Do Shareholders And Businesses Share The Same Interests?
The reason I ask is that we have seen plenty of examples of “activist shareholders” who have the potential to inflict irreparable damage to a company’s future. I’m thinking particularly of the hedge funds, which have bought significant shareholdings and think that this gives them the right to dictate company direction.
Sorry folks, this is why you have a Board of Directors whom you as shareholders entrust with the stewardship of the company to ensure that it remains a viable business. Their job is not only to look at how much can be squeezed out in dividends, but to decide in which way the business goes. Hopefully, they understand it better than you do (that’s why they’re directors).
Hedge funds in particular have been seen to focus solely on “returns” in order to satisfy their investors (after all, that’s what they're paid for).
Apart from shareholders, business also has “stakeholders”. These can be shareholders, but also includes:
- Employees
- Management
- Auditors
- Legal advisers
- The local (and perhaps, international) community
- Environmentalists
- Others
Most of us can see already that there’s a direct conflict between shareholder interests and, say, employee interests if shareholders insist on disproportionate dividends that limit the company’s ability to invest for the future (and maintain its competitive edge). Equally, if there’s technology out there that will make the company more competitive, but means loosing workers, some might say that the company’s future depends on being able to shed workers who are no longer required, despite the hardship this entails.
Equally, environmental concerns may mean costs of disposing of certain types of waste increase, reducing profits (and thus dividends payable - to the detriment of shareholders).
To put not too fine a point on it, shareholder and stakeholder interests will often be at variance. The question that shareholders need to ask is: why I investing in this business? For high dividends or long-term capital growth?
With some shareholders, it’s often the former. For employees, the latter. If one considers that any business has a corporate and social responsibility as well as a duty to shareholders, then the latter may have to step back.
One remedy that is always available to shareholders is to exercise their collective power to remove a Board of Directors that they consider is not up to the challenge. This they do at their own risk…
I have spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to offer solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Leadership, Strategy
Measuring Your Business
Not everything that
counts can be measured and not everything that can be measured counts.
Most of us (I hope) wouldn’t drive a car with no working
speedometer, fuel gauge, engine temperature gauge or rear-view mirrors. Many, however, take this attitude with
running their business.
Good business owners know how much they’ve made so far and
how much more they need to make to cover this month’s costs. This is like saying that you know how fast
your car is going based on the speed of those around you. You know you aren’t driving too slowly or too
fast, and you know that you're headed in the same direction as the others.
Modern cars measure all sorts of things. My last one measured average speed, average
miles/gallon, current miles/gallon, total trip distance so far, average speed
for journey, distance to drive on current fuel, outside temperature, miles to
next service, fuel level, engine revolutions, current speed, engine
temperature. Lights warned that a
headlight bulb wasn’t functioning, I was low on fuel, my battery was
malfunctioning, and other information.
What did I actually monitor?
Speed, fuel, distance left based on current fuel consumption and engine
temperature occasionally. The rest
was only relevant from time to time,
depending on circumstances.
Continuing the car analogy, when I get into my car, the
first thing that I do is perform a quick exterior check to see that all tyres
look normal, that there are no unsightly marks and that the car looks “normal”.
I then need to know whether I have enough fuel to complete
my journey. This is usually available
when I turn the key part of the way to the “ignition” position.
Then I turn the key fully to “ignition” and all my warning lights
come on for a second or two (hopefully) as the car does a self-check. If all go out, I know I can continue. If one stays on, I decide whether it’s important.
As my journey continues, I check speed or fuel levels
depending how far I’m going or where I am on a long journey.
Just as in driving a car, businesses need to know certain
information all the time, but other information depending on the
situation. The key is to identify:
- What information is needed;
- What level of detail is needed;
- When it is needed;
- Who needs it;
- How often it is needed;
- How quickly it is needed;
- What action will be taken as a result and by whom.
When people say that they need a report or such and such
information, ask “What do you do with it?” or “How do you use it?” If they say “File it”, then ask whether that
report is necessary or whether that information “counts”. Producing information that noone uses or is
too difficult to understand is a waste of time, money and resources.
At times, I help clients decide what information counts and how it can be obtained with minimal
effort. Quality information should be easy to:
- Obtain so that it can be delivered in a timely
manner;
- Understand;
- Act on quickly;
- Trust.
The final point is crucial.
If people doubt the validity of information, they won't use it.
I remember episodes at one of my employers
where managers constantly said that the data contained in a report wasn’t valid
and that therefore it couldn’t be used to assess the performance of their
team/their function or business.
In Formula 1 races, the cars send a stream of data back to
monitoring centres to tell the support team how the car is performing. The information concerns every aspect of the
car and is highly detailed. They relay
this to the Team Manager at the trackside, who decides whether the driver needs
to take action. The driver can only
monitor a few indicators at a time, so his support team look after the rest.
Businesses need to consider whether they need “Formula 1”
levels of detail, “just the basics” or a
mix depending on circumstances. They
then need to decide how to gather it and present it in a timely manner to the
right person in a way that tells them immediately what action they need to take.
I have spent more than half my life
delivering change in different world markets from the most developed to
“emerging” economies. With more than 20 years in international financial
services around the world running different
operations and lending businesses, I started my own Consultancy to offer
solutions for improving performance, productivity and risk management. I work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An
international speaker, trainer, author and fund-raiser, I can be contacted by email . My website provides a full picture of my portfolio of
services. For strategic questions that
you should be asking yourself, follow me at @wkm610.Labels: Productivity, Strategy, Teamwork
Downsizing: The Aftermath
In previous articles,
I wrote about planning and then the process of downsizing. Now we need to examine what happens after
people have been “let go”.
You will need to consider two dimensions: internal and
external. Over internal, you have a fair
amount of control. Over external, at
most only a limited degree.
On the internal side, let’s start with morale. The staff who
survived will be suffering low morale for a number of reasons:
- “Survivor’s Guilt” (the fact that they weren’t “let go”);
- Loss of colleagues and friends;
- Increased workload (not necessarily accompanied by an
increase in pay);
- Processes not necessarily amended to take account of the new
reality.
For the first two above, you’ll need to help them understand
why they survived and their future
contribution to the new, smaller organisation.
They may still fear that more redundancies will come, so they need
re-assurance that no more cuts are coming.
One tip: if you're going to cut staff, cut once and cut big.
Don't adopt a “salami-slicing” approach with
cuts every six months/year.
This will
simply mean that people will leave faster (if they can) out of fear that
they’ll be next in line…
They’ll also be feeling for colleagues and friends who were
“let go”. They will know that those
people had families, hopes, etc and will worry for them. Understanding this helps in working out how
to address these feelings and shows that you're “human”.
It’s often a good idea to call people together and explain why
things happened the way they did and why the organisation is now in a better
position. Try to get some “quick wins”
chalked up so people start feeling better about themselves and the company’s
future.
Processes often develop around the people who work
them. Productivity will suffer due to
increased workloads as well as processes that haven’t been re-designed to take
account of the new reality (particularly if they are seen as “critical”). If, during the planning and process stage,
you didn’t address this issue, now is the time to do so.
On the external side, you’ll have:
- Customers and customer service
- Suppliers/regulators
- The Community at large
to think about.
This is where you have less control. With customers, suppliers and regulators you
will (I hope) during the planning and process stages, have explained what
you're doing and why as well as how it will impact them.
In the early stages of the newly-shrunk organisation, you’ll
need to monitor customer and supplier care/service extra-carefully. Make sure that any new processes bed down or
are corrected quickly. Engage your
customers, suppliers and regulators to obtain feedback.
With the community at large, you have least control of
all. Without knowing the particular
circumstances of any organisation, this is something that can only be judged at
the time. Again, this is where proper
planning and process can make a real difference in how much potential “negative
fallout:” you get.
In all, you need to understand that “downsizing” is a longer
drawn-out process than you may have imagined.
I have spent more than half my life
delivering change in different world markets from the most developed to
“emerging” economies. With more than 20 years in international financial
services around the world running
different operations and lending businesses, I started my own Consultancy to
offer solutions for improving performance, productivity and risk
management. I work with individuals,
small businesses, charities, quoted companies and academic institutions across
the world. An international speaker, trainer, author and fund-raiser, I can be
contacted by email
. My website provides a full picture of my portfolio of services. For strategic questions that you should be
asking yourself, follow me at @wkm610.Labels: Crisis Management, Customer Care, Leadership, Strategy, Teamwork
Downsizing: The Process
“Downsizing” (the
polite way of saying “firing lots of staff”) is a traumatic time for everyone
involved from those who are being “let go” right through to IT support. Recently,
I wrote about the planning stage.
Managing the process is just as critical and is by no means the end of
the story, as you will see…
This is where the real pain starts as you “let people go” (another
polite way of saying “fire them”). To
all those who use this euphemism, the phrase “letting go” implies that they have
chosen to leave and that you are
doing them a favour. If they have
volunteered (e.g. for early retirement), “letting go” might be justified. For those singled out for compulsory
redundancy, then call it like it is.
How you manage the redundancies will influence how your
business operates in the future, the morale of those who remain with the
organisation, perceptions of stakeholders and the community at large.
I’m assuming that, after looking at all the options and consequences, you’ve reluctantly decided that
some people have to go…
To start with, colleagues will lose friends and co-workers
and will have to pick up the work left by their departure. Morale will plummet because of this. How will you handle it?
Make sure that all processes, limits of authority and
decision-making channels have been reviewed and re-documented, agreed and
re-assigned. You just might find during
this process that firing someone may result in a disaster that costs more in
terms of lost business, goodwill or processing ability (or all three).
Next, customers, suppliers, auditors, regulators, etc will
notice that their “favourite” staff or contact is no longer there, or that
service levels have dropped (hopefully not to critically low levels which may
drive them away). Will it impact their
willingness to continue to do business with you? You will need to explain why and what action
you’re taking to ensure that they continue to receive good service.
Internally, you might notice that the wrong person in IT has
been removed if suddenly the computers stop working. This will impact on your ability to continue
doing business.
Shareholders may love you for “cutting costs” by removing
“excess staff”, but you’ll be doing them no favours if this means that their
investment is no longer able to do business and therefore generate returns for
them. They won’t thank you if the value
of their investment falls…
There’s also the security angle; for example, how do you
prevent “revenge” attacks by IT staff who have been fired? If you are removing people in “sensitive”
roles or who have access to “sensitive” information, how do you prevent that
from leaving with them?
The most important part I have reserved for last: the staff
who are being fired. Some of them may be
expecting it; some may be dreading it.
The way you handle them is key. Don’t
forget: one day, they may be the person deciding whether your business becomes their
supplier. Equally, if word gets out that
you messed up, you may find you have a major community and PR crisis on your
hands.
Some organisations try to soften the blow with financial
incentives (e.g. large payoffs, paying for training courses, “outplacement consultants”,
etc). In some countries, there are
strict laws on firing people, which have to be observed. Only you can best judge how to manage the
situation. Whatever you do, don’t adopt a standard “one size fits
all” approach. Some people may actually
prefer a larger cash settlement than you paying for an expensive outplacement
consultant… Better, perhaps, to agree an
overall “value” of severance package which can be spent as the member of staff
wishes (taking local legal and tax considerations into account).
Finally, I remember one case of someone who had been made
“redundant” and who had come to their last day at work. Some two hours before they left, a technician
came to remove their desk phone. The
person’s manager told the technician to come back later. This small act of respect restored a measure
of dignity to the person about to leave.
I have spent more than half my life
delivering change in different world markets from the most developed to
“emerging” economies. With more than 20 years in international financial services
around the world running different
operations and lending businesses, I started my own Consultancy to offer
solutions for improving performance, productivity and risk management. I work with individuals, small businesses,
charities, quoted companies and academic institutions across the world. An
international speaker, trainer, author and fund-raiser, I can be contacted by email
. My website provides a full picture of my portfolio of services. For strategic questions that you should be
asking yourself, follow me at @wkm610.
Labels: Crisis Management, Customer Care, Leadership, Strategy
