Nightly Business Report Presents Lasting Leadership: What You Can Learn from the Top 25 Business People of our Times download epub

Former G.E. executives lead 30 of the 300 largest U.S. companies. Welch believes that his main job was not to design aircraft engines, CAT scans, or sitcoms, but to build leaders. The first chapter of 'Lasting Leadership' summarizes Welch's methods of building leaders.

When you begin your career, you start by thinking about yourself. It's all about you. But once you become a leader, your thinking must change, to 'all about them.' You will only look good if your people achieve extraordinary results. That's why you have to hire the smartest people you can find. If you don't have the self-confidence to do so, you can't lead.

You've got to go with people who allow you to be yourself - never a company where you have to put on a persona to fit in. If you are a nerd, go hang out with nerds. Then consider opportunity - eg. biotechnology over the airline industry. Always to places that offer opportunities to learn, where you will not be the smartest person in the room. Go to a place that is a start-up if you can, where you can learn a lot of things, or to a company with a strong brand (J&J, Microsoft, G.E.)

The first thing you want to look for in people working with you is energy, second those who can energize others around them, the third is edge, fourth people who can execute, and with passion. When looking at someone from outside, ask 'Why did you leave your last job?' What you listen for is if the person is just a whiner, or if the work wasn't exciting enough and the person was looking for a new challenge.

People talk about values. Welch says to forget about values and focus instead on behaviors. Reward those you want, and punish those you don't. If you have an ethics violation, do not let the personal reasons/to spend more time with the family. Publicly hang that person in the square - tell the rest why. If you don't, people will laugh at you.

G.E. didn't buy companies in California in the late 1990s because salaries were too high and would have caused dissension elsewhere.

Herb Kelleher injected two core values into SWA from the beginning - a light-hearted irreverence for bureaucracy and an emphasis on teamwork.

When Jack Welch became GE CEO in 1981, he began a crusade to eliminate the company's weak links before they could drag down the entire organization. Managers were ordered to fix, sell, or close businesses that were not fist or second in their markets. GE made 1,700 acquisitions and divested 408 businesses while Welch was CEO. Among the first to go was central air-conditioning in 1982, followed by Utah International ($2 billion natural resources businesses), the $300 million housewares business (Welch saw them as sitting ducks for low-cost foreign competitors). He acquired NBC because he felt foreign ownership rules governing television networks would give him some cover from rival companies abroad. He also began to focus on developing its financial arm, G.E. Capital, figuring it would be more profitable than 'grinding metal.' Welch also pressed transferring successful practices from one division to another - include Six Sigma.

During the go-go stock market era in the 1960s, it seemed that investment managers could do no wrong. But the bubble popped in 1973 and stocks fell by nearly 50%. John Bogle had been bothered by the conflict of interest inherent in many fund operations. They typically use outside money managers to select the stocks and bonds held, and those management companies also handle the administrative, marketing, and distribution functions for the funds they serve. In most cases the fund company's board is dominated by executives from the management company. Income for the management companies comes from fees charged. Bogle argued that the funds should purchase the management company used, eliminating the conflict, because fund investors would be owners as well as customers. Bogle also argued that the funds should be 'no-load,' instead of using brokers who charged as much as 8%.

Part of Bogle's strategy depended on educating investors about the poor performance of the average, actively managed fund, then selling to this more knowledgeable class of buyers. In 2002, he pointed out that the average expense ratio for equity funds reached 1.6% of fund assets, while trading commissions and other costs increased expenses another 0.8 percentage points. With miscellaneous expenses included, total costs averaged nearly 3% of assets, while at Vanguard's S&P 500 fund, the expense ratio was 0.18%. Funds like Vanguard operate essentially on autopilot, generating very little of the turnover that triggers capital gains taxes.

In 1974, a prolonged famine devastated residents of many of India's small villages. Muhammad Yunus, and economics professor, first decided to enlist the media's help in calling attention to the rising number of starvation deaths, then try to increase food production in a small village (Jobra), near his home. Over the course of a year, he succeeded in helping farmers improve an irrigation system that would allow rice production on previously unused land. He then decided to focus on landless poor, about 50 million of Bangladesh's 120 million inhabitants, as the market for the Grameen Bank he started. Loans, ranging from $1 to $100, were typically for a year, first at 16% interest and later at 20%. Recipients were required to start making payments the second week of the loan, and were only made to individual borrowers who had formed into groups of five. The idea was that peer pressure and support would help insure the loans were repaid. Grameen also mostly lent to women, reasoning they were more reliable and more likely to spend profits on their families. By 2004, the bank had loaned $4.18 billion, of which $3.78 had been repaid, with a recovery rate of 99%,

IBM and clones soon dominated the PC market after the Apple first was introduced. The genius of Jobs was that he then went into other areas. One of the hallmarks of Steve Jobs' leadership style is his ability to see business opportunities in situations where others observe little more than chaos and confusion. Pandemonium reigned in the online music business. College students and others on the Internet were swapping MP3s for free rather than paying for downloading songs. After a bruising battle, the Recording industry Association of America was able to force Napster to shut down, but successors were still around and the industry estimated it was losing $3.5 billion/year to piracy. The industry's response was erecting technological barriers to downloading and filing lawsuits against downloaders and their enablers. Jobs chose a third path - creating user-friendly software and simple-to-use hand-held players (Ipods) that would let music lovers download songs (iTunes) for a small fee (99 cents). Spring of 2001, Apple launched iTunes online music service, initially just for Apple users. Each file had an embedded signal aimed at preventing the songs from being shared on Internet file-sharing services. The market exploded when a Windows version was introduced spring 2003. iTunes sold 20 million tracks in its first 7 months of operation, and by spring of 2004, had a 70% share of the market for legal music downloads.

In 1962 downtown department stores in big cities still employed elevator operators wearing uniforms, and in small towns, family variety stores sold with first-name service. S.S. Kresge opened its first Kmart in Michigan, Dayton's launched Target, Woolworth started Woolco, and Sam Walton opened his first Wal-Mart. Walton focused on Kmarts, in their stores constantly. After 10 years, Walton had 50 Wal-Marts and 11 variety stores in small-town America with distribution centers ringed by stores, county by county, whose sales totaled $80 million/year; Kmart had 500 stores and $3 billion/year in sales - focusing on highly populated urban centers and growing suburbs. Walton's first opportunity to compete against Kmart was in 1972 in Hot Springs.

Kmart retaliated by opening stores in four of Wal-Mart's better markets - Jefferson City and Poplar Buff, Missouri, and Fayetteville and Rogers, Arkansas. Walton refused to be undersold, even when selling at a loss. Walton focused on a new distribution system and technology, and by 1981 had saturated much of the heartland but had little presence in the deep South. Wal-Mart decided to buy the troubled Kuhn's Big K chain of 92 stores - even though it had done only one prior acquisition and preferred organic growth, and in 1990, Wal-Mart overtook Kmart. Five years later, Kmart sales were a third of Wal-Mart's. Walton himself believes that had he laid low and not stirred up the competition, he would have remained a regional operator and eventually have been bought out.

Early Wal-Mart stores also had a bit of circus atmosphere - eg. ice cream and popcorn sold outside, along with rides for children, charity events, precision shopping-cart drill teams, and organized parades. Walton insisted that markups be kept to 30% or less, with low overhead. 'Every time Wal-Mart spends one dollar foolishly, it comes right out of our customers' pockets. Every time we save them a dollar, that puts us one more step ahead of the competition.' Between 1970 and 1990, a large segment of consumers became increasingly price-sensitive because tax, interest, medical, and social security payments from fro 25% of personal income to 34%.

Computer component prices fell about 1%/week. In Dell Computer's first year, it moved four times, starting in a 1,000 square-foot office and ending in a 30,000 square-foot-factory. Less than two years later, it had to move again. Then in 1989 it was caught with excess inventory in computer memory as the industry was shifting from 256K to 1 megabyte. Then came three more years of growth - and strayed from its direct-selling model to enter the retail distribution chain in 1990. Sales rose, but profits fell. Then in 1992, Dell initiated price cuts to head off competition - sales grew from $890 million to $2 billion, straining operations - Dell estimated it still had the infrastructure of a $500 million company. He brought in outside managers and introduced a strict profit and loss initiative. Setting extraordinary goals and learning from mistakes became part of its culture.

'How do you convince people to buy a computer over the phone?' Dell's answer was to offer a 30-day money-back guarantee. Dell eventually moved into the server market (mid-19902) and by 2003, 76% of sales were generated by corporate customers. In 2003 he expanded into peripherals - printer sales topped 1 million the first year offered and had 12% of the all-in-one printer/fax/scanner market within the first six months. Monitors - now an 18% share.

While riding from New York to California in 1994, Jeff Bezos worked on a business plan to raise $1 million to launch his company and keep it operating for at least two years. He managed to raise $100,000 from his parents, and the rest through about 20 angel investors - $50,000 at a time. At the time research showed net usage data was growing at 2,300% a year. A year later, VCs began to line up outside his door. Amazon then raised $54 million in 1997. In May, 1999, just as Barnes and Noble was preparing its IPO, Bezos announced his company would begin offering best-sellers at half off list price. In 2001, Amazon offered free shipping for orders over $99, and in June 2002 the minimum order for free shipping went to $49, then $25 in August 2002. Realizing that Internet customers had more power to spread the word
(good or bad), Amazon stopped TV advertising in 2002.

After Lee Iacocca took over the financial disaster that was Chrysler in 1979, he fired 33 of its 35 vice presidents, twice convinced Chrysler's unions to cut their hourly wages, and laid off more than 15,000 salaried workers in 1980. Then he went to D.C. and obtained $1.5 billion in U.S. loan guarantees. Iacocca believes business leadership boils down to two simple points: Hire good people and set priorities. He'd agreed to a salary of $1/year, plus stock options. Soon introduced the minivan. Bought AMC in 1987, primarily to get the Jeep brand.

Lasting Leadership, a collaboration of Nightly Business Report and [email protected], by Mukul Pandya and Robbie Shell (2005) is a book handy to have on any chief communicator’s shelf or desk. I reach for it, as you might, for quick reference on what “the top 25 business people of our times” (book cover promo) did right and not so right as corporate chiefs in a recent quarter century. In efficient presentation, you get a profile, an overview, a timeline and a concise narrative on C-suite chiefs including Bill Gates, Steve Jobs, Warren Buffet, Herb Kelleher, Sam Walton, Jack Welch, Jeff Bezos, Mary Kay Ash, Michael Dell, Oprah Winfrey, James Burke, Lou Gerstner, Richard Branson, Bill George (let me mention True North by Bill George here, another favorite for communicators), Lee Iacocca—and, well, you get it—plus a short take on the early (1950s), still relevant to communicators, counsel given by leadership thinker Peter F. Drucker. The index and footnotes can send you into the internet for the rest of the day, gathering pretty close to what you need to produce proper precedent for what you’re counseling. And, not to leave you guessing, who do the authors claim is the “best of the best”? While Andy Grove’s story of leadership at Intel is cited as “most influential”, it’s a good squint at fumbling, fussing, leadership communication, in which the CEO finally gave in to C-suite colleague advise (especially Intel’s marketing chief). It’s a leadership lesson: Grove’s conversion from livid resistance to what he thought of as C-suite sweet talk (he called it bulls***) to actions to win back public trust and confidence.

Great book

The last time I checked, Amazon and Borders offer 18,573 different books on the subject of leadership, supplemented by a significant number of CDs, DVDs, etc. Obviously, interest in this subject remains great as a New Year begins and, if anything, that interest will probably increase in 2006. Many of these books focus primarily on specific qualities which all great leaders share in common. Others focus primarily on individuals (on CEOs such as Jack Welch, public figures such as Winston Churchill, and military leaders such as Ulysses S. Grant) as exemplars of great leaders. Still others focus on both.

What we have in this volume is a rigorous and eloquent examination of 25 contemporary business executives who have provided great leadership over an extended period of time. Lasting Leadership is the result of a collaboration of Nightly Business Report and [email protected] Credit Mukul Pandya and Robbie Shell with their brilliant organization and presentation of material in ten chapters which range from "Best of the Best: Inside Andy Grove's Leadership at Intel" to "Conclusion," the final chapter which -- all by itself -- is worth far more than the cost of the book.

When reviewing the list of 25, we recognize many of the "usual suspects" (e.g. Warren Buffet, Grove, Steve Jobs, Herb Kelleher, Ted Turner, Sam Walton, and Welch) but also others who may be less familiar as business leaders -- at least to some readers -- but are nonetheless eminently worthy of inclusion (e.g. John Bogle, James Burke, William George, and Muhammad Yunus). According to Pandya and Shell, those who provide "lasting leadership" throughout any organization create a strong corporate culture, emphasize and exemplify "truth telling," identify and then develop under-served markets, recognize "winners" as well as market and even industry trends before their competitors did, use pricing strategies to establish and then sustain competitive advantage, build and then manage a dominant brand (if not several), are fast learners, and effectively manage risk. Granted, some of the 25 had business careers in which all eight attributes were not required. Peter Drucker, for example. However, all of them affirmed their importance to sustainable excellence.

Comparisons between and among great leaders can sometimes be forced because they "come in all shapes and sizes." Pandya and Shell skillfully avoid making that mistake. Indeed, they note significant differences in personality and circumstance while using eight common characteristics as themes to guide and inform their organization and presentation of material.

I especially commend Pandya and Shell for their skillful use of so many reader-friendly devices throughout their narrative. They identify for each of the 25 a "Challenge" and then explain how the given leader responded to that challenge, in process demonstrating one or more of the "eight attributes of lasting leadership." For example:

Andrew S. Grove: Dealing effectively with the Pentium flaw debacle
Mary Kay Ash: Motivating a Sales force of thousands
Peter Drucker: Inventing the discipline of management studies
Muhammed Yunus: Using microcredit to "lead beggars into business"
Ted Turner: Keeping the Big Picture clear

They also suggest a specific "Leadership Lesson" (or lessons) for each of the 25. For example:

Jack Welch: "The truth can be more bitter than a sweet illusion, and making the right decision [e.g. firing a loyal but incompetent subordinate] can involve unpleasant confrontations" but "doing the right thing -- which usually involves truth telling -- tends to work out well for everyone in the end."

Steve Jobs: Rather than erecting technological barriers to downloading and filing lawsuits against downloaders and their enables, Jobs chose a third path: Creating user-friendly software and hand-held players that would let music lovers download their favorite songs for a small fee."

Bill Gates: He responded to the rise of the Internet in three ways. "First, Microsoft developed the Internet Explorer web browser,...began to adapt existing products and develop new products centered on the Internet," and "when companies came along that had established a strong presence in a niche where Microsoft was lagging behind, Gates responded with another time-tested tactic: acquisition."

Of special interest to me is what Pandya and Shell reveal about Muhammed Yunus whose use of microcredit resulted in loans (ranging from $1 to $100) by the Grameen Bank of more than $4-billion which enabled 8,000 beggars to sell simple products house-to-house. Yunus recognized "that not all poor people are alike, that there are different levels of poverty depending on a person's individual circumstances. And yet, he said, government officials, economists, and social scientists failed to make these distinctions when they created programs to ease poverty." Over time, Yunus and his bank intend to at least 25,000 others so that, as they become successful, "they remove their begging bowls and replace them with with cash boxes."

So many other business books which discuss leadership from one perspective or another tend to focus on celebrity CEOs and their well-publicized successes without explaining how and why those successes were achieved with what Bill George characterizes as "authentic leadership." Granted, Pandya and Shell include several celebrity CEOs among the 25 but, as all of the CEOs whom Jim Collins discusses in Good to Great correctly indicate, character rather than charisma is far more important to effective and sustainable leadership.

This is precisely what Pandya and Shell have in mind when concluding their book. "In the end, leadership boils down to a personal approach to the business of managing. Leaders are able to communicate their ideas, values, and beliefs to em-ployees and the business community at large. They encourage innovation at times when none seems necessary. They work in chaotic environments and bring discipline and a vision of the future to their stakeholders." Yunus envisions a world that will be free of poverty, one in which the market for his bank will no longer exist. This would be a world, he says, "we could all be proud to be in."