Showing posts with label CEO. Show all posts
Showing posts with label CEO. Show all posts

Friday, February 01, 2013

Following some basic principles can help

Recession tests companies to the hilt, but following some basic principles can help

It was just a few months ago that I met the hallowed Ram Charan (Fortune considers him one of their favourite management gurus), over lunch. And it was only two months ago that he wrote the classic ‘Investor’s Special for the Recession Economy’ in Fortune, where he gives four simple and broad principles for CEOs to crack the recession conundrum, which are: (1) Keep Building: “Do not consider product development, innovation, and brand building optional. Sacrificing your future for a slightly more comfortable present is not worth it.” (2) Communicate Intensively: “It’s counter-intuitive but true that when the economy slows down, the pace of decision-making has to speed up. The companies that are readiest to act on solid information are primed to shoot ahead of the business cycle.” (3) Evaluate Your Customers: “In good times, companies manage the P&L; in bad times, cash and receivables matter more. Therefore, you need to identify your higher-risk, cash-poor customers. You could decide to simply not supply them anymore.” (4) Just Say No To Across-The-Board Cuts: “By all means, cut costs if it makes sense to do so, but make sure there is purpose in how you do it.”

Jay Leno, the king of stand up acts, gave a classic perspective of the US economy in one of his shows: “Some good news for the economy. President Bush went on a month-long vacation.” Companies, like I mentioned before, wouldn’t necessarily find the blame game as easy as Jay wishes it to be. Harvard Business School, in its most recent April 2008 posting, gives a tempered, but well researched, response with its paper, ‘4 Steps to Growth During a Recession’. First, “Invest heavily in research and development” – Your competitors may in general cut R&D investments; ergo, your investment increase would yield a “strong product advantage” in the future. Steve Jobs quoted a few days back, “In the last recession, we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over… And it worked! That’s exactly what we’ll do this time!” Second, “Spend some time learning about the customers of your weakest competitors” – Instead of focusing on bagging your strongest competitors’ largest clients, choose these times to add attractive customers of your weakest competitors, who would not have the wherewithal to withstand your attack. Third, “Identify your most critical suppliers and distributors” – Find out ways you could help them. HBS quotes, “Even the smallest gesture can sometimes build an enduring loyalty that will pay off for years to come.”


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
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IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
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IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
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Monday, December 10, 2012

Why we loved Rick’s trick... (Sic!!!)

32 long years did this Harvard MBA take to understand GM; one fine day it took the US Senate to fire him! No more gambles, Rick...

George Bush Jr. (the former US Prez, who else?!) and Rick Wagoner share many things in common. Both are men. Both married. Both Americans. Both Harvard MBAs. Both controlled the strongest entity in their fields (one ruled over the US Senate & the other, over the largest US automaker). Both elected in 2000. Both saw their best days in the first four years of their administration. Both reigned for eight years. Finally, 2009 saw both becoming history… And yes, before we forget, both can hold the Democrat Obama responsible for their ousting! But beyond the drama, there exists one stark difference between the two, and in the manner in which they played their final goodbye tunes. While Bush was ‘booth’ed out respectfully by Democrat Obama & his administration (as he’d run out of time), that very same Obama army, booted out Rick!

And it all happened on March 29, 2009, when Rick Wagoner (now former CEO & Chairman, GM), met up with officials from the US Senate. The Senate (under the Republican Bush administration) had previously given him a reason to raise a toast on New Year eve, showering upon him a most benevolent $18.88 billion on December 31, 2008. But matters got no better, and GM ended up burning dollars in public, reporting $52.8 billion in net losses for FY2008!

His affair with GM shareholders haven't been too cordial (See chart to note how GM shares have lost value on NYSE). But hey Rick, we're not here to criticise you... we are proud of you, and surprised we are, as to how the world's turned a blind eye to what's left in the glass... Yes, the $90 billion in GM’s Mcap that you peacefully destroyed during your reign amounts to just 98% of GM's total Mcap when you began gnawing. Rick, now what are they cribbing about? You've still saved 2% for your successors!!! What’s more, the day your resignation was announced, GM’s Mcap rose by a cool $128.2 million; did someone thank you?


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri

For More IIPM Info, Visit below mentioned IIPM articles.

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Monday, November 19, 2012

Seven effective habits of highly lousy CEOs!

From the Editor’s desk, comes to you seven rocking ways in which global CEOs have destroyed their companies...
 7 effective habits of highly lousy CEOs! In other words (and with due apologies to Stephen Covey), ‘How To Be A Lousy CEO; and Get Paid For It Too’! It’s a question that has hounded management experts for the longest of time. How do you avoid ending up being a lousy CEO and how do you avoid destroying your company? Relax, help is at hand; just know what the worst CEOs do, and don’t do that! Simple, isn’t it? So speed on and read on...

Lousy CEO Habit #1: Hanging on to pop’s business

Research from Harvard (Belen Villalonga, 2004) to Wharton (Raphael Amit, 2004) has proved that owner-family CEOs ‘always end up destroying a company’s value. Amusingly, research from Hiller (Leeds) and McColgan (Aberdeen) documents positive stock price increases to the “announcement of the sudden death of a company’s founder executive!” So if you’re hanging on dearly to your Dad’s company’s reins, you’re my

Lousy CEO #1.

Lousy CEO Habit #2: Believing age, and not youth, is the most important HR asset Dun & Bradstreet, Ropert Starch, Spencer Stuart (Route To The Top; CEO Survey 2006), et al have shown that not only is the average age of a CEO falling, but the most successful CEOs are those who believe in the power of employing young and brilliantly talented individuals (and paying them the sky) than blindly opting for old experienced people.

Lousy CEO Habit #3: Changing jobs & companies regularly

Lousy CEOs change jobs. Excellent ones don’t! A mind numbing 81% CEOs of the top 100 US firms have never worked anywhere else (or maximum, changed just one job in their life). Forbes quotes how a monumental 75% CEOs of leading non-US firms have spent 35 years or more with the same company they lead. 

Read more.......

Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
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Thursday, November 15, 2012

CEO PROFILE: GREGORY S. BROWN, CEO, MOTOROLA INC.

Aren’t four months a tad too little to turnaround a troubled company drenched with losses?

Under him, the $6.7 billion government and corp. comm. divisions have grown by a CAGR of 10% and its profitability too has doubled. Furthermore, he successfully led the acquisition of Symbol Technologies for $3.9 billion – the second-largest deal in the history of Motorola! Greg also turned around the automotive unit & consequently led its sell off for $1 billion to Continental.

Surely, Moto’s handset division can be given to a new leader, but Brown’s leadership for the other division is necessary. Even Jack Gold, J. Gold Associates agrees, “A new leader is required to run the newly-formed handset division. It must bring in new blood to stir things up and get the innovation cycle moving again...” Surely, Motorola has decided it must reorganise itself, and part of this process must be a top-down review of its total business game. Kagan, too, agrees on the same as he says, “I think Motorola can recover with the right CEO and the right attitude. I think that with the right leadership, they can recover and do well.” Brown’s previous tenure as a CEO at Micromuse saw him increase revenue by a teeth-rattling 809% to over $200 million, which critics should not overlook! Especially when experts like John Thompson, Vice Chairman, Heidrick & Struggles, too have generously tagged him as “highly talented’ and that he “has the personal bandwidth to be CEO of a Fortune 50 company.” As far as the split is concerned, Greg will surely lose control over the handset division; but then given a choice, he too would have chosen ‘quality’ work over ‘quantity’ work. Well, nothing wrong in giving up what you can’t handle.
 

Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
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Wednesday, August 08, 2012

Of Irene, ego, Altria, and Todd the God‘d’!

Kraft CEO Irene Rosenfield’s overeager bid for Cadbury has done more for Cadbury’s shareholders than its CEO Todd Stitzer could ever achieve in his tenure. A tale about how Todd pulled it off, by B&E’s Vareen Ray

Todd perhaps would be ready to part with half his separation package for Irene by now, given the fact that without her belligerent egoistic effort that doesn’t seem to be settling down, Cadbury’s (previously called Cadbury Schweppes since 1969, till the demerger last year) stock price volume trades wouldn’t ever have hit the highs seen in the past few days. Eat this dope: Historically, Cadbury’s stock prices had languished at the under $20 level for ages – it’s a Brit company, you know. The year 2003 was perhaps the crossover year, when stock prices suddenly starting going up by almost 50% and even crossed $30 many times. And why? Financial performance aside, Todd (and his histrionics; check the photo on the right) became Cadbury’s CEO – or CEOs, if you’re English! Todd very well knew that if shareholders were his most important aim, then it’d take more than simple financial results to improve the share price. If 2006 saw the $40 mark being broken, 2007 even saw the $50 mark being broken. Todd had become the new Godd (with an extra ‘d’, please). Todd pulled it off with ease despite the fact that Cadbury’s net income had fallen dramatically from $2 billion in 2006 to $812 million in 2007. How in heavens did the CEO of a truly-upnosed Brit company manage this? Well, Todd is a thoroughbred American, straight out of Walker Texas Ranger (primetime on NBC east coast; don’t bother if you’ve not watched it) who puts a dairy premium on showacting and shooting from the hip. And then came his debacle, when in a bid to outsmart the market, he demerged Schweppes in 2008, hoping the stock price would rise further. Net income fell to $529 million by end 2008; by 2009, stocks collapsed to the $30 levels and below that too! Todd had tried everything in and out of the book; but was failing to get the price back, till Dame Irene plopped out of the sky. That Kraft CEO Irene Rosenfeld is headstrong is not doubted – Kraft belongs to the stable of the Altria group, the world’s largest cigarette manufacturer – but that she would get her Adam’s apple hooked onto this deal was unexpected! Well, her ego basket must have been overflowing – since she was ranked sixth on Forbes’ list of most powerful women, 2009 – for her to have taken the hardball move on September 8, 2009, to acquire Cadbury Plc for $16.7 billion, a clearly high premium of 30%.

The move would have seemed to be undertaken totally in cahoots with Todd, had it not been for the evident hatred the companies have for each other – Kraft is American. Irene claims that post the merger, the entity will be catapulted to the number one position in the global confectionery market, creating a $51 billion package-food and confectionery company, bigger than that of current leader Mars (“It [Cadbury] is a perfect fit with our long-term strategic priorities,” she says). A Kraft veteran, Irene has spent a quarter of a century with the Illinois-based company, briefly moving to PepsiCo in 2004 to run its Frito-Lay snack unit. She returned back to Kraft in June 2006 as its CEO and bought out Danone’s cookie business for $7.2 billion and made Kraft the world’s largest biscuit maker, which is where the current irrational exuberance emanates from. Kraft claims with 14.9% of combined market share, the nearest competitor Mars would be left ‘far’ behind (one wonders about that, given Mars has a global market share of 14.5%; not that ‘far behind’!). Irene refuses to acknowledge that Kraft would have to pile up $6.8 billion in debt to finance the cash portion of the deal, if it goes through. The company already has about $3 billion in net debt. Also, Cadbury’s global confectionery share has in the past increased pithily (for example, from 10.2% in 2007 to 10.3% in 2008). They do account for almost 30% of the global gum market though. Over the last couple of years, the average takeover multiple for similar food deals has been 15 x EBITDA, which in this case would require a bid value per Cadbury share of $85 considering the 2008 EBITDA, clearly too high.

So why does Todd in all probability consider Irene his most important benefactor? Till September 4, Cadbury share prices were twittering around $37. Since September 8, stock price has screamed up to beyond $52! (Kraft’s price tanked to $26 on that day, down from above $30 a few days back). And how does Todd respond to such a brilliant offer by Irene? He dismisses it [“Kraft’s bid fundamentally undervalues the group and its prospects”], and plays the game exactly according to how it should be played, as he knows that given her BA in Arts in Psychology from Cornell, the ego state in Irene just won’t give up. It seems the markets too realised that. Trading volumes of Cadbury, which just last month were a shabby 100-300,000 went insane this past week post Todd’s refusal touching almost 10 million.




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