Business Blog: Hoover’s Business Insight Zone

Seth Godin has a good post today called “The discipline of one ring.” Here’s the crux:

. . . some companies have decided to answer the phone on one ring. . . .

When you need to answer the phone in one ring, you discover exactly what it means to provide a certain level of service. Either you’re succeeding or failing. So you hire more people and devote more resources, because there is no slippery slope. On or off.

I love this because it’s so pure. Are you in the service business? If you swear in front of everybody that you’re going to give white-glove service, then you’d better make sure you can pass the white-glove test — all the time.

This reminds me of what Mark Cuban did when he took over the Dallas Mavericks. He hired an old colleague of his, a top-flight sales manager, to run the Mavs ticket office. The guy’s mandate was simple: Sell out every ticket to every game. Cuban told the sales chief that if he needed to hire as many salespeople as the Mavs’ arena has seats, so that each salesperson would be responsible for selling out that one seat for 41 home dates per season, so be it.

Clarity is power.

Bill Miller’s* message to Citigroup: Don’t bring in a new CEO to launch a new strategy. Bring in someone who can simplify and execute instead — like Mark Hurd has done at Hewlett-Packard.

Bill Miller’s simple plan for Citi

. . . He said the bank should find someone who has a similar management style to Hewlett-Packard CEO Mark Hurd. Hurd replaced Carly Fiorina in 2005 and has led a dramatic turnaround at HP, mainly by cutting costs and focusing the computer company on what it does best.

In other words, Miller said he does not want to see Citigroup bring in someone who would have a radically different vision for the company, even though it has been hit hard by the subprime mortgage crisis.

“I would like someone to run Citi like the way that Hurd saw HP - someone to come in and simplify the processes. That’s key. Someone who would approach Citi that way would be great,” he said. “Citi doesn’t need a major strategic overhaul.” . . .

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Related posts:

• How good was Carly Fiorina at Hewlett-Packard?
• Putting out fires versus fireproofing.
• Floyd Norris and Chuck Prince: a follow-up.
• The importance of execution.

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* Miller is a rock-star fund manager for Legg Mason.

“There’s nothing you’ve ever been successful at that you didn’t work on every day.”

That’s the takeaway message from this TIME story and this 60 Minutes profile on Will Smith as he prepares for next week’s debut of his new film, “I Am Legend.” In the 60 Minutes piece, he discusses his “sickening” dedication to hard work:

“I’ve never really viewed myself as particularly talented. I’ve viewed myself as slightly above average in talent. And where I excel is ridiculous, sickening, work ethic. You know, while the other guy’s sleeping? I’m working. While the other guy’s eatin’? I’m working. While the other guy’s making love, I mean, I’m making love, too. But I’m working really hard at it,” he tells Kroft, laughing.

Here’s how the TIME piece puts it:

With his ready grin, jug ears and baritone belly laugh, Smith’s image is that of the happy-go-lucky Everyguy. But you don’t accrue $4.4 billion in worldwide box-office receipts and two Oscar nominations without machine-like drive. Smith’s four most recent movies–The Pursuit of Happyness, Hitch, Shark Tale and I, Robot–have each grossed more than $300 million worldwide . . . Because Smith has mastered the delicate art of appearing artless, few moviegoers realize that his is one of Hollywood’s most meticulously planned and executed careers.

Those key phrases: “ridiculous, sickening, work ethic,” “machine-like drive,” “meticulously planned and executed” put me in mind of Prof. Anders Ericsson’s work on “deliberate practice,” about which I’ve been reading a lot lately. (A good place to start on the topic is this great 2006 Geoff Colvin article from FORTUNE: “What it takes to be great.”)

If I have a clear picture of Smith’s meticulous planning and incremental self-improvement, he embodies what Ericsson has studied across many fields of endeavor (chess, science, golf, writing, surgery, and so on). While Ericsson’s work has many ramifications, one of his most startling findings bears out what Smith says about his own talent: many expert practitioners display only a modicum of talent, but virtually all expert practitioners have work routines characterized by incessant practice — and not just practice, but deliberate practice that is designed to improve their skills constantly.

The poster children for this phenomenon are Tiger Woods and Roger Federer, who dominate their sports as few individuals ever have, and who will tell you in a heartbeat that, for all their accomplishments, they still have much more improvement in front of them. It’s the same as the greatest CEOs: as their companies post record quarters, they’re thinking ahead about how to be better next quarter, next year, and ten years down the line. All of these performers also benefit from sophisticated “mental models” of their fields of expertise (another area that Ericsson has researched); apparently Will Smith shares that trait, if you consider his comments from the TIME and 60 Minutes articles about the way the movie business works.

Food for thought: how much better could you be at your job if you engaged in deliberate practice? And what could your organization do to foster deliberate practice?

At footnoted*, Michelle Leder tells the happy story of Jacobs Engineering, which took the high road in terms of investor transparency and reaped financial rewards.

Doing good by doing well?

. . . while it’s obviously too simplistic to say there’s a direct cause and effect here, I’d argue that this type of openness does have an impact because it shows that a company’s management isn’t wasting time and resources trying to shove problems under the proverbial mattress (read: holed up with lawyers and accountants trying to bury it deep in an SEC filing) and, instead, is focused on executing their business.

It’s revolutionary, I tell you!

Kudos to Michelle and kudos to Jacobs Engineering.  Say what you mean and mean what you say, and you’ll never have to worry about keeping your story straight.

“The Patriots have been running up the score.” That’s been a steady refrain in the current NFL season. I say baloney.

Tom Peters, writing in from abroad, complained about this a couple of days ago:

. . . I would order a pox on the Pats—leading 42-10 at the end of three quarters, why the 14 additional points in Q4?

Depite being a fan of his, I let him have it in the comments of his blog. After reviewing how the Pats’ fourth-string running back scored long after the team’s aerial game had been grounded, and how a lightning-fast defensive back scored on a recovered fumble, I called into question Peters’s attitude:

Pardon me while I interrupt my years and years of unreserved Tom Peters fandom to get in a two-second snit with you, Mr. Excellence! Always!: What the hell are those players supposed to do out there, NOT try? They’re trained to play hard on every play, and playing at half-speed is a recipe for injuries and accidents.

These aren’t Little Leaguers. If my son’s team of Runts squared off against the Big Bad Bombers and got shelled, at some point we’d invoke a mercy rule. My Longhorns don’t score gratuitously against Podunk State in the second half of a pre-season game. But the Bills defense (players and coaches) are highly compensated professionals whose JOB is to stop opposing offenses. They couldn’t do it last night because the Pats are too good at what they do. That’s tough for the Bills, but you know what? Their professional pride (and large paychecks) will somehow help them weather the storm.

Is Goldman supposed to not “run up the score” because Merrill and Citi are hurting? Tell that to Lloyd Blankfein and see if he can contain his laughter.

The Pats’ attitude isn’t what I’d want my little boy to emulate. But they’re achieving as much as they are because they’re BETTER than all the rest. They are Excellence in action, even if you and I don’t like the flavor.

The other commenters on the post seemed to agree with me. These aren’t schoolboys — they’re professionals. They’re not scoring every point they can, but they will continue to play hard for 60 minutes (a habit that saved them in their big clash with the Colts a couple of weeks ago, by the way). Any of their opponents who would like that to stop . . . should stop them. Just like Citi and Merrill should get better to top Goldman. And so on throughout the business world.

If you can’t stand the heat, stay out of the kitchen.

Xerox has declared its first quarterly dividend since the dark days of 2001.

Most of us Hoover’s editors can’t help but develop some favorites among the companies we cover. Xerox is one of mine, because it embodies several things that I find compelling:

• It’s proof-positive that a big, legacy-burdened company with a broken business model can sometimes be fixed. (This is something that Alan Mulally at Ford seems to grasp — and a good thing, too.)
• Instead of reaching outside the company for an overcompensated big-name CEO to play savior, the Xerox board tapped an insider — Anne Mulcahy — who already knew the Xerox culture inside and out, but who also had the guts to change what needed changing.
• As we’ve discussed before, Mulcahy and the Xerox board have set up a clear succession plan so that, when Mulcahy is done, Ursula Burns is fully prepared to take over.
• The company’s recovery from near-disaster several years ago has, in many ways, been resolutely un-sexy. It’s been mostly about building methodical advantages over time.

Many other companies in trouble could take a lesson here.

So why only two-and-a-half cheers? Because I’m going to save the full three cheers for the day — not to far from now, I’d bet — when Xerox is on such a good course that any talk about its restructuring dwindles away into the mists of history.

This short item from Deal Journal offers a nice insight to the CEO hiring process for private equity firms — and what that may mean for the private-equity veteran, Alberto Cribiore, who is running Merrill Lynch until a permanent successor can be recruited. The interviewee (JG = Jonathan Goldstein) is a founder of an executive headhunting outfit that helps private equity shops find CEOs for the businesses they run.

PE’s Hiring Advice for Merrill: Avoid the Chronically Unlucky

DJ: How do PE fund managers differ from other people looking to hire top executives?
JG: I think that maybe the most important thing a PE investor is looking for is that the operating manager - the CEO to be - appreciates the time frame that a PE firm works in – the need to move quickly and produce results. It’s a different time frame and a different mentality than CEOs of firms are typically used to.

This reminds me of a great article from the August issue of Bloomberg Markets: “The KKR Way.” [Note: PDF link.] The article talks about how KKR (a.k.a. Kohlberg Kravis Roberts) tackles management issues within the companies it buys. While the process is sophisticated, it’s hardly delicate: KKR hires hard-nosed executives with track records of serious operational success, it makes sure they have “skin in the game” (i.e. their own wealth is invested in the companies they run), and then it keeps very, very close tabs on how they improve performance.

And those improvements had better come quickly. The article quotes Michael Chu, a former KKR limited partner who went on to found his own private equity firm:

You don’t have the luxury of managing issues at the margin. If the market changes, you change the strategy. If the CEO doesn’t work out a year into the deal, you never shy away from the tough questions. You change the CEO.

The result is a relentless focus on operational excellence rather than any form of corporate window-dressing. Contrast this to the long, slow mediocrity that is the tenure of the average CEO.

I’ll say it again: being a CEO requires a special combination of skills that is not very common . . . but not that rare, either. You don’t churn through people in the top spot if you can help it, but you don’t avoid change when it’s necessary, either.

Addendum: Another Deal Journal post (about my favorite whipping boy, Chuck Prince) points toward the Management Turnover as Change Agent blog, which seems to have nothing but posts on CEO turnover. From a quick skim, looks like good stuff.

After yesterday’s entry, I was thinking more about the plight of Alcatel-Lucent and similarly challenged outfits that are trying to restructure their operations. The companies that spring to mind are Kodak (nearly done with its reformation), Ford (slimming down), and Countrywide Financial (no telling whether it will survive the mortgage mess). All of these companies face the challenge of dealing with large infrastructures that may no longer help them to address the needs of their customers. In some cases of restructuring, those customer needs — or even the entire customer base — changes quickly enough or radically enough that the company awakes to find itself in what is essentially a new marketplace.

Certainly this happened to Kodak, which had to come to grips with the revolution in digital technology that has swept through the world of photography in the past decade. It may be happening to Ford, which hasn’t shown any recent ability to turn out hit models one after the other, and which seems unable to engender anything like the customer loyalty it enjoyed once upon a time. Certainly Countrywide faces a very different mortgage landscape than it did in previous years.

In each of these cases, changes in the prevailing conditions of business have upended the organizational quality of these large companies. What I mean is that they may have been rightly organized for earlier prevailing conditions in the marketplace — surely they were, considering the huge profits Kodak, Ford, and Countrywide have made at times — but whenever they can’t keep their organization evolving in pace with the evolution of the marketplace, they’re bound to end up looking disorganized. In fact, they are disorganized, as far as making steady, healthy profits is concerned.

Which brings us back to Alcatel-Lucent. Waves of change in telecommunications technology and in the markets for telecom equipment are tough enough to negotiate. Now stack them on top of a decades-long legacy of the hugeness and bureaucracy that came with old-style telephone monopolies . . . and then square the result, since the combined company now must deal with the legacies of both Lucent and Alcatel. Oh, yes, and throw in some trans-Atlantic cultural friction, too. Even if Lucent had been perfectly organized on its own (it wasn’t) and if Alcatel had been perfectly organized on its own (ditto), the combination of the two companies would be tricky enough. But layer their legacy problems on top of one another and . . . you get the mess they’re facing now.

As I see it, maybe the biggest problem of this kind of disorganization is that when it prevails, enterprises can’t harness the talents of their members. This is true whether we’re talking about a Cub Scout pack or an NFL team or Ford Motor Company. Well-organized enterprises are worth more than the sum of the parts because they harness the great advantages that come from coordinated effort. Disorganized enterprises are worth less than the sum of the part because too many individuals are left to their own devices in terms of applying their talents to the company’s broader efforts. Being worth less than the sum of the parts is one of the reasons that all of these companies have laid off so many employees: when you’re that disorganized, you can sometimes do better at meeting goals of profitability and so on when you subtract people from the equation. That’s not to let management off the hook: the best-run companies, like Toyota and Cisco, have shown that they can operate very well in these supposedly broken industries, and they don’t face the prospect of laying off hard-working employees whose talents go unharnessed because of disorganization within the system.

Pat Russo has her work cut out for her at Alcatel-Lucent, because no silver bullet (like the ill-advised merger of Alcatel and Lucent itself) can fix the company. It took a lot of entropy, a lot of sub-optimal choices, and years of fealty to legacy decisions to get the Alcatel side of the business, the Lucent side of the business, and the merged company to where they are today. You don’t say “Hey presto!” and undo that caliber of a mess. No, you have to make hard decisions one by one that progressively enable more of the company’s talent to come online. Nothing else can transform a bloated, ineffective entity like Alcatel-Lucent into a successful competitor.

After many years in which most of the bestselling business books focused on strategy, in the past couple of years we’ve seen some crackerjack titles focused on the nuts and bolts of execution. The prime example of this — as its title and sky-high sales figures would suggest — is Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan. I haven’t read the book myself*, but it has earned broad currency in the business world for its nuts-and-bolts focus on how to get things done in the business world. As a long-time consultant to some of the world’s top companies, Charan is an acute student of business phenomena; Bossidy earned his stripes in decades as an operations whiz at General Electric before taking the reins at AlliedSignal (which later merged into Honeywell, which Bossidy also ran).

These men and their book have now been joined by James Kilts, former top executive at Kraft, Nabisco, and most famously Gillette (now part of Procter & Gamble), and his book Doing What Matters. I particularly like this Wall Street Journal review of the book, which kicks off with this quote from Harold Geneen, who built ITT to the peak of its glory in the 1960s and 1970s:

“In business, words are words, explanations are explanations, promises are promises, but only performance is reality.”

Amen, brother. As the review points out, when Kilts took the top job at Gillette, “People were being rewarded for effort; performance, under Mr. Kilts’s regime, became the new measure.” This is too often the case throughout corporate America, and while books alone can’t solve the problem (”words are words”), good books like these can help.

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* I should say I haven’t read it yet: this is something I keep planning to do . . . but haven’t, uh, executed.