Outlook for WA business in 2017: better!

sunny times in WA

In a talk I delivered to the Western Suburbs Business Association last week, I struck a cautiously optimistic tone in regards to the prospects for business in WA in 2017. Most of those attending seemed to agree that things had been picking up of late, and perhaps in 2017 we would all just get on with business, and not worry about post mining-construction doom and gloom.

Here are the slides from the talk.

As always, start with a story, so I began with one of my favourites about the motorcylist in June 1944, having to turn around a convoy of armoured vehicles and trucks on a rainy country road just north of Portsmouth, UK. To find out out he did it, read this post.

The 3 main lessons from this story are:

  1. If you’re going in the wrong direction, admit it! (most managers can’t)
  2. Think about what direction you should be heading in (hint: the trend is your friend)
  3. Make sure you stick to the new direction (no returning to old ways)

While Nokia and Kodak famously did not find a better path, Samsung and Apple most notably did.

There’s no doubt that 2016 was a difficult year (for most, but not all, in businesses in WA). Apart from all the celeb deaths (no more than usual, statistically), we had the Brexit and Trump election shocks, more senate issues for PM Malcolm, a sluggish local economy  and the media got smashed (SCOOP went under, and The Sunday Times was bought by The West with barely a whimper).

In fact, 2016 was a relatively good year for WA stocks, as shown by the ‘BN30’ index of 30 representative WA ASX-listed companies. Starting the year at a base of 100, the BN30 ended it 20% higher at 120.

There was some good news around in 2016:

  • the US economy grew, and markets hit new records
  • US CO2 emissions were the lowest since 1991
  • The Giant Panda is off the endangered wildlife list, as are Tigers
  • Poverty levels fell, to their lowest levels
  • The Colombian government signed a peace deal with FARC

But there’s no doubt, some sectors in WA did it tough in WA:

  • Mining services
  • Retail
  • Property
  • Recruitment
  • Business Services

Mainly because:

  • WA population growth has stalled
  • Mining construction boom ended
  • Digital disruption
  • Uncertainty about the future

…. all fed in to lower business confidence, lower investment, less new jobs created.

Despite all this, unemployment peaked at 6.1%, and GDP grew (for the 25th successive year.)

There were some bright spots in the local economy:

  • ICT, tech and digital businesses did well
  • Professional services did OK as activity continued
  • Annuity (SaaS) businesses were fine
  • Agribusiness
  • Some miners, especially iron ore, gold and lithium were hot

On that last point, it should be noted that the mining boom is not over, even though the construction boom may have over. Mining, as an industry, is three times the size it was 10 years ago. It’s just that they are not building as many mines as they were during 2004-2012.

FMG’s share price rose 250% in 2016. Atlas Iron, once the darling of the stock market, and then pronounced dead, saw its shares rise from a penny to 4.5c. Long way off its prime, but still alive. For many, this signalled all is not lost. Atlas started paying down debt. FMG could be debt free soon.

What has great potential in WA business?

  • Tourism
  • Education
  • Aqua/agriculture
  • Mining/bio/tech startups and software
  • Many other industries

So looking to 2017 and beyond, there is much to be thankful for, and positive about in business in WA.

Much of what happens is in the mind anyway. If we think it, it may very well happen. We can create our own future, and we can certainly determine the success of our businesses by the attitude we take.

Plus, we live in paradise, lest we not forget. The sun is shining. The beaches are gorgeous. As is the wine.

Public Speaking? Start with a story

tell a story

There are 2 really bad ways to start a speech, and most of the time when I hear someone speak in public, one or other of them is used.

The most common way, and one that I have fallen into the trap of doing myself a few times, is to throw up a slide with the title of your speech on it, your name, position, perhaps your twitter handle. You say ‘hello’, or something like that, thank the person who introduced you, then repeat the title slide with your name, and flick to a second slide with the agenda for your talk on it: maybe 4 or 5 bullet points sunken into a nice visual background, repeating that also.

I suppose we do this because it is the natural order of things. We had to do a cover sheet for our assignments at school, and we did a contents page. When we got to talk about our assignments in class, we were encouraged to do a power point slide with the title of our talk on it, and then the agenda for our talk. This was how we began our public speaking career.

Part of the reason this is so bad is that the human brain can read your slides very fast. Very, very fast. By the time you have taken your first breath on stage, and the slide has been up there for 0.5 seconds, the audience has already read it.

SO WHY ARE YOU READING IT OUT TO THEM?!!!!!

OK, now this is not the very worst way of starting a speech, but it is the second worst. The worst is to shamble up to the podium, look around the room, glance at your watch, adjust your notes, cough a few times, drink some water, murmur ‘Ermmm… ummmm … good morning/afternoon/evening..’ and then follow this with an apology of sorts (as if to curry favour with your audience)…”Errr, sorry, I’m not very used to public speaking… errr, how long have I got? OK, well, here we are, ummmm, today I’d like to…”

Cue slumping of audience, flicking open of social media from the audience’s smartphones, and you’re off to the worse possible start. You’ve lost your audience, and you’re only 15 seconds in.

There is ONLY ONE good way of starting a speech.

Well, possibly two. The second best method is to start with a quirky, surprising statement that takes people by surprise and makes them think.

“More photos will be taken this year than in the entire history of the planet to this date.” That’s it, your first sentence. ‘OK’, think the audience, ‘we’re off to the races here’ and they sit up.

If I was speaking about digital disruption/transformation (my favourite subjects) then this might get me off and cracking.

But it’s not the best start. The best start is to start with a story. The adult equivalent of ‘Once upon a time’.

The best orators do it, every time. JFK, Martin Luther King, Obama.

Steve Job’s wonderful Stanford commencement address in 2005 is 15 minutes long and has 3 stories from his life. Wonderfully, simply told, with points made powerfully. (If you’ve not heard it, please do yourself a favour and watch it.)

It’s such an easy technique, I am amazed not everyone does it. We are all wired to listen to stories. It’s how our ancestors and their ancestors before them passed down their learnings, around the camp fire, from generation to generation over millennia. It’s how we as children learned our vocabulary, and bonded with our parents by our bed at night.

It does not matter if you have a 20 minute keynote at a business sundowner or an hour long keynote at a conference. Launch into a story. Straight away.

Have a visual on the slide (no words) if you like. But no bullet points. No elaborate diagram.

Choose a story that will transform your audience, take them with you and fire their imagination. You’ll have them (immediately) eating out of your hands. Take 5 minutes or so telling your story, in all its detail, using lots of layered description: the colour of the sky, the ebb and flow of the waves, the scream of the seagulls. Transport your audience. If you do this well enough, at a good pace, they will come with you. Practice it. Many times, until it is fantastic.

Once the story is over, make the point(s) count. The story is a device to grab your audience, and make the analogous links to what you want to get across. Your (few) bullet points or visuals can help ram it home.

I have a hand full of favourite stories I like to wield in public speeches: one is about the germination of the idea for my startup, which actually happened (true story) the same night my wife and I were dragged on stage to perform with Dame Edna.

Or I might talk about the ‘cup drop moment‘. Another relates to a young motorcyclist in June 1994 doing a U-turn, just before D-Day, of the convoy of trucks down a narrow country road, using a field and a gate. Yet another involves my Dad, who, unbeknownst to us had a growing tumour on his brain (thankfully benign) which, over 5 years,  grew to the size of a golf ball before anyone knew it was there.

I use these to grab the audience’s attention, draw them in, and make my points. They remember the story, and they remember the points. And perhaps, they remember me.

Next time you are delivering a speech, start with a good story, told well. Next time, and every time after that. Your audience will thank you for it, and as a means of communication, nothing beats it.

You can complain, wait or do something

leader adjusts the sails

As the seasonal period of goodwill recedes, and people trudge back to work (only to grab another week off before the end of January while the kids are still on holidays), some of us are prone to ponder the state of the world, and how 2017 might run its course.

This time last year I was optimistic about the coming year, despite the slew of celebrity deaths that kicked it off. In some ways, this may have been the harbinger of things to come, a portent of the gloom that was 2016. I did not predict Brexit nor the Trump presidency. But neither did I predict that the Aussie stock market would rise 20%  …well, a selected group of WA ASX listed stocks anyway, as shown by the BN30 index, something my business posted daily from Jan 4th 2016. It started at 100 (index) and today sits above 120.

Like many, I knew there was disquiet in areas of the western populace, but did not think there was enough to herald the UK to leave the EU, or for the orange bullying buffoon to actually get elected to the most powerful position on the planet (is it though?)… even though he garnered nearly 3 million LESS votes than his opponent. Malcolm Turnbull’s (nail bitingly close) reelection seems amazing in hindsight, compared to the crazy results elsewhere.

Meanwhile the Aussie economy ticked along, with some high points in iron ore miners and gold, and varied other places. The global economy also improved, helped by a resurgent US (now raising its interest rates, not once, but twice) and an OK China, expanded global trade. The Indian, East Asian, Brazilian and other economies are now part of the global picture, and contribute to its future much more than its past. The European economy has less sway than before. The Aussie economy is now entering its 26th year without a recession, and there does not seem to be one on the horizon either.

However, back on the ground, things are tough for many in business in WA. Real estate sales are slow, as is advertising, print, retail, media and the whole raft of mining and professional services. IT & technology is a growth area, as is aged care services. There are deals being done, IPOs and reverse take overs being planned and executed, money being raised. Not on the grand scale of the mining expansion from 2004-2012 no, but it is there nonetheless. And it’s patchy.

So here we go 2017. Things could bump along for a while before lifting, but most people now think the worst is behind us. Whereas I got the Brexit and US election totally wrong, I am not going to predict elections in WA, Germany or France, but a change in government in all 3 is not out of the question. Plus sa change… as the French like to say…

We can complain about the wind, or just expect it to change. The leader, as John Maxwell once noted, is the one that adjusts the sails, tweaks the business, sees opportunities, and sails off in a new direction, plotting their own course. That is what we should do in 2017. Happy sailing!

Clinton won 2 million more votes

Clinton

For those you left numb and disbelieving over the recent election of a President Trump, consider that Hillary Clinton won the 2nd most number of votes ever in a Presidential election and 2 million more than her opponent.

Of course that did not get her elected, due to the quirks of the electoral college system. It’s actually a system I admire in that it forces nominees to travel around the country (or at least the dozen or so swing States) rather than just rack up votes in their most populous areas.

Unfortunately for Clinton, she racked up some amazing votes in States she was always going to win, and others she was bound to lose, mainly around the coast. She won California by 3 million votes, which would not have meant any difference to the electoral college outcome compared to winning it by just solitary vote. She lost Texas and Arizona, but scored far better there than Obama did 4 or 8 years earlier. It did not matter, she still did not get one solitary electoral college vote from these places. Nor did Obama.

A week on, we can see a clearer picture. Trump’s narrow path to victory lay in flipping Clinton’s so called ‘blue wall’ of Pennsylvania, Michigan and Wisconsin, where he collectively won the combined 3 States by only 107,000 (less than 0.1% of the total votes case). They are worth 46 electoral college votes. Add that 46 to Clinton’s likely 232 votes and she sails over the 270 winning post, and is President.

She lost Michigan by less than 12,000 votes. The fact that Clinton won 2 million more overall does not matter one jot. Trump threaded the needle by the slimmest of margins where it mattered.  He was very fortunate, a few tens of thousands of votes the other way and we’d be analysing things very differently.

I say ‘fortunate’ because the electoral college map was always stacked against him, and he was pandering to a diminishing number of the electorate – whites. They represent 72% of the population, and falling. The majority of babies born in the US today are non white. In the 1980s, whites made up 84% of the population. Trump had to win a huge proportion of this vote to win, and he had to win them in the right places, which is what he (just) did. You might call it a brilliant strategy, maybe it was. It did not make for a pretty campaign, but it worked. It all had to come off for him, and it did.

Consider the maths for Obama in 2012. He lost the white vote 39% to 59% to Mitt Romney, but he won the non white vote by a whopping 60 points. That adds up to 50.2% of the total vote, and 47.8% for Romney. Plus Obama won them in the right places – Iowa, Ohio, Florida, Pennsylvania, Michigan and Wisconsin,  … the blue wall. Clinton already knew (weeks out) she was well behind in the first two and Florida was on a knife edge, but she did not realise she was behind in the other 3, until it was too late. She never even visited Wisconsin. Trump won all 6 and shot to more than 300 electoral college votes.

So it was wafer thin. Yet Trump won fair and square, that’s the system.

So, we are left with two very large amorphous groups of the electorate – one, so annoyed at their lot, GFC, their changing country (they don’t like change, hence ‘Make America Great Again’ appealed)  and everything else that they would cast a vote for someone they may not like, but who was telling them he would blow up the system (#draintheswamp), throw the whole lot out and only he could fix it because he was the ultimate outsider. They were more likely to be white, non college educated and rural. And then there’s another large group, which is larger, who did not vote this way, a coalition of college educated, city dwelling whites and non-whites who appreciated Obamacare and wanted more affordable college education. Both these two policies only appealed to a minority on Clinton’s side, and did not interest the others.

After 8 years of Obama, they wanted change, and Clinton could not run on change. Trump could, and did. Boy, did he. After 8 years of W Bush, the country wanted change, and Obama personified it. Brilliantly. After 8 years of Bill Clinton, and the scandals that ended it, the country wanted change, and Bush was change. 8 years earlier Bill had represented a cool, younger change to the old and crusty Bush senior. Reagan was change from the washed up Jimmy Carter, who in turn had been change from the Watergate-plagued 1970s Republicans…

So the wheel has turned. It has not resolved the issues, nor the divisions. But the other side will have their turn for now. I wish Hillary all the best in her retirement. As Donald himself says, she deserves a vote of thanks for her 30 years of service. I hope Trump ends up being better than we fear, because the world could do with a little less fear and uncertainty right now.

We’ll see. I reckon it will be fascinating watching, no matter what. Get the popcorn ready.

UPDATE (Dec 23rd 2016) – Clinton won 2.9 million more votes than Trump)

If Trump wins New Hampshire, he’ll be President

It's all about new Hampshire

I’ve been watching this crazy, relentless US Presidential campaign over many months, open-mouthed at how low it has sunk. A reality TV celebrity kingpin real estate billionnaire (who, I learned this morning, is an anagram of ‘Tan Dump Lord‘) is extremely close to winning the Presidency against probably one of the most qualified, deserving and divisive of candidates, and its first woman (not before time).

How close? It all comes down to the little north eastern state of New Hampshire, the ‘granite State’.

The state that almost started the whole dang voting process back in January (Iowa snuck in first with its caucus), with only 4 electoral college votes and 1.3 million population, would provide the GOP nominee with sufficient to get him to 269.

By my calculation, at this moment, he is more likely than not to get to 265 electoral college votes, 5 short of an overall win. New Hampshire can push him up to 269 and a tie with Clinton. Now, wouldn’t that be entertaining?

According to the combined polls-only model at FiveThirtyEight.com States where he is more than 60% chance to winning gets him to 215 votes. Add in the 3 toss up states of Florida, Nevada and North Carolina (worth 50 votes combined) where he is currently more than 50-50 in favour of winning each gets him to 265. (See calculation below.)

If he wins New Hampshire’s 4 electoral votes, where he currently is favoured 38% of a chance (so not impossible by any means), he gets to 269, and a tie. Clinton would also be a 269.

If that happens, the House of Reps votes on the President, and the Republican leaning House would vote their man in. In a wonderful twist, the Senate would vote for VP, and if that goes Democrat, we might have Tim Paine as Donald’s VP. Or would the current Senate (which is Republican) get to vote?

It would be poetic beauty in many ways, and was predicted by the storyline in the wonderful comedy Veep, where the erstwhile Julia Louis-Dreyfus character is forever VP and never, quite, makes it to the top job.

FiveThirtyEight has Donald at 35% chance of becoming President, about the same as his chances of winning New Hampshire. It’s more than a 1 in 3 chance, and a far better chance than the Chicago Cubs had in winning last week’s world series (especially after coming from 3-1 down and not having won in 108 years). Yet that happened.

In the polarised world, most of the other States will vote as they will, with a certainty factor of 75% or more. Tuesday’s election will come down to 4 States, and Trump has to win them all to fall over the line by the slimmest of margins. Clinton needs just one of these to block his route.

So, if you want him in (or, like me, don’t) watch Florida, Nevada, North Carolina and New Hampshire. 3 of them are east coast states so will be called earlier than others, probably around 10am here in Western Australia.

~~

Here’s how I got to a 269-269 tie:

States that Clinton has a lock on give her 201 votes
– she’ll probably (more than 68% chance) also win Colorado, Michigan, Pennsylvania, Virginia & Wisconsin, which add 68, bringing her to 269

States Trump has a lock on gives him 164 votes
– he’ll probably also win (>68% chance) Arizona, Georgia, Iowa & Ohio, which add 51, bringing him to 215.
– add the toss up states (where is just ahead, between 50-53% chance) of Florida, Nevada and North Carolina, which give him another 50, and he’s at 265.
– New Hampshire is currently 61% (and falling) chance of going to Clinton. If Trump flips that, he gets their 4 votes, and he’s at 269.

Trump’s case is much more solid if he can win any of Clinton’s states (Colorado, Penn., Michigan, etc) but he has to hold all his. If he fails to do this and Clinton wins just one of the States (or new Hampshire), she’s won.

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 are 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 and inclusive. Ultimately, this makes us and 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. Over 8 years, I saw no bullying behaviour. Instead, 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 each other’s cultures. In fact, it was not even an issue. Put different cultures together at an early, formative age and they will have peace, argued Kurt Hahn, the founder of the United World Colleges. They were set up in the 1960s, a few years after the horrors of the Second World War, precisely for this reason. 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 best example of this in practice. 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. Love trumps hate.

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.

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!

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!

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.