Executive Insight

Released: Fortune Magazine’s Best Companies to Work For, 2013

The list of good employers on Fortune’s prestigious annual list stays consistent this year with Google retaining the top spot and just a couple of newcomers to the top 10.

Rank	Company	Job Growth	# of Employees
1	Google, Inc.	N.A.	53,546
2	SAS	5.6%	6,373
3	CHG Healthcare Services	4.7%	1,378
4	The Boston Consulting Group, Inc.	18.6%	2,314
5	Wegmans Food Markets, Inc.	8.3%	43,927
6	NetApp	7.8%	7,426
7	Hilcorp Energy Company	47.7%	1,012
8	Edward Jones	-0.9%	35,114
9	Ultimate Software	18.7%	1,440
10	Camden Property Trust	13%	1,896

See Full List

Source: CNNMoney

The Most “Civic” of America’s Large Companies

IBM, Citi, and AT&T, Inc. take top honors in the first comprehensive ranking of S&P 500 companies that best use their time, talent and resources to improve the quality of life in the communities where they do business. The Civic 50 was prepared by The National Conference on Citizenship (NCoC) and Points of Light, national experts on civic engagement in partnership with Bloomberg LP. It features a comprehensive, transparent methodology to identify companies that have taken a leadership role in developing and implementing civic engagement programs. The list is intended to raise awareness of the importance of a civic consciousness through the U.S. corporate world.

Companies were evaluated on seven specific metrics: leadership, measurement and strategy, design, employee civic growth, community partnerships, cause alignment and transparency. Winning companies employed increasingly sophisticated tools to measure the impact of community engagement and alignment of these programs with their business’ core competencies. More than two-thirds of the top 50 companies say they “frequently” or “always” use the professional skills of their workforce to address social issues and real community challenges. Sixty-six percent of the top 50 say they have “mission-level” alignment with the community partners, meaning they work with them on the highest strategic level, not just on individual programs or events.

The companies recognized in the inaugural Civic 50 contributed a remarkable amount of time and resources to improve the communities they serve. For example, the top five companies alone provide $1.5 billion in grant support to community organizations, 17.5 million volunteer hours valued at over $375 million, and $150 million in matching donations.

The full list of winners can be found online at Businessweek.com. Here are the top ten:

1. IBM
2. Citigroup
3. AT&T Inc.
4. Aetna
5. Capital One Financial Corporation
6. Morgan Stanley
7. Campbell Soup Company
8. The McGraw-Hill Companies
9. General Electric
10. Hasbro, Inc.

Source: The National Conference on Citizenship

CEOs Embrace a More Connected Culture

A new IBM study of more than 1,700 Chief Executive Officers from 64 countries and 18 industries worldwide reveals that CEOs are changing the nature of work by adding a powerful dose of openness, transparency and employee empowerment to the command-and-control ethos that has characterized the modern corporation for more than a century.

The advantages of the fast-moving trend are clear. According to the IBM CEO study, companies that outperform their peers are 30 percent more likely to identify openness – often characterized by a greater use of social media as a key enabler of collaboration and innovation – as a key influence on their organization.  Outperformers are embracing new models of working that tap into the collective intelligence of an organization and its networks to devise new ideas and solutions for increased profitability and growth.

To forge closer connections with customers, partners and a new generation of employees in the future, CEOs will shift their focus from using e-mail and the phone as primary communication vehicles to using social networks as a new path for direct engagement. Today, only 16 percent of CEOs are using social business platforms to connect with customers, but that number is poised to spike to 57 percent within the next three to five years. While social media is the least utilized of all customer interaction methods today, it stands to become the number two organizational engagement method within the next five years, a close second to face-to-face interactions.

Coming after decades of top-down control, the shift has substantial ramifications – not just for the CEOs themselves – but for their organizations, managers, and employees, as well as for universities and business schools, and information technology suppliers. IBM’s research finds that technology is viewed as a powerful tool to recast organizational structures. More than half of CEOs (53 percent) are planning to use technology to facilitate greater partnering and collaboration with outside organizations, while 52 percent are shifting their attention to promoting great internal collaboration.

Greater openness is not without risks. Openness increases vulnerability. The Internet – especially through social networks – can provide a worldwide stage to any employee interaction, positive or negative. For organizations to operate effectively in this environment, employees must internalize and embody the organizations values and mission.  Thus, organizations must equip employees with a set of guiding principles that they can use to empower everyday decision making. Championing collaborative innovation is not something CEOs are delegating to their HR leaders. According to the study findings, the business executives are interested in leading by example.

By the Numbers

CEOs regard interpersonal skills of collaboration (75 percent), communication (67 percent), creativity (61 percent) and flexibility (61 percent) as key drivers of employee success to operate in a more complex, interconnected environment.

To build its next-generation workforce, organizations have to actively recruit and hire employees who excel at working in open, team-based environments.  At the same time, leaders must build and support practices to help employees thrive, such as encouraging the development of unconventional teams, promoting experiential learning techniques and empowering the use of high-value employee networks.

The trend toward greater collaboration extends beyond the corporation to external partnering relationships. Partnering is now at an all-time high. In 2008, slightly more than half of the CEOs IBM interviewed planned to partner extensively. Now, more than two-thirds intend to do so.

Other Findings

The IBM study found that a majority (71 percent) of global CEOs regard technology as the number one factor to impact an organization’s future over the next three years – considered to be a bigger change agent than shifting economic and market conditions.

Across all aspects of their organization – from financials to competitors to operations – CEOs are most focused on gaining deeper insights about their customers. Seven out of every ten CEOs are making significant investments in their organizations’ ability to draw meaningful customer insights from available data.

Given the data explosion most organizations are facing, CEOs recognize the need for more sophisticated business analytics to mine the data being tracked online, on mobile phones and social media sites. The traditional approach to understanding customers better has been to consolidate and analyze transactions and activities from across the entire organization. However, to remain relevant, CEOs must piece together a more holistic view of the customer based on how he or she engages the rest of the world, not just their organization. The ability to drive value from data is strongly correlated with performance. Outperforming organizations are twice as good as underperformers at accessing and drawing insights from data. Outperformers are also 84 percent better at translating those insights into real action.

Source: IBM

Selected Charts: Flickr

 

Only 2 in 10 Hold a Positive View of Corporate America

Each year since 1999 Harris Interactive has measured the reputations of the most visible companies in the U.S. based on a survey of members of the American general public; his year 17,555 people were interview in the survey process.

In its work Harris has consistently demonstrated the link between strong corporate reputations (i.e., perceptions) and positive supportive behaviors toward those companies, including product purchase and investment behavior. Moreover, it has identified a strong positive relationship between change in reputation and change in market capitalization.

The research evaluates stakeholder perceptions across 20 attributes that are grouped into six dimensions of reputation:

• Products & Services 
• Financial Performance 
• Workplace Environment  
• Social Responsibility 
• Vision & Leadership 
• Emotional Appeal

The overall conclusion from the survey is that the reputation of Corporate America is more tarnished today than a year ago and that a positive momentum from 2011 has faded in 2012:

• Just 2 in 10 Americans say that corporate America’s reputation is positive.
• Only 9% of respondents said that the reputation of corporate America improved over the past year, while 60% said it has declined.

Industries positioned as part of the solution to America’s economic woes are best able to weather negative perceptions surrounding corporate America.

Industries that are seen to be helping America’s ailing economy tend to have higher reputations. Technology enjoys reputation dominance; Government lands in last place behind the Tobacco industry

• Technology and Retail: 53% and 39% of Americans, respectively, see them as part of the solution.

Industries that are perceived to be hurting the economy tend to have lower reputations.

• Financial Services and Banking: 70% and 75% of Americans, respectively, see them as part of the problem.

The Automotive industry continues its reputation recovery, adding another 7 points to positive perceptions after a 15-point increase between 2010 and 2011.

At a specific company level Apple supplants Google for the top spot and Berkshire Hathaway loses luster from prior surveys. Indeed Apple’s score of 85.62, is highest for any company in the history of the survey, and the Technology industry as a whole represents three of the top four companies.

Read the Summary Report.

How Charlesmore Partners Helps Clients Build High Performance Organizations - An Interview with Managing Partner, Edward Ferris

In a time when companies are facing intensive demands for business and organizational improvement, Charlesmore Partners is getting a lot of attention for providing tangible, incisive and implementable management consulting solutions.

We sat down with Charlesmore Partners’ Edward Ferris to find out more about how the firm is helping companies around the globe convert strategic intent into sustainable business results.

In one sentence, tell me about Charlesmore Partners?

Charlesmore Partners is a management consulting firm that helps clients build an organization capable of delivering strategy.

Why should a company consider Charlesmore Partners?

While most companies convert their business strategies into detailed and actionable plans, the same degree of acuity and rigor is rarely given to the organizational implications of these strategies. 

Today’s organization is rarely fully equipped to deliver tomorrow’s desired business results and varying degrees of transformation will be required to assure that strategic intent is fully realized. Simply put, Charlesmore Partners helps companies build an organization capable of delivering strategy.

Depending upon client needs and circumstance, we examine and improve key performance levers such as organizational design and structure, operating standards and culture, competencies and skill mix, performance capabilities and requirements and talent management systems and practices. Importantly our work is customized to client needs; we provide no cookie-cutter solutions. The consulting work is pragmatically designed around the realities of a client’s particular circumstance with the core purpose of making a material performance difference to their business.

There may be hundreds of consulting firms out there. How is Charlesmore Partners different?

There are two primary differences – who does the work, and how the work gets done.

Many consulting firms use principals to sell engagements and (considerably) less experienced associates to deliver the work. That’s not the way Charlesmore Partners does business. The same seasoned consultants sell our engagements as deliver them; clients pay for our depth of expertise and the distinctive insights that our broad-based experience can bring.

Secondly, many consulting firms deliver stylized reports with fancy charts and see this as the consulting deliverable; regretfully while attention-getting, these reports typically end up on corporate bookshelves gathering dust.

Charlesmore Partners delivers results, not reports. We work with clients to implement improvements that drive organizational performance; we are not looking down from the balcony, our work is on the field of play making a tangible business difference. 

How did this consulting style emerge? How much were you influenced by your experiences at ABB and General Signal Corporation?

The influences are many; we call it the scars of experience. There’s no doubt though that my own career – and the careers of my colleagues – helped frame our desire to build a different kind of consulting firm. One that delivers material results for clients.

Our experience of working in over forty-four countries on six continents certainly provided an extraordinary experience base. The challenges we faced often came thick and fast and the learning was real-time and visceral. We know the realities and tough choices that line executives face. We know that if they decide to invest in our consulting expertise, we need to add significantly more value in deliverables than the cost of the fees we charge. 

What core value does Charlesmore Partners add?

We understand organizational performance and what is required to deliver it. There is no secret sauce, just many essential ingredients. Our indepth knowledge of organizational design, culture, leadership requirements and talent management practices has been honed over multiple years of direct line experience in tough, multinational business. By applying our core competencies to the client’s business situation we can help them identify the key performance levers that will make the difference between achieving desired results and underperformance. This is our value-add.

Also its important to remember that today over 70% of the value of most companies is now considered to be intangible - knowledge, methods, capabilities, relationships, brand. We work in a high impact/high leverage domain; materially improving organizational capability and performance can increase company value significantly.

How do you work with client human resource executives? This sounds squarely their domain.

The short answer is extremely collaboratively. We are externals – however close our work may get to a client’s business. We respect and recognize this. We are there to add value - expertise, insight, resources, program management. We are not there to supplant or sideline. That would be counterproductive and wrong; client HR executives often become our greatest advocates.

You talk about achieving material results. How do you measure success and what type of results do you achieve?

At the start of each engagement we lay out key deliverables in collaboration with the client. The deliverables are typically phased over time and mutual expectations are defined in qualitative and quantitative terms. We meet regularly through the term of the engagement to review progress and results. It’s a partnership framed by clear commitments and explicit parameters.

We don’t succeed or achieve results independently of our clients. They achieve the results; our work helps them do so. We have a track record of helping firms materially accelerate growth, restructure operations for profitability, build global-standard practices and build performance cultures.

Download How Charlesmore Partners Helps Clients Build High Performance Organizations

 

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Charlesmore Partners International is a global management consulting firm specializing in organizational strategy, organization development and change management. The firm works with CEOs and their top management teams to develop the organizational strategy and initiatives that convert strategic intent into organizational capability, commitment and performance.

Founded in 2005 and headquartered in the greater Philadelphia region, Charlesmore Partners serves clients in most sectors and transnationally.

Edward Ferris serves as Charlesmore Partners’ Managing Partner; he specializes in organizational strategy, organization development and change management. Previously Edward held executive positions at Del Global Technologies Corp., ABB, General Signal Corporation and British Telecom with responsibilities spanning some 44 countries on six continents. He is a co-author of a recent Conference Board report on CEO Succession Planning, teaches global leadership at The New School for Public Engagement in New York City and is a member of The Conference Board’s Expert Committee on Shareholder Activism. 

Edward can be contacted at +1.215.353.6472 or by email [email protected].

PR Blunders of the Year

The 17th Annual Top 10 PR Blunders List, compiled by San Francisco's Fineman PR, features blunders by organizations that were unprepared, undecided, unconscious, unfair and uninformed, and all of them preventable. 

1. Penn State, "Your Scandal Isn't Going Away"

The story of disgraced former Penn State assistant football coach Jerry Sandusky's arrest on charges of sexual abuse is a terrible one, but news of the university's lack of action over more than 10 years infuriated the public and media alike. University President Graham Spanier fanned the flames with a poorly planned initial statement featuring more support for two University officials alleged to have been covering up a 2002 incident than for the eight abuse victims. But that was just one of many stumbles in the eyes of prominent media and PR professionals, who urged Penn State to get organized, take responsibility, prioritize the victims and get all the bad news out as quickly as possible. Poor crisis planning was an obvious issue, with Advertising Age reporting that "despite months of advance notice, Penn State's board didn't enact a communications plan, and waited until after the arrest … was all over the news" before retaining crisis counsel. Even Penn State senior lecturer of public relations Steve Manuel agreed, telling USA Today that "this was a crisis in the making of at least three years. Penn State knew this shoe was going to drop and it was not prepared." Lynn Zinser of The New York Times urged University leaders to accept that "your scandal isn't going away," describing the "sorry spectacle" as "what appears to be an institution-wide moral collapse."

2. Cain Undeniably Unprepared

Republican presidential hopeful and former National Restaurant Association (NRA) head Herman Cain made a major mistake by not dealing with questions from Politico regarding accusations of past sexual harassment promptly and completely, leaving himself open for wave after wave of damaging speculation. According to John Cassidy of The New Yorker, Cain had "ample time" to prepare for the crisis and should have "sat down his staff, explained that he was sitting on an unexploded landmine, and asked them to prepare a contingency plan" early on. But despite being aware of media interest for at least 10 days, Cain and his staff appeared completely unprepared for scrutiny on the subject. According to numerous media sources, the candidate breathed audibly and glared at Politico's John Martin for several seconds when asked if he had ever been accused of harassment before evasively echoing the question. Cain's bizarre, reactionary responses incented his past accusers to come forward, prompting him to stumble further by dismissing their claims as "baseless" (despite five-figure NRA settlements with two women involved), suggesting race was a factor in the coverage and claiming that either rival candidate Rick Perry's camp or the "Democratic machine" was out to smear him. U.S. News and World Report opinion editor Robert Schlesinger wrote that "Cain left the presidential race as he entered it—more a sideshow than a contender," after he suspended his campaign.

3. Oakland Mayor Quan Plays Both Sides – Against Each Other

The Occupy Movement tested city officials nationwide, but none more than Oakland Mayor and former community activist Jean Quan, whose handling of the Occupy Oakland encampment was widely and critically covered. In the first two weeks of the tense situation Quan flip-flopped frequently, first attending the encampment as a supporting speaker, then eventually authorizing a police raid to clear the site, a reversal that provoked nationwide criticism of the violent confrontation. At first, Quan tried distancing herself from the raid, saying she did not know when it was going to take place, but City Hall sources indicated she "was fully informed about the size and scope of the operation hours before it started" and had ample opportunity to prevent the raid, according to San Francisco Chronicle columnists Phillip Matier and Andrew Ross. Quan invited protesters back the very next day – after spending more than $1 million to clear them out – and later encouraged city employees to join an Occupy-sanctioned general strike against the "establishment," causing the Oakland Police Officer's Association to release a statement asking: "is it [Oakland's] intention to have city employees on both sides of a skirmish line?" The San Jose Mercury News joined the Association, other media and residents in blasting Quan's handling of the situation, noting that "real leaders think through challenges, make tough calls and take responsibility if things go wrong. Quan has been all over the map – an icon of what not to do."

4. Bank of America Nickels and Dimes

Bank of America wasn't the only bank planning on bolstering revenue through new debit card fees, but it suffered significant reputational damage for being the last to abandon its plans to do so after severe public outrage in what The Wall Street Journal termed "the latest publicity nightmare for an industry that is already under fire." J.P. Morgan Chase, Wells Fargo & Co. and several regional banks dropped similar plans after widespread outcry, but being last out made Bank of America, the nation's second-largest bank, the situational whipping boy in the media, the public eye and even in Congress, where Sen. Richard Durbin (D, Ill.) urged consumers to "vote with your feet." Consumers nationwide did just that, pulling out of major banks en masse to join local credit unions.  The Huffington Post reported that at least "650,000 customers joined credit unions [in about five weeks after] Bank of America announced it would charge customers $5 to use their debit cards for purchases."

5. "Nutty View" Damages GOP Confidence in Perry

While some might declare Rick Perry's inability to recall his own agenda his most memorable campaign gaffe of 2011, to many his most significant – and completely preventable – blunder was dredging up the birther meme in an interview with Parade Magazine. Perry was apparently "totally kidding," according to Dan Amira of NYMag.com, noting that the beleaguered candidate's main mistake was associating himself "with a conspiracy theory that was debunked once and for all six months ago and to which only the crankiest of cranks continue to subscribe." While Perry may have been "just having some fun," Philip Rucker of The Washington Post reported that he "undercut the reach of his economic message by repeatedly injecting an issue that most Americans thought had been put to rest." GOP strategist Karl Rove summed the blunder up neatly, telling Fox News when "you associate yourself with a nutty view like that … you damage yourself."

6. Qwikster Just a Flash in the Netflix Pan

How should management handle customer discontent over, say … a controversial 60% price increase that led to hundreds of thousands of lost customers and a drop of nearly half of a company's stock value? Netflix CEO Reed Hastings remained silent for two months, then released a seemingly reluctant blog statement apologizing for the increase… and announcing plans to split off DVD-by-mail operations "in the same breath," according to the San Francisco Chronicle. But the Chronicle also reported that "customers ripped that plan" as seriously inconvenient because it entailed zero coordination between Netflix and proposed new unit Qwikster. Netflix backpedaled in the face of consumer backlash, abandoning plans for Qwikster three weeks later, but its stock value remained severely depressed.

7. Facebook Complains About Lack of Transparency, Anonymously

Not only did Facebook contract a prominent PR firm to question how Google's Social Circle collects and uses personal data, the social network allegedly insisted on client anonymity. But things spun out of control when blogger Christopher Soghoian - targeted (and annoyed) by the campaign – posted the agency's pitch emails online, while USA Today reported of false claims in pitches. Newsweek tech editor Dan Lyons described the "clumsy smear" in The Daily Beast and exposed Facebook as the mystery client, noting that "the mess, seemingly worthy of a Nixon re-election campaign, is embarrassing for Facebook, which has struggled at times to brand itself as trustworthy." Miguel Helft of The New York Times noted Facebook founder Mark Zuckerberg's transparency obsession, skewering the social network for hypocrisy, "Facebook, it seems, doesn't always practice what it preaches."

8. Dodger Owner's Words "Very, Very Unfair" to Coma Victim, Family

Los Angeles Dodgers owner Frank McCourt took a year-long pounding in the press for his handling of numerous issues, including the team's bankruptcy proceeding and his very public divorce. But for many McCourt's biggest blunder was his insensitive reaction to the horrific, coma-inducing beating received by San Francisco Giants fan Bryan Stow in the parking lot of Dodger Stadium after the March 31st opening day game. The Los Angeles Times reported that McCourt described the assault as "tragic" but also that he was "very, very satisfied" with his organization's effort to "make [Dodger Stadium] the safest venue in sports" and that it was "very, very unfair to take what was otherwise a fantastic day … and to have a few individuals mar that." McCourt spent much of the year defending his organization instead of taking responsibility and prioritizing the victim, creating an appearance of callousness and widespread media outrage. McCourt's problems peaked when his attorney sought to place blame on Stow for the incident. As the Times commented, "one of McCourt's problems has been his consistent cluelessness about the public relations effects of his decisions. Neither he nor Dodgers fans need to see his lawyers making a similar blunder."

9.  "Tweeting Teen" Teaches Kansas Gov. Brownback about Social Media

Kansas Gov. Sam Brownback and his staff should have considered the source before trying "to police a teenager's Internet musings," according to the Associated Press, when 18-year-old Emma Sullivan sent a tweet to her 61 followers claiming to have "told him he sucked." Brownback's communications team contacted Sullivan's principal with news of her online claim, who, in turn, demanded that Sullivan write an apology. But according to the Kansas City Star, Sullivan never wrote the apology. The incident gained rapid national recognition, with Sullivan's Twitter following exploding to more than 12,000 followers. Brownback eventually apologized for the incident, and according to Gawker, noted that his "staff over-reacted." PRNewser called the actions of his communication staff "an example of how little some people know about how this whole social media thing works."

10. Ben & Jerry's Churns Ice Cream into Schweddy Balls

Popular ice cream maker Ben & Jerry's has a longstanding tradition of edgy flavor names, but the company's latest effort, "Schweddy Balls," an homage to Saturday Night Live character Pete Schweddy, has some families and consumer groups, including American Family Association affiliate One Million Moms, up in arms. The Miss.-based organization issued a statement calling the irreverent name "anything but appealing" and claiming that "the vulgar new flavor has turned something as innocent as ice cream into something repulsive." While Ben & Jerry's dismissed these claims, noting that the company has always embraced irreverent names, the company may have suffered in the process as NPR, Time, the New York Daily News and other media reported that some supermarket chains, including Mass.-based Stop & Shop, were not carrying the flavor.

Fineman PR has also compiled a list of five classic PR Blunders documented in the agency's previous Annual Blunders lists. The list is available on the agency's website: www.finemanpr.com. 

San Francisco-based Fineman PR (www.finemanpr.com) assembles the annual PR Blunders List as a reminder that good public relations is critical to businesses and organizations. Selections are limited to Americans, American companies or offenses that occurred in America. Selections are limited to avoidable acts or omissions that caused adverse publicity; image damage was done to self, company, society or others; and acts that were widely reported in 2011.

Source: PRNewswire

Playing Now in Theaters Everywhere: The H-P Saga

The H-P board/CEO saga is turning into pure theater. Analysts are actively encouraging shareholder revolt, H-P has hire Goldman Sachs as a “defensive move” against their wrath, the CEOs of Oracle and unpopular H-P acquisition Autonomy bandy words in a very public and contentious way (see article and graphic below).

The CEO succession backdrop is particularly fascinating. On August 6^th, 2010 Netscape founder, H-P Board member and celebrity technologist Marc Andreessen was interviewed by Maria Bartiromo in a CNBC Special Report:

“We will run a search as fast as we can, but insuring we get the best possible candidate. We will look at both internal and external candidates in that process.

We have just formed a committee, so work will begin on this immediately. But we’re going to dive right into it.

And fundamentally, you know, we’re looking for someone who is outstanding, who we can pair up with a truly great company. The company is in great shape, it’s extremely well positioned for the future.

We’re executing on the strategy. The performance is strong, so we’re look at someone who can both maintain that level of performance and then build on it.”

In other words, “we are totally unprepared, but trust us, we’re on it!”

H-P eventually settled on Leo Apotheker, who had recently been ousted as head of European technology giant SAP (after seven months on the job).

Now more details are being revealed about that appointment process. James Stewart in The New York Times describes how botched the process of hiring Apotheker was:

[W]hen the search committee of four directors narrowed the candidates to three finalists, no one else on the board was willing to interview them. And when the committee finally chose Mr. Apotheker and again suggested that other directors meet him, no one did. Remarkably, when the 12-member board voted to name Mr. Apotheker as the successor ... most board members had never met Mr. Apotheker.

One of the board members who had never met Apotheker tried to explain: "I admit it was highly unusual. But we were just too exhausted from all the infighting." As Morgan Housel writes in The Motley Fool, “Try using that line on your boss sometime.”

Stewart describes the board in this way: “while composed of many accomplished individuals, as a group (it) was rife with animosities, suspicion, distrust, personal ambitions and jockeying for power that rendered it nearly dysfunctional.” His article makes interesting reading.

Only 3 of the 13 current directors - Andreessen, Lawrence T. Babbio, and John H. Hammergren were on the search committee that ultimately replaced Hurd with Apotheker. In the Board shuffle that followed  2 of the  directors who were replaced (Joel Z. Hyatt and John Joyce ) were in favor of keeping Hurd, while a third, Lucille S. Salhany, (according to Stewart) wanted to slow down the process, worrying aloud that “no one has ever met him…”

Business as Unusual. Chrysler, the UAW Meet Project Runway

The fashion police were in force in Detroit this week when  negotiations started on a new Chrysler/UAW labor contract.

Both sides' bargaining teams filed into the auditorium where the talks will be held at Chrysler's headquarters wearing identical maroon jackets emblazoned with the logos of the company and the union. It was impossible to tell who was from Chrysler and who was from the UAW.

There was none of the adversarial tone that characterized prior negotiation cycles between the parties. It was more like a prelude to a church picnic.

Instead of talking about “strike targets,” for example, the UAW’s president, Bob King, has been more likely, lately, to speak of “creative problem-solving.”

The symbolism was clear: This time, we are all on the same team.

The stakes are high.  What happens at the bargaining table over the next six weeks could determine the long-term viability of both the union and Detroit’s Big Three carmakers. The future of all of them was in question just two years ago when Chrysler and GM were forced into Chapter 11 bankruptcy protection, and the third domestic maker, Ford, avoiding that process only by mortgaging its assets. Although the pain was shared widely among stakeholders, workers were especially hard hit, with their union agreeing to a number of concessions that slashed all-in labor costs from around $76 an hour in 2006 to just over $50 today. The UAW reversed decades of tradition and approved a two-tier wage structure in which new hires start at roughly half the pay and benefits of more senior line workers.

UAW President Bob King said his union and the company understand that they owe it to the American taxpayers — who bailed out the Auburn Hills automaker and saved thousands of union jobs in 2009 — to prove that they have learned from their mistakes.

"We collectively feel we have a huge responsibility to the American public," he said, adding that negotiating a competitive agreement with Chrysler would lead to more job creation.

Chrysler Vice President of Employee Relations Al Iacobelli agreed.

"We have a responsibility to ensure that we do not go back to the old formulas," he said.

Both sides expressed confidence that they would soon hammer out an agreement that rewards workers for their contribution to Chrysler's recent success and protects the competitiveness gains the company has made since the last national contract was negotiated in 2007.

Holding out a carrot, Chrysler says that if the UAW keeps it competitive with the transplants—foreign-owned plants, like the Nissan assembly line in Smyrna, Tennessee, that also pay around $50 an hour—there will be even more work. The maker is looking at more than 300 projects to bring back in house work that it had, over the years, outsourced to suppliers. General Motors will be producing its new Chevrolet Sonic subcompact at a suburban Detroit plant using two-tier workers: the previous Chevy small car had been built in South Korea.

Whereas some American trade unions negotiate cross-industry contracts, the UAW has traditionally had to bargain separately with the domestic carmakers. As always, it hopes that the first agreement it reaches will set a pattern for the rest. However, the Big Three's management seem less likely to go along with that approach this time, reflecting the increasing differences between the companies.

The fragility of Detroit’s Big Three was driven home this week when, on the same day bargaining began,  Chrysler and Ford reported lower second-quarter earnings. The numbers were not dire and reflected a variety of factors such as weak spring car sales and some one-off charges. At Ford, these included the cost of scrapping its ailing Mercury brand. Chrysler, meanwhile, would have been more than $180 million in the black but for its decision to pay off its $7.5 billion in American and Canadian government loans six years early, accruing $551 million in non-recurring charges.

Sources:

The Detroit News: Chrysler, UAW contract talks kick off with show of unity

The Economist: The Bargaining Begins 

News Corp’s Missteps and Lessons Learned from Other Corporate Crises

John Bussey’s Wall Street Journal article today examines the missteps in News Corp’s still unfolding hacking crisis. In parallel, a recent Cass Business School research report – The Roads to Ruin - examines 18 high profile corporate crises. Together they provide solid cause and effect examples that underpin corporate crises.

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No company ever wants a crisis to get to this point, writes Bussey: the chief executive and his lieutenant grilled by skeptical legislators, with errors condemned, reputations impugned and the drama broadcast around the world.

For News Corp. CEO Rupert Murdoch and his son James, the hearings in London on Tuesday on the company's phone-hacking scandal were the climax of a bad couple of weeks. For the company and its shareholders, it may have been confirmation of something more troubling: for years News Corp. insisted its phone-hacking scandal was largely an isolated affair: one reporter and his investigator gone rogue, a small number of voice mails hacked.

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Cass investigated 18 high profile corporate crises of the last decade. Companies involved in these crises include AIG, Arthur Andersen, BP, Cadbury Schweppes, Coca-Cola, EADS Airbus, Enron, Firestone, Maclaren, Northern  Rock, Shell and Société Générale. Their aggregate precrisis value was over $6 trillion.

In seven cases a company involved faced bankruptcy, of which three were ‘rescued’ by Government. In 11 cases the Chairman and/or CEO lost their jobs, and in others senior executives and non-executive directors (NEDs) lost their positions. In 16 cases the companies and/or executives personally suffered financial penalties or fines, and in four cases executives received prison sentences.

Most companies - and their shareholders – suffered severe, uninsurable losses and most reputations suffered severe damage. None of the companies emerged without obvious immediate harm.

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Top managers at News Corp. responsible for managing its crisis may have believed the problem was an isolated incident, and may also have believed they had properly investigated and addressed the problem. But it turns out more rogues were involved, and many more lines were hacked—possibly thousands. Authorities in Britain are also investigating whether News Corp. employees bribed police.

Bussey quotes Andrew Brimmer, a partner at Joele Frank, a crisis-management firm: "Management should have responded more thoroughly to the issues raised by the original hacking. What happens to a crisis deferred? It typically explodes into the open at some point."

The penalty for missteps in the early phase of a corporate crisis—expense, lost reputation, distraction—can be brutally high.

Ask BP, which initially played down last year's oil spill in the Gulf of Mexico. Or Toyota, which at first dithered over public concerns about alleged sudden acceleration in its cars. Or Jack Welch, the former General Electric CEO, who was slow to see how his robust retirement package might become a public embarrassment for GE.

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Cass’ study  identified the key lessons associated with the failure to prevent each crisis and thereafter manage the consequences. The failures that gave rise to each crisis were analysed and seven key issues emerged, described in this report as the underlying risks that caused the crises:

1. Board Skill and NED Control: Risks arising from limitations on board skills and competence and on the ability of NEDs effectively to monitor and, as necessary, control the executive arm of the company
2. Board Risk Blindness: Risks from board failure to recognize and engage with risks inherent in the business, including risks to business model, reputation and ‘license to operate’, to the same degree as they engage with reward and opportunity
3. Inadequate Leadership on Ethos and Culture: Risks from a failure of board leadership and implementation on ethos and culture
4. Defective Internal Communication: Risks from the defective flow of important information within the organization, including up to board level
5. Risks from Organizational Complexity and Change: This includes risks following acquisitions
6. Risks from Incentives: This includes the effects on behavior that results from both explicit and implicit incentives
7. Risk ‘Glass Ceiling’: Risks arising from the inability of risk management and internal audit teams to report on and discuss, with both executive and nonexecutive directors, risks emanating from higher levels of their company hierarchy, including risks from ethos, behavior, strategy and perceptions.

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In News Corp's case, the rising casualty count includes: Two senior executives forced out; a newspaper closed down; a key corporate acquisition lost (for now); law-enforcement investigations in Britain and the U.S.; the energies of top managers consumed by the problem; and shareholders increasingly restive.

Experts who deal with blow-ups like this say News Corp.'s big mistake was not understanding—or ignoring—the dimensions of the problem from the outset. The time for crisis management, they say, was in the years between 2006 and 2011, when evidence of wrongdoing kept emerging, when inadequate investigations were conducted by the police and the company, and when victims kept complaining and reaching settlements with News Corp.

The advice from other experts is straight forward: This time, get to the bottom of what occurred, find out if there was a coverup, and determine if the rot was unique to the down-market News of the World or if it extends elsewhere into the News Corp. culture. Then make everything public, make amends with victims and the authorities, and demonstrate how the company will assure it never happens again.

How the company manages the next stage of the crisis will determine one of two things: Will News Corp. be able to start rebuilding its reputation? Or will the crisis worsen into a more serious attack on the leadership of the company?

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Read the full article from John Bussey in the Wall Street Journal.

Read the Cass Business School Report: Roads to Ruin - A Study of Major Risk Events, their Origins, Impact and Implications

 

Wal-Mart Women Watch and Wait

In one of the most closely watched cases on the US Supreme Court docket, the court has heard oral argument in the largest American employment class action litigation ever. Betty Dukes, representing millions of Wal-Mart female employees, filed suit in 2001 alleging that Wal-Mart engaged in a discriminatory pay and promotion practices. The women sued for backpay and an injunction requiring the company to change its practices. The class includes between 500,000 and 1.5 million current and former female employees.

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Linda Mullenix, a law professor at the University of Texas School of Law in Austin, comments on the case for the UK’s Guardian newspaper, explaining with lucidity to a non-US audience what the case is all about.

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How the justices resolve the case will have significant impact. The litigation pits millions of female employees alleging company-wide, gender-based discrimination against the country's largest retail establishment. Whether the supreme court upholds this class certification is being closely watched by not only female employees, but by corporate America, which is concerned that if the class certification is upheld, almost every large American corporation would be vulnerable to sweeping allegations of employment discrimination based on generalized theories of discriminatory corporate culture and subjective local decisions.

The class action device permits millions of allegedly injured people to "aggregate" their claims in one representative litigation. The American class action rule has been in existence since 1938, but the procedure took its modern form through a rule revision in 1966. If a court approves or certifies a class action – as the California courts did – only the individual class representatives' claims (such as Dukes's case) would be tried by a jury. In the Wal-Mart case, there are only three women who are class representatives; a court would not individually adjudicate the millions of other women's claims. In addition, the women's attorney proposed that each woman's damages could be determined through a mathematical formula, rather than by examining individual work records.

American class action litigation has always been a controversial means for pursuing group relief. Indeed, most civil law countries have historically rejected it – the UK, for example, has a very limited means for aggregating claims, known as a "group action". However, in recent years, the idea of an American-style class action has gained traction in some European countries.

Advocates in favor of class action view it as a means to empower large number of injured victims whose claims have comparatively little value. Such victims most likely would not be able to hire a lawyer, because attorneys have little interest in representing individuals with small claims. In this vein, the Wal-Mart women's attorney argued that a class action was appropriate because each woman's claim was probably worth no more than $1,100. Without a class action, millions of Wal-Mart employees would not be able to recover on their discrimination claims. In contrast, large corporations that are sued view this as a means to coerce them into enormous settlements without providing fair trials on individual claims. Several prominent American appellate courts have suggested that when a court certifies a class action to proceed to trial, this decision amounts to "settlement blackmail". Corporate defendants maintain it denies them their rights to examine, challenge and defend against the individual claims of class members.

With over 3,400 stores, Wal-Mart is America's largest private employer. Women comprise over 80% of workers and hold only one-third of managerial store management jobs. Wal-Mart has a company-wide policy that bars workplace discrimination based on sex. Notwithstanding this policy, individual Wal-Mart store managers have substantial discretion in making salary and promotion decisions in each individual store.

The women complained that they had been subjected to an array of discriminatory actions, including denial of management training, retaliation for initiating internal grievance procedures, failure to promote, harassment and denial of equal pay. The complaint alleged that Wal-Mart "fosters or facilitates gender stereotyping and discrimination … and that this discrimination is common to all women who work or have worked in Wal-Mart stores". California federal courts granted and upheld class certification, which is a green light to proceed to trial. Wal-Mart asked the Supreme Court for review, arguing that the litigation should not to go forward as a massive class action.

It is important to understand what the Supreme Court will not be deciding. It will not address whether the women employees have legitimate claims, whether Wal-Mart engaged in discrimination, or whether either side should win. Instead, the court will evaluate whether the proposed litigation satisfied the requirements to go forward as a large class action. In order for a court to permit this, the court must be satisfied that the Wal-Mart female employees share common legal or factual questions about their claims. In addition, the women's claims must be typical of all the women in the lawsuit, and they must be adequately represented.

Wal-Mart argued that lower courts' liberal application of class certification requirements was inappropriate where hundreds of thousands of individualized employment decisions were involved. Therefore, the women's claims did not share common facts and were not typical of each other. The company argued that the class action effectively denied the corporation's right to present evidence concerning how individual women were treated with regard to promotion or pay decisions. In particular, it also objected it was unfair to determine possible backpay awards based on a mathematical formula.

Women's groups, on the other hand, are concerned that the court may seize the Wal-Mart appeal as a platform for tightening class certification requirements in employment discrimination cases, thereby increasing the difficulty for female employees to seek recovery. Thus, if the court reverses class certification, the Wal-Mart case could signal a significant regression in women's rights in the workplace.

Source: The Guardian

By: Linda Mullenix, Wednesday  March 30, 2011