With some 75 blog postings behind us, I wanted to take this end-of-year opportunity to turn the tables and ask you what topics you would like me to tackle in the New Year. In 2008 I devoted most of the postings to describe the inner-workings of the business book industry. The second most covered topic was Peter Drucker and his accomplishments—in order to provide a backdrop to support the publication of my latest book—Inside Drucker’s Brain.
As I look to 2009 I see better things for us. I see an economy that will turn the corner, led by [finally] a bottoming of the housing industry. I see the promise of a new presidential administration that will bear little resemblance to the previous occupants of the White House. However, nothing will happen overnight. Things will have to get worse before they get better.
So I ask you to please weigh in and let me know what you would like to hear more about in the year ahead. I will include some topics below and please feel free to add new topics as well:
* More on how-to-management
* Career advice
* More on Leadership
* Tips on how to manage (e.g. conducting performance reviews)
* Jack Welch and other CEOs
* Business history
* More on Peter Drucker
* Any other topic or topics (feel free to write in)
Many thanks for all of your support in the past year. Here’s wishing you and your family a happy, healthy, and prosperous 2009. And once again, please do drop me a note to let me know what interests you the most so that I can include it on my 2009 agenda.
With warm regards,
Jack Welch ─ the so labeled “Manager of the Century” ─ may be the only manager capable of saving General Motors. Welch, who ran General Electric from 1981 to 2001, turned a company worth some $12 billion when he took over into a company worth more than $400 billion when he left. For much of his second decade at the helm of GE, latter years, GE was the most valuable company in the world.
In order to save GM, Welch could simply pull out his GE playbook and call many of the same plays. He would have to do many of the same things but do them in record time. But he is prepared for that. He had said that one of his greatest regrets at GE was that he did not move faster. In light of that experience he now has the mental preparation required to move boldly and quickly enough.
One of the greatest problems with GM is a credibility gap. No one believes in the company, its products, or its management. That’s why the appointment of a Jack Welch would do so much for the company, even before he picked up the reigns. The announcement of Welch as the company’s new CEO would increase the market capitalization of the company (which isn’t much these days) by some fifty to one hundred percent overnight.
The “Welch premium” at GE was enormous. For his last years in office, GE’s stock was valued at more than fifty times earnings-and more than sixty times at its zenith. That’s how much confidence Wall Street had in Jack Welch’s abilities to run a large and complex conglomerate.
Welch has gone on record as saying that nothing short of a declaration of bankruptcy could save GM. Once in bankruptcy, he recommends that Chrysler and GM merge.
I do not believe that bankruptcy is the answer. That word conjures up awful images that would steer car buyers to Toyota and Honda and away from GM. Welch says that people fly on bankrupt airlines but I believe that comparison is a poor one. This nation has a long history of flying on bankrupt airlines. We know they still fly. But a bankrupt car company is a different story altogether. People would not want to gamble their $30,000, even if the U.S. government stepped in to guarantee the car’s future service.
However, a merger with Chrysler does make sense and plays right into Welch’s strengths. As CEO of GE, Welch turned the culture upside down by making acquisitions a perfectly good way to grow the company. Under him, General Electric did more than 1,000 acquisitions of every size, and merging the two companies would give him more room to maneuver and make changes that would save the firm.
While we of course live in different times, I believe that the confidence of a Welch running GM would be enormous, and even spill over to other automobile companies as well. Simply naming him as the new CEO of the beleaguered car company would attract millions of new investors while giving customers enough confidence that the company will be there for the long haul.
Today we have a crisis in confidence on so many levels, but the one that is discussed the least is a crisis in leadership in the nation’s most prominent corporations. If asked to name an active CEO who should be emulated or named in our business textbooks as a model, one has a difficult if not impossible time doing so. We know that there are none in our financial companies, given the stunning failure of so many of the names that were once associated with the bluest of blue chips. Even a few short years ago, a complete collapse of Bear Stearns or Lehman Brothers would have been unthinkable. Today, there isn’t a financial company around that inspires the confidence of anyone.
Why else would Jack Welch be the ideal candidate? Consider the following. GM of 2008 is reminiscent of IBM of 1993. By that year, IBM had lost more than $8 billion (and that’s when a billion was a billion). Enter Lou Gerstner, the Snack Food King, CEO of RJR Nabisco. Critics scoffed at the choice, the first outsider to run IBM in its history. Gerstner was not only an outsider to IBM, but was an outsider to the technology space. But when Gerstner arrived he said there was a customer running IBM, which was exactly what was needed. GM also needs an outsider, someone not afraid to make the really hard decisions, and serve as a leader to be emulated rather than criticized.
As CEO of GM, Welch would take a firm hold of the company by implementing the following in his first one hundred days:
- FACE REALITY: THAT IS A WELCH IMPERATIVE, AND THE FIRST THING HE WOULD DO IS ASSESS THE BUSINESS REALISTICALLY, SOMETHING CURRENT MANAGEMENT APPEARS INCAPABLE OF DOING. THIS WOULD ALLOW HIM TO SEE THE COMPANY WITH A FRESH PERSPECTIVE, SOMETHING SORELY NEEDED TODAY.
- MERGE WITH CHRYSLER: THIS WOULD BE A PIVOTAL PART OF THE WELCH PLAN. THE CEO OF CHRYSLER ─ ROBERT NARDELLI ─ IS SOMEONE WHO WORKED DIRECTLY UNDER WELCH FOR YEARS AT GE AND HAD SOME OF THE BEST RESULTS WELCH HAD EVER SEEN. THE TWO WOULD WORK WELL TOGETHER AND BE ABLE TO MOVE MUCH FASTER THAN IF WELCH WAS FORCED TO WORK WITH A STRANGER.
- REPLACE THE MANAGEMENT TEAM: GM IS IN DESPERATE NEED OF A NEW MANAGEMENT TEAM, ONE NOT ASSSOCIATED WITH THE INEPT DECISIONS THAT GOT THEM IN SO MUCH TROUBLE. HE WOULD TAP FORMER GE PEOPLE THAT HE CULTIVATED FOR YEARS TO FILL IN THE CURRENT “MANAGEMENT GAP.”
- ELIMINATE ALL UNPROFITABLE PRODUCT LINES, AND ANY INCAPABLE OF BECOMING MARKET LEADERS DOWN THE LINE. WELCH WAS ONLY INTERESTED IN OFFERINGS/PRODUCTS THAT COULD BECOME TOPS IN ITS MARKET. THIS WOULD MEAN A MUCH SMALLER COMPANY, BUT ONE THAT COULD RETURN TO PROFITABILITY BY 2010.
- CUT THE RIGHT NUMBER OF PEOPLE IN A NEWLY MERGED GM/CHRYSLER, BASED ON HIS VISION FOR A NEW, COMBINED COMPANY. RATHER THAN DOING THIS ON AN INCREMENTAL BASIS, WELCH WOULD HAVE A PLAN THAT WOULD ALLOW HIM TO DO THIS QUICKLY (BASED ON THE NUMBER OF PRODUCT LINES THAT HE OPTS TO SHUT DOWN). HE WOULD ALSO INCLUDE A PROVISION FOR CUTTING THE BOTTOM 10 PERCENT OF THE WORKFORCE EVERY YEAR, SOMETHING HE DID AT GE FOR YEARS.
- BRING INNOVATION BACK TO DETROIT BY HARNESSING THE COLLECTIVE INTELLECT OF THE COMPANY. AT GE WELCH FOUND THAT THE PEOPLE WHO ACTUALLY DID THE WORK HAD SOME REMARKABLE IDEAS ON HOW TO MAKE THINGS BETTER, BUT NO ONE HAD EVER ASKED THEM. HE WOULD CHANGE THE CALCULUS AT GM, BRINGING THAT SAME LEVEL OF OPEN MINDEDNESS TO GM. HIS PLAN WOULD NO DOUBT FOCUS ON HYBRIDS AND MORE GREEN SOLUTIONS.
Welch would also change the culture by doing what he did at GE ─ he would create a “boundaryless” culture by tearing down any and all walls that exist within the company and between the company and its customers and suppliers. That is a long-term goal, but one that must be a vital part of any turnaround story at the falling giant.
One of Peter Drucker’s signature concepts was called purposeful abandonment. You probably have heard of it before, in one context or another (I featured it in a previous posting). The key to purposeful abandonment is to figure out what to stop doing or what to stop making. (Peter Drucker once told his friend Rick Warren (The Purpose-Driven Life), don’t tell me what you are doing, tell me what you have stopped doing).
If you work in an organization of any size, chances are that that there are things you need to stop doing, even in a healthy economy. That’s because it’s easy to fall into a trap of continuing to do something long after it has served its purpose. Call it inertia, call it laziness—the reason doesn’t matter. But I have never heard of a perfect corporation that only does the things that are absolutely necessary to the proper functioning of that organization. In a hobbled economy, the role of abandonment becomes that much more important for readily apparent reasons.
Please take a few minutes and answer the following questions. If you do identify some money-saving, abandonment tactics that will work in your place of business, be sure to jot them down and put them into action asap:
* What documents or reports require signatures/approvals that no longer require that level of approval?
* What reports or documents do you print out that can simply be viewed on-line—helping your organization to move toward a paperless office?
* What products/product lines no longer provide the organization with the same level of profitability, meaning that they are likely the cash cows of yesterday than tomorrow?
* What products or services might your company experiment with today that might turn out to be the cash cows of tomorrow?
* While I always feel that cutting people should be a last resort, have you considered cutting “the bottom ten percent” of your workforce each year as a regular exercise (as Jack Welch, former CEO of GE urged managers to do)?
* What ideas do your employees have that will save the company money? If you haven’t asked them you have overlooked one of the best sources of potential money-saving tactics.
Remember why you are looking into these potential steps. You want to make some changes so that the entire enterprise is never put at risk, even if the economy continues its downward spiral.
It isn’t often that you read a review of your book written by someone who really gets your book. I mean, someone who really gets it—a management expert who totally understood what you were trying to accomplish when you set out to write your book years earlier. I want to thank Jim Stroup for being that reviewer. Jim is a blogger and his very fine Website is Managing Leadership: The Strategic Role of the Senior Executive. You can read his review here:
As always, I look forward to any comments or feedback.
I don’t have to remind any of you about how bad the economy is—the worst in decades. Companies are desperately trying to save money by cutting costs across the board. Unfortunately, one of the things that managers seem to think of first is cutting people. Even the best managers are guilty of that. Back in the early 1980s, with the U.S. economy sandwiched between recessions, Jack Welch (known as “Neutron Jack” for cutting the people but leaving the buildings standing) did that when he eliminated more than 120,000 people in his first years on the job.
Welch was a cost-cutting pioneer. He was among the first big company CEOs to cut tens of thousands of jobs. Peter Drucker was ahead of his time in despising CEOs for laying off workers by the boatloads while simultaneously collecting multi-million dollar pay packages. He called it immoral and said, presciently, that we would pay a steep price for this level of avarice. He even called it the “death of capitalism.”
But I am getting a bit off topic. This post is supposed to offer a very quick litmus test on deciding on how a company makes a decision on when to cut costs. Drucker has provided the best I have ever come across:
“To start cost cutting management usually asks: ‘How can we make ths operation more efficient?’ It is the wrong question. The question should be ‘Would the roof cave in if we stopped doing this altogether?’ And if the answer is “probably not’, one eliminates the operation.”
Drucker also said:
“…Eliminating an entire operation is by far the most effective way to cut costs, and the only one likely to produce by itself permanent cost savings.”
Drucker wrote those words some two decades ago and, for better or worse, this is one piece of advice that got through. Businesses of all sizes have taken this advice to heart and are shutting down whole parts of their companies. This is likely to continue until we have some solid evidence that the deep recession we are in is changing course.
Drucker gave this advice in one of his later books. He wrote many books before imparting these suggestions. He was far more interested in building up businesses than shutting them down. However, he was a pragmatist at heart, and preferred to see companies scale back rather than shut down entirely.
We live in ironic times. Type in “leadership” at Amazon.com, and you get astonishing 300,000+ matches. For as long as I can remember, leadership books have been a robust category on the business book shelf. I believe many managers and aspiring managers go into bookstores, browse the business category, and come out with a leadership book or two. Even if these folks were looking for something else, they were drawn to the leadership shelf and couldn’t resist one that promised to transform them into something larger than themselves.
After all, who doesn’t want to be a leader? We all think we possess some leadership abilities, even the shyest among us. If that is true, then I have one question:
Where on earth are all the leaders?
We not only live in ironic times, we live in dangerous times. And I am not talking about wars or the kind of terrorism we saw in Mumbai late last month. Those are indeed dangerous and tragic events, so please don’t get me wrong. I am talking about a wrecked economy that is taking an ever greater toll with each passing day. In today’s wired, 24-hour-news cycle, You Tube society, things happen in days that used to take weeks or longer. The stock market fluctuates 700-900 points in a single day, moving more than three percent most days. Job losses are routineley announced in the many thousands by our greatest companies on the same day.
Then there was the near-death of the financial industry, where century-old financial institutions disappeared like ghosts in the night (e.g. Lehman Brothers, Bear Stearns). We have an automobile industry on the verge of extinction. Unemployment is up by some fifty percent in the last two years alone (to 6.7 percent). We just lost more jobs in a single month since 1974—533,000 in November–and the economy is in its worst shape since the Great Depression. Yet, with all that, who is stepping up and demonstrating an ounce of leadership? Besides symbolic and important gestures by President Elect Obama, we see little leadership on display. (However, we really cannot count the incoming president, since he has no real power to do anything other than to tell us what he will do starting in about 40 days. And like he says, there is only one president at at time, so he obviously cannot make law or policy).
Congress, after doing the only thing it could do by green lighting a $700+ billion package for Wall Street, came dangerously close to allowing the three automakers go out of business. Sure, the car-makers are responsible for most of their own woes, but this is no time to cut off our noses to spite our faces. Allowing another two million jobs to go by the wayside in the midst of this already severely impaired economy would have been a suicidal move. The fact that they made the three CEOs come back to Washington to beg for $25 billion was ridiculous. Congress was more interested in pointing fingers than doing the right thing, violating a key Drucker imperative: “it doesn’t matter who is right, but what is right.” Those more interested in the former rather than the latter do not deserve to be in positions of influence, insisted Drucker.
With a lame duck president seemingly unwilling to do anything but to pack his bags, with no CEO or congressional leadership, we are facing the greatest leadership vacuum of my lifetime (which started during the JFK administration—my lifetime—not the leadership vacuum). Warren Buffett tried to add a little confidence by making investments in Goldman Sachs and GE, but those deals were more symbolic than anything else, since Buffett got sweetheart deals unavailable to the rest of us both times. The failure of any authentic leadership in these troubled times points to a larger, systemic problem. While there are many solid qualified leaders out there, their failure to communicate confidence or help build confidence in any way in these times is unforgivable.
One of the things Peter Drucker and I discussed was the essence of the management job itself. He explained to me how the modern day manager was born. Big corporations were formed in the 1880’s in the U.S., Japan and U.K., all pretty much at the same time (France held on to family run organizations a little longer, Drucker told me).
Up until that point, the most capable member of each family business ran that business. Pierre S. du Pont (1870-1954), for instance, served as president of the diversified company from 1915-1919. Drucker called this small group of men “geniuses,” or “naturals”—men who had the ability to lead with no training or formal education in business or management.
That got me wondering, how exactly did the modern corporation evolve, and how was middle management formed? After all, if all we had were family members running the “family businesses,” then how did the middle manager come into being? The answer is, not very easily. That was because at DuPont, and other companies like it, only family members were permitted into the management ranks. Then how were middle managers formed? That’s when Drucker turned things around and asked me a question:
“What do you do with those able workers who were not family?”
That’s when the clouds cleared and the answer became clear: “You give them middle management jobs, right, I asked?
“Right,” said Drucker.
“Du Pont invented middle management jobs just to keep them.”
So it was pure pragmatism, I thought. The only reason big company, family CEOs granted individuals the title of middle manager was because they could not afford to lose the workers who were playing a pivotal role helping the trains to run on time. As those companies grew, where would they be if they lost their best workers? And Professor Drucker wasn’t finished. He explained to me that middle managers took a long time to develop in a meaningful way:
“Middle management before World War II was very thin. Even the first companies I knew in this country still had first line supervisors reporting directly to top management. I am thinking of manufacturing companies…Remington, for instance, in Connecticut.”
I tried to digest what Drucker was telling me. What he was saying was that middle managers were a relatively late phenomenon, not really coming into their own until after World War II. That’s amazing, when you think about it. After all, I have been a middle manager for more than a quarter century. I had no idea that middle managers were really a phenomenon of the 1950’s and after. I don’t ever remember that lesson when I majored in business in the early 1980s. Chalk that up to one more Drucker lesson that is not taught in business schools or other universities. In fact, one would be hard pressed to find more than a passing mention of Drucker in any management textbook—either at the graduate level or the undergraduate levels.
Tom Peters, lead author of In Search of Excellence, said that he was not asked to read a single Drucker book in his years at The Stanford Business School. Don’t get me started on why Drucker isn’t taught at the business schools—it was one of the driving reasons I wrote Inside Drucker’s Brain. So he wouldn’t be forgotten. However, Tom Peters also said that “no true discipline of management existed before Drucker.” He is not alone in regarding Peter Drucker as the key management pioneer of the 20th century. Other luminaries who hold Drucker in such high esteem include Jack Welch, Bill Gates, Andy Grove, Noel Tichy and too many more to mention here.
People ask me if there is a lull between Thanksgiving and Christmas in the publishing industry. Do we finally get a chance to lower the volume from a loud and hectic beat of the drum to something lower and more restful? The answer is a definitive no…well, lets say mostly no. And the answer has a lot to do with the way business books are sold. Here are some of the specifics, first.
On the editorial side, we tend to see fewer viable book proposals during this period. We experience less agent activity as many agents take at least part of this time to recharge their batteries. This means that we are less likely to see proposals for the truly game-changing books, the really big books that can command advances well into the hundreds of thousands of dollars, or higher. We are much more likely to see those books in other months like January or September (which, coincidentally, are two good months for business book sales as well). However, that does not mean that things slow down for us. Here’s why.
Like most large publishers, we are a three-season publisher. This means that three times a year, we are finalizing a list of books that our stellar sales reps will be selling for the following season. For example, in mid-November we held our sales conference for the summer, 2009 books—books slated to be published from May to August of 2009. That shows you how many months in advance we are working.
With each publishing season the reps get a catalog that includes one to two pages featuring each book. Each page includes a detailed description of the book, its unique selling proposition, a picture of the book jacket, a bio of the author, as well as a list of his or her most successful books. This catalog, prepared largely by that publisher’s various marketing teams, is the key tool used by the reps to sell each book to the large chains and independent bookstores. Business book buyers from bookstores both large and small tend to be well versed in the business book category and make calculated decisions on how many of each book to buy. However, I would be less than candid if I did not tell you that it is common for publishers to be disappointed with the actual buy on certain key titles. But the good news is that if a book takes off, the book chains and stores respond by placing quick reorders. And publishers respond just as quickly by making sure that books are available (if there are not enough in stock, publishers reprint in lightning-like fashion).
What separates the top tier publishers from all the others is related, in part, to the number of books each imprint has to sell each season. A publishing imprint that publishes, say, fifteen books per season naturally has a far more manageable task than the publisher that may sell 80-100 per season. I have been on both ends of the spectrum and I can tell you that the list of fifteen books are better titled, packaged and handled than the 80-100 put out by a single, very frenetic imprint. Business book buyers from the Barnes & Noble’s of the world recognize the difference between the two imprints, and order accordingly. These buyers understand that the imprint with the smaller number of titles will put much more resources (e.g. marketing and otherwise) behind each title and feel confident placing larger orders from the top tier publishing houses.
Lastly, the key to all of this is to make sure that when each book is published, a maximum number of each book goes out the door onto the store’s bookshelves. The greater the number, the more visible the book and the more visible, the more copies that are eventually bought by our final customer, the book buyer/reader.