Some employees will like the company’s new direction and will be prepared to follow. Promote them. Replace the others with outsiders.
“Make changes with new blood.”
Have a passion to win and a sense of urgency about getting it done.
At the end of the day, it’s about balance. Extremes are rarely the right answer.
Did you know?
Rosenfeld was once No. 6 on the Forbes list of the 100 most powerful women among business executives.
Became CEO of Kraft in 2006, which became a Fortune 100 company in 2008 when it was spun off by Altria Group.
Rollerblades.
Straightens the cookie shelves when grocery shopping.
Skin in the game
Ron Sargent, Staples CEO 2002-16 on beefing up the board
Great companies require good governance. Directors need a nuts-and-bolts understanding of the business. They need to challenge management. They need a healthy balance between loyalty and independence.
Elect directors with good values, broad-based experience with different backgrounds and perspectives.
“You can’t legislate morality. Money does not trump integrity.”
Boards have an obligation to claw back incentive pay if the company’s results were overstated.
Require directors to own a $200,000 stake in company stock to align their interests with shareholders.
Director pay should be competitive. Companies that pay on the far end of the bell curve should be scrutinized.
Pay more to committee chairmen and to those who attend more meetings. Unfair treatment impedes board dynamics.
Directors have additional responsibilities relating to Sarbanes-Oxley.
Transparency is valuable, but Sarbanes-Oxley was an overreaction to bad actors in a few companies. The expense is too much of a burden on small and medium companies. They may be better off being private.
“Sarbanes-Oxley cost Staples $1 million to comply.”
Sarbanes-Oxley makes honest companies jump through more regulatory hoops, yet does not stop executives who are intent on being corrupt. If someone is determined to commit fraud, it can be done with or without the legislation.
Advice to investors: Don’t focus on company governance. Look at the industry and track record of current management more than at the board. The management team is living with the company 60 hours a week.
Did you know?
Sargent was born in Fort Thomas, Kentucky. MBA at age 23 from Harvard Business School.
Started out at 16 stocking shelves for grocery store chain Kroger. Worked 10 years for Kroger before joining Staples in 1989.
Are your employees well-trained seals?
Julie Scardina, SeaWorld animal ambassador on the secrets of positive feedback
Don't take your whale's compliance, motivation or energy for granted. Use effective communication, encouragement, rewards, creativity, effort and variety. Pay attention to good behavior. Don't make a big issue of their mistakes.
Set your dolphins up to succeed. Reward them sometimes for nothing more than a great attitude.
“Work hard to create an environment that is interesting, fun, stimulating. Draw attention to behavior you want repeated.”
Don’t punish. Go neutral. Inattention is effective discipline. Punishment has a dampening effect, which can lead to defensiveness and aggression. Give misbehaving dolphins a couple of hours to hang out by themselves.
Say, there are four animals in your pool. You send them all out on a job and one of them says: "Ehhh, I'm going over to talk to the whale at the coffee pot." The last thing you want to do is leave the three whales that do the right thing and give attention to the time waster.
Where do you devote time and effort? Devote it to the mammals doing the right thing.
If the whales aren't getting it, trainers haven’t been positive enough, or the whales haven’t developed enough.
Trainers never view themselves as a boss, especially when dealing with whales.
‘I’m 110 pounds and get into the water with 10,000-pound killer whales. The last thing I want is a whale to be thinking: “You know, yesterday, she told me that I wasn’t doing a very good job.”
Avoid feedback that is intermittent or vague. You want your whale to be thinking: “We had fun yesterday, even though I wasn’t quite understanding what you wanted. I’m ready to try again.”
Don't give fake praise. What you reinforce is what you get.
Fish is not the reward of choice for whales and dolphins. Each animal has its own favorites. Be creative. It can be toys of different sizes, different colors of ice cubes that melt in different ways that they chew, swallow or push around and watch melt. They like being touched, scratched or rubbed. Variety is important.
Mammals become satiated with rewards that they get over and over. We all like to get back rubs. But if somebody gave us ten back rubs a day, we’d want something else. Keep it fresh.
An overused reward for humans is money.
When you ask a whale to breach and splash the audience, the best time to reward him is at the apex of his behavior. But it's impossible to reward him when he's up in the air. Use a communication "bridge." Blow a whistle to tell him he is going to get the reward.
A “bridge” for human mammals is praise.
Submissive whales go, "Uh-oh, the dominant whale’s looking at me funny. I'm dropping my fish, or I'm not going to play with that toy." Teach the dominant animals that they need to be kind to less aggressive animals if they want to get reinforced.
Treat all animals with respect. No one incident of bad behavior is worth losing a close relationship over.
Competency comes from the right mix of success and challenges, failure and encouragement. Notice good behavior, ignore the bad. If you are dishing out discipline or punishment, you're wrong.
Did you know?
Scardina was the most frequent guest on The Tonight Show with Jay Leno.
Allergic to fish. "I can handle it and feed it to the whales, but I can't eat it."
Her pets included a blind rescue parrot from the Amazon.
The big gorillas in the room
Henry Silverman, Cendant CEO 1991-2006 on debt and taxes
Deficits are OK if they are around 2% of GDP.
Pork, government waste and corporate welfare are small potatoes compared with Social Security, Medicare and Medicaid.
Those who try to fix entitlements are like the first person trying to twist the cap off a ketchup bottle. The air seal is tough, and you get red in the face. Eventually, someone will take the cap off, and we'll say, "Gosh, you must be lifting weights." But it will be because others have incrementally loosened the cap.
“Someone must start twisting the cap.”
Entitlement reform requires difficult decisions. If you have a stroke in the U.K. they send you home.
Every idea faces opposition. Like ending the home mortgage deduction. Only 24% claim it, but it might hurt all home owners by depressing real estate values.
Technology can save $140 billion in health care.
We need to reform our medical liability system. Americans need to become smarter consumers by understanding the cost and quality of care.
“The advice I give the President is, you have to start somewhere. He may not succeed, but he can get it started for the next guy, or the next guy after that.”
Debt undermines our global competitiveness.
Taxes are a necessary evil, but if entitlements aren’t reduced, taxes will rise drastically. That will devastate economic growth. It’s a death spiral.
Taking away a tax deduction is a tax increase.
The source of economic growth is the private sector. Growth creates jobs. Companies pay taxes, and their employees pay taxes.
Therefore, let a consensus form in the business community ov
er proposals that strengthen the economy.
“Solve the deficit by growing out of it.”
Companies are at odds over solutions. Cendant is in the rental car business and has a different perspective about insurance matters than Allstate.
Did you know?
Silverman’s childhood dream was to play center field for the Yankees, but he couldn’t hit a curve.
Don’t shame companies for making money
Bruce Smith, Tesoro CEO 1996-2010 on being the corporate villain
Most people frown when gasoline prices go up, but a lot of jobs are created by the industry.
The free market is efficient. Price-gouging is a common criticism, but very rare in practice.
“The Bill of Rights does not say ‘life, liberty, the pursuit of happiness AND cheap gasoline.”
Companies ranging from Tesoro, Walmart and Google come under fire for being successful. Controversy can’t be avoided. Be proactive. Practice honesty. Communicate, communicate, communicate.
Educate employees so that they can defend where they work at social gatherings. They didn’t cause hurricanes that shut down refineries in the Gulf.
When oil prices rise, more oil will be found. That moderates the price.
Every company wants to be seen as green, not brown. Make a sincere effort to demonstrate that when given the chance.
Government regulation and interference has a poor track record. We keep imported ethanol out of the U.S. with a 54-cent tariff. Most people won't spend an extra $500 a year in hybrid car payments to save $200 on gas.
The infrastructure is not set up for alternative fuel.
Did you know?
Smith grew up in Coffeyville, Kan., population 16,000.
Served in U.S. Army during the Vietnam War years, but never went to Vietnam.
Hobbies include golf, skiing, tennis, reading and traveling with his wife and family. Golf handicap: 20. Favorite family vacation: skiing in Aspen, Colo.
The past points to the future
Fred Smith, FedEx founder on the leadership lessons of historical figures
There aren’t many new things under the sun. History lessons are clear and proven.
“Somebody once asked Chinese leader Zhou Enlai what he thought of the French Revolution. He said: ‘It’s too early to tell.’”
Business successes are but blips in history. Tom Watson and his son were fantastic managers, but IBM’s success waned. Now, it’s General Electric’s turn. Listen to history, not business gurus.
Alexander the Great was better at winning the peace than at winning wars. He reached out after a military victory. Losers had always been put in shackles, or had their heads cut off. Alexander gave defeated chieftains authority.
Likewise, most acquisitions result in wholesale turnover. Alexander’s far-seeing management style enabled him to build the biggest empire ever, matched only by the Romans years later. His lesson: Make an acquired company a part of the team – make two plus two equal five.
George Marshall was the architect of the reconstruction of Europe – the Marshall plan and the United Nations. He was self-effacing. He refused to write his memoirs because he said his memories had been paid for by taxpayers, and because the truth about some people would be unpleasant for their families. Learn humility from Marshall.
Historic figures who would have made great CEOs: Marshall, Theodore Roosevelt, Peter Drucker and Cordell Hull. Hull was a congressman, senator and secretary of State under Franklin Roosevelt. He won the Nobel Peace Prize. He was the father of the modern trading system. After World War II, the Depression and the Smoot Hawley tariff increases, Hull became an advocate of open trade. Open markets track back to Hull just as all management theory comes from Drucker.
“Hull said, ‘When goods cannot cross borders, armies will.’”
Union Civil War Gen. George McClellan was fired, but too late. He was too cautious. He never had enough resources, always waited for the optimal moment. He was indecisive.
Too many leaders think inaction is the least risky path when action can be the most conservative and safest. Before Pearl Harbor, they put all the airplanes in the middle of the airfield to protect them from saboteurs. We were undone by cautiousness, not bravado.
Every decision is made with imperfect information. Washington was pretty sure when he crossed the Delaware that he was going to be annihilated. Eisenhower had rudimentary meteorological information when he made the D-Day decision on the 6th of June. He wrote out on a slip of paper that the fault of the invasion failing "is mine alone." History is the study of people going out on a limb.
Great leaders take responsibility. When they have a chance to rectify a mistake, they react urgently and strongly, and oftentimes do things they don’t want to do.
Julius Caesar had a proconsul in Palestine, one in Gaul and one in Britain. Each reported to a cavalry commander, each had infantrymen, an archer, etc. FedEx has leaders in Hong Kong, Brussels, etc. Each has an IT person, each has a business unit head, each has a personnel person.
“Julius Caesar would recognize FedEx’s organizational structure.”
Speed has been important throughout history. The Pony Express was the FedEx of its time. It was put out of business by the telegraph. FedEx sails the clipper ships of the computer age. We carry pharmaceuticals, fashion goods, surgical kits, airplane parts, semiconductors. High-value goods are more expensive to move slowly. Container ships move 98% of the tonnage. Air is less than 2%, but almost 45% of the value. Take out petroleum and agriculture and the majority of international trade doesn't go by sea.
Business is fueled by the Internet. Order an auto part from the Sahara desert and in 24 to 48 hours it's there.
Read history, not management books. A half dozen management books provide 95% of what you need to know about leadership. Know Edward Deming and J.M. Juran if you have an interest in providing a quality product. Drucker is profound in terms of the theory of business.
The right war movies are valuable. Twelve O'Clock High with Gregory Peck is the story of a feeling man who has command of a unit, and he can't get the job done. The more he doesn't hold people accountable, the worse it becomes. He tries to be too good, and it works against his purpose. Peck comes in with a cold dose of discipline. The lesson is if you don't hold people to a high standard, organizations gravitate to the lowest common denominator.
Leaders are made. Some people are incapable, but you can identify them on the front end. The rest can be taught to be effective. Some fail because leadership requires them to subordinate self-interests for the organization.
A Mount Rushmore of CEOs would include Alfred Sloan of General Motors. Henry Ford owned the auto industry, but Sloan recognized that the country was becoming more affluent and marketing was more important. Tom Watson Jr. at IBM made the courageous decision down the path into computing and modern mainframe computers. William Allen of Boeing bet on the swept-wing jet that led his company's aerospace dominance. How could you not put Walmart's Sam Walton there? He allowed people of modest incomes to have a standard of living they never dreamed.
Did you know?
Smith served in the U.S. Marine Corps 1966-70. Remains CEO of FedEx, which he founded in 1971.
If he could travel back in time he would want to see the Napoleonic armies laid out at Waterloo; the Constitutional Convention in Philadelphia; ancient Rome.
Who would Smith rather have lunch with?
Ulysses S. Grant or Robert E. Lee? "Lee. I suspect Grant was not a good conversationalist."
Thomas Jefferson or Alexander Hamilton? "Probably Hamilton."
Washington or Lincoln? "Wow. I guess Lincoln because of the scope of what he was managing. What Washington did was every bit as profound, but in scale a fraction of what Lincoln dealt with."
Mahatma Gandhi or Martin Luther King Jr.? "I admire both, but I’d choose King. In many ways he sort
of saved America."
Lewis and Clark or Magellan? "Lewis and Clark. Magellan did a lot, but it must have been pretty damn boring out on that ship. He probably had only one or two good stories."
Hitler or Stalin? "Neither. The depravity of the Stalin regime was every bit as bad as the Nazis; it just didn't get the exposure. I would pass."
(Editor’s note: Fred Smith is a fan of the first draft of history. He reads five newspapers each day and calls them “the world’s best bargain.” I’ve published the historical novel The Cremation of Sam McGee set in the 1898 heyday of yellow journalism. It’s the most interesting period of newspaper history, before radio, when it was common to read five newspapers a day. The novel’s unreliable narrator is a New York reporter who fabricates front-page stories to start the Spanish-American War and boost circulation in a newspaper war between moguls Joseph Pulitzer and William Randolph Hearst. Request the first chapter at
https://caseystrikesout.wixsite.com/website).
When you’re taking on water
Gary Smith, Ciena CEO 2001-present on leading through a catastrophe that sinks the ship
Be paranoid. This is what can happen: In the late 1990s, Ciena was the hottest company around. It developed a way to boost the capacity of fiber-optic cables 40-fold. Orders poured in too fast to be filled, but it sold $1.5 billion of its core product in 2000. The next year, that plunged to $18 million. It lost a huge order from AT&T just as Ciena was to be acquired by Tellabs. The deal collapsed, and Ciena was wounded and alone.
You wonder if you could have seen it coming. Dust yourself off and get galvanized around a plan. Notice little wins like getting a new customer or getting a new product to the same customers. Enjoy the baby steps as best you can.
“What doesn’t kill you makes you stronger?”
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