Time for leadership change at Vestas

Windmill 02

Vestas Windmill

The board and management of Vestas Windsystems the biggest windmill producer in the world need to take a real hard look at themselves and how they conduct their business.

For to long the board have clinched to the hope that their CEO, Ditlev Engel, would have some sort of grip on the realities he and the company is facing. Year after year, quarter after quarter he has led the people who have put their trust in his statement down.

By being to optimistic he has again and again showed that he is unable to set realistic targets and even when nobody else has any doubt, which way the market is going. Vestas keep on insisting on unrealistic targets. Take for example the target of firm and unconditional orders for 7000-8000 MW and an EBIT margin of 7%. But until date the intake is only around 5200 MW very far from the and when the average announced intake is only around 80MW per order it is hard to imagine that the company will reach its targets in 2011. The investors have already taken the necessary steps and have punished the stock so that the change in stock price from last year is -58%. With the fall in the last 6 months of 53% it is clear that investors wants to see real change especially when it comes to realistic communication by management.

Investors like to know what they are buying and at the moment they do not trust the communication coming from Veatsa and when a company have lost the trust of their investors it is a true sign that change have to happen and happen fast. For the past three or four years there have been hopes that Ditlev Engel would start to deliver as he promised and time and time again he has been unable. I do not think that it is a loss of confidence in the product or the way that Vesats have put their business model together. Rather investors do not believe a word that Ditlev Engel is speaking and that is a real problem for the company as a whole.

As I see it is Vestas at the moment really undervalued and would be a good target for a takeover for a smaller windmill producer that could put in effective management.

The board need to step in and find a replacement that can build confidence with the market there is CEOs out there who have the necessary experience and competencies to bring Vestas back on track.

It’s all about what you do – from gender equality to strategic benefits

Most international surveys rank the Scandinavian countries among the very best in terms of women and men’s equality. At the World Economic Forum are all the Nordic countries among the top 10 and the independent NGO, Women Watch the small group of countries in northern Europe is also among the very best. So there is little doubt that there is something at the Scandinavian approach to gender equality, which rings true.

Although we are close to being world champions in the equality discipline it has not been something we have been particularly good at exploiting in a commercial sense. Instead we have resorted to toasts and speeches and we highlighting the individual women who have actually been able to beat their way through the glass ceiling.

In Denmark we have come up with initiatives such as charter for more women in management which is a set of principles like the Global Compact that is meant as tool for strategic gender equality development within originations or the torch campaign were individual companies communicate how they work with equality within their organization. While these initiatives are very fine they have the drawback that they simply perpetuate women and femininity as a handicap.

It is not because equality is not a real problem and that for many women means that being thirty is also de-facto means the end of their professional career in management. I just think that if we continue to regard the female gender as a handicap, we will never move beyond the challenges that both the country, but more specifically the individual companies are facing in terms of organizational development and continued competitiveness. A novel approach towards gender equality that has not exactly been dominant in the current debate neither here in Scandinavia nor to my knowledge anywhere else in the world.

Companies in charge know how to use sex

Men and women are in many ways different and in many cases, the direct opposites, like Mars and Venus, if I had to take a familiar example. Yet we are out unable to function without dealing each other’s good and sometimes bad sides.

Take, for example the trait of being entrepreneurial and the willingness to assume risk. Here is one of the traits that we perceive as being masculine and it is something we as a society appreciate. It turns out also that around. 2.5 times more men are entrepreneurs than women. Of course there are also female entrepreneurs and we are lucky to have them, yet it is a trait we usually put in connection with being a man.

As a counterweight to the enterprising men we see the risk averse women. The ability to understand and devise strategies to avoid risk is something we associate with feminine traits. It would be wrong to say that men can’t be risk averse but as we traditionally have favored the risk-taking in men and given credit to women who understand and is able to avoid risk it is the traits we see now as being most prominent. Remember that I do not judge if these traits are good or bad if they have come from the creation of stereotypes or if it is something in our genes, but only look at how people actual act.

There are many companies that have discovered that women are good in the role of risk monitors. Thus, more than 45% of audit committees in the Swedish OMX companies of women, which is in contrast to that is somewhere between 10 to 20% women on boards in general. It turns out also to companies with a gender-differentiated Board of Directors and generally cope better with the crisis at least the first one in 2008. These organizations have been able to respond quickly and consistently to market changes and have implemented the changes needed to make money in a difficult market. Examples include the Swedish Hennes & Mauritz (clothing and fashion), or the Danish firms Carlsberg (beer and soda) and D/S Norden (shipping), who all have women in both the Board and executive management. All three companies have fared well through the crisis and although it has been difficult, they have been able to exercise constant care in very troubled waters.

I’m not sure that these businesses have completely understood the significance that gender has had on their ability to adapt to its environment in an efficient manner, but in any event, it worked.

The patriarchal business is stalled

In contrast stand the less diversified firms, or said in another way, those who either did not want or have failed to attract other than male employees into their strategic management group. These companies have not been able to get rid of their risk as the market they operated in changed. This can obviously be due to many factors, but the interesting thing is that they generally perform worse than their more diversified counterparts. As a consequence of their inability to understand the organizational risks that they faced, they have not been able to show a sufficient earning capacity or have had direct losses. Both of which have been penalized by the stock markets to a degree where some of theses companies are valued less in terms of market price than the value it has according to its books.

An example of a company that has a high organizational risk seen with a gender perspective is firm Vestas. Time after time, Vestas has disappointed the market mainly because they have not had a good feel for what their stakeholders wanted to know and therefore could not live up to expectations that primarily professional market analysts and portfolio managers had. As a consequence, we have seen share prices today are at the bottom even when compared to its tangible value. As I have blogged about Vestas before there is no doubt that they have a good product, excellent production and are market leaders so there is no reason why there share price should not be much higher than it is today.

Two typical strategic moves that male-dominated companies have been using are first, to try to save themselves out of trouble by cutting costs; secondly to dismiss its leaders. It is not because this is a particularly patriarchal features that organizations use in times of recession, but the strategies only aims to reduce costs and simultaneously makes them unable to think further ahead, the whole exercise ends up in an actual fight for survival. To use an analogy it is like beating the body into submission and when that does not bring results we cut of the head. Not that some companies do have a lot of fat which can be trimmed but if there is no strategic thinking behind the cost reduction it will mount to little less than the ultimate loss of the business.

Everything else being equal, companies that have come through the crisis by adapting to and cultivating new markets perform better than those who are just coming through to save and reduce their organizations as the only means of maintaining a solid balance sheet.

The Scandinavian competitive advantage

Both here in Denmark but also in particular the rest of the countries were gender equality is high we have a resource that is not only unique but also virtually impossible to copy. By using our human resources to its full potential, we can provide competitive advantages in both the short and long term that will enable companies to navigate more safely and with less risk on the global market.

Universities and business schools produce far more women than male candidates. If business continues to let this resource remain unused and under utilized, we must compete on parameters where do not have many chances such as production costs and human and labour rights areas were we are unable or unwilling to compete.

Today there are already well-developed tools that can contribute to positive gender development in private and public organisations. The question is whether the HR departments, executives and board members are willing and have the courage to embark on an organizational debate about strategic consequences that extend far beyond the words and cheers and speeches in for example Charter for more women in leadership, Torch and other kinds of woman leader priced which reduces the debates to centre around gender quotas or not.

As individual and members of organisations we have to come to terms with the fact that women and men bring different approaches, viewpoints and perspectives to organizational development. And that these differences can be utilised strategically by organisations that know how. Through an understanding the differences that gender contribute with, we will be able to attract and retain skilled employees and thus be able to reap the benefits found in the fact organisations consist of people that think and behave differently. Female and male employees contribute, for better and for worse, to the development of companies and that the sexless organisation does not exist and that it is better to work to exploit these differences rather than ignoring them.

The Ups and Downs in the ”Green” industry

Yet again Vestas have promised more than they can deliver and the market has promptly punished the company with a massive fall in shareprice. It would seem that the management of Vestas with Ditlev Engel in front can’t get it right or as a minimum they are just too optimistic for their own good.

But why is it so hard to predict how Vestas performs even for the management of the company? One guess could be that the market for wind turbines is extremely versatile. From 2006 to 2008 there seemed to be a fairly stable period with a slow but steady increase in order intake then in 2009 the market seemed to bottom out as the talks about CO2 quotas went on and then in 2010 Vestas got a few but very big orders.

One of the reasons why Vestas is so vulnerary is that they in contrast to other plays like GE and Siemens only have one product line. Other companies have a diverse portfolio that they are able to market so if they lose something on one product line they can make up some of the looses in another. This is also apparent in their stock have experienced a close to steady positive development for the past year.

I would not write of Vestas for now but they do need to get their communication to the market under control or at least be more open about their prospects. Investors get jumpy when they are confronted with information that they did not expect, both in a positive and negative sense. In a very volatile market as the wind energy market is, there is no substitute for timely valid and real hard facts instead of dreams and hopes for the future. If the CEO is to remain at Vestas he needs to provide the market with more than his dreams.

The biggest wind turbine ever

A Vestas Wind Turbine

Image via Wikipedia

Vestas winds systems announced the construction of a new mega wind turbine for offshore opperations. The mill will produce some 7 MW of power enough to power a small town!

In the past I and other have criticised Vestas for not delivering on the promises and I’m kind of reluctant to put my chips on this one but it does sound real good. Both in terms of the energy produced but also in relation to the economics of offshore windmill operations.

If the company is able to pull this one of they will be the number one green energy manufacturer of the world. Well i’m for one is glad that I bought stock in Vestas.

Enjoy the videos ;O)

http://vestas.23video.com/v.swf

http://vestas.23video.com/v.swf

http://vestas.23video.com/v.swf

No Bonus for Vestas Wind Systems Management

Vestas wind turbine, Dithmarschen.

Image via Wikipedia

Vestas wind system have in the past have had real problems with customer satisfaction. The main problems have been with the gear system in the wind turbines and in the past they have been the source of real challenges for Vestas customers.    

In the just released annual report the company reported a customer satisfaction of 64 but this is not good enough when the target was for 70. Vestas’ customer satisfaction, not deliver the expected growth in 2010 and therefore contributed to an absent bonus for Vestas management. 

Vestas in 2010 conducted a customer satisfaction survey in which 986 persons from 348 customers answered the Danish wind giant. And the answers were not positive enough. 

Customer Satisfaction Index was ended in the index 64 and thus unchanged from 2009, where satisfaction rose by 12 index points. 

Five sales business units went forward and two went back, said Vestas annual report. Now reads the target for 2011 at an increase in customer satisfaction index to 72 and a further increase to “at least 75”. 

“It is on level with the best in the world,” says Vestas. 

The bonus for 2011

As the targets that triggered the bonuses for 2010 was not met by Vestas management they will have to wait another year and try again.
The customer satisfaction index of 72 counts 20 per cent of the corporate bonus target. In addition, counts an operating margin of 8.4% counts for 35%, a free cash flow of 200 million euro 30% and a turnover of 7 billion euro 15%. 

In 2009 Vestas managed to raise customer satisfaction which was mainly attributed to better performing mills, an improvement in the cooperation with customers, better internal process management and launching of new products and services. 

“All actions that are helping to lay the foundations for the necessary growth in turnover and profitability in the coming years,” said Vestas.

Vestas from my short list

Vestas Nabe

Image via Wikipedia

Vestas fires 3000 employees due to poor sales results and expected earnings in 2010 and 2011. This makes the stock go down. This could be a oppertunity to buy at a low price or going down in flames Vestas Performance.

As my analysis is not finished at this time it would be wrong to jump to conclusions. But it says something about the volatility (Beta) in the market and that even “green” companies can be subject to market trends.