Mean Business

Rating:
Summary: Great at Exposing Stalled Thinking: Weak for Best Results
Review: I find it challenging to review this book, because it has some outstanding points in it. At the same time, the author's philosophy is one that I strongly diagree with based on many years of consulting experience and research. Whenever Mr. Dunlap is talking about the procrastination, wishful thinking, and "do nothing" approach of the managements he followed, Mr. Dunlap is superb. I have met some of these people, and also found their management styles to be deficient. Management has responsiblity to look, listen, and sense how well it is serving its customers, employees, shareholders, suppliers, and the communities the company services. Having diagnosed what needs to be done, good management then does something effective to make a change. Then management monitors the results and keeps making changes, until the correct outcomes follow. The people who preceded Mr. Dunlap seemed to have lived in a fairy tale world of reorganizing the internal perceptions and jobs, but doing little to affect the world external to the corporation. To anyone who wants to see how management can delude itself, Mr. Dunlap has given us valuable case histories. On the other hand, I think he is totally wrong in putting shareholders first (even if we assume that shareholders deserve a greater reward than any other stakeholder group). My experience has been that shareholders make much more money (near-term and long-term) when all stakeholder groups prosper. For example, you can make more money for shareholders by creating better products and services than you can by just reducing costs in the near-term. Our research has shown that the vast majority of companies that do large cost reductions like those Mr. Dunlap has done underperform the stock market compared to industry peers (and the market averages) after 18 months has passed. I think Mr. Dunlap was wise to sell his businesses as soon as possible after the cost reductions were over. A different management style was then needed to create longer-term and larger prosperity for shareholders. I, too, have worked in the paper industry (as a consultant) and I find the same principles apply in paper as elsewhere: There are ways to create more for everyone. But first, you have to look for them. In his haste, I fear that Mr. Dunlap has missed seeing the larger opportunity for his investors. For example, the best reason to achieve a higher stock price is to then use that stock price to create even more advantages for the shareholders (such as buying new resources less expensively, having more financial flexibility to pursue opportunities, and growing earnings and cash flow faster). If you would like to know more about this point, read my article in the Fall 1998 issue of DIRECTORS & BOARDS called "The Benefits of Having a Higher Stock Price."