Tag Archives: business

The theme of Business Continuity Awareness Week is Cyber Security. No, really…

If businesses and public organizations needed a kick in the backside over their cyber crisis preparedness, then many got it over the weekend as the ransomware ‘Wanna Decryptor’ paralysed hundreds of thousands of users and systems in more than 100 countries, including hospitals and doctors’ practices in the UK National Health Service.

So the irony of this being ‘Business Continuity Awareness Week’ #BCAW2017 is only heightened by the fact that the theme of the week is ‘Cyber Security’. But the timing of this week – and the theme – couldn’t be better.Screen Shot 2017-05-15 at 10.08.25

As the hand-wringing, blame-gaming and shock-horror media coverage continues – it’s worth spending a few minutes leafing through the Business Continuity Institute’s guide on preventing cyber attack (this is safe to click, by the way). Sure, there is some VERY basic advice in the guide – like not using ‘password’ as your ‘password’, but don’t roll your eyes too quickly.  One in five passwords are things like ‘1234567’ or ‘qwerty’ – and other entirely predictable passwords. It’s clear people need reminding of the simplest security habits.

The BCI’s guide won’t solve complex IS security issues, but it’s often the weakest links that allow the hackers in to do their business.  That weakest link is commonly your company’s IS or information security policy (or lack of it) – and if you have a policy – how well employees have been trained to implement the policy AND how diligently they act on those policy requirements.

I’m in trouble – send money!

And finally, it’s not only the junior or non-techie employees who let the hackers in.  Scammers and phishers target all levels of an organization in an attempt to breach firewalls or just separate someone from their money.

I’m aware of one CEO who knew what a ‘419’ scam was (wonder how many of you opened that link…) and how to avoid it, but was nearly stung by another email scam.  We just managed to stop him from sending his credit card details (including the ‘magic code’ on the back) to an employee whose email to the CEO claimed he was in trouble abroad, having had his laptop, wallet and phone stolen and who needed credit card details for him to be able to book into a hotel for the night.  Except it wasn’t the employee’s internet email address and he wasn’t in trouble… and, and, and.

Is BlackRock’s CEO Larry Fink a champion of the worker, or an investment manager? Well both actually

Last year Larry Fink’s letter to CEOs of companies in which BlackRock invests urged them and their boards to look forward (as opposed to back) at strategic issues affecting value creation. (See my blog from 2016).

This year, his letter to CEOs urges them specifically to look at a ticking timebomb: the lifecycle of employees’ careers – not only ongoing retraining and ongoing education of workers, but also of actively preparing them for a secure, solvent retirement.

The letter covers some strategic corporate and governance issues on which BlackRock will hold companies to account, such as:

  • Globalization and more particularly the effect of automation on lower-skilled employees’ jobs and the consequent gulf in their earnings versus highly-educated employees
  • As an active, long-term investor, engaging with companies on behalf of their clients, and voting against incumbent directors or misaligned executive compensation, when companies are not sufficiently responsive to BlackRock’s input
  • Reviewing companies on Environmental Social and Governance (ESG) performance – often seen as an indication of a company’s appreciation of long-term factors that affect value creation and how seriously global companies see themselves as part of a local community
  • Research and technology and employees’ development and long-term financial wellbeing

Fink sees the government’s role as supporting the private sector in addressing these challenges by creating a capital gains regime that rewards long-term investment, tax reform, infrastructure investment and strengthening retirement systems.

On tax reform, he doesn’t want to see cash trapped overseas simply being repatriated in share buybacks, but used for strategic growth initiatives.  Infrastructure investment will promote employment and may go some way towards providing jobs to less skilled workers who have lost work as a result of their jobs being automated.  “However,’ he notes,’…it’s not a solution to that problem.”

headcount-cuts

Cutting the headcount

Companies that are currently struggling for technical talent must build their education and training capabilities in order to retrain existing employees for the new demands of the high-tech and connected workplace.  In ‘helping the employee who once operated the
machine to learn to program it’, companies will have ongoing access to talent, while fulfilling their responsibilities to their employees. Chopping out older employees and bringing in fresh talent, apparently, might not be sustainable or competitive.

And once employees reach retirement, Larry Fink is concerned by two issues:

First, that millions of workers are not covered by employer-provided retirement plans and he’d like to see this change via a selection of options, including auto-enrolment, auto-escalation, pooled plans for small businesses and ‘potentially even a mandatory contribution model like Canada’s.’

Second – as many pensions move from defined contribution to defined contribution/money purchase pensions, the financial planning and responsibility for retirement funds moves away from the employer and falls more on the individual pensioner.  In this context, companies have a role in ensuring that their employees become more financially literate, while asset managers also have a responsibility to educate investors so they can make smart investment decisions.

“If we are going to solve the retirement crisis – and help workers adjust to the globalized world – businesses need to hold themselves to a high standard and act with the conviction that retirement security is a matter of shared economic security,” writes Fink

Commentary: As the Baby Boomer population ‘bulge’ in the West creates more pensioners supported by fewer workers over the coming years, companies and governments must review their terms of reference.

Older workers, made redundant before retirement give the handloomsystem a ‘double whammy’ shock as an employee moves from being a net contributor to tax, their pension pot and social costs, to being an early ‘taker’ of benefits.

Companies look like they win twice with a reduced wage bill and no ongoing social or pension costs.

The option of passing older employees on to the State to look after, without penalty, seems to be an implicit incentive for companies to do just that.

This isn’t sustainable, but a last resort would be for governments to hike taxes charged to employers to pay for taking on responsibility for the companies’ ‘surplus workers’.

In this context, governments that find ways to encourage, support and incentivize companies to retain, retrain and educate their older employees will not only help in assuring continuity of employment but will also limit avoidable social security costs for unemployment and pension support.

Loom photo and header photo: Courtesy ILO. This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 3.0 IGO License. To view a copy of this license, visit creativecommons.org/licenses/by-nc-nd/3.0/igo/deed.en_US

Making America Great Again: risks and opportunities for the new POTUS

I wouldn’t want to be Mr. Trump. Not for all the tea in China (although from Friday, I hear he will be mandating that ‘all that tea must be made in the US from now on’).

I wouldn’t want to be Mr. Trump, because I’ve just read the 2017 Global Risks Report, released last week by the World Economic Forum.  Managing the multitude and magnitude of risks in the report will need thought, care, attention, leadership and policy responses from him as head of the most powerful nation on earth.  As an aside, I use the reports to provide strategic background to crisis and resilience scenarios that I develop for exercises and workshops for clients. In the past, they’ve also provided excellent context for Enterprise Risk Management (ERM) work.

So what are the risks that may be keeping POTUS Donald Trump up at night?

The top four strongest risk trends in the 2017 report are ‘rising inequality of income and wealth’, ‘polarisation of society, especially among older generations’, ‘climate’ and ‘cyber dependency’. Risk trends pull together a basket of specific risks and the higher the number and importance of those contributory risks, the stronger the trend.

Looking at the impact of specific risks (and there’s certainly reference to a ‘water crisis’, but that’s only risk number three, in terms of impact). Top and second place go to ‘weapons of mass destruction’ and ‘extreme weather events’, fourth is ‘major natural disasters’ and finally, ‘failure of climate change and mitigation’.

moby

Watson and the Shark, photo of detail of original painting by John Singleton Copley. Photo: Adam Roscoe

In terms of likelihood, the top risk is ‘extreme weather’, second is ‘large-scale involuntary migration’, then ‘major natural disasters’ followed by ‘large-scale terrorist attacks’ and finally ‘massive incident of data fraud or theft’.

It seems to me that many of the environmental and social risks, could be rooted in, affected by or the result of climate change.  Extreme weather, water scarcity and some major natural disasters and some triggers for migration are all connected with climate change, so it is concerning that the new POTUS intends to roll back on the Paris Climate agreement.

When combining most likely/biggest impact risks, then ‘interstate conflict’ and ‘unemployment or underemployment’ are consistent features in BOTH the 2016 report and 2017 report. These are both big enough issues to sit firmly on Mr. Trump’s desk, where a predecessor displayed a plaque stating ‘The buck stops here’.

Interstate conflicts and proxy wars are already flaring in the Middle East and are drawing in US and other western (NATO) forces, whether Mr. Trump thinks NATO is up to the job or not. 

‘Making America Great Again’ is the theme of this presidency and there seems to be a risk is that the ‘greatness’ could be made at the expense of relations with other countries like China and Mexico.

25 million jobs a year

A previous Chinese president in the 2000’s said what kept him up at night was the ability of the economy to grow at a sufficient rate that it created 25 million jobs a year. Economic growth and the ability to create those jobs affects the government’s ability to maintain order and close inequality gaps in the country. But as China moves from a so-called ‘cheap labour arbitrage country’ to a high-tech, high automation exporter, they will need to cut a win/win deal with the US that saves face for both parties and doesn’t precipitate a mutually damaging trade war.

86% of all US jobs lost in the decade from 1997 were lost to productivity, not trade

And it’s a war that really needn’t be fought.  According to the economists Michael Hicks and Srikant Devaraj, 86% of manufacturing job losses in the United States between 1997 and 2007 were the result of rising productivity [a part of which was achieved through automation], compared to less than 14% lost because of trade (see page 20 of the 2017 Risk Report). Making America Great Again need not to be a regressive step into Luddite protectionism, even if AI, robotics and biotech will require regulation.

If it is to remain competitive, the US will also need to actively manage the inevitable disruptive effects of automation that the Fourth Industrial Revolution brings.  The promise of on-shoring or re-on-shoring jobs to the US, allegedly at the expense of lower cost economies is a delicate juggling act – if not purely smoke and mirrors.  Create too many blue- and white collar jobs in the US that can be done by automation and robotics and the economy risks being uncompetitive.

A partial response to this challenge could be regular retraining of older workers in industry and commerce – so they continue to contribute to taxes, rather than become a drain on the social security system – should become the standard operating practice for all companies and could be supported by tax breaks.  High value-added work will always be needed and will be well-paid, but people will need to be trained on an ongoing basis to do it.

Win, win, win…

Part of the solution should include investment in low carbon technologies, including solar, wind, hydro and electric mobility, all of which are getting huge attention and investment in China.  The US could also improve its energy resilience by making additional investment in alternative sources of power, aside from fossil fuels, and retraining older workers to install, service and run new energy projects.  Low carbon tech could create a ‘win, win, win’ for the economy, jobs and the climate and in doing so positively mitigate some of the key risks highlighted by WEF.

Regardless of whether the future is low carbon or high carbon, you just have to look outside the top 10 headline risks to find some consequences of getting the response to these key risks wrong or too late or weak.  The ‘failure of a financial mechanism or institution/fiscal crisis’, ‘failure of national governance’ and ‘profound social instability’ all vie for a position in the top 10 risks and could jump to the top spot.

But who knows what will happen, when and how? After all – in 2016, few pundits or risk reports predicted that Brexit would become a reality, or that Donald Trump would be elected President, or that 5,000-1 outsiders Leicester City (a UK football club, round balls) would win the Premier League title.

Creating a company culture that drives business priorities – the Bezos way

Jeff Bezos of Amazon bought the Washington Post three years ago.

Prior to that, journalists there had variable compensation based on one thing – operating income. Now it’s different, as described by Shailesh Prakash, the Post’s chief information officer:

‘When Jeff bought us, within about six months, he threw that [operating income metric] out. Now there are three other criteria. It’s basically: How fast do you move? It’s very subjective. The second one is that there are no sacred cows, to push experimentation. The third thing is debate, but commit. So you can argue all you want, but once we agree, then there’s no undermining. Those are the three things that now very subjectively drive the compensation. [1]’

Bezos paid $250m cash for the Post – a publication founded in 1877, a public treasure, winner of 47 Pulitzer Prizes and one-time employer of ‘All the President’s Men’ reporters Carl Bernstein and Bob Woodward, whose ‘Watergate’ work precipitated the downfall of Richard Nixon.washington-post

It takes a brave investor to jump into the turmoil that is today’s mainstream news media – and especially one with such credentials, unless you are a natural disruptor and rich enough that losing some or all of the cost of the business would be less of an unmitigated disaster and more of a mild irritation.

But Bezos hasn’t bought the The Post out of a sense of nostalgic philanthropic generosity for an old warhorse.  It’s a fantastic brand and a business with a future, but he needed to ring the changes, rally the troops and point them in the right direction.

The creation of those three simple ways of working – that translate across the newsroom, the digital platforms and in advertising – is a great way to start and offers some lessons to those about to embark on the mission, vision, values tap-dance.

Personal view: I like that there are three elements to ‘how we do things around here’ because:

  • Individually, they’re easy to understand and act on
  • There are three of them, so  it’s not going to be difficult to remember all of them
  • They push behaviour to radically improve performance – ie which will help a great publication build on its clout and reputation, and move quickly to consolidate its position in the highly competitive world of global digital news, where competitors are nimble and who, rather than having a range of fixed assets including printing presses, invest in cloud capacity in server farms

It may seem obvious that smart, simple, memorable values work best.  But over more than 20 years, I’ve consulted for and worked in companies that have got their knickers in a terrible twist while trying to develop meaningful, unique values and behaviours that drive superior business performance.

The following completely fictitious scenario shows how this process can go wrong, and might be a good guide for the future.

Company ‘A’ already has values and behaviours – quite good ones and they’ve been around just three years.  But a new CEO is appointed and wants to stamp his/her authority and style on the company.  The CEO gives some input on the dozen values and behaviours they want to bring to life to a working group of communications, HR and business people, supported by an agency with experience and a track record ‘in these things’.  Three months later the group comes back to the CEO with a tidy set of proposals, based on vast in-depth research and focus groups among employees and other stakeholders. [SO FAR, SO GOOD]

CEO quite likes the proposals, but has some doubts whether the work covers all areas sufficiently.  So instead of sending the working group away to tweak the proposal and re-submit, the boss decides to put the values and behaviours proposal as a topic on the next board agenda. [FYI: FATAL MISTAKE]

The board members like some of them, but also share the view that some additional work is needed and it’s agreed that each board member takes the proposals back to their business or functions for consultation. [FYI: AS ABOVE]

It’s already obvious where this is going, but instead of calling a halt by having conversations about ‘not letting the perfect be the enemy of the good’ and launching the simple but imperfect proposal from the working group, the values project begins to die the death of a thousand cuts.

Three months later and nine months into the ‘new’ CEO’s tenure, the inputs from the dozen or so board members land with a thud on the boardroom table.

The new version will have 26 values and behaviours.  Some of the original values and behaviours will be hacked into their three constituent parts, renamed ‘drivers’ or ‘imperatives’; values will be muddled with behaviours.  The only benefit is that each board member’s business or function is represented by AT LEAST one value or behaviour.

Camels, a dog’s breakfasts and big cheeses

The values and behaviour project becomes a ‘camel’; the result of designing a horse by committee, augmented by an injection of Myers-Briggs personality profiling.  The resulting ‘declaration’ can look like this:

‘Company A and its employees are a force for good in society and business.  We stand for: Speed, simplicity, clear communications, integrity, risk-taking, responsiveness, customer-focus, fair-dealing, respectful, entrepreneurial, hard-working, work-life balance, environmentally empathetic, process-driven, leading supplier to the paper industry, low inventory, and it’s a great place to work.’

The agency with experience and a track record ‘in these things’ decides to take the fees so far and resign the account, fearing for its own reputation if they’re further associated with what is shaping up to be a ‘dog’s breakfast’.

This ‘basket’ of values is then launched to (dumped on) a bemused senior management team at the annual ‘big cheese’ meeting. Powerpoint packs for cascading the new  ‘what we are and how we behave’ program to employees are issued at the end of the first day of the conference. And there’s the threat of a quiz on the values on the last day of the conference.

Senior managers burn the midnight oil learning the new values and behaviours,  and most of them ‘pass’ the quiz on the final day. There’s schadenfreude (a behaviour that nearly made the cut for the ‘long list’ because someone on the project had their spell-checker switched to German) in the conference hall when the CEO publicly belittles only one poor soul who couldn’t remember that ‘respectful’ was one of the values…or behaviours.

The roll-out ensues across the globe and employees with more than three years’ service sigh and play the game of ‘Value and Behaviours Workshop’, just two years after they played ‘Behaviours and Values Workshop’ which the previous CEO had spearheaded, before he was fired.

Sadly, if you work for a company where this value-destroying festival of fun occurs every few years, you risk dismissal or being passed-over for promotion if you question ANY part of the Values and Behaviours project.  Dissent and skepticism (two values that didn’t make the long list)  will be seen as disloyal, a signal of not being a team player and evidence that you are a dangerous subversive ‘who may, sooner or later, wish to work for another company whose values they prefer’.  Invariably, declaring that the king is short of a few items of clothing is never career-enhancing.

Don’t mention the war, how to nudge the culture and the ‘mirror test’

So, that’s what can go wrong. But what are the key elements of a successful process. Here’s some of the lessons I’ve learned:

  • KISS – Keep It Simple, Stupid.  Why?  Because employees are normal human beings who, aside from the pressures of their work, will only remember about three ways of working or important behaviours.  If you’re already up to six, start again
  • Who’s Running This Place? A new CEO can run a mission, vision, behaviours and values project on their own with expert input. The fact they do it this way – rather than as a representative sport for board members –  will do more to stamp their authority on the company than many other things.  And they will maximise the production of horses, instead of camels
  • Define the process [for the values and behaviours project] – and respect the process. Thanks to Alan Mulally, former President and CEO of Ford for that.  Our CEO of Company A didn’t define the process, got cold feet early on and threw the project to the dogs by letting the board fiddle with the content of the project
  • A Devil’s Advocate Reference Group.  Pull together some of the most cynical, diverse, incisive old soldiers and young bucks and tell them to tear the early proposals apart.  Listen to them and amend as necessary
  • Cut the Formality. Labelling things ‘behaviours’, ‘values’, ‘principles’, ‘imperatives’ is in itself a warning to employees that a new regime is flexing its muscles.  Their reaction will be to start digging psychological ‘slit trenches’ that they can jump into to avoid being hit by yet another cultural salvo from HQ. So try to avoid referring to the new values and behaviours as such.  Tell stories around what the new desired culture looks like and the values will likely get embedded more quickly as ‘the way we do things around here’. This need not be a full-frontal artillery barrage, if a clever special forces op will do the job
  • Link to the Business. While you don’t label them ‘behaviours’ etc (The Post guy called them ‘criteria’…without a capital ‘C’), where possible, make the behaviours part of the scorecard for variable compensation and stick them on the appraisal template so employees can focus on these things and get rewarded AND recognized for ‘walking the talk’.
  • Blah, blah, blah.  Make them as unique to the company as you can. So many companies’ values are so samey, bland and interchangeable that they look like they bought a subscription for the same online ‘values generator app’
  • The ‘Values Project’ May Be the Most Important Thing in Your Life, but… Be clear about what you mean by missions, visions, behaviours, values etc and what’s intended for internal and external consumption.  If the values and behaviours are aimed at employees, don’t be tempted to share them in too much detail with external audience, like the media.  In my experience, it’s the quickest way to empty a press conference.  Shareholders, on the other hand, might want to see a return on the huge amount of management time spent on something they might see as peripheral, so if the behaviours enhanced performance, have some examples ready for questions at the AGM
  • The Mirror Test. And finally, the CEO and senior colleagues should be able to wake up every morning and look in the mirror and run through all of the values without blinking, flinching or forgetting one.

SOURCES

[1] Thanks to the Columbia Review of Journalism for prompting this blog  and for this para quoted verbatim. Their original article by @kylepope is here

Washington Post photo: Thanks to Esther Vargasc

Link to original Washington Post Photo

Photos posted under Creative Commons Licence.