Sep 1, 2021 | Collaboration, Governance
Trust in our institutions is generally accepted as being on a slippery slide to zilch. I am certainly one who has loudly carried that message.
It is easy to say, but what are the essential elements of trust amongst a group?
If you look up the wisdom of Dr. Google, you will see a library of articles, posts and opinion that varies in the words used, but when boiled down, are saying pretty much the same 7 things.
Trust that others have your back. When things go wrong, you will not be left to carry the burden yourself.
Trust in common values and objectives. This implies that the values and objectives are an outcome of the group, rather than having them imposed on the group. Objectives and values can be superficially common, as in a group put together for some specific task. However, those objectives and values will not necessarily be shared, which comes from the interactions of the group with each other over time.
Trust that we will keep each other’s confidences. Inability to keep confidences indicates a lack of integrity, poison to any level of trust.
Trust in our willingness to learn from each other. This is a two way street, and is not driven by artificial hierarchy such as position on the organisation chart.
Trust that people will do as they say they will do. No further explanation required.
Trust that we are free to express our views and ideas. Often, we refer to ‘psychological safety’ as if it were a fence constructed in some way to keep the nasties out. However, it is a fence only in our individual and collective minds, but is critical to building relationships.
Trust that we are able to be critical without being personal. We need to be able to be tough on our friends, without damaging the foundations of friendship and respect. Commonly I refer to this as ‘transparency’. It is not inconsistent with the requirement to be sure that confidences will be kept, it is more a foundation that enables those critical confidences to be shared and kept. Nothing is as corrosive as uncertainty, whether it be about your performance of a task, or how long it will take for the taxi to get to you.
In an HBR article from February 2019, the authors cited three elements a leader must have to hold the trust of those for whom he/she is responsible:
Positive relationships. Meaning a leader must demonstrate empathy, balance results with concern for people, resolve conflict as it occurs, and deliver honest and helpful feedback.
Good judgement and Expertise. People being led will be willingly led, as distinct from managed by someone who demonstrates good and consistent judgement in decision making, seeks and absorbs the opinions of others, and has the expertise relevant to the task.
Consistency. This is simply walking the talk, following through, setting a good example, and being prepared to do what is necessary.
To my mind, the 7 elements cited above contain these three, with a perspective that is a bit closer to the sorts of situations individuals find themselves in over the course of time. They are more specific, less generic than the three cited in the HBR article.
I recently heard a definition of the point at which you have a ‘group’ that is more than an assembly of people looking to achieve a defined outcome, which I like:
“A group is when you do not need to look around to know everyone is doing the right thing, but you do look around to see that everyone is OK’
Cartoon header courtesy www.gapinvoid.com
Aug 23, 2021 | Governance, Leadership, Personal Rant
The Prime Minsters performance on ‘Insiders’ yesterday reminded me of Erwin Schrodinger’s cat thought experiment.
This was an absurd illustration of wave function collapse, a characteristic of quantum mechanics. (Note: I understand absolutely nothing about quantum). It proposes that the imaginary cat can be both alive and dead at the same time. Clearly a challenging situation, for the cat at least. Dead but not dead, perhaps just not buried yet?
It also seems to represent the Morrison governments chattering about climate change, and the choices that are needed, and not needed, all at the same time, amongst several other important questions.
As with Quantum, I fail to understand the half in the box and half out of the box ambiguity that is presented by those supposed to be making the tough choices on our behalf, and then acting on them.
Perhaps they are acting and not acting at the same time as well, and perhaps acting, taken in the context of performing rather than taking action is appropriate.
The resurrection of Barnaby Joyce to the exalted role of Deputy PM may be another kitty both in and out of the box. It seems to depend on whether he is berating the Labor party (who have their own litter of pussie-cats hidden away, unseen in the box) for some infraction of his imaginary rules, or defending George Christianson’s right to blather nonsense in the federal parliament.
I guess George does have the right to blather nonsense in parliament, he had a solid majority in his electorate at the last election, so some must think he is on the money, but the Nats also have the right to kick him out of their box. Label him clearly as a dead cat! Problem of course that they want to hold the seat, so he must remain alive as well, at least until they can find some alternative feline just as screwy to replace him at the next election.
This is a ‘Schrodinger Government’ both dead and not dead at the same time. Disturbing to see them still stumbling around blathering.
The pussy is also busily clawing at the response/non-response to the question of enabling businesses making covid vaccination mandatory. They are hoping business will do their job for them, again, and carry the risk of legal action brought under the provisions of an act clearly not reflecting the current need.
That comes on top of the narrative happening in Kabul. The PM blathered yesterday about how hard the government has worked to get out those who helped us in the 20 years of slog, and how honourable the sacrifices made by our armed forces. The fast words delivered with the conviction of a snake-oil salesman will carry little weight at all to the families of the 41 killed, and 249 injured, and those we leave behind in that sad place.
At least the chronic decision making vacillation and teflonesque reflex to dodge outcomes is consistent!
Header cartoon courtesy www.howstuffworks.com
Jul 30, 2021 | Governance, Innovation, Strategy
The old saying that ‘he who pays the piper calls the tune‘ is almost always true.
The piper in this case has been the orthodoxy prevailing over the past 40 years in Australian manufacturing.
I have been actively observing the trend towards outsourcing for a long time, deeply concerned that as a country we were collectively making a huge mistake, by focussing on lowering costs by outsourcing. By slicing off the things that are not deemed to be ‘core’ in some way to your profitability, you can reduce costs while maintaining revenue.
I guess it is much easier than being truly creative, taking risks, betting on a future different to the present.
As a result, manufacturing businesses in this country have progressively outsourced manufacture of sub-components, then whole components, then manufacture and assembly of finished products, and finally, because the manufacturers in China, Vietnam, or Thailand are closer to the technology, the design.
All Australian manufacturers, those few that have survived so far, are left with is a brand, with nothing to support it.
A brand without the supporting ‘brand infrastructure’ is a bit like a heavily inflated balloon. At some point a bugger with a pin will come along and, ‘bang’, you have nothing left.
The bugger with the pin proved to be a virus.
Supply chains have been ‘kneecapped’ and there is suddenly a recognition of the need for ‘sovereign manufacturing’.
Being driven by short term profit at the expense of long-term commercial sustainability has been a dumb choice.
I understand how it has happened.
Along with outsourcing manufacturing, we outsourced good old common sense to the educated but inexperienced crowd who applied IRR (Internal rate of return) and RONA (return on net assets) models shoved down their throats in MBA classes. These led to incremental investments in little, short term things at the expense of longer term and less certain but potentially bigger returns, to satisfy IRR hurdles. Reductions in the denominator in ROI calculations by flogging off productive assets made them look good by increasing RONA numbers.
They forgot that cash, and intellectual capital are not ratios, you either have them or you do not. Without cash you will be dead tomorrow, without the intellectual capital underpinning operations, you will be dead by a slower route, but just as dead.
Covid has awakened us to the effects of those decisions made over an extended period. Question is, do we have the resources and resolve left to start playing a different tune, one that common sense rather than capital ratios dictates?
I truly hope so for the sake of my grandchildren.
Header cartoon courtesy www.Gapingvoid.com
Jul 7, 2021 | Governance, Management
Small and medium businesses have many advantages over their larger rivals. They also have many disadvantages, which centre around the more limited resources they have to get the job done.
One of those disadvantages rarely spoken about, but sadly, present too often, is the lack of robust book-keeping procedures, which can and too often does, enable fraud.
This comes usually from the lack of internal controls, coupled with the ‘all hands in’ necessity of SME’s which means basic financial security measures are curtailed. For example, the recording of both debtors and creditors is in the hands of one person, or even simpler, there is little scrutiny on such items as credit card usage.
The propensity for fraud, and/or misleading financial reports and results can be looked at in a similar manner to fire.
For fire to occur, there needs to be 3 things in place. Fuel, oxygen, and heat. Take away any one of these 3 factors and fire cannot occur. If there is no fuel, it will not burn. Take away oxygen by covering the fire with water, or a fireproof sheet, and it will not burn, take away the heat source, and the fire cannot start.
It is the same in finance.
The 3 factors are opportunity, pressure, and rationalisation.
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- Pressure. For an individual to perpetrate a fraud, there must be some pressure for them to do so. Some situation in their lives that makes them take what they know is a risk creates the pressure to take that step. Debt, divorce, a burning desire to own something they cannot afford, and so on. Then there are a few who are just opportunistic, and when the opportunity arises, will leverage it.
- Rationalisation. The individual must be able to rationalise the fraud, stealing by another name, in some way. They need the money more than the company, nobody will notice a bit going missing every month, ‘I have been underpaid for the value I add’ and so on.
- Opportunity. There must also be the opportunity for the fraud to be perpetrated. The easiest way is to gain access to cash before it is counted, as in retail environments, but the lack of controls in a bookkeeping function or warehouse can have the same impact. I have seen payments clerks set up an account for a phony supplier, generate invoices from that phony, and pay them. I have also seen an order for 10 pallets have 11 pallets loaded onto a truck for delivery and the extra pallet not accounted for. This may not be financial fraud, it is stealing, and the effect is the same. Involving more than one person to perpetrate a fraud makes many types more possible, while at the same time, offering greater detection opportunity.
Remove any one of the 3, and fraud is far harder. Not impossible, but harder.
There are many simple things that management of any enterprise can do to minimise the occurrence of fraud in their business.
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- Separate the recording from the physical. The obvious example of this is the use of a till in retail that records the products and amounts bought, which then must be reconciled with the actuals in the cash drawer. This also records the products being sold which can be reconciled with stock records in a stocktake, further eliminating a source of opportunity.
- Separate the two sides of a transaction or create transactions as a data collection point. For example, the separation of the recording and payment of a debt should be separate to avoid the ‘phony’ customer situation. In a factory, you might institute a data collection point using bar coded pallet numbers on transfer from the factory production floor to inventory. This separates inventory from the waste stream, sometimes the source of an opportunity, as it was in the example noted above. This latter example also offers management some of the data necessary for improvement projects as an added benefit.
- Regular and close management of the debtors and creditors ledgers with the bank accounts. This will detect unauthorised payments made from the bank accounts.
- Restrict manual transactions, particularly where they involve cash.
- Control access to the books to ensure accountability of individuals for accuracy and completeness.
- Build in multi person authorisation into standard processes.
- Have clear transaction audit trails, that are monitored.
If some of these seem a bit ‘over the top’ for an SME, I understand. However, the volume of fraud that goes undetected and unreported is huge, and very damaging for an SME without the financial depth to easily navigate the losses.
Implementing some simple safeguards is just responsible business practice.
Get some help if you need it, and usually the return on a modest investment will be very quick.
Jun 30, 2021 | Change, Governance, Marketing
I have been at this ‘marketing’ game a long time, long enough to know that the bits you see, as a customer, prospective customer, or just by accident, are only the tip of the iceberg.
For many so-called marketers, what you see is the whole iceberg, they are ignorant, wilfully, or otherwise of the underlying factors that go into making a success of the process of ‘marketing’.
Despite the market research, social tracking, customer satisfaction measurement, and all the other stuff that we can do, the customer is often ignored.
Why is it so??
- There is little ‘fit’ between the market and the product/service being offered. This is usually because there is no ‘seat in the boardroom’ for customers. This should be the responsibility of the marketing people, but they so often revert to cliches and fluffy qualitative assertions that they are ignored. I really like the practice of Amazon, where there is an empty chair in every meeting, signifying the customer.
- Products are designed back to front. Businesses assemble the resources they have available, and build products they think customers will buy, rather than identifying customer problems and working backwards to assemble the resources that solve them.
- Marketing is usually seen as a subordinate function. The heads of the accounting, engineering, and operational functions are more likely to wield corporate influence than marketing. Partly this is the fault of marketers, who have systemically failed to speak the language of the boardroom. Marketing, which is about the future, tends to speak ‘qualitative’ whole other functions are all about the past, and can speak authoritative ‘quantitative’. This difference makes them more believable, as our brains like the certainty of quantitative. Partly also it is a failure of leadership. How many CEO’s are you aware of that have ‘marketing’ as their core skill?
- KPI’s rarely involve customer metrics of any value. I am a huge fan of tracking performance, but measures that do not relate to the manner in which the job done satisfies customers is a metric that is only looking internally. Some are necessary, but most are not, in my experience. Then, you see the occasional customer metric touted, and it is the number of likes on a social platform, vanity measures that again mean nothing. In fact, such measures are worse than nothing, they are misleading.
- Marketers by their nature are looking forward. This tends to enable them to be blinded by the newest shiny thing that emerges. This constant response to the shiny object serves to erode any focus and consistency of brand building, customer awareness and loyalty. When you are constantly moving around from video to podcasts, clubhouse, Tik Tok, and all the rest, you become hard to follow.
- Poor key strategically important customer definition. Too often marketers are unable to focus on the niches where the really powerful returns hide. The old cliché that you cannot be all things to all people prevails. The more important to the few who will buy your products and nothing else you are, the better. The temptation however to try and broaden the appeal, just a bit, to get a few more customers just dilutes the power of the value proposition.
- Innovation is messy, suboptimal, and experimental. Marketing and strategic development, whether it be of product, brand, customer groups, geographies, always has significant elements of trial and error, risk, and the inevitable failures. In enterprises that run on continuous improvement and optimising processes, this ‘messiness’ is unacceptable, and so is minimised. The result is the evolution of the enterprise stalls for lack of innovation, and marketing cops the blame. The corollary is that marketers are intimidated by their KPI’s and the status quo, into not making waves, so are always playing safe. This results in bland, undifferentiated marketing that has little impact.
- Marketers are not often the smartest people in the room. It seems to me to be a sad fact that this is often the case. From the outside, marketing looks easy, so those who do not seek or are unable to make the grade into professional training often seem to gravitate to marketing. Of the outstanding marketers I have seen and hired, many seem to come from a professional background. Scientists, lawyers, accountants, engineers, looking for something that values their creativity in bigger doses than their first profession. Running a marketing function in a large company for some time, I always went looking for these people when hiring, although it did take me some time to figure it out.
- Marketers fail to engage the other functions that are critical to success. Marketing is the only function that needs the co-operation of others over whom they have no functional control, to be successful. While this is a great test of leadership, it most often ends in tears. How often have you seen an operations manager whose KPI’s are all about factory efficiency, take a hit because the marketing manager wants to do a factory trial of something the ‘Ops’ people regard as a fantasy?
- The pace of superficial change is faster now than ever before. However, human behaviour does not change easily. The tools we use are becoming like our underwear. The reasons we wear underwear do not change, but the brands, types, cuts, and colours of the underwear we buy can change easily. This profound difference is most often shovelled under the carpet, kicked away by the seeming attraction of an apparent change in short term choices we make, which are at odds with the underlying drivers of behaviour. The unfortunate added outcome of this is a dilution of the creative impact of advertising communication. When you have to produce volumes of ‘content’ on a short term timetable, the impact of that communication is necessarily diluted. We fail to give the creative part of the communication process sufficient time to generate the attention and magnetism required in a frenzied world of fragmented communication.
- DIY syndrome. Marketing, like everything else has become increasingly fragmented, and specialised. No one person can cover all the required bases, any more than a doctor can be a specialist in more than one narrow niche of medicine. Yet many fail to recognise the competitive necessity of engaging specialists for specialist tasks. This can be addressed in large companies by very specific job descriptions and skills of those employed, but in SME’s, it requires often expensive specialists to be engaged on an ‘as needed’ basis.
The good news is that all these shortcomings can be overcome. The bad news is that it takes large doses of experience, leadership, and time, to do so
Header cartoon credit: www.TomGauld.com in New Scientist.
Jun 25, 2021 | Governance, Management
Often when seeking advice, we set out to find those who have ‘Domain’ knowledge’. Those who know what we need to know because they have ‘been there done that’ or have studied the domain extensively for one reason or another.
When you break it down, there are three components to building valuable domain knowledge:
First hand experience.
There is no better way to gain a feel for a market than to be out there, in the weeds, dealing with the drivers of performance as well as the day-to-day challenges that arise. Understanding ‘why’ things happen is infinitely better than just being able to observe them happening, it gives you a sense, an instinct that cannot be easily defined. Hands on experience and exposure to a market and its drivers offers the opportunity for the nuanced understanding you may be looking for. Fingerspitzengefuhl‘ is a German word for it.
Helicopter view.
In a helicopter, you are high enough to see the whole domain, but still low enough to be able to see the features that make up the whole. Importantly, you can zoom in and out to investigate features that grab the attention in some way, to examine how they work, and the relationships they have to other features in the terrain.
Through others eyes.
Being able to see and objectively assess your value proposition from the perspective of your ideal customer is vital, a basic discipline of marketing and sales. Why should they buy yours, and not the offering of the opposition? You also need to be able to look at yourself through the eyes of your competitors, seeking the points of relative weakness and strength, the potential paths to a greater share of wallet, or attracting new customers. Others, not necessarily those with whom you are commercially engaged can also have an influence in the way you deploy your limited resources. Regulators, interest groups, research bodies, and others can all have an influence on your enterprise. Being attuned to the potential impacts of those views is an important component of domain knowledge. Just look at what a small group of animal rights activists did to the live cattle trade to Indonesia a few years back. Irrespective of your views on the rights and wrongs, they managed to totally change the face of a large industry almost overnight.
Most business owners find themselves short of the time and expertise to build a nuanced view of their domain. Confirmation bias also tends to rob them of breadth of view. Engaging an advisory group, or individual is the best way to fill in the holes and build long term success.
