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Managing Your Company To Death
puppetman writes "This weeks I, Cringely is a frightening monologue on the plight of over-managed companies: VC's and professional managers who are looking to make a quick buck, even if it consigns the company to the rubbish heap. He praises companies like Oracle and Sun because the founder still runs the company, and is in touch with the core of the buisiness. He also makes an interesting aside about the founders of the Canadian company, Research in Motion (makers of the Blackberry) and their personal contribution of $120 million for research into particle physics, to illustrate what happens when technical expertise and business success can lead to."
He praises companies like Oracle and Sun because the founder still runs the company
The founder's presence is not a guarantee at all for the flourishing of a company - how many companies (ok, most of them are the usual derelict dotcoms) have evaporated into thin air in the last two years despite the founder still leading the company ?
And what about cases like CMGI, where it would've probably a better idea to get rid of the founder (David Wetherell) a long time ago ?
Just my $0.02...
i am a management student - cringely has got a point. managers are only interested in their stock options / bonuses while they are still at the company. it's only *rational* that they think short term. in a speculative environment, shareholders may not even care about the longer term (look back at the last few years). the solution should be to make management's incentives longer term. e.g. stipulate contracts which delay the stock related payment of a manager for X years after he has left the company.
>He praises companies like Oracle and Sun because >the founder still runs the company, and is in >touch with the core of the buisiness.
Anybody forgot to mention Microsoft?
Take Apple. Love or hate Steve Jobs, Apple tends to work as a company from the consumor point of view because everything has been thought of. From the Australian stone floors in the bathroom of Apple Retail Stores, to the brand dress on boxes and the look of OS X... everything works together.*
(*Note: Not to say that it all works perfectly, but for the most part, it does work)
Compare Apple to one of those companies that are ran by comitte. I would say Direct TV is a great example. They are in the middle of an access card swap and my DirectTV/TiVo has a banner on the screen telling me to 'Replace your access card now.' Only one problem, I haven't received it in the mail yet, and I can't clear the banner off the screen without replacing the access card.
I called customer service and was told that my card was mailed out on Oct 11, but they couldn't clear the banner off my screen at all. This, to me, is a symptom of a company being run by a bunch of suit wearing monkies-
Security Manager - "How are we going to make sure our moronic customers don't just throw the new access cards away?"
UI Manager - "Simple, we just annoy them with a big message across all their TV screens that won't go away until they replace the card."
Security Manager - "Great! But what if they don't have the card yet?"
UI Manager - "Fuck Em! It'll show up SOMEDAY."
As such, I have called customer support every hour, on the hour and asked them to clear the screen.
"But most just felt an increasing ache as their company slowly changed into something they no longer liked."
This is why I left Intel. Plain and simple. When I suddenly became a mini-manager [not by choice, I assure you] and still had 3 managers immediately above me (who had, in turn, 4 or 5 more above them) I knew it was time to stop drinking the Kool-Aid and get the fuck out. I took a nice separation package and hauled ass without looking back.
Of course... now I've said it out loud and the Blue Men will come hunt me down or something...
- I am made of meat.
Why? Stock ownership on the stock market more closely resembles the activity of a sports betting syndicate than actually owning a company; most stock trading is not driven by an individual interested in a company but institutions interested in maximising return.
The people who actually care about companies are referred to as stakeholders these days - non-C*O level employees, customers, and the communities in which those companies do business. They all have an interest in the long term value of the company (much as sports fans care about thier favourite teams and the quality of the game). Stockholders don't.
The two problems with executives incentives are these:
1/ Anyone smart/devious/whatever enough to end up the CEO of a company like Tyco will likely understand very well how to screw the company (and owners, and stakeholders) for all they're worth. If you've hired someone who has a good understanding of the complexities of modern multinaitonal businesses and who is ruthless enough to, eg, fire thousands of people on your behalf, why would you assume that they won't look after number one? It's the rational thing to do.
2/ GTHe stockholder problem I alluded to above. Funds managers and VCs don't actually give a fuck if the company succeeds, nor do many investors. They care about maximising return, and if that means raping the company into oblivion, screwing staff, communities, and customers, they won't care - because they'll just shift their money elsewhere to someone who is doing it on their behalf.
Markets have become so efficient and rational in the short term, they're incapable of protecting the long term. And investors have gotten very good at socialising risks (bankruptcy, layoffs, etc) and keeping profits.
I'm not sure how you come off considering Apple to be one of the best off companies. Yes, they have managed to be successful and stay in bussiness thus far, though their marketshare number have shrunk as of late. However, they don't even compare to the real giants.
If you want to stay in the tech industry, Microsoft and IBM are two great examples. Both much, MUCH larger than Apple and neither run by a fanatical leader. Bill Gates did exert a great deal of control over MS, however it was still not his singular drive running the company, just his overall vision. IBM, well they just defince the faceless corperation. I bet even most geeks can't name their CEO.
It's much the same in other industries. Take General Electric. They are, by most measures, the biggest company in the world. They do everything from aircraft engines to lightbulbs to health insurance (really, they are my provider). They have so many divisions it would be impossable for a single person to control them entirely, even if they wanted to.
I think many Mac fans are so personally facinated with Mac products that they loose sight of the overall picture. Apple is certianly a successful company, of that there is no debate, but they are not a giant, and probably never will be.
Apple is to the computer industry somewhat like Mackie is to the audio industry. They both make quality products, and make money doing it. They both have a storng following. However, ultimately, both are small time players.
I've felt modern capitalism is moving to resemble fuedalism for a while; moreover, what we're seeing now, especially in the States, is the moral problem of capitalism Adam Smith warned about.
It is probably good for the economy for the same reason as it is good for the economy to decalare highly educated professionals as useless relics because they have passed 40 years of age. It is really funny to read an analysis by some Wallstreet bozo claiming a company is stagnant and not "young and dynamic" anymore based on the facts that the average age of the employees is a bit high and that a search on a select collection of online job indexes revealed that they are not constantly hiring alot of new people. The net result is that people looking for a job get rejected becaue they are too old or respond to a job advertisement that turns out to be an "Opportunity for an unpaid praktikum period" (like anybody wants to work unpaid for a few monts) which is another way of saying "we just advertised that job because management wants to fool the stock analysts into thinking we are a "young and dynamic" company so we brought you all this way to an interview to make you an offer we know you will refuse. Perhaps the management methods you describe are the legacy of the 1980s jukbond kings and takeover pirates?
Only to idiots, are orders laws.
-- Henning von Tresckow
I usually think Cringely does good research and has clear insights. This week, I believe he's got it wrong.
:-)
Companies do not exist to make traditions. Companies do not exist in order to secure basic technological research. Companies do not exist in order to provide decade long careers.
Companies exist because you can create more value by putting a number of people under one umbrella than by having everyone in the world make a freelance living. It's simple Adam Smithian division of labour, no more and no less.
It is always temptimg to decry 'short-term'policies. But the fact remains none of us has a long term crystal ball. Five year plans never happen. Short term thinking is absolutely rational.
I'm sure it's the case that many 'professional management' teams do a bad job. It may even be the case that they do a worse job than founders motivated by enthusiasm might have done. But there's no inherent caasal factor there. It may well be that Cringeley's unsubstantiated charge of cronyism creates worse teams than some more meritocratic proces might. But he does not demonstrate that.
Prodcutisng industries all work like Hollywood - one success pays for multiple failures. No-one really understands what will create success. All we are seeing is that in a tight economy people tolerate fewer failures before they become risk averse. That's natural, and rational. It'll swing back again.
And I am not an MBA
I disagree with his assertions that maximizing shareholder wealth at the expense of employee satisfaction is regarded as a good thing in business schools. It is obvious that Cringely has never attended a business school. I am working on an MBA and this is simply not the case. Employee satisfaction and well-being is consistently associated with success.
Yes, maximizing shareholder wealth should be a goal. Shareholders are the owners of the company. If they aren't satisfied with the direction of the business, then you've got problems. Your board and management team don't mean anything if the shareholders decide to dump them.
Cringely overestimates managerial influence on the companies that he mentions, but disregards other factors such as economic conditions and competition. Most of those companies simply could not compete with industry leaders.
Of course, I never take Cringely seriously...
Are the world class managers actually MBAs? Does a MBA make you to some "liege lord"? This is the assumption most aspiring MBA seem to have.
Let's have a look at some world class companies.
The management board of Daimler-Chrysler:
1x Engineering and Economics
1x Engineering and MBA
2x Economics
2x MBA
2x Law
4x Engineering
John Palmisano, President of IBM, is has graduated with a Bachelor in social and behavioural sciences.
Louis V. Gerstner, Jr., Chairman of the Board, has a bachelor in engineering and a MBA.
The first non-engineer CEO at Sony was Nobuyuki Idei, in 1995. He graduated with a Bachelor of Arts in Political Science and Economics.
The president of Sony from 1989 to 1995 was Norio Ôga, graduate of Tôkyô National University of Fine Arts and Music.
The prime requisit of the best managers are very good social skills and a good judgement. A good knowledge of economics is plus, without doubt, but a good knowledge of the matter at hand, too.
Of course, this doesn't negate your quite correct observation, that there are several managers, which jump of the sinking ship, with their "golden parachute".
It makes me wonder, how many of those managers are MBAs.
"Between strong and weak, between rich and poor [...], it is freedom which oppresses and the law which sets free"
What a hoot! Scott McNealy has defined himself by being anti-microsoft instead of pro Unix/Solaris. Just google the guy. He never talks about Solaris, only about how bad Microsoft is.
Maybe if Sun brought some geeks to the front office, they could bring back some excitement to the Solaris community. Who knows?! Dare I suggest that Sun could even win a benchmark or even make a sale ???
I think the article is on target even if his examples aren't. Cisco is a classic example of the original visionaries being pushed out.
*Disclaimer - I have been unemployed for 6 months as a result of my company being bought and subsequently being laid off.
Sanity is the trademark of a weak mind. -- Mark Harrold
When a friend of mine quit his last job, the reason he gave in his notice was "because Dilbert isn't funny anymore." In his exit interview, he was asked what he meant by that.
I really like Cringley's article. That said there's something important that was left out:
The wealth of a business owner does not come from income but from the value of his or her stake in the business. Ultimately this wealth is "paper" wealth untill the company is sold.
That means if it is best for owners to sell, they'll "package" the company for sale (this often involves actually reducing the value of the company to a level that someone will buy it). What's more, a lot of the actions that appear shortsighted are acutally long term maneuvers to sell out. Closing down R&D to make your books look attractive is one way to do this. With businesses, "let the buyer beware" is the rule, not the exception.
One condition that universally sucks is when something happens that makes it appear that the owners of a company's wealth is at risk. Then owners pressure managers to make shortsighted decisions to protect their wealth and often attempt to prematurely sell the company. The results are often mass layoffs and the buyer gets a firm that is cancerous and consumes their company or personal wealth as well.
At present I own a company. I know my employees will not like it when I decide to sell it. I can't guarantee that they will all come out ahead, but I'll try my best. The reason I started this company was to build it up, and then sell it so that I and my fellow investors could get rich. My employees benefit by having great jobs and some, through ownership options, will be rewarded when the sale happens.
$G
-- $G
Then we went public, lots of money burned, but the product didn't fly high, and the grey-haired managers showed up. The VCs & large institutional investors that now controlled the company brought in management to wring as much money out of the company as possible. Since we weren't a high flyer the large investors didn't care about keeping us alive anymore, they just wanted as much money as possible extracted from it.
By this point I had bailed, I didn't like the way things were going. As fate would have it, I jumped from the frying pan into the fire, but that's another story.
It survived for a few more years. Pieces of the company were spun off & sold off. The large investors had gotten a sweet deal on stock, but had to hold it for a several years. A few months after they could legally sell it I noticed the company's stock skyrocket -- then drop .... for 3 days it rachetted up on low volume then dropped on high volume. Several times the outstanding share volume changed hands over those few days.
By the end of that year the company was dissolved
"Glory is fleeting, but obscurity is forever." --Napoleon Bonaparte
Since most MBAs lack domain expertise and since the much of the behaviour taught in business school is geared towards stripping a company of assets, I'd have to guess that you're better off without them.
Beta is broken and the link to classic doesn't work. Stop wasting our time or there won't be anybody left here.
Granted, there are plenty of examples of companies which went to pot because the founders were replaced by management-types. There are also plenty of examples of companies that made it because the founders were replaced by management-types.
It is obvious that you can't run a technology company if you don't understand technology, just as you cannot run Walmart if you don't have a clue what a department store is.
(Disclosure, I am an MBA.)
I have been providing services to high-tech companies for a decade, and my business has outlived those of most of my clients, and from my experience, the #1 failing point of companies is developing technology that is really cool but nobody wants, or developing technology that is really useful and not knowing how to make it into a real product. I can't tell you the number of companies I've worked for who have either never heard of a version freeze, or who freeze a version every month only to defrost it a day later.
Case in point, a good friend called me to ask me in what cases you should translate the user manuals to a different language, for example Portugese. He works for a small hw developer with real international sales. I said "well, you know how much you sell in Brazil, and your salespeople tell you how much more they might sell if people could actually use the product, and you can figure the cost yourself" (this is a system that costs hundreds of thousands of dollars; read, even one extra sale would justify the cost). I continued "You know, just like you figure out whether to add a feature to the product -- you figure out how much it costs to develop the feature, and how many extra sales it will make you over the competition, and then you know if it is worth it, right??" and he was like, "Uh, well, that is a different way of thinking about it. We kind of have a meeting and discuss what to put in the product and usually we are right." Yeah, but it turns out that they don't document the new feature and nobody uses it unless they call the help desk. Etc., etc. This is a company that has been in business 15 years and has had sales for more than 10 of those years and they just went through a first round of layoffs. The obvious only reason they are laying people off is because of poor management by the founders. They should be profitable by now but they are still living off of venture capital.
You talk about the dotcom boom as if it were some kind of freak accident, but it wasn't. The eager engineers who founded all these companies really truly believed that their ideas and products had added value. And it wasn't only dotcoms -- look at all the telecom and wireless stuff. The dotcom bust was what happens when all those tecchies working out of their garages get a hold of real money. Now they are back working out of their garages, and 1% of them will emerge with something that makes money. Why 1%? Because that is the percentage of leaders out there who can be geeks and managers and marketeers, or who have the common sense to get someone to fill the gaps they don't do themselves. If you are the kind of founder who can't give real power to people who make up for your shortcomings, your company will go belly-up even quicker than the companies with managers who don't understand technology but can at least doctor the numbers.
I'm a Gen-X Slacker, but I forgot I was one for almost 6 years. I worked my ass off for this company or that, trusting their management until I got my ass canned, when I'd get another gig paying twice as much. Well, last year the gigs ran out. If you're a Unix admin, you better damn well have at least a Masters in a technology field, 'cuz nobody's gonna look twice at you otherwise. Recruiters tell me there are 150-200 resumes submitted for every open position, and everyday a new tech company folds, or goes through a round of layoffs. While I'm in the top 10% based on my skillset and experience that means there's 15 to 20 people who are in line ahead of me. Some schmoe who spent the last six years figuring out Tetris was N-P for a sheepskin is gonna get the nod because all I ever did was flunk out of art school.
/., and drinking. So! Cram a little code, email the hell out of reviewers and tech news blogs, set up a website with credit card ordering information, et voila! Software company. There's probably an open source way to scam money from people with big iron and deep pockets, but I'm too lazy to think of it. Go think of it yourself.
In short, I trusted that someone knew what they were doing in the big corner office, and now I'm fucked. And it's all my own damn fault, because I forgot the work ethics that brought me into computers and technology in the first place. Time for some of that olde timey religion:
1) SLACK! The world does owe you a living.
Screw 80+ hour workweeks for fat checks. I want 10 hour workweeks for fat checks, and a reasonable assumption that the fat checks will keep rolling in with minimal effort. I don't mind hellacious effort up front... being a lazy sysadmin, I know ten hours of scripting and testing can lead to a hundred hours or more of prime goof-off time. (Or, as the case was, time to write more scripts and to string more cable for my corporate overlords.)
So, by putting in a lot of work that's actually just fucking around with the computer up front, I can spend more time reading comics, posting trolls to
2) If it's worth doing, it's worth DIY.
The suit-wearing weasels sold me out. I'll never trust another. "Professional Management" means "porfessional backstabber." Screw 'em. I will learn the fundamentals of business management from one of the many excellent books at my local library, used book store or web bookseller.
I will learn how to market what I make, and how to balance the books. I will learn how to grow a company. I will never hire employees, but I will pay co-conspirators, and I will figure out a way to make this legal. I will figure out how to run a health insurance/HMO co-op with local small businesses. I will do all this with the meager funds from my teensy, just-above-minimum-wage non-computer job, and I will make any interested Venture Capitalists drink a bottle of robitussin, and I will laugh at them as they hallucnate and tell them to get the hell out. MY company, damnit!
Because if it's worth doing, it's worth doing my own damn self.
But first! I will learn Java and low-level C programming, for the things I am now interested in require that knowlege. I'll fake the rest as I need to. In a year, I'll come back to let you know how well I've succeeded. (I can't fail, as I'm already at baseline failure state right now. Any change is an improvement.)
Slack!
SoupIsGood Food
I now have a new respect for my profession (well, once I actually find a job). Everyone said "electrical engineers can do anything" and today you proved it.
:-)
Your control system model of the economy is dead on. After all, what isn't a control system? Economic systems have gains, oscillations, inertia, delays....
Interesting that you phrase it "cap" gains tax. Because essentially you would be implementing a lowpass RC filter with a capacitance dumping high frequencies to ground (the bottomless pit of taxes).
Sounds like a really interesting way to look at economics. Maybe someone should write a book about it.
...
It's not that I stop finding Dilbert funny, but I read a strip and am overcome by the icy grip on my heart of recognising that it depicts a situation that actually happened in my company
This actually happened. We were a shop doing embedded development hosted on a Unix platform. We got a contract to do ActiveX development for NT. I told my manager it would take XX man-months plus 4 months calendar (learning curve). I was actually told by my manager's boss to "work smarter, not harder". (I should have quit right then, but I have a wife, 2 kids and a mortgage).
Guess what? The project took exactly 4 months longer than they bid it. Surprise, surprise.
Fascism starts when the efficiency of the government becomes more important than the rights of the people.
Rounds of layoffs, stifling of any creativity. It seems like there's an overwhelming drive towards mediocrity, and an actual fear of high performers, because they would be hard to replace. Oh yeah, and Open Source, which was our darling for a few years, saving us big time, and performing hard is now being replaced with W2K. It's better to run mainstream, so you can hire some MCSE balloon sculptor, than it is to do "great things". Bah.