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Bill George

Harvard Business School Professor, former Medtronic CEO

Category: Politics

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: 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

 

President Obama’ Challenge to Business: “It’s Time to Invest in America”

Last August I wrote a column for the New York Times urging President Obama to make concrete moves to “invest in America.” On Monday the President went to the U.S. Chamber of Commerce – his nemesis the past two years – offering to partner with business to get the U.S. economy rolling, saying,  “Now is the time to invest in America.” He urged business leaders to work with his administration to “out-innovate, out-educate, and out-build our competitors.” The President said he would go “anywhere, anytime to help American business.”

Cynics might say that these are just words from an eloquent President. Actually, the business community hasn’t heard anything close to these words in the last two years; instead, it has been blamed for America’s ills of income disparities, corporate greed, and excessive profits.

In the past six weeks, the President has not only changed his tune, but is backing up his music with concrete actions. For example,

  • Negotiating the Recovery Act that continues the Bush tax cuts for two years;
  • Providing100% depreciation on capital investments in 2011;
  • Making R&D tax credits larger and permanent;
  • Breaking down regulatory barriers by eliminating onerous regulations;
  • Expanding exports and free trade via agreements with India, China and South Korea, and negotiating treaties with Columbia and Panama;
  • Upgrading transportation and IT infrastructures;
  • Encouraging American innovation by expanding investment in basic research;
  • Investing in training skilled workers by increasing math and science education;
  • Freezing domestic government spending;
  • Proposing to reduce corporate income taxes and eliminate loopholes.

In addition, the President has made dramatic changes in the people advising him to include more “business-friendly” faces, such as:

  • Businessman Bill Daley as chief of staff and Gene Sperling as chief economic advisor;
  • GE’s Jeff Immelt to head President’s Council on Jobs and Competitiveness
  • Steve Case, founder of AOL to head Start-Up America, designed to use public-private partnerships to stimulate new company formation;
  • Boeing’s Jim McNerney and Xerox’ Ursula Burns to co-chair export council.

These aren’t just words. They are concrete actions. Of course, we need to see results from them, but they are clearly a move in the right direction. Taken as a whole, they represent a very impressive package.

Some people are asking, “Is this just good politics, or has the President changed his beliefs about business?” I prefer to believe the President is growing in his appreciation for the private sector and its capacity to create jobs and build create successful businesses that pay taxes. He may even recognize that he was led astray by his former advisors who urged him to increase federal spending to stimulate growth and jobs. Learning that it didn’t work, the President has not only changed advisors but turned to the business community to invest to make American businesses stronger on a global scale and to create sustainable jobs.

Echoing the famous words of President John F. Kennedy’s inaugural address, the President  challenged business leaders, “Winning the future is not just about what the government can do to help you succeed. It’s about what you can do to help America succeed.”

I agree with this notion. President Obama has symbolically offered business an olive branch by going to the Chamber to make his appeal. It’s time for business to meet him (at least) halfway by investing in America to create innovative products and services, highly efficient manufacturing facilities, energy and efficiency savings, and sustainable jobs. It will be difficult for American companies to establish themselves as global leaders unless they have healthy markets here at home into which to sell.

Even if it took a “shellacking” in the mid-term elections to serve as a wake-up call, President Obama clearly understands that America needs to invest at home in order to compete with China, India and all the other rising nations to create world-class companies and to win the competitive race for jobs and investment.

Enlightened leaders will seize this opportunity as a “win-win” solution to facing global challenges. The time is now for American business to invest in America to make this country more competitive on a global scale. 

Obama 2.0: The President’s Speech

In the State of the Union address on Tuesday, President Obama has the opportunity to recapture the hearts and minds of the American people and unify the country. Will he seize the moment?

He did so brilliantly in the 2008 campaign by integrating visionary leadership with pragmatic politics. When he became president, the American people expected him to inspire us to restore America’s leadership at home and in the world.

Instead, President Obama abandoned any pretense of vision and narrowed his focus down Pennsylvania Avenue to Capitol Hill. Led by Rahm Emmanuel, his “win-lose” chief of staff, he played “inside the Beltway” politics so well he ignored the moderates and independents who elected him.

He used Democratic majorities to force through major legislation: $878 billion stimulus virtually ignoring private enterprise; health care focused on access to the exclusion of cost and quality; and financial services requiring two years of regulation writing just to define derivatives and proprietary trades.

In the process the president failed to convince the American people why these moves would help them. Mr. Obama’s visionary rhetoric of the campaign turned into “political speak” that was both confusing and uninspiring. Not understanding the benefits, people turned against his initiatives, giving Republicans an enormous opening.

Since the November election, President Obama seems like a different leader. He is listening again to a wide range of thoughtful people. He has replaced his hardball chief of staff with a mature, experienced business executive. He upgraded his chief economic adviser to a pragmatic negotiator who gets things done.

He is reaching out to chief executives and responding to their input, while dropping his antibusiness rhetoric. He is focusing on private sector jobs, domestic manufacturing and exports. He even negotiated a centrist tax package with the Republicans that will serve as a major economic stimulus.

Now he has one more task: to present a compelling vision to the American people of where America is headed and how it will regain its stature in the world.

Everyone knows he can do this better than anyone since John F. Kennedy. The question is not “can he?” but “will he?” In Arizona, at a memorial service for the victims of the Tucson shooting rampage, he seemed to regain the touch. Now he has to broaden the issues and set the course for the rest of his presidency.

What should he say on Tuesday night? Here’s the theme I would propose:

“It’s time to invest in America. For decades we have helped the rest of the world. We aren’t abandoning them, but the pressing need is to invest here at home. We must commit ourselves to building America for the 21st century. Here are seven areas for investment to become globally competitive once again.”

Health and Wellness The health reform act granted access to 25 million more Americans, but offers no concrete way to pay for their health care. The president should declare a “national health and wellness campaign” and charge Americans with taking responsibility for their health. Incentives need to be reversed to reward people for staying healthy and holding medical systems responsible for keeping people healthy.

Education The United States is rapidly deteriorating into a two-tier education system, which can only lead to greater unemployment and political rifts. Education Secretary Arne Duncan’s “race to the top” is on the right track, but we need to educate people for 21st century jobs.

Infrastructure The antiquated infrastructure in the United States will take huge investments to bring it up to world-class standards. Are we prepared to raise the bar to the levels of Europe, Japan and even China?

Jobs With 27 million Americans looking for full-time jobs, America cannot have a vibrant economy until people get back to work. This requires investments in retraining and vocational/technical education.

Manufacturing and Exports The manufacturing sector and exports are suddenly showing signs of life, led by the resurgence of the Big Three domestic automobile makers. President Obama’s new Jobs and Competitiveness Council, led by Jeffrey R. Immelt of General Electric, is an important first step. New tax incentives will spur investments in automated, high-tech manufacturing and increase exports.

Innovation Entrepreneurship and innovation are America’s competitive advantages. We need to stimulate investments in research and development, inventions, breakthrough ideas and venture capital.

New companies and small businesses New jobs come from start-ups and small businesses. We need to ease regulations to let companies build their businesses and expand hiring.

If the president begins such an “Invest in America” program and asks Americans to make sacrifices to bring this country back to global leadership, he can set off an American renewal.

It can be done. What is needed is the president’s vision on Tuesday.


 

Posted in the New York Times DealBook on Monday, January 24, 2010

The Obama 2.0 Series

I have written on the importance of investing in America as a way to rebuild the economy and create jobs, not only replace the ones that we have lost.  It is time for Obama 2.0.  Below I’ve pulled together my series on the emergence of Obama 2.0 as the President. 

 


Time to Invest in America

 

In talking with dozens of chief executives, I hear pragmatic managers focused on building their businesses and earning fair returns for shareholders, yet extremely concerned about government policy. Here are the real reasons they are not investing in America:

  1. They expect no real domestic growth for the foreseeable future. In contrast, they foresee emerging markets sustaining double-digit growth. As a chief executive at a large consumer products company told me: “Half our revenues already come from Asia; within 10 years it will be 70 percent. Naturally, we are shifting more operations there.”
  2. To compete with local companies, global companies are investing overseas in factories and sales and marketing personnel. Foreign governments like China and Singapore make investments very attractive. One chief executive noted that he chose China for his $62 million factory because local subsidies reduced his investment to only $13 million.
  3. Companies are also moving infrastructure support from the United States to lower-cost areas in Asia. Unable to obtain visas for its Indian employees, a major computer software company moved most of its software operations to India, where well-educated employees enjoy higher standards of living at one-quarter of the cost.
  4. Without domestic growth, there is no need for additional employees. Instead, companies are achieving productivity gains by running lean. Mounting costs of doing business and increased benefit costs have created so much uncertainty that chief executives are reluctant to hire, especially small business owners.
  5. Chief executives feel they have access in Washington, but limited influence. Without any business people in the Obama administration, there are no advocates for sound business policies. A successful commercial banker described how open the president appeared to his concerns, yet the next day — without any consultation — the administration announced a new $50 billion bank tax.

Ask yourself: if you were faced with these conditions, would you be investing in America and hiring more people? Unless the climate in Washington changes dramatically, this no-growth, no-jobs environment will continue indefinitely.


 

It’s Time for Obama 2.0

In Obama 1.0, the president stabilized the economy with government spending that minimized job losses and personal bankruptcies. But the economy has stagnated as these policies have been ineffective in stimulating private sector growth, jobs and innovation. Relying on monetary policies and deficits to drive consumer spending is not working, because the economy is experiencing fundamental structural changes that are impervious to these macroeconomic approaches. That’s why there are 26 million people — 16.5 percent of the workforce — who would like to be working full time but are not.

Now is the time to introduce Obama 2.0 by initiating pro-growth economic policies that will invigorate job growth. This means investing in America to unlock the $2 trillion currently in corporate coffers and to stimulate private-sector hiring. Mr. Obama also needs to make fundamental changes in relationships with the business community, overcoming the distrust that has developed on both sides.

The president’s Labor Day proposals were encouraging. He offered a 100 percent deduction for capital investment until the end of 2011, an increase in research and development tax credits that would make them permanent, and an additional $50 billion in infrastructure spending. All three initiatives suggest Mr. Obama is finally moving away from trying to cure the economy’s ills with deficit-fueled government spending and beginning to enact policies that foster private-sector investment and job creation.

 


What He Should Say at the State of the Union

 

Health and Wellness The health reform act granted access to 25 million more Americans, but offers no concrete way to pay for their health care. The president should declare a “national health and wellness campaign” and charge Americans with taking responsibility for their health. Incentives need to be reversed to reward people for staying healthy and holding medical systems responsible for keeping people healthy.

Education The United States is rapidly deteriorating into a two-tier education system, which can only lead to greater unemployment and political rifts. Education Secretary Arne Duncan’s “race to the top” is on the right track, but we need to educate people for 21st century jobs.

Infrastructure The antiquated infrastructure in the United States will take huge investments to bring it up to world-class standards. Are we prepared to raise the bar to the levels of Europe, Japan and even China?

Jobs With 27 million Americans looking for full-time jobs, America cannot have a vibrant economy until people get back to work. This requires investments in retraining and vocational/technical education.

Manufacturing and Exports The manufacturing sector and exports are suddenly showing signs of life, led by the resurgence of the Big Three domestic automobile makers. President Obama’s new Jobs and Competitiveness Council, led by Jeffrey R. Immelt of General Electric, is an important first step. New tax incentives will spur investments in automated, high-tech manufacturing and increase exports.

Innovation Entrepreneurship and innovation are America’s competitive advantages. We need to stimulate investments in research and development, inventions, breakthrough ideas and venture capital.

New companies and small businesses New jobs come from start-ups and small businesses. We need to ease regulations to let companies build their businesses and expand hiring.

If the president begins such an “Invest in America” program and asks Americans to make sacrifices to bring this country back to global leadership, he can set off an American renewal.

What the President Should Say Tomorrow Night

Tomorrow night the President addresses the nation.  He’s made great strides to rebuild relationships with business leaders over the last four months, but now it is time to reconnect with the American people.  He must address the big issues facing our country:  

  • Health care reform 

  • Education 

  • Infrastructure 

  • Jobs 

  • Manufacturing and Exports 

  • Innovation 

  • New companies and small businesses 

I continue the conversation on what the President should say on the New York Times DealBook.

Politics Trumps Sound Fiscal Policy (Again)

Yesterday’s “compromise” between Republicans and the President proves an old adage: political giveaways always trump sound fiscal policy. Or stated another way, it’s easier to agree to increase the deficit $4 trillion over the next ten years than it is to reduce it that amount.

What a difference a weekend can make. Just last Friday the 18-member Deficit Reduction Commission, appointed by President Obama and led by former Republican Senator Alan Simpson and former Clinton chief of staff Erskine Bowles, voted 11-7 to pass a package of deficit reduction items totaling $4 trillion over the next decade. That would have helped the United States get out of the financial ditch we’re in right now and back on the road to fiscal responsibility.  Unfortunately, the seven “nay” votes, six of which came from politicians, keeps the majority from forcing a vote on this package in Congress. Now it goes to the White House for “review.”

One would have hoped this moderate set of fiscal policy initiatives, backed by a bipartisan majority, would have given the President the courage to recommend adoption by Congress. Quite the contrary. Republican leaders, who historically represented the party of balanced budgets and fiscal stability, instead negotiated with the President increase the ten-year deficit by $4 trillion by extending the Bush-era tax cuts. Granted, this is a “temporary” extension for two years, but who believes in the heat of the 2012 Presidential elections that sixty senators and a majority in the House will vote to kill further extensions. Don’t bet your Medicare on it!

For the mathematically inclined, that’s an increase of $8 trillion in the deficit in just three days. As they say, not bad for a weekend of work.

There is no doubt that today’s American voters favor unlimited tax cuts and unlimited government spending for their retirement and their health care. Instant gratification rules over long-term plans.

The consequence? This generation will pass on an impossible financial situation to the next two generations, which inevitably means their standard of living will decline. Just paying interest on our national debt will absorb the bulk of taxes Americans pay.

To their credit, Bowles and Simpson along with their fellow commissioners tackled the deficit head on.  Esteemed for their independence, they took on a task that nobody in Washington will touch: telling the truth to the American people.  They recommended raising the Social Security age, reducing the number of federal workers, dramatically cutting defense spending, eliminating many tax deductions, and reforming both personal and corporate income tax rates. All sound ideas, mostly containing some short-term pain for long-term gain.

Congress is broken.  An incumbency bias, an increasingly polarized media, and hyper-partisan political parties are destroying the last shreds of civility – and replacing it with an angry, ineffective politics that fans the flames of anger and hostility throughout the country. Thus, our political leaders are contributing to the tendency of Americans to think they are entitled to instant gratification and can blame someone else for their troubles.

Starting in January, the U.S. government will officially have split government. The President and the new Congress face problems of extraordinary magnitude.  Senate Budget Committee Chairman Kent Conrad affirms that the United States borrows 40 cents of every dollar it spends, and the federal budget deficit equaled 8.9% of Gross Domestic Product for the fiscal year ending September 30. 

There is much talk of the problem, but little serious dialogue about how Republicans and Democrats might work together to solve it. Instead, both sides sound like they prefer “gridlock” for the next two years. If President Obama is re-elected in 2012 and the Republicans take the majority in the Senate, gridlock could last for six years.

This country can ill afford gridlock and economic malaise while the deficits continue to grow. Meanwhile, other nations like China, India, Germany, Brazil, Singapore, and even the United Kingdom are moving ahead rapidly to become more competitive in world markets.

In the end, a nation’s strength comes more from its economic strength than its military might. On that score at least, we are steadily losing the battle for global competitiveness as our standard of living is forced to decline.

The real problem is elected leaders looking for short-term solutions – quick fixes, if you will – to long-term, intractable problems. Our problems of fiscal stability, job creation, economic strength, and education can only be solved with long-term solutions that require unified action. 

Politicians who place narrow self-interests ahead of the long-term best interests of the nation imperil our future. It is time for our elected leaders, Democrats and Republicans alike, to treat the American people like adults and tell us the truth about the near-term sacrifices we must make if the country is to regain its economic might and national pride. 

Let’s get on with solving long-term problems with long-term solutions. It is the only way to catapult the U.S. back into global leadership.

Reflections On The Midterm Elections

Last night I discussed the impact that the midterm elections would have on the economy, health care, and jobs on CNBC.  It was a lively discussion and one I wanted to be sure to share with you.  

– Bill