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Saturday, 24 March 2018

Optimist or Pessimist? Be Sure to Cage the Chimp!

I always considered myself to be an incurable optimist until an event occurred recently that caused me to rethink. In fact pessimism and optimism are on the same continuum and we vary our position from day today, from event to event. I was right in pessimism mode.

I spend a deal of time as a mentor encouraging the members of my Vistage CEO peer group to look to a bright future will and generally deal comfortably with any bumps that always happen on the way.

Spring for me is the best season. It has all the promise of warm days ahead, green shoots heralding new growth an all in all, portends a bright future.

However, the event that made me examine myself was a problem I had with a very large professional enterprise which I had retained. After a period where relationships and service were going well all of a sudden everything changed.

Communications almost stopped and I couldn’t seem to be able to improve the situation.  As the work they were doing was statutory it began to be serious.

I starred to do precisely what I advise all my members NOT to do and that is to worry.  In the film, Bridge of Spies, the defending attorney played by Tom Hanks tells his client played by Mark Rylance that if he is found guilty it could mean the death penalty for treason.

MR: “I understand
TH: “Aren’t you worried?
MR: “Why, would it help?

A brilliant piece of advice to anyone in worry mode that I mention frequently and ignored completely.

The really sensible thing that I did was to take advice from of my group and she was both reassuring and helpful. I took her advice, the situation is now under control and the feeling of relief is palpable.

I should have known better. Some years ago I worked as a special  product engineer covering the North of England and one Friday late afternoon I took a call from the manager of our Leeds office who peremptorily told me to be in his office at 9.00am on Monday morning. I didn’t like him and the feeling was definitely mutual.

I didn’t enjoy the weekend simply because worry took over. I was going to  lose my job, my family would reject me and there would be nothing for it but to take the Beachy Head solution.

I did as I was instructed and turned up, apprehensive, pale and wan, at 9.0-am only to hear him say:

“Thank you so much for coming. I have a problem that only you can solve”.  

I suppose that I felt rather stupid at the waste of emotion but relief was the overwhelming feeling.

Again, did I learn from this experience?  Not really because it does still happen from time to time.

Professor Steve Peters in his great book, The Chimp Paradox, says that the chimp or emotional brain has five times the power of the human or rational brain and unless we learn how metaphorically to cage the chimp, we will allow our emotions to dominate.

Mark Twain said that as an old man he had known many troubles but most of them never happened.  It seems to me that the most sensible thing that I can do is to take my own advice.

“Physician, heal thyself” (Luke 4.2) says it all.

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Sunday, 18 March 2018

Looking to Make People Accountable? Help Them to be Self-Accountable!

We in business tend to talk glibly about and even assume that there is a process in place for accountability but, in truth, is there?

I am a great believer in giving people the freedom to make decisions and take action without overwhelming pressure from nervous top-down management.

Indeed many wise business sages have expressed strong opinions that leaders should always appoint the best people possible and then get out of their way and let them get on with it, whatever “it” happens to be.

Easier said than done, of course, because two relevant words come to mind in the doing of it, those being “trust” and “threat”.

We can dispose pretty promptly of the threat connotation because if a leader truly thinks that an exceptional employee poses a threat on a personal or corporate basis then they need to indulge in a little self-examination.

Trust is an entirely different proposition. If a leader shows the courage to give people their heads and then lets them get on with it, then many outwardly confident characters can still suffer inward pangs of nervousness.

Time is, as they say, a great healer and time will usually exhibit results, positive or negative, that will confirm or deny the leader’s decision.

The trick is, of course, to shorten the time span to make sure that the time for any negative impact is as shortened as possible, and that is where accountability kicks in.

In essence accountability implies that while we have the freedom to make decisions and take action, we are always accountable for both decision and action that need to be for the greater good of the enterprise.

The difficulties now lie in the frequency, depth and hierarchical level to which people are accountable so that it does not become a wet blanket of authority.

It does seem obvious to say that if we rightly give our people freedom then they should be accountable and some individuals find this both scary and irksome. Consequently they can be identified as the people in the business who just need to be directed, told what to do and then get on and do it.

There is a danger, fed eagerly by the media, that accountability can be equated to dramatic failure and we then can get into a “heads must roll”  scenario.

The whole concept needs to be a part of the values and the culture of the business; we offer you trust and the freedom to do what you consider to be right and we expect that you will accept accountability for the outcome.

Aristotle said that excellence is not an act, it is a habit and he might well have substituted accountability for excellence. It is said also that when we have done something for thirty days it becomes a habit and I would suggest that this is the desired outcome anyway.

The real answer is to set up a process that is not irksome or seemingly investigative but one rather that eventually relies on self-motivation and self-accountability, in other words becomes a habit.

Eight plus years ago I was in a break-out group at a Vistage conference where we discussed accountability. Each of us decided on a regular action we would take and we would then be accountable to another member of the group. After four or so weeks I found that I was calling my colleague rather than being called.  

Self-motivation kicked, I found that I didn’t need to feel accountable or responsible for the blog, that I enjoyed the experience and now more than 450 posts later, I am still at it.  In other words it became a habit.

If we can set up a process in our business that delivers self- motivation and self-accountability as habits then we have a process that can only lead to growth and success and probably more satisfied employees.

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Sunday, 11 March 2018

Having Problems With Communications? Be Brave, Try Something Different!

Whenever a survey is taken of employee satisfaction it is strange to note how many comments are forthcoming about the perceived lack of communication in the business.  Paradoxically this complaint is being ventilated in a survey to uncover problems in communication.

I had a very interesting one-to-one this week with one of the members of my Vistage CEO peer group and we discussed this issue at length.

He is dedicated to doing as much as possible to enhance the level of effective communications to the employees of around 300 but has begun to realise that methods that worked at least on a satisfactory level now seem to have a reduced effect.

His overall theme was that as communication methods have changed then why are we still using old methods with noticeably less success.

Methods like noticeboards, an intranet, regular newsletters to everyone, briefing meetings, information campaigns, surveys and so on seem to have lost their effect.

We had a brilliant speaker from the USA, Herb Meyer, at a meeting of my group some time ago and he had been special counsel to the Director of the CIA so he had some some considerable experience of communications.

He said that if they needed to pass some extremely sensitive information this would be done by placing it in a locked box which was then transported in trusted hands to the recipient who then unlocked the box. Herb said that ten minutes later everyone in the building knew about it.

He went on to say, perhaps a little cynically, that the only way to make sure that it stayed secret was to put it on the noticeboard.  Question: how long is it since you have looked at your notice board?

The fact is that methods of communication have changed and are still changing dramatically and the question is, are we up to date with everything available that can be validly used in the business?

On a simple level we all see people in restaurants settle at the table then everyone gets out their phones and spend time gawping (my Lancashire background coming out) at them.

I find that habit objectionable but it happens and if people prefer to read news or check their emails constantly then that is their business.  The fact is that we may be missing a trick if we don’t exploit the habit in some way.

One method that I found out about only yesterday (I am not always an early adopter) is Facebook Workplace and that seems to me to be a very engaging way to encourage people to communicate more readily.

After all communication  to be effective must be at least two way.  The old technique employing a metaphorical pointing finger followed by “Do you understand?” has long gone or at least we hope so.

As far as possible the best way to pass on the message is individually and that can be complex in larger organisations where the message has to be delivered at all levels of the business. There is a consequent probability that it becomes garbled at some stage.

There cannot be too much communication but it is essential that the methods used ar acceptable to recipients  and are as little top-down as possible.

The old adage about “my door is always open” sounds great but it needs to be visible and individual to make it truly effective.  Think about some real differences that are exciting and try them out. Test them if necessary in a small pilot scheme and monitor the results.

There is no magic bullet but a constant drip feed of communication in ways that people understand and like can have a dramatic effect.  Perhaps it may even slow down the complaints in those employee surveys.

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Sunday, 4 March 2018

How Effective is Your Supply Chain? It's Vital For Your Gross Margin!

I posted a blog a couple of  weeks ago about the late Brian Warnes and his brilliant concept of Dynamic Budgeting.  He also introduced me to the 5-Line P&L, again a brilliant and simple concept.

During a recent one-to-one mentoring session with one of the members of my Vistage CEO peer group, we were discussing some instances of indifferent performance of their supply chain and it occurred to me that Brian’s 5-Line P&L might supply some form of solution.

If we analyse the P&L, Sales comprises Volume and Price and Cost of Sales is Labour and Materials.  This applies largely to a manufacturing businesses, of course.

We should always be aiming to increase the gross margin, the true income of the business so for a start let’s see how this can be achieved. Sales as we said comprises volume of product sold together with price.

Volume can and indeed should be affected by our sales and marketing procedures but can be seriously affected by competition.  

Please mote; competition is NOT restricted to price.  

There are many reasons why customers buy from us and price is frequently number 4 or 5 on the list below the product itself, quality, service and so on.

We do, however have control over the price for the product and on the basis of getting the basics right for a start, we should be able to increase prices.  Vistage speaker Malcolm Smith, for example, runs an excellent session called “It’s Not About The Price”.

If then we consider the cost of sales it usually comprises labour and materials with an adjustment, if required, for stock.

If we can’t or don’t want to reduce the labour cost, the spotlight falls inevitably on the materials component.

As a side issue it is interesting to do the 1% test on your 5-Line P&L because we don't always realise that tiny incremental changes can have a significant effect overall.  For example if the objective is to increase the gross margin, then we can increase sales, either by more volume or increased prices.  Do this by 1% which automatically increases cost of sales by 1% with fixed costs remaining the same.

If we then reduce costs by 1% and recalculate, just take a look at the effect on the net profit.  One of my members did the same exercise at 2% and he was astonished to find that it doubled the net profit.  Remember that even a 2% change should be relatively easy to achieve with a little imagination.

If we increase prices then the increase goes straight to the bottom line.  If we decrease the cost of sales, then the same applies so it seems sensible to concentrate on both of these factors.

Taking the cost of sales component, the part that needs to be considered is the materials costs.

My member discovered that the purchasing team, once they settled on a supplier then a certain amount of complacency set in and there was little examination as to how they could reduce the purchase costs other than by negotiation with one supplier.

There was some reluctance to look for alternative suppliers which immediately  raised concerns as to why this was the case.  For example, was it laziness or something more sinister?

He took the decision to insist with purchasing that for major supplies defined using Pareto Analysis (80% of all purchases result from 20% of suppliers) they were able to identify precisely where competition could be introduced.

The upshot of the exercise resulted in an overall 8% reduction in purchasing costs and a more active, competitive and responsive supply chain.

This is all very simple and I would be surprised if you are not working this yourself.  The question is: how effective is your purchasing and what could be achieved with a little more analytical activity and imagination?

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