Straturity

Transforming Organisations

Organisational Issues

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Is Your Corporate Governance Designed to Invite Dissent?

The distribution of decision rights, authority, and resource control is the essence of governance design. The aim is to ensure successful execution of strategy with sustained integrity. And in this context, virtually every executive will claim to want honest, open debate – and be upset if important facts are withheld. However, all too often, resource control, authority over execution decisions, and setting long and short-term priorities don’t occur where they should. On the contrary, such responsibilities are usually assigned to the wrong level and include too few of the right players.

Why is dissent – or at least the possibility to challenge “truths” so important? Simply, to avoid Groupthink and provide an atmosphere in which people feel comfortable holding difficult discussions. In such an atmosphere, mistakes can be found and corrected before they end up endangering the business!

So how to get it right? The real quality of a corporate governance system can be seen in the organisation’s culture (Are mistakes really acceptable or must they be swept under the rug? Can decisions be challenged without risk to one’s career? Etc.), in the delegation of responsibility for meeting reporting requirements (Do the frontline employees also report on their actions?) and in decision-making and resource allocation of the company (Who decides how resources will be distributed? How are business decisions made?).

For companies looking to strengthen their governance (not just the reporting function!), a useful start can be to assess where they are strong and where risks may lie today. The Straturity Human Capital Self-Assessment© gives answers to these questions and more. Check it out on www.straturity.com!

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Strengthening Resilience – on both the personal and company levels

The Cambridge English Dictionary defines resilience as “the quality of being able to return quickly to a previous good condition after problems”.

This simple description belies the challenge many individuals and enterprises are experiencing at a time of widespread uncertainty and in the face of multiple, self-compounding “problems”.  But it provides a good starting point to reflect on what is necessary in order to reestablish a “previous good condition” and be able to rebound, despite the continuing presence of such problems.

Let’s take individuals first. One of the most important steps a person can take, in order to build resilience, is to recognize (usually unwanted) feelings of concern, helplessness and despair. Instead of trying to ignore them and hope they will go away – which normally just results in making them all the stronger – it is useful to take stock of the exact situation one is in at the moment. Just doing so will often enable a person to start reflecting on how to improve their situation or resolve or at least mitigate current problems. And clarifying what the situation is and the options for resolving it allows one to face fears (the monster you know is much less threatening than the monster you don’t know but fear) and in so doing reduce them.

Considering that fear is mostly the result of feeling unable to control a situation, person or event, once one can face it down, they can build resilience!

How does this apply to organizations?

In a crisis, organizations often get stuck in trying to address the current challenge which, although important, is not sufficient to return to a previous good condition! Here too, it is essential to clarify the exact situation of the company from several perspectives, in order to prioritize measures to be successful. In my experience, without a clear picture of the exact situation, an organization risks wasting precious resources chasing unreachable goals. And this is the exact opposite of resilience!

Resilience in an organization or a company can best be observed if its people identify with the purpose and strategic goals, culture and governance and have the means to decide flexibly and responsibly how to respond to challenges as they arise.

So how can you check your exact situation (which will give you an idea how resilient your company is)? One way is to engage expensive consultants to perform an audit. Another is to access the Straturity Human Capital Self-Assessment© and obtain rapid, clear results. 

For more information (in German), we invite you to attend a (gratis) webinar on Monday, June 8th, at 14:00 CET. It would be our pleasure to welcome you there! Here is the link to register: https://lnkd.in/dvtQxQp

For information in English, let us know of your interest and we will provide all information. We look forward to hearing from you!  

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How do Good Organizations achieve Greatness?

What is greatness in an Organization? It goes way beyond good figures and a solid bottom line, important as these are. Greatness in an organization can be seen in its outstanding performance in terms of people, potential, transparency, agency, governance, lived values and sustainability, all of which will be reflected in its unique, individual culture.

So, if you know you work for a good organization or company and want it to evolve into greatness, how do you go about this?

First, it is important to take stock of the strengths upon which you can build. What do you do particularly well? Which special features create an enabling, innovative and productive environment?  Are you good at finding the right people for key tasks, in motivating, training and reinforcing them, in applying the right skills at the right time? Can your teams take autonomous decisions, including on investments for their work? Or do you perhaps have a culture in which all employees contribute to identifying and living up to a set of common values?

Once you are clear about where your strongest strengths are, examining your biggest weaknesses is the next step. Where are the greatest challenges to transparency in the organization? Are there areas of operation which are unsustainable (either in their nature or in how they are currently working)? Is the real potential in your activity being attained or what is holding you back?

After that, clarifying the risks is very important: does a genuine commitment to good governance permeate the organization? Do you succeed in enabling sufficient transparency that problems and failures can be detected before they do harm?

But how to carry out such an analysis, particularly in times when those who can are working from home and many others are in maintenance mode? One way is to complete a self-assessment such as the one offered by www.straturity.com. This can very quickly clarify the current situation and help you prioritize your steps to attain greatness!

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“It’s all just marketing, the values thing”

Well, at least that is what some managers would like to believe. In fact, there are a large number of different international companies whose foresighted top management has understood that values-based leadership and an encouraging, supportive company culture are actually highly beneficial for business in the long run.

Let’s take three examples from very different industries – that all have in common high cost-saving pressure and rising competition: Unilever, Zappos and Nordstrom. All three very successful, all growing solidly and being successful despite turbulence in markets and other potentially hazardous conditions.
Unilever: The four core values of this company are integrity, responsibility, respect and pioneering. And Paul Polman, CEO until the end of 2018, ensured that these values actually guided the choices made in most instances by managers and staff alike. Even the “mistake” that contributed to his resignation after 10 years at the helm of the organization had to do with sustainability: trying to move the corporate headquarters from the shared site between the UK and the Netherlands, to a simple location in Rotterdam. The rationale was to reduce the risk of a hostile take-over from Kraft Heinz or others with vastly different corporate cultures and try to preserve the very special and forward-looking company culture.
Zappos: This company has 10 core values:
1. “Deliver WOW Through Service,
2. Embrace and Drive Change
3. Create Fun and A Little Weirdness
4. Be Adventurous, Creative, and Open-Minded
5. Pursue Growth and Learning
6. Build Open and Honest Relationships with Communication
7. Build a Positive Team and Family Spirit
8. Do More with Less
9. Be Passionate and Determined
10. Be Humble
Nordstrom: the core values are trust, respect, loyalty, awareness, humility, communication and collaboration. With those values as the foundation, Nordstrom creates a culture of innovation and adaptation in order to stay relevant.

So, the next time someone suggests that there is an inconsistency between the values published in your company and those that its staff and customers experience, you may wish to consider applying the lessons of these three companies – for your own long-term success!!

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Six ways that cost cutting exercises actually end up costing more money

While cost-cutting in itself can be absolutely necessary and worthwhile, HOW it is done is very often wasteful and ends up generating higher costs than the intended benefits can ever bring. We speak today of six specific cost-cutting traps.

1)   Undiscerning hiring freezes

It seems logical: if we think we have too much staff, we should stop hiring. However, a blanket hiring freeze can put your company into a straitjacket that actually increases costs. With bigger companies, people will tend to take on external contractors, who – even though they ostensibly don’t show on the balance sheet – are usually more expensive than staff. And then these external contractors may leave after a few years, taking their hard-won knowledge with them. In smaller companies, where the possibility to bring in external contractors is limited, important jobs don’t get started or completed and the flexibility to bring in exactly the skill set required for certain challenges is capped.

2)   Staff cuts by percentage

One of the most common cost-cutting mistakes is the across-the-board staff cut idea. In this case, each department or division must sacrifice equally, to avoid any complaints of favoritism. Needless to say, with such an approach, the most efficient departments will suffer in their productivity, creating exactly the opposite effect to what was intended. Add this to the rule that many top performers, knowing that they can get another job, will put themselves on the list of separations, and such a policy actively damages the enterprise. Not to mention the knowledge that is lost, the motivation that demonstrably sinks in such times and the general productivity reduction generated by uncertainty.

3)   Office/Space sharing which disregards the type of work

One very common mistake of the past 10-15 years has been to group staff in open plan offices. While such offices can be beneficial for saving space, study after study has shown that productivity can fall and staff anxiety, illness and general discomfort rise significantly when people who need quiet to think about their work are forced into undeniably louder and more distracting working situations.

4)   Outsourcing risks along with services

The dogma that outsourcing all “non-core” functions is beneficial has long been a mantra of cost-cutting. However, there can be significant risks to doing so. A number of companies outsourced their IT only to be obliged a few years later to insource it again. If, for example, IT is outsourced, a company still has to be very careful not to inadvertently take on serious new risks. It must have its own capability to supervise and oversee performance and development, not to mention the back-ups or other risk mitigation measures. And these are also costly!!

5)   Inappropriate savings on work tools

This may seem like a small-budget item, but it is a common favorite among some cost-cutters. Unfortunately, saving on the software updates or new tools and materials can also backfire in a big way and incur very large costs down the road (not to mention additional risks).

6)   Setting unrealistic goals

Last but not least is the trick of setting top-down cost reduction goals. These may look good on paper. But when individual departments and divisions are not consulted, such goals can badly backfire. One example of this is when work that is essential and in the global interest of the company is postponed or when strategic priorities are subsumed to cost-cutting pressures, and revenues suffer as a result.

At some stage, almost every company sees a need to reduce expenditures. As this article shows, it is essential to do so in a strategic, thoughtful manner that weighs the unintended consequences and avoids pitfalls. In coming blogs, we will discuss how to get it right.

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What kind of society do we want?

California’s new labor regulation law has implications far wider than its stated goals (to give gig economy workers more stability and economic security). On the downside, if left unchanged, it will most likely hasten the death of some traditional industries that we appreciate and/or which still play an important role in society (such as local newspapers, which generally rely on independent journalists and haven’t in our evolving “faster, cheaper, more convenient” era found business models that will enable them to survive).

On the other hand, it is a start towards curbing the worst consequences of the new gig economy. For years, ever increasing numbers of people have been obliged to hold two and more jobs just to make ends meet. A growing percentage of these jobs are poorly paid (defined as full-time work that leaves the earner at or under the poverty level) and are configured to pass on full responsibility for social insurances to the job-holder. Figures published just last year show that some 40% of the American population, if confronted with an unexpected bill of $400, would need to borrow the money. This means that 40% of the population of one of the wealthiest countries in the world belong to the new precariat.

Even if one appreciates flexibility, there is no denying that these practices contribute significantly to the ever-widening gap between haves and have-nots in our society.

However, there are other dimensions to the problem, which will not be fully addressed by this law, and with which cities and communities world-wide are grappling due to the seismic changes being wrought by the gig economy: inner cities devastated by the loss of brick-and-mortar businesses unable to compete with online ordering; pollution and traffic chaos caused by delivery vans; loss of income through taxes, etc.

What kind of society do we wantIn my view, it is time to take a holistic view to the impacts of the gig economy and regulate accordingly, so that quality of life is not irretrievably sacrificed to the economic gain of a few individuals. And if paying its drivers a living wage makes Uber go bust, then perhaps there is an issue with the business model itself. Slavery and servant bondage were outlawed centuries ago. Do we really need to bring them back?

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Why the War for Talent is so relevant to risk management

Howard Schmidt (name changed to protect privacy), a software engineer in a leading machine-building company in Europe, realized that something was terribly wrong. The computers he and his colleagues used to write the software and firmware on which the company machines relied were suddenly closing down, and there seemed to be no way to restart them. Concerned that this could indicate a rapidly spreading infection of the entire system, he knew the time for response was extremely limited. He mustered as many colleagues as he could, ran to the demonstration and training rooms and the production facility, and systematically took all the machines offline. This very quick response prevented the virus from spreading to most of the machines and effectively protected them from a massive hacking attack, which would have completely crippled all operations for months had the hackers been able to access the machines. The far-thinking and rapid reaction of a committed staff member contributed significantly to reducing the damage done by an unexpected event/system-wide failure.

Why is this relevant?
A number of staff members of the company saw something unusual and put in urgent requests for support, but by the time the local and international IT support functions had clarified the source of the trouble, more than 24 hours had passed. In the event, local and international IT ended up working overtime for 10 days on resolving the hack into the computer systems of the company. And as it later turned out, if Howard and his colleagues had not seized the moment, the company would have been paralyzed for more than a month and suffered untold financial losses.

The best Business Continuity Planning in the world will not help you in a crisis if you do not have people in place who

  1. Think about what the entire company needs, not just their own unit or section
  2. Show deep commitment to the mission, vision and values of the entire company
  3. Are capable of thinking out of the box and finding the not-so-obvious solutions
  4. Are empowered to take decisions that may cost money and use up resources and
  5. Are not hampered by the fear of failure.

This is where the so-called “War for Talent” comes in. Companies are increasingly aware that to be successful in the digital age they need to attract and place the best talents. Where they don’t seem to be as consistent is in ensuring that these talents can grow, develop themselves and most of all thrive within the company culture and norms.

So it is essential – within a BCP exercise (or within normal strategic planning) – to verify that in all key locations and departments there are people who can challenge the status quo, think for themselves and act intelligently in an emergency. Once these people are in place, taking some time to ensure that they have what they need to succeed will keep them motivated and productive over the long-term, saving much more than what they cost.

And if your company is having difficulty attracting such people, it may be useful to start by examining the culture and working conditions, to see whether these are attractive enough for the kinds of talents you will be needing in the future.

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Note to The Business Roundtable: Effective Corporate Governance requires more than nice words!!

On August 19, the Business Roundtable issued a new definition of the purpose of a corporation, signed by 181 CEOs of leading American corporations. This new definition widens the responsibility of a corporation from simply focusing on creating shareholder value, to include delivering value to customers, investing in employees, dealing fairly and ethically with suppliers and supporting local communities. Altogether an honorable sentiment.

Of course, this statement could be taken as a cynical ploy to forestall a potential social explosion or a time trip back to the 1930’s, when it reflected the common understanding.  But taken at face value, it does represent a mindset change and effective repudiation of the shareholder orthodoxy of Milton Friedman. In other words, a very small step in the direction of (at least acknowledging the importance of) effective and sustainable corporate governance.

And even if I am wary of grand proclamations unaccompanied by specific policy recommendations, I am inclined to suggest waiting a year to see if anything has changed in the approach and way of doing business of these corporations. As one example of many, I would like to see whether Johnson & Johnson acknowledges its significant role in deepening the opioid crisis and commits to paying damages and supporting the communities its actions have helped devastate. Its top management publicly supports the new statement, as can be seen on the website of the Business Roundtable:  

“This new statement better reflects the way corporations can and should operate today,” added Alex Gorsky, Chairman of the Board and Chief Executive Officer of Johnson & Johnson and Chair of the Business Roundtable Corporate Governance Committee. “It affirms the essential role corporations can play in improving our society when CEOs are truly committed to meeting the needs of all stakeholders.”

To be sure: a more values-based governance from our largest corporations would indeed create massive positive change in Western societies and contribute to resolving some of the huge imbalances and problems they have helped create with the current, short-sighted focus on shareholders alone. The big question is: will they follow through?