Do Economies Need More Than Just Corporate Reform?

Despite the efforts of national governments and international organisations to improve corporate governance in emerging markets, the response of the companies themselves has been underwhelming. Many companies ignore the initiatives - which primarily involve reform of boards of directors - or just pay lip service to them. Little attention is paid to the directors' qualifications, even when reforms are mandated, as they are in South Korea, where 25 to 50 per cent of a company's directors (depending on its size and sector) must now come from the outside. Could the problem be that the would-be reformers are focusing on the wrong reforms?

This raises some interesting questions, where for example some may argue that corporate reform is required in first world countries, let alone emerging markets; where Board structure has been debated for years and yet actual change is taking a lot longer than it should. But as mentioned below, many first world countries may also need to look at political reform, where ‘governments’ need to change their priorities from ‘selfish re-election’ policies to actually putting their country’s development first.

Paul Coombes and Mark Watson mention that “over half of the respondents in a recent McKinsey survey of private equity investors said that reform of the institutional context – reform driven by governments, local stock exchanges, and regulatory watchdogs - was at least as important as reform of companies. Within the institutional context, the two main concerns were weak enforcement of legal rights and the management of the economy,” (p.91).

What’s particularly interesting about this 2001 article is that they state that “the corporate-governance model usually prescribed is the one that prevails in the United States and the United Kingdom. Its emphasis on shareholder value reflects the environment in those two countries, where a very large, dispersed class of investors, with no prior connection to the companies listed on the public exchanges, insists on boards that are similarly independent. These investors also demand a high level of financial and business disclosure,” (p.90).

Yet we see ten years on from this article that the governance models of the United States and the United Kingdom have not responded to the advice and rhetoric; and where some emerging markets actually responded quicker to institutional problems, for example, enforcing credit controls prior to the global crisis – in the process showing strong and intelligent leadership, which though rarely spoken about in ‘the West’, made these emerging markets much stronger than their first world counter parts.

It’s as if some first world governments and their industry advisors, were so caught up in their own invincibility, that they didn’t believe they could be affected by a ‘global crisis’ in such a catastrophic way, compared to their ‘lowly’ counter-parts around the world - proving once again that arrogance is the worst predictor of future success.

Like it or not, financial control is a basic requirement of an economic system and the global economic crisis still holds many unanswered questions, including how first world countries managed their failure during this time and what can be learnt by it? Governments and industry leaders seem to have a magical power to be able to sweep embarrassing mistakes under a very large carpet – often arguing that it’s better for the ‘countries’ economic standing to ‘forget and move on.’ But without proper analysis and review there is a real danger that lessons will never actually be learnt.

Unfortunately embracing proper and good governance is still lacking within politics and industry on a global scale. Board composition is just one part of this important ‘equation’ which still needs a lot of attention – but pressure must be put on governments to focus beyond their tenure and to focus on sustainable national growth – where the stakeholders of a nation aren’t just its citizens today but are the generations to come.

The selfish pursuit of short term power and fame in politics and industry has done enough damage to the economies of too many countries already, including the US, Greece, Ireland, Portugal, Spain, Italy and numerous other countries.

So where are the leaders of the future who are going to put organisations and countries back on a ‘real’ sustainable path of growth and success, rising above the game playing both with their respective organisations or the lives of their citizens?

References

Coombes, P. and Watson, M. (2001). Corporate Reform in the Developing World. The McKinsey Quarterly, No. 4, p. 89-92.

 

Is Bigger Always Better?

Given a choice is it better to join a large corporate organisation to maximise your career development rather than a smaller one? The immediate thought might be yes; as its size should give security; it is likely to have more money and resources to invest in talent management; and you can get access to greater benefits, including share schemes that over time can prove quite lucrative – but maybe the first question we need to ask is, “what is a large company – how is it defined?”

The EU defines a large company as one with a headcount of more than 250 people; turnover greater than €50m; or a balance sheet greater than €43m. The EU definition is important since state support to ‘Large’ companies is strictly limited. Whereas in Australia a proprietary company is defined as large for a financial year if it satisfies at least two of the following paragraphs:

• The consolidated revenue for the financial year of the company and any entities it controls is $25 million or more

• The value of the consolidated gross assets at the end of the financial year of the company and any entities it controls is $12.5 million or more, and

• The company and any entities it controls have 50 or more employees at the end of the financial year.

But many people in today’s global economy would still consider these companies small, or at least medium sized, compared to the multi-national large corporate with thousands of employees around the world.

The biggest ‘employer’ in the world is considered to be the US Department of Defence with around 3.2 million employees – but if we look at ‘organisations’ we know as businesses then Walmart is the largest with around 2.1 million employees, followed by McDonald’s with 1.9 million employees.

When you look at these sized companies it can be difficult for many people to even imagine an organisation of this size and how it works, unless you’ve actually worked for one. People who haven’t worked in ‘very’ large corporates are often concerned that they will become faceless, nameless people – just a ‘clock’ number whose chances of progression are limited to doing something extra special that gets them noticed by the right people.

Maybe a better example of ‘large’ would be organisations like Tesco which has over 180,000 employees; or Barclays with around 140,000 employees and Shell with over 101,000 employees – these would be considered examples of ‘well known’ large corporates that look after their staff (or most anyway) – where employees quickly learn how to make the most of these organisations, adapting to the ground rules to progress in their careers.

Not everyone has the same career ambition and if you join a large corporate early in your career you are likely to be ‘developed’ into their culture and from your perspective have a very enjoyable and rewarding career, with good financial reward; excellent development opportunities and a very good pension, guaranteeing an enjoyable retirement (possibly an early retirement too).

The only question that you may not be able to answer is whether you have achieved your full potential.

And that’s the rub – whereas a large organisation is likely to give you financial security for life and year-on-year personal development; a small or medium sized organisation may be risky, but in fact can give you a greater opportunity to maximise your true potential and the real possibility to earn significantly more than with the large corporate.

If I was giving general advice and assuming your desired career path allows it – get the experience with the large corporate first, or early in your career – earn the money and invest it wisely; get the training and development; get global exposure by looking international ‘transfers’ every three years or so; and get exposure to as much as you can; and then assuming you feel that you still have so much more to achieve in your career and have reached the ceiling with the ‘big boy’, then look at sharing your experience within the sme market, accepting that they will teach you just as much as you will give to them – as you will be entering a different environment, a different decision making process, a different culture.

Of course some people go straight into the sme market and with their natural entrepreneurial flair make a huge success of their career and retire early and buy an island :-)

 

So think about what you want from your career and try to make the right choices early on – as this forms the foundation for your career moves in the future.

 

  

Does Honesty Impact Corporate Strategy?

For most business principles to work efficiently organisations require a culture of openness and honesty. But how many open and honest organisations are there?

Don’t we still teach our children to always ask when they don’t know and never to lie? If we are still teaching these basic values to our children – because we know they are right – then why aren’t we applying the same principles in business? What is there to be afraid of?

Organisations should want the best from their people and not only encourage, but demand, a culture of openness where employees don’t fear retribution or humiliation for simply being honest. In fact the very cornerstone of most business principles demand honesty – what is the point of staff appraisals, if those taking part aren’t being honest with each other; and what would be the purpose of 360 degree feedback if the feedback isn’t honest; and how can organisations evaluate their ‘real’ strengths and weaknesses, if employees aren’t honest about them? Organisations and their strategic leaders who do not strive for an open and honest culture are only limiting their future growth and fooling themselves.

It is today’s business leaders that must set the standard and continually reinforce the principles of open and honest business cultures. As Mi Troy, Chairman of Molina Healthcare, stated in a 2009 article, “There is only one agenda – the company’s agenda – and neither the individual leader nor the department’s interests supersedes it. Leaders should model the behaviour and culture they want for their organisation.”

Although, in discussion, most executives and employees will agree that they desire to work in an open and honest environment, often the biggest problem seems to be; when and how do we start to change?

The ‘when’ is today and the ‘how’ is by ensuring that ethics become an integral part of your individual and organisational vision and strategy.

Culture change must be approached like any other change initiative.

1. It must be driven by the organisational leadership, who must set the example for everyone to follow – if the leadership falter, the culture change will fail;
2. The culture change and its positive impact on the organisation must be clearly communicated to the entire organisation; as well as how the change process will take place;
3. Leadership is looking for ‘ownership’ and not ‘compliance’ of the new culture;
4. If the organisation currently operates in a climate of mistrust then the leadership must realise that although the concept may be understood and in principle accepted by the employees, sufficient time and dedicated focus must be given to ensure a fully owned and sustainable culture change;
5. The leadership and the organisation need to be patient and focus on the benefits of the end result; (without direct leadership it is to easy for the organisation to revert back to how things were);
6. As the benefits become visible to the entire organisation a critical mass will start to form. Managers, departmental teams and individuals will start reinforcing the positive outcomes from the culture change;
7. Once the ‘new’ culture takes over, it forms part of your core business principles and impacts your strategic choices.
8. The benefits of an open and honest culture, besides the working environment itself, will include a more accurate and meaningful assessment of the business environment and the organisations ‘real’ strengths and weaknesses. This will naturally lead to efficient strategic decisions that will add greater value to your future growth, compared to organisations that don’t embrace the principles of openness and honesty.

Remember, it is said, that in business, “lies may take care of the present, but they have no future,” (Cortes, 2007).


References

Atufunwa, B. (2009). The art of effective communication. Black Enterprise. Vol. 40, Issue 4, p.46-47

Green, C., Cortes, M.A., Cheung, C. and Kennedy, D. (2007). What are some communication mistakes that leaders make? Communication World. Vol. 24, Issue 5, p19.

Craving Poor Customer Service

Can it be that a majority of the global population crave poor customer service? It could be true, why else would so many companies try so hard to consistently offer poor customer service.

Organisations, through their Management and Strategic Leaders, are constantly taught to meet the expectations of the customer – so they must be in contact with this vast group of customers that crave poor service, who relish long queues, who delight in rude people and who expect poor quality and over-priced products.

It sometimes feels like I’m a member of a minority who not only seek, but expect, service quality and excellence. The return for the organisation is my patronage and loyalty – but this seems to be scoffed at.

Yet where does one find this vast group of people who crave poor customer service?

In contradiction to the above I find that the majority of people still crave service excellence and who sadly find customer service is becoming a rarer and rarer commodity.

So why the contradiction and who’s to blame? If so many people do in fact desire to receive service excellence, then do these same people always offer it when on the other side of the counter? If not, why the hypocrisy?

Customer service is one of the simplest skills for organisations to implement. You don’t need books and training courses to embrace it. Since, as is more likely, the majority of us do crave service excellence, then the first place to start is to treat your customer as you’d like to be treated. How complicated is that? If you’d expect reliability then offer it; if you’d expect quality then offer it – it really is that simple and when the customer’s expectations are unrealistic, don’t confront or lie to them, engage with them and change their expectations.

As customers we must also take some of the blame for accepting poor service in the first place. We have actually lowered our standards, as it seems to be the path of less resistance and we avoid that ‘conflict moment’. We find excuses by telling ourselves that we don’t have the time, don’t want the hassle and don’t expect to make a difference anyway.

Many of us have given up the belief that we deserve service excellence and have forgotten the power we have. As customers we need to start demanding and responding to service excellence and when we don’t get it vote with our feet and assert our right to complain!

Organisations also need to practically understand how all their employees approach customer service. Although it’s the organisation that gets the reputation for poor service, it isn’t the organisation that offers bad service, it’s the people within it – and it is often an unchecked minority who create the bad image for all to be tarnished with. If organisations don’t encourage and reward service excellence then they mustn’t be surprised when their customers, say ‘enough is enough’ and leave for greener pastures.

So in 2010 it’s time for you, the customer, to demand your right for service excellence and to realise you do have the power to make a difference in today’s technological world.

Finally there are astute organisations, large and small, who have already realised that offering personalised service excellence is a very real and sustainable competitive advantage in the 21st Century. To those special few, I thank you for meeting my expectations and making my ‘shopping’ experience such a pleasure.

It's Your Future

What all organisations need are people, at all levels, who are focused on success. It is said that;

“There are three types of businesses;

Those that make things happen;
Those that watch things happen;
Those that wonder what happened.”

(Anonymous)

Yet, business success or failure is dependent on the people within these organisations. Hence if the quote is true for organisations it must also be true for individuals as well. Simply put there must be three types of people in business;

Those people who make things happen;
Those people who watch things happen; and
Those people who wonder what happened!

Watching things happen can be acceptable in the short term, but only as long as people and organisations make things happen from what they’ve seen and learnt. For example, watching your competition so that you can create a better competitive strategy can be a source of best practice in its own right - since from watching and learning you are making things happen; but simply watching and doing nothing is unhealthy (to say the least).

There are too many people in business today who are content to watch and sadly many who are still wondering what happened!

What ‘winning’ organisations need are people who will make things happen.

So which do you want to be? You can decide today to become an individual who contributes to their own future and that of the organisation they work for by embracing a culture of best practice and being someone who makes things happen. This will not only ensure sustainable growth for your organisation but will, in the process, create job satisfaction and career growth for yourself; a perfect win-win solution.

Extract from the book ‘Be the Best in Business’ by Nigel Brownbill

Over Worked and Under Performing

I didn’t get the memo, but it looks like many organisations, both large and small, have instituted internal ‘reward programmes’ for employees who work more than 250 hours a month.

It’s not clear, at the time of writing, whether the ‘reward’ is an all expenses paid trip to a five star hotel in the Bahamas or to the cardiac unit of their local hospital.

I was talking to a banking executive the other week, who, having just come back from a week’s conference was working till 23h00 each evening just to catch up. Amusingly his company asked him to go on another conference last week, to which he said no (or something similar) – you’ll be pleased to know that he’s now on three weeks holiday and has left instructions that he doesn’t want anything in his ‘in-tray’ on his return – (we wish him luck).

How can organisations effectively plan for tomorrow and their future, if their management and staff are spending 150% of their time either ‘catching up’ or sorting out yesterday’s problems?

Effective organisation structures, effective team work, delegation, succession planning (and other business principles), along with improved technology (like the Internet and mobile phones) are supposed to make business more effective and streamlined and not more cumbersome.

There can only be two reasons why management and staff are working 250 hours a month, it’s either due to the efficiency of the current management and staff compliment. In this case, and as Jim Collins says in his book Good to Great, “you need to get the right people on the bus, the wrong people off the bus and the right people in the right seats”.

Or, if it’s not the managers and staff, then you have to conclude that you have poor or ineffective leadership. In this case you either need to re-evaluate your leadership style and approach or get off the bus.

With all the technology and business principles organisations have at their disposal it is a poor reflection on organisational leadership when managers and staff have to work harder rather than smarter.

Organisations need to find the time to effectively analyse their business environment, so they can embrace business methodologies and practices that simplify their business operations – this will give them a highly motivated workforce and an immediate competitive advantage.

References

Collins, J. (2001). Good to Great. HarperCollins. NY.

How good is your Strategy for 2010?

A recent McKinsey Global Survey, completed in February 2010, showed that out of the 1,467 Executives surveyed, the majority expected their organisations to record a profit increase over the next twelve months, and less than fifty-percent of them expected their organisations to reduce costs over the same period.

With similar feedback being reported on a regular basis there is a feeling amongst many organisations that they have worked their way through the recession.

Yet, what now; organisations cannot afford to relax and pat themselves on the back for surviving the crisis. Now is the time to review and implement effective and efficient strategies for 2010 and beyond. As organisations recover, they will emerge in different states of readiness to take advantage of the changing market conditions.

Organisations need leaders at all levels to embrace the principles of effective strategic planning and implementation and an organisational culture that thrives on ensuring their strategies are constantly aligned to the business environment and are constantly challenging the status quo.

There are two questions that you should be able to ask any employee in your organisation; and the answers you get will tell you the effectiveness of your strategic process (planning and implementation). The two questions are (1) what are the organisations current strategic goals and (2) how, through what you do on a daily basis, do you contribute to these strategic goals.

So, if you asked the employees in your organisation or department, what percentage of them would know, without hesitation, the correct answers to both questions?

Remember as you plan for the year ahead, it isn’t the strategic process that has failed organisations, but organisations that have failed the strategic process. Organisational strategies will only be as good as the inputs and outputs used to develop them and the integrity of the individuals and teams who plan and implement them.

So strategy must be done right or not at all, if you want to take your Executives and/or Management away for a couple of days, then take them away – just don’t call it a strategic workshop as it gives strategy a bad name.


References

McKinsey Global Survey. Economic Conditions Snapshot, February 2010.

Our Passion for Being the Best

Don’t we all want to be the best at what we do? As we grow up and start imagining our future careers, we don’t imagine ourselves as being an average performer or just getting by, we imagine ourselves as being the best.

Organisations are the same, when they are no more than innovative thoughts either in someone’s mind or scribbled on paper, the images are of success and not just of getting by or survival strategies.

So what happens – and why do we settle for less? Sometimes it’s because we’re told that we can’t be the best, or we are over ambitious and expect to be successful straight away without developing our career or business. Other times it just appears to be so much work – and where other people (consciously or unconsciously) blunt our passion and encourage us to drop the dream and simply go with the flow.

Although you may not be part of a best practice organisation today, if you embrace a ‘best practice’ culture and encourage those around you to do the same, you can be part of a best practice organisation of tomorrow. From there you are at the forefront of business development and assured of sustainable growth and a unique competitive advantage.