Science to the Rescue?

It's at least twenty years ago that I had a notion: the mathematical and statistical worlds of statistics, mathematics, physics, astronomy, biology and chemistry must have a lot to teach the world of accounting and business. Due to a lack of knowledge of these areas and a lack of time and opportunity to garner such knowledge, I let it lie.

Now, I have been proven prophetic and, I suppose, impotent at the same time. I still know very little of the areas I have just mentioned but articles have appeared over the last twenty years that show how right I was.

For example, I have just read this mini article, officially called a conversation starter, ‘Power curves’: What natural and economic disasters have in common from the McKinsey Quarterly journal. It shows the relationship between frequency and magnitude and so on in terms of power curves. Accountants are wont to use straight lines, with some justification I should add, whilst those of us more gifted can work with power curves, logarithmic curves, exponentials and so on.

Here's one such curve to whet your appetite: the corporate bankruptcy curve

Where X = rank by size of assets; and Y = size of 15 largest US public company bankruptcy filings by assets, 2001 - 2008 in billion real 2000 Dollars

See

http://www.mckinseyquarterly.com/Strategy/Globalization/Power_curves_What_natural_and_economic_disasters_have_in_common_2376 for a much larger version and the whole conversation starter. Forgive me if you need to be a subscriber to the McKinsey site to see this in full ... I am so I never get a message telling me to sign up!

If you can access that page, you can join in the conversation ... one or two very interesting points being made there!

You should also read Using ‘power curves’ to assess industry dynamics. I am pretty sure you need to be a subscriber to read this one. http://www.mckinseyquarterly.com/Using_power_curves_to_assess_industry_dynamics_2222

Gradely as we say in Yorkshire!

DW

Ten Fatal Flaws That Derail Leaders

Another one from the current issue of the Harvard Business Review. It’s a list along the lines of those things that Tom Peters and his ilk love to tout around the world. Take them for what they are but as you do so, consider whether they are valid, all valid, some valid …

Poor leadership in good times can be hidden, but poor leadership in bad times is a recipe for disaster … Every bad leader had at least one and most had several ... the ineffective leaders we studied were often unaware that they exhibited these behaviours … those who were rated most negatively rated themselves substantially more positively. Leaders should take a very hard look at themselves and ask for candid feedback on performance …

The Worst Leaders:

• Lack energy and enthusiasm. They see new initiatives as a burden, rarely volunteer, and fear being overwhelmed. One such leader was described as having the ability to “suck all the energy out of any room.”
• Accept their own mediocre performance. They overstate the difficulty of reaching targets so that they look good when they achieve them. They live by the mantra “Underpromise and overdeliver.”
• Lack clear vision and direction. They believe their only job is to execute. Like a hiker who sticks close to the trail, they’re fine until they come to a fork.
• Have poor judgment. They make decisions that colleagues and subordinates consider to be not in the organization’s best interests.
• Don’t collaborate. They avoid peers, act independently, and view other leaders as competitors. As a result, they are set adrift by the very people whose insights and support they need.
• Don’t walk the talk. They set standards of behaviour or expectations of performance and then violate them. They’re perceived as lacking integrity.
• Resist new ideas. They reject suggestions from subordinates and peers. Good ideas aren’t implemented, and the organization gets stuck.
• Don’t learn from mistakes. They may make no more mistakes than their peers, but they fail to use setbacks as opportunities for improvement, hiding their errors and brooding about them instead.
• Lack interpersonal skills. They make sins of both commission (they’re abrasive and bullying) and omission (they’re aloof, unavailable, and reluctant to praise).
• Fail to develop others. They focus on themselves to the exclusion of developing subordinates, causing individuals and teams to disengage.

Jack Zenger and Joseph Folkman (2009) Ten Fatal Flaws That Derail Leaders Harvard business Review June page 18

Duncan Williamson

Key Factors in Executive Career Advancement

The title of this post is the heading of the summary of kep points that we need to observe and live by if we are to try to guarantee that we get the promotion(s) we think we deserve. Take a look at this list and see whether you agree with everything you see there: I don’t. I think we can all find examples of people who fall foul of several of these key factors and yet have still made the grade.

Key Factors in Executive Career Advancement

Non negotiables___________________________________

Factors that are absolutely necessary for you to be a contender

• Demonstrating consistently strong performance a Displaying ethics, integrity, and character
• Being driven to lead and to assume higher levels of responsibility

Deselection Factors________________________________

Characteristics that prevent you from being considered as a serious candidate

• Having weak interpersonal skills
• Treating others with insensitivity or abrasiveness
• Putting self-interest above company good
• Holding a narrow, parochial perspective on the business and the organization

Core Selection Factors_____________________________

Capabilities that breed others' confidence in your ability to succeed at the senior executive level

• Setting direction and thinking strategically; spotting marketplace trends and developing a winning strategy that differentiates the company
• Building and continually upgrading a strong executive team; having a "nose for talent"; establishing an adequate level of team cohesion
• Managing implementation without getting involved at too low a level of detail; defining a set of roles, processes, and measures to ensure that things get done reliably
• Building the capacity for innovation and change; knowing when new ways of doing business are required; having the courage, tolerance for risk, and change-management skills to bring new ideas to fruition
• Getting things done across internal boundaries (lateral management); demonstrating organization savvy; influencing and persuading colleagues; dealing well with conflict
• Growing and developing as an executive; soliciting and responding to feedback; adjusting leadership style in light of experience

Source: John Beeson (2009) Why you didn’t get that Promotion Harvard Business Review page 103 June

Duncan Williamson

Pricing Error?

What do you think of this pricing policy at a cafe in an hotel?

Ice cream choice:

One scoop. 7
Two scoops. 12
Three scoops 20

Answers on a post card please!

DW

Sent from my BlackBerry® wireless device

McCurry

How about this for some common sense at last?

In the UK a few years ago McDonalds persecuted a poor woman called McDonald from Luton I think it was. Ms McDonald, her real name, by the way, opened a sandwich shop and, perhaps unsurprisingly, called it McDonald's sandwich shop.

No attempt at golden arch copycat, the shop was painted blue as I remember it and there was nothing to suggest that Ms McDonald was trying to do anything other than make an honest living for herself.

Big Mac took Ms McDonald to Court and won so the poor lady had to close her business ... change its name ... evil Big Mac.

The same has just happened in Malaysia apparently except that there the Courts are far more sane and McCurry (I think that's the name), a one outlet organisation providing chicken curries to Malay society, has been allowed to stay open and trade as if Big Mac didn't exist.

Let's hear it for the little guy and the rational Courts of Malaysia.

Duncan

Bonuses: just wait, it's going to get worse

Here is a prediction I think you won't be seeing anywhere else, for a while anyway.

The Fred Goodwin debacle at RBS has shown that anyone who gets themselves in a position to manipulate their bonus and pension payouts can do virtually what they like. Just wait, it will probably get worse and here is why:

• Share prices and so on are probably at or around rock bottom and many managers mistakenly relate their performance as a manager to their company's share price. This has been the case for a long time even though everyone appreciates it is far from a rational thing to do.
• Bonuses and possibly pension and even general remuneration packages are probably being set in terms of share prices now.
• Put the two together and you will see in the next two to five years or so that many managers and management teams will be "earning" massive bonuses and pension enhancements as a result of what will probably be major increases in share prices over those periods.

What is wrong with this and why am I warning you that it is going to happen? The share prices are going to rise ANYWAY, irrespective of the abilities and actions of the managers, above and beyond the minimum they can do to keep the business working.

Even if a manager is deemed to have failed due to lacklustre profits and weakening balance sheets, if the stock markets marks the shares higher in the future than now, these clowns will be paid their bonuses and pension enhancements.

This is how the Fred Goodwins on this world get away with blue murder. It's so easy.

Duncan

Why GM Needs Massive Reorganisation

Here's a story I tell quite often even though the full details and source have long since been lost to me. If you know the source of the story I'd be delighted to update my records.

A number of years ago someone asked the major car makers in the USA a very simple question: if you were to make one of all possible combinations of all models of all vehicles you currently make, how long would it take you to do that?

That is, imagine the Dodge Shadow is made as a 1 litre and 1.1 litres and ... 2 litres ... petrol and diesel ... sedan and hatchback ... and so on.

• Toyota responded that it would take them 2.5 days
• GM responded that it would take them 2.5 billion years

Complexity has been the GM watch word for many a long year!

Duncan

Welcome to Duncan's Diacritical Discussion ... DDD2

Welcome to Duncan's Diacritical Discussion (DDD2), a brand new blog that will take the business web by storm.

The purpose of this blog is to tease out from my other blog, Duncan's Diurnal Diatribe (DDD1), the business and accounting things that Iwrite about.

Consequently, you will need to bookmark two blogs now or simply to migrate from DDD1 to DDD2 or even ignore DDD2 altogether if all you need are my insights into modern British life.

Duncan