Strategic Downsizing

I have been involved in downsizing at many companies and have been exposed to both the theory of downsizing and the horror of the reality. In today’s business environment we are seeing faster downsizing than usual, but in many cases still not the most effective approaches.

Where senior managers and business owners make the biggest mistake is in understanding their biggest risks in these scenarios – morale. The problem with morale is that it takes time to build and is easy to shatter. The idea that damage to corporate morale can be quickly regained is false and leads to counterproductive strategies.

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The Absent Manager: Not a Mythical Creature

The absent manager is someone most of us have worked for at some point in our lives. Let’s see how to recognise them and the only choice in dealing with them.

A manager can be absent in two ways. The first is to be physically absent. The second is to be mentally absent.

It is not easy to identify the physically absent manager as it is not simply a case of not showing up to work. Managers can be physically absent and still seem to be working quite hard.

One scenario is simply to be out of the city/country ostensibly going to training courses, conferences, marketing, due diligence trips and international client/partner/vendor visits. Although such trips can be useful they are not necessarily the best use of a manager’s time and certainly should not occur frequently.

The second scenario is similar but occurs in the same city as the manager’s office. Here the focus switches predominantly to clients. Again, a manager constantly visiting clients pitching the products and services of the company and trying to close deals is the normal course of business. On the other hand if the manager meets with clients with no specific agenda tied to identifying revenue producing opportunities then it is a waste of time.

There are many warning signs to meeting clients as a replacement for real work. This includes meetings that occur in coffee shops instead of the client’s premises. Why on earth meet in a coffee shop? There is no privacy, there are no resources to support the meeting and it is never quiet. Worse is the manager who spends his whole day wandering from coffee shop to coffee shop, an executive nomad, filling his time in between scheduled meetings with other ineffective managers swapping gossip and who believe coffee shops equate to managing. One almost wonders if the revenue of the local branches of Starbucks, Costa and Bateel aren’t a negative indicator of management effectiveness.

An internal warning sign is when a manager spends the whole day in coffee shop meetings but at the end of the day does not generate any action items. A natural consequence of any meeting is to produce minutes of that meeting highlighting decisions made, potential revenue opportunities and action items. This should happen for every single meeting. So a day filled with six coffee shop meetings and a lunch should end with several hours writing meeting minutes, reflecting on opportunities and identifying action items. Instead it seems that the only outcome of all that coffee is frequent visits to the restrooms.

The third and final choice that a manager has to be absent is to be physically present in the building but not present in the relevant offices. I do not know who cursed us with the concept of “management by walking about” but there is nothing effective about that other than to give absent managers legitimacy.

There are exceptions as always such as trading floors or factory floors where real-time work in an open space can be observed. However in most cases employees work singly in offices or cubicles and just randomly dropping in adds no value to the employee and provides no insight to the manager. Instead it gives an excuse to the manager to socialise with employees and usually waste their time. Sadly, anecdotal evidence points to attractive female employees as being the most likely target of this tactic.

One step up from this is meetings. Nothing gives the incapable and incompetent a better sense of fulfillment and accomplishment then attending a meeting. Warning signs include frequent ad hoc meetings (a week’s notice should be a minimum requirement), lack of agenda, lack of advance material, a goal other than to reach a decision (such as updates), lack of action items, lack of circulated minutes, etc. Again, these are not hard and fast rules but a pattern of such behaviour is a clear danger signal.

If you do manage to corner a professionally absent manager that doesn’t mean that you will get anything useful, especially if you are looking for a decision. The defensive judo skills of the absent manager include “Did you get sign off from the following 36 people?”, “There isn’t enough data, get more,” “Let’s run it up the flag pole” and the dreaded “Leave it on my desk.”

Entertaining as it is to talk about the absent manager, it is important to understand that he is lethal to your career. The fact that it is not overtly malicious behaviour makes it all the harder to recognise. But if you your boss is a professional absentee, you are best served by finding a new manager, even if it means going to a new company.

This article was originally published in The National.

What your mother-in-law can teach you about performance reviews

Here is a secret – managers do not dislike employee performance reviews because the reviews are difficult, but because the managers are usually decent people.

Formal performance reviews are presented as a positive feedback mechanism that helps employees develop. The reality is that performance reviews usually happen once a year, and that is far too infrequent to be of any use. Even the most aggressive review programme maxes out at four times a year, still too infrequent to be of any use.

In a normally functioning company, useful feedback to any employee is in the form of continual informal feedback over the whole year. A formal review adds no real value to employee development over and above an informal feedback process.

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Leadership versus Management: Myth and Reality

The “Leadership versus Management” debate has mushroomed, infesting every corner of the business media space. Sadly, the debate has devolved into a polarised view of leaders as empowering saints and managers as narcissistic hell-spawn. This is not only wrong, it is harmful.

Leadership and management are simply roles. Anyone in business who fills just one role and not the other will fail spectacularly. Not knowing when each role is appropriate will also stifle an executive’s career.

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The Importance of a Culture of Trust

This blog recently talked about the importance of trust-based systems, as opposed to personal trust. This article continues investigating the role of trust in business with a focus on the importance of building a culture of trust.

The prime mistake made with respect to building a culture of trust in a business is believing that the aim is to have senior employees trust more junior employees. This is the complete opposite of what is needed, and the core reason that so many corporate cultures lack an element of trust.

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Financial Gems found in Famous Quotes

I have noticed a trend whereby people will post or tweet a quote, with nothing else: no analysis, no interpretation, not even a link to a relevant real world situation.

But that is not what I find strange. What I find strange are the scores of ‘likes’ and dozens of responses along the lines of “Right on!”, “Exactly!”, “How insightful!”, etc. How vapid. There is, though, one redeeming quality of this social media blight. I get to use the word vapid in writing for the first time in my life. Also blight.

I am not saying that these quotes from great minds are not enlightening, just that if one wishes to post quotes, then they should use it as the foundation of a deeper meaning. Otherwise it is just spam.

Not being one to simply point out problems without providing solutions, allow me to lead the way in posting pearls of wisdom from the long dead as well as my insights on these quotes. Attempting to provide value, if you will.

The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt.
– Bertrand Russell

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Equity Issuance: A Danger Signal

Companies issue equity all the time. It is considered a normal part of business. In fact, when equity markets are doing well, CEOs will often push for a rights issue, arguing that the market is over priced and therefore it makes sense to issue new shares and sell them into the market.

That might seem to make sense at first blush. But if a CEO thinks that this makes commercial sense then they are being naive. The only other explanation is that they are less than honest. Let us explore why.

As a first step, why is selling something at a higher than value price incorrect? In general, if it is a non-producing asset, then there is nothing wrong with this. Selling someone a pair of shoes should not cause any issues. The problem lies in what if it is a producing asset?

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The Pirate Code is behind Pay Inequality

In the fourth article of the game theory series, we build on the Saudis out-bluffing OPEC and The Joker forcing the good people of Gotham to choose between game theory and Batman. In this installment, you will learn how blood thirsty, treasure hunting pirates might just explain the ridiculously large wage gaps in modern day corporations. To set the stage, one must think like a pirate, indeed be the pirate. I do not mean the rum soaked debauchery of commercially suggestible women in a tavern named Hurricane. What I mean when I say ‘think like a pirate’ is think selfishly. That’s what successful senior executives do. Isn’t it?

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Delegation Will Set You Free

Centralised control has failed in every single economic endeavor known to man. As a national economic system centralised control, better known as communism, failed spectacularly in the USSR. More recently China’s attempt to incorporate capitalist elements to its centralised economic control framework lead to the country wasting USD 6.8 trillion in investment according to a recent report by the Financial Times.

Such failure tends to be true at the company level as well. Centralised management, or non-delegation, restricts the potential for a company. The CEO is a single person and if he retains complete control and refuses to delegate then he will limit the potential of the company to his personal ability to manage all of it. On the other hand, a more distributed control structure allows the company to scale its business by scaling its human resources.

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Gotham Game Theory: The Joker's Dilemma

The most famous example used to explain game theory is a game called The Prisoner’s Dilemma. A far more fun approach is looking at a game that The Joker introduces to the hit movie The Dark Knight, one of the Batman movies.

In the movie The Joker rigs two ferries with bombs. Ferry A is filled with innocent civilians and Ferry B is filled with prisoners and their police escort. Ferry A has a detonator for the bombs on Ferry B, and Ferry B has the detonator for the bombs on Ferry A. That is the setup, now for the rules.

If Ferry A detonates Ferry B and kills everyone on it, then the passengers on Ferry A survive. If Ferry B detonates first, then they survive. If nobody detonates within 30 minutes, then both ferries explode and everybody dies.

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