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.     

Succession and failure

Norman Windom, the chairman of Tiverton Media, may not know much about the world of popular music, but he does fancy himself a careful planner and a superb judge of managerial talent. That's why he's been grooming COO Sean Kinnane, a Wharton-minted numbers man, to take over an important division, Aleph Records, and one day Tiverton itself. But Derek Solomon, Aleph's 68-year-old CEO and founder, remains a creative force and a father figure to the label's artists. What's more, he's touchy about anything that might slow down Aleph's responses to the market's ever-shifting preferences--or that might call into question his indispensability. Though Sean dutifully participates in Tiverton's broad-based and elaborate executive development plan, he senses that Aleph's future leadership structure is uncertain. As impatient as he is ambitious, he announces that he's leaving Tiverton for more suitable pastures. Several of his associates, also unsure about their fate within Aleph, are following him out the door. In one fell swoop, they've torn Norman's proud succession plan apart. What kind of plan should the board adopt going forward? Commenting on this fictional case study are Francis N. Bonsignore, a senior vice president at Marsh & McLennan; Michelle L. Buck, a clinical associate professor of management and organizations at Northwestern's Kellogg School of Management; Jon Younger, who heads leadership development at National City Corporation, a financial holding company in Cleveland; and Thomas Leppert, the chairman and CEO of the Turner Corporation, a large construction company in Dallas.     

Why doesn't this HR department get any respect?

Since becoming managing partner of human resources at Loft Securities more than a year ago, Luke Robinson has tried everything he can think of to change his department's reputation as an administrative backwater. But he's swimming against the tide. Ever since the retirement of a charismatic CEO in 1995, the firm has suffered a slow bleed of good people. The new CEO doesn't have a flair for attracting and retaining talented people, and the HR department hasn't been able to pick up the slack. Robinson has done his best to turn things around. He's met with just about everyone, from senior executives to administrative assistants to external contacts. And, when he found out that recruiting wasn't Loft's only problem, he took a variety of concrete steps. Among other things, he established internal service standards and performance guarantees for his department. He created "listening posts" and implemented and "HR ambassador" program. And he drafted plans for a program to help educate all the company's employees about the role of HR--specifically, how it can contribute to creating and upholding the firm's strategy for success. But Robinson has run over some major speed bumps. Just before he joined the company, HR sullied its reputation by mishandling the investigation of a discrimination charge. And while on Robinson's watch, HR botched the issuance of year-end bonus checks for the managing directors and vice presidents. The frustrations are piling up, leading Robinson to entertain thoughts of bailing out. Five commentators on this fictional case study explain why he should avoid quitting and how he can help his department earn new respect.     

Should this team be saved?

As far as anyone could tell, Vigor Skin Care's star was rising, mostly on the strength of Ageless Vigor, its new line of enriched skin cleansers and cosmetics. In fact, this evening, the three employees responsible for developing the product line were slated to receive the parent company's highest award for performance. But CEO Peter Markles knew that despite the accolades, the business unit--and its "fearsome threesome"--had hit a rough patch in recent months. When Peter took the reins four years ago, Vigor Skin Care was the sleeping dog of the health-and-beauty industry; his challenge was to rejuvenate the maturing business. He knew a turnaround would require equal parts discipline, politics, and creativity--so he pulled together a team that could address those needs. Peter relied on Sandy Fryda, Vigor's longtime marketing director, to help him navigate the tricky political waters at headquarters. And he tapped 30-year-old Josh Bartola, a maverick contributor to Vigor Skin Care's research group, for his independent spirit and new product ideas. Their all-consuming, intensely collaborative efforts resulted in the successful Ageless Vigor line. Then reality set in. The team found the day-to-day operations of manufacturing Ageless Vigor, for all their necessity and urgency, a bit tedious. Peter felt relegated to troubleshooting distribution problems. Josh was having meetings with executives from another division who were actively recruiting the wunderkind. And Sandy was simply on the verge of burnout. Tonight, at the award ceremony, there would be speeches and applause and toasts. But tomorrow, Peter would have to face the question: Should he try to salvage the Ageless Vigor team? Four commentators offer their advice in this fictional case study.     

Too old to learn?

C.J. Albert, the head of family-owned Armor Coat Insurance, is just settling in on a Sunday evening when the receives an unsettling phone call from his star salesman. Fifty-two-year-old Ed McGlynn has just returned from a business dinner with his younger technology mentor, and he's none too happy with the way he's being treated. If C.J. doesn't take this attack dog off him, Ed warns, he's gone. C.J. had indeed assigned 28-year-old Roger Sterling--the company's monomaniacal, slightly antisocial director of e-commerce--to teach Ed about digital strategy and the Web. Reverse mentoring seemed like a good way to create synergy between the sales and technology groups. The goal was to create a digital insurance product that would allow Armor Coat to keep up with its competitors. But there'd been tension between Ed and Roger right from the start--stemming from their personalities and their two departments. So when the two reluctantly agreed to meet for dinner to talk, the conversation didn't go well. Ed insisted that great sales reps, not the Internet, are crucial to selling insurance. Roger insisted that the Web will revolutionize the way insurance is sold and distributed--that Ed either give in or move on. Ed took off in a huff and subsequently phoned C.J. Roger followed Ed's irate call with his own weary ultimatum: "Either Ed goes or I go." C.J. faces some difficult Monday-morning discussions with both disgruntled parties. What should he do? Six commentators, including a mentor-protégé pair, offer their advice in this fictional case study.     

The case of the combative CFO

Minute Publishing Chairman and CEO Neil Harcum has a right to be proud of his new national newspaper, America Today. It has won three Pulitzer Prizes and attracted one million readers in just three years of publication. But, as CFO Peter Rawson points out, it's also losing $100 million a year and has broken Minute's 20-year string of earnings gains. In the process, the company has been split between two warring factions: one is backing Harcum and favors continuing the paper. The other agrees with Rawson that the project must be stopped. The board of directors has been assembled to decide the newspaper's fate. In his speech to the board, Rawson says it's time to cut Minute's losses and put an end to America Today. And Wall Street agrees. Several brokerage houses have taken Minute off their buy lists, and rating agencies are about to down-grade the company's debt. "America Today is not a good investment," Rawson argues. "Certainly, it isn't in keeping with our commitment to deliver maximum value to our shareholders." But Harcum thinks Rawson is way out of line. "We cannot allow our bean-counters to set policy," he claims. Harcum sees the newspaper as a product of the future that has created its own market. It's only a matter of time before America Today attracts enough advertising to put it in the black. He has a successful track record, and he doesn't want the board to lose faith in him now.(ABSTRACT TRUNCATED AT 250 WORDS)     

Back where we belong

If you were the CEO of Pitney Bowes, the postage meter maker, how would you envision the future of the business? The company has an undeniable core competence in the solutions it provides to high-volume postal service users. But with snail mail on the decline, some would say that core has about as much future as the buggy whip. In this article, Pitney Bowes chairman and CEO Michael Critelli gives us a glimpse of how he leads his company's strategy development--and how that development has supported a counterintuitive return to the company's core after decades of diversification. He and others in the company begin the process by tapping into deeply knowledgeable people and organizations to understand key trends in the business and the rate at which change is occurring. Then, it's a question of the firm reshaping the environment in which it does business, whether through R&D investments or work with regulators and policy makers who influence market forces; this is especially important in emerging markets. Focusing on a core business area enables a company to find adjacent high-margin opportunities and to offer comprehensive solutions to customers. What stands out most sharply in this account, however, is the importance of having a strategist's mind-set. Whether Critelli is reading the day's news, visiting a key account, or spending an hour with his own people working in the context of a customer mail room, he is constantly extrapolating possible long-term competitive implications from the immediate facts. Often inspired by strategic thinkers, Critelli believes that the greatest thing he can do for his organization is to shift the terms of the debate. "Rarely am I credited with sterling words or bold, symbolic actions", he writes. "Instead, I help people to see the business we are in differently and to reach a shared vision as to where we want to end up. And, little by little, things move in the right direction".     

Do something--he's about to snap

Lynne Tabor, an IT manager at manufacturing giant MMI, has a great team. Everyone works hard and gets along. Everyone, that is, except Max Dyer. Max is a talented programmer, but he's terrible in the interpersonal skills department. So terrible, in fact, that three years ago Lynne reworked his job after employees complained that he was unengaged and even belligerent. Since then, he's been a solid worker, putting in extra hours and meriting good performance evaluations. But recently, Max's coworkers have noticed a change for the worse in him. True, everyone at MMI is on edge after a round of layoffs, but Max's behavior seems like more than a case of the jitters. To make matters worse, reports of a workplace shooting in Seattle are all over the news. Paige overhears Max shouting at someone on the phone. George finds Max pinning up a certificate from a shooting range in his cubicle, and Nicole, who worries they will all end up as statistics of office violence, wants to know how Lynne plans to ensure their safety. When Lynne tries to talk to Max, it's clear he thinks his coworkers are out to get him. And the truth is, they believe he fits the profile of a man on the edge. But what can Lynne do about an employee who has never made so much as a veiled threat to anyone? Commentators James Alan Fox, a professor of criminal justice at Northeastern University; Steve Kaufer, a cofounder of the Workplace Violence Research Institute; Christine Pearson, a management professor at Thunderbird; Christine Porath, a professor of management and organizational behavior at the University of Southern California's Marshall School of Business; and Ronald Schouten, the director of the Law and Psychiatry Service at Massachusetts General Hospital, offer advice in this fictional case study.     

The best-laid incentive plans

Hiram Phillips couldn't have been in better spirits. The CFO and chief administrative officer of Rainbarrel Products, a diversified consumer-durables manufacturer, Phillips felt he'd single-handedly turned the company's performance around. He'd only been at Rainbarrel a year, but the company's numbers had, according to his measures, already improved by leaps and bounds. Now the day had come for Hiram to share the positive results of his new performance management system with his colleagues. The corporate executive council was meeting, and even CEO Keith Randall was applauding the CFO's work: "Hiram's going to give us some very good news about cost reductions and operating efficiencies, all due to the changes he's designed and implemented this year." Everything looked positively rosy--until some questionable information began to trickle in from other meeting participants. It came to light, for instance, that R&D had developed a breakthrough product that was not being brought to market as quickly as it should have been--thanks to Hiram's inflexible budgeting process. Then, too, an employee survey showed that workers were demoralized. And customers were complaining about Rainbarrel's service. The general message? The new performance metrics and incentives had indeed been affecting overall performance--but not for the better. Should Rainbarrel revisit its approach to performance management? Commentators Stephen Kaufman, a senior lecturer at Harvard Business School; compensation consultant Steven Gross; retired U.S. Navy vice admiral and management consultant Diego Hernandez; and Barry Leskin, a consultant and former chief learning officer for Chevron Texaco, offer their advice in this fictional case study.     

Behave yourself. Interview by Gardiner Morse

Executive consultant Marshall Goldsmith tells his CEO clients that he's not the real coach; the people around them are. To change your behavior, he says, quit whining about the past and start asking your colleagues how you can do better. You're not done until they think you are.     

Micromanager

George Latour considers himself a good leader. As CEO of Retronics, George has a mandate to grow revenues with an eye toward taking the software-engineering firm public by 2006. At the behest of the chairman of the board, he has hired a new marketing director, Shelley Stern--"a thoroughbred" who, the chairman insists, just needs a little training in the business. George does his best to bring his new hire up to speed. He has Shelley sit in on developers' meetings, has her accompany the sales force on client calls, and even has the CFO explain the company's cash flow situation to her. He also takes pains to help her correctly position marketing and press materials. But Shelley never seems to really take the bit. In fact, Shelley considers George's hands-on management style oppressive, and she's dreadfully unhappy. What George sees as efforts to bring her up to speed, like making her go on those sales calls when she has other work to do, she views as signs that he doesn't trust her judgment. What's more, Shelley is spread too thin. Yet when she asks for help--if not additional staff, at least an outside contractor--George asks for a list of everything she's working on and tells her he'll help her prioritize. In this fictional case, a he-said, she-said debate erupts over competing management styles. Four commentators--Jim Goodnight, the CEO of SAS Institute; Mark Goulston, a psychiatrist and the senior vice president at Sherwood Partners; J. Michael Lawrie, the CEO of Siebel Systems; and Craig Chappelow, the senior manager of assessment and development resources at the Center for Creative Leadership--offer their perspectives on the problem and how to solve it.     

The turnaround value of values

John Thorbeck is an executive with a ten-year career history of successes--and a sense of repeated failure. Just out of business school, he was marketing director at the Aspen Skiing Company for three years and helped to reverse thirteen seasons of decline. At the Timberland shoe company in the mid-1980s, he led a marketing strategy that tripled sales. At the Bass shoe company, where he was CEO from 1987 to 1990, he took the company from big losses to big profits. Now he is president, CEO, and part owner of a third shoe company--Geo. E. Keith--that is surely the oldest, perhaps the smallest, and arguably the finest shoemaker in the United States. But the high points of Thorbeck's résumé conceal a leadership education that led him only slowly to abandon confrontational management in favor of management by history, values, competence, and what he calls organizational coherence. In his first two marketing jobs, he fought wars with his opponents and won. Then at Bass, he tried to recapture the company's proud past. He revived company folklore and history, gave workers back their pride in workmanship, and used this rejuvenated company spirit to meet and win new markets. Yet he was trying to take Bass someplace its owners simply wouldn't let it go, and he left the company profitable but divided, the work force eager to go one way, owenership another. In each of his jobs, Thorbeck overlooked some vital part of the organizational community.(ABSTRACT TRUNCATED AT 250 WORDS)     

High tech the old-fashioned way. An interview with Tom Siebel of Siebel Systems. Interview by Bronwyn Fryer

There is a growing awareness among corporations that the quality of the customer experience they provide directly affects their bottom line. Many are turning to high-flying software maker Siebel Systems for help in managing those relationships. The young company holds a leadership position in an explosive market-enterprise application software. But customer satisfaction, not dot-com chic, is foremost on the mind of Siebel Systems' founder, chairman, and CEO, Tom Siebel. The buttoned-down Siebel rejects the freewheeling management style and culture that characterize many Silicon Valley companies. As the former CEO of Gain Technology and a former executive at Oracle, Siebel believes in putting customers ahead of technology, discipline ahead of inspiration. In this interview, conducted at the company's San Mateo, California, headquarters, Siebel describes how this obsessive focus on customer satisfaction has been the driving force behind the company's success. He talks about how the organization remains true to its core values: a deep commitment to providing customer satisfaction; responsible fiscal practices that have created a cash-positive business amid today's cash-negative dot-coms; and general professionalism. "The notion of dressing in jeans and a T-shirt to greet the CEO of a major financial institution who just got off the plane from Munich is not acceptable," he says. Siebel Systems rejects the concept of going to war with rivals; instead, the CEO says, the company has forged an ecosystem of partnerships that allows it to support and integrate its own systems with other companies' software products and ultimately ease the customer's software installations. Indeed, Siebel says, the CEO's most important job is to understand what customers need and deliver that.     

Oil and wasser

It was supposed to be an amicable "merger of equals," an example of European togetherness, a synergistic deal that would create the world's second-largest consumer foods company out of two former competitors. But the marriage of entrepreneurial powerhouse Royal Biscuit and the conservative, family-owned Edeling GmbH is beginning to look overly ambitious. Integration planning is way behind schedule. Investors seem wary. But for Royal Biscuit HR head Michael Brighton, the most immediate problem is that he can't get his German counterpart, Dieter Wallach, to collaborate on a workable leadership development plan for the merged company's executives. And stockholders have been promised details of the new organizational structure, including a precise timetable, in less than a month. The CEO of the British company--and of the postmerger Royal Edeling--is furious. It's partly a culture clash, but the problems may run deeper than that. The press is harping on details that counter the official merger-of-equals line. For instance, seven of the ten seats on the new company's management board will be held by Royal Biscuit executives. Will the clash of cultures undermine this cross-border merger? Commenting on the fictional case study are Robert F. Bruner, the executive director of the Batten-Institute at the University of Virginia's Darden Graduate School of Business Administration in Charlottesville; Leda Cosmides and John Tooby, the codirectors of the Center for Evolutionary Psychology at the University of California, Santa Barbara; Michael Pragnell, the CEO and director of the board for the agribusiness firm Syngenta, based in Basel, Switzerland; and David Schweiger, the president of the Columbia, South Carolina--based management consulting firm Schweiger and Associates.     

The CEO as organizational architect: an interview with Xerox's Paul Allaire. Interview by Robert Howard

As chairman and CEO of the Xerox Corporation, Paul Allaire leads a company that is a microcosm of the changes transforming American business. With the introduction of the first plain-paper copier in 1959, Xerox invented a new industry and launched itself on a decade of spectacular growth. But easy growth led Xerox to neglect the fundamentals of its core business, leaving the company vulnerable to low-cost Japanese competition. Starting in the mid-1980s, Xerox embarked on a long-term effort to regain its dominant position in world copier markets and to create a new platform for future growth. Thanks to the company's Leadership through Quality program, Xerox became the first major U.S. company to win back market share from the Japanese. Allaire describes his efforts to take Xerox's corporate transformation to a new level. Since becoming CEO in 1990, he has repositioned Xerox as "the document company" at the intersection of the worlds of paper-based and electronic information. And he has guided the company through a fundamental redesign of what he calls the "organizational architecture" of Xerox's document processing business. Few CEOs have approached the process of organizational redesign as systematically and methodically as Allaire has. He has created a new corporate structure that balances independent business divisions with integrated R&D and customer operations organizations. He has redefined managerial roles and responsibilities, changed the way managers are selected and compensated, and renewed the company's senior management ranks. And he has articulated the new values and behaviors Xerox managers will need to thrive in a more competitive and fast-changing business environment.     

Who really makes the big decisions in your company?

In many companies, the top management team is officially responsible for helping the CEO make a company's big decisions. But another, unofficial group usually does that job de facto. That's the way it should be, argues Frisch, of the Strategic Offsites Group, provided that the CEO is deliberate in devising the role of this informal and unnamed "kitchen cabinet." Problems can nevertheless arise when senior executives learn about important decisions after the fact, mistakenly assume that they have real power to protect their departments, and find themselves in a system where the way decisions are actually made goes unacknowledged. The key, according to Frisch, is to make better use of senior executives' time and talents by giving them specific responsibilities that complement--but do not overlap--the advisory duties of the kitchen cabinet. A CEO who explicitly acknowledges the role of her cabinet and strikes the right balance between it and her official advisory group of executives can get the best from both.     

Leading change when business is good. Interview by Paul Hemp and Thomas A. Stewart

Lou Gerstner's was a hard act to follow. As CEO in what were arguably IBM's darkest hours, Gerstner brought the company back from the brink. After nearly ten wrenching years, in which the big-machine manufacturer remade itself into a comprehensive software, hardware, and services provider, business was looking good. So the challenge for Sam Palmisano, when he took over as CEO in 2002, was to come up with a mandate for a second act in the company's transformation. His primary aim was to get different parts of the company working together so IBM could offer customers "integrated solutions"--hardware, software, services, and financing--at a single price. As part of this effort, he asked all of IBM's 320,000 employees, in 170 countries, to weigh in on a new set of shared corporate values. Over a 72-hour period, thousands of IBMers throughout the world gave Palmisano and his executive team an earful in an intranet discussion dubbed "Values-Jam," an often-heated debate about the company's heart and soul. Twenty-four hours into the exercise, at least one senior exec wanted to pull the plug. The jam had clearly struck a chord with employees, but it was a dissonant one, full of rancor and discontent. Palmisano let the discussion continue, and the next day, the mood began to shift. The criticism became more constructive. Out of the million words generated by the jam grew a set of values that, as Palmisano explains in this interview, are meant to guide the operational decisions made by IBM's employees-and, more important, to serve as Palmisano's mandate to continue the reinvention of the company.     

Building corporate character. Interview by Nan Stone

Stride Rite is a good company by any definition: Keds, Sperry Top-Siders, and Stride Rite children's shoes are consumer favorites for their fit, quality, and comfort. Wall Street analysts praise the company's outstanding financial performance. Innovative programs such as the first corporate child-care center and public service scholarships support Stride Rite's reputation as one of the most responsible employers and corporate citizens in the United States. Behind Stride Rite's good performance are the building blocks of corporate character: a legacy of quality and service and a leader committed to keeping that legacy lively. When Stride Rite shipped its first children's shoes in 1919, they came with the company's commitment "to produce an honest quality product in an honest way and deliver it as promised." For Arnold Hiatt, that commitment has been the driving force behind the company's evolution from manufacturing into marketing and product development as well as the guiding principle in its relations with consumers, dealers, suppliers, and employees. But Stride Rite's corporate character is also a reflection of Hiatt himself. In his early 20s, Hiatt fled a management training program "designed to make carnivores" out of its new employees and bought Blue Star Shoes, a small manufacturing company that had gone into Chapter 11. Through experience and "stumbling around," he built Blue Star's sales to $5 million-and got a practical education in management, markets, and human nature that has proved equally useful in running Stride Rite.     

A time for growth: an interview with Amgen CEO Kevin Sharer. Interview by Paul Hemp

Fast growth is a nice problem to have--but a hard one to manage well. In this interview, Kevin Sharer, the CEO of biotech giant Amgen, talks about the special challenges leaders face when their companies are on a roll. Sharer, who was also head of marketing at pre-WorldCom MCI and a division head and a staff assistant to Jack Welch at GE, offers insights drawn from his own experience--and from his own self-proclaimed blunders: "I learned the hard way that you need to become credible and enlist support inside the company before you start trying to be a change agent. If you think you're going to make change happen simply by force of personality or position or intellect, you'd better think again." And change there was: Under Sharer's leadership, Amgen overhauled its management team, altered its culture, and launched a couple of blockbuster products. How do chief executives survive in that kind of dizzying environment? "A CEO must always be switching between different altitudes--tasks of different levels of abstraction and specificity," Sharer says. "You might need to spend time working on a redesign of your organizational structure and then quickly switch to drafting a memo to all employees aimed at reinforcing one of the company's values." Having a supportive and capable top team is also key: "A top management team is the most revealing window into a CEO's style, values, and aspirations.... If you don't have the right top team, you won't have the right tiers below them. [The] A players won't work for B players. Maybe with a company like GE, the reputation of the company is so strong that it can attract top people to work for weaker managers. In a new company like Amgen, that won't happen."     

The case of the unpopular pay plan

Three years after launching the team-based Quality For All program, Top Chemical Company CEO Sam Verde was searching for a team-based compensation system that would reflect his company's new philosophy. With a committee gathered to discuss the issue, Verde confronts the fact that changing pay plans is an issue few people can agree on. "Very simply," explains vice president for compensation Gilbert Porterfield, "the plan is designed to give employees working on teams real incentives for constant improvement and overall excellence. The variable aspect of the system pays employees for the performance of their group." This doesn't sit well with the others. "It's going to punish teams like mine for the failings of others instead of rewarding us for the work we do and have already done," says packaging team representative Ruth Gibson. Another committee member feels that team-based anything is a "motivational happy land that doesn't square with how people really work." While Verde likes the proposed pay plan, he has doubts over whether his employees will accept the risk. Upper management has no problem basing 60% of its pay on TopChem's performance. But getting line employees to risk part of their salaries--even as little as 4%--on the ups and downs of the chemical industry may be more trouble than it's worth. Four experts on compensation reveal where Top Chemical went wrong in its plan and how Sam Verde might bring about change successfully.