Scott J. Landstrom

As a CEO/COO, Scott is known by his peers for being driven, motivated, competitive, a “quick study”, possessing excellent strategic analytical skills, team-oriented, loyal friend and family member, focused and aggressive once he sets goals. Read More...

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Thursday
Sep282017

Managing and Inspiring the new Breed of Worker: "Milennials" (Part I)

Image result for cartoons of millennials

There is little debate that one of the eternal challenges of effective management in the workplace is, and always has been, to understand how the latest generation of young, new employees coming into an organization often has a completely different perspective on a wide variety of subjects from previous generations. 

These young people, new to the full-time workforce in just about every generation, bring with them youthful energy, passion, increasing levels of technical competence, and new ways of looking at business problems that are sometimes unique, or even revolutionary. Merely looking at the staid, conservative, risk-averse perspective of the Depression Era generation (1912 - 1927) in the workplace, vs the bold, innovative, and risk-willing perspectives of subsequent generations dramatically shows that just "doing things the way they have been done" is NOT the path to corporate enlightenment and organizational acceleration of success.

Biologists long ago concluded, relative to Darwinian Evolution, that "Species increases in competitive survival occur at the fringes of the herd." 

What that means is that it is not the "normal" births of typical characterisitic Sable Antelopes that advances the species, but the mutations that look very different from "normal", that do. Sometimes those mutations introduce a deficiency in competitive survival and reproduction, and those are quickly lost and not persistent. But other times, for instance, say a Sable Antelope that is 4 inches taller than average, and can run significantly faster, is born through a positiive mutation. The breed advances, and these traits are increasingly expressed over subsequent generations.

What does that have to do with dealing with new generations like the "Millinneals" (loosely defined as anyone born bewtween 1984 and 2004) as employees ? They have a very different way of looking at many various issues and workplace policies, and topics,  - some of which might be viewed objectively as negative "mutations" from the historical office paradigms (such as "sense of entitlement" and lower priority for long hours at the workplace), and some of which should be viewed as positive evolutions from the culture the "Generation X or Y" generations have harbored (such as "desire to make a difference", priority on making the world a better place over pure monetary compensation importance).

While it can be hotly debated which of the new perspectives of this emerging generation are either positive, or negative, vs historical paradigms - one thing is for certain. The better a senior executive from either the Baby Boomer generation (1946 -1962), or the Gen X and Y generations (together, 1963 to 1983) can understand the dramatic differences in life experience, environment, technology immersion, and even family unit interplay that these Millinneals have gone through, the better job they can do managing and inspiring them. And, oh by the way, what comes along with that is to have higher levels of employee satisfaction, productivity, and the ability to attract and retain top new talent that shares these perspectives and life experiences. 

The cartoon I started with laughingly suggests "selling" the employee's - but it does point out that the traditional generations seemed fixated on monetizing everything in business, and I think a more enlightened view that these Millineals bring with them about "making a difference" and "valuing people over things" are both mutations of the herd that Darwin would conclude are "advantageous" to current corporate performance.

In Part II of this column, I will address some of the specific issues and areas of difference that are brought up by the Millennial perspective. I am reminded of an old General Motors TV ad in which a young man looks at a flashy new car driving by and says "Boy, this is not my father's Oldsmobile !!" 

Well, effectively managing this new workforce from this new generation is exactly like that, and those that don't adapt in some fashion to the changing rules expected in the workplace are destined to sub-optimize their corporate competitiveness. Those resistant managers and executives are like the Sable Antelope Alpha Males that refuse to allow mutant new births to run with the herd - the herd becomes stagnant, less competitive, and loses out in the end.

 

Friday
May122017

In Business, as in Politics, high turnover at the top is Incriminating

In the past three and a half months, the United States has witnessed an unprecedented number of appointees, some among the most senior in the entire Administration, staffers, and other support personnel being fired from Team Trump. Others have resigned, unhappy with the culture and the treatment afforded them in an environment several have labled as "toxic" within the White House grounds. Whether you are "pro-Trump", or "anti-Trump" is immaterial - the specific issue I am raising here is simply the profound level of turnover we have seen to date. And that it HAS to stop, and stop soon. 

Similarly, we have all come across companies that have a similar footprint when it comes to "changing horses" at the top, and "thinning the herd" further down in the middle management ranks. And this process seems to play itself out interatively for some companies led by specific CEO's. A great example is Silicon Valley legend Bob Graham, who merely co-founded Intel Corporation with Andy Grove, and later built Novellus into a powerhouse equipment firm as CEO. Graham was FAMOUS for firing executives for various, seemingly whimsical, and sundry reasons, often reversing field a few weeks later and hiring them back, a quizzical as that sounds. As incredible a leader and visionary as Graham was in almost all other areas, this seemed to be his one "blind spot" he could not navigate out of, or else he would have been an even greater Silicon Valley legend than he already was (Graham passed in 2008).

In both cases, something is broken in the "process" of talent evaluation, selection, recruitment, hiring, training, mentoring, giving feedback, and discipline (when required). To look at the great (overall) achievements of Graham without wondering how much more he could have achieved if he spent more discipline on WHO he hired, HOW they were trained and mentored, and then WHAT to do (other than turn into the "Terminator") when expectations weren't met. The bottom line is when this process plays itself out at a clock-speed of firings many multiples above industry peers, quite simply, "where there is smoke, there is fire." No matter how you try to analyze this track history at Intel and Novellus, "all roads lead to Rome" in terms of implying something was wrong in the talent acquisition and dispersion process, and that something was part of the culture instituted and the deicisions made by an otherwise brilliant man: Bob Graham. 

So while remaining resolutely on "the sidelines" relative to other polical decisions and tactics decided on by the current Administration, I can ony say that they need to stop the roulette wheel of talent loss, both forced and otherwise, by changing how they go about bringing talented individuals onto the team, assuring these newcomers buy in to the culture and overall philosophy, and then provide more guidance and mentoring once on board. Any other solution will likely keep the "body count" flowing, and for both companies and Presidential Administrations, that is definitely NOT a "good outcome". 

 

Tuesday
Jan032017

A "Business Lens" view of the result the most acrimonious Presidential election in US history

Whether you are a Republican, Conservative, Democrat, Liberal, Progressive, or Libertarian - one thing that all can agree on regarding this recent election: it was a ghastly, "roll-in-the-mud", coyote-ugly affair on all sides. Presidential debates degraded in quality and statesmanship until they were simple name-calling contests. Rather than espouse policies and proposed programs, the candidates laser-focused on the shortcomings of their counterpart. Never in the history of Presidential debates had so much of the program ended up focused on "mud-slinging" at their political adversary, rather than focusing on the hope and promise of what their own candidacy proposed to bring to the Presidency.

Moreover, each of the major two candidates suggested there might be very solid reasons why their opponent should be placed in jail, rather than elevated to the Oval Office, an unprecedented level of aggression and hubris.

Historians have chronicled the world outrage that occurred in 1960 when Nikita Kruschev angrily pounded his shoe on the podium in anger at the United Nations General Assembly, decrying "stooges of American Imperialism", but this election came close to that level of accusatory bile and acrimony, stopping just short of using footwear as a virtual gavel in the process. It resembled what one might expect from a third-world country, still struggling to understand what democracy entailed, more than the contest for the most powerful position on earth in a storied democratic confederation like the United States of America.

"Fake news" reports sprang up in support of extremist views on all sides of the political spectrum, and with Reuter reporting that 44% of all US adults get at least some of their daily news input from Facebook, a source that requires no fact-checking, no validation of stories or sources, no journalistic credentials, so what was factually "true" had never had so much competition from what was "trending" - so electors believed what they chose aligned best with their political leanings, regardless of how falacious the stories were on all sides. I read reports that claimed with utter certainty that Obama's children were not his own, that Hillary was the functional head of ISIS, and that Trump was a "stooge" of the Russian mafia, beholden to them for hundreds of millions in debt.

And in the end, after an election that deeply divided this country like none before it, Donald Trump was elected to be the 45th President of the United States of America.

Without taking any position on whether that was a positive or negative outcome, let us instead focus on the likely impact on US businesses that this Administration is forecasted to have: 

 Sectors Benefiting: 

1) Oil and Gas Industry: Trump has gone on record as being in favor of "energy independence" and against over-regulation of hyrdrocarbon exploration, and that should be a windfall for Natural Gas and Oil firms.

2) Defense Industry: Trump has repeatedly vowed to re-invigorate some of the aging assets in the military, both nuclear and non-nuclear, and with a Republican controlled Congress, this looks like a sure bet.

3) General Construction Industry: Again, with vows to "rebuild our crumbling infrastructure", heavy construction equipment and materials suppliers should see a windfall

4) Big Pharma: There had been an enormous push, led by a democratic White House, to go after critical drug providers guilty of obscenely escalating life-saving drugs, in some cases over 500% in six years. Trump generally opposes regulation of free enterprise, allowing these practices to likely continue

5) Private Prison Operators: Clinton had vowed to shut down such operations after a few "bad actors" among the dozens were caught in rights violations against prisoners. Trump has no such plan, so some of these public companies that run the private detention facilities saw their stocks climb over 30%.

 

Sectors Suffering: 

1) The Automotive Industry: Trump has threatened to place a universal 30% tarriff on goods coming from Mexico and China, to name two frequent US trade partners. Many of the sub-systems and components used in Detroit are manufactured in one of those two countries, potentially vastly damaging their worldwide competitive cost profile.

2) The Guns and Munitions Industry: With Clinton promising significant tightening of the current rules on certain types of guns and munitions if she were elected, analysts had projected a "run" on such products that would have nearly emptied shelves of specific semi-automatic weapons, ammunition, and related home defense peripheral products. Now such a "run" is not necessary, with Trump promising to veto any such legislation.

3) The Medical Services Industry: With "Obamacare" almost certain to fall into the "repealed legislation" category with the composition of the House and Senate combined with Trump's distaste for it, it seems clear that in its place will come a system promoting more competition on price/cost, lowering margins for doctors and hospitals in general.

4) The "Import-Export" Industry: In fact, not only this sector, but any industry that relies heavily on foreign sourcing of products, parts, and components. Trump has, at various times, claimed to be in opposition of NAFTA (North American Free Trade), TAFTA (European Union Free Trade), and the Trans-Pacific Partnership (Australia, Japan, Vietnam, others). One popular "short" on Wall Street right now is Walmart, due to their extensive use of outsourcing beyond American borders.

5) The "Green Movement" on Energy: With Trump advocating lesser regulation, both in terms of pollution and in terms of prohibiting certain regions from drilling and exploration, this will definitely HELP the Oil and Gas sector, and hurt Solar, Wind, and Geothermal energy products and services providers. 

 So there you have it. A brually divisive election, but as there always are, there are "winners" and "losers" on the economic scoreboard to think about when you think about investing equity in 2017 and beyond.

 

 

Monday
Aug222016

The High Tech M/A Growth Vehicle: Metrics of Success (or Failure)

In my extensive readings on analytical metrics of high tech mergers and acquisitions, depending on the author and the study involved, the conclusions reveal something between 62-68% of all executed transactions being dillutive to the acquiring shareholder in the long term, when all is said and done.

But is accretion/dillution a proxy metric for whether a deal was beneficial in overall long term enterpise value to the acquiring firm ? Is short term enhancement of earnings per share an appropriate "bell-weather metric" for whether a given transaction was good for the acquiring company and their shareholders? Perhaps - surprisingly - decidedly not, the research suggests.

A recent survey of corporate executives by Consulting firm A.T. Kearney found that the four most utilized metrics for evaluating possible acquisitions were:

 

1) EPS impact: accretive or dillutive, short term

2) Enterprise Value vs Purchase Price of target

3) P/E ratio of target company

4) Discounted Cash Flow (DCF) of target company


Yet the post-deal research done by Kearney finds that only one of these four actually correlates best to those same executives feeling a given transaction resulted in value-creation, when compared to what they paid out to close the deal (Enterprise Value vs Purchase Price). 

Let's just contemplate the other three key metrics for a moment: accretion/dilution and P/E ratio, and DCF analysis. Even a cursory financial analysis of acquiring another public company involves some sort of "premium" to market price. So if the P/E ratio is more attractive than the acquiring company's "currency" (their stock) is trading at, then it must be so by a fair margin in order to absorb the premium to market pricing that will be required in the great majority of public stock acquisitions.

So let's just say that the P/E of a given deal, including the premium, is still less than the acquiring company maintains, so this would generally indicate an accretive transaction, with all else being equal. 

But a careful analysis would reveal that the market is relentless in its long-term sophistication at valuing equities, so while earnings per share has risen, the "multiple" of the acquirer has been "dumbed down" to a degree by adding a lower P/E asset to their portfolio. So while the "E" has been enhanced, in an efficient market, the multiple declines. 

Of course, if we switch to looking at "private" companies as targets, then a whole different set of factors play into the analysis, and much more discordant valuations emerge from different suitors based on their appraisal of, and value for, the private company's assets, technology, team, verfiable backlog and account presence, and competitive position.

Discounted cash flow is the undisputed "king" of true shareholder value, but the degree to which assumptions must be made can make the deal swing wildly in value based on issues like the beievability of a 4 year sales forecast. So cash flows which are demonstrably in the present get weighted heavily, while prospective "hockey stick" forecasts should not. Thus, the problem with using DCF in M/A analysis - it is only as good as the forward-looking assumptions it is based upon. 

So what SHOULD have been the other 3 metrics that are at the top of the list for executives contemplating M/A action ? According to Kearney, they are:

 

1) "Core Capabilities Assessment"

2) "Realizable Synergies"

3) "Cultural 'Fit' Assessment'


The first has to do with a detailed, "bottom-up" appraisal of the skills and capability of the technical, operational, and management teams being acquired. Bringing in highly talented teams and putting them to good use on projects and programs they are well suited for is a "value creator" every time. 

BUT, that assumes that such talent stays around to create that value, and that is where "Cultural Fit" comes into play, and related to that, "Integration Strategy" as well. Depending on how insistent the acquirer is that the new portfolio company "clone" the parent's systems and culture can often dictate how severe the talent-retention problem can be. If the "fit" is close to begin with, then the chances of keeping key talent on board is much higher, regardless of integration strategy, obviously. But try to (as once almost happened) merge a free-spirit culture like Apple Computer into a "blue-blood" conservative firm and culture that is IBM's ? Good luck!

The third metric, "Realizable Synergies" is intuitive. Whether those synergies are market-related, cost-related, or technology-related, any time you can create more efficiency in either creating value, or the costs of taking value to market, then there is an obvious and compelling "win" that can result in the proverbial 1+1=3 M/A transaction. 

So, while accretion/dilution and market multiples clearly need to be looked at, and well understood, perhaps some of the more "soft", people-related metrics, along with a sober analysis of true synergies available, should be at least equally weighted in attempting to judge whether a given transaction is "green-lighted" for action. 


 

 

 

 

 

Saturday
Jun112016

The Orlando Massacre highlights an old management blunder: The US role in creating ISIS

The recent tragedy in Orlando, which is now the deadliest mass-murder in US history, was claimed by the terrorist organization ISIS as one of their supported missions. While it is galling beyond belief that we have criminal, terrorist groups executing missions of mass assasination of US citizens on American soil, it is equally galling, to me, to consider the role the United States played in the formation of ISIS in the first place. I am not talking about peripheral influences of the US' victory in the second Gulf War, I am talking about "blocking and tackling", obvious errors that showed such a deeply flawed and haphazard decision process as to be downright tragic and contemptible in retrospect. And it is quite possible that multiple terrorist attacks across the globe are direct ramification of the US bungling this set of decisions so badly....

In the same fashion that the onerous "Treaty of Versailles" at the end of World War I put such draconian terms on Germany that it actually set the stage for WWII, rather than put an end to wars of that scale and carnage, the US mismanaged the "winning of the peace" after conquering the renegade state of Iraq, and we are paying for those mistakes in lives, even today. 

But I digress. Let's lay out the facts and let the reader decide.....

The US government came upon a "nation buidling" decision following the second "Gulf War" in 2003 of what to do about the defeated Iraqi military. Clearly, the very top leaders of that junta needed to be jailed or sanctioned for their role in some of the more inhumane actions taken by the Iraqi military over the previous decade (like gassing civilian townships, and mass executions).

But the rank and file of that army were clearly part of the "fabric" of the social infrastructure of the country, and had not done anything (in general) to merit being incarcerated, or sanctioned.  With insufficient police on the street, and rioting and mayhem occurring after dark almost every night, mid-level Iraqi military officers approached US commanders after the war, ready to go to work, put up to 20,000 trained soldiers on the streets of Baghdad, and take their orders from the US provisional government in place there. In one of the most laughably, horribly misguided decisions ever made by an occupying nation at any time in history, the decision was made to "disband" the Iraqi Army altogether.

A quick examination of the "process" that the US government used to make this decision is even more revealing. They appointed a lifelong politician, Walter Slocumbe, to lead a "Blue Ribbon Panel" to make a recommendation to Paul Bremer, Presidential Envoy to Iraq, and subsequently, to President Bush for approval. Slocumbe never left Washington to go to Iraq, he never read the joint letter sent by the British Joint Chiefs recommending preserving the Iraqi military, he never talked to a single US Military commander, all of whom seemed to feel similarly to their British peers, and neither he, nor his boss Bremer, ever consulted Secretary of State Colin Powell, who was traveling during this whirlwind decision. A "white paper" was written, delivered to the President, and despite (Bush) admitting in his memoirs that "The policy was always to keep the Iraqi army solvent....it didn't happen." 

So without even getting the dust of Iraq on one pair of shoes, without talking to ANY of the experts that had just finished waging war against this same army - Slocumbe jumped to a conclusion, Bremer backed him, and the often-vacuous George W. gave it no thought and approved it, before Colin Powell could get back to Washington and intervene with common sense. 

Thus, the US cut loose 720,000 suddenly unemployed trained warriors onto the streets, with no ways of earning a living for their families. So they did the predictable. They went to "the other side of town" where people WERE hiring experienced military commanders and soliders...the insurgency. And they began to train what would become ISIS in tactics, strategy, and maneuver. A recent estimate was given that of the 40 ISIS senior military commanders, 25 of them came from the former Iraq military. Yep, those same guys that were willing to come back to work and take their orders from the US Provisional Govenment. 

As a result, when I see a tragedy like Orlando occur (or Instanbul, or Bangladesh, or the recent Baghdad attack), I can't help but wonder if Bremer and (particularly) Slocumbe ever have trouble sleeping at night knowing they bungled an obvious "winning the peace" decision that could have prevented much of this killing and carnage. 

Epliogue: Months later, lifelong military historian Andrew Bacevich was in Baghdad, trying to analyze why so many people were dying in attacks against both US military and Iraq civilians. He went to Bremer's command center, and was stunned to see about a dozen US college grads all sitting at minicubes outside Bremer's office. He was puzzled what these "wet behind the ears" kids, fresh out of school, could be contributing to the cause, so he approached one, a vivacious looking young woman. "What are you doing here ?" he asked pointedly. She proceeded to tell him she had been handed the comprehensive responsibility for Traffic Planning in the entire country.

This issue, Bacevich knew, was something that people were so frustrated with malfunctioning traffic lights, frequent losses of power, and unclear rights of way, that Iraqis were getting out of their cars insane with frustration and shooting people dead - all over traffic flow problems. Almost daily. He asked her if she had any formal training in Traffic Planning, and she replied "Oh no....not at all. I am a Political Science major. This is all very new and exciting for me to manage !" At that, Bacevich went out to the front step of the Consulate, sat down on the concrete steps, and wept at the utter insanity of it all. 

So, a set of seeds planted many years ago through ineptitude, laziness, and complete lack of vision continues to this day to haunt us, and make others weep, just like Bacevich. An ongoing "tragedy manufactured" instead of avoided, and the bill keeps coming due.....