Lame Duck CEO

Avon Products Inc., the global beauty company, is saddled with a lame duck CEO, i.e. Andrea Jung. Her fortune has indeed changed dramatically as compared to her hugely successful early years. She was made chief executive of this door-to-door cosmetics company in 1999 and in her first five-and-a-half years, Avon's stock nearly tripled and she even won praise as the company aggressively expanded overseas. One of America’s most high-profile bosses, she also sits on the boards of Apple and General Electric

Today, Jung – although still in the CEO job – will surely find her current situation untenable. After all, Avon has already begun an active search for CEO candidates outside the company. Once it settles on one, Jung will step aside and serve as full-time executive chairman. [She is currently chairman and CEO]. Even so, this position is temporary – she is executive chairman for a two-year period – to help with the CEO search and then help the new CEO get acclimated. These decisions are intended "to put the company back on a growth track".

Her impending exit is really not unexpected. Since 2005, things had started to unravel. As profits began to sputter, Avon responded with a restructuring that it promised would boost margins by reducing layers of management, simplifying the product lineup and slashing the number of suppliers. Six years later, the company is still stumbling.

For sure, Avon is knee-deep in messy muck. The company's shares have tumbled 45% so far this year. Already, sales have slumped and the company has admitted that it would fail to meet its sales targets.To rub salt into the wound, the company has been conducting an internal investigation for the past two years into allegations that it spent millions bribing officials in China and Latin America. It is now being formally investigated under the Foreign Corrupt Practices Act. The FCPA makes it illegal for representatives of US firms to bribe foreign officials and legal experts have said the company could be landed with a potentially huge bill if found guilty. The investigation has already cost Avon more than $150 million in legal bills.

Still, it is unusual for a company to announce it wants a new CEO while the current chief executive is still in the job. So, what am I trying to say here?

Chief executives must earn their keep. Otherwise, they will have to face the axe. There is no room for sentiment. If only CEOs of Malaysian companies, including the GLCs are also subjected to this same game rule: Perform or perish! It’s really about accountability.

But with Avon putting itself in this perplexing predicament, it leaves the company in limbo. And for how long, we don't know. Andrea Jung is doing a grave injustice to Avon by staying put! Her leadership is already compromised. Like it or not, she is overstaying. It is best she leaves, and leaves immediately. As I have said, let us not get sentimental!

Lessons from Everything Everywhere

Everything Everywhere, the merged UK businesses of France Telecom (i.e. Orange) and Deutsche Telekom (i.e. T-Mobile) have installed a new boss, Olaf Swantee (above photo).

I can glean a few lessons that my Business students should pay heed to.

First, Swantee replaced Tom Alexander – the latter stepped down just a year after the company was formed. His parting words were very revealing: “It was time to evolve from the ‘1990s obsession’ with customer numbers and ‘reward loyalty, usage and tenure’ instead”.

I am saying it again, customer retention is more important than customer acquisition. This is not something new yet marketers don't give it the due respect. So too the other important marketing concepts like focussing on (1) creating customer satisfaction – delivering superior quality products and services, and (2) building brand equity – the sum of the intangible assets of a brand. [Factors that contribute to this can include name awareness, perceived quality, brand loyalty, the associations consumers have towards the brand, trademarks, packaging, and marketing channel presence].

But even as we recognize all of the above as important, most times, the single-minded focus is still on sales numbers! We give lip-service to the rest. And unhappily, we give a lot less attention to creating and maintaining relationships. I believe Tom Alexander was referring to this aspect of marketing that was somewhat neglected.

For those who don’t know, the growth in relationship marketing was fueled by the writings of management consultants. In 1993, Don Peppers and Martha Rogers published The One-to-One Future. Taking inspiration from mass customization manufacturing technologies and applying them to marketing communications, Peppers and Rogers encouraged a one-to-one focus on “share of customer” rather than the mass marketer’s “share of market.” This was based on the marketer’s ability to communicate a unique message to the customers based on the company’s knowledge of their interests. They claimed that this one-to-one interaction with customers would lead to improved lifetime value.

Frederick Reichheld further developed the importance of building customer commitment in his 1996 book The Loyalty Effect. He focused on the cost of customer defection and set the stage for the problem by claiming “many major corporations now lose and have to replace half their customers in five years [...]” (Reichheld 1). Using examples from financial service companies, advertising agencies, and manufacturing firms, Reichheld claimed that even small improvements in customer retention can as much as double company profits. This is because (a) it costs less to serve long-term customers, and (b) loyal customers will pay a price premium.

So, now you know why I consider relationship marketing to be important. To win customers and to keep them – marketers must forge one-to-one relationships with their customers. The problem is that this is not something that management can instruct as a SOP – it has to be free-willed, meaning, within the organization, our own people must individually and collectively embrace the vision and the values of the organization so that they embody this vision and values and that, in turn, they engage their customers in meaningful acts of studied spontaneity.

Second, based on a July 28, 2011 report in UK’s The Telegraph, the company seeks to make £73 million more of efficiency savings by the end of the year. Swantee then decided to cull his executive team and he did it on his first day at work! Finance director Richard Moat, chief commercial officer Andrew Ralston and chief change officer Linda Kennedy were among six senior managers who announced their resignations on September 01, 2011, as Swantee disclosed the management shake-up. I am assuming Swantee made a business decision that was in the company’s best interests and he left no room for personal sentiments. After all, Moat and Ralston were the architects of the merger between Orange and T-mobile that created Everything Everywhere.

We can debate about the merits of executive termination and whether Swantee had made a wise decision. I acknowledge that many companies are top-heavy and in trying times, it is important to dispose those whom we consider as surplus requirements. Most times, most senior managers are surplus, aren’t they? I remember when I was with HICT not too long ago – and when the crunch times hit us – the ordinary staff members were guillotined with pay cuts but the high-salaried senior mangers were spared. Good staff members became disgruntled and one by one, they left until the once-proud Klang-based college became almost an empty shell. This carried on for at least a year and leadership was sorely missed. [Footnote: HICT was a lost cause and so the HELP management decided to re-posiiton the college and it transformed into the HELP College of Arts and Technology].

I mentioned that senior managers are surplus only because they may know how to manage (or at least they think they do) but in essence, they don’t know how to lead. I am a firm believer that the best managers are leaders. I won’t even bother to argue that without leadership in organizations, we will inherit a disengaged workforce – one that is not motivated to succeed and one that is not sustainable at all in the long-term.

I recommend that we go back to basics. I suggest managers must not be afraid to step forward and face the leadership challenge. Kouzes & Posner (2007) talked about how leaders mobilize others to want to get extraordinary things done in organizations. In today’s demanding business environment that swells with crowded competition – it is not enough to just do things; we must do great things, even extraordinary things. And if managers are incapable, then they would fail as leaders. And when they do fail, they shouldn’t be warming the seats anymore! It will be time to get rid of them!

So, leadership is really about the practices leaders use to transform values into actions, visions into realities, obstacles into innovations, separateness into solidarity, and risks into rewards. It is about leadership that creates the climate in which people turn challenging opportunities into remarkable successes. When there is an absence of leadership, and the situation is made worse by a business that is bleeding – we know we have to embark on cost-cutting. When this happens, it makes sense to discard managers and we should start from the top! Caution: Cutting costs is to be done only as part of a turnaround blueprint – we should desist from doing it as an ad-hoc measure.

Anyway, Everything Everywhere is in a mature market and quickly finding themselves in deep shit. So the departure of a significant tranche of senior management may or may not exacerbate matters but whatever the case may be, I would plead that this was necessary. I also recognize that this will be particularly sensitive for the company, which is still smarting after being exposed for using a "traffic light" system to inform staff about redundancies. Last year the company informed thousands of staff about their potential redundancies by displaying red, yellow or blue lights at mass meetings to signify different risk levels of particular positions. Now, isn’t that stupid or what?

Now that I know this company a little better, I would claim that Swantee was right in doing what he did!

Leadership Lessons from The King's Speech

Canadian Patrick O'Neill writing in his newsletter “Extraordinary Conversations” calls The King's Speech one of the best contemporary portraits of a person being initiated into power. "Every leader, no matter what level of the organization they work in, should see this film," he advises.

O'Neill notes that the film illustrates three powers of leadership that were identified in Angeles Arrien's book The Four-Fold Way:

CLAIMING THE POWER OF PRESENCE

The power of presence means that we are able to bring four intelligences forward: mental, emotional, spiritual and physical. Prince Albert, or Bertie as he was known, played by Colin Firth, was a stammering, tongue-tied isolated man embarrassed by his own deficiencies.

But the film shows how he was supported by his speech therapist, Lionel Logue, played by Geoffrey Rush, to deal with the loneliness, neglect and bullying of his childhood.

"The leader's journey often requires facing difficult issues and challenges that have interfered with development or entrapped them in 'unfinished business,' " O'Neill writes.

"Presence is earned when leaders are able to remove these obstacles to befriending the self, and allow their gifts and talents to surface above the insecurities."

CLAIMING THE POWER OF COMMUNICATION

The focus in the film is on his struggle to communicate without stammering. He is frustrated by the many therapists and the methods they suggest, such as stuffing a half dozen glass balls down his throat while trying to read out loud. Logue's unconventional approach of singing, swearing and camaraderie starts to pay off as the member of royalty starts to trust the therapist and himself. "This is the leader's challenge. He or she must trust that they can find their own authentic voice. That is the voice that inspires and empowers others, the voice of true authority," O'Neill observes.

CLAIMING THE POWER OF POSITION

When his brother, King Edward, abdicates, the prince must confront his duty as heir to the throne. He is understandably fearful and uncertain, but realizes he must serve the nation. Through this decision, O'Neill stresses, he generates a communication breakthrough:

"The power of position means responsibility is taken for leadership. It is the willingness to face the challenges of an uncertain future from a place of courage, integrity and action. Certainly, the timing of Bertie's ascendancy could not have been less opportune. Europe was in chaos. Rather than focusing on his faults and deficiencies, Bertie enlists the support he needs to overcome his stammering and deliver a speech that not only declares war on Nazism but also transforms him into King George VI, one of Britain's greatest monarchs."

I found the above article in Canada’s Globe and Mail, posted on February 22, 2011. Certainly, my UCS3001 Leadership class students should see this movie.

A DIfferent Kind of Leader

This afternoon, I traversed to the other end of Sunway (or is it Subang?) to be at Taylor’s University which was hosting the Joint B1 & B2 International Speech and Table Topics Contest. There were close to 50 of us there, either as contestants, role players or audience. I came to participate in the Table Topics contest, representing Taman Indrahana Toastmasters Club. And I was the Area B2 champion! Fellow club member Chan Weng May (third photo on the right) also did well for she took first place in the International Speech contest. Both of us gave a good account of ourselves and I am glad we brought honors to our club. I have to admit that we were really good!

As for Area B1, Meyyappa (Deloitte KassimChan Toastmasters Club) and Bernard Louis (D’Utama Advanced Toastmasters Club) were the champions of the International Speech and Table Topics contests respectively. Personally, I believed Thiagarajah from MAS Melor Toastmasters Club (above right) should have won the International Speech contest but he only managed third place. As for Table Topics, I would have chosen Meyyappa as the winner but he came in second place. Sigh, maybe I really don't know how to pick the winners. Never mind, I stand by my own selection.

I found this video clip and I thought it is interesting because it shows a different kind of leader. When Japan Airlines hit hard times in 2009 and began to lay off staff, JAL CEO Haruka Nishimatsu cut his own pay to less than that of his pilots and eliminated all his perks. He even commutes on the city bus and eats in the employee cafeteria, standing in line with his colleagues. When is the last time you saw such a CEO?

Failed Leadership Sank the Titanic

Yesterday, over dinner, a few of us (well, four of us) talked about the subject of failed leadership. Of course invariably, the conversation turned to HICT – I remember as far back as June 30 last year, I had highlighted this issue in this very blog, but things are still the same, if they are not getting worse. Anyway, I have no intention of talking about this organization anymore, but this article "The Sinking of the Titanic: An Analogy of Failed Leadership" by Gregory P Smith (Webpage http://www.chartcourse.com/articletitanic.htm) that I happen to chance upon, makes great reading on this same subject. I reproduce it in its entirety:

“We have struck iceberg . . .sinking fast . . .come to our assistance.” On a cold evening in 1912 that message came blistering across the airwaves. Before they tapped the last bit of Morse code, those words became the epitaph over the lives of the 1200 people lost on the Titanic. The ship was doomed as it slowly sank into its watery grave. Why did the largest, most advanced ship of the time fail?

Those of us who study history or remember the movie may know why. It wasn’t the iceberg that caused the disaster, but something else. Clear in my mind was the real cause – failed leadership.

The Titanic still rests on the bottom of the ocean, but we can resurrect the truth and apply a few lessons learned to help us become better leaders.

Leadership is Always Responsible. Leadership is responsible for everything the organization does or fails to do. Leadership is more than a wooden figurehead. A leader is not a position, job title, or in this case, the captain of the ship. Leadership is not about power, ego, or pride. Leadership is ever present, touching, motivating, talking, and checking, removing barriers, training, preparing, breathing, and moving about. This was Captain E.J. Smith’s retirement trip. He was headed for the easy life. All he had to do was get to New York. God only knows why he ignored the facts, why he disregarded seven iceberg warnings from his crew and other ships.

Biggest Is Not the Best. Today’s businesses must change course quickly. It took over 30 seconds before the Titanic turned away from the iceberg . . .but it was too late. The larger an organization becomes, the greater its inflexibility. The more difficult and cumbersome it is to steer, to direct, and to change. Large businesses soon grow into huge bureaucracies where rules, regulations, policies, procedures, and “I need permission to make a decision” become the norm.

Rank Has It’s Privileges? Ranking is good for command and control, but not good for change and innovation. Ranking people limits their potential. Today, businesses rank and classify people--sometimes unintentionally. Whether it is reserved parking spaces for the privileged, or being categorized as blue collar, white collar, temporary, part-time, those with cubicles, those with offices etc, the results are the same. Clear the lines between the classes and make everyone feel they are rowing in the same direction, for the same purpose. In a disaster, everyone is equal.

The Truth Changes All the Time. The Titanic was unsinkable, so they thought. They were so confident in their ship they only had enough life boats for half the passengers. The thinking that made us successful yesterday will cause us to fail tomorrow. Our unlearning curve must be greater than our learning curve if we are going to succeed.

Good Technology is Never a Substitute for Bad Leadership. When technology fails, leadership must prevail. Captain Smith said years before the Titanic’s voyage, “I cannot imagine any condition which would cause a ship to founder . . .Modern shipbuilding has gone beyond that.” Many businesses today have placed the wrong people in charge. They are not leaders, but managers. So – when disaster strikes, who is going to step up and lead or will your technology pull you under?

Leadership is About Training and Development. As the stern of the Titanic lifted out of the water; the crew and passengers struggled with the lifeboats. There were no drills, no rehearsals, and the crew stood unfamiliar with their responsibilities. The boats were improperly loaded and only one boat went back to try to recover survivors. A good leader helps people improve their skills so they can become more productive.

What Lies Below Is More Destructive Than What Is On Top. The greatest dangers lie unseen below the surface. That night in 1912 was smooth like glass – deceptively dangerous. The iceberg lurked below. Like steel fangs, it tore at the rivets along 300 feet of the Titanic’s hull. Those below, the “crew and steerage,” felt and saw the damage first. Like a gasping breath, the steam billowed above as chaos reigned below. Then and now, those who know what’s wrong with your “ship” are those below decks. Those people on the front-line usually have the best ideas and solutions to your problems. Consider asking them for their ideas and suggestions before catastrophe strikes.

Leadership Looks Beyond the Horizon. A good “Captain” is on the lookout for shifting trends, changing needs, storms, and icebergs. Sam Walton identified and met a need while other retailers did not. Apple saw the need for the Ipod while others were still happy with CD players. The vision of the Sony Walkman existed in Akio Morita’s mind way before the competition. Get the picture? Be on the look out scanning the horizon for the next wave of change instead of waiting for it to hit you in the face.

Cost-Cutting at Univeristy of Melbourne

The other day I brought up the topic of ‘execution’ in this blog. In fact, this is a subject that is familiar to my students, especially those taking my OL328 Leadership course this semester. We have learned about Jack Welch and the 4E’s. The discipline of the 4E’s in fact, has helped Welch to find and develop leaders who would fit into GE’s high-octane, performance-based culture. The fourth E is ‘execution’ (and the other 3 E’s are energy, energize, and edge). People who execute effectively understand that activity and productivity is not the same thing. The best leaders know how to convert energy and edge into action and results. In short, they know how to execute. That’s why execution is so vital to any organization that wants to succeed!

My students are well-advised to pay attention to the above...

Dr. Paul Chan highlighted news from the University of Melbourne regarding job cuts. This news is bound to hatch some anxiety because jobs in the education sector are supposedly recession-proof. I suppose in today’s world, everything has become unpredictable and volatile, and anything can happen. Given that this university is No. 38 in the THE.QS World University Rankings 2008, I was intrigued and even puzzled. And so I searched the Net to find out more about this cost-cutting exercise.

On webpage http://news.smh.com.au/breaking-news-national/melbourne-uni-to-cut-220-jobs-20090728-dzy1.html (accessed July 29, 2009), I was dismayed to read that the university remains in the black but because it does not want to compromise its long-term viability – whatever that means – Vice Chancellor Professor Glyn Davis announces that the axe is about to fall on 220 jobs through a voluntary redundancy program. The impending job losses, amounting to about three per cent of the university's 7,500 staff, are expected to cost around $15 million, and they are among a number of measures designed to save $30 million a year. Other measures include a senior staff wage freeze, a hiring freeze on non-academic staff, job sharing and cuts in travel. But of course, the university is executing this "with a heavy heart".

“We anticipate that if we are successful in holding down expenditure then we can come through this with no further loss of jobs and without having to go through a further round of voluntary redundancies," Prof Glyn told reporters.

"Most Australian universities have gone through a process like this, or are going through the process but we've decided to go public and be upfront about ours”.

This is plain horsefeathers. Still this is also today’s reality.

Sogo Sunday

All the evening drills have paid off, because yesterday, the Sogo show came and went, and Sheila Wong pronounced it a success. HICT models had performed to expectations. Although I was not there to be with them, I know they did me proud as they paraded down the catwalk with practiced poise and composed confidence!

Further to my posting the other day about British Airways, I had mentioned that their staff were asked to work for free, but I neglected to mention if this was agreed upon. We must be extra careful when we announce this, because otherwise, we give the impression that BA staff were complying. Nothing could be further from the truth. It turned out that BBC News (Webpage http://news.bbc.co.uk/2/hi/business/8136503.stm, posted today, i.e. July 06) has clarified that the airline had actually written to their 40,000 staff in the UK, asking for volunteers to work for nothing to help make savings – but that only 800 workers had positively responded. And the icing on the cake, or so it would seem was when BA chief Willie Walsh agreed to work unpaid in July, forgoing his month's salary of £61,000. If this is not tokenism, I don’t know what is.

HICT is also not spared of staff sacrificing part of their salaries in the interests of making savings – but perhaps the lesson is for our CEO/President to do what Willie did, if only for a month (Psst, we are in the month of July after all!), and show us staff that she is prepared to demonstrate leadership by example. After all, Albert Schweitzer did say, “Example is not the main thing in influencing others, it is the only thing”.

Jack Welch's Leadership Formula

I bought a Jeffrey Krames book “Jack Welch and the 4E’s of Leadership” because the teaching of OL328 Leadership is never complete without embracing the winning leadership formula of Jack Welch. In his 20-plus years at the helm of General Electric, Welch transformed this mature manufacturing company into an outstanding products-and-services juggernaut. But most of all, Welch selected and developed leaders – under his watch, GE turned out more Fortune 500 CEOs than any other company in history (pp 2-3). But what impressed me about him is that he had guts! He was not afraid to act decisively: selling off more than 100 businesses and firing more than 100,000 employees (pp 6-7). As he himself said: “Change before you have to”. Now, what about HICT?

A second Jack Welch quote awakened inside of me: “Strong managers who make tough decisions to cut jobs provide the only true job security in today's world. Weak managers are the problem. Weak managers destroy jobs”. Is it any wonder that Fortune magazine named him one of America’s toughest bosses? It is not uncommon to read of massive job losses because of the current weakened economic state worldwide. It’s a tough call to make – erase jobs to save jobs! A third quote from Jack Welch rightly nailed it down: “Face reality as it is, not as it was or as you wish it to be”. I am a Jack Welch fan now. In fact, anybody who needs lessons in leadership should read this book!