The current volatility in stock markets around the world will not only wipe off billions of dollars from personal and corporate wealth, but will also raise the bar for Boards, and the expectations of CEOs and their senior executive leadership teams (ELTs).
"Hundreds of billions wiped off world’s financial markets today as Chinese rout sends shares tumbling in Europe, Asia and the US."
"The Australian share market has lost as much as $60 billion in value as a fresh crash in Chinese stocks drives heavy falls around Asia."
"New Zealand shares have had their biggest fall in four years, joining a global selloff after weak Chinese manufacturing data added to concern about the world's second-largest economy and sapped risk appetite."
This news follows the first Module of our ISL | MBA: Strategy, Systems Thinking & Change last week, during which we played the video clip 'SHIFT HAPPENS' to signal the massive changes in business paradigms. No longer can we mechanically 'run' organisations as we did pre GFC. We now need to 'pilot' organisations - keeping a sharp eye on business performance analytics and diagnostics (how well are we operating?), as well as monitoring the strategic radar (where are the patches of volatility and where lay the new entrants with game-changing digital technologies?).
Who could have imagined KODAK (with ‘best-of-breed’ photographic technology and a respected global brand) being decimated by unforeseen 'substitute' technologies (aka the smartphone)? Who on the Board of KODAK would have anticipated a new competitor adopting a 'Blue Ocean’s Strategy' providing instant photos FREE OF CHARGE? Most likely the Board and senior executives were too busy stuck in the here-and-now to monitor and anticipate these possibilities.
"News that the 131-year-old company may seek bankruptcy protection in the next two weeks didn’t come as a surprise, but it was hard to tell whether consumers actually cared."
Taking the 'piloting' metaphor 30,000' higher, this year we dropped the traditional MBA Class Room model and stepped up into an A380 Organisation Cockpit, complete with a real-time Enterprise Performance Dashboard monitoring MOJO, Leadership Capability, Cockpit Crew Performance, Cabin Crew Engagement, Passenger Satisfaction, Operating Performance, Financial Performance, and Shareholder Satisfaction (measured as share price).
ISL is moving fast to step up beyond personal and team leadership into the Organisation Performance Leadership space. Our goal is to train and accredit the Next Generation of organisation pilots - high flyers trained to use 'evidence based data' to fly their organisations in an efficient, safe, sustainable and ethical manner. Cockpit teams who can effectively deal with volatility and uncertainty; navigating through rapidly changing circumstances.
The next generation leaders will operate as a cockpit team, and apply their leadership skills to inspire and engage their cabin crew (particularly through periods of volatility), to ensure the cabin crew are in a positive frame-of-mind and treat passengers as special guests. Passengers who stay loyal, return for more, tell their friends to use our airline, and in doing so, raise revenues, profits, and share price.
Based on our recent evaluations of three large organisations in the commercial and government sector, most fail their WOF / Safety Certificates if the following criteria was applied:
Most cockpit crews are stressed, out-of-balance, and unable to stay strategic, let alone 'listen' to their cabin crew.
Their organisations are making a lot of noise, running in the Red on the Rev-Counter, yet their Speed and ability to make innovations and fast changes are very LOW.
Typically only around 20% of the Cockpit Crew have any recent strategic leadership development, and only 10% have had commercially relevant CEO level business education. Most claim they are way too busy to stop and take time out to refresh and retrain.
They rely on old-school mechanical gauges and haven’t taken the time to up-date their cockpits to digitally integrated diagnostic systems.
They spend from $2m - $6m on Cockpit Crew Running Costs (salaries, bonuses, travel etc.) and $150,000 - $400,000 on audit fees, yet only a miniscule amount of time and money is invested on cockpit crew development.
In summary, they fly on a 'Wing and a Prayer' and view leadership as a retro art form.
This style of organisational leadership begs the following two questions:
Would you want to fly to Europe with a Cockpit Crew who stepped up from flying Microlights to piloting an A380 based on being self-taught?
Isn’t it time we expected as much from our organisational leaders as we do our A380 cockpit crew?
So, food for inflight thought... I hope that these observations and questions will create some discomfort and questioning - after all, comfort is the enemy of learning and learning is the key to organisational relevance and survival. And, as the Vinyl Industry found out, if we don't reinvent the gramophone record, our crew and passengers will stay stuck in the same groove and keep playing the same music… and then we are at risk of being blindsided by first a CD and then an iPod-type Exocet on the starboard quarter.
take the step | up
With kind regards
Craig Norgate (arguably New Zealand's most widely known and respected Chief Executive) died this week in London, aged 50.
Craig’s sudden death has created a sense of deep loss throughout the New Zealand business and farming communities, particularly among the people who worked with him.
Craig was a big man in every respect: he had a big heart, a big intellect, and a generous spirit. He stimulated people’s growth by stretching them, trusting them and believing in them. Those lucky enough to work for him gained self-belief, confidence, and resilience, and flourished as a result. Responding to his high expectations, they went the extra mile and regularly exceeded their own anticipated achievements.
Craig’s own achievements were considerable. He was a leader in the agribusiness sector, having been appointed CEO of Kiwi Dairies at 29 years of age. By his mid-30s, he had negotiated deals, merged companies, and forged Fonterra, New Zealand’s largest business and the central cog of New Zealand’s economic and social welfare. Fonterra provides a livelihood to 18,000 employees, services 10,700 dairy farmers, processes 2.8 million tonnes of dairy products annually, and earns $22 billion of overseas earnings each year that flows into our community – funding jobs, spending, and taxes to fund education, health, security, local and central government.
Craig was the organisation’s CEO at the age of only 36. When he attended SLP6 at Millbrook in 2006, his talent shone like a beacon; he was a leader to watch on everyone's radar.
Despite his high-flying career, Craig maintained real connections with his community and the wider world. He was proud of his roots in ‘The Naki (Taranaki), and supported local activities – from spending time out on farms with the 'cockies' to underpinning business, sports, and community events. Like all CEOs, he had his share of setbacks, disappointments and criticisms, which he took in his stride, always with grace.
Craig’s vision stretched people’s thinking and fired their imaginations, inspiring them to scale the heights and take in the wider view. He had a genuine talent for leading with both his head and heart. A down-to-earth man, he recognized people’s faces and remembered their names. People will remember and cherish the way he exuded warmth: from the kind timbre of his voice to his dry sense of humour and mischievous persona.
Yesterday the entire business community buzzed with the sad news of Craig’s death. I received numerous calls and messages from his former colleagues and ISL classmates, as people wanted to talk and share their memories and express their respect. A selection of these comments:
"He had a big heart, Geoff! ...and oh yes, he had a big strategic brain too!”
"I’ve been fortunate to have shared experiences with Craig from many aspects, as a good mate, a family friend, a peer, my boss and as also a counter-party in commercial transactions (some of which were pretty hotly contested!) I’m a much better person for having been close to Craig and I’ll miss his wise counsel, even if he often told me things I didn’t want to hear!”
"Craig had a positive influence on the careers of very many young New Zealanders - these past few hours many of them have reached out to me to express their sorrow and share precious memories.”
"Craig was a visionary boss who inspired and stretched everyone he worked with. He took people way beyond their limits and they achieved things they never thought possible."
"I can’t think of anyone who worked with Craig for any length of time who wasn’t full of admiration for the man."
"I was drawn to this man. He cared that much about Fonterra, and he cared that much about my experience and whether it had lived up to his promise. I can say definitively that it did. And I can say, with equal fervour, that I loved Craig Norgate for giving me such an incredible opportunity which indeed changed my life for the better. I will cherish my memories of this great man."
These words reflect the man and the leader we all simply called ‘Craig’. I could share plenty more about his leadership – and I will, in due course. For now, doff our hats for this great leader. He leaves behind cherished memories for those who knew him and a strong legacy for our country. Let’s reflect on his qualities and acknowledge what he did for others.
With great respect,
PS. You will find more about Craig Norgate online at Wkipedia.
“Ask not what your country can do for you; ask what you can do for your country.” JFK
Why is it that when executives get to the top, they become at-risk of making judgment calls that bring their reputations (individually, as well as the collective CEO brand) into question?
One would expect a clearer and more strategic view from the peak of the Mountain, yet for some reason there is always the risk of CEOs (and their Board members) succumbing to Vertigo.
Two examples this week here in London:
"TESCO was condemned yesterday for failing to pay the Living Wage to shop workers while turning failed executives into millionaires. Bosses at the firm, which posted a record annual loss of £ 6.4 billion last year, faced fierce criticism over the supermarket's decline at an annual meeting of its shareholders.
Amid falling sales, the company is at the centre of a Serious Fraud Office investigation into allegations that trading profits were artificially inflated by £ 326 million.
Tesco pushed out its chief executive last year amid claims he failed to respond to the threat posed by competitors. He was in charge when the firm overstated profits ... he left with a £ 1.2 million lump sum and a pension payout of £ 14 million . "Daily Mail, June 27, 2015.
"Former HBOS Chief in line for Windfall ...The man who presided over the failure of HBOS (a banking subsidiary of Lloyds Bank), at the height of the financial crisis, is poised to share in a multi-million pound windfall. This former CEO who led HBOS when it collapsed in 2008, is understood to be one of almost 50 executives and managers who stand to benefit from a merger that would value their share holding at around £ 100 million." The Sunday Telegraph, 28 June, 2015.
So here's the triple bottom line ...
Has the time has come when Boards (and Search firms) are required to provide objective evidence that the CEOs and senior leadership teams they appoint have the talent and ethics to lead organisations?
Leadership is a privilege that comes with a significant premium for responsibility. It follows that CEOs and their Executive Leadership Teams need to be objectively measured (by those they lead and serve) each six months in order to provide evidence that they are both commercially effective and their attitudes and behaviours are aligned with True North.
Here follows the ISL Strategic Leader Competency Framework that we use to measure performance:
1. Strategic Thinker - can identify unintended consequences
2. Role Model - creates a culture of empowerment
3. Change Champion - takes others in new directions
4. Business Savvy - holistic understanding of the business
5. Team Builder - builds and integrates teams that achieve goals
6. Influencer - reputation and networks that secure their tribe's needs
7. Motivator - putting the 'tiger' in others' tanks
8. Emotional Intelligence - understanding and valuing diversity
9. Emotional resilience - fit to lead
These are the 9 elements of the ISL Strategic Leader Competency Framework that underpin the ISL online 360 tool.
In addition, CEOs and their senior team also need to be assessed objectively using measures of Staff Engagement and Customer Engagement. With this in mind, ISL has developed a suite of profilers, each one has the imbedded antecedents (drivers) of the next, based on the premise that:
Leadership creates engaged staff, who in turn engage customers, that drive up revenue, financial sustainability, and stakeholder satisfaction.
This ISL High Performance Framework, and the associated Personal Dashboard, Team Dynamic & Team Performance Profiler, and the recently developed Enterprise Performance Diagnostics touch screen app (see attached), are the basis of what we will be using on the forthcoming ISL | MBA General Mangement Programme to develop the CEOs of the future - people who have the know-how, analytics, and diagnostic tools to lead and manage successfully for the benefit of all stakeholders (staff, customers, suppliers and investors).
Corporate PR and "Best Places to Work' competitions will no longer cut the mustard in the new 'sustainability & corporate responsibility' paradigm.
We posit that: Innovative, customer centric, high performance organisations that are led by corporate athlete teams who are objectively measured and regularly monitored, will become the new global expectation.
ISL new Staff Engagement Framework
TAKE THE LEAD ON MANAGING RISK
Last week I attended a "Compliance Summit', in Singapore. The participants included Heads of Compliance executives from Multinational Corporations from across Asia and further afield including the USA, as well as Risk Diagnostics experts from major consulting and niche specialist firms. Given the ever increasing complexity of business, this proved to be a timely opportunity to update my risk management mindset in anticipation of facilitating the 'Strategy, Change & Systems Thinking' module of our forthcoming ISL|MBA (scheduled to start in August).
In addition to all the 'bright-side' aspects that we focus throughout our SLP and LP, we all need to be mindful that strategic leaders also need to take the lead on managing risks so that their inspirational Visions flourish well beyond a pipe dream.
Here follows some key insights that I learned and consider to being key to leading a sustainable organisation, and protecting one's personal and organisation's brands.
BRIBERY & CORRUPTION UNDER THE SPOTLIGHT
I was astonished to hear the views, experiences and recommendations from the Summit speakers and participants.
-China based offices of MNCs are being regularly hit by Dawn Raids from Chinese government investigators over corruption issues.
-Bribery and corruption, in the new Xi Jinping led China , is a serious offence.
-Apparently it's not "If the Chinese investigators visit, it's when they visit".
-Pharmaceutical companies have been held to account for bribing / incentivising doctors in China to use and prescribe their brand of pharma-drugs. The financial and reputation risks are significant (both in China and back in the MNC's home / headquarter country).
GlaxoSmithKline, for example, was recently fined US$460 million for funneling billions of renminbi to hospital doctors and officials in an attempt to boost sales in one of the world's biggest and fastest growing pharma-drug markets.
-Recruiting sons and daughters of Government officials (by companies) is regarded as an offence if the purpose is to gain access, influence and competitive business advantage.
-A paradigm shift is well underway and, as a consequence, 'Compliance' is now top-of-mind for all MNCs operating there.
-Cyber hacking is inevitable everywhere and companies need to protect and have back-ups.
-Companies dealing with China need to train their people about the complexities of doing business in and with China, and be mindful of the risks to them personally and to their organisations.
-Third parties are often involved (e.g. suppliers) and are being investigated; so companies need detailed stakeholder maps to identify and mitigate risks. In an investigation, a company needs proof that it is not using third parties (e.g. travel agents and bogus Conferences) to build up 'cash banks' for subsequent use in bribing customers and officials.
-MNCs are using sophisticated analytics to identify potential unethical practices and high risk individuals within their companies.
STRATEGIC THINKING & RISK MITIGATION
Strategic Thinking is a key success factor for Boards, CEOs and senior executives, as well as for politicians and regulators. In the rapidly emerging 'New China' paradigm, Strategic Thinking takes on a whole new dimension.
Given the importance of China as a market for New Zealand (and nearly every other major Western country), strategic leadership is not just about 'opportunities'. It is also about thinking through 'unintended mid-longer term consequences".
It is clear that Risk identification and Compliance are evolving into a much more complex and sophisticated science involving analytics and diagnostics. Executive travel and entertainment patterns are typically used in algorithms as proxies for identifying potentially high risk individuals.
SOME RISK RELATED ISSUES TO PONDER
On arriving in London, I opened the paper over breakfast to find that syncroniciy was at play; a supplement in the 'Independent' focusing on Business Risk Strategies. Here follows some abstracts that provide further 'food for thought'.
-Hackers can bring chaos and even ruin to businesses often with impunity, but what can be done to counter cyber attacks?
-Stress and mental health remains a taboo subject among many employers who fail to provide help for staff which could not only benefit individuals but also their organisations.
-Social media demonstrates every day how the world has moved on, but many businesses are stuck in their silos.
-Intangible assets, such as key personnel and brand value, along with damage from cyber attacks, are difficult to quantify - and are strikingly underestimated by senior leaders.
-Safeguarding corporate reputation and brand value is now firmly on the boardroom agenda and executives must learn to be nimble in response to questions, criticism and crises.
-What is risk management all about? Is it simply about avoiding things that threaten your organisation? Or is it something deeper - how you think about business performance?
-Mao Zedong said "food before ethics" and that while no one would suggest that bribery and corruption are good things, if you believe your job is dependent on offering or paying a bribe, the corruption policy sent round by head office may have little bearing on your decision in the moment.
-Creating a culture that influences employees' actions, decision making and behaviour can be a challenging and lengthy process. Corruption can be so ingrained into a company's culture in terms of "the way that we have to do business and compete over there". This is especially important for companies who use agents and other intermediaries, and who operate in countries where facilitation payments are seen as the norm. -Getting staff to see that a backhander is actually a form of corruption takes time and requires regular communication and training. Backhanders often start out as corporate entertainment and favours (that come with expectations of reciprocity) and ultimately prove to be the thin end of an unethical wedge.