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The intolerance of difference

celebrate difference

In a recent post, I argued there was one proven way (borne from research) that dealt with bullying, but it was not easy to do. You had to deal with all 4 sides of bullying behaviour: the bully, the victim, the bully’s acolytes and the majority who carry on with their lives.

I’d now like to step back and discuss what causes bullying behaviour in the first place. What explains persistent and aggressive behaviour against a weaker group by another larger, stronger group?

It’s intolerance of difference, pure and simple.

Bullies play on the herd mentality, that bond that makes people stick together in a group of sameness. This group pours scorn and blame on a smaller group ‘that looks different’. Perhaps these victims dress different, pray different, eat different, speak different, act different. Some things, or many things, are different about them. And it’s this intrinsic ‘different-ness’ that becomes the reason to pick on them.

We are naturally scared of things we don’t understand. It’s an understandable, human response. Ever since our cave-dwelling days, we have been wired to distrust anyone that comes into our area that is not from our tribe. Safer to assume they will attack us, take our food, our jobs, destroy our neighbourhoods. You tended to live longer that way. Survival of the fittest.

Whether it’s the red-haired chubby 9 year old being picked on by taller, slimmer jocks, or whether it’s Hanson’s ‘Asian invasion’ of the late 90s (or her ‘Muslim invasion’ of the mid 2010s), what is common to all this behaviour is a majority privileged group putting down a smaller ‘different’ group, and blaming them for all their own ills.

What is also common is a complete falsehood with the facts. Asians did not invade Australia, nor are we being swamped by Muslims (less than 2% of the population). And anyway, what is actually wrong with having a nice variety of people and cultures on our country? What a boring, staid place it would be if it were all the same. How insular and sad that country would be. We’d all be missing out on some amazing experiences, many of which we take for granted today, that only came about through immigration and ties between countries (such as open trade).

Of course the two-faced nature of the ‘anti immigration’ debate is that those proposing it are indeed immigrants themselves, in their own generation or not many generations before. They should be more honest in their arguments (but of course they are not) by declaring: ‘I got here first, I like it, and I don’t want anyone else coming in and getting what I enjoy.’

If we only ‘stopped the boats’ (full of fleeing refugees, by their very nature the most downtrodden, weakest people on the planet), or ‘reduced immigration’ or ‘banned head scarves’ then somehow everything would be back to how it was. The implication is that it is too easy to get to our country, and we’re being overrun. A country of 24 million, with a land mass of 7.7 million sq kms, one of the largest countries on the planet.

Quickly you see the same four groups forming – the bullies shout from their safe positions as shock jocks, Alt Right politicians, Senate seats, news opinion pulpits or press columns, while their supporters jeer from the stands (‘Trump tells it like it is!’). Half a million voted in the recent election for Hanson’s party. Suddenly all your issues can be blamed on them, those that look and act different to us, those same people fleeing the horrors of Syria or African war lords. Meanwhile the victims line up for scorn, and have little recourse to a fair hearing. At the same time, the majority sit by, possibly disagreeing but not intervening.

One wonders why we don’t celebrate difference, rather than have a preconditioned aversion or suspicion to it. Multiculturalism brings the world together, creates better understanding and forms ties between peoples. You are less suspicious of people you have met and interacted with. 20,000 Syrian refugees is not going to ruin Australia (or the US for that matter) any more than the Vietnamese boat people did in the 1970s. In fact, many went on to form businesses, not for profits and councils and do great work in our communities. It makes a society richer, more understanding, inclusive and understanding. Ultimately, this makes the country safer. What puts a country at risk is tribalism, with people bleetingly following their one eyed herd.

In the 1990s I taught at the United World College of SE Asia in Singapore. There were students from 60 different nationalities in the school, over 1500 in all. I saw no bullying behaviour. I saw celebration of difference, proudly proclaimed on ‘UN Nights’ and every day with kids just getting on with each other, forming friendships and understanding. UWCs were set up in the 1960s precisely for this reason. If we can bring students from different cultures together, in their most formative years, we will forge peace and understanding argued founder Kurt Hahn. There are now 16 such colleges around the world. None (sadly) in Australia.

I am looking for the politician or leader to celebrate difference. To plot a different path. To talk about what unites us, rather than play on what naturally can scare us and rub salt on divisions. To talk to our better angels, not our worse demons.

This is not for some trendy tree-hugging bohemian reasons, this is actually for our own (and everyone’s) betterment. A safer future, a surer world, confident in itself, able to stand up to bullies.

Perhaps Canada’s new prime minister, Justin Trudeau, is the only one leading the way. He personally welcomed the first group of Syrian refugees. When he was asked about the risk of letting in Syrians, he corrected the interviewer, saying ‘They are Canadians, and we will protect them, as we do all Canadians.’

Let’s use the power of the people to make this happen. Let’s call out those who pander to the lowest common denominators.

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How to deal with bullying

BULLY

The repeated aggressive actions designed to belittle, humiliate or exclude is the act of bullying. Whether it’s in the school playground, online, at work or in the board room, there are four groups involved in bullying. They are present in all cases, and if the bullying behaviour is to stop, you have to deal with all four.

Before I get onto them, let me clearly explain what bullying is, and is not. One off acts of aggression are not necessarily acts of bullying. Bullying is the repeated picking on someone, or some group of people, over time. Nasty, incessant and continual. It is done to put down the victim, who the bully (and their acolytes) are there to dominate. It is usually for some totally unfair reason, be it someone who is slightly ‘overweight’ or has red hair, something the victim cannot control. At the root of the bullying behaviour is a power play, with the distinct desire of the bully being to put the victim down, and to make the bully (feel) superior. It is highly likely the bully is themselves acting out an insecurity issue, or has been the subject of repeated violence before. It is learned behaviour.

Anyone who has been bullied knows the horrible sinking feeling in the pit of their stomach whenever the bully or their supporters are around. React, lash out or cry and the victim is laughed at, punched, pushed over, physically or verbally. Complain to the powers that be, and retribution can follow. It can involve exclusion, it can be online (sending photos around social media, mocking someone on Instagram.)

I came across bullying at school, both as a student and as a teacher. When I was on teacher training I researched this area, and found some great work from Denmark which clearly laid out how to deal with bullying instances. Before I get to this, let me outline what does not work.

What does not work

  1. Ignore it – “they just want a reaction” ~ understandably the victim might be to ignore what is going on, in the hope it simply goes away. The bully and their mates laugh, and see the victim as an easy target. It usually continues.
  2. Fight back – “Man up!” ~ Not only does this ignore the fact that 70% of school bullies are female, fighting back can get you into trouble, and lowers the victim to the bully’s level. Settling things through violence is precisely NOT the way to deal with this. In any case, if the bully thought you’d beat them in a fight, they would not have picked on you to start with.
  3. Punish the bully (only) ~ complaining to the teacher or an adult is the first thing a victim must do, but if that authority figure then simply metes out retribution to the bully only (thinking this will solve it), the bully could turn on the victim and worsen the situation. If it’s one word against another, with parents involved, what is the teacher to do? Detentions might be a badge of honour for the bully and their mates.
  4. Laugh it off ~ can work in some cases, if you are strong enough to laugh in the face of the bully and their supporters and get away with it. Chances are, this will not work, unless you can really sustain some very good scripting (see below).

The Four Groups 

Bullying needs 4 things:

  1. A bully
  2. A victim
  3. A group of bully supporters (the acolytes)
  4. Everyone else does nothing (the silent majority)

To adequately deal with a break out of bullying behaviour, you need do counsel all four.

The bully needs to be isolated and talked to – why are they doing this? What is the problem? How do they think the victim feels? Is it right or wrong? Are they big enough to stop it? They might be acting out an insecurity. They may be suffering at home. They may have modelled this behaviour from others. Can they learn from this?

The victim also needs counselling. What signals are they giving off to the bully and their supporters? What can they do about the situation? What friends/assistance do they have? They may be submissive individuals. If you provide some ‘strengthening’ advice for the victim, they might be able to grow. “You’ve got a large nose”. “True, it is a bit big isn’t it?!”. “You’re an idiot.” “You think so – why’s that?”

The other (often ignored) group are those that egg on the bully. They are secretly glad the bully is not picking on them, and are usually scared of the bully themselves. They might not like the aggression, but fall into line through weakness. The bully, being manipulative, might end up getting them into trouble as well. This group needs talking with. Why are they doing this? Do they want it to end? This group can be the quickest to defeat bullying. Take away the crowd the bully is acting up to, and the major benefit for the bully evaporates.

The final group is also often forgotten in all this. Bad things happen only because good people allow them to continue. Everyone knows what is going on. While this group are not the bullies’ mates and not actively encouraging the behaviour, their silence and inaction allows it to continue. In fact, it’s a necessary precondition. If this group confronted the bully and their supporters, the bullying would cease. If they befriended the victim, they would out number the bully. The power balance would shift.

I witnessed some bad cases of bullying in schools. For each case, I tried to isolate the four groups and spoke with each of them. It took time. I engaged each group in finding a solution. They all knew I knew what was going on. After a week or so, the behaviour had completely gone. The victim had some good friends who looked out for him. He grew as a person. The victim was not that successful at school, and needed some better outlets. The acolytes felt a bit sheepish, as did the silent majority (where most of the victim’s new friends came from).

What sickens me about bullying is the total unfairness of it, and the deep hurt it can cause. It is every person’s basic human right NOT to be bullied, and to be able to go about their business without this kind of sickening antagonism. Some become so isolated, so hurt and unhappy they feel they do not want to go on. Youth suicide is a real issue. It’s dreadful. It is preventable.

Moving out into the world we see grown ups who act as bullies. They shout and stamp and think this is going to get them through. They may have large physical presences, and use this to get their way in business and in life. One even uses classic bully techniques to run for President. What is common to all bullies is a deep-seated insecurity. They are cowards. If the majority rise up and call them on it, they lash out, but in the end they are trumped.

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Company Directors Course – 5. Board effectiveness

CDC - board effectiveness

The final day of the company directors course focussed on board effectiveness –  what is it? how can it be managed? what’s best practice? what are some of the traps? The first half involved long time board recruiter Mike Horabin sharing his vast knowledge and decades of hard won experience. The second half involved us being put into a live case study, where we each in turn acted out as a presenter to the board, an observer of the board, and being a director on the board on a separate agenda item. It was the high point of the week, and a strong conclusion to the proceedings. 

There are so many takeaways from this course, so here are just a few more to add to those already posted about the board’s responsibilities and decision-making, duties and the law, risk and strategy and accounts, solvency and finances

  1. Boards are charged with coming to sound conclusions, concentrating on the proper items in front of them, with concise, well prepared information. They need a good mix of people and skills, have leadership from within (Chair) and provide leadership to the company. Overall, they are there to add value.
  2. Good boards provide calm decisions in times of crisis, are not rushed or panicked.
  3. They are a pool of wisdom, and are there to guide, mentor and assist management.
  4. Individual characteristics of good board members include: integrity and honesty, relevant experience, strategic thinking, good communication skills, wise and battle scarred, inclusive, good team player, adaptable, willing to change their views, courageous enough to ask difficult questions, are independent, decisive and have good instincts.
  5. High performance boards can have tough conversations but still reach decisions and be productive; they respect each other, trust and share in an open environment.
  6. The ‘magnificent 7‘ things a board needs to do are: lead with the right culture, develop the best strategy & pick the best CEO (then these others become easier ->), manage risk, monitor performance, ensure compliance & maintain good shareholder relations.
  7. The chair’s role is crucial – they are elected by the board, their relationship with CEO is pivotal, and they can only continue if they have the backing of the board.
  8. The Board should manage their own secession; most of the time they should try to get a new member on board before the other departs, and then have their position ratified at an AGM; they can come on as casual for a few months beforehand.
  9. Board committees must have clear terms of reference, time frame, its own Chair (good training ground for future chairs) and make recommendations to the main board.
  10. If you don’t agree with the way decisions are going in the main board meeting, by all means meet other board members, but make your points and do a paper to the next meeting if needs be. Talk to the chair; don’t thump tables, and if the decision goes against you, abide by it. Don’t form factions.
  11. Develop a “Matters reserve list” which shows which matters require sign off from Board, with the implication that all else can be handled by the CEO and management. Review this regularly.
  12. A board calendar should outline what needs to be dealt with throughout the year – monthly, quarterly, six-monthly and annually. Board meetings should last 2-3 hours, but can be half days, and in some indigenous organisations might last 2 days.
  13. Culture is crucial and central; it’s not fluffy, it’s hard nosed, but a good corporate culture can lead to so many good outcomes. “Culture is how people in the organisation behave when no one’s watching.”
  14. If Chairs disagree on the direction of the discussion, or how consensus is forming, ask a question. Monitor how bad news gets to the board – is it disguised? embellished? hidden? slow? Ultimately, boards need the bad news quickly.
  15. Papers to the boards are legal documents, as are your notes on them if they are kept and a legal case starts. After that you cannot destroy them, they are evidence. Minutes should be published within 48 hours of each meeting.
  16. Finally, take time to reflect as a board and as individuals, with each other – what can we do better? how did the meetings go? how good were the papers? were our decisions correct/best? have we added enough value? what can be improved?

Overall, the company directors course was a high value 5 days, and brought home the complexity and skill in group decision-making around the board table, how to search for answers, the importance of asking the right/tough questions. It’s made me reflect on how challenging it can be, but how vital it is to do well. It’s made me realise that this is something I want to do, in time, and something where I think I can contribute.

Over the next 3-5 years and beyond organisations are going to be challenged like never before with the rapid changes in technology, cyber security, digital disruption, the sharing economy, robotics, driverless cars, connected devices, the Internet of Things and much more besides. Who knows what jobs will exist for our children in 10 or 20 years time? Probably they have not even been thought of yet. Whole industries will disappear, and new ones will be created. Businesses that cannot stay relevant will fade away. Others will start up.

I would like to be the ‘digital guy’ who sits on various Boards, thinks strategically, and assists organisations make the transition from old way of doing things to the new. It’s exciting, and challenging, and something where I can probably add value. What can you add value on? Are boards something you might be interested in? If so, I highly recommend the AICD company directors course.

… and now I have to do my exams and pass this thing!

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Company Directors Course – 4. Finances and Solvency

CDC - accounts

The 4th day of the company directors course was all about “the books”, and what directors need to know about them, what they need to ask, and why. For many this was the day they dreaded, but I’ve never found accounting all that bad, in that the principles (once learnt) are fairly straightforward and much of the rest is plain logic. It’s a bit of detective work, sifting through the evidence to uncover what the real story is, where the concerns are. It can be fun when you discover the truth, like solving a puzzle. OK, I sound a bit geeky, but it is made all the easier when you have an expert and calm trainer (as we did today), who is well experienced and could build up everything from first principles, so you could see how it all hangs together. I learned a lot, and I felt it filled in some gaps I did not know I had.

Directors need to be aware that they bear the ultimate responsibility for the financial performance and position of the company, so they should be asking questions if they suspect anything is not completely understood, right and proper.

Again, this is not an exhaustive list, but from memory, here are some important matters to consider as a director in regards to an organisation’s accounts & finances …

  1. The Accounts are an indicator only, like a light on your car dashboard. Some lights will not be flickering, some may never become a concern, but at times as you drive along they may indicate something. It’s very easy in hindsight to spot problems in a mangled heap of law suits and company implosion, but even in these cases a sensible director might have been querying things many years before the problems became endemic, and in some cases, ruinous.
  2. The 3 main account documents are: the Profit and Loss (P+L), the Balance Sheet, and the Statement of Cash Flows.
  3. The P+L shows you how they organisation has performed in $ terms over a past period (year, quarter or month). It looks backwards. It starts with a statement of income from sales to customers (Revenue) and deducts the direct cost of those sales (cost of good sold, COGS, such as direct labour and raw materials) to calculate Gross Profit.
  4. For a retail store, COGS would be calculated as Opening Stock of Goods plus Purchases (= available for sale) minus Closing Stock (stock still left over).
  5. Your Gross Profit divided by Sales is your ‘margin‘, and in most trading entities, it would be expected this would be positive and worth about 30% of sales or more. The higher the gross profit margin (GPM) the more margin you have, and the more profitable you are.
  6. After Gross Profit is deducted expenses, to get an Earnings Before Interest and Tax (EBIT). Often EBIT is used to compare organisations as it is not affected by how a company funds its operations (payment of interest on loans) or by specific tax rules.
  7. Various other deductions are then made, such as depreciation (to make sure you are accounting for your plant and machinery losing value over time), tax and interest, and you’ll end up with Net Profit after Tax (NPAT), the bottom line. Net Profit, if positive, can be used to pay dividends and/or plough back into the company (as reserves, a source of future funds).
  8. The Balance Sheet will give directors a statement of the financial position of the company at one moment in time (the date on the balance sheet). Notice the difference here – the P+L is over a period of time, and the balance sheet is a snapshot at one point in time. It’s as if everything in the business is frozen and added up, including all the assets the business owns (Assets: such as property, cash, receivables, equipment), all the debt it owes (Liabilities, such as bank loans, payables, overdraft, employee provisions/leave) and the amount of money in the business that is left over (Equity). Assets = Liabilities + Equity, or Assets – Liabilities = Equity.
  9. Equity can be made up of the initial share capital invested, plus any subsequent share raisings, plus any accumulated reserves and retained profits earned over time, less dividends paid.
  10. Various ratios can help you decipher what is going on, although you’d want to know why the ratios are changing, not only that they are changing. For example, ‘return on assets’ may be rising because you are generating more profit from your assets (Good!) but it might also be because you had to write off some useless assets (Bad!).
  11. The third important document is the Statement of Cash Flows, and from various cases today it was clear that the P+L might look great, so too the Balance Sheet position, but once you look at where the business is actually earning its cash from, and where it is spending it, a very different picture may emerge. All 3 documents are required for a better overall understanding.
  12. One classic case here was a WA-based winery (which later went insolvent, had to be broken up and sold off). The P+L looked fine for the 5 years presented, but digging deeper it was clear that by the 5th year in question the only reason it made a positive NPAT at all was due to some revaluation of the vine trees (upwards), which had been done (perfectly legally as per accounting standards) over the previous two years. This had come on to the books as ‘other revenue’. Meanwhile the balance sheet looked OK, albeit with some higher debt levels and some share issuing, but otherwise things looked ‘not great’, but ‘under control’. However, looking at the statement of cash flows, it was clear they were not earning positive cash inflows from their actual business at all, and that a combination of more borrowing (debt), share issuing (diluting shareholders) and asset sales (flogging off what was seemingly not bolted down) were the main reason they still had cash in the bank at all. All major ratios were trending down, and in fact the liquidity ratio (ability to pay immediate debts) had been well below acceptable levels 3 years earlier, and continued to be thus.
  13. There were certainly warning signs up to 6 years before the business eventually went into administration. This brings up one of the most sober points for directors – trading while insolvent, or trading close to insolvency. Solvency is “being able to pay debts when they fall due” and so has a timing element to it. As long as the business can pay debts as they fall due, then you are OK.
  14. How would a director know if the business might be sailing close to the wind on insolvency or not? Early warning signs may include – a reduction in cash balances, an increase in creditors (the business may be trying to buy time with suppliers), a low liquidity ratio (below 0.75 is generally a worry), net cash receipts from customers is less than cash paid to staff and suppliers, cash income from sales is less than reported book sales, an overdraft being used and rising over time, various other devices are being used to keep cash up (asset sales, share issuing, increases in debt) and dividend payments being funded from borrowing or anything other than operating cash profits. All the directors have to do is raise some questions about all this, and in the case of the winery above, questions could have been asked many years before the business failed.
  15. The insolvency issue is fundamental, as directors must not allow the business to continue trading if they suspect the business cannot pay its debts as they fall due. If the business continues to trade, the directors could be held personally liable for any more debts incurred. This is illegal! ‘Hoping things will turn around’ and ‘we’ll trade out of it’ are not valid excuses. You fail in your fiduciary duty as a director to the company if you allow the business to trade while insolvent. Pure and simple. If you suspect this, you have to have this recorded (e.g. minuted), and stop trading. But well before then, you should have picked up the warning signs and asked important questions, such as ‘why are we paying a dividend while making a trading loss?‘ or ‘how are we paying for ongoing business expansion when our receipts from customers are less than what we pay our suppliers and staff?‘ or ‘our liquidity ratio is at 0.4, and an acceptable level is 0.75 or higher, how are we going to revert back to an acceptable level?’…
  16. There are far more issues to do with accounts than these few points above – for example, there are many more accounts than the 3 main ones above, and dozens of ratios. Last point – beware the fine print. Read the notes to the accounts – there should be explanations for any asset impairment, or revaluation or anything like this that can have a material impact on results. Remember, if you’re not sure, ASK!
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Company Directors Course – 3. Risk and Strategy

CDC - risk and strategy

Day 3 of the company directors course, and we had a superb facilitator, Peter Fitzpatrick, who has loads of experience, and even better, is a well versed and highly competent at providing it. He kept us engaged all day. Quite a skill. We’re 60% of the way through, and it’s a weekend, so I can take a pause to reflect on another full day with lots of learning.

Risk and Strategy are two of the most important matters a Board will focus on. Risks come in all shapes and sizes, seemingly from anywhere, and you can never exclude all risk altogether. It’s more about how aware the company is about their risk environment, what appetite they have for it, and can they act when a risk suddenly blows up in their face? As for strategy, it’s the essential role of directors to look 3 to 5 years ahead and keep the company moving in the right direction, whatever that is.

Here are my takeaways in regards to risk and strategy:

  1. There are positives with risk – they can make you look after your company better, your people, save money.
  2. It’s important to keep asking questions – never assume – rather than making statements.
  3. A board refresh will be important from time to time, so you don’t get stuck in the same way of thinking.
  4. There are various ways to manage risk, and boards have a duty of care and oversight role.
  5. The company’s risk appetite needs to be defined, with KPIs (such as ‘our maximum gearing ratio will be x%’ or our ‘days creditors will be y‘)
  6. Crisis management plans needs to be prepared, with various scenarios, and from time to time, rehearsed.
  7. A diagram/overview can place all valid risks in one chart, which can be updated, and have a risk register with more details on what they are and how to mitigate and deal with each.
  8. Have a full set of risk documents, stored, updated, and understood.
  9. On strategy, first look at Simon Sinek’s ‘The Why’ – people buy the why, not the what or how. Do you know your ‘why‘?
  10. 60% of workers are disengaged with strategy and the workplace – engage them, communicate, involve them, inspire them.
  11. Developing a strategy is 1 of the 7 key roles a board does.
  12. 4 Russian brothers can be useful: Moreov, Lessov, Ridov, Tossin (!)
  13. Allow a good time for strategy day with enough preparation. November can be a good month to hold a strat day.
  14. What’s your main game? Don’t stray from this. What are you (or can you be) best at?
  15. A good external facilitator is required for strat days.
  16. Have KPIs, get everyone’s commitment and hold people accountable.
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Company Directors Course – 2. Duties and the Law

CDC the law

Day Two of the Company Directors Course was about the duties and responsibilities of Directors, and the legal environment. It was a drier day in many respects than day one, not only because the wintry rain abated. Much of the day was spent delving into such matters as the fiduciary duties of directors, recent test cases such as AWA (1992) and James Hardie (2012) and the complex issue of contract law, privacy and the rest …

It’s not for nothing that many boards require or expect Directors to have done the AICD’s company directors course. As I work my way through it, the mind boggling array of detail and complexity that a single director and board can get into only makes the point that no one should treat lightly onto any Board of any description. The undertaking is a major one, and gets more and more complex and risky the larger and more public the company. ‘I did not know‘ is no defence. Nor is ‘someone did not tell me‘. Anything that happens in the company can impact back on its Directors, for it is they that the shareholders have entrusted the power of overview and governance in the first place. It is they that carry the ultimate responsibility and where the buck stops. The ‘company’, albeit a separate entity, is not a person and cannot make decisions, but people can, and the people who have ultimate control are the Directors. Everyone in the company essentially works at their behest.

Having said that, a Director acting in good conscience, honestly and dutifully, who is well informed and asks reasonable questions, is well prepared, attends and is involved, should not have any issues and may very well have a long and distinguished board career. It’s not that businesses go down, many do, it’s that a ‘hypothetical reasonable person‘ parachuted into that same board seat would have done everything they could have done (within reason) to know what was going on, and make informed decisions. Did you?

Here are my takeaways from day 2 on the subjects of the duties/responsibilities of Directors and the legal environment in which they operate:

  1. There is common law and statutory law – common law is what is laid down by a judge from a court judgement, and as such sets precedents. Statutory law is pronounced through Acts of Parliament, and as such gives bodies like ASIC the powers to prosecute and attach penalties on companies. Both laws work side by side.
  2. Directors have a fiduciary duty, meaning their duties are owed to the company itself and mainly revolve about being honest, trustworthy, careful, diligent and acting in good faith.
  3. The Directors duty is to the company, and not one single group of stakeholders. ‘What is best for the company?’ should be in the forefront of their minds as they deliberate.
  4. Sometimes one group’s rights get ahead of the queue – for example, if the company is insolvent (cannot pay its immediate bills) then satisfying creditors becomes the most important concern. Once they are sorted, then the company may be able to continue trading (and as such, directors have the done the right thing by the company – shareholders, staff, and others may continue to benefit).
  5. Sometimes ‘shadow directors’ can be determined to be directors: for example, a consultant may sit on board meetings, give advice, and their deeds and actions may determine what a company ends up doing, bringing action back to that consultant if so deemed. Consultants are not automatically shadow directors, but in some cases act as if they are directors, and so could find themselves being treated as a director by the courts.
  6. To ‘act in good faith’ essentially means you have no conflict of interest (you, or a friend/family do not personally benefit from a decision the board deliberates on) and do not improperly use the information available to you as a Director (such as trading its shares – as Steve Vizard was alleged to have done while on the board of Telstra… which also begs the question, what was Steve Vizard, comedian, late night TV host, doing on the board of Telstra?!)
  7. A director should ask questions, be knowledgeable, have a well developed world view and exercise judgement.
  8. The ‘business judgement rule‘ absolves directors if they have taken decisions with the available facts and fully thought through their strategies in a planned, methodical, well documented manner. As mentioned, sometimes things go wrong, the main point is – would your decision look good in 10 minutes time, or 10 days, or 10 years? Would it look good if discussed in an article in Business News?
  9. Trading while insolvent is illegal. If directors suspect the company is near or in (or likely to be in) an insolvent position (i.e. not able to pay its bills as they fall) then the company should not continue to ‘trade out of the situation’ hence incurring more costs and possible debts. The directors could be held personally liable for those increases in costs/debts, plus other penalties including prison.
  10. An important recent case involves the collapse of Centro Property Group, where a long term liability (debt due to be repaid in more than 12 months) had not been rolled over and hence became a current liability (due within 12 months) post balance date. The directors either did not notice (or bother with) the potential problem should this liability not be rolled over for another year. When the banks took a tougher line and refused roll it over (as the GFC unfolded), it became an immediate debt and the company did not have enough immediate funds to meet the demand. It was $1.5 billion and not a trivial matter. Collapse ensued. 8 directors were held to have breached their duties. The directors should have asked the right question – what happens if this is not rolled over? what’s the likelihood? what’s the contingency? has anything changed (such as the GFC!)?
  11. Directors and Officers (D+O) insurance will reduce risk for directors (and help defray legal fees), but not if they have acted improperly. Nothing protects you against that. D+O insurance is best kept for up to 7 years after a director leaves the board, as the statute of limitations is that long.
  12. Reputational damage can be immense should a company breach a law. Good reputations help companies attract and retain the best people, help build a strong brand which can provide long term value.
  13. Reputations can be dashed through PR disasters such as last year’s VW emissions scandal or the BP Deep Horizon oil spill of 2010.
  14. Contract law is fraught with complications, and boards should review all standard contracts and have clear policies around who can agree to what and how much.
  15. IP law, competition and consumer law, privacy law, work health and safety law, environmental law and anti-discrimination law all impacts on companies.
  16. Directors have to be ahead of the game on the legal environment, state and federal, and have all the information they need to make reasonable decisions and ensure they are ‘more than’ complying with all the relevant laws in all the jurisdictions in which they operate.
1

Company Directors Course – 1. Board decision making

CDC day one

I’m back at school again, this time on the student side, for the first time in 18 years. Day one of the AICD Company Directors Course has just ended, and I’m going to blog my thoughts and take aways each day, so this will be the first of 5 such posts… 

The CDC course involves 10 modules, each takes half a day, so we covered the first 2 modules today – an introduction to the roles and responsibilities of directors and then group decision making.

It’s fast paced and you have to engage. There’s a lot of pre-reading (I reckon 20-25 hours should be set aside to read all the material and case studies beforehand), and I’m glad I did all the reading, as it gave me a head start and strong overall understanding before I walked in this morning. I could apply my reading to the cases immediately. You could tell some had done all their reading, and some had not. Like a sewer, what you get out of it depends on what you put in. My suggestion is to do the pre-reading work, over a few weeks beforehand and take notes as you read, which helps you stay awake while reading, remember it, and then you can re-read your notes just before the session, and it all comes flooding back.

My main take aways from today are:

  1. Directorships are not for the faint hearted – know what you’re getting yourself in for. Be clear on your responsibilities (to the shareholders) and what you are bringing to the table. Doing the wrong thing can land you in jail (think Adler and Williams from HIH).
  2. Actively participate, but don’t do so overly; add quality to the discussion, and consider how the best boards could be run, and best decisions be made.
  3. Some of the most important decisions a board make involve selecting the best CEO and formulating the best strategy, keeping the management and CEO to account
  4. Boards need to fly at 35,000 feet taking a view from above, and leave the CEO and management to work on ground level on the business; communication between them is critical – how much is enough/too much? how would you know?
  5. Sometimes boards need to fly down to ground level to help (e.g. in a crisis) and then they need to get out of the way again above the clouds when the crisis has been averted.  (Think Kevin Rudd, who was seemingly good in the GFC but then could not let go once it was past.)
  6. You should not get too comfortable on the board; after a few years, a refresh is needed. You can only be truly independent if you are relatively new and have no ties to the organisation (not a major shareholder or supplier).
  7. Group decision making is complex, but should be better than individual decision-making if the board is diverse, has enough information, takes enough time and analyses all sides and thinks what’s in the best long term interests of the shareholders.
  8. There are various tools that can assist decision making (Bono’s 6 hats, decision trees, PEST analysis, etc).
  9. Sometimes short term priorities blur long term thinking.
  10. A good Chair, who can draw out and use the talents of every board member, is crucial – they are like a conductor of an orchestra, and are ultimately responsible.
  11. Groupthink, where everyone just agrees and goes along with a (usually dominant) CEO of Chair is very dangerous; a managed bubbling of various ideas is healthy.
  12. Always consider what other options are possible, why others have not done this, what other information may be required.
  13. Voting is not a good idea; a good Chair will move the Board to a consensus, where all views have been expressed, and everyone can agree on the course of action, how success will be measured. If someone wants their opposition noted, note it.
  14. Reflect on past decisions and what it means for future ones.
  15. Before taking a decision, agree on how the decision shall be made (process).
  16. Will your decisions look good in the cold light of day? the next month? in 10 years’ time?

There will be many more takeaways; but these are off the top of my head (my notes are left back at AICD in the city).

See you tomorrow🙂

0

Focus on what you can do

Focus on your own s**t

At a recent business cocktail function the WA swimmer Eamon Sullivan was interviewed about his illustrious career, which has included a world championship gold and a bronze, 2 Olympic silvers and bronze, as well as various world records.

A major take away for me was his honest self appraisal of his failure to win gold at the Beijing Olympics in 2008, despite having the 100m freestyle world record at the time (which he had broken in the semis). He put it down to a ‘classic and unforgivable error’ in the final, as he concentrated more on what his opponent might do, than on what he was about to do.

‘All coaches tell you, never worry about your opposition or concentrate on what they might do. Concentrate on your own skills, your own game, your own stroke, and what you can control. My failure to do this cost me the gold, and it’s something I have to live with, and I know I’ll regret it for the rest of my life.’

You might think he’s being pretty tough on himself, but it’s a really important point. In life generally, we can often get caught up in what others might do. We cannot control what they do. We are only in charge of what we can do, and that’s what we should focus on. Our own performance. Our own skills. Consistently. Persistently. Patiently. Avidly.

We can control what time we turn up for work, what calls me make, how we make them, what we say in client and staff meetings, what we prioritise. We are in control of what we put off for later in the day, or tomorrow. We determine what we do now, and how we do it.

What Eamon reminds us, is that we need to make sure, no matter what, we do the best we can do. For no matter what result occurs, we do not want to have to ponder what we might have done better. Looking back on an exam result, a sales proposal or a potential partner meeting, you do not want to be thinking ‘what might have been if only I’d…’.

It’s obviously something Mr Sullivan is learning to live with, in relation to his big moment, 8 years ago. So, I ask you – are you going to focus* on what you can do, or get distracted by what others might do?

~~

* Or as someone once eloquently put, focus means “focus on your own s**t”.

1

Two natural ways to increase sales

Bob2

A business owner friend and I were discussing the current business environment this week, and swapping notes on what works (and what does not) when it comes to increasing sales.

Assuming the product and services are in demand and provide value to customers, there seem to be two relatively easy ways a business owner/development manager could increase sales …

  1. Attend 2 or 3 business events a week

Now, a word of caution here. You don’t go along with sales uppermost in your mind. Your intent is to meet new people, make some connections and add value to their conversations and knowledge.

The more you do this in the right spirit (‘give more than you expect to receive‘), the better you will become at it, the more people you will meet, the more of their connections you will be allowed to make, and you will actually walk away with more sales opportunities, and ultimately more sales.

People are naturally gregarious, which means we are wired to cluster in groups. (Be they sporting clubs, political parties or when we attend a business event.) So go along to these gatherings, regularly, and, although it might seem a bit daunting at first, here’s a trick I learned from the master of networking himself, Ron Gibson:

As you walk into the room, don’t go over to people you already know (by all means say ‘Hi’ to them) but head directly for those you don’t. In fact, make a beeline for a person who is on their own. They will probably standing at the fringe of the event, hoping the walkpaper swallows them up, feeling a bit uncomfortable and nervously looking at something interesting on their phone. They will normally be relieved and delighted to see you approaching them, smiling, introducing yourself. Ask them what they are doing here, what their business is, and engage them in conversation. Show genuine interest in what they do, while exploring in your mind how you might best help them. (Not how they can help you, the other way around). When you get a chance let them know how you can help them (if possible) and also explain what you do, and you’ll quickly see if there is any common ground. If relevant, swap cards, and maybe promise to catch up in a few days time. Try to make 4 or 5 new contacts this way at every meeting. Attending 2 or 3 a week means you’ll quickly gather 10 or more new potentially useful business contacts every week, and remember, each will have 100 or more contacts of their own. The value of this regular exercise is the permission you win to gain access to these new people.

Pick your events wisely. I have found the ones set up expressly for networking are not necessarily the best ones as they can attract those that are only trying to sell. You know the kind. The same people frequent them, they are usually free. Go to a variety of professionally run (and often paid for) business functions, because that’s where the interesting business people are. As a nice bonus, you will also learn much from the presentations and discussions on stage. Some might be stand up cocktail functions, others a sit down breakfast or lunch. Either way, there will be opportunities to mix and mingle, where it is far easier to stay seated or in your comfort zone. Most will stick to who they know. But as a wise sale coach told me recently, you only grow when you are out of your comfort zone. So get up and go meet some people. People are naturally friendly in this setting, far more so than if you cold called them. So get it done!

Consistently doing this over time expands your own networks, and believe me, for someone like me, not born or bred in this fair city, it has worked a treat.

In fact, failing to do this not only harms your business, it also limits your career opportunities. I’ve had 6 jobs in my 30-year career so far, but have only ever had less than a handful formal job interviews. My last 4 jobs (spread over almost 2 decades) have not stemmed from a formal job interview at all. They have been gained through networks I have forged over time, and often from cups of coffee or a phone call from a referral. I even sold my business within 6 weeks of an initial coffee meeting where the idea was first mooted.

Following up with those people you can help, that you might open doors for (and they you), is critical. This is where you need a good system to lock away your new contacts in your Outlook Contacts or a CRM (client relationship management) system. Using something like CamCard (a free app that takes a photo of business cards and automatically synchs the data into your contacts) can make it a piece of cake.

       2. Treating LinkedIN like a business event

I treat LinkedIN in the same way I do a live business networking event – I go there to meet new people, connect and add value. The more you do this the more new business will drop off the bottom as a matter of course. I also do this with Twitter, and to a lesser degree Facebook and Instagram.

Essentially, LinkedIN is very much like business networking, except you don’t have to physically meet someone first. Again, don’t go on there to sell, go there to connect and add value, and in time you will meet loads of new people, some of whom will be interested in how you can help them (and they you),  and the permission to sell to them (or one or more of their contacts) may be granted. I have met many new business contacts this way. I have also used it to get into a company, that hitherto had seemed impossible.

As in networking events, be careful not to cross that line. Don’t go on LinkedIN too much (10 minutes a day will suffice), and use it to meet new people, publish and share interesting information. Be the better Roman. Share and like other people’s posts. Add some comments. Share and publish something of your own.

~

As with all these things, it’s about persistence and consistency. If you only do a little bit for a few weeks assuming this to be ground breaking, you will be sorely disappointed. Do not expect results straight away, learn as you go. Don’t overdo it either – there are people in every town (mine included) that have a bad reputation of spamming people on these networks and at business events. They’re always there, and sadly, they seem blissfully unaware that whenever their name is mentioned, you can hear collective groans of disapproval. Don’t be them!

Get out there and be seen, both physically and on LinkedIN, in the right way, and I promise you will make more connections and win more opportunities to do more business. You might enjoy a pretty nice career as a result.

Extra resource: Read this excellent post > ‘Scared of Networking? How to kill it at your next event

1

Uber disruption

share and share alike

Last week I got the chance to listen to Jerry Hausman, an economics professor from MIT, who spoke on ‘Startups – will their economic models take over?’ – a topic close to my heart.

The 70 year old econometrician started by pouring scorn on Twitter (‘I mean, don’t you have something better to do?’) which I thought was wonderfully ironic, given his audience contained the esteemed business leader and well known Twitter aficionado, Diane Smith-Gander, who was tweeting away live at the time. The point he was making was he was not necessarily a raving fan of these new businesses, despite being an avid user of Uber (‘They are 40% the price of taxis in Boston – in fact you could do away with public transport and give everyone Uber vouchers and it would be far cheaper for government’).

Uber’s valuation of US$62 billion and Airbnb’s of US$30bn defines them as ‘unicorns’ (valued over a billion) and have come from nowhere in less than 10 years. This was simply not possible when Jerry (or most of us) were growing up. ‘Stanford university was a backward country college, not even Ivy League, now people drop everything to get in there.’ Stanford has spawned Yahoo!, Google, Hewlett and Packard, Youtube, LinkedIN, Netflix, Paypal, Cisco and Sun among its alumni and is known as the ‘billionaire factory’.

The poster child of the sharing economy, Uber, has been incredibly disruptive forcing regulatory fights (and invariably, wins) in 68 countries and 450 cities. ‘Uber keeps dropping its prices and driver compensation, yet Uber wants to maximise revenue, so has to drive huge increases in sales.’ argues Hausman, ‘The drivers are earning less and less – in the US they only drive 13 hours week – and they also have to run their own cars paying for maintenance, petrol and depreciation.’ Jerry pondered if the Uber drivers were getting a good deal or not, and thought not.

In the US, cars are only used 4% of the time, and with regulation lagging the fast development of Uber, there is still upside for the company in terms of usage, and savings in costs for users. Imagine if the continued rise of Uber and their ilk meant that cars were used 25% of the time (a 6-fold increase). Many of us may get rid of our second car, or even give up owning a car altogether, as ownership made less and less economic sense. Imagine what would happen when self-driving cars become the norm, that you can hail easily through an app. What would that do to traffic congestion, car accidents, the environment, public funding of new roads, the health system, taxation, the insurance industry, car industry and car park revenues? This would disrupt many sectors, and drive fundamental changes (some for the better, some worse). But it does hinge on the economic model for Uber and their drivers working, and the public’s acceptance of the car sharing economy. Airbnb can do likewise for accommodation. I see many startups trying to be the ‘Uber for the x industry’. It’s the startup ‘model du jour’. We teach our children to be good sharers, might we as adults do likewise?

Jerry is not a fan of regulation, above the minimum, as he sees it crowding out efficiency and entrepreneurship. His favourite phrase was ‘I’m a fan of capitalism between consenting adults.’ Any large industry that has been over regulated over time is ripe for these new models to take hold. ‘How about the real estate industry’?, I asked him, ‘Is anyone, or could anyone uber that?’ Jerry replied, ‘It’s easier to uber your car ride, or your stay in a hotel, as we’ve all given lifts to people in our cars or had people over to stay. But the average person simply does not sell their property very often, so it’s not something they feel comfortable doing on their own. It’s a big ticket item, often their largest financial asset. That’s not to say it can’t happen, ever, but that will be a more difficult one to disrupt.’

I agree, and it’ll probably take some time before the real estate transaction is done directly between buyer and seller, but I also bet some people somewhere are working on this, and over time, even this transaction will be changed irrevocably. My advice to real estate agents, as it is for taxi drivers and hoteliers and anyone in a regulated industry, is to be aware of these creeping changes that can disrupt your entire industry, seemingly from nowhere. Don’t scoff at the technology, have an interested and serious look into it. Stay relevant. Keep your customers close. Don’t assume anything. If you wait until you’re waving placards on the steps of Parliament against some well funded and beautifully designed upstart to get interested in the sharing economy, you’ve already lost.