Business Week's inspiring business speak for private equity execs

[Nords]

I couldn't decide whether to post this on "Young Dreamers", "Fire and Money", or even "Health and ER"... so I defaulted to "Other".

"Perform or Perish"

With these quotes, who needs the article? The irony of the following quotes, and the linked story, is that Business Week thinks these execs are all doing a great job. For somebody, anyway.

"It will be survival of the fittest for employees," says Robert Finkel, founder of Prism Capital, a Chicago-based private equity firm.

"We expect CEOs to exceed our plan, and we talk to them daily or every other day," says one chairman and CEO of a private equity firm. "They're under a microscope."

"I'm not sure he can go faster; he has already taken the floorboard out of the car," says Griffith. But he also makes it clear that Clarke won't be cut much slack should the economy weaken.

And two sentences later:

" Paul "Chip" Schorr, a senior managing director at Blackstone, seems even less inclined to ease up: "I think they can go faster," he says of Clarke's team. "They're a couple of years ahead already, so why not?"

… CEOs who bring "hard" qualities such as aggressiveness, persistence, insistence on high standards, and the ability to hold people accountable are significantly more likely to succeed. Those who offer primarily "soft" skills that are often effective at public companies—like listening, developing talent, being open to criticism, and treating people with respect—are unlikely to work out. Says Smart: "Successful private equity CEOs are cheetahs."

"You're ahead of plan," Clarke concluded at the end of the presentation. "And we want more."

"You can't guarantee people jobs in this world," says Jo-Anne Kruse, Travelport's executive vice-president for human resources. "We are here to manage the cost and productivity of labor." The straight talk, she says, should be comforting. "It can be taken as a very negative thing, but I don't believe that's what it is," says Kruse. "If you're in a financially healthy company, you know your check will clear."

"I've intentionally made a team that will not accept the possibility of failing," he says. Now Storch is setting his sights on the rank and file, who wear badges pledging that they're "Playing to Win." Laggards "have got to go," Storch told a group of store managers recently. "If you don't get rid of poor performers, they turn into your biggest problem."

How one hard-charging exec got ahead of those pesky employee expenses:

][Petrovich's] first accomplishment was her most audacious: persuading hardened workers at the company's main factory in Oshkosh, Wis., to sign a new United Auto Workers contract. Workers resigned themselves to a 33% cut in wages and benefits. It was bitter medicine. "Employees are angry about the wage cuts forced on them, and they will be angry about it until they die," says one former employee who asked not to be named.

Oh, but that doesn't strike fear & trembling into the hearts of the execs as much as this:

Petrovich also attacked expenses by forcing executives to fly economy instead of business class and setting dollar limits on hotel costs.

"She's very demanding. You can't hide from [Petrovich]. If you're not performing, she'll find you."

Clisch says he took just one half-hour nap—on Saturday afternoon—and finished the project at 11 p.m., nearly 50 hours after he had begun. But Petrovich is toughest on her senior managers. In an August, 2006, presentation to a trade group, she noted that she had changed six of the seven top executives who reported to her. Today, four of those recruits are gone. "The executive turnover rate is very high—the highest I have witnessed in over 25 years in industry," says Daniel H. Burns, a former vice-president for operations who left AxleTech earlier this year. Says Petrovich: "Most senior leadership departures in private equity are driven by an inability to perform at the highest standards expected for value creation."

And my "favorite":

When one manager offered soft goals, Demetriou snapped: "Are we going to have negative synergies? Raise your stretch targets!" When another confessed he had ordered too much material, Demetriou seemed incredulous. "It just blows my mind," he said. "This is a page you should put up in your offices and get pissed off!" And this, evidently, was a good day. "We actually had a great quarter," says Demetriou after the day-long session. "I just felt it was my responsibility to dive into these guys." Adds one employee who has seen Demetriou in action many times before: "People got off easy."

I joke that I've never had a real job, and thank goodness for that. But if you've ever worked for, or even with, these people then you have my sympathy.

I cancelled my Business Week subscription, too…

 

[REWahoo]

Dammit Nords, stop posting that crap! I'm gonna to have nightmares tonight, I just know it...

 

[Ed_The_Gypsy]

I have in mind creating a company run like a pirate ship: everyone gets a share and everyone gets a vote. I think we could tear up the road. There are entirely too many managers and executives in the world.

 

[cute fuzzy bunny]

Clisch says he took just one half-hour nap—on Saturday afternoon—and finished the project at 11 p.m., nearly 50 hours after he had begun. But Petrovich is toughest on her senior managers. In an August, 2006, presentation to a trade group, she noted that she had changed six of the seven top executives who reported to her. Today, four of those recruits are gone. "The executive turnover rate is very high—the highest I have witnessed in over 25 years in industry," says Daniel H. Burns, a former vice-president for operations who left AxleTech earlier this year. Says Petrovich: "Most senior leadership departures in private equity are driven by an inability to perform at the highest standards expected for value creation."

In the process, Petrovich destroyed any long term strategic value the management team may have offered, due to both excessive high speed turnover and by making all the managers tactical as they attempted to cut each others throats to preserve their jobs.

Anyone of particular value was wasted as they spent most of their time paranoid and worrying about short term issues. This strategy sort of works with sales people in jobs that dont require a lot of expertise. Not in many others.

I always found some benefit to employees feeling like they needed to try a bit harder, but none in people worried about losing their jobs under the heel of a tyrant.

 

[Texas Proud]

Just reading what was posted here.... reminds me of Enron.. they fired the bottom 10% of the company every year NO MATTER HOW GOOD THEY WERE.. you did not want to be at the bottom...


And it reminds me of where I used to be in my megacorp... it was a group that wanted everybody to put in 80 or more hours... all the managers were workaholics and thought your should be also... it did not matter that you produced more than others did on your 50 hours... just think what you could do if you worked 80!!!

The turnover was in the 30 to 50% range for the past 7 years. I just talked to someone Friday afternoon and even though the group was sold to another company they said it has gotten worse.. but he said he has to stick it out since he is in his early 60s and does not yet have enough to retire...

The other funny part is the stupidity of management... we have put together our budget for next year... we had to do it 'bottom up' and justify everything we spend... it totals $3.5 billion... but after being presented to management they say 'cut $200 mill'... now, a lot of what we are spending is contractual or not able to cut... there is not $200 or 'real' saving to be had... but who cares... make it a 'management' challenge as we KNOW you can do it... except that means we do not do the necessary preventive work so we do not know when something is going to break and cost us 10 to 20X more to fix...

 

[Sandy]

These managers are scary. I can't imagine what makes them think this is effective practice for anything longer than a few weeks. I am always amazed that people with this style/personality get these leadership j*bs - in every type of business.

The other funny part is the stupidity of management... we have put together our budget for next year... we had to do it 'bottom up' and justify everything we spend... it totals $3.5 billion... but after being presented to management they say 'cut $200 mill'... now, a lot of what we are spending is contractual or not able to cut... there is not $200 or 'real' saving to be had... but who cares... make it a 'management' challenge as we KNOW you can do it... except that means we do not do the necessary preventive work so we do not know when something is going to break and cost us 10 to 20X more to fix...

That sounds exactly like our state goverment's budgeting process.

 

[bssc]

The other funny part is the stupidity of management... we have put together our budget for next year... we had to do it 'bottom up' and justify everything we spend... it totals $3.5 billion... but after being presented to management they say 'cut $200 mill'... now, a lot of what we are spending is contractual or not able to cut... there is not $200 or 'real' saving to be had... but who cares... make it a 'management' challenge as we KNOW you can do it... except that means we do not do the necessary preventive work so we do not know when something is going to break and cost us 10 to 20X more to fix...

When I was at a hospital, we always put 10 to 15% more in the budget so that management could cut it. If we were lucky, they would not cut as much as we expected so we could come out ahead. And management felt that they were duty controlling costs.

 

[chinaco]

Funny thing... I have worked for aggressive companies and companies with a less aggressive postures towards people. The least aggressive company retained the most employees and is financially one of the strongest... there is probably a lesson there!

Personally, even with more laid back companies, I have always worked like my job depended on it. I am wired that way.

 

[Texas Proud]

When I was at a hospital, we always put 10 to 15% more in the budget so that management could cut it. If we were lucky, they would not cut as much as we expected so we could come out ahead. And management felt that they were duty controlling costs.

You would think... but that is why we did a 'zero budget' at first... to get rid of the fluff..

Most of what we spend is fixed (we are running the real estate of the company), such as rent, depreciation, utilities (mostly), and cleaning..

yes, we can clean less and save, do less maintenance and save (until the major break that disrupts actual business)... but there is no fluff.. you just have to decide what not to do.

 

[donheff]

Makes you glad to be ERd doesn't it? With the walking wounded these jerks foster, it is a wonder that there aren't more corporate versions of Dillon and Kliebold taking out some of their front offices.

 

[cantlogin]

Makes you glad to be ERd doesn't it? With the walking wounded these jerks foster, it is a wonder that there aren't more corporate versions of Dillon and Kliebold taking out some of their front offices.

Ain't dat da truth.

 

[clifp]

Makes you glad to be ERd doesn't it? With the walking wounded these jerks foster, it is a wonder that there aren't more corporate versions of Dillon and Kliebold taking out some of their front offices.

Not that I am advocating any of this but... It is pity that when people go Postal at at workplace, it is alway the low level worker bees who get shot and not the guys who induce the stress.

 

[cute fuzzy bunny]

You wanna match up lists and take a trip to Santa Clara?

 

[Brat]

CFB my DD works for a private investment firm in your part of the world which has a GREAT culture and manages funds with among the best returns in the industry. She is blessed indeed.

 

[cute fuzzy bunny]

Theres a required combination. Great leadership is a triangle involving a combination of eliminating doubt, creating emotional investment, and envisioning a path to success for the organization and its people.

A lot of people simply cant do one or more of these, so they approach it with the only tool they have...fear. They create doubt, they create an enormous amount of improper emotion and their path to success is 20 more hours a week and 20% more of whatever simple goal is evident. Rinse and repeat until people start breaking and then replace them.

Some people are really great at one or two but fail on the third. That can create really nice places to work that go out of business because people arent emotionally invested or have an obvious, navigable series of destinations.

Part of it is an invasive general culture that has removed most of the emotional investment by making all people replaceable and outsourcing jobs. When companies stopped wanting to employ us for life and employees wanted to work for the mothership until they retired, a critical cog fell out of the machine.

People who feel ownership and engagement, certainty in their direction and trust in those around them, and knowledge of where they're going and what they're supposed to do, along with the power to effect progress and change...can do an awful lot very effectively in a very short time.

 

[Sandy]

Theres a required combination. Great leadership is a triangle involving a combination of eliminating doubt, creating emotional investment, and envisioning a path to success for the organization and its people.

A lot of people simply cant do one or more of these, so they approach it with the only tool they have...fear. They create doubt, they create an enormous amount of improper emotion and their path to success is 20 more hours a week and 20% more of whatever simple goal is evident. Rinse and repeat until people start breaking and then replace them.

Some people are really great at one or two but fail on the third. That can create really nice places to work that go out of business because people arent emotionally invested or have an obvious, navigable series of destinations.

Part of it is an invasive general culture that has removed most of the emotional investment by making all people replaceable and outsourcing jobs. When companies stopped wanting to employ us for life and employees wanted to work for the mothership until they retired, a critical cog fell out of the machine.

People who feel ownership and engagement, certainty in their direction and trust in those around them, and knowledge of where they're going and what they're supposed to do, along with the power to effect progress and change...can do an awful lot very effectively in a very short time.

Very well said.

 

[Eagle43]

Y'all do remember Chainsaw Al Dunlap?
CHAINSAW: The Notorious Career of Al Dunlap in the Era of Profit at Any Price. - Review - book reviews Washington Monthly - Find Articles

a snippet: IF THE AL DUNLAP OF Chainsaw were a fictional character, he would be dismissed as a figment of bad writing, a one-dimensional caricature: He capitalizes on his notoriety for mass layoffs by writing a book called Mean Business. He seems to revel in firing people. He is fond of telling visitors, "I just love predators. They can't just call up room service when They must go out and hunt and kill to survive." An egomaniac, he screams at and purposefully humiliates his employees, including top management. He has a personal life to match: He cut himself off from his family, abused his first wife, and was stunningly stingy in child support payments to a son from his first marriage.

According to a Slate article, everyone who deals (dealt) with Dunlop loses, with the exception of the shareholders. He takes pride in laying off employees and could care less about the effect upon their lives. And, the stock rises and rises, even if the company's product(s) suffer.

Al Dunlap - By David Plotz - Slate Magazine

REW is right; this might interrupt sleep. Oh, but wait, I don't need to suffer a-holes anymore. zzzzzzzzzzz!

 

[cute fuzzy bunny]

07/06/98 HOW AL DUNLAP SELF-DESTRUCTED

The 'rest of the story'...

 

[Nords]

The 'rest of the story'...

Remember when Business Week would applaud Chainsaw Al's techniques? Neutron Jack? Enron, the power-distribution company of the future?

I think what I object to the most about Business Week is their cheerleading. Today they're applauding these private-equity execs for their bold thinking, and tomorrow they'll be picking over the post-mortem ashes and telling us how far over the line these people went.

Or, in the case of guys like Welch, hiring them as [-]tutors[/-] columnists...

 

[travelover]

...........Or, in the case of guys like Welch, hiring them as [-]tutors[/-] columnists...

Yea, that guy makes me gag. At MegaMotors we had a Jack Wanna Be that instituted the mandatory 10% unsatisfactory performance reviews, all the while packing his own golden parachute.

 

[saluki9]

Remember when Business Week would applaud Chainsaw Al's techniques? Neutron Jack? Enron, the power-distribution company of the future?

I think what I object to the most about Business Week is their cheerleading. Today they're applauding these private-equity execs for their bold thinking, and tomorrow they'll be picking over the post-mortem ashes and telling us how far over the line these people went.

Or, in the case of guys like Welch, hiring them as [-]tutors[/-] columnists...

Forget the article on private equity, I'm canceling my subscription because the new format sucks.

It looks like The Economist and they took away everything that isn't hard business news. If the comments on their website are representative it looks like I'm not the only one.

 

[Nords]

Forget the article on private equity, I'm canceling my subscription because the new format sucks.

The ads are bigger and the print is even smaller. I'm not that presbyopic but I was squinting with my 2.00s and holding up the 1.75s for an occasional boost.

Every time they change their format, people bitch & moan and carry on as if the world has ended. (Well, I guess it has for me.) Yet they never seem to reduce their prices or need to do anything else to attract more revenue. I think they've attracted more revenue this time by giving more space to the advertisers...

I've been a subscriber since the late 1970s. I don't think they care, and I don't think they have to.

 

[cute fuzzy bunny]

The ads are bigger and the print is even smaller. I'm not that presbyopic but I was squinting with my 2.00s and holding up the 1.75s for an occasional boost.

Just be thankful you arent raising a baby right now. All baby product instructions and labels are written in 2 point fonts for 20 year old eyes. I've had to break out the magnifying glass a couple of times to figure some stuff out. Once I had to use the little embedded ultra magnifier lens in the magnifying glass to read the serial number off the crib to register it.

 

[Nords]

Just be thankful you arent raising a baby right now. All baby product instructions and labels are written in 2 point fonts for 20 year old eyes.

Yeah, I've noticed that. But I've been thankful at not raising a baby for over a decade now!

I wonder how grandparents feel about this 2-point-font trend...

 

[cute fuzzy bunny]

Hmm, my dad hands it to me and says "What does this say?".

I guess *i'm* the magnifying glass.