LEADERSHIP INSIGHTS FROM A C-SUITE VETERAN

G. A. Finch interviews Ronald E. Daly, a former President & CEO of Oce USA Holdings, former President of Donnelley Print Solutions, and a member of corporate boards of directors of US Cellular and SuperValu.

Ronald E.  Daly

Ronald E. Daly

FINCH: For our readers’ context and benefit, you and I have had opportunities to discuss leadership values and insights from our being alums of Leadership Greater Chicago Fellowship program and our both advising Cook County Board President Toni Preckwinkle on policy matters as members of her kitchen cabinet. In these two fora, we have had an opportunity to discuss leadership issues in-depth. One of the things that I learned from you was the concept of initiating radical change to save or right an organization and you have referred to the “burning platform” change strategy that forward business thought leaders have utilized. As you first recounted and as I have since researched its genesis, the “burning platform” metaphor comes from an oil rig worker having to decide to either stay on a burning oil rig and definitely die, or jump into the freezing, flaming-detritus-filled ocean and have a very high likelihood of dying. Either prospect carried a catastrophic risk, but the jump had the slight possibility of prolonged survival.

Oil Rig Explosion

Oil Rig Explosion

This metaphor has been used to capsulize a leader’s dilemma of effecting radical change for the benefit of the business or organization. I know you are a fan of John Kotter’s Change Model. Kotter’s recommendation to create a sense of urgency concerning the necessity of change is akin to the burning platform impetus for radical change. What do you find compelling in Kotter’s change model and why?

DALY: I like Kotter because he is very upfront about the difficulty of achieving transformational change. He advocates a process for attacking any change initiative. He then goes ahead and provides a process. When implementing change there will be forces that stand in the way of success. The major force will be people who object because of fear, comfort with the status quo, or a belief that this, like all prior initiatives, will pass. To get the ball rolling you have to illustrate why your changed state is better than the status quo or that the current state is unsustainable. This is why you start with the burning platform. By the way I like your explanation of the burning platform better than the one I have been using.

FINCH: Have you had to confront your own mega or mini version of burning platforms in organizations in which you played a leadership role and what did you do to effect change?

DALY: Absolutely. I push Kotter as a method to use because I have had success with it. I spent most of my career in the printing business at R R Donnelley. The year I became president of the Telecom Group (1995), my group, like the rest of Donnelley was faced with increasing competition, unstable commodity prices, rapidly changing technology and customers aggressively seeking lower prices. I had an additional hurdle. Our board of directors had decided that Telecom was the most likely business to expand internationally. My boss let me know that I was expected to achieve this expansion without degrading profits from my US business. To finance international growth I had to find a way to make more profit.

From a cultural standpoint Donnelley had a huge problem stemming from internal competition. For a very long time Donnelley had no external competition of our size and scale. The leaders of the business had set up internal competition between printing plants. The objective was to beat the other plants in efficiency so that your operation would be the best place for the sales force to bring sold work. CompetitionthThis competition led to open hostility inside and a lack of attention to what outside competition was doing. Plants were very adept at using different accounting methods to measure throughput so comparisons were difficult. Sharing best practices was a no-no. This had to change.

Over the next five years we were able to implement a new business model. We moved from the focus on being the low-cost provider. This model had us lower costs so we could compete with lower prices. We moved to a model of customer intimacy. This model steered us toward being a solutions provider. In doing so we had to learn so much about our customers that we probably knew more about them than they knew about themselves. In achieving this we became the industry thought leader. We used our knowledge and technology from other Donnelley printing markets to bring new revenue generating products to our customers. Becoming a part of our customer’s revenue equation took pressure off prices we were paid as we got a premium over competition.

On the cost side we shed the ideas that printing was a craft and not a science. Over the next five years we instituted statistical process control, multi variable testing, six sigma and 5S. We saw efficiency improve greatly and quality take huge leaps forward. We put in processes to stabilize our earnings. We developed a common dictionary and implemented activity-based costing that made comparisons and sharing easier.

Business ChartWe used quarterly business reviews, monthly conference calls and yearly leadership conferences to work the communications and cultural side of this change effort. We did lots of round tables to bring employees into the loop. We used a process called OGSM to cascade high-level objectives to the lowest levels of the organization so that every employee knew their role in achieving our goal.

The market knowledge we had allowed us to become intimate with international publishers thirsty for ideas to grow their businesses. We were not a threat as were U S publishers trying to take market share from them. We helped them and we signed contracts to print for them. Being the low price supplier wasn’t what they wanted from us.

Over my seven years in Telecom, we became the most profitable of all the Donnelley printing businesses, we more than doubled the size of the business globally, we were the most efficient directory printer in the world and we were the market leader on four continents. Kotter’s model was instrumental in achieving this.

FINCH: What three things would you advise a brand new CEO beginning his tenure at a different company?

DALY:

1. Do your best to understand the culture. Culture eats strategy for lunch. That doesn’t mean you shouldn’t pursue your strategy but you need to understand the cultural hurdles you face. Then use Kotter.

2. Do a thorough assessment of your management team. You cannot achieve your goals without the proper support and talent.

3. Realize that saying something doesn’t make it so. Too many leaders issue an edict and expect people to fall in line. They don’t, so you must be prepared to be a driver in achieving your goals.Bossth

FINCH: What challenges are different for CEOs in 2014 that were not present ten or even five years ago?

DALY: The concept of maximum shareholder value and activist shareholders are more brutal today than ten years ago. International competition continues to intensify. A problem that concerns me most is the inability of our educational systems to produce adequate human capital to fill the jobs of the future.

FINCH: If you could go back in time to visit your 25-year old self, what one piece of career advice would you give?

DALY: I have been pretty consistent in saying that if you expect your company to invest in you; you must be willing to invest in yourself. I spent eight of ten years in the 1970’s going to night school to achieve an AA, BA and MBA. This helped me move from the factory floor to the executive suite.

If I were to give a second piece of advice it would be, “if you want to influence a culture, you must be a part of that culture.”

FINCH: Do you think American graduate business schools are sufficiently training students to be effective and innovative executives and leaders? What could B-schools be doing better?

DALY: I do not. We do a great job of preparing them to do a job but not necessarily to think. I think more focus on subjects outside of the major would be beneficial for students to have a larger worldview. I would like to see more focus on critical thinking embedded in course work along with more research work and written exams.

FINCH: You have been President and/or CEO of companies and on the boards of directors of two major companies. Are personal relationships and executive search firms the only paths to a corporate board directorship? If so, what can be done to broaden the pool of qualified candidates who are not the “usual suspects” coming from a certain background or gender.Board RoomthCAUQCDTM

DALY: You have nailed it. Boards still rely on relationships and search firms. Too many boards simply look to the usual suspects to find the person to fill the next opening. As much as there is talk about diversity, boards still look for people who look like the ones they have. These new ads may be female or minority but they are very much like the existing members or they won’t be chosen. An alternative place to look may be organizations like Leadership Greater Chicago. This would require a change in focus for LGC however.

FINCH: Finally, when you were a CEO and as a member of corporate boards of directors, what have you observed to be the best way to identify and develop executive talent within an organization?

DALY: The best way is to have a process that evaluates internal talent. The results of this process must be on the radar for every top executive and should be reviewed by the board at least annually. The process should provide development plans for those leaders that are viewed as having upward potential. Development plans should exist for those who are not on a fast track but are deemed essential to managing the enterprise. Finally those who are not deemed essential, nor on a fast track should be given improvement programs. If no improvement, then they should be removed from the organization. Evaluations should be calibrated so a high potential is really of high potential and not listed as such because of an easy rating boss or a personal relationship.

Copyright © 2014 by G. A. Finch. All rights reserved.

OBSERVATIONS OF A HEADHUNTER: G. A. FINCH INTERVIEWS EXECUTIVE RECRUITER THOMAS HAZLETT

Copyright © 2010 by G. A. Finch. All rights reserved.

Hazlett Associates  through its principal, Tom Hazlett, has provided search consulting services on a national basis to a number of Fortune 500 companies as well as smaller, privately held firms across a wide range of industries, with an emphasis on consumer products and business to business direct marketing companies, agencies and financial services organizations.   Assignments have included senior and upper mid-level positions.

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FINCH:

Tom, you’ve been in the high-level executive search consulting game for close to two decades now.  2008 and 2009 were tumultuous years for our economy.  How has the recent recession affected job turnover in senior executive suites?

HAZLETT:

In this recession, as in past ones, normal executive job turnover has been seriously disrupted.  During a contraction, many companies restructure and consolidate their organizations—either voluntarily or involuntarily–to survive; other companies go under or are acquired.  This leads to considerable one-way turnover and the well-documented unemployment figures, across all levels of management.  Remaining executives tend to hunker down and remain in place to ride out the storm.  Employed senior executives are less receptive to potential career moves unless there is a great degree of familiarity with the situation, the board and/or the hiring manager.  The severity and breadth of this downturn clearly have magnified the situation.

FINCH:

Will we see more or fewer executive searches in 2010?

HAZLETT:

We should see more searches in the coming year.  The paralysis and fear of a year ago have morphed into an uneasy uncertainty about what the new “normal” will be going forward—but with the understanding that it must be addressed.  The draconian cuts made by many corporations and service organizations have led to the realization that replenishing the ranks will be necessary to begin growing again.  The past year has also uncovered weak performing executives needing replacement.

FINCH:

Because of the bonus controversies in the financial industry, think Merrill Lynch and AIG, are you seeing different allocations of salary versus bonus in compensation packages?

HAZLETT:

Performance based compensation still appears to be preferred by both hiring entities and strong executive candidates.  Companies are less willing to offer large guaranteed salaries or huge signing bonuses.  Performance bonus targets are being refined and more carefully calibrated.  Clearly more rationality has taken hold (on both sides) in compensation negotiations.

FINCH:

Is compensation in the form of stock or equity becoming more or less prevalent in the current employment market?

HAZLETT:

Cash is king.  The equity craze has abated, at least for the foreseeable future.

FINCH:

Wall Street, like Washington, can be insular and sometimes obtuse and may not have a real handle on how its actions and behavior are being perceived by Main Street.  Do you think corporate America has failed to explain to and educate Joe Six-Pack as to why senior executives are so well compensated?

HAZLETT:

The short answer is corporations have not explained compensation issues because they have not been pressed to do so. The extraordinary income numbers coming out of  Wall Street have become grist for the populist mill.  These figures seem to be setting off alarms in the boardrooms of public corporations.  Typically, senior executive compensation is buried in the pages of 10-K statements.  When times are good, revelations about upper level pay are generally greeted with envy or mild consternation.  When times are bad, and many are hurting financially, seeming inequities are magnified in the minds of many.  Whether or not more transparency will occur, likely will depend on the attention span of the public, the politicians and the media.

 

FINCH:

Because some corporate reform activists see generous severance packages for senior executives as “failure pay,” are severance payment provisions in employment contracts getting harder to negotiate and obtain?

HAZLETT:

Board Directors, especially those on Compensation Committees, have become more aware of their legal fiduciary responsibilities in overseeing the compensation packages of senior executives.  This has led to more scrutiny and conservatism in negotiating all aspects of employment contracts, including severance agreements.  That said, the ability to attract a crucial executive away from his or her current job, may require the offer of a substantial “safety net” in the event of change of control or other trigger events.

FINCH:

As your parting advice, what are the three most important tips you would give to an executive recruitment candidate for the candidate to successfully navigate an executive search process?

HAZLETT:

  1. Be completely honest in every aspect of your endeavors, from resume facts, dates, compensation, degrees, etc. to answering interview questions.  You must assume that everything will be checked—because it will.
  2. Do your homework—before and during the process.  Not enough due diligence about the company’s situation, prospects and agenda,            and   honest self-appraisal about your role, the cultural fit, and personalities of prospective colleagues can be a recipe for serious problems.
  3. Be patient and rational during the process.  This is easier to do if you are currently employed, but necessary in any case.