Posted by: Diane Brady on January 14
Here is a news item from my colleague, Aili McConnon:
Even though executive recruiting giant Heidrick & Struggles announced in December it would reduce its global headcount by 10-15%, the Chicago-based firm is still doing some hiring and capitalizing on the downturn to lure top talent from rivals.
John Wood, a partner at privately-held firm Spencer Stuart, is moving to publicly-held Heidrick & Struggles. At Spencer Stuart, Wood, 55 did 85 CEO searches in the last 10 years, and helped place Douglas Conan, the CEO of Campbell Soup, William L. McComb, the CEO of Liz Claiborne and Mark P. Frissora, the CEO of Hertz. At Heidrick & Struggles, he will be a vice chairman focused on CEO and board member searches, typically the most lucrative area in executive search.
Wood says he made the move because of Heidrick’s CEO L. Kevin Kelly. “Kevin’s vision of how this business model is evolving is very exciting,” he says. “One of his comments to me is that this is a fairly antiquated business model and doesn’t acknowledge the impact of technology on CEOs, executives and their businesses.”
In December, the two publicly traded search companies Heidrick & Struggles and Korn/Ferry International said they saw the search business drop off dramatically in November. Heidrick said new searches or “search confirmations” were 20% below expectations.
At Korn/Ferry, meanwhile, new searches shrunk by 40-45%. Privately-held rivals Russell Reynolds, Spencer Stuart and Egon Zehnder did not fare much better, according to analysts.
But Wood’s move and the news today that Yahoo! has named a new CEO, Carol Bartz, a search that Heidrick & Struggles conducted, indicate business may be not be booming but restless executives are helping it along.
Posted by: Nanette Byrnes on January 13
The bad news just keeps getting worse for companies that offer workers a traditional pension plan.
According to pension experts at consulting firm Watson Wyatt, companies with defined benefit pensions are going to have to come up with $109 billion in cash to shore up their pension plans this year. And another $103 billion next year. That's up from $38 billion in 2007.
Plans with assets worth less than 80% of their liabilities (and there will be plenty of them) will be hit with an additional $3.2 billion in penalties.
The main culprit is sharp losses in the investment pools set up to pay these obligations. But recent changes in accounting rules have added to the pressure, forcing fund manager to quickly mark those assets to market prices and fill shortfalls.
Last week consulting firm Mercer published an estimate that companies will suffer a $70 billion earnings haircut due to their pension plan investment losses.
But while down earnings hurt, doling out precious cash is much more painful these days. Especially for strapped companies finding corporate credit as rare these days as a ticket to the inauguration.
The new administration won't have long to settle in before companies come calling looking for pension relief. Employers want changes to the new rules pushing them to fund up quickly. Their primary goal: slowing the rate at which assets must be marked to their current dismal levels.
Such changes won't erase the problem entirely. Employers would still have to pay a big pension bill: $68 billion in 2009 and $87 billion in 2010, Watson Wyatt estimates.
Without some relief, pension plans are in jeopardy the experts warn. “As contributions jump, employers may be forced to make tough choices to cut costs," said Mark Warshawsky, director of retirement research at Watson Wyatt. "We hope that with more temporary funding assistance, employers will still be able to provide defined benefits plans and their employees will continue to enjoy retirement security.”
Posted by: Emily Thornton on January 12
Many managers make the mistake of believing that innovation is something they can only afford during the good times. They limit their definition of innovation to boosting investment in potentially blockbuster products. To many, that’s a luxury they can not afford when times get tough.
But when I spoke recently to David Silverstein, CEO of Longmont (Colo.) consultancy Breakthrough Management Group, for our recent story on The New Rules, he argued that innovation is more akin to management practices like Six Sigma than many might think.
Why? Because both Six Sigma and innovating are about problem solving. So he encourages executives to innovate in both good times and bad. By using tools of innovation, Silverstein argues, managers will increase efficiencies and find ways to cut costs potentially even more deeply.
Here are some of his thoughts on the differences and similarities for anyone who is interested:
Q: What do you consider innovation?
A: We confuse innovation with creativity versus other ways to problem solve. Ultimately, innovation isn’t just figuring out something better. It about how to do something better by doing something different.
Q: What would be an example of how innovation achieves results similar to Six Sigma but in a different way?
A: I’ll give you a simple one. Take a company that makes paper. The paper has got to be dried out. And the last couple of years the paper industry has been getting killed with high energy costs. The Six Sigma approach to solving this problem is to figure out the optimal temperature of the heaters; the optimum speed for the fan; and how far the fan should be from the paper. But another way to attack the problem is to say, hey, let me use tools of innovation. And look at how they dry things out in other industries. So let’s talk about how the orange juice industry dries out oranges. They use a chemical. And low and behold, once you look, you discover that you can use that chemical to dry paper for one tenth the cost.
Q: Are there any potential advantages to using tools of innovation instead of Six Sigma?
A: Innovation is about finding a solution out of the box. So tools of innovation can help you cut costs even faster and indoctrinate your company into innovative thinking so that when the economy does turnaround you’ll be in a much better position to grow. People will be much more accustomed to looking outside of your industry and your company and thinking differently. It’s taking a much broader perspective of what innovation really means.
Posted by: Jena McGregor on January 10
The economy is in sorry shape, and come nine days from now when the inauguration occurs, there will be another group of people out looking for work: former Bush administration officials. One place they may have less luck? Corporate boards.
According to a new study in the Academy of Management Journal by Richard H. Lester of Texas A&M and colleagues from Arizona State and Tulane Universities, which my colleague Nanette Byrnes wrote about here, the Democratic majorities in the Congress, Senate, and executive position at the White House suggest Bush's former officials will be in less demand. "Our research reveals that if a party is shut out of both Congressional houses plus the executive branch, as Republicans will be," said Lester in a statement, "its members' chance of joining the board of a large corporation is about 30 percent less than it would otherwise be." In other words, the relationships and political sway these officials bring isn't as valuable without their party in power.
Still, the researchers note that despite that dip, recruitment will still be much greater than what it was several decades ago. They cite Korn/Ferry International numbers that show that in 1973, just 14% of large corporate boards included former high-level government officials. By 2003, that number had increased to 59%, even though the average number of outside board members had decreased, unfortunately, from 16 to just nine. (The most recent number puts about 53% of corporate boards with a former government official.)
Also, the researchers find--and this is hardly surprising--cabinet members like Condoleezza Rice or Elaine Chao will be most likely to find director spots. The study showed that former cabinet members were more than twice as likely as former senators, and more than five times as likely as former representatives, to be appointed corporate directors between 1988 and 2003, the 16 years covered by the research.
Interestingly, eight of the 11 former officials who were appointed to seven or more boards were cabinet members, as were all of those appointed to 10 or more. The former government official with the most board appointments, the study found, was Reagan Secretary of Labor Ann D. McLaughlin, who was on 13 boards at the time the research was performed.
Posted by: Jena McGregor on January 10
As the stunning frauds at Indian tech outsourcer Satyam and by Bernard Madoff shock the investment world, many business executives believe it may not be the last. Sixty-three percent of respondents in a recent Deloitte Financial Advisory Services poll expect accounting fraud to increase in the next two years. "Smaller paychecks, reductions in employee headcount and internal controls, as well as diminished morale, are just a few factors that can open the door to fraud in a down market," said said Kerry L. Francis, United States Chairman of the Board for Deloitte Financial Advisory Services LLP, in a statement.
Perhaps even more surprising, just 46 percent of respondents said their organizations have set up protocols for conducting investigations into accounting fraud. And just 39 percent think fraud awareness training would assist their prevention efforts in the current downturn, while only 20 percent think an expansion of internal audit monitoring would do the same.
These executives seem either far too trusting of their colleagues (what do the other 54 percent do when there's suspicion of audit fraud?) or too suspicious of how they'd react just because their paychecks go down. What does everyone else think? Do you think a wave of accounting fraud and irregularities will turn up as the economy worsens? Or will the ebbing economic tide just reveal those places where it's already occurred?
