tenfold during Ryan's tenure. But Ryan's personal affairs were beginning to call into question his leadership abilities. The local paper's gossip column recently ran a photo of Ryan--a married man--leaving a gala event with a beautiful young woman from the company, with the headline "Who's That Girl?" Indeed, rumors about Ryan's philandering were starting to take on a harsher edge. Some people believed his secretary left because Ryan had sexually harassed her. Others believed a mail-room employee had been promoted to factory supervisor because of her affair with the CEO. Having warned Ryan several times about his alleged infidelities, the board is stuck. What should it do about Ryan's extracurricular behavior? Does Ryan's personal behavior even affect the company? Is what Ryan does outside the office the board's concern? Six commentators weigh in.     

Leading change from the top line. Interview by Thomas A Stewart and David Champion

Most CEOs who specialize in turning around struggling companies focus on costs. But for Fred Hassan, chairman and CEO of Schering-Plough, the primary focus in a turnaround is the top line. Since 2003, when Hassan took the helm at the global pharmaceutical company, he has overseen a remarkable recovery in performance. And consistent with his philosophy, the turnaround started with sales. Considering sales reps as less than crucial to strategy, Hassan cautions, is a big mistake. At Schering-Plough, he has concentrated on motivating and organizing salespeople to create trusting relationships with doctors. "You have to differentiate the salesperson in the customer's mind--just like you differentiate brands," he explains. A doctor may see 60 pharmaceutical reps on a regular basis but actually trust far fewer. To earn a spot in this inner circle, Schering-Plough reps try to turn each customer encounter into an occasion to help doctors provide better care for their patients. Schering-Plough also restructured its sales forces so that reps carry not just one kind of product, as they do in most pharmaceutical companies, but several. Covering a broad range of treatments gives reps more ways to build value-adding relationships with doctors. In this interview, Hassan discusses his success at Schering-Plough and his experiences at other pharmaceutical companies. During his career, he has built a reputation for being in tune with the front lines, as well as for reaching out to the managers who supervise salespeople. He has found that this level of personal attention not only makes reps feel respected but also gives him valuable strategic insights.