This article first appeared in Forum, The Edge Malaysia Weekly, on June 6 - 12, 2016.
It looks like Marissa Mayer will be another high-profile CEO casualty. She was appointed CEO of Yahoo Inc in July 2012 after a 13-year career at Google. Yahoo’s problems were well known and several CEOs had come and gone with nothing to show for their tenure. After co-founder Jerry Yang stepped down in 2009, Carol Bartz, chairman Roy Bostock, Tim Morse, Scott Thomson and Ross Levinsohn have all had a shot at turning around the company — without success!
Mayer was the 20th employee at Google and had a reputation for running a tight ship. Fast forward to 2016 and Yahoo is still struggling four years after her appointment. Plans for a tax-free sale of the “golden egg” — shares in Alibaba Group Holding Ltd — were rejected by the authorities. Yahoo’s share price has been a reflection of the value of their holdings in Alibaba, whose shares have been volatile. The remake is not working but the auction of Yahoo’s internet assets has sparked some investor interest in the stock. Last month, Warren Buffett, via Berkshire Hathaway, backed a bid to participate in the second round of bidding.
Ron Johnson was a notable CEO casualty. The head of Apple’s retail business under Steve Jobs, Johnson was made CEO of J.C. Penney (JCP) in November 2011 when activist shareholder Bill Ackman (who a year earlier had acquired a US$900 million stake) pushed the board into accepting the appointment. Much was written about JCP during this period, when Ackman was seen to be managing the board and Johnson the company. A lot of the commentary squarely blamed Ackman for taking the JCP board for a ride. However, a deeper dive reveals that JCP had tried several strategies to halt its declining sales performance but nothing had worked. The board seemed desperate for a magic wand, which Ackman waved in front of them. He got them to agree to a radical plan to reposition the stores under the stewardship of Johnson. While the frustration at the fallout is justified, blaming Ackman is grossly misplaced. The repositioning exercise was a disaster. Johnson’s vision was to create a new and lucrative style of retail with high-end “shops” of specific brands and replacing the frequent markdown sales — a staple of JCP — with round-the-year “fair and square” pricing. A total of 19,000 employees lost their jobs compared with 134,000 during Johnson’s time and in April 2013, Johnson was fired as the CEO and replaced by his predecessor, Mike Ullman.
JCP got into a discounting downward spiral and could not find its way out. Johnson basically said, “My ship, my orders”, and almost took the ship down with him. Yahoo has been struggling with its business model, or as we say, business frame, for years. Sadly, when the business frame is broken, even a talented CEO cannot fix it. Buffett expressed this neatly when he said, “When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.”
Are companies over-reliant on the CEO to drive performance?
Yahoo and JCP were both in a desperate situation and brought in an external CEO to fix the problem. One wonders what senior management and board members did or did not do that got them into the mess in the first place. This is why it is so important — from an early stage — to harness the talents and resources of the entire company, senior management and the board. Technology companies seem to do this quite naturally. Board and senior management have “skin in the game” and everyone seems to be pulling in the same direction. This sense of vision and purpose, or what we refer to as Passion, coupled with Realism and Energy-Action-bias, drive success. These are qualities that allow entrepreneurs to navigate dangerous and uncharted waters. “My ship, my orders” just do not work in today’s volatile, uncertain, complex, ambiguous and hyper-connected (VUCA-H) world.
Is Leicester City FC rewriting the rules of management?
Football clubs are not run in a consultative way and typically, the manager is all-powerful. That is, until the team hits a stretch of poor results and the board decides on a change. At Manchester United, David Moyes (July 2013 to April 2014) and Louis Van Gaal (July 2014 to May 2016) were only told of their dismissal after the decision was leaked to the media. That says much about the culture of the club. Much has changed following the departure of Sir Alex Ferguson (November 1986 to May 2013) who in his time there established comprehensive control. It will be interesting to see if Jose Mourinho, who was just appointed manager, replacing Van Gaal, will find success. Mourinho is also a strict disciplinarian, not unlike Van Gaal and Moyes before him. Will this management style work?
The approach adopted by Claudio Ranieri, manager at Leicester City since July 2015, is reflective of a new management style. He is much more consultative. Google, in a recent study, found that team performance was enhanced by psychological safety — team members feel safe to take risks and be vulnerable in front of each other. These findings are impactful, established theories on management. Our own research highlights of successful entrepreneurs reveal nine characteristics that are important, or what we call entrepreneurisms. The Leicester City team displayed many of these entrepreneurisms: self-efficacy, risk-taking, passion, learning, realism, persuasiveness, opportunism, innovation and energy-action bias. Defending deep, hoping not to concede an early goal and waiting for a counter-attack opportunity represent a risky but realistic strategy, given the resources at the club’s disposal. What a remarkable season they had. Only three defeats from 38 games and 23 wins. They conceded 36 goals, only one more than Tottenham Hotspur and Manchester United, which had the best defensive record.
A culture change is also underway at Real Madrid, where Rafael Benitez (June 2015 to January 2016) was replaced by former star-player Zinedine Zidane. Although not in command for the full season, Real Madrid have done well, winning the 2016 Champions League final against Atlético Madrid and finishing behind Barcelona in the Spanish La Liga. Outgoing manager, Benitez, had a reputation for being a control freak, which was resented by the players. Zidane brought back the fun of the game and seems to have convinced Cristiano Ronaldo to abandon his plan to leave the club.
What is entrepreneurial management?
It starts with having the right people in the organisation with a shared vision of where they are going. Most startups only have a vague idea of what they are trying to do, which gets refined over time, through what we call a business frame. The leadership needs to provide appropriate motivations to their people. These motivations take the shape of policies, procedures and technologies, which we call the infostructure. Adopting the appropriate entrepreneurisms and putting in place the infostructural motivation will enable companies to move past pocket initiatives and energise the entire organisation.
Anwar Jumabhoy is an author and speaker on bringing entrepreneurship into large organisations
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