Leaders & Laggards Revisited —Update #1
We’ve been publishing our Leaders & Laggards coming up on two years, give or take. It’s been fun, if not sometimes a bit of effort. And I can’t say we always agree with who wins what, though generally we find common ground. Especially on the Laggards—they frequently make it pretty damned easy.
We thought it might be time for an update, so that’s what we’re going to do for the next few months: give you a clear Leader or Laggard (just one), then spend the rest of the space updating you on how a couple of those nefarious prior laggards are doing now, presumably after having some time to see the error in their ways and appropriately repent. Or not. So, without further ado…
United is a two-time recipient of our prestigious Laggard award (once sharing the honor with Volkswagen). The first time, in August of 2015, their reservation and traffic system went down for almost two hours, their network was hacked and flyer data breached, and they received the worst customer service ranking among all U.S. Airlines. All the while CEO Smisek was buying back stock to pander to shareholders. All of this in a 60-day period.
Their second Laggard victory came when Smisek abruptly resigned after allegedly conspiring with David Samson of the NY/NJ Port Authority for lease reductions in exchange for direct flights to Samson’s home town. A match made in heaven. Still no labor agreement for 30,000 some-odd flight attendants and mechanics, Smisek failed at every single turn that mattered to customers and employees.
Smisek pulled in $20M in severance and free first-class seats for life.
Well, it can’t be a full-fix to just replace Smisek (too easy). There needed to be some indication of real improvement in practices, operations and results.
Operationally, they’re still sucking wind, at least compared to the U.S.-based airlines, coming in dead last in profitability as reported in a recent Airline Weekly analysis.
On the plus side, new CEO Oscar Munoz is the real deal, paying out almost $700M in profit-sharing even with the reduced profitability, after a $650M in negotiated pay raises across multiple groups. Further, they did pretty well in the semi-obscure Points Guy rankings, falling behind only Alaska Airlines in several criteria. Not a home run, but not too shabby for a guy who had a massive heart attack followed by a heart transplant just a month after being named CEO.
Munoz also just won the Communicator of the Year award from PRWeek for engaging customers, employees and the public, a departure from the toad-like behavior of his predecessor.
All in all, it’s fair to say he’s been busy. Let’s see if he can tackle on-time performance next.
Net-Net: Munoz is getting there, but it’s too early to call…Almost a Leadership Leader
CEO Parker Conrad “resigned” in February 2015 (I’m sure to ‘spend time with family’) amid revelations that some of the Zenefits salesforce was selling health insurance without required licenses. COO David Sacks, oblivious to the misbehavior, was then promoted to CEO, promising to fix their “inadequate” compliance processes and controls. Yeah, right. I was born at night, but not last night.
According to Sacks, the company grew so fast, it outgrew its culture and controls. To un-grow, Zenefits whacked about 250 people – almost all to the salesforce. Right before the layoffs, Sacks banned drinking at work. Whaaat? That’s just plain mean.
This is the same company that felt it needed to send out a memo that declared building stairwells were no longer to be used for smoking, drinking, eating, or sex. Now THAT’S culture!
New CEO Jay Fulcher has been on the job for a month and a week, and believes that fresh eyes and some better thinking will help with their recovery.
He’s claiming “We’re making sure we’re operating with integrity. We’re also building a great place to work.” After killing the beer in offices and sex in stairways, I’m not sure what he intends to do for morale. Especially since they whacked another 430 employees (mostly from operations this time) nearly on the very day Fulcher started. Might want to hold off on that “Best Places to Work” survey, Jay-man.
Fulcher is banking on a skinnied-down SaaS cloud business to replace the money-making, license-cheating, Animal House company that was the original Zenefits. He says it’s a good four to five year runway. “As with any new CEO, you have to re-evaluate,” he said. “You have to right-size and re-distribute. The business is very much set on the horizon. This is giving us an opportunity to reset. This is a very common thing.” Fulcher goes on to say he’s focusing on smart engineering to “work smarter and not harder”.
Sounds like a buzzword soup to me, and I think we have CEO #3 who just doesn’t get it.
In the meantime, what about Sacks? Don’t worry about him, he’s still a proud member of the Board of Directors, claiming Fulcher’s hiring was just the “last step in a planned transition that began one year ago… when the board asked me to step in and steward the company through a difficult situation.” Step in what? I should have used BS font size 16 for that quote.
And then Zenefits laid the decision to give 45% of the company pink slips squarely at Sacks’ feet, giving Fulcher plausible deniability should something else happen. Maybe if Sacks had turned the ship around, instead of devaluing it by more than 50%, he could have stayed on as CEO.
Net-Net: Zenefits’ Directors are still Leadership Laggards
The Laggard was an easy pick this month. Ok, it’s usually pretty easy every month, but this one… wow. Just wow.
Big 4 accounting firm PricewaterhouseCoopers, or PwC for branding, screwed up. Bigly.
Seems the Academy Awards, affectionately called “The Oscars,” had a bit of a misstep this year. Unbeknownst to Neanderthals like me, vote tallies for the various categories are not done via a show of hands, a 2-inch slip of tightly crumpled paper, or ballots rife with hanging chads.
No, apparently, it’s a big formal deal, where individual ballots—each and every one—are counted by the accounting powerhouse of PwC (too hard to type that long name again). More precisely, they are counted manually (by hand) by firm Partners Martha Ruiz and Brian Cullinan. Yes, all 6,200 (plus or minus) ballots are counted by hand, by two Big 4 Partners earning a bit more than minimum wage.
You would think, given the singular responsibility and simplicity of that function, they could get it right. You could think that, but you’d be wrong.
Seems they (Cullinan) personally gave out the wrong envelope, and for Best Picture to boot. Warren Beatty and Faye Dunaway gave the award to La La Land, then had it reversed (several acceptance speeches later) to Moonlight.
The. Biggest. Screw-up. In. Oscar. History. Congrats, PwC. Way to make a name for yourselves.
As leadership consultants, the backstory is more important to us in this case.
Notably, the Partners were told not to use social media once they cleared the red carpet (at least someone thought the job was important). They did, of course. Partner (and US Board Chairman) Cullinan tweeted just minutes before the snafu, and deleted that tweet later. Damn you, inerasable internet!
Further, the real issue wasn’t the human error. No, as we’ve often said, it’s not the first mistake that gets us in trouble—it’s the unforced error we make afterwards. In this case, “Once the error occurred, protocols for correcting it were not followed through quickly enough by Mr. Cullinan or his partner.”
Indecision kills. In this case it was just a premier reputation.
Easy call for this month, PwC—you are our Leadership Laggard.
(By the way, Uber was our runner-up for Laggard, but that story gets better – or worse – every day.)