Jack Welch’s shareholder value bombshell
My colleague Francesco Guerrera pulled off a wonderful scoop the other day when he asked Jack Welch, former chief executive of GE, for his views on how business leaders should be running their companies in these chaotic times.
“On the face of it, shareholder value is the dumbest idea in the world,” he declared to a stunned world.
In recent days Mr Welch has tried to finesse his position a little, but he has not withdrawn the orginal comment.
What do you make of it?
In the workplace, green issues used to be the preserve of activists. Now they are drawing in careerists too.
By factoring sustainability into their day-to-day decision making, managers can gain plaudits from their bosses. Reducing waste, for instance, is a great way to cut costs in a recession. Many companies are also looking to profit from green-tinged government spending plans.
In a new FT Management podcast, Andrew Shapiro of GreenOrder, a sustainability consultancy that helped GE craft its ‘Ecomagination’ strategy, explains why middle managers can profit from a policy of enlightened self-interest when it comes to the environment.
You can listen through the FT’s podcast player or through iTunes.
Leslie Gaines-Ross, chief reputation strategist at PR firm Weber Shandwick, has emailed me three tips for companies that want to escape the general revulsion felt for big business in a recession.
I paraphrase:
To illustrate tip number one, she cited as a model of straightforwardness Howard Schultz’s recent memo to Starbucks staff announcing layoffs.
Hmm: I’ve seen worse, but his prose didn’t exactly strike me as a model of plain speech, particularly when it talked of the need to “aggressively re-architect our cost structure” (he does, at least, spell out elsewhere in the memo that this means cost-cutting).
When I raised these concerns, Ms Gaines-Ross stood by her initial judgment:
He coupled the corporate-speak with attention to why the company needs layoffs, how he intends to keep the company’s founding values and employee benefits.
She said it was also interesting that the internal memo was published on the internet for the world to see, meaning that there was no need for leaks or innuendoes.
Any thoughts from the floor?
Regional bosses in global organisations are like squabbling siblings, desperate to get the attention of bigger bosses working hundreds or thousands of miles away at HQ.
They might benefit from reading IMD prof Cyril Bouquet’s tips on how to become a multinational’s pet foreign subsidiary.
His advice includes a strategy attributed to the CEO of the Australian arm of Yum! Restaurants:
Unlike other subsidiaries that like to import talent, his objective is to export three of his top people every year to other parts of the group. These people are good, they get recognized and the perception is that the Australian subsidiary must be doing something right. So when they need access to more funds, they have managed to build important pillars of influence that help.
Sounds like a clever idea: perhaps Australia’s remoteness from the rest of the world makes such ingenuity imperative.
Elsewhere:
Lynda Gratton of London Business School reckons that recession is calling into question the command and control style of corporate leadership:
Many people are now questioning the wisdom of placing so much power in the hands of so few. At the same time, insights from research in decision sciences and technological advances have shown that often the best decisions are made by an “intelligent crowd”, rather than one all-powerful individual.
This is a fissure in the norms of organisational life that could well lead to the acceleration of a more democratic and distributed decision-making process and the idea that leadership can be held by a wider group of people.
Her advice? “Bring diversity back on to the agenda.” I can’t agree more — but can’t see an imminent end to the autocratic reign of the “middle-aged men with similar backgrounds” (her label for the decision-making elite).
That said, her prediction that hard times will lead to more “virtual teams” — as opposed to face-to-face collaboration — is bang on.
Elsewhere:
More on CSR
Yesterday’s column seems to have stirred things up a bit (see comments section).
Here is one of the best responses I have seen.
Please keep them coming.
Column: the hot air of CSR
Thank goodness, now the recession’s here we can forget all that nonsense about corporate social responsibility (CSR) and get back to trying to make some money.
Admit it, the thought had occurred to you. There may have been much talk of (newly rediscovered) responsibility in Davos last week. But for most managers the biggest responsibility of all will always be to make a profit and stay in business.
The good news is that serious CSR types understand this. I went to a lunchtime meeting at the House of Lords last week where this became clear. This was no crowd of burbling do-gooders. One executive declared: “I can’t stand writing CSR reports. I hate it. It’s so boring.” Another – in fact our co-host, Michael Littlechild, the head of the advisory business Good Corporation – conceded that, for many business people, CSR was just a case of BDF: “babies, dolphins and forests”.
The remainder of the article can be read here. Please post comments below.
Bob Sutton is singing hymns to a 1984 study of peripatetic Methodist ministers.
The Stanford Graduate School of Business professor and author of The No Asshole Rule says it still shows how good leaders have the most impact on teams and small organisations, not vast companies.
Elsewhere:
Pick of the week
Wharton professors share their thoughts on the implications for the corporate governance debate in the current financial crisis.
An unexpected (and unexpectedly sentimental?) outbreak of support for General Motors from William Kristol in the New York Times.
An unflinching message from Lucy Kellaway about the new realities of work in 2009.
And finally, advice from Dilbert (aka Scott Adams) in Fortune magazine on how to save your job.
I worry when people talk about there being a business case – as well as a moral case – for making the workplace fairer.
Reformers who claim that appointing a female director or CEO increases a company’s return on capital by 10 per cent are playing with fire, for instance. Not all statistics will be so helpful.
Take a new study called Women in the Boardroom and Their Impact on Governance and Performance, by academics at the University of Queensland and London School of Economics (and flagged by the Harvard Law School Corporate Governance Blog).
Surveying US companies, they claimed that attendance at board meetings was better at more gender-diverse companies, where CEOs were also more likely to be held to account for poor stock price performance.
But the study went on to claim that this same diversity hampered their adjusted measure of financial performance:
The average effect on gender diversity on firm performance is negative.
The authors hypothesise that this might be because the appointment of female directors increases the intensity of monitoring from the boardroom to unproductive levels.
Frankly, I don’t care whether the financial performance stats are positive or negative. The moral case for boardroom diversity is strong enough in itself.
Further reading: a new MBA Gym workout on corporate social responsibility, giving an interactive taste of how the subject is tackled at business school.
Ravi Mattu is the editor of Business Life, the FT's management features
section, and a former editor of the Mastering Management series. He joined the FT in 2000 from Prospect magazine
Stefan Stern writes a weekly column on management . He has won awards from the Work Foundation and the Management Consultancies Association.
Lucy Kellaway writes a weekly column on work , poking fun at management fads and jargon and celebrating the ups and downs of office life. She is also the FT's Agony Aunt.
Luke Johnson writes an FT column on entrepreneurship. He is chairman of Channel 4 and runs Risk Capital Partners, a private equity firm.
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