Sterling Performance

What stops middle managers from progressing? “When you are fighting off the alligators, it’s hard to remember you’re trying to drain the swamp,” says Richard Jolly, adjunct associate professor for organisational behaviour at London Business School.
Middle managers haven’t fully grasped the challenge of what it takes to be a senior manager. They are so busy working at the coalface that they don’t have time to step back and consider their career. But they must actively do so if they want to progress.

While technical expertise is what got middle managers to their current position, it could be a hindrance if they want to get to the next level.

Early in our careers, we aim to make ourselves indispensible by becoming an expet in a particular area. But as you get promoted, that can become a liability — senior managers won’t want to promote an indispensible technical expert out of their job. Y

Middle managers need to learn new skills and actively start managing their careers, says Jolly, if they want to move to the next level.  They are excellent at fighting alligators, but they need to take responsibility for draining the swamp.

So how do you start thinking like a senior manager?

Here some things to think about if you’re looking for a promotion to senior management:

• What are the top three priorities of your role? Look at your diary or planner to see where you are spending most of your time. If you’re not focusing on the top three, you’re wasting time.
• CEOs look for people who understand what the business is trying to achieve and will help them reach those goals. Managers need to figure out what the organisation needs them to do — how can you, in your role, help the organisation achieve its ambitions?
• Are you wasting time in meetings? “Meetings are a way of avoiding having to do any real work,” says Jolly. Are back-to-back meetings a good use of your time?
• If you read the writings of people who’ve been successful, they describe having had a mentor at key times in their career. Do you have someone who can tell you where you can shine, and what strengths to maximise?
• Last, and most important, are you in the right job? Can you envisage a time when you are able to delegate to people who know their jobs better than you? Senior management is about helping other people achieve a sense of authority, rather than controlling them.

(Photo: CGAphoto, CC2.0)

Reading BNET1’s latest find from Bain & Co, it occurs to me that there’s rarely a day that goes by without a new (usually pessimistic) forecast about the economy, an industry, or an individual business.

But whose predictions should we heed — how reliable are the analysts and economists now (as opposed to 12 or 18 months ago)?

The UK’s pre-budget report raised serious questions as to how accurately the government could predict future growth (if you hadn’t harboured concerns already).

In the US, the National Bureau of Economic Research questioned the very definition of recession by claiming that the US had been in recession for 12 months. Merrill Lynch told us the very same thing about 10 months ago and was largely ignored.

A recent gathering of entrepreneurs and investment professionals only served to underline how hit and miss predictions can be. When asked to call the end of the recession, there was little consensus. Predictions ranged from six months to 10 years (the latter from Andrew Keen, who also predicted the demise of the “free” business model and is not without his critics.)

One investor said that the next six months would be largely determined by the mindset of those in business — their outlook would determine whether recession or recovery would win the day.

This seemed unrealistic — that resolutely positive thinking could so swiftly bring an end to economic turmoil the likes of which we’ve not seen in 18 or 79 years, (or ever, depending on who you believe).

That said, psychological outlook certainly works on the negative side — the NBER’s declaration of recession was enough to send the Dow plummeting (again).

So can we use reverse psychology to get ourselves out of recession?

Advertising Age highlights another recession-busting strategy that has the potential to save billions in packaging.

Anglo Dutch consumer giant Unilever (whose CEO , Paul Polman, was one of three Unilever execs caught up in the Mumbai attacks) could save between $13m and $26m in Europe on packaging costs by cutting back on the number of colours it uses.

Its Project Rainbow colour harmonisation programme has created a new palette, reducing the number of colours Unilever uses from 100 to six without any apparent damage to familiar brands such as Hellman’s and Flora.

London-based brand identity specialists LFH initially carried out an audit for the business and identified a way of using its own colour harmonisation process, Chapter 1, to save costs by using less ink.

According to LFH managing director Mano Manorahan, it has meant “substantial cost savings” with no compromise on quality for Unilever. In a before and after test of packaging, customers couldn’t tell the difference between the reduced-palette packaging and the old version.

Matthew Daniels, Unilever’s best practice manager, told one reporter that the team was “quite frankly blown away by the results — no-one could believe that such quality could be realised when using six colours.”

Now in use on Unilever’s food brands, the Rainbow process also has the potential to save time and money on printing production costs for other businesses, although economies of scale will be most significant in large organisations. Even so, it could open the way for co-printing of designs — something hitherto limited by the need to clean and recalibrate machinery for each new job.

It should also be less wasteful — fulfilling chief marketing officer Simon Clift’s recent pledge to keep investing in environmental innovation. He sees the current economy as a spur to companies to become more creative in saving costs and reducing waste.

“All consumer behaviour regarding the environment is about delegating to manufacturers. It puts a lot of responsibility onto us. In the end it is an important challenge to us.

Consumers’ relationship to capitalism is going to go through a fundamental change through this financial crisis. People will realise unleashed capitalism does not have all the answers.”

(Photo: Pingu1963, CC2.0)

Is it better to hire people on the basis of their experience or their potential? If you believe experience is preferable, and that age equates with experience, there’s no better time than now.

By 2011 about half UK workforce will be over 40, which means they will have had 20 or so years of work experience.

But experience is not the issue. The question is, experience of what? Is experience as a bank manager a predictor of performance as a customer service manager in a telecoms company? Is a person who has been in a job for five years more experienced that someone who has been in the job for one year, or does five years actually mean one year’s experience five times in a row?

The problem of hiring on the basis of experience gained in a former job is the assumption that it parallels what is needed in the new job. Organisational cultures and situations can and do differ dramatically. There is a litany of highly competent executives like Bob Nardelli, who excelled at GE, but was unable to duplicate that success at Home Depot. Experience is situation-specific.

Experience also tends to equate with baggage. Behaviour is learned. We do what we do on the basis of it having led to success in the past. We’ve all been annoyed by people who insist on telling us how things were done in their last company or last job. There are benefits to learning how other people do things, but the underlying message is that what we’re doing is no good, and that can be demoralising.

So what about hiring on potential? This, too, comes with some small print.

For “potential”, read “lack of directly applicable experience”. That means giving the individual time to learn, which implies training, coaching and the provision of development opportunities.This one of the reasons many companies fall back on what they hope is the quicker-fix solution of hiring so-called experienced people — it takes less effort.

There are a number of companies that have successfully hired for potential though, notably Southwest Airlines, the originator of the discount airline model. Southwest claims it hires for “attitude” — motivation, energy, keenness, and team spirit.

But Southwest doesn’t make the mistake of thinking that’s enough. It follows up with intensive skills and culture training. People learn what behaviour is acceptable and rewarded. Very few organisations make a conscious effort to do this. Instead, people have to learn the hard way.

If you wish to hire people for their potential, you need to define the core competencies for the roles in question. These are things like a demonstrated ability to motivate people, being able to close sales, a record of building effective teams, or being able to make and stand by hard decisions.

Either people have done these things or they haven’t. They can be tested and observed. Assessing potential doesn’t have to be subjective — it manifests itself in observable behaviour.

But as James Callaghan, a former British Prime Minister, once said: “Some people, however long their experience or strong their intellect, are temperamentally incapable of reaching firm decisions.” No amount of experience can change that.

(Photo: Ezioman, CC2.0)

Just shy of its 100th birthday, two main divisions of Woolworths are to go into administration, potentially putting 30,000 people out of work. With debts of £385m, the retailer will shut the doors on over 800 outlets, as well as its Entertainment UK division, a DVD and books wholesaler.

Woolies has had longstanding problems — analysts reckon the rot began with its demerger from Kingfisher in 2001, when Woolworths somehow got saddled with an inflexible and expensive leasing deal and a poor succession plan. In the intervening years, it went from a £350m business to one that closed at £18m. How could a board comprised of experienced retailers from Asda, Littlewoods Shop Direct and a 50-year veteran of Woolworths itself get it so wrong?

It’s been a similar story over at furniture chain MFI — that is, the writing’s been on the wall for a while, with chief executive Gary Favell’s buy-out only buying the 44-year-old business a couple of months before its demise.

If the administrators decide to make a cash-grab by offloading stock, the immediate effect on other retailers — already fighting tooth and nail for Christmas business — could be detrimental, according to Dresdner Kleinwort retail analyst Sanjay Vidyarthi.

Leading Woolworths shareholder Ardeshir Naghshineh, founder of Norfolk-based Targetfollow, which owns London’s Centrepoint, expressed anger at the government’s failure to intervene.

Earlier in the day, it looked as if Peter Mandelson, the business secretary, might step in on the government’s behalf. But how could a bail-out be justified? The UK can hardly afford to prop up failing stores — even those as venerable as Woolworths.

The fightback

Call it desperation, if you like — I prefer creativity. Here’s a short list of how the nation’s shopkeepers are fighting the downturn.

• Seam-work: Arcadia and M&S’s bosses, Sir Philip Green and Sir Stuart Rose, have put aside their differences to show solidarity, according to Retail Week. They are joining Next, New Look and Mosaic Fashions in implementing Chancellor Darling’s VAT reduction, due to take effect on Monday, with 2.13 per cent coming off prices. It’s believed they will save the cost of re-ticketing individual items by taking the discount off at the till.
• VAT’s off: Tesco’s implementing the VAT cut early on its non-food products, so customers can take advantage of it from Friday. DSG International — which owns PC World, Curry’s and Dixons.co.uk — has already passed on the savings.
• Wheel deal: Colchester car-broker Broadspeed.com, perhaps seeing the writing on the wall, offloaded its stock of Dodge Avenger SXT 2.4i, in possibly the first BOGOF (buy one, get one free) ever to be undertaken by a UK car dealer. Initially offered at half price, the two-fer offer was all that was needed to draw 22,000 customers to the site, which temporarily crashed as a result of demand. Managing director Simon Empson is so impressed he plans to do more offers in future.
• Banana breakfast: London’s West End stores are fighting the Westfield effect by opening early and offering free gifts and breakfast. On Friday, West End outlets of Topshop, Brooks Brothers, Wallis, Boots, Jaeger and Mamas & Papas will offer discounts in an Early Bird event, while other retailers are offering other early morning incentives to spend. Grab breakfast at Banana Republic, pop over to Liberty for a glass of champagne and a free cosmetics gift, then pick up a sobering free coffee at M&S from 7am to 9.30am.
• Big Mac attack: “With all the doom and gloom, we wanted to bring a little Christmas cheer,” said Bragster.com founder Bertrand Bodson, explaining his £10,000 giveaway. Bodson projected a massive display of his credit card, with all details visible, onto the side of the Bank of England on Kensington High Street in London. It also provided his address and telephone number and a £10,000 float — with a single shopper blowing £7,200 the Apple Store.

(Photo: TheTruthAbout, CC2.0)

A key reason that organisations are too busy is that they do not know the difference between risk management and risk avoidance. Do you recognise the following scenario?

1. A company has a stretching profit target which is significantly higher than its current projections.
2. An internal project team is set up to identify quickly new areas for profit growth to fill the gap.
3. A new, exciting opportunity for profit growth is identified which, if it delivers its potential, will significantly add to the bottom line.
4. At a business planning session, a fear of not meeting the budget means that the benefits of the initiative are ‘down-dialled’ to something more reasonable.
5. As a result, the investment required to deliver the project is reduced so that its cashflow profile is acceptable.
6. The results fall slightly short of the budget, validating those who argued for a less aggressive benefits case.

The company still wishes to meet its stretching profit goal, so:

1. An internal project team is set up to rapidly identify new profit growth ideas… And so on.

Risk management is focused on identifying and managing contingent and preventative actions that enable an organisation to deliver big benefits.

Risk avoidance is focused on ensuring there is no bad news. The problem with risk avoidance is that there is little chance of there being any good news, either.

I see the cycle of risk avoidance in various guises across many different organisations. As with any downward cycle, the place to intervene is where you can have the single biggest impact. In this case, that place is the business planning process.

By using trials, tests and prototypes and relentlessly ensuring that the initiative has a customer and business model that works, a company can ultimately make bigger leaps. It is a case of less haste, more speed.

Tesco’s Express strategy took over 10 years and a tie-up with Esso to really take off.
I’ve said it before: you can’t chase two hares.

Is your actively managing risks on the way, or is it avoiding risk, hedging its bets, generating excessive work and limiting its progress?

(Photo: Felix,CC2.0)

Entrepreneurs are said to be differently wired and are more willing to take big risks as a result. So what’s maverick budget airline boss Sir Stelios Haji-Ioannou doing trying to restrain the board, hardly known for wild decisions, at EasyJet?

Has he, as some would have it, lost his nerve and fallen prey to the kind of mid-life corporate crisis entrepreneurs are prone if they don’t let go? Is he the “grumpy founder shareholder… barrelling up and down the aisle as the flight gets bumpy”? Or is he showing another trait common among entrepreneurs, a reliable gut?

His travel brands are the best performing of Sir Stelios’s myriad concerns, which include EasyCar, a rental business and EasyInternet Cafes (these likely to see less demand as home broadband is so widespread). And he now has control of over 25 per cent of EasyJet’s holdings, having added his siblings’ 11.3 per cent holdings to his own 15.6 per cent stake, estimated to be worth around £180m.

His public criticism of the board does his shareholding no favours and he would have done better to keep it behind closed doors. And while it’s true that there are doves and hawks in every boardroom, it’s naturally going to be more damaging when the founder refuses to back his board’s business strategy.

On the other hand, Sir Stelios has remained pretty hands off up until now — giving his intervention all the more weight. Maybe that caution’s just what is needed. Aerospace giant Rolls Royce has announced plans to lay off up to 2,000 of its 39,000 employees (60 per cent work of whom are UK-based) because of delays on delivery of some Airbus A380 and Boeing 787 aircraft. Overall, this takes the total announced job cuts in the UK to 24,000 this week. High-street retailers are desperately slashing prices while Woolworth’s contemplates a £1 bid for its 800-outlet chain.

His caution may be uncharacteristic, but maybe Sir Stelios is right to ground EasyJet’s growth plans for now.

What do you think — does the current financial crisis call for a more risk-averse entrepreneur?

(Photo: Redvers, CC2.0)

Entrepreneur and author Jon Gillespie-Brown suggests that entrepreneurs may want to hold onto their day job if they need a bit of time to incubate their ideas.

In a video interview for the UK’s Enterprise Week, Gillespie-Brown says the prospects for start-ups in cleantech, biotech and IT remain strong in Silicon Valley, but financing may prove tougher to raise over coming months. Those who can ‘boostrap’ or self-fund their fledgling enterprises will be in a good position in the current economy.

Research by the Kauffman Foundation demonstrates that nearly 75 per cent of start-up capital derives from an equal contribution from the owner and a bank or credit card debt. So the tough credit markets will make it tougher on even promising tech start-ups, which tend to be more favourably looked upon as investment prospects.

The silver lining is for bigger businesses, or at least those that can still afford to nurture some of these entrepreneurial ideas or channel wannabe entrepreneurs’ energy to innovate within their current roles.

Nevertheless, Gillespie-Brown’s advice to potential business start-ups remains the same: if you’ve got the idea and the passion, just do it.

Here’s the interview in full. Don’t be offended by the frequent book plugs — proceeds, after all, go to the Grameen Foundation, so it’s all for a good cause.

Policies, processes and controls that are designed to improve performance can often deliver unintended, negative consequences.

That’s why London’s mayor, Boris Johnson, is removing street furniture — signs, traffic lights, barriers and road markings — in order to create uncertainty about who has the right of way between cars, cycles and pedestrians and to encourage all road users to act more responsibly.

The roll-out of the scheme in London follows a trial where the number of collisions fell by 40 per cent.

Business leaders also need to remove unnecessary barriers that prevent allow their people from giving their best. Reducing the level of control may lead to the odd preventable accident, but as with the London traffic trial, it can create better overall performance.

So how do you know if you have excessive and inhibiting levels of control? Here are five indicators that your organisation has installed too much street furniture.

1. No guiding purpose or intent. A sense of organisational purpose, over and above the pursuit of profit, can have a galvanising effect on an organisation and how it operates. Whole Foods, the US natural food supermarket, has a mission of “Whole Foods, Whole People, Whole Planet”. It has used this clear purpose to give its people broad discretion to make effective decisions.
2. More than seven key performance indicators (KPIs). Psychological studies show that people cannot hold more than seven pieces of information at once. Having too many KPIs creates confusion and hinders development. In “Good to Great”, author Jim Collins argues that great organisations establish a single KPI to keep managers focused on what’s truly important.
3. Employees are not given, or made accountable for, specifically defined outcomes. Marcus Buckingham’s book, “First, Break All The Rules”, concludes that the best managers focus their time on setting the right outcomes, not on prescribing how the results should be achieved. We all have different needs and preferences. Great managers play to this by being rigorous on the destination but not on the route taken.
4. An intolerance of failure. Behind every great breakthrough and success is a mountain of failure. Thomas Edison, who filed over 1,000 patents and is credited with developing early solutions for mass communication and electricity distribution, once said of his failures: “I have not failed, I’ve just found 10,000 ways that won’t work.” Similarly it took Tesco over five years and several prototypes to build a winning model for its Express format.
5. Annual planning and budgeting. Relying on annual planning cycles to discuss strategy, direction and investments kills the ability of your organisation to respond to fast-moving markets. Former CEO of eBay Meg Whitman said of her company that, unlike the traditional strategy approach of annual meetings, “strategy sessions are needed several times a week.”

What other controls prevent people from achieving dramatically better results?

 (Photo: .Martin., CC2.0)

Companies are very good at diversity, if you believe their annual reports. On the cover there are likely to be photographs of a melting pot of races, religions, minorities and at least two genders.

This diversity will then give way to reality inside the report which will feature paeans to the chairman, chief executive and senior officers who all look suspiciously as if they share the same race, age, religion, gender and golf club.

Women are allowed into the boardroom — either to serve tea and clean up, or to be a harmless non-executive who helps bolster the flagging diversity credentials of the company at senior levels.

But the real diversity problem is not the one that politicians worry about. The real diversity problem for many businesses is deeper and more dangerous. Even organisations that do quite well at superficial diversity fail the business diversity test.

Many companies pride themselves, like McKinsey, on being a “one firm firm”. They celebrate their strong and cohesive structure which enables them to act as a truly global firm. No-one will mistake a McDonald’s, Disney or Starbucks for anything else, wherever it may be in the world.

The implication of a uniform, global culture is simple: we don’t care what race, religion, age or gender you may be as long as you sign up to our corporate culture, our way of doing things and our way of thinking. In diversity terms, that really sucks.

The reality is that most organisations value intimacy over diversity. A homogenous culture makes it much easier to communicate, understand each other, make decisions quickly and to transport ideas around the world.

The downside is that such uniform cultures are not much good at innovation. The established status quo is preferable to the risk of the unknown.

So, as long as the world does not change much, these uniform cultures can survive. Unfortunately, the world has a habit of changing. In the last 25 years 75 per cent of the members of the Fortune 100 and the FTSE 100 (top UK companies) have either been overtaken or taken over.

This is an abysmal survival rate for the greatest businesses on the planet. It indicates that not many of them are much good at adapting to a changing world.

A bit more diversity and a bit less uniformity is not about keeping regulators happy. It is about finding the capacity to change and to survive.