Operation-oriented vs. accounting CEOs

Those of us who have worked hands-on in industry are proud of our efforts to provide quality goods and services to our customers. We know that equipment needs to be maintained and upgraded. We know how much effort goes into producing consistent high quality. When took MBA courses in the late 1970s and early 1980s quality and customer service were the touchstones.

When U.S. corporations began to shut down manufacturing plants in the 1980s and offshore production in the 1990s, some companies began to change their CEOs from operation-oriented to financial-oriented. I was horrified in 2000 to see a friend’s MBA economics text say, “The job of the CEO is to maximize the share price.”

The financialization of business in the 21st century was exacerbated by the low interest rate policy of the Federal Reserve, as described in the book, “The Value of Time.” Companies that had been created by dedicated production-oriented leaders were taken over by bean-counters with borrowed money. The companies’ missions were transformed from providers of goods and services to servicing the massive debts used to buy the company. The CEOs lost touch with the front-line employees.

General Electric, Toys’R’Us and Boeing are examples of companies which were degraded or destroyed by this process.

I read a moving essay on Facebook by a Southwest Airlines employee named Larry Lonero. I wish I could post the entire thing but of course that’s not allowed on TMF. Here are a few snips.

"…Herb Kelleher was the brilliant CEO of SWA until 2004. He was a very operationally oriented leader. Herb spent lots of time on the front line. He always had his pulse on the day to day operation and the people who ran it. That philosophy flowed down through the ranks of leadership to the front line managers. We were a tight operation from top to bottom. We had tools, leadership and employee buy in. Everything that was needed to run a first class operation.

When Herb retired in 2004 Gary Kelly became the new CEO.
Gary was an accountant by education and his style leading Southwest Airlines became more focused on finances and less on operations. He did not spend much time on the front lines. He didn’t engage front line employees much. When the CEO doesn’t get out in the trenches the neither do the lower levels of leadership. …

They all disengaged the operation, disengaged the employees and focused more on Return on Investment, stock buybacks and Wall Street. This approach worked for Gary’s first 8 years because we were still riding the strong wave that Herb had built.
But as time went on the operation began to deteriorate. There was little investment in upgrading technology…

Gary Kelly retired as CEO in early 2022. Bob Jordan was named CEO. He was a more operationally oriented leader…But two decades of neglect takes several years to overcome. And, unfortunately to our horror, our house of cards came tumbling down this week as a routine winter storm broke our 1990’s operating system. …" [end quote]

I have a deep and abiding hatred for top managers who destroy the efforts of the workers who have built a productive company over years. I don’t want to buy stock in any such company even if they are profitable because they will eventually run the company into the ground.

In addition to looking at the debt-to-equity ratio and how well free cash flow covers debt payments and dividends, how can an investor learn whether the CEO of a company is operation-oriented or accounting oriented?

Many years ago, I read that the CEO of Maidenform (a women’s underwear company) was hired to be the CEO of a steel manufacturing company because the relevant CEO skill set was the same. No, no no!



I saw that piece by the Southwest employee somewhere else. Said “yup”, as it’s bottom line was the lack of investment in the business by the beancounter CEO. Beancounter CEOs are not new however.

Chrysler was notorious for it’s beancounter honchos, first Lynn Townsend, then John Riccardo. through the 60s and 70s. In my grad school finance class in 81, we were talking about the use of leverage: enhances profits when times are good, but makes losses worse when times are bad, and the prof specifically pointed at Chrysler for being more highly leveraged than it’s competitors. Chrysler also did not invest in plant and equipment like it’s competitors. Dodge Main and Jefferson Assembly dated from before World War I, but were still running into the early 80s. Chrysler also became notorious for sub-standard product quality. All the US automakers made lousy cars in the 70s, but Chrysler products were an extra special level of shoddy. Somewhere along the line, I heard Iacocca comment that, ironically, for a company run by beancounters, when he got there, Chrysler had no financial controls. No-one could tell him what it really cost to make anything. Apparently, all Chrysler management did was decree continuously poorer quality materials and more slack tolerances, to cut costs, rather than invest in a proper financial control system.

But Wall St, and the beancounter community has developed the “enhance shareholder value” narrative, as cover for hollowing out a company.




I read that piece recently, and it kind of struck me as a “blame the previous guy” thing. See, if you blame the previous guy, nobody currently in charge during the debacle needs to be punished. It’s the perfect out. The facts remain that the previous guy ran the company for 18 years, with nary a hitch, while growing the business, AND while growing customer satisfaction (my daughters prefer Southwest over most other airlines, even over the vaunted JetBlue).

And trust me, as an engineer in industry for 40 years, I dislike the beancounters as much as the next guy. I am not asserting that the previous CEO doesn’t share some of the blame, I am however asserting that it isn’t as simple as the way it is being presented.


When I was much younger my dad talked me out of getting an MBA because of what both of us saw going on in the 1990s. We were disgusted with the worthless CEOs. Making money short term and having value are two different things.


Similarly, I talked myself out of getting a law degree. But a sibling succumbed, worked as an attorney at a big NY firm for a few years, and then left law after great disillusionment.

My near miss as a lawyer is a kind of funny story. One of my sisters signed up for the LSAT, but didn’t drive yet, so she needed a ride. I agreed to drive her (it was on a weekend, so I was off from work). Then in a short bout of madness, I figured I may as well take the exam while waiting for her there anyway, so I did late sign up and a couple weeks later took the exam with her. In the end I scored 44 which was easily good enough to get into pretty much any tier 2 law school (I was surely not even considering springing the big $$$ needed for a tier 1 school). So I applied to 3 schools and was admitted. I seriously considered going, but backed out shortly thereafter. No regrets. That sister also opted not to go to law school.


I have a cousin the oldest of three. She went to Cornell for law. Met her husband a Cornell IP law student her class. She is now a senior partner and completely miserable. Her husband abandoned the law. She works for both of them. He is known to have anger problems. She is chained to her job and feeling very depressed and trapped. She has gained 100 plus pounds. She was a short little thing. The money is not worth it. Her husband knows it. Her kids are in college. But I think she has never said, ‘no longer for me’ in her entire life. She was speed reading at age 3. She is a powerhouse academically. Her parents never took their foot off her neck to step aside from pure success.

1 Like

Hi @WendyBG - I posted that information to this very board at this link yesterday… Maybe you missed it?

For others who may be interested in his entire words…



Sorry, I missed it.

Then avoid AT&T like the plague. Randall Stevenson stripped the company of its most important asset, 250,000 people who had ownership.

When i started the Chief Wire Tech (Central Office Technician) swept and mopped the floor each day, if an outside tech came in with muddy feet he could be banned from the central office for a long time. If he actually touched the frame, he might as well transfer because his life is over.

Today a central office tech wouldn’t put out fire without a trouble ticket to charge time to. The office is a disaster and nasty. The equipment and structure looks like something from a post apocalyptic nightmare.

(In AT&T craftsmen or rated as level zero, or front line employees, then there are level 1 managers, level 2 area managers and then level 3 directors.)

When I worked in the Southwestern Bell operating company as a communications tech, every year the first level toured his offices with the second and third level in tow. Every year!

In the last 10 years I have seen a third level once, a second level once and have spoken to a second level four times on the phone.

My newest first level manager met me four times a year, (job requirement, but he did not see my office for two years and has never seen my regen huts.

It is unlikely my second and third levels could find my office using Google maps, and even if they did, they wouldn’t have the proper access to get into the building.

As I receive AT&T stock, I pretty much wait until the CEO’s options vest and I get a “no overtime” “no travel” notification as they are polishing up the quarterly or annual report then sell the stock.

Last time I looked, Apple or Google could by controlling interest in AT&T with cash on hand. It is telling that they do not.



Do you know the names of any of these people? I was at a Steelcase dealer where the one other staffer in the department was laid off, while the manager’s position was eliminated and he was made a salesman. I was never informed who my supervisor was, after that RIF. I can’t remember how many years it was, before I had an “annual review”. The guy that did finally show up to do my “annual review” was from the main office in Southfield, had little idea what I even did, and even less of an idea how I did it. I amused myself by pining each new phone list that came out on top of the older ones, noting how they kept getting shorter and shorter.

Considering how I see everyone glued to their cell phones, it must take determination to make dead money of providing cell service.



I know my first and second level. I get emails from a couple if the others, and emails when they cycle in and out of the jobs.


My dad used to help taking out the dirty dishes when the waiters were too busy serving customers.

The Captain

1 Like

Exactly! It is pretty amazing. A fortune 500 company, (It was then) a union company, and the union man of the fortune 500 company had ownership.

When I was a Central Office tech, before cell phones were allowed in the office (interfered with the equipment) I used my down time (I had down time because I kept my office in immaculate condition) I rewired the internal phone system system and labeled it, I labeled every circuit (special, T-1 and fiber) with labels that could be easily cross referenced with the word docs (the engineering of the circuits that showed end to end connectivity through the entire system. In this way, I could pull the word doc when there was a trouble and could quickly match it with the physical locations in the Central Office and be able to run the tests need to prove the trouble in or out of the office (almost always out of the office) and be able to contribute to the team to
clear the trouble.

My compadre when we got a new generator obtained paint and repainted the generator room floor including the yellow/black on the curb leading to the generator room.

At another Central Office, the office tech planted flowers and maintained a garden outside the central office.

Ownership like that comes from a developed culture. When that culture is destroyed by people who simply extract, I believe that there is no recovery.



I have a BSEE, minor in economics and an MBA. I obtained the MBA before entering Corporate America. I didn’t get the MBA because I thought at the time the content of an MBA program would fill a void between engineering and economics. Instead, I thought it would give me a background in the terminology and types of analysis used by business types that would prove useful as I served as a liason between technical teams and non-technical teams.

As cynical as that motivation might have been, I was not prepared for what I actually saw in Corporate America. I started off in operations roles in telecommunications but once I started moving up, my roles were predominately tied to either product development or back-office ordering / provisioning / telemetry systems which all had to undergo enhancements to support new product launches. In my entire career, I didn’t see a SINGLE project that seemed to undergo basic ROI analysis on ONE sheet of paper accountable to ONE executive. Instead, a project was approved either because it was a regulatory requirement (THAT makes sense) or someone just decided this is something that should be done. At that point, marketing estimated its needs, product development estimated its needs, engineering estimated its needs, operations estimated its needs and customer care estimated its needs. SEPARATELY. Everyone turned in their estimates, funds were allocated, each group was held accountable for coming under its request but NO ONE ever reviewed the entirety of the project to realize the plan made no sense – or that even though we have to do SOMETHING, we don’t have to do THIS.

Okay, story time…

I worked for SBC from 1990 through January 2000. In early 1994, a new product was developed by another regional Bell company for providing voice-recognition based phone dialing. The physical product combined a Tandem computer with NonStop UNIX and dozens of Pentium based peripheral boards that ran recognition algorithms. This platform would be connected via trunks to a telephone switch like a 5ESS or DMS-100 to temporarily bridge a customer’s 2-wire connection into a channel into the Pentium peripherals. The customer would “train” the system by saying something like “Dominos” and map it to 816-555-1234. Later, as customers made calls, they would hear a short interval of dial tone, a BEEP, then get connected to this platform which would wait for them to say something, attempt to match it against prior samples, then dial the associated number.

At the time, I was working in a field operations role and headquarters operations planning people came out to visit our market and “partner” with us on launching a trial. Only the HQ people had no expertise in this system or anything vaguely related to it. I didn’t either but because I understood switching and understood computer systems, I wound up leading interactions with the vendor’s engineering team to plan the installation and turn-up of the trial launch. I apparently did so well at that that I wound up getting promoted into the very HQ group that was leading this deployment.

The product launched in my market right as I was promoted into the HQ group. At first, the product was provided for FREE to any customers that wanted it and proved wildly successful – at least in terms of take rate, when given away for free. After 3-4 months, given the FANTASTIC take rate, a decision was made to launch it across all of SBC – all five states – at a cost of roughly $70 million.

Uhhhhhhhhh… Remember, I mentioned that at this point, none of the TRIAL customers were actually PAYING for the product? Well, when product management decided to start collecting revenue, as soon as people started having to pay $6/month for a service that didn’t work that well — this was 1994, Pentiums at 60MHz was the state of the art for CPUs, there’s only so much algorithm logic that can run against 8kHz audio samples at those clock rates… – customers started churning out. NO PROBLEM, says Marketing, we’ll boost the advertising budget and sign up more people for 3 months free then pay. Well, that doesn’t solve the problem if the churn rate is nearly 50%. At some point, you will churn through the entire customer population and no one will be left.

Even THAT looming financial disaster was not enough to get executives to recognize the mistake and withdraw the product and stop spending money on deployments.

The product was finally axed after the vendor was informed that the Tandem platform they had selected had been manufacturer discontinued by Tandem and that the new version of Tandem NonStop UNIX on the new Tandem hardware was not backward compatible with the now-obsolete application software version we were currently running. That meant we would not only have to replace ALL of the Tandem computers we had JUST PURCHASED but our vendor would have to rewrite much of the software for the new NonStop UNIX version and re-test and we would have to chip in on all of those costs as well.

But even that combination of facts wasn’t recognized by execs. We had a meeting in late 1997 which was intended to review / confirm the next year’s spending plan for the product across Marketing, Product, Engineering and Operations. In that meeting, all of the teams were asked to summarize their ask and the talking stick was passed around the table. As teams were seated at the table, I was last in the circle along with my boss. Each team rattled off their plan, based on their own leadership’s marching orders. Each team provided their dollar figures and basically said “all in.” I was the last to speak – my boss just deferred to me and didn’t say a word. When asked by the EVP leading the meeting what our ask was, I basically said…

We think we should withdraw the product and kill it. Our vendor has already told us the core Tandem component is obsolete, cannot be supported and would require replacement across the footprint which would probably be $30 million alone. The vendor has also told us they have to rewrite their application software and could not support both the current and new versions in parallel without passing the duplicated costs on to us, so that’s probably another $10 million. And the PRODUCT DOESN"T WORK. Recognition rates as recorded by the telemetry are low which is supported by the the fact that customer churn is extremely high. Recognition will only improve with faster recognition processors, requiring all of the Pentium cards to be replaced for probably another $10 million after the vendor updates the software and training algorithms. And Marketing just told you they are cutting their advertising / promotion budget so we won’t be able to make up for the churn. And even if we did, we would churn through the entire base of customers.

DEAD SILENCE in the room. For probably 45-60 seconds. (That’s a looooooong time in a meeting with an EVP…)

The EVP then adjourned the meeting. A month later, a bland announcement appeared in some dull planning document saying that the product had been withdrawn as part of a product rationalization effort for the SBC / PacBell merger taking place at the time, allowing the company to take a write-off for capital assets tied to products that would not be kept as part of rationalizing operations. By my calculations, that write-off probably generated a one-time savings of $25-30 million dollars but no one on the team received even a note of thanks.

Back to the point of this thread. In my experience, it’s probably a tie between bean counters and “product development” types in the contest for who causes the most harm in large companies. The problem is worse in large “cash cow” companies that ARE otherwise profitable cuz profitability can hide many, many internal financial decisions. It can’t hide them forever, but long enough for those making the mistakes to move on to bigger, dumber things before the folly of their current mistake becomes unavoidable.

The case of Southwest Airlines’ week-long operational meltdown should be a wakeup call not only to other airlines but entire industries. The SWA meltdown is an example of a unique problem resulting from a system that has grown organically for DECADES, must process TENS OF THOUSANDS of continuous updates when functioning under NORMAL conditions and requires HUNDREDS OF THOUSANDS of updates to restore normal operations after major failures yet is subject to BOMBARDMENT from users trying to use the system during recovery, which further thrashes the system. This is a very familiar problem domain for people in “network” oriented industries – be they communications related or electricity generation / distribution.

In the case of SWA, their back-office has not been modernized to provide an efficient way for pilots and attendants to provide their status and location to the portion of the back-office that optimizes plane schedules. SWA knows the status of all of their planes and leased gates but status info for PEOPLE is pulled from a different system. That PEOPLE system has no modern “smartphone” app to let pilots and attendants click a button to efficiently push their status / location into a database. They have to CALL a human in an internal SWA call center who have to use an ancient application to update the status info. When a massive storm freezes 70% of flights, at least 70% of the required PEOPLE status data is obsolete and requires updating. Only the manual system for updating it was never sized to handle 70% of their pilots and attendants all calling in simultaneously to update their information. And if they cannot update their information, flights continue to encounter delays, which re-invalidates the status of other people in the system and it thrashes, unable to catch up.

As an aside, this exact scenario is exactly the danger we face with any massive failure in the electrical grid. If major portions of the grid are damaged, the entire grid can fail, requiring a LENGTHY restart sequence requiring gradual re-introduction of load that can take DAYS or WEEKS. We as a country should be paying far more attention to the “vandalism” incidents being reported at substations around the country. Those aren’t mere cases of vandalism – those are failed terrorist attacks and should be treated and investigated as such.

I can guarantee there are dozens of people in IT and operations at SWA who have been screaming about this problem for years asking for money to modernize the back-office and provide an app for operations employees to provide duty status. But hey, we’re making money… Why drop $70 million into this re-build? From where CEO Bob Jordon sits – which I’m pretty sure is more often seat 1, row 1 of a private jet than seat 24E of a Southwest 737 trying to board out of LGA – things look GREAT. Or at least, they did until they didn’t.



38 Amazing tribute to Herb. Terrible thing to watch in a CEO what happened next.

Bob Jordan has a computer science degree from Texas A&M, but doesn’t appear to have used it in years. Either way, he is better placed to address the mess created by years of underinvestment by his beancounter predecessor. Look for years of Southwest earnings “misses” as they try to repair the beancounter’s damage.


1 Like

My experience over the decades is show that sort of “ownership”, and you become everyone’s “b!tc4”. If you don’t automatically pick up the slack from your coworkers, who only do the minimum to keep from being fired, your boss orders you to do the extra work, because he’s as lazy as the rest of them. It took me 30 years of working to learn to say “that’s out of my pay grade”.


1 Like

Southwest Air has an interesting and unique history. The Airline developed from a very small regional airline with just a few routes and less than five aircraft to what it is today; which in large part explains a lot about their “point to point” operations. Southwest pilots and crew would fly the same aircraft and same routes without switching to alternates points. Up until 1985, Southwest had only few destinations in Texas, Colorado, Arizona, and California (with one route to New Orleans,) how it truly earned its name.
Originally, Southwest few only in Texas, and in order to set lower ticket fees and undercut potential rivals and avoid the regulations of the Civil Aeronautics Board, they took their case the the Texas Supreme Court. Southwest didn’t expand to Florida until after 1996.

The principle underlying problem with Southwest is that the airline remains committed to its regional airline model while growing into the largest domestic US Airline with international flights to track as well. Southwest’s SkySolver booking and flight tracking system is based on The Sabre reservation system was created by IBM for American Airlines in the 1950s. The outdated system was clearly a problem over Columbus Day ’21. Cpt. Tom Nekouei, Second Vice President of the Southwest Airlines Pilot Association referred to this in a recent interview. Apparently, the computer system could only track pilots and crew to the “scheduled” destination. Their scheduling software functions in a manner where it more or less simulates a “perfect” day of operations. Airplanes take off on time, land, and continue on. If anything disrupts this simulation, crew members had to call in and talk to someone to update the computer system to tell it that both the airplane and crew members are not where the system thought they were.

"We had massive, massive reassignments. Over that weekend (Columbus Day ’21) where the company lost $75 million in lost revenue, we had 33% of our pilots who were on duty, but never flew an airplane because they were either in the back of an airplane trying to get positioned to an airplane to fly or they were stuck in a hotel and could not contact crew scheduling or get to an airplane to fly.” Cpt. Tom Nekouei
I wonder if a lot of the recalcitrant frame of mind has to do with a culture in Texas that pretends that its not part of the rest of the United States, just like their antiquated electric power grid. Southwest didn’t want to upgrade its ancient software because it was good enough for booking flights in Texas fifty years ago. Even after the Columbus Day ’21 massive messed up reassignment weekend, Southwest refused to upgrade. It may have something to do with its Texas frame of mind.


In my case once I moved to an “inside job” I generally only had one co-worker. No I generally have none. Technology has driven a lot of labor out of telecommunications. The Corporate Real Estate (CRE) handles the building, cleaning repair, air conditioning. Years and years ago all that was contracted out. So we get a parade of cleaning ladies that come through our buildings (If I were a terrorist, I would get a job as a cleaner for AT&T, easy access, mostly at night multiple buildings, the destruction of the communications infrastructure would be complete) many quit. Not because the job is difficult, but because it is so spooky to clean the big mostly empty old buildings with it creaky ventilation systems, alarms and
old equipment.

So now even as a mostly outside tech (I have inside and outside duties, but mostly I stand around and scowl at people) I have my territory and when my next coworker over in the next county takes off, I cover his territory, and when I am off he covers mine. But for the most part, nobody
asks me for anything.

Another set of coworkers to the west seemed to have a problem covering their territories and kept asking me for help. I did for a while, but after a while I told my boss that nothing was for free and if I did anything in those territories it would be terribly expensive in the way of overtime.

They started clearing requests for help through him and voila! My overtime fell off.



My art business has been profitable. I can spread my wings and work. I have no coworker to resent because they let me volunteer. I learned that the hard way repeatedly. It is like playing baseball. Some folks are on the team and others aren’t. When you think you are on your boss’s team you can get shafted.

As my own boss that never happens. More gets done.