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A random walk through management theory with the occasional intercultural critique.

Thursday, October 23, 2014

Five Challenges for Total

Having an eye on ‘management culture’ and in particular French leadership styles, it would be impossible to write anything this week other than to pay homage to the former CEO and Chairman of Total who died in a plane crash on 21 October. The global reaction to his tragic and untimely death was testament enough to a leader who evidently touched the lives of many people. In the French corporate environment, which tends to lean towards ‘management’ rather than ‘leadership’, he stood out as a leader first and foremost. He formulated clear visions of where the group needed to go and spent time communicating those; he engaged people with his energy and determination; he was empathetic and could relate to each counterparty individually; he established a truly global and senior network; and above all, was a very good communicator. He will be missed.
With all the news agencies covering the story this week, most also focused on the challenges ahead for the energy group. The most succinct of these was penned by the WSJ (“5 Challenges for Oil Group Total”, 21 October 2014). Here they are along with further considerations (“et alors”):
Five Challenges for Total
Verbatim from WSJ 21.10.14:
European oil major is a French institution
Managing Total is no easy task. The company is invariably in the political, media, and environmental spotlight. It is France’s biggest energy group by market capitalization, equivalent to nearly $130 billion, making it the second largest on the Paris bourse, and second only to Royal Dutch Shell among European oil and gas companies. Boasting nearly 100,000 staff working in more than 130 countries, Total is as admired by investment analysts for its growth potential as it is under scrutiny by environmentally-sensitive politicians and lobbyists.
Go where the oil is
Under Christophe de Margerie, Total has proved anything but risk averse. The company placed a big bet on Russia, which indirectly contributed 9% of its oil output last year—up from less than 1% a decade ago—but now has to contend with the sanctions western countries have imposed. Total’s recent investments include projects in Kazakhstan and Uganda.
A mega project turned sour
Total—along with Shell, Exxon and others—has invested heavily in one of the world’s biggest oil fields, Kazakhstan’s Kashagan, which remains unproductive after tens of billions of dollars of investment and years of delays.
Making the most of an African oil champion
Total is one of the oil and gas companies with the most experience of operating in Africa. The continent has large untapped hydrocarbon reserves but also a reputation among its governments for frittering away oil wealth, leaving many countries with large energy deficits amid robust economic growth, rapidly increasing populations and sometimes unstable politics. Africa contributed more than 28% of Total’s oil and gas output in 2013, ahead of the Middle East and Europe.
Re-inventing Total as an energy group
Under Mr. de Margerie, Total has put more effort into diversifying from oil and gas into new sources of energy. Total has chosen solar power and biomass as its preferred sectors while eschewing the big bets that rivals have made on unconventional sources of oil and gas. Total has a 65% stake in Silicon Valley-based SunPower Corp. Total’s New Energies division broke-even in 2013.
Et alors
Christophe de Margerie leaves some very big shoes to fill and to meet these 5 challenges, effective leadership will be necessary to helm this ‘French institution’ going forward. The analysts appear to be pleased with the nomination of Patrick Pouyanne as CEO.  In any succession, success is rarely achieved by replicating the predecessor’s leadership style; however, for the new CEO, there is a ‘sixth’ challenge, namely which ‘leadership style’ to adopt? Without imitating his predecessor exactly, there are potentially some points for the new CEO to carry forward from the late Mr de Margerie: vision, engagement and communication.

Thursday, October 9, 2014

The Limitations of SWOT Analysis

“SWOT can be a good tool if used wisely. It offers the standard framework for discussion. But in the wrong hands it can also do damage by reinforcing the status quo mindset.” So says Paul Schoemaker as published on Inc.com in September 2014 (‘five-traps-swot-analysis’ accessed on 22.9.14.) The commonly used tool which looks at internal strengths and weaknesses along with external opportunities and threats has some inherent limitations. The author suggests that there are five common strategic planning pitfalls which could “set your company in the wrong direction.”
Here are the limitations of SWOT analysis along with further considerations (“et alors”):
The Limitations of SWOT Analysis
Schoemaker suggests there are five common pitfalls to avoid when using SWOT analysis to make strategic plans:
1.       Too much navel-gazing
With an internal focus, the ‘strengths’ and ‘weaknesses’ may become a laundry list of all and sundry ranging from micro-issues to macro-ideas.
Labeling an item as a plus or minus involves a “value judgment in which your current strategy becomes the implicit reference point.” To avoid these pitfalls, make sure the focus in outside-in (cf. point #4.)
2.       Imprisoned by the status quo
The concept of ‘opportunities’ and ‘threats’ “forces you to prejudge whether external change is a positive or a negative with the current strategy as the natural reference point.”
It is therefore better to consider “neutral” language such as asking which external forces orissues could impact your business.
3.       Insufficient Systems Thinking
Systems thinking (“grasping how external trends and uncertainties may be changing your playing field”) is very difficult; in addition, trends are useless when viewed in isolation.
The strategist needs to ask when the key trends might stop, “over what time frame the key uncertainties could play out and how the pieces of the puzzle interact.”
4.       Poor Outside-in Analysis
Internal topics tend to get preference in the SWOT analysis. The changing world needs to be considered before looking internally. The analysis needs to be “outside-in.”
Instead of asking “how can we serve our customers better”, ask “why aren’t more customers buying from us” and instead of “how should we improve” ask “how are our competitors superior?”
5.       Little “Future-Back” Thinking
SWOT analysis can reduce value by taking complex strategy questions and reducing them to a list of items that “in isolation are hard to assess.”
Instead, “by reimagining how the entire market can be served better… strategic leaders discern which actions today will create new options for tomorrow.”
Et alors
There are two principle tenets to Schoemaker’s critique of SWOT analysis: firstly that it is too internally focused and therefore ‘anchors’ the strategy analysis to center around the status quo. This is a huge risk for companies as the changing environment is not fully taken into account. An arbitrary judgment of opportunities and threats can overlook how easily both of those can change, whereas what is really needed is “options.” The second main point is the challenge of seeing the dynamic. The SWOT analysis is at a point in time and can be likened to the ‘snapshot’, when what really needs to be reviewed is the changing ‘movie.’ Simply put, a current strength can be your biggest future weakness! The solution to address these two key points is to use scenario planning to focus the strategy review on an outside-in basis, to consider the forces and issues at play and to look for options in every eventuality so that you can be best placed to win tomorrow (and not just today)!

Wednesday, September 24, 2014

Changing World, Changing Management

McKinsey&Company (MKC) have been publishing their “Quarterly” for 50 years and are therefore celebrating by looking to the next 50 years. In an article by Dobbs et al, (“Management Intuition for the Next 50 Years”, September 2014) they suggest that the “collision of technological disruption, rapid emerging-markets growth, and widespread aging is upending long-held assumptions that underpin strategy setting, decision making and management.” This ‘collision’ is so significant that “much of the management intuition that has served us in the past will become irrelevant…” Their research has led to some interesting analysis and insight:
·         The world saw 5 exaflops of computing capacity added in 2008, 20 in 2012 and 40 in 2014. “Global flows of data, finance, talent and trade are poised to triple in the decade ahead, from levels that already represent a massive leap forward.”

·         By 2025, MKC estimate that more than 45% of Fortune 500 companies will come from emerging markets (c.f. 5% in 2000) and nearly half the growth of global GDP between 2010 and 2025 will come from 440 cities in emerging markets (95% of which are small or medium-sized).

·         60% of the world’s population now lives in countries with fertility rates “considerably below those needed to replace each generation.” Germany estimates that in 2060 its population will have shrunk by 20% (and its working population by 28%).
Changing world, Changing Management
So what are the implications for management? MKC propose 5 focus points to address the “magnitude of the coming changes…”
Setting Strategic Direction
MKC estimate that 66% of a company’s growth is determined by momentum (i.e. the environment): to continue to capture that momentum companies will now have to be more agile just to keep up… For strategy analysis, instead of thinking of national markets broken into value ‘segments’, think of multiple offers varied by city, distribution channels and demographic segments…
Managing Technology
Technology has to be seen as a strategic issue; it is no longer “simply a budget line… it is an enabler of virtually every strategy.” Executives need to think about how specific technologies are likely to affect every part of the business and “be completely fluent in how to use data and technology.”
Managing the New Workforce
Machine intelligence needs to be used in innovative ways as soon as possible to change and reinvent work itself. Displaced workers (est. 140 million FTEs globally) will need to be retrained. Developed and emerging markets will experience issues differently – the challenge for global companies is paramount.
Rethinking Resources
Combining IT, nano-science, biology and industrial technology should yield “substantial resource-productivity increases” enabling wealth creation for economies becoming more consumer and service orientated. More ‘productive’ natural resource use is vital to support growing consumption.
Breaking Inertia
MKC research showed that “companies almost always allocated resources” on the basis of pastrather than future opportunities; however the most active companies in resource allocation achieved on average 30% higher total returns than the least active. Be forward looking!
Et alors
The world is changing fast and MKC suggest we are at an inflection point. The ‘intuition’ that current management has gleaned during the last 20-40 years is rendered redundant by the multiple changing paradigms. Is the easiest solution simply to replace the ‘old guard’ with the new generation? No – the change is too significant and too rapid for it not to be addressed immediately by ‘new’ and ‘old’ alike. So what to do? Two key words are going to determine the potential for success in the very near future: adaptability and agility. Both need to be accelerated in all areas: riding the wave of emerging market growth, seizing opportunities and mitigating threats from demographic shifts and being at the forefront of technological change!

Friday, July 4, 2014

Twelve Absolutes of Leadership

There have been many books written on leadership (including mine), but there is one book that seems to have everything covered. Whilst it is not a simple “two step” approach, by virtue of listing twelve “absolutes” it is nothing if not complete! Gary Burnison is the CEO of Korn Ferry International and with his experience as such (delivering leadership “solutions” to many clients) he published “The Twelve Absolutes of Leadership” (2012, McGraw Hill). For anyone who wants a “definitive” overview of what a corporate leader should do, there are few guides that are better.
Here’s the twelve absolutes followed by further considerations (“et alors”):
Twelve Absolutes of Leadership
The first “absolute” (of all “absolutes”) is “lead” itself, after which there are six “elements” – purpose, strategy, people, measure, empower and reward. Then there are five “links” (“activities in which a leader must be constantly engaged”) – anticipate, navigate, communicate, listen and learn.
Leadership is about “self-discipline, distinguishing between the urgent and the important so that you can rise above the immediate.” It is not just about reacting – if problems are encountered they should be converted into opportunities shifting from “I to we…”
“Purpose creates change, inspires possibility, and raises the altitude of the organisation.” With long-term vision, “purpose is the constant through all the upsets and setbacks…” Inspired by purpose “others will become more and achieve more as they give more…”
“Strategy, rooted in values and purpose, gives encouragement through times of ambiguity and uncertainty. Strategy without purpose and values is a short-term plan that is directed toward shallow goals.”
“Leaders are facilitators on the sidelines, but they are never removed from the front line. The leader can’t be the star player, scoring all the points. Rather, the leader must be committed to helping others to do their best.”
“Never confuse measurements with data.” The real added value is knowing what the results mean. Besides the insight, action is also needed to be an effective leader. “Measuring, monitoring and metrics matter”, but in the right way…
“Be behind your people in success and in front of them in defeat.” “Empowerment means enabling and equipping others to make decisions. It means delegating authority so that hundreds of people can make thousands of decisions that are directionally in line with your vision.”
“Employees work harder for leaders who demonstrate respect for their work.” “A leader can build his reputation with employees by using purposeful praise – spending a significant amount of time praising workers’ specific efforts and actions, and noticing what they are accomplishing.”
“As a leader, you must always have your focus on the horizon.” Looking to the outside (economy, market, industry, competitors) you need to anticipate you plan of action and countermoves. Defining the present, you ground the reality and look forward (using both your intellect and intuition).
“As a leader, although you do not have a complete view of the future, you must define it through navigation and action – in other words, through decision making. Navigation happens in the moment with adjustments in speed, altitude, and direction as needed.”
“Communication is not merely telling people what you think and what you know. It is a process in which you seek first to understand what others think.” Messages need to be inspiring and “without ownership, your words – whether written or spoken – will have little impact.”
“It is gravitational for communication to cascade down, but it is far harder for it to bubble up. As a leader you must create freedom of speech through an information-sharing culture.” The “tone at the top” has to be one of listening for this to happen.
“To be an effective leader, you must have and demonstrate learning agility – the ability to learn from experience and to apply that learning to new or first-time situations.” “Distinguish your leadership not only by what you know, but also by your open and curious mind… Learning never ends!”
Et alors
Here we are talking about “corporate” leadership and however “asset-based”, “long-term” or “certain” the business, actually the whole “play” is in a dynamic which can be very suddenly impacted by changes in customer and competitor behaviors, the economy, the market, the industry, technology etc, etc. In other words, the “play” is in a permanent dynamic and change is inevitable. My vote for the most important “absolute” of leadership is therefore “learning”; moreover, Korn Ferry themselves say that this is the greatest predictor of success for any potential leader! Keep learning!

Friday, June 20, 2014

Reducing Complexity

The Boston Consulting Group (BCG) created an “index of complicatedness,” based on surveys of more than 100 U.S. and European listed companies. Measuring this over the past 15 years showed the amount of “procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed in each of those firms has increased by anywhere from 50% to 350%.” This according to Yves Morieux as published in his TED talk and “5 Rules for CEOs to Simplify Their Job,” in CEO Briefing Newsletter on ChiefExecutive.net (17.3.2014).
According to BCG analysis over a longer time horizon, “complicatedness” has increased by an average of 6.7% a year over the past five decades. In such complexity, apparently managers spend 40% of their time writing reports and 30% - 60% of it in meetings. With little time for teamwork, employees are often misdirected and end up being disengaged and dissatisfied. Such low levels of engagement lead to less productivity. Complexity appears to be a problem, so how can leaders help reduce it and/or reduce the effects of complexity?
Here’s how to reduce complexity followed by further considerations (“et alors”)
Reducing Complexity
Referring to “smart simplicity” the author proposes five rules to reduce complexity, increase engagement and hence productivity:
Understand what others do
Understanding what others do can have far-reaching implications for the organization. The author cites the example of engineers building machines that are subsequently hard to maintain; whereas it would be better during the build to understand what the maintenance people might need to do...
Reinforce integrators
“Integrators are existing managers that you as a leader must reinforce so that they have power and motivation to make others cooperate.” It is not more rules and procedures, but delegation that makes an organization more effective. Unless you empower people, they will withdraw.
Create feedback loops
The consequences of peoples’ actions are often invisible in a large organization. To improve, the author cites the example of a car manufacturer which rotates the design engineers to become maintenance engineers 3 years after the launch of the car: they become part of a very effective feedback loop.
Increase reciprocity
Reciprocity leads to cooperation: reward those who do and blame those who don’t. Lego Group CEO says “blame is not for failure, it is for failing to help or ask for help.” This makes it in everyone’s interest to be transparent and ask for help before a potential problem becomes an actual problem.
Human Resources
The author’s fifth point is to actually apply the first four points to HR management! It is not creating more complexity, it applying the simplicity of the above four points to all HR processes. In a sense, it is embedding the principles in everything the organization does.
Et alors
The above can be distilled into one key word: “leadership.” Without it, complexity tends to “take over” in large organizations… Leadership is the counterweight, the balance to level out the complexity. Even senior executives in large companies can sometimes “withdraw” to management: organizing, controlling, checking details, and reviewing (or even blaming). Essentially, “management” from such a senior level can exacerbate the complexity in the organization. What is needed is leadership: setting strategies rather than just organizing; communicating visions and missions rather than just controlling; constantly reviewing the big picture rather than checking details; and rewarding rather than just reviewing.

Friday, June 13, 2014

Potential versus Performance

Approximately only one in five companies uses an empirically validated model for assessing the potential of its participants on executive courses. How therefore, are future leaders being selected in 80% of the cases: answer – mainly on past performance. Unfortunately however, the key to success in a new leadership role is usually highly dependent on the individual’s potential – the ability to learn and adapt; rather than the individual’s experience and competencies. This is according to Claudio Fernandez-Araoz in the June 2014 HBR article “21st Century Talent Spotting: why potential now trumps brains, experience and ‘competencies.’” On the assumption that 1/ you are a manger who wants to develop potential; and 2/ you work in one of the 80% of companies that don’t have empirical ways of assessing potential, how might you detect and assess potential?
Here’s what to look for in terms of potential along with further considerations (“et alors”)
Potential versus Performance
According to the author, performance factors such as intelligence, experience, surpassing objectives and specific competencies “particularly the ones related to leadership” should not be overlooked when hiring or promoting “talent”; however the key to getting the right people into challenging positions is to seek potential. Here’s what to look for:
“A fierce commitment to excel in the pursuit of unselfish goals.” Ambitions should be big and collective but expressed with “deep personal” humility with a desire to continually develop.
A “penchant” for seeking out new experiences, knowledge and candid feedback. This should be along with an openness to learning and change.
The ability to gather and make sense of information in order to suggest new possibilities. It is not just research or analysis but a “what could be done” perspective.
A “knack” for using emotion and logic to communicate a persuasive vision.  The key is to engage others and “connect with people.”
The wherewithal to fight for difficult goals despite challenges and bounce back from adversity. With the drive to succeed many things can be made to happen…
Et alors
Not many companies ask managers to assess the potential of their staff and yet at the same time they might have a myriad of executive education courses targeted at “high potentials”. If the company does go some way to formalizing its high-potential detection process, the system inevitably falls back on detecting high performance. The only way to break out of this cycle is to educate managers on the detection of potential: it’s not just if the junior manager appears to be “one of us”, or has done a good presentation, or works long hours, or is “correct”; rather it is all about motivation, curiosity, insight, engagement and determination. Above all, it is learning agility that makes the talent have the “best chance of success.”

Friday, June 6, 2014

Change Inspiration

This week I took part in a jury at a business school to assess the overall grade of participants’ “final projects”. As ever, the quality varied: from excellent to poor with a lot in between! For a business plan, besides the basics of market research and analysis, an attractive customer-offer, innovation, robust financing etc., what made a plan really “excellent” was change “leadership” rather than change “management.” Instead of just talking about how to manage a project with the focus on shareholder return, the participants delivering “excellent” plans would strike something a bit bigger: the idea of changing a paradigm, changing the way people do things, or even introducing something completely new to the world…  To achieve that, you have to have “inspiration” to change and it is not that easy to come by. So I thought to share some insights that I found in “Change Management and Reorganization” (March 2014, ICAEW)…
Here’s some thoughts from leaders to inspire change along with further considerations (“et alors”)
Change Inspiration
As a leader, when you are looking for that extra “boost” to lead a change, any of the following insights might be of interest:
A Einstein, Physicist
The world as we have created it is a process of our thinking. It cannot be changed without changing our thinking.
W Churchill, Politician
To improve is to change; to be perfect is to change often.
E Land, Polaroid Co-Founder
It’s not that we need new ideas, but we need to stop having old ideas.
GB Shaw, Author
Progress is impossible without change, and those who cannot change their minds cannot change anything.
CS Lewis, Author
It may be hard for an egg to turn into a bird: it would be a jolly sight harder for it to learn to fly while remaining an egg. We are like eggs at present. And you cannot go on indefinitely being just an ordinary, decent egg. We must be hatched or go bad.
Et alors
One could say that the only constant is change itself! And to survive or even flourish in a world that is constantly changing, you have to not only change, but change quicker than the others! Not much more to say on the subject!