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IDFC EXECUTIVE LEADERSHIP PROGRAM

31 May – 2 June 2009


Assignments

Participant: Veronica John

(1) HBS 9-406-002: Leadership Development at Goldman Sachs

(a) What are the critical components of GS’s culture and value system?
i) Retaining an appreciation for the firm’s culture and history
ii) Weinberg’s central principles: long-term relationships (over short-term
profits and steady, safe growth (over risk taking).
iii) The business principles that emphasized teamwork, integrity, reputation,
talent and quality.
iv) Keeping burgeoning egos in check – “Client’s are simply in your custody.
Somebody before you established the relationships, and somebody after
you will carry them on.”
v) Blend of confidence and commitment to excellence and an inbred
insecurity that drives people to keep working and producing long after
they need to.
vi) Hiring high achievers
vii) Strong norm of feedback seeking behavior and an openness to critique.
viii) Better outcomes emanate from a shared work effort than with that of a
single individual.
ix) Supporting partners through good and bad times – the essence of
partnership.
x) Unique apprenticeship model.

(b) How do they manage the conflict between making clients happy and doing what
is right-ethics?
i) This is not really addressed – it seems that the firm believed that by simply
hiring the best and the brightest and by keeping a check on arrogance that
clients would be kept about and professionals would simply do what was
right. The firm is very inward looking and focused on excellence and
seems to believe that by virtue of its culture that clients would be
adequately served without this conflict coming into play.

(c) How do they manage the conflict between a team culture and individual pay-for-
performance?
i) The creation of a new source of developmental feedback – instituted 360-
degree performance reviews in the 1990s
ii) Creation of new title of Managing Directors bestowed on Vice Presidents
with all the benefits of partnership – equal salaries and offices – purpose
was to increase competitive strength.
iii) Mentoring apprenticeship process.
iv) Committee structure - Executive, Operating, and Partnership Committees
– taking line people and having them focus on broader issues important to
the firm.
v) Relying on two or three line managers to jointly lead departments and
divisions – increased representation and ownership – extra leadership
opportunities helped to retain tope players.

(d) How do they mitigate arrogance and executive elitism?


i) Hiring individuals that get an unusually large benefit from accomplishment
– caring a great deal about doing things right and well.
ii) Leaders working with leaders
iii) Pronoun Education – the use of “we” instead of “I”. First person singular
was only used to describe a mistake, not an accomplishment.

(2) HBS 9-103-061: Arthur Andersen LLP

(a) Describe Arthur Andersen’s founding principles


i) Respect, integrity, stewardship, passion for excellence, professional
growth and one firm.
ii) An insistence on hiring bright aggressive young people who were as
interested in the operations of a business as in the practice of accounting.
iii) Professionals had to understand financial information and its use in
making management decisions.
iv) Providing the best training available
v) Business decisions should be made that would result in the greatest good
for the greatest number of people.
vi) An emphasis on professional and community service.
vii) Honesty and integrity as trademarks of AA
viii) Representation of true financial facts
ix) “Think straight – talk straight”

(b) What were the key components of the Andersen culture-value system?
i) The firm regardless of size should “act as one firm and speak with one
voice”.
ii) Honest accounting with no conflict of interest. Public accountants should
be answerable to the investing public, not the companies they audit.
iii) Independence above everything.

(c) What caused Andersen’s demise?


i) Conflict of interest and unchecked greed – revenues derived from non-
audit activities made it almost impossible for AA and the other
international accounting firms to remain truly independent.
ii) Changes in the accounting industry allowing accounting firms to
advertise and compete on prices, which resulted in a focus on cost cutting.
iii) The accounting industry turning to alternative revenue sources in the
areas of business and systems consulting.
iv) Declining fees for audits falling as firms began to outbid one another
aggressively for audit engagements as a springboard to sign up clients for
more lucrative consulting engagements. This led to a decrease in
standards across the industry as firms became unwilling to upset clients.
Audit work became a loss leader.

(d) Why was Andersen’s failure a failure of leadership?


i) Leaders actions set the tone and stated the values of firm and in the case
of AA this was the cause of its end. There was a lack of senior leaders’
commitment to reinforcing the appropriate culture and values by personal
example.
1) Senior management was willing to tolerate Enron as one of
approximately 50 clients that it deemed as “maximum risk”
because it did not want to jeopardize the fees that it was
receiving from this client.
2) Carl Bass was overruled by the practice director in the Houston
office when his advice would have resulted in approximately a
$40 million charge to Enron’s earnings. Bass was removed (with
Berardino’s consent) from his oversight role at the request of
management.
3) SEC found that the decision to “go along” with the clients’ (Waste
Management) financials was backed by the highest levels of
Andersen’s partners in its Chicago headquarters. Andersen had
proposed hundreds of millions of dollars adjustments of
accounting adjustments. When the client refused, Andersen
agreed. The consulting side of the client engagement was five
times higher than the audit fees.

(3) HBS 9-402-014: McKinsey & Co

a. Describe the objectives of Marvin Bower when he took over the New York office
of McKinsey
i) To serve clients well so that their executives would recommend them or
refer them to more successful businesses.
ii) To become the leading management consulting firm in the US.
iii) Be known as favorably as any other firm in their field for the quality of
their work, the prestige of their clientele, their professional standing ,and
the caliber and competence of their consulting staff.
iv) Be an economically stable firm that continues in perpetuity.
v) Every individual in the firm will protect and build its future and reputation
b. What were the key differentiating business operating principles which Bower
adopted?
i) The “top management approach” as articulated in the General Survey
Outline.
ii) Emphasis on persuading clients to act on our recommendations.
iii) Ceased using per diem rates and arranged fees based on the value of the
study McKinsey would conduct for the client firm, an extension of the
trust that it wanted to establish with clients.
iv) Professionalism – the firm had to bring something special to the client, a
special skill, experience, or reputation, and also professional attitude.

c. Describe the McKinsey culture- its values


i) Genuine agreement on the kind of firm that partners wanted to be.
ii) Consistently put client interests ahead of firm interests, adhere to high
ethical standards, preserve confidences and maintain an independent
position – be ready to differ with client mangers and tell them the truth
even if it adversely affected the firm’s income or endanger the
continuance of the relationship.

d. Why did McKinsey adopt an up-or-out policy?


i) To separate individuals who did not show the potential for advancement
in order to maintain high caliber professionals that would hold up the high
standards set in the firm’s culture and how it did business.

e. What key management principles lie at the heart and soul of McKinsey’s
success?
i) Fact-based and Fair Personnel Decisions – performance is the central fact
on which personnel decisions are made.
ii) Obligation to Dissent
iii) Spirit of Partnership
iv) Consideration for others
v) De-emphasis of Hierarchy
vi) Leadership by Consultants
f.

(4) UVA S-0142 Best Buy

a. Describe Best Buy’s new Customer Centricity business model


i) A business model that moved salespeople from commission to non-
commission. This required the company to adopt a new operating culture,
leadership model, and employee training program.
ii) It required instilling an owner/operator mentality. All matters concerning
capital, inventory mix, and format size were to be governed by the
profitability of the portfolio of its customers.
iii) Instead of managing traffic, conversion, and revenue, managers were
trained to optimize a customer portfolio and business outcome, and new
employees were trained to meet customers’ needs and not just sell
products.
iv) Customer centricity meant treating each customer better than the firm’s
competitors.

b. Why did Best Buy change its culture?


i) It believed that it could maximize long term profits by competing more
effectively.
ii) To understand their customers better than their competition and drive the
company’s growth.
iii) To achieve improvements in customer loyalty, employee retention, and
market share.
iv) To keep it’s people energized and prevent from becoming complacent,
satisfied and arrogant.

c. Why did Best Buy change its leadership model?


i) To engender greater loyalty and identification between employees and
management.
ii) To create something that would live on – and help to fight complacency
and self-satisfaction.
iii) To increase employee engagement and store-level employee retention.

d. Why did Best Buy adjust its executives’ stock option plan?
i) To create greater equality and stakeholder loyalty at all levels within the
institution.