Posts Tagged ‘crisis management’

Cracks In The Nest

Wednesday, May 31st, 2017

Attached to my Parents loggia at their country home is a retractable sunshade that provides welcome shade to the outside dining area. This winter, a bluetit created a nest in one end of the sunshade, the giveaway was a few cracked shells lieing on the cobbled stones below. This past weekend’s warm weather created the need to open the sunshade and from the nest flew three small bluetits with their Mother hovering nearby. Unfortunately, the cat spotted one of the chicks later in the afternoon and it didn’t make it back to safety.

A huge number of venture businesses are currently incubated in what appear to be “safe” homes for innovation (corporate accelerator, incubator and venture funds), yet the opposite is true. When the overriding “need” arises to focus on the corporate organisation’s key strategic area (sales growth, capital allocation etc.), many of those early-stage venture will be deemed irrelevant, too weak to survive or fall prey to others. Insurance, financial services and the broader “Internet of Things” businesses are particularly vulnerable, yet most people are looking in the exact opposite direction. No one can predict precisely when that might be but history tells us it will happen. What entrepreneurs would be wise to consider is:

  • Why is this the right home for us today, not when we started? (access to capital, talent, innovation, markets, leadership etc.)
  • What changes (foreseen or unforeseen) in the Corporate organisation’s circumstances (balancing short and long-term profitable growth and their investors’ demands) would dramatically change their opinion?
  • Are our preventative (lines of communication) and contingent measures (Plans B and C) sufficiently robust (speed and quality) to safeguard our firm and its’ investors future should our corporate support end at short notice?

Far too many entrepreneurs are so immersed in building their businesses today, they are overlooking the risks attached to “building a home within a corporate home”, at their peril.

© James Berkeley 2017

 

 

Producing and Rewarding Loyalty

Monday, November 2nd, 2015

I am always fascinated by the differences between “producing” and “rewarding” loyalty.

In a great many financial services businesses, particularly in post merger integration or when members of a leadership team walk out, there is a huge confusion between the two. You cannot motivate an individual to stay. Motivation comes from within the individual.

He or she makes a determination that their self-interest is best served by being loyal to their direct report and the firm’s strategic direction. In return for their contribution to the firm’s future health and well-being, the employee has expectations (pay, incentives, affiliation, career development and so on) that must be met or exceeded.

This is not Alcatraz. Legal “lock up” remedies that demand “compliance” are largely ineffectual.  Equally, peer pressure,  for example, midway through the sale process, “we are best served by sticking together”, only works where there is hard evidence or strong anecdotal information to support it (peer pressure).

To understand how you produce loyalty, turn the question upside down, “what would most likely cause the individual to walk away?” Write down a list of 10 probable reasons. Highlight the five most probable reasons. Delete the other four most probable reasons and work on the top reason. Once addressed, move on to addressing the next most probable reason.

Ask yourself, “what alternative exists or we could quickly create to meet this objective?” and then, “How easy is this to implement?” (timing, approval, flexibility)

Of course, your accuracy and probability of success is dramatically enhanced by having this conversation with each individual in-person on neutral territory.

If you think that by hiding from having the conversation you are safer, you are deluding yourself. Silence is not golden, it is merely a retreat into a higher risk and more obscure position.

The default position for many owners of newly acquired businesses or businesses responding to a mass departure of executives is to throw money at it. A belief that a one time retention bonus alone will “secure” the businesses prized assets (people, clients, intellectual property and so on). I am sorry that is crap. You are dealing with human behaviours.

Financial incentives in the form of carrots need to be frequent to impact human behaviour. One off payments do very little to engender loyalty other than to negatively impact the firm’s expense growth and cash resources. You are making disillusioned key employees richer but not more committed to the firm’s future.

Indeed, retention bonuses in isolation are often counter effective. People believe what they see happening not what they hear or read in the organisation.

You immediately create the “have’s” and the “have not’s” in the acquired or ongoing business (divisive behaviour). The “have not’s” lose trust and respect for the “have’s” (a belief, often correct, that their loyalty has been bought). You are encouraging leaders to protect THEIR nest egg (short-term thinking) ahead of furthering your interests (future growth and expansion).

Money alone is rarely the reason someone leaves a financial services business with the exception possibly of a heavily commission-orientated trader, broker or relationship manager. In 75% of cases I observe it is about the relationship with their direct boss. Therein lies the biggest clue to producing loyalty, develop great bosses who engender high levels of trust and respect from their subordinates (an honest-to-god belief that they will do the right thing for their subordinates).

In the acquiring company, make it a risk management priority in the due diligence phase to go through middle managers’ past performance in making smart people decisions and managing crises. Does the business have middle managers who command high, moderate or low levels of respect from key subordinates? Find the “glue” (answers) and you will be on the fast track to making smart decisions about securing the firm’s prized assets.

© James Berkeley 2015. All Rights Reserved.

 

 

 

Putin’s Boardroom Lesson: Who Let The Dogs Out

Wednesday, February 19th, 2014

The heightened escalation of hostilities in Kiev splashed across global news media goes to prove that even the most choreographed “coming out” parades or new launches can be a hostage to fortune. The billions invested in Sochi to showcase a confident, high-growth and modern country are submerged beyond powerful images of fires, death and Russian political influence in Ukraine’s domestic affairs. When the 2014 Winter Olympics are over, it is clear no amount of images showing celebrity giant slalom skiers, 15 year old ice skaters and singalongathon’s  at the bottom of the Big Hill will stick long in the mindset of most people watching around the world. It is also a timely reminder to executive management tasked with exploiting profitable growth opportunities in a high growth market that they can never control or plan for everything.

  • If you have the predominance of your infrastructure in place, start, don’t wait to be 100% ready or 100% certain.
  • You must have preventative and contingent action in place for incorrect assumptions (market size, market demand, propensity of buyers to buy through different distribution channels) or unplanned events (the arrival of a new competitor, the announcement of new regulations)
  • You must establish clear accountabilities within the business for monitoring progress towards business goals and appropriate interventions
  • You must plan in advance to regularly bring good news to your key constituents, such that the need for changes of direction “on the fly” are put in the appropriate context
  • You must hire people with the skills, aptitude and personal resilience to work daily in a highly ambiguous environment
  • You must surround them with the appropriate tools (technology), support (feedback and resources) and authority (decision-making power) to manage a safe passage through the rocky terrain

There is a slightly macarbe irony watching a Russian DJ pumping up the crowd to the strain of 1990s anthem “Who Let The Dogs Out” in a momentary lull before the evening final of the ski jumping, and events across the border this week in the Ukraine. What is clear is that even the most powerful and wealthy governments and businesses cannot control everything and have to prepare for foreseen and unforeseen obstacles.

© James Berkeley 2014. All Rights Reserved.