Tuesday, September 30, 2008

Crisis what crisis? Everyone’s become so boring…

Regular readers will know that my blogs are (more often than not) either inspired by a situation I encountered or by the people I have met during the previous week. But in the last few days my business acquaintances have become so boring. It’s not that they themselves are boring, it’s just that the enormity of what is happening in the world’s financial markets is so overwhelming that everything else seems to shade into trivia and insignificance.

Of course, if I switch the conversation to the crisis (which isn’t difficult) then everyone, including myself, wakes up and has an opinion. But the whole thing is very bizarre. Here in Brussels, now that two of the household name banks are in deep trouble, people are beginning to feel a sense of doom. However, I get the feeling that they are either trying to ignore it (like a family embarrassment) or are simply refusing to believe that it will have any effect on them.

The quote of the week for me comes from BBC 4’s, ‘News Quiz’ radio program when contributor Jeremy Hardy quoted John McCain “This is no time for politics” – well excuse me, if ever there was a time for politics, it is now! With the apparent collapse of capitalism (albeit temporary – one hopes) in the US, one might imagine that it is time for the politicians to do what they are paid for? It’s weird how the word ‘politics’ has been so much over used by business people that it now has come to mean, ‘plotting’ and ‘underhandedness’, when according to the English Chambers dictionary it actually means ‘the art or science of government’.

The whole scene reminds me of the image I have of Pompeii at the moment of Versuvius’ eruption – in a modern context you can imagine Mum and Dad and their two children in the car park of Delhaize supermarket loading ready made meals into the trunk of their Porche Caynne.

Everyone is an expert but no one knows for sure what to do – and those with the loudest voices are often taken to be the wise ones, until someone in a quiet voice calmly suggests a total other alternative that spins your imagination into another unwelcome direction.

I train my teams to think out of the box and to be creative but this advice is not given for crisis situations that have been predicted and when there is a well thought through risk analysis strategy that has been painstakingly prepared and tested beforehand. Or am I wrong? Was today’s situation so completely unpredictable, were there no warning signs at all? In ICT we are trained to ask the big ‘what if’ questions and to build complete solution scenarios for them, so I find it kind of weird that the US politicians have no such risk strategy prepared and in place, especially as there are ample previous examples of similar situations, albeit on a smaller scale?

Hopefully next week everything will be back to normal, and my blog will be back on the topic of everyday management issues? I just hadn’t thought that risk strategies might end up being one of them?

Monday, September 22, 2008

Interim Managers: How much is your agent taking as their cut?

I was having a meeting with a seasoned interim manager this week and he was very interested to work with The Bayard Partnership because he could see that we had all the advantages he was looking for, but did not take as big a margin as our competitors. This got me thinking – what is the average cut that most suppliers of interim management assignments take?

One of our interviewee’s previous suppliers said “You have two thirds of what the client pays us and we take a third”. This might sound reasonable but when you see it as a mark up, it comes out at more than 40%. So the real question should be: Is the +/-400EUR per day mark up (in his case) to the agency good value for money or not? One can presume that the agency's clients must think so, otherwise they would look for other alternatives of hunting for their interim managers? Or is it simply accepted as a necessary downside due to the fact that looking for the right interim manager is very time consuming and risky? Perhaps interim managers are also a little to blame as they are too busy on their assignments to do the necessary networking to be sure of finding enough assignments directly?

In these days of litigations and uncertainty, most customers do not want to have direct contracts with their interim managers, but there are many exceptions. Reviewing contracts, discussing small changes to terms and conditions etc. takes up far too much time on both sides. Hence a well written template agreement saves time and gives a certain degree of protection. But if they could, one would imagine that the end customer would like to see as much of that 40% in their own bank account.

As we move forward into evermore turbulent days, the need for interim managers will only increase and it will be the free market that will eventually decide the correct up lift. However, in the meantime – how much percentage are you currently paying to your agent/supplier and do you find it too much?

Monday, September 15, 2008

How to Survive a Recession

With the recessionary storms gathering pace, this week I am offering my advice, based upon hard earned experience of having endured two previous recessions, (one in the 90's in the UK and the '.com crisis', ten years later). To aid focusing on the key issues, I have constructed a framework of four ‘A’s’to explain the survival process: Anticipation, Analysis, Action and Attitude. (But first the introduction):

I find it incredible how many financial advisors and so called 'experts' are saying how unpredictable the current recession was, it is as if there was no warning. Anyone who has lived for more than forty five years either in the UK or the US should at least be thinking ‘I wonder how much longer this property boom can last’?

Every eighteen years or so, the banks get into difficulty and new regulations are brought in to ensure that ‘nothing like this can ever happen again’. I admit, this time its on a much bigger scale, but the principles remain the same. The bottom line is, in the financial world, the traders and low level decision makers are only looking at the situation immediately infront of them, at their daily, weekly and monthly performance figures. Little wonder that things go wrong when the deals they make effect the long term strategies of the businesses they invest in. This time, like the last, it is the ordinary mortgage lender that felt the hit first and, in turn become the catalyst that drove the current economic downturn. But having said all this, it is time to get to the point and to our area as business leaders where we have some influence.

A yachtsman sailing solo around the world knows only too well that the beautiful balmy day he is enjoying, relaxing in the sunshine on the deck, can not and will not last forever. Take a look around his yacht and you will see water tight hatch doors slid into the open position and everything he needs to weather a mighty storm, neatly tucked away, just out of sight but within easy reach. In the galley are tins and tins of provisions that every sailor hopes that he or she will never have to eat.

For the last decade or so, year on year giant loses are announced in the automobile industry and one wonders how these losses are sustained? The answer lies mainly in provisions. Just like the yachtsman, companies with the desire to survive, put aside, in the profitable years, a provision (upon which they are prepared to pay corporation tax), in order to bank for a rainy day. The amazing thing is – why don’t more companies do this and especially small ones? One theory I have is that accountants are so focused on guiding companies to reduce their taxation liabilities that the owner conveniently interpret this as ‘it’s better to spend every dollar you earn than ‘give away’ tax to the taxman. The result is one finds oneself surrounded with useless acquisitions that if truth be known add little or no value to the core business.

Currently there is a 4% downturn in the retail industry and everyone is running around like headless chickens acting like it’s the end of the world. If your business cannot sustain a 4% downturn for a short period, then you might as well ask yourself how is this possible? Some say that shareholders are to blame, wanting every cent possible as a return – but this is not the only story. The trouble is when things are going well we make out it is down to our wonderful leadership and of course when things are going badly, we make out that it is obviously down to ‘the recession’ and we spend our days trying to identify other companies in a similar position to comfort and justify to ourselves that we are not the only ones in trouble!

So what are the four A’s for surviving a recession? (the first might be too late for many, but don't be downhearted and read on anyway)

• Ensure you have sufficient cash reserves to weather it out (anticipate a sustained downturn, a period of no profit and or moderate losses, for at least 24 months).
• Look for the warning signs, trust your logic and instincts – (eighteen years of unbridled growth and massive house price inflation, should be a good start).
• Compare bad years with good years - Ask your accountant for a copy of the financial results for the last ten years (If your company does not go back that far, ask for the results of the best year so far) compare the results with now, check for the good year:
o Who were your clients?
o Why did they choose you?
o What service or products were you supplying?
o Where did the profit come from?
o What has changed since then?
o Who are you core customers today?
o Which customers are the profitable ones?
o Why are you spending energy on non profitable activities (ego tasks)?
o How much longer will your cash flow last if you carry on with the burn rate you currently have?
• Ensure that you react quickly. Like the yachtsman, batten down the hatches in time, don’t hang around on deck pontificating, better be safe than sorry.
o Cut back on all surplus expenditure
o Cancel all purchases that are not signed and/or not 100% linked to your core business
o Cancel all non comitted business deals that are not profitable and could eat up valuable cash reserves
• Look up the word ‘prudent’ and learn the definition off by heart, get your staff to do the same
• Increase your networking activities, do it with a purpose. Go back to the basics: remember your elevator pitch from the good old days. Adjust the words, change the context, if need be, but retain the original focus and passion.
• Do not panic into making ill thought through marketing decisions
o Avoid sudden changes of direction. (Brainstorming crazy new business saving ideas are probably the very actions that will kill you, if they are ever implemented)
• Extend your credit lines before you need them extending.
• If your luck turns with one good deal, never think your problems have gone away
• Prioritize your payments, pay only those that simply must be paid and hold back on all the others for as long as you reasonably can.
• Focus your energy on what you do best and encourage your staff to do likewise
• Try to remain positive but keep an air of realism
• Consider bringing in an interim manager to do a 30 day quick scan of your business to find the areas for improvement that you might have missed – there can be no ‘holy cows’ here.
• Sell assets that are surplus to requirements, but find the right buyer and do not under value them, no matter what the ‘experts’ say, most are out to rip you off and probably have a buyer in mind and will make the margin that could have saved your business
• Do not sell the tools of your trade, without them you are finished
• Make sure your cash reserves are in a safe place where they can be located quickly and without interference
• Try to remain positive but keep an air of realism
• Politeness, clear thinking, discipline and control are the four most important attributes you need to get through.
• Never say die unless the balance sheet tells you too and then get out in time

Saturday, September 6, 2008

Home working – Money for Nothing?

Not since 1764 and the invention of Hargreaves Spinning Jenny, has there been a more important tool for home working than a PC connected to the internet. As more and more companies elect to encourage a proportion of their staff to work from home, the question of management and motivation becomes evermore important. With the Spinning Jenny it was quite simple, the company delivered the machine to the home worker and each week raw material was delivered and the spun product was collected. This simple machine was one of the fundamental enablers of the rapid growth of the British economy in the 18th. Century. (Look above the door at the Bank of England and you will find that the symbol carved in stone is that of a sheep and not a bar of gold as might be expected).

This week I witnessed the dramatic proof of how complex managing and motivating PC based home workers can be. If the home worker has a measurable job, such as, typing handwritten addresses into an online database, then there is no major worry – especially if they are paid by the number of addresses completed. On the other hand, if their work is more complex or involves a variety of actions that are hard to measure – then the trouble begins.

The case that was brought to my attention was of a young professional woman who was offered a part-time (five hours per day) job working from home. The job was well paid and involved carrying out research and writing up findings and preparing white papers and reports. Everything was fine at first but very soon she became depressed because each week she would send off her weekly report and case notes, only to fail to receive any acknowledgement back. The complete lack of ‘management’ meant effectively that she rapidly became de-motivated. Each day she did less and less, until it came to the point that she did almost nothing at all, apart from hanging around at home on the off chance that her boss would call her with a special request.

Now this is an extreme example, and one might say easily fixed – but the interesting point is that you might think that being paid to stay at home to do nothing would be the perfect job (according to most tabloid newspapers it is what millions of people are doing by choice every day). But the reality is far off. In the case of our professional she became so desperate that she resigned and is now looking for a new job.

It is obvious that us humans need a purpose in life, that we need discipline and encouragement to keep us from becoming depressed or going insane. But home working is an exponentially growing phenomenon and the complexities of motivating and managing remote workers demands a complete new set of rules.

For a start, the simple question of trust emerges – how do I know, for example, if my PA (who works from her home) is busy or simply lasing around on the sofa watching daytime TV? How do I know if she is working efficiently or allowing herself to get heavily involved in a minor detail that, in an office, would get detected and set aside very quickly?

Sure you can use Skype and call each other at regular intervals, but the question of trust and self motivation always comes back. There are some pretty neat software tools such as ‘softactivity’ that allow you to monitor the number of mouse movements and key strokes and applications accessed etc. – but what does that tell us?

I am a manager that likes to walk around the office floor everyday, and observe and listen, picking up minor issues, long before they become important. Motivating teams to have fun and to deliver to the maximum without breaking down is one of the secrets of my success.

Now, to put the record straight, I am very satisfied with the work my PA does, but the nature of the working relationship means that we need to speak with one another at least two to three times per day, if not more. However, this means that the usual management ratio of one to six is rather difficult to maintain over a long period of time, especially if the manager has a pile of work to do themselves, which is more often than not the case.

Over time, I am sure many management books and seminars will be written on the subject of motivating remote employees. But until we have adjusted and mastered the art of remote management, the best solution for self employed home workers is in the form of an online task agency such as 'Pajama Nation'. This amazing concept allows the home worker to review each day jobs that need doing and they have to bid to win them. Just like at Amazon and E-bay, suppliers are awarded satisfaction points for the quality of the work delivered. A whole new world of variety is open for those that do not need the physical company of others to motivate them. After all why sit in a traffic jam burning up precious energy and hours of your life, when staying at home can be even more rewarding? Money for nothing it isn’t but I guess it is as close as it can ever be?