Trust in the Middle East is based on social networks: how much I trust you depends on how often I have interacted with you and whether people I trust also trust you. Essentially, trust is a commodity that is built up over time. This model is found globally but there exist alternatives and substitute models that are applied when appropriate. One such model is the swift trust model that Americans often use when faced with situations where trust is needed but there is no time to build it up using a conventional model. This is a trust first, verify later model. A simple example is disaster relief groups which are composed from various sources who need to act immediately. This model is precisely why Americans seem to be able to repeatedly launch successful start ups, whilst in the Middle East many start ups seem stuck.
Author Archives: Sabah al-Binali
SME financing needs from management's perspective
Small and medium enterprises (SMEs) have been getting a lot of attention in the past few years. Government initiatives such as the Khalifa Fund and Dubai SME 100 complement private initiatives seeking to provide financing for these SMEs. Everyone agrees that SMEs form an important part of the economy. Everyone also agrees that supporting SMEs is challenging. That is the sum total of what people agree on with regard to SMEs.
Cost Management Insights for Entrepreneurs
My basic philosophy on business is that opportunities and challenges are continuously presented to us and we need to respond appropriately. When it comes to managing challenges it makes sense to prepare in advance. My experience is that many entrepreneurs have difficulty doing this at two key points: right after a round of funding and when their business goes cash flow positive. The idea of saving for a rainy day goes right out the window and the dangerous assumption that the business will never go cash flow negative again sets in. This has destroyed many a promising start up.
Planning and Reorganising Masquerading as Work
One of the recurring themes in my writing is that there is not enough planning before action is taken. Maybe what I should have said is that there is not enough effective planning. The distinction is important as far too often too much planning and reorganisation gets in the way of real work. My experience is that there are two main sources for this wasteful work: perfectionism and deception. Continue reading
Saudi Oil: Through the Looking Glass & Other Adventures in Investing
About a month and a half ago I wrote an article on the sudden drop in oil prices, pointing out some basic errors in the media analysis and providing alternative interpretations for what was going on. The media flurry continued, and the errors in reporting and analysis also continued. So I wrote a second article diving in deeper into the analysis. The media storm continues unabated. To understand the insanity, Reuters on 17 November reported that hedge funds where net short oil. On 8 December Reuters announced that hedge funds were net long oil. What gives? Continue reading
Managing Negative Cash Flows
All entrepreneurs and many executives face in their professional careers the dreaded negative cash flow scenario.
For entrepreneurs this is a normal phase going from start up to, hopefully, mature company. For CEOs it can happen during an economic downturn or if the company had previously made serious mistakes or faced a catastrophe.
The underlying mistake that these managers nearly all make is to consider cash flow break even as a goal. It is a milestone. The goal, of course, is a pre-agreed return on equity (ROE). There might be many more milestones, such as cost per unit and number of customers, but ROE is the target. Continue reading
Performance Appraisals Gone Wild
Performance appraisals are a great idea usually badly implemented. Early in my career a new Head of HR showed up and implemented a complete overhaul of HR not only without input from the rest of the company but with no transparency as to what the new HR systems were. Then the time came for performance appraisals and the madness began. On a 1 to 5 scale we were instructed that 3 was good, 4 was excellent and nobody should get a 5.
I diligently went through the appraisals with my team and submitted them to HR. They requested a meeting. Present at the meeting were the Department Head of HR, we’ll call him Rajesh, and a mid-level HR person who we’ll call Asha. Finally there was a Divisional Head present who had nothing to do with HR. We’ll call him Simon. I was a Divisional Head.
So, now that we set the scene, Asha of all people opens the discussion. The company wide performance average was a little over 3 and the average for my division was well above 4. HR felt that this was not fair. The tremor in her voice belied her nervousness. Quoting a well known joke (later immortalised in a Dilbert cartoon) I asked if Asha wanted me to reduce my team’s scores or their actual performance. Nobody laughed. It was going to be one of those meetings. Continue reading
Performance Reviews: Transforming Bureaucracy into Value
Everybody agrees that performance reviews can, in theory, add tremendous value to a company and its employees. Everybody also agrees that in reality performance reviews are painful and often destructive. About the only point that is contested is who is at fault. Employees blame management. Management blames the employees. Everyone blames HR. Even HR. Continue reading
Conducting an Effective Board Meeting
In espousing deployment of corporate governance frameworks it is not enough to discuss principles only, details of how to effectively operationalise these principles are just as important. One of the crucial operational aspects of corporate governance is managing board meetings. Board meetings are the focal point for dissemination of performance information, discussion of major issues and strategic decision making. Since there are usually only four to six board meetings per year it is critical that these meetings are conducted effectively as there is little room to make up for delays. Continue reading
An Effective Job Description Creates Value
I have been a CEO at two companies and a senior executive or board director at several others. In nearly every job description for a CEO that I have seen is something similar to the following: “To develop, in conjunction with the Board, the Company’s strategy.” Sounds good but what does that mean, exactly? And how does sticking the board in the middle of it useful in any way other than to confuse who is responsible for what? A job description is supposed to be a map to an employee’s job. In reality it is usually a feel good statement that serves no practical value. Continue reading