Monday, September 26, 2011

Are companies lying?

Often the most difficult question to answer is “why” – that three letter word that children can repeat relentlessly until you are driven to distraction, ending up either with “enough now!” or explaining Einstein’s theory of relatively.

Ask the same question about business and you end up with nothing as clear as E=mc2, but literally billions of words in organisational theory and consultant speak. Indeed, company strategy gurus, Collins and Porras suggest that you ask “why” five times before coming close to the purpose of the business. Judging from the responses to my previous articles on this theme, in South Africa you would most likely end on the first take with a dogmatic and unequivocal “to maximise profit”. The second “why” would solicit “more profit” and the third “even more profit”, and so on.

If you want to be bemused, then go through some company annual reports to see what they themselves say about their purpose. You will be fortunate if you can find some coherence around company intent amongst the many pledges and statements that reflect “why” – mission, vision, purpose, values, ethics, goals, branding and slogans – presented either as a new version of War and Peace, or as a three word mantra. At the very least, you will end up thinking that either they are lying or that they are indeed a schizophrenic lot.

So all of the time and money spent on “bosberade” and high flying management consultants on designing missions are wasted by behaviour that belies the statements, or are contrary to popular perceptions set in stone. Yet mission statement architecture has become an industry in itself, spawning some of the highest paid and best known management gurus. Browsing through some dedicated “mission statement” websites (some 6 million are suggested by Google) I was amused to see that you can even buy software programs to tell you how to tell others why you exist! The criteria suggested by two different programmes made it possible for the user to define maybe two or more very different purposes for one company.

The need for a rah-rah mission statement remains unconvincing to many. Statistical research by California academics Lance Leuthesser and Chiranjeev Kohli examined nearly 400 annual reports of the late 1980s to mid-90s. Only 16% of the reports contained mission statements; of these, more than 90% focused on customer needs first.

One thing is clear with all “good” mission statements. They mostly do reflect benevolent intent and making a difference to the good of others. This is the essence of entrepreneurial behaviour at an individual level. It therefore makes logical sense that the same should be present at a company level. Here are some examples:

At Microsoft, we work to help people and businesses throughout the world realize their full potential. This is our mission. Everything we do reflects this mission and the values that make it possible.

The Coca-Cola Company exists to benefit and refresh everyone it touches.

[3M’s purpose is] to solve unsolved problems innovatively.

[Mary Kay Cosmetics’ purpose is] to give unlimited opportunities to women.

[Merck’s purpose is] to preserve and improve human life.

Ford will democratise the automobile.

[At Pick ’n Pay] we serve. With our hearts we create a great place to be. With our minds we create an excellent place to shop.

The above mission statements all convey a “giving” spirit or benevolent purpose. Where not defined, it’s implied all the same. This fits in with the market-driven model. We can fairly say that for a company to be both ethically right and successful it should have a “serving” purpose, and that most companies at least say they have it. And yet, many perceive and experience companies differently. The company whose actions don’t bear out its statements of purpose is telling a lie. And it does so at the expense of consistency in service and focus on the customer and there will be a negative outcome sooner or later.

I came across an astonishing bit of advice in one of the “do-it-yourself MBA” websites: “While firms exist to earn a profit, the profit should not be highlighted (in the mission statement) since it provides little direction to the firm’s employees.” This is outright duplicity! If this is what’s being taught at business schools it is small wonder when employees snigger at battle cries about common purpose. But then the sages at Quick-MBA went on: “What is more important is how the firm will earn its profit since the “how” is what defines the firm.” I would not have taken this source seriously if it did not reflect a fairly common phenomenon.

Humanity seems to be defining itself more and more by what it does and how it does it, instead of why it does it. The “why” gives meaning and meaning comes from what we give, not from what we get. Without meaning we are nothing. We have no identity. We become very disturbed people if the “what” and the “how”, which are reflections of behaviour, are out of line with purpose, motive and intent.

There has been a notable shift in the past decade or two in the way companies see themselves as reflected in mission statements, vision and core values. Reading annual reports was part of my daily fare for some thirty years, and up to about the mid-1980s I saw many mission and vision statements that either explicitly or implicitly focused on shareholder value or profits. Today you will find few that do.

The shift itself is significant. It points to a growing need for companies to behave differently and become truly market-driven as opposed to profit-driven. According to Jim Collins, the best companies have always done this, but mostly market focus is still viewed as a means to an end and not as an end in itself.

The keys to success that apply to individuals and to countries also apply to companies. The overriding principle is that if people by and large are taking more than they are giving, they will create deficits and poverty. If they are giving more than they are taking they will create surpluses and prosperity.

Having an external focus and developing people is as important to a company as it is to a country. Indeed it could not happen at a country level if it didn’t happen at the level of a company, which is after all a cell of national economic activity.

A credible and successful mission is 1% formulation and 99% adherence and application. This is impossible without sincerity.

Monday, September 19, 2011

The Swiss Role Model.

Fritz Leutwiler has thus far not been given his own biography in Wikipedia. It was the nature of the man to be modest almost to the extent of anonymity. Yet he had an ability to leave lasting insights with many after even a brief interaction.

It’s not that his achievements and impact on the world of finance have gone unnoticed. As a leading Swiss banker, chief of the Bank for International Settlements in the early 80’s and the role he played in the transition from fixed exchange rates in the 70’s, his achievements have been well documented in some of the more august financial journals. His prophetic insight is reflected in a statement he made well before computer day trading, that the growth of transactions by computer would make it difficult to “allow any proper examination” of whether a commercial bank was solvent. For central banks, measuring the amount of money in circulation “would be nearly impossible”.

South Africans should remember him as the mediator between the government and foreign banks during the debt standstill after 1985. It was at that time that I met him briefly between negotiation sessions. We were given to small talk because the negotiations themselves were shrouded in the utmost confidence, a condition that Leutwiler found easy to impose as former chief of the B.I.S.

I have always been fascinated with the Swiss economic model, ever since it recorded a negative inflation rate in the early seventies, and Swiss banks were paying – or charging -- negative interest rates on deposits. It’s a position that the Swiss find themselves in again. As investors run away from paper currencies into gold, the one exception is the Swiss Franc which is even stronger in trade-weighted terms than it was in the 1970s. Its safe haven status is not related only to well-managed finance. Think of any socio-economic barometer that economists love to talk about and you will find Switzerland consistently in the top ten – Gross National income per capita, Human Development Index, Gini Co-efficient, longevity and even the Happiness index. It has again topped the W.E.F. Global Competitive Index despite having the strongest currency in the world.

It is standard fare for politicians, economists, commentators and journalists to trot out a whole host of key ingredients for prosperity and solutions to economic woes. Using a variety of socio-economic “wellness” measures in comparing countries shows that virtually none of the supposed solutions by itself, on its own, represents a formula for success. And this “success” is in any case measurable only at a tip of the iceberg.

The fundamental conditions for wellness (or abundance, in terms of a broader understanding of that term) cannot be found in one set of circumstances. If wellness is based on individual peace and contentment, then it has to start from within the individual. I have argued that at least from a human perspective (as opposed to a spiritual perspective) wellness is based on our capacity to give to others and make a contribution to the wellbeing of the world around us, as against merely taking and accumulating. If real wellness is achieved even only partly by some of the people of a nation, then the behaviour change will most probably ensure a far higher level of sustainable prosperity.

“Can you explain the Swiss success story to me?” I asked Leutwiler. He gave a faint smile that showed he’d had the question put to him often.

“What do you think accounts for it?” he asked.

I ran through all the popular theories – neutrality, banking, holocaust spoils, pharmaceuticals, watches, knives… He dismissed each one with little more than a few words of explanation and comparison. I was puzzled.

“What then?” I asked.

“You have failed to mention one,” he said. “It’s our best-known export. The one we are probably the most proud of. Its flag flies across the world. You see it wherever there is pain and suffering that needs to be addressed.”

I had no idea what he was talking about and remained silent.

“The International Red Cross,” he offered.

I blurted back: “But that’s not an export!”

"Why not?”

“Because you don’t make money out of it!”

The depth and subtlety of what he’d said was lost on me just then, perhaps because at the time I was attuned to scientific and quantitative arguments and saw him as a seasoned banker and the last person of whom one would expect such a “soft" response. What he was telling me was that the Red Cross represents a Swiss philosophy, a way of doing things that permeates through all transactions, including business.

It is the inability to think of economics as something made up of more than the systemic and measurable that has held back its true dynamic. That the Red Cross is a symbol of human compassion is unquestionable. The Red Cross as a dynamo of economics is unthinkable. It was only years later that the whole thing made sense to me, when I recognised the importance of behaviour that the model represented and how the behaviour pattern that accounts for success in the individual also accounts for success as a country.

It’s all about the ability to look beyond the reward, to focus on what contribution one can make to mankind without linking the behaviour too firmly to a desired outcome.

It’s the opposite of what’s-in-it-for-me and want-it-now.

Monday, September 12, 2011

Televised Democracy.

Did you enjoy the Mogoeng Mogoeng show on television? I was riveted for the nearly two days of the live broadcast. It’s been hailed as a giant leap forward in democracy where the Chief Justice is grilled by his peers live on television.

But this form of governance, transparency and accountability may deserve greater scrutiny before we get too excited. The question is quite simply whether Television brings out the best in people. I have my doubts based on my own 30 years of experience in the industry. Television is primarily a peddler of impressions and perceptions rather than information and knowledge. After my first TV news appearances many years ago, a friend called to congratulate me on my debut.

“What did you think of the report?” I asked

“I can’t really remember, but wear a different tie next time!” was the response.

During one of the early broadcasts of the TV business programme “Diagonal Street” a mischievous panellists decided to bait our studio guest, mining magnate Joe Berardo. Sceptical of the mining group Joe had constructed, the panellist asked: “How can you put together a lot of nothing and call it a company?”

Missing the taunt, Joe replied: “Through hard work!”

“And you’ve done really well!” another broker panellist remarked, obviously trying to promote some relationship with Joe’s company.

A better known example of perceptions driven by TV was when Pick ‘n Pay’s Raymond Ackerman faced Clive Weil from Checkers in a TV debate that I chaired. Earlier, Weil had accused Ackerman of some dubious “confidentials” in dealing with suppliers. A livid Ackerman flayed into Weil and reduced him to a very contrite and apologetic figure. In the end there was overwhelming viewer support for Weil who was seen to be unduly bullied by Ackerman.

It is virtually impossible for people not to play to some or other gallery when the cameras are on them. It is one of the most seductive media we know and can transform people in an instant, sometimes permanently with repeated exposure into self-aggrandizing monsters. As sharp and as astute as ever, political analyst Adam Habib recognised this point and condemned the performers/actors on the Mogoeng show for being closed-minded from all sides. He said: “If they were at university they would all have failed.” But Cosatu’s Patrick Craven inadvertently highlighted the real problem with this relatively new form of public accountability and instrument of democracy. “They were too polite”, he wailed in a TV news report.

That’s it! We need and expect TV to be entertaining. Interviewees must squirm. They must be provoked until they lose it before you have a show worthy of any kind of ratings. What most will remember of the Mogoeng show is when indeed he did lose his cool and tarnished whatever dignity he tried to maintain in 15 hours of gruelling.

Today they call it “provocative” journalism. It’s a technique where old world courtesy is abandoned for emotional impact. But it’s nothing really new. As a cadet reporter I learned very quickly that you could ask a simple question in two ways for different effects: The first: “why are you investing in South Africa?” and the second “aren’t you being silly to invest in South Africa?” The content of the response will be the same, but the manner of reply different. The former is for enlightenment and the latter for effect.

At the same time, by including a subtle editorial in the question, the interviewer seems clever and knowledgeable. A few “buts” and a good dose of interruptions and abrasiveness make for even better viewing and self-promotion by interviewers. There are other, even more subtle techniques, such as intense lighting or camera angles that can make the subject appear threatening, friendly, fearful or shifty. These, I must concede are seldom if ever used by directors or producers worthy of that status.

We are still far from assessing the full social impact of the electronic revolution on human behaviour. We already know that Television plays a major role in shaping society. In the United States, for example, money and media win presidential elections. John McCain had little chance against the TV friendly Obama, whose real performance in office now overshadows his ability to win over TV viewers. But it’s a feature of modern life that clearly will not go away. We just have to be more discerning in the way we judge or assess people who either use or are abused by the broadcast media.

Then, far from opposing job interviews on reality TV, I would encourage its expansion. Why restrict it to the Chief justice? As important and as vital as that position is, there are many that can have an equal, if not greater impact on our lives as ordinary citizens.

Cabinet ministers for one should be subject to intense interrogation by a panel of both opposing and supporting politicians, and also from representatives of groups who have a vested interest in the portfolio.

Leaders of state owned enterprises should clearly be included. I cannot imagine poor judgment from a Chief Justice having the same impact on the nation as Eskom’s power black-outs had. Leadership issues undoubtedly played a major role in that event.

There is a compelling argument to include top business appointments in the loop. The sheer size and power of some companies today have made society very vulnerable to their behaviour – Enron and Lehman Brothers being two big international examples. It is a point often raised when executive pay levels are defended.

The argument for more public scrutiny in the appointment of people into top company positions is also supported by the greater emphasis on governance, transparency and accountability as in King III. Companies are quick to argue these days that they have moved their focus from a narrow shareholder interest to a broader “stakeholder” interest.

Then the panel of job interviewers should include customers, employees, suppliers, shareholders, lobby groups, and government. The point is that like the JSC, it is not the final appointer – shareholders remain that. But the latter will be far better guided by this process than by some board driven by individual self-interest.

Who qualifies for inclusion as subjects can be easily determined either by company size or social impact.

I would be more interested in the questions put to incumbents to reveal their priorities and focus.

Monday, September 5, 2011

The lost generation.

There was something disturbingly symbolic about the scenes that played themselves out at Luthuli House in Johannesburg this past week.

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While the “suits” performed pompous procedures in the Luthuli House laager, a mostly adolescent mob was running amok outside. Clich├ęs like “fiddling while Rome is burning”; “arranging deck chairs on the Titanic” and “let them eat cake” came to mind.

Every generation has its troubled youth. It is virtually physically ordained that we will have revolutionary flames in our bellies as we progress from puberty into that confusing period where we are expected to make decisions that will set the rest of our lives in stone. Adolescence is in the middle of life’s inexorable journey from unconditional taking as a baby, to unconditional giving when we die. It’s a time when we haggle with life. Unfortunately, many do not progress beyond this and never learn the bliss, contentment and true value of unconditional generosity.

At that age not all, perhaps very few, will have dreams of a suburban home with the proverbial white picket fence. They are only a few short years from the time when instant gratification was easily achieved by ear piercing howls from the cot. Short-termism, instant gratification and want-it-now is what drives the majority of pre-30’s. Indeed, research has shown that the earlier we learn the value of discernment and postponement, the more likely we are to achieve success and contentment in later life. But for most that comes only with experience, hard knocks, a few grey hairs and extra wrinkles.

In my youth there were missile hurling youngsters causing mayhem across the world. If you did not join the ranks of student rioters on campus or marchers against nuclear proliferation, you were protesting against the Vietnam War or racism and Apartheid. And you did not always need a cause: mods, skinheads, rockers, ducktails and hippies were all a symptom of agitated adolescents causing their own brand of social discomfort. South Africa’s turbulence between the sixties and nineties all had a large, perhaps major component of youth.

Violent protests are a daily fare in South Africa, with some 600 having been recorded in the past year. You would think that by now our security forces would have learned the art of crowd control that would make the live Television coverage in homes and public places a little less frightening. The recent London riots showed too that instant electronic messaging and networking, demands a much higher level of skill on the part of police. Today crowd control and protest containment are a policing science.

So we can take some comfort from the government’s intention to reinstate a special riot police unit. The ANC’S condemnation of the Luthuli House events as anarchic hooliganism and rabble rousing is ironic given President Jacob Zuma’s downplaying the Civil servants’ strike mayhem last year as “part of a culture of violence.” It is to be hoped that our obsession with the “right of assembly” will be tempered against the right to freedom and protection of others. The absence of full accountability for the actions of protestors is a key factor in the lack of discipline around such events.

The disquiet we should all feel about the latest protests, however, is much more than adolescent agitation or raging hormones. It is perhaps even a bit disingenuous on the part of many political analysts and commentators to interpret them mainly, if not exclusively as a political battle between Malema and Zuma; old ANC guard and new.

It’s actually irrelevant whether Malema is the voice of the voiceless; is a hypocritical champion of the poor, is merely an astute populist and politician; is economically illiterate and has half-baked economic ideas. Ultimately it is not all that relevant whether he stays or goes. Nothing in society happens in a vacuum. The events unfolding are a symptom of a much deeper malady. Like all symptoms, they can distract one from dealing with causes, like giving a nasal spray to a pneumonia patient. It is common cause that the real underlying problem in South Africa is unemployment, poverty and intolerable wealth disparities. Of course this is recognised by any commentator worthy of that status but they too have become somewhat distracted.

The malaise confronting the youth is much more serious. There is one very telling difference between what they face today, and what previous generations of adolescents had to deal with. It is the absence of hope. Previous youth had at least a sense of choice. They had a vague belief that if they chose to they could through hard work and their own aspirations achieve a measure of meaningful productive activity. Throwing stones at people in uniforms was “part of growing up” and not their only option of achieving a better life. It’s not that things were easier then. Indeed in many respects they were more robust and demanding. But their expectations were lower and dependence on others and governments less.

The disenchantment of today’s youth is more deep rooted. Despite its validity, no amount of rationalising about lack of discipline, being too dependent on others, and being spoilt detracts from the reality of their plight. Technology, demand for much higher and more specialised skills, globalisation, greater concentration of economic activity and many other features of our modern world have become quite overwhelming to a substantial proportion of today’s youth. This is severely compounded in South Africa by our past, poor education and widespread poverty

Quite frankly, I am glad I am not an average teenager in today’s world.