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| Volume 8, Issue 1
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In This Issue:
 Leading your business to maximum results
 [Societe Generale] Outlines How Trader Hid His Activities
 The road to CFO
How to ax your auditor
What you don't know about headhunters: 10 tips
Tom Brady and efficient capital markets
The big lie
 How Toyota creates and sustains best-practice supplier relationships
 Focus your team with stories
The many faces of employee engagement
How to hire, train, and retain great employees
 Career killers
 The office: The bad and the ugly
 Best corporate practices 2008
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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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[Societe Generale] Outlines How Trader Hid His Activities
The French bank Société Générale, facing persistent questions over how a lone, junior trader could have instigated more than $7 billion in losses, acknowledged on Sunday that his activities prompted questions from risk managers several times last
year, but that the bank never began an investigation because his explanations defused any suspicions.
The disclosure came as the trader, Jérôme Kerviel, 31, spent a second day in police custody, facing questions about what the bank asserts was an elaborate, yearlong ruse that involved betting tens of billions of dollars of the bank’s money on
European stock index futures. Mr. Kerviel’s lawyers late Sunday denounced what they called the “media lynching” of their client in recent days and argued that the bank’s managers “brought the loss on themselves.” In a five-page statement, the bank
outlined how it believed Mr. Kerviel combined several different “fraudulent methods” to hide his activity — including using computer access codes of other employees and falsifying documents. Briefing reporters separately by telephone, Jean-Pierre
Mustier, chief executive of the bank’s corporate and investment banking arm, said that the discovery of the $7.2 billion fraud on Jan. 18 and the unwinding last week
of the roughly $70 billion worth of risky investments that were uncovered represented...
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The Road to CFO
A solid grounding in finance and accounting never gets old for future finance chiefs. But these days, those hoping to become CFOs also need a dollop of charm and a global perspective.
Corporate recruiters know better than anyone what it takes to reach the ultimate prize of a finance career: the CFO slot. But well before that final interview, they say, young finance professionals make a series of crucial career choices. And while
taking the road less traveled may make for nice poetry, choosing certain well-traveled roads makes all the difference for someone with their eye on the CFO's office...
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How to Ax Your Auditor
Jack Henrie has switched auditors eight times during his 18-year finance career. Asked how to do it, he has one word: "Del-i-cate-ly."
As CFO for a string of companies since 1990, and more recently in providing CEO and CFO support services as a outside consultant, he has been involved with no less than eight auditor replacements — a number "that's close to unique," he suspects. While
each case of firm switching has been dictated by different circumstances, he believes his experiences offer some universal lessons, both about the reasons for changing accounting firms, and the way to do it effectively....
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What You Don't Know about Headhunters: 10 Tips
Understanding what makes recruiters tick is a vital but often overlooked component of the job hunt. With a recession looming, it may be more crucial than ever.
At long last, you have made the tough decision: it's time for a new job. Or maybe someone else decided that for you. Whatever the motivation — new owner, new boss, company going bankrupt, getting fired after a restatement — the first thing to do is
find some executive recruiters. Right? At this point, you might as well. But it would have been smarter to forge relationships with recruiters when you weren't in such a hurry to move — that way, a recruiter could have contacted you as positions
became available. Not only is that how they prefer to work, it's a far surer path to making a change than pushing the panic button and expecting something to happen overnight. Understanding what makes recruiters tick is a vital but often overlooked
component of the job hunt. Here's what you need to know...
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Tom Brady and Efficient Capital Markets
Two university professors use a football playbook to teach net-present value, IPO pricing, risk-shifting, and more to undergrads and MBA candidates.
When New England Patriots quarterback Tom Brady was spotted by paparazzi wearing a walking cast on his foot, a shock wave rumbled through Patriots nation. The frightful images also sent bookmakers scurrying to rework betting lines. A potential
injury to the seemingly unstoppable New England quarterback had odds makers reworking the Super Bowl point spread, knocking 2 points off of the original calculation and making the Patriots a 12-point favorite over the New York Giants.
The Brady boot incident is an example of the efficient-markets hypothesis, says James Mahar, an assistant professor of finance at St. Bonaventure University, near Buffalo, New York. An efficient market adjusts rapidly to the arrival of new
information, which means that current prices (or the line on the Super Bowl, in this case) will reflect all available information. From a theoretical standpoint, the revelation that Brady's ankle may be weak when he takes the field on Super Bowl
Sunday is an example of the so-called semi-strong form laid out in the theory. That is, a semi-strong form asserts that current prices reflect all new information. Meanwhile, a weak form factors into the price past market-based information, and a
strong form includes insider information. Mahar and Rodney Paul, an associate professor of finance at St. Bonaventure who teaches a graduate course called "Economics and Finance in Sports," have come up with a handbook to teach
undergraduate and MBA finance courses using football analogies. "Using Football to Teach Finance," which was released in 2003, makes a connection between football, the leading spectator sport in the United States, and basic finance theories and
practices. "Even though baseball is talked about as being America's pastime, this generation of students has a greater interest in football, on both the professional and college levels," Paul tells CFO.com. The professors use the teaching technique
to draw students into the often-abstract world of finance by using concrete sports examples. While the handbook won't have faculty members ditching textbooks, it is a
useful tool to help students make real-world connections to finance, adds Paul. For example...
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The Big Lie
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"At times, it is a slow, plodding development of facts, checking theories, trying to find connections, and thinking through the issues until you get it right." — Cynthia Cooper, former WorldCom Internal Auditor |
"Follow the money." That was the mantra of Deep Throat, the mysterious source whom investigative reporters Bob Woodward and Carl Bernstein met in an underground parking garage in their real-life thriller, "All the President's Men".
Cynthia Cooper, the internal auditor who unearthed the WorldCom accounting scandal, doesn't record such a refrain in Extraordinary Circumstances, her gripping new book about her investigation. But Cooper's bywords might well have been: "If you don't
understand it, and nobody can explain it, keep digging until you find out what it means."...
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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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How to hire, train, and retain great employees
Where I live (in Idaho), the cost of replacing an employee averages somewhere between $17,000 and $31,000. Employees making over $60,000 per year cost more than
$38,000 to replace. The problem for most employers? Many of these costs are hidden and spread out, so they don't glare at you as a single line item in the budget.
When I present these figures during a training session, some people scoff and say it can't be true. All I can say is don't shoot the messenger. These numbers come from the Department of Labor and the Society for Human Resource Management. What about
entry-level workers? Surely it doesn't cost $17,000 to replace them? Usually true, but it still costs more than people think. A few years back I conducted a workshop for a retail Mall Merchant's Association. In an exercise during the workshop, the
merchants discovered that among their own group, $2,000 was the least amount it cost replace an entry-level employee. If you're an employer, how much time does it take for you to earn $2,000? If you make $50,000 per year it's 80 hours. If you earn
$100,000 per year, it's about 40 hours. If you earn $200,000 per year, it's 20 hours of precious time. Therefore, if you could get something done in less than 20 hours that helped you retain just one entry-level employee, you'd be saving money. That's
an amazing claim, but do the math. Then calculate how much time it takes you to earn $17,000. Then calculate for $31,000. Those are realistic costs for replacing just one employee. From this, it's pretty obvious we need to do more than find great
employees; we need to keep them, too. To keep them around, we must examine the real reasons employees leave. Most say it's because they're seeking better pay. Wrong
answer, try again. The Harvard Business Review reports that the number one reason people leave is...
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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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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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