Northwest Airlines, Madison’s largest air carrier, announced new non-stop service to Las Vegas yesterday. This service competes with an existing non-stop route flown by Allegiant Airlines. The major airlines have often used this tactic to drive low fare competitors from the market. Northwest flies several non-stop routes from Milwaukee that compete with local favorite Midwest Airlines. These flights are unusual in that they do not require connections on NW’s Minneapolis, Detroit or Memphis fortress hubs.
Category: Business
Stock Options: Do They Make Bosses Cheat?
My sister, Mary forwarded this interesting, brief summary of research (PDF) on the shareholder effects of large option grants to the chief executive.
QUESTION for shareholders: If the company’s directors give lots of options to the chief executive, should you be happy or nervous?
The traditional answer from academia was that big options grants were good. They aligned the interests of executives with shareholders, and they helped to offset the tendency of executives to avoid risky but potentially profitable investments.
But it turns out that the conclusions were based more on optimistic theories than data. Now, with option grants having become the largest portion of chief executive compensation – worth more than either salary or bonus for the average boss – analysis of data on corporate performance provides some disturbing results.
It appears that really big options grants make it more likely that companies will fudge their numbers and that companies with such grants are more likely to go broke.
Netscape IPO +10 Years
Kevin Kelly looks at what Netscape’s IPO has wrought:
Before the Netscape browser illuminated the Web, the Internet did not exist for most people. If it was acknowledged at all, it was mischaracterized as either corporate email (as exciting as a necktie) or a clubhouse for adolescent males (read: pimply nerds). It was hard to use. On the Internet, even dogs had to type. Who wanted to waste time on something so boring?
The memories of an early enthusiast like myself can be unreliable, so I recently spent a few weeks reading stacks of old magazines and newspapers. Any promising new invention will have its naysayers, and the bigger the promises, the louder the nays. It’s not hard to find smart people saying stupid things about the Internet on the morning of its birth. In late 1994, Time magazine explained why the Internet would never go mainstream: “It was not designed for doing commerce, and it does not gracefully accommodate new arrivals.” Newsweek put the doubts more bluntly in a February 1995 headline: “THE INTERNET? BAH!” The article was written by astrophysicist and Net maven Cliff Stoll, who captured the prevailing skepticism of virtual communities and online shopping with one word: “baloney.”
Thinking Different: GM $5,000 Chinese Minivan
Keith Bradsher, former NY Times Detroit bureau chief and author of the SUV craze critique: High and Mighty writes about the maverick executive behind GM’s successful $5,000 Chinese minivan. The executive, Philip F. Murtaugh, is of course, no longer with GM.
Their development was led by an American, Philip F. Murtaugh, a native of Ohio and a maverick executive who was willing to zig while the rest of G.M. was zagging. Mr. Murtaugh was able to create in China the kind of innovative environment that G.M. has struggled for decades to achieve in its American operations. But whether G.M. can duplicate elsewhere its achievements in China or even keep its pace here is unclear.
In what may be a telling sign of the corporate culture at G.M., Mr. Murtaugh’s success in China led not to promotion but to his departure from the company. G.M. declined to discuss personnel matters, but both it and Mr. Murtaugh said he resigned and was not dismissed.
A soft-spoken man in a company known for autocratic leaders, Mr. Murtaugh ran the China operations for more than nine years from his base in Shanghai, repeatedly making some of the best calls in the industry. Now he finds himself unemployed and living in a small community in rural Kentucky.
Bradsher’s tenure covering the auto industry was rather controversial. More on Bradsher.
Land’s End President Out
The turmoil continues at Lands’ End with the firing of president and CEO Mindy Meads after just 18 months at the helm of the clothing retailer.
Meads had been promoted to Lands’ End CEO in February 2004.
Replacing Meads as interim president is David McCreight, executive vice president of merchandising for Lands’ End.
Green Bay’s Schneider National: HBR on their Operational Innovation
Great example of a traditional company that continues to improve. I remember using Schneider years ago, on the west coast and being astonished at their unique GPS shipment tracking system. This was in the late 1980’s…. Michael Hammer takes a look:
That’s the bad news. The good news is that Schneider’s leaders did not give up, but restarted the effort in a different way. This time around the company was astoundingly successful. The time to respond to a customer’s RFP, which had been in the range of 30–45 days, plummeted to 1–2 days. These results started to appear within nine months of the project getting underway and were fully realized in less than two years. By getting back to customers so much faster than its competitors, Schneider was able to shape the terms of competition. The result was a rise of some 70 percent in the percentage of bids that Schneider won, which translated into sales increases of hundreds of millions of dollars annually. Ironically, many of the ideas that had been developed in the original project resurfaced in the new system for responding to RFPs.
So what changed between the first and second efforts that made the difference between failure and success? There were six key factors:
Peter Drucker
5-year-old Peter Drucker is one of the world’s most respected thinkers. For six decades, he’s helped shape many of today’s great corporations and made the study of management theory a respected discipline. As a journalist, teacher, consultant, and author of more than 35 books, Drucker’s expertise reaches far beyond the confines of the Fortune 500.
audio
A New Kind of Middleman
But Noone’s outlook couldn’t be more global. He spends a typical weekend watching Chinese-language movies and listening to Chinese-language tapes. At least once a week he makes sure to eat with chopsticks. “You’ve got to show people you’re interested in their culture,” he says.
Noone is interested, all right. The 54-year-old entrepreneur is founder and CEO of Capacitor Industries, which imports low-cost electronic components from China and sells them to motor makers and other manufacturers in the U.S. and, increasingly, abroad. His stock-in-trade is capacitors: tiny devices that store charges, maintain electrical currents, keep motors running, and protect computers and communications equipment from surges. Every motor manufacturer needs a steady supply of them, which has helped send Noone’s annual sales to $5 million.
Life is Customer Service
Jeff Jarvis continues his ongoing “Dell Hell” saga with links to Craig Newmark’s customer service philosophy, which is right on:
In Technology Review, Craig Newmark writes about his list and his view of customer service. As I think I’ve said here before, I’ve heard Craig introduce himself at more than one event as the guy who does customer service and that always gets a laugh but it is no joke. Customer service is the highest ethic of his venture. It is the highest ethic of open source. It is the highest ethic of a true community. If newspapers… and Dell… and AOL… and government remembered that customer service is their job, they’d be a lot more successful than they are.
I, too, have had problems with a recent Dell purchase. I now have an unusable Dell laser printer, thanks to a failed firmware upgrade. On hold to Dell support in India for 90+ minutes (pleasant person, but what a waste of time), I was advised to try it again, which I knew would not work as the printer is evidently in an infinite loop. After several go rounds, I called Dell and asked them to take it back. Unfortunately, my request was 29 days after the purchase date and Dell evidently only accepts returns 21 days after the purchase date. I’ve turned it over to my credit card company….
My Father emphasized great customer service throughout his career. Dell is simply being cheap and it will cost them.
The Personal 40 MBA
My goal was to reduce the PMBA list to no more than 40 titles. Here are my editing criteria:
- Valuable Content – each book has to contain a lot of useful, practical information on how business works, how you can add value, and must explain why the material in the book is important to know. As a whole, the list must cover as much ground as possible, while providing a mix of both complimentary and conflicting viewpoints.
- Acceptable Time Commitment – no 1,000 page books here, although there are a few (good) textbooks in the mix for the more technical topics (accounting, finance, real estate). You should be able to get the key points of each book in a few hours, or by reading the chapter introductions and summaries of the textbooks.
- Reference Value – is the book going to be one you pick back up when you need information? How does the book re-read? Is this a book that is worth keeping for many years?