Leading For Change II
March 5th, 2007

Utah Economic Snapshot

Economic Notes:

Best Cars

Best Use of an Agenda

This Weeks Leads:



The CEO's role in leading transformation II

The CEO (Mayor, Chair, Director) helps a transformation succeed by communicating its significance, modeling the desired changes, building a strong top team, and getting personally involved.

Second Installment

In today’s business environment, companies cannot settle for incremental improvement; they must periodically undergo performance transformations to get, and stay, on top. But in the volumes of pages on how to go about implementing a transformation, surprisingly little addresses the role of one important person. What exactly should the CEO be doing, and how different is this role from that of the executive team or the initiative’s sponsors?

As the interviews in this publication show, there is no single model for success. Moreover, the exact nature of the CEO’s role will be influenced by the magnitude, urgency, and nature of the transformation; the capabilities and failings of the organization; and the personal style of the leader.

Adopt a personal approach

CEOs who take time to personalize the story of the transformation can unlock significantly more energy for it than those who dutifully present the PowerPoint slides that their working teams created for them. Personalizing the story forces CEOs to consider and share with others the answers to such questions as “Why are we changing?”; “How will we get there?”; and “How does this relate to me?”

Some leaders include experiences and anecdotes from their own lives to underline their determination and belief—and to demonstrate that obstacles can be overcome. Klaus Zumwinkel, the chairman and CEO of Deutsche Post, talked about his passion for mountain climbing, linking the experience of that sport and the effort it requires to the company’s transformation journey. Corrado Passera, CEO of Banca Intesa, kicked off the communication effort by composing a short story, “written in human language,” about the transformation. John Hammergren, CEO ofMcKesson (a US health care services operation on the West Coast), stressed the fact that every employee was or would be a patient in the health care system and that this “larger purpose” made a difference. “Had we been in the ball-bearing business, I’m not sure it would have been as easy to personalize it,” he acknowledges.

Openly engage others

When a CEO’s version of the transformation story is clear, success comes from taking it to employees, encouraging debate about it, reinforcing it, and prompting people to infuse it with their own personal meaning. Most CEOs invest great effort in visibly and vocally presenting the transformation story. Julio Linares, executive chairman of the Spanish telecom provider Telef?nica, says that, for him, the most important and hardest part of the transformation was “to convince people of the need for the program.” N. R. Narayana Murthy, chairman of the board and former chief executive of India’s Infosys, agrees and says, “The first responsibility of a leader is to create mental energy among people so that they enthusiastically embrace the transformation.” His view matches the experience of Banca Intesa’s Passera, who spearheaded communication efforts to get the story out to 60,000 employees by traveling the length and breadth of Italy. Passera says, “It is a long process, but you have to put your face in front of the people if you want them to follow you.”

Once the story is out, the CEO’s role becomes one of constant reinforcement. As P&G CEO Alan G. Lafley says, “Excruciating repetition and clarity are important—employees have so many things going on in the operation of their daily business that they don’t always take the time to stop, think, and internalize.” Paolo Scaroni, who has led three public companies through various chapters of change, likes to find three or four strategic concepts that sum up the right direction for the company and then to “repeat, repeat, and repeat them throughout the organization.”

‘Sharing success stories helps crystallize the meaning of the transformation and gives people confidence that it will actually work’

Reinforcement should come from outside as well. Passera notes, “If everyone keeps reading in the newspapers that the business is still a poor performer, not contributing to society, or is letting the country down, people will not believe you.”

Spotlight success

As the company’s transformation progresses, a powerful way to reinforce the story is to spotlight the successes. Sharing such stories helps crystallize the meaning of the transformation and gives people confidence that it will actually work. Murthy of Infosys describes how high-performing teams were invited to make presentations to larger audiences drawn from across the company, “to show other people that we value such behavior.”

Ravi Kant, the managing director of the integrated Indian auto business Tata Motors, deliberately identified people who would serve as examples to others. He talks about how he highlighted the achievements of one young man whose success on a risky project and subsequent promotion showed colleagues that talented and determined people can rise through the hierarchy.

Emphasizing the positive, behavioral research shows, is especially important. In 1982, University of Wisconsin researchers who were conducting a study of the adult-learning process videotaped two bowling teams during several games. The members of each team then studied their efforts on video to improve their skills. But the two videos had been edited differently. One team received a video showing only its mistakes; the other team’s video, by contrast, showed only the good performances. After studying the videos, both teams improved their game, but the team that studied its successes improved its score twice as much as the one that studied its mistakes. Evidently, focusing on the errors can generate feelings of fatigue, blame, and resistance. Emphasizing what works well and discussing how to get more out of those strengths taps into creativity, passion, and the desire to succeed.

Role-modeling desired mind-sets and behavior

Whether leaders realize it or not, they seem to be in front of the cameras when they speak or act. “Every move you make, everything you say, is visible to all. Therefore the best approach is to lead by example,” advises Joseph M. Tucci, CEO of EMC, the US-based information storage equipment business. Ultimately, employees will weigh the actions of their CEO to determine whether they believe in the story.

Transform yourself

Employees expect the CEO to live up to Mahatma Gandhi’s famous edict, “For things to change, first I must change.” The CEO is the organization’s chief role model.

Typically, a personal transformation journey involves 360-degree feedback on leadership behavior specific to the program’s objectives, diary analysis to reveal how time is spent on transformation priorities, a commitment to a short list of personal transformation objectives, and professional coaching toward these ends. CEOs generally report that the process is most powerful when all members of an executive team pursue their transformation journeys individually but collectively discuss and reinforce their personal objectives in order to create an environment “of challenge and support.

Murthy’s 2002 decision to take on the job title of chief mentor at Infosys, for example, meant that he had to reinvent himself, because he laid aside his formal managerial (CEO) authority at the same time. He explains, “You have to sacrifice yourself first for a big cause before you can ask others to do the same,” adding, “A good leader knows how to retreat into the background gracefully while encouraging his successor to become more and more successful in the job.”

Take symbolic action

The quickest way to send shock waves through an organization is to conceive and execute a series of symbolic acts signaling to employees that they should behave in ways appropriate to a transformation and support these types of behavior in others. For instance, C. John Wilder, CEO of the Texas energy utility TXU, gave a large bonus to a woman who had taken a clear leadership role in a very important business initiative. “This leader’s contributions generated real economic value to the bottom line,” he explains. “Of course, news of that raced through the whole organization, but it helped employees understand that rewards will be based on contributions and that 'pay for performance’ could actually be put into practice.”

Continued Next Week

Source: McKinsey & Company, Inc.


I received excellent comments on the first installment of the attached piece on The CEO's (Mayor's, Chair's, Director's) role in leading transformation.


Bob Springmeyer

Bonneville Research

  • Utah Economic Snapshot
  • Labor Market Indicators – January 2007


    • Employment Growth: 4.5%
    • Employment Increase: 52,400
    • Unemployment Rate: 2.7%

    United States

    • Employment Growth: 1.6%
    • Unemployment Rate: 4.6%

    Source: Utah Dept of Workforce Services

    Where the Jobs Are – January 2007

    • Salt Lake County - 25,076 +4.5%
    • Utah County - 8,768 +5.1%
    • Davis County - 3,921 +4.1%
    • Washington County - 3,738 +7.6%
    • Weber County - 2,270 +2.5%

    What kinds of Jobs – January 2007

    • Specialty Trade Contractors - 9,800 +17.4%
    • Professional, Scientific, and Technical Services - 5,800 +10.1%
    • Health Services and Social Assistance - 3,800 +3.1%
    • Accommodation and Food Services - 2,700 +7.6%
    • Construction of Buildings - 2,700 +14.0%

    Source: Utah Dept of Workforce Services

    Economic Snapshot – First Seven Months FY2007

    • Sales and Use Taxes (Gen Gov’t) (+4.7%) +3.1%
    • Individual Income Taxes (Education) (+8.2%) +5.7%
    • Corporate Franchise Taxes (Gen Gov’t) (+33.3%) +25.4%
    • Motor Fuel Taxes (Transportation) (+1.5%) -2.2%
    • Severance Taxes (Gen Gov’t) (+11.9%) +11.2%

    Source: Utah State Tax Commission, 2/15/07

  • Economic Notes:
    • GDP
    • As expected, there was a significant downward revision to fourth quarter economic growth. Annualized real growth was revised down to 2.2% for the quarter, from 3.5% in the advance estimate. Smaller inventory accumulation, weaker growth in personal consumption expenditures, and higher imports led to the downward revision. Growth remains below potential, largely due to the contracting housing market.
    • New Home Sales (C25)
    • New home sales dropped sharply in January. The pace of sales decreased by nearly 17% m/m to 937,000 annualized units. Months of inventory jumped up to 6.8 months. The median price is down by 2% y/y, although the average price did increase by 4%.
    • Existing Home Sales
    • In line with expectations, existing home sales increased in January, according to the Realtor’s data. Sales of existing homes increased by 3%, with the pace of sales up to 6.46 million units in January. House prices are down 3.1% from a year ago, and the months of inventory stands at 6.6 months.
    • MBA Mortgage Applications Survey
    • Mortgage demand increased 3.2% in the week ending Feb. 23. Purchase applications increased 5.2% and refinance applications increased 1.2%. The raw numbers are down significantly, so the uptick in the seasonally adjusted indices may be more about the non-annual cycles of housing than a clear market signal.
    • UBS Index of Investor Optimism
    • After rising sharply to begin the year, investor optimism reversed course this month. In February, the UBS Index of Investor Optimism chimed in at 90, down from 103 the month prior. Although large month-to- month fluctuations are common, this month’s decline is identical to January’s gain. Large swings in optimism are a bit surprising as the drivers for sentiment remain slightly positive.
    • US Equity Markets
    • Online bank and brokerage firm E*Trade Financial Corp. launched a pilot global trading platform Feb. 20 with a test group of 1,000 investors. When it is released to all customers during the second quarter of 2007, the platform will allow U.S. retail customers to trade stocks and currencies from six major financial centers over the Internet. Customers will be able to use the platform to buy and sell common stock in Canada, France, Germany, Hong Kong, Japan and the United Kingdom in U.S. dollars or in the country's currency. In the future, E*Trade could open up the program to as many as 42 international financial markets. While individuals already can trade international stocks through brokers for commissions of up to $100 per trade, E*Trade is the first to introduce online trading for a minimal commission of $20 per trade. E*Trade's move to facilitate international trading could spur other brokerage firms into online international trading.
    • Agricultural Prices
    • The preliminary All Farm Products Index of Prices Received by Farmers increased 2.4% in the past month. The Crop Index rose 4.6% and the Livestock Index increased 2.6%. Producers received higher commodity prices for corn, broilers, soybeans and hogs. Lower prices were posted for broccoli, lettuce, eggs and oranges. The All Farm Products Index is up 12% from February of last year. Prices paid by farmers marginally increased from January and are up 4.1% from year-ago levels. Farmers paid lower prices for feed concentrates, diesel fuel, herbicides and tractors. However, these improvements were more than offset by higher prices for complete feeds, feed grains, mixed fertilizers and LP gas and feed supplements, some services and feed grains.
    • Durable Goods (Advance)
    • New orders for manufactured durable goods fell 7.8% in January, following a 2.8% increase in December. The drop in new orders was broad-based, with ex transportation orders down 3.1% and core capital goods orders down 6%—the largest drop in this category since 2002. Core capital goods have fallen in three of the past four months.
    • The Conference Board Consumer Confidence
    • The Conference Board index of consumer confidence increased in February to 112.5 from a nearly unrevised 110.2 in January (previously 110.3). The gain came from the present situation component; the expectations component increased only fractionally.
    • Chain Store Sales
    • Chain store sales rose 0.2% in the week ending February 24, but year-over-year growth tumbled to 2.2%, the slowest growth since last December. Rising gasoline prices appear to be taking a toll on sales.
    • Home Depot Alert
    • Home Depot, the world's largest home improvement retailer, announced a 28% drop in fourth quarter net profits, caused in large part by a slump in spending on home improvement projects as the housing market cools.
    • Oil and Gas Inventories
    • Another bullish report on oil inventories. Crude oil inventories rose by 1.4 million barrels for the week ending February 23, according to the Energy Information Administration, below the 1.9 million barrel build expected. Distillate inventories plummeted 3.8 million barrels, far greater than the 2.8 million barrel draw expected. Gasoline stocks fell by 1.9 million barrels, in line with expectations. Refinery activity improved marginally.

    Source: Economy.com, Financial Times

  • Best Cars
    • Fun to drive - Mazda MX-5 Miata
    • Small SUV - Toyota RAV4
    • Small sedan - Honda Civic
    • Family sedan - Honda Accord
    • Minivan - Toyota Sienna
    • Luxury sedan - Infiniti M35
    • Midsized SUV - Toyota Highlander Hybrid
    • Budget cars - Honda Fit
    • Green car - Toyota Prius
    • Upscale sedan - Infiniti G35

    Source: Consumer Reports - 2007

  • Best Use of an Agenda
  • Tips on how to best use an agenda for meetings:

    1. Use an outcomes-based agenda - Make sure everyone knows what answers you seek or what will be different as a result of the meeting.
    2. For recurring meetings, develop group behavioral agreements (aka meeting groundrules) AFTER meeting several times.
    3. Integrate a "who-does-what-by-when" Action Plan into your meetings. Record commitments during the course of a meeting and then write them into the agenda for your next meeting for follow up.
    4. Suggest time frames for each agenda item. Let people know what they can expect.

    Source: CompassPoint Nonprofit Services


    Improve Economic Development Through Universities!

    • University Center Economic Development Program
    • POSTED: 2/2/2007
    • FUNDING SOURCE: Dept. of Commerce
    • $ AVAILABLE: $6,500,000
    • MAX GRANT SIZE: $155,000
    • DEADLINE: 5/3/07
    • CONTACT INFORMATION: John Christ, 512-381- 8145
    • DESCRIPTION: Grants to improve economic development via universities.

  • This Weeks Leads:
    • Orvis Co.
    • Orvis Co., Inc. trades as Orvis Co. at 39 locations throughout CA, CO, GA, IL, KS, MA, MS, NJ, NY, PA, TX, VA, VT, WA and WY.
    • The stores, selling outdoor sporting goods along with apparel, gifts and home furnishings, occupy spaces of 9,000 sq.ft. to 13,000 sq.ft. in endcaps, freestanding locations, lifestyle and strip centers.
    • Growth opportunities are sought nationwide and in Canada during the coming 18 months.
    • For more information, contact
      • David Dumeer,
      • Orvis Co., Inc.,
      • 808 Thompson Street,
      • Glastonbury, CT 06033;
      • Email: dumeer@cox.net;
      • Web site: www.orvis.com.
    • J. Crew
    • J .Crew, Inc. trades as J. Crew at 204 locations nationwide.
    • The upscale men and women’s apparel stores occupy spaces of 4,500 sq.ft. to 5,500 sq.ft. in malls, lifestyle and specialty centers and urban/downtown areas.
    • Plans call for 30 openings nationwide during the coming 18 months.
    • Typical leases run 10 years.
    • Preferred cotenants include Abercrombie, Ann Taylor, Banana Republic, Gap and Talbot’s.
    • Preferred demographics include a population of 200,000 within 10 miles earning $50,000 as the average household income.
    • For more information, mail site submittals to:
      • Holly Cohen,
      • J. Crew, Inc.,
      • 770 Broadway, 12th Floor,
      • New York, NY 10003;
      • Web site: www.jcrew.com.
    • Firehouse Subs
    • Firehouse Restaurant Group trades as Firehouse Subs at 261 locations throughout the southwestern region.
    • The sandwich shops, serving subs, salads and chili, occupy spaces of 1,500 sq.ft. to 1,800 sq.ft. in malls and strip centers.
    • Plans call for 100 openings nationwide during the coming 18 months.
    • Typical leases run 10 years.
    • Preferred demographics include a population of 20,000 within three miles earning $35,000 as the average household income.
    • For more information, contact
      • John Namey,
      • Firehouse Restaurant Group,
      • 3410 Kori Road,
      • Jacksonville,
      • FL 32257;
      • Web site: www.firehousesubs.com.

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