It seems as if time is finally catching up with GE.  For many decades, GE was held up as the doyen of effective business management and leadership.  Some of us who were a bit more skeptical had other ideas - evidence of this was their performance management with its "forced ranking" system.  Under the GE system (which has been adopted by some other companies), former Chief Executive Jack Welch required managers to divide talent into three groups -- a top 20%, a middle 70%, and a bottom 10% - many of whom were shown the door!

Critics suggest that such systems unfairly reward groups made up of stars and hinder collaboration and risk-taking - a growing concern for companies that are trying to innovate their way to growth.  

Two organisations who had adopted a similar system - Enron and their accountants, Arthur Anderson - are now no longer with us.

The latest news on GE, is that their accounting practices have been called into question.  Apparently, local finance people were "cooking the books" to ensure their targets were met.  This week, GE agreed to pay US$50 million to the Securities and Exchange Commission which said the company had fiddled the books to make the figures look good.

HR practices, particularly those that attempt to "systemize" management are doomed to failure and are likely to encourage behaviour such as was found at Enron and Arthur Anderson and now appears to be happening at GE. (You can see a good precis of the criticism of such systems in an article "The Struggle To Measure Performance - Rigid rankings hinder the teamwork and risk-taking necessary for innovation. But what combination of methods works best?"

Ultimately, there is no substitute for good management and leadership!

Service - another attempt at "Bribing people to perform"

The US airline industry, is the latest to try bribery as a way of getting their people to provide good customer service.  Delta and American Airlines have both recently introduced schemes aimed at improving customer service.  Both schemes are doomed for failure - see why at "Service with a smile!".

As I said before, with all people management practices, there is no substitute for good management and leadership.

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I read an article this morning "On the job evaluations can end or give fresh start to careers".  Although the article did give an example of how a poor performance evaluation can lead to an improved career, the main thrust was advice on how ro handle a poor evaluation.

Wouldn't it be of more use to employees and managers to talk about how to manage performance better?

The main reason evaluations are seen as negative, is that often managers do not give feedback regularly.  The best managers, let their people know immediately when they have done something well or not so well.  In this way, the performance evaluation becomes redundant. 

I was fortunate to work for such a manager, who not only gave immediate feedback, but also did performance reviews quarterly.  In the few days prior to the review, he would write down his comments, pass these to me and suggest we base our discussion around his comments and my responses.  This, combined with the immediate feedback, meant there were no surprises at the official annual review - both my manager and I knew what the evaluation would contain. 

No surprise to hear the he was the best manager I ever worked for and that his team was not only highly motivated, but also the most talented group of people with whom I have worked.

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Leadership and image - which is more important?

He goes cycling at lunch time, leaves work early (well apparently 7.30 pm is early for Americans) and takes a "bottom up" approach to leadership.  Who is he?  James L . Jones, President Obama's national security advisor.

When asked by reporters about other White House officials who work deep into the night, he responded "Congratulations.  To me that means you're not organized".

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There were two interesting stories in the International Herald Tribune yesterday (20^th April 2009).  They were in fact on the same page.   For me this was ironic for I believe the two articles express the antitheses of true leadership.

Article 1:  "Standards for bonuses start to shift"

The first article talked about the new way remuneration "experts" are now suggesting that managers and particularly senior managers, should have their bonuses calculated.  Poor things, the economic climate does not now give them the opportunity to base their bonuses on business profit, shareholder value or some other meaningless performance measure.

So, the latest thinking is to base a bonus on another measure such as preserving cash flow.  Now, I'm not an accountant and although I have a general notion of cash flow, I needed to do some research.  Basically, cash flow is the movement of money in and out of the business.  If you have more money coming in than you do going out, then the business remains solvent.  

On the surface, this seems like a reasonable (and important) thing to measure.

Cash flow analysis involves examining the components of your business that affect cash flow, such as accounts receivable, inventory, accounts payable and credit terms.  By performing a cash flow analysis on these separate components, you'll be able to more easily identify cash flow problems and find ways to improve your cash flow.

A quick and easy way to perform a cash flow analysis is to compare the total unpaid purchases to the total sales due at the end of each month. If the total unpaid purchases are greater than the total sales due, you'll need to spend more cash than you receive in the next month, indicating a potential cash flow problem.

With me so far? 

You can probably already see some of the financial flaws in using "preserving cash flow" as a measure for paying senior manager bonuses (unless you're the CFO who will probably quite like the idea).  But there's another major drawback to using cash flow.  You can quickly improve your cash flow by delaying payment of your creditors - easy, pay them in 60, 90 or 120 days and see how that improves your cash flow.  Mind you it will also very quickly "tick off" your suppliers!  (There's one company that I refuse to do business with now, because they kept delaying payment of my 14-day invoices by 60 days).

For example, the article quoted Xerox as replacing "revenue growth" as a bonus measure with "cash flow" and "earnings per share".  Now, managers may (and I say "may") have some influence on cash flow.  But most managers are so far removed from "earnings per share" that it would be extremely difficult to suggest any performance that would make the direct link.

Financials and relevant performance measures aside, when will people realise that paying bonuses, no matter in what format do not lead to improved performance?  It irks me so much that businesses continue to make this mistake that I just had to put that sentence in bold.

Article 2:  "Better results from a broad view of ‘we'"

And now for the good news. 

I was impressed with what Nell Minow, a corporate governance expert, business proprietor and former company president, had to say in an interview about leadership.  To quote Nell:

"One thing that helped move my thinking forward was that I noticed in my first job that there was something very definitional in who was included in somebody's "we" and who was included in somebody's "them."  I found generally that the more expansive the assumptions were within somebody's idea of who is "we" - the larger the group you had included in that "we" - the better off everybody was.  I started to really do my best to make sure that my notion of "we" was very expansive and to promote that idea among other people."

Wow!

I've written previously about one of Nelson Mandela's key leadership qualities, inclusiveness, and that's what I think Nell is also describing.  It's early days yet, but I've also seen much of this in Obama, recently at the G20 summit but also previously, for example before he announced the troop withdrawal from Iraq he telephoned former President Bush to let him know.

For me "inclusiveness" is one of the key leadership qualities.  And what a great way to make it happen - thinking about your definition of "we".

More good news!

Well, it's good for me and I'm hopeful you'll all agree.  My book "What To Do When You Become The Boss" has just been taken up by McMillans and will be published in India.  A small print run to start with, but I'm hopeful.

Cheers for now.

Bob

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The Crisis 

Well, it's been an interesting week so far, particularly for the financial markets.  At last an upsurge!  The general feeling seems to be that this may be just a blip on the graph and the market will start to go down again.

If you're looking for a very good explanation of how the US and ultimately, the world got into this mess, then go to Matt Taibbi's story in the Rolling Stones magazine.  Here's just a sample of what Matt has to say:

The latest bailout came as AIG admitted to having just posted the largest quarterly loss in American corporate history - some $61.7 billion. In the final three months of last year, the company lost more than $27 million every hour. That's $465,000 a minute, a yearly income for a median American household every six seconds, roughly $7,750 a second. And all this happened at the end of eight straight years that America devoted to frantically chasing the shadow of a terrorist threat to no avail, eight years spent stopping every citizen at every airport to search every purse, bag, crotch and briefcase for juice boxes and explosive tubes of toothpaste. Yet in the end, our government had no mechanism for searching the balance sheets of companies that held life-or-death power over our society and was unable to spot holes in the national economy the size of Libya (whose entire GDP last year was smaller than AIG's 2008 losses).

Matt's a financial lay person and had to do a lot of research and interviews to get his head around the topic, so it's an interesting, at times humorous and most importantly an enlightening read.

I think Matt is quite right (and something that I have been saying for a long time) when he says:

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

This is a must read article for all who are serious about being informed of what's happening (or not happening) in today's financial and political spheres.

If you would like an economists view of this, then I would recommend "The Return of Depression Economics" by Paul Krugman.  Krugman is a Nobel Prize winner in economics and his book is a very easy and enlightening read on all of the recessions and depressions that have befallen us over the last century.  It's the first economics book that I have read cover-to-cover, if that's any recommendation.  I hope to review it later this week.   If you happen to read Krugman's book, you'll see how spot on a financial lay person like Matt Taibbi can be.

The People

In discussions with friends and colleagues from around the globe this week, I've come across an interesting phenomenon.  As the financial crisis took hold, people in firms gathered together and supported one another.  It seems that the usual response of an external threat was taking place - we're in this together and we can support one another through the difficulty.  For example:

• There is more sharing of information and knowledge
• People will go out of their way to find out what others are doing and how they can help
• People get together more at a social level (for example, business lunches are back in)

That seems to have gone on, and still is the case in many firms.  The exception seems to be where there have been lay-offs.  Once people are laid off, the mood and the response from those that stay, changes:

• People become less sociable
• At the lower levels, staff start to emphasise (publicly) what they are achieving (sometimes even at the expense of others)
• On the other hand, some staff retreat into themselves and hope "that it will all go away soon"
• Managers become less visible and remote.  They are always in meetings.  When asked about "What's happening?", very little of the real story emerges

Managers - what to do?

In tough times, people revert to their basic needs - security, food, shelter.  So, whilst it's important to share company information, it's also very important to cater for these basic needs.  More socialising, interacting and even physical contact (hand shaking, hugs etc).  One colleague I spoke with took his four direct reports to the football - a first for him and the firm and the mood within the team has improved dramatically since.

People can only do their best work when their basic needs are catered and cared for.  In these times, it's important to stress security, food, shelter before talking about business performance.

And speaking of things "social" . . .

Last weekend my wife and I together with another couple visited the town of Appenzell in one of the smaller cantons of Switzerland.  To give you some idea of the area, the tourist brochure describes it as:

Appenzell and the canton of Appenzell Innerrhoden lies in a very picturesque, hilly landscape to the south of Lake Constance.  Rambling and climbing on the Alpstein and the region's independent culture, fashioned by long-held rural customs and religious traditions, are the highlights. With around 7000 inhabitants, Appenzell is the political, economic and cultural hub of the smallest of the Swiss cantons: Appenzell Innerrhoden. The smart alleyways with their numerous small shops in the car-free eastern-sector invite passers-by to stroll and enjoy leisurely shopping outings. Houses adorned with many murals are a characteristic of the region. The Appenzell Museum in the town hall and the «Im Blauen Haus» [In the blue house] private museum exhibit a cross-section of local history and culture.

Apart from the amazing scenery and the friendly locals, the interesting thing about Appenzell is the way the region is managed.  Once a year, all of the inhabitants (up to 7,000) meet in the village square to vote on the council issues for the coming 12 months (including the budget).  Now that's democracy!

The pics in this blog are from Appenzell.

Cheers

Bob

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The Obama Image

I continue to be impressed with the leadership capabilities displayed by the new US President.  Not yet through his first 100 days and his list of accomplishments is quite outstanding.

But over and above what he has done, the three leadership qualities that stand out for me are:

• His inclusiveness.  This is an ability and willingness to include all possible stakeholders in his deliberations and decisions.  Whether people like the final decision or not, they feel as if they have been involved.  This too, was a strong characteristic of Nelson Mandela when President of South Africa.
• His "humaneness".  I watched him last night talking about the AIG bonus payments and he was truly angry.  He freely displayed the same feeling many people in the US were also feeling.
• His "commonness".  He is maintaining his "I am an ordinary person, just like everyone else" approach to life, despite holding the highest office in the US.  I hear that he is to appear this week on the Jay Lenno Tonight Show - a first for an American President.

It will be very interesting to track Obama's leadership skills over the next few years and I have a feeling that we will see some great leadership examples.

Business - Can too much success lead to failure?

My recent article on decision making at Management-Issues brought some interesting comments

• From Larry Underwood, Scottsdale, AZ, US.
  I think "stress" and "fear" have been a major part of big corporations for a long time, which in turn creates the pervasive impact of micro-management throughout those organizations. In this litigious day and age, big corporations are extremely afraid of lawsuits (sexual harassment, wrongful termination, discrimination, or some other type of negligence allegation) which could cost them millions of dollars, even if they really did nothing wrong to begin with. With attorneys' fees and out of court settlements (not to mention bad public relations), "fear" becomes the catalyst for how the nervous mid-level to high-level managers try to placate their immediate supervisors, to maintain the safe status-quo.

  This paranoid philosophy filters all the way down throughout the organization, to the front line employees who feel they need to perform their tasks almost flawlessly, to keep their bosses from badgering them to death. Of course those badgering bosses have badgering bosses, and so on, all the way to the top; the head badger, aka the CEO.

• From Nicola Hunt, London.
  Hopefully, the companies that are treating their people badly and creating workplaces based on fear will be the ones that are not innovative enough to challenge the Status Quo.

• From Izzat.
  Thanks! Very good article indeed. I will forward it to the Sales team at my company. Thanks again.

Check out the full article "Can too much success lead to failure?"

Coaching

For all of you involved in coaching, if you're into "clean" coaching, then check out the latest "How clean is your coaching".  It received 3216 hits in the first five days of publishing at TrainingZone.

The Swiss Countryside

In case you were wondering, the above picture was taken recently on a Sunday walk in the hills near our home in Switzerland.

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It's been a while since I posted an entry, so I have decided to turn over a new leaf and be more regular!

Middle Managers
Just back from a week in Australia where I facilitated on a program for middle managers.  It was interesting to talk with people who are in the real "engine room" of the organisation at the moment. 

Middle managers have always been squeezed - from above to achieve more and from below by people who want their voice heard "upstairs".   And now it's no different.  My participants told me that they are certainly being asked to do more with less since the recession hit - some have even been asked to take on more responsibilities when a colleague's role has been abolished.

But my people were still very upbeat and positive about the future, so it was a pleasure working with them.

On the subject of middle managers, there's a new book out called "The Truth About Middle Managers" by Paul Osterman, although the UK Financial Times gave it a pretty harsh review.  I'll have to wait and see

Decision Making
Speaking of books, there's a new book "Think Again:  Why Good Leaders Make Bad Decisions and How to Keep it Happening to You" which I've been asked to review.   

Authors Finkelstein, Whitehead, and Campbell, suggest that for many of us the fault lies not so much in our own errors of judgment, but rather in the brain's processes that help create these errors of judgment.

They quote many famous cases (including the US auto makers) of managers and leaders who have made poor decisions.  They attribute these to the brain's;

• agility in linking the current situation to previous misleading experiences,
• ability to relate current situations to our pre-judgments of similar situations,
• inability to separate the situation from personal self-interests,
• tendency to draw an inappropriate emotional link between current stakeholders and those for whom we have strong personal feelings.

Could be an interesting read.

The "Die-Hard" old manager
Had an interesting call from a colleague looking for suggestions on how to handle "older, technical (male) managers who are not good at people management and not interested in learning".  You may be interested in my response - if you have other suggestions, please let me know:

• Rather than train the managers (at least not initially) why not train their people in "How to manage their boss"?  i.e.. what style of upward communication works best with these people?  Their people will probably be more receptive to training anyway.
• These type of managers only relate to analysis and logic, so any "touchy feely" stuff does not work.  Stop training!  However, they do like certain types of training.
• What are their most pressing challenges?  I recently worked with a group of scientists (who had become managers) and found that the things they related to were:
  • My concept of analysing how they spend their time in terms of Leading, Managing, Operating (first two chapters of my book).  I got them to do a one week time log prior to the workshop to see how much they spent on each of LMO and then looked at what changes they could make to the ratio and then of course, what they needed to do to make these changes (kinda touchy/feely via the back door)
  • They also responded well to the model of structured decision making by Phil Yetton - this then led to discussions about the management of groups vs. teams and which one they had.  This then led to discussions around the style of leadership needed for each and the types of meetings they should run etc.
  • I also used the Team Management Profile, which is another structured approach to the make-up, management and leadership of teams.
  • Your people would also probably respond well to Project Management training with the emphasis on structure, but also how to get the best results (outputs) from their project teams (inputs).  It is important to talk in their language!

All target learners must see "what's in it for me" irrespective of their management style, so that should be the starting point.  Secondly, what style of learner are they?  Any training must be built on this style and preferably (although not essential) be delivered by a similar type.

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A friend of mine, Richard David, sent me a picture he took on New Year's Day.  I am walking at 2,700 metres in Bever, Switzerland with the temperature at minus 18!

Richard's message with this picture read - "The following needs to be read in a loud voice, deep base and a bit of echo:

'And God sent down a little sun-beam to warm those who are pure at heart.'

I can't understand why he missed!"

Richard, nor can I.

But missed I did, in the Sales Article of the Year competition, that is.  As many of you will know, the article "Tough times call for tough training" finished 2nd in the public voting poll with less than 0.50% margin to the winner. 

The article came second in the public vote and nowhere with the judging panel (there were three runners-up), so it was disappointing.  It doesn't help much when the rules are changed half-way through the competition.  In 2007 it was purely on public vote.  This year, when it looked like a non-sales article might win, they suddenly added a panel vote which makes up half of the total score.  The chief panelist, Jonathan Farrington (who started the site and the competition and is a POM to boot) wrote in his blog midway through the contest:  

Today's News: The Aussies are absolutely panning the Yanks over at Top 10 for the Top Sales Article Of 2008 - absolutely creaming them - you have no idea how much pain that causes me as a Brit: Don't get me wrong, Bob is a great guy, and it is a superb article - but it is in my genes to rally against "The Oz"

So how can you win against that?  Not happy.  I do take solace in the fact that the article (although far from what I consider my best) to be at least the equal of the other finalists.  The striking thing for me (and I feel another article coming on) is that all of the sales articles are about the individual salesperson - there is nothing about team work and sales teams (an oxymoron, by the way).  

So there you have it.

A big thank you!

Many thanks to everyone who voted for the article and especially to all of you who went to extraordinary lengths to garner other votes.

Collaboration and team-work

One of the very pleasing aspects of this competition was the collaboration and support I received from people worldwide.  In all, people responded from more than 25 countries, which was truly amazing.  I now have so many more friends around the world who are ready and willing to support one another.

I wish you all the best for 2009 and if I can be of any assistance to all my friends, colleagues, relatives and new-found friends, please let me know.

Bob

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This is the time of the year when many people are in reflective mode.  I've listed under "news" some of my highlights for 2008.

But now there's a new one.  And you can help.  One of my articles "Tough times call for tough training" has been nominated as a finalist in Sales Article of the Year Awards at Top 10 Sales Articles http://www.top10salesarticles.com/  Please vote for my article by logging on to Top 10 Sales Articles.  Thanks.

Season's greetings to all and my best wishes for 2009

Bob

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Welcome to my very first blog on the updated site at National Learning Institute!

I hope you like the look and feel of the new site and of course, particularly the content. 

As a direct result of feedback, I've added a lot of new features and there are more to come.  I'd like to make this one of the premier websites for helping managers, so please send in your suggestions.

I look forward to hearing from you soon.

Cheers

Bob

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