Want to make your own pants? The site will have instructions for that. And also how to make your own sewing machine. It aims to be a repository of instructions on how to make everything, and change how we think about where our stuff comes from.
When industrial designers think about ways to make products more sustainable, they often focus on small tweaks: removing BPA from plastic, or making a product that’s slightly less toxic than previous iterations. But these are bandaids on the larger problem: materials that aren’t biodegradable and that are mass-produced in central locations (so supply chains can be easily disrupted).
When Dominic Muren, a former toy designer, started the Humblefactory design laboratory, he decided to address systemic supply chain issues. "What if instead we thought about the way slow food thinks about food? Slow food isn’t trying to be a healthy alternative to a TV dinner," he explains. "It’s asking people to completely reexamine the way food gets delivered to them in a local context."We don’t have a good place to have conversations on what’s possible to make on a small scale in your local community and how you do that making.
Humblefactory has worked on a variety of projects, including a skin-based method to hold assemblies of objects together and a way to use waste paper to make durable 3-D objects (the vacuum-powered molding process can be seen in the slide show above). But Muren’s latest is his most ambitious. Alchematter, a site that will launch in closed alpha this summer, will be a crowdsourced guide to making things from scratch--or, if you like, a Wikipedia for makers.
Says Muren: "We don’t have a good place to have conversations on what’s possible to make on a small scale in your local community and how you do that making. There’s Instructables and Make:Projects and a couple of websites that allow you to share instructions, but nothing that allows you to share the whole chain from the ground up."
A sample project on Alchematter might contain instructions for making a sweater. But it won’t stop there: There could be variations on a single procedural step that change the pattern, or even instructions on how to make a knitting machine that creates the sweater for you. The sweater instructions could also be embedded into a larger project, like a knit cushion that goes on a couch.
Muren is also excited about the prospect of DIY bioengineering projects being included on the site (see this video on how to make DIY antidepressant yogurt to see what he means). "There’s little small-scale support infrastructure," he says.It’s not just you either live in New York and you’re a hobbyist or you live in rural Ghana and you’re a farmer with nothing.
Each project can be adapted to a local context by contributors. In New York, makers might have the cash to buy tools from McMaster Carr, a massive industrial supply company. In Detroit, makers might not have the funds for that--but they may have access to scrap, because they live in a place where industry is in decline. A savvy contributor could make a note on a project for locals living in places that have an excess of trashed microwaves: Go find a dead microwave and take a particular chunk out of it to use in XYZ project.
"The reality of small-scale making is that there are a lot of different situations," says Muren. "It’s not just you either live in New York and you’re a hobbyist or you live in rural Ghana and you’re a farmer with nothing."
By the time the public gets to play with Alchematter, there will probably be plenty of projects to look through. Humblefactory is teaming up with Open Source Ecology, an organization working on a toolkit containing 50 components that can build a civilization from scratch (we’ll believe it when we see it) for the closed alpha. "They’re missing a good way of sharing these designs," says Muren.
When industrial designers think about ways to make products more sustainable, they often focus on small tweaks: removing BPA from plastic, or making a product that’s slightly less toxic than previous iterations. But these are bandaids on the larger problem: materials that aren’t biodegradable and that are mass-produced in central locations (so supply chains can be easily disrupted).
When Dominic Muren, a former toy designer, started the Humblefactory design laboratory, he decided to address systemic supply chain issues. "What if instead we thought about the way slow food thinks about food? Slow food isn’t trying to be a healthy alternative to a TV dinner," he explains. "It’s asking people to completely reexamine the way food gets delivered to them in a local context."We don’t have a good place to have conversations on what’s possible to make on a small scale in your local community and how you do that making.
Humblefactory has worked on a variety of projects, including a skin-based method to hold assemblies of objects together and a way to use waste paper to make durable 3-D objects (the vacuum-powered molding process can be seen in the slide show above). But Muren’s latest is his most ambitious. Alchematter, a site that will launch in closed alpha this summer, will be a crowdsourced guide to making things from scratch--or, if you like, a Wikipedia for makers.
Says Muren: "We don’t have a good place to have conversations on what’s possible to make on a small scale in your local community and how you do that making. There’s Instructables and Make:Projects and a couple of websites that allow you to share instructions, but nothing that allows you to share the whole chain from the ground up."
A sample project on Alchematter might contain instructions for making a sweater. But it won’t stop there: There could be variations on a single procedural step that change the pattern, or even instructions on how to make a knitting machine that creates the sweater for you. The sweater instructions could also be embedded into a larger project, like a knit cushion that goes on a couch.
Muren is also excited about the prospect of DIY bioengineering projects being included on the site (see this video on how to make DIY antidepressant yogurt to see what he means). "There’s little small-scale support infrastructure," he says.It’s not just you either live in New York and you’re a hobbyist or you live in rural Ghana and you’re a farmer with nothing.
Each project can be adapted to a local context by contributors. In New York, makers might have the cash to buy tools from McMaster Carr, a massive industrial supply company. In Detroit, makers might not have the funds for that--but they may have access to scrap, because they live in a place where industry is in decline. A savvy contributor could make a note on a project for locals living in places that have an excess of trashed microwaves: Go find a dead microwave and take a particular chunk out of it to use in XYZ project.
"The reality of small-scale making is that there are a lot of different situations," says Muren. "It’s not just you either live in New York and you’re a hobbyist or you live in rural Ghana and you’re a farmer with nothing."
By the time the public gets to play with Alchematter, there will probably be plenty of projects to look through. Humblefactory is teaming up with Open Source Ecology, an organization working on a toolkit containing 50 components that can build a civilization from scratch (we’ll believe it when we see it) for the closed alpha. "They’re missing a good way of sharing these designs," says Muren.
Yesterday's gap up opening couldn't translated in to short covering and buying at 5340 levels and Nifty clawed back to 5300 level. Today's market is muted with no direction as global cues is negative and ahead of Spain's 10 year bond sale which will take place later on thursday.
Trader's are watching closely that will the spain able to refinance its 10 year note with yield around 6% and whether it will continue to climb. Nifty will see 5280 levels in near later half when European markets will open as there will be no hope for positive news from Spain's debt auction and markets will disappoint after that.
For the first time in the history of the Indian commodity markets, National Spot Exchange (NSEL) will launch "e-Platinum", an investment product in platinum in demat form under NSEL's e-series banner, on Tuesday, April 17, 2012.
Indian investors will now have an opportunity to buy, sell, hold and liquidate their e-Platinum units electronically. They will also have the option to invest their small savings in this rarest of all precious metals through SIPs (systematic investment plan).
Benefits
**Trading units available in 1 gram
**Extended trading hours from 10 am to 11:30 pm
Indian investors will now have an opportunity to buy, sell, hold and liquidate their e-Platinum units electronically. They will also have the option to invest their small savings in this rarest of all precious metals through SIPs (systematic investment plan).
Benefits
**Trading units available in 1 gram
**Extended trading hours from 10 am to 11:30 pm
Why would anyone in his right mind pay Rs 1 crore – yes, one crore – for a post-graduate seat in a medical college?
If you had that kind of money after school, would you even have to work to earn a living?
According to a story in DNA newspaper, the leader of the opposition in the Maharashtra assembly, Eknath Khadse, unveiled the details of a “sting operation” on the sale of engineering and medical seats in the state, where seats were apparently sold to bidders for considerations ranging from Rs 7 lakh to Rs 1 crore.
The report, quoting Khadse, says that “private colleges and universities demanded Rs 7 lakh to Rs 10 lakh for bachelor of dental surgery (BDS) seats while the rate for a post-graduation courses goes up to Rs 1 crore.”
Extracting a crore from medical college aspirants is apparently easier than extracting teeth out of dental patients.
But the idea flies in the face of economic logic – since the whole purpose of an education is to find a vocation that earns you a decent income.
Why would anyone in his right mind pay Rs 1 crore – yes, one crore – for a post-graduate seat in a medical college?AFP
While smaller sums such as a few thousand rupees or even a few lakhs may make some sense since the student will presumably earn much more on graduation, the crorepatistudent clearly needs some coaching in economics.
Let’s look at the math.
If I invest Rs 1 crore in a seat, and, let’s say, I expect to spend another Rs 10 lakh while I am doing the medical course (MBBS, etc) over the next five-and-a-half years or six, that’s an investment which will yield nearly Rs 1.9 crore at the end of six years. (Assumption: a 10 percent annual compound interest, which is easily possible in a mix of equity and debt schemes).
Put another way, the opportunity cost of doing a medical course for six years after paying Rs 1 crore as capitation fee or bribe is a loss of Rs 1.9 crore at the end of the course. And let’s not forget that while the seat-bagger will be slogging his butt off in the medical course, the person who opts to invest the Rs 1 crore in a mutual fund or bank fixed deposit will be having a ball.
No work, all play.
On the debit side, at the end of six years, the person who did the medical course would have a skill that can earn him an income while our all-play-no-work idler would have few skills but Rs 1.9 crore in the kitty.
However, one can acquire skills for far less money – even if it is not to become a doctor. In fact, one could do odd jobs and small courses and earn some money. So there would be some skills learned while our future medic is beavering away with hefty books and inspecting skeletons in the lab.
Now, if one were to invest Rs 1.9 crore in a tax-free bond at 8 percent (which is the going rate in recent tax-free bond issues), it would give you a monthly tax-free income of Rs 1.26 lakh.
No MBBS doctor or even specialist will start out his career with that kind of income.
Paying Rs 1 crore for a medical seat is only for the economically-challenged.
See more similar story about Para Medical studies as well e.g. Pharmacy
If you had that kind of money after school, would you even have to work to earn a living?
According to a story in DNA newspaper, the leader of the opposition in the Maharashtra assembly, Eknath Khadse, unveiled the details of a “sting operation” on the sale of engineering and medical seats in the state, where seats were apparently sold to bidders for considerations ranging from Rs 7 lakh to Rs 1 crore.
The report, quoting Khadse, says that “private colleges and universities demanded Rs 7 lakh to Rs 10 lakh for bachelor of dental surgery (BDS) seats while the rate for a post-graduation courses goes up to Rs 1 crore.”
Extracting a crore from medical college aspirants is apparently easier than extracting teeth out of dental patients.
But the idea flies in the face of economic logic – since the whole purpose of an education is to find a vocation that earns you a decent income.
Why would anyone in his right mind pay Rs 1 crore – yes, one crore – for a post-graduate seat in a medical college?AFP
While smaller sums such as a few thousand rupees or even a few lakhs may make some sense since the student will presumably earn much more on graduation, the crorepatistudent clearly needs some coaching in economics.
Let’s look at the math.
If I invest Rs 1 crore in a seat, and, let’s say, I expect to spend another Rs 10 lakh while I am doing the medical course (MBBS, etc) over the next five-and-a-half years or six, that’s an investment which will yield nearly Rs 1.9 crore at the end of six years. (Assumption: a 10 percent annual compound interest, which is easily possible in a mix of equity and debt schemes).
Put another way, the opportunity cost of doing a medical course for six years after paying Rs 1 crore as capitation fee or bribe is a loss of Rs 1.9 crore at the end of the course. And let’s not forget that while the seat-bagger will be slogging his butt off in the medical course, the person who opts to invest the Rs 1 crore in a mutual fund or bank fixed deposit will be having a ball.
No work, all play.
On the debit side, at the end of six years, the person who did the medical course would have a skill that can earn him an income while our all-play-no-work idler would have few skills but Rs 1.9 crore in the kitty.
However, one can acquire skills for far less money – even if it is not to become a doctor. In fact, one could do odd jobs and small courses and earn some money. So there would be some skills learned while our future medic is beavering away with hefty books and inspecting skeletons in the lab.
Now, if one were to invest Rs 1.9 crore in a tax-free bond at 8 percent (which is the going rate in recent tax-free bond issues), it would give you a monthly tax-free income of Rs 1.26 lakh.
No MBBS doctor or even specialist will start out his career with that kind of income.
Paying Rs 1 crore for a medical seat is only for the economically-challenged.
See more similar story about Para Medical studies as well e.g. Pharmacy
The Wall Street Journal has learned a few incredible facts about the recent deal to buy Instagram. Firstly the deal was led almost exclusively by CEO Mark Zuckerberg himself in a brief and intense three day window, without much of the legal or banking paraphernalia that usually goes with such negotiations. And then, at the key moment of discussing price it was guessed that if Facebook was one day to be worth $200 billion, then Instagram's value should be 1% ... Or $2 billion. That's twice what it ultimately went for. The WSJ also suggests that Zuck made the moves because he was worried that Instagram was growing so very swiftly, effectively bypassing Facebook's photo-sharing dominance--this information chimes with rumors he "panicked" at this news. And Facebook's board was "told" not asked about the deal. This paints a complex picture of its CEO as at once confident and bold, and also nervous and panicky--details that will be scrutinized come Facebook's imminent IPO.
Coupon seller Groupon has acquired social ratings service Ditto.me. Ditto launched a little over a year ago as a check-ins app for the iPhone, which would let you see what your friends are planning to do. Foursquare-like in its check-ins feature, it was built to favor a tad more interaction--with it, your friends would know where they might run into you before you got there. Also, the app would draw from your list of contacts to serve as a recommendations service for restaurants or movies. With Groupon's buy, Ditto's days are numbered. The company's Windows and iPhone apps are scheduled to be deactivated on April 30th.
As we have seen a strong move on Nifty yesterday after RBI's credit policy announcements and due to the supportive global cues from Europe and US, Nifty has comfortably taken off 5300 level.
As the up move is getting near to 5400, we might see a profit taking and there might not be enough strength that help markets to take off that level in April expiry. We maintain our view that strong buy signal may arise only after 5400 has been taken off and until then trade the nifty in the range of 5200-5400.
As the up move is getting near to 5400, we might see a profit taking and there might not be enough strength that help markets to take off that level in April expiry. We maintain our view that strong buy signal may arise only after 5400 has been taken off and until then trade the nifty in the range of 5200-5400.
Samsung is sending out invites for the May 3 London launch event of its next generation Galaxy device (Samsung does not say if it is a range of devices or a single phone). The device remains officially unnamed, but has already been gleefully welcomed as the challenger to Apple's "iPhone 5" (or, as sticklers woud have it, the company's sixth-gen device) rumored to launch this year. Samsung's Galaxy line includes several phones, but it is the Galaxy S II that is the company's flagship. Though Samsung raced ahead of Apple in sheer numbers of smartphones shipped last year, Apple snuck ahead to take the lead in the final quarter of 2011 thanks to booming sales of the iPhone 4S. Samsung is close at Apple's heels, yes, but if leading phones are going head-to-head, Samsung's Galaxy S II, though popular, has some ground to cover before it sees the sales numbers that Apple's iPhone enjoys.
As we have seen a correction has started in Nifty after Budget 2012 in march and Nifty has performed in lower top lower bottom formation pattern. As it couldn't take off 5400 level and meanwhile it has getting a strong support around 5180-5200 levels and still be able to manage above it on a closing basis.
Optimism has seen in Bank Index, due to the euphoria related to RBI credit policy meet today. It helped Nifty to stay above 5200 till now.
What can be happen now?
According to US & European markets and renewed fear about spain and italy debt yield made headlines to pull markets in corrective mode and increase in volatility to around 20 ( VIX Index ). Also FII inflow has started being negative compared with first 3 months of 2012.
If we put all equations together and think that whether credit policy will cheer markets or no? The simple logical answer is no.
The reason is if credit policy will be positive, the cheer will be short term and traders will take " sell on rise approach" Nobody will think of buying in sentiment driven rally, which probably could fizzle out within a day or two.
So Don't feel optimistic about policy and make cautious approach until nifty comfortably trade above 5400, which is not seems to be possible within a day or two. So "Sell on rise" will be the favorable approach today and tomorrow.
Optimism has seen in Bank Index, due to the euphoria related to RBI credit policy meet today. It helped Nifty to stay above 5200 till now.
What can be happen now?
According to US & European markets and renewed fear about spain and italy debt yield made headlines to pull markets in corrective mode and increase in volatility to around 20 ( VIX Index ). Also FII inflow has started being negative compared with first 3 months of 2012.
If we put all equations together and think that whether credit policy will cheer markets or no? The simple logical answer is no.
The reason is if credit policy will be positive, the cheer will be short term and traders will take " sell on rise approach" Nobody will think of buying in sentiment driven rally, which probably could fizzle out within a day or two.
So Don't feel optimistic about policy and make cautious approach until nifty comfortably trade above 5400, which is not seems to be possible within a day or two. So "Sell on rise" will be the favorable approach today and tomorrow.
Leadership change affects a company's enterprise value. Whether that's positive or negative depends largely on measures taken by boards and CEOs in the months leading up to — and following — the change.
CEO change presents more downside risk than upside potential, with enterprise risk extending well beyond the point of transition. Further, there is more value at risk in unplanned CEO transitions. In particular, the greater the surprise and the higher the potential for corporate strategy shifts surrounding the transition, the more enterprise value is at risk. But the value at risk also increases over time, irrespective of the circumstances related to the transition. Recognizing this environment, boards and new CEOs must take action before, during and after a leadership change to carefully manage the risk inherent in a CEO transition while setting the agenda for the future.
To understand the risks in CEO transitions, the Strategic Communications segment of FTI Consulting recently studied the impact of CEO transitions on enterprise value. FTI Consulting also surveyed members of the financial community to learn how CEO changes affect their investment decisions, expectations and performance guidelines.
CEO transitions are far from rare. Among companies with market capitalizations in excess of $10 billion, nearly a third (31%) announced a CEO transition between July 1, 2007 and June 30, 2010. Among these transitions, 43% were unplanned. In all, the FTI Consulting study evaluated 263 CEO transitions across companies based in 35 countries.
The study also found that the reputation of a CEO is a critical factor in investor decisions to buy or sell a company's shares. In fact, on average nearly a third of investment decisions are based on perception of the CEO. As a result, leadership transitions put a significant portion of the investment decision at risk as opinions of the new leader are formed.
Knowledge of the industry dynamics and a firm grasp of the company's challenges and opportunities are crucial for new CEOs, according to investors. However, investors generally grant new CEOs a six-month "honeymoon" to set the vision and strategy for the company while establishing appropriate expectations for key stakeholders. Once this honeymoon period has ended, investors expect CEOs to begin delivering on their strategy.
How investors assess new CEOs
The reputation of a new CEO matters to investors. According to the study, investors indicated that nearly a third (32%) of their investment decision, on average, is based on perception of the CEO (see chart below).
In addition, when asked to name the key factors affecting an organization's reputation in the investment community, CEO reputation was among the top six factors cited. That was nearly on par with the company's historical reputation itself and more important than the brand equity of a company's products and services.
When CEOs change, investors are more than twice as likely to sell shares in a company as they are to buy them. All things being equal, nearly 40% of investors said they would sell a stock solely on the basis of the new CEO, the FTI Consulting survey found, while only 15% said they would buy the stock on the same basis.
Not surprisingly, when a CEO transition occurs, investors will perform due diligence on the new CEO's qualifications. Their perceptions will be based primarily on the CEO's track record, which is by far the single most important factor that investors use to evaluate a new CEO (see chart, opposite page).
However, investors are also mindful of the circumstances surrounding a CEO's departure. Essentially, with greater surprise comes greater value at risk. For this reason, planned successions present the lowest risk (see chart, page 62) and can even have a positive impact on stock prices at the time of the announcement.
While much attention is paid to the market reaction to the announcement of a CEO change, in reality the months that follow present an even greater period of risk — and reward — with a higher potential for both value destruction and value creation. The outcome depends, in part, on how well the new CEO sets the agenda and manages the transition.
As stated above, investors are generally willing to grant new CEOs a six-month honeymoon. This honeymoon, handled well, can buy the CEO time and maintain the company's value. But handled poorly, this period may lead to serious risk to both the company's value and the CEO's reputation.
For example, in late 2010, after Leo Apotheker became CEO of Hewlett-Packard, he failed to establish a clear strategy. Some nine months into his term, HP confused the market by first discontinuing its TouchPad line of mobile tablets, then selling them at a deep discount, and then restarting production. At about the same time, Apotheker said HP might sell its profitable PC division, then said it might not after all. Investors reacted by dropping the price of HP shares some 20% on a single day of trading in August 2011, erasing about $12 billion in market value and leaving the company's stock near six-year lows. (By
comparison, the S&P 500 that day closed at 1,123.52, down 17.12, or 1.5%.) Including earlier share price declines under Apotheker's leadership, HP's stock had lost more than 45% of its value. In September 2011, Apotheker was dismissed from the company.
Once a CEO's honeymoon ends, he or she must quickly begin to deliver on the new strategy and performance goals. During this period, investors seek evidence of successful execution of the strategy. This should not be confused with financial performance per se, which most investors expect will take at least 12 months to see traction. When a CEO handles this execution period well, the company's stock value tends to increase; when handled poorly, the company's value — and the CEO's career — may suffer.
At Yahoo! Inc., Carol Bartz's nearly threeyear term as CEO provides an example of the latter. Bartz started with a splash in early 2009, bringing an impressive agenda for a corporate turnaround. Then, during her first six months, she upended Yahoo!'s organizational structure, replaced executives, cut costs and laid off 5% of the workforce. Industry analysts and investors were impressed; the moves, they said, were just what Yahoo! needed. But when the honeymoon ended, Bartz failed to deliver the promised turnaround. In September 2011, less than three years into her reign, Bartz was replaced as CEO; three days later, she also resigned from the board.
A road map for CEO transition
Given the impact of CEO transitions on enterprise value, companies should take concrete steps to prepare for and carefully manage leadership change.
CEO succession planning helps reduce the surprise of a transition and should be an integral part of any company's preparation for leadership change. However, it must be accompanied with and informed by a robust due diligence on all CEO candidates. In addition, having a deep knowledge of stakeholder opinions on the company, its strategy and competitive position can help to align board decisions with stakeholder expectations, permissions and needs. This can be particularly helpful in addressing the ongoing risk inherent in transitions involving fraud, regulatory investigations, strategic transformations, bankruptcies and restructuring.
Equally important, new CEOs must align their organizations to respond to change by setting the vision and strategy, establishing the appropriate expectations across stakeholder groups, and then engaging with stakeholders through new and diverse communications channels. The study found that six months after the start of the new CEO, stock performance often reversed from the knee-jerk euphoria or disenchantment at the time is critical, 80% of new CEOs have no prior CEO experience. Therefore, there is often minimal publicly accessible independent information of past performance available. For internal candidates, the board and management team can address this paradox by showcasing the depth and breadth of the management bench (and one or more potential successors). This increased level of exposure and positioning can be instrumental in managing unplanned transitions.
Apple Inc. provides a case in point. CEO Steve Jobs's surprising resignation for health reasons, in August 2011, could have been perilous for the company's stock. Never before, it seemed, had any company been so closely associated with its top executive. Yet on the day of Jobs's resignation, Apple's stock price dropped by only 5% in afterhours trading. This relatively small change resulted from several factors: Apple had announced a succession plan more than two years earlier; Jobs had previously revealed his illness to the general public; and Jobs's heir apparent, Timothy Cook, was well known and well liked by key stakeholders.THE CENTERPIECE OF ANY SUCCESSION PLAN SHOULD BE THE VETTING AND IDENTIFICATION OF A NEW CEO CANDIDATE.
As a result, even the shock of Jobs's death mere weeks later was quickly absorbed by investors.
Of course, it is not enough for a board to simply name a CEO candidate. The board must also perform due diligence, ensuring that the candidate possesses the qualities investors and other stakeholders seek. In this way, the board helps protect share value.
How do investors assess a CEO? Mainly, they expect a positive track record of past execution, as well as some industry experience. In the FTI Consulting survey, industry experience was identified by nearly 20% of investors as a key factor shaping their initial opinion of a CEO.
Apple again provides a good example. Cook, successor to Jobs and now the company's CEO, had earned a solid reputation for both execution and industry experience during his 14 years of working for Apple. As the company's COO, Cook had outsourced much of Apple's manufacturing, improving the company's margins. Also, because Cook is an Apple insider, he knows the company's business and industry, and this smoothed the transition after Jobs's surprising resignation.
Yet industry outsiders can succeed too, as long as they can demonstrate an understanding of the company's situation and a relevant track record of execution. For example, Alan Mulally has successfully led Ford Motor Co. despite his lack of prior experience in the auto industry. Mulally became Ford's president and CEO in late 2006; he had previously served as CEO of Boeing Commercial Airplanes. Under Mulally's leadership, Ford — which had lost tens of billions of dollars during the recent recession — has posted eight consecutive quarters of net profits. Ford is also the only one of the Big 3 U.S. car companies to have avoided a government-sponsored bankruptcy.
Investors, as part of their due diligence on a new CEO, will seek insights from a broad range of information sources, including internal and external stakeholders, both past and present. In particular, the FTI Consulting study found that customers, partners and the candidate's former colleagues were the sources that most influenced investors' opinions of new CEOs. In addition, investors will look to the board for reassurance that the candidate's management approach is likely to be in harmony with the company's situation and overall approach. Accordingly, companies should leverage perception studies and anecdotal evidence to better understand the stakeholders' views on a CEO candidate. For the new CEO. During the first six months in office, a new CEO should be dedicated to articulating a new vision and strategy, establishing appropriate expectations and managing internal talent. Investors, in their initial interactions with a new CEO, will be watching to see how well the CEO takes command. It is no longer sufficient to serve as a command and control executive. Instead, investors are looking more for "hard" attributes — including a grasp of the company's situation and plans for the future — than for "soft" ones, such as leadership style, charisma and personality.During the CEO's second six months, investors expect to see evidence that the strategy is being executed successfully (see chart below). To stay ahead of investor expectations, a CEO should carefully set the expectations against which he or she wants to be measured. Then the CEO can begin to meet stated financial objectives, improve the company's financial performance, and boost market performance and valuation over the ensuing 12 months, which is in line with investor expectations. Also, in evaluating performance success, the study reinforced the principle that the investment community values metrics associated with stewardship of capital and cash flow, such as return on invested capital and free cash flow, far more than bottom-line metrics such as earnings per share and net income.
The high value of good communication
For a new CEO, communicating effectively with all stakeholders is critical to managing risk and its impact on a company's enterprise value. While communications are important at any time of major change, they are especially vital during a CEO transition.
How to communicate effectively? New CEOs should begin by listening to the market. For example, CEOs can conduct research to gauge perceptions and test company messaging. This can help them identify any gaps between what the company says and what its stakeholders actually hear. New CEOs also need to have a well-honed corporate narrative to tell the company's new story. To achieve this, a CEO should develop a comprehensive communications strategy that is linked closely to his or her vision and strategy. This may involve the development of appropriate messages and channels for different groups, according to what will best reach and persuade them. For example, at The Coca-Cola Co., CEO Muhtar Kent has made a point of communicating his strategy and other changes through new channels to better engage with the company's workforce, especially those based outside its headquarters. Kent does so, in part, by conducting town halls at bottling facilities and sending text messages to workers' mobile phones, as many employees of Coca-Cola cannot readily access e-mail, video or other means of communication during the workday.
Also, while many companies focus their communications efforts on the media, the FTI Consulting survey indicates that it is not a terribly influential constituency for investors. When investors were asked for the key external source shaping their opinion of a company, only 27% named the media, far less important than those much better placed to judge the capabilities of an executive, such as customers, business partners and former colleagues (see chart, opposite page).
Call to Action
Because CEO transitions create a potential risk for enterprise value, all companies should make CEO succession planning an integral part of their riskmitigation strategy. At the same time, companies should be aware that CEO succession planning cannot take into account all factors that affect stock value.
INVESTORS EXPECT A POSITIVE TRACK RECORD OF PAST EXECUTION AS WELL AS SOME INDUSTRY EXPERIENCE
When announcing a CEO succession plan, the board should also emphasize the CEO candidate's track record of execution. Again, this track record is by far the most important factor for investors. Industry experience and personal reputation are a distant second and third.
Once the new CEO is in place, he or she should align the organization by communicating with stakeholders, establishing credibility and setting reasonable expectations among stakeholders.
To protect share value, all companies should remember that surprises increase risk. Therefore, boards should strive to create CEO transitions that are both smooth and well thought out. A CEO's planned retirement, for example, involves far less risk than a forced resignation. But even when a CEO transition hurts the stock price in the short term, the right management initiatives later can often restore value over the long term.
Published at FTIJournal.com
Copyright © 2012. All rights reserved.
