Old Wine In New Bottles

I just read an article from Executive Excellence entitled, “New Wine, Old Bottles” written by Stephen R. Covey.  It started out with a good metaphor about how bad it is to put new wine in old bottles.  Covey compared that to how some CEOs do not always drop their old management style completely when they bring a new one.  The new management style is tainted and will not run the way it is intended to, the way old wine taints the new wine so you do not get the unique flavors you paid for.  Covey then tricked me when he started to write about an evidenced-based management technique called servant leadership.  So that is why I titled this post “Old Wine In New Bottles.”  No matter how you try disguising the old wine (in a new bottle) it is still the same old wine.

I have to give it to Covey though I like servant leadership.  I thought about this article for a few hours and I just do not think of it as true leadership but supervisory.  The servant leader is nothing more than a pleasant supervisor who does not hound you or your team whenever they get a chance.  Comparing it to my current position, I try to follow the same 3 steps of a servant leader: 1) forming relationships based on trust, 2) giving win-win performance appraisals, and 3) being a source of help.  In my job you need to trust one another or you both can get into trouble.  I always give win-win evaluations to keep up morale.  I am always there as a source of help.

I did however like Covey’s example of a great football coach and how the servant leaders have a lasting career for a team or university where as the other gets burnt out and jumps from team to team.  It is true that the coaches who trust their assistant coaches and coordinators will be more successful because they are more often than not on the same page.  Their trust and team depends on it.

Leven’s Conscience

I just read a WSJ article entitled “Good Leadership Requires Executives To Put Themselves Last,” and I guess I did not get it because I do not think the author’s example put himself last.  The article starts out with a good quote,

“Good governance depends primarily on leaders who put integrity and the interests of their companies ahead of their self-interests.  These executives are willing to grapple with difficult decisions that may involve personal sacrifice.”

The article then goes into describing some examples involving Michael Leven, chairman and CEO of US Franchise Systems.  The first example was Leven saw his company was not going to make it’s year end earnings and he announced it; thus, plummeting the stock prices.  Leven did not have to announce it because the numbers were not due for another 4 months.  The second example happened before that incident when he was president of Days Inn.  He found some irregularities in accounting and it ended up being the owners were stealing from the company.  He confronted them about it and they fixed it, but then it happened again and he just quit.  Days Inn went bankrupt and the owners were arrested.

Both of his actions, I believe, were selfish.  I believe that in the first example Leven’s conscience got the best of him and he had to tell everyone they were not going to make the year-end projections.  While the second example he, in my eyes, hid under a rock and quit when he found out the owners were stealing.  Both of those situations probably cost a lot of people their jobs.  Instead of trying harder to meet the year-end projections, he did something that probably pissed off the board and he probably had to cut jobs to make up for the earnings.  Secondly, instead of ratting out the owners of Days Inn to the Securities and Exchange Commission, he let Days Inn go bankrupt.  That probably ended up costing a lot of people their jobs, except for the select few who were hired back by the future owners.

Another thing I did not like was why didn’t Leven accept a severance?  The owners were stealing money, he wasn’t.  He did nothing wrong and he should of taken it because he went 6 months before getting another job that paid less.  I guess he thought that was the right thing to do because the article ends with him explaining his anger towards CEOs who accept compensation packages when employees are losing their jobs or getting pay cuts.  If that is the case, I believe even stronger that he should have taken down the owners of Days Inn, and saved his “baby.”

The Dean’s Disease

I just read a really interesting article about “The Dean’s Disease” written by Arthur Boneian in the Academy of Management Learning and Education Journal.  Boneian brings 30 years of experience in his explanation of the affects of power in an academic environment.  “Dean’s Disease” is brought on by yes-sayers and power.  Deans can easily get lost in the power and also lose their identity because there are a lot of priviliges from interacting with CEOs and executives in the corporate world.  The Dean sees how they live and he wants it for himself.

There are three causes for “Dean’s Disease,” first is doppelgangers, second is strategic praise and third is the taste for power.  The doppelgangers are the yes-sayers who usually want something from the dean.  The doppelgangers are born from the Dean’s resource disbursement so the Dean becomes the target of flattery.  The doppelgangers are good at what they do, and all of the flattery goes to the Dean’s head and he begins to believe it and that is the second cause, strategic praise.  The Dean thinks he is the greatest and he has the best ideas because he is never questioned.  With great admiration and praise, comes material gifts and power and that is cause three, the taste for power.  The power is so addictive that the Dean will do morally objectionable things to keep it and even influence morally objectionable behaviors from his faculty and staff.  The power also causes the Dean to become arrogant and he stays away from those he deems “unworthy.”  The arrogant dean begins to doubt himself so he never hires the best or brightest staff because he does not want them to question or overshadow him.

A true Dean has to do the exact opposite.  The Dean is not the priority it is the students and the academic environment.  The Dean needs the best faculty that challenges him and his ideas.  The way they find these Dean’s looks tough though.  Boneian wants you to look at the applicants and their past history and analyze them for any imperfection.  The background check may be too extreme to handle.  Once the true Dean is found the University needs to implement “safeguards” to protect the Dean from himself.  They need to establish values and encourage independent thought.  Disagreement is therefore encouraged and desirable.

The best suggestion to stay on track as encouraging the Dean to continue to research his area of study and if they are able to, teach an undergraduate graduate class.  If the Dean taught every once and a while, he would not lose focus on the people who are really important, the students, faculty and employees.

Gary Loveman The Data Prospector

In my last post I talked about the management style of Gary Loveman at Harrah’s Entertainment, and in this post I will focus on Harrah’s marketing and customer service.  I just read “Diamonds in the Data Mine” written by Gary Loveman for the HBS.  Before Gary Loveman came to Harrah’s, Harrah’s was following the pack with their Total Gold program in the 90s and they were able to evolve their program to “Total Rewards” and they have been leading the pack ever since.  Their old Total Gold program allowed Harrah’s to find a trip-by-trip estimated value for their players and they gave comps, free rooms, and steak dinners like everyone else in the business.  Total Gold was unable to capture the true value of their customers and that is where Total Rewards came in.

Former Harrah’s CEO Phil Satre hired Loveman as COO to lead the company “into a marketing-driven company that builds customer loyalty to all Harrah’s Properties.”  Customer loyalty using marketing and excellent customer service is their number one goal.  In 2002, Harrah’s owned and ran 26 casinos in 13 states, and by that time their Total Rewards program was up running.  The only way they were able to accomplish that was by branding and consolidating Harrah’s.  The trick was getting all of the properties on the same page and offering great service and services at all of them.  That was the Harrah’s brand and if one of their customers found themselves in proximity to a Harrah’s property, they were able to use their Total Rewards card and their comps at all of the 26 properties.

Besides consolidating their properties, Harrah’s was able to find a lifetime value for their customers by tracking everything they did.  Every time a customer used their Total Rewards card, Harrah’s tracks it.  Whether it was at a slot machine, blackjack table, restaurant, gift shop, or boutique.  They track everything and they are able to use that information to get those customers back, whether it is with a free meal or a shopping spree in the boutique.

“A happy customer makes for a happy company.”  Having happy customers is what Harrah’s strives for because happy customers spend 24% more per year on gambling.  Their customer service starts on the phone or the valet and runs through every person, nook and cranny.  Harrah’s was able to implement a bonus program for all of their employees who used outstanding customer service.  Every year each Harrah’s property was rated on customer service through comment cards and if they exceeded the 3% everyone was given a bonus up to $200.

Total Rewards has been the best rewards program to date.  It is so valuable to Harrah’s and in return their customers receive the best offers and services.  I don’t know about currently, but in 2005 especially Harrah’s was run by some of the smartest most educated people in the country.  Total Rewards marketing is very strong.  It is run by MBAs and PhDs and is just unfair to the common gambler.  Harrah’s goes after everyday people and they are able to influence them into gambling past their means.  They entice them to come in for free cash and free play and the customer stays until every last cent is gone.

Lately I have been talking to a lot of dissatisfied Harrah’s customers and former employees.  The economy crash has caused Harrah’s to lose a lot of their great employees and worst of all their great customers.  Budget cuts after budget cuts has brought Harrah’s down emotionally.  All of the best employees (the highest paid) were fired and they have even cut off their players.  I talked to a former Harrah’s player of over 25 years, and his comps were cut off because he had not visited them in a year.  He was in Australia for business the past year and Harrah’s would not budge.  His wife was so mad that she said she would leave her husband if he ever went back to Harrah’s.  Big players like that are extremely valuable and Harrah’s kicked him to the curb.  Even in tough times, Harrah’s should have been smart enough to know that this customer pays their bills.

Harrah’s Loves Loveman

I just read a Stanford Business School Case study entitled “Gary Loveman and Harrah’s Entertainment.”  It is about a former non-tenured professor from Harvard Business School named Gary Loveman and how he was offered a job as the COO of one of the biggest casino companies in the World, Harrah’s Entertainment.  It was a gutsy decision by Harrah’s CEO Phil Satre to hire someone from academia without any casino and any real world business experience, but it has since paid off.  Loveman was brought in to streamline Harrah’s at both the corporate and ground level.  Harrah’s loyalty program was so data rich that they needed someone like to Loveman and his team of MBAs to decipher all of the data.  They were able to use it to develop their “Total Rewards” system that gave each guest a value.

When Loveman came into action, he did not want to micromanage.  He was not going to be seen on the casino floor filling out Cash Transaction Reports and he was not going to be in the cage cashing out chips.  He knew the people he had in place were good employees and competent, but Loveman still pushed efficiency.  There was one instance where he found himself micromanaging a General Manager from the Showboat in Atlantic City, but Loveman caught it, fired the guy and got back to work.

One of Loveman’s greatest accomplishments, in my eyes, was how he “instilled a sense of accountability and rigor (Pg. 7).”  Everyone knew how smart he was and the employees wanted to show him they were smart and good at their jobs.  Loveman was able to push his employees to be the most efficient fact finding team in the casino industy.  Loveman wanted to know what they knew not what they thought.  Loveman told the VP of HR, “I eat numbers for breakfast (Pg. 7).”  Loveman is a scientist and he wanted every idea tested with a control and their jobs depended on that.

One contribution that I did not like from Loveman was the Meritocratic Management, in his eyes, his greatest contribution.  In an evidence-based management system this will be shown as something that works, but I do not believe in it.  This system is the exact opposite to the Johnson & Johnson system.  Loveman’s first priority was to the shareholder and the shareholders “owned” the jobs, not the employees.  Johnson & Johnson’s number one priority was to their customers and their shareholders were last, especially behind the employees.  The Meritocratic system works for Harrah’s and with this system they have been able to hire better employees thus lowering turnover by about 50%.  I would have a hard time telling an employee the only reason they are there is to make the shareholders money.

The case study ended with Phil Satre stepping down as CEO and Gary Loveman getting promoted to CEO.   As CEO, the study says Loveman will have some difficulties expanding Harrah’s any further because they are a big company and they have a lot of processes to go through.  The processes or shareholders, the owners of the jobs, were now in the way of Harrah’s future.  In an attempt to further streamline Harrah’s, Loveman made Harrah’s private.  The buyout occurred at a horrible time and the collapse of the economy is making it nearly impossible for Harrah’s to make their payments.  In a better economy, I believe Loveman would have been able to make Harrah’s the most powerful casino company of all times.

The Quick Fix

I just read “Evidence-Based Management” written by Jeffrey Pfeffer and Robert Sutton and I also read “Good To Great, Or Just Good?” by Bruce Niendorf and Kristine Beck.  After I read both of these studies I came to a conclusion that there really is no quick fix to business management.  There is a lot of great ideas and evidence out there that works, but whom does it work for?  Most of the time the best ways to run a business are going to be unique to that company and it will not work for another.

What I thought was so great about these two studies was that they did not offer a quick fix.  They gave the reader the ability to sift through bullshit.  Pfeffer and Sutton gave a lot of evidence that using evidence-based management will help a company, and they said you are going to have to do a lot of research to find the best management technique for your company.  Niendorf and Beck wanted to teach not believe everything you read.  They basically said the statistics in the book Good to Great (GTG) was not done correctly and they manipulated it to say what they wanted.

An example frequently used throughout “Evidence-Based Management” was the forced ranking system used at General Electric (GE).  They used GE’s management model to show how their model works for them and example on how it did not work for another company.  GE has an evenly distributed ranking system that ranks all of their employees.  70% of their employees meet standards and the rest are either rewarded (the top 20%) or they are counseled and/or fired (the bottom 10%).  The forced ranking system works for GE, but it will most likely not work for another company.  The ranking system increases competition and negative behavior and it messes with the morale of the employees.  In “Evidence Based Management,” managers are recommended to study and research management techniques that have worked for other companies before they implement them.

In “Good to Great, Or Just Good?” Niendorf and Beck did a good job studying and analyzing the data of the top 11 GTG companies to find the flaws in the statistics and their hypothesis.  GTG was one of the best selling books and Niendord and Beck saw it had flaws.  They were able to show the 11 GTG companies were not great and the GTG model of success was not good enough.

The researchers also made it a point to show their faults.  They gave you all the information they had, and they want the reader to figure out if it was good for them or not.  Evidence-based management is hard because there are thousands of books and journals that all claim to be the best way to manage.  Pfeffer and Sutton let you know that it is hard work to find a model that is good for you and your business.

What I was able to get out of these studies was that you should not go after the quick fix and do some good old-fashioned research to figure what your business needs to succeed.

Failed Intelligence

The CIA is supposed to be one the best intelligence-gathering agency’s in the world.  Movie characters like James Bond 007 has relied on the CIA’s help to foil many evil plots against the world.  Everyone in the CIA is supposed to work together to make the U.S. a safe place to live.  One of the CIA’s most recent errors was they were the agency involved in gathering information on Iraq and their weapons program.  According to an article on CBC News Online entitled, “In-depth: Iraq, United States Senate Select Committee on Intelligence: report on pre-Iraq war intelligence,” it was the CIA’s groupthink that led to the failure.  By definition (according to Understanding Organizational Behavior by Nelson and Quick) groupthink is a “deterioration of mental efficiency, reality testing, and moral judgment resulting from pressures within the group.”  Everyone in the group (the CIA, George W. Bush and his team, and the Iraqi informants) wanted the U.S. to invade Iraq, so they were blinded from using moral judgment and reality testing.  They interpreted “ambiguous evidence” as “conclusive evidence” and they were able to see this in hindsight.

I believe that it came down to following George W. Bush’s agenda.  He wanted information about WMD in Iraq, so the “group” gathered all they could and The W got what he wanted.  Without moral judgment they were unable to see the flaws in the intelligence and they may have pushed aside the intelligence that would have shown there were no signs of WMDs in Iraq.  They blamed it on the lack of “human intelligence” in Iraq, but it was the lack of intelligence in the oval office.