Archive for the ‘Operating Performance’ Category

Avoiding The Regulatory Tailspin

Friday, July 29th, 2016

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Countless businesses today are being thrown miles off course in accomplishing their profitable growth goals (banks, financial services, insurance, gaming, healthcare, energy and so forth) largely because of their own inadequacies. They are like the pilot who hits turbulence at 30,000 feet, loses their bearings and temporarily or permanently is sent into a tailspin. If you are going to fly, you accept there is a high probability of turbulence. If you are providing essential products, services and relationships in society today, expect to be held to account for your standards and behaviour. Stop moaning.

Leaders have two options: embrace or resist regulation. Then adjust the speed, direction and ascent of the profitable growth plans to accommodate the proposed changes. Here is what sets apart my very best clients:

  1. Positive Regulatory Mindset. Business leaders, who maintain a perspective that says “there are abundant opportunities in front of us, we didn’t wish the regulation but we will learn to live with it”, empirical evidence suggests dramatically outperform others. Change is a constant and our futures are about embracing change (biotech, pharma). Contrast this with those business leaders, who only see fear, limited opportunities on the horizon, vent loudly at the negative consequences and create Domesday predictions (airlines, agriculture, bookmakers). Change is a threat to their cosy status quo and they do their level best to resist it until such that they wearily accept it or fold their cards.
  2. Impressive Regulatory Engagement. Seek to be on the front foot with regulators, actively maintain a presence in the regulatory dialogue within the industry, take positions on regulatory boards and consumer watchdogs.
  3. Superb Regulatory Antennae. Most regulation is reactive to events, changes in consumer perception, media perception and political perceptions. Rarely can you accurately predict the timing but you can sense the shifting of opinions and the force fields (changes in critical factors ‘+’, ‘-‘ or ‘neutral’) that create the momentum for change.
  4. Rapidly Mine Regulatory Motives. Behind every regulation lies an emotional imperative. Understand why a powerful voice(s) at the regulator or consumer body discernibly sees their self-interests best served in implementing the new policies and procedures, in the proposed time frame and manner (increased power, greater influence, greater control, greater political influence, greater credibility and so forth).
  5. Quantify Regulatory Value. “Value” in the form of tangible, intangible and peripheral benefits that arise from regulation (although sometimes they may be hard to discern) and the investment required to enact it. Tangible benefits over a defined time period (clawing back funds over trading or market abuse scandals). Intangible benefits and the breadth of scope (bankers behavioural changes and sweeping industrywide cultural changes to treating their customers fairly). Peripheral benefits (structural market changes such as the Dodd Frank Financial Regulatory Reform Bill and the impact on proprietary trading businesses in investment banks). Lawmakers and regulators are typically prudent risk takers, smart business leaders are keenly attuned to how they weigh up the risks and rewards (personal and professional) and act.
  6. Anticipate Regulatory Opportunity. Outstanding businesses have a regulatory radar system (Corporate Affairs) embedded into the upper and mid-level line management tiers that excels at alerting them to: Why there is a need for regulation? (public sentiment) Why now? (window of opportunity) Why on the basis proposed? (tried and failed with other legislative tools)
  7. Acute Sense of Regulatory Timing. Can you identify the priority that is driving the need to enact the regulation (political fall out, media outcry, changes in public opinion etc)? Timing is about regulators and lawmakers priorities. Stuff gets done because they need to be seen to be doing something (seriousness, urgency and gravity behind the issue). Inevitably, it is almost overpowering, ill-conceived and often off target but that is not the point. Lawmakers and regulators can show they acted. Don’t blame us.

Large or small businesses, the dynamics are largely the same but the consequences are often dramatically different. How many of these skills, traits and expertise do you Managers possess today? What do your profitable growth plans demand that you possess in future in order arrive safely at your desired destination? How do you best upgrade your regulatory response toolkit and when?

© James Berkeley 2016. All Rights Reserved.

A Fool’s Wisdom

Wednesday, March 23rd, 2016

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In this Trumpian era where people are encouraged to say anything however crass or non-sensical to get noticed on social media platforms, I see so called business advisers increasingly adopting the tactic.

Today on Hotels the global hotel industry’s foremost media blog, a guest contributor and acclaimed expert, writes a two part post suggesting the industry is retarded if it doesn’t adopt a nickel and dimeing strategy! His point is that hotels need to follow car rental and airlines in better educating their customers about the hidden value they are providing, the best way to accomplish that is to charge them for every extra. I read the posts twice to check it wasn’t April 1.

What the writer fails to consider is how much more customers would pay if the product was better. It is this type of poverty mentality that kills growth businesses.

Don’t be drawn into a fool’s wisdom just because it is seemingly coming from a highly credible source. Ridiculous advice really says more about the source’s credibility than the advice itself.

© James Berkeley 2016. All Rights Reserved.

All Black Execution

Monday, October 26th, 2015

People talk about champions or champion teams.

World-class execution under pressure, whether in sport or businRWC Semi Finaless is largely about positive behaviours and experience rather than skills.

The ability to stay in the moment, to respond swiftly to opportunity and to think clearly in adversity.

The New Zealand rugby team, the world champions, on Saturday faced with being bundled out of rugby’s showpiece event at the semi-final stage provided a “master class”.

Bouncing back from an underwhelming first half of rugby on Saturday (too many penalties) and playing with 14 men, for 10 minutes they shackled their opposition in their own half.

When opportunity presented itself they resorted to the pragmatic taking a rare drop goal and changing the momentum of the entire game and triumphing over arch enemies,  South Africa. They did this largely by changing their mindset and stopping giving away penalties. The inspiration coming from the experience of their captain Richie McCaw, Dan Carter and Conrad Smith.

Copyright James Berkeley 2015. All Rights Reserved.

Its The Management, Stupid

Wednesday, July 1st, 2015

McKinsey has cottoned on to what I have been saying for several years. The insurance sector’s obsession with data and analytics is irrelevant if the management of the businesses aren’t willing or able to change their beliefs and attitudes.

www.mckinsey.com/insights/financial_services/what_drives_insurance_operating_costs?cid=other-eml-alt-mip-mck-oth-1507

In a year when weekly landmark deals have rained down like confetti in all corners of the industry, it raises the following questions:

  1. Why is the industry is so in love with hiring C-level executives from within?
  2. If so many leaders are poorly qualified or unwilling to address business complexity, operating models, IT and performance management as McKinsey suggest, why aren’t Board Chairs and shareholders more assertive in casting a wider net?
  3. What would it take to attract leaders with the skills and volition to challenge widely held beliefs and make meaningful changes that transform insurers’ operating performance?

Therein lies the key future challenge for the sector and the experts who are able to help answer those valuable questions will be able to charge whatever they want.

© James Berkeley 2015. All Rights Reserved.

 

The Masters of Wealth Management

Thursday, April 10th, 2014

Just back from a WealthBriefing event, titled “The Elephant In The Room”, exploring the operational challenges facing the global wealth management sector.  It struck me that so many private bankers, wealth managers, consultants, media and others serving the needs of customers in that sector overlook the most critical “need”  – strong leadership – in favour of urging more time, money and effort being directed towards tactical improvements (enhanced customer experience, greater operational synergies, technological advancement etc.).

It is rather like the NBC commentator berating Rory McIlroy’s waywardness off the tee at Augusta last year on his new Nike clubs and his personal life. When it is blindingly obvious to the casual observer, it is his brain that needs to operate better, and more clearly, on the golf course.

Unprecedented levels of profitable growth, just like low rounds on the perfectly manicured fairways of Georgia’s fabled course, are largely a consequence of:

1. Exceptional and consistent decision-making (weighing up various outcomes and results, the need for advice and the degree to which you are comfortable making unilateral decisions)

2. Knowing when the right time to seek help is (time invested vs. level of conviction)

3. A willingness to involve subordinates in the strategy and tactics (honest feedback, constant improvement and increasing effectiveness).

The wealth management business has a small number of people running extremely profitable and dynamic businesses. However, it is largely characterised by a swathe of big hitters and some less powerful rattling around in the woods, chastising themselves for past errors, desperately trying to avoid regulatory sand traps, and hoping against all hope, to survive off a surfeit of miracle recoveries. Some might get lucky and avoid Rae’s Creek; others will wave apologetically to the fans and head off to the drop zone. All in the knowledge that it is not how far they can hit it, how sweetly they swung the club or how many sit ups they did in the morning gym session, it is how consistently they make the right decisions.

The overriding priority in the sector today is to help current leaders acquire the skills and competencies necessary to be an effective leader. In businesses, where that is in short supply, they need to bring in others from outside the sector, who bring a blast of fresh air (fresh ideas, insights and regeneration) and high levels of self-worth. The Wealth Management industry is a very worthy and important part of the Financial Services sector, yet like newspapers, airlines and banks, they must accept that past success is no guarantee of future success. They must learn to adapt to the situation, other competitors and the degree of urgency demanded by the regulators and their customers. That above all else requires strong and effective leadership, not a preoccupation with tactical improvements.

© James Berkeley 2014. All Rights Reserved.

 

Ultra High Net Worth Clients, Ultra High Net Debt Advisers

Thursday, January 16th, 2014

Headline sales in 2013 of premium art, private jets, houses, superyachts, bloodstock and the other foibles of  ultra high net worth individuals create impressive column inches for the advisers, brokers, dealers and auction houses. A certain spring arises in the step of those individuals welcoming you into their offices. However behind the perma grin, firm handshake and the Ralph Lauren Black Label double-breasted suit lies an unspoken truth. Whisper it quietly, the cash banked tells a dramatically different story. The wealthy Russian client’s private office has withheld the most recent payment, the Chinese billionaire is not responding to the request for settlement of his account, and the Indonesian client is pre-occupied with the recent changes in government policy on the fortunes of his business. The list goes on…..

Advisers and intermediaries have largely improved their pre-sale credit checks over the last decade. However, their cashflow methodology has hardly changed. I am referring to how they convert revenue into cash banked. The balance sheets, particularly amongst the top 10 firms in each sector of premium art, private jet, real estate, bloodstock, real estate, jewellery are littered with outstanding debtors.  It is painful but not terminal. Routinely, executive memos are issued in the third and fourth quarter of the financial year advising all non-essential planned expenditure (headcount, travel and entertainment, marketing, longer-term client initiatives etc.) is to be put “on hold”. Get below this tier in each sector and there are firms whose very survival is on the line.

It is like Kate Moss coming to terms with twenty years of hard living in the bathroom mirror. Not such a pretty sight away from the flashlights of the fashion world’s jeunesse doree.

My observation is that many of these advisory and intermediary businesses suffer from a lack of goal congruency and mutual self-interest in the middle management layers of these businesses.   The best intentions of executive management are distorted in the day to day dealings with the clients. Cash collection is not seen as important in the organisation or an executive priority. There is no carrot or stick. Indeed, in many cases the client’s principle contact in the firm is not accountable for banking the cash. It is the responsibility of administrative or finance people. When pressure is applied on the principle contact, fearful of losing the cherished relationship or not knowing how the UHNW individual will react to his “honour” being questioned, the adviser or broker procrastinates. He or she makes up excuses to “Finance” why Client X is unavailable or it is the wrong time to ask (another valuable consignment is on the way or they are in delicate negotiations to buy a replacement yacht or plane).

Here is what these firms need to immediately act upon:

1. What are the desired behaviours and results we seek from our clients ? (our terms and conditions are routinely adhered to with very few exceptions, no debtors beyond 90 days and so on)

2. What are the desired behaviours and results we seek from our advisers/brokers? (high-level of self-worth and self-confidence, act as a peer not a pawn of the client, favourable terms agreed at all times, preventative and contingent action in place for cash collection, accountable for their own behaviour and performance)

3. Where are the mis-alignments?

4. What is the priority? (consider the seriousness, urgency and growth of each issue)

5. What action is required? (clearer business goals and accountabilities, improved individual skills and behaviour, improved tools and communication, improved experience and so on)

6. How do we make that happen? (stronger exemplars and avatars in senior management, training, development, more effective individual performance and reward, other carrots and sticks)

My experience is that sustained improvements can be dramatic if leaders in these businesses and their subordinates have the skills and volition to make cash collection a priority and where necessary, seek external help.

© James Berkeley 2014.