Wednesday, November 25, 2015

Lessons from company gunslingers


An important distinction between content and context.

Jimmy Furstenburg was a company gunslinger. It’s a term frequently heard in the frenzied days some decades ago, of organisational “re-engineering”; when structure was seen to be the most fundamental feature of company strength and which gave rise to the gunslingers, hit-men, or the formal description of turnaround consultants.

They would come in on contracts of a few years as “interim managers”; turn the company, site or plant around and restore or improve profitability. They would then move on to the next one and like the old gunslingers of the American West, reputation would open new doors and determine the lucrativeness of the next contract. Specialised knowledge and experience of their clients was far less of an issue than their ability to massage metrics, manpower and other resources to ensure that at the end of their term they had restored the site to maximum profitability.

One of the better known in South Africa, was Coleman Andrews, an American import contracted to restore South Africa’s national airline, SAA to profitability. After 20-months at the helm, the company could report a profit of R350m. Andrews left with a pay-out of R220m, 14 months before his contract was to expire and stripping assets such as aircraft, and outsourcing internal functions to the lowest bidder. Even a superficial glance at the performance figures would have revealed that without the sale of aircraft, SAA was still running at a substantial loss, which returned within months of Coleman’s departure.

Despite many turnaround specialists probably having done laudable work, it’s a moot point whether these efforts on balance caused more harm than good. It was more than coincidence that in the wake of the re-engineering fad, we saw the birth of another called sustainability, still a major force in organisational strategy today. The era of re-engineering and with it the ugly sisters of containment, rationalisation, restructuring, reconstruction, deconstruction, and similar terms in consultant-speak, came on the back of a fundamental shift in the 1970’s to short term thinking and maximum returns in the shortest possible time. This was not only witnessed in company strategy but also individual behaviour.

Despite rigorous efforts to ensure sustainability, including King III, good governance prescriptions, sustainability reports and even legislation, short termism is still firmly entrenched, exacerbated greatly by executive rewards based on dubious criteria, shareholder pressure for immediate returns and the frenetic pace of trading in financial instruments. Turnaround specialists and interim managers by the nature of their briefs, simply fit into this mould.

It was an epiphany Jimmy had on one of his last assignments that gives an important insight into this behaviour. He told me that despite many successful ventures, he was becoming increasingly disillusioned with what he was doing. It dawned on him that he was constantly working with content, and very little with context. It was during this time that he came across my work and publications and decided to change his career course. He has collaborated with me on two recent books and is taking the concepts further in practical application in the marketplace.

Content is simply working with the factors mentioned earlier: financials, manpower deployment and resource allocation.

Context relates to the company’s relations with its outside environment, with its purpose and with factors such as markets, customers, innovation and those things that give all involved a sense of purpose and making a difference to others.

It’s an important insight that can easily be lost as one squeezes company operations for maximum returns in the shortest possible time. At the same time it gives a valuable tool for assessing a company from a variety of perspectives, including sustainability and investment. An emphasis on content may deliver results for traders and speculators, but context is far more important to longer term value investments.

A company’s focus on content or context can easily be identified simply by seeing what company leadership is pre-occupied with; what excites the CEO and his team; what grabs the attention of the board. There are many examples apart from the SAA debacle, which illustrate how an exclusive emphasis on content can lead to disastrous long term consequences. Yet, for many it seems to be the more important of the two. A more recent example, of course, is MTN’s run-in with the Nigerian authorities. A focus on income (content) overrode regulatory requirements (context).

The distinction is equally important in many other areas of our lives. The most obvious is our working environment. I can recall a number of articles I have written about this, albeit from a different perspective. For most, the daily working routine is simply about content: about tasks, deadlines, deliverables, time clocked and the routine pay check. The broader context of making a difference to others’ lives is lost, although it can be easily found simply by making the link between those tasks and the common purpose of all in the company in serving its market.

There is a well-known anecdote that illustrates this: the one where a sweeper at NASA was asked what he was doing and he replied: “Helping to put a man into space”. The same distinction can fruitfully be applied in assessing our personal lives: how much is related to routine, forgettable content and how much to elevating and empowering context.

Content is about means; context is about meaning. Content is about living; context is about life.

Wednesday, November 11, 2015

Education: beyond slogans and hash-tags

The missing link in getting real value from education.

There were two Koreans in the class of 1983 of the Senior Management Development programme at the Oxford Centre for management studies (now called Templeton College). They were severely disadvantaged because one could manage only a few English sentences, and the other hardly understood the language at all.

They would record every word of every lecture and with the help of an interpreter back home, work through the material for hours after class. In effect, they were spending twice the time on lectures as their classmates did. Yet, they soldiered on for months, helping each other in a camaraderie typical of those determined to achieve a common goal. As if that was not enough, they would constantly question their fellow classmates who hailed from various countries, again recording every word and throwing that into the mix of information they would work through at night. It was as if they were hopelessly addicted to knowledge.

These two were a perfect reflection of a nation determined to succeed – one that clearly saw education and knowledge as the key ingredient. They epitomised the superhuman work ethic that Koreans were known for, and I finally got to understand what was behind the Korean economic miracle.

Of course there were many other factors that contributed to that miracle, not the least of which was the conversion within one generation and with massive US funding, of a mostly agrarian society at the end of the Korean War in 1953 into a largely industrialised state. With that came huge investment in education and training. Then there was cultural cohesiveness, galvanised by the constant threat of an aggressive northern neighbour. Above all, like Germany and Japan after WWII, they were a society devoid of any sense of entitlement; one with low individual expectations and high aspirations. The perfect recipe for success.

It is that recipe that South Africa would do well to consider seriously in its current agonising about education, particularly accessibility to higher education. The student unrest of recent times has sharpened the focus on this undeniably critical issue but has also created some blind spots that we may ignore at our peril.

Much has been said about affordability, and funding will no doubt be central to the debate in the foreseeable future. The issue of whether we can afford “free” or at the very least low cost access to higher education, can easily be answered with the question of whether we can afford not to. Education as part of state expenditure should be reassessed to be viewed in the same light as infrastructural and not current expenditure – because the benefits of skilled and productive labour are felt some years later.

This makes the expectation by Higher Education and Training Minister, Blade Nzimande, of greater private sector involvement in meeting these costs disingenuous and a deflection of accountability. Apart from the fact that the various forms of government and state owned enterprises are the largest employers in South Africa, what benefits the private sector ultimately also benefits the government.

While matriculants are writing their final exams, we should be reminded that access to higher education is the smallest part of wasted potential. This loss is far greater at secondary level, and even more at primary level. Funding for education generally is not the primary issue; we have one of the highest proportions in the world of budget allocations to education. Dismal returns on that investment are the real issue.

But at the outset, we have to explode the myth that education on its own will promote growth. All it can do is remove skills shortages as an impediment to growth. The same can be said of capital: availability on its own will not promote growth, only remove an impediment to growth.

Certificates are never proof of competence. We have an obsession with diplomas and certificates in South Africa as an end in itself and not a means to an end; to the point of risking fraudulent claims at the highest levels and irrespective of subjects covered. There is an assumption that the certificate alone is the final decider of the holder’s destiny. Yet low economic growth and a global trend towards lower labour participation have led to a relatively new problem of graduate unemployment.

The latest quarterly labour bulletin puts graduate unemployment at about 9%. It is a moot point whether this will not increase further as the supply of graduates increases. In some emerging economies, such as China and India where there has been much emphasis on higher learning, graduate unemployment has been estimated at about 30%. In many developed countries such as Europe and North America, graduate unemployment at about 7½% is often higher than the general unemployment rates. These figures increase significantly for youth unemployment.

As an analysis by economist Mike Schussler’s shows, education is needed for economic growth, but on its own does little to promote growth. He points out that there has been a significant increase since 2002 in the number of adults with matric or more, yet there has been no notable increase in economic growth.

All of this points to an urgent need to introduce a touch of realism in student expectations and to counter the display of entitlement, supported no doubt by lofty aspirations entrenched in the constitution and political rhetoric. The ultimate victims will not be those who made the promises, but those who expected them to be met. It has become fashionable and arguably very counter-productive, to shame into silence those who use terms such as “entitlement” and “unrealistic expectations”, with responses such as “trans-generational privilege” and “legacies of the past”. Whatever the merits of those responses are, there is no greater destroyer of self-accountability than finding someone or something else to blame.

The often argued “mismatch” between subjects covered and skills required in the workplace is, in my view, also exaggerated. All knowledge should be empowering and indeed apart from highly technical and specialised fields, many find theoretical knowledge obtained in academic pursuits of limited value in practical application. Witness too the number of self-made men and women with either limited or irrelevant academic achievements.

If students apply the same fortitude to self-help as they did in their protests they will be assured of a much brighter future. There are three main components to self-fulfilment: academic qualifications; skills and experience, and willingness and self-accountability. It is the latter that defines us and has by far the greatest effect on our destiny. It is the ultimate determinant of success. It is also an essential component of entrepreneurship.

Shame on those who blunt that in our youth for popular appeal and political expediency. Even greater shame on those who fall for it.