Who will be Deutsche Bank’s New CEO?

Deutsche Bank’s CEO Josef Ackerman is Opposed to The Idea of The Non-German Speaking Anshu Jain becoming his Successor. Reason – he finds Jain Unsuitable and has his Own Choice for Crown Prince. For The $55 billion giant, This may Prove The First Step to Losing The Future.

For a CEO who has spent the last ten years of his life shuttling between time zones, “comfort” is never an option. Josef Ackerman, the 63 year-old CEO of Deutsche Bank (DB), in a matter of a week, on average, touches down in at least seven countries. Talk of peregrination. And for critics who classify his living out of a suitcase act – in the comforts of Presidential suites & chartered planes – a leisure-filled populist gambit, here is some delicious inside bit of a half-day-long act which proves how he is not sleepwalking towards his goal of making the $55.17 billion-worth entity bigger. The second Thursday of February this year, saw him begin his day at 7:45 am with a business breakfast with some Chinese bankers in Hong Kong. Despite having flown-in an hour past midnight, the previous night from Malaysia, there showed no wrinkle of fatigue on Ackerman’s face. The meeting was followed by a brief interview with CNN, and a couple of one-on-ones with high net-worth customers of DB. Other pre-lunch sessions included a quick interaction with the bank’s Southeast Asian head Rob Rankin (and some managers at the company’s Hong Kong office) at the International Commercial Centre, and a moderately long one with Li Ka-shing, the $26 billion-worth Asian businessman. There was one final appointment planned for the day before he had to head straight to the airport (to fly back to Frankfurt). At precisely five past twelve, he walked out of a black Mercedes at the main entrance of Hotel Conrad. The Ballroom was where he was headed. He had to address a mix of entrepreneurs, businessmen, some bankers and a few chosen Germans. 30 minutes later, he was out. To be fair, Ackerman squeezes in more events during an “ordinary” working day than an “ordinary” CEO. That he is trying hard is obvious. But is he doing enough? That bright-socked, tin whistle-blowing pony-tailed lady shareholder who disrupted proceedings at the 2011 AGM (May 26, 2011, at Frankfurt) – while reacting to Ackerman’s failure to clarify doubts over his successor – certainly would disagree.

Ackerman has parented the German bank for 15 long years. The long hours and his tireless attitude justify his commitment all right. But in discipline, he falls short. Emotions have got to him. Nine years after occupying the top spot, he is still found biting his nails when questioned about his successor – an answer which he should have had ready as early as the fall of 2009 (when he was initially scheduled to retire). But his contract was renewed till the AGM of 2013 for lack of succession planning. Expectedly, with less than 24 months to go before he finally steps down (he has to; 65 years is the mandatory retirement age at DB and he is 63), the worried shareholders have gone aflutter over who will fill his shoes. There are more guesses than one and despite claims of having put in place a “clearly structured process” to zero-in on the next CEO, the obvious fact is – the company is scrambling, with no conclusion in sight.

Bad news is – the CEO and shareholders stand divided over who should be handed over control of DB. Of those most likely to get lucky – including names like Hugo Bänziger (Chief Risk Officer of DB), Hermann-Josef Lamberti (COO), Stefan Krause (CFO), Reto Francioni (Head of Deutsche Boerse), and Paul Achleitner (CFO of Allianz, Europe’s largest insurer) – insider Anshu Jain (head of the company’s Corporate and Investment Banking division) & outsider Axel Alfred Weber (fr. President of Germany’s central bank, the Bundesbank) are the clear favourites. Trouble is – despite English being adopted as the official language of communication during all intra-management and shareholder meetings (since DB bought the Bankers Trust in 1999 for $9 billion), Ackerman is strongly opposed to the fact that the non-German speaking Jain can adapt to and take forward the Franfurtian-ideology & legacy of the bank. He is an Indian-born, British citizen by choice candidate, and his London-mannerisms are presumably not something that will please the political circles in Germany. On the other hand, Weber, a German, given his long career spanning three decades in the country, understands politics & the state of the domestic macro-economy. Given this, Weber should be the winner hands down. Actually, no.

Sometimes, even clamouring shareholders display a higher sense of intelligence. This is one such instance. Ackerman, despite wanting an experienced insider as replacement, is not convinced about Jain. To understand why he is sitting on the wrong side of logic, a little math is in order.

The German, non-German divide. Many understand that since Ackerman joined Deutsche in 1996, he has encouraged a culture of globalisation. Result – as compared to 1995 (when Jain joined the bank to head the nascent markets business), the company has grown into a global institution. In FY2010, only 25% of the company’s revenue came from German customers. Considering that this value has decreased phenomenally from 70% in 1995, this is a trend which deserves a radical change in mindset. A question. If at present, a German-speaking “global” CEO can be put in charge of a business which makes only 25% of its topline from the German market, what is so sinful about allowing an English-speaking Brit to look after the same business, which makes 75% of its topline from non-German markets (largely consisting of US, Central & Eastern Europe, UK and Asia – markets which speak English-at-large)? Perhaps Ackerman wants to avoid hurting the “sentiments” of his “German-speaking” employees. But even on that front, there appears no concrete evidence. Of the 102,602 full-time employees (FY2010) at the company, 73.33% are present in markets outside Germany. Even a majority of its shareholders (count of 640,623; institutional and private entities) – 54% to be precise – are non-Germans. Customer-wise, employee-wise, shareholder–wise, all indicators cry out to justify why the word “global” appears precisely 194 times in the company’s 2010 Annual report. And Ackerman (who himself is a Swiss-born) is still unwilling to grant a non-German a shot at the crown of being the face of this (as the company claims) “meritocratic tradition and culture”?

Read more....

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management

Clear The Waterways first, Can You?

A number of Industries are Blamed for their Contribution to Global Warming, but as Statistics Reveal, The Shipping Industry beats The Rest, and Requires Special Regulations

Unfortunately, ‘long term’ is a set of words that people use in a lot of instances, but rarely do they understand their relevance or importance. Unfortunately, as far as caring for environment is concerned, a lot has to do with ‘long term’ impact, which does explain why it remains relatively low on priority for global businesses, governments & people alike. Innumerable measures have been taken; but risks remain alarmingly high. A major factor that people are ignoring is shipping, the greatest source of environmental pollution. And the dangers are visible here and now.

Shipping is responsible for 3-5% of climate change emissions worldwide and contributes around 900 million tonnes of carbon annually. Total emissions are comparable to some major national economies. One big container ship can emit almost the same amount of cancer and asthma-causing chemicals as 50 million cars. The total emissions of 15 large cargo ships are equivalent to the emissions of all cars together in the world! International Maritime Organization (IMO) estimates that if things go as they are, shipping’s contribution to greenhouse emissions could reach 18% by 2050. From 1990 to 2007, emissions of basic pollutants (NOx, SO2,  PM &CO2) from shipping have nearly doubled to 1096 million tons.

About 60,000 humans die by particulate matter (PM) emissions from shipping; this costs over $330 billion annually to the world economy. In one example, it was estimated that shipping emissions cost the Danish government some £5 billion annually. Around 33% of total deaths are occurring in Europe and around 25% in each of East Asia and South Asia. For example, over 700 premature deaths take place in the Los Angeles port area annually. Low-grade ship bunker fuel has 2,000 times more sulphur content than diesel fuel used in US and European automobiles. There are over 90,000 cargo ships worldwide and they burn over 300 million tonnes of bunker fuel every year. Researches show that a passenger cruise can generate about 210,000 gallons of black water, 1,000,000 gallons of gray water, 37,000 gallons of oily bilge water and more than eight tonnes of solid waste in a week. As a consequence, over one in ten children suffer from asthma in major port cities. Unfortunately, the recent meeting of the IMO, where plans for implementing measures such as emissions trading schemes, remained deadlocked due to the very familiar debate between developed and developing countries, wherein the latter are reluctant to compromise on their growth.

Read more...

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age WomanIIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management

Current Surge in Global crude Oil Prices

 The Current Surge in Global crude Oil Prices puts forth two basic Questions – what are The Underlying causes and what’s The Worst we can expect. While The Most Pessimistic Projections may prove untrue, The World is Indeed staring in The Face of another crude shock that could derail Global Recovery 

In a communiqué to B&E, credit rating firm Crisil states, “In a year when the world expects its dependence on OPEC oil supply to increase, concerns over a wider disruption of supplies from OPEC countries will fuel further oil price increase.” The dependence on OPEC stems from the fact that global oil consumption will grow by an annual average of 1.5 million barrels per day through 2012, while the growth in supply from non-OPEC countries averages less than 0.1 million barrels per day each year. At this juncture, it is important to understand the fact that in the present scenario, OPEC does have substantial spare productive capacity (approximately 5.2 million barrels per day – Saudi Arabia’s contribution being pegged at 3.2 million barrels per day), which can be used to replace reduced output in Libya or any other country in the midst of the uprising. The only viable reason for the surge in crude oil price is purely based on perception that the political upheaval could eventually spread to major oil producing countries including Saudi Arabia (in fact, a Wiki Leaks covered in The Guardian recently claimed that even Saudi reserves are overestimated). Indeed, that is not entirely a remote possibility, considering that there is a simmering discontent with the monarchy there as well.

Rachel Ziemba, an analyst with Roubini Global Economics, gives another reason why the risks to price seem to be tilted to the upside in the near term. Rachel put the onus on the fact that oil companies are putting on hold their current operations and explorations in Libya, “fearing political risks, and sabotage of energy infrastructure.” Further escalation would probably lead to decades of underinvestment, which eventually will increase future supply risks. It is worth pondering over the fact that unlike in 2008, when the spike in oil prices was primarily because of booming demand and speculative frenzy, the $150+ oil price today stems from a potentially major supply shock. Analysts like Kent Moors of Money Morning feel that the Middle East crisis represents an unsettling reality and the recent oil price march is just the beginning.

But is the new magic figure going to be $220 per barrel? Although it is not clear as to how long the impasse will continue, global oil reserves and actions taken up by OPEC members have ensured that prices come down. The estimates of prices reaching $220 a barrel or more are purely based on a simplistic assumption that both Libya and Algeria would halt their production – which is an unlikely scenario so far. Yet, even this dose of optimism doesn’t discount the importance of bringing stability to the MENA region. Thanks to its underground resources, the region is just too critical to be left to fend for itself.

Read more....

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri 
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles. 

IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting

Businesses too small to let fail

Why do small businesses have such a high rate of failure? What can be done to lower it?

4Ps Business & Marketing, in a strategic alliance with the new york times service, presents a column by howard Schultz, Chairman, President and CEO of Starbucks corporation

This is such an important question right now because so many struggling economies around the world desperately need their countries’ entrepreneurs and small businesses to succeed. The jobs that small companies provide and the high-quality goods and services their employees produce can give powerful boosts to a faltering economy.

Unfortunately, studies show that about half of small businesses fail in their first five years – for a variety of reasons. Insufficient capital. Inexperienced management. Lack of – or incorrect – focus. An irrelevant product or service that does not meet or inspire market needs.

But let’s assume a company gets all of the above right – even though capital is hard to come by these days. The company can still sink if it does not attract and engage the right people.

Let me take a step back to make my meaning more clear. The hardest part of building a company at the outset is recognising the need to invest ahead of the growth curve, and then having enough capital to do so. The kinds of investments I’m referring to are ones you’d expect: materials, inventory, technical infrastructure, marketing, real estate.

Generally, the largest investments are in pay and benefits. This is where many small businesses get into trouble: By trying to minimise “people”-related costs, a small-business owner can inadvertently stunt the company’s growth. That said, investing in people is not just about spending money. It’s also important to expend intellectual energy on ways to inspire great work.

So, to answer this question more directly, small businesses have such a high rate of failure because their leaders do not put enough money or time toward employing, retaining and maximising top talent.

When I speak to small-business owners, I encourage them to follow a few guideposts:

LOOK FOR CHARACTER AS WELL AS SKILLS WHEN HIRING

Even in a down economy with high unemployment, the pool of the most talented people in any given area is shallow. That pool gets even shallower when the bar for hiring is skills PLUS strong character. This is the pool you want to hire from, even if it takes a little longer to fill a role.

Interview people through the lens of building a culture of trust. Ask yourself: How will they lead – by instilling fear or by encouraging greatness? How will they treat their direct reports, suppliers or customers – with respect or with condescension? Over the years, I have seen that character is more important than experience. People can learn the nuances of a job, but passion for doing the right thing cannot be taught.

Remember, the first people in the door will hire the next generation as you grow, so layer the organisation with teams that are smart, respectful, collaborative and just plain nice.

TREAT COMPETITIVE COMPENSATION AS A STRATEGY, NOT AN EXPENSE

Back in the late 1980s, at the beginning of my management of Starbucks, I wanted to be the retail employer of choice. I felt that I could achieve this only if, after hiring bright, friendly people to work in our shops (and our offices), I paid them more than the going wage in other restaurants and stores. I also had to offer benefits that were not available elsewhere.

Doing so came with a price. Back then, health-care costs were soaring and most companies were cutting benefits – much like today. Some of my investors accused me of irresponsibly raising expenses when the company had yet to turn a profit. I explained my position with data, showing that competitive pay and benefits would increase retention for existing employees and thus cut recruiting and training costs. Ultimately, my argument to investors proved true.

That was a long time ago, but treating overall compensation as a strategy for success, and not just an expense, remains critical. Today’s pay and benefits mix should be a sustainable blend of things beyond merit pay – stock options, retirement-account-contribution matches, tuition reimbursement, health-care coverage – that each hold value and add up to a total package that addresses people’s well-being on several levels.

For more articles, Click on IIPM Article

Source : IIPM Editorial, 2011.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
IIPM Proves Its Mettle Once Again.....
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management
IIPM RANKED NO.1 in MAIL TODAY B-SCHOOL RANKINGS
Planman Technologies
IIPM Contact Info
IIPM History
IIPM Think Tank
IIPM Infrastructure
IIPM Info
IIPM: Selection Process
IIPM: Research and Publications
IIPM MBA Institute India