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Leadership Kudos and Gaffes: Schultz leading globally and domestically, Boehner's leadership relying on chaos

Leadership Kudos this week go to Howard Schultz, founder and CEO of Starbucks,for his courageous restoration of Starbucks to a pioneering coffee house, nowexpanding around the world under Schultz's leadership. When Schultz returned as CEOin early 2008, most observers were predicting that the Starbucks mystique was waning and its growth was doomed. Schultz jumped in and addressed the problems head on, even closing all stores for a day to get his employees retrained on customer focus. Since then, Starbucks' revenues have grown in double digits, earnings have tripled, andfrom its low point in the fall of 2008, Starbucks stock has quintupled. Who says founders can't successfully go back home?

Leadership Gaffes go to House Speaker John Boehner for explaining Republicans hard line on the debt ceiling on talk radio, "A lot of them believe enough chaos would make opponents yield." He and his fellow Republicans were certainly successful in causing chaos and contributing to the historic downgrade of the U.S. credit rating from AAA to AA+. But the deeper issue here is that Boehner sees everything as a win-lose contest between parties and isn't focused on the country's pressing problems: jobs, growth, and deficit reduction. With 25 million Americans unable to find full-time jobs, don't we have enough chaos?

The CEO Playbook for this Crisis

CEOs of multinational corporations are in a stronger position than three years ago.  Balance sheets are strong, and productivity has increased.  This crisis presents an opportunity to go on the offensive for CEOs who are in a position of strength.  Here's the playbook I'd run:

  1. Reassure everyone that your company is in great shape.  CEOs needs to maximize their visibility to ensure employees, supplier, customers, and community that their strategy is intact.  Write an email, go on TV, post a series of Tweets, and show up to let the troops know that the company's strategy makes sense -- particularly in this tumultuous economy.  
  2. Buy your stock back.  Your stock is likely cheaper than it has been all year.  Buying back your stock puts excess cash on the balance sheet to work, it shows the market how you really feel about your growth prospects, and it oftentimes provides a floor for your stock.  
  3. Expand in emerging markets.  There is growth abroad -- and not just in China.  The current financial panic will likely accelerate the rise of new markets.  Every CEO should be doing a quarterly global review of marketshare and growth.  Now is the time to double down on bets that are playing out well in Asia, Latin America, and the Middle East.  
  4. Initiate cost savings and productivity improvements.  The best CEOs are always looking for efficiency increases alongside revenue growth.  Even if that means trimming up employment in the US, companies must be lean and agile to sail through roiling seas.  Growth isn't coming to the USA anytime soon, so CEOs must have an appropriate cost structure.
  5. Do cash acquisitions.  This is an opportunity to put cash to work.  As competitors' stock prices decline, look for opportunities to acquires businesses or assets in cash.  Inflation seems almost certain in mid-term.  Your cash may be the most valuable in this window that it's ever been.

This is a great time to get out from behind the desk, get into the market -- both telling your story and seeking new opportunities.  Great leaders and great companies find opportunity in times of crisis.  

Leadership Kudos and Gaffes: Addressing both sides of S&P's downgrade

Leadership Kudos this week go to John Chambers, head of Standard and Poor’s (S&P) for having the courage to stand up to pressure from Treasury Secretary Geithner and federal politicians and downgrade U.S. debt from AAA to AA+. Even after adjusting for a calculating error, S&P concluded that the U.S. debt situation warranted the downgrade because the country was not facing fiscal reality. “The gulf between the political parties,” S&P said, “had reduced confidence in the government’s ability to manage its finances.” China, the nation’s largest creditor with $3 trillion in foreign exchange reserves, said ominously, The U.S. needed to “cure its addiction to debts” and “live within its means,” raising the specter of creating a global reserve currency to replace the U.S. dollar.

Leadership Gaffes go to all the administration officials and political leaders, Democrats and Republicans alike, who ignored S&P’s warnings in early July, and continued to put their political ideology and angling for political advantage over the needs of their country. Their wishful thinking brings to mind the infamous words of Vice President Dick Cheney, who said, “We have proved deficits don’t matter.” All of them failed to heed the first rule of crisis management, “Face reality, starting with yourself.” Deficits do matter, and unless U.S. leaders bring finances in line, the country will be faced with a decade of Japanese-style malaise. 

Debt-Ceiling Agreement: No Cause for Celebration

This week’s agreement to increase the U.S. debt ceiling is no cause for celebration.

Regardless of what the spin doctors tell us, there are no winners here. The political landscape is covered with the blood of all the politicians who were losers in this “no win” battle. Among the losers are:

  • The President, who lost the leadership on U.S. deficits last December when he ignored the thoughtful recommendations of the bipartisan Bowles-Simpson Commission, leaving deficit reduction up to the politicians in Congress.
  • The Republican Party, which let itself be dominated by Tea Party extremists, ignoring the wishes of the majority of Americans, walking away from a sound agreement and demonstrating its willingness to let the country sink for political gain.
  • The Democratic Party, which has rigidified into the party of more spending and higher taxes while ignoring the country’s mounting deficits. It even undermined its President as he attempted to negotiate an agreement with House Speaker John Boehner.
  • The United States, which has lost credibility in the eyes of the world as a constructive democracy and sound fiscal system which other countries can look to for leadership of the global economy.

The last minute agreement to avoid an historic default did not solve anything. It merely postponed the disagreements and set up yet another committee to resolve these complex issues.

“Gridlock” has become the new order of U.S. politics. Politics as the art of compromise has been abandoned by the current group of politicians who are willing to jettison the country’s best interests in order to gain short-term political advantage.

This is the third time since the November elections that the country has been traumatized by political deadlock:

  • In a single weekend last December, shortly after the Bowles-Simpson Commission proposed a bi-partisan $4 trillion deficit reduction plan, the President and Congressional leadership went in the opposite direction.  They lowered taxes and increased government spending by a combined $4 trillion, intensifying  the problems that lay ahead. 
  • In April, unable to agree on a budget for this fiscal year, the politicians once again took the country to the brink of shutting down the government. The midnight agreement involved more compromises that kept the country running on an empty tank.
  • For the past month the country has been paralyzed by the artificially-created debt ceiling duel. While mounting deficits are a growing concern, the politicians on both sides of the aisle were far less concerned about reducing them than they were in gaining political advantage through an historic game of “chicken.”

The biggest loser in all this is the United States and its citizens. Why? Because we are losing confidence in our elected leaders to put the interests of the country ahead of their political ideology and to reach sound agreements that enable the country to grow and produce jobs while putting the country on a sound fiscal footing.

Meanwhile, this debt ceiling tug of war distracted our leaders from the real issue: the sagging U.S. economy and jobs crisis. The U.S. continues to slip into a “no growth, no jobs” malaise, as recent GDP growth figures prove and twenty-six million Americans (16.2% of the work force) are unable to find full-time jobs. Until people get back to work and the economy starts growing, we will just continue to fight over a shrinking pie, as deficits continue to mount. The only solution to this dilemma is to get the private sector growing once again in the U.S.

However, the CEOs of companies, both large and small, that I have talked to in recent weeks are completely fed up by the political struggles in Washington.  They are turned off and tuned out. They want to have no part of the debate, unless they feel that they have to weigh in to protect their best interests.

These CEOs are pragmatists, not political idealists. In the absence of domestic growth opportunities, they are looking overseas where great growth potential exists. Meanwhile, they are shedding U.S. jobs in favor of productivity gains, which are substantial. Privately, they don’t believe that the President or either party in Congress is committed to building the private sector and removing the myriad barriers that are preventing growth in the U.S.

How can this dilemma be resolved? By presidential leadership, in which President Obama puts himself and his re-election on the line by taking a series of actions to restore private sector jobs and growth while cutting the deficits. President Obama is an extremely smart, savvy leader who knows what to do. Now he must take the political risk to do it because the risks to the country of inaction are far greater.

Leadership Kudos and Gaffes: Automakers lead on upping standards, while politicians distract the public

Leadership Kudos this week go the CEOs of U.S. automakers, Alan Mulally of Ford, Dan Ackerson of GMand Sergio Marchionne for their leadership in enthusiastically agreeing to automobile fuel economy standards that will increase to 54 miles per gallon by 2025. This represents a 50 percent cut in greenhouse gases and a 40 percent reduction in fuel consumption compared with today’s averages. For the next decade or more, using energy efficiently is the best new source of energy.

Leadership Gaffes go to all the politicians who distracted the country with a confidence-shattering debate on raising the debt ceiling – an artificially- egrocreated limit – instead of focusing on the growth and job creation the country so desperately needs. No matter how the politicians spin the agreement, there are no winners here, and a lot of losers, including the faith in our country’s fiscal stability.

Leadership Kudos and Gaffes: Leader of a Model American Company

Leadership Kudos this week go to Caterpillar and its CEO Doug Oberhelman. Caterpillar is rapidly becoming a role model American company, showing how American companies can compete globally. With its Midwest roots and values, heavy manufacturing in the U.S. and steady long-term investments, CAT has become a global leader in its field, with large exports to Asia, Europe and the rest of the world. In its most recent quarter CAT's global revenues were up 37% and its earnings up 44%, as the company has added 6,000 American workers. More companies should follow CAT's lead.

Leadership Gaffes go to Republican Tea Party and Democratic liberal Congressmen for blocking deals negotiated by President Obama and Speaker Boehner to solve the articifically-created debt ceiling crisis. These politicians continue to put the country at risk as they maneuver for selfish political advantage.

Leadership Kudos and Gaffes: Leading and supporting a team, while the other is burying his mistakes

Leadership Kudos this week go to Sheryl Sandberg, Facebook’s chief operating officer. While founder Mark Zuckerberg gets the media attention, it is Sandberg whois steadily building Facebook into a great growth company. Her steady hand on thewheel is driving a well-oiled machine that continues to take on broader challengesand strengthen its management talent. Watching the P&L as well as numbers ofparticipants, Sandberg is the driving force behind Facebook’s growing market value,estimated by some as high as $100 billion.


Leadership Gaffes go to News Corporation’s founder and CEO, Rupert Murdoch.  Who else? Murdoch has aggressively built his media empire by taking over newspapers and television stations and turning them into mouthpieces for his political goals. Now his tactics, many of them unethical and even illegal, have caught up with him. He can fire Rebekah Brooks and Les Hinton (or “bury his mistakes,” as he likes to say), but the buck stops with him. His scandal threatens even the British political establishment. Is it time for him to accept responsibility and step down?

Kudos and Gaffes: Remembering a quiet leader and continued failed leadership on the economic recovery

Leadership Kudos go to former First Lady Betty Ford, who passed away this week at age 93. A quiet leader, Ford showed remarkable courage in publicly acknowledging her chemical dependency and later establishing the Betty Ford Center for treatment of people suffering from alcohol and drug dependency. After she was diagnosed with breast cancer, Ford urged other women to seek treatment for their cancer. Throughout her long lifetime Ford proved that public leaders can retain their graciousness and humility while serving millions of people.

Leadership Gaffes go to U.S. economists who have wrongly predicted since early 2009 that jobs would recover and unemployment would decline sharply. Last month’s unemployment numbers – in contrast to forecasts of virtually every economic forecast – finally made it clear that the current U.S. economic improvement is tepid at best and is proving to be a jobless recovery. With 26 million Americans unable to find full-time jobs, the time is long overdue for new approaches for jobs creation.

Leadership Kudos and Gaffes: Dean Nohria is making transformative changes while the MN politicians fail to act

Leadership Kudos this week go to Harvard Business School Dean Nitin Nohria. After only one year in office, Nohria is making transformative changes at  HBS to make its mission of “educating leaders who make a difference in the world” a reality. He has launched major changes in the MBA program to give students more leadership opportunities, global immersion in companies, and entrepreneurship, all in a new year-long course called FIELD. He is focusing on the role of business in society and the regaining of trust in business leaders with emphasis on values and ethics. Already more students are going into manufacturing and services, and a higher proportion of women have been admitted than ever before. His visionary leadership is putting HBS on a very positive course for the future.

Leadership Gaffes are awarded to Minnesota politicians for their failure to reach agreement on a balanced budget, thus shutting down state government, just in time for the 4th of July weekend. All state parks and museums and the Minnesota Zoo are  closed for the holidays. Those concerns didn’t keep the politicians from declaring their own five-day holiday, presumably they can spend it in neighboring Wisconsin where budgets are balanced and parks are operating. This is not good news for former Governor Tim Pawlenty, who left his successor a $5 billion deficit so he can run for President as a fiscal conservative.

Obama’s Choice on Jobs: Politics or Policy

President Obama held his second meeting with his new Jobs and Competitiveness Council earlier this month at an electronics plant in North Carolina. With job growth stagnant and the nation’s underemployment stuck at 16 percent — that’s 25 million Americans — the meeting represented an ideal opportunity for the president to develop a list of sound ideas he could put into action.

It didn’t happen. Instead, the meeting turned into a campaign “photo op” in a swing state Mr. Obama carried in 2008. The A-list of leaders who run General Electric, American Express, DuPont, Facebook, Xerox and Procter & Gamble was impressive. The ideas coming from the meeting were not. The group produced only a tepid list of quick-fix ideas rather than fundamental solutions to put jobs on a solid growth trajectory.

Instead of boarding Air Force One for Florida fund-raisers after the meeting, Mr. Obama should have boarded Amtrak for South Carolina. Boeing’s chief executive, W. James McNerney Jr., who heads up the president’s Exports Council, would have gladly given him a tour of Boeing’s new aircraft factory that will manufacture its the flagship 787 Dreamliner. Boeing has billions of dollars in aircraft orders for export and has spent $1 billion in constructing the plant and hired the first 1,000 workers. Thousands have applied for the remaining 5,000 jobs.

But there is a problem: Mr. Obama’s National Labor Relations Board has sued Boeing to stop production for locating in a right-to-work union state. The issues are being contended in a Seattle court, where Boeing has recently hired an additional 2,000 unionized employees. Years of appeals lie ahead.

While in South Carolina, the president could have also stopped by BMW’s and Mercedes’s highly successful automobile plants. The irony here is obvious: German companies are permitted to produce in a right-to-work state, but not American companies.

These two situations typify why the nation’s jobless rate is stuck at a perilously high level, one that will threaten Mr. Obama’s 2012 re-election bid. Neither photo opportunities nor empty pronouncements can shroud the ugliness of the present economic malaise or the magnitude of the crisis this country now faces.

Two years ago, I wrote that the president is like the Roman god Janus, with two heads facing in opposite directions, as Mr. Obama the politician pulls against Mr. Obama the leader. Since 2009, Mr. Obama the politician has prevailed, but time is running out for Mr. Obama the leader to implement policies that restore America’s economic competitiveness.

First-hand reports from chief executives who have met with the president indicate that he listens hard and seems to understand the deeper problems, but fails to take action. Or stated more clearly, he takes only politically expedient actions.

These leaders are pragmatists. With the American economy growing at less than 2 percent and emerging markets at 10 percent, they are focusing on overseas sales — and jobs are following. If you were a chief executive with responsibility for tens of thousands of employees, would you do anything different?

In addition to stagnant domestic growth, these chief executives cite several limitations that keep them from investing at home: political gridlock in Washington, the unpredictable regulatory environment, excessive corporate tax rates and uncertainty over health care and financial regulation.

To get the American economy growing again, a multifaceted plan is required to address these issues:

1. Resolve the budget gridlock with a solid deficit reduction plan rather than letting the debt ceiling imperil the nation’s solvency.

2. Reduce regulations that suffocate jobs. Why let politicians block the remarkable shale gas discoveries that would reduce pollution and help balance the nation’s energy supplies? Why is the Food and Drug Administration holding up so many life-saving drugs and devices? According to California Healthcare Institute, clearances for devices are down 43 percent and approval times have lengthened by 75 percent.

3. Lower basic rates to make corporate tax rates competitive with other nations, while eliminating corporate deductions to yield a more equitable tax system. To incentivize companies to bring back the $1 trillion trapped overseas, reduce repatriation tax rates to 15 percent from 35 percent, if the money is invested in physical assets in the United States.

4. Clarify lingering uncertainty created by the health care and financial services laws. The buck now rests, or stagnates, in the regulatory agencies. Meanwhile, small businesses cannot get loans and will not hire workers without knowing the cost of their health care. Furthermore, Medicare is on course toward bankruptcy. The McKinsey Quarterly reports that 30 percent of employers will plan to stop offering employer-sponsored insurance in the years after 2014. The Obama administration must reach agreement on practical rules to enable these vital sectors to move forward.

Instead of addressing these problems with policies that would solve them but might cause some political pain, President Obama continues to put politics over policy. The nation continues to suffer.

 


Originially posted in the New York Times Dealbook on June 27, 2011