berry close up cooking delicious

A spoonful of sugar

You’ve probably come across…maybe even been on the receiving end of…the “praise sandwich”. That’s where a manager buries any negative feedback between two layers of praise. The idea being not to leave the employee at a low point at the end of the conversation.

Management training programmes often teach that “sweetening the bitter pill” of negative feedback with praise before and after is a gentle way to get people to improve their performance .

There’s a couple of problems with this approach.

Firstly, for some employees…hopefully not many…finding two things to praise them for so you can slip the negative feedback in the middle might be a bit of a stretch.

Secondly, and more seriously, it turns out the praise sandwich isn’t all that effective.

Think about it.

You want people to learn where they’ve under-performed and do something about to put that right next time. You want to leave them primed for action, not basking in the warm glow of having done a good job on something else.

Of course, some managers don’t enjoy conflict so shy away from the negative feedback anyway. So their direct reports get the mildest hint of under-performance mentioned briefly surrounded by extensive and lavish praise. They probably come away from that discussion with the feeling that they’re doing a great job and needn’t change anything.

By the same token, being over-critical isn’t right either. There’s no quicker way to switch off any sense of staff motivation than continually criticising someone, especially if they can’t do anything about the issues which cause that under-performance.

The other problem with the praise sandwich is the delays it can lead to.

Pretty much everyone agrees the right time to give any sort of feedback, positive or negative, is as close to the incident as possible while everything is fresh in people’s minds.

If you wait hours, days, weeks or months until you’ve racked up a couple of positive things to say alongside the negative one, most of the benefits of having that conversation are lost. Unless it’s an enormous issue, the longer the elapse of time between the incident taking place and receiving feedback, the more likely it is the staff member concerned won’t even remember the incident you want to give feedback about.

To make progress faster, praise people generously when they’ve done something excellent. Don’t store it up in case they do something wrong next week and you don’t have anything else to use as one of the positive layers in your praise sandwich.

By the same token, raise any concerns as quickly as possible too. The last thing you want is for an area of under-performance to become the norm just because you haven’t pulled people up about it for days or weeks. Then it’s twice as hard to get them to correct course and do things they way they should have been doing them all along because they have to “unlearn” the wrong way and re-learn the right way.

In the final analysis, however noble its intentions, staff members quickly get to recognise the praise sandwich when they see it and know what’s coming as soon as you’ve reeled off the first compliment. That takes the edge off any positive feedback you might give which means the net effect of this conversation is to leave them demotivated, when the stated intention of the praise sandwich is to leave people in a positive frame of mine.

This renders the whole purpose of the praise sandwich null and void.

When it comes to giving performance feedback, a spoonful of sugar to help the medicine go down is not nearly as effective as you’ve been led to believe.

People respect being told what they need to do better, as long as you do it in the right way and with the intention of helping them improve, rather than for point-scoring or to undermine them.

There’s no need for a spoonful of sugar to help the medicine go down when people know you’re on their side and cheering them on for the win. They’ll be happy to take any learning points and try their hardest to do better next time.

Which is what you want, after all.

A waste of $2,420

According to recent Gartner research, in 2019 companies spent an average of $2,420 per person to enhance the employee experience in their business.

But increasingly “enhancing the employee experience” is leaving people cold – that same research found that only 13% of employees were fully satisfied with their employee experience at those businesses.

I don’t know about you, but if I was leading a customer service initiative that 87% of customers felt wasn’t meeting their needs I wouldn’t be ploughing that particular furrow for very long. I’d try a bit harder to find something at least a working majority of customers actually did like.

I’m not suggesting for a moment that employee experience isn’t important. I wouldn’t have bothered leading a business to the Top 100 Places to Work in the UK listing if I thought that.

But in too many places, employee engagement has become one of those terrible tick-box initiatives deployed by the sort of people who went into HR careers despite clearly not liking other people all that much.

The exercise becomes never-ending wish lists for free coffee or on-site childcare or flexible working hours. And for every employee who likes a particular perk, there will be others who hate the very idea of it.

If you want to provide free coffee or flexible working, just decide to do it.

That’s a 30 second decision. Forget the painful HR strategy development papers and subsequent detailed process-writing…not to mention the excruciating monthly management reports about how much coffee you’ve bought or how many people worked what hours.

HR Departments love this stuff, of course. They get to hire an Employee Experience Manager, go to all the HR Managers’ conferences to tell everyone how brilliant they are and take up rather too much time in management meetings reporting on data which has very little to do with making your business more successful.

Want to know how to make your staff feel like they’re having a better employee experience? It’s really simple.

Firstly, just give them free coffee and flexible working. Tell them to work out the details for themselves to make sure all the work is covered and everyone puts in their contracted hours over the course of a month. But apart from that leave them to it.This will cost you somewhere close to nothing.

Secondly, take the $2,420 per person you were going to spend on employee experience initiatives and give everyone a $2,420 pay rise.

Thirdly, just make some decisions. Then you can take the Employee Experience Manager and their various assistants and hangers-on out the HR Department. Spread the salary savings you make across all the people in your business, on top of the $2,420.

The net cost to you, apart from a the odd jar of coffee…nothing.

Outside your HR Department, the research suggests 87% of your staff will be more satisfied with those outcomes than anything an Employee Experience Manager could dream up.

police army commando special task force

Not hitting your targets on purpose, SAS-style

My kids love the TV programme “SAS: Who Dares Wins”. If you haven’t seen the show, a group of ex-Special Forces instructors put members of the public…and occasional celebrities…through their paces as if they were on the famously-tough SAS selection course.

I don’t imagine for a moment the TV show covers every challenge real applicants to the UK’s most elite special forces endure. But, frankly, I wouldn’t even do the version we see on TV, so I take my hat off to those who try it for real.

Recently they’ve introduced a new test where “recruits” are given a rifle then blindfolded, dragged through the undergrowth by an instructor, being pushed, shoved and shouted at constantly while explosions erupt all around them.

Once they’re thoroughly disorientated, recruits’ hoods are whipped off. Now they have a split-second to decide whether to “shoot” a figure dressed in all in black who’s sprinting out a building towards them, carrying a firearm.

There’s the tiniest clues, easily overlooked when you’re completely disorientated and confused – a shoulder-patch with the flag of a friendly country, perhaps.

That’s the split second decision. Friend or foe? End a life or save a life?

Get it right and you’re special forces material. Get it wrong and you’re the one going home in a body bag if you’re on your own behind enemy lines.

Thankfully that’s not a decision most of us will ever make…on TV or in real life.

But it’s not unlike the crazy, chaotic, fast-paced world of business. Several times a day, you’ve make split second decisions with long-term consequences.

Do you apologise to the customer, even if it wasn’t your fault, or tell them to get lost?

Do you fire a member of staff, or accept everyone, including you, makes mistakes from time to time?

Do you make promises with a straight face to customers, funders and lenders knowing your chances of delivering on them are slim, or have a difficult conversation now and try to work out a way forward everyone can live with?

The coward’s way out is always to take the “obvious” action.

If someone’s running towards you carrying a gun, you shoot.

If the customer is technically in the wrong, per your 40-page terms and conditions, you tell them to get lost.

If the staff member has done something silly, you prove who’s boss by firing them.

If customers, lenders or funders are putting you under pressure, you tell them what they want to hear for now and hope you can weasel out of delivering somewhere down the line.

It’s easy to “hit the target” and do the obvious thing. That’s much, much easier than pausing for a split second to think more broadly about the situation.

Heroes…the sort of people who work in special forces…are specifically trained not to take the coward’s way out and blast away at every target regardless.

Smart business leaders do the same. They apologise to the customer, they give that staff member another chance, they tell the truth to lenders and investors, even if that causes them problems in the short-term.

Cowards shoot first and ask questions later. Heroes know when not to pull the trigger.

Rapper’s Delight

If you’re a music fan like me, this article’s title will immediately make you think of what’s widely considered the first rap record to “go mainstream”. “Rapper’s Delight” was a UK Number 3 in December 1979 and a US Top 40 hit in early 1980 for the Sugarhill Gang.

But that’s not what I’m writing about today.

Today it’s all about rappers bringing delight to their audience. And the way one rapper in particular does it.

I recently read Glenn Fisher’s excellent book “The Art of the Click” (which I’d highly recommend).

Glenn tells the story of going to a Drake concert and the way Drake engaged his audience.

There’s not enough space for me to do Glenn’s story justice here. You need to buy his book for that.

But there’s a really important lesson for every business in the concert experience Glenn describes.

And it’s this…

If you really want to delight your customers, you have to work with them. You have to involve them in the process. You have to make them feel what you’re doing is for them You have to make an impact on them as individuals.

Too often, groups of managers get together in windowless conference rooms without a customer in sight and set out to deliver “customer delight”, or some such nonsense expression.

Take it from me. You’ll never deliver customer delight that way. Often the outcome of those meetings cheese customers off more than it makes them happy, in my experience.

For delight…the sort of reaction you hope will inspire years of loyalty from your customer base…you have to connect with your customers in ways most businesses don’t.

And while there are some challenges to doing this, it’s not nearly as hard as you’d think.

Delight depends on your mindset. It’s all about how you make deep connections with individual customers. And, unless your organisation is currently in a state of utter disorganisation, it’s rarely about introducing new procedures or buying a new CRM system (despite what business consultants and CRM system vendors would have you believe).

If the top-selling male solo artist of all time can make those sorts of connections with people they’ve never met and create delight for their gazillions of fans in the way Glenn describes, I’m absolutely certain you can do the same or better with your dozens or hundreds or thousands of customers.

You might not become a multi-platinum recording artist, but you’ll certainly run the most successful business in your sector.

And you don’t need to be a rapper for that to bring delight to your balance sheet.

The copycat’s conundrum

I used to do an exercise with clients where I’d show them sections clipped from their website and similar sections clipped from their competitors’ websites. The challenge was to identify which sections were theirs.

Spoiler alert – I almost never got the right answer. Even when I did, people usually admitted it was just a lucky guess.

Too many businesses forget is that when they look exactly the same as every other potential supplier, that only leaves price as the basis for customers to make purchasing decisions. Over time, you’ll end up one of hundreds of commodity suppliers, all competing on price.

Many businesses seem to prefer the anonymity of conformity to standing out. It feels “safer” perhaps, but being like everyone else is actually the riskiest thing a business can do.

Here’s one example why – according to a recent survey virtually 100% of companies say they provide excellent customer service, but only 80% of managers think their company actually provides superior customer service.

More worryingly, only 8% of their customers agree.

Can you imagine how easy it would be to stand out from your competitors for providing excellent customer service when 92% of your potential customers don’t think anyone in your industry provides that?

More to the point…why would you copy ways of working that 92% of your potential customers already don’t like?

This isn’t just about customer service, though.

Try the same exercise I used to take clients through. Get someone to copy-and-paste your website and the websites of five or six competitors into a plain Word document, removing any images and company names and jumble them up.

Can you tell them apart? Can you tell which is yours?

Almost certainly not. And guess what…neither can your customers.

You’ll never beat your competitors by copying them. The opportunities for smart business people to do something different…provided they deliver on their promises…are huge.

What’s stopping you?

white british airways taking off the runway

What profit margin should I target?

Business owners ask me questions like this a lot – what should my margin be…what rate of sales growth should we be achieving…what return on capital should we target?

However this misses an important point.

Many of the metrics people talk about are relatively useless in the context of an individual business. That’s not what they were designed for.

The alphabet soup of GM, ROI, ROCE, ROIC, etc, etc were invented to make it easy for banks and investors to compare one company in a sector with another.

But this is irrelevant to most business owners because they’re not usually deciding whether to invest in their own business or in one of their competitors. They’re either going to invest in their own business or not at all.

So there’s only one answer to the question “what should metric X be”…and that’s “as good as possible, in the context of your business, operations and customer base”.

Here’s just one example.

Landing fees are a big cost to airlines. But the landing fees Ryanair pays at its out-of-the-way airports are a fraction of the landing fees British Airways pays to land a jumbo jet at London Heathrow.

That’s because one airline wants to keep their landing fees as low as possible, entirely consistent with their mission to fly people round Europe for pennies.

The other airline willingly incurs much higher landing fees because that gives them access to more affluent passengers who prioritise convenience and service over cost in their purchasing decisions.

So any comparison between the two is relatively meaningless. Yes, they’re both airlines, but in reality they’re each in a completely different business, trying to attract a completely different group of customers.

Stop comparing your business to other businesses. Decide what customers you want to serve and try to deliver as much value as possible to your chosen customers while making a for profit yourself.

Most of the time, comparing your business with your competitors won’t make your business more successful. They’re doing their thing their way. You should be doing your thing your way. The chances of that leading to the exact same performance metrics for you both is tiny.

Checks and balances…they’re a feature not a bug

It’s been an exciting few days for checks and balances.

Adam Neumann got ousted as CEO of WeWork after their IPO disappeared in a flash of unicorn dust.

The Democrats started an impeachment case against President Trump in Congress.

California Governor Gavin Newsom signed a new law forcing Uber, Lyft and similar companies to reclassify their contractors as employees…a potential knockout blow to the business models of those firms.

In the UK, Prime Minister Boris Johnson came off second best in the Supreme Court earlier this week.

And late on Friday evening, news broke that Boris Johnson’s behaviour while Mayor of London, by allegedly favouring a female entrepreneur he was close friends with, has been referred to the Independent Office for Police Conduct. (An oversight route made possible because, as Mayor of London, he was also London’s Police and Crime Commissioner.)

Much as I’m scathing about WeWork’s Adam Neumann on Twitter from time to time, in fairness he’s largely accepted the game’s up for him (albeit he has 700 million reasons not to feel too bad about the way things turned out).

In every other case, the response of those who’ve had their behaviour questioned is to say that the case against them is a political move by their opponents.

But is it?

A feature, not a bug

Having your political opponents take a case against you isn’t a bug in the system, it’s a feature of it. And one we should treasure.

After all, who’s going to keep you honest? Your cronies, your friends, the people who drink deeply from the same well of dodgy cash as you do?

Of course not.

It’s the people who have completely different views to yours, opponents who don’t bathe in the same water as you do, who keep you honest. That’s exactly how checks and balances are supposed to work.

The US Constitution, for all its faults, is still one of the finest structures for the separation of powers the world has ever seen.

The three elements of government – the Executive, the Legislature and the Supreme Court – have been set up in such a way that one element alone cannot act without the consent, tacit or otherwise, of the other two.

While that’s occasionally frustrating, we have to remember the drafters of the Constitution wrote it that way on purpose. They were the original “small government” pioneers who resented the Kings and Queens of England interfering in the affairs of the North American colonies.

That’s why the Declaration of Independence didn’t replace a King in London with one in New York or Boston. The colonialists wanted an entirely different model. One where no absolute ruler could tell them what to do.

So the US Constitution was designed to make it all-but-impossible for any one person to hold all the cards when it came to the business of government.

But the drafters of the US Constitution were also public spirited enough to recognise that they had a responsibility to, as the preamble to the Constitution says, “promote the general welfare”.

So if all three elements – Executive, Legislature and Supreme Court – agreed on a course of action, that was probably a sensible way forward which the country could unite behind.

The drafters of the US Constitution never quite put it in these terms, but they’d suffered under the yoke of far-off kings and noblemen for long enough to know that, in the famous words Lord Acton would utter a century or so later…

Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men…

Lord Acton – letter to Bishop Creighton, quoted by econlib.org

From the Boston Tea Party to chocolate’s sugar rush

In the UK, we famously don’t have a written constitution. Most of the time it somehow all works anyway, but there are times when that unwritten constitution is strained to its limits.

The same is true in company law. For a long time company bosses could do pretty much what they liked. Most were decent people trying their best, but a few disreputable individuals with their eyes on the big money prize pushed things too far.

The late 1980s and early 1990s saw financial scandals like Polly Peck, Robert Maxwell’s plundering of his companies’ pension funds, the Barings Bank collapse and BCCI.

Even for a country with an unwritten constitution we Brits collectively decided there had been one corporate scandal too many, so decided we’s write a “constitution” for our businesses to follow.

The basic structure for this new system of corporate governance was laid out in the Cadbury Report, named after Sir Adrian Cadbury, of the Cadbury chocolate empire, who chaired the less than snappily-titled Committee on the Financial Aspects of Corporate Governance.

I did a law degree before being seduced by the bright lights of an accounting career, and had a particular interest in constitutional law, so I was probably less surprised than many to find the Cadbury Report highlighting the importance of the separation of powers in an organisation to help keep people honest.

This included the principle, familiar to drafters of national constitutions around the world for the last 250 years or so, that no one individual should have final decision-making powers in a business. This would be ensured by having independent non-executive directors in the majority on company boards.

In the most recent iteration of corporate governance standards in the UK, the UK Corporate Governance Code, there is an explicit requirement for the Chair of the board to be independent of the business and separate from the Chief Executive (Provision 9).

All UK-listed companies are required to comply with the UK Corporate Governance Code as a condition of retaining their stock market listing. Similar provisions apply in most major financial markets around the world.

From Sir Adrian Cadbury onward, those in charge of corporate governance in the UK have understood that “power corrupts and absolute power corrupts absolutely”. They have done their best to make sure nobody holds absolute power in an organisation.

Well, that’s the theory…

Of course, even a system with separation of powers built into it relies on people behaving honestly and sensibly.

And this isn’t an expectation for company bosses alone. It’s how the UK’s parliamentary oversight process is supposed to work, as is the governance process in trade unions.

However, as we’ve seen recently in politics, if you make sure…by fair means or foul…the people exercising oversight all share precisely the same position as you do on this issues of the day, or that they have some vested interest in the outcome you’re seeking for yourself, even if that’s for a different reason than the reason you have, then oversight can quickly become a sham.

Tiny numbers of people control the UK’s main political parties by taking positions which have alienated substantial numbers of their own supporters. Far from being political suicide, as you might initially think, this means those spouting the most extreme nonsense, on both left and right, hide under the language of “implementing a democratic mandate from my party”.

When “your party” means the 20 or so most vocal activists in each constituency cobbling together to ensure a vote which serves a party leader’s best interests, that’s not a democratic mandate at all. It’s closer to mob rule.

And the same is true of corporate governance.

Governance of any sort is a sham when the people doing the oversight are just as interested in reaping the rewards as the person heading the organisation.

Their precise objectives might be slightly different, but the key is that now, in effect, we have a single individual able to make all the decisions in direct contravention of every fundamental precept of corporate governance.

In theory, the governance structure has been set up to prevent that. In practice nobody wants to stop an out-of-control Chief Executive because they get a share of the spoils if the Chief Executive gets away with it.

Take the unfortunate WeWork saga.

There was absolutely nothing Adam Neumann did at that company which wasn’t public knowledge and which the chair and board of directors were unaware of. There was full disclosure in the S-1 form filed with the SEC prior to WeWork’s abortive IPO. There is no suggestion that any information has been withheld from either the board of directors or the SEC.

In fact, it was the disclosure of what WeWork had been up to in their S-1 which sank their IPO without trace.

The only question is – how on earth did the corporate governance abomination that was WeWork ever think their behaviour as a business, and their Chief Executive’s…shall we politely say…narcissistic idiosyncrasies were in any way acceptable for a public company with a supposed value of $47 billion?

The answer – any rational notion of corporate governance in that business had completely failed.

The consequence of that failure of corporate governance – WeWork went from a valuation of $47 billion to, effectively, zero in the space of a few weeks. That’s an expensive lesson, so let’s look at how such a spectacular failure happened on the eve of a major IPO.

Where was the board while all this was going on?

You might think the board of WeWork would have stepped in when Adam Neumann started going off the rails a little.

In fairness to Neumann, he clearly had energy, vision and a way of presenting his ideas persuasively which would have made him an asset to any business. But he was like the 3 year-old whose parents don’t stop them eating as many cookies as they want and instead end up dealing with their child’s poor behaviour as they ride the roller coaster of successive massive sugar rushes followed an hour or two later by deep crashes.

In the business world, as for toddlers, poor behaviour left unchecked tends to have severely negative consequences down the line. Not usually $47 billion-worth, admittedly, but still consequences.

Yet the board of WeWork displayed very little inclination to keep Adam Neumann’s hands out the narcissistic cookie jar, even though it is the role of the board to preserve the long-term health of the business. Whatever the people who lost $47 billion thought they were doing, they certainly weren’t preserving the long-term health of the business, as subsequent events have proved.

And that’s largely because the board of WeWork had their hands in a cookie jar too, albeit a financial cookie jar rather than a narcissistic one.

They didn’t get their “hits” from another narcissistic episode, like their Chief Executive basking in admiring articles in business magazines and speaking at top-line conferences around the world.

In the words of Vanity Fair…

It’s hard to overstate the degree to which WeWork’s business is built on the egomaniacal glamour and millennial mysticism of Neumann and his wife. Neumann sold WeWork not merely as a real estate play. It wasn’t even a tech company (though he said it should be valued as such). It was a movement, complete with its own catechisms (“What is your superpower?” was one). Many major players found this special sauce irresistible.

Vanity Fair, 23 September 2019

No, the board got their “hits” from selling shares in WeWork at successively higher valuations, which in turn made their personal shareholdings, and those of the investors they represented, more valuable.

WeWork was founded in 2010 and by 2012 had raised $17 million in a Series A funding round. A $40 million Series B followed and their $157 million Series C in November 2013 valued the company at $1.6 billion.

From there, it was up and up, all the way to $47 billion by summer 2019.

When you’ve got a charismatic founder with, ahem, those little idiosyncrasies generating significant personal wealth for you…or a substantial return on investment for your employers…or both…very few people are strong enough to want to knock that particular gravy train off its tracks.

And yet that’s precisely what should have happened long ago.

When fantasy meets reality

Sooner or later even gravy trains hit the buffers.

There’s even an expression for it in financial markets – the “greater fool” theory.

It states, roughly, that no matter how delusional you are, as long as you can find someone more delusional than you are to buy your shares from you at a fancy price then everything is OK.

Indeed, they’re buying those shares in the expectation that they’ll be able to find a “greater fool” a little way down the line to sell those shares on to and make a profit for themselves.

But if you’re the last “fool” in line before the market shifts south at a rate of knots, then you’re the one whose wealth is destroyed.

At lower levels of valuation, WeWork might have made some financial sense. London-listed IWG plc, which has been in the shared office business for 30 years and operates the Regus brand of shared offices, is worth a little under $5 billion.

But there was a point for WeWork when the valuation jumped across a line from “a very optimistic view of future prospects” to “delusional and not justified under any sensible economic model”.

And at that point, WeWork’s corporate governance failed.

Not because they didn’t tick any boxes they should have ticked. As I’ve said already, there is no suggestion that WeWork withheld any information from the SEC, the NYSE or the legions of public investors they hoped to attract.

But, had the WeWork IPO got away, there wouldn’t be a single person on their board upset with Adam Neumann. He’d still be their CEO, in all his idiosyncratic glory.

The early investors would have banked their cash and gone off into the sunset before the ordinary man and woman in the street realised they’d been completely stiffed by people who sold them a business model which made no economic sense.

And the board was egged on by the investment bankers at JP Morgan and Goldman Sachs who stood to make millions in fees from a successful IPO. In the memorable words of NYU Stern Business School Professor Scott Galloway

The bankers (JPM and Goldman) stand to register $122 million in fees flinging feces at retail investors visiting the unicorn zoo.

Scott Galloway August 16, 2019

Corporate governance failed at WeWork because nobody was prepared to take the other side of the deal.

While the investment bankers, board members and investors were licking their lips and planning to buy themselves oceangoing yachts and Gulfstream jets with their profits, nobody was saying “are we all sure this is a good idea?”.

Nobody was looking out for the retail investors, the ordinary people who invest their hard-earned savings in public companies, either directly or through their pension funds and mutual funds…except perhaps Professor Galloway.

And it’s not that nobody knew the truth.

People who work at JP Morgan and Goldman Sachs might not have moral compasses which work terribly well, but they’re smart people. They know how to run an Excel spreadsheet. And there’s no way on earth an objectively-constructed Excel spreadsheet loaded with WeWork’s business plan would have made any economic sense at any point in the next several centuries.

They must have known WeWork’s plans made no sense, but pressed on anyway with their eyes on $122 million in fees.

By the same token, the board of WeWork, which had plenty of smart people sitting on it, must have known the business plan made no economic sense, but pressed on anyway with their share of $47 billion as the prize for getting the IPO away.

WeWork, in a sense, did nothing wrong. Every box which should have been ticked was ticked.

And yet WeWork did everything wrong when it came to the fundamental principles of corporate governance.

Every business needs someone taking the other side of the deal

In the modern corporate world, pledging allegiance to some corporate messiah is what fancy business schools’ leadership programmes say should happen.

This is hokum.

The most valuable person in any business is the one who isn’t drinking the same Kool-Aid as everyone else. The person who can take an independent view, someone who can put themselves in the position of an outsider looking in on the business and ask the CEO and investors “are we quite sure we want to do things like this?”.

Like the little boy in the story about the emperor’s new clothes, someone has got to be given authority to speak out and challenge the prevailing orthodoxy without fear or favour.

Despite what people with fancy MBAs will tell you, that sort of dissent isn’t a sign of organisational weakness, it’s a sign of organisational strength.

And it’s the foundation of good corporate governance – not the tick-box type where your high-priced lawyers make sure you don’t get sued, but the type that matters. The type of governance that stops you making a $47 billion fool of yourself, destined to go down in business history as either a crook or a moron.

Checks and balances matter. They’re a feature not a bug, but when everyone’s drinking from the same ego-fuelled money trough, all the tick-box corporate governance in the world won’t save an out-of-control business from the consequences of its investors’ greed and its Chief Executive’s narcissism.

It cost WeWork $47 billion to learn this lesson.

Hopefully you’re a lot smarter than they were.

(Picture credit: Bekir Dönmez on Unsplash )

The Business Disaster Zone…and how to avoid it…

Before being seduced by the bright lights and glamour of the accounting profession, I did a Law degree. That taught me the single most important thing I’ve ever learned, and I’m going to tell you what that is in just a moment.

It’s how I’ve been able to create great businesses as a CFO and in other C-Suite roles.

As a CFO, I know that keeping your accounting records straight is an important, and legally-required, activity. It keeps you out of jail, but it’s rare this adds a lot of value to any business.

There is, however, one thing I do which always adds value. And you’re about to discover how to do it too, making you smarter than a Nobel Prize winner if you do it right.

It’s something I learned it in the second year of my Law Degree.

The wise old professor who took our Company Law class looked at us over the rim of his glasses one morning, mid-lecture, and told the class-full of aspiring young lawyers… “Never forget there are always two sides to every legal argument…there’s often more than two, but there’s always at least two. It’s your job to work out the other side’s perspective and why that might be different from your client’s so you can develop a way of counteracting their claims.”

There’s always at least two sides.

Especially when you think there isn’t.

To run a great business you don’t need the smartest people in the room. In fact, sometimes that’s a hindrance rather than an asset, as we’ll see shortly.

What you need are different experiences and different perspectives. Someone exploring the side of the story nobody else is.

And in case you think that’s an unnecessary luxury or a waste of time, here are three quick stories of how some of the smartest people on the planet got things spectacularly wrong because that’s exactly what they thought…followed by the steps you can take to make sure your business doesn’t suffer a similar fate…

To screw things up really badly, you need a Nobel Prize winner

To screw things up really badly, you need a Nobel Prize winner. But to bring the financial world to its knees, you need two.

Improbable, you might think, but in 1998 that’s exactly what happened, largely behind closed doors and with the minimum of publicity. For a time, unknown to most of us, the international financial system was only a heartbeat or two away from collapse.

And we got there thanks to two Nobel prize-winners and a room full of PhDs in Greenwich, Connecticut. Some of the smartest people on the planet.

Robert C. Merton and Myron Scholes won the Nobel Prize in economics for developing a financial model which untangled the arcane world of pricing options on financial markets.

So when Merton and Scholes became partners in Long Term Capital Management (LTCM), a hedge fund set up by some of Wall Street’s biggest names of the mid-1990s, surely nothing could go wrong?.

LTCM used the principles developed by Merton and Scholes (and Scholes’ co-developer Fischer Black…together, creators of the Black-Scholes Option Pricing Model which is still used in financial markets today) to devise an unusual investment strategy using highly-leveraged financial derivatives.

LTCM’s approach was hugely successful for a time, returning unprecedented 40%-plus annual gains on its portfolio.

But, soon after, this secretive, closely-held hedge fund controlling highly-leveraged off-balance sheet derivatives worth an estimated $1.25 trillion…roughly the GDP of an economy like Australia or Spain…came crashing down in spectacular fashion as their models stopped working and their luck ran out.

The reason for this collapse? Insiders at LTCM were so wedded to their “magic formula” that they couldn’t see any other possible strategy. People who didn’t “get” their genius were shunned or ignored. They were the smartest people on the planet, after all, so everyone who didn’t see things their way must be suckers or idiots…right?

LTCM stuck by their strategy even as the markets moved sharply against them because they were so convinced the market was wrong and their formulas were right.

As we know now, it turned out the market knew exactly what it was doing after all and LTCM disappeared in a cloud of dust as quickly as it had arrived on the scene just a couple of years earlier.

The Federal Reserve twisted the arms of the big Wall Street banks to bail out LTCM at a cost of $4 billion or so and save the international financial system from potential ruin.

But, to the very end, some of the partners at LTCM believed so firmly in the models the firm had developed and the strategies their data had led them to believe were “true” that they almost went down with their ship.

And nearly took all of us with them.

History doesn’t repeat, but it rhymes

10 years after LTCM went belly-up the financial crisis hit.

The rot started when sub-prime mortgage specialist New Century Financial Corporation went into Chapter 11 protection in April 2007. 18 months later Lehman Brothers spectacularly imploded and nearly took the global banking system down with it.

The Federal Reserve and governments around the world pumped billions into their economies to prevent the global banking system collapsing altogether.

While there were many contributory factors, at the heart of the financial crisis were the “Quants”, or Quantitative Analysts…Wall Street’s developers of complex spreadsheets and financial models.

These backroom specialists thought they’d developed a way of taking sub-prime mortgages…essentially the dodgiest loans in any lender’s portfolio…and converting them into AAA investments.

In fairness, the maths is quite interesting and the broad concept is not without entirely without merit but, as we now know, those loans were not as attractive as the Wall Street sales teams would have us believe. It turned out they were largely worthless.

Even at the time, some investors held the view that, to put it as politely as possible, no amount of effluent could be endlessly repackaged with a range of other sources of effluent without it remaining anything other than 100% effluent.

But the Quants had their models and their spreadsheets showing just how valuable their securities were.

There was plenty of “proof”, plenty of data, plenty of financial models developed by top-end PhDs from the very best Ivy League schools. These were smart people. And the numbers never lie…right?

On the way up, everyone did very nicely out of this financial alchemy. Few people asked awkward questions while they were busy filling their own bank accounts.

Like Long Term Capital Management, the strategy worked absolutely fine until…virtually overnight…it didn’t, and the biggest financial crisis the world has ever known got fully into its stride.

I’d like to buy the world a Coke

Sometimes called the “hilltop ad”, the mighty Coca-Cola Company shifted plenty of their products on the back of one of the classic TV ads of all time.

Even the jingle was adored, a rare event in the tough world of TV advertising. It was so popular The New Seekers took a re-worked version, which they re-titled “I’d Like To Teach The World To Sing (In Perfect Harmony)”, to the UK Number One spot in 1971.

The Coca-Cola Company had long been one of the world’s most profitable and most successful businesses. Until one day in the early 1980s, when they had an idea which has since been used as a case study of corporate failure in probably thousands of MBA classes.

Coke was concerned about their main rival, Pepsi. They’d been making ever-greater inroads into Coke’s dominant market share since the end of the Second World War.

The pressure ramped up in 1975 when, with the warm feelings of the “I’d like to buy the world a Coke” commercial still fresh in soft drink buyers’ minds, Pepsi launched their hugely successful “Pepsi Challenge” campaign.

Consumers were invited, on camera, to sip Pepsi and Coke side-by-side in a blind taste test and choose their favourite. When the big reveal came, their preferred drink was almost always Pepsi, even among people who described themselves as long-term Coke drinkers.

Perhaps understandably, this caused consternation in Coke’s headquarters.

The New Product Development team was whipped into action. Make us a drink that performs better in blind taste tests than Pepsi, they said.

After spending a rumoured $4 million in new product development costs (Coca-Cola has never confirmed the actual number) that’s exactly what they got.

Almost 200,000 blind taste tests were carried out to reformulate Coca-Cola’s century-old recipe. As many as half of the testers preferred New Coke to both Classic Coke and to Pepsi. It was just what the top brass had been hoping for.

Certain of their strategy after analysing the data from those 200,000 taste tests, overnight Coca-Cola retired the recipe they’d been serving for 100 years and introduced New Coke in a blaze of publicity.

There was just one problem.

Despite the extensive pre-launch testing, in practice consumers didn’t buy New Coke in the shops…or at least not more than once.

There was plenty of speculation about why, but that hardly matters. When it came to voting with their wallets, consumers didn’t buy New Coke at the tills. The 100-year old Coca-Cola Company was on the brink of a meltdown.

Only 77 days after withdrawing what was now called Classic Coke from the shelves, the Coca-Cola Company re-introduced it and consumers started buying their products again. New Coke’s market share dwindled to almost nothing and it was quietly withdrawn, and an estimated $30 million of unsold concentrate written off in the process.

At the press conference to announce the hurried back-tracking on their strategy Coca-Cola’s then-President, Don Keough, uttered probably the most honest assessment of an internally-created disaster any business leader has ever given…

Some critics will say Coca-Cola made a marketing mistake. Some cynics will say that we planned the whole thing. The truth is we’re not that dumb and we’re not that smart.

Don Keough, Coca-Cola President, 1985

Where did it all go wrong?

These three business disasters…and there have been plenty more…share one common characteristic.

Nobody in the business was taking a different perspective to everyone else.

The same Kool-Aid was being quaffed by everyone involved in the decision-making and, if there were any dissenting voices, they quickly got the message that their input was unwelcome to a career-threatening degree.

In every case, there was nothing wrong with the mathematical calculation of the numbers all these businesses relied on. The basic premise was flawed, but the maths just faithfully reflected that initial premise.

Put enough scientific-sounding formulas together and throw in some huge computers churning through terabytes or petabytes of information and very few people are going to challenge the answer the magic box throws out.

None of these ultimately fatal decisions lacked data. But data alone wasn’t enough to protect those businesses from disaster.

In every case, each business allowed itself to be seduced by their own brilliance, convinced of their invincibility, secure in their position at the top of the world.

Because of their brilliance…those Nobel Prize winners, rooms-full of top PhDs, expert new product development teams…those businesses suckered themselves into believing they had an edge they didn’t really have.

The more data they had, the more they believed everyone else in the world…Wall Street, the Federal Reserve, soft drink buyers…were completely wrong.

Those businesses forgot their data was just a model…an estimation, an approximation, a best guess at a point in time.

Data was elevated from the status of “potentially helpful aide to decision-making” to the status of “nobody dare question the all-knowing, all-seeing Oracle”.

Strong opinions, loosely held

If you can’t rely on your data what do you do?

I’ve always liked an idea I’ve heard Marc Andreessen, of top Silicon Valley VC firm Andreessen-Horowitz, talk about.

When his fund makes investments, he thinks in terms of “strong opinions, loosely held”.

What he means by that is the firm is completely committed to whatever strategy they’ve decided, but they’re always testing out other options, considering where their initial model may be off-base to some extent, and they don’t shy away from having to completely re-invent the business model if that seems the right thing to do.

In the 10 years since the firm was founded, Andreessen-Horowitz has grown from nothing to having $10 billion under management. So it’s probably fair to say there’s something in that approach.

If you’re not lucky enough to have a top Silicon Valley VC on board, what do you do?

No matter how well you’re doing, you need to be able to take a completely different perspective on your business.

Just as the darkest hour is just before dawn, the biggest risk to your business comes when things have never been better.

LTCM enjoyed a succession of stellar years before going belly-up in the matter of a few months.

Wall Street was buzzing, bonuses were flowing, markets were booming…right up until the point where the sub-prime crisis hit and a succession of major financial institutions imploded overnight.

The Coca-Cola Company was still the world’s number one soft drink maker when it decided that it needed to be more like its less-successful competitor even though the race was Coke’s to lose.

Taking a very different perspective sounds easy, but it’s really hard. The odds are stacked against it to a large extent.

If you ask one of your managers for a report on something, odds are they’re not going to put something forward that shows them in a bad light. Even if they have to stay up all night to find a glimmer of positivity, they’ll include some data to suggest they’re doing at least an OK job, even as their world collapses around them.

That goes double if the report relates to a part of the business where the CEO or the Board has been quite specific about how they want it to run.

How the business interacts with customers, both its current customers and its future potential ones, is a common area for CEOs and Boards to take a particular interest. Ditto how it interacts with employees. And, occasionally, how the technology that underpins the business works.

That doesn’t mean any of those strategies are wrong. But over time, the market might move in a different way. To give a current example, the Daily Telegraph reported at the weekend that Facebook usage is down by one-third in the UK due to concerns about their data privacy policies.

Money-making machine though Facebook is, it’s in real danger of being caught on the wrong side of a sudden market move away from sophisticated, some might say manipulative, advertising-funded income strategies and towards a world where there are greater concerns about protecting privacy.

Their strategy worked until it didn’t. Just like LTCM’s. Just like Lehman Brothers’. Just like the Coca-Cola Company’s.

That’s why a different perspective is so important.

And, in a lot of businesses, that’s the job of your CFO. Even though they will be just as committed to your business succeeding as you are, the worst thing you can expect them to do is drink the same Kool-Aid as everyone else.

A good CFO should be good with numbers, without being a slave to them…especially when those numbers come from somewhere other than the Finance Department.

They should be supportive of the company’s mission, but challenging about the best way to get there.

They should help make sure any major decision…even one taken for the best of reasons with more data than you can shake a stick at…doesn’t bankrupt your business if it should turn out, with the benefit of hindsight, to have been a move in the wrong direction.

To paraphrase Scotland’s national poet, Robert Burns, into modern English, “the best-laid plans of mice and men often go awry”.

One of the best ways to make sure your plans don’t go awry is to have the right Finance Director or CFO in your business, someone who’s going to bring a perspective nobody else is bringing..

When the rest of the business is zigging, you want your CFO to be zagging. Not necessarily because they’re right, but just because that’s how you bring a different perspective to bear. That’s how you end up considering some issues you might not have considered otherwise.

And remember, there’s always at least two sides to everything. You need to give someone the job of finding the perspective everyone else has missed.

Your CFO is usually a great choice.

(Picture credit: Leio McLaren (@leiomclaren) on Unsplash)

The last thing your business needs is more metrics

The problem with metrics is that smart people try to game them, and dumb people try to achieve them.

You know the sort of person I mean…the one who dogmatically insists on continuing to do something they get measured on, all the while turning a deaf ear to the legions of customer complaints, wielding their weapon of choice… “company policy”… as the excuse for disappointing paying customers..

Difficult though this dynamic is for any business, the problem is more acute the more metrics, targets and KPIs your business has. I once ran the division of a multinational business where we had 42 different metrics to track and report on every month.

Each of these numbers had some degree of relevance…they were interesting, up to a point…but with 42 metrics to keep on track, that gave me about an hour a week on each of these apparently equally-important metrics.

Not that I actually had an hour a week to spend on any of those things. My experience is that businesses with lots of metrics also tend to have lots of meetings where the metrics they’re tracking are discussed, analysed, picked over and post-mortem’d.

Every metric had a manager somewhere who was responsible for that particular measure across all the divisions of the business, who in turn reported in to someone pretty important in the Head Office management structure.

Because each metric’s manager reported to a senior person at head office, each of them insisted on their own battery of meetings and reports…separate from, and in addition to, the corporate set of meetings and reports through the existing reporting structure…so each metric’s manager knew what was going on well enough to pass on their own reports through to their own bosses..

If you think that sounds like chaos, you’d be right. Very little ever got done to move the business forward. All our time was spent reporting on history or having meetings about it.

Here’s a new initiative – let’s make sure we’ve got some metrics in place

Part of the problem in that business was every time a new idea was sanctioned by the CEO or the Board, a raft of new metrics was brought in to make sure this new idea could be measured and tracked in minute detail across all the operating divisions of the business.

Thankfully, as you might have realised by now, it wasn’t very often that a new idea was actually implemented. That would have required us to stop talking about things that had happened in the past for long enough to have an idea or two about what we might like to do in the future.

As a Finance Director and CFO, this approach used to drive me crazy, (although I wasn’t the FD or CFO in this particular business, so just had to go along with it).

The amount of unproductive time spent in senior managers meeting with one another was beyond astounding. I reckoned the costs of measurement and reporting was possibly the single biggest cost the business had, even though resources were being starved from the front line at the time on the grounds of “cost pressures in the business”.

For every new XYZ Initiative Manager appointed, we could probably have put four people on the front-line where they were desperately needed. But the Chair, Board and Chief Executive of this business could never see things that way.

I’ve no doubt they were well-meaning. But they’d all taken on board the sort of thing people are taught at business school somewhat too literally, which made the whole thing unmanageable.

As a principle “what gets measured, gets managed” has something going for it, but carried to the extreme, all it does is seize up the inner workings of a business.

Of course businesses should have some basis for deciding whether the initiatives they’re implementing have some positive benefit to the business and its customers. But there are often simpler ways of achieving that objective.

After all, when you break it down, all any business is trying to do is bring in enough income from customers to cover their costs and leave a profit.

Since profit is calculated as a balancing figure, you’re only really managing two dimensions here – income and cost. Profit is what’s left over after deducting one from the other.

In most businesses, costs are either fixed (that is they don’t wary much from month to month, like salaries or rent) or variable on some predetermined formula (X per hour, Y per item produced, Z% share of income generated) or a mix of both, again on some predetermined basis (eg some permanent staff paid on a salary and some temporary staff paid on an hourly rate)..

Off-hand, it seems to me that the optimal number of metrics and KPIs to measure those mathematical relationships is some number a long way short of 42.

You might say…”that’s all well and good, but what about non-financial measures that matter to stakeholders?”

Fair point – how many of those do we need?

Treat people fairly, without bias, based on gender, ethnic background or belief systems? I’m all for that…

Ensure your people are safe from harm at work? Seems reasonable…

Buy your products fairly, without supporting exploitative labour practices in third world countries? Yup…

Reduce our impact on the planet? Another tick…

Operate according to the principles of good corporate governance? Yes to that one too.

There may be some industry-specific concerns over and above those. If you’re disposing of radioactive waste from a nuclear power station, I’d expect a few additional metrics around how you might do that without destroying half of the nearest town, for example.

But those should be pretty rare. There can’t be many businesses which need to track more than six or seven key metrics in detail. And even if you could, that doesn’t mean you should…especially when you consider the cost of collecting all the data you need for a never-ending round of review meetings about the latest metrics or KPIs.

The cost of measurement

You’d probably come to the same conclusion if you did what very few businesses bother to figure out – the cost of measuring and reporting on each initiative you think is important.

In the business I described earlier, pretty much every measure had its own manager to track each metric, so there was probably a 60-80 grand salary just in that.

But it gets worse…

Some of these people had their own departments to help them with their analysis and reporting. One, I recall, had a department of six, in addition to the manager, all on 40-50 grand salaries.

Measuring this particular feature of the business probably cost the thick end of £400,000 just in salary costs…maybe as much as half-a-million when you add in IT costs, facilities, travel and the costs of the conferences these people always seemed to be going to.

And that’s just the more obvious measurement and management costs.

On top of that there was my time, time spent by the other divisional heads, time spent by our respective teams collating the information in the first place…which, in some cases, required an investment in bits of kit or software where human beings just couldn’t collect the data quickly enough or accurately enough..

I couldn’t give a definitive picture of what that cost might add up to, but I guesstimated it at about half again of the costs incurred running the official “measuring departments”. And I’m probably being kind at that.

Although the 6-person measuring department was the worst example, multiply that guesstimated cost by 42…one for each metric which was “vital” to the business…and add on half again for our “in-house” costs at divisional level. You’ll quickly see why the cost of measurement was easily one of the biggest costs in this business, even though nobody ever thought of it like that..

It’s been a while since I worked at this business. They may have changed since…although I wouldn’t bet on it. Some behaviours become too deeply ingrained to be changed under anything other than the most severe existential threats.

Don’t measure it, do it!

That business was the first thing going through my mind at the weekend as I read a succession of articles about changes people felt should be made to the business world.

These were changes for the good, let me add.

The articles suggested encouraging more women and minorities into senior roles, emitting less carbon from company vehicles, providing opportunities for young people trying to get onto the job ladder and so on.

I wouldn’t argue against any of those things.

However every article demanded additional metrics, tracking, targets and KPIs against each of those inherently worthy objectives.

But, thinking back to the place I used to work, I imagined the impact on that business if they picked up any one of those and started to carve out a six-person department to track progress and report to head office about it.

What would you rather have – £500,000 spent on measuring the recruitment of women and ethnic minority candidates into senor level posts or £500,000 spent giving women and ethnic minorities within the business the training, support or coaching they might need to be a credible candidate for the next senior role?

Which one is more likely to create the positive result you’re looking for…measuring it or doing it?

To quote one of the world’s foremost quality and efficiency experts…

…measurement of productivity does not improve productivity.

W Edwards Deming, “Out of the Crisis”, p15

I’d rather spend the money actually doing things that lead directly and tangibly to the outcome being sought, instead of spending the same sum measuring whether we’ve done it or not.

In fairness, I don’t think this is a position most people would argue with. The problem is that very few businesses know the true cost of their back office activities…including things like measuring and reporting on information, and the costs of managing those who do.

And, admittedly, while it’s not impossible to work out, it is tricky…and sometimes fairly approximate unless you have everyone in the business fill in time sheets all the time (which would, of course, require a Time Sheet Manager and a raft of people to collate, do the data entry and report on whatever the time sheet data told them…rather defeating the point!).

There are times when the cost of getting more accurate measurements just isn’t worth the cost involved. Intelligent approximations, consistently applied, will often get you close enough for most decision-making purposes.

When is the cost of measurement too high?

It’s hard to be dogmatic about this. If you’re servicing aircraft engines or conducting open heart surgery, you might think it was important to do a bit more tracking than you might for a business making black plastic refuse sacks.

But my personal “concern meter” goes off when the costs of administration are more than 5-10% of the project concerned.

On that basis, a budget of, say, £500,000 should have no more than £50,000 spent administering it and reporting on it. The rest should be spent doing whatever the objective might be.

In a large corporate environment, £50,000 doesn’t get you very far. It’s a small fraction of a C-Suite executive’s time. It might get you an Executive Assistant, or half a departmental manager…maybe most of a front-line manager.

When you approach measurement and metric setting from that perspective, it forces you to think about what you really need by way of metrics, KPIs, dashboards and whatever else you use in your business.

When you’ve only got a few grand to do your measuring with, you’re forced to concentrate only on the metrics that really matter…not every metric a full-time department of six might come up with between them after an all-day brainstorming session..

And in case you think this is impossible, I assure you it isn’t.

I once took a major organisation through an environmental certification process, which was important to them at that point in time for reasons I won’t go into here. I did it with a budget of zero and just little scraps of people’s time.

We invested every penny we could leverage out of existing budgets to support the process as best we were able and, in just a couple of years, went from being one of the sector’s poorer environmental performers to gaining a prestigious certification from an independent awarding body, which, in turn, helped boost our market positioning and ultimately our revenues.

We only had one metric – achieving, and subsequently sustaining, that accreditation.

I led meetings about once every two months, for a couple of hours each time, so we could catch up with the dozen or so people across the business who might be able to impact on this initiative.

At that meeting we identified what cash had been freed up from existing budgets and prioritised where we would spend it to make the fastest progress possible towards one or more of the certifying body’s assessment criteria.

In the three years or so I ran this initiative, I made one report to the Board, about 18 months in, to explain what we were doing and how we’d spent the money we’d found in pursuit of the objective to gain that certification. We did another session when we’d achieved the accreditation. That was it – maybe an hour in total over three years.

That apart, I refused to set up meeting cycles, reporting sessions, KPIs to track what people were getting up to or any of the usual stuff that people do in this situation.

There was no need for any of those things as I could manage it all through the bi-monthly meetings. So we spent little or nothing on administration, measurement and management. We spent everything we could achieving the objective.

Now I’ve got my good points, but there was nothing I did that nobody else couldn’t do with a bit of trust and some room for manoeuvre. There was no financial risk as everything we spent still had to be signed off through the normal approval processes.

My experience is that, given the will, and given an understanding of just how much management and monitoring costs the average business, there are very few projects which can’t be delivered the same way. You might surprised how quickly you can make progress, if anything.

But we can’t trust our people to operate like that…

When I tell this story to business leaders, I’m often told that they could never do things the same way because they can’t trust their people enough to operate without lots of reports and meetings.

I find this very sad…but this perspective raises an interesting question…

Who hired these people in the first place?

Well, it seems that was the same business leaders who claim they can’t trust the people they hired themselves!

Seems to me the solution to that problem is entirely in their own hands. Hiring people you can’t trust doesn’t sound like the smartest recruitment decision I ever heard.

“Oh, but the people we could trust are too expensive,” people sometimes respond, “so only have the budget for entry-level people.”

Again, the solution is in the hands of leaders. Running the business on cheap labour is often the most expensive way to run a business.

On the surface it looks cheap, but by the time you add in management, reporting, tracking and measurement systems sufficient to give at least a reasonable level of assurance that nothing is going badly wrong, this approach is often the most expensive option.

But this response is also an illustration of why the measurement, tracking, reporting process is fundamentally flawed.

Despite all the measurement, tracking and reporting they already have to regulate the behaviour of people they employ, those business leaders still don’t trust their staff.

More metrics isn’t the answer. They’ve got plenty of those already. But none of them do the job they really need doing.

Metrics won’t give you trust. At best they protect your downside a little, but they’re not infallible – many a formerly market-leading business has gone into administration even though all their metrics and reports were pointing in the right direction up till the moment the bank pulled the plug (Patisserie Valerie, anyone?).

Trust is an emotional construct, not something governed by the laws of physics which you can measure mechanically and improve in a factory.

If trust is what you want to create, don’t imagine traditional reporting mechanisms will help. They won’t.

Instead, work on trust (pausing to reflect, at least briefly, on whether the problem might be with you, rather than with your people).

Get that in place, and redeploy most of the resources (keeping back a reasonable 5-10% so you can do the tracking that really needs doing) spent on managing, reporting and tracking things into making your overarching objective happen.

From the moment you do that, your business will march towards your objectives faster than you can imagine. You’ll get where you want to go faster, more profitably and with a lot less stress and strain on your life and your calendar.

And if you think this is just my own personal opinion, no less an authority than Dr W Edwards Deming, the father of modern quality control, had as part of his famous 14 Principles “Eliminate management by numbers and numerical goals, Substitute leadership.”

Go on. Give it a go. You might be surprised how good your business can be when you don’t measure things.

(Picture credit: Tyler Easton on Unsplash