Posts Tagged ‘profit’

Uncommon Culture and Family Office Direct Investing

Monday, March 27th, 2017

 

I often ask CEOs in high growth investee businesses controlled by sizeable Family Offices,  a simple question: “Are you being treated as you would treat others in the business? Be honest, in reality, how often is that the case?” The single most common underlying issue, is conformity to the prevailing belief system.

CEOs have differing levels of propensity to conform to the beliefs that govern the behaviour of a Family and the key people in its’ Family Office (the culture). At one extreme, highly inflexible, and at the other end, highly flexible.

The most successful families in direct investing have adopted a belief system that is highly similar to outstanding for profit and not-for-profit organisations. Think of Weybourne Partners (James Dyson’s Family Office), MSD Capital, (Michael Dell’s Family Office) or Grosvenor (the Duke of Westminster’s family entity).

In contrast, where direct investing has historically been a very small part of a Family’s wealth but a decision is made to ramp up its’ activity, culture is a huge issue. The Family Office wants to increase control and involvement of the capital deployed in profitably growing the portfolio businesses. Yet, the operating beliefs that pervade the Family Office rarely change or not quick enough, to support the new or enhanced direct investing strategy.

Take a recent example, the newly installed CEO in a European luxury business, who arrived with a strong industry reputation but zero experience working within, distinct from consulting to Family Offices. The coterie of key people in the Family Office, what I term the “protectors” sought to immediately reinforce and immerse the CEO in the existing belief system. “This is how the Family has always done things….” “This is what Mrs X expects…” “This is how you communicate with her….”  Yet, if the luxury business was to achieve the shared vision of the Family Principal and the CEO, some quite radical changes needed to be made to the Family Office’s typical direct investment approach – changes to governance, speed, communication, rapid access to resources and so forth. The “house style”, wasn’t going to work in a fast moving, highly competitive sector.

Does the CEO conform or push back? If they do the latter, how do they do that without upsetting the apple cart? How do they accomplish that if the protectors, and the Family Principal, consciously create distance? How do they stop the protectors “playing” the Family Principal (self-interested feedback) and not projecting their biases?

There are three means of the Family Office getting the investee company’s CEO to conform: by coercion (threat), by peer pressure (“the in-crowd”) or by self-interest (personal benefit). Only one alternative works, self-interest.

Ultimately, it requires

  1. A CEO with a high level of self-worth and the skills to not only formulate strategy but implement it.
  2. A flexible and intellectually honest CEO. Not to the extreme of absolute conformity and equally never compromising where it is detrimental to the critical and highly important aspects of their strategy.
  3. A Family Principal and their key people with the volition to listen and act appropriately.
  4. A willingness to adapt the Family Office belief system to the needs of the new direct investment strategy and where appropriate, the performance, accountability, feedback and rewards systems.

There is a lot of talk about an inability to change family culture, most of it is rubbish. Of course, the Family Office can change but does it possess the will to do so? If it doesn’t that needs to at the top of its’ direct investing criteria in selecting portfolio businesses and the leadership traits it hires in.

© James Berkeley 2017. All Rights Reserved.

 

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.

RPM I: My Best Laid Plans Are Screwed

Friday, April 1st, 2016

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I recently talked about the organisational dynamics and consequences of Resilient Growth in the value creation process for large and small businesses.

Resilient Growth

Behind resilient organisations lies resilient people. People with the skills, expertise and behaviour at all levels to thrive not just survive on the firm’s profitable growth journey. To maintain and increase the profitable growth momentum in the organisation. Think of this as keeping the “rev” counter high.

Knowing “how” their behaviour accelerates or destroys profitable growth is important but maintaining the right mindset and knowing the right questions to ask is the difference between someone telling you what route to fly and actually co-piloting the plane with you. Huge!

Starting today in a new series, titled Resilient People & Momentum (“RPM”), here are my observations from over 450 clients around the world over the past 25 years in very common situations, where I have had a ringside seat.

Situational Overview: The New Market Entry Strategy Has Gone AWOL – your best laid plans aren’t working in the real world. The assumptions made about the market size, demand, relationships, marketing impact, acquisition costs, ease of delivery and available resources are miles off in reality. Executive management, investors and employees are fretting madly or indeed, clamouring for your blood. Cut and run, retire graciously or come out fighting?

Resilient People & Momentum Mindset: You are a prudent risk taker. You have a track record of past success honed by past wins and losses. You live for ambiguity. This is your time to shine. Failure is not about you personally. No one is firing at you. You have tremendous value and results to provide to others in future. You can work it out with others help given their support, time and resource.

Resilient People & Momentum Questions: Your first and most important assessment is with yourself 

  1. Is there a visible outcome (result and value) that is good for my key constituents?
  2. Is there an alternative allowing for speed and the quality of the outcome that I can immediately call on or develop (good news: unless the car has crashed there is always an option)?
  3. What are the attendant benefits and risks (after preventative and contingent actions are put in place)?
  4. What is the best course of action for all parties (accepting that you are looking for a compromise that preserves everyone’s critical and highly prized issues but dispenses with the moderate and low-level stuff)?

Liked this? Daily bursts of resilience advice to follow on this blog. Please come and read, share your experiences and comment. If you prefer, a quick confidential “free” debrief, write to me at james@elliceconsulting.com

© James Berkeley 2015. All Rights Reserved.

Publishing Path

Tuesday, September 8th, 2015

Walk in a hotel and the best concierges will not only point you towards where to go, they will lead the way to your destination and in so doing provide immediate value, sometimes in surprising ways (what to see, where to eat, how to get into the must-see show).

What does your publishing tell others (ideal customers, shareholders, employees, business partners) about “what”, “where”, “when”, “why” and “how” you want them to act with your help?

Telling me what you think is moderately valuable, showing me how you would act with my money and best interests at heart is impressive. Having others doing the telling (testimonials, hosted events, forums and so on) is even more impactful.

Every bank, insurer, asset and investment manager and advisory firm is weekly or daily self-publishing (published research, newsletters, online presence). The overwhelming majority of the effort is having little or no impact on their key constituents’ behaviour. That is a fact. It is bland, it is regurgitated ideas packaged as “new” or statements of the blindingly obvious. The intent is not clear or it acts as a “stop sign”.

They persist “because everyone else is doing it”.

Stop for a moment and ask this:

1. What would my ideal customer base look like in 12 months?

2. What aspects of my publishing would not only attract them to our brand (results, credibility, expertise) but cause them to act (emotional connection) in a positive manner? That is a huge difference.

3. What offerings do we have or we can create that our publishing can point existing or prospective clients towards at different price points offering increasing value?

4. How do we best curate our publishing within an existing client or a new client relationship?

Publishing is like a sequence of sign posts with different dimensions.

1. Are they pointing towards your future or past business?
2. Are they moving the customer faster towards your offerings and their desired improvement?
3. Are they offering immediate value that builds trust and enhances your credibility?
4. Is the frequency and quality of the publishing consistent with where you want your business, relationships, customer base, finances and productivity to be in 12 months?

A nice smile or an arm pointing out where to go is helpful but if it doesn’t visibly get me to my desired destination.

Focus on results (increased credibility, lower acquisition costs, stronger brand, larger pipeline) and work backwards with your publishing as the “sign posts”.

Copyright James Berkeley 2015. All Rights Reserved.