domingo, 29 de abril de 2012
sábado, 28 de abril de 2012
Larsen Sees More Tornado Claims for Insurers
Kermit may be fined by the German government for product placement on a broadcast channel
Sorry, I could not read the content fromt this page.Former Murdoch Aide Rebekah Brooks Arrested
Kermit may be fined by the German government for product placement on a broadcast channel
Sorry, I could not read the content fromt this page.How to Get a Pay Raise (If You're a CEO)
Setting the CEO’s salary is one of the most important duties of a public company’s board. So CBS (CBS) directors decided to give Chief Executive Officer Leslie Moonves a $69.9 million pay package last year only after assessing the competitive market for senior executive talent. The board of directors, however, looked at companies that are, on average, more than twice as large as CBS and included many in businesses far afield from media.
Illustration by 731
Such lopsided comparisons aren’t unusual at U.S. corporations. To justify how much they offer CEOs, board compensation committees typically measure against the pay of CEOs at other companies. But they routinely pick larger companies, often outside their industry, that pay more and aren’t rivals for the same executive talent. “There is pretty straightforward evidence of cherry-picking, and it’s pervasive,” says Thomas DiPrete, a Columbia University sociologist who has studied the use of board-selected peers to set CEO pay.
In the 1980s and ’90s, when executive compensation rose dramatically and often angered investors, pay consultants sold many companies on the practice of benchmarking against peers. The idea was to compare compensation with that of similar-size companies in similar industries to determine a fair compensation level. The problem is that the choice of peer groups can itself seem arbitrary. Four separate groups of academic researchers have found what they consider to be evidence of bias in the peer groups that U.S. boards use to set pay. Another found no bias. None of the studies identify companies using skewed peer groups by name.
Illustration by 731
Intentionally picking better-paid peers “has been a big part of the ratcheting up of executive pay,” says Bill George, a Harvard Business School governance professor who’s a director at ExxonMobil (XOM) and Goldman Sachs (GS) and a former CEO of Medtronic (MOT). The adjusted average compensation of CEOs in the Standard & Poor’s 500-stock index rose to $12.9 million in 2011, or 380 times the average worker’s pay. That’s up from $625,000, or 42 times average worker pay in 1980, the AFL-CIO said in a report released in April.
Many directors “have incentives to make compensation decisions that are more favorable to executives” than to shareholders, says Lucian Bebchuk, a Harvard Law School professor who has researched CEO pay. One reason: Directors may not want to risk upsetting their board position or their relationship with a CEO, he says. Companies that use peer groups to help set compensation—one study found that 89 percent do—have been required to disclose them by the Securities and Exchange Commission since 2006.
Most companies vary pay based on performance, yet still use competitive peer data to determine the size of a CEO’s target compensation, set at the beginning of a company’s fiscal year. This includes salary, a bonus target whose final amount varies based on annual performance, and an award of stock or options. Directors at CBS measured pay for Moonves against that of CEOs at five other media companies, all of them larger by market value and all but one larger by sales. Directors also look at a bigger group of businesses in a variety of industries, such as IBM (IBM) and General Electric (GE). The median company on both lists is more than twice the size of CBS by both sales and market value.
GE had 11 times CBS’s sales, based on the latest figures available when CBS determined pay, while IBM had 14 times CBS’s market capitalization. Neither company compares itself with CBS in setting its pay. GE CEO Jeffrey Immelt had total compensation of $21.6 million last year, and former IBM CEO Sam Palmisano, who stepped down in December, had compensation of $31.8 million for 2011. CBS in a statement said benchmarking is “just one data point” it uses when setting CEO pay, which varies based on performance.
CBS’s corporate sibling Viacom (VIA), from which it was separated in 2005, uses almost the same groups of outsize peers. The median company on Viacom’s media-industry peer group is 56 percent bigger by market cap and more than twice as big by sales; the median company in its broader peer group also has more than twice Viacom’s sales and market value. Viacom said in a statement that it doesn’t set pay directly based on its chosen peers but “uses this information to get a broader perspective of overall compensation practices.” Sumner Redstone, who is executive chairman of both companies and controls them through a special class of stock, made a combined $41 million in pay last year. Viacom CEO Philippe Dauman collected $43 million.
Some companies measure CEO pay against executives in completely different industries—even as they gauge their corporate financial performance by looking within their own sector. Monsanto (MON), the world’s largest seed company and the maker of Roundup herbicide, compares its financial performance with DuPont, Dow Chemical (DOW), and other chemicals and seed-producing rivals. Its board also used to focus on these companies when they set executive compensation.
But since at least 2006, Monsanto’s board stacks up CEO Hugh Grant’s pay mostly against leaders at health-care companies such as Abbott Laboratories (ABT) and Eli Lilly (LLY). They’re among the best-paid on Monsanto’s list, including $24 million for Abbott’s Miles White and $16.4 million for Lilly’s John Lechleiter in 2011. Grant’s pay has risen from about $2.7 million in 2004, his first year as CEO, to $11.6 million in 2011. None of the 14 health-care companies Monsanto cites compares its CEO pay with the seed company. Monsanto in a statement said it’s at least as big or bigger than its median peer, that the group is diversified across nine industries, and most “are science-based and research-focused like Monsanto.”
Illustration by 731
Boards sometimes justify pay increases for CEOs simply by adjusting their peer groups. Northern Trust’s (NTRS) board added six companies to the list of businesses it deemed CEO-talent rivals in 2009. There weren’t enough asset managers on the old list, the Chicago bank and wealth manager said in explaining the decision to investors. “Only a small number of the current peer companies have a directly comparable business profile,” the bank said.
Left unstated was the impact government-imposed pay restrictions had on banks that accepted bailout funds during the financial crisis: Median pay among Northern Trust’s old peer group dropped from $9.2 million to $6.8 milion in 2008. None of the companies added to the list—five asset-management companies and a brokerage firm—were subject to government pay restrictions. Among them was BlackRock (BLK), the largest money manager in the world, which had just had the second most profitable year in its 21-year history. After the shift, CEO Frederick Waddell received a compensation increase to $11.9 million, from about $8 million the year before. The bank declined to comment about whether peer comparisons played a role in its pay decisions.
Illustration by 731
Two years later, 31 percent of shareholders voted against Northern Trust’s compensation program at its April 2011 annual meeting. The bank responded by increasing Waddell’s salary to $956,250, from $900,000, cutting his cash bonus to $1.6 million from $2 million, and long-term awards to $7 million from $8 million. Directors also dropped the six newcomers and returned to the old peer list, calling it a “more targeted” group.
That’s not necessarily bad news for Waddell. By 2011, most banks, including Northern Trust, had repaid their bailouts. Median CEO pay on the old list of rival banks for 2010 had risen to $12.9 million. Northern Trust said it believes the current peer list is “appropriate.” It declined to comment on the pay differences between the two lists. Since Waddell, a lifer at Northern Trust, became CEO in 2008, the bank’s shares lost 33 percent after dividends through April 25, compared with a 40 percent drop for the KBW Bank Index.
Four groups of researchers, including Columbia’s DiPrete, who looked at several years’ performance at 1,183 companies for a study published in 2011, found evidence that companies were probably cherry-picking better-paid peers intentionally, with three of them concluding that boards had no legitimate justification for doing so.
One group, led by John Bizjak of Texas Christian University, that looked at 707 companies, found that the amount of cherry-picking has tapered off since the companies had to disclose their choices in 2006. But another group, including Michael Faulkender at the University of Maryland and Jun Yang of Indiana University, finds the opposite in a working paper. It says that cherry-picking has gotten more pronounced since the SEC demanded disclosure. “Observing opportunistic peer benchmarking at other firms,” wrote the researchers, who looked at 763 companies, “those firms that did not engage in such practices may have begun to do so.”
The bottom line: Board compensation committees routinely set CEO pay based on comparisons to CEOs at companies that are larger or pay more.
Diller Duels With TV Networks at SXSW
Kermit may be fined by the German government for product placement on a broadcast channel
Sorry, I could not read the content fromt this page.U.S. Airlines Find Out We Really Want to Fly
The first quarter turned out to be rosier than expected for many U.S. airlines, with fare increases offsetting higher jet fuel costs and redeeming what could have been a dreary winter. What’s more interesting is the story behind the numbers.
Airline executives said demand has been strong and they expressed confidence the summer will bring continued throngs aboard planes. The companies have been relentless in their pursuit of capacity reductions (that is, fewer flights and planes) to cull unprofitable trips and to closely align aircraft sizes with demand. The effort has led to firmer pricing and the end of widespread discounting, with narrow fare sales deployed more surgically in 2012. “Since about two years ago it’s been a slow, steady economic recovery,” says Tom Trenga, US Airways’ (LCC) senior vice president of revenue management. “It gets a little better every month.”
Central to all this positive news for the airlines is us, the consumer. We really want to fly, and it shows. Yet isn’t unemployment still above 8 percent? Aren’t we all on pins and needles that the euro’s implosion is nigh? Don’t people talk about being underwater more often in Arizona than they do on scuba diving trips? Even the Federal Reserve seems to be of a mixed mind about just how good or bad things really are. What gives?
“From the economic surveys I’ve seen in the media, basically people are adjusting to this new slow-growth economy and getting on with their lives, and you can see some faith in the business community,” says Ray Neidl, a veteran aerospace analyst with Maxim Group, a New York investment bank.
One big source of demand for air travel is corporate America, which is sitting on a record cash pile of $1 trillion and is eager to stimulate new business. “The U.S. … continues to be really strong for us, and the premium cabin really drives that,” United’s (UAL) chief financial officer, John Rainey, said on a conference call on Thursday, referring to corporate travel bookings. ”People want to make sure that they’re out there talking to their clients,” says Megan Costello, managing director of the 2,500-member Association of Corporate Travel Executives (ACTE).
In its global travel forecast for 2012, American Express (AXP) told clients to expect steep jumps in business-class fares “as airlines take advantage of business travelers needing to be on the road to secure new accounts and market expansion where opportunities exist.” Michael Hilton, co-founder of Concur Technologies (CNQR), a travel-expense management firm based in Redmond, Wash., says his 15,000 client companies are optimistic that the economy has turned a corner. “There’s generally an optimistic and positive outlook from corporate America,” he said in a telephone interview. “People are investing to grow their businesses.”
Can You Be Friends With Your Boss?
A few years ago I attended a party that was broken up by the cops—and when it happened, I was sitting next to my boss. I’ve been invited to a boss’s wedding and gone to dinner with several more. Once, my boss’s boss invited a co-worker and me for drinks at a private social club to which he belonged because I mentioned that I’d always wanted to see it. (Actually, I think I said something like, “Take me to where all the rich people are!” and sent him an appointment reminder through Microsoft Outlook.)
I’ve always gotten along with my bosses and have enjoyed hanging out with many of them outside the office. But not all friendships are created equally, and there’s a distinct line I’ve never felt comfortable enough to cross. There are work friends and after-work friends. There are friends with whom you’ll discuss your love life, friends you approach for favors, friends you drunk dial, and friends you’ll invite into your home even when you haven’t showered and you’re wearing pajamas. Call me old-fashioned, but I just don’t want to watch a Will Ferrell movie and eat Chinese takeout with someone who could fire me.
To find out if I’m too casual or too rigid with my bosses, I decided to consult some experts. I asked Barbara Patcher, a business etiquette speaker, if bosses and employees can ever be friends. She immediately lectured me about improper relationships. “Are you friends with benefits? Cause that is not O.K.,” she said. (Lord, no. I’d never do that. At least not until Johnny Depp launches a magazine.) “What is the gender balance?” Patcher asked. “Is it male-female? That’s a little tough. What’s the age gap? Is it your immediate boss? If it’s a higher-up boss, they can get in trouble for having friendships with younger underlings. These are all questions that need to be answered.” Talking to Patcher really stressed me out. I’m impressed my boss and I can even have a conversation without a copy of the company harassment policy on hand at all times.
Angie Herbers, a professional HR consultant, told me not to worry, that being friends with a higher-up isn’t that big of a deal. “I actually encourage friendships between bosses and their employees,” she said. “People like to work with people they like, and if you can develop a friendship with your boss, you’ll want to be more productive. You’ll want to worker harder, and you’ll probably want to stay at the company.” Herbers pointed to Zappos Chief Executive Tony Hsieh as someone who develops close relationships with his employees. In the early days of his original company, LinkExchange, Hsieh made a point to hire friends and friends-of-friends, which made the long hours of startup business enjoyable. When he came to Zappos, he cultivated a similar culture and turned the online retailer into a workplace that’s so closely knit its employees now refer to it as the “Zappos family.”
But Zappos’s culture is unusual—so unusual that Hsieh once wrote a book about it—and for every employee who works in a low-key, anti-corporate environment, there are thousands more who toil in Office Space-type cubicles, surrounded by piles of TPS reports. There, befriending the boss might be a little more difficult. Although according to Linsday Cross, a writer in Fort Wayne, Ind., it’s still possible.
When Cross was 23, she worked as an office manager at a beer wholesaler and quickly became friends with a 27-year-old woman named Molly, who just happened to be vice president for sales. They both had children the same age, which meant that they had a lot of conversations about child care. They got along well, so they went out to lunch together, sometimes hung out after work, and quickly developed a regular, nonwork friendship. Then Molly promoted Cross so that she worked directly under her, a move Cross says “bothered some people who had also applied for the job internally. They thought she picked me because I was her favorite.” That made her work harder, which made her a better employee, and surprisingly, her friendship with Molly didn’t suffer for it. “She’s a very straight-forward person, so if she told me something wasn’t right and I had to do it over again, I knew that was something she’d say to me even if she wasn’t my boss,” Cross says.
Cross and Molly didn’t have many boundaries. But Thomas, 30, who works at a communications company in Dallas, has become friends with his boss’s boss—a relationship that requires definite rules. Thomas says his boss’s boss is significantly older than he is, but because he’s a single man with kids at college, he finds he has more in common with his younger employee than he does the married types who live in the suburbs. “We don’t have families to come home to at night, so we can do other things,” Thomas says. “We play pickup soccer together or go running, sometimes go out to dinner. But I’m not going to invite him to weekend parties.”
The weekend, it turns out, is the most common boundary that people designate in boss-employee friendships. There’s something about a Saturday dinner that’s different from one on a Wednesday. “I talk to my boss about my personal life more than I do some of my real friends,” says Caroline Coykendall, a sales representative for an insurance agency in Las Vegas, who is friends with her immediate manager. “But we’ll never have a ‘Hey, it’s Friday, let’s go get crazy on the Strip’ type of thing.”
O.K., so binge drinking in a casino is out of the question. But what about a lower-key activity, such as inviting someone over for dinner? While Patcher seemed to think anything I did would result in a Monica Lewinsky-style scandal, Herbers said that under the right circumstances, I could have my boss over for dinner. “But do you necessarily want that kind of friendship?” she asked. No, probably not. For one thing, I’d have to clean my apartment first.
Briefs
Wal-Mart Stores (WMT) may end up paying hundreds of millions of dollars to investigate allegations that it bribed Mexican officials if the government expands its probe into other countries, according to former federal prosecutor Amy Conway-Hatcher. Wal-Mart is examining claims raised by an April 21 New York Times story that said executives in Mexico paid more than $24 million in bribes to speed its expansion there, and covered up the results of an internal probe. The Department of Justice has opened a criminal investigation into the matter, a person familiar with the probe said. In the past year, the company has created a new global anti-bribery compliance post at its headquarters.
Robust demand for the iPhone in China fueled a 94 percent surge in Apple’s quarterly profit, to $11.6 billion. The country now accounts for 20 percent of the company’s revenue. Worldwide, Apple (AAPL) logged a 59 percent increase in sales during its fiscal second quarter. The stock jumped as much as 10 percent, to $618, on April 25, the first day of trading after the announcement. That nearly erased declines earlier in the month prompted by reports that sales of the iPhone were slowing in the U.S. and that the company faced shortages of key components.
Google (GOOG) Chief Executive Officer Larry Page and Chairman Eric Schmidt are among the backers of a venture to mine asteroids for precious metals, as earth’s resources become strained. Planetary Resources aims to launch a telescopic surveyor into earth’s orbit within two years to identify potential targets and begin prospecting within four years. The venture also plans to develop galactic “gas stations” that will use hydrogen and oxygen in asteroid water to refuel spacecraft, including satellites.
MetLife (MET), the largest U.S. life insurer, will pay about $500 million to settle a multistate probe into whether it and other insurers keep death payouts owed to beneficiaries. Regulators say the insurers, who learn of deaths through Social Security data, should try harder to pay beneficiaries who haven’t submitted claims. MetLife will pay $188 million in 2012 and the rest over 17 years. It says nearly all claims are submitted by beneficiaries and are paid quickly. MetLife is also starting monthly reviews to identify unclaimed death benefits.
A former BP (BP) engineer was arrested on charges of intentionally destroying evidence requested by U.S. authorities about the size of the 2010 Gulf of Mexico oil spill. In a criminal complaint filed in federal court in New Orleans, Kurt Mix, who worked on internal BP efforts to estimate the amount of oil leaking from the well, is charged with deleting text messages between him and a supervisor. Mix entered no plea at an April 24 hearing. BP, which declined to comment on the case, says it will continue to cooperate with the investigation.
— SABMiller: Alan Clark to be CEO in 2013
— JPMorgan Chase: Jeff Urwin named Asia Pacific chief
— Lufthansa: CFO Stephan Gemkow leaves
— MetLife: Eduardo Castro-Wright of Wal-Mart resigns from board
Bill Ackman on Seeking a New CEO at Canadian Pacific
Once you have a big stake in a company, you can usually influence its strategy. Before we pick a target we run an algorithm we call Return on Invested Brain Damage—the return has to be high enough to justify the work. Most of the time, management is not the problem. At Canadian Pacific (CP) [of which we own 14 percent], you have a CEO who has underperformed for six years and runs the worst-performing railroad in North America. We’ve sought to replace him with a man who had the best track record in the industry at Canadian National (CNI): Hunter Harrison.
Soon after we disclosed our stake, I spoke to [CP] Chairman John Cleghorn. We agreed to meet at the Montreal airport on Nov. 2. Although I’d said we wanted to talk about a management change, he and [CP CEO] Fred Green were there. After three of us made a presentation, Mr. Cleghorn said, “I’ve spoken to the board and want to let you know we’re 100 percent behind Fred.” I couldn’t believe the board made its decision before hearing our case. I asked to speak to him alone and said, “Look, the last thing we want here is a proxy contest, but if you’re not open to alternatives, we’ll go to the shareholders for support.” I got back on the plane. After the doors were closed and the engines started, the pilot said, “Bill, do you recognize this gentleman on the tarmac?” I looked out the window and there was John Cleghorn, standing in front of our plane with his arms folded. We powered down and I got out. He said, “Bill, I’ve had a chance to talk to Fred Green. He’s prepared to step aside for Hunter; that’s how much he hates CN. The board would like to work with you.” I got back on the plane and said, “That was easy.” We were practically high-fiving each other. I expected a call the next day. Thursday passed. Then Friday. On Saturday, I sent an e-mail and he called to say the board wanted Hunter to meet with their CFO. When I said we could join the board and work together on the CEO transition, he paused: “You want a board seat?” We’d already asked for two. I later realized they were determined to stand by their man.
We’ll take our slate of seven board nominees to a vote on May 17. I don’t like public battles. This is only our third proxy contest in eight years. You have to go to the mat if it’s right for shareholders. — As told to Diane Brady
How to Deal With a Nosy Co-Worker
My friend Megan has an office stalker. She works at a library in Nashville, where one of her co-workers walks by her desk so frequently that one day, Megan started keeping a tally. “She passed by my cubicle 17 times between 8 a.m. and 10 a.m.,” Megan says, “and almost every time she’ll be like, ‘Hi!’ and pop her head in. I can’t stand it.”
If Megan’s surfing the Web, the co-worker will ask what website she’s visiting. Is that a project Megan’s working on? What is that YouTube (GOOG) video? “She’ll point to the screen and ask, ‘Oh, what’s that?’” Megan says. “And I’ll be like, ‘Uh, databases.’”
Megan has tried everything—averting her eyes, pretending to be busy, acting as if she didn’t hear the question—but the co-worker is both oblivious and persistent. Other people in the office have also fallen victim to the woman’s pop-ins and questions. “Every conversation we have about her always starts with: ‘She’s so nice, but …’” Megan says. “There’s always a ‘but.’”
Megan’s problem is a distressingly common one. Every office has at least one nosy co-worker, and they come in a myriad of irritating forms. Laura in New York once had a colleague ask if she was pregnant. (She wasn’t.) Amy in Michigan has a boss who has asked several times how much she weighs. When I was a teenager, working as a Starbucks (SBUX) barista, a woman asked me—in front of other employees and several customers—why my parents were getting divorced.
Henry Alford likes watching people struggle to find a polite way to ask if he is gay. “I’m someone who radiates an ambiguous sexuality, so all my life people have asked me leading questions about my love life,” says Alford, author of Would It Kill You to Stop Doing That, a book that’s less a manners guide than it is a manners rant. “Over the years, I have developed a series of mysterious and ambiguous comments meant to lead people off the scent.” If you don’t want people to know your sexuality at work, Alford suggests saying something stereotypically straight, “and then talk about your handbag collection. It will totally mess with their antennae.”
But why do we have to mess with them to begin with? Don’t they realize what they’re doing, how much social anxiety they’re causing the rest of us as we struggle to figure out the most polite way to ask them to shut up? What is wrong with these people?
“People get very comfortable in a work environment,” explains Diane Gottsman, national etiquette expert and owner of the Protocol School of Texas. “We spend so much time with our co-workers that we sometimes develop a sense of trust that really isn’t there.” Gottsman is right; when you see someone every day, you often find yourself creating a false sense of intimacy. “It’s not necessarily a negative thing,” says Gottsman, “but if you feel that someone is crossing a boundary, don’t be afraid to put them in their place.”
“Believe me, I’ve tried,” says Tika, who works in a hospital in Southern California. Tika is 31, and although she and her husband have been married for nine years, they don’t have any children. “People at work ask me all the time, when will I have kids?” she says. “I tell them that’s none of their business, but they keep asking.” Eventually, Tika admitted that she didn’t know if she wanted kids. “Then they just asked me how my husband felt about that, if he ‘approved’ of my decision.” One time, she admitted that maybe she’d want to adopt. “I thought that would shut them up but instead the woman I was talking to looked at me and said: ‘There’s nothing like the joy of your own child.’ I stared back at her and said, ‘Well, I wouldn’t know,’ then walked away.”
At other jobs, Tika made friends easily and hung out with her co-workers outside of work. She’s been at her current job for three years, but the constant questioning has made her feel like an outsider. “I don’t know if it’s because they’re older, so they think they can comment on my life like I’m still a kid,” she says. “They even try to tell me what foods to eat.” Tika is very petite and thin, and whenever she eats something healthy, her co-workers say something. “I eat oatmeal every morning. That’s not that strange, right? But someone always talks about it. It’s oatmeal.”
“There are a lot of weird girl politics tied up with what you eat,” my friend Megan says. “If I get breakfast in the morning, there’s a woman here who hops up out of her seat like she’s standing to attention and peers at my food and exclaims, ‘Ooh, what’d you get?’” And I’ll have to say, ‘A muffin.’ Sometimes she’ll comment further and say something like, ‘That looks really filling.’ What the f— does that even mean? Why are you talking about my muffin? Just ignore the fact that I have food.”
Gottsman laughed when I told her this story. “She’s probably just uncomfortable with herself and her diet,” she says. “The next time someone says you’re eating a lot of food, ask what they ate today. Turn it on them.”
Alford takes a different approach. “Pattern yourself after Bartleby, the Scrivener. If you’re asked a question that you don’t want to answer, just say: ‘I would prefer not to.’” Alford says one of his favorite responses is to tell people, “I wish to remain mysterious.” To be fair, that line only works if when you say it, you happen to be wearing a cape.
Amazon vs. Publishers: The Book Battle Continues
There’s a glaring anachronism at the center of most Amazon.com (AMZN) fulfillment centers: aisle after aisle of old-fashioned books. Amazon stocks these volumes for the many customers who still favor the tangible pleasures of reading on paper. Yet the company is relentless about increasing efficiency and has at the ready an easy way to remove some of those bookshelves: on-demand printing. With an industrial-strength printer and a digital book file from the publisher, Amazon could easily wait to print a book until after a customer clicks the yellow “place your order” button. The technology is championed by those who want to streamline the book business—and it might turn out to be a flash point in the hypertense world of publishing.
The book industry isn’t eager to embrace any more wrenching changes. The introduction of the Kindle in 2007, and Amazon’s insistence on a customer-friendly $9.99 price for new releases, has set off a multifront fracas. Efforts by the largest publishers to sidestep Amazon’s pricing strategy attracted the attention of the U.S. Department of Justice, which recently filed an antitrust lawsuit against Apple (AAPL) and five book publishers over their alleged collusion to raise e-book prices. (Three publishers have settled the lawsuit.) The issue of print on demand has taken a backseat as this e-book drama plays out.
Yet executives at major New York-based book publishers, who requested anonymity because of the legal scrutiny of their business, say Amazon regularly asks them to allow print on demand for their slower-selling backlist titles. So far they’ve declined, suspecting that Amazon will use its print-on-demand ability to further tilt the economics of book publishing in its favor. Asking publishers to move to print on demand “is largely about taking control of the business,” says Mike Shatzkin, founder of Idea Logical, a consultant to book publishers on digital issues. “It adds some profit margin, but it also weakens the rest of the publishing universe.”
Print on demand has been around for more than a decade. In 1997, the largest book wholesaler in the U.S., now known as Ingram Content Group, started a division called Lightning Source to serve publishers who wanted to print limited copies of certain books. In 2005, Amazon acquired a rival print-on-demand provider, BookSurge, and began offering publishers the option of supplementing inventory with print-on-demand copies when physical volumes of a title sell out. Now called CreateSpace, the Amazon subsidiary mostly caters to small publishers and self-published authors. The technology has gotten better over time, and print-on-demand books are now indistinguishable from most paperbacks.
Publishers worry that a widespread shift to print on demand could, like the advent of e-books, disrupt their century-old business model. Companies such as Random House and Simon & Schuster have spent decades investing in their own supply chains, storing books in giant warehouses and developing the transportation infrastructure to ship those volumes to stores within days. If print on demand became widespread, publishers could cut their fixed costs and solve the perennial problem of stores returning unsold books. But that would throw into doubt almost everything else about the way big publishers conduct business, since they’re compensated based on the range of services they provide, from editorial guidance to storage and distribution. Print-on-demand technology would make it harder for the publishers to justify keeping a large majority of a book’s wholesale price.
One of the New York publishing chiefs says that even allowing titles to be printed on demand by Amazon when shortages occur is a bad idea, since it might encourage the company to order fewer printed books. And having a limitless inventory would give Amazon yet another edge over retailers such as Barnes & Noble (BKS), which publishers want to keep in business as a counterweight to the e-commerce juggernaut. Another top executive of a major New York publisher says there’s too little trust in Amazon to consider its print-on-demand services.
Amazon is not the only company trying to usher reluctant big publishers into a print-on-demand future. In the late 1990s veteran Random House editor Jason Epstein had a vision of an ATM-like machine that could produce hard-to-find books, and in 2003 created the company On Demand Books to develop the idea. Today its Espresso Book Machine, manufactured by Xerox (XRX) and costing about $100,000, sits in a few dozen bookstores around the country. It takes about four to five minutes to download and print a high-quality paperback. Last fall, HarperCollins Publishers, a division of News Corp. (NWSA), became the first major publisher to make part of its catalog available to On Demand Books, offering about 5,000 older volumes. Yet the machines still offer an extremely narrow selection of popular titles, which has limited their appeal. “The catalog is huge, but it’s overwhelmingly public domain,” says On Demand Books Chief Executive Officer Dane Neller, referring to older books no longer under copyright. “That’s a function of publishers’ reluctance to upset their existing supply chain, though we hope and believe that will change.”
As the digital transition upends the industry, resistance to on-demand printing may fade. Smaller publishers that have already made the switch away from printing and storing their own books say it’s well worth it. “Instead of putting all those books in a warehouse, you free up cash flow to invest in R&D,” says Laura Baldwin, president of O’Reilly Media, a publisher of technical books that moved to print on demand last year and shed $1.6 million in inventory cost. “You can invest in the technical future of publishing as opposed to printed books that are sitting in the warehouse.”
The bottom line: Publishers are reluctant to allow on-demand printing for fear of empowering Amazon, though smaller publishers enjoy the cost savings.
Lamborghini Aventador J Sold for $2.76 Million
Kermit may be fined by the German government for product placement on a broadcast channel
Sorry, I could not read the content fromt this page.iPad Is Reinventing Portable Computing
Kermit may be fined by the German government for product placement on a broadcast channel
Sorry, I could not read the content fromt this page.Can Steve Wynn Beat the Odds in Massachusetts?
Gaming magnate Steve Wynn doesn’t shy away from a fight. In Foxborough, Mass., the founder of Wynn Resorts (WYNN) has been battling hard to get a $1 billion casino built. He’s sent a video pitch, bought full-page newspaper ads, and sent canvassers door-to-door to persuade residents to support the project.
Wynn faces plenty of obstacles: Civic leaders won’t negotiate with him, an opposition group has attracted 1,200 members, and rival Caesars Entertainment (CZR) wants to build its own Boston-area casino. On April 16 a supporter of Wynn’s project was arrested for allegedly threatening the life of a town selectman, according to police. “I don’t think Steve Wynn anticipated the negative feeling in the community,” says Ray Poirier, executive editor of Gaming Today. “He’s got to turn the town around.”
Massachusetts Governor Deval Patrick signed legislation in November authorizing three casinos and a slot machine parlor in the commonwealth. The law divides the state into three regions, allowing one casino in each. The winning proposals will be picked by the Massachusetts Gaming Commission based in part on their potential economic contribution to the state. Before the commission can review an application, however, the operator must negotiate an agreement with the host community and win a local referendum. Licenses aren’t expected to be awarded until mid-2013.
The prize is the permit for the Boston region. With 4.5 million residents, it’s the 10th-largest metropolitan area in the U.S. Per capita income in Boston, at $31,856, is 16 percent above the national average. Clyde Barrow, a professor at the University of Massachusetts Dartmouth who studies the New England gambling market, figures a Boston-area casino could generate as much as $800 million in gaming revenue a year. (The state will be entitled to a 25 percent cut.)
Wynn identified Foxborough, a town of 17,300 that lies 30 miles south of Boston, as his site of choice last year. He wants to build the casino on land leased from New England Patriots owner Robert Kraft and adjacent to Gillette Stadium. Neither Wynn nor Kraft responded to requests for comment.
The Las Vegas billionaire shouldn’t be surprised that Foxborough’s residents are digging in their heels. The town twice rejected zoning changes that would have allowed gambling, in 2004 and 2011, says Paul Mortenson, a former selectman. In a December letter to government officials and Wynn, the board of selectmen said Foxborough did not want to pursue casino negotiations. Yet the balance could shift after elections on May 7 in which two of five seats are being contested. Two candidates oppose the casino and two favor negotiating with Wynn, according to Mortenson.
Residents are just as divided. Collin Earnst, a marketer at a software company, says he’s concerned about the effect the project will have on traffic and property values. “The zoning they applied for is the size of the Statue of Liberty,” says Earnst, who has joined the No Foxboro Casino group. Real estate agent Millie Cetrone, who supports the casino because it will bring in tax revenue, points out that the neighboring town of Walpole has a prison, “and the [property] values there are a lot higher than Foxborough.” She calls the decision “a no-brainer.”
Wynn claims the casino would create 4,000 permanent jobs and could generate as much as $15 million in revenue for schools and other public services. The billionaire has funded a grass-roots group called Jobs for Foxboro, which has organized three town meetings to drum up support.
Barrow questions whether Wynn has chosen the right locale. A casino north of Boston would have less competition and keep more dollars in Massachusetts in the event that New Hampshire legalizes gambling, he says.
Caesars, Wynn’s longtime rival, has teamed up with Suffolk Downs, a horse racing track in East Boston, to pursue its competing bid. On April 12, Boston Mayor Thomas Menino named an advisory panel to pursue a deal with the Caesars/Suffolk Downs group, a move he likened to firing the starting gun for the Boston Marathon. In a statement, Menino predicted the outcome of the race “could be the largest economic development game changer in Boston’s recent history.”
The bottom line: Residents of Foxborough, Mass., are resisting Wynn Resorts’ plan to build a casino that could generate $800 million a year.
Limbaugh Advertisers Rush to Leave Show
Kermit may be fined by the German government for product placement on a broadcast channel
Sorry, I could not read the content fromt this page.Davy Jones, Made-for-TV Lead Singer of the Monkees, Dies at 66
Laurence Arnold
Feb. 29 (Bloomberg) -- Davy Jones, the accidental pop-music star who gave voice to songs such as “I’m a Believer’’ and “Pleasant Valley Sunday’’ as lead singer of the made-for- television band the Monkees, has died. He was 66.Jones died today of a heart attack in Indiantown, Florida, where he lived, according to the Associated Press, citing Helen Kensick, his publicist.The British-born Jones started his career on stage, then signed with Columbia Pictures/Screen Gems Television, which became his route to pop music.The Monkees, the band, began as “The Monkees,’’ the TV show, which ran on NBC from 1966 to 1968 and followed the misadventures of a fictional musical quartet of Jones, Micky Dolenz, Peter Tork and Michael Nesmith. The fast-paced hijinks were inspired by “A Hard Day’s Night,’’ the 1964 mock- documentary about, and starring, the Beatles.The Rolling Stone Encyclopedia of Rock & Roll calls the Monkees “the first, and arguably the best, of the prefabricated 60s and 70s pop groups’’ manufactured by TV executives to capitalize on the frenzy known as Beatlemania. The Partridge Family was another such group of made-for-TV musicians.Small of stature and gentle in demeanor, he became a family-friendly heartthrob to a generation of girls in the 1960s and 1970s. Jones may have made his biggest television splash on an episode of “The Brady Bunch’’ in which he appears as Marcia Brady’s dream prom date come true.‘Kiss the Girls’Jones enjoyed a career in music long after his television show ended. In an interview published in January in the Republican newspaper of Springfield, Massachusetts, publicizing a free concert he would be giving at the Mohegan Sun Casino Wolf Den, he said he would have been happy to remain a Monkee.“I just wanted to be in the show, fall in love twice in each episode and kiss the girls,’’ he said. “I had no ambition to be Steven Spielberg or Cecil B. DeMille.’’According to the article, Jones said he was happily married to his third wife, Jessica Pacheco, and was trying “to be very positive today in my life.’’“I have a beautiful wife, four great daughters, and several grandchildren, and I’m close to them all,” he told the newspaper.David Jones was born on Dec. 30, 1945, in Manchester, England. According to a biography on the website of his manager, New York-based Roger Paul Inc., Jones began entertaining at age 11 on the ITV soap opera “Coronation Street.’’Encouraged to try the London stage, he portrayed the Artful Dodger in “Oliver!,’’ a West End production of the Charles Dickens tale “Oliver Twist.’’ At 16, he originated that role on Broadway and was nominated for a Tony Award.--With assistance from Andy Fixmer in Los Angeles. Editors: Steven Gittelson, Charles W. Stevens
To contact the reporter on this story: Laurence Arnold in Washington at larnold4@bloomberg.net
To contact the editor responsible for this story: Charles W. Stevens at cstevens@bloomberg.net
Spanish Soccer's Economic Crisis
Spaniards enduring both a debt crisis and the European Union’s highest unemployment haven’t had much to celebrate in recent years other than the exploits of soccer stars Iker Casillas and Xavi Hernandez. Spain’s national team won the European Championship in 2008 and the World Cup in 2010. Now Spanish broadcasters say they may not be able to afford the TV rights to future soccer matches.
Antena 3 de Television and Mediaset Espana Comunicacion, Spain’s biggest commercial TV stations, say that when the rights to broadcast next season’s top weekly soccer matches come up for sale in June, they won’t bid unless prices fall by half. Rival station La Sexta, which is merging with Antena 3, paid about €60 million ($79 million) last season, or €1.6 million for each of the 38 matches, according to Antena 3.
Spanish broadcasters are struggling to turn their nation’s success on the field into a profitable business. A 15-year-old Spanish law requires that one major game a week be shown free on broadcast TV; the rest go to cable and satellite pay-TV operators. That scarcity of sports programming for conventional broadcasters has helped push up the prices they must pay to air that one weekly match, which can be a huge ratings draw. Pay-TV operators suffer as well since they lose subscription revenue from fans content to watch one game a week free of charge, the Spanish Soccer League says. “The problem with sports events is that it’s good for ratings, but it’s a financial disaster,” says Antena 3 Chief Executive Officer Silvio Gonzalez.
The prospect of lower TV revenue in turn threatens the financial viability of Spanish clubs and their ability to slow down the exodus of star players to the English Premier League, where clubs are bankrolled by Russian oligarchs, Middle East oil sheiks, and Indian food companies. Players are concerned about whether Spanish teams can honor contracts if there’s a collapse in the value of TV rights, says Rodrigo Garcia, a lawyer in Madrid who handles negotiations for several players in La Liga. “You aren’t 100 percent certain of getting paid,” he says.
While the Spanish League, which generates about €600 million in annual TV revenue, trails the English league in overall income, its superstars are the world’s highest-paid players. France Football magazine estimates that Barcelona’s Lionel Messi is soccer’s No. 1 earner with an annual income of €33 million, including base salary, bonuses, and endorsement deals. Real Madrid’s Cristiano Ronaldo is No. 3 with €29 million, the publication says. Representatives for the players declined to comment.
Players who have left the country in the past two years include Spanish national-team players David Silva and Juan Mata, who left Valencia for Manchester City and Chelsea, respectively. Valencia’s banks had stopped lending it money, and at one point it was late with salary payments to players.
European media is abuzz with speculation that other stars may head north. Manchester City, owned by Abu Dhabi’s Sheikh Mansour bin Zayed Al Nahyan, may make a ?42 million ($67 million) offer for striker Radamel Falcao, who scored more than 25 goals for Spain’s Atletico Madrid this season, the Sun reported on March 29. Chelsea, controlled by billionaire Roman Abramovich, may pay ?80 million to get Ronaldo and his Real Madrid teammate Gonzalo Higuain, the Daily Telegraph said on March 26. Representatives for the clubs declined to comment.
In the English Premier League, La Liga’s biggest rival, no games are shown live on free TV. British Sky Broadcasting Group (BSY), the pay-TV company that’s held exclusive rights to England’s top soccer games since 1992, has more than 10 million subscribers and is one of the most profitable businesses of Rupert Murdoch’s News Corp. (NWSA)
Although teams concede there’s little hope Spain’s government will end the free-to-air TV rule in the current economic environment, that hasn’t stopped them from crying foul. “It’s not compulsory to put movies or theater on free television in Spain,” says La Liga spokesman Juan Carlos Santamaria. “So why should it be for soccer?”
The bottom line: Spanish soccer generates about $792 million in TV revenue annually. Broadcasters say they can no longer afford the hefty TV rights.
Baigorri is a reporter for Bloomberg News in Madrid. Duff is a reporter for Bloomberg News in Madrid.Mountain Dew Wants Some Street Cred
Urban cool and Mountain Dew are two phrases that don’t usually go together. PepsiCo (PEP) is trying to change that. The snack and beverage giant built the country’s best-selling non-cola soft drink thanks to its popularity with primarily white consumers in the Plains states and the Southeast. Now it’s working to broaden the sugary, caffeine-laced drink’s appeal with young blacks and Latinos.
The soda's new campaign uses rapper Lil Wayne—known by his nickname 'Weezy'—to help draw more diverse and urban drinkers
In a marketing push featuring hip-hop star Lil Wayne and street skateboarder Paul Rodriguez, PepsiCo is hoping Mountain Dew will catch on in urban centers such as New York, Miami, and Los Angeles just as it has in rural areas such as Nebraska and Kentucky. “Our biggest opportunities are in those areas with the highest concentration of consumers who probably haven’t heard the Dew message as focused as we could have” made it, says Brett O’Brien, vice president of marketing at Mountain Dew.
Mountain Dew has been a bright spot in PepsiCo’s brand portfolio, outperforming Pepsi-Cola over the past two years. There’s cause for worry, however. The brand that accounts for 20 percent of PepsiCo’s U.S. beverage sales lost share last year while Coca-Cola’s (KO) Sprite and Fanta gained. Meanwhile, Mountain Dew’s target market—young people from 18 to 24—are increasingly more diverse. The trick for the world’s second-largest soda maker will be to reach these new audiences while holding on to core Dew fans. From 2000 to 2010, the percentage of white non-Hispanics younger than 24 fell to 18.6 percent of the U.S. population, from 21.5 percent. And though whites make up 70 percent of soda drinkers, they are 80 percent of Dew consumers, according to iTrack Data figures provided by PepsiCo.
The new “This Is How We Dew” TV advertising campaign debuted in April and features Lil Wayne. “If you got anything from me, it’s to find your thing and do you,” he says over clips of concert footage and skateboarders. “We all know it’s not what you do, it’s how you do.” The initial ad mixes in snowboarders and a country singer to keep the brand’s mainstream hooked in. Future versions will target regional tastes and pastimes.
Look at a map of the U.S. showing Mountain Dew’s top-selling states and you’ll find a swath reaching from North Dakota east to the Virginias and then swinging back to Arkansas. Dew even outsells Coca-Cola in convenience stores in Georgia, Coke’s home state. Dew’s weakest territory stretches from California along the southern U.S. border to Louisiana.
Mountain Dew, once a nickname for moonshine liquor, was created in the 1940s by Ally and Barney Hartman as a lemony soda and spirits mixer. Early bottles featured a gun-toting hillbilly chasing a federal agent from an outhouse. PepsiCo bought the brand in 1964 but kept the down-home image: Its first TV ad used the slogan, “Ya-hoo! Mountain Dew! It’ll tickle your innards.” A barefoot, one-toothed mountain man raved, “Shore as shootin’, there’s a bang in every bottle,” as a curvy woman wearing a hair bow and Wilma Flintstone-looking dress took a sip.
The new campaign—targeted at consumers in their teens to 20s—includes TV and radio ads built around a diverse lineup of seven celebrities whose appeal is tailored to regional markets. Country star Jason Aldean’s spot might be in heavy rotation in Nashville, for example, while Lil Wayne woos TV viewers in Los Angeles. Mexican-American professional skateboarder Paul Rodriguez, aka P-Rod, appeals to a street-skate set that is racially diverse, O’Brien says, and his spots will air in multiple markets. “It’s been a matter of messaging,” he says. “We haven’t really talked to this differentiated, emerging teen base as much as we have that heartland consumer.”
Lil Wayne’s collaboration with Mountain Dew marks his first endorsement deal with a major consumer-products brand. Next month a promotion called DEWeezy—a mashup with his nickname, Weezy—will invite consumers to help the tattooed Grammy winner produce a 30-second TV spot for the drink.
Dew’s campaign will be coupled with a distribution push in urban centers such as New York City, where often only the original version is carried. Flavors including cherry Code Red and orange LiveWire, as well as diet varieties, may be added at gas stations and convenience stores, where 45 percent of all Mountain Dew is sold.
The bottom line: Mountain Dew, which accounts for 20 percent of PepsiCo’s U.S. beverage sales, is trying to attract more black and Latino drinkers.
My Week at Private Equity Boot Camp
Judy Lynch is driving a forklift, and I am trotting behind her. A plastic stopwatch hangs from my neck on a lanyard, and I am carrying a clipboard, from which I have wiped several years of warehouse dust. The dust, black and sticky, consists mostly of tread particles from solid-rubber forklift wheels. It lies a quarter-inch thick on the concrete. Lynch leaves a furrow as she drives.
She asks whether she needs to slow down for me. I assure her that she needs to drive as fast as she always does; I am timing her drive. When she stops, I will note it on my clipboard. And at the end of the week the data on my clipboard will change her job and possibly cost her two employees. Lynch, then, has reason to be suspicious, but she is not. She tells me I remind her of her former brother-in-law. This is a good thing, she says.
Photographs by Hollis Bennett for Bloomberg BusinessweekLynch is in charge of six people in the 50,000-square-foot warehouse serving the main plant of the Heat Transfer Products Group in Scottsboro, Ala. HTPG, with 473 employees, makes parts for industrial refrigeration units and does about $100 million a year in revenue. It had been a small, forgotten part of a larger company when in 2010 it was purchased by Monomoy Capital Partners, a private equity group that manages about $700 million in investments. Monomoy specializes in buying medium-size manufacturers and making them more efficient.
The word “efficiency” hovers over the private equity industry: Find enough of it, and you will end up making some jobs superfluous. “Efficiency” has given private equity partners a reputation as hatchet men. It gets things thrown at them on shop floors when they show up to take ownership. And it has dogged the presidential campaign of Mitt Romney, the former head of Bain Capital.
To buy a company and sell it at a profit requires a complex skill set: financing, restructuring, negotiating new leases and labor contracts, and, of course, “operations,” the term private equity uses for “making things.” Improving operations can mean parachuting in a consultant or a former chief executive officer as an adviser. Monomoy goes further. It occupies a plant floor like heavy infantry, with yellow tape, label makers, and overwhelming force.
Photographs by Hollis Bennett for Bloomberg BusinessweekIn part, Monomoy does this through a series of two-week “boot camps.” Four times a year, the firm pulls about 20 managers from the manufacturers in its portfolio and sends them to one of its plants to suggest—and carry out—efficiencies. In February it invited me to Scottsboro. Not as an observer. As a participant.
My boot camp starts on a Monday at a training room in the main plant at HTPG. Behind the wall, a machine on the plant floor stamps out copper parts. At intervals it sounds like a diesel truck downshifting over a steel plate next to your head. John Stewart, who built and runs Monomoy’s operations group, is telling us what we’ll be doing. He spent most of his career at Toyota Motor (TM), where he started as a 19-year-old on the night shift in Georgetown, Ky. He trained in Japan, then got promoted all the way to general manager of Toyota UK. At several different plants, he ran the Toyota Production System, a philosophy of manufacturing efficiency that touches a company’s every person, object, and motion. TPS made popular the Japanese concept of kaizen, or continuous improvement.
Monomoy has adopted Toyota’s system. Five of the seven people in Stewart’s operations group spent time on the line at the Toyota plant in Georgetown, among them Mike Bray, also in the training room. Bray, tall and goateed, runs the boot camps for Monomoy. He uses the word “kaizen” as a transitive verb and as a noun with an indefinite article, as in “We’re going to kaizen this” and “We ran a kaizen on it.”
Toyota’s system is not new to America, but it can be disruptive, and it rests on a sometimes alien obsession with cleanliness and order. Stewart, Bray, and the rest of the operations team apologize for the system even as they ruthlessly carry it out. Their accents, their dress, their turns of phrase all say: We are going to upend your workday, but it happened to us once, too. We’ve swung a hammer. We like Wildcat basketball. It’s going to be OK.
Stewart starts with cleaning. Seri, seiton, seiso, seiketsu, shitsuke. “I don’t like to use those words now that I’m not at a Japanese company,” he says. They translate nicely into five English s’s, too: sort, straighten, sweep, standardize, sustain. Deb Farrister, sitting next to me, nods her head quietly. Farrister works as a team leader on the main plant floor at HTPG. She wears grandma readers and has a bright-red ponytail. She’s worked at HTPG for 11 years. In the past two years seven boot camps have made their way through the company. The five s’s have happened to her already.
At the table next to me and Farrister sits Justin Hillenbrand. He is a Monomoy founding partner, and it was his idea to hire Stewart, but this week he’s a camper like me. All three of Monomoy’s partners, along with the seven employees not in operations, have graduated from at least one boot camp. This is Hillenbrand’s fourth. Monomoy has even run a boot camp at its headquarters in Manhattan, identifying several hundred distinct steps in its dealmaking process and increasing threefold the number of prospects it can consider in a year.
Bray divides us into four groups of five and assigns each a station at the plant. I will be at the warehouse across the street, working with Farrister. Before we head over, she leads the warehouse team out of the training room and onto the main plant floor for a tour. She runs the station at HTPG that builds the V-series—15,000-pound refrigeration parts that, among other things, help make ice in skating rinks. Stewart walks behind us, shaking hands and chatting with workers on the line. “It’s clean,” I tell him, looking around at the plant. “It’s clean now,” he says. I ask Farrister what it was like when the Monomoy boot camps started rolling through in 2010. “Hoo-ee,” she says, remembering. “Hoo. Ee.”
Stewart explains that since buying HTPG, Monomoy has moved roughly 15 tractor-trailer loads of machines and inventory off the floor and consolidated into the same space an entire plant from Yuma, Ariz. Copper tubing and sheet metal had been stacked between stations; you can now see clear across the plant’s 200,000 square feet. Before Monomoy, stations had “pushed” parts forward, simply making them at will and keeping them to be used down the line as needed. The plant now “pulls” product, starting with the day’s orders from customers and building components on demand. Excess inventory wastes capital and hides problems, says Stewart. I will hear that often this week.
Farrister nods again as Stewart speaks. She doesn’t nod like an employee. She nods like a believer. “It’s the best thing that’s happened to this plant,” she says. At her station, a boot camp team removed the clutter, ran time studies, created more space to work, defined a precise job for everyone, and improved productivity from two units per shift to five units a shift. “People are nicer now,” she says. “It used to be so stressful. You’re searching for parts, trying to get sheet metal, everyone’s at each other’s throat. It’s not as stressful now.”
Stewart leaves us with a koan, passed on from his mentor at Toyota. “TPS is the best way,” he says. “The best way is TPS.” Whatever the right thing to do is, that’s the right thing to do. Simple.
Tuesday morning at 7, the five members of my boot camp team start tracking the first shift at the warehouse, and I start following Judy Lynch. An office near the loading bay contains three computer desks, a calendar from a supplier, and a fax machine, which prints out orders from the plant across the street. Lynch often notices the orders first, so I begin tracking her “picks,” her trips to the warehouse floor to fill orders from the plant.
Mike Bray is in charge of the boot camp team in the warehouse. He watches as seri, seiton, and seiso begin around him. Lynch’s staff takes turns on a scrubber, a machine the size of a ride-on lawn mower that sucks up rubber dust. “A kaizen from last year,” says Bray. It leaves a wet trail, in which it slowly becomes apparent that the concrete floor was once finished with a glossy sealant. Craig Sanders, a boot camper from Oneida, the iconic flatware company, which Monomoy bought in November 2011, knows how to drive a forklift. He starts moving unused inventory to the back of the warehouse—400-pound copper spools and packs of seven-foot-long stands left over from the Yuma consolidation.
In 2010, Monomoy cut 86 workers from HTPG’s payroll in Scottsboro. Then a funny thing happened. A year of boot camps has helped the company beat industry lead times, the weeks that pass between sale and delivery. On-time delivery ran at 72 percent before Monomoy bought the plant; so far for 2012 it’s at 96 percent. Deb Farrister’s V-series now take two weeks to build, a quarter of the industry average. In 2011 sales grew by 10 percent. And overall, since Monomoy bought HTPG in 2010, head count is up in Scottsboro and sales are up 19 percent.
It’s a bright picture, clouded somewhat by the 150 jobs lost in Arizona when Monomoy closed the Yuma plant. If you add Yuma into the head count, the net loss at HTPG is about 75 people. The partners at Monomoy are not saints, and people are expensive. But if you cut costs through head count alone—and not by improving operations—you have to just pray the economy goes your way. To survive, you cut people. To grow, you cut waste.
The Toyota Production System recognizes three kinds of waste, muda, mura, and muri. Translation: movement that creates no value, overburdening people or machines, and inconsistent production. People are easy to find on a cash-flow statement. Muda, mura, and muri all add drag on capital just like a day’s wages, but they hide on the plant floor.
I begin bird-dogging the fax machine in the warehouse office, pouncing when orders arrive from the plant. Paul Griffin, one of Lynch’s forklift drivers, gets an order, and I follow him on a pick with my stopwatch. He heads down an aisle, craning his neck to find a crate. He starts talking about Carrier (UTX), the heating and cooling company that used to own HTPG, and Vijay Inbasagaran, the plant’s old director of operations. “Vijay,” says Griffin, “he brought the kaizen.
Bray sees waste in the copper stacked at the loading bay. He knows it makes sense to leave it there—the plant turns over its stock of copper 13 times a month—but it bothers him to see so much inventory. Bray is sometimes on the road four and a half days a week. Usually he drives the boot camp truck, which contains supply carts for making signs and cleaning, a computer workstation with a printer, and a toolbox so spotless and so comprehensive that, he says, “Nascar would be proud.” He’ll show it to the maintenance staff at a plant and tell them, “If your toolbox looked like this, my machine wouldn’t be down.” By which he means Monomoy’s machine. Bray is a type-A obsessive masquerading as a good ol’ boy.
Monomoy’s headquarters is on the 17th floor of a building in midtown Manhattan. In the early 2000s, Justin Hillenbrand, Daniel Collin, and Stephen Presser were turning companies around for KPS Capital Partners when they noticed an opportunity. With larger companies they found more capital chasing fewer deals, and the market tended to be more efficient. By “efficient,” read: harder to make money in. On the lower end of the middle market, however—companies bringing in $100 million to $150 million in revenue—they could double, triple, and sometimes even quadruple Ebitda (earnings before interest, taxes, depreciation, and amortization).
“There’s always a disproportionate amount of underperforming businesses when you’re looking at the smaller end of the spectrum,” says Collin. Smaller businesses are more exposed to market fluctuations and have more trouble raising money in capital markets. Over time, better managers leave for larger companies. Although the businesses are small, it’s a huge market, he says; in North America there are more than 150,000 companies this size.
In January 2005 the three left KPS and started Monomoy. They visited hundreds of plants. The better-performing companies consistently used some form of the Toyota Production System. The partners began to realize that the traditional private equity approach to operations—putting a former CEO on a company’s board—wouldn’t work for some of their purchases. “You could have the best CEO in the world,” Hillenbrand says, “but in a manufacturing company profits are made on the floor.”
“A little bit to our credit,” he says, “we’re pretty good at the other stuff, the financial restructuring, the lease restructuring, the union negotiations, the commercial side. But we recognized that in order to improve operations you needed someone on the ground.” The partners began bringing candidates to a plant that eventually became part of Compass Automotive Group, which they also own. It already had a Toyota-like system in place. The first several candidates thought the business was fine. Not John Stewart. “When John came in,” says Hillenbrand, “he tore the place apart.”
After a day at the warehouse on Tuesday, my time studies are sloppy. I have crossed out and marked over rows of steps; everyone picks differently. Mike Bray explains that the first kaizen is the worst. There is no process when you start to create a process, so it’s harder to isolate the steps that add waste.
I have determined, however, that the time between an order’s arrival and the moment a worker starts a pick averages just shy of 13 minutes. I point out to Bray that the faxes sit in the office while the forklifts move on the floor, so nobody sees them arrive. He says the problem is worse than that. If the plant is working as it should, Judy Lynch should know at the start of the day what needs to get trucked over. Now there are orders when the shift starts, orders on the fax, and “hot” orders, which the plant follows up with a phone call.
Bray proposes that we turn the fax machine into a “bat phone.” We will install it on the end of a row just inside the loading bay and rig it to a photo sensor and a rotating green light to summon the forklifts. I have discovered a muda: movement that creates no value, in this case movement between the office and the warehouse floor. I am as proud as a toddler. I ask Bray whether we should get a handheld inventory scanner for each forklift, too. “Well, we don’t even know yet how many forklifts we need,” he says. I am kaizening ahead of myself. “Most of what forklifts do is just drive.” More muda. The scrubber is still circling. More seiso.
On Wednesday the warehouse boot camp team runs more time studies and feeds them into spreadsheets. We all have hunches, and these hunches need to be confirmed. Around 9 p.m. a maintenance crew arrives to install the bat phone. We are almost done for the night, and the warehouse boot camp gathers as maintenance finishes up. I place a sheet of paper in the tray. The sensor sees it. The green light begins sweeping in circles, 10 feet in the air. I raise my hands in triumph. I have moved a fax machine. I have created an efficiency. I have completed a kaizen.
Thursday morning we’re back in with the first shift to make sure our big ideas are working. Joe Meinke has trouble getting used to a new layout. He works the FedEx station at the warehouse, shipping out smaller replacement parts to customers. “It’s like I kinda got my insides ripped out,” he says. Two boot campers have been tracking Meinke this week, and by Thursday morning one of two boxing tables at the station is gone, along with a chair and an extra stand that dispenses bubble wrap. Tape on the floor shows him where to stack boxes. A square is marked “trash can.”
By 8:30, Meinke has come around. A sheet metal platform on the remaining table has brought his keyboard up to the height of his elbows when standing. He taps the platform. “This is sweet,” he says. “I’m kind of a tall guy.” Gone: one mura, the overburden of leaning down to type. Deb Farrister has been running time studies on the UPS receiving station on the other side of the warehouse. She has marked out lanes with tape. She is mopping them. Still more seiso. Over the week’s cleaning, we have discovered 18,000 pounds of copper tube and a broken forklift that everyone had forgotten about. Near the loading bay, Meinke is singing Movin’ on Up, the opening theme from The Jeffersons.
I walk to the bat phone and begin running time studies. We have placed the tray at elbow height for someone driving a forklift, and drivers can grab the order without climbing out. 0:19. 2:13. 4:28—the new time from the arrival of a fax to the start of a pick averages 2:20. I have reduced the cycle time for a pick by about 10 minutes. This took four days. In one warehouse. At one plant. The Toyota Production System is like a diet. It is not hard to grasp. It is hard to do.
A group of boot campers has gathered with Farrister at the UPS station. They are talking about Monomoy’s demanding reporting requirements for their own plants. “I get it,” says Farrister. “I invest a million dollars, I’m going to see what happened.” I ask her how Monomoy is different from Carrier, the company that used to own the plant. “They talk to you,” she says.
“Scrubber’s all tore up,” says a member of Lynch’s team. Indeed, the scrubber has finally been driven into the ground. It sits by a loading door, bleeding gray fluid. Before it expired, it excavated near the UPS desk several lines of tape on the floor from a previous attempt at a kaizen, back when the plant was owned by Carrier. A square from that prior effort is marked “trash.”
Before I leave Scottsboro, John Stewart walks me around the main plant, as before stopping to chat with line workers. Some have his personal cell number, and use it. When he gets to a new plant, he looks at hands; if they are not moving, something is being wasted. He looks at forklift loads; if they are not full, something is being wasted. Stewart believes that if you can get costs down, there’s no reason not to make things in the U.S. Offshoring carries political risks and incurs supply-chain costs, he says. It can prove difficult to teach culture to a foreign workforce. “You make investments in people,” he says. “We believe that North American manufacturing deserves to exist.”
This is the language of a union leader, not a private equity executive. Later that day, I talk to HTPG’s union steward and try without success to get her to say something bad about Monomoy. After several tornadoes touched down in Scottsboro last year, Monomoy’s partners sent everyone at the plant whose houses were hit a Home Depot gift card for $500. Yet Monomoy is not a charity. It sells its acquisitions when it is done with them.
Justin Hillenbrand is on the floor, too, wrapping up his boot camp. At his station, which assembles small condensers, five boot campers have kaizened away an entire production shift. They have created a “kitting area,” a single spot for parts delivery, so a worker doesn’t have to look for them to build a new condenser. At the Scottsboro plant, about one in three cars and one in five persons display in some way the colors of the University of Alabama. Hillenbrand, who grew up in New Jersey, is wearing a Crimson Tide T-shirt. He’s taking John May, HTPG’s CEO, through the week’s results. That is: A partner in a private equity firm is showing an executive at an acquisition a set of changes that he, personally, has made to the production line.
As I walk with Stewart, I notice tape on the floor that reads “Top brazing cart #1.” It does not contain anything that looks like it might be a brazing cart. I see oil and water on the floor, too. A cart labeled “closing cart” is a mess. I point these out to Stewart. “TPS is an ideal state,” he says. “We’re trying to get from a B-minus, C to a B-plus. We don’t have to hold this long enough to get to Toyota quality to get significant value.” I ask him whether this should worry a potential buyer. HTPG CEO May—and Farrister, a team leader on the line—both seem dedicated to the system. Yet on the plant floor, I can already notice it beginning to slip in places. Investors “aren’t going to look at it like that,” says Stewart. “They’re looking at financials. They’re looking at 12 months of value.”
Practiced this way, private equity is not slash-and-burn liquidation, extracting money from capital. It’s not overleveraging, making profits off dividends paid out of unsustainable loans. Private equity, the way Monomoy does it, is a castle in the sand, a brief victory for order in the constant slide toward entropy. We walk past the electrical-box assembly station. A broom leans against a machine. Above it, a shadow board, painted to show where tools belong, reveals an outline where the broom should hang.
The Apple Store Experience
Kermit may be fined by the German government for product placement on a broadcast channel
Sorry, I could not read the content fromt this page.Insieme: Cisco's Latest 'Spin-In'
Mario Mazzola may have the best gig in Silicon Valley. Other innovators pursue their dreams at the risk of failure; there are few safety nets for an entrepreneur. But Mazzola, who builds computer networking products, is the main beneficiary of a controversial model known as the spin-in. Not once, not twice, but three times, Cisco Systems (CSCO) has agreed to fund and buy companies founded by Mazzola and his longtime lieutenants, Prem Jain and Luca Cafiero, when the startups were little more than ideas. In each case, Cisco invested $50 million or more for a stake in the company, along with an option to buy the remaining shares at a certain date. The final price, while tied to how well the startup’s products sell, is generous. Cisco paid $750 million for Mazzola’s Andiamo Systems in 2004 and $678 million for Nuova Systems in 2009. On April 19, Cisco said it was prepared to spend as much as $750 million for the trio’s most recent effort, called Insieme.
Cisco Chief Executive Officer John Chambers insists the deals are good for his company. By all accounts, Mazzola, 65, and his colleagues are one of the great product teams in the enterprise technology world. They invented a corporate networking switch—which helps shuttle data from one place to another—while at Crescendo Communications in the early 1990s. Cisco bought the company in 1993 for $94 million and built it into a $13 billion business, its largest. The funding of Andiamo in 2002 helped Cisco expand into the storage-related switch market. Nuova enabled Cisco’s most daring strategic move in decades: taking on former partners Hewlett-Packard (HPQ) and IBM (IBM) with its own line of computer servers, part of an effort to offer a full range of data-center hardware and services.
The spin-in structure lets Cisco ensure the allegiance of Mazzola and his team, rather than risk competing with them or losing them to a rival. Mazzola’s startups also help Cisco tap top engineering talent that might otherwise avoid working for a large public company. With almost $47 billion in cash, Cisco can afford its spin-in strategy—which provides huge returns if Mazzola’s team hits a home run. (With Nuova, Cisco says it earned back its investment several times over.) “The team at Insieme is a team that’s been remarkably successful for us,” Chambers told reporters on April 19.
Many former Cisco managers criticize spin-ins as destructive deals that tear at the morale of employees not lucky enough to be involved. Chambers could have made an arrangement with Mazzola, who had already earned millions as a top Cisco executive, that wasn’t so enriching to just a few people. “I think these deals basically suck,” says Samuel Wilson, a former equity analyst who now runs an investment firm called Taos Global Investors. “It suggests Cisco is willing to bribe people who are already employees and raises the question of whether these people are loyal to Cisco or to themselves.” Last fall the trio resigned just weeks after getting the final payout on the Nuova deal, then started work on Insieme.
Cisco doesn’t disclose how much Mazzola, Jain, and Cafiero earn on the spin-ins. After considering Cisco’s stake and shares given to recruits, it’s likely less than 30 percent of the purchase price, say two former Cisco managers who declined to be named because the deals are not public. Still, that could easily mean hundreds of millions for the three executives—none of which shows up as compensation in Cisco’s financial statements.
So far, no other tech companies are following Cisco’s lead. “I can’t think of any other examples,” says Harvard Business School professor David Yoffie. He suggests that other companies may worry that spin-in employees won’t work as hard as independent entrepreneurs because they lack the “unknown upside that comes from a possible IPO or bidding war.”
With Insieme, Chambers expects Mazzola & Co. not to deliver a product for a new market, but to protect an existing one. Cisco’s biggest source of revenue is its pricey machines loaded with proprietary software that direct and process data flows. Insieme is working on a new approach called software-defined networking. It will perform the same task as Cisco’s costly units by running software on everyday PCs.
The bottom line: The spin-in strategy has created important products for Cisco but enriches a few stars at the price of lower morale.
Apple Can Control Working Conditions, White Says
Kermit may be fined by the German government for product placement on a broadcast channel
Sorry, I could not read the content fromt this page.HP Innovation, One Pricey Giant Screen at a Time
With a tsunami roaring toward Sendai, Japan, Hewlett-Packard’s (HPQ) Photon Engine software directs the response at a nearby command center. Collecting data from traffic cameras, first-responder vehicles, smartphones, and satellites, the software displays information on a huge touchscreen. It lets emergency personnel have what military types call “full situational awareness,” and quickly suggest escape routes.
It’s only a simulation, one that took place recently on HP’s Cupertino (Calif.) campus. Todd Bradley nods approval. The executive vice president of printing and personal systems at the computer giant’s newly merged PC and printer business says Photon Engine is a step toward renewing the company’s “heritage of innovation” and silencing critics who say its best days have passed. Bradley and Chief Executive Officer Meg Whitman say they plan to reverse the decline in research and development spending that occurred under previous CEOs. Last year, HP spent 2.6 percent of sales on R&D, down from more than 4 percent seven years ago. “We underinvested in innovation,” Whitman says.
Photograph by David Paul Morris (Hurd)
The popularity of mobile computing—and HP’s inability to adapt to this new world—has left Bradley’s group producing commoditized gear with dwindling profits. Operating margins have fallen from 8 percent a decade ago to 5.2 percent in January. The increasingly paperless offices that mobile devices make possible have weakened HP’s once highly profitable printer business. The company’s attempt to enter more lucrative markets by spending $1.2 billion on mobile device maker Palm in 2010 fell flat. HP stopped making devices using Palm’s webOS software in 2011.
Bradley acknowledges that the company is behind in integrating hardware and software into “really compelling packages that can compete with Apple (AAPL) and anyone out there.” Photon Engine is an early attempt at catch-up. The package varies, but typically includes projectors, screens, and a high-powered PC and costs $10,000 to $125,00. At the heart of it is software called Pluribus, which is geared to taking disparate forms of data—video streams, GPS coordinates overlaid on a map, Web pages, even 3D footage—and then instantly formatting high-resolution versions for screens of any size. The data can come from iPads, traffic cameras, or other sources, and the output can be displayed with cheap projectors or on $100,000 screens appropriate for concert stages.
Thanks to Photon Engine, HP is “years ahead” of rivals in the so-called immersive displays business, says Richard Doherty, co-founder and director of consulting firm Envisioneering Group. “It should be named the emotion engine because it gives people the ability to see motion, and process information, with the same depth and connection that you’d get from looking at something with your naked eye,” he says.
Fashion house Marchesa recently used Photon Engine at a Bergdorf Goodman store in Florida. Shoppers wore glasses to watch 3D images of models wearing Marchesa’s spring line saunter across a huge screen. Marchesa marketing director Allison Lubin credits the technology with doubling sales that weekend. IMS Research expects the immersive displays business to grow 40 percent annually and reach $7 billion worldwide by 2013. Photon Engine could also help HP sell monitors, projectors, and high-powered PCs, lines that brought in $3 billion in sales last year.
HP is waiting for the fall launch of Windows 8, with its new touch-optimized Metro interface, to have another go at the consumer mobile market. Bradley hints a big emphasis will be on convertible laptops—lightweight PCs with swiveling or detachable touchscreens—to compete with Apple’s iPad and other tablets. Whitman says HP’s turnaround will take three to five years. “It took us a while to get into this, and it’s going to take us a while to get out,” she said in February.
The bottom line: HP says Photon Engine shows it can integrate hardware and software. It’s waiting for Windows 8 to prove it can do the same in mobile.
Nokia's Colorful Silicon Valley Office
Since 2010, Nokia (NOK) has closed its five satellite offices in the Bay Area and relocated the employees—mostly workers from research and development and marketing—to a gleaming five-story building in Sunnyvale, Calif. There, amid Nordic modernity, they enjoy a shape-shifting office: Fewer than 10 of the 500 employees have a permanent workspace.
“It’s about the variety it gives you,” says communications manager Karen Lachtanski. “We move to new views to give a new perspective. We’re not a place with family portraits pinned to many cubicle walls.”
Employees work over lattes and fresh-made sandwiches from a cafe that brews Peet’s (PEET) Coffee. Two wellness rooms, each with a shower and a napping area, help traveling executives decompress before meetings. Clusters of classic arcade games and a trophy case of obsolete Nokia models are constant reminders of the inexorable need to innovate or perish. The smallest conference rooms, lined with fragrant pine slats to evoke a Finnish sauna, double as private phone booths. “Finns love their saunas,” says Lachtanski.