Context is important with news

Context is key to understanding. It enables one to understand why a change or news item is important and when people are masking over a problem or blowing smoke.

Here are a few examples of why context matters:

Mark Zuckerberg, the CEO of Facebook testified to Congress of his concerns of privacy of data. He may say he is concerned, but his business model is to sell access to your data to marketers. Unless that model changes, our data will be exposed. Facebook was told to address these privacy issues five years ago and failed to act. It may be a new company, but it has learned to feign concern like an old one.

Football helmets are very high tech these days to soften the impact of blows to the head during this violent game. Yet, no matter how much cushion is offered, the problem is they cannot stop the fact the brain rattles around inside the head when it is struck. Unless football outlaws head hits, the game may have to require players to sign a waiver acknowledging the potential damage before they play and youth tackle football may be banned.

The changes needed in governments are obvious to many, including the legislators. But, they won’t happen. Why? Change will not occur if the people who need to make it are too aligned with what needs to be changed. Politicians are too enamored with keeping their job to actually do their job. Money matters too much in these equations.

Let me close with a final example. There is a difference between someone who does the right thing 19 times out of 20, but screws up one time versus someone where the opposite is more true. The one error for the first person may be similar to one of the second person, but they deserve a closer look. I have seen good people fired because managers ignored this kind of math. Context is key.

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Thoughts for Thursday

Here are a few random thoughts on a rainy Thursday, with more rain to come in the days ahead.

A retired ambassador said recently, the US strength is more than its military, it is its relationships with allies. What concerns me is we are devaluing our allied relationships. This is echoed by the European Union Chairman Dean Tusk. Tusk said the EU must be more united than ever before to deal with what he called Trump’s “capricious assertiveness”. My question is this how we want to be viewed by our friends?

Another retired ambassador to Israel said while he agreed with the move of the US embassy to Jerusalem, the US administration made two mistakes. It should have been announced in the context of moving toward a two state solution. In essence, the US placed little obligation on Israel for this move. Also, celebrating the opening on the anniversary of Israel is an insult to Palestinians. This date is not viewed favorably, so the celebration rubbed salt in a wound.

Assuming the role of ambassador for the disenfranchised in the US, a huge opportunity missed occurred during the rushed tax bill which hugely favored companies and the wealthy. I favored some relief on the corporate tax rate, but we went way too far and are negatively impacting our huge and growing debt. The additional opportunity missed I am referencing is not imposing a requirement on companies to provide raises. One way of doing this would have been a concurrent increase in the US minimum wage moving it from $7.25 to a living wage of above $10 per hour. Token one-time bonuses are actually the barest minimum of what could be done with an annual tax break – how about a raise instead? More income to people in need is accretive to the economy.

Finally, I have seen footage of conservative news sources highlighting Venezuela’s problems as an indictment of socialism. While I am a capitalist, I also recognize our country is a mixture of both. Social Security, Medicare, Medicaid, unemployment benefits, and bankruptcy laws are all forms of socialism. We also have other restrictions to prevent unfettered capitalism. Venezuela’s problems are due to corruption and mismanagement that can be traced even back to the popular Chavez. His successor, Maduro, has shown a level of incompetence that is quite visible to all.

That is all for this Thursday. Please share your thoughts.

US CEO Pay has reached epic differential

As reported in The Guardian today, US CEOs now make in pay 339 times the pay of the average worker according to a Bloomberg study of 225 companies. In retail companies, the ratio is 977 to 1 on average. Let that sink in a little.

A quote from the article entitled “‘CEOs don’t want this released’: US study lays bare extreme pay-ratio problem” by Edward Helmore is very revealing:

“According to a recent Bloomberg analysis of 22 major world economies, the average CEO-worker pay gap in the US far outpaces that of other industrialized nations. The average US CEO makes more than four times his or her counterpart in the other countries analyzed.”

Some people may push back and opine that US CEOs may be worth 4X that of their non-US industrialized nation counterparts. If that were true, it would mean US company performance is 4X that of non-US companies and there would be a huge flight of capital to the US.

In my years as a consultant, I have seen CEO pay ratchet up over time, rewarding CEOs with stock grants and options. What happens is a competitive totem pole exercise, where the competitive pay analyses are upward elastic and downward inelastic (they go up more easily than they go down) over time.

I have also observed the 80/20 rule applies to CEOs as well, with 20% of the CEOs earning their keep. I have worked with egalitarian CEOs, benevolent dictator CEOs and some of the greediest SOBs you will ever meet. Seeing CEOs who realize the teamwork involved in the company making money is admirable. On the converse, seeing CEOs who are imperialistic is off putting. As I write this, I am thinking of the handfuls I worked with and some who were notorious over the years for their greed.

On the bottom end of this exercise are efforts to flatten pay for the average worker. Over time companies will use a variety of rationales and tactics to put lids on pay increases. The salary increase budget may be limited because of the uncertainty in the economy, the company is having some hardship or the company expects to have hardship. Sometimes concurrent with the salary budget, groups of people are laid off. Why is the timing an issue? By moving on lower performers, people whose salary increases would have kept the average percentage increase down are removed from the equation meaning better performers will now get lesser increases.

Coupling this with pressure on not increasing the minimum wage and to diminish the power of labor unions (that is another story), these ratios result. I respect greatly the need for incentives to help reward successful CEOs, but we must not forget who helped them earn those numbers.

We have a poverty problem in this country. We have a middle class where too many are living paycheck to paycheck. Yet, our leaders passed a tax law that benefits CEOs, their companies and the wealthy by a large margin. It would have been nice to have at least obligated the pass through of salary increases or an increase in the minimum wage to a living wage. So, do not expect this ratio to measurably decrease any time soon.

Execution matters

Very early in the Trump presidency, he signed an executive order to institute a travel ban. It was so poorly conceived, vetted, communicated and staged, its disastrous rollout was canceled in a couple of days. A key example was he failed to tell (or involve) the people who would execute the decision what they needed to do. He also did not advise beforehand the Speaker of the House and Senate Majority Leader who found out when we did.

Earlier this week and over fifteen months later, the President decided to pull the US out of the Iran nuclear agreement. Whether people agree with this decision, the State department had a very difficult time answering questions the next day as to what this all meant. The did not know answers to questions on the impact on business transactions underway, business transactions that had multiple parties from various countries, business transactions where US suppliers provided parts to French companies working with Iran, etc.

One reporter noted it was shocking how little the State department people knew on what needed to be done and the answers to many questions. They were not briefed. Apparently, the lessons of the first travel ban and other poorly rolled out decisions have not been learned. This is what vetting, planning and communication tries to avoid. Just because a regal person says to do something does not mean it can easily happen. Execution matters. Time matters.

As a former consultant and business manager, I can assure you execution is as important as good ideas. This is a key reason companies spend time and money in project management training. With that said, it is not uncommon to see execution challenges. I recall one prospective client telling me a new software was going to go live a certain date. I asked what alternatives they had considered if certain things did not happen as planned. His answer was of course they would happen on time. It is rare that things go as planned and this was no exception as the start date was delayed.

Yet, what we are seeing from the White House should not be a surprise, as one only needs to look at the business history of the leader. While the confident President would never admit this, what financial reporters and biographers have known for years is Trump is a terrific merchandiser, but they would not confuse him with being a good manager. Managing by chaos and loyalty are not conducive to the very necessary boring competence. Even vetting candidates for jobs is essential and is not a competency for which this White House is known.

Execution matters. Vetting, planning, communication, and time are essential. Without doing these things, too many people are caught off guard. A visual metaphor is White House communication staff hiding in trees from the press after they just found out Comey was fired. Not only did Comey find out after the media did, but so did the Communication staff. Without execution, you have chaos and confusion.

Draining the swamp is hard with so many Yertle the Turtles

One of Dr. Seuss’ popular children books has a lesson for us all and a few have called it an important business book. Briefly, “Yertle the Turtle” is about a leader named Yertle who stands on the backs of his servant turtles to see his realm. Yet, as the stack grows, he continues to ignore the complaints of Mack the turtle on the very bottom. Of course, the stack falls and Yertle comes tumbling down. The moral to the story is not hard to decipher.

I mention this swamp example because the President was elected, in part, because he was going to drain the swamp. Setting aside why people believed an imperial man would deign to do basic things for the masses, what he has done is appoint people to be his Department secretaries whom are also used to nice things. He hired a bunch of Yertles making it hard to drain the swamp standing on the backs of others.

At least five of his cabinet members have come under fire for lavish expenditures on the taxpayers’ dime. HHS Secretary Tom Price resigned over his frequent desire to travel with charter flights. Treasury Secretary Steve Mnuchin is still on the job, but took seven military flights costing $800,000, one of which was coincidental to a city in the path of the recent solar eclipse (a certain Carly Simon song lyric comes to mind in “You’re so vain.”)

HUD Secretary Ben Carson has been the quietest of appointees until it was learned he was installing palatial furniture totalling $165,000 in his office. Interior Secretary Ryan Zinke is also traveling well being $200,000 over budget robbing from emergency funds to pay for it.

Not to be outdone, EPA Director Scott Pruiit also likes to travel well and goes with  an entourage. Part of that is due to security reasons as he does not care for people reminding him his role is to protect the environment, not business. But, he is getting flak for his devious way to provide lucrative raises to two key staffers (and then deny it) and renting a luxury condo from a fossil fuel lobbyist at a very favorable rate. It should be noted that several Mack the turtles were reassigned when they complained of ethical concerns in the EPA.

These Yertles have always liked nice things, but so does their boss. His predecessor took a huge amount of grief for his travels and golfing. Yet, that has been dwarfed by the biggest Yertle in the White House who does not spend much time there as it is actually a step down in luxury to him. That speaks volumes.

It is hard to drain the swamp when you have so many Yertles doing the draining. And, this is without even considering the measures taking by these men to grease the skids for business reducing regulations, selling off rights to public lands and providing a huge tax cut. The friends of the Yertles are Yertles as well. Unfortunately, the Macks of the world only matter as props in this value enhancement for the Yertles. Not much is trickling down, just the opportunity for the Macks to stick their nose in the mud.

 

 

 

The available talent pool is shallow

A leader can choose to hire people that are competent, experienced and even loyal. When a new President comes on board, they usually draw from a deep talent pool of folks who served the incumbent’s party in the past.

From the outset of the current incumbent’s election as President, the rules have not fully applied. The first clue was his surprise that he won. He had done little preparation for hiring a staff and is still behind in filling positions.

The second clue is the focus on loyalty more than the first two criteria. While there are a few capable folks on the staff, many capable and experienced folks took their names off the list or were not considered as they dared be critical of this imperfect man. They were not loyal enough.

The third clue is the continual lack of due diligence on the people announced and even hired. Many people told the President not to hire Michael Flynn. He was the first to go. Others were not approved by Congress and still more should not have been approved due to poor qualifications for the position.

A final clue is the talent pool has tightened. More candidates have taken their name out of the pool given the tempestuous White House. This a reason the President is hiring people he sees on TV which is where he spends much of his attention. By itself, that is not necessarily bad, but coupled with the lack of due diligence, several people have been offered jobs who should not have been due to conflict. As recent evidence, his legal team announced four new additions, only to withdraw their names after finding out about conflicts of interest. A Supreme Court experienced attorney named Ted Olson declined to be considered citing this chaos as one example of a well oiled machine.

One year ago, the President said he had formed the finest cabinet and staff ever. With the significant amount of turnover, it is obvious that statement was hyperbole. Yet, the people he has added of late are not being described as universally great choices. Even the more competent ones are defined as having similar character flaws to the President.

The key question I ask folks is would you want to to work for such a tempestuous and deceitful person? And, if you did, how long do you think it would take before you wore out your welcome or left because of the environment?

We need more competent, experienced and cooler heads. This is even more true when the boss colors so much outside the lines. The problem is that pool has been purposefully drained.

Wednesday Wanderings Once Again

With a few thoughts bouncing around in my head, let me wander some on this Wednesday. Please walk with me down this meandering path.

Last spring, a certain boss known for firing people on a faux reality show, fired the FBI Director by having him find out via TV news report. I was reminded of this as the same boss apparently fired his Secretary of State by tweeting the world before telling him. The manner in which these folks were let go is simply not right and a window into someone’s character or lack thereof.

According to Vladimir Putin, he does not ever do what people believe he has done, Given his KGB training and bent to deny, diffuse, defray, distort and demean any allegation, he is less believable than the current President of the United States. He is better at lying which may be why Trump admires him so. It will be interesting to see if Trump actually backs Theresa May if she points the finger at Putin for this attempted poisoning in the UK and, unlike Trump, actually does something about it.

As for lying more locally, I have again asked Speaker Paul Ryan and my Congressman to remove Representative Devin Nunes as Chair of the House Intelligence Committee and censure him for his unethical, unprofessional and highly political efforts to discredit the Russian investigation. His sycophancy toward the President is obvious, but his libelous accusation toward a Democrat Senator drew the ire of Republican Senator Richard Burr. Burr, who heads the Senate Intelligence Committee, shared his concern with Speaker Ryan. And, not only did Burr not support the Nunes’ memo, another Republican Congressman, Tom Rooney, who serves on Nunes’ committee disagrees with the Republican members announced report’s findings on Russian intent and collusion with the Trump campaign. Why is that?

The next shoes to drop on the real Russian investigation under Robert Mueller will be interesting. For me, Nunes’ efforts to clear Trump make the man look even more guilty. Mueller is following the money, which Trump has not wanted. I don’t know what Nunes was following.