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SCORECARD
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.
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Greetings!
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.
Best,
Bob Springmeyer
Bonneville Research
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| Utah Economic Snapshot |
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Labor Market Indicators – January
2007
Utah
- 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
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| Economic Notes: |
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- 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
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| Best Cars |
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- 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
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| Best Use of an Agenda |
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Tips on how to best use an agenda for
meetings:
- Use an outcomes-based agenda - Make sure
everyone knows what answers you seek or what will
be different as a result of the meeting.
- For recurring meetings, develop group behavioral
agreements (aka meeting groundrules) AFTER
meeting several times.
- 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.
- Suggest time frames for each agenda item. Let
people know what they can expect.
Source: CompassPoint Nonprofit Services
Grants
Improve Economic Development Through
Universities!
- University Center Economic Development Program
- POSTED: 2/2/2007
- FUNDING SOURCE: Dept. of Commerce
- ELIGIBILITY: IHEs
- $ AVAILABLE: $6,500,000
- GRANTS AVAILABLE: N.A.
- MAX GRANT SIZE: $155,000
- DEADLINE: 5/3/07
- CONTACT INFORMATION: John Christ, 512-381-
8145
- DESCRIPTION: Grants to improve economic
development via universities.
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| This Weeks Leads: |
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- 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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| BONNEVILLE RESEARCH - People, Passion & Pride |
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Successful client work requires a superior team of
outstanding people working fluidly together.
Bonneville Research is committed to excellence.
We work to help clients achieve enduring results
and improve the communities in which we live.
BONNEVILLE RESEARCH
Bonneville Research is a Utah-based consulting
firm providing economic, financial, market and policy
research to public and private sector clients
throughout the intermountain west.
Our services include:
- Financial Analysis
- Urban Renewal & Redevelopment
Analysis and Budgets
- Strategy and Policy Analysis
- Economic and Fiscal Impact Analysis
- Statistical and Survey Research
Each of our studies is tailored to address the
unique needs of our clients and their communities.
If we can help, please call or email us at
- Bob
- 801-364-5300
- BobSpring@BonnevilleResearch.com
- Jon
- 801-746-5706
-
JonSpring@BonnevilleResearch.com
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