Is your company like Greece?

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I was working with a company a while back that I compared to Greece. Not surprisingly, my observation didn't go down well in some quarters. I think that's sometimes the best measure that what you have said makes at least some sense...because you may have hit on an embarrassing truth.
What can make a company like Greece?

• Borrowing lots of money to expand...
• ...with the means to pay back the loans dependent on a sale of the company, rather than ever being able to pay the capital part of the loan back out of operating cash flows
• Management that are blind, or close their eyes, to the realities of the situation
• Unrealistically false and optimistic forecasts and predictions for the future
• Middle management that believe going through the motions will be enough
• Staff that see the truth but have no voice

Interestingly, there are a number of things in a company that many believe are a sign of health, but just like a bankrupt country, may mask the truth...

• A strong and charismatic leader
• A clear vision/mission and general buy-in to it
• A belief that stretching targets are necessary to keep staff motivated
• A strong Group function that sets Best Practice for operating divisions

Indeed, all of these things CAN be positive, even necessary for a successful company. But they are not evidence in and of themselves of deep seated health.

What's the solution if your company is like Greece?
The six million dollar question (or maybe billion)...
I was chatting with some financial big-wigs a while back and they observed that it is in everyone's interests in Europe to ignore the fact that there is essentially no solution to the Greek issue, and keeping calm and carrying on is the only route forward. To what end, nobody knows. But it's still better than collapsing everything in on itself. 
A bit like Schrodinger's cat, when you are pretty sure the cat in the box is dead, but there seems no point in opening it simply to confirm your suspicions - better to leave it closed and act as if the cat is still alive.
Is it the same with a company? I'm not so sure. The company that I compared to Greece ended up in different ownership via a hostile takeover. The large debts were publicly traded, and this made them vulnerable to being bought up by a so-called "vulture" fund, resulting in an ownership change. While a disaster financially for the previous owners, the old management team that were fired, and the other staff that lost their jobs in a final attempt at a face-saving round of cuts, the result for the company was perhaps better than any other imaginable solution. It survived, many people kept their jobs and the operating business did indeed keep calm and carried on.
A little like the normal Greek people. They carry on. The financiers and government ministers may lose paper millions and their jobs, but somehow people still live and eat.
So your response if your company is like Greece may well differ, depending whether you own it, manage it or "only" work for it...

No such thing as bad publicity?

I read with interest the statistics on the positive reactions to Olympic sponsorship from major companies.
Cadbury apparently won the ratings with a 16% positive score, with P&G behind in 2nd place on 10%. Coke crossed the line like a GB BMX rider, in last place with 1%.
Before I move on, I just have to reverse the statistics, as I was always taught to do...

• A massive 99% of people reacted neutrally or negatively to Coke's sponsorship
• 90% reacted neutral/positive to P&G
• The PR "winners" managed about 5 in 6 people reacting neutrally or negatively...that's a bit like saying that you have a daily habit to do something that you actually manage once a week

These are big majorities. But then people often react neutrally or negatively to sponsorship, advertising etc. Or at least they say they do. For what no company should forget is that what people SAY their reaction is, may differ significantly from how they ACT after the sponsorship or advertising.

More interesting might be to see what percentage of people ate a Cadbury product or drank a Coke while visiting the Olympic Park. Clearly these statistics will be positively biased due to limited availability of other options that was part of the sponsorship deal, but they would still show more about action than emotion.

So it is often said that there is no such thing as bad publicity. Coke will likely be a little worried at their score above as it really does seem to be extremely low. 

However, I suspect they will have sold a lot of fizzy stuff over the last 2 weeks, and will continue to do so in the future. People's actions are what matters. Coke will examine the statistics of how much they sold pre- and post-Olympics to assess their sponsorship investment. 

They will not worry about what people say, only what they do.

Playing by the rules 2

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The Standard Chartered bank situation is another great example of playing by the rules.
Whether or not we agree with the US setting what, in the eyes of the rest of the world, are very restrictive limitations on banks activities, the fact is those rules are there. Every bank therefore has the choice of whether to do business in any particular country, they must base those decisions on the rules governing business in that jurisdiction. And not only every bank, every business must do this.
The fact is that business in every industry and in every geography is a balance of risk and reward. This is learned in Economics 101 - strange that so many people seem to forget it sometimes.
What this means is that if Standard Chartered want to join in the rewards of doing banking business in the US, then they must also run the risk of falling foul of the rules, or indeed any other risk of doing business. If they do not wish to carry the burden of risk, then they should not partake in the rewards.
The fact is, that in the banking world at least, it seems that the US has a bit of a stranglehold - if you want to be a global player in the banking world, then you simply have to be in the US. This does give them a certain amount of power to set the rules how they see fit, regardless of everybody else's opinions, and then fine banks if they break the rules.
The positive way of seeing this is that the US has earned the right to impose rules as it sees fit, by being at the forefront of the global banking scene. If you don't like it, don't have pretensions as a global player.
Lessons here are numerous:

• You can't cherry pick rewards without taking the risks
• Market power earns the right to set the rules
• And finally, doing business with dictators is difficult - whether they are countries or banking regulators...

Business case?

My background is in finance and I have spent many years putting together, reviewing, and pulling apart, business cases for a wide variety of proposals. While the business case is often abused (the Goal Seek function in Excel has a lot to answer for!) the discipline of assessing investments against their likely or possible return is simply good practice.
What frustrates me in observing the public sector is the seeming complete lack of business case type thinking.
Take Lords reform. It has been a political football, kicked around by our politicians, with each team always kicking in the same direction, based on their ideology. Now Lords reform appears to have been parked for these completely political reasons.
My observations of the issue are more practical and economic...
In our current financial crisis, what benefit to our economy would Lords reform deliver?
What would reform of the Lords cost? (so that we can weigh the cost against the benefit...)
While it would be like the proverbial turkeys voting for Christmas, I have long been a believer that our political systems are bloated and ineffective. For example, the business case for halving the number of MPs while increasing their salaries and expense allowances by 150%, is clear to me. We have the highest number of MPs per head of population in the western world. Much of what our MPs do is rubber-stamping of what is effectively decided in the European Parliament. The MPs do not earn enough to attract the best  - just look where an MP would be in the salary hierarchy of any large company, I estimate about half way up. Half the MPs, 75% of the cost. Same results. Easy business case.
The Lords is pretty much the same: 
Is it doing a reasonable job of providing checks and balances to Parliament? Yes. 
Are there too many of them? Yes. 
Is it worth revamping the system. Probably not. There would likely be little results improvement, a lot of cost involved in "fixing" it. And likely no operating cost reduction.
I am glad the Lords reform is off the table, even if it is for the wrong reasons...
What is on the agenda of your business that is political, that has no business case? Or what should be on the agenda but isn't because it would be political suicide to raise it? Or which business case really makes no sense but has been manipulated to deliver a politically expedient result. 
I challenge you to think in a business case fashion in everything you do.

Not playing to win

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One of the biggest controversies of the London Olympics was the disqualification of 8 badminton players for not trying to win their final group matches. The format of the competition made it advantageous for them to lose in order to secure weaker opposition in the following knock-out rounds.
Meanwhile in the swimming pool, the format of the competition meant many swimmers took it (relatively) easy in order to conserve energy for future rounds or other events.
Across at the stadium, athletes did similarly in their heats.
Down in Weymouth, the format of the competition meant that the British sailor Ben Ainslie won a gold medal coming 9th (out of 10) in the final medal race, by purposefully distracting the only other guy that could beat him, into 10th, while allowing 8 other boats to beat him.
On face value, these are all examples of not giving one's best. Which is against the Olympic ideals. 
So why did the badminton players get disqualified while all of my other examples get lauded for brilliant tactics, or being very sensible approaches to energy conservation?
Surely the badminton players were also only trying to conserve energy across the whole tournament - in those fateful group matches but also later in the quarter- and semi-finals, in order to give themselves a better chance at a medal. The same as the swimmers and athletes in their heats.
I think that the only difference here is: What is normal?
In a badminton match that is one on one, it is "normal" to try to win every match.
In swimming and athletics, it is normal to only give fully of one's best in the final (except if something unexpected happens earlier and it becomes necessary to give more in order to get into the final). In sailing, it is normal to be extremely tactical and putting off one's opponent is used often as one of these tactics. Importantly, these are multi-contestant "heats" or "matches" rather than one-on-one.
What's to learn here? Well, the difference between the shame of failure and the celebration of success can depend on the measure of "normality" against which one is judged.
In your business, are you absolutely sure you know what the standards are for your success, do you know what measure of normal you will be judged against?
If you think you are, great...but just think that Barclays, G4S and a number of other recent examples also thought that what they did was OK because it was "normal", only to find out later that actually a different normal was applied to them.
I encourage you to think again and make absolutely sure you know the rules of the game, the written ones and the unwritten ones.

Fundamental business issue?

I read with interest the headline that Virgin airlines have been "forced" into a loss-making situation due to high fuel costs.
Nothing unusual there, you might think. We have got used to hearing such stories from airlines over the years. Some american airlines (small 'a's but also included with the big 'A's) have been in Chapter 11 bankruptcy protection, one or more times, in the last few decades.
But what is going on here?
Airlines, competing with each other but all with the same major cost element - an element whose cost is pretty consistent between them since it's a commodity traded openly on the global market.
Clearly, there are some significant opportunities to shift the cost base of an airline to be more competitive; whether from Head Office costs, purser staffing costs or food provision as a profit centre rather than a cost centre, charging for baggage etc.
But I really wonder if all of these added together are really sufficient to make the difference. Or is there a fundamental business issue at the heart of this?
I think what is really going on here is a classic pricing and yield management issue. When competitors in an industry face very common commodity costs, the relative profitability between them will likely come down to the efficiency of the pricing and yield models that they operate. Margins are tight, small differences in that efficiency can swing a company from profit to loss.
But most importantly, the overall industry margins will always tend towards the low side in these industries. Barriers to entry are pretty high and incumbents will have an advantage, and will need to leverage that as much as possible in a low margin industry.
Most interesting of course, is that not so long ago, Virgin itself was one of those newcomers, taking on BA and other competitors.