Saturday, June 25, 2005

A favorite piece by one of the more criminally unlauded medical essayists of our time.

Dissecting Room

First in his class

James S Goodwin

Of the three traditional roles for the academic physician, I like teaching the least. I fantasise that I will be summoned by my superiors and told “It's OK, Jim. No more teaching for you. Research, patient care, and an occasional essay will more than suffice”. But fantasies are fantasies; so every fall I spend a month teaching house officers and medical students on the hospital service.

On the third day of the rotation a new student showed up. He had initially been on another service but was transferred to mine for obscure reasons. “Oh, that's Martin”, said one of the other students, “He's number one in the class”.

Never having been number one in anything, I took a mild dislike to Martin. As we made rounds on the dozen or so patients, I peppered him with questions. What is the differential diagnosis of leg swelling? Why does cirrhosis cause ascites? How would you treat diabetic ketoacidosis? I also had him perform pulmonary, cardiac and abdominal examinations, and report his findings. By the end of rounds I was astounded. He had answered nearly every question incorrectly.

“What did you hear examining Mr. Smith's chest?” “Rales half way up on the left and clear on the right, with dullness to percussion at the left base.” “Wrong.” “What laboratory tests would you order to screen for hypothyroidism?” “A T3 and T4.” “Wrong.” By the time rounds were over I was in love with this guy, and I knew very well why he was number one in his class.

Martin possessed a rare attribute. He was not afraid to answer. He did not answer a question with a question. He did not bob and weave, stall for time, change the subject, or give an answer so general that it was impossible to classify as to content. No, he answered all the questions, answered them thoughtfully and specifically, and, in many instances, incorrectly. But what happened next was truly unusual—it was education. By giving a specific answer, he allowed me to either ratify or correct him, and he learned something. Over the month, he began to answer more questions correctly, but he still gave more wrong answers than all the other students combined. The other students, pleasant as they were, spent 90% of their intellectual activity avoiding being pinned down. Until I encountered Martin, I hadn't realised how much creative energy most medical students waste on avoiding being put into a position where they can be called wrong.

What Martin was demonstrating was not intelligence. Rather it was a combination of courage and trust. Courage allowed him to risk failing in front of others. His trust that my questions were meant to help him learn allowed him to answer without equivocation.

You cannot learn without making mistakes. Even computers know that. In artificial intelligence systems, the way computers are “taught” is by programming them to make every possible error, so that it will be recognised as such in the future. No wonder computers are becoming smarter than human beings. They aren't afraid to make mistakes. Pity our poor error-averse students. They will rarely be wrong and rarely be correct.

I would imagine that some readers have concluded that this is all my doing, that I am incapable of creating the soft and fuzzy environment in which students feel safe asking questions. Let me pre-emptively reply: students are not supposed to feel safe; it's a scary world out there. They will soon be physicians, responsible for patients who have not been schooled in nurturing fragile egos.

No, we have gone about as far as we can with the soft and fuzzy. What we need are more students like Martin. I taught him some geriatrics. He taught me to keep plugging away at teaching.

The Lancet
Volume 361, Issue 9354 , 25 January 2003, Page 356
Copyright © 2003 Elsevier Ltd All rights reserved.

"Information is our business..." -- not said by the usual suspects.

June 26, 2005
The Newspaper of the Future
Lawrence, Kan.

EVERY Little League player in this town of about 85,000 people can be a star. Regardless of how he or she hits or fields, each tyke and teenager is eligible for a personalized electronic trading card - replete with a picture, biography, statistics and an audio clip of the player philosophizing about the game - that can be posted on the Web site of the local newspaper, The Lawrence Journal-World.

Lawrencians buying tickets for University of Kansas football games can visit the same site,, and find photographs offering sightlines from each of Memorial Stadium's 50,000 seats. Law aficionados can find transcripts of locally significant court cases posted on the site and participate in live, online chats debating the pros or cons of some cases - sometimes with experts who are involved in the proceedings.

A related Web site,, is aimed at college readers. It allows visitors to download tunes from the Wakarusa Music Festival, find spirited reviews of local bars and restaurants and plunge into a vast trove of blogs, including the Gay Kansan in China Blogger, who recently had his first "disgusting" experience with a woman, to the Born-Again Christian Blogger, who offers videotaped huzzahs to the Nascar legend Dale Earnhardt Sr.

The steward of this online smorgasbord is Dolph C. Simons Jr., a politically conservative, 75-year-old who corresponds via a vintage Royal typewriter and red grease pencil while eschewing e-mail and personal computers. "I don't think of us as being in the newspaper business," said Mr. Simons, the editor and publisher of The Journal-World and the chairman of the World Company, the newspaper's parent. "Information is our business and we're trying to provide information, in one form or another, however the consumer wants it and wherever the consumer wants it, in the most complete and useful way possible."

Owned by the Simons family since 1891, The Journal-World is a small-town paper emphasizing small-town news, but it is hardly restrained by a small-town mentality. Indeed, at a time when newspapers big and small are facing financial and journalistic crossroads, media analysts say The Journal-World, with a circulation of just 20,000, offers guidelines for moving forward.

The Simons family, through the World Company, enjoys an unfettered and often-criticized media monopoly in Lawrence. But the family has used that advantage to cross-pollinate its properties, ranging from cable to telephone service to newspaper and online publishing, and to take technological and financial risks that other owners might have avoided.

Mr. Simons and his associates describe their overall goals as a shared belief in quality, a deep attachment to Lawrence as a community and a constant reinvention of their business's relationship with readers, viewers and advertisers.

"We believe that journalism has been a monologue for so long and now is the perfect time for it to become a dialogue with our readers," said Rob Curley, 34, the World Company's director of new media. "We want readers to think of this as their paper, not our paper."

LAWRENCE has a long history as an independent, contrarian town. Founded in 1854 by New England abolitionists, it became one of the most violent, bloody battlegrounds in the slavery debate and was burned to the ground by pro-slavery raiders in 1861.

The University of Kansas opened its doors here just after the Civil War; women made up almost half of its first class. Haskell Indian Nations University, a college for Native Americans, opened here in 1884. After Mr. Simons's grandfather arrived in town more than a century ago, he bought the local paper for $50.

Today, Lawrence is a regional anomaly, anchoring a Democratic county in a solidly Republican state. Its large student population brings spunk to Lawrence, the university adds academic sophistication and sports fanaticism, and the town, dotted with funky restaurants and boutiques, has become a favorite of artists and activists.

Lawrence is also peppered with tidy, attractive homes and schools that draw middle- and upper-class families headed by professionals who commute to work in Topeka and Kansas City. "It's a real town with a real soul where people like to get involved," said Paul Carttar, a Lawrence native who is executive vice chancellor for external affairs at the University of Kansas. "People here care about what Lawrence will become."

Mr. Simons says his family takes its Lawrence roots seriously. "My dad told me that if you take care of Lawrence, Lawrence will take care of you," he said.

To that end, Mr. Simons has been an aggressive consolidator of local news and information services while resisting what he described as repeated offers over the years from larger companies wanting to buy him out. He has also been an early adopter of new technologies. The World Company began laying cable in 1968 and offered cable programming to residents in 1971, paying for the expansion with profits from The Journal-World - long before most larger media companies would embrace cable.

Today, about 80 percent of homes in Lawrence have cable connections. The Journal-World began publishing on the Internet in 1995, the same year that Sunflower, the broadband subsidiary of the World Company, first offered cable modems to customers. In 1999, the newspaper and its television station began sharing talent, using reporters to write for The Journal-World and appear on the company's news stations.

"We're not afraid to jump outside of the box, and that's because of who our owners are," said Patrick Knorr, 32, Sunflower's general manager, who also oversees strategic planning for the World Company. "They're determined not to lose because they were asleep at the switch."

Mr. Knorr said that World, which employs a total of about 600 people, did not try to offer new content to broadband subscribers until it had solid relationships with its customers and a robust pipeline through which it could pump media offerings.

"Content is absolutely critical and king," Mr. Knorr said. "But consumers have more power than ever over who gets crowned."

On a sweltering midsummer morning in 2001, Mr. Simons convened most of his media staff in the basement of a handsomely restored former post office at the corner of New Hampshire and Seventh Streets. The building was World's new "converged news center," where the company's television, newspaper and online staffs would all be housed.

Mr. Simons told his editors and reporters that they were going to do more than merely work shoulder to shoulder; they were going to share reporting assignments, tasks and scoops - whether they liked it or not.

Many did not like it at all, and some World reporters say they sometimes still feel taken advantage of - when they are asked to squeeze multiple print, television and online duties into the course of a single day. Print reporters and their editors have, at times, been reluctant to share scoops or ideas with their television counterparts, and vice versa. But many reporters also said that, over time, they have adapted.

"You can really teeter on the edge of, 'I'm not enjoying this and it's not fair,' to, 'This is one of the coolest things I've ever done,' " said Deanna Richards, a television reporter who works in World's converged newsroom. The company currently has 81 news employees, an unusually large number for an operation of its size.

In 1993, Mr. Simons recruited Bill Snead, an award-winning photographer from The Washington Post, to oversee the Journal-World newsroom. Now a senior editor, Mr. Snead, 67, has written, photographed and shot video for feature assignments on topics such as farm strife, cheerleaders and cowboys. He said that while he had never shot video before arriving at The Journal-World, he had no trouble adapting.

"Technology is our servant; it's our valet; it gets our stuff out there - but it's still about the content," he said, adding that his company's online and cable properties have helped to forge a closer relationship with readers. "If you show people respect and don't treat them like a novelty, you'll have free rein. That's what we're doing here."

For as ambitious and creative as the Journal-World team is, the newspaper still offers a menu of stories that is relentlessly, sometimes numbingly, local. Weather, local trials, local sports and other local comings and goings dominate. Some critics say that controversial topics, like divisive land-use debates, are soft-pedaled in the paper's pages.

"They control the dialogue on local news," said Charles Goff III, 46, a political activist and artist in Lawrence. "Every viewpoint goes through their filter and is tied to the Chamber of Commerce and the moneyed elite."

Mr. Goff conceded, however, that he was unaware of the depth of offerings on the Web site of The Journal-World. He also said that while he felt that the paper's editorial and opinion pages were staunchly and unsparingly conservative, he thought that the news pages usually offered more balanced viewpoints.

Mr. Simons and his news staff vehemently deny that controversial topics are sidestepped.

And while some residents bemoan The Journal-World's local navel-gazing, those overseeing the publication are unapologetic and enthusiastic examiners of all things Lawrence. "When the space shuttle blew up, we didn't have it on our home page; when the war in Iraq started, we didn't have it on our home page," Mr. Curley said. "It's focusing entirely on local stories that we think made our Web traffic go crazy."

Mr. Simons recruited Mr. Curley to the World Company three years ago, when The Journal-World's Web site snared about 500,000 page views a month. Mr. Curley says the number is now about seven million. The company said its online operation was losing about $15,000 a month when Mr. Curley arrived; it expects the online business to become profitable this year.

Ralph Gage, World's chief operating officer, is a no-nonsense taskmaster whom Mr. Simons deputized to make sure the company's trains ran on time. Online revenue comprises only about 1.5 percent of World's total revenue, he said, while the bulk comes from broadband, at 53 percent, and the newspaper operation, at 37 percent.

But Mr. Gage says the company expects newspaper revenue to slacken over time, with online ventures eventually being a much more significant source of sales. For that reason, World has been willing to use its broadband funds to underwrite its online ventures until the online profits become more meaningful, probably by the end of the decade.

ACCORDING to a recent survey by Nielsen/NetRatings, newspaper Web sites nationwide had a 12 percent increase in unique visitors from May 2004 to May 2005, with a significant portion of readers aged 35 to 44 switching from a newspaper to the same paper's Web edition for their daily read.

"Newspaper circulation has been tanking since the 60's and now we're finally growing our audience online, so when I hear people complain about having to give their content away for free on the Internet I think they just don't get it," Mr. Curley said. "I'm a capitalist, and I respect people who want to make a ton of money, but, dude, I'm a journalist and I want to build cool things."

Of course, building cool things simply for the sake of building cool things suffered a notable national flameout during the dot-com bust. But through the newspaper Web site and, Lawrence comes alive in a fashion rare for a town of its size. ( is also published as a print weekly.)

The town, once home to the poet Langston Hughes and the novelist William S. Burroughs, has a rich literary tradition. Journalists at World are assembling a lushly embroidered Web site devoted to Mr. Burroughs that includes rare letters, photographs and other archival material.

During a local election, a list of questions reporters had asked of all candidates as part of a voter's guide were posted online. That allowed voters to answer the same questions themselves. Then they could use an online tool to find the candidates whose answers most closely matched their own - an example of civic journalism on steroids.

The paper also routinely files local freedom-of-information requests and uploads piles of public records to its Web site. In 2003, World installed about 30 wireless hot spots around Lawrence. That same year, it began sending daily content to cellphones. For example, subscribers can have real-time scores and statistics from the University of Kansas's football and basketball games delivered on demand.

The company has begun offering daily "podcasts" of news and other information to Apple iPod owners or anyone else carrying an MP3 player. It plans to offer a service that automatically loads information onto a docked MP3 player in the early-morning hours before students head to school.

About a third of the 18 employees in the online operation are interns, and their presence allows Mr. Curley to have data, video, photos and other material collected and uploaded at little cost, a process he grinningly refers to as "internology."

"People come here from thousands of miles away expecting to see something very high tech and expensive, but a lot of what we do we do on the cheap," Mr. Curley said. "So it just amazes me when people say they can't do what we do because they don't have the resources."

Still, it is financial resources, not content, that is behind the handwringing in newspaper circles everywhere.

While print advertising stagnates or slips, it is not yet being replaced in a meaningful way by online advertising revenue - especially at companies that lack a source of bridge financing like World's broadband operation. Although journalists may cringe to hear it, the near-term battle for corporate survival is likely to be waged and won primarily by inventive business and advertising teams at media companies.

The World Company's advertising staff said that its sales force had embraced convergence enthusiastically and that offering customers multiple advertising platforms - on TV, on the Internet and in print - has become a strong pitch.

But the company is still finding it difficult to persuade readers to interact with online display ads. And, while willing to adapt to news advertising demands, the company refuses to turn its Web site into an advertising billboard, believing that the clutter would undermine the quality and integrity of its journalism.

"I think as we've converged the content we're going to converge the advertising," said Dan Simons, president of the company's broadband operations and a son of the chairman. "I think you'll have to adapt to how buyers want to convey their messages so we're not just sellers of space and time. We have to be both advertisers and public relations advisers so we can help companies create their messages."

As effervescent as the new media are in Lawrence, analysts balk at making grand extrapolations from World's efforts.

"It's a market dominated by one company so you have to be very careful when holding them up as a paragon," said Howard Finberg, director of interactive learning at the Poynter Institute, which operates a Web site devoted to journalism. "Are they creative? Without a doubt, but I'm cautious about it being seen as a single solution or a model."

Others are more laudatory but equally cautious about Lawrence's online innovations. "Nobody else is close to doing what they've done," said David Card, a new-media analyst at Jupiter Research. "But you also wouldn't necessarily be able to duplicate what they're doing in towns like San Francisco or New York."

Dolph Simons, who writes a cantankerous Saturday column that draws barbs from Lawrence's liberals, is a gentle, self-effacing man who still serves Thanksgiving turkey to his newsroom employees. He says he considers himself a "little fish in a big pond" and is reluctant to be seen as a know-it-all by colleagues and competitors in the news business.

Even so, his opinion about the future of the news business is clear.

"I'm terribly concerned about readership in the country and I think we all have to learn new things as fast as we can. Otherwise other people are going to beat us to it," he said. "We need to be driving with our brights, because if we're driving with our dims somebody's going to come in from the side of the road and knock us off."

Copyright 2005 The New York Times Company

Enough already. This article lists the tenets of William Swanson's "secret CEO handbook".

Swanson's Rules
by Tyrone Taborn

William H. Swanson, CEO and President Raytheon Company Raytheon's CEO Does Management Right, by the Numbers

There are two things on which Raytheon's William H. Swanson doesn't need a lecture. One is management skills. The other is the value of diversity.
As diversity champion turned chief executive officer, president, and member of the board, Swanson has an unwavering commitment to increasing the number of minorities in the field of technology. And, as if to underscore the point, an appearance at Tuskegee University was his first speaking engagement on a college campus since he became CEO of the nation's fourth-largest defense company.

That's typical Swanson: setting the bar and jumping over it himself. On his staff are more than 40 Tuskegee alumni, not including interns, who, Swanson says, "fit very well into our structure because of the foundation that they learned here on campus."

Working for Swanson means facing perhaps the toughest defense executive in recent history. But according to Tuskegee alum Gaynelle P. Swann, M.Sc. in engineering, he answers 99.9 percent of his own e-mail and endears himself to those around him by remembering details such as the names of their children.
When Lester L. Lyles, then the Air Force's only Black four-star general, received Lifetime Achievement honors at the 2003 Black Engineer of the Year Conference, Swanson sent personal congratulations. Such attention to the human element has made Swanson an admired executive.

Says the now-retired Gen. Lyles: "Raytheon is clearly in the top echelon of DoD contractors because of his leadership!"
Swanson's success is no accident. He is highly principled. He hits the ground running well before 7:00 a.m.; his typical day ends 14 hours later. More than half of his weekends are spent away from home, and, if he could, he would shake hands with each of Raytheon's 76,000 employees.
Swanson's leadership is based on management rules he developed over his 30-plus years at Raytheon. "Swanson's Unwritten Rules of Management" are 25 straightforward directives that also provide insight into what it takes to be successful.

"Swanson's Rules" might explain how Raytheon emerged as the leader in high-tech warfare and remained a corporate powerhouse during a time of economic contraction.

Many inside and outside of Raytheon credit Swanson with saving the company. And some say it wasn't just the business he rescued but Raytheon's sense of social mission as well. As the company's first executive champion for diversity, Swanson worked to build an inclusive culture. As he says, "Our commitment to diversity has made us a better company. To have diversity of thought and opinion expressed by the people in your organization is incredibly powerful. If you're able to harness that, there is no [limit to] what you're able to accomplish."

In 1997, as a corporate vice president, he received one of the toughest of assignments: integrating the newly acquired defense businesses of Texas Instruments and Hughes into Raytheon.

A lot was riding on his managerial acumen. Raytheon's overall revenues nearly doubled with the acquisitions. The commercial groups, which had produced nearly 60 percent of total company sales in 1995, and close to half of total earnings, suddenly were eclipsed by the defense business groups. It was up to Swanson to assimilate the former rivals into the company.

It was probably at this point that Swanson's third rule kicked in: "If you are not criticized, you may not be doing much." Swanson definitely got his share of criticism -- from employees caught in painful layoffs and irate members of Congress disturbed by their states' economic losses -- but he was busy laying a foundation that would pay great dividends in just a few short years.

Swanson's efforts would not be fully appreciated until Sept. 11, 2001, when the world was changed fundamentally with terrorist attacks on the Pentagon and World Trade Center. Then, it became clearer that the $3.3 trillion the U.S. spent on defense in the 1990s could not guarantee security. Our nation needed a new military that would fight a new kind of war. Secretary of Defense Donald H. Rumsfeld called it the era of "transformational military" initiatives.

Another of Swanson's Rules came into play: No. 9, "Persistence or tenacity is the disposition to persevere in spite of difficulties, discouragement, or indifference…." Swanson's role in handling the mergers was a thankless, seemingly no-win job. He found himself in California running a smaller division than he'd left. But those who expected him to fade from the scene were wrong. Swanson's new unit, Raytheon's Electronic Systems, provided key products to the new high-tech military, and, under his leadership, it ramped up to about 40 percent of Raytheon's sales.

Rule No. 4 also applied: "Look for what is missing. Many know how to improve what's there, but few can see what isn't there." According to Carl Conetta of the Project on Defense Alternatives, military transformation meant moving away from capital-intensive armadas of heavy mechanized ground forces, artillery and missile systems, and advanced combat aircraft, toward full adoption of new information technology and restructuring of the armed forces to produce an "Information Age" military.
Bill Swanson saw this future. Acquiring the defense businesses of TI and Hughes proved him right and made Raytheon the company that provides the defense world's most high-tech offerings.

This year, Swanson rose to be Raytheon's president and CEO. But as his Tuskegee visit proves, one of his top priorities will be dealing with the disturbing reality that women, Blacks, Latinos, Native Americans, and persons with disabilities now make up two-thirds of the U.S. work force but hold only about a quarter of the technical jobs.

Another priority will be Swanson's Rule No. 25: "Have fun at what you do. It will reflect in your work. No one likes a grump except another grump!"

Seeing Swanson at Tuskegee, happily chatting about the future with young students, it was clear he had learned his lesson well.

Bill Swanson's '25 Unwritten Rules of Management'
1. Learn to say, "I don't know." If used when appropriate, it will be often.
2. It is easier to get into something than it is to get out of it.
3. If you are not criticized, you may not be doing much.
4. Look for what is missing. Many know how to improve what's there, but few can see what isn't there.
5. Viewgraph rule: When something appears on a viewgraph (an overhead transparency), assume the world knows about it, and deal with it accordingly.
6. Work for a boss with whom you are comfortable telling it like it is. Remember that you can't pick your relatives, but you can pick your boss.
7. Constantly review developments to make sure that the actual benefits are what they are supposed to be. Avoid Newton's Law.
8. However menial and trivial your early assignments may appear, give them your best efforts.
9. Persistence or tenacity is the disposition to persevere in spite of difficulties, discouragement, or indifference. Don't be known as a good starter but a poor finisher.
10. In completing a project, don't wait for others; go after them, and make sure it gets done.
11. Confirm your instructions and the commitments of others in writing. Don't assume it will get done!
12. Don't be timid; speak up. Express yourself, and promote your ideas.
13. Practice shows that those who speak the most knowingly and confidently often end up with the assignment to get it done.
14. Strive for brevity and clarity in oral and written reports.
15. Be extremely careful of the accuracy of your statements.
16. Don't overlook the fact that you are working for a boss.
* Keep him or her informed. Avoid surprises!
* Whatever the boss wants takes top priority.
17. Promises, schedules, and estimates are important instruments in a well-ordered business.
* You must make promises. Don't lean on the often-used phrase, "I can't estimate it because it depends upon many uncertain factors."
18. Never direct a complaint to the top. A serious offense is to "cc" a person's boss.
19. When dealing with outsiders, remember that you represent the company. Be careful of your commitments.
20. Cultivate the habit of "boiling matters down" to the simplest terms. An elevator speech is the best way.
21. Don't get excited in engineering emergencies. Keep your feet on the ground.
22. Cultivate the habit of making quick, clean-cut decisions.
23. When making decisions, the pros are much easier to deal with than the cons. Your boss wants to see the cons also.
24. Don't ever lose your sense of humor.
25. Have fun at what you do. It will reflect in your work. No one likes a grump except another grump.

About Raytheon

Raytheon ("light of the gods") has shined as the No. 4 U.S. defense contractor after Lockheed Martin, Northrop Grumman, and Boeing. Offerings include missile systems (Patriot, Hawk, and Tomahawk); radars; and reconnaissance, targeting, and navigation systems. Raytheon also makes radios, air traffic control systems and satellite communications systems, turboprop planes, and Beech and Hawker jets.

Raytheon, which piled up $10 billion of debt from acquisitions, has sold off non-core businesses to focus on missiles, radar, and defense-related businesses. It sold its aircraft-integration unit to L-3 Communications for $1.1 billion and explored selling its aircraft unit, which lost $760 million in 2001.

Under CEO Daniel Burnham, Raytheon cut 3,000 jobs, and its stock value fell more than 45 percent. That's still a far cry from its 1922 inception as refrigerator maker American Appliance Company, founded by Lawrence Marshall. Marshall moved on to "Raytheon" radio tubes, and in 1925 changed the company's name.
During World War II, Raytheon made magnetrons, used in radars and microwave ovens. Sales peaked at $173 million but dwindled by 1947. A rumored bankruptcy was averted in 1956.

In 1964, then-President Thomas Phillips bought Amana Refrigeration (1965), D.C. Heath (textbooks, 1966), Caloric (stoves, 1967), and three petrochemical firms (1966-69).

Raytheon began making computer terminals in 1971, but quit in 1984. In 1980, it bought Beech Aircraft but still relied on missiles, radar, and communications systems for most sales. In 1991, it won an $800-million Army contract to upgrade the Patriot for the Gulf War.

Raytheon next bought British Aerospace's business jet division (1993), E-Systems (advanced electronics and surveillance equipment, 1995), and most of DaimlerChrysler's aerospace and defense holdings (1996).

By 1997, Raytheon was the No. 1 U.S. missile maker, after buying the defense businesses of TI for $3 billion and Hughes Electronics' for $9.5 billion. Raytheon sold its analog chip business to Fairchild Semiconductor (1997); home appliance, heating and air-conditioning, and commercial cooking units to Goodman Holding (1997); and a flight-controls business to Moog (1998).

Weak Asian sales cost Raytheon 14,000 employees in 1998 -- 16 percent of the defense total -- and closed 28 plants. Former AlliedSignal Vice Chair Daniel Burnham became CEO in 1998, and battled with Hughes over valuation of Hughes' unit; the suit was settled for $650 million in 2001.

In 1999, Raytheon cut more jobs and closed or combined 10 facilities and took a $668-million charge over problems in defense electronics. The firm also sold its road-building equipment business to Terex and a hybrid-microelectronics business to Imrex Microelectronics.

Raytheon sold its flight-simulation business for $160 million in 2000 and its engineering and construction unit to Washington Group International, formerly Morrison Knudsen, for $500 million. Raytheon also sold $800 million in aircraft loans and leases to DaimlerChrysler and tried to sell its aircraft business. Raytheon then won a $1.4-billion contract (through 2008) to develop three radars for the Army's Theater High Altitude Area Defense (THAAD) program. Raytheon also sold its optical systems business to B.F. Goodrich and set a joint venture with France-based Thales, formerly Thomson-CSF, in air defense.

The Washington Group declared bankruptcy in 2001 and sued Raytheon, alleging cost overruns and lower-than-expected profits. That October, Raytheon issued 29 million new shares of common stock -- 8 percent of those outstanding -- to pay $1 billion in debts.

In 2002, Raytheon made a bid for TRW's satellite and missile defense operations. It shelved plans to sell its aircraft unit.

About Bill Swanson
Bachelor of Industrial Engineering, magna cum laude, Outstanding Industrial Engineering Graduate, California Polytechnic State University, 1972
Graduate work in business administration, Golden Gate University
Honorary Doctor of Laws, Pepperdine University, 2002

Joined Raytheon, 1972
Named CEO, July 2003
Also serves as Raytheon's president and member of the board of directors

Selected non-Raytheon Service:
California Polytechnic State University School of Engineering Advisory Council, Board of Regents
Pepperdine University Board of Regents
Member, Editorial Advisory Board, Journal of Electronic Defense
Member, Secretary of the Air Force Advisory Board

Selected Honors:
2002 Semper Fidelis Award, Marine Corps Scholarship Foundation
California Manufacturer of the Year, California Manufacturing and Technology Association

Tyrone D. Taborn is publisher and editor in chief of US Black Engineer & Information Technology magazine. He can be reached at

Bad network = slower exchange of ideas = retarded development.

Down to the Wire
By Thomas Bleha
From Foreign Affairs, May/June 2005

Summary: Once a leader in Internet innovation, the United States has fallen far behind Japan and other Asian states in deploying broadband and the latest mobile-phone technology. This lag will cost it dearly. By outdoing the United States, Japan and its neighbors are positioning themselves to be the first states to reap the benefits of the broadband era: economic growth, increased productivity, and a better quality of life.

Thomas Bleha, the recipient of an Abe Fellowship, is completing a book on the race for Internet leadership. Previously, he was a Foreign Service officer in Japan for eight years.


In the first three years of the Bush administration, the United States dropped from 4th to 13th place in global rankings of broadband Internet usage. Today, most U.S. homes can access only "basic" broadband, among the slowest, most expensive, and least reliable in the developed world, and the United States has fallen even further behind in mobile-phone-based Internet access. The lag is arguably the result of the Bush administration's failure to make a priority of developing these networks. In fact, the United States is the only industrialized state without an explicit national policy for promoting broadband.

It did not have to be this way. Until recently, the United States led the world in Internet development. In the late 1960s and 1970s, the Department of Defense's Advanced Research Projects Agency conceived of and then funded the Internet. In the 1980s, the National Science Foundation partially underwrote the university and college networks -- and the high-speed lines supporting them -- that extended the Internet across the nation. After the World Wide Web and mouse-driven browsers were developed in the early 1990s, the Internet was ready to take off. President Bill Clinton and Vice President Al Gore showed the way by promoting the Internet's commercialization, the National Infrastructure Initiative, the Telecommunications Act of 1996, and remarkable e-commerce, e-government, and e-education programs. The private sector did the work, but the government offered a clear vision and strong leadership that created a competitive playing field for early broadband providers. Even though these policies had their share of detractors -- who claimed that excessive hype was used to sell wasteful projects and even blamed the Clinton administration for the dot-com bust -- they kept the United States in the forefront of Internet innovation and deployment through the 1990s.

Things changed when the Bush administration took over in 2001 and set new priorities for the country: tax cuts, missile defense, and, months later, the war on terrorism. In the administration's first three years, President George W. Bush mentioned broadband just twice and only in passing. The Federal Communications Commission (FCC) showed little interest in opening home telephone lines to outside competitors to drive down broadband prices and increase demand.

When the United States dropped the Internet leadership baton, Japan picked it up. In 2001, Japan was well behind the United States in the broadband race. But thanks to top-level political leadership and ambitious goals, it soon began to move ahead. By May 2003, a higher percentage of homes in Japan than in the United States had broadband, and Japan had moved well beyond the basic connections still in use in the United States. Today, nearly all Japanese have access to "high-speed" broadband, with an average connection speed 16 times faster than in the United States -- for only about $22 a month. Even faster "ultra-high-speed" broadband, which runs through fiber-optic cable, is scheduled to be available throughout the country for $30 to $40 a month by the end of 2005. And that is to say nothing of Internet access through mobile phones, an area in which Japan is even further ahead of the United States.

It is now clear that Japan and its neighbors will lead the charge in high-speed broadband over the next several years. South Korea already has the world's greatest percentage of broadband users, and last year the absolute number of broadband users in urban China surpassed that in the United States. These countries' progress will have serious economic implications. By dislodging the United States from the lead it commanded not so long ago, Japan and its neighbors have positioned themselves to be the first states to reap the benefits of the broadband era: economic growth, increased productivity, technological innovation, and an improved quality of life.


In the late 1990s, after a decade in the economic doldrums, Japan lagged well behind the United States in Internet access and broadband usage. But in mid-2000, Prime Minister Yoshiro Mori appointed the Information Technology Strategy Council, headed by Sony Chairman Nobuyuki Idei, which put together a bold plan to make Japan the "world's leading IT [Information Technology] nation" by 2005. Just as President Bush was taking office, a new Japanese "IT strategic headquarters," headed by the prime minister and including the entire cabinet, launched an "e-Japan strategy."

A central goal of that strategy was to bring better-than-basic broadband to 40 million of Japan's 46 million households within five years. The government hoped to make high-speed broadband available to 30 million households (through cable or digital subscriber lines [DSL], which use phone wires) and ultra-high-speed broadband connections to another 10 million (through fiber-optic cable). But even Japanese officials were skeptical about reaching such ambitious goals. And they understood that if they wanted even to come close, they would have to enlist the private sector and create the proper conditions.

The government quickly removed many regulatory obstacles. But because cable providers were mostly mom-and-pop operations in rural areas, officials realized that they would also have to create a highly competitive private-sector environment. So the telecommunications ministry came up with one of the most competitive regimes in the world: it compelled regional telephone companies to grant outside competitors access to all their residential telephone lines in exchange for a modest fee (about $2 per line a month). The antitrust authorities also ensured that these companies did not create obstacles for their competitors, helping provide a level playing field.

The results were extraordinary. Yahoo! BB, created by Masayoshi Son's venture-capital firm Softbank, and several other companies soon entered the DSL market. Yahoo! BB began offering high-speed service five times faster than current U.S. broadband for $22 a month. After aggressive marketing forced its competitors to meet Yahoo! BB's price, high-speed DSL subscriptions skyrocketed. By the end of 2002, such access was available to many more than the 30 million Japanese households the government had targeted. Within another five months, a greater percentage of homes in Japan than in the United States had access to broadband.

Thanks to the government's competitive framework, the speed of the DSL service offered also rose dramatically, from 8 megabits per second in 2001 to 12, 26, and 40 megabits today. (The typical U.S. broadband connection, whether DSL or cable, is still only 1.5 megabits per second or slower.) Meanwhile, the price of monthly subscriptions remained stable, even for 26-megabit access speeds, at about $22 per month -- by far the lowest price in the world. By September 2004, 15.3 million Japanese subscribed to high-speed broadband. Moreover, for an additional $5 per month, users of Yahoo! BB can also have Internet telephone service. One in every 25 telephone calls in Japan is now made over the Internet, and the number keeps growing.

Meeting the e-Japan strategy's second goal -- making ultra-high-speed access (up to 100 megabits per second) available to ten million Japanese households -- proved more difficult. Such connections permit real-time video telephoning and video conferencing, telecommuting, and rich multimedia options such as digital high-definition television, interactive games, and five-minute movie downloads (instead of the short, jerky video streaming that Americans are used to). But data cannot be transmitted at such speeds through existing phone lines, and new fiber-optic cable had to be laid throughout Japan. Having decided that those lines, too, should be open to competition, the Japanese authorities set out to devise significant incentives to persuade Japanese companies to invest in new ultra-high-speed cable, especially in rural areas.

The government used tax breaks, debt guaranties, and partial subsidies. It allowed companies willing to lay fiber to depreciate about one-third of the cost on first-year taxes, and it guaranteed their debt liabilities. These measures were sufficient to ensure that new fiber was laid in cities and large towns, but in rural areas, municipal subsidies were also needed. Towns and villages willing to set up their own ultra-high-speed fiber networks received a government subsidy covering approximately one-third of their costs, so long as those networks, too, were open to outside access.

These incentives created the right environment for the rapid deployment of fiber networks. Again, other companies decided to compete with regional telephone companies. The first, Usen, a nationwide distributor of background music with its own fiber network, was later joined by electric power companies. The resulting competition quickly drove the price of an ultrafast fiber connection down to $30 to $45 per month.

By the end of 2002, ultrafast fiber connections were available to more than ten million households in Tokyo and Osaka; a primary goal of the e-Japan strategy had been met. But the program -- and the government's tax incentives - had also called for fiber lines to run directly to homes and offices, and those connections proved economic only in densely populated cities. In less settled areas, the government agreed to provide tax incentives for fiber taken only as far as neighborhoods, leaving it to individual users to decide how to connect. Some have chosen -- and paid for -- a direct fiber connection; others have opted for a cheaper but slower wireless connection. By mid-2004, ultra-high-speed broadband was available to more than 80 percent of Japan's citizens. With more than two million subscribers, it can be said to have gone mainstream.

Fiber deployment is still moving quickly, and by the end of the year, ultra-high-speed access will be available to virtually all Japanese either directly or in their neighborhood. The program has been so successful that the Japanese government has already set its sights higher: in mid-2003, it decided to move beyond promoting access to ultra-high-speed broadband to encouraging its use.


So far, no one in the Bush administration has offered a vision nearly as compelling as Japan's. Although Michael Powell, the former chairman of the FCC, spoke eloquently about the benefits of the coming "digital broadband migration," he suggested no date for arrival in the promised land. Moreover, he measured U.S. broadband progress by the exceptionally slow 200-kilobit-per-second standard -- about one-hundredth of the speed of typical broadband in Japan today. According to that minimal standard, the United States has made some progress: by mid-2004, more than 30 million American homes and offices had signed up for basic broadband. But the service is expensive, very slow, and rather unreliable. And despite these limitations, the Bush administration has made little effort to encourage cheaper and more robust high-speed broadband or to promote what many agree should be the model for the future: a vast network of ultrafast fiber connecting homes, offices, and neighborhoods.

Without vision or leadership, U.S. broadband policy drifted during the Bush administration's first two years. The FCC tended to other matters. The Department of Commerce insisted that the market, not the government, should drive the rollout of broadband. Meanwhile, regional telephone companies relentlessly tried to reverse some of the promising measures that had been taken under President Clinton. Continuing efforts they had launched after the 1996 Telecommunications Act was passed, they lobbied legislators and sought court decisions to overturn regulations that had forced them to open their residential telephone lines to competitors.

Powell seemed not to mind this challenge; he preferred a somewhat different approach anyway. He backed promising new technologies and appeared less interested in the idea of promoting DSL competition for residential telephone lines, even though the strategy had quickly boosted access speeds and lowered prices in Japan and elsewhere. Instead, he favored pitting the cable television industry against the regional telephone industry.

Although in theory the strategy was viable -- telephone and cable lines run in front of more than 75 percent of U.S. homes, and with some technical upgrading, both can provide basic or high-speed broadband -- many opposed it. Among the critics of the multiplatform approach were Powell's predecessors at the FCC, who had done their utmost to open residential telephone lines; many economists, who were distrustful of duopoly competition; and consumer groups. Firms that were already competing or that wanted to compete with regional telephone companies in providing DSL service disagreed, too, as did those that coveted access to cable television lines. Some even claimed that this approach violated the 1996 Telecommunications Act, which, they argued, required the sharing of residential telephone wires.

Still, when the FCC got around to reviewing broadband policy in February 2003, it made convoluted decisions that left only the multiplatform approach. Firms that were competing with regional telephone companies to offer high-speed DSL service over telephone lines would have only three more years of access. More significant for the long run, the regional telephone companies would not have to share with outside competitors the ultra-high-speed fiber lines they laid. The following year, moreover, at the urging of regional telephone companies, a court reaffirmed an earlier ruling that these companies need not share their residential lines with DSL competitors. Although many expected an appeal, higher levels of the administration chose not to challenge the decision. Thus, broadband competition over residential telephone lines was effectively killed. A proven strategy had been lost.

Unfortunately, vigorous multiplatform competition is unlikely to emerge soon. True, there are signs of competition between the cable-modem broadband offered by cable television companies and the DSL service offered by telephone companies. Comcast plans to provide reliable Internet-based telephone service by doubling the speed of its broadband offerings from 1.5 megabits to 3 megabits per second over the next three years. Verizon and SBC Communications have dropped the cost of their broadband service to about $30 a month. And to compete directly with cable, some phone companies have begun to talk of developing their own Internet telephone service and providing higher broadband speeds to deliver video.

But these new services will probably appear only slowly, and competition between the telephone and cable companies will remain limited. The reasons are simple: cheap, high-speed broadband would lead to widespread use of Internet telephones and thus threaten the phone companies' lucrative voice-telephone business, and more inexpensive broadband would multiply outside video and movie offerings and endanger the cable companies' profitability. So, although both the telephone and cable companies could provide cheap, high-speed broadband if they chose to, they are not rushing to develop it.

The lack of strong incentives to encourage competition has, in other words, doomed broadband in the United States to remain much slower and more expensive than in Japan. Over the next five years, service is likely to get only marginally faster and cheaper. Meanwhile, at current transmission speeds, the next "killer" application -- Internet telephone service -- will remain shaky and unreliable.

The development of ultra-high-speed fiber broadband service, which is just beginning to appear in the United States, will also lag. Barely more than 600,000 U.S. offices and homes had fiber connections at the end of 2003. Verizon plans to bring fiber to 3 million of the United States' 115 million households by the end of this year, with speeds ranging from 5 to 30 megabits per second. SBC Communications, which dominates the Midwest and Southwest markets, and BellSouth, the leader in the Southeast, are also laying fiber, although at a much slower rate. But they plan to stop the work after spending about $10 billion (the estimated cost of bringing fiber close to about 10 million U.S. homes and offices) and then examine whether further investment is justified. As a result, the pace of rollout will be slow. And the emergence of the substantial market needed to inspire innovative new products and services for those with fiber Internet access remains years away.


The United States is even further behind Japan in wireless, mobile-phone-based Internet access, even though that platform is increasingly versatile and valuable. More and more, mobile phones can be used for tasks traditionally performed on computers. Except for the most office-oriented applications, such as word processing, spreadsheets, and presentation software, mobile phones will soon be used for nearly everything. In fact, many, including the Japanese, are already planning for a convergence of wireline and wireless technologies. By 2010, it is expected that such "ubiquitous networks" will permit Japanese to access the Internet at high speeds from a desktop, a laptop, a hand-held personal digital assistant, or a mobile phone.

Japan now has a commanding lead in mobile-phone Internet technologies and usage. With a nationwide cell-phone infrastructure in place by the mid-1990s, Japan began the shift away from voice services to Internet data services in early 1999. Then NTT DoCoMo introduced the "i-mode" service, providing e-mail and customer access to over 60 Web sites especially created for mobile-phone use. These sites offer news, financial services, weather, personal ads, games, and much more. (This service was recently introduced as "m-mode" in the United States.) Competitors soon emerged, and customer response was stunning. By December 2004, total mobile-phone subscriptions had reached 83.5 million in Japan (representing more than 60 percent of the population), of which more than 72 million included Internet services. The lesson the NTT DoCoMo leadership took from this experience was that if you develop a new technology and market it, consumers will buy it.

Following this philosophy, in October 2001, NTT DoCoMo launched a third-generation videophone service. By December 2004, thanks to thriving competition, Japanese videophone subscriptions had reached nearly 26 million and were growing by nearly 190 percent a year. As expected, this new market prompted notable mobile-phone innovation such as global-positioning-linked advertising, television reception, and music videos. Now Japan is testing fourth-generation, high-speed broadband phones that can support high-definition-television reception, movie downloads, more sophisticated games, and other multimedia applications.

The Japanese government played a critical part in these developments. It made well-considered and timely decisions to allot cost-free spectrum for each new mobile-phone generation. In so doing, it gave up badly needed revenue, but it retained full control over the terms of licensing and the flexibility to reassign spectrum according to future technological developments. In 2007, the government is expected to announce new spectrum allocations for the fourth-generation broadband mobile phones planned for 2010. Meanwhile, to protect consumers, the government has set important conditions before granting a service license, insisting that a carrier's network cover a certain area of the country and guarantee a certain level of service (with minimal dropped calls or interference, for example).

By contrast, U.S. mobile-phone policy was born of a colossal blunder from which the industry has yet to recover fully. In the early 1980s, after the management consultancy McKinsey estimated that there would be little demand for mobile phones and a small prospect of profitability, the FCC carved the United States into 734 tiny mobile-phone districts. It handed out two provider licenses in each district: one automatically went to the regional telephone company, and the other was drawn by lottery. The resulting infrastructure was cripplingly fragmented. It could not support nationwide calls, and inefficiencies and expensive connection rates translated into sky-high charges for customers.

Twenty years later, the Clinton administration made a belated effort to encourage nationwide cellular networks. The government opened up enough spectrum for six nationwide networks and invited bids. Thanks to an imaginative on-line auction, it had sold off the spectrum for $7.7 billion by early 1995. Although the networks that entered the market still struggle to offer consistent quality, competition among them sharply reduced the price of mobile-phone service and spawned millions of new customers.

Since the Bush administration took office, however, the FCC has only tinkered with spectrum policy around the edges. It has allowed companies to trade bits of spectrum to round out their infrastructure and opened modest amounts of spectrum to new wireless technologies such as WiFi and WiMax. Meanwhile, although the number of would-be national carriers dwindled from six to four and they expanded their infrastructure, U.S. mobile-phone service remains awful by European, let alone Japanese, standards. U.S. mobile phones can take digital pictures and connect to the Internet, but the cellular infrastructure is so spotty that even in large cities calls from an ordinary wireless phone may not go through. Sadly, U.S. mobile-phone competition is still based on price and the extent of a company's coverage rather than the kind of advanced data services available in Japan and elsewhere.

In 2004, third-generation mobile service came on the market in selected U.S. cities. As in Japan, two somewhat different technologies are being used, both of which require upgrading the existing infrastructure. For the time being, third-generation mobile-phone service is available in only eight cities. (The much slower, older service can be had in several others.) Although the FCC has provided some additional badly needed spectrum, the third-generation cellular infrastructure remains painfully inadequate: most of the country has no service at all. Meanwhile, the FCC has announced that it will auction third-generation spectrum "as early as June 2006." Plans for fourth-generation mobile service in the United States are well beyond the horizon.


The United States is losing considerable ground to Japan and its neighbors, and they will be the first to reap the economic benefits of these technologies. It is these countries, rather than the United States, that will benefit from the enhanced productivity, economic growth, and new jobs that high-speed broadband will bring. In 2001, Robert Crandall, an economist at the Brookings Institution, and Charles Jackson, a telecommunications consultant, estimated that "widespread" adoption of basic broadband in the United States could add $500 billion to the U.S. economy and produce 1.2 million new jobs. But Washington never promoted such a policy. Last year, another Brookings economist, Charles Ferguson, argued that perhaps as much as $1 trillion might be lost over the next decade due to present constraints on broadband development. These losses, moreover, are only the economic costs of the United States' indirection. They do not take into account the work that could have been done through telecommuting, the medical care or interactive long-distance education that might have been provided in remote areas, and unexploited entertainment possibilities.

The large broadband-user markets of Northeast Asia will attract the innovation the United States once enjoyed. Asians will have the first crack at developing the new commercial applications, products, services, and content of the high-speed-broadband era. Although many large U.S. firms, such as Cisco, IBM, and Microsoft, are closely following developments overseas and are unlikely to be left behind, the United States' medium-sized and smaller firms, which tend to foster the most innovation, may well be.

The Japanese and the South Koreans will also be the first to enjoy the quality-of-life benefits that the high-speed-broadband era will bring. These will include not only Internet telephones and videophones, but also easy teleconferencing, practical telecommuting, remote diagnosis and medical services, interactive distance education, rich multimedia entertainment, digitally controlled home appliances, and much more.

Given these costs and losses, it is clear that broadband is critically important to the U.S. economy and the United States' international competitiveness and that it must become a national priority. In the run-up to the election in November, President Bush finally addressed the issue, promising the electorate "universal, affordable access" to broadband technology by 2007 and "plenty" of carriers to choose from "as soon as possible thereafter." To reach these goals, he expressed confidence in new broadband service over power lines, promising wireless technologies, such as WiFi hotspots and longer-distance WiMax, and unspecified tax credits.

But real progress will require more than these measures. To move forward, the administration should quickly take two steps. First, it should explain clearly the profound ways in which broadband will change work, learning, and leisure in the United States. Identifying such substantial benefits would energize providers and encourage potential users to get the most from the Internet. It would also give the private sector confidence in the nation's direction and a degree of business certainty.

Second, the administration should push the President's Information Technology Advisory Committee (PITAC), a group of private-sector IT leaders and academics, to play a key leadership role in advancing broadband deployment. Involving the private sector and prominent academics in broadband leadership is essential given the pace of technological advance and today's dynamic business environment.

One of the PITAC's first tasks should be to set out bold long-term goals for the deployment of broadband in the United States, carefully distinguishing three different levels of service: basic broadband (at 1.5 to 3 megabits per second), for slow downloads from and uploads to the Internet and Internet telephones; high-speed broadband (at 10 to 30 megabits per second), for Internet reception of digital high-definition television and other video uses; and ultra-high-speed fiber broadband (at 100 megabits per second), for the highest-end applications.

The PITAC should consider how to redeem President Bush's pledge to provide, by 2007 (or 2010, at the latest), basic broadband access to all Americans at an affordable price ($20 to $25 per month should be the goal). To reach everyone, the effort would require developing a combination of technologies: wireline, wireless, and satellite. The United States' vastness no doubt complicates the task, but it is no excuse for not undertaking the job. (Canada, the world's second-largest state, also ranks second in global broadband connectivity.) If necessary, tax credits should be granted to companies that help reach rural and underserved areas.

By 2010, the PITAC should also aim to make available high-speed broadband access to two-thirds of all U.S. households for $30 to $35 per month. The key to reaching this goal is the government's taking the lead in creating a strongly competitive environment for DSL, cable, power line, and newer wireless broadband technologies. The more these technologies compete among themselves, the sooner Americans will have access to faster, cheaper broadband service. And with enough competition, there should be no need for government financial incentives.

The PITAC should also do its best to promote ultra-high-speed fiber access for one-third of all U.S. households at $40 to $45 per month by 2010. It should use its convening power to bring to the table all the stakeholders in the millions of miles of unused fiber that run below U.S. city streets. The purpose of such discussions would be to encourage the widespread use of existing fiber by analyzing the reasons for its current disuse and seeking ways to make it viable. The PITAC might also recommend legislation to permit the National Science Foundation to provide matching grants to bring fiber to the campuses of colleges and universities across the country. This program could be modeled on the highly successful National Science Foundation Network (NSFnet) project that brought the Internet to campuses in the 1980s.

Finally, by 2010, the PITAC should suggest ways to create a comprehensive, nationwide, third-generation cellular infrastructure. With such mobile phones Americans would, at long last, be able to talk with one another regardless of where they are. A first step might be for the PITAC to bring stakeholders together to sift through the many economic, legal, regulatory, community, and environmental issues that currently stand in the way. Another would be for the government to begin considering now the requirements of fourth-generation wireless technologies. The new policy would also anticipate the likely convergence of wireline and wireless that will provide the anytime, anywhere, any-device connections to the Internet that have long been predicted. For starters, however, the government should take steps to ensure that by 2007 the hundred largest cities in the United States will no longer be riddled with dead spots and that third-generation mobile phones will be available in select rural areas as well.

Reaching these goals will require top political leadership and consistent, purposeful government policies, as well as private-sector action. It will be the Bush administration's task to tell Americans how broadband could change their lives, provide the leadership needed to set out and reach specific goals, and fashion the competitive market framework that will foster fast progress. Another four years of drifting would likely leave less than one-half of the nation with somewhat cheaper but slow broadband service, a substantial portion preferring to stick with dial-up, and a significant share with no affordable access to broadband at all.

Unfortunately, it could take half a dozen years (or more) to reach these goals, and meeting even that timetable would take commitment, resourcefulness -- and luck. In the meantime, the world leaders in broadband and mobile-phone service will continue to move ahead: Japan is already expected to have a comprehensive nationwide ultra-high-speed fiber infrastructure, as well as an entirely new third-generation mobile-phone infrastructure, in place by the end of the year. As usage grows, Japan and its neighbors will be the first to reap the substantial economic, innovative, and quality-of-life benefits of their enlightened leadership. It is now time for the United States to summon the will to catch up with them, so that Americans, too, can look forward to the rewards of the broadband economy.

Friday, June 24, 2005

An update on a classic.

What Makes an Effective Executive

Great managers may be charismatic or dull, generous or tightfisted, visionary or numbers oriented. But every effective executive follows eight simple practices.

AN EFFECTIVE EXECUTIVE does not need to be a leader in the sense that the term is now most commonly used. Harry Truman did not have one ounce of charisma, for example, yet he was among the most effective chief executives in U.S. history. Similarly, some of the best business and nonprofit CEOs I've worked with over a 65-year consulting career were not stereotypical leaders. They were all over the map in terms of their personalities, attitudes, values, strengths, and weaknesses. They ranged from extroverted to nearly reclusive, from easygoing to controlling, from generous to parsimonious.

What made them all effective is that they followed the same eight practices:

They asked, "What needs to be done?"
They asked, "What is right for the enterprise?"
They developed action plans.
They took responsibility for decisions.
They took responsibility for communicating.
They were focused on opportunities rather than problems.
They ran productive meetings.
They thought and said "we" rather than "I."
The first two practices gave them the knowledge they needed. The next four helped them convert this knowledge into effective action. The last two ensured that the whole organization felt responsible and accountable.

Get the Knowledge You Need
The first practice is to ask what needs to be done. Note that the question is not "What do I want to do?" Asking what has to be done, and taking the question seriously, is crucial for managerial success. Failure to ask this question will render even the ablest executive ineffectual.

When Truman became president in 1945, he knew exactly what he wanted to do: complete the economic and social reforms of Roosevelt's New Deal, which had been deferred by World War II. As soon as he asked what needed to be done, though, Truman realized that foreign affairs had absolute priority. He organized his working day so that it began with tutorials on foreign policy by the secretaries of state and defense. As a result, he became the most effective president in foreign affairs the United States has ever known. He contained Communism in both Europe and Asia and, with the Marshall Plan, triggered 50 years of worldwide economic growth.

Similarly, Jack Welch realized that what needed to be done at General Electric when he took over as chief executive was not the overseas expansion he wanted to launch. It was getting rid of GE businesses that, no matter how profitable, could not be number one or number two in their industries.

The answer to the question "What needs to be done?" almost always contains more than one urgent task. But effective executives do not splinter themselves. They concentrate on one task if at all possible. If they are among those people -- a sizable minority -- who work best with a change of pace in their working day, they pick two tasks. I have never encountered an executive who remains effective while tackling more than two tasks at a time. Hence, after asking what needs to be done, the effective executive sets priorities and sticks to them. For a CEO, the priority task might be redefining the company's mission. For a unit head, it might be redefining the unit's relationship with headquarters. Other tasks, no matter how important or appealing, are postponed. However, after completing the original top-priority task, the executive resets priorities rather than moving on to number two from the original list. He asks, "What must be done now?" This generally results in new and different priorities.

To refer again to America's best-known CEO: Every five years, according to his autobiography, Jack Welch asked himself, "What needs to be done now?" And every time, he came up with a new and different priority.

But Welch also thought through another issue before deciding where to concentrate his efforts for the next five years. He asked himself which of the two or three tasks at the top of the list he himself was best suited to undertake. Then he concentrated on that task; the others he delegated. Effective executives try to focus on jobs they'll do especially well. They know that enterprises perform if top management performs -- and don't if it doesn't.

Effective executives' second practice--fully as important as the first -- is to ask, "Is this the right thing for the enterprise?" They do not ask if it's right for the owners, the stock price, the employees, or the executives. Of course they know that shareholders, employees, and executives are important constituencies who have to support a decision, or at least acquiesce in it, if the choice is to be effective. They know that the share price is important not only for the shareholders but also for the enterprise, since the price/earnings ratio sets the cost of capital. But they also know that a decision that isn't right for the enterprise will ultimately not be right for any of the stakeholders.

This second practice is especially important for executives at family owned or family run businesses -- the majority of businesses in every country -- particularly when they're making decisions about people. In the successful family company, a relative is promoted only if he or she is measurably superior to all nonrelatives on the same level. At DuPont, for instance, all top managers (except the controller and lawyer) were family members in the early years when the firm was run as a family business. All male descendants of the founders were entitled to entry-level jobs at the company. Beyond the entrance level, a family member got a promotion only if a panel composed primarily of nonfamily managers judged the person to be superior in ability and performance to all other employees at the same level. The same rule was observed for a century in the highly successful British family business J. Lyons & Company (now part of a major conglomerate) when it dominated the British food-service and hotel industries.

Asking "What is right for the enterprise?" does not guarantee that the right decision will be made. Even the most brilliant executive is human and thus prone to mistakes and prejudices. But failure to ask the question virtually guarantees the wrong decision.

Write an Action Plan
Executives are doers; they execute. Knowledge is useless to executives until it has been translated into deeds. But before springing into action, the executive needs to plan his course. He needs to think about desired results, probable restraints, future revisions, check-in points, and implications for how he'll spend his time.

First, the executive defines desired results by asking: "What contributions should the enterprise expect from me over the next 18 months to two years? What results will I commit to? With what deadlines?" Then he considers the restraints on action: "Is this course of action ethical? Is it acceptable within the organization? Is it legal? Is it compatible with the mission, values, and policies of the organization?" Affirmative answers don't guarantee that the action will be effective. But violating these restraints is certain to make it both wrong and ineffectual.

The action plan is a statement of intentions rather than a commitment. It must not become a straitjacket. It should be revised often, because every success creates new opportunities. So does every failure. The same is true for changes in the business environment, in the market, and especially in people within the enterprise -- all these changes demand that the plan be revised. A written plan should anticipate the need for flexibility.

In addition, the action plan needs to create a system for checking the results against the expectations. Effective executives usually build two such checks into their action plans. The first check comes halfway through the plan's time period; for example, at nine months. The second occurs at the end, before the next action plan is drawn up.

Finally, the action plan has to become the basis for the executive's time management. Time is an executive's scarcest and most precious resource. And organizations -whether government agencies, businesses, or non profits -- are inherently time wasters. The action plan will prove useless unless it's allowed to determine how the executive spends his or her time.

Napoleon allegedly said that no successful battle ever followed its plan. Yet Napoleon also planned every one of his battles, far more meticulously than any earlier general had done. Without an action plan, the executive becomes a prisoner of events. And without check-ins to reexamine the plan as events unfold, the executive has no way of knowing which events really matter and which are only noise.

When they translate plans into action, executives need to pay particular attention to decision making, communication, opportunities (as opposed to problems), and meetings. I'll consider these one at a time.

Take responsibility for decisions. A decision has not been made until people know:

the name of the person accountable for carrying it out;
the deadline;
the names of the people who will be affected by the decision and therefore have to know about, understand, and approve it -- or at least not be strongly opposed to it - and
the names of the people who have to be informed of the decision, even if they are not directly affected by it.
An extraordinary number of organizational decisions run into trouble because these bases aren't covered. One of my clients, 30 years ago, lost its leadership position in the fast-growing Japanese market because the company, after deciding to enter into a joint venture with a new Japanese partner, never made clear who was to inform the purchasing agents that the partner defined its specifications in meters and kilograms rather than feet and pounds -- and nobody ever did relay that information.

It's just as important to review decisions periodically -- at a time that's been agreed on in advance -- as it is to make them carefully in the first place. That way, a poor decision can be corrected before it does real damage. These reviews can cover anything from the results to the assumptions underlying the decision.

Such a review is especially important for the most crucial and most difficult of all decisions, the ones about hiring or promoting people. Studies of decisions about people show that only one-third of such choices turn out to be truly successful. One-third are likely to be draws -- neither successes nor outright failures. And one-third are failures, pure and simple. Effective executives know this and check up (six to nine months later) on the results of their people decisions. If they find that a decision has not had the desired results, they don't conclude that the person has not performed. They conclude, instead, that they themselves made a mistake. In a well-managed enterprise, it is understood that people who fail in a new job, especially after a promotion, may not be the ones to blame.

Executives also owe it to the organization and to their fellow workers not to tolerate nonperforming individuals in important jobs. It may not be the employees' fault that they are underperforming, but even so, they have to be removed. People who have failed in a new job should be given the choice to go back to a job at their former level and salary. This option is rarely exercised; such people, as a rule, leave voluntarily, at least when their employers are U.S. firms. But the very existence of the option can have a powerful effect, encouraging people to leave safe, comfortable jobs and take risky new assignments. The organization's performance depends on employees' willingness to take such chances.

A systematic decision review can be a powerful tool for self-development, too. Checking the results of a decision against its expectations shows executives what their strengths are, where they need to improve, and where they lack knowledge or information. It shows them their biases. Very often it shows them that their decisions didn't produce results because they didn't put the right people on the job. Allocating the best people to the right positions is a crucial, tough job that many executives slight, in part because the best people are already too busy. Systematic decision review also shows executives their own weaknesses, particularly the areas in which they are simply incompetent. In these areas, smart executives don't make decisions or take actions. They delegate. Everyone has such areas; there's no such thing as a universal executive genius.

Most discussions of decision making assume that only senior executives make decisions or that only senior executives' decisions matter. This is a dangerous mistake. Decisions are made at every level of the organization, beginning with individual professional contributors and frontline supervisors. These apparently low-level decisions are extremely important in a knowledge-based organization. Knowledge workers are supposed to know more about their areas of specialization -- for example, tax accounting -- than anybody else, so their decisions are likely to have an impact throughout the company. Making good decisions is a crucial skill at every level. It needs to be taught explicitly to everyone in organizations that are based on knowledge.

Take responsibility for communicating. Effective executives make sure that both their action plans and their information needs are understood. Specifically, this means that they share their plans with and ask for comments from all their colleagues -- superiors, subordinates, and peers. At the same time, they let each person know what information they'll need to get the job done. The information flow from subordinate to boss is usually what gets the most attention. But executives need to pay equal attention to peers' and superiors' information needs.

We all know, thanks to Chester Barnard's 1938 classic The Functions of the Executive, that organizations are held together by information rather than by ownership or command. Still, far too many executives behave as if information and its flow were the job of the information specialist -- for example, the accountant. As a result, they get an enormous amount of data they do not need and cannot use, but little of the information they do need. The best way around this problem is for each executive to identify the information he needs, ask for it, and keep pushing until he gets it.

Focus on opportunities. Good executives focus on opportunities rather than problems. Problems have to be taken care of, of course; they must not be swept under the rug. But problem solving, however necessary, does not produce results. It prevents damage. Exploiting opportunities produces results.

Above all, effective executives treat change as an opportunity rather than a threat. They systematically look at changes, inside and outside the corporation, and ask, "How can we exploit this change as an opportunity for our enterprise?" Specifically, executives scan these seven situations for opportunities:

an unexpected success or failure in their own enterprise, in a competing enterprise, or in the industry;
a gap between what is and what could be in a market, process, product, or service (for example, in the nineteenth century, the paper industry concentrated on the 10% of each tree that became wood pulp and totally neglected the possibilities in the remaining 90%, which became waste);
innovation in a process, product, or service, whether inside or outside the enterprise or its industry;
changes in industry structure and market structure;
changes in mind-set, values, perception, mood, or meaning; and
new knowledge or a new technology.
Effective executives also make sure that problems do not overwhelm opportunities. In most companies, the first page of the monthly management report lists key problems. It's far wiser to list opportunities on the first page and leave problems for the second page. Unless there is a true catastrophe, problems are not discussed in management meetings until opportunities have been analyzed and properly dealt with.

Staffing is another important aspect of being opportunity focused. Effective executives put their best people on opportunities rather than on problems. One way to staff for opportunities is to ask each member of the management group to prepare two lists every six months -- a list of opportunities for the entire enterprise and a list of the best-performing people throughout the enterprise. These are discussed, then melded into two master lists, and the best people are matched with the best opportunities. In Japan, by the way, this matchup is considered a major HR task in a big corporation or government department; that practice is one of the key strengths of Japanese business.

Make meetings productive. The most visible, powerful, and, arguably, effective nongovernmental executive in the America of World War II and the years thereafter was not a businessman. It was Francis Cardinal Spellman, the head of the Roman Catholic Archdiocese of New York and adviser to several U.S. presidents. When Spellman took over, the diocese was bankrupt and totally demoralized. His successor inherited the leadership position in the American Catholic church. Spellman often said that during his waking hours he was alone only twice each day, for 25 minutes each time: when he said Mass in his private chapel after getting up in the morning and when he said his evening prayers before going to bed. Otherwise he was always with people in a meeting, starting at breakfast with one Catholic organization and ending at dinner with another.

Top executives aren't quite as imprisoned as the archbishop of a major Catholic diocese. But every study of the executive workday has found that even junior executives and professionals are with other people -- that is, in a meeting of some sort -- more than half of every business day. The only exceptions are a few senior researchers. Even a conversation with only one other person is a meeting. Hence, if they are to be effective, executives must make meetings productive. They must make sure that meetings are work sessions rather than bull sessions.

The key to running an effective meeting is to decide in advance what kind of meeting it will be. Different kinds of meetings require different forms of preparation and different results:

A meeting to prepare a statement, an announcement, or a press release. For this to be productive, one member has to prepare a draft beforehand. At the meeting's end, a preappointed member has to take responsibility for disseminating the final text.

A meeting to make an announcement -- for example, an organizational change. This meeting should be confined to the announcement and a discussion about it.

A meeting in which one member reports. Nothing but the report should be discussed.

A meeting in which several or all members report. Either there should be no discussion at all or the discussion should be limited to questions for clarification. Alternatively, for each report there could be a short discussion in which all participants may ask questions. If this is the format, the reports should be distributed to all participants well before the meeting. At this kind of meeting, each report should be limited to a preset time--for example, 15 minutes.

A meeting to inform the convening executive. The executive should listen and ask questions. He or she should sum up but not make a presentation.

A meeting whose only function is to allow the participants to be in the executive's presence. Cardinal Spellman's breakfast and dinner meetings were of that kind. There is no way to make these meetings productive. They are the penalties of rank. Senior executives are effective to the extent to which they can prevent such meetings from encroaching on their workdays. Spellman, for instance, was effective in large part because he confined such meetings to breakfast and dinner and kept the rest of his working day free of them.

Making a meeting productive takes a good deal of self-discipline. It requires that executives determine what kind of meeting is appropriate and then stick to that format. It's also necessary to terminate the meeting as soon as its specific purpose has been accomplished. Good executives don't raise another matter for discussion. They sum up and adjourn.

Good follow-up is just as important as the meeting itself. The great master of follow-up was Alfred Sloan, the most effective business executive I have ever known. Sloan, who headed General Motors from the 1920s until the 1950s, spent most of his six working days a week in meetings -- three days a week in formal committee meetings with a set membership, the other three days in ad hoc meetings with individual GM executives or with a small group of executives. At the beginning of a formal meeting, Sloan announced the meeting's purpose. He then listened. He never took notes and he rarely spoke except to clarify a confusing point. At the end he summed up, thanked the participants, and left. Then he immediately wrote a short memo addressed to one attendee of the meeting. In that note, he summarized the discussion and its conclusions and spelled out any work assignment decided upon in the meeting (including a decision to hold another meeting on the subject or to study an issue). He specified the deadline and the executive who was to be accountable for the assignment. He sent a copy of the memo to everyone who'd been present at the meeting. It was through these memos--each a small masterpiece -that Sloan made himself into an outstandingly effective executive.

Effective executives know that any given meeting is either productive or a total waste of time.

Think and Say "We"
The final practice is this: Don't think or say "I." Think and say "we." Effective executives know that they have ultimate responsibility, which can be neither shared nor delegated. But they have authority only because they have the trust of the organization. This means that they think of the needs and the opportunities of the organization before they think of their own needs and opportunities. This one may sound simple; it isn't, but it needs to be strictly observed.

We've just reviewed eight practices of effective executives. I'm going to throw in one final, bonus practice. This one's so important that I'll elevate it to the level of a rule: Listen first, speak last.

Effective executives differ widely in their personalities, strengths, weaknesses, values, and beliefs. All they have in common is that they get the right things done. Some are born effective. But the demand is much too great to be satisfied by extraordinary talent. Effectiveness is a discipline. And, like every discipline, effectiveness can be learned and must be earned.


By Peter F. Drucker

Peter F. Drucker is the Marie Rankin Clarke Professor of Social Science and Management at the Peter F. Drucker and Masatoshi Ito Graduate School of Management at Claremont Graduate University in Claremont, California. He has written nearly two dozen articles for HBR.

Copyright of Harvard Business Review is the property of Harvard Business School Publication Corp. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.
Source: Harvard Business Review, Jun2004, Vol. 82 Issue 6, p58, 6p, 1c.
Item Number: 13208426

Retirement equals disaster for all involved.

It's Time to Retire Retirement

Long-standing human resource practices invest heavily in youth and push out older workers. This must change-and public policy, too--or companies will find themselves running off a demographic cliff as baby boomers age.

IN THE PAST FEW YEARS, companies have been so focused on downsizing to contain costs that they've largely neglected a looming threat to their competitiveness, the likes of which they have never before experienced: a severe shortage of talented workers. The general population is aging and, with it, the labor pool. People are living longer, healthier lives, and the birthrate is at a historic low. While the ranks of the youngest workers (ages 16 to 24, according to Bureau of Labor Statistics groupings) are growing 15% this decade as baby boomers' children enter the workforce, the 25- to 34-year-old segment is growing at just half that rate, and the workforce population between the ages of 35 and 44-the prime executive-development years-is actually declining.

In the United States, the overall rate of workforce growth faces a sharp drop. After peaking at nearly 30% in the 1970s (as the baby boomers as well as unprecedented numbers of women entered the workforce), and holding relatively steady at 12% during the 1990s and again in the present decade, the rate is projected to drop and level off at 2% to 3% per decade thereafter. That translates into an annual growth rate of less than 1% today and an anemic 0.2% by 2020. Meanwhile, age distributions are shifting dramatically. The proportion of workers over 55 declined from 18% in the 1970s to under 11% in 2000- but it's projected to rebound to 20% by 2015. In other words, we've recently passed what will prove to be a historic low in the concentration of older workers. Just when we've gotten accustomed to having relatively few mature workers around, we have to start learning how to attract and retain far more of them.

During the next 15 years, 80% of the native-born workforce growth in North America-and even more so in much of Western Europe - is going to be in the over-5o cohort. In the next decade or so, when baby boomers--the 76 million people born between 1946 and 1964, more than one-quarter of all Americans-- start hitting their sixties and contemplating retirement, there won't be nearly enough young people entering the workforce to compensate for the exodus. The Bureau of Labor Statistics projects a shortfall of 10 million workers in the United States in 2010, and in countries where the birthrate is well below the population replacement level (particularly in Western Europe), the shortage will hit sooner, be more severe, and remain chronic.

The problem won't just be a lack of bodies. Skills, knowledge, experience, and relationships walk out the door every time somebody retires- and they take time and money to replace. Given the inevitable time lag between the demand for skills and the ability of the educational system to provide them, we'll see a particularly pronounced skill shortage in fast-growing technical fields such as health care. What's more, employees are your face to the marketplace. It's good business to have employees who reflect the ethnic, gender, and, yes, age composition of your customer base-- especially when those customers are well off. Baby boomers will be the most financially powerful generation of mature consumers ever; today's mature adults control more than $7 trillion in wealth in the United States-70% of the total. As the population at large ages, and ever-more spending power is concentrated in the hands of older customers, companies will want to show a mature face to their clientele-and yet those faces will be in high demand.

The problem is pretty clear. Workers will be harder to come by. Tacit knowledge will melt steadily away from your organization. And the most dramatic shortage of workers will hit the age group associated with leadership and key customer-facing positions. The good news is that a solution is at hand: Just as companies are learning to market to an aging population, so they can also learn to attract and employ older workers.

And yet, despite irrefutable evidence of workforce aging, many managers may be marching their companies straight off a demographic cliff. According to a recent survey from the Society for Human Resource Management, two-thirds of U.S. employers don't actively recruit older workers. Furthermore, more than half do not actively attempt to retain key ones; 80% do not offer any special provisions (such as flexible work arrangements) to appeal to the concerns of mature workers; and 60% of CEOs say their companies don't account for workforce aging in their long-term business plans. Instead, relying on the mistaken assumption that the future will be populated by a growing pool of talented and loyal young workers, companies are systemically offering older workers the "package" and skimming people out of the labor force from the top age brackets down.

Little wonder that baby boomers and "mature" workers (those 55 and above) are feeling little loyalty to their current employers. These employees are bottlenecked, with too many people competing for too few leadership positions. They're distrustful, fearful, and defensive, knowing that they're "too old" to easily find work elsewhere and likely to be pushed out before the "official" retirement age. They're struggling to update their skills, and they're feeling burned out after 30-plus years on the job. Meanwhile, they stand back and watch as recruiting, training, and leadership development dollars, as well as promotion opportunities, are overwhelmingly directed at younger employees, with little thought to the skills and experience that the over-55 crowd can bring to bear on almost any business problem.

In short, most baby boomers want to continue working--and they may need to, for financial reasons--but they may not want to work for you. Twenty percent of those collecting employer pensions are still working in some capacity, and among people under 60 who are already collecting pensions, more than 50% are working. Among those age 55 and older who accepted early retirement offers, one-third have gone back to work. But these working retirees are more likely to be working part-time or be self-employed than their not-yet-retired counterparts- in other words, they're working on their own terms. That's increasingly where you'll need to meet these older workers if you want to gain access to their skills. As the labor market tightens, they will have more choices, and the most capable and accomplished among them are likely to be the most mobile and financially independent; they're the ones who are most likely to move on. The challenge is to find a way to reconnect with these employees before they're ready to take a retirement package and run-perhaps to a competitor.

We recently conducted a yearlong research project in which we looked at the implications for businesses of an aging workforce. Broadly speaking, our findings suggest an urgent need to find ways to attract and retain employees of all ages. But of most concern is the potentially debilitating mass retirement that threatens to starve many businesses of key talent in the next ten to 15 years. On the basis of our research, we've concluded that the concept of retirement is outdated and should be put out to pasture in favor of a more flexible approach to ongoing work, one that serves both employer and employee. In this article, we'll describe how companies can retain the skills of employees well past the traditional age of retirement by moving from a rigid model where work ceases at a certain age to a more flexible one where employees can become lifelong contributors.

Create a Culture That Honors Experience
If companies are to win back the hearts and minds of baby boomers and other generations of mature workers, they need to start with the work environment itself, which has become increasingly alienating to anyone over the age of 50. Human resource practices are often explicitly or implicitly biased against older workers, and these biases can seep into the culture in a manner that makes them feel unwelcome.

It starts with recruiting, in subtle ways such as the choice of words in a job advertisement. Even high-energy, young-in-spirit older workers, for example, may interpret an ad stressing "energy," "fast pace," and "fresh thinking" as implicitly targeting younger workers and dismiss the opportunity out of hand. Mature workers are more likely to be attracted to ads emphasizing "experience," "knowledge," and "expertise."

Traditional recruiting channels such as want ads or help wanted signs may not attract older workers either. Twelve years ago, pharmacy chain CVS looked at national demographic trends and concluded that the company needed to employ a much greater number of older workers. But managers didn't know how to find them-older people shopped in the stores but didn't apply for openings, perhaps believing they wouldn't be hired. Now the company works through the National Council on Aging, city agencies, and community organizations to find and hire productive new employees.

Interviewing techniques can be unintentionally off-putting as well. Being left alone for half an hour to build something with Legos or being asked to perform the type of verbal gymnastics Microsoft became famous for in job interviews (example: how are M&Ms made?) may be daunting to candidates accustomed to a more traditional approach to demonstrating their skills. One major British bank realized that its psychometric and verbal-reasoning tests were intimidating to older candidates and replaced these tests with role-playing exercises to gauge candidates' ability to handle customers. And Nationwide, Britain's largest building society, has begun short-listing job candidates by telephone to reduce the number of applicants who are rejected because they look older.

Training and development activities also tend to favor younger employees. According to the Bureau of Labor Statistics, older workers (age 55 plus) receive on average less than half the amount of training that any of their younger cohorts receive, including workers in the 45 to 54 age range. One reason may be that they're reluctant to ask: As people well established in their careers and very busy on the job, they may not feel or want to admit the need for training and development. And yet many mid-career and older employees require refresher training in areas from information technology to functional disciplines to nonhierarchical management methods. The challenge is to make them feel as though it's not a sign of weakness to ask. At Dow Chemical, the company-wide expectation is that employees at all levels will continue to learn and grow; as a result, employees regularly seek training and development opportunities, readying themselves for their next career moves.

Most important, mature workers will be attracted to a culture that values their experience and capabilities--an environment that can take some time and effort to build. The Aerospace Corporation is a company that has, over the years, built a reputation for valuing experience and knowledge. Nearly half of its 3,400 regular, full-time employees are over age 50 -- a clear signal to job candidates that experience is appreciated. CVS has made great strides in creating a company that is more welcoming to older employees, having more than doubled the percentage of employees over age 50 in the past 12 years. It has no mandatory retirement age, making it easy to join the company at an advanced age and stay indefinitely (six employees are in their nineties). The company boosts its age-friendly image through internal and external publications. Company and HR department newsletters highlight the productivity and effectiveness of older workers, and the company coproduces with a cosmetics company a senior-focused magazine that's called IN STEP WITH HEALTHY LIVING.

Older workers can see that CVS honors experience. A year ago, after taking a buyout package from his management job in a major drugstore chain, 59-year-old Jim Wing joined CVS as the pharmacy supervisor for the company's southern Ohio stores. What influenced his decision? "I'm too young to retire. [CVS] is willing to hire older people. They don't look at your age but your experience." Pharmacy technician Jean Penn, age 80, has worked in the business since 1942. She sold her own small pharmacy to CVS five years ago and began working in another CVS store the next day. She was recently given a 50-year pin. ("Turns out they don't make 6o-year pins," she says.) By giving Penn credit for time served before she joined the company, CVS once again sent a strong signal about the value attached to experience.

Offer Flexible Work
While older employees won't sign on or stick around if the HR processes and culture aren't welcoming, the substance and arrangement of work are even more important. Companies need to design jobs such that staying on is more attractive than leaving. Many mature workers want to keep working but in a less time-consuming and pressured capacity so that they may pursue other interests. And many baby boomers have a direct and compelling need for flexibility to accommodate multiple commitments, such as caring for children and elderly parents at the same time. Flex work-- flexible in both where and when work is performed, as well as flexibility in the traditional career path- can offer many attractions and rewards and appeal to employees' changing needs.

The concept of flexible work is not new, of course, and many companies offer it in some form- job sharing, telecommuting, compressed workweeks, and part-time schedules. But such programs are usually small in scale and, in practice, are often taken up by new mothers and others with consuming family commitments. What's more, the implicit bargain is often that employees who participate will see their careers suffer for it. Companies that have successful flex programs not only make these programs easily accessible to older workers but also structure them so that people who participate don't feel that they're being sidelined or overlooked for promotions- and so that participation leads to a win-win for employer and employee.

Look at ARO Incorporated, a business process outsourcer based in Kansas City, Missouri. Six years ago, its staff turnover was at 25%, which limited its productivity as an operator of contract call centers, back-office and forms processing, outbound customer interaction, and more. Kansas City hosts some 90 call centers, so employees had numerous other options, and the applicant pool was shallow.

Michael Amigoni, the company's chief operating officer, soon found a way to cut costs and improve service by upgrading the company's technology to allow some 100 teleworkers to remain off-site. He then actively recruited baby boomers, who were attracted to the flexibility, to fill these jobs. Employees were not permitted to do the work simultaneously with child care, elder care, or pet care, and company managers visited people's homes to make sure they had an appropriate working environment. While some younger workers signed on initially, the company found that these employees missed having an office community and largely dropped out.

Meanwhile, ARO gained access to a large pool of mature, experienced employees, who, on the whole, have stayed with the company longer than younger employees have. Turns out, they're also a much better match for the company's customer demographics. "ARO has clients in the insurance and financial services sectors, and a lot of the people we talk to are older," says Amigoni. "It helps that the people making the calls are older, because they are in similar circumstances to customers." For insurance companies, a lot of ARO's work is underwriting, which involves asking questions about health, among other things. It's useful to have workers who are facing some of the same health concerns-- their own or perhaps their parents'-- that their customers are. ARO has found that younger, entry-level workers cannot make these connections as easily. Turnover is now down to 7%, and productivity is up 15%, partly because the company now has more seasoned staff. To boot, the company was able to expand without having to move into a larger facility, which it didn't want to pay for.

Other companies offer flexibility in work assignments to reignite older employees who have come to find their jobs a bit stale-an approach that can be of particular value in appealing to highly paid managerial talent. For example, four years ago, Deloitte Consulting looked at the firm's demographics and realized that by 2003, 40% of its then 850 partners would be 50 or older and eligible to retire at 55. The firm didn't want to lose this talented group of men and women en masse, so it created what it called a Senior Leaders program, which enabled partners in their early fifties to redesign their career paths. (The program, along with a similar program at Deloitte's sister company, Deloitte & Touche, is currently on hold as the two companies reintegrate operations following last year's decision not to separate as planned.)

Here's how the Senior Leaders program worked: Each year, a ten-member global selection committee assessed candidates who had made a unique contribution to the firm and would continue to add significant value. The committee then sat down with each nominated employee to customize a second career with the firm, including flexible hours and work location, special projects, and the opportunity to engage in mentoring, research, training and development, company promotions, or global expansion. Deloitte still has about a dozen active senior leaders, most of whom opted for full-time work in their rejuvenated roles. The partner who launched the program told us: "The biggest surprise was the prestige the program gained. Being a senior leader became extremely prestigious both to the firm and to the clients."

Still other companies appeal to older workers' desire for flexibility by reducing hours in the years leading up to retirement. The reduced hours are an attractive option because it gives workers opportunities to pursue outside interests. At Varian, a leading provider of radiotherapy systems, employees age 55 and over who have a minimum of five years of service and who plan to retire within three years can negotiate a reduced work schedule. The typical arrangement is four days per week the first year and three days a week thereafter. Half-time is the minimum, and two half-timers can job share. Participants retain full medical and dental benefits and can request a return to full-time work if the new schedule results in economic hardship.

We are strong advocates of flexible work, in all the varieties described here, not only because it's a way to entice older workers to continue working but also because it forms the foundation of a flexible new approach to retirement, one that assumes people can continue to contribute in some way well into their "retirement" years.

Introduce Flexible Retirement
Flexible retirement is flexible work in the extreme- a logical extension of the flexible work models just described, where the work may continue indefinitely.

Retirement, as it's currently understood, is a recent phenomenon. For almost all of history, people worked until they dropped. It was only during the Great Depression that, desperate to make room in the workforce for young workers, governments, unions, and employers institutionalized retirement programs as we know them today, complete with social security and pension plans. When the modem notion of retirement was first articulated near the end of the nineteenth century, the designated retirement age of 65 was longer than the life expectancy at the time. Over the last 50 years, the average retirement age declined steadily; in the United States, Great Britain, and Canada, the average retirement age is currently around 62. Meanwhile, life expectancies have increased, leaving more years for leisure.

But in fact, many people don't want a life of pure leisure; half of today's retirees say they're bored and restless. A recent AARP/Roper Report survey found that 80% of baby boomers plan to work at least part-time during their retirement; just 16% say that they won't work at all. They're looking for different blends-three days a week, for example, or maybe six months a year. Many want or need the income, but that's not the only motivator. People tend to identify strongly with their work, their disciplines, and their careers. Many wish to learn, grow, try new things, and be productive indefinitely, through a combination of commercial, volunteer, and personal pursuits. They enjoy the sense of self-worth that comes with contributing to a business or other institution, and they enjoy the society of their peers. For some people, the workplace is their primary social affiliation.

For all these reasons, the notion of retirement as it is traditionally practiced- a onetime event that permanently divides work life from leisure- no longer makes sense. In its place, companies are starting to design models in which employees can continue to contribute in some fashion, to their own satisfaction and to the company's benefit. Some regulations currently restrict our vision of workers moving seamlessly in and out of flexible work arrangements without ever actually retiring. The IRS prohibits defined benefit plans from making distributions until employment ends or an employee reaches "normal" retirement age. And pension calculations often discourage people even from reducing their hours with a current employer prior to retirement because payouts are often determined by the rate of pay in the last few years of work. (For more on these barriers, see the sidebar "Why So Inflexible?") But a growing number of companies have found ways to call on the skills of retired employees for special purposes.

From the standpoint of the employee, these flex programs offer opportunities to mix work and other pursuits. They also offer personal fulfillment and growth, ongoing financial rewards, and continued enjoyment of the society of colleagues. For employers, the programs provide an elastic pool of staff on demand and an on-call cadre of experienced people who can work part-time as the business needs them. Recruiting and placement costs are close to zero because the business is already in contact with these workers, and training costs are minimal. They know the organization and the organization knows them; they fit in right away and are productive without ramp-up time. And they bring scarce skills and organizational knowledge that can't be matched by contractors unconnected with the organization.

Retirees can also act as leaders on demand. Corporations periodically face waves of executive retirements, and many have done a poor job of maintaining the leadership pipeline. A group of experienced executives who can step in at a moment's notice can both fill gaps and help bring the next generation of leaders up to speed.

Typically, these programs allow an employee to take regular retirement and then, sometimes after a specified break in service (typically six months), return to the employer as an independent contractor, usually for a maximum of 1,ooo hours a year. (The IRS imposes the hourly restriction to discourage companies from substituting full-time employees with retirees and thus avoiding expenses such as benefits and FICA. Employees who work more than 1,000 hours per year usually need to be contracted through an agency and make their services available to other employers as well.)

While most such programs today lack sufficient scale to make a difference in a company's overall staffing, serving instead as a safety valve and a source of specific skills and experience, large corporations would do well to bring these programs up to scale as labor markets tighten. An example of a program at a scale proportional to the overall employee population is that of the Aerospace Corporation, which provides R&D and systems-engineering services to the air force. The personnel needs of this California-based company vary from year to year and contract to contract, and its Retiree Casual program helps level the staffing load.

Long-term employees can generally retire with full benefits at age 55 or older. As part of the Retiree Casual program, they can then work on a project-consulting basis for up to 1,000 hours per year at their old base salaries, sometimes less, depending on roles and responsibilities. Eighty percent of retirees sign up, and some start back the day after they retire. About 500 retiree casuals are available at any given time, while 200 are working. They work various patterns-most work two days per week, but some work six months on, six months off (the 1,000-hour limit is approximately the equivalent of half-time). A few (three to four a year) are so indispensable that they have to be dropped from the program and contracted via an agency after they hit the 1,000-hour limit. Most participate into their midsixties, some beyond 80.

The program assures the company a degree of "corporate memory," according to George Paulikas, who retired in 1998 at age 62 as an EVP after spending his entire post-PhD career with the company. He was off only a couple of weeks before being asked back to help on a project and has worked part-time ever since-about one-quarter time last year. "You don't want people with enormous experience to just walk out the door. The Retiree Casual program keeps expertise around and helps transfer it to others. People often remark that we don't have many consultants around here. Actually, we do, but they're called retirees, and they already know the business inside out" Paulikas sticks with the program because it allows him to keep his association with the organization but on his own terms. "This program is a pleasant way to keep associated with a great organization, great people, great work. I get to work less often and with less intensity." And because he's not working full-time, Paulikas has been able to pursue other professional interests; he works as a consultant to the Institute for Defense Analyses and is a member of the National Academy of Sciences Space Studies Board.

Monsanto has a similar program, which it calls the Resource Re-Entry Center. It's open to all employees who leave the company in good standing and want to return to a part-time position, though departing employees have to wait six months after leaving a full-time job. Managers are directed to use retirees for job sharing, for cyclical spikes, and for temporary positions in the case of unplanned leaves. They're told not to attempt a reduction in benefit costs by hiring retirees for long-term work. Participants are eligible for company savings and investment plans as well as spot bonuses (though not the normal bonus structure). Originally, participants were limited to 1,000 hours of work per year to ensure the program wouldn't interfere with pension payouts, but Monsanto recently relaxed the requirement for those people whose pensions wouldn't be affected, such as retirees who had received a lump-sum payout.

Jim Fornango, who retired from Monsanto in 1996 at the age of 53, has returned to work on a variety of projects since 1998. He likes the flexibility: "I spend the amount of time I want doing things I want. I'm not locked into a structure." And, like Paulikas, he's been able to explore other interests at the same time; he serves as a substitute teacher and as a counselor to other teachers.

It's fashionable to invest heavily in high-potential employees, creating programs that give these select (and historically young) people the leadership experiences they'll need to ascend quickly through an organization. Why not, then, develop a similar type of program aimed at older and midcareer workers with the skills, abilities, and experiences that your organization most needs? A life-long contributor or high-retention program could call on a variety of techniques to reengage these valuable players. Such a program might include fresh assignments or career switches, mentoring or knowledge-sharing roles, training and development, and sabbaticals - all of which have the potential to rejuvenate careers while engendering fresh accomplishments and renewed loyalty.

And yet in our research, we didn't find a single company that explicitly created such high-retention pools among over-55 workers. Some businesses are taking the first step: Sears, for example, has expanded its talent-management and retention focus to include not just highly promotable people but also solid contributors and pros with specific, tough-to-replace skills. Dow Chemical has oriented its human resource management systems toward "continuous rerecruitment" of its workforce, in part by encouraging people to move into different roles throughout their careers. And companies like Aerospace and Monsanto are using their retiree programs to retain employees with valuable skills. But by and large, in most companies, the over-55 crowd continues to get very little attention from management.

That's going to have to change. Sixty-five isn't what it used to be. In 2001, Bob Lutz, then 69, was recruited to join General Motors as vice chairman of product development, charged with rejuvenating the product line as he had done at Chrysler with the Dodge Viper, Chrysler PT Cruiser, and Dodge Ram truck line. In last fall's World Series, the winning Florida Marlins were led by 72-yearold Jack McKeon, called out of retirement early in the season to turn around the fortunes of a youthful but underperforming club. Collecting Grammy Awards in 2000 were Tony Bennett, Tito Puente, and B.B. King--combined age around 220. Al Hirschfeld's caricatures graced the print media for more than 75 years, and he was still drawing when he passed away last year, his 100th. And then there's the litany of business executives called out of already active retirement to inject stability, direction, confidence, and sometimes legitimacy into major corporations in need of leadership. Examples include 67-year-old Harry Stonecipher, who recently succeeded Phil Condit as Boeing's CEO; John Reed, named interim chairman and CEO of the New York Stock Exchange; Allan Gilmour, vice chairman of Ford, who rejoined the company after retirement; and Joseph Lelyveld, who stepped in temporarily at the NEW YORK TIMES last year.

But then, maybe 65 was never what we thought. Lee Iacocca once told WIRED, "I've always been against automated chronological dates to farm people out. The union would always say, 'Make room for the new blood; there aren't enough jobs to go around.' Well, that's a hell of a policy to have. I had people at Chrysler who were 40 but acted 80, and I had 80-year-olds who could do everything a 40-year-old can. You have to take a different view of age now. People are living longer. Age just gives experience. Besides, it takes you until about 50 to know what the hell is going on in the world."

What Iacocca understood was that people don't suddenly lose the talent and experience gained over a lifetime at the flip of a switch. It's not good business to push people out the door just because your policies say it's time. Smart companies will find ways to persuade mature workers to delay retirement or even eschew it entirely as long as they remain productive and healthy.

Who Will Run Your Company?

If we look at workforce growth rates by age segment, the patterns are dramatic. In the current decade, the ranks of youngest workers (ages 16 to 24, according to Bureau of Labor Statistics groupings) are growing by 15%, thanks to the "echo boom" as baby boomers' children enter the workforce. The 25-to 34-year-old segment is growing at just half that rate, and the workforce population between 35 and 44 years old is actually declining. With the baby boom generation moving into middle age and its vanguard nearing retirement age, the fastest workforce growth rates are in the three oldest age segments.

About the Research
Our yearlong research project, "Demography Is Destiny" concluded in the fall of 2003 and was conducted by the Concours Group in partnership with Ken Dychtwald and Age Wave. Sponsored by 30 major public and private organizations in North America and Europe, the project explored the emerging business challenges presented by workforce aging and other profound shifts in workforce demographics. On the basis of our findings, we developed a series of management actions and pragmatic techniques for anticipating, coping with, and capitalizing on those changes. Member organizations shaped the focus and direction of the project, shared their experiences as part of the field research, and participated in a series of workshops. (For a management summary of our research findings, see


By Ken Dychtwald; Tamara Erickson and Bob Morison

Ken Dychtwald is the founding president and CEO of Age Wave, a San Francisco-based think tank and consulting firm focused on the maturing marketplace and workforce. A psychologist, gerontologist, and adviser to business and government, he is the author often books, including Age Wave (J. P. Tarcher, 1989) and his latest book, Age Power (J. P. Tarcher, 1999). Tamara Erickson is an executive officer and member of the board of directors for the Concours Group, a management consulting, research, and education firm based in Kingwood, Texas. Bob Morison is an executive vice president and the director of research of the Concours Group. Dychtwald, Erickson, and Morison are coauthors of a forthcoming book about the impact of demographic shifts on the workplace (Harvard Business School Press, 2005). They can be reached at kdychtwald@,, and

Copyright of Harvard Business Review is the property of Harvard Business School Publication Corp. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.
Source: Harvard Business Review, Mar2004, Vol. 82 Issue 3, p48, 9p, 1 graph, 2c.
Item Number: 12383677