June, 1998 Volume 2, Number 9

Focus Japanese Companies on Capital Markets

Keizai Doyukai, the Japanese Association of Corporate Executives, has completed a two-year study of how Japanese companies can be revitalized through greater focus on shareholders. With a membership of 1,600 executives from 900 companies, its Committee on Corporate Management visited executives and scholars in the U.S. and Europe, and it has concluded that Japanese firms must "increase profits by emphasizing the efficient use of capital, raise the value of the company, and increase the company's ability to induce investors to invest in the company." It warns: "Only companies which can support and strengthen cycles of behavior directly linked to the fast-paced market will survive."

The report notes that in the wake of the collapse of Japan's bubble economy, many Keiretsu firms are reducing their stock cross-holdings and more of their shares are being acquired by foreign owners, which "are sure to exert a major influence" on the companies. The report and an earlier companion report -- "Manifesto for a Market-Oriented Economy" -- urge that Japanese companies:

• Enter into an "energetic dialogue" with institutional investors.
• Promote the development of professional stock analysts.
• Restructure around profitable business lines.
• Create metrics of performance that are visible to investors.
• Expand stock-options.
• Reward managerial performance, not seniority.
• Bring more women into the workforce.

Source: Keizai Doyukai (Japan Association of Corporate Executives), Management Focused on the Efficient Use of Capital (Tokyo: Keizai Doyukai, 1998). The home page for Keizai Doyukai can be found at <http://www.doyukai.or.jp/Eindex.htm>.

Of related interest: James R. Lincoln, Michael Gerlach, and Christina Ahmadjian, "Evolving Patterns of Keiretsu Organization and Action in Japan," Research in Organizational Behavior (JAI Press), 1998, vol. 28, pp. 303-345.

Beyond Reengineering

Lance Berger, Martin Sikora, and Dorothy Berger chronicle the plunge of a company, "White Chips," into mindless restructuring. On the advice of a consultant and on the instinct of its technology-focused chief executive, the chip maker downsized its sales force, closed one of its three manufacturing facilities, and installed a new information system. The remaking of the firm proved disastrous: employee morale plunged, management time was diverted, and a new line of chips delayed. Its competitors were quick to fill the breach.

The CEO of White Chips had allowed himself, the authors observe in their Deengineering the Corporation, to be swayed by an outside prescription for change that did not fit the inside. White Chips had its problems, but top management misdiagnosed them. The chief executive had fragmented his top managers, encouraging each to focus on a functional areas and none to focus on their customers. The company had takes its eye off the market, and its board had left an entrepreneur at the helm who was unable to provide the leadership required to change the firm before the market would force it to do so.

The authors' solution: Write an "alignment blueprint" that lays out the company's vision, financial goals, strategies to achieve them, and rewards for those who make it happen. Above all, managers must become "change responsive," relentlessly measuring and anticipating changes in customer needs and competitor moves.

Source: Lance Berger, Martin Sikora, and Dorothy Berger, Deengineering the Corporation: Leading Growth Within (Haverford, Pa.: Haverford Business Press, 1998).

Of related interest: Lance Berger, Martin Sikora, and Dorothy Berger, editors, The Change Management Handbook: A Roadmap To Corporate Transformation (Burr Ridge, Il.: Business One Irwin, 1994).

Leadership Development Program: Petroleos de Venezuela, S.A.

Petroleos de Venezuela, S.A. (PDVSA), the state-owned oil company, is one of the world's largest petroleum corporations, and to remain competitive in an increasingly competitive environment, it has launched a leadership development program. PDVSA managers are enrolling in a leadership course organized by its training arm, Centro Internacional de Educacion y Desarrollo (CIED, International Center for Education and Development). In mid-June, CIED brought PDVSA's top 250 executives to its Caracas training center for a two-day seminar on "Leading Change: Driving Successful Transformations." The seminar's speakers included the manager of General Electric's Work-out and Change Acceleration program; executives from Shell Oil, British Petroleum, IBM, and British Airways who described their own organizational transformations; and PDVSA's three business heads and its chairman and chief executive, Luis E. Giusti. Information on CIED's leadership development and change initiatives is available from Giuseppe di Filippo at <gdifilippo@cied.pdv.com> and CIED's web-site at <http://www.pdvsa.com/corporacion_en/filiales_cied_en.html>.

Director Development

What is the company board's role in long-range planning and strategy? What role should directors play in creating shareholder value, responding to company crises, and setting executive compensation? In association with SpencerStuart, Wharton Executive Education offers its two-day "Directors' Institute" in the U.S. and "Directors' Forum" in the U.K. Participants serve on the board of MegaMicro, Inc., a fictitious multinational manufacturing and service company, whose board chair has recently been played by Lewis Platt, chief executive of Hewlett-Packard, and Dennis Kozlowski, CEO of Tyco International. The next U.S. offerings are December 2-4, 1998, in Scottsdale, Arizona, and May 5-7, 1999, in Lansdowne, Virginia; the next U.K. offering is March 24-26, 1999, in London. For information on the program, contact Jane Hiller Farran at <farranj@wharton.upenn.edu> or see <http://www.wharton.upenn.edu/execed/eecat/di.html>.

"When Larry Bird agreed last year to become the head coach of the Indian Pacers, there were many doubters. Few superstars have made the successful transition from playing to coaching. Why should Bird break the mold? It didn't take him long to prove the skeptics wrong."

"Bird's fresh approach to coaching and to leadership should be welcome today, when so much has been said about the failure of coaches to assert authority over other players."

"All too many coaches, at the pro and collegiate levels, rant and rave, often yelling at their players. Bird stays on an even keel. He doesn't lead through fear. I would rather have a Robert E. Lee or an Omar Bradley in charge than a George Patton."

"In my view, quiet confidence gets the best results. Leaders shouldn't do all the talking. Part of their job is to learn, through listening and observing. Bird is not a know-it-all."

Source: John Wooden, "Sideline Wisdom," Op-ed, New York Times, May 15, 1998, p. A25.