World Brifing

By Julie Rawe; Sally B. Donnelly Sunday, Feb. 15, 2004
    • Memo to the COO: Update Your Resume
    According to a new study, chief operating officers can be likened to your appendix. Not only are they unnecessary, but they can also turn into expensive problems. The study, which will appear later this year in Strategic Management Journal, concludes that companies with a CEO-COO combination substantially underperform those without a second-in-command. For boards of directors, the COO position is always a thorny issue, particularly if they have strong-willed CEOs. Researchers examined 10 years' worth of data, from 1987 through 1996, for more than 400 companies in 21 industries to yield a sample of 3,168 firm-years. The bottom line: having a COO lowered returns on assets an average of about 1%. For a company with $1 billion in assets, that means a $10 million dent in annual profits, according to the study's lead author, Donald Hambrick of Pennsylvania State University's Smeal College of Business. Says Hambrick: "The two broad possible explanations are that the CEO-COO duo is an inferior arrangement or that it is a sign of an inferior CEO." Our guess is that underachieving CEOs will point to the former.

    EXECUTIVE SUMMARY
    A New Take on Girl Talk
    Stanford Business School's popular Interpersonal Dynamics course forces students to critique one another's personal demeanor as it relates to the messages they're trying to convey. Too bashful? Fidgety? Overly aggressive? The class, which students call Touchy Feely, aims to overcome bad body language, which too often equals bad business. Similar classroom pointers are now available in Lois Frankel's Nice Girls Don't Get the Corner Office. As promised in the subtitle, the book details 101 unconscious mistakes women make that sabotage their careers — ranging from tilting their heads when they talk to couching statements as questions and accepting dead-end assignments. Frankel, an executive coach who has worked with FORTUNE 500 companies, offers tips like "Don't substitute tears for anger." In other words, skip the Kleenex, ladies. Get mad, get even — and get ahead.

    Give Us Heathrow
    Negotiators for the U.S. and the European Union are moving toward liberalizing the transatlantic aviation market. A crucial goal for the U.S. side: more access to London's Heathrow Airport. An old, restrictive U.S.-British pact allows only American and United to fly to the world's busiest hub. For their part, the Europeans want their carriers to be allowed to fly to U.S. cities from anywhere in Europe. KLM, for example, can fly to the U.S. only from its home country, the Netherlands, but would prefer to operate from Paris or London as well. With Air France and KLM heading toward a merger, the market is forcing the issue. "When we reach a deal with the E.U.," says Jeffrey Shane, U.S. Under Secretary of Transportation, "it's going to mean more flights to more places and more choices for passengers."

    Nike's Village People
    Nike is expanding its unlikely role as an economic developer in Southeast Asia. Last month the shoemaker renewed a partnership with a Thai NGO to curb migration to overwhelmed cities like Bangkok by creating economic opportunities in rural areas. The project, branded Nike Village, has paired a cluster of rural stitching centers in the Chakkarat district with a microloan program. "We've got something to show now," says Bob Speltz, Nike's director of global community affairs. He cites success stories about villagers who use $50 loans to start or expand businesses — from food sellers, left, and fried-cricket vendors to a guy peddling ice cream on his motorcycle. Nike's latest $150,000 infusion will fund community services, including a mobile AIDS unit and a school-lunch program. The company is also expanding its microcredit efforts into China. Through partnerships with local microfinance institutions, it has loaned more than $2 million in Thailand, Indonesia and Vietnam.

    An Industry Wake-Up Call
    In the battle for mid-priced-hotel market share, Hampton Inn is tapping into one of travelers' biggest pet peeves: the mysterious and often utterly frustrating task of figuring out how to set the hotel-room alarm clock. As part of a brand overhaul that includes installing high-speed Internet access in all its rooms, the Hilton Hotels subsidiary tested 150 clock radios before dumping them all and designing its own, which is being manufactured by Timex. The clock radio not only comes with easy-to-follow instructions marked on top but also features five clearly labeled buttons to help guests find radio stations, set to formats such as jazz and hip-hop. So many customers are asking to buy these low-tech gadgets that the chain, based in Memphis, Tenn., is considering branching out into electronics. Could a Hampton Inn laptop be far behind?

    Lucent's a Live Wire
    After three years in the red, Lucent Technologies last month reported its second consecutive quarterly profit. Archrival Nortel Networks two weeks earlier scored a $1 billion — plus contract from Verizon Communications to gear up for voice-over-Internet protocol (VoIP). Both telecom-equipment makers have managed to claw their way back to profitability — Nortel was in danger of being delisted 1 1/2 years ago — in part by axing two-thirds of their work forces. With no more fat to trim (at one point Lucent tried to save money by turning off the lights in the hallways of its research labs), these tech survivors are starting to benefit as cable and telecom firms battle one another for bundled customers. "We are clearly seeing evidence that the market is stabilizing," says Lucent CEO Patricia Russo, right. But the biggest boost for Lucent and its rivals could be telecom's transition from traditional circuit-based phone networks to VoIP, which routes calls over the Net as data packets. Verizon's mega-investment in VoIP will probably spur fellow telecoms to follow suit, as long as demand for the service keeps growing.