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Disagreements at the top

March 16, 2012 1 comment

This week the news reported the departure from their companies of two executives – both long-standing.

Greg Smith’s departure from Goldman Sachs, after 12 years, has been reported globally. This is not surprising – as everybody loves to hate bankers, and investment banks. The claim that Goldman Sachs viewed clients as “muppets” is a delicious image, and so it’s not surprising to see a journalistic feeding frenzy following Smith’s resignation letter, published in the New York Times on 14 March 2012.

The real question however is whether Smith’s departure matters. I think that it depends on what clients do, and I suspect that the answer will be very little or perhaps nothing. Obviously Goldman Sachs’s aim is to make money. In a testosterone fueled environment, bravado, where clients are called muppets and phrases such as “hunt elephants” (referring to getting customers to spend more with you) shouldn’t be a surprise. If anything, the discussion will raise again (for a few more weeks) the issue of banker remuneration. It may even have a salutary effect by making firms such as Goldman Sachs emphasise that ethical behaviour in business must be the norm, and that the 1980s dogma that “greed is good” is not an asset post the 2008/9 financial crisis. As Goldman Sachs has said in response:

In our view, we will only be successful if our clients are successful. This fundamental truth lies at the heart of how we conduct ourselves.

In fact, as the Economist suggests, the real muppet may be Smith himself, for not realising that clients aren’t stupid, and that if they weren’t getting value from the firm they’d move elsewhere. I suspect that the real reason for Smith’s resignation was sour grapes. Perhaps somebody got a bigger bonus. Whatever the reason, it’s unlikely he’ll find similar work with other banks – as no company will want to employ somebody who is quite so vocal in their condemnation of their former employer.

The more interesting departure however, from a strategic perspective, was that of Richard Brasher, the UK boss of the supermarket Tesco. Brasher was the most high profile departure since new CEO, Philip Clarke, replaced Sir Terry Leahy. Leahy retired from Tesco at the end of February 2011 and since then a number of other senior executives have left or are leaving the firm. These include

  • David Potts, head of the Asian operations who will retire, aged 55, from Tesco in June;
  • Andy Higginson, head of Tesco bank and former group finance and strategy director – also aged 55;
  • David Reid, Tesco’s chairman – who was replaced by Sir Richard Broadbent in November 2011;
  • Lucy Neville-Rolfe, Tesco’s director of corporate and legal affairs, who will retire from Tesco in January 2013. Lucy Neville-Rolfe’s role is being split into two – neither of which will be a board post;
  • Richard Jones, Head of Clothing who has moved to the private Irish supermarket, Dunnes, taking the same role;
  • Laura Wade-Gery, CEO of Tesco.com and Tesco Direct, and head of non-Food, who has moved to a board-level position with Marks & Spencer.
The news stories reporting Brasher’s departure mentioned Tesco’s poor winter sales implying that this was the reason for the change. Philip Clarke will take over Brasher’s role, combining the job of UK CEO with that group Chief Executive. Some reports suggested that deep disagreements existed between the two over strategy for the UK – which issued its first profit warning for 20 years. Tesco has not denied this. Although originally Clarke said that there was no rift between the two, he changed his tune after the announcement of Brasher’s departure, saying

You can’t have two captains in a team

However it’s not just Brasher that seems to be finding a problem. The number of senior executives – especially long-standing executives – leaving Tesco suggests profound disagreements at the top.

David Reid was expected to retire and Tesco had been looking to appoint a new chairman to replace him. Potts, Higginson and Neville-Rolfe are also reported to be retiring. Their departures, so close together, suggests an unhappiness with Clarke’s management of Tesco as generally companies try and prevent large-scale boardroom changes to ensure continuity.

When a board is split over strategy and cannot agree, continuity is not possible. Management is all about consensus and agreement on the path that should be followed.  If this is not possible  there has to be change, with one side or the other leaving. The alternative is chaos, resulting in the company losing share and profitability as the focus moves to internal dispute, rather than market growth. This appears to be the situation at Tesco – forcing Philip Clarke to assert his authority. It was either his head or Brasher’s. As Clarke said: there can only be one captain.

 

Note: After writing the above article I came across a great Harvard Business Review blog looking in depth at Goldman Sachs culture and how it may have changed over the years since Greg Smith started (and why). Worth reading for any Goldman Sachs watchers:

http://blogs.hbr.org/fox/2012/03/greg-smiths-resignation-op-ed.html

The Art of the Possible

October 17, 2010 2 comments

I try and make sure that my blog posts stand on their own – and if read in a year’s time will still be relevant. Although I sometimes focus on news issues, I always try and look beyond to lessons that can be learned.

The news this week throughout the world has focused on the rescue of the Chilean miners. News stories have focused on how the 33 miners kept up their spirits, their faith in God, their humility and so on. The rescuers were praised for their commitment to free the miners – and that they never gave up.

There are numerous lessons to be drawn from this news story – for management of businesses and humanity in general. However I’m not the first to spot the connections. Jeff Kaplan’s ThinkIt blog post Corporate Lessons from the Chilean Miner Rescue is worth reading. Jeff highlights how the rescue showed commitment to save the miners, determination to rescue them, and for the miners to stay alive, cooperation to achieve the objectives, and several more aspects that made the rescue possible.

There was one area that Jeff didn’t cover, and that is that believing in yourself can turn something that seems impossible into something possible. Benjamin Zander, the  conductor of the Boston Philharmonic Orchestra co-wrote a great motivational book – “The Art of Possibility“. I think that this is the true miracle of the Chilean miners and the best lesson to be learned. Rather than give up the miners as lost, efforts were made to locate them. When they were found, even more efforts were made to get them all out alive. What seemed impossible was proved not to be – difficult, but achievable.

However bad things are, giving up is not the solution. Rather, try, try and try again. Failure should never be an option. Instead focus on succeeding – and if things don’t go right first time, try again, learning the lessons from the first time so that mistakes aren’t repeated.

Management Partrnerships

August 11, 2007 Leave a comment
Last year I wrote a blog entry on leadership. That entry was based on an idea expressed by Rabbi Mendel Lew, and given in one of his weekly synagogue sermons. Today Rabbi Lew gave another sermon which I think has implications for management.

The topic was a strange verse in the Book of Genesis just prior to the creation of Adam’s wife, Eve. Genesis chapter 2 verse 18 is generally translated from the original Hebrew as follows: God said, ‘It is not good for man to be alone. I will make a compatible helper for him’. Two verses later (verse 20) the same idea comes up. The man named every livestock animal and bird of the sky, as well as all the wild beasts. But the man did not find a helper who was compatible for him. The Hebrew words “ezer kenegdo” are translated as compatible helper or similar variations (e.g. a suitable helper) but a more literal translation would actually be a helper against him or a helper who contradicts him / argues with him. (For linguists – ezer means “helper”, while kenegdo means “against him”)

So what does this have to do with management. The second verse quoted gives the clue – in that Adam was not actually on his own, as implied in the first verse. Adam had companions – dogs, cats, livestock, etc. However none could advise him or work with him. They were all subordinate to, and dominated by, him.

There are two types of managers

  1. those who seek to dominate those around them
  2. those who listen to, work with, and respect the opinions of those around them.
The first sort generates “yes men” and “yes women” who dare not question the wisdom and leadership of the manager. The problem with this sort of manager is that if they are wrong they will have nobody to tell them so. They will have helpers – but nobody to tell them when they are wrong, or even to discuss issues objectively. Nobody will risk contradicting such managers – and if such a manager did ask for the opinions of those around them, the answers received would be crafted to correspond to what people thought he/she wanted to hear. Essentially the helpers are a bit like a sheepdog rounding up sheep for the shepherd – very useful, but only so long as everything is straightforward and there are no problems. The moment problems occur, the manager – like the shepherd – will be alone. Essentially this type of manager has nobody to share ideas with: he/she has no peers to listen to, to respect and to view as equals.

For true management and leadership success this is not enough. You also need to hear contradictory opinions and take into account the views of those who disagree with you – who are against you. From the differing opinions you can then develop a balanced viewpoint – and end up making better, more profitable decisions.

In a recent blog entry (Thinking Hats) I suggested that prior to making a decision you look at the problem from six different perspectives, with the sixth being a synthesis of the other five. The same applies to management: to manage successfully you need to consider the opinions and attitudes of those around you. You need an ezer kenegdo whose opinions are seen as equal to your own, so that you can balance your and your peers’ views when making decisions.

However this only goes as far as the planning stage. When it comes to action, you need to think as one – and act as one. There should be no scope for different people to pull in contradictory directions. Successful managers should take on board diverse viewpoints, and then come up with rational strategic or tactical decisions that bring people together; that unify the various perspectives; and that lead to coherent actions that fulfill agreed business aims and objectives.

The question of leadership

July 2, 2006 Leave a comment

I last wrote about leadership almost a year ago. Yesterday I heard a talk that made me think again about this topic.

Understanding leadership is a crucial competitor analysis skill. Poor leadership is a weakness which is reflected in the strategies taken by the company. And companies with poor leaders are less likely to survive when competition intensifies. The opposite is the case for good leaders.

But what makes a good or bad leader. Is it just an ability to come up with winning strategies, or is there more to it.

I’ve written before about how the Bible can teach us lessons that are applicable for today’s business. The biblical story of Korach – told in the book of Numbers is one story that illustrates the issues of leadership. Korach was a cousin of Moses, the Israelite leader. According to Jewish legends, he was fabulously wealthy, and he was also sufficiently charismatic to attract several followers. He approached Moses and asked why he was being passed over – questioning the right of Moses and his brother Aaron to be top dogs. God was not amused, and eventually Korach and his followers were destoyed.

But was it so wrong to aspire to leadership. What was so special about Moses and Aaron that made God accept their leadership style and not that of Korach. Afterall, Korach had proved that he could be successful – his wealth and followers showed this.

The answer lies in how you lead. There are two sorts of leader. The first, leads for reasons of ego. They want to lead. They want to be the boss. Essentially, their ambition is to make things better for themselves, and if those beneath them benefit, then all the better. They thrive on the feeling of power and control that leadership can convey. This type of leader can be viewed as a taker. They take what is given from their followers and those underneath them. If they are good at strategy, then all benefit – although they will often benefit more. If they fail, however, then through not cultivating successors and partners, they are likely to drag all down with them.

The second sort of leader is the opposite of the first, in that rather than choosing to lead, leadership is thrust upon them. They may be the boss, but their ambition is not to benefit themselves but to make things better for those who entrusted them with the leader role. They are givers and will encourage others to follow them, through taking up leadership roles and sharing power. As a result, such leaders are more likely to leave a long-lasting legacy, and will also be better suited to withstand problems. They can call on others for help – and as their motivation is altruistic, they are more likely to receive help.

So how do you spot givers and takers in companies. The first thing to do is look at the company culture. Is it collaborative or mercenary? Do the leaders lead by example, or do they just expect to be obeyed? Do they consult with others and take account of the needs and interests of all the organisation or just a select few who they see as their near-equals?

People like to knock Microsoft, and Bill Gates. Gates is a ruthlessly successful businessman. It is not for nothing that there used to be a Googlebomb that claimed that Microsoft was more evil than the devil. Afterall, Windows and Office are the dominant computer operating systems and software (although not 100% – this is being written on an Apple iBook using Firefox – if you are not using either, consider switching for a better computing experience!). But let’s look at Gates himself, over the last few years. He stepped back from being the Microsoft CEO, and now has virtually stepped out of the picture. The world’s richest man stated that his aim is to use his wealth to benefit others – via his charitable foundation. This is not the profile of a taker but of a giver. Is this why Microsoft is so successful – it listened to its staff, its customers, its suppliers and the inner voice that says make the world a better place.

Or what about Google. Their company motto may be a trite Don’t be evil but this at least recognises that corporates can be evil – Enron and Worldcom were just the tip of the iceberg. OK – so Google’s practices in China are suspect. And the way they don’t filter out pornographic sites is defintely wrong. However I personally think that both these examples are reflections of how difficult it is to resolve mutually incompatible conflicts of interest. How do you supply search listings when a government gives you a choice of censorship or nothing. Refusal to comply, and so getting blocked totally, doesn’t help the population of China. And machines don’t find it easy to tell good from bad – Google set rules on what could be found and how, and although these could be altered for exceptions, it sets precedents that could destroy the very accuracy people want. Essentially, Google’s leadership style is that of a giver – but giving is never easy. It is taking that is easy as you then consider what is best for a small elite and don’t have to balance multiple conflicts of interest.

Both these examples link to computers and the Internet. But givers don’t just come from these areas. Ben & Jerry’s ice-cream company is another example – that as part of its corporate objectives supports small-scale family owned farms that would otherwise have gone under – squeezed out by their larger competitors. Ben & Jerry’s new owners – Unilever also take corporate social responsibility seriously. And if you look at how Unilever is managed, you will see a truely diverse company with many races and creeds at senior positions. Or take the Indian ICICI bank. India is seen as a patriarchal society by many. Yet ICICI has more women at senior / board positions than many US corporations. It is also India’s fastest growing private bank – success and the giving mentality seem to go together.

There are many more examples. Just recently Warren Buffett, the chairman of Berkshire Hatherway, announced that he plans to leave 85% of his fortune to the Bill & Melinda Gates foundation – which made charitable payments in 2005 alone, of more than twice that donated by UNESCO. The name Buffet won’t even become incorporated in the charity’s name.

So, when you look at the leaders of your competitors (and your own companies) think about whether they are givers or takers. If they are givers and your company is a taker than be worried, as long-term it seems that being a giver is a more reliable indicator of success.

(With thanks for the idea of givers and takers to Rabbi Mendel Lew and his sermon given following the annual reading in synagogue of the story of Korach).

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