Managing Negative Cash Flows

December 9, 2014 By in Cash Flow Tags: ,

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

December 7, 2014 By in HR Tags: , ,

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

December 3, 2014 By in HR Tags: ,

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

December 2, 2014 By in Corporate Governance Tags: ,

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

November 30, 2014 By in HR Tags: ,

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 →

Anthony Mallis on Building SICO into a Regional Asset Manager

November 30, 2014 By in Executive Insight, Asset Management Tags: ,
Anthony Mallis on Building SICO into a Regional Asset Manager

In the first of an occasional series titled Executive Insight I will write together with a regional business leader who shares the benefits of their experience.

Anthony Mallis, the chief executive of Securities & Investment Company (SICO) of Bahrain between 2001 to 2014, grew a boutique brokerage company into a regional asset management powerhouse. (Tony is humble in his accomplishments and all promotion of his accomplishments is attributable solely to his co-author.)

Mr Mallis was hired to a challenging assignment; turn around or close a money-losing entity that was caught short by the GCC market malaise of the late ‘90s. In 2001 the GCC and Mena capital markets were still nascent, with the Gulf still affected by low oil prices and mid-’90s collapsed share prices. Locally, commercial banks had little interest in the domestic capital markets, focusing on deposit-gathering, the local retail markets and pushing third-party foreign investment products to their clients. The small number of local investment banks had a largely real estate focus, or were parochial when it came to regional investments – focusing on their domestic markets for both clients and proprietary activities. Continue reading →

Shareholder Activism Requires Shareholder Networking

November 26, 2014 By in Corporate Governance Tags: , ,

Shareholder activism has acquired a bad name being associated more with corporate raiding than it is with concepts of introducing corporate governance by the shareholders. This is a shame as shareholder activism is the best way to ensure effective corporate governance of a company. The current model gives shareholders the semblance of control at annual general meetings when they get to ask questions about the financials and vote in directors of the board. The reason that this is not real control is that any disparate body of people that does not communicate and internally discuss matters in advance of a group decision will invariably make a bad decision.

Continue reading →

The Role of Meritocracy in Corporate and National Success

November 25, 2014 By in HR Tags: ,

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Meritocracy in the corporate world can be defined as hiring and promoting employees into positions based solely on their competence without any favouritism such as to relatives, known as nepotism, or to benefactors, known as cronyism. Meritocracy is such a strongly held concept in terms of the successful execution of any endeavour that nations have embraced it as a central tenet of their civil service where employment and placement are based on rigorous competitive exams. Singapore, arguably the poster child for successful emerging nations, has meritocracy as a basic national guiding principle. If nations are paying attention to meritocracy, should not businesses do the same?

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Is Hiring Any Different Than Pure Guessing?

November 23, 2014 By in HR Tags:

I must admit that I have found the recruitment process challenging in every single position that I have had. As a senior executive I have often been involved in hires by other managers and frankly they do not seem to fair any better. As far as I can tell there seems to be no correlation between the interview process and the quality of the hire. First pick hires often end up adding no value and at times even destroy value. Fourth picks often end up flourishing and becoming stars. Is there any reason to have an interview as part of the recruitment process? Continue reading →

Lack of SME Lending Harms Large Corporates, Creates Shadow Banking

November 20, 2014 By in SME Tags: , , ,

The existence of an SME credit gap, the difference between demand for loans by SMEs and provision of those loans by commercial banks, and its effects on SMEs has been discussed in detail in a separate article on this blog. The effects on large corporates is no less serious. Using some simple statistics from the earlier article, if SMEs are the source of greater than 50% of GDP and their share of bank lending is only 4% then either SMEs are super efficient, big corporates are super inefficient, or somebody else is financing these SMEs. I think that we can safely agree that it is highly unlikely for the SME sector to be super efficient or big corporates to be super inefficient. That leaves some, or all, of the USD 260 billion SME credit gap funded by a segment of the economy other than banks. Let’s unravel this mystery.

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