Leaders & Laggards – August 2017

Leadership Leader

Seems like I’ve been reading a lot over the last few years about activist investors shaking up a company’s leadership – sometimes successfully and sometimes not. Some recent examples include Proctor & Gamble, Nestlé, Samsung (this month’s Leadership Laggard), insurance giant American International Group (AIG), railroad CSX Corp., Buffalo Wild Wings (June’s Leadership Milquetoast) and Avon. Sometimes just the threat of a proxy war can influence leadership to accommodate the investor’s desired change a company’s direction.

Not so with Automatic Data Processing (ADP) CEO, Carlos Rodriguez. You can argue that ADP could use some fresh ideas, but you can’t deny Rodriguez has the cajones to stand up to Bill Ackman, the latest activist challenge to his leadership.

There’s definitely some “he-said, he-said” going on, and I have neither the time nor the inclination to sort out the alternative facts, but Rodriguez was definitely not going to kowtow to an investor who’s stake in ADP is still in stock options.

A couple of things we believe here at Triangle: no one gets their own facts, and you can make numbers support any position you want to take. 58% of statistics are made up, anyway.

Billionaire hedge-fund manager Ackman wanted ADP to reduce “corporate bloat” (who doesn’t, except the bloat), accelerate investment in back-end improvements and product migrations, and increase sales force productivity. I’m fine with those suggestions, although they’re hardly fresh ideas.

Rodriguez countered that Ackman’s analysis was based on cherry-picked data from 2009 and pointed out ADP has out-performed the S&P 500’s returns and eclipsed (like the solar one last week) those of Ackman’s hedge fund over the last half decade. After ADP refused Ackman’s request to extend the deadline for his board member nomination earlier this month, ADP’s board rejected all of Ackman’s nominees (including Ackman himself). The board explained that the nominees would bring no “additive skills or experience to ADP’s board.”

Rodriguez has been with ADP for almost 20 years and has a track record of successful performance and effective leadership. Ackman, who’s recent investments include Chipotle (last month’s Laggard), J.C Penny’s, Target, and Valeant Pharmaceuticals, has been an ADP investor for barely a month. But, I don’t have to pick a side.

Recognizing a CEO who bucked the trend and stood up to a bully investor, we congratulate Carlos Rodriguez for being named Triangle Performance’s August Leadership Leader.

Leadership Milquetoast

Google CEO Sundar Pichai missed an incredible opportunity—our very definition of a Milquetoast—when he summarily fired James Damore for penning Google’s Ideological Echo Chamber.

Lots of aspersions have been cast on Damore, many pretending that he said things he clearly and openly dismissed in the memo itself. Damore didn’t say that women are biologically unfit for tech, or that diversity is bad, or that sexism doesn’t exist.

I’ve read Google’s code of conduct; to say this guy violated it is a stretch in reasonableness, and requires interpretations not in evidence.

Pichai said “It is contrary to our basic values and our Code of Conduct, which expects “each Googler to do their utmost to create a workplace culture that is free of harassment, intimidation, bias and unlawful discrimination.”

With this broad interpretation, they can hide behind most anything as a code of conduct violation. The manifesto did not harass, intimidate, show bias (except to use bias as a clear foundation of error), and was not unlawful discrimination. At most, it hurt someone’s feelings. Get over it.

And don’t forget–Google sucks (that’s the technical term) at diversity already. They needed the catalyst for conversation this could have created. Instead, they got bupkus.

If the guy is completely and absolutely wrong, then there is zero reason why Google shouldn’t have positive diversity representation, meaning their significant lack of representation today (or really any meaningful progress at all) must be willful and intentional.

 

“Once you eliminate the impossible, whatever remains,
no matter how improbable, must be the truth.”

–Arthur Conan Doyle

It’s not a free speech issue per se, since companies aren’t required to allow constitutional free speech (that’s between government and citizens), but it certainly smacks of retaliation for disagreeing with a position. At a bare minimum, it has created a seriously chilling effect on open dialog around diversity and inclusion.

Google–and virtually every other tech company–should get their own house in order before bullying others to suppress opinions. We need diversity—real diversity—in organizations today. I see it as a business necessity for future success. But Pichai, that’s a really dumb way to go about it.

Talk about a missed opportunity. These sorts of conversations–in the open–are what real diversity and inclusion efforts are missing. Google will never have another chance to have an open dialog around these topics (with those who may have different thoughts). No one will ever dissent again publicly. They blew that big time.

That was an unforced error, Sundar Pichai, and it makes you this month’s Leadership Milquetoast.

Leadership Laggard

We wanted to honor Samsung’s board of directors with this month’s Laggard award, but we couldn’t figure out who’s really running the 60+ company conglomerate that makes up the Samsung Group. Certainly not the Chairman, Lee Kun-hee, who hasn’t been seen publicly since suffering a heart attack in 2014.

So, we settled for spotlighting his son, Jae-Yong Lee, aka Jay Y. Lee, and one of two Vice Chairmen of Samsung Electronics who was sentenced last week to five years in prison for bribery, embezzlement and hiding assets overseas.

Remember ousted South Korean president Park Geun-hye? Lee and some of his colleagues have been accused of bribing Park and a “friend” to the tune of $17M in donations to organizations affiliated with the friend and an $800,000 horse for the friend’s daughter to ride. Lee needed government support to merge a few companies in the Samsung Group to strengthen his family’s control. Apparently, the move wasn’t particularly popular with non-family investors.

So, why are we picking on Lee, since he wasn’t alone in the scheme? Because he expected to be treated like the heir apparent when he didn’t know squat about leading or running the business. He was a figurehead who clearly wasn’t busy enough to stay out of trouble. He said it best himself at his trial: “There was no line of approval involving me. I had no knowledge to make decisions, nor the competence.”

Hardly something to brag about from a Vice Chairman of the world’s biggest smartphone and memory chip maker. We’re not worried about Samsung, though; there are some talented guys (excluding Lee) at the top of the electronics giant. Under the leadership of the three co-CEOs who didn’t go to jail, Samsung Electronics posted record net income, released the Galaxy S8, the Note 8, and stock prices reached an all-time high in the six months since Lee was imprisoned.

Think what they might be able to achieve with him behind bars for five years!

Leadership isn’t about titles and control; that’s dictatorship. For his refusal to take responsibility and his clear lack of leadership, we’re pleased to name Jay Y. Lee this month’s coveted Leadership Laggard.

Leaders & Laggards – July 2017

Leadership Leader

National_LifeMehran Assadi, CEO of National Life Group

Mehran Assadi is an island in shark-infested waters.

Assadi leads National Life Group, the fastest growing life insurance company in the country over the last decade with, according to Scott Mautz’s article in Inc., employee engagement levels and agent retention four times the industry average.

Read that again… Retention four times the industry average. How much is that worth? Damn.

How does he do it? Simple. He says “people first.”

“Wait,” you say. “That’s nothing new, Kevin.” Yeah, well, what is new is that he means it. He lives it. And he leads from that singular position.

Assadi steadfastly insists that their culture is bigger than individuals, and bigger than him; it is tangible and shows up at the top line, bottom line, and every measure in between. He claims their culture is the secret sauce to their success. It’s not perfection—it’s learning as they go, and they are getting better every day.

Now, keep in mind that this guy is working with a 150+ year-old company here. This isn’t some upstart start-up trying to make it big. It’s an established organization in an industry not exactly known for brilliant innovation or trend-setting in the culture department.

assadiHe’s a big believer in servant leadership, insisting that leadership is a privilege, not a right or entitlement. There’s some cutting-edge thinking, Lou, and uncommon insight for a financial services CEO. Further, he insists people care for–and know—themselves.

To quote Assadi, “When you find your ‘why,’ you find your way.”

Six years ago, he started a once-a-year process of collecting feedback for their top 200 leaders, from at least 20 people each, on how they were faring as a servant leader. Not coincidentally, the same year they started doing this, sales began increasing every year–by double digits.

Go figure.If all that’s not enough, he shows the LOVE. In fact, L.O.V.E. at National Life Group has come to mean “Live Our Values Everyday”.

Nice touch, Mehran, and a big reason you are July’s Leadership Leader.

Leadership Milquetoast

PepsiCo Inc.’s longtime honcho Indra Nooyi is sort of shooting herself in the foot.

NooyiNow, before anyone leaps prematurely, I’ve been a fan of hers for some time. She’s been solid, a progressive and people-centric CEO, and kicked serious butt in financial performance. There are precious few women in that Fortune 100 role (7, at last count), and she’s had the chair long enough to damn sure prove her mettle. In corporate performance, at least. In succession planning? Not so much…

You know, the better you perform, the more that is expected. And it’s logical for expectations for Nooyi to be high. And her recent announcement/non-announcement of a promotion was clearly not her best work.

Congratulations go out to Ramon Laguarta, currently grand poobah at PepsiCo’s Europe and sub-Saharan Africa business, as he transitions to the company’s President role. The gig includes global operations, corporate strategy, public policy and government affairs, not a small swath of responsibilities.

Then, she simply dropped the ball, announcing that Mr. Laguarta shouldn’t be presumed her successor. “There is no heir apparent,” she said. “When the time comes for succession, whenever it is, I think the wonderful thing is our board is going to have so many people to choose from.”

Yeah, well, I’m calling bullshit. This is a lousy way to plan for succession, and she should know it; she already lost a couple of key CEO-contenders. During Nooyi’s 11-year ride, two viable successors have been promoted into that No. 2 role, and subsequently left the company.

Look, Nooyi’s only 62, so there’s no dramatic rush for succession. But you can’t promote the best, tell them to sit still, and tell the world “this means nothing, long-term,” and expect them to stick around quietly with their thumbs up their derriere waiting for your eventual career plans to be revealed. Talent management—succession planning—simply doesn’t work that way. You don’t have to promise them the job, but to take special effort to say “he’s not the guy” is a bit much, and counterproductive.

PepsicoThat President job has been vacant since the 2014 departure of Zein Abdalla, someone clearly identified as “shortlisted to become chief executive.” He kept the role for two years before his abrupt, unscheduled retirement, which occurred shortly after Nooyi lost Brian Cornell to Target (another identified successor). Before Abdalla, John Compton stayed as Pepsico President for less than a year, before assuming the CEO of Flying J Oil Corp.

Houston, we have a problem. Nooyi has to develop a process for developing and promoting within a non-guaranteed succession plan, that motivates potential successors to stick around, not bolt for the door.Saying, “he ain’t the guy,” is likely not the way to do that. You’re better than that, Indra Nooyi, and this strange non-succession succession plan makes you this month’s Leadership Milquetoast. 

Leadership Laggard

EllsSteve Ells, Chipotle’s CEO is in hot water—again—for contaminated food. This time, 135 or so sick customers, with at least two contracting the norovirus. This marks the 7th – SEVENTH – incidence of norovirus disease contracted at Chipotle since October 2015.

The SEVENTH!

That’s not even counting their other woes, like poor financial performance (apparently caused by guacamole. Seriously), and their massive data breach just a few months ago.

HiResCrap like this, folks, does not occur in a vacuum. Generally, when leadership is poor, it shows in multiple areas, not just operational performance. I believe we can safely say that Chipotle leadership is poor.

This piece is short; we covered much of this when Steve was our Milquetoast in January, but thanks to 135 more sick people, he’s “done graduated” to our Leadership Laggard for July… Congrats, Steve.

June 2017 Leaders & Laggards

Leader

Benno Dorer, CEO of The Clorox Company                              

CloroxBenno Dorer is a Rockstar. He was recently recognized as the highest-rated CEO by Glassdoor in its 2017 Employees’ Choice Awards, surpassing Elon Musk and Mark Zuckerberg in the top 10 list.

Now, let’s get something straight here. I’m neither for nor against glassdoor.com, but at least theirs is based on relevant, first-hand input, not like some of the myriad “great places to work,” and Fortune’s “here are our favorite companies” listings. Glassdoor is a website where current and past employees get to rate their employer, including specific ratings and comments for the CEO. For the record, I always take at least a cursory look at glassdoor.com ratings when speaking with a new or potential client.

A fairly valid grading system, and Dorer clocked in at 99%. NINETY NINE percent!! I’m impressed at anything above 80, so this is rarefied air indeed. And he blew right past all the Fortune favorites and greatest places reviewers hoping to snag a client—he scored well above Zuckerberg, Musk, Bezos, et al.

And before now, who had even heard of this guy, specifically by name??

By the way, lest you fall for the myth that popular (read “nice”) leaders must be milquetoast business managers, know that Clorox stock has increased in value by almost 40% since Benno took over in late 2014. That’s just two and a half years, for the mathematically challenged among us.

DorerDorer is the real deal. When notified of the award, he said the title was humbling and “gratifying in a sense that I take it as a vote of confidence from our employees in the direction we’re taking the company.” While we’re quoting the guy, he also said:

  • “A good leader is someone who ‘has a point of view, has a vision of what can be accomplished and enrolls others in that vision and helps get barriers out of the way.’”
  • “Diversity and inclusion is something that is good for employees and also good for business.”
  • “As leaders, employees expect us to make the tough calls, and empower them make tough calls themselves. Employees want us to be decisive.”
  • “We measure employee engagement and… my own pay is determined by that engagement level…”
    (Re-read that last one—his pay is determined (in part) by employee engagement levels!)
  • “What I care about is results, versus how many hours you put in.”

Now, read this last quote, because it sums up everything Dorer does to exude successful leadership in a nutshell, “I leave it up to my people on how they accomplish what it is we want to accomplish. So, try to empower people to do what they can do best–I try to stay out of their way–and create a real supportive environment.”

To do that, senior leaders must be confident; not just in themselves, but in their vision, direction, veracity of strategy, and ability to discern results and outcomes quickly. In other words, they must be confident to lead.

And Benno Dorer clearly does that solidifying his position as this month’s Leadership leader.

Milquetoast

Sally Smith, CEO of Buffalo Wild Wings

BWWWhen investors get antsy, senior executives get defensive. That’s not necessarily a negative leadership response, if that leads to action that makes the company better.

It is a poor leadership response if they start blamestorming for their failure to respond to changes in the market.

Enter Buffalo Wild Wings. Along with many other restaurants of their genre, BWW has been suffering from declining profits over the last few years. Why? According to the CEO, Sally Smith, it’s the Millennials’ fault.

No, really. Apparently “millennial consumers are more attracted than their elders to cooking at home…”

Note: I unscientifically polled 100% of the millennials in my household and found no evidence to support Sally’s claim.

Granted, she also whined that shopping mall traffic was down – a blinding flash of the obvious – and added declining viewership of sporting events as a contributing factor to BWW’s woes, but why did she think excusing her management team’s failure to adapt to a changing market was going to appease the shareholders?

SallyHey, Sally, here’s a reality check: the BWW customer experience has been in decline for the last half decade in some pretty important categories (food quality, service, cleanliness, and menu variety to name a few). You can cherry-pick statistics all you want, but that doesn’t mean BWW didn’t rank in the bottom quartile in every surveyed metric in the 2016 Nation’s Restaurant News Consumer Survey for casual dining restaurants.

Being dead last in the Overall Guest Experience category – including the bottom 10% of food quality and service – doesn’t exactly build confidence that senior leadership is paying attention to what it takes to get people to eat in your restaurant.

I’ll concede that BWW’s latest foray into food delivery service and a fast-food version of their restaurant (B-Dubs Express) shows they’re paying some attention to changing preferences, but that’s reactionary, not visionary. And that kind of leadership is definitely not going to convince people to come out to eat bad food, drink and watch sports on the big screens… not even us Boomers.

Sally Smith’s classic failure to accept responsibility for her leadership team’s lack of vision nearly made her this month’s Laggard, but she lost out to the competition (see below). So congrats, Sally, you’re the Triangle Performance Leadership Milquetoast for June 2017.

Laggard

CheescakeCheesecake Factory CEO, David Overton

Look, Davie here is also the founder, so he’s not going anywhere, but he could damned sure use a lesson in accountability. When revising downward his quarterly analyst’s forecast, he blamed the weather—yes, the WEATHER—for the decline in sales.

May not be as bad as Buffalo Wild Wings’ millennial crap, but it’s awfully close.

Yes, this is the same Cheesecake Factory you’re thinking of, with the two-ton sandwiches, 250-item menu, and restaurants so dimly lit you could catch lunchtime zzz’s after the carb overload. A meal there makes anyone feel like Mr. Creosote — the “better get a bucket…” guy from Monte Python’s Meaning of Life. I’d include a youtube link for that part, but I’d catch too much flack, so you can look it up yourselves.

THAT Cheesecake Factory.

And Overton is seriously claiming that weather in the East and Northeast reduced patio useage to the point it effected year over year sales. Yeah… right. I was born at night, but not LAST night.

Sure, Dave, maybe weather was bad. Maybe somewhat fewer gluttons dined on your outdoor patios. Or maybe, just maybe, your leadership needs a tuneup. Consider:

  • Over the past six months, the industry has gained 8.7%, while Cheesecake has lost 14.8%. Surely yours wasn’t the only patio effected.
  • The failure of your March value menu insert, ~10 items below $15, highlights the inability to drive incremental traffic.
  • The weak summer box office is problematic, given Cheesecakes’ proximity to movie theaters.
  • Increasing Costs: Cheesecake Factory was planning to open eight new restaurants in 2017 and is anticipating a 5+% increase in labor costs. Wage inflation has continued this year.

burgerBy the way, something else to consider… Though the Macaroni and Cheese Burger, Topped with Creamy Fried Macaroni, Cheese Balls and Cheddar Cheese Sauce SOUNDS simply decadent (almost 1,500 calories), that fare may be headed the way of the dodo bird.

Stock fell 10% overnight upon the “weather” announcement, so it seems investors were calling “bullshit” as well. The stock is near 52-week lows, and still 15% below that fateful announcement date.

cheesecake2Incoming Chief Financial Officer Matthew Clark (he’s not the “regular” CFO until July 7) said despite the climate impact, the company still expects same-store sales growth of 2%. Good luck with that, Matt, and best wishes on the new job. Hopefully, you’ll do better than Winnie the Pooh’s “The rain, rain, rain came down, down, down…”

As it is, your boss, David Overton, used the weather as a reason to avoid personal accountability for strategies and decisions that should be reconsidered. As such, he wins our Leadership Laggard for June.

Leaders & Laggards – May 2017

Leader

Ford jrBill Ford, Executive Chairman Ford Motor Company

Gutsy decision to oust current CEO Mark Fields, a 25-year Ford veteran, in favor of Jim Hackett, a Ford outsider and most recently the CEO of Steelcase. Hackett had most recently been running Ford’s Smart Mobility initiative.

In all fairness, Fields had a tough act to follow; he followed Allen Mulally’s rock star tenure as Ford’s CEO. Mulally, another industry outsider, was personally responsible for averting Ford’s bankruptcy and refusing a government bailout — the only legacy automaker to do so. A CEO of our times, to be sure.

The bigger difference between them however may actually have been Mulally’s leadership ability, where he demonstrated transparency, a culture of positive leadership and the real benefits from working together, no easy culture shift for a behemoth like Ford. None of those traits personified Fields, more known for his combative approach than any easy-going personality. Fields is the guy who said that employees worrying about their pensions would be “a great motivator.” Cultures are hard to manage, and clearly Fields failed at driving Ford’s.

ford

Late to the game

Fields, as CEO, said repeatedly that Ford didn’t want to be the first company to offer self-driving cars. Conversely Bill Ford felt otherwise, saying “I don’t want to be slow. We need to be quick in everything we do.”
Fields was playing catch-up, using the backs of employees to fund the effort; he announced earlier this year a plan to cut 3 billion in costs and as many as 1400 white-collar jobs. I can imagine the discussion… “Let’s get innovative!” says Fields. “Great—how do we pay for it?” says senior staff. “Let’s whack a couple thousand surplus employees—that’s a good start,” says Fields. A decidedly un-innovative approach; CEOs have been whacking folks to save a few bucks since time immemorial. It ain’t new.

The auto industry is being disrupted by companies like Tesla, Uber, and even Google and Apple with their self-driving efforts. Add to that the completely predictable decline in US auto sales, and you start painting a pretty good example of a lack of vision.

acketConversely, Jim Hackett is Ford’s go-to guy for the future. “This is a time of unprecedented change,” Bill Ford said during a conference call. “And time of great change, in my mind, requires a transformational leader. And thankfully we have that in Jim.”

Thankfully, indeed. Hackett knows what it’s like to lead 100-year-old company; he views change is critical to the company’s survival; and he has a history of giving fans what they want. Exactly what is needed at Ford today.

Bottom line, if automakers are going to stay around, they need to get off their collective butts, invest in new technology, and make some things happen. Investments today will allow survival in the future. But you must have the courage to see the future, set a vision, then pursue that vision violently.

I may wish you would have fired Mark Fields a year earlier, Bill Ford, but you’ve taken a step in the right direction. Tough job, but it does make you our Leadership Leader for May.

Milquetoast

John Skipper, President ESPN

It seems everyone on our leader-laggard list this month is whacking people left and right. ESPN recently laid off (that’s fired) about 100 people (10% of the total workforce), most of them on-screen personalities from various shows and reporting efforts. Executives claim it’s a simple branding reposition and not a mandate from parent company Disney.

skipper“These decisions impact talented people who have done great work for our company. I would like to thank all of them for their efforts and their many contributions to ESPN.”  — John Skipper

“Dynamic change demands an increased focus on versatility and value, and as a result, we have been engaged in the challenging process of determining the talent—anchors, analysts, reporters, writers and those who handle play-by-play—necessary to meet those demands,” Skipper wrote to employees.

What a load of crap. The reasons are always simple for layoffs. Someone made some mistakes along the way, and the answer to those mistakes is short-term money-saving via reduce payroll. ESPN claims to have outlined a new strategy for the network, including an increased focus on its ESPN app with the multiscreen approach around big events, more live news video, and enhanced video and audio streaming. They also plan to bolster ESPN’s online presence

Look, ESPN has been hemorrhaging subscribers for several years now (roughly 12 million in six years), a natural result of fewer people attached to cable televisions as a revenue source. Considering ESPN pays billions of dollars to various leagues to be able to broadcast these events, they simply didn’t prepare for the sudden decline in revenue. It seems the only people that didn’t realize fewer people are using cable, ergo fewer people are paying for televised events, was ESPN. I knew it, you knew it, my neighbors knew it.

espnESPN, however, apparently did not know it. And their negligence in planning directly caused about 100 people to lose their job, many of those were solid, valuable, high performing employees. And here’s the thing; do the math — ESPN pays billions to sports leagues for the right to broadcast. How much of a dent does the salary for 100 employees actually make? This is the same network that signed a nine year $24 billion deal with the NBA. You’ve gotta whack a whole lot more than 100 analysts, reporters and announcers to cover coin like that.

Now, let me throw a wrinkle into this: ESPN is not our Leadership Milquetoast this month because they laid off hundred people. No, they are our milquetoast because they still haven’t fixed their business model, and this layoff is a distraction that further postpones any real and meaningful shift in strategy. Just do something is a juvenile response to a valid business need, and confuses activity with meaningful change.

It’s that ridiculous activity — instead of impactful business change — that brings ESPN and John Skipper into our spotlight, pulling down our dubious Leadership Milquetoast position for May.

Laggard

cornellBrian Cornell, CEO Target Corporation (NYSE: TGT)

What the hell are you doing, Brian?? TGT stock has been on a vicious two-year decline, currently trading at a five year low, a market-cap reduction of almost $13 billion. Waiting until just after the nick of time to exit the Canadian market, that was a $5B+ write-down. Same store sales and total revenue have fallen for four consecutive quarters.

All of this after Cornell announced a two-year turnaround plan in 2015, committing to cut costs, prioritize merchandise categories, increase grocery and online sales and open more small-format stores.

Oops… seems he now needs a turnaround plan for the turnaround plan.

At a time when innovation and strategy need to be at the forefront, Cornell whacked Casey Carl, Target’s Chief Strategy and Innovation Officer. It seems Carl, a 20-year Target veteran, was a bit too innovative and strategic. Now, the strategy is to copy Wal-Mart — remodeling existing stores, investing billions in lower prices, and hoping really hard that online sales increase (that last one wasn’t Wal-Mart’s, just Target’s).

targetSpeaking of online… did I mention that Jason Goldberger, originally president of target.com, was pushed out of the chief digital officer role? Those duties transferred to the incumbent CIO. Now, I like CIOs as much as the next guy, but unsure how much that role aligns with the intense marketing and online savvy necessary for Target to catch up to Wal-Mart with its digital strategy.

And while we’re discussing whacking folks… don’t forget the departure of the Chief Marketing Officer, Chief Legal Officer, Chief Human Resources Officer, Chief Stores Officer and the head of the grocery division; since Cornell’s ascension, only 2 of the 11 executive leadership team remain. Lots of things can cause such a leadership turnover, but most of them are bad, and all point to the CEO.

This will obviously be a test of patience for Target’s Board of Directors. Unlike Ford, this month’s Leadership Leader, the Target board has demonstrated a penchant for moving way too slowly on CEO decisions. Their undeserved patience helps vault Brian Cornell into our Leadership Laggard for May.

Leaders & Laggards – April 2017

Leadership Laggard

United_logoDamn, United. Just last month, we upgraded your abysmal 2015-2016 shenanigans to an “almost.” And this is how you repay us? With that colossally bone-headed move?

Assuming our readers haven’t been living under a rock, or in Tibet, or someplace where no signal of any kind could penetrate the local ether, United Airlines screwed up. In a nutshell, they tried to remove a passenger after confirming his boarding, and surprise! The passenger didn’t want to get off the plane. United gate agents must have decided that “no doesn’t mean no,” so they called the gestapo airport security, who apparently decided “Hey, let’s just drag him off…?!”

And the whole thing was recorded. Not much wriggle room for any sort of spin story-telling. In fact, I won’t insult you by showing—for the 2 millionth time—that video. Just picture it in your head.

It’s received so much publicity, we weren’t even going to address it here. Sort of like the “that’s just too easy” line of thinking. But then we realized… the lesson here isn’t about some gate agent’s poor judgement, or even the idiot security dude’s MMA moves on an elderly doctor. I won’t even raise the ire of many reading this by reminding that that same elderly doc should have disembarked when ordered to do so and fought his fight later.

Nope, this fiasco is all about—and only about—leadership. In this case, failed leadership. For example:

  1. Someone screwed up way back when. Allowing the aircraft to fully board before saying “Hey, wait a minute, we’ve got to get these four crew members on board.” Mistake #1, and the lack of a process, or lack of a followed process, is a leadership issue.
  2. Someone decided those four United employees were worth removing paying passengers from an already-boarded aircraft. That sort of decision-making comes from the belief they will be supported by leadership. That’s mistake #2, and another leadership issue.
  3. Apparently, a gate agent decided, after three passengers disembarked, that the hold-out passenger warranted calling security, undoubtably knowing something bad might happen. Again, fully expecting to be supported by leadership in that decision and causing mistake #3.
  4. Seriously, either that one security guy has serious issues, or he was trained so poorly he thought standing on another seat to remove a seated passenger with his lates MMA moves was the next step in the checklist. Either way, a leadership misstep that provided the impetus for mistake #4.
  5. The only truly unforced error during the entire situation: Munoz’s comments. First, supporting employees in the face of that video without further investigation, then with the horrendous “reaccomodating” remark, then finally with a too-late sincere-sounding apology.

united ceoLook, I get it. Munoz was left a pile of dung from Smisek’s departure. I really do get it. He likely has invested hundreds of hours, if not more, in trying to improve relationships with various categories of employees, agents being just one of them. I get all that. But as CEO of a customer-facing organization, you don’t get to make knee-jerk statements. Ever. When you unwisely do so, it’s on you.

As the other Kevin’s mom likes to say, “You kind of brought that on yourself.”

Oscar Munoz is April’s Leadership Laggard. And the vote wasn’t even close…

Update: Wells Fargo

Then:

wellsfargoCEO John Stumph blamed the creation of over two million fraudulent bank and credit card accounts on individual rogue employees – more than 5,300 of them who were summarily fired.

Claiming that “there was no incentive to do bad things,” Stumph defended the head of community banking, Carrie Tolstedt, as the “standard-bearer of our culture” and justified her $125 million retirement payout.

Turns out he also exercised 1.5 million stock options (worth just $83 million) the month before the company was hit with $185 million in fines for the deceptive practices.

Now:

Stumph is now the ex-CEO, Tolstedt got fired instead of retired, three other senior executives were fired for cause, eight remaining senior executives forfeited their 2016 bonuses, and Wells Fargo’s reputation stopped its free-fall.

Unsurprisingly, it turns out Mr. Stumph wasn’t paying very close attention to the community banking business unit or its Senior EVP. Last week, Wells Fargo released the report of its directors’ investigation into the cross-selling practices, laying the blame squarely on Stumph’s blind spot when it came to Tolstedt, Tolstedt’s controlling management style that actively discouraged dissention, a couple of dishonest regional VPs, and lax corporate oversight.

The extremely decentralized organizational structure favored the business units and led to the creation of fiefdoms in the company with “substantial deference” to the feudal lords and ladies. Without effective checks and balances, Community Banking was able to mask the signs – like high attrition and under-funding of new accounts – that something was seriously amiss. Changes in the reporting chain and new corporate control functions introduced by the Board should realign accountability and responsibility.

The Board allowed itself to be misled about the extent of the problem, but they get credit for bolstering their oversight responsibilities, creating an Office of Ethics, Oversight and Integrity (albeit, just after the nick of time), and for setting aside funds to make it right by the customers rather than forcing arbitration. And, while it’s not all about the money, the $180 million they clawed back from ex-senior executives and withheld from current members of the Operating Committee will almost cover their fines.

stumphAs tempting as it may be for some to paint the new CEO, 29-year Wells Fargo veteran Tim Sloan, with the same brush as Stumph, but Sloan hasn’t shied away from accepting responsibility for himself and the rest of the senior leadership team, he’s engaging with Wells Fargo employees in an effort to regain their trust, and so far he’s re-hired back about a thousand of the 5,300 employees that were fired.

The Wells Fargo scandal was a direct result of failed leadership, but leading is a journey, not a destination. They’re not out of the woods yet, but we’re definitely seeing signs that the Wells Fargo senior leadership is serious about rebuilding lost trust with their customers and shareholders. We wish them well at the annual stockholders meeting next week.

Net Result: While John Stumph’s place on the Laggards list is secure, Tim Sloan and the current Wells Fargo senior executive team are looking more like Leadership Leaders every day.

Update: Chevron

Then:

chevronCEO John Watson commented on the oil pricing impact with a Captain Obvious remark: “…we maybe have gotten a little sloppy in the past few years.” I think, given the 200K+ headcount slashing that occurred in the industry, “sloppy” may not have been the word I would have used.

Now:

He mentioned several things they should have been doing already. The good news is that they certainly seem to be doing those things now. Watson outlined his plan by saying they needed to focus on five things:

  • First, finish project under construction which reduces spend and brings on new revenue.
  • Second, reduce capital expenditures and focus on work that’s profitable lower prices.
  • Third, lowering operating expenses by getting more efficient at everything.
  • Fourth, complete planned asset sales.
  • And finally, do all of this while operating safely and reliably.

watsonFrankly, in all fairness to Watson and Chevron, they knocked this outta the park. In 2016, Capex reduced by over $11B; 2017 spend will be another $2.5B less, and those projects have a two-year horizon for cash flow. Revenue is up $8B, and earnings up almost $1B; Opex and SG&A down over $2.5B. They maintain over $7B in cash, the stock price has more than recovered from the 2015 decline, and they continue to outperform every competitor.

And if simply brilliant financial and operating results aren’t enough, there’s this: John Watson says the reason he has stayed with Chevron for 36+ years, is “every time I said, ‘Well, gee, I wish I could do something else,’ I was moved on to some other part of the company.”

“If you have to leave a company to get a new challenge, I think that’s a really sad statement,” Watson says. “I think it’s a missed opportunity for some companies to not try to retain their workforce and keep them stimulated over time.”

True words—we would do well to replicate that thinking in other organizations.

Sort of a “Heckuva job, Brownie,” only this time for real. Way to go, John… good on ya. You’ve led Chevron from a 2015 Milquetoast to a 2017 Leadership Leader.

Leaders & Laggards – March 2017

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.

leader updateWe 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… 

(more…)

At C-Level

nletter

  • This field is for validation purposes and should be left unchanged.