Jason Jennings: Mind Your Own Business [4/14/03]
By Reed Bunzel
Widely recognized as a business consultant, speaker, and educator, Jason Jennings has achieved near-legendary status with his no-holds-barred, tell-it-like-it-is approach. A veteran of the Radio industry, at age 22 he was one of the youngest Radio station group owners in the U.S. His unique and legendary programming, sales and management strategies are credited with revolutionizing many facets of the broadcasting industry.
His success in Radio helped him parlay his knowledge and experiences into Jennings-McGlothin & Company, a consulting firm that, within three years of its founding, became the largest media consultancy in the world. Jennings has spent 20 years founding and leading successful businesses and consulting other companies, showing them how to achieve their full economic potential. More than 300,000 businesses worldwide have purchased his best-selling videos on leadership, sales, management, and customer satisfaction.
Jennings spent 18 months traveling the globe in search of, and digging deep inside, the fastest companies in the world for his book Itís Not The Big That Eat the Small Ė Itís The Fast That Eat the Slow. Within weeks of the bookís 2001 release, it hit bestseller lists of The Wall Street Journal, USA Today and New York Times. Published in 24 languages, USA Today named it one of the top 25 books of 2001.
His latest book, Less Is More, takes a look at the 10 most profitable companies and identifies the factors that make them that way. "To find these top 10 companies, my research team and I spent over a year sifting through more than 4,000 companies, looking for the 10 we could defend as being the most productive in the world," Jennings says. "We based our criteria on revenues per employee per year (which is very quantitative); operating income per employee per year; and return on invested capital and return on equity per employee per year ó all very quantitative." The only qualitative criteria Jennings used, he says, was to "get rid of anyone who was written about to death, and to get rid of anybody that could do an Enron on us." The book is already hitting bestseller lists, and Publisherís Weekly writes that it is "a plea for sanity in the post-Enron age." Fast Company magazine calls it "the new In Search Of Excellence."
When not traveling for research and adventure, Jennings consults companies around the world and gives more than 50 keynote speeches annually for such companies as Verizon, GlaxoSmithKline, Invesco, Sun America, Lexmark, Ford, Wells Fargo and AOL Time Warner.
INK: Corporate CEOs have attracted a lot of attention over the past 12-18 months. Do they deserve the bad rap theyíve been getting?
JJ: Yes. Dr. Linda Trevino, who was the head of the business department at the University of Pennsylvania, once told me, "Layoffs are nothing more than a fad that CEOs think they have to do to be seen in the marketplace as being lean and mean. In actuality, any company that has to constantly resort to layoffs ultimately has to be seen as being mismanaged in the first place."
In many respects, thatís an apt metaphor for an answer to this question. One of the problems with CEOs is that 95 percent are white males, and they do things like lemmings going over a cliff. They see somebody build a big corporate headquarters, so they think they need to build a big corporate headquarters. Their buddy, whoís a CEO, gets a corporate jet, so they need a corporate jet. They see somebody do layoffs, so they think they need to do layoffs. In many respects, itís almost a case of arrested emotional development on the part of these people, who just play a me-too game. And when you pick the wrong role model, you end up with everybody doing the same thing.
How much of the current economic disrepair can be blamed on the actions of corporate CEOs?
That is one of the brilliant questions of all time. And I will respond with an equally brilliant answer. I found it fascinating that within three days of 9/11, airlines around the world had announced the cumulative layoffs of 120,000 people, they had slashed their routes 20 percent, and they had mothballed hundreds of aircraft. On the other hand, within three days of 9/11, Ryanair had plastered Europe with hundreds of thousands of posters with a picture of Bin Laden on it and the headline "Donít Let The Bastards Win," with a sub-head that read "500,000 free seats, 1 million seats for 10 Euros."
Now, every quarter since 9/11, Ryanair has enjoyed double-digit revenue and profit growth over comparable periods. They now put 24 percent of every dollar in revenue to the bottom line, which has never been equaled by an airline. No American airline has ever come close to this; the most they get is 2 or 3 cents.
Hereís what it comes down to: Is it the job of a CEO to manage expenses and head count, or is it the job of the CEO to create demand for the companyís services and products? Because if CEOs are spending all of their time creating demand for their goods, services, and products, then they can have underlings and computers count the people and count the expenses. But based on the research for my last two books, I believe most CEOs would say their job is to manage the corporate checkbook and lay people off if necessary. Thatís the difference between truly brilliant companies and the also-rans.
Do most CEOs understand the business theyíre in?
No. One thing that jumped out at me about all of the companies I wrote about in my book is that they all have a singular focus and they run a very simple business. Nucor Steel makes rolled steel and joists ó thatís all. World Savings issues adjustable rate mortgages, and they attract deposits through slightly higher interest rates on CDs. Thatís all they do. Ikea makes knock-down, assemble-yourself furniture for the masses; at no point in time were they corrupted into thinking they could be all things to all people. All of these companies essentially run very simple businesses.
When we contrast that with most other companies, itís almost as though, when most people get into business and enjoy a little success, they incorrectly assume that theyíre suddenly omnipotent. They begin to think that, if they came out of metal fabricating, all of a sudden they should buy a hotel chain or a rental car company, although they know nothing whatsoever about those businesses.
What else do the brilliant companies do?
A remarkable man named Taiichi Ohno is known as the father of lean production. Hereís what Ohno says: "In order to improve a system, you must have a system. In order to improve a process, you must have a process." What all of these companies have done, even though they had never heard of Taiichi Ohno, is this: Whatever business theyíre in, theyíve taken that business and theyíve figured out the best practices for doing what they do ó and then they do it over and over and over again, always making it better. The benefit of that is, you get to wring out the waste. The husband and wife who head World Savings have been at it for 40 years, and they enjoy it as much today as they did 40 years ago. So why in the world would they be bedazzled by the prospect of going into another business?
Are Radio companies guilty of this lack of focus?
Yes. Iíve always had a close relationship with Clear Channel, and not many years ago, they invited me to a several-day retreat with their general managers and sales managers. During one of the breaks, I was sitting in the hallway with Lowry Mays, talking about a company we both worked with in Australia ó it happened to be in the newspaper, outdoor, Radio business ó and I asked Lowry, "Would you ever have any interest in getting into any of those businesses?" And Lowry said, "Absolutely not. We donít know anything about any of those businesses. Why would you get into a business you donít know anything about?"
Today, of course, although Iím still a raving fan of Lowry, Mark, and Randall Mays, you have to ask yourself the question "What do they know about concert venues or billboards?" What was this need to go into all of these businesses that werenít among their core strengths?
How does a major corporation like Kmart reinvent itself and get back to the business of productivity?
When Lou Gerstner took over IBM, many people had given up the company for dead. The Wall Street Journal was filled with stories that IBM would never be able to achieve its former glory, it would be broken into smaller operating companies, that the name IBM might not even endure. When Gerstner took over the company, he said, "The last thing we need right now is a damned vision. What we need to do is spend our time calling on customers." Throughout his tenure, Lou Gerstner spent 50 percent of his time on sales calls. I donít mean having lunch or golfing with a big customer ó he spent half his time calling on companies. I would challenge every business owner and CEO today to ask themselves what percent of their time they actually spend calling on customers. And I say the answer would be practically none. Most CEOs donít know anything. They have lost the right to speak about business when theyíre not on the front line, dealing with customers. If youíre not on the front line, whatís the only thing to do? Retreat to your offices, balance the checkbook, and lay people off.
So youíre saying that many CEOs have lost sight of who their customers really are?
Yes. Hereís what happens in most companies. Virtually any company answers to Wall Street in one of two ways: Either theyíre a publicly traded company, which means theyíre an equity-based company answering to Wall Street, or they do it with bonds, borrowing money. Theyíre raising money with debt or equity ó in either case theyíre answerable to Wall Street. Hereís the problem: The moment a CEO of any company begins giving advance guidance to the analysts, theyíre screwed forever. If you have a conference call with the analysts and you say, "During the next quarter, our revenues will be $1 billion," one of several things will happen. If the analyst likes the billion-dollar number, theyíll give your stock a good rap, and your share price will go up. If they donít like the number, theyíll give your stock a bad rap, and the share price will go down. So whatever number you give to the analyst, it has to be pleasing to them.
And either way you have to pay the piper.
Precisely. You have to deliver that number. If you donít, the analysts will destroy you. But hereís what happens: When youíve gone down that slippery slope, you no longer are in business for your customers, your shareholders, your people ó you are in business for a small, close-knit group of Wall Street analysts.
So why do so many corporate CEOs get into bed with the analysts? Itís not as though they must...
One thing the 10 companies in the book have in common is they donít give advance guidance. As Herb Sandler at World Savings said, "I will be damned if Iím going to let some snot-nosed 26-year-old kid who follows my company have me working for him. We do not give advance guidance. Wall Street gets the numbers at the same time our shareholders get the numbers."
Thatís brilliant. Itís counter-intuitive, because itís not the way everybody else does it. But these companies are very clear that, when you tell Wall Street what youíre going to do, youíre no longer working in the best long-term interest of your company ó youíre working for the analysts. As further proof of that, we can run down the list: Xerox, operating under federal indictment and fined tens of millions of dollars. What were they guilt of? Generating artificial revenues. ImClone? Artificial revenues. MCI-Worldcom? Artificial revenues. Enron? Artificial revenues. Global Crossing? Artificial revenues. They just lied, cheated, and made up revenues that didnít exist, just so they could hit those short-term Wall Street numbers.
Were you surprised when the headlines broke, saying those companies had been playing with their numbers?
Not surprised at all. If anything, I was probably heartened to see the skirts lifted. I do not believe theyíve been lifted high enough. If we were to scratch away a little harder at the veneer, we would see literally hundreds of other companies that have been engaged in similar revenue engineering.
Do you think the process of generating artificial revenues has stopped?
No. Once youíre addicted to crack, itís very difficult to get off it. This problem will keep surfacing. Six months ago, as a keynote speaker for GlaxoSmithKline, I hung with these people for a day and spent a lot of time studying the companies; I really enjoyed the people I was with. But last month, The Wall Street Journal had a story alleging that GlaxoSmithKline is guilty of the same damned thing: revenue engineering. I believe itís endemic; these are not isolated cases.
What is the most critical element in forming and leading a truly productive company?
Nucor Steel is probably one of the two best-led companies in the world today. Forty U.S. steel companies have gone bankrupt in the last three years, but in the face of all that negativity, here is Nucor Steel, now Americaís largest producer of steel. It has had 132 consecutive quarters of growth. The company grows between 10 and 20 percent every year; its average steel worker makes $80,000-100,000 a year, and the company has reduced the time it takes to make a ton of steep from 11 hours to 30 minutes. So the question is, how in the hell can they do that?
Nucorís CEO, Dan DíAmico, told me, "Any time you hear a CEO or manager talk about how important their people are, run for cover for this reason: People are not your most important asset. The right people are your only asset." Thatís one thing that continually struck me when I was visiting these companies. They donít use the rhetoric about the importance of their people. They truly believe that the right people are their only asset. Thatís one of the big differences I find between CEO and manager wannabes and pretenders, and those who are real. So CEOs should ask themselves this: Once youíve killed yourself to assemble the right people, why in the world would you ever have a layoff or let any of them go?
Do some CEOs view their people as liabilities, more than assets?
Someone once said to me, "The two greatest disarming tactics in the world are truth and humor." In these companies, the truth is what counts. But because the word "truth" is over-used, the word I used in the book is "authentic." None of these truly productive companies have environments that are based on politics, hidden agendas, or climbing the corporate ladder with your nose stuck firmly up the bum of the person the rung above. These companies deal in the truth, and their CEOs believe that the people who work for them are their most important asset. Great CEOs have an absolute belief in people, and they create environments that are based on the truth.
Have most companies lost sight of their "big objective" ó the reason theyíre in business?
All great companies have a simple, big objective. What I find to be very curious about these companies is that most companiesí big objective is to make as much money as they can. The problem with that is, when thatís your big objective, youíll engage in any unsavory activity if it allows you to make money. Not one of these 10 most productive companies in the world, however, has a big objective of making money, even though they end up being the most profitable companies in the world. Itís fascinating. They truly see profit as a byproduct ó a deserved byproduct ó of doing what they do.
How does the "big objective" of simply making money apply to the dot-com era?
That period of time knew more great train robbers than any other time in the history of the planet. More people raped, pillaged, and intentionally plundered for their own private net worth than at any other time. I would suggest that the biggest sin is that we do not put people in jail for management malpractice. We jail people for medical malpractice, we take away their licenses, we have legal malpractice where we take away legal licenses, and on some occasions we have put attorneys in jail. So itís very strange that we donít have management malpractice and that we do not put people in jail or take away their licenses to practice management and business.
We put people in jail for stealing a loaf of bread...
Thatís exactly right, but these people have been allowed to walk free. It is absolutely criminal. And, of course, the Radio industry got caught up in the same hype and mania. The bottom line is, there was no "new economy," there will never be a new economy. There will always be a single economy, where in the end the marketplace is ultimately fair. All of us receive exactly what we deserve based on what we produce, what we create, or the value we add. We can hope that the rules of gravity donít apply, or we can hope that they donít apply to us, but ultimately they do.
How important is the concept of a corporate culture today?
I would ask everybody reading this: "What is the culture of your company?" If they canít answer that question, they have a culture by default. But the culture they have by default is not a very pretty one, because itís a culture of everybody looking out for themselves. The difference between great companies and also-rans is one culture everybody wants to be part of. Most companies donít have a culture. Even worse is the incredible disconnect between what the people at the top and what the other employees believe is the culture. Most disheartening is a CEO who believes his own press and believes thereís a culture, and everyone else in the company believes thereís a different culture. Then you have a disconnected organization.
How would you distinguish between management and leadership?
Good question, because most people confuse the two. Management is about counting stuff ó how many people showed up for work today, how many people do we need working on the dock, what are the accounts receivable, how many avails do we have for next Tuesday, what is our average year?
If management is about counting stuff, what is leadership?
Napoleon said, "A leader is a merchant in dreams." Eisenhower said a leader is "someone who gets people to do the things he wants them to do, but makes them want to do it." It has been my experience that people left alone will not do the things they need to do to get to where they want to be. Itís all too hard. So in my mind, the most apt definition of leadership is this: "Leadership is about taking people where theyíd like to go but wouldnít go by themselves."
Consolidation According To Jennings:
"Twelve years ago, in 1991, financial data showed that 72 percent of all Radio stations in the U.S. were losing money. And of the 28 percent that made money, the average profit was $10,000. Obviously, it was an industry that was upside-down.
"The real question here is not how consolidation has helped pull the Radio industry out of that mess, but how in the world did it get in that damned dilemma to begin with. There is only one answer. Itís an answer that infuriates people, and itís the reason people have either been a supporter of Jason Jennings or they are infuriated by him. The reason is because Radio had never figured out how to sell against other media. Radio sold against other Radio stations, and therefore the industry was played like a fiddle by agency media buyers, local storeowners and car dealers.
"They would go to Station A and say, ĎIím thinking about spending $10,000 bucks; how many spots am I going to get?í Then theyíd take whatever answer Station A gave them and go to Station B and ask them to beat that deal, with some value added. Then theyíd take that discounted deal back to Station A to see what they could get. They could do this because Radio was fighting Radio and not selling against other members of the media; it was as though they were cannibalizing each other.
"Then, with the industry upside-down, they went to Washington ó not unlike the steel industry ó with their hats in their hands, begging for regulatory relief. What they got was total regulatory relief, which allowed them to own all these stations. Now hereís the question: In the name of deregulation, what did we essentially end up with? We ended up with something we can call near-total deregulation, but we really ended up with what would be closer to re-regulation. Now, instead of having 10 or 12 different Radio groups fighting one another for revenues, bloodying each other in the marketplace, we have three groups that are in the marketplace, doing the same thing.
"Essentially, weíre in the same place that led to deregulation in the first place. I still donít believe that Radio knows anything about how create demand for advertising revenues. All they can do is fight one another for existing dollars. Ten years ago, you had 12 stations fighting for the $100,000 from the Ford Dealer; now you have three groups fighting each other for the same $100,000. The more things change, the more they stay the same.
"One more thing ó anyone who says that their focus today is to get dollars from other media have their heads up their butts. That is just not the reality I see in the marketplace. I wish I could tell you that Radio is out there effectively selling against television, or that I see cases of Radio effectively selling against newspaper, but I have to tell you ó I donít see it. And Iím out there on the front lines all the time. It is same-old, same-old all over again."
Comment on this story