Bob Nardelli. A good leader for Chrysler in its present plight?

November 4, 2007

bob-nardelli.jpgIf you believe in situational leadership you may feel that Bob Nardelli’s style is an appropriate one for Chrysler, following the Cerberus takeover

The bloodletting at Chrysler is not going to be pleasant. It calls for a special kind of leadership to avoid worse outcomes than might have been possible. There have been business leaders in the past who relished the prospects of being in charge in such a crisis. They had earned their reputations as uncompromising men willing to made the big decisions in a slash-and-burn situation.

Uncompromising men? It’s just that there are fewer stories about equally ruthless business women, because they haven’t had as many opportunities. A few years ago there was Linda Wachner, America’s first Fortune 500 female boss, whose high-handed management style was blamed for the bankruptcy of clothing company Warnaco. And I have little doubt that if Margaret Thatcher had found herself in change at Chrysler at the moment, she would have entered into the spirit of things with her legendary energy and decisiveness.

Heroes and villains

In times of crisis, it is tempting to portray events as dominated by the actions of great villains or heroes depending on your view of capital market mechanisms. The leader as hero rescues what can be saved, and in the process accepts that casualties as a vital part of winning the battle. That might be called the unconditional free-market view. Opposed to that, is notion of the leader brought in to a company in trouble is a villain, a mercenary, a ruthless bounty-hunter contracted to deliver what is required, ‘dead or alive’ in order to earn his own booty on behalf of a powerful rapacious corporate raider. That’s the unconditional anti-capitalist view.

Young people around the world learn of their national heroes and traitors in terms rather like these. Cultural forces sustain the views, as part of each culture’s ‘national heritage’, regardless of efforts at history teachers to offer a more nuanced explanation of events and of the impact of individuals.

Many years ago, Thomas Carlisle took the view that great leaders could be excused human flaws. Assuming they have something special which achieves great results, we must beware of belittling them for being all too human. That’s one argument. Carlisle warned against what he called valetism. (‘No man is a hero to his own valet’).

One of various objections to Carlisle’s idea is the way in which heroes suddenly become villains (the hero to zero effect), but in either case are granted exceptional abilities. It anticipated the more technical studies of leadership in search of the right stuff, the essence of leadership.

It took us a hundred years of work to suspect that the impact of great leaders was to a considerable degree based on the perceptions of followers. That’s why I am rather keen to promote the suggestion that we get the leaders we deserve, and that they are to some degree the creation of our collective imaginations.

Remember Chain-Saw Al?

Before returning to Chrysler, it may be worth recalling the rise and fall of other leaders once hailed great, and then trashed. ‘Chain saw’ Al Dunlap comes to mind. Older subscribers will remember Al as hero of Wall Street, the wizard of down-sizing. Al was in demand for a company in need of the slash and burn treatment. Al kept producing the goods, metaphorically. He eventually was found not to be producing the goods literally, and had been engaging in all sorts of creative accounting.

Morer recently, we witnessed had the rise and fall of Sam O’ Neal at Merrill Lynch. Sam had been lauded as Sam the Man who had shaken Merrill Lunch out of its strategic slumbers. He had also presided over the company at the time when it hit the buffers as one of the biggest losers in the sub-prime markets this year. Exit Sam with some $16 million compensation for his efforts during the good years.

Once the performance of Merrill Lynch fell, Mr O’Neal’s contribution, and his leadership style were called into attention. He was autocratic. He would not listen to advice. He could be very difficult to work with. And so on.

Which brings us back to Bob Nardelli

When Nardelli left Home Depot, earlier this year, the consensus was that

Home Depot faces a well-known dilemma. It has long passed a growth phase when its stock was rising in sensational fashion. Efforts to maintain the growth led to a decision to bring in new and dynamic management. When the desired growth was not achieved, the leader was deposed. Nardelli’s demise was made easier by his management style and a skill at extracting extremely favourable personal rewards. It should be noted that this might suggest he was a difficult boss, but not a stupid one

When Cerberus acquired Chrysler, they turned to Nardelli.

Why? Private Equity business deals require leaders to be able to follow a plan, stick to the numbers. They may or may not be ‘good with people’. If they are, it’s a bonus.

Matching the situation and the leader

Situational leadership suggests that different situations call for different leadership skills. In one well-known leadership formulation, leaders are invited to assess situations and seek an appropriate style. In Chrysler’s situation, the temptation for the new owners is to regard a directive style as appropriate. That’s how it’s worked in the past. Hello, Bob, I think we’ve got just the job for you …Yes, a bit like Al., but we don’t want any financial tricks. Remember what happened to Al.

So is Nardelli likely to be a good leader for Chrysler?

There are no easy answers in a case study like this one. Conclusions have to be supported by argument and indications of the assumptions being made. So far, I’ve been putting forward a qualification that it is not possible to put leaders into one of two boxes ‘good or bad’. This is based on the evidence that leaders may have a style that suits them to some circumstances better than others.

The next point to consider is good for what and for whom. In evaluating Nardelli’s impact at Chrysler we may wish to take the broad view that Chrysler appears to be in need of drastic and painful change, and that Nardelli was attracted with a deal in which he is generously rewarded for carrying out the painful operation of change.

I suspect he has some of the characteristics of the tough-minded leader required to meet the short-term financial objectives of Cerberus. I don’t know if he will succeed in the wider challenge of creating something permanent that will be recognised as the New Chrysler. Sadly, among the biggest losers at Chrysler will be tens of thousands of workers who will be without jobs over the coming months. The unconditional free-marketeers will Maybe argue that the alternatives would likely have led to even more job losses at Chrysler further down the line. Maybe a tough approach now will create more jobs elsewhere, than a more ‘humane’ and collaborative approach which fails to bring about changes in market prospects of the ailing corporation.


Magic Madge keeps Pearson in the Pink

January 24, 2007

Shares of the Pearson publishing group hit a five-year high this week. City analysts upgraded its prospects. CEO Dame Marjorie Scardino has received the brickbats in its years of decline and now earns the plaudits in its renewal. Rumors persist that the Financial Times remains an attractive target for an asset raider. Will Dame Marjorie stay to savor the fruits of success, or will she became a hostage to the fortunes of The FT, whose pink pages have come to symbolize the early-morning reading matter of City commuters?

When shares at the Pearson group hit a five year high this week, city analysts upgraded its future prospects. CEO Marjorie Scardino also celebrates ten years as leader of the publishing group, and her sixtieth birthday. Have a nice one, Lady M.

Only FT100 female CEO

It has been a turbulent ten years. Marjorie Scardino was the first woman to lead a major (Footsie 100) company. In her early time as leader, she put in place a policy of disvesting non-core assets (such as the high profile Madame Tussauds). She was lauded in the city, and Pearson shares started to pick up. But the gain occurred during the dot-com boom. Shares rocketed, and then equally rapidly fell precipitously. Her big investment in acquiring National Computer Systems (NCS) at the peak of the boom was particularly criticized as an expensive error of judgment. Scardino’s personal stock also slumped.

Courageous moves

Critics identified the Financial Times as a source of volatility at Pearson’s, and its sale a possible opportunity for consolidation. Scardino linked her future to retaining the FT, as her ‘over my dead body’ quote indicated. The unspectacular recovery of the share price four years had just about fended off the criticism of City analysts.

The current reappraisal reveals that the decision to acquire NCS was as shrewd as retaining it was courageous. It places Pearson at an advantage over other media rivals such as Reed Elsevier who have not invested as thoroughly in educational technology.

Is Pearson’s future stabilized?

Possibly not. The thrust of criticism remains, that the group’s assets are not integrated (that unlovely buzz-word) to deliver synergies (that even uglier buzz-word). As recently as last year, new Chairman Glen Moreno indicated his concerns on the UK’s operating structure and performance. Critics see the potential for asset raiding. And the jewel in the crown is the FT. Other much loved brands such as Penguin are also vulnerable.

Is Dame Marjorie vulnerable?

Possibly. Chairman Glen Moreno says the company has no succession plans in hand for her job. A lingering doubt remains. ‘Back me, back my brand’ was her watchword over the FT. Which also translates to predators as ‘Ditch the Bitch, and Deliver the Brand’. In which case, the Private Equity poker players will be doing a good job at losing a good leader, which are hard to find. Scardino’s protégé Rona Fairhead head of the FT group also becomes vulnerable. The winners in such a battle are likely to end up with the leader they deserve.