Oct 28, 2020 | Governance, Leadership
Over 25 years of consulting, the second most common problem I see being faced by SME’s, after managing their cash, is to attract and retain talented people.
Many managers do not put enough time, thought and energy into their personnel roster, as they do not have the time to do so.
So they think.
The hidden costs of just keeping a seat warm by substandard recruiting outcomes are huge. Not only does recruiting consume time and money, you then have to train and manage a series of new employees as the poor decisions come home to roost. As with a customer, spend the effort to ensure they are the one you want, invest in them to ensure they stay with you, and over time the investment will deliver a great return.
Some of the things I have seen work over my 45 years of commercial life are as follows:
Pay over the odds.
This is not to encourage a culture of greed or entitlement, it is simply to make sure that really good people do not have remuneration as a reason to go elsewhere. You will always lose employees from time to time, but ensuring good pay removes one reason for them to leave. It is also a great way to ensure former employees have nothing bad to say about you, which in turn, makes recruiting easier.
Recognition.
People love to be recognised for doing a good job, for delivering over and above. Recognition of a good employee makes them want to come to work. Some just want the one on one recognition, others need the public affirmation of their good job by the boss. Be sensitive to which an individual might prefer, and deliver as appropriate. I have never yet seen a situation where someone was uncomfortable because they were recognised too much!
Have a clear strategic framework.
Employees like to know why they are there, other than to pay the rent and feed the kids, and what roles they play in achieving an outcome for the enterprise. Having in place a robust and transparent strategic framework not only provides the foundation of decision making at all levels, it enables people to articulate the role they play in success.
Do not micro-manage.
Micro-managing someone implies that you do not have the confidence in them to let them do the job they were hired to do. The usual outcome is that they do not do it, and they go elsewhere, or are at best, are disinterested and therefore sub-optimal employees.
Manage good people by the outcomes they achieve, not by the detail of the means by which they are achieved.
Play to the strengths of good people
Nobody is perfect, and no one person is perfect for any specific job. When you have someone good, rather than try and change them to address the gaps they leave, find ways to fill in around them so that their strengths can be developed and leveraged.
Have a significant ‘onboarding’ process
First impressions count, and you can only make them once. Making a new employee feel welcome, valued, important to the whole group is easy if you think about it. Rather than just having them turn up, almost unannounced, to a desk covered with the detritus of the previous incumbent, make a show of welcoming them, ensure they are introduced to everyone, specifically including the big bosses. A drowning person can often drag others under in their efforts to swim. It is no different with a new employee, far better to spend a bit of time and effort teaching them to swim than to deal with the consequences of discovering they cannot, or that they do breaststroke when freestyle is required.
Role clarity
Every person needs to understand their own role, and that of those around them, particularly those that are impacted by their performance.
Treat people as people, not resources.
Total transparency will go a long way towards this outcome. Good people react very positively to honesty, and non-judgmental feedback on their performance.
As a reminder, the biggest problem most businesses have, and particularly SME’s is cash. Generating, collecting and managing it.
When you need an old experienced hand, give me a call.
Oct 14, 2020 | Governance, Leadership, Management
A key part of managing activity is to record it as necessary to be done, check it off when done, and make any observation necessary for next time.
This holds true from the development of a strategy down to the daily activities on the shop floor, and everything in between. The only difference is the scale of the things that are being recorded, discussed, and allocated to a responsible person, and perhaps the time between reconciliations.
Years ago I obtained a private pilots licence. An essential part of the training was to have a list of items to be checked off prior to take-off. In that case, it was not a written checklist, as when you are filling in a written checklist yourself, it is too easy to just run down the list and tick all the items as done. In that case the list was physical: my hand went to the item being checked off in the plane ‘walk-around’, and then in the cockpit, touching the item concerned. This addition of the physical to the memorised and written list ensured it was done. In the cockpit of a commercial airliner, where there is a co-pilot, the co-pilot has the written checklist, which he reads out to the captain, who checks the status and reports back for recording by the co-pilot.
Checklists serve a number of purposes:
- They serve as a specific reminder, as our memories are faulty, and prone to taking the easy way out.
- Repeating a list builds memory and habit, and when a habit is broken, we become uncomfortable, our ‘survival’ 6th sense kicks in.
- It provides assurance that the item has been done in an accountable manner.
- It provides the opportunity for specific feedback and immediate remedial action. In a factory this may be to complete an unfinished run from the previous shift, deliver preventative maintenance to a piece of machinery, and a thousand other things.
- It acts as a training profile to be followed by newcomers. Theoretically this should enable someone with no knowledge of the specific process to be able to complete it, simply by following the checklist.
- It allocates responsibility for actions to be done. During the resurrection of Ford by Alan Mulally, he had a daily meeting with his direct reports, in which they reported on the activities they had been allocated from the previous day. Clearly this process is not just for the factory floor.
- During those meetings Mulally also had the daily Ford cash balance calculated and shown, which underlined the importance of cash to the business during a time when they were losing money at a huge rate.
- Lists enable the allocation of priorities, so that resources can be allocated in the most impactful manner.
- Lists act as ‘grease’ for collaboration
Have you ever noticed that those who have the discipline to do daily and weekly checklists for themselves, and stick to them, appear more productive than their peers?
That is generally because they are.
Header photo credit: NASA
Sep 18, 2020 | Change, Governance
Gas, it seems is the way forward, according to the Prime Minister.
It seems to me that the conflicted debate about the evolution of our energy sources between fossil fuels and renewables, who wins and who loses, is more about the deployment of capital, and the beneficiaries of that deployment, than anything else. Platitudes about consumer energy prices, offering manufacturing the opportunity to have power at competitive rates is all very fine, and correct, just a few decades slow in coming.
For the whole of the 20th century, the geopolitical landscape around the world was driven by fossil fuels, and perhaps to a lesser extent other extractive industries.
The enterprises, public and private, made their owners and leaders rich by extracting profits, most often rewarding themselves for the largess provided by geography and to a lesser extent, politics and luck. They were, and continue to be an extraordinarily powerful force, often below eye level of the general public. Communities and the individuals in them have benefited from these industries, but not nearly as much as those that control them.
Now, the economic worm has turned, and renewables are becoming rapidly more economically viable, the extractive fossil fuel industries are being squeezed. As the battle for market share has intensified, we see the price of oil has dropped dramatically, and productive assets and their supply chains are being increasingly stranded.
The current oil price is around $40/barrel and under significant downward pressure, while at the same time, extraction is increasingly capital intensive, as the ‘easy oil’ is running out. This combination of downward price pressure, increasing competition from other energy sources, and increasing capital intensity is a harbinger of a wave of bankruptcy as the higher cost wells are closed as uneconomic. I am old enough to recall the very real concern about ‘Peak Oil’ back in the seventies, when the world was supposed to be running out of the stuff. Now the price in dollars is almost the same as it was 30 years ago.
Ref https://tradingeconomics.com/commodity/crude-oil
Listen to the discussion of the modest resurgence of US manufacturing, the low price of fuels comes up, particularly natural gas as the driver. Gas is now at about 2.40/MMBtu, the same price it was back in the early nineties, a sixth of the price 15 years ago, having undergone a roller coaster ride.
This would appear to me to be commercially unsustainable. Gas is (as I understand it) even more capital intensive than oil, as gas wells generally do not have a long life before the resource is exhausted, and therefore need a return in a very short time frame to justify the investment risk.
This is before the environmental risk is considered. I have absolutely no expertise in this area, but have heard a very knowledgeable source describing the fracking process as: ‘being like locking the exit doors in a multi story building , and yelling fire, then watching where the leaks occur as the pressure builds’. In areas of sensitive geology, this is unlikely to have any positive impacts at all, particularly after the gas has been released, and the gas company moved elsewhere to repeat the exercise.
(Gas is measured in BTU’s, or British Thermal Units, which is the quantity of heat content in a fuel. 1 BTU is the quantity of heat required to heat a pound of water by 1 degree Fahrenheit when the water temperature is at 39 degrees Fahrenheit. A MMBtu is 1 million BTU’s)
Then there is coal, a similar roller coaster, and currently below the prices of 20 years ago. There are many grades of coal, some less price sensitive than others, but they all share similar characteristics as being dirty, and now cheap, under the cost of production of all but the most productive mines.
Then you have the cost of renewables, dropping by huge amounts over the last decade, photovoltaic by over 80%, less for wind .
(CSP is concentrated solar power) Graph https://www.irena.org/newsroom/articles/2020/Jun/How-Falling-Costs-Make-Renewables-a-Cost-effective-InvestmEnt
Of course the numbers depend a bit on who you use as a source, and what sort of granularity on the data you are seeking, but the trends are unmistakeable.
At some point, fossil fuels will become completely uneconomic, and we are probably not far from that point. When that happens, investment will cease, the ownership of these entities will pack up, having extracted all the returns that can, and move on. What will be left is the massive clean-up bill.
Who will be paying the clean-up bill?
We will, taxpayers, the public, from whom the fossil fuels industries have already extracted super profits from the jointly ‘owned’ resources.
I am not a green lefty by any means, but am concerned at the legacy being left to my children and more specifically my grandchildren. It is them that will carry the greatest burden of the clean-up.
There are many people with the chops necessary to speak on these topics from a point of expertise, I am little more than a concerned observer. However, the science is unequivocal, and there are paths to improvement.
Barry Jones when Minister for science in the Hawke government keynoted with Al Gore in a 1984 an ‘Ozone layer’ summit in London, sponsored by the darling of conservatives, Maggie Thatcher. This led to the Montreal Protocol, an international agreement to ban the manufacture and distribution of CFC’s. They were replaced by HCFC’s, which did less damage, and have been subsequently replaced again by chemicals with even less impact. Perhaps I am being cynical, but I see the profits of chemical companies driving this change, rather than the need to act for the general long term good. Nevertheless, the science has been undisputed by experts for almost 40 years.
It seems that so far, there are insufficient numbers in the halls of political power listening to scientists, unless it suits them to do so, as in the current Corona crisis.
I cannot believe it is because they are stupid, or blind, rather that they comply with that wry observation made in varying forms by several including Upton Sinclair: ‘It is useless to argue with a man whose opinion is based upon a personal or pecuniary interest’
Somehow, we need to poke a lighted stick up the arses of those who continue to push for the retention of fossil fuels as a core of our energy mix and export income. In the absence of any action to make change, we will be in even deeper trouble than I think we are.
Sep 16, 2020 | Governance, Innovation, Strategy
A short while ago I felt very sad, and uplifted at the same time.
Weird.
I was watching my 4 year old granddaughter play , keeping herself company in her own fantasy world, jumping from one thing to another without any hesitation, no sense of self consciousness, but following a ‘logic’ only she could see, hear and feel.
Creativity being expressed in a totally natural way.
I am pretty sure most people have seen this, at some point, and felt uplifted. Then I realised, that in a few months, she would be going to school, and that joy of random thought, learning by experience, feeling absolutely free from judgement was about to hit the wall.
School works with a set of disciplines. Numbers, regulated behaviour, nominated time slots for scheduled activities the kids did not choose. It teaches organisation, discipline, and a ‘top down’ awareness to these rapidly developing brains consistent with what ‘conventional wisdom’ has decreed as appropriate for the future life kids will lead.
Who knows anything about the future life of my granddaughter?
Watching her, I also recalled that I had seen the previous week the announcement of the death of Sir Ken Robinson. That made me sad again, all over,
For those few on the planet who do not know who Sir Ken was, just google ‘the most watched TED talk’ for a dose of his verbal and philosophical magic.
Asking how schools kill creativity in kids, and how to fix it, was his life’s crusade. His TED talk at the time of writing has 69 million views, several of which have been mine, and a much larger number have been those I have persuaded, cajoled and pushed to watch.
Here, in front of me was the living reason he took on the world of education academia.
It also occurred to me in those minutes of reflection, that over time, my granddaughter may be pushed into doing the things she was good at, in preference to the things those she liked to do.
That is how the world now works.
Most people have things they are good at, but do not particularly like doing. I certainly have. To meet the outside markers of success, most go with those things, and use their free time for the things they really like doing. In those times, hours seem to pass like minutes; somehow, you have entered what some would call ‘a flow state’ where time seems compressed, and the output, is just for its own sake.
Joyous.
Wouldn’t it be fantastic if the things we like become the things we spend our days doing to earn a living?
Imagine living your life in a state of ‘Flow’
My granddaughter was in a state of flow playing, and it seems like my duty to extend that as far as possible.
A lucky few get to feel it for themselves every day, and as a result, have a chance of both being as happy as they can be, and changing the world.
Sep 14, 2020 | Change, Governance, Management
‘5 why’ is a tool often used to understand the real cause of a problem. Finding those real causes is often like peeling an onion: one apparent problem or more often symptom of a problem, leads to another, to another, until the root cause is clear.
Often however, we make changes in the absence of a compelling problem, usually to take advantage of an opportunity, or simplify/optimise some sort of process. In those cases, I have often seen the onion reverse itself.
You end up with unintended consequences.
A pack change that confuses existing customers, a change of supplier for a better price that has consequences for operational efficiency; a product feature added that customers said they wanted that added to unanticipated production complexity, and so on. I have suffered from several of these unintended consequences of seemingly sensible, well considered and pro-active changes.
Before any change, exercise a ‘Reverse 5 why’. Look for the wider consequences that may be caused by the change, and take the impacts into consideration.
Move a few steps back, and ask yourself; are there any impacts from this change? How will other functional responsibilities, customers, supply chain partners, be affected? What unintended consequences may occur?
It is very easy to become close to a project, and proceed to implementation without taking a ‘helicopter’ view of the potential impact beyond the immediate context of the change. Once you start doing it, taking that extra moment, which is usually all it takes, it becomes an integral part of an automatic due diligence process undertaken before making a change.
Building an automatic ‘Reverse 5 why’ into your planning processes will identify risk, and build the confidence of others with a veto in the projections you will have done to support the change.
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Sep 2, 2020 | Governance, Marketing, Small business
How do you execute on that BEHAG?
How do you fulfil the vision?
How do you accomplish the mission?
These are all questions I get from time to time from people stumped at the point where the dream, whatever label you choose to put on it, has to be turned into some sort of activity.
A dream in the absence of the steps to achieve that dream is commonly called a fantasy.
The process that I help people through is what I call ‘Hindsight Planning’
It has four distinct steps.
Step 1. Understand the market dynamics.
There is no avoiding the necessity to understand the drivers in the markets you are seeking to leverage. The technologies, barriers to entry and exit, capital requirements, regulatory requirements, major competitive factors, and a host of others all play a role. In the absence of at least having some idea of the ‘Current state’ of the market, you risk that plan being just a shattered dream. Unless you understand what it is you want to change in order to grow, and what the probable drivers of that growth will be, it will remain a fantasy.
Step 2. Agree on the shape of the business down the track.
Planning horizons change from market to market. Technology markets are changing almost as we speak, some others have very long lead times, although it is often these that are disrupted by newcomers who throw the long held beliefs that have driven the market over the wall and change everything. Nevertheless, difficult choices need to be made. What you will do and how, but often more importantly, what you will not do and why.
Step 3. Plan backwards.
Having agreed the shape and size of the business in 1, 3, or 5 years, whatever horizon you have agreed on, the task now is to ‘put yourself there’. Imagine the outcome has been achieved, and then articulate the steps you have taken in that journey. This might seem just to be an exercise in words, and to some extent that is true, but importantly, it is also an exercise in perspective. Working backwards enables you to test ideas, assumptions and choices, against an outcome you have agreed has already occurred, albeit in your collective minds. In that way, a ‘reality filter’ of sorts has been applied.
Some of the obvious questions that need to be answered may be:
- Where did the revenue come from? Growth is not possible in the absence of revenue, so list the sources on a whiteboard. Current customers, new customers, channels, business models, products, technical achievements, geographies, and so on. However, do not just list them, articulate in some detail how it has happened. Again, that past perspective adds real ‘grunt’ to the conversations.
- Where did the capital come from? Growth is a veracious consumer of resources, particularly capital. How did you fund that growth? Reinvestment of retained earnings, capital raising from friends and family, or from the markets, public and private, debt finance considering the necessity for assets as collateral?
- What is the dominant business model? Are you a middleman, retailer, on line item sales, subscription sales, did you achieve a position to monetise arbitrage opportunities, and so on. Digital has delivered a host of new and emerging business models to us over the last decade, but one thing that has become clear, if it was not already, is that differing business models do not live comfortably in the same house. Therefore, if your revenue streams come from different business models, the structure of your resulting business needs to be decentralised by those differing business models.
- What is the ideal corporate structure? Have you remained private, are you publicly owned, a partnership, Joint venture, franchise system? There are many options, and as in the previous question, potential siblings rarely successfully live in the same house.
- What capabilities were required to succeed? This is a question in two parts. Firstly, what capabilities were required from individuals, technical, strategic, financial, and all the other factors that make human beings able to contribute? Secondly, what were the organisational, leadership and cultural factors that enabled the organization to leverage the capabilities the individuals brought in each morning as they turned up to work.
Step 4. Execution of the plan
As noted, a plan of any sort remains a fantasy in the absence of the means to execute, and deliver on the plan.
Executing on a plan to achieve an objective has a few wrinkles that must be accommodated:
- ‘No plan’, as George Patton said, ‘survives first contact with the enemy. This means that the plan must be sufficiently agile to accommodate the unexpected, while remaining focussed on the objective.
- All stakeholders, and most particularly those who are employed, must not only know the plan, but they must understand and ‘buy into’ the objective, while reacting tactically to the unplanned things that confront them. The means to achieve these usually mutually exclusive outcomes, is that they not only understand their role, and the part their role plays in the larger objective, but they must also be prepared to be more than just an unthinking functionary, doing as they are told, or at least as they understand they are being told. It is a process of critical thinking and feedback going up, down, and very importantly, across the management chain. Not an easy thing to achieve and one we normally just attribute to some natural ‘leader’ who emerges. However, everyone has the capacity to be a leader, simply by being a participant in the process and holding themselves accountable for the actions of others.
- Operationally deploying ‘Nested’ functional plans. Like the operations of a mechanical watch, to tell accurate time, each part of the mechanism must contribute in a defined way to every other part of the mechanism, while not being overtly connected. There are always a range of flywheels driving others of varying sizes that are doing different roles, that all add up to that accurate time. An organisation is just the same, and this diversity of role, timing, and relationships to other flywheels must all be kept in synch if the outcome is to be achieved. No easy task, which is why it so often fails. Successfully driving towards an objective, means that the various parts of the mechanism of the organisation must work be synchronised in ways that are able to accommodate the tactical opportunities and reverses that inevitably occur while not losing sight of the objective. This all requires what I call ‘operational nesting’
When you need an expert to help you think about these things, let me know.
