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| Volume 8, Issue 1 |
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In This Issue:
 The new CEO board dynamic
The Southwest story
Leading your business to maximum results
 How Toyota creates and sustains best-practice supplier relationships
 Customer service critical
Mentoring millennials
 Focus your team with stories
The many faces of employee engagement
 Eight reasons you need to fly private
Career killers
Deconstructing directors
 The office: The bad and the ugly
 Best corporate practices 2008
Credit scores: Not-so-magic numbers
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The new CEO board dynamic
What makes a board ideal—and makes for ideal CEO-board interaction?
In his recent tenure as CEO of Embarq, Daniel Hesse had the luxury of building a board from scratch. A public company spun out of Sprint in 2006, Embarq had only one sitting director—the chair of the audit committee. “That helped a lot in recruiting,
because you could tell candidates that they wouldn’t have to chair the audit committee,” quipped Hesse, who recently left Embarq to return to Sprint Nextel as the telecom’s CEO. Hesse’s jest underscores a painful truth about the CEO-board
dynamic today. There is greater concern on the sides of both business leaders and directors about the role of the board and the responsibilities of individual directors. In fact, Hesse's first condition for the search firm he hired to help Embarq find directors was...
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The Southwest Story
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When James F. Parker moved into the CEO post at Southwest Airlines, his No. 1 mandate was: “Don’t screw it up.”
The company had built a winning reputation with both customers and investors as a low-fare airline with stellar service, profits were healthy, and the future seemed bright. Then came 9/11. “You can have plans for lots of emergencies—but nobody had a
plan for anything like that,” says the now-retired Parker. “But our people rose to the occasion. We had flights landing in places that we didn’t even usually fly to, and we had to try to find ways to get passengers where they needed to go or find
places for them to stay and things for them to do in the meantime. Pilots and flight attendants just pulled out their wallets and took the initiative to get things done.” It was a rocky start for Parker’s reign, which began just three months before
the crisis. But its fallout, both in the moment and in the aftermath, are behind the inspiration for—and message of— his book, Do the Right Thing: How Dedicated Employees Create Loyal Customers and Large Profits. Hit hard by the drop in travel
post-9/11, most airlines responded with aggressive cost-cutting. Instead, Southwest practiced the “do the right thing” mantra that company management had always preached with three pivotal decisions:...
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Leading Your Business to Maximum Results
Executives are finding it harder to meet investors’ rising expectations. Owners are serious about wanting their companies to produce maximum results. This series of articles is about how to do that—a results best practice.
Delivering those maximum results means that the company’s leaders —the CEO, division presidents and the general managers in those divisions — first have to answer three key questions: What are we being scored on? What should we do to maximize our score?
What’s the most effective way to increase the economic value of our company? For example, is the wealth-creation ability of our current businesses better than that of others we can create, or migrate into? Are we managing with the best value
metric? The new tools described here will let executives find the answers. They underlie “Insight-Based Management”—or first find the best ways to boost results, then do them...
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Customer service critical
As new research hits the news feeds this week, there now seems little doubt that recession is on its way. Americans of all classes are cutting back on spending and consumers now demand top value for their hard earned dollar.
What's that mean? Customer service is becoming even more critical to your organization's success. Keeping this emerging trend, and the knowledge that most customer service is now performed over the phone, in mind, The Ascent Group
conducted the Call Center Strategies 2007 survey at the end of last year to find out what works—and what doesn't—for company call centers in a variety of industries. Call centers were analyzed in three main categories: cost per call, productivity and
service. The study also looked at service stats in several sub-categories, including abandoned calls, calls resolved on first contact, agent availability and average speed of answer. "By examining call center performance on several dimensions,
companies can understand if service is being compromised by cutting costs, or conversely, if a company is spending too much to attain a high service level," the study says. The Findings...
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Mentoring millennials
Generation Yers—also known as "Millennials," need their iPods, Xbox, and Avatars, but guess what? They also need mentoring.
Two summers ago, I was invited to speak to the board of directors of the National Association of Law Placement. Half-way through my presentation, one attendee, who happened to be the head of recruiting for a major New York City law firm, burst out
laughing. I recall thinking, "That's strange. That wasn't a designated laugh line," at which point the attendee apologized and said, "Oh Mary, I'm sorry. You just have to hear this." The recruiting professional then clicked on her BlackBerry and read
aloud a message she had just received from one of the firm's newest summer associates: "What's the firm's policy regarding wearing a bra to work?" It was time for a little mentoring. Employers across the country are bracing for the arrival of
the Millennials, a generation of new workers born in or around 1982. The Millennials represent the largest, healthiest, and most cared for generation to ever enter the workforce. This also is a generation with very little real work experience. Boomers
likely recall, with pleasure or disdain, after-school and summer jobs they landed throughout their youth. Many Millennials, by contrast, were encouraged by their parents to forego flipping burgers, or mowing lawns, and focus instead on building their résumés. While some Millennials boast they climbed the Himalayas, and helped excavate Machu Picchu, many have little idea about office life. To help Millennials quickly integrate into the workforce, organizations have instituted formal mentoring programs for them. The way it works is...
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Focus your team with stories
"We sit through seminars, sermons, and speeches of all types, and what we remember most are the stories." If you're leading or building a team, Annette Simmons has a question for you: "What's your story?" Not your personal background or
what you've been doing in your team building efforts. Not fishing stories, hunting, or war stories.
She wants to know what story you're using to focus your team and draw it together into a cohesive unit. Simmons, whom I first met in 2003, is author of several books, including
Whoever Tells the Best Story Wins. She says we can study just about any inspiring leader and we'll find someone who can tell a story that drives home a point – all the way
down to a person's core. Think about it. We can sit through seminars, sermons, and speeches of all types, and what we remember most are the stories. Why do stories work?...
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The many faces of employee engagement
For Britons and Americans it is all about respect. For workers in France and India it is the type of work they are doing. For Germans it is who they work with.
And for the Japanese, it is pay. Employee engagement, it is clear, takes many different forms around the world.
Workers around the world are fired up by completely different things, according to new research, meaning that a global, one-size-fits-all approach to employee engagement will almost inevitably be doomed to failure. A study of workers in 22
countries by HR consultancy Mercer has found sharp differences around the world in what makes workers tick. Employees were asked which of 12 factors most influenced their engagement at work, with surprisingly varied results. Overall, respect was
identified as having the strongest impact on engagement globally, and was the top factor noted in the UK and U.S. But it was notable that in Japan – where respect is much more of a "given" in society and culture in general – it was considered a much
less significant driver of employee engagement. Similarly, workers in France and India cited...
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Eight reasons you need to fly private
For those who fly privately, price is often no object. Take, for example, a hedge fund manager who recently hired the Long Island, N.Y.-based Talon Air to fly him and five guests to Las Vegas on a Gulfstream IV.
The party began their four-day trip with a catered meal from the exclusive Japanese restaurant Nobu. They relaxed in reclining leather seats and sped toward Sin City
at 570 miles per hour. On the return flight, they again enjoyed a Nobu meal, this one prepared at the Las Vegas restaurant. The total cost?...
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Career killers
Kudos to the paltry 14% of us who keep New Year's resolutions. The vast majority--a full 86%--go right back to our counterproductive ways as it relates to personal health, careers, relationships, and otherwise. Forgo the ever popular New
Year's resolution to lose weight and, instead, commit to avoiding a simple list of career-killers that so often result in hearing the feared words, "You're fired," again and again in the course of a career.
Avoiding these seven deadly sins will also help individuals balance their "whole life" and assure they are ready to take on new workplace challenges as they are presented--and execute them well...
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Deconstructing directors
What are directors doing to combat takeovers? Which firm has 30 board members? What's it mean to be "over-boarded?" Is 98 too old for a director? Is 26 too young?
The Corporate Library reports this and more [about CEOs] in its 2007 Governance Practices Report. While age and gender are important to note, the study, which focused on 3,154 companies, also analyzes the type of corporate ownership models, auditing,
the size of boards, takeover defenses and independent directorship. Famously, Ivanka Trump, 26, is the youngest director among U.S. public boards and represents the one in 10 women who serve as a director. She works for father Donald Trump's Trump Entertainment Resorts.Probably less well known, but equally impressive, are
two 98-year-old directors serving on public boards--Louis Berkman of Ampco-Pittsburgh and Theodore T. Rosenberg of ABM Industries.The most common age among people serving as CEO of the companies in this study is 58. Age and gender aside, The Corporate Library,
a research firm based in Portland, Maine, also evaluated the corporate-ownership structure of companies, showing that the most common ownership structure is "principal shareholder,"
a company where one or more shareholders own at least 10% of the company. This structure comprises...
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The office: The bad and the ugly
Seven signs that your employees detest you. (By you, of course, we mean some other boss.) There's a reason Dilbert, The Office, and their ilk are so popular.
Satire gets old fast, but the appeal of realism endures. And the real world, sadly, is full of lousy bosses.
Someone ought to do a study on where these louts come from. Were they abused by their own bosses? Did they toss overboard the ballast of human kindness to hasten the ascent of their career balloons? Or is this an example of absolute power
corrupting absolutely? Such research might also demonstrate how ubiquitous miserable managers are. The proliferation of boss-bashing screeds with titles like When You Work for a Bully, Nasty Bosses, and How To Work for an Idiot suggests a plague. A
few months ago I enumerated five ways in which bosses could be great. A bookend column about bad bosses would never fit in this space, because while goodness tends to be monochromatic, badness comes in every color of the rainbow. But bad bosses of
all stripes evoke similar responses in employees; consequently, you can often tell that people hate you, even if you're not sure why.Inc. readers, of course, are all purebreds among top dogs. But on the off chance that a misfit manager stumbles
across this page, here are seven signs that you are a bad boss...
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Best corporate practices 2008
Last year, we showcased some of our favorite corporate management practices (BusinessWeek.com, 3/28/07) in this space, and BusinessWeek.com readers responded in droves.
Easy as it is to focus on the stupidest, most annoying corporate practices we encounter—from no-moonlighting policies to "stitch-level" dress code policies—it
makes sense to highlight the smart moves that employers make in managing their teams, at least once a year...
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Credit scores: Not-so-magic numbers
The once-vaunted FICO credit scoring system is now being blamed for failing to flag risky home-loan borrowers. Will an overhaul be enough to appease angry lenders?
From humble beginnings in 1956, Fair Isaac Corp.'s credit score- developed by engineer Bill Fair and mathematician Earl Isaac to help banks and department stores calculate their customers' creditworthiness-has come to loom over consumer finance like no
other statistical measure ever has. The ubiquitous three-digit FICO score now helps determine everything from the interest rates people pay on their credit cards to their attractiveness as job candidates. Some hospitals have even begun checking FICO scores before admitting patients. "FICO is the wizard behind the curtain of the economy,"
says Matt Fellowes, a scholar at the Brookings Institution, a Washington think tank. But with mortgage defaults surging and credit-card issuers bracing for more problems, the wizard seems to have lost some of its magic.
A slew of unforeseen problems, some of Fair Isaac's making and others not, have combined to weaken the credit-scoring system on which most U.S. lenders and investors rely.
The FICO score, last overhauled in 1989, is based on a complex formula using many variables-and yet it can be manipulated fairly easily by ordinary people. In the past few years a group of "credit doctors"
and mortgage brokers began devising tricks, some illegal, to help borrowers juice their FICO scores to qualify for credit cards and mortgages on homes they couldn't afford.
At the same time new, exotic mortgages were bursting onto the scene and Fair Isaac was slow to keep up with the changes. By the end of the housing boom in 2006, FICO's accuracy in predicting the likelihood of a borrower's repaying a debt had slipped.
"The more heavily lenders and bankers relied on credit scores, the more mistakes were made,"
says Anthony B. Sanders, a finance professor at Arizona State University and former head of asset-backed research at Deutsche Bank (DB) in New York. Yet as FICO was becoming less effective, lenders were relying on it more and more. In earlier times, banks
would go to great lengths to vet potential borrowers, checking pay stubs and tax returns, calling employers, poring over investment account statements, and on and on, a process called underwriting. The mortgage boom changed all that: Wall Street
investment banks were buying up every loan in sight, and lenders had to race to keep pace with the surging demand. The FICO score became...
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