The Long View

The hidden costs of firing people

Everyone know that making people redundant is expensive.

One company in Luxembourg that I checked out quotes its restructuring costs of making about 10% of its workforce redundant at €60M; with annual savings of €50M.

What their website does not tell us, are whether they have factored in the hidden costs associated with this restructuring, costs that cannot (easily) be quantified.

Fortune magazine features an article about what needs to be taken also in account to highlight the real costs of layoffs:

• Brand value: the reputation of a firm that lays people off is on the line
• Leadership costs: you may be firing that could have taken the company forward in the future
• Morale costs: Grief and lost productivity (and even lots of bad conscience about surviving) of those that remain
• Share price impact: layoffs: means trouble: mean lower share price
• Re-hiring costs: finding, inducting, training, acclimatising… it takes time and money and resource and energy…

To read the full article in Fortune magazine: Layoffs cost more than you think. The Harvard Business Review has come to similar conclusions in this article about reducing your workforce. 

On a similar note: 

A short study we did years ago on the true costs of staff turnover showed that in the average car dealership, a person that leaves the company costs the company about a year's salary in terms of calculable and not precisely quantifiable losses.

That is without any redundancy payment. Now multiply that by 10% of your workforce. 

Asking all your staff to reduce their work time (and pay…), combined with not replacing natural attrition, seems not only the more culturally acceptable offer, but also, in the longer run, the more economical one.

Fragmentation, convergence, contribution

The world is becoming more and more abstract. Certainties of the past are dwindling; we are moving in an ever escalating spiral of innovation, change and, more recently, turbulence.

There are essentially two ways to deal with this: cautious withdrawal and open embrace. 

Whichever you "chose" (and a lot could be said about that conscious or unconscious choice) will have an impact on our individual and collective outcomes and futures (yes, with a plural s). 

Yet there is more to it: the fragmentation of the traditional monoliths (state, company, society, family) is not just a breakup of cherished habits. It is also a powerful invitation to connect with people"other" side with the "other" context, with the people we do not usually do business (or buddiness) with. 

The opening of new intellectual and social portals produces and generates vast opportunities to talk to people of varying backgrounds, knowledge levels and semantic fields and linguistic jargons. Organisations, well established, like Ted, or more recent ones like Mindshare, highlight the growing desire to converge and exchange field notes with people from different scientific backgrounds.

In this interactive mash-up between social sciences, cognitive discoveries, business priorities and fractal movement, each of us can make a contribution. 

What we sometimes forget today, in the fearful chatter of recession an depression, is the basic fact that we still live in an economy of abundance, as measured in terms of available information, accelerated creativity and opportunities to shape and create the new paradigms for the century, while helping those around us that may be struggling today.

I am fundsmentally convinced that the sucess stories of the future will be written not by those who ask "What do I have to lose?" but by those who act on the question "How can I help you succeed?" 

The Internet of the future

The Internet as we know it, with endless sources of information, seemingly limitless resources and its tidal wave of downloaded documents is just the beginning.

We have seen nothing yet. Current search engines give us millions of references to places where to find information (a Google search on "leadership" gives me this morning about 183,000,000 entries in 0.14 seconds), but nothing in terms of how these pages relate to each other, and, more specifically, how they can be useful to me. In many ways, this way of finding information is already starting to look antiquated.

Enter the Semantic Web.

The Worldwide Web Consortium (W3C) under the "founder of the Internet" Sir Tim berners-Lee is working on the next generation internet. In the site's own words:

The Semantic Web provides a common framework that allows data to be shared and reused across application, enterprise, and community boundaries.
…
The Semantic Web is a web of data. There is lots of data we all use every day, and it is not part of the web. I can see my bank statements on the web, and my photographs, and I can see my appointments in a calendar. But can I see my photos in a calendar to see what I was doing when I took them? Can I see bank statement lines in a calendar?
Why not? Because we don't have a web of data. Because data is controlled by applications, and each application keeps it to itself.
The Semantic Web is about two things. It is about common formats for integration and combination of data drawn from diverse sources, where on the original Web mainly concentrated on the interchange of documents. It is also about language for recording how the data relates to real world objects. That allows a person, or a machine, to start off in one database, and then move through an unending set of databases which are connected not by wires but by being about the same thing.

Suddenly, the Web becomes my oyster.

The impact on business will be swift, and huge. Even top notch state-of-the-art websites of today will look outdated  as we move into the next era of mass information management. The Harvard Business Review in its February issue warns CEOs that they have a problem if they ask their CTOs about the semantic web and get a blank stare.

And you just thought you had it figured out?

Not so green figure

The McKinsey Quarterly has released a report of a 2007 survey the firm conducted across a range of countries among which Brazil, Canada, China, the UK, The US, France and Germany. Out of over 7,700 consumers, 87% worry about the environmental impact of the products they buy… yet only 33% say they are ready to buy green products, and only 25% say they have done so in the past.

Green products make up about 2% of the market, just as hybrid cars on the car market.

Two thirds of the consumers cannot name a single green brand. Can you?…

A long way to go yet.

A wind of change?

In three significant ways, Barack Obama has already delivered on his promise for change.

1. By taking the race card out of the election, he overcame centuries of injustice and resentment. in its colour-blindness, this presidential election has created a true paradigm shift in the way we envisage the American presidency. 
2. By harnassing the internet in a way no other politician (or organisation) has, he has set new standards, expectations and operational methods for democracy in the twenty first century.
3. By running a disciplined, and exceptionally well organised campaign, he has given a clear picture of how powerful a strong vision combined with a flawless execution can be and he has a set the tone for a measured, competent and effective administration. Barack Obama ran his campaign as a responsible CEO would his company. 

For the Nay-sayers, and the “yes, but“ lovers this makes it easy to point out that from now on, Barack Obama can only disappoint, and the realities of his office may well be too daunting for any man. In 1981, in France, François Mittérand incarnated the hope for change of a generation, and he happily squandered tons of goodwill (and opportunity) on ill advised policies and a secretive approach to power. And so it is today, in the more taxing circumstances that are the context of our time.

Yet the three points above illustrate also that regardless of next steps, three ways of viewing our political process have finally entered the 21st century:

1. A new level of equality changes the cards on race race relationships and affirmative action
2. Technology is now a constituent part of the way in which e do things, and not a nice to have add-on to our existing business
3. Leadership and discipline of execution matter more than ever before.

I will explore these aspects more ind depth in a later post. This election has been an object lesson in management and leadership. One can only hope that the execution of the mandate will live up to these high expectation standards set on 4 November.

A market difficult to bear

Here is a snapshot from the New York Times comparing this stock market downturn with the previsou biggies (And yes, it is a biggy…). We are reaching 1974 levels, in percentage drops… well beyond the 1987 drop.

The How of the What, in the context of the Why

This week I had a lot of conversations around leadership. There is lots of great literature available on the subject, and I will create a list of the most important one of these days.

One comment I got this week was along the lines that "sometimes these books cloud the issue instead of clarifying it for me. The author's thinking process looks great on paper, makes lots of sense, but then when I have to apply it to real life situations, it turns into quite a different animal." 

Readers get lost in models, definitions, principles and graphics. Managers don't know if they should use a different theory at the beginning of the week and then end, in the morning and the evening.

What the entire leadership discussion might just come down to is three things: the What, the How and the Why.

The What: management roles - objectives, responsibilities, targets, directions, tasks,  deadlines, deliverables… This is what managers get hired for in the first place. It is their job.

The How: leadership roles (and styles) - personal credibility, accountability, inspiration, motivation, communication, handling of (own and others') emotions… This is how each person builds up the work culture in and around him, how she relates to her staff and what environment they chose to work in (Yes there is a choice element in that as well…).

The Why: What do we want to achieve in the end, why are we making all these efforts - vision, mission, values… The Why provides the context, background and the ultimate reason for our actions. Without it a vital piece is missing and this makes the manager's job virtually impossible.

The consistency and overall effectiveness of the manager (in managing others or/and themselves) lies in the careful reflexion on and mutual balancing of the What, the How and the Why.

And if you look closely, that works for pretty much everything in life.

Listening to you(,)(r) customers

Those of you who have been to my seminars know that I have some views about what a strong relationships with customers could/should/would like.

Seth Godin on his blog this morning talks about listening to customers:

Here are three common listening mistakes:

1. Believing that your customers are monolithic, that they all want the same thing.
2. Believing that loud customers speak for all customers.
3. Worrying that if you don't satisfy short-term, loudly articulated needs, you will fail.

There's an art here, it's not a science. I'd focus on a few tactics:

• When someone is in pain, recognize it and address it if you can.
• You decide, not your customers, where you want to go. Lead, don't follow.
• Amplify the voices of the people you care about, those with the most value to you in the long run. Give them a platform and make it easier for them to speak to you and the rest of the market.

It is impossible to over-estimate the importance of the listening part of the customer relationship. The listening is not enough, of course. 

Matching the listening with the right action for that particular is what will make the difference. 

Customer satisfaction statistics are great (when you can get them, and may many companies do not have a formal process for collecting these data). In any events, stats are only one foundation stone on which to build a listening culture. The hard part is keeping an open ear.

Take the lead in listening. It pays off in the long run.

A new Olympic Motto

Add a single word, and the world is a different place.

The traditional motto of the Olympic Games, “Faster, Higher, Stronger” (Citius, Altius, Fortius), could always be applied to business.

This is no longer enough. 

Corporate social responsibility,global warming and other environmental issues, stakeholder involvement, shareholder accountability, stricter accounting practices, lower margins, more informed customers... 

Competitiveness just turned into a new, tougher sport requiring more discerning talents to deal with the additional constraints.

To succinctly capture the change of business paradigms over the past ten years, all you have to do is add one word to the motto. 

It changes everything, redefines the rules, and will probably  redistribute the medals:

“Faster, Higher, Stronger, Cleaner”.

Management language

Different levels of management use different language. 

What changes, is not just the focus, the objectives or the general outlook on life (that too). 

The main differences lie in what each level thinks the others should realise, take into consideration, understand (and doesn't). This can create a huge disconnect between people who deep down want the same: a sucessful organisation. 

Senior management wants to fire up enthusiasm for the vision of the company, middle management thinks it is a lot of smoke hiding the real fires that need to be extinguished, front line managers think the upper levels should do some fire drills to understand what is really going on, and the staff... just gets burned.