7. February 2020
Source: The Economist
The rules of management are being ripped up. Bosses need to adapt
On paper this is a golden age for bosses. Chief executives have vast power. The 500 people who run America’s largest listed firms hold sway over 26m staff. Profits are high and the economy is purring. The pay is fantastic: the median of those ceos pockets $13m a year. Sundar Pichai at Alphabet has just got a deal worth up to $246m by 2023. The risks are tolerable: your chances of being fired or retiring in any year are about 10%. ceos often get away with a dreadful performance. In April Ginni Rometty will stand down from ibm after eight years in which Big Blue’s shares have trailed the stockmarket by 202%. Adam Neumann got high in private jets and lost $4bn before being ousted from WeWork last year. The only big drawback is all those meetings, which eat up two‑thirds of the typical boss’s working hours.
Yet ceos say the job has got harder. Most point the finger at “disruption”, the idea that competition is more intense. But they have been saying that for years. In fact the evidence suggests that, as America’s economy has become more sclerotic, big firms have been able to count on cranking out high profits for longer. Nonetheless, bosses are right that something has changed. The nature of the job is being disrupted. In particular, ceos’ mechanism for exercising control over their vast enterprises is failing, and where and why firms operate is in flux. That has big implications for business, and for anyone climbing the corporate ladder. Read the rest of this entry »
2. November 2019
Source: The Economist
We have obtained a copy of a recent letter to a business dean
Dear Dean Whiteboard,
On behalf of the trustees of the Gordon Gekko Business School, I write with a helicopter view on our beloved institution. There is good news and bad. First, congratulations are in order. Under your leadership, GorGeBS has again been named by The Economist as one of the world’s top 100 business schools.
The bad news is that our best-of-breed status is in jeopardy because the very business model of our school faces tectonic challenges. Demand is plunging. Our mba applications are down by a quarter. Across America, applications to business schools have fallen for five years in a row. Even at Harvard, they are down this year by about 6%.
One reason is a drop in international applicants, many of whom are put off by America’s anti-immigration policies. But before you rush to blame all those law graduates staffing up government departments, the bigger factor is that we are charging too much. Our mba costs nearly twice as much as it did a decade ago, but nobody believes we are delivering twice as much value. Read the rest of this entry »
27. September 2019
Source: The Economist
It could lead to a two-tier system
“From nine till five, I have to spend my time at work,” warbled Martha and the Muffins back in 1980. “My job is very boring, I’m an office clerk.” Many of the hundreds of millions of people who trek into an office will feel as despondent at the prospect as Martha did. The office needs a revamp. But the crisis at WeWork, a trendy office-rental firm whose boss, Adam Neumann (pictured), stepped down this week after its attempt to float its shares turned into a debacle, shows that businesses are still struggling to come up with a new format.
The large office, like the factory, is an invention of the past two centuries. The factory arose because of powered machinery, which required workers to be gathered in one place. Big offices grew from the need to process lots of paperwork, and for managers to instruct clerks on what to do. But now the internet, personal computing and handheld devices mean that transactions can be dealt with on-screen and managers can instantly communicate with their workers, wherever they are. The need for staff to be in one place has been dramatically reduced.
A new model may take time to emerge—electric power was first harnessed in the 1880s but it was not until the 1920s that factories changed their layouts to make full use of it. The new model will have to balance three factors: the desire of many workers for a flexible schedule; the high cost for firms of maintaining office space; and the countervailing desire to gather skilled workers in one place, in the hope that this enhances collaboration. Read the rest of this entry »
11. August 2019
Source: The Guardian: David Runciman
Some say a second-class mind makes for a first-class leader, others that madness is an essential feature of the role. From Trump and Obama, to Blair and Boris Johnson, which personalities are born to rule?
‘The only game-changing asset Johnson has that his predecessor may have lacked is a willingness to embrace his inner Trump’
There is a story that often gets told about modern presidents and prime ministers, and sometimes gets told by them as well. The politician spends half a lifetime working tirelessly towards the top job, with the goal of making a real difference once he or she gets there. They issue their instructions. Dutiful officials nod along encouragingly. But nothing really changes. Once the door to the Oval Office or No 10 closes behind them, and they settle their feet under the desk, the new president or prime minister finds out that it’s just another room and just another desk. It feels as if true power is still somewhere out of reach.
In politics you should never assume that there is a pot of gold at the end of the rainbow. It’s better to know how little is waiting for you, like a weird inversion of the parable of The Wizard of Oz. In place of the Yellow Brick Road is the greasy pole, which has to be ascended to reach the Emerald City. Yet the successful climber finds that his or her fate is not to encounter a shrunken wizard at the end of it. Instead it is to become that person: the impostor behind the curtain.
How do politicians react when they discover themselves in that position? Some, like George W Bush, never quite acknowledge it. Others, like Tony Blair, decide to do something about it. Blair concluded that he had to build the machinery that would enable his administration to deliver on its ambitions. He called this instrument “the delivery unit”. It was designed to make sure that the levers in Downing Street were connected to the rest of government. Yet even after 10 years in power, Blair was frustrated with how little he had managed to achieve. One reason he was reluctant to leave office at the end was a nagging feeling that he was only just beginning to get the hang of it. Read the rest of this entry »
21. February 2018
Source: The Wall Street Journal
A culture that disdained bad news contributed to overoptimistic forecasts and botched strategies
Former GE Chairman and CEO Jeff Immelt
Jeffrey Immelt, the longtime boss at General Electric Co. , was a polished
presenter who held court each year at a waterfront resort off Sarasota, Fla., where industrial executives and Wall Street listened for his outlook on the conglomerate.
“This is a strong, very strong company,” Mr. Immelt said at the event last May.
On that Wednesday morning, though, he looked shaky to some people in attendance, running quickly through highlights of 27 slides in the ballroom of the Resort at Longboat Key Club. He defended his long-held 2018 profit goal, an optimistic benchmark Wall Street had long abandoned.
“It’s not crap. It’s pretty good really,” he told the room, referring to GE’s recent financial performance. “Today, when I think about where the stock is compared to what the company is, it’s a mismatch.”
It was a mismatch. On that day, GE shares were trading near $28. They would go on to collapse over the next six months while the stock market set fresh records. Today, they trade below $15. Read the rest of this entry »
23. January 2018
Source: The Wall Street Journal
Aging tech giant’s revenue finally rises, but investments expected to curb earnings growth for year ahead
Even for IBM , growth doesn’t quite solve everything.
International Business Machines reported Thursday that fourth-quarter revenue rose nearly 4% year over year. Even adjusting for a boost from favorable currency rates, Big Blue’s top line managed its first period of growth in nearly six years. Strong sales of systems hardware business along with IBM’s growing cloud-computing service contributed to the uplift.
Still, IBM’s shares fell Friday, much like they have done following 10 of its last 12 quarterly reports. A bit of growth, as it turns out, isn’t quite enough to assuage concerns about how the company gets there. Fourth-quarter gross margins slipped below the 50% line for the first time in five years for what is typically the company’s strongest seasonal period. And, while IBM did project annual revenue growth for 2018, it is unclear if the company can do that without continued help from favorable exchange rates.
Given that IBM’s stock had jumped more than 15% since its last quarterly report, some disappointment was bound to set in. The company also expects a slight drop in free cash flow in 2018 due to increased capital spending in key segments to drive future growth. IBM did manage to close 2017 with a small gain in adjusted per-share earnings of $13.80 after three years of declines. But the company also projected flat earnings for 2018, given its need to invest more in its business.
Those investments have borne some fruit. The “strategic imperatives” IBM has been so focused on for the last few years accounted for 46% of total revenue for 2017, compared to 41% the year before. While encouraging, for an overall business that has been in steady decline for the last six years, investors are now willing to take only so much on faith.