Jaffer Inc

When Organizations Become Political

admin — Fri, 28 Jan 2011 17:25:44 +0000

Often as I meet individuals, especially those involved with larger companies or in community- or faith-based organizations, I hear the comment “things have become too political”; or “I do not want to be involved [or to participate] because of the politics”. Even worse, these individuals become unwilling to do what is right for the organization for fear of repercussion.
Interestingly, there are two basic reasons why organizations become ‘political’:

• Selectively sharing information within the organization. The people who have the information share different portions of this information with different people, all in turn using it as a basis of power and control.
• A lack of courage to make difficult choices or to resolve key issues, particularly at the risk of hurting someone’s feelings. Instead, individuals camouflage and sugar-coat information in the name of political correctness, leading to misinterpretation and assumptions that end up creating confusion and helping no one.
Over time, I have found that “political” organizations end up essentially dysfunctional as their people spend more time speculating on and sharing “privileged” information (or rumours) while their leaders spend more time finding ways to manage and control the information.
With cheap enabling technology, it has become far easier for information to travel and be easily accessible. This adds significant complexity to those organizations attempting to tightly control the information, who they share it with and how it is used as a basis for managing their organizations.
The solution to this is simple – develop an organization that includes “candor” as one of its key management principles. In his book Winning, Jack Welch discusses candor in the chapter titled ‘The Biggest Dirty Little Secret in Business’. He suggests that “lack of candor blocks smart ideas, fast action, and good people contributing all the stuff they’ve got. It’s a killer”. In his analysis, Jack Welch found that less than 20% of his audience received honest, straight-between-the-eyes feedback that tells them exactly what they have to do to improve and where they stand in the organization.
If candor enables smart ideas and fast action, why don’t organizations promote it and make it part of their culture? One of the definitions of politics – ‘to deal with people in an opportunistic, manipulative, or devious way, as for job advancement’ – provides a powerful explanation as to why individuals in leadership lack the desire or foresight to include candor in their culture.
A related challenge that plagues most organizations is the reluctance of individual members to speak their mind. It goes back to their upbringing, when their parents protected them by censoring them from information that was deemed as inappropriate for a child and regularly reminded them “if you can’t say something nice, don’t say anything at all”.
With this reluctance to speak one’s mind, it is often easier to let things slide, ignore or work around hard issues without truly addressing them and make decisions only when forced. This unwillingness to face hard issues often manifests itself in organizations as various phases of reorganization, going from one model to another and back again…all the while losing opportunities and not making the meaningful cultural changes necessary to truly move forward.
In community-based organizations where leaders are either appointed or elected, the lack of candor can result in declining commitment and increasing apathy, especially in younger members. The cynicism generated from selective sharing of information does little to promote community building. Unfortunately, many leaders see it as a means to retain their power and control, which further exasperates the situation.
The solution to all this is simple and it has to start at the top. Organizations have to:

• Share all information broadly, fairly and honestly. Straight up with no camouflage or additives. If senior leadership engage in candor, it will flow right down the organization.
• Engage the organization. Whether as an employee or a member of a specific community organization, people deserve to be engaged, to be able to contribute and make a difference.
• Base individual relationships on candor; between an employee and their supervisor or peers, and within individual groups.
• Get rid of the task force approach to defining the vision or strategy. Leaders need to have the courage to define the vision and enable the task force to work collectively on the execution.
• Simplify the decision making process. Eliminate unnecessary processes that are aimed at retaining control.
• Reward based on results, not process or control. Individual behaviours are determined by the incentive process, and designing an incentive package that rewards candor and penalizes control will go a long way.
It takes courage to speak your mind and deal with hard issues with candor and openness. But when an issue is handled with honest, straight-forward and candid dialog, it is amazing how easy it becomes, how quickly and effectively you can move the strategy forward and achieve the desired result.
The question in your mind I am sure is, ‘how does an individual who has been promoted (or appointed) to their highest level of incompetence survive at that position?’ Well, someone needs to candidly deal with them.

The Art of Execution

admin — Fri, 28 Jan 2011 17:23:46 +0000

“Good ideas today are cheap, a dime a dozen in our real-time, inter-networked, fast paced world. Brilliant concepts and practices are disseminated with stunning speed … What’s still in short supply, though, is the ability to effect change, to get things implemented, to make things happen” (from Discipline of Market Leaders, Treacy and Wiersema, 1995). As you finished watching the Super Bowl … the loosing coach will argue that they had a solid strategy, they were well prepared mentally and physically, had a tremendous game plan … they just failed to execute and thus lost. Over and over again, in business, in sports, in life, in school you hear the same message … the expectations were not met because execution was lacking.
In business, what is interesting is that execution is considered by many as a low level task that can be delegated and managed. And even when the CEO confirms that the company failed to execute, it is not clear where the failure actually resides and how one transitions a company to execute. The culture of execution is defined at the top of the organization and every level of the organization is responsible for the execution, the higher one is in the organization, the greater the responsibility.
What does execution really mean? In simple terms execution is the ability get things done or making results happen. The primary role of any leader is to execute … plain and simple. The leader can not and should not delegate this responsibility to anyone in the organization, and if that were to happen, clearly the organization is doomed. The challenge for any business leader is not to confuse “doing things themselves” with being responsible for execution, as these are two very different and distinct tasks. When an organization is struggling, the tendency for business leaders is to “role up the sleeves”, take over or micro manage every aspect of the business, all of which are dangerous and short term remedies.
According to “Execution – The Discipline of getting things done” (by Bossidy and Charan, 2002), there are three distinct processes that every business leader has to take responsibility for … People … Strategy … Operations … these are key processes that help drive the culture of execution within any organization.
Entrepreneurs who start their own business go through an interesting cycle … during the initial days of the organization they are responsible for the entire operation and are aware of all happening, even the minor issues. As the company grows, a good entrepreneur is able to “let go”, empower others to help move the business forward while still retaining the pulse of the organization and able to step at anytime to rescue a failing project, department or business area.
As the company grows further, the entrepreneur is further removed and there is a tendency to remove oneself from the business and operate the business through others … the expectation of the leader is that the management chain will operate as he/she did driving the execution. What really happens is that the chain of command, seeing the leader removed from the business, start doing the same and suddenly there is no execution but a lot of very good strategy and management going no where.
How does the leader execute without doing the work? The leader drives the process that defines the business. A sales manager commits to the leader that the quota for the quarter will be achieved, which the leader accepts as fact. At the end of the quarter, the quota is not met, the business leader is mystified given the previous commitment and one could argue that the sales manager failed in the execution? But the leader should have expected nothing else … the fact that the sales manager committed to the quota does not mean anything unless the leader asks the questions … how is the quota going to be met; what does the pipeline look like; do the clients have the budget; are there other competitors to worry about; if the pain real; is the solution relevant and accepted by the technical folks etc … That is execution by the leader … and from the answers to those questions, the leader has a solid feel for the quota, what it will take to achieve the quota and more critically what are the risks.
From these questions, a culture of execution is developed as the sales manager asks the sales team a similar set of questions, driving the strategy, understanding the strengths and weaknesses and making things happen. In this example, it is not about the leader going out and selling, but defining the execution process and making it happen.
Execution means having the right people, the right environment, the right message, the right business model, the right incentive, the right compensation, the right team structure to deliver the results. In a sports team, a solid coach understands the strength and weaknesses of the team, and prepares a solid execution based on taking advantage of the strength and minimizing the impact of the weaknesses. This is how business strategies work … clearly understanding the people you have and the business you are in will allow one to execute to success.
So the next time you hear a CEO saying, I am no longer involved in “execution” … run …

Government Subsidies – Who do they help?

admin — Fri, 28 Jan 2011 17:23:11 +0000

Over the past few years, there have been several high profile attempts at subsidies to aid various industries. The majority of these have failed, which prompts the question: can business subsidies work?
From a free enterprise point of view, subsidies create an unfair competitive advantage – benefiting a few at the expense of many. While the basic premise of subsidies and concessions – preventing failure and aiding through difficult times – may be noble, it is self-defeating. Failure is required for progress. Without failure, there is no success. Without failure, you can’t learn from your mistakes. Without failure, energy and money continue to be thrown at initiatives that achieve no good without looking at ways to achieve better efficiency.
The government aid package that was intended to assist Canada’s cattle ranchers following the ‘mad cow’ crisis didn’t provide much relief to the people who needed it most. It did enable the middle men to pad their pockets. Alberta’s three largest meatpacking plants nearly tripled their earnings since May of last year when the crisis hit.
Meanwhile, consumers wanting to show support to the farmers by purchasing more beef paid normal prices, with the profit being shared between the packers and the retailers. Once again, big business benefited and the ranchers whom the subsidies and the media campaigns intended to assist were left with nothing.
In another recent example, the City of Edmonton and Edmonton Economic Development Corp. provided Dell with generous incentives to open a call center in Edmonton. According to media reports, the deal is worth $6 to $10 million and includes exemption from property taxes for five years and a 20-year lease of City owned land for $1 per year.
Yes, it is great to have a company like Dell come to our fair city, but not at the expense of the companies who have been here for years, paying into the tax base and employing hundreds or thousands of Edmontonians. Incentivizing Dell to set up shop in Edmonton is a slap in the face to these ‘loyal Edmontonians’ who are here because of the great things the city offers and not due to tax concessions and sweetheart deals offered by the city. In addition, it gives Dell an unfair competitive advantage while their presence here will drive up the cost of doing business for others, particularly with respect to attracting and retaining employees due to increased competition.
Competition is a good thing when it is the way it is meant to be…when the company with the best product, produced most efficiently wins, not when the company with the most government leverage wins through incentives.
Typical of the ‘polite Canadian syndrome’, we are selling ourselves short and perpetuating a myth that we are a second-rate city. These types of incentives confirm that we don’t believe that what we can offer as a city will stand on its own. Edmonton does have many great assets – talented resources, first class education, great quality of life, low cost of doing business – and that should be enough. We shouldn’t need to resort to bribery. In fact, in the age of close public scrutiny and attention to good governance practices, the Code of Ethics that most corporations adhere to would not allow such a practice in business – why should it be allowed in government?
The danger of providing public subsidization of a private enterprise to lure them to our city is that any other company considering coming to Edmonton will want to receive a similar subsidy.
The only form of subsidy or concession that fits with free enterprise is a ‘consumer subsidy’ in the form of reduced taxes, which enables consumers to buy more. Consumers get the best product and are able to purchase more, and the enterprises that can produce most efficiently while meeting consumer demand grows.
Does this fit somewhere?? Ontario – Auto manufacturing – concessions to keep auto makers there and save jobs. A better strategy for economic progress would be to allow those plants to go where it make the most business sense and put the money into retraining those who will lose their jobs for new, more advanced roles.

Corporate Greed

admin — Fri, 28 Jan 2011 17:22:30 +0000

Over the past year, a lot of media attention has been given to corporate scandals … companies such as Enron and WorldCom have become the poster companies for all those looking to define corporate greed, fraud and indulgence. Those in the know have skillfully shifted the focus from what is a criminal issue, executed by a very small number of individuals, to creating the perception in the investing public that there is a significant deficiency in corporate regulations, and specifically corporate reporting and governance. Today, most corporate executives are viewed with a sense of mistrust, an image of high-flying individuals whose primary business focus is to defraud a naïve investing public by issuing fraudulent financial reports.

The challenge we face is that there are many constituencies at play, each intent on maintaining and sustaining their individual interests. When the Enron story first came to light, the majors in the accounting and audit industry were first to react by publicly distancing themselves from Enron and calling for sweeping changes to corporate reporting. In fact, many wrote books, articles and worked the media to get their message through. The theme of their messages was clear … they were working to build public trust, the current reporting structures were wildly inadequate and as one of them put it … they had to “stand up and be counted”.

When one investigates this response, an interesting question comes to mind. Why stand up and be counted NOW? These same individuals earned a handsome living creating financial reports for all of the major corporations in the world. If this reporting was so inadequate, why were these inadequacies not identified earlier and fixed.

The reality is that we already have some of the finest corporate governance practices in place. While there is always room to improve, corporate governance will never stop individuals who aim to defraud. The fact that individuals periodically speed does not justify having traffic police on every roadway to monitor speed and issue tickets to offenders. One would consider such a response excessive and self-serving, as is the current response to corporate governance.

What is clear to all involved is that changes in corporate reporting and governance will do little to protect the investing public. It will create a false sense of comfort, create significant additional revenue for those in the financial reporting business, put additional strain on corporate profits and at the end of the day diminish shareholder value. The reality is that those who analyze corporate reports, provide projections, valuations, and those responsible for presenting this information to the public have a far more substantial impact on the capital markets than anything else … including corporate reporting or corporate performance. And the real question is who holds these individuals accountable?

Consider two of the major declines on the Canadian markets … the slide of Nortel and 360 Networks. In both cases, the impact to shareholders and employees was comparable to Enron’s. In both cases, there was NO reporting impropriety, there was no fraud and yet the impact was devastating. This carnage has been repeated many times at numerous companies and has impacted a significant number of people and wiped trillions of dollars out of the capital markets. By focusing on Enron, and on corporate reporting and governance, attention has been diverted away from the real issue.

The challenge that faces the capital markets is not corporate governance, but corporate valuation. For a company that makes money, corporate valuation is a fairly simple process … a multiple of earnings provides a consistent mechanism for valuation. But for many of the key players in the capital markets … from analysts, to investment bankers, to brokers, to mutual fund managers, to corporate finance to those in the financial media, such companies are boring and provide no activity or income.

This is because the entire capital market thrives on uncertainty. When there is uncertainty, there is activity. When there is activity, they all make money. If there is no uncertainty, the capital markets will perish or they will create the uncertainty … you get the picture. This activity can be as simple as trading or raising capital to as complex as various forms of mergers and acquisitions.

The markets reached their peaks in 2000, fuelled primarily by greed. I recall a discussion on the valuation of Amazon.com at a time when the company was focused on selling only books over the Internet. A mathematician questioned an analyst’s projection on revenue, suggesting that even if every book that was ever bought by anyone on the face of the earth were purchased from Amazon.com, the revenue projections would still not be met. Similarly, in an era of well-known and recognized analysts, there was not a single analyst who had a 12-month price for Nortel at $1.00 one year ago.

Everyday, based on analyst recommendations, a company’s stock climbs or declines, creating uncertainty for the investors but significant revenues for those involved in the capital markets. While the analysts have a difficult task with little or no control on how companies perform, they prepare recommendations and define capital markets trends with no regulation or governance other than their own reputations. Since they clearly have a significant impact on capital market performance, one wonders why no one has focused on their actions and activity.

50.1% is ENOUGH

admin — Fri, 28 Jan 2011 17:21:50 +0000

The year 2004 will go down in history – especially for Albertans – as a year of elections. With Federal, Provincial, Municipal as well as the American elections, we witnessed a transition to a new model for Canadian democracy, one that closely follows in the footsteps of our American neighbors. Apparently we did not learn from their example the divisive results of this new democracy. What Canadian politicians did learn is that they do not need to earn the entire vote, but just enough of the vote and within the right jurisdiction to win it all.
The original concept of democracy was to define and execute the will of the majority. Early expectations were that the people of a nation were naturally monolithic and could elect individuals and parties to carry out the agenda of their collective will. And always the expectation was that the majority would be something greater than 60% … unfortunately (or fortunately) Canadians, like our Southern neighbors, have evolved into a pluralistic society with differing views and a much more regional focus.
Under these circumstances, how does one win an election? One has to remain extremely focused on the “numbers” and understand how these numbers can all add up to an election win. In the United States, the popular vote does not have much bearing for the President. Rather it is the electoral votes which play the larger role. The electoral is complex, understanding how it works and where the base support is located has evolved to a science, one that employs as many data analysts and polling experts as individuals with other skills.
The absolute focus on the church leadership to help bring home the votes, understanding the key swing states and driving all the resources and energy within that focus enabled George Bush to be re-elected for another term. In maintaining this absolute focus, a hugely divided Nation has emerged which in the short term has delivered the Presidency, but over the long term will require considerable healing.
In Canada, the minority Liberal Government typified the same resolve … it was clear to Mr. Martin that the only way to survive this election was to scare the people of Ontario into thinking that the concepts Canadians value most, such as Health Care, would be at risk if a Westerner would take on the reigns of the country. And systematically and surgically he was able to retain power, while creating a divided country and further solidifying the mistrust between the various regions.
Of course, Mr. Klein did just enough to build a legacy … but as Mr. Chrétien has found out, a legacy can not be created when you introduce uncertainty by announcing retirement well in advance.
The 2004 elections provided lessons not only for politicians, but for businesses as well. Based on this new model, we can define where and how we invest our resources for maximum results.
Politicians have done a good job of understanding what it takes to win: use data and focus to drive success. It is no longer about issues and policies, but has been reduced to a numbers game. Businesses have the same opportunity to help drive their bottom line using the same concepts. This is highlighted exceptionally well in television advertising. The longstanding challenge of advertisers centers on reaching the target market. Common methods used to reach the target are structuring the message to appeal to the right group and understanding the demographics and patterns of television viewing to determine which shows and time slots are most relevant to the target market. This is an absolute science that again employs some of the finest data analysts to make the connection.
But as the cost of television advertising grows, advertisers are looking for a more focused way to reach out to their targets. Research is underway to emulate the customizability of Internet advertising in television. Using digital techniques, data collection and analysis, you will soon see TV advertising targeted to specific profiles not just based on television viewing patterns, but by individual household. You and your neighbor may be watching the same program, but will watch different commercials specifically – and automatically – determined for you based on your family profile. And as your personal lifestyle, family lifecycle stage and interests change, the advertising will automatically change to deliver real value for both the advertiser and the viewer. Whether this will reduce channel surfing during commercials or minimize family feuds over the control for the remote remains to be seen.
While this may be the advertising of the future, today’s marketing looks quite different. Companies tend to cast a wide net so they are able to capture as many opportunities as possible to increase their chances of success. The reality is that a wider net also captures a large number of useless opportunities that take a lot of time and resources to chase and eliminate. The ability to cast the net within the right area, with the right focus will result in the right opportunities to deliver business success. But this takes discipline and focus, especially for smaller companies looking to make a name for themselves. A restaurant in Edmonton does not need the entire city to know about them and their cuisine… they just need the right people at the right level with the right size wallet to know who they are.
Over the next decade, the model of democracy that is taking shape will be under close scrutiny. Democracy, as implemented today, is clearly unhealthy, divisive and limiting in terms of driving any agenda forward. It does not facilitate the prosperity or brotherhood that is essential for long term sustainability and a cohesive national identity. However, the concepts and tools used by politicians today to run a successful election campaign have value for businesses who understand and apply them.
Who said there is nothing we can learn from politicians?

Lure of the Global Market space

admin — Fri, 28 Jan 2011 17:21:16 +0000

During the technology heydays of the late 90s to early 00s, investors went mad for companies that demonstrated significant revenue growth, regardless of whether these companies had ever shown a profit. The thinking was that with exponential revenue growth, eventually the profit would follow…and when it did arrive, it would be huge.
After the tech bubble burst, the focus shifted to profit as the key factor on which companies were assessed and valued. As a result businesses have focused on cutting costs, improving operating efficiencies and concentrating on their core business strengths for the past four or so years. They have been opportunistic about sustainable growth while being careful not to sacrifice profitability, all the while awaiting more certainty in the local and global economy to drive the return to revenue growth.
With the continued uncertainty that 2006 promises, businesses must take advantage of the opportunities that exist today rather than waiting and hoping for a brighter future and a return to global prosperity.
In this environment, the pendulum has swung back and investors are beginning to once again clamor for revenue growth…not at the expense of earnings this time, but with the appropriate balance between growing revenue and sacrificing a bit of today’s profit to drive future growth.
So how do companies accelerate revenue growth? The textbook options for growing a business immediately come to mind: to expand within the existing client base, to grow the client base, to identify new applications for existing product lines, or to grow the product line. A few quick projections make it clear that growing the client base to reach beyond the city, to the province, to the country and to the world make exponential revenue growth possible. If you sell 20 gadgets in Edmonton, the market opportunity across Canada may be 3,000 and globally, it may be 300,000.
Growing internationally requires a strong infrastructure and a well management financial base. In addition, several aspects of business need to be rethought in light of the idiosyncrasies of the global market place.
International success requires a different type of sales and marketing. Outside North America, developing relationships is perhaps the single most critical aspect of the sales cycle as opposed to the typical North American focus on technology, features or price.
Consideration must also be given to other aspects of the business. For a technology company, how will you support an international client base? Will you need to translate various documents, including marketing materials into other languages? How will you ensure that your message has relevance, and not an entirely unintended meaning, in an unfamiliar language? Even major corporations such as Coca-Cola and McDonalds have had to re-brand and repackage to account for regional differences in culture, language and taste.
As an Albertan, I find the lure of the global market space intriguing. Even more intriguing is the huge opportunity that exists five hours north of Edmonton in the development of the oil sands. Here, the key will be in how local companies are able to compete against global organizations that are all vying for a piece of the action. Success will require the same rigor and energy necessary to develop a global presence.

Charity: A Corporate Commitment

admin — Thu, 20 Jan 2011 17:37:20 +0000

As we come to the end of the year and the beginning of the holiday season, various charitable organizations accelerate their efforts to tug at the hearts of individuals for commitment to various causes. Over the year, and especially at this time of the year, corporations are inundated with requests ranging from direct financial contribution, sponsorship of and participation at fund raising events, and indirect contributions to different causes. For senior leaders of companies who are active with a specific faith group, there is the added expectation of significant involvement by the corporations and their leaders in their efforts locally and globally.
In a year where we will likely have three major elections, contributions to the political process have also taken a bite out of available resources. Globally, the world faces various crises and a number of new initiatives to address and support these crises have been launched, each looking to raise awareness and raise funds.
Corporations and key individuals within these organizations struggle to balance how much they can afford to give, who they give this to and how they track the viability of the various causes. One could divide the causes into six broad categories:
Social Support …

where the cause is related some social cause, local or national or global. Examples of which could be the United Way, Good Samaritan Society, Aga Khan Foundation, CARE Canada etc …
Disaster Relief …

where this is in direct response to certain man-made or natural disasters. Examples of which could be the hurricane relief, wars, repatriation and agencies such as the Red Cross, Doctors without Borders, Focus etc …
Policy Groups …

where groups have been formed to promote various causes such as the environment, women or racial equity, against war, against taxes etc … examples of which include Green Peace, World Wildlife Fund and some more controversial groups.
Academic-Medical Institutions …

this is a growing group where each institution is looking to build an endowment and appeal to a broader business community and their alumni. The amounts involved in this are huge …
Religious Contributions …

where individuals contribute to their religious affiliated groups for various causes … building a new prayer or social facility, daily operation, youth camps etc …
Political Process …

this occurs primarily during the election season where one contributes to an individual candidate or to the broader party.
There are probably others, but they would fit within such a framework. As I was putting together this list, one is amazed at the breadth of commitment required and of course the new emerging group of highly compensated individuals who help organizations in the fund raising effort. So how does a corporation work through this maze, be effective as a corporate citizen but remain disciplined and remain within a defined strategy.
There are three aspects that can help drive corporate responsibility …
CORPORATE GIVING …

what are the areas that corporations should give directly. Management (the larger companies do this with their Boards) defines a strategy as part of the annual planning process of what their commitment would be and it would be distributed. Generally it does not make sense for corporations to support policy groups, religious entities or the political process directly. Given the multi-faith and fairly diverse employee base in many organizations, supporting any of these directly will likely create tension internally and have a significant negative impact externally if clients differ in their opinions with the corporation.
Academic/Medical Institution giving

supporting broader based golf tournaments, fund raising events (banquets) remain effective ways of creating broader awareness of company citizenship.
JOINT INDIVIDUAL/CORPORATE GIVING …

this remains by far the most effective way of creating internal excitement and making a significant impact especially within local community efforts. When individual contributions are matched by senior executives and further matched by the corporations makes for a very effective effort. This effort is especially effective, if the contribution by each individual can be assigned to their charity of choice thus allowing for broader acceptance.
INDIVIDUAL GIVING …

giving to policy groups, the political process and especially religious contribution should remain an individual effort and not associated with the corporation. Encouraging participation by employees within various organizations also helps create good citizenship.
It is clear that demands on corporations and individuals will continue to grow and having a solid corporate strategy of giving and promoting giving will make it easier to say “NO” as that is the hardest thing to with so many causes and so many close friends, all involved in so many different causes.
Building an organization of individuals committed to building a community is critical to creating a community within the organization that will help drive the business. But giving remains a very personal effort and organizations that are able to harness these very personal initiatives into a corporate effort find much satisfaction and success.
As Deepak Chopra says in his book (paraphrased) … the more you give, the more you get, and you create a cycle of giving and getting. The key is to have faith to give in the first place to start the cycle …
To who much has been given, much is expected …