December, 1999 - Volume 4, Number 3

Darla Moore's Full-Court Press

Robbie Shell, Deputy Editor, Knowledge@Wharton

During a 1996 New York Knicks game, spectator Darla Moore caught a wild pass from mid court. Instead of throwing it back to the ref, she tried to make the basket herself.

It's one of the few times she has missed her mark.

Darla Moore - president of the private investment firm Rainwater Inc. - was recently named to Fortune's 1999 list of the 50 most powerful women. Appearing at Wharton on December 7 as part of the Zweig Executive Speaker Series, Moore shared perspectives on leadership and success in work environments that ranged at times from unsupportive to hostile. She spoke, for example, about the importance of "being willing to pick your fights within the corporate environment" and, having picked them, "to fight to the death." She reminded her audience "to never take any attack personally in the business environment because if you do you will be rendered ineffective ... it is irremediable to break into tears in a public forum." She spoke also of the role of mentors and of the importance of "being a decision maker... the ability to make a decision, even if it's a wrong one, can't be underestimated."

Moore had attended business school at George Washington University and then joined 30 other MBAs in the training program at Chemical Bank (now Chase). "It was the early '80s, a time when the sun was rising on the LBO business," Moore notes. "All the action in the financial arena, everything interesting and powerful, was there. And I thought to myself, 'This is the place I have to be. Because I can be somebody.'"

As it turned out, Moore never got the chance. "There wasn't a snowball's chance in hell that a female from the rural deep south would be invited or embraced by that LBO environment. Historically no major players in the LBO business were women."

A mentor advised Moore to consider the bankruptcy area, which, Moore says, "was open because it was viewed as a graveyard, a place where you were sent because you couldn't play in the mainstream … The idea was to work with companies that got into financial trouble. At the time there were very few of them, and no one was doing anything remotely like making [any money on it]."

"I worked in the trenches with these financially distressed companies while the LBO establishment continued to churn out ever bigger, ever more expensive mergers and acquisitions. These people had no concept that there would ever be an economic downturn." Of course there was, and "America blew up, largely as a result of greed, a total lack of perspective … and the over-leveraging of the corporate environment. I had watched all this going on and thought, ‘Keep financing this, boys, because you are just creating business for me,'" Moore says.

By the early 1990s, Moore had become the highest-paid woman in banking and an extremely tough negotiator. "All of a sudden, this product I had created was the ‘product du jour'. Nobody in the country had any kind of infrastructure or knowledge that could address this, other than what I had developed over a several-year period. I was the only person with the expertise, and our area was the only one making any money. It had become a powerful profit center within the bank."

The single best area to learn about business is in a financially distressed environment, adds Moore, "because there are no rules. It's only what works. You are operating in a limited time frame, which forces you to make decisions. You find out very quickly what it takes to run a company."

In 1993, Moore became president of Rainwater Inc. "At Rainwater, we do things differently than other investment companies," Moore says. "We are not public stock pickers. We are not market pickers at all…. We identify companies and assets and then go out and select managers.

"In the early days we will be fairly active in a business or an investment, but we are interested bystanders. We will not run anything, unless something bad happens." As it did with Columbia/HCA, where Moore eventually fired CEO Rick Scott after the health-care company became the target of a federal criminal investigation.

One of the biggest lessons she learned from being in the investment and bankruptcy environments, Moore says, is that "the success or failure of the business doesn't necessarily have to do only with the numbers, but rather with the personalities and character of the people who run it. People get so impressed with what they have accomplished that they can no longer see themselves in the context of reality. This is what happened with Columbia."

Moore is also well known for her decision to remove corporate raider T. Boone Pickens from Mesa, his oil and gas company which by the early 1990s was overextended and facing a possible takeover. Moore put $260 million into Mesa to buy a preferred stock position that gave Rainwater Inc. control of the company. Originally the plan had been to let Pickens stay in place, but when "I went out into the market to refinance Mesa's debt, I found that no one on Wall Street would touch this because of Pickens." The CEO had to go. "So what came to be viewed as me [removing] Scott and Pickens had nothing to do with me personally," Moore says, acknowledging, however, that the perception of her "allegedly taking these two out" led to a 1997 Fortune cover story. "It had to do with the markets. Always remember, markets take people out. That's one of the glories of capitalism."

Leaders Transform Thoughts Into Results

Jeffrey Pfeffer and Robert Sutton of Stanford University argue that managers often know what to do, but they just don't do it. In their new book, they press managers to break through the "knowledge-doing gap," to transform awareness of best practice into a record of best performance.

The barriers to closing the gap are several. First, some managers equate agreeing to implement an innovative work idea with actually innovating. One manufacturer the authors observed, for instance, decided to become a project-based organization to foster product innovation, but woefully little happened on the heel of the decision to make it happen. In another case, a securities firm treated its mission statement as the complete embodiment of its core values, so complete in fact that the values were nowhere else evident within the firm.

Pfeffer and Sutton identify devices that companies from SAS to Starbucks have used to close this gap. Among the solutions: all managers high and low do the company's work besides managing its people, the former ensuring that every manager is savvy about what will work and what's not working.

A second gap is when memories of past successes and failures define future possibilities, as in: If something has not worked before, it surely can work no better now. One solution: radical decentralization, ensuring that the periphery is unburdened by the center's history.

A third barrier is fear of failure, leading managers to stay with tried-and-true methods even when they see better ways to run the railroad. Solution: praise delivery of bad news to bosses.

A fourth gap is performance measures that mislead, and a fifth is when collegiality among managers is paralyzed by cutthroat competition between them.

Closing the gap, conclude Pfeffer and Sutton, requires effective leadership if ideas are to become anything more than just that: "Leaders of companies that experience smaller gaps between what they know and what they do understand that their most important task is not necessarily to make strategic decisions or, for that matter, many decisions at all. Their task is to help build systems of practice that produce a more reliable transformation of knowledge into action."

Source: Jeffrey Pfeffer and Robert I. Sutton, The Knowing-Doing Gap: How Smart Companies Turn Knowledge Into Action (Boston: Harvard Business School Press, 2000).

Cargill in Latin America

Cargill is one of the world's largest privately-held companies, with annual revenues exceeding $50 billion and employment of more than 80,000. Headquartered near Minneapolis, it is restructuring itself in 1999-2000 to place more authority and responsibility in the hands of managers who run its many agricultural, food, industrial, and financial businesses around the world.

To prepare its managers in Latin America for the new leadership required, Cargill gathered 130 top people and spouses from 11 Latin countries together for a four-day program in Rio de Janeiro. The organizers designed the October, 1999, event around the company's new "strategic intent" of becoming the "premier provider of innovative customer solutions in food and agriculture."

The planners knew that past platforms would not work well for this agenda. Instead of a succession of lecturing executives with powerpoint presentations, they crafted the program to convey the restructuring message that "this was not business as usual." When participants arrived, Cargill's Latin director greeted them with a dozen samba dancers.

To drive home the vital messages, participant groups enacted the main points. Cargill is cultivating deeper knowledge of its customers, and one group staged an encounter between a weary manager of McDonalds, one of Cargill largest customers, and an informed Cargill account manager. The company is pressing for innovation and change, and here participants confronted the "ghost of Cargill's past," a lingering spirit that despised risk. Cargill is fostering collaboration, and for this a team of "five musketeers" dramatized how its Central America managers had rallied in the aftermath of the devastating hurricane in Honduras.

To bring out the firm's new strategic intent, a master of ceremonies played Larry King -complete with wig, glasses, and suspenders - and in Larry King fashion provocatively interviewed Cargill's CEO, Warren R. Staley, about the company's direction.

Finally, to reaffirm firm's focus on "leading change together," managers and spouses divided into competitive teams that performed song and dance for Cargill's own version of a Carnivale celebration, the legendary festival of Rio.

Information on Cargill is available at http://www.cargill.com/, and information on its leadership development programs is available from its organizers, Rae Lesmeister, Manager of Worldwide Learning at rae_lesmeister@cargill.com and Barbara Luke, Learning Manager, at barbara_luke@cargill.com.

Customized Learning about Leadership and Change

Wharton Executive Education provides customized programs that include a focus on leadership and change. Building leadership and leading change are among the subjects developed during one- to two-week programs that have been offered during the past two years for managers of the following companies:

3Com Corporation
American Institute for Chartered Property Casualty Underwriters
Columbia Energy
Bell Atlantic
DuPont
First USA
CGU (British insurance company)
Laporte Specialty Chemical Company
Merrill Lynch
Morgan Stanley Dean Witter
PNC Bank
Securities Industry Association
Toyota Motor Corporation

Information on customizing programs is available at http://www.wharton.upenn.edu/execed/eecat/custom.html and from Scott Koerwer, director of custom programs, at koerwerv@wharton.upenn.edu and 215-898-5509.

Timothy A. Koogle, The founder and chief executive of Yahoo!, argues that having a small board of directors is an asset when the company works in the world of the Internet. "When you're starting a business from scratch," he says, "speed is everything. Keeping the board small and concentrated really helps. You don't have to manage the interrelationships between board members."

Source: Jennifer Reingold, "Dot.Com Boards Are Flouting the Rules: They're Small and Packed with Insiders," Business Week, December 20, 1999, pp. 130-134.