Sterling Performance

Understanding, developing and exploiting your company’s strengths and competitive advantages is at the heart of any strategy for business growth. Yet many business leaders do not fully understand how and why their company wins.

Executive teams often draw up a list of strengths and competitive advantages based on gut feel but have few robust facts to support their beliefs and they risk building their business strategy on flawed assumptions.

A UK supermarket chain I worked with needlessly invested in a multi-million pound bonus package. Management held a belief that the quality of their store teams gave the company a competitive advantage versus other grocers. To underpin this belief the company created a bonus for store managers based on the satisfaction of their store staff.

The problem was that there was no discernible link between staff satisfaction and customer satisfaction for this retailer. Customers were focused on speed, convenience and price, which don’t always tally with satisfied staff. (more…)

Organisational trust has been studied for many years. Only relatively recently however have events helped to drive this issue to the top of many business agendas.

The near collapse of the financial system and the actions of senior bankers is one of the most damaging. The recent behavior of British MP’s in claiming expenses has undermined trust in UK democracy.

We have also seen oil companies being attacked for their impact on the environment and on staff safety, pharmaceutical firms being exposed for ethical issues around drug trials and airlines vilified for poor customer service when operations have gone wrong.

While many of these reputation and trust issues impact on customers and investors, there are also significant workforce implications.

Dr Cecily D. Cooper recently explained the complexity of organizational trust at one of our forums. According to Dr Cooper, employee related trust can facilitate acceptance of organizational change, it can build good corporate citizens, and can help develop credible leadership.

Organizational trust can also stop people leaving, being absent, becoming disruptive, or even stealing a firm’s assets.

However, until recently, there has been little research into the building blocks of trust and even less about trust failure and repair. For Dr Cooper, fairness or justice is key.

For example, how an organization behaves in difficult situations, such as during layoffs, can have a significant impact on levels of staff trust.

This is of course highly relevant in the current recession. But interactional justice is that most closely linked to trust and this arises in day-to-day staff relations. In this respect, one key lever of trust building arises through the actions of managers.

With trust breakdown, Dr Cooper’s research looks at trust failure in terms of competence and integrity, and it is the latter that can cause most damage. So when trust breaks down what is the best approach –- apologize, deny, shift blame or stay silent?

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Been invited to Wimbledon this year? Or Glyndebourne? Or the Big Chill? Or have you taken clients to such events?  Perhaps not, given the recession, but how would you feel if details of such hospitality became public?

Summer 2009 should be remembered for the major advance in transparency. After the MPs’ expenses became public, the BBC voluntarily disclosed its top executives’ claims and in future will include lower management tiers in its publication.

The spirit of self-exposure has yet to reach corporate boardrooms, but watch the trend. There are demands for declarations of interest and the receipt of hospitality:

some companies, especially investment managers, already keep internal registers while some public bodies publish lists of gifts received and meals bought.

Companies may think their own affairs are private but they risk being caught in the public sector’s disclosure regime. Savills may not reveal it gave six bottles of champagne to a member of the Bank of England’s monetary policy committee but the Bank’s register reveals it (and that she handed the estate agents’ gift to staff).

Does being bought lunch or attending a football match corrupt the recipient? Unlikely. If the hospitality puts the recipient at a disadvantage, why has it been accepted?

But the practical issue is not about bribery but appearance. What will be remembered of the BBC expenses disclosure will be petty claims for parking or champagne rather than accusations of unfair influence. It is about wasted money and mean executives, rather than palm-greasing.

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Unemployment has now hit 2.26 million, and still climbing. As jobs become increasingly insecure, it’s more important than ever to stand out from the crowd.

If you can’t define your differentiation in your speciality you have a problem.

Here are my tips for being the stand-out candidate in your marketplace or your boss.

• As an employee, consider how you would run the business if you owned it. The mindset of being a cog in a wheel won’t bring rewards. Believe in your importance to the business, and that your expertise, and your interactive, active and enthusiastic contribution is vital to its success.
• Always keep a ‘challenge-action-result’ record. Whenever you have a project, make a note of what it was, how you dealt with it and the successful result. It’s good for bosses to be reminded that you have achieved great things for the business. (more…)
  Tessa Hood is a Consultant in Career Management and Personal Reputation. She also advises global corporates on executive business image and lectures on Employability at 7 University Business Schools’ MBA courses. Connect with her at Changing Gear.

With Marks & Spencer at odds with its shareholders over pay and combining the chairman and chief-executive roles – and with the chairman apparently at odds with his senior non-exec – the retailer again offers evidence that the corporate governance code is not working perfectly.

But revising it for the sake of revision is not sensible: rules encourage box-ticking unless the first rule – maybe the only rule – is that the rules must be flexible.

Amazingly M&S touches on the cause of its own problems in its submission to the Financial Reporting Council on how the current combined code should be changed. It seeks more guidance on succession planning and on chief executives becoming chairman.  

There again, Royal Bank of Scotland tells the FRC that the quality of non-executive directors needs improving with a code specifically for them. The balance between supporting the executives and challenging them needs spelling out, says the rescued bank.

The code has come along way since Sir Adrian Cadbury wondered, after Robert Maxwell’s collapse, where boardrooms had gone wrong. The last revision, from Sir Derek Higgs in 2003, was a reaction to Enron. Now the post-banks rewrite is underway, the resulting regulations might shackle companies rather than allow them to flourish.

Higgs stuffed boardrooms with non-execs. Now, when the part-timers meet as a remuneration committee there are virtually no board-level executives left to determine pay for. The current review looks set to increase the power and scope of those non-execs even further. 

Yet if nine years in the boardroom is too long for a non-exec to remain independent, what if they have to spend so much time doing their duty – that they are dependent on one company for their living? Executives at one company increasingly find it hard to devote time to be non-exec at another company because of the report reading, board and committee meetings and calls to meet staff and shareholders.

But lose that talent and the quality of the independent directors diminishes when chairmen should be getting rid of time-serving part-timers and seeking active outsiders.

Raising the quality of boardroom debate would be more useful than becoming bogged down in rewording the Comply or Explain rule. Some boards think it means Comply or Else, but it has not stopped companies like M&S deviating from the code when it suits, often applying boilerplate statements that confirm they are not conforming without saying why. 

A rigid code may be useful for investors to beat boards with but it is not conducive to good business. Good governance may eventually translate into good investment results but the old codes treat it as an end rather than a means.

If FRC wants to be radical, it should tackle corporate performance rather than rearrange the boardroom seating plan again.

(Pic: Matt From London cc2.0)

At a time when many of us are job-seeking, I thought this would be an appropriate moment for a post on dressing for interviews. Here are a few tips to consider when putting your interview look together:

• Why appearance is important and who you need to impress
• Common mistakes when dressing for an interview
• Accessories and body language, women’s suits
• Great shops, shining examples
• Seven key tips for interview dressing

(Pic: a.drian cc2.0)

How’s your business plan for the next year or two? Hopefully, it’s all over the place. With so many conflicting reports about the state of the economy (”green shoots” versus “double-dip recession“) and where inflation is headed (”it’s going to soar!“, “beware deflation!“) only a fool would have a cast-iron plan in place.

Or, as turnaround expert Jim Weight puts it, “You’ve got to be downside protected.” A former finance director at Westminster Healthcare (it used to own the Priory rehab centres) and HIT Entertainment (which makes “Bob the Builder”), Weight has also helped several businesses where there has been no Plan B.

“I come across it a lot,” he says. “The MD convinces himself that rather than plan to make a lot of his friends redundant, he’s going to perfect that all-important sales pitch, the money will come in and everything will be fine. Occasionally it is — but often it isn’t.”

If the pitch doesn’t come off, you still have to find a way to survive. So, when confronted by optimistic salespeople — and, after all, you pay them to be optimistic — you have to know what you’re going to do if their expensive sales trip doesn’t yield results. Having that downside protection plan ready to roll in the bottom drawer of your desk is essential.

And, right now, you need plans C to Z as well. What if the economy does improve rapidly? What if inflation takes hold? What if demand from overseas markets soars while the UK stays in the doldrums?

What if a major competitor runs out of cash and you need to expand quickly to fill the vacuum? Even devoting just half an hour at every board meeting to scenario planning one situation so the key decision-makers know roughly how they’ll react is time well spent.

Two other things worth adding. Financial muscle is always important, whether you’re working to Plan A, B or Z. Companies with robust balance sheets — that means cash and manageable liabilities — always look more attractive to customers.

Don’t forget that your strategy probably remains the same whichever plan you’re executing. Strategy is defined as succinctly articulated, long-term goals. Any of your plans should be able to move your business towards them — even during uncertain times.

(Check out the Chartered Institute of Management Accountants’s guide to maintaining strategic direction through a downturn, too.)

A good idea beats the dull weight of money every time. The greatest start-ups are traditionally born in a garage: Microsoft, Google, Skype and most Silicon Valley innovation worked with the reality that every entrepreneur quickly discovers: their ambition was exceeded only by their poverty.

The big question is how established organisations can innovate.

The evidence is not good. Innovation is popular in theory, but not in practice. No-one gets fired for failing to take a risk, failing to spot a new market.

Plenty of people get fired for taking a risk and failing. Risk is like kryptonite to many organisations. Innovation without risk a like sky-diving without a parachute: you know it will end in tears.

We can not teach dinosaurs to dance and we cannot get large organisations to act like Silicon Valley start ups. But any company can still be innovative.

Here are six ways to innovate without having to be a creative genius or a risk junkie:

1. Copy an idea Discount airlines were not invented by Ryanair: the idea was imported from the US and Southwest Airlines. Let others do the innovation for you.
2. Solve the problem Akio Morita, the founder of Sony, saw gangs with boom boxes on their shoulders. He saw their problem: the need for music on the move. He solved the problem and the world was introduced to the Walkman and its successor, Apple’s iPod. James Dyson took 5,127 prototypes to solve the problem of vacuum cleaners losing suction.
3. Experiment The dotcom boom and bust was a massive market experiment in making money from the web. Boo.com, Webvan went down in flames. Amazon won. Google discovered paid search and won, while AOL and Yahoo! were still testing subscription models and banner advertising. Even the smartest brains can’t predict what will work in advance. The only test that counts is the market. If you don’t pay for a ticket, you can’t win the prize.
4. Get lucky. Virgin Atlantic emerged as the successor to the ill-fated Laker. Both had a discount model. Virgin had a 12-seat Upper Class for Richard Branson (that’s him on the right of the photo above) and his music industry mates. It was great, word spread and Branson had the wit to realise he’d hit a gold mine. He built the premium traffic and avoided Laker’s fate.
5. Act little, act often. Most businesses don’t even need breakthrough innovation. They need incremental innovation. This can be process improvement (total quality management) or product improvement.
6. Ask everyone. Top managers do not know all the answers. Knowledge is dispersed. The challenge is to gather it in. P&G’s Connect programme looks for product ideas from universities, customers, alumni and the public. Many of the best process improvement ideas in TQM come from the shop floor.

Successful innovation does not require genius, brainstorming workshops, taking risks or even technology. Listen to your customers and to your staff well and you may discover the next great innovation is on your doorstep.

(Photo: Edgar Neo,CC. 20)

The decision by designer Theo Fennell to retake control of his eponymous brand (he owns 19 per cent of the company) highlights a problem for any company still run by its founders.

Anyone who has ever worked for a company run by its owners (and I am one of these) knows it can be as much of a hindrance as a boon. Owners cannot help sticking their oar in, whether it is wanted or not.

Much of the time, their unique experience of the company provides the sort of insight you won’t get any other way and their standing with customers generally boosts loyalty to the brand. Grudgingly we have to accept they still have lots to offer.

On the other side it’s nigh-on-impossible for them to let other people take risks and it’s not unusual for their nerve to fail when the company is underperforming as a result of a change in direction, as has happened with Theo Fennell.

Under its new leadership, the Jeweller will move back into its established niche in the higher end of the market as a luxury brand, away from the high street where it was being steered by the previous (co-owner and) chairman and chief executive Richard Northcott and Pamela Harper, respectively.

This decision is probably right in the current climate. The luxury market usually stays buoyant even in the worst of times. Even though the value jewellery market was going stellar on the high street a few years ago, it is not a good place for non-essential offerings at the moment.

One word of warning though, founders who leap in to save their companies may find the role becomes a golden choke-chain (perhaps an idea for a new product line, Theo). As Steve Jobs has found, confidence in Apple’s fortunes is now directly linked to his involvement in the company. In a way, he can’t leave, even when his health demands it.

Ultimately Fennell will want to leave again, to enjoy the rewards of building up a premium brand but it may be harder to extricate himself than he expects, without the brand faltering again as a result of his departure.

On the other hand, he may want to keep at the helm for life, only to relinquish control when his cold, dead hands are prised from the tiller. Even so, everyone has to move up to the great boardroom in the sky some day.

What will happen to Theo Fennell the jewellery brand –- or any other company in a similar situation –- when it has to stand on its own two feet?

(Pic: Mark Coggins cc2.0)

Avoiding risk is the most effective way to make your business irrelevant, redundant and bankrupt.

Unfortunately, it appears that, in the face of the recession, risk avoidance has become the preferred strategy of most British companies.

Last week, the insurer RSA and the Future Foundation published a report that suggested that British companies were choosing not to pursue growth opportunities.

Although over 60% of the 250 business leaders questioned said that opportunities existed in their markets, less than half of them believed that their company would grow. More worryingly, only a quarter of these senior executives agreed that risk-taking was a good way to make money.

It seems that the mismanaged risk-taking in the financial sector over the past decade, the subsequent decline in bank lending and the stream of bad news in the media, is persuading our business leaders to steer clear of new opportunities and their inherent risks.

This attitude is both wrong and concerning. Prudent risk-taking is at the heart of corporate growth. Indeed, most company breakthroughs occur when business leaders spot a new opportunity and find ways to exploit it profitably.

Take Tesco, for example. It is one of the UK’s biggest corporate successes of the last 20 years, and its executive teams have continuously raised the bar and been willing to invest in new opportunities that have included international expansion, new ranges and departments, new formats, new channels and stronger customer relationships.

What’s more, history tells us that continuing to invest in growth during recessions is likely to drive longer-term success.

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